Assigned Case for January 30, 2016

Lesson 3 International Law and Municipal Law

1. Ware vs Hylton 3 Dall, 199, 228 (US 1796)
United States Supreme Court
WARE v. HYLTON, (1796)

Argued:

Decided: February 1, 1796

Error from the Circuit Court for the District of Virginia. The action was brought by
William Jones, (but as he died, pendente lite, his Administrator was duly substituted
as Plaintiff in the cause) surviving partner of Farrel and Jones, subjects of the king of
Great Britain, against Daniel Hylton & Co. and Francis Eppes, citizens of Virginia, on
a bond, for the penal sum of 2976 11s. 6d. sterling, dated the 7th July, 1774.
The Defendants pleaded, 1st, Payment; and, also, by leave of the court, the
following additional pleas in bar of the action.
2nd. That the Plaintiff ought not to have and maintain his action, aforesaid, against
them, for three thousand one hundred and eleven and one ninth dollars, equal to
nine hundred and thirty three pounds fourteen shillings, part of the debt in the
declaration mentioned, because they say, that, on the fourth day of July, in the year
one thousand seven hundred and seventy six, they, the said Defendants, became
citizens of the state of Virginia, and have ever since remained citizens thereof, and
residents therein; and, that the Plaintiff, on the said fourth day of July, in the year
1776, and the said Joseph Farrel were, and from the time of their nativity ever had
been, and always since have been, and the Plaintiff still is a British subject, owing,
yielding and paying allegiance to the King of Great Britain; which said King of Great
Britain, and all his subjects, as well the Plaintiff as others, were, on the said fourth
day of July, in the year 1776, and so continued until the third of September, in the
year 1783, enemies of, and at open war with, the state of Virginia, and the United
States of America: and, that being so enemies, and at open war as aforesaid, the
legislature of the state of Virginia did, at their session begun and held in the city of
Williamsburgh, on Monday the twentieth day of October, in the year 1777, pass an
act, entitled 'an act for sequestering British property, enabling those indebted [3
U.S. 199, 200]
to British subjects to pay off such debts, and directing the
proceedings in suits where such subjects are parties,' whereby it was enacted, 'that
it may and shall be lawful for any citizen of this Commonwealth, owing money to a
subject of Great Britain to pay the same, or any part thereof, from time to time, as
he shall think fit, into the said loan office, taking thereout a certificate for the same,
in the name of the creditor, with an endorsement under the hand of the
commissioner of the said office, expressing the name of the payer, and shall deliver
such certificate to the Governor and council, whose receipt shall discharge him from
so much of the said debt.' And the Defendants say, that the said Daniel L. Hylton
and Co. did, on the 26th day of April, in the year 1780, in the county of Henrico, and
in the state of Virginia, while the said recited act continued in full force, in

pursuance thereof, pay into the loan office of this Commonwealth, on account of the
debt in the declaration mentioned, the sum of 3111-1-9 dollars, equal to 933:14,
and did take out a certificate for the same, in the name of Farell and Jones, in the
declaration mentioned, as creditors, with an endorsement under the hand of the
commissioner of the said office, expressing the name of the payer, which certificate
they, the Defendants, then delivered to the Governor and Council, who gave a
receipt therefor, in conformity to the directions of the said act, in the words and
figures following, to wit: 'Received into the Councils' office, a certificate bearing
date the twenty sixth day of April, 1780, under the hand of the treasurer, that
Daniel L. Hylton and Co. have paid to him thirty one hundred eleven and one ninth
dollars, to be applied to the credit of their accounts with Farrell and Jones, British
subjects. Given under my hand, at Richmond, this 30th May, 1780.'
T. JEFFERSON.
Whereby the Defendants, by virtue of the said act of Assembly, are discharged from
so much of the debt in the declaration mentioned, as the said receipt specifies and
amounts to, and this they are ready to verify. Wherefore, they pray the judgment of
the court, whether the said Plaintiff ought to have or maintain his action, aforesaid,
against them for the 933: 14, part of the debt in the declaration mentioned.
3rd. That the Plaintiff ought not to have or maintain his action, aforesaid, against
them, because they say that, on the 4th day of July, in the year 1776, the said
Defendants became citizens of the state of Virginia, and have ever since remained
citizens thereof, and residents therein, and that the said Plaintiff, and the said
Joseph Farrell, on the said fourth day of July, in the year 1776, and from the time of
their nativity, had ever been, and always since have been, British subjects, [3 U.S.
199, 201] and the Plaintiff still is a British subject, yielding and paying allegiance to
the King of Great Britain, which said King of Great Britain, and all his subjects, as
well the Plaintiff and the said Joseph Farell, as others, were on the said 4th day of
July, 1776, and so continued till the 3rd day of September, in the year 1783,
enemies of, and at open war with, the state of Virginia, and the United States of
America; and that, being so enemies and at open war, as aforesaid, the legislature
of the state of Virginia did, at their session commenced and held in the city of
Williamsburg, on the third day of May, in the year 1779, pass an act entitled 'An act
concerning escheats and forfeitures from British subjects,' whereby it was, among
other things enacted, 'That all the property, real and personal, within this
Commonwealth, belonging at this time to any British subject, or which did belong to
any British subject at the time when such escheat or forfeiture may have taken
place, shall be deemed to be vested in the Commonwealth; the lands, slaves, and
other real estate, by way of escheat, and the personal estate by forfeiture.' And the
legislature of the state of Virginia did, in their session begun and held in the town of
Richmond, on Monday the sixth day of May, in the year 1782, pass an act, entitled
'An act to repeal so much of a former act, as suspends the issuing of executions
upon certain judgments until December, 1783,' whereby it is enacted, that no
demand whatsoever, originally due to a subject of Great Britain, shall be
recoverable in any court in this commonwealth, although the same may be
transferred to a citizen of this state, or to any other person capable of maintaining
such an action, unless the assignment hath been, or may be, made for a valuable
consideration, bona fide, paid before the first day May 1777, which said acts are
unrepealed, and still in force. And the Defendants, in fact, say, that the debt in the

declaration mentioned, was personal property, within this commonwealth,

belonging to a British subject, at the time of the passing of the said act, entitled 'An
act concerning escheats and forfeitures from British subjects;' and the Defendants,
in fact, also say, that the debt in the declaration mentioned, is a demand originally
due to a subject of the King of Great Britain, not transferred to any person
whatsoever. And these things they are ready to verify: Wherefore they pray the
judgment of the court, whether the said Plaintiff ought to have, or maintain his
action aforesaid, against them.
4th. That the Plaintiff, his action aforesaid, against them, ought not to have or
maintain, because they say that a definitive treaty of peace between the United
States of America and his Britannic Majesty, was done at Paris, on the third day of
September, in the year 1783, and that, by a part of the seventh [3 U.S. 199, 202]
article of the said treaty, it was expressly agreed, on the part of his Britannic
Majesty, with the United States, among other things, 'That his said Britannic Majesty
should, with all convenient speed, and without causing any destruction, or carrying
away any negroes or other property of the American inhabitants, withdraw all his
armies, garrisons and fleets, from the said United States, and from every port, place
and harbour within the same,' which may more fully appear, reference being had to
the said treaty: And the said Defendants aver, that on the said 3rd day of
September, 1783, and from their birth to this day, they have been citizens of these
United States, and of the State of Virginia, and that the Plaintiff has ever been a
British subject, and that the Plaintiff ought not to maintain an action, because his
Britannic Majesty hath wilfully broken and violated the said treaty in this, that his
Britannic Majesty hath, from the day of the said treaty and ever since, continued to
carry off the negroes in his possession, the property of the American inhabitants of
the United States, and hath, and still doth refuse to deliver them, or permit the
owners of the said negroes to take them. And the Defendants aver, that his
Britannic Majesty hath refused, and still doth refuse to withdraw his armies and
garrisons from every port and harbour within the United States, which his said
Britannic Majesty was bound to do by the said treaty: and the Defendants aver, that
from the day of the treaty his Britannic Majesty, by force and violence, and with his
army, retains possession of the forts Detroit and Niagara, and a large territory
adjoining the said forts, and within the bounds and limits of the United States of
America, and the Defendants say, that in further violation of the said treaty of
peace, concluded as aforesaid, certain nations, or tribes of Indians, known by the
names of Shawanese, Tawas, Twightces, Powtawatemies, Quiapoees, Wiandots,
Mingoes, Piankaskaws and Naiadonepes, and others, being at open, public and
known wars with the inhabitants of the United States, and living within the limits
thereof, and for the purpose of aiding the said Indians in such war and hostility, at
certain posts, forts and garrisons, held and kept by the troops and garrisons of his
Britannic Majesty, to wit, at Detroit, Michelimachinac and Niagara, within the limits
of the said United States, on the 4th day of September, 1783, and at divers times
after the said 4th day of September, 1783, up to the institution of this suit, by
orders and directions of his Britannic Majesty, and his officers commanding his said
troops and armies, at the said garrisons of Detroit, Michelimachinac and Niagara,
and at other forts and places held by the said troops and armies within the limits of
the United States, are supplied and furnished with arms, ammunition and weapons
of war, to wit, with guns and gunpowder, lead [3 U.S. 199, 203] and leaden bullets,
tomahawks and scalping-knives, for the purpose of enabling them to prosecute the

war against the citizens of these United States, and also giving and paying to the
said Indians money, goods, wares and merchandize, for booty and plunder taken in
such war, and for persons, citizens of these United States, made prisoners by the
said Indians, in such their warfare against the United States, and so the King of
Great Britain is an enemy to these United States: And this they are ready to verify.
Wherefore they pray judgment of the court, whether the Plaintiff, his action
aforesaid, against them, ought to have or maintain.
5th. That the debt in the declaration mentioned, was contracted before the 4th day
of July, in the year 1776, to wit, on the seventh day of July, in the year 1774, and
that when the said debt was contracted, and from thence to the said fourth day of
July, 1776, and on that day, and until this day the said Plaintiff was, and is a subject
to the King of Great Britain, residing in Virginia, until the said fourth day of July, in
the year 1776, on which day the people of North America, among whom were these
defendants, who had theretofore been the subjects of the King of Great Britain,
dissolved the till then subsisting government, whereby the right of the Plaintiff to
the debt in the declaration mentioned, was totally annulled. And this they are ready
to verify: Wherefore they pray the judgment of the court, whether the Plaintiff ought
to have, or maintain his action aforesaid, against them.
The Plaintiff replied, 1st. Non Solverunt to the plea of payment; on which issue was
joined; and to the 2nd. plea in bar he replied,
2nd. That he, by reason of any thing in the said plea alleged, ought not to be barred
from having or maintaining his said action against the said Defendants, because
protesting, that that plea, and the matters therein contained, are not sufficient in
law to bar the said Plaintiff from having or maintaining his said action in this behalf,
against the said Defendants, to which the said Plaintiff hath no reason, nor is he
bound by the law of the land to answer; yet, for replication in this behalf, he, the
said Plaintiff, faith, that after the debt in the said declaration mentioned was
contracted, and after the said 4th day of July, 1776, in the said plea of the said
Defendants mentioned, and also after the said twentieth day of October, 1777, and
the passing the act of General Assembly, in the said plea also mentioned, and also
after the day in which the said receipt in the plea stated, is said to have been
granted, to wit, on the third day of September, in the year of our Lord 1783, it was
by the definitive Treaty of Peace between the United States of America and his
Britannic Majesty, made and done in the [3 U.S. 199, 204] City of Paris, that is to
say, in the commonwealth, now District of Virginia, and now within the jurisdiction
of this honourable court, stipulated and agreed, among other things, 'that the
creditors of either side should meet with no lawful impediment to the recovery of
the full value in sterling money, of all bona fide debts, theretofore contracted;' and
the said Plaintiff in fact faith, that he, on the said third day of September, in the
year 1783, and for a long time before (as well as the said Joseph Farrell, in his
lifetime were) then was, and ever since hath been and still is, a subject of his
Britannic Majesty, and a creditor within the intent and meaning of the 4th article of
the Definitive Treaty; and that the debt in the declaration mentioned, was
contracted before the said third day of September, 1783, that is to say, in the
county and commonwealth aforesaid, now the District of Virginia, and now within
the jurisdiction of this honourable court; and there was and still is owing and unpaid.
And the said Plaintiff, for further replication, faith, that after contracting the debt in
the declaration mentioned by the said Defendants, and also after the fourth day of

July, in the year of our Lord 1776, and after the said twentieth day of October, in the
year of our Lord 1777, and also after the said third day of September, in the year of
our Lord 1783, that is to say, on the day of 1787, in the then commonwealth, now
the district of Virginia, and now within the jurisdiction of this honourable court, it
was by the Constitution of the United States of America, among other things,
expressly declared, that treaties which were then made, or should thereafter be
made, under the authority of the United States, should be the supreme law of the
land, any thing in the said constitution, or of the laws of any state to the contrary
notwithstanding; and the said Plaintiff doth, in fact, aver, that the said Constitution
of the United States, was made and accepted, subsequent to and after the
ratification of the said definitive treaty of peace between the said United States of
America and his Britannic Majesty, whose subject the said Plaintiff then was, and
still is, and after the said fourth day of July, in the year 1776, and also after the said
twentieth day of October, in the year 1777: Wherefore without that the debt in the
declaration mentioned, was bona fide, contracted before the making of the said
Definitive Treaty of Peace, and before the making of the said Constitution of the
United States, that he, the said Plaintiff, is entitled to demand, have, and recover of
the said Defendants, the aforesaid debt in the declaration mentioned without that
the Governor and Council did give a receipt for a certificate of the payment into the
loan office of the sum of 1311 1-9 dollars, in the name of Farrell and Jones, [3 U.S.
199, 205]
and in conformity to the direction of the act of General Assembly,
entitled 'An act for sequestering British property, enabling those indebted to British
subjects, to pay of such debts, and directing the proceedings in suits where such
subjects are parties;' whilst the said act was in force, as in the said plea of the said
Defendants is alledged, and this he is ready to verify. Wherefore the said Plaintiff, as
before, prays judgment of the court, and his debt aforesaid, and damages for
detention of the debt to be adjudged to him.
To the 3rd, 4th and 5th pleas in bar, the Plaintiff demurred generally.
The Defendants to the Plaintiff's second replication, rejoined, that the said Plaintiff,
for any thing in the said replication contained, ought not to have or maintain his
said action against them, because they, by way of rejoinder, in this behalf, say, that
in the same Definitive Treaty of Peace between the United States of America and his
Britannic Majesty, by the said plaintiff in his replication mentioned, and which is now
to the court shown, it was among other things stipulated and contracted as follows:
'There shall be a firm and perpetual peace between his Britannic Majesty and the
said United States, and between the subjects of the one and the citizens of the
other; wherefore, all hostilities both by sea and land, shall from henceforth cease,
all prisoners on both sides shall be set at liberty, and his Britannic Majesty shall,
with all convenient speed, and without causing any destruction or carrying away
any negroes, or other property of the American inhabitants, withdraw all his armies,
garrisons, and fleets, from the said United States, and from every port, place, and
harbour within the same:' And the Defendants, in fact, say, that his said Britannic
Majesty hath not performed those things, which, by the said Treaty of Peace, he was
bound to perform, but hath altogether failed to do so, and hath broken the said
Treaty in this: that on the fourth day of September, in the year 1783, and on the
third day of June, 1790, and at divers times between the said fourth day of
September 1783, and the said third day of June, in the year 1790, his Britannic
Majesty at Detroit, and other parts within the boundaries of the United States, to
wit, within the commonwealth of Virginia, and the jurisdiction of this honorable

court, in open violation of the said treaty, and the articles thereof, excited,
persuaded, and stirred up the Shawanese, and divers other tribes of Indians, to
make war upon the said United States of America, and the commonwealth of
Virginia; and gave them, the said Indians, aid in the prosecution of the said war, and
furnished them with arms and ammunition, for the purpose of enabling them to
prosecute the same. And his said Britannic [3 U.S. 199, 206] Majesty hath not, with
all convenient speed, and without causing any destruction or carrying away any
negroes, or other property of the American inhabitants, withdrawn all his armies,
garrisons and fleets, from the said United States, and from every port and place
within the same; but hath carried away five thousand negroes, the property of
American inhabitants, on the fourth day of September, in the year 1783, from New
York, to wit, in the commonwealth of Virginia, and within the jurisdiction of the
court; and hath refused to withdraw with all convenient speed, his armies and
garrisons from the United States, and from every post and place within the same;
but hath, with force and violence, and in open violation of the said Treaty of Peace,
on the said third day of September, in the year 1783, and since, maintained his
armies and garrisons in the forts of Niagara and Detroit, which are posts and places
within the United States, and still doth maintain his armies and garrisons within the
said forts; and the Defendants further say, that the debt in the declaration
mentioned, or so much thereof, as is equal to the sum of 933 14. was not a bona
fide debt due and owing to the Plaintiff, on the said third day of September, 1783,
because the Defendant had, on the day of 1780, in Virginia as aforesaid, paid in part
thereof, the sum of 311 1-9 dollars, and afterwards obtained a certificate therefor,
according to the act of the General Assembly, entitled 'An act for sequestering
British property, enabling those indebted to British subjects, to pay off such debts,
and directing the proceedings in suits, where such subjects are parties,' which
payment was made while the said act continued in full force, without that the said
Treaty of Peace, and the Constitution of the United States, entitle the said Plaintiff to
maintain his said action, against the said Defendants, for so much of the said debt
in the declaration mentioned, as is equal to 933 14. and this they are ready to
verify: Wherefore they pray the judgment of the court, whether the Plaintiff ought to
have or maintain his action aforesaid, against them, for so much of the debt in the
declaration mentioned, as is equal to the said sum of 933 14.
The Defendants joined issue on the demurrer to the 3rd, 4th, and 5th pleas in bar:
And the Plaintiff having demurred to the Defendants rejoinder to the second
replication, issue was thereupon likewise joined.
On the demurrer to the Defendant's rejoinder to the Plaintiff's replication to the
second plea, judgment was given by the Circuit Court, for the Defendants, and that
as to so much of the debt in the declaration mentioned, as is in the said second plea
set forth, the Plaintiff take nothing by his bill: On which judgment, the present writ
of error was brought; but on [3 U.S. 199, 207] demurrer to the 3rd, 4th, and 5th
pleas, judgment was given for the Plaintiff; a Venire was awarded to try the issue in
fact on the first plea of payment; and on the trial a verdict and judgment were given
for the Plaintiff for 596 dollars, with interest at 5 per cent. from the 7th July, 1782,
and costs.
On the return of the record, the error assigned was, that judgment had been given
for the Defendants, instead of being given for the Plaintiff, upon his demurrer to

their rejoinder to the replication to the second plea. In nullo est erratum was
pleaded, and thereupon issue was joined.
The general question was whether by paying a debt due before the war, from an
American citizen to British subjects, into the loan office of Virginia, in pursuance of
the law of that state, the debtor was discharged from his creditor? And the
argument took the following general course. *
E. Tilghman, for the Plaintiff in error.
It is conceded that a debt was due from the Defendants to the Plaintiff, at the
commencement of the revolutionary war; and it has been decided, in the case of
Georgia versus Brailsford, ant. p. 1. that although the state had a power to suspend
the payment of such a debt, during the continuance of hostilities, yet that the
creditor's right to recover it, revived as an incident and consequence of the peace.
There is, indeed, no controverting the general right of a belligerent power to
confiscate the property of its enemy, in ordinary cases; though the modern policy of
nations abstains from the exercise of that right, in respect to debts. Vatt. B. 3. s. 77.
p. 484. But the relative situation of Great Britain and her colonies was of a peculiar
nature, widely different from the situation of the Grecian, or Roman colonies; and,
therefore, requiring a new and appropriate rule of action. At the time of the
revolution, the creditor and debtor were members of the same society; subjects of
the same empire. Had they belonged, originally, to distinct, independent states,
both would have anticipated, in the case of a war. an exercise of the power of
confiscation; but the event of a civil contest could not be reasonably contemplated,
nor provided for. We find, therefore, upon the law of positive authority, as well as
upon a principle of natural justice, that even the declaration of independence was
deemed to have no obligatory operation upon any inhabitant of the United States,
who did not choose, voluntarily to remain in the country, or to take an [3 U.S. 199,
208] oath of allegiance, to some member of the confederation. 1 Dall. Rep. 53. On
the declaration of independence, the American debtor might choose his political
party, but he could not dissolve his obligation to his British creditor; and if he had no
power to dissolve it himself, it follows that he could not communicate such a power,
to the society of which he became a member. Vatt. Pr. Dis. s. 5. 11. Besides, there
are, certainly, a variety of cases, to which the rigorous power of confiscation cannot,
and ought not to extend. Suppose a contract is formed in a neutral country,
between subjects of two belligerent powers, the debt thus incurred could hardly be
the object of confiscation. An action, it has been adjudged, may be maintained on a
ransom bill, even during the continuance of the war. Doug. 19. And. in general, it
may be stated, that capitulations, made in time of war, though they embrace the
security of debts, as well as other property, must be held sacred. Vatt. B. 3. s. 263.
264. p. 612. 613.
But supposing Virginia had the right of confiscation in the present instance, two
grounds for judicial enquiry will still remain to be explored: 1st, Whether an act of
the Legislature of that State has been passed, and so acted upon, as ever to have
created an impediment to the Plaintiff's recovering the debt in controversy? And
2nd. Whether such impediment, if it ever existed, has been lawfully removed?
1st. It does not appear, from the enacting clauses of the law of Virginia, which has
been pleaded, that the State had any intention to confiscate the British debts paid

into her treasury; and the preamble ( which, though it cannot controul, may be
advantageously employed to expound, the enacting clauses) is manifestly
inconsistent with such an intention. The money, when paid by the debtor into the
treasury, was, simply, to remain there, subject to the directions of the Legislature;
and as the debtor was not bound so to pay it, the provisions of the act could not
amount to a confiscation; but were merely an invitation to pay, with an implied
promise, that whoever accepted the terms of the invitation, should be indemnified
by the State. Nor was the invitation indiscriminately given to all debtors, but only to
those who were sued; from which the inference is irresistible, that whatever
responsibility the state meant herself to assume, there was no intention to
extinguish the responsibility of the Virginia debtor to the British creditor, The act of
the Virginia Legislature, passed the 3rd of May 1779, is in pari materia, and throws
light on the construction of the former act; for, there, when the Legislature meant to
interpose a bar to the recovery, they have in express terms declared it. Several
other acts have passed on the subject, to which it is merely necessary to refer: The
act of the 1st of [3 U.S. 199, 209]
May, 1780, repeals the act of the 20th of
October 1777, so far as regards the authority to pay debts into the treasury. The
acts of the 6th of May 1782, and 20th of October 1783, revive the authority of
making such payments in relation to British debts; and prevents the recovery by
British creditors. The act of the 3rd of January 1788, fixes the amount for which the
State will be liable on account of payments into the treasury; to wit, for the value of
the money at the time it was so paid, with interest.
2nd. But if any impediment ever existed to the recovery of the debt, it is removed
by the operation of the treaty between the United States and Great Britain,
Congress having a power to repeal all the acts of the several States, in order to
obtain peace; and the treaty made for that purpose being the supreme law of the
land. The fourth article declares that creditors on either side shall meet with no
lawful impediment to the recovery of debts heretofore contracted; and unless this
provision applies to cases like the present, it will be useless and nugatory. An
interpretation, which would render a clause in the treaty of no effect, ought not to
be admitted. Vatt. B. 2. s. 283. The fifth article expressly stipulates, that Congress
shall recommend the restoration of some parts of confiscated property, and a
composition as to other parts; but that 'all persons who have any interest in
confiscated lands, either by debts, marriage settlements, or otherwise, shall meet
with no lawful impediment in the prosecution of their just rights.' Both parties to the
treaty seemed to think that there had been no confiscation of debtsa; and debts
were the great object which the British commissioners wished to secure. Whatever
tends to produce equality in national compacts ought to be favoured; Vatt. B. 2. s.
301. and as the British government had thrown no impediment in the way of
recovering debts, the American should be presumed to have acted on the same
liberal principle, if any doubt arises upon the construction of the public acts. When a
statute is repealed, mesne acts are valid; but it is not so, when a subsequent act
declares a former one to be void. Jenk. 233. pl. 6. Had the treaty meant to obviate
only a part of the impediments, the meaning would have been expressed in
qualified terms. But as it could not be supposed, that, after the peace, laws would
be passed creating impediments to the recovery of British debts; the treaty cannot
be construed merely to intend to prevent the passing future laws, but to annihilate
the operation of such as were previously enacted. There is no such clause in the
treaties, which England

a Iredell, Justice. --The state of North Carolina did actually pass a confiscation law. [3
U.S. 199, 210] made at the same period with France, Spain, and Holland, and for
this obvious reason, that those countries had passed no law to impede the recovery
of British debts. A change of circumstances, a recognition, ex post facto, will often
impose an obligation, which may not, originally, be binding on the party: The debt
contracted by an infant, is obligatory on him, if he promises to pay it when of age.
The assumption of a certificated bankrupt, to satisfy a debt, which the certificate
would, otherwise, have discharged, affords a new cause of action. And the bare
acknowledgment of a debt, barred by the statute of limitations, is sufficient to
maintain an action against the debtor. So, in the present case, the treaty, operating
as a national compact, is a promise to remove every pre-existing bar to the
recovery of British debts; and, whatever may have been the previous state of
things, this is a paramount engagement, entered into by a competent authority,
upon an adequate consideration.
Marshall, (of Virginia) for the Defendant in error.
The case resolves itself into two general propositions: 1st, That the act of Assembly
of Virginia, is a bar to the recovery of the debt, independent of the treaty. 2nd, That
the treaty does not remove the bar.
I. That the act of Assembly of Virginia is a bar to the recovery of the debt,
introduces two subjects for consideration: 1st. Whether the Legislature had power to
extinguish the debt? 2nd. Whether the Legislature had exercised that power?
1st. It has been conceded, that independent nations have, in general, the right of
confiscation; and that Virginia, at the time of passing her law, was an independent
nation. But, it is contended, that from the peculiar circumstances of the war, the
citizens of each of the contending nations, having been members of the same
government, the general right of confiscation did not apply, and ought not to be
exercised. It is not, however, necessary for the Defendant in error to show a parallel
case in history; since, it is incumbent on those, who wish to impair the sovereignty
of Virginia, to establish on principle, or precedent, the justice of their exception.
That State being engaged in a war, necessarily possessed the powers of war; and
confiscation is one of those powers, weakening the party against whom it is
employed, and strengthening the party that employs it. War, indeed, is a state of
force; and no tribunal can decide between the belligerent powers. But did not
Virginia hazard as much by the war, as if she had never been a member of the
British empire? Did she not hazard more, from the very circumstance of its being a
civil war? It will be allowed, that nations have equal powers; and that America, in
her own tribunals at least, must from the 4th of July 1776, [3 U.S. 199, 211]
considered as independent a nation as Great Britain: then, what would have been
the situation of American property, had Great Britain been triumphant in the
conflict? Sequestration, confiscation and proscription would have followed in the
train of that event; and why should the confiscation of British property be deemed
less just in the event of the American triumph? The rights of war clearly exist
between members of the same Empire, engaged in a civil war. Vatt. B. 3. s. 292.
295. But, suppose a suit had been brought during the war by a British subject
against an American citizen, it could not have been supported; and if there was a
power to suspend the recovery, there must have been a power to extinguish the
debt: they are, indeed, portions of the same power, emanating from the same

source. The legislative authority of any country, can only be restrained by its own
municipal constitution: This is a principle that springs from the very nature of
society; and the judicial authority can have no right to question the validity of a law,
unless such a jurisdiction is expressly given by the constitution. It is not necessary
to enquire, how the judicial authority should act, if the Legislature were evidently to
violate any of the laws of God; but property is the creature of civil society, and
subject, in all respects, to the disposition and controul of civil institutions. There is
no weight in the argument, founded on what is supposed to be the understanding of
the parties at the place and time of contracting debts; for, the right of confiscation
does not arise from the understanding of individuals, in private transactions, but
from the nature and operation of government. Nor does it follow, that because an
individual has not the power of extinguishing his debts, the community, to which he
belongs, may not, upon principles of public policy, prevent his creditors from
recovering them. It must be repeated, that the law of property, in its origin and
operation, is the offspring of the social state; not the incident of a state of nature.
But the revolution did not reduce the inhabitants of America to a state of nature;
and, if it did, the Plaintiff's claim would be at an end. Other objections to the
doctrine are started: It is said, that a debt, which arises from a contract, formed
between the subjects of two belligerent powers, in a neutral country, cannot be
confiscated; but the society has a right to apply to its own use, the property of its
enemy, wherever the right of property accrued, and wherever the property itself
can be found. Suppose a debt had been contracted between two Americans, and
one of them had joined England, would not the right of confiscation extend to such
a debt? As to the case of the ransom bill, if the right of confiscation does not extend
to it, (which is, by no means, admitted) it must be on account of the peculiar nature
of the contract, implying a waver of the rights of [3 U.S. 199, 212] war. And the
validity of capitulations depends on the same principle. But, let it be supposed, that
a government should infringe the provisions of a capitulation, by imprisoning
soldiers, who had stipulated for a free return to their home, could an action of
trespass be maintained against the gaoler? No: the act of the government, though
disgraceful, would be obligatory on the judiciary department.
2nd, But it is now to be considered, whether, if the Legislature of Virginia had the
power of confiscation, they have exercised it? The third section of the act of
Assembly discharges the debtor; and, on the plain import of the term, it may be
asked, if he is discharged, how can he remain charged? The expression is, he shall
be discharged from the debt; and yet, it is contended, he shall remain liable to the
debt. Suppose the law had said, that the debtor should be discharged from the
commonwealth, but not from his creditor, would not the Legislature have betrayed
the extremest folly in such a proposition? and what man in his senses would have
paid a farthing into the treasury, under such a law? Yet, in violation of the
expressions of the act, this is the construction which is now attempted. It is,
likewise, contended, that the act of Assembly does not amount to a confiscation of
the debts paid into the treasury; and that the Legislature had no power, as between
creditors and debtors, to make a substitution, or commutation, in the mode of
payment. But what is a confiscation? The substance, and not the form, is to be
regarded. The state had a right either to make the confiscation absolute, or to
modify it as she pleased. If she had ordered the debtor to pay the money into the
treasury, to be applied to public uses; would it not have been, in the eye of reason,
a perfect confiscation? She has thought proper, however, only to authorise the

payment, to exonerate the debtor from his creditor, and to retain the money in the
treasury, subject to her own discretion, as to its future appropriation. As far as the
arrangement has been made, it is confiscatory in its nature, and must be binding on
the parties; though in the exercise of her discretion, the state might choose to
restore the whole, or any part, of the money to the original creditor. Nor is it
sufficient to say, that the payment was voluntary, in order to defeat the
confiscation. A law is an expression of the public will; which, when expressed, is not
the less obligatory, because it imposes no penalty. Banks, Canal Companies, and
numerous associations of a similar description, are formed on the principle of
voluntary subscription. The nation is desirous that such institutions should exist;
individuals are invited to subscribe on the terms of the law; and, when they have
subscribed, they are entitled to all the benefits, and are subject to all the
inconveniences of the association, although [3 U.S. 199, 213]
no penalties are
imposed. So, when the government of Virginia wished to possess itself of the debts
previously owing to British subjects, the debtors were invited to make the payment
into the treasury; and, having done so, there is no reason, or justice, in contending
that the law is not obligatory on all the world, in relation to the benefit, which it
promised as an inducement to the payment. If, subsequent to the act of 1777, a law
had been passed confiscating British debts, for the use of the state, with orders that
the Attorney General should sue all British debtors, could he have sued the
Defendants in error, as British debtors, after this payment of the debt into the
treasury? Common sense and common honesty revolt at the idea; and, yet, if the
British creditor retained any right or interest in the debt, the state would be entitled,
on principles of law, to recover the amount.
II. Having thus, then, established, that at the time of entering into the Treaty of
1783, the Defendant owed nothing to the Plaintiff; it is next to be enquired, whether
that treaty revived the debt in favour of the Plaintiff, and removed the bar to a
recovery, which the law of Virginia had interposed? The words of the fourth article of
the Treaty are, 'that creditors on either side, shall meet with no lawful impediment
to the recovery of the full value, in sterling money, of all bona fide debts heretofore
contracted.' Now, it may be asked, who are creditors? There cannot be a creditor
where there is not a debt; and British debts were extinguished by the act of
confiscation. The articles, therefore, must be construed with reference to those
creditors, who had bona fide debts, subsisting, in legal force, at the time of making
the Treaty; and the word recovery can have no effect to create a debt, where none
previously existed. Without discussing the power of Congress to take away a vested
right by treaty, the fair and rational construction of the instrument itself, is sufficient
for the Defendant's cause. The words ought, surely, to be very plain, that shall work
so evident a hardship, as to compel a man to pay a debt, which he had before
extinguished. The treaty, itself, does not point out any particular description of
persons, who were to be deemed debtors; and it must be expounded in relation to
the existing state of things. It is not true, that the fourth article can have no
meaning, unless it applies to cases like the present. For instance; there was a law of
Virginia, which prohibited the recovery of British debts, that had not been paid into
the treasury: these were bona fide subsisting debts; and the prohibition was a legal
impediment to the recovery, which the treaty was intended to remove. So, likewise,
in several other states, laws had been passed authorising a discharge of British
debts in paper money, or by a tender of property [3 U.S. 199, 214] at a valuation,
and the treaty was calculated to guard against such impediments to the recovery of

the sterling value of those debts. It appears, therefore, that at the time of making
the treaty, the state of things was such, that Virginia had exercised her sovereign
right of confiscation, and had actually received the money from the British debtors.
If debts thus paid were within the scope of the fourth article, those who framed the
article knew of the payment; and upon every principle of equity and law, it ought to
be presumed, that the recovery, which they contemplated, was intended against
the receiving state, not against the paying debtor. Virginia possessing the right of
compelling a payment for her own use, the payment to her, upon her requisition,
ought to be considered as a payment to the attorney, or agent, of the British
creditor. Nor is such a substitution a novelty in legal proceedings: a foreign
attachment is founded on the same principle. Suppose judgment had been obtained
against the Defendants in error, as Garnishee in a foreign attachment brought
against the Plaintiff in error, and the money had been paid, accordingly, to the
Plaintiff in the attachment; but it afterwards appeared that the Plaintiff in the
attachment had, in fact, no cause of action, having been paid his debt before he
commenced the suit: If the treaty had been made in such a state of things, which
would be the debtor contemplated by the fourth article, the Defendants in error,
who had complied with a legal judgment against them, or the Plaintiff in the
attachment, who had received the money? This act of Virginia must have been
known to the American and British commissioners; and, therefore, cannot be
repealed without plain and explicit expressions directed to that object. Besides, the
public faith ought to be preserved. The public faith was plighted by the act of
Virginia; and, as a revival of the debt in question, would be a shameful violation of
the faith of the state to her own citizens, the treaty should receive any possible
interpretation to avoid so dishonorable and so pernicious a consequence. It is
evident, that the power of the government, to take away a vested right, was
questionable in the minds of the American commissioners, since they would not
exercise that power in restoring confiscated real estate; and confiscated debts, or
other personal estate must come within the same rule. If Congress had the power of
divesting a vested right, it must have arisen from the necessity of the case; and if
the necessity had existed, the American commissioners, explicitly avowing it, would
have justified their acquiescence to the nation. But the commissioners could have
no motive to form a treaty such as the opposite construction supposes; for, if the
stipulation was indispensable to the attainment of peace, the object was national,
and so should be the [3 U.S. 199, 215]
payment of the equivalent: the
commissioners, in such case, would have agreed, at once, that the public should
pay the British debts; since the public must, on every principle of equity, be
answerable to the Virginia debtor, who is now said to be the victim. The case cited
from Jenkins, does not apply; as there is no article of the treaty, that declares the
law of Virginia void. See Old Law of Evidence 196.
Campbell, of Virginia, on the same side.
The questions to be discussed are these: 1st. Did the act of Assembly of Virginia
discharge the debtor? 2nd. Did any subsequent act, or law, of the government, recharge him?
I. The right of confiscation, in a time of war, is incontrovertibly established; Vatt. b.
3. c. 5. s. 77. and nothing but the conventional, or customary, law of nations, can
restrain the exercise of that general right. But the conventional, or customary, law
of nations is only obligatory on those nations by whom it is adopted. Vatt. Pret. Dise

s. 24. 25. 17. Vatt. b. 3. c. 28. s. 287. 292. Even in the English courts, indeed, the
confiscation law of Georgia has been adjudged to be valid. If, therefore, the right of
confiscation might be exercised by an individual state, nothing can more
emphatically prove its exercise, than the language of the act of Virginia. The act is a
discharge in express terms, saying, that 'the receipt of the proper officer shall
Discharge the payer from so much of his debt, as is paid into the treasury;' whereas
a confiscation of the debt, would only work a discharge by legal inference. To
restrict the meaning of the discharge to a discharge from the state, is absurd; for,
the state never had a charge against the debtor; or, if the state had a right to
charge him, another consequence, equally fatal to the Plaintiff's cause, would
ensue, that the right of the British creditor to charge him was extinguished; since
the debtor clearly could not be responsible to both.
II. In considering, whether any thing has been done by the Government, to revive
the charge, in favor of the British creditor, it is to be premised, that the state of
things, at the time of making the treaty, is to be held legitimate; and whatever
tends to change that state, is odious in the eye of the law. Vatt. B. 4. c. 2. s. 21. Ibid.
B. 2. c. 17. s. 305 As, therefore, by the law of nations, a payment under a
confiscation discharges a debtor, though if there had been no payment, the debt
would have revived at the peace; Byrk. c. 8. p. 177. de reb. bell. nothing short of an
express and explicit declaration of the treaty should be allowed so to alter the state
of things, as to revive a debt, that had been lawfully extinguished. If then the treaty
had been intended to alter the state of things, reason, equity, and law, concur in
supposing, that it would have been by a provision, [3 U.S. 199, 216] calling on
Virginia, who had received the money, to refund it in satisfaction of the claim of the
British creditor. Adverting to the words of the fourth article of the treaty, and thence
deducing a fair, legal, and consistent meaning, the claim of the Plaintiff cannot be
supported. It may not be improper to apply the word Creditors to British subjects;
but, it is contended, that the Virginia act interposes a lawful impediment, ( not an
impediment in fact, such as payment to the creditor himself) to the recovery of the
debt, which impediment the treaty intended to remove. The answer, however, is
conclusive, that this was not a debt at the time of making the treaty; and, therefore,
the expression, whatever may be its general import, cannot be applied to the case.
It is urged, likewise, that the words debts heretofore contracted, are peculiarly
descriptive of debts of the present class: but the words heretofore contracted,
cannot alter the nature and import of the word debt; and those words were
necessary to be inserted; because they ascertained the debts, which were, at all
events, to be paid in sterling money; debts contracted afterwards being left to the
lex loci, and liable to the tender laws, which the different states had made, or might
think proper to make. If, indeed the opposite construction prevails, then all debts,
previously contracted, in whatever manner they may have been extinguished, are
revived by the treaty. But, surely, obscure words ought not to be construed so as to
alter the existing state of things between the two nations, and involve thousands of
individual citizens in ruin. It is not now contended, that debts do not revive by the
peace; though the Commissioners, who formed the treaty, might entertain doubts
on the subject; and, therefore, provided specially for the case. Grotius B. 3. c. 9. s.
9. says, (though his commentator dissents) that debts are not, of course, revived by
a peace; and there are many instances of Conventions between nations, stipulating
for the revival. Bynk. de reb. bell. c. 8. p. 177. The treaty extends to British, as well
as to American, debtors; and as Britain had passed no act of confiscation, the article

was meant solely as a convention, that debts not paid to the public, should be
recoverable of the original creditor. To illucidate the subject, it is necessary to
inquire into the power of the Commissioners; for, it is not to be presumed, that they
were ignorant of their power, or that they meant to exceed it; and if one
construction will produce an effect, to which they were competent, while the other
construction will amount to a mere usurpation, the former ought certainly to be
adopted. Thus, Congress never was considered as a legislative body, except in
relation to those subjects expressly assigned to the Federal jurisdiction; and could at
no time, nor in any manner, repeal the laws of the several states, or sacrifice the
rights of individuals. The power of abrogating, [3 U.S. 199, 217] is as eminent as
the power of making laws; Vatt. B. 1. c.3.s.34.47. and even the powers of war and
peace may be limited by the fundamental law of the Society. Vatt. B. 4. c. 2.s.10.
The fundamental law of the Union, was declared in the articles of confederation; and
those articles, as well as the written constitutions of the several states, must have
been known to the commissioners on both sides, as the boundaries of the authority
of the American government itself, and of course of all authority derived from that
government. But the right of sacrificing individuals, even on the ground of public
necessity, belongs only to that power in a state, which is vested with the eminent
domain, a domain inseparable from empire. Vatt. B. 4. s. 12. Ibid. B. 1. c. 20. s. 244.
245. On the revolution, the eminent domain was vested in the people of America, in
their respective State Legislatures; and it could not be divested and transferred,
without an express grant by the same authority. The debates that arose in the
British Parliament on the subject of the treaty, show, likewise, that the British
Commissioners were sensible, that the power of the American Commissioners did
not extend to the repeal of any State law. On the faith of the Virginia law, many
citizens collected their estates from other hands, and paid them into the treasury;
and, therefore, even if the treaty requires a payment of those debts, the
responsibility ought only to attach upon the State. If the Virginia law had made a
direct and unqualified confiscation, there would be no doubt of its validity; but it
discharges the debtor as much as if it had been a confiscation, and being
discharged, it can be no reason to revive the debt, that the discharge was procured
by a voluntary payment. Upon the whole, the act of Assembly amounts,
substantially, to a confiscation; which means nothing more, than a bringing into the
public Treasury the confiscated property; and the State may, if she pleases, restore
it in that case, as well as in the case of a discretion expressly reserved, or in the
case of a forfeiture for treason, or felony.
Wilcocks, for the Plaintiff in error.
It is necessary, 1st, to ascertain the meaning of the acts of the Legislature of
Virginia; and 2nd, the operation of the treaty of peace, in relation to those acts.
I. That the Legislature of Virginia did not mean to confiscate debts, is evident from
the declaration contained in the preamble, that such a confiscation is not agreeable
to the custom of nations; and where the enacting clause is doubtful, the preamble
will furnish a key to the construction. After providing, therefore, for the
sequestration of real estate, the law proceeds merely to permit the payment of
British debts into the public Treasury. There is nothing compulsory on the debtor; all
[3 U.S. 199, 218] debtors are not enjoined to pay; and no debtor is restrained from
remitting to his British creditor. Even, indeed, if a bare sequestration had been
intended, there never could be terms more defective. The Legislature only says, if a

debtor chuses to pay his debt into the Treasury, he shall be indemnified; and, in a
subsequent act, when the State declares the amount for which she will be
responsible, (the value of the money paid with interest) she does not determine,
whether the payment by the American debtors, was a discharge from the British
creditors. To pay the British creditor in that way, would be manifestly unjust; but if
the American debtor is reimbursed the value of what he paid, with interest, he has
no right to complain.
II. In examining the effect of the treaty, if it is conceded, that the Virginia act
extinguished the debt, it may be assumed, that the commissioners had power to
enter into the treaty. That instrument, therefore, is the supreme law of the land:
and, upon the whole, it is highly favourable to America. Treaties ought to be
construed liberally; but it would be illiberal to construe this treaty, so as to prevent
the recovery of bona fide debts. The British Commissioners gave up a great deal;
but they were particularly anxious on two points, the property of the loyalists, and
the security of the British debts. It is objected, that the treaty does not make any
express mention of the repeal of State laws: but the laws interfering with the object
of the fourth article were so numerous, that, probably, the commissioners did not
know them all; and it was safest to resort to general expressions. The words
'heretofore contracted,' mean debts contracted before the revolution; and include
not only existing debts, at the time of forming the treaty, but all debts contracted
before that memorable epoch, though extinguished by the acts of State
Legislatures, without the consent, or co-operation, of the British creditors. The
words that 'creditors shall meet with no lawful impediment in the recovery of all
such debts,' mean, that when the creditors apply to a court of justice, no law shall
be pleaded in bar to a judgment for their debts. What else, indeed, could reasonably
be the object of the British Minister, who was bound to protect the commercial
interests of his nation, and who insisted on the insertion of the fourth article? Could
he mean to relinquish all debts paid into the public treasury of the different States?
Then, if all had been so paid, the article was nugatory. But the impediments referred
to, must have been the existing impediments, and not impediments to be
afterwards created; and the enforcement of the former would be, on general
principles, as unjust to the British creditor, as the introduction of the latter. Besides,
if the former description of impediments was not contemplated, British creditors
were in a worse predicament, [3 U.S. 199, 219]
than loyalists, owners of
confiscated real estate, in whose favor, it was stipulated, that a Congressional
recommendation should be made.
Lewis, for the Plaintiff in error.
The individuals of different nations enter into contracts with each other, upon a
presumption, that, in case of a war, debts will not be confiscated. The presumption
is founded upon the uniform practice of the monarchies of Europe; and the national
character of the American Republic is interested that a more rigorous policy should
not be introduced. Congress, indeed, never attempted the seizure of debts; and
very few of the States have passed confiscating laws. It is now, then, to be
enquired, 1st, Had the Legislature of Virginia a competent authority to extinguish
the debt? 2nd, If the Legislature had such an authority, has it been exercised? And
3rdly, if the authority was lawfully exercised, what is the effect of the treaty of
peace.

1st. If the power to confiscate debts existed, it existed in the United States, and not
in the individual states. It has been admitted, that Congress possessed the power of
war and peace; and that the right of confiscation emanates from that source. All
America was concerned in the war, and it seems naturally to follow, that all America
(not the constituent parts, respectively) was entitled to the emoluments of
confiscation. It is true, that when a civil war breaks out, each party is entitled to the
rights of war, as between independent nations; and, it is not denied, that Virginia
was vested, at the revolution, with all the eminent domain attached to empire,
which was not delegated to Congress, as the head of the confederation. Such was
the peculiar state of things, that although Virginia might, in any future war, have
acted as she pleased, in the war then subsisting she had no election; all the powers
of war and peace were vested in Congress, not in the legislatures of the several
states. When it is said, that even the British courts recognize the validity of a state
confiscation; it should be remembered, that the case alluded to, arose from a law of
treason, and the forfeiture for treason, properly belonged to the state of Georgia. 1
H. Bl. 148.9. So, when it is said, that the act of Virginia was passed, prior to the
completion of the articles of confederation, it is sufficient to answer, that the same
objection has already been over-ruled in Doane & Penhallow.* It is absurd to
suppose, that Congress and Virginia could, at the same time, possess the powers of
war and peace. The war was waged against all America, as one nation, or
community; and the peace was concluded on the same principles. Before the
revolution, the power of confiscation was vested in the King, not in the Parliament.
When the revolution commenced, conventions, committees of safety, and other
popular associations, [3 U.S. 199, 220] were formed, even while the legislatures of
the several states were in session. The people assumed themselves, in the first
instance, the powers of war and peace, but quickly and wisely vested them in
Congress. At what period, then, could the state legislatures assert that they
possessed those powers? All the property of the enemy, likewise, of whatever kind,
was booty of war, and belonged to the Union. The authorities say, that one
belligerent power may confiscate debts due from its subjects, to the subjects of the
other belligerent power; but it is no where said, that a member of any belligerent
power, a constituent part of the nation, possesses such authority. The eminent
domain of Virginia must, therefore, be confined to internal affairs; and it is not
sufficient to object, that the property of the debt in question, was within the limits of
her territory, and, therefore, was subject to her laws. The inference would be false,
even if the premises were true: but the premises are unfounded; for a debt is
always due where the creditor resides, except in the case of an obligation, which is
due, where the instrument is kept. 1 Roll. Abr. 908. pl. 1. 4. Ibid. 909. pl. 1. 7. Salk.
37. 4 Burn. Ecc. L. 157.
2nd & 3rd. On the second and third points, there can be but little added to the
arguments already advanced. If laws change according to the manners of times, as
reason and authority inculcate (1. L. Raym. 882.) the act of Virginia should be so
expounded as to conform to the modern law of nations, which is adverse to the
confiscation of debts. The right of sequestration may exist (and that is all the case
in the Old Law of Evidence, p. can prove) but Bynkershook says expressly, that a
debt not exacted, revives upon the peace; and, in the present instance, the
payment was surely voluntary, without force of any kind.
The Court, after great consideration, delivered their opinions, seriatim, as follow:

Chase, Justice.
The Defendants in error, on the day of July, 1774, passed their penal bond to Farrell
and Jones, for the payment of 2,976 11 6, of good British money; but the condition
of the bond, or the time of payment, does not appear on the record.
On the 20th of October, 1777, the legislature of the commonwealth of Virginia,
passed a law to sequester British property. In the third section of the law, it was
enacted, 'that it should be lawful for any citizen of Virginia, owing money to a
subject of Great Britain, to pay the same, or any part thereof, from time to time, as
he should think fit, into the loan office, taking thereout a certificate for the same, in
the name of the creditor, with an indorsement, under the hand of the commissioner
of the said office, expressing the name of the payer; and [3 U.S. 199, 221] shall
deliver such certificate to the governor and the council, whose receipt shall
discharge him from so much of the debt. And the governor and the council shall, in
like manner, lay before the General Assembly, once in every year, an account of
these certificates, specifying the names of the persons by, and for whom they were
paid; and shall see to the safe keeping of the same; subject to the future directions
of the legislature: provided, that the governor and the council may make such
allowance, as they shall think reasonable, out of the INTEREST of the money so paid
into the loan office, to the wives and children, residing in the state, of such creditor.
On the 26th of April, 1780, the Defendants in error, paid into the loan office of
Virginia, part of their debt, to wit, 3,111 1-9 dollars, equal to 933 14 0 Virginia
currency; and obtained a certificate from the commissioners of the loan office, and
a receipt from the governor and the council of Virginia, agreeably to the above, in
part recited law.
The Defendants in error being sued, on the above bond, in the Circuit Court of
Virginia, pleaded the above law, and the payment above stated, in bar of so much
of the Plaintiff's debt. The plaintiff, to avoid this bar, replied the fourth article of the
Definitive Treaty of Peace, between Great Britain and the United States, of the 3rd of
September, 1783. To this replication there was a general demurrer and joinder. The
Circuit Court allowed the demurrer, and the plaintiff brought the present writ of
error.
The case is of very great importance, not only from the property that depends on
the decision, but because the effect and operation of the treaty are necessarily
involved. I wished to decline sitting in the cause, as I had been council, some years
ago, in a suit in Maryland, in favour of American debtors; and I consulted with my
brethren, who unanimously advised me not to withdraw from the bench. I have
endeavored to divest myself of all former prejudices, and to form an opinion with
impartiality. I have diligently attended to the arguments of the learned council, who
debated the several questions, that were made in the cause, with great legal
abilities, ingenuity and skill. I have given the subject, since the argument, my
deliberate investigation, and shall, (as briefly as the case will permit,) deliver the
result of it with great diffidence, and the highest respect for those, who entertain a
different opinion. I solicit, and I hope I shall meet with, a candid allowance for the
many imperfections, which may be discovered in observations hastily drawn up, in
the intervals of attendance in court, and the consideration of other very important
cases.

The first point raised by the council for the Plaintiff in error was, 'that the legislature
of Virginia had no right to make [3 U.S. 199, 222] the law, of the 20th October,
1777, above in part recited. If this objection is established, the judgment of the
Circuit Court must be reversed; because it destroys the Defendants plea in bar, and
leaves him without defence to the Plaintiff's action.
This objection was maintained on different grounds by the Plaintiff's council. One of
them (Mr. Tilghman) contended, that the legislature of Virginia had no right to
confiscate any British property, because Virginia was part of the dismembered
empire of Great Britain, and the Plaintiff and Defendants were, all of them, members
of the British nation, when the debt was contracted, and therefore, that the laws of
independent nations do not apply to the case; and, if applicable, that the legislature
of Virginia was not justified by the modern law and practice of European nations, in
confiscating private debts. In support of this opinion, he cited Vattel Lib. 3. c. 5.
s.77, who expresses himself thus: 'The sovereign has naturally the same right over
what his subjects may be indebted to enemies. Therefore, he may confiscate debts
of this nature, if the term of payment happen in the time of war. But at present, in
regard to the advantage and safety of Commerce, all the sovereigns of Europe have
departed from this rigour; and, as this custom has been generally received, he, who
should act contrary to it, would injure the public faith; for strangers trusted his
subjects, only from a firm persuasion, that the general custom would be observed.'
The other council for the Plaintiff in error (Mr. Lewis) denied any power in the
Virginia legislature, to confiscate any British property, because all such power
belonged exclusively to Congress; and he contended, that if Virginia had a power of
confiscation, yet, it did not extend to the confiscation of debts by the modern law
and practice of nations.
I would premise that this objection against the right of the Virginia legislature to
confiscate British property, (and especially debts) is made on the part of British
subjects, and after the treaty of peace, and not by the government of the United
States. I would also remark, that the law of Virginia was made after the declaration
of independence by Virginia, and also by Congress; and several years before the
Confederation of the United States, which, although agreed to by Congress on the
15th of November, 1777, and assented to by ten states, in 1778, was only finally
completed and ratified on the 1st of March, 1781.
I am of opinion that the exclusive right of confiscating, during the war, all and every
species of British property, within the territorial limits of Virginia, resided only in the
Legislature of that commonwealth. I shall hereafter consider whether the law of the
20th of October 1777, operated to confiscate or extinguish [3 U.S. 199, 223] British
debts, contracted before the war. It is worthy of remembrance, that Delegates and
Representatives were elected, by the people of the several counties and
corporations of Virginia, to meet in general convention, for the purpose of framing a
NEW government, by the authority of the people only; and that the said Convention
met on the 6th of May, and continued in session until the 5th of July 1776; and, in
virtue of their delegated power, established a constitution, or form of government,
to regulate and determine by whom, and in what manner, the authority of the
people of Virginia was thereafter to be executed. As the people of that country were
the genuine source and fountain of all power, that could be rightfully exercised
within its limits; they had therefore an unquestionable right to grant it to whom they

pleased, and under what restrictions or limitations they thought proper. The people
of Virginia, by their Constitution or fundamental law, granted and delegated all their
Supreme civil power to a Legislature, and Executive, and a Judiciary; The first to
make; the second to execute; and the last to declare or expound, the laws of the
Commonwealth. This abolition of the Old Government, and this establishment of a
new one was the highest act of power, that any people can exercise. From the
moment the people of Virginia exercised this power, all dependence on, and
connection with Great Britain absolutely and forever ceased; and no formal
declaration of Independence was necessary, although a decent respect for the
opinions of mankind required a declaration of the causes, which impelled the
separation; and was proper to give notice of the event to the nations of Europe. I
hold it as unquestionable, that the Legislature of Virginia established as I have
stated by the authority of the people, was for ever thereafter invested with the
supreme and sovereign power of the state, and with authority to make any Laws in
their discretion, to affect the lives, liberties, and property of all the citizens of that
Commonwealth, with this exception only, that such laws should not be repugnant to
the Constitution, or fundamental law, which could be subject only to the control of
the body of the nation, in cases not to be defined, and which will always provide for
themselves. The legislative power of every nation can only be restrained by its own
constitution: and it is the duty of its courts of justice not to question the validity of
any law made in pursuance of the constitution. There is no question but the act of
the Virginia Legislature (of the 20th of October 1777) was within the authority
granted to them by the people of that country; and this being admitted, it is a
necessary result, that the law is obligatory on the courts of Virginia, and, in my
opinion, on the courts of the United States. If Virginia as a sovereign State, violated
the ancient or modern [3 U.S. 199, 224] law of nations, in making the law of the
20th of October 1777, she was answerable in her political capacity to the British
nation, whose subjects have been injured in consequence of that law. Suppose a
general right to confiscate British property, is admitted to be in Congress, and
Congress had confiscated all British property within the United States, including
private debts: would it be permitted to contend in any court of the United States,
that Congress had no power to confiscate such debts, by the modern law of nations?
If the right is conceded to be in Congress, it necessarily follows, that she is the
judge of the exercise of the right, as to the extent, mode, and manner. The same
reasoning is strictly applicable to Virginia, is considered a sovereign nation;
provided she had not delegated such power to Congress, before the making of the
law of October 1777, which I will hereafter consider.
In June 1776, the Convention of Virginia formally declared, that Virginia was a free,
sovereign, and independent state; and on the 4th of July, 1776, following, the United
States, in Congress assembled, declared the Thirteen United Colonies free and
independent states; and that as such, they had full power to levy war, conclude
peace, etc. I consider this as a declaration, not that the United Colonies jointly, in a
collective capacity, were independent states, etc. but that each of them was a
sovereign and independent state, that is, that each of them had a right to govern
itself by its own authority, and its own laws, without any control from any other
power upon earth.
Before these solemn acts of separation from the Crown of Great Britain, the war
between Great Britain and the United Colonies, jointly, and separately, was a civil
war; but instantly, on that great and ever memorable event, the war changed its

nature, and became a PUBLIC war between independent governments; and

immediately thereupon ALL the rights of public war (and all the other rights of an
independent nation) attached to the government of Virginia; and all the former
political connection between Great Britain and Virginia, and also between their
respective subjects, were totally dissolved; and not only the two nations, but all the
subjects of each, were in a state of war; precisely as in the present war between
Great Britain and France. Vatt. Lib. 3. c.18,s.292. to 295. lib.3.c. 5.s.70.72 and 73.
From the 4th of July, 1776, the American States were de facto, as well as de jure, in
the possession and actual exercise of all the rights of independent governments. On
the 6th of February, 1778, the King of France entered into a treaty of alliance with
the United States; and on the 8th of Oct. 1782, a treaty of Amity and Commerce
was concluded between the United States and the States General of the United
Provinces. I have ever [3 U.S. 199, 225] considered it as the established doctrine of
the United States, that their independence originated from, and commenced with,
the declaration of Congress, on the 4th of July, 1776; and that no other period can
be fixed on for its commencement; and that all laws made by the legislatures of the
several states, after the declaration of independence, were the laws of sovereign
and independent governments.
That Virginia was part of the dismembered British empire, can, in my judgment,
make no difference in the case. No such distinction is taken by Vattell (or any other
writer) but Vattell, when considering the rights of war between two parties
absolutely independent, and no longer acknowledging a common superior (precisely
the case in question) thus expresses himself, Lib. 3.c. 18 s.295. 'In such case, the
state is dissolved, and the war between the two parties, in every respect, is the
same with that of a public war between two different nations.' And Vattell denies,
that subjects can acquire property in things taken during a CIVIL war.
That the creditor and debtor were members of the same empire, when the debt was
contracted, cannot (in my opinion) distinguish the case, for the same reasons. A
most arbitrary claim was made by the parliament of Great Britain, to make laws to
bind the people of America, in all cases whatsoever, and the King of Great Britain,
with the approbation of parliament, employed, not only the national forces, but
hired foreign mercenaries to compel submission to this absurd claim of omnipotent
power. The resistance against this claim was just, and independence became
necessary; and the people of the United States announced to the people of Great
Britain, 'that they would hold them, as the rest of mankind, enemies in war, in
peace, friends.' On the declaration of independence, it was in the option of any
subject of Great Britain, to join their brethren in America, or to remain subjects of
Great Britain. Those who joined us were entitled to all the benefits of our freedom
and independence; but those who elected to continue subjects of Great Britain,
exposed themselves to any loss, that might arise therefrom. By their adhering to
the enemies of the United States, they voluntarily became parties to the injustice
and oppression of the British government; and they also contributed to carry on the
war, and to enslave their former fellow citizens. As members of the British
government, from their own choice, they became personally answerable for the
conduct of that government, of which they remained a part; and their property,
wherever found (on land or water) became liable to confiscation. On this ground,
Congress on the 24th of July, 1776, confiscated any British property taken on the

seas. See 2 Ruth. Inst. lib. 2.c.9.s.13.p.531.559. Vatt. [3 U.S. 199, 226]
lib.2.c.7.s.81.& c. 18.s.344.lib.3. c,5.s.74.& c. 9. s. 161 & 193.
The British creditor, by the conduct of his sovereign, became an enemy to the
commonwealth of Virginia; and thereby his debt was forfeitable to that government,
as a compensation for the damages of an unjust war.
It appears to me, that every nation at war with another is justifiable, by the general
and strict law of nations, to seize and confiscate all moveable property of its enemy,
(of any kind or nature whatsoever) wherever found, whether within its territory, or
not. Bynkershoek Q. 1. P. de rebus bellicis. Lib. 1. c. 7. p. 175. thus delivers his
opinion. 'Cum ea sit belli conditiout hostes sint, omni jure, spoliati proscriptique,
rationis est, quascunque res hostium, apud hostes inventas, Dominum mutare, et
Fisco cedere.' 'Since it is a condition of war, that enemies, by every right, may be
plundered, and seized upon, it is reasonable that whatever effects of the enemy are
found with us who are his enemy, should change their master, and be confiscated,
or go into the treasury.' S. P. Lee on Capt. c. 8.p. 111. S. P.2. Burn. p.209.s.12.p.219.
s.2.p.221s.11. Bynkershoek the same book, and chapter, page 177. thus expresses
himself: 'Quod dixi de actionibus recte publicandis ita demum obtinet. Si quod
subditi nostri hostibus nostris debent, princeps a subditis juis, revera exegerit: Si
exegerit recte solutum est, si non exegerit, pace facta, reviviscit jus pristinum
creditoris; quia occupatio, quae bello fit, magis in facto, quam in potestate juris
consistit. Nomina igitur, non exacta, tempore belli quodammodo intermori videntur,
sed per pacem, genere quodam postliminii, ad priorem dominum reverti. Secundum
hoec inter gentes fere convenit ut nominibus bello publicatis, pace deinde facta,
exasta censeantur periisse, et maneant extincta; non autem exacta reviviscant, et
restituantur veris creditoribus.'
'What I have said of things in action being rightfully confiscated, holds thus: If the
prince truly exacts from his subjects, what they owed to the enemy; if he shall have
exacted it, it is rightfully paid, if he shall not have exacted it, peace being made, the
former right of the creditor revives; because the seizure, which is made during war,
consists more in fact than in right. Debts, therefore, not exacted, seem as it were to
be forgotten in time of war, but upon peace, by a kind of postliminy, return to their
former proprietor. Accordingly, it is for the most part agreed among nations, that
things in action, being confiscated in war, the peace being made, those which were
paid are deemed to have perished, and remain extinct; but those not paid revive,
and are restored to their true creditors. Vatt. lib. 4. s.22. S. P. Lee on Capt. c.8.p
118.' [3 U.S. 199, 227] That this is the law of nations, as held in Great Britain,
appears from Sir Thomas Parker's Rep. p. 267 (II William 3rd) in which it was
determined, that choses in action belonging to an alien enemy are forfeitable to the
crown of Great Britain; but there must be a commission and inquisition to entitle the
crown; and if peace is concluded before inquisition taken, it discharges the cause of
forfeiture.
The right to confiscate the property of enemies, during war, is derived from a state
of war, and is called the rights of war. This right originates from self-preservation,
and is adopted as one of the means to weaken an enemy, and to strengthen
ourselves. Justice, also, is another pillar on which it may rest; to wit, a right to
reimburse the expence of an unjust war. Vatt. lib.3.c.8.s.138, & c.9.s.161.

But it is said, if Virginia had a right to confiscate British property, yet by the modern
law, and practice of European nations, she was not justified in confiscating debts
due from her citizens to subjects of Great Britain; that is, private debts. Vattell is the
only author relied on (or that can be found) to maintain the distinction between
confiscating private debts, and other property of an enemy. He admits the right to
confiscate such debts, if the term of payment happen in the time of war; but this
limitation on the right is no where else to be found. His opinion alone will not be
sufficient to restrict the right to that case only. It does not appear in the present
case, whether the time of payment happened before, or during the war. If this
restriction is just, the Plaintiff ought to have shown the fact. Vattell adds, 'at
present, in regard to the advantages and safety of commerce, all the sovereigns of
Europe have departed from this rigour; and this custom has been generally
received, and he who should act contrary to it (the custom) would injure the public
faith.' From these expressions it may be fairly inferred, that, by the rigour of the law
of nations, private debts to enemies might be confiscated, as well as any other of
their property; but that a general custom had prevailed in Europe to the contrary;
founded on commercial reasons. The law of nations may be considered of three
kinds, to wit, general, conventional, or customary. The first is universal, or
established by the general consent of mankind, and binds all nations. The second is
founded on express consent, and is not universal, and only binds those nations that
have assented to it. The third is founded on TACIT consent; and is only obligatory on
those nations, who have adopted it. The relaxation or departure from the strict
rights of war to confiscate private debts, by the commercial nations of Europe, was
not binding on the state of Virginia, because founded on custom only; and she was
at liberty to reject, or adopt the custom, as she pleased. [3 U.S. 199, 228] The
conduct of nations at war, is generally governed and limited by their exigencies and
necessities. Great Britain could not claim from the United States, or any of them,
any relaxation of the general law of nations, during the late war, because she did
not consider it, as a civil war, and much less as a public war, but she gave it the
odious name of rebellion; and she refused to the citizens of the United States the
strict rights of ordinary war.
It cannot be forgotten, that the Parliament of Great Britain, by statute (16 Geo.3.c.5.
in 1776) declared, that the vessels and cargoes belonging to the people of Virginia,
and the twelve other colonies, found and taken on the high seas, should be liable to
seizure and confiscation, as the property of open enemies; and, that the mariners
and crews should be taken and considered as having voluntarily entered into the
service of the King of Great Britain; and that the killing and destroying the persons
and property of the Americans, before the passing this act, was just and lawful: And
it is well known that, in consequence of this statute, very considerable property of
the citizens of Virginia was seized on the high seas, and confiscated; and that other
considerable property, found within that Commonwealth, was seized and applied to
the use of the British army, or navy. Vattel lib. 3.c.12. sec. 191. says, and reason
confirms his opinion, 'That whatever is lawful for one nation to do, in time of war, is
lawful for the other.' The law of nations is part of the municipal law of Great Britain,
and by her laws all moveable property of enemies, found within the kingdom, is
considered as forfeited to the crown, as the head of the nation; but if no inquisition
is taken to ascertain the owners to be alien enemies, before peace takes place, the
cause of forfeiture is discharged, by the peace ipso facto. Sir Thomas Parker's Rep.
pa.267. This doctrine agrees with Bynk. lib. 1.c.7. pa. 177. and Lee on Capt. ch.8.p.

118. that debts not confiscated and paid, revive on peace. Lee says, 'Debts,
therefore, which are not taken hold of, seem, as it were, suspended and forgotten in
time of war; but by a peace return to their former proprietor by a kind of postliminy.'
Mr. Lee, who wrote since Vattel, differs from him in opinion, that private debts are
not confiscable, pag. 114. He thus delivers himself: 'By the law of nations, Rights
and Credits are not less in our power than other goods; why, therefore, should we
regard the rights of war in regard to one, and not as to the other? And when nothing
occurs, which gives room for a proper distinction, the general law of nations ought
to prevail.' He gives many examples of confiscating debts, and concludes, (p. 119)
'All which prove, that not only actions, but all [3 U.S. 199, 229]
other things
whatsoever, are forfeited in time of war, and are often exacted.'
Great Britain does not consider herself bound to depart from the rigor of the general
law of nations, because the commercial powers of Europe wish to adopt a more
liberal practice. It may be recollected, that it is an established principle of the law of
nations, 'that the goods of a friend are free in an enemy's vessel; and an enemy's
goods lawful prize in the vessel of a friend.' This may be called the general law of
nations. In 1780 the Empress of Russia proposed a relaxation of this rigor of the
laws of nations, 'That all the effects belonging to the subjects of the belligerent
powers shall be free on board neutral vessels, except only contraband articles.' This
proposal was acceded to by the neutral powers of Sweden, Denmark, the States
General of the United Provinces, Prussia and Portugal; France and Spain, two of the
powers at war, did not oppose the principle, and Great Britain only declined to adopt
it, and she still adheres to the rigorous principle of the law of nations. Can this
conduct of Great Britain be objected to her as an uncivilized and barbarous
practice? The confiscating private debts by Virginia has been branded with those
terms of reproach, and very improperly in my opinion.
It is admitted, that Virginia could not confiscate private debts without a violation of
the modern law of nations, yet if in fact, she has so done, the law is obligatory on all
the citizens of Virginia, and on her Courts of Justice; and, in my opinion, on all the
Courts of the United States. If Virginia by such conduct violated the law of nations,
she was answerable to Great Britain, and such injury could only be redressed in the
treaty of peace. Before the establishment of the national government, British debts
could only be sued for in the state court. This, alone, proves that the several states
possessed a power over debts. If the crown of Great Britain had, according to the
mode of proceeding in that country, confiscated, or forfeited American debts, would
it have been permitted in any of the courts of Westminister Hall, to have denied the
right of the crown, and that its power was restrained by the modern law of nations?
Would it not have been answered, that the British nation was to justify her own
conduct; but that her courts were to obey her laws.
It appears to me, that there is another and conclusive ground, which effectually
precluded any objection, since the peace, on the part of Great Britain, as a nation,
or on the part of any of her subjects, against the right of Virginia to confiscate
British debts, or any other British property, during the war; even on the admission
that such confiscation was in violation of the ancient or modern law of nations. [3
U.S. 199, 230] If the Legislature of Virginia confiscated or extinguished the debt in
question, by the law of the 20th of October 1777, as the Defendants in error
contend, this confiscation or extinguishment, took place in 1777, fagrante Bello; and
the definitive treaty of peace was ratified in 1783. What effects flow from a treaty of

peace, even if the confiscation, or extinguishment of the debt was contrary to the
law of nations, and the stipulation in the 4th article of the treaty does not provide
for the recovery of the debt in question?
I apprehend that the treaty of peace abolishes the subject of the war, and that after
peace is concluded, neither the matter in dispute, nor the conduct of either party,
during the war, can ever be revived, or brought into contest again. All violencies,
injuries, or damages sustained by the government, or people of either, during the
war, are buried in oblivion; and all those things are implied by the very treaty of
peace; and therefore not necessary to be expressed. Hence it follows, that the
restitution of, or compensation for, British property confiscated, or extinguished,
during the war, by any of the United States, could only be provided for by the treaty
of peace; and if there had been no provision, respecting these subjects, in the
treaty, they could not be agitated after the treaty, by the British government, much
less by her subjects in courts of justice. If a nation, during a war, conducts herself
contrary to the law of nations, and no notice is taken of such conduct in the treaty
of peace, it is thereby so far considered lawful, as never afterwards to be revived, or
to be a subject of complaint.
Vattel lib. 4. sect. 21. p. 121. says, 'The state of things at the instant of the treaty, is
held to be legitimate, and any change to be made in it requires an express
specification in the treaty; consequently, all things not mentioned in the treaty, are
to remain as they were at the conclusion of it. All the damages caused during the
war are likewise buried in oblivion; and no plea is allowable for those, the reparation
of which is not mentioned in the treaty: They are looked on as if they had never
happened.' The same principle applies to injuries done by one nation to another, on
occasion of, and during the war. See Grotius lib. 3. c. 8. sect. 4.
The Baron De Wolfuis, 1222, says, 'De quibus nihil dictum ca manent quo sunt loco.'
Things of which nothing is said remain in the state in which they are.
It is the opinion of the celebrated and judicious Doctor Rutherforth, that a nation in
a just war may seize upon any moveable goods of an enemy, ( and he makes no
distinction as to private debts) but that whilst the war continues, the nation has, of
right, nothing but the custody of the goods taken; and [3 U.S. 199, 231] if the
nation has granted to private captors (as privateers) the property of goods taken by
them, and on peace, restitution is agreed on, that the nation is obliged to make
restitution, and not the private captors; and if on peace no restitution is stipulated,
that the full property of moveable goods, taken from the enemy during the war,
passes, by tacit consent, to the nation that takes them. This I collect as the
substance of his opinion in lib. 2. c. 9, from p. 558 to 573.
I shall conclude my observations on the right of Virginia to confiscate any British
property, by remarking, that the validity of such a law would not be questioned in
the Court of Chancery of Great Britain; and I confess the doctrine seemed strange to
me in an American Court of Justice. In the case of Wright and Nutt, Lord Chancellor
Thurlow declared, that he considered an act of the State of Georgia, passed in 1782,
for the confiscation of the real and personal estate of Sir James Wright, and also his
debts, as a law of an independent country; and concluded with the following
observation, that the law of every country, must be equally regarded in the Courts
of Justice of Great Britain, whether the law was a barbarous or civilized institution,

or wise or foolish. H. Black. Rep. p. 149. In the case of Folliot against Ogden, Lord
Loughborough, Chief Justice of the Court of Common Pleas, in delivering the
judgment of the court, declared 'that the act of the State of New York, passed in
1779, for attainting, forfeiting, and confiscating the real and personal estate of
Folliott, the Plaintiff, was certainly of as full validity, as the act of any independent
State. H. Black. Rep. p. 135. On a writ of error Lord Kenyon, Chief Justice of the
Court of King's Bench, and Judge Grose, delivered direct contrary sentiments; but
Judges Asburst and Buller were silent. 3 Term Rep. p. 726.
From these observations, and the authority of Bynkersboek, Lee, Burlamaque, and
Rutherforth, I conclude, that Virginia had a right, as a sovereign and independent
nation, to confiscate any British property within its territory; unless she had before
delegated that power to Congress, which Mr. Lewis contended she had done. The
proof of the allegation that Virginia had transferred this authority to Congress, lies
on those who make it; because if she had parted with such power it must be
conceded, that she once rightfully possessed it.
It has been enquired what powers Congress possessed from the first meeting, in
September 1774, until the ratification of the articles of confederation, on the 1st of
March, 1781? It appears to me, that the powers of Congress, during that whole
period, were derived from the people they represented, expressly given, through
the medium of their State Conventions, or State Legislatures; or that after they were
exercised they were [3 U.S. 199, 232] impliedly ratified by the acquiescence and
obedience of the people. After the confederacy was compleated, the powers of
Congress rested on the authority of the State Legislatures, and the implied
ratifications of the people; and was a government over governments. The powers of
Congress originated from necessity, and arose out of, and were only limited by,
events or, in other words, they were revolutionary in their very nature. Their extent
depended on the exigencies and necessities of public affairs. It was absolutely and
indispensably necessary that Congress should possess the power of conducting the
war against Great Britain, and therefore if not expressly given by all, (as it was by
some of the States) I do not hesitate to say, that Congress did rightfully possess
such power. The authority to make war, of necessity implies the power to make
peace; or the war must be perpetual. I entertain this general idea, that the several
States retained all internal sovereignty; and that Congress properly possessed the
great rights of external sovereignty: Among others, the right to make treaties of
commerce and alliance; as with France on the 6th of February 1778. In deciding on
the powers of Congress, and of the several States, before the confederation, I see
but one safe rule, namely, that all the powers actually exercised by Congress,
before that period were rightfully exercised, on the presumption not to be
controverted, that they were so authorized by the people they represented, by an
express, or implied grant; and that all the powers exercised by the State
Conventions or State Legislatures were also rightfully exercised, on the same
presumption of authority from the people. That Congress did not possess all the
powers of war is self-evident from this consideration alone, that she never
attempted to lay any kind of tax on the people of the United States, but relied
altogether on the State Legislatures to impose taxes, to raise money to carry on the
war, and to sink the emissions of all the paper money issued by Congress. It was
expressly provided, in the 8th article of the confederation, that 'all charges of war
(and all other expenses for the common defence and general welfare) and allowed
by Congress, shall be defrayed out of a common Treasury, to be supplied by the

several States in proportion to the value of the land in each State; and the taxes for
paying the said proportion, shall be levied by the Legislatures of the several States.'
In every free country the power of laying taxes is considered a legislative power
over the property and persons of the citizens; and this power the people of the
United States, granted to their State Legislatures, and they neither could, nor did
transfer it to Congress; but on the contrary they expressly stipulated that it should
remain with them. It is an incontrovertible fact that Congress never attempted to
confiscate [3 U.S. 199, 233] any kind of British property within the United States
(except what their army, or vessels of war captured) and thence I conclude that
Congress did not conceive the power was vested in them. Some of the states did
exercise this power, and thence I infer, they possessed it. On the 23rd of March, 3rd
of April, and 24th of July, 1776, Congress confiscated British property, taken on the
high seas.*
The second point made by the council for the Plaintiff in error was, 'if the legislature
of Virginia had a right to confiscate British debts, yet she did not exercise that right
by the act of the 20th October, 1777.' If this objection is well founded, the Plaintiff in
error must have judgment for the money covered by the plea of that law, and the
payment under it. The preamble recites, that the public faith, and the law and the
usage of nations require, that debts incurred, during the connexion with Great
Britain, should not be confiscated. No language can possibly be stronger to express
the opinion of the legislature of Virginia, that British debts ought not to be
confiscated, and if the words or effect and operation, of the enacting clause, are
ambiguous or doubtful, such construction should be made as not to extend the
provisions in the enacting clause, beyond the intention of the legislature, so clearly
expressed in the preamble; but if the words in the enacting clause, in their nature,
import, and common understanding, are not ambiguous, but plain and clear, and
their operation and effect certain, there is no room for construction. It is not an
uncommon case for a legislature, in a preamble, to declare their intention to provide
for certain cases, or to punish certain offences, and in enacting clauses to include
other cases, and other offences. But I believe very few instances can be found in
which the legislature declared that a thing ought not to be done, and afterwards did
the very thing they reprobated. There can be no doubt that strong words in the
enacting part of a law may extend it beyond the preamble. If the preamble is
contradicted by the enacting clause, as to the intention of the legislature, it must
prevail, on the principle that the legislature changed their intention.
I am of opinion, that the law of the 20th of October, 1777, and the payment in virtue
thereof, amounts either to a confiscation, or extinguishment, of so much of the debt
as was paid into the loan office of Virginia. 1st. The law makes it lawful for a citizen
of Virginia indebted to a subject of Great Britain [3 U.S. 199, 234] to pay the whole,
or any part, of his debt, into the loan office of that commonwealth. 2nd. It directs
the debtor to take a certificate of his payment, and to deliver it to the governor and
the council; and it declares that the receipt of the governor and the council for the
certificate shall discharge him (the debtor) from so much of the debt as he paid into
the loan office. 3rd. It enacts that the certificate shall be subject to the future
direction of the legislature. And 4th, it provides, that the governor and council may
make such allowance, as they shall think reasonable, out of the interest of the
money paid, to the wives and children, residing within the state, of such creditor.
The payment by the debtor into the loan office is made a lawful act. The public
receive the money, and they discharge the debtor, and they make the certificate

(which is the evidence of the payment) subject to their direction; and they
benevolently appropriate part of the money paid, to wit, the interest of the debt, to
such of the family of the creditor as may live within the state. All these acts are
plainly a legislative interposition between the creditor and debtor; annihilates the
right of the creditor; and is an exercise of the right of ownership over the money; for
the giving part to the family of the creditor, under the restriction of being residents
of the state, or to a stranger, can make no difference. The government of Virginia
had precisely the same right to dispose of the whole, as of part of the debt. Whether
all these acts amount to a confiscation of the debt, or not, may be disputed
according to the different ideas entertained of the proper meaning of the word
confiscation. I am inclined to think that all these acts, collectively considered, are
substantially a confiscation of the debt. The verb confiscate is derived from the
latin, con with, and Fiscus a basket, or hamper, in which the Emperor's treasure was
formerly kept. The meaning of the word to confiscate is to transfer property from
private to public use; or to forfeit property to the prince, or state. In the language of
Mr. Lee, (page 118) the debt was taken hold of; and this he considers as
confiscation. But if strictly speaking, the debt was not confiscated, yet it certainly
was extinguished as between the creditor and debtor; the debt was legally paid,
and of consequence extinguished. The state interfered and received the debt, and
discharged the debtor from his creditor; and not from the state, as suggested. The
debtor owed nothing to the state of Virginia, but she had a right to take the debt or
not at her pleasure. To say that the discharge was from the state, and not from the
debtor, implies that the debtor was under some obligation or duty to pay the state,
what he owed his British creditor. If the debtor was to remain charged to his
creditor, notwithstanding his payment; not one farthing would have been [3 U.S.
199, 235] paid into the loan office. Such a construction, therefore, is too violent
and not to be admitted. If Virginia had confiscated British debts, and received the
debt in question, and said nothing more, the debtor would have been discharged by
the operation of the law. In the present case, there is an express discharge on
payment, certificate, and receipt. It appears to me that the plea, by the Defendant,
of the act of Assembly, and the payment agreeably to its provisions, which is
admitted, is a bar to the plaintiff's action, for so much of his debt as he paid into the
loan office; unless the plea is avoided, or destroyed, by the Plaintiff's replication of
the fourth article of the Definitive Treaty of Peace, between Great Britain and the
United States, on the 3rd of September, 1783. The question then may be stated
thus: Whether the 4th article of the said treaty nullifies the law of Virginia, passed
on the 20th of October, 1777; destroys the payment made under it; and revives the
debt, and gives a right of recovery thereof, against the original debtor? It was
doubted by one of the counsel for the Defendants in error (Mr. Marshall) whether
Congress had a power to make a treaty, that could operate to annul a legislative act
of any of the states, and to destroy rights acquired by, or vested in individuals, in
virtue of such acts. Another of the Defendant's council (Mr. Campbell) expressly,
and with great zeal, denied that Congress possessed such power. But a few remarks
will be necessary to shew the inadmissibility of this objection to the power of
Congress. 1st. The legislatures of all the states, have often exercised the power of
taking the property of its citizens for the use of the public, but they uniformly
compensated the proprietors. The principle to maintain this right is for the public
good, and to that the interest of individuals must yield. The instances are many; and
among them are lands taken for forts, magazines, or arsenals; or for public roads, or
canals; or to erect towns. 2nd. The legislatures of all the states have often exercised

the power of divesting rights vested; and even of impairing, and, in some instances,
of almost annihilating the obligation of contracts, as by tender laws, which made an
offer to pay, and a refusal to receive, paper money, for a specie debt, an
extinguishment, to the amount tendered. 3rd. If the Legislature of Virginia could, by
a law, annul any former law; I apprehend that the effect would be to destroy all
rights acquired under the law so nullified. 4th. If the Legislature of Virginia could not
by ordinary acts of legislation, do these things, yet possessing the supreme
sovereign power of the state, she certainly could do them, by a treaty of peace; if
she had not parted with the power or making [3 U.S. 199, 236]
such treaty. If
Virginia had such power before she delegated it to Congress, it follows, that
afterwards that body possessed it. Whether Virginia parted with the power of
making treaties of peace, will be seen by a perusal of the ninth article of the
Confederation (ratified by all the states, on the 1st of March, 1781,) in which it was
declared, 'that the United States in Congress assembled, shall have the sole and
exclusive right and power of determining on peace, or war, except in the two cases
mentioned in the 6th article; and of entering into treaties and alliances, with a
proviso, when made, respecting commerce.' This grant has no restriction, nor is
there any limitation on the power in any part of the confederation. A right to make
peace, necessarily includes the power of determining on what terms peace shall be
made. A power to make treaties must of necessity imply a power, to decide the
terms on which they shall be made. A war between two nations can only be
concluded by treaty.
Surely, the sacrificing public, or private, property, to obtain peace cannot be the
cases in which a treaty would be void. Vatt. lib. 2 c. 12.s. 160. 161. p. 173. lib. 6.
c.2. s. 2. It seems to me that treaties made by Congress, according to the
Confederation, were superior to the laws of the states; because the Confederation
made them obligatory on all the states. They were so declared by Congress on the
13th of April, 1787; were so admitted by the legislatures and executives of most of
the states; and were so decided by the judiciary of the general government, and by
the judiciaries of some of the state governments.
If doubts could exist before the establishment of the present national government,
they must be entirely removed by the 6th article of the Constitution, which provides
'That all treaties made, or which shall be made, under the authority of the United
States, shall be the Supreme law of the land; and the Judges in every State shall be
bound thereby, any thing in the Constitution, or laws, of any State to the contrary
notwithstanding.' There can be no limitation on the power of the people of the
United States. By their authority the State Constitutions were made, and by their
authority the Constitution of the United States was established; and they had the
power to change or abolish the State Constitutions, or to make them yield to the
general government, and to treaties made by their authority. A treaty cannot be the
Supreme law of the land, that is of all the United States, if any act of a State
Legislature can stand in its way. If the Constitution of a State (which is the
fundamental law of the State, and paramount to its Legislature) must give way to a
treaty, and fall before it; can it be questioned, whether the less power, an act [3
U.S. 199, 237] of the State Legislature, must not be prostrate? It is the declared will
of the people of the United States that every treaty made, by the authority of the
United States, shall be superior to the Constitution and laws of any individual State;
and their will alone is to decide. If a law of a State, contrary to a treaty, is not void,
but voidable only by a repeal, or nullification by a State Legislature, this certain

consequence follows, that the will of a small part of the United States may controul
or defeat the will of the whole. The people of America have been pleased to declare,
that all treaties made before the establishment of the National Constitution, or laws
of any of the States, contrary to a treaty, shall be disregarded.
Four things are apparent on a view of this 6th article of the National Constitution.
1st. That it is Retrospective, and is to be considered in the same light as if the
Constitution had been established before the making of the treaty of 1783. 2nd.
That the Constitution, or laws, of any of the States so far as either of them shall be
found contrary to that treaty are by force of the said article, prostrated before the
treaty. 3rd. That consequently the treaty of 1783 has superior power to the
Legislature of any State, because no Legislature of any State has any kind of power
over the Constitution, which was its creator. 4thly. That it is the declared duty of the
State Judges to determine any Constitution, or laws of any State, contrary to that
treaty (or any other) made under the authority of the United States, null and void.
National or Federal Judges are bound by duty and oath to the same conduct.*
The argument, that Congress had not power to make the fourth article of the treaty
of peace, if its intent and operation was to annul the laws of any of the States, and
to destroy vested rights (which the Plaintiff's Council contended to be the object and
effect of the fourth article) was unnecessary, but on the supposition that this court
possess a power to decide, whether this article of the treaty is within the authority
delegated to that body, by the articles of confederation. Whether this court
constitutionally possess such a power is not necessary now to determine, because I
am fully satisfied that Congress were invested with the authority to make the
stipulation in the fourth article. If the court possess a power to declare treaties void,
I shall never exercise it, but in a very clear case indeed. One further remark will
shew how very circumspect the court ought to be before they would decide against
the right of Congress to make the stipulation objected to. If Congress had no [3 U.S.
199, 238] power (under the confederation) to make the fourth article of the treaty,
and for want of power that article is void, would it not be in the option of the crown
of Great Britain to say, whether the other articles, in the same treaty, shall be
obligatory on the British nation?
I will now proceed to the consideration of the treaty of 1783. It is evident on a
perusal of it what were the great and principal objects in view by both parties. There
were four on the part of the United States, to wit. 1st. An acknowledgment of their
independence, by the crown of Great Britain. 2nd. A settlement of their western
bounds. 3rd. The right of fishery: and 4thly. The free navigation of the Mississippi.
There were three on the part of Great Britain, to wit, 1st. A recovery by British
Merchants, of the value in sterling money, of debts contracted, by the citizens of
America, before the treaty. 2nd. Restitution of the confiscated property of real
British subjects, and of persons residents in districts in possession of the British
forces, and who had not borne arms against the United States; and a conditional
restoration of the confiscated property of all other persons: and 3rdly. A prohibition
of all future confiscations, and prosecutions. The following facts were of the most
public notoriety, at the time when the treaty was made, and therefore must have
been very well known to the gentlemen who assented to it. 1st. That British debts,
to a great amount, had been paid into some of the State Treasuries, or loan offices,
in paper money of very little value, either under laws confiscating debts, or under
laws authorising payment of such debts in paper money, and discharging the

debtors. 2nd. That tender laws had existed in all the states; and that by some of
those laws, a tender and a refusal to accept, by principal or factor, was declared an
extinguishment of the debt. From the knowledge that such laws had existed there
was good reason to fear that similar laws, with the same or less consequences,
might be again made, (and the fact really happened) and prudence required to
guard the British creditor against them. 3rd. That in some of the States property, of
any kind, might be paid, at an appraisement, in discharge of any execution. 4th.
That laws were in force in some of the States, at the time of the treaty, which
prevented suits by British creditors. 5th. That laws were in force in other of the
States, at the time of the treaty, to prevent suits by any person for a limited time.
All these laws created legal impediments, of one kind or another, to the recovery of
many British debts, contracted before the war; and in many cases compelled the
receipt of property instead of gold and silver.
To secure the recovery of British debts, it was by the latter part of the 5th article,
agreed as follows, 'That all persons [3 U.S. 199, 239] who have any interest in
confiscated lands, by DEBTS, should meet with no lawful impediment in the
prosecution of their just rights.' This provision clearly relates to debts secured by
mortgages on lands in see simple, which were afterwards confiscated; or to debts
on judgments, which were a lien on lands, which also were afterwards confiscated,
and where such debts on mortgages, or judgments, had been paid into the State
Treasuries, and the debtors discharged. This stipulation was absolutely necessary if
such debts were intended to be paid. The pledge, or security by lien, had been
confiscated and sold. British subjects being aliens, could neither recover the
possession of lands by ejectment, nor foreclose the equity of redemption; nor could
they claim the money secured by a mortgage, or have the benefit of a lien from a
judgment, if the debtor had paid his debt into the Treasury, and been discharged. If
a British subject, in either of those cases, prosecuted his just right, it could only be
in a court of justice, and if any of the above causes were set up as a lawful
impediment, the courts were bound to decide, whether this article of the treaty
nullified the laws confiscating the lands, and also the purchases made under them,
or the laws authorizing payment of such debts to the State; or whether aliens were
enabled, by this article, to hold lands mortgaged to them before the war. In all these
cases, it seems to me, that the courts, in which the cases arose, were the only
proper authority to decide, whether the case was within this article of the treaty,
and the operation and effect of it. One instance among many will illustrate my
meaning. Suppose a mortgagor paid the mortgage money into the public Treasury,
and afterwards sold the land, would not the British creditor, under this article, be
entitled to a remedy against the mortgaged lands?
The fourth article of the treaty is in these words: 'It is agreed that creditor, on either
side, shall meet with no lawful impediment to the recovery of the full value, in
sterling money, of all bona fide debts, heretofore contracted.'
Before I consider this article of the treaty, I will adopt the following remarks, which I
think applicable, and which may be found in Dr. Rutherforth and Vattel. (2 Ruth. 307
to 315. Vattel lib. 2. c. 17. sect, 263 and 271.) The intention of the framers of the
treaty, must be collected from a view of the whole instrument, and from the words
made use of by them to express their intention, or from probable or rational
conjectures. If the words express the meaning of the parties plainly, distinctly, and
perfectly, there ought to be no other means of interpretation; but if the words are

obscure, or ambiguous, or imperfect, recourse must be had to other means of

interpretation, and in these three cases, we must collect the meaning from the
words, [3 U.S. 199, 240] or from probable or rational conjectures, or from both.
When we collect the intention from the words only, as they lie in the writing before
us, it is a literal interpretation; and indeed if the words, and the construction of a
writing, are clear and precise, we can scarce call it interpretation to collect the
intention of the writer from thence. The principal rule to be observed in literal
interpretation, is to follow that sense, in respect both of the words, and the
construction, which is agreeable to common use.
If the recovery of the present debt is not within the clear and manifest intention and
letter of the fourth article of the treaty, and if it was not intended by it to annul the
law of Virginia, mentioned in the plea, and to destroy the payment under it, and to
revive the right of the creditor against his original debtor; and if the treaty cannot
effect all these things, I think the court ought to determine in favour of the
Defendants in error. Under this impression, it is altogether unnecessary to notice the
several rules laid down by the Council for the Defendants in error, for the
construction of the treaty.
I will examine the fourth article of the treaty in its several parts; and endeavour to
affix the plain and natural meaning of each part.
To take the fourth article in order as it stands.
1st. 'It is agreed,' that is, it is expressly contracted; and it appears from what
follows, that certain things shall not take place. This stipulation is direct. The
distinction is self-evident, between a thing that shall not happen, and an agreement
that a third power shall prevent a certain thing being done. The first is obligatory on
the parties contracting. The latter will depend on the will of another; and although
the parties contracting, had power to lay him under a moral obligation for
compliance, yet there is a very great difference in the two cases. This diversity
appears in the treaty.
2nd. 'That creditors on either side,' without doubt meaning British and American
creditors.
3rd. 'Shall meet with no lawful impediment,' that is, with no obstacle (or bar) arising
from the common law, or acts of Parliament, or acts of Congress, or acts of any of
the States, then in existence, or thereafter to be made, that would, in any manner,
operate to prevent the recovery of such debts, as the treaty contemplated. A lawful
impediment to prevent a recovery of a debt can only be matter of law pleaded in
bar to the action. If the word lawful had been omitted, the impediment would not be
confined to matter of law. The prohibition that no lawful impediment shall be
interposed, is the same as that all lawful impediments shall be removed. The
meaning cannot be satisfied by the removal of one impediment, and leaving
another; and a [3 U.S. 199, 241] fortiori by taking away the less and leaving the
greater. These words have both a retrospective and future aspect.
4th. 'To the recovery,' that is, to the right of action, judgment, and execution, and
receipt of the money, without impediments in courts of justice, which could only be
by plea, (as in the present case) or by proceedings, after judgment, to compel
receipt of paper money, or property, instead of sterling money. The word recovery is

very comprehensive, and operates, in the present case, to give remedy from the
commencement of suit, to the receipt of the money.
5th. 'In the full value in sterling money,' that is, British creditors shall not be obliged
to receive paper money, or property at a valuation, or any thing else but the full
value of their debts, according to the exchange with Great Britain. This provision is
clearly restricted to British debts, contracted before the treaty, and cannot relate to
debts contracted afterwards, which would be dischargeable according to contract,
and the laws of the State where entered into. This provision has also a future aspect
in this particular, namely, that no lawful impediment, no law of any of the States
made after the treaty, shall oblige British creditors to receive their debts, contracted
before the treaty, in paper money, or property at appraisement, or in any thing but
the value in sterling money. The obvious intent of these words was to prevent the
operation of past and future tender laws; or past and future laws, authorizing the
discharge of executions for such debts by property at a valuation.
6th. 'Of all bona fide debts,' that is, debts of every species, kind, or nature, whether
by mortgage, if a covenant therein for payment; or by judgments, specialties, or
simple contracts. But the debts contemplated were to be bona fide debts, that is,
bona fide contracted before the peace, and contracted with good faith, or honestly,
and without covin, and not kept on foot fraudulently. Bona fide is a legal technical
expression; and the law of Great Britain and this country has annexed a certain idea
to it. It is a term used in statutes in England, and in acts of Assembly of all the
States, and signifies a thing done really, with a good faith, without fraud, or deceit,
or collusion, or trust. The words bona fide are restrictive, for a debt may be for a
valuable consideration, and yet not bona fide. A debt must be bona fide at the time
of its commencement, or it never can become so afterwards. The words bona fide,
were not prefixed to describe the nature of the debt at the date of the treaty, but
the nature of the debt at the time it was contracted. Debts created before the war,
were almost the only debts in the contemplation of the treaty; although debts
contracted during the war were covered by the general provision, taking in debts
from the most distant period of time, [3 U.S. 199, 242] to the date of the treaty.
The recovery, where no lawful impediments were to be interposed, was to have two
qualifications: 1st. The debts were to be bona fide contracted; and, 2nd, they were
to be contracted before the peace.
7th. 'Heretofore contracted,' that is, entered into at any period of time before the
date of the treaty; without regard to the length or distance of time. These words are
descriptive of the particular debts that might be recovered; and relate back to the
time such debts were contracted. The time of the contract was plainly to designate
the particular debts that might be recovered. A debt entered into during the war,
would not have been recoverable, unless under this description of a debt contracted
at any time before the treaty.
If the words of the fourth article taken separately, truly bear the meaning I have
given them, their sense collectively, cannot be mistaken, and must be the same.
The next enquiry is, whether the debt in question, is one of those, described in this
article. It is very clear that the article contemplated no debts but those contracted
before the treaty; and no debts but only those to the recovery whereof some lawful
impediment might be interposed. The present debt was contracted before the war,

and to the recovery of it a lawful impediment, to wit, a law of Virginia and payment
under it, is pleaded in bar. There can be no doubt that the debt sued for, is within
the description, if I have given a proper interpretation of the words. If the treaty had
been silent as to debts, and the law of Virginia had not been made, I have already
proved that debts would, on peace, have revived by the law of nations. This alone
shows that the only impediment to the recovery of the debt in question, is the law
of Virginia, and the payment under it; and the treaty relates to every kind of legal
impediment.
But it is asked, did the fourth article intend to annul a law of the states? and destroy
rights acquired under it?
I answer, that the fourth article did intend to destroy all lawful impediments, past
and future; and that the law of Virginia, and the payment under it, is a lawful
impediment; and would bar a recovery, if not destroyed by this article of the treaty.
This stipulation could not intend only to repeal laws that created legal impediments,
to the recovery of the debt (without respect to the mode of payment) because the
mere repeal of a law would not destroy acts done, and rights acquired, under the
law, during its existence and before the repeal. This right to repeal was only
admitted by the council for the Defendants in error, because a repeal would not
affect their case; but on the same ground that a treaty can repeal a law of the state,
it can nullify it. I have already proved, that a treaty can totally annihilate [3 U.S.
199, 243]
any part of the Constitution of any of the individual states, that is
contrary to a treaty. It is admitted that the treaty intended and did annul some laws
of the states, to wit, any laws, past or future, that authorised a tender of paper
money to extinguish or discharge the debt, and any laws, past or future, that
authorised the discharge of executions by paper money, or delivery of property at
appraisement; because if the words sterling money have not this effect, it cannot be
shewn that they have any other. If the treaty could nullify some laws, it will be
difficult to maintain that it could not equally annul others.
It was argued, that the fourth article was necessary to revive debts which had not
been paid, as it was doubtful, whether debts not paid would revive on peace by the
law of nations. I answer, that the fourth article was not necessary on that account,
because there was no doubt that debts not paid do revive by the law of nations; as
appears from Bynkershock, Lee, and Sir Thomas Parker. And if necessary, this article
would not have this effect, because it revives no debts, but only those to which
some legal impediment might be interposed, and there could be no legal
impediment, or bar, to the recovery, after peace, of debts not paid, during the war
to the state.
It was contended, that the provision is, that CREDITORS shall recover, etc. and there
was no creditor at the time of the treaty, because there was then no debtor, he
having been legally discharged. The creditors described in the treaty, were not
creditors generally, but only those with whom debts had been contracted, at some
time before the treaty; and is a description of persons, and not of their rights. This
adhering to the letter, is to destroy the plain meaning of the provision; because, if
the treaty does not extend to debts paid into the state treasuries, or loan offices, it
is very clear that nothing was done by the treaty as to those debts, not even so
much as was stipulated for Royalists, and Refugees, to wit, a recommendation of
restitution. Further, by this construction, nothing was done for British creditors,

because the law of nations secured a recovery of their debts, which had not been
confiscated and paid to the states; and if the debts paid in paper money, of little
value, into the state treasuries, or loan offices, were not to be paid to them, the
article was of no kind of value to them, and they were deceived. The article relates
either to debts not paid, or, to debts paid into the treasuries, or loan offices. It has
no relation to the first, for the reasons above assigned; and if it does not include the
latter it relates to nothing.
It was said that the treaty secured British creditors from payment in paper money.
This is admitted, but it is by force [3 U.S. 199, 244] and operation of the words, 'in
sterling money,' but then the words, 'heretofore contracted,' are to have no effect
whatsoever; and it is those very words, and those only, that secure the recovery of
the debts, paid to the states; because no lawful impediment is to be allowed to
prevent the recovery of debts contracted at any time before the treaty.
But it was alledged, that the fourth article only stipulates, that there shall be no
lawful impediment, etc. but that a law of the state was first necessary to annul the
law creating such impediment; and that the state is under a moral obligation to
pass such a law; but until it is done, the impediment remains.
I consider the fourth article in this light, that it is not a stipulation that certain acts
shall be done, and that it was necessary for the legislatures of individual states, to
do those acts; but that it is an express agreement, that certain things shall not be
permitted the American courts of justice; and that it is a contract, on behalf of those
courts, that they will not allow such acts to be pleaded in bar, to prevent a recovery
of certain British debts. 'Creditors are to meet with no lawful impediment, etc.' As
creditors can only sue for the recovery of their debts, in courts of justice; and it is
only in courts of justice that a legal impediment can be set up by way of plea, in bar
of their actions; it appears to me, that the courts are bound to overrule every such
plea, if contrary to the treaty. A recovery of a debt can only be prevented by a plea
in bar to the action. A recovery of a debt in sterling money, can only be prevented
by a like plea in bar to the action, as tender and refusal, to operate as an
extinguishment. After judgment, payment thereof in sterling money can only be
prevented by some proceedings under some law, that authorises the debtor to
discharge an execution in paper money, or in property, at a valuation. In all these,
and similar cases, it appears to me, that the courts of the United States are bound,
by the treaty, to interfere. No one can doubt that a treaty may stipulate, that certain
acts shall be done by the Legislature; that other acts shall be done by the
Executive; and others by the Judiciary. In the sixth article it is provided, that no
future prosecutions shall be commenced against any person, for or by reason of the
part he took in the war. Under this article the American courts of justice discharged
the prosecutions, and the persons, on receipt of the treaty, and the proclamation of
Congress. 1 Dall. Rep. 233.
If a law of the State to annul a former law was first necessary, it must be either on
the ground that the treaty could not annul any law of a State; or that the words
used in the treaty were not explicit or effectual for that purpose. Our Federal
Constitution establishes the power of a treaty over the constitution [3 U.S. 199, 245]
and laws of any of the States; and I have shown that the words of the fourth article
were intended, and are sufficient to nullify the law of Virginia, and the payment
under it. It was contended that Virginia is interested in this question, and ought to

compensate the Defendants in error, if obliged to pay the Plaintiff under the treaty.
If Virginia had a right to receive the money, which I hope I have clearly established,
by what law is she obliged to return it? The treaty only speaks of the original debtor,
and says nothing about a recovery from any of the States. It was said that the
defendant ought to be fully indemnified, if the treaty compels him to pay his debt
over again; as his rights have been sacrificed for the benefit of the public. That
Congress had the power to sacrifice the rights and interests of private citizens to
secure the safety or prosperity of the public, I have no doubt; but the immutable
principles of justice; the public faith of the States, that confiscated and received
British debts, pledged to the debtors; and the rights of the debtors violated by the
treaty; all combine to prove, that ample compensation ought to be made to all the
debtors who have been injured by the treaty for the benefit of the public. This
principle is recognized by the Constitution, which declares, 'that private property
shall not be taken for public use without just compensation'. See Vattel. lib. 1. c. 20.
s. 244. Although Virginia is not bound to make compensation to the debtors, yet it
evident that they ought to be indemnified, and it is not to be supposed, that those
whose duty it may be to make the compensation, will permit the rights of our
citizens to be sacrificed to a public object, without the fullest indemnity. On the best
investigation I have been able to give the fourth article of the treaty, I cannot
conceive, that the wisdom of men could express their meaning in more accurate
and intelligible words, or in words more proper and effectual to carry their intention
into execution. 2 Am satisfied, that the words, in their natural import, and common
use, give a recovery to the British creditor from his original debtor of the debt
contracted before the treaty, notwithstanding the payment thereof into the public
treasuries, or loan offices, under the authority of any State law; and, therefore, I am
of opinion, that the judgment of the Circuit Court ought to be reversed, and that
judgment ought to be given, on the demurrer, for the Plaintiff in error; with the costs
in the Circuit Court, and the costs of the appeal.
Paterson, Justice. The present suit is instituted on a bond bearing date the 7th of
July 1774, and executed by Daniel Lawrence Hylton & Co. and Francis Eppes,
citizens of the State of Virginia, to Joseph Farrel and William Jones, subjects [3 U.S.
199, 246] of the king of Great Britain, for the payment of 2,976 11s. 6d. British, or
sterling, money.
The Defendants, among other pleas, pleaded,
1st. Payment; on which issue is joined.
2nd. That 3111 1-9 dollars, equal to 933 14s. od. part of the debt mentioned in the
declaration, were, on the 26th of April 1780, paid by them into the loan office of
Virginia pursuant to an act of that State, passed the 20th of October 1777, entitled,
'An act for sequestering British property, enabling those indebted to British subjects
to pay off such debts, and directing the proceedings in suits where such subjects are
parties'. The material section of the act is recited in the plea.
To this plea the Plaintiffs reply, and set up the fourth article of the treaty, made the
3rd. of September 1783, between the United States and his Britannic Majesty, and
the Constitution of the United States making treaties the supreme law of the land.

The rejoinder sets forth, that the debt in the declaration mentioned, or so much
thereof as is equal to the sum of 933 14s. od. was not a bona fide debt due and
owing to the Plaintiffs on the 3rd of September 1783, because the Defendants had,
on the 26th of April 1780, paid, in part thereof, the sum of 3111 1-9 dollars into the
loan office of Virginia, and obtained a certificate and receipt therefor pursuant to the
directions of the said act; without that, that the said treaty of peace, and the
Constitution of the United States entitle the Plaintiffs to maintain their action
against the Defendants for so much of the said debt in the declaration mentioned as
is equal to 933 14s.
To this rejoinder the Plaintiffs demur.
The defendants join in demurrer.
On this issue in law judgment was entered for the Defendants in the Circuit Court
for the District of Virginia. A Writ of Error has been brought, and the general errors
are assigned.
The question is, whether the judgment rendered in the Circuit Court be erroneous? I
shall not pursue the range of discussion, which was taken by the Counsel on the
part of the Plaintiffs in error. I do not deem it necessary to enter on the question,
whether the Legislature of Virginia had authority to make an act, confiscating the
debts due from its citizens to the subjects of the king of Great Britain, or whether
the authority in such case was exclusively in Congress. I shall read and make a few
observations on the act, which has been pleaded in bar, and then pass to the
consideration of the fourth [3 U.S. 199, 247] article of the treaty. The first and third
sections are the only parts of the act necessary to be considered.
1st. 'Whereas divers persons, subjects of Great Britain, had, during our connexion
with that kingdom, acquired estates, real and personal, within this commonwealth,
and had also become entitled to debts to a considerable amount, and some of them
had commenced suits for the recovery of such debts before the present troubles
had interrupted the administration of justice, which suits were at that time
depending and undetermined, and such estates being acquired and debts incurred,
under the sanction of the laws and of the connexion then subsisting, and it not
being known that their sovereign hath as yet set the example of confiscating debts
and estates under the like circumstances, the public faith, and the law and usages
of nations require, that they should not be confiscated on our part, but the safety of
the United States demands, and the same law and usages of nations will justify,
that we should not strengthen the hands of our enemies during the continuance of
the present war, by remitting to them the profits or proceeds of such estates, or the
interest or principal of such debts.'
3rd. 'And be it further enacted, that it shall and may be lawful for any citizen of this
commonwealth, owing money to a subject of Great Britain, to pay the same, or any
part thereof, from time to time, as he shall think fit, into the said loan office, taking
thereout a certificate for the same in the name of the creditor, with an endorsement
under the hand of the commissioner of the said office expressing the name of the
payer, and shall deliver such certificate to the Governor and Council, whose receipt
shall discharge him from so much of the debt. And the Governor and Council shall in
like manner lay before the General Assembly, once in every year, an account of

these certificates, specifying the names of the persons by and for whom they were
paid, and shall see to the safe- keeping of the same, subject to the future direction
of the Legislature.'
The act does not confiscate debts due to British subjects. The preamble reprobates
the doctrine as being inconsistent with public faith, and the law and usages of
nations. The payments made into the loan office were voluntary and not
compulsive; for it was in the option of the debtor to pay or not. The enacting clause
will admit of a construction in full consistency with the preamble; for, although the
certificates were to be subject to the future direction of the Legislature, yet it was
under the express declaration, that there should be no confiscation, unless the King
of Great Britain should set the example; if he should confiscate debts due to the
citizens [3 U.S. 199, 248]
of Virginia, then the Legislature of Virginia would
confiscate debts due to British subjects. But the King of Great Britain did not
confiscate debts on his part, and the Legislature of Virginia have not confiscated
debts on their part. It is, however, said, that the payment being made under the act,
the faith of Virginia is plighted. True-but to whom is it plighted- to the creditor or
debtor-to the alien enemy, or to its own citizen, who made the voluntary payment?
Or will it be shaped and varied according to the event-if one way, then to the
creditor; if another, then to the debtor. Be these points as they may, the Legislature
thought it expedient to declare to what amount Virginia should be bound for
payments so made. The act for this purpose was passed on the 3rd of January,
1780; and is entitled 'An act concerning monies paid into the public loan office, in
payment of British debts.'
'Section 1. Whereas by an act of the General Assembly, entitled 'An act for
sequestering British property, enabling those indebted to British subjects, to pay off
such debts, and directing the proceedings in suits where such subjects are parties;'
it is among other things provided, that it shall and may be lawful for any citizen of
this commonwealth, owing money to a subject of Great Britain, to pay the same, or
any part thereof, from time to time, as he shall think fit, into the said loan office,
taking thereout a certificate for the same, in the name of the creditor; with an
indorsement under the hand of the commissioner of the said office, expressing the
name of the payer; and shall deliver such certificate to the governor and council,
whose receipt shall discharge him from so much of the debt; and the Governor and
Council shall, in like manner, lay before the General Assembly, once in every year,
an account of these certificates, specifying the names of the persons, by and for
whom they were paid, and shall see to the safe keeping of the same, subject to the
future direction of the Legislature.
'Sect. 2. And whereas it belongs not to the Legislature to decide particular
questions, of which the judiciary have cognizance, and it is therefore unfit for them
to determine, whether the payments so made into the loan office, as aforesaid, be
good or void between the creditor and debtor. But it is expedient to declare to what
amount this commonwealth may be bound for the payments aforesaid. Be it
enacted and declared, That this commonwealth shall, at no time nor in any event or
contingency, be liable to any person or persons whatsoever, for any sum, on
account of the payments aforesaid, other than the value thereof when reduced by
the scale of depreciation, established by one other act of the General Assembly,
entitled An act directing the mode of adjusting and settling the payment [3 U.S.
199, 249]
of certain debts and contracts, and for other purposes, with interest

thereon, at the rate of six per centum per annum; any law, usage, custom, or any
adjudication or construction of the first recited act already made, or hereafter be
made notwithstanding.'
On the part of the Defendants, it has been also urged, that it is immaterial whether
the payment be voluntary or compulsive, because the payer, on complying with the
directions of the act, shall be discharged from so much of the debt. Be it so. If the
Legislature had authority to make the act, the Congress could, by treaty, repeal the
act, and annul every thing done under it. This leads us to consider the treaty and its
operation. Treaties must be construed in such manner, as to effectuate the intention
of the parties. The intention is to be collected from the letter and spirit of the
instrument, and may be illustrated and enforced by considerations deducible from
the situation of the parties; and the reasonableness, justice, and nature of the thing,
for which provision has been made. The fourth article of the treaty gives the text,
and runs in the following words:
'It is agreed, that creditors on either side, shall meet with no legal impediment to
the recovery of the full value in sterling money, of all bona fide debts heretofore
contracted.'
The phraseology made use of, leaves in my mind no room to hesitate as to the
intention of the parties. The terms are unequivocal and universal in their
signification, and obviously point to and comprehend all creditors, and all debtors,
previously to the 3rd of September, 1783. In this article there appears to be a
selection of expressions plain and extensive in their import, and admirably
calculated to obviate doubts, to remove difficulties, to designate the objects, and
ascertain the intention of the contending powers, and, in short, to meet and provide
for all possible cases that could arise under the head or debts. The words 'creditors
on either side,' embrace every description of creditors, and cannot be limited or
narrowed down to such only, whose debtors had not paid into the loan office of
Virginia. Creditors must have debtors; debtors is the correlative term. Who are these
debtors? On the part of the Defendants in error, it has been contended, that Virginia
is the substituted debtor, so far as respects debtors, who may have paid money into
the loan office under its laws. But the idea, that the treaty may be satisfied by
substituting the state of Virginia in the stead of the original debtor, is far fetched,
and altogether inadmissible. The terms in which the article is expressed, clearly
evince a contrary intention, and naturally and irresistably carry the mind back to the
original debtor; for, as between the British creditor and the [3 U.S. 199, 250] state
of Virginia, there was no express and pre-existing stipulation or debt. Besides, what
lawful impediment was to be removed out of the way of the creditor, if Virginia was
the substituted or self-created debtor? Did this clause make Virginia liable to a
prosecution for the debt? Is Virginia now suable by such British creditor? No; he
would in such case be totally remediless, unless the nation of which he is a subject,
would interpose in his behalf. The words 'shall meet with no lawful impediment,'
refer to legislative acts, and every thing done under them, so far as the creditor
might be affected or obstructed in regard either to his remedy or right. All lawful
impediments of whatever kind they might be, whether they related to personal
disabilities, or confiscations, sequestrations, or payments into loan offices or
treasuries, are removed. No act of any state legislature, and no payment made
under such act into the public coffers, shall obstruct the creditor in his course of
recovery against his debtor. The act itself is a lawful impediment, and therefore is

repealed; the payment under the act is also a lawful impediment, and therefore is
made void. The article is to be construed according to the subject matter or nature
of the impediment; it repeals in the first instance, and nullifies in the second. Unless
this be the construction, it is not true, that the creditor shall meet with no legal
impediment to the recovery of his debt. Does not the plea in the present case
contradict the treaty, and raise an impediment in the way of recovery, when the
treaty declares there shall be none? Payments made in paper money into loan
offices, and treasuries, were the principal impediments to be removed, and
mischiefs to be redressed. The article makes provision accordingly. It stipulates, that
the creditor shall recover the full value of his debt in sterling money; hereby
securing and guarding him against all payments in paper money. Suppose the
creditor should call on Virginia for payment- what would it be-the paper money paid
into the loan office, or its value. Would this be a compliance with the article? In the
one case, the money being cried down and dead, is no better than waste paper; and
in the other, the payment, when reduced by the table of depreciation, would be
inconsiderable, and in many cases not more than six-pence in the pound. Can this
be called payment to the full value of the debt in sterling money? The subsequent
expressions in the article, enforce the preceding observations, and mark the will and
intention of the contracting parties, in the most clear and precise terms. The
concluding words are, 'all bona fide debts heretofore contracted.' In the construction
of contracts, words are to be taken in their natural and obvious meaning, unless
some good reason be assigned, to show, [3 U.S. 199, 251] that they should be
understood in a different sense. Now, if a person, in reading this article, should take
the words in their common meaning, and as generally understood, could be mistake
the intention of the parties? Their design unquestionably was, to restore the creditor
and debtor to their original state, and place them precisely in the situation they
would have stood, if no war had intervened, or act of the Legislature of Virginia had
been passed. The impediments created by Legislative acts, and the payments made
in pursuance of them, and all the evils growing out of them, were, so far as
respected creditors, done away and cured. This is the only way in which all lawful
impediments can be removed, and all debts, contracted before the date of the
treaty, can be recovered to their full value, by the creditors against their debtors. It
has, however, been urged, that this article must be restricted to debts existing and
due at the time of making the treaty; that the debt in question was discharged,
because it has been paid into the Loan Office, agreeably to law; and that the treaty
ought not to be construed so as to renovate or revive it. To enforce this objection,
the rule laid down by Vattel was relied on, 'that the state of things at the instant of
the treaty, is to be held legitimate, and any change to be made in it requires an
express specification in the treaty; consequently all things not mentioned in the
treaty, are to remain as they were at the conclusion of it.' Vatt. B. 4. c. 2. s. 21. The
first part of the objection has been already answered; for it is within both the letter
and spirit of the instrument, that the creditors should be reinstated, and, of course,
that the debtors should be liable to pay. The act of Virginia, and the payment under
it have, so far as the creditor is concerned, no operation, and are void. There is no
difficulty in answering the objection arising from the passage in Vattel. The
universality of the terms is equal to an express specification in the treaty, and
indeed includes it. For it is fair and conclusive reasoning, that if any description of
debtors or class of cases was intended to be excepted, it would have been specified
in the instrument, and the words, 'that creditors on either side, shall meet with no
lawful impediment to the recovery of the full value in sterling money of all debts

heretofore contracted,' would not have been made use of in the unqualified manner,
in which they stand in the treaty. Another article in the treaty now under review, will
serve by way of illustration.
'Article VII. There shall be a firm and perpetual peace between his Britannic Majesty
and the said States, and between the subjects of the one and the citizens of the
other, wherefore all hostilities both by sea and land shall then immediately cease:
all prisoners on both sides shall be set at liberty, and his Britannic [3 U.S. 199, 252]
Majesty shall, with all convenient speed, and without causing any destruction, or
carrying away any negroes or other property of the American inhabitants, withdraw
all his armies, garrisons and fleets from the said United States, and from every port,
place and harbour within the same; leaving in all fortifications the American artillery
that may be therein. And shall also order and cause all archives, records, deeds, and
papers, belonging to any of the said States, or their citizens, which in the course of
the war may have fallen into the hands of his officers, to be forthwith restored and
delivered to the proper States and persons to whom they belong.' Would it be an
objection on the part of his Britannic Majesty, that the state of things at the instant
of the treaty is to be held legitimate, and any change to be made in it, requires an
express specification? That the forts are not specified, and therefore not to be given
up? The objection would be considered as futile and evasive. The answer would be,
that there is no doubt, because the expressions are general, comprehend the forts,
and are equal to an express specification. So in the present case, the universality of
the terms are equal to a specification of every particular debt, or an enumeration of
every creditor and debtor. It is the same thing as though they had been individually
named. All the creditors on either side, without distinction, must have been
contemplated by the parties in the fourth article. Almost every word, separately
taken, is expressive of this idea, and when all the words are combined and taken
together, they remove every particle of doubt. But if the class of British creditors,
whose debtors have paid into the Loan Office of Virginia, are not comprehended in
the fourth article, then they pass without redress, without notice, without so much
as a recommendation in their favour. The thing is incredible. Why a distinction- why
should the creditors, whose debtors paid into the Loan Office, be in a worse
situation than the creditors, whose debtors did not thus pay? The traders, and
others of this country, were largely indebted to the merchants of Great Britain. To
provide for the payment of these debts, and give satisfaction to this class of
subjects, must have been a matter of primary importance to the British ministry.
This, doubtless, is at all times, and in all situations, an object of moment to a
commercial country. The opulence, resources, and power of the British nation, may,
in no small degree, be ascribed to its commerce; it is a nation of manufacturers and
merchants. To protect their interests and provide for the payment of debts due to
them, especially when those debts amounted to an immense sum, could not fail of
arresting the attention, and calling forth the utmost exertions of the British cabinet.
A measure of this kind, it is easy to perceive, would be pursued with unremitting [3
U.S. 199, 253]
diligence and ardour; sacrifices would be made to ensure its
success; and, perhaps, nothing short of extreme necessity would induce them to
give it up. But, if the debts, which have been confiscated, or paid into loan offices,
or treasuries, be not within the provision of the fourth article, then a numerous class
of British merchants are passed over in silence, and not so much attended to as the
loyalists, or Americans, who attached themselves to the cause of Britain during the
war. Is it a supposable case, that the British negociators would have been more

regardful of the interests of the loyalists than of their own merchants? That they
would make a discrimination between merchants, when in a national and political
view, and in the eye of justice, they were equally meritorious, and entitled to
receive complete satisfaction for their debts? No line should be drawn between
creditors unless it be found in the treaty. The treaty does not make it: the truth is,
that none was intended; for, if intended, it would have been expressed. The
indefinite and sweeping terms made use of by the parties, such as 'creditors on
either side, no lawful impediment to the recovery of the full value in sterling money,
of all debts heretofore contracted,' exclude the idea of any class of cases having
been intended to be excepted, and explode the doctrine of constructive
discrimination. The fourth article appears to me to come within the first general
maxim of interpretation laid down by Vattel. 'It is not permitted to interpret what
has no need of interpretation. When an act is conceived in clear and precise terms,
when the sense is manifest, and leads to nothing absurd, there can be no reason to
refuse the sense which this treaty naturally presents. To go elsewhere in search of
conjectures, in order to restrain or extinguish it, is to endeavour to elude it. If this
dangerous method be once admitted, there will be no act which it will not render
useless. Let the brightest light shine on all the parts of the piece, let it be expressed
in terms the most clear and determinate; all this shall be of no use, if it be allowed
to search for foreign reasons, in order to maintain what cannot be found in the
sense it naturally presents.' Vatt. B. 2. ch. 17. s. 263.
To proceed, the construction on the part of the defendants excludes mutuality. The
debts due from British subjects to American citizens were not confiscated, or
sequestered or drawn into the public coffers. They were left untouched. Now, if all
the British debtors be compelled to pay their American creditors, and a part only of
the American debtors be compelled to pay their British creditors, there will not be
that mutuality in the thing, which its nature and justice require. The rule in such
case should work both ways: Whereas the other construction creates mutuality, and
proceeds upon [3 U.S. 199, 254]
indiscriminating principles. The former
construction does violence to the letter and spirit of the instrument; the latter flows
easily and naturally out of it.
It has been made a question, whether the confiscation of debts, which were
contracted by individuals of the enemy in time of war, is authorised by the law of
nations among civilized states? I shall not, however, controvert the position, that, by
the rigour of the law of nations, debts of the description just mentioned, may be
confiscated. This rule has by some been considered as a relict of barbarism; it is
certainly a hard one, and cannot continue long among commercial nations; indeed,
it ought not to have existed among any nations, and, perhaps, is generally exploded
at the present day in Europe. Hear the language of Vattell on this subject, B. 3. c. 5.
s. 77. 'But at present, in regard to the advantage and safety of commerce, all the
sovereigns of Europe have departed from this rigor. And as this custom has been
generally received, he who should act contrary to it, would injure the public faith;
for strangers trusted his subjects only from a firm persuasion, that the general
custom would be observed. The state does not so much as touch the sums which it
owes to the enemy. Every where, in case of war, funds credited to the public are
exempt from confiscation, and seizure.' The Legislators of Virginia, who made the
act, which has been pleaded in bar, lay down the doctrine relative to this point, in
strong and unequivocal terms. For, they expressly declare, that the law and usages
of nations require, that debts should not be confiscated. If the enemy should, in the

first instance, direct a confiscation of debts, retaliation might in such case be a

proper and justifiable measure. The truth is, that the confiscation of debts is at once
unjust and impolitic; it destroys confidence, violates good faith, and injures the
interests of commerce; it is also unproductive, and in most cases impracticable.
Ingenious writers have endeavoured to defend the doctrine on the ground, that the
confiscation of debts weakens the enemy and enriches ourselves. The first is not
true, because remittances are seldom, if ever, made during a war, and the second
generally proves unprofitable, when attempted to be carried into practice. The gain
is, at most, temporary, and inconsiderable; whereas the injury is certain and
incalculable, and the ignominy great and lasting. History furnishes a remarkable
instance in support and illustration of the foregoing remarks. For, in the war that
broke out between France and Spain in the year 1684, his Catholic Majesty
endeavoured to seize the effects of the subjects of France in his kingdom; but the
attempt proved [3 U.S. 199, 255] abortive, for not one Spanish agent or factor
violated his trust, or betrayed his French principal or correspondent. If the
payments, which have been made into the loan office, pursuant to the act of
Virginia, should be scaled according to a subsequent act of that state, they would
not, it is probable, amount to a very large sum. Other reasons in support of the
doctrine have been assigned, namely, that the confiscation of debts operates as an
indemnity for past losses, and a security against future injuries; but they do not
appear to me to be more solid than those already mentioned. Confiscation of debts
is considered a disreputable thing among civilized nations of the present day; and
indeed nothing is more strongly evincive of this truth, than that it has gone into
general dessuetude, and whenever put into practice, provision is made by the
treaty, which terminates the war, for the mutual and complete restoration of
contracts and payment of debts. I feel no hesitation in declaring, that it has always
appeared to me to be incompatible with the principles of justice and policy, that
contracts entered into by individuals of different nations, should be violated by their
respective governments in consequence of national quarrels and hostilities. National
differences should not affect private bargains. The confidence, both of an individual
and national nature, on which the contracts were founded, ought to be preserved
inviolate. Is not this the language of honesty and honor? Does not the sentiment
correspond with the principles of justice, and the dictates of the moral sense? In
short, is it not the result of right reason and natural equity? The relation, which the
parties stood in to each other at the time of contracting these debts, ought not to
pass without notice. The debts were contracted while the creditors and debtors
were subjects of the same king, and children of the same family. They were made
under the sanction of laws common to, and binding on, both. A revolution-war could
not, like other wars, be foreseen or calculated upon. The thing was improbable. No
one, at the time that the debts were contracted, had any idea of a severance or
dismemberment of the empire, by which persons, who had been united under one
system of civil polity, should be torn asunder, and become enemies for a time, and,
perhaps, aliens forever. Contracts entered into in such a state of things ought to be
sacredly regarded. Inviolability seems to be attached to them. Considering then the
usages of civilized nations, and the opinion of modern writers, relative to
confiscation, and also the circumstances under which these debts were contracted,
we ought to take the expressions in this fourth article in their most extensive sense.
We ought to admit of no comment, that will narrow and restrict their operation and
[3 U.S. 199, 256]
import. The construction of a treaty made in favor of such
creditors, and for the restoration and enforcement of pre-existing contracts, ought

to be liberal and benign. For these reasons this clause in the treaty deserves the
utmost latitude of exposition. The fourth article embraces all creditors, extends to
all pre-existing debts, removes all lawful impediments, repeals the legislative act of
Virginia, which has been pleaded in bar, and with regard to the creditor annuls
every thing done under it. This article reinstates the parties; the creditor and debtor
before the war, are creditor and debtor since; as they stood then, they stand now. To
prevent mistakes, it is to be understood, that my argument embraces none but
lawful impediments within the meaning of the treaty, such as legislative acts, and
payments under them into loan offices and treasuries. An impediment created by
law stands on different ground from an impediment created by the creditor. To
conclude: I am of opinion, that the demurrer ought to have been sustained; and, of
course, that the judgment rendered in the court below, is erroneous; and must be
reversed.
Iredell, Justice*.
In delivering my opinion on this important case, I feel myself deeply affected by the
awful situation in which I stand. The uncommon magnitude of the subject, its
novelty, the high expectation it has excited, and the consequences with which a
decision may be attended, have all impressed me with their fullest force. I have
trembled left by an ill informed or precipitate opinion of mine, either the honour, the
interest, or the safety of the United States should suffer or [3 U.S. 199, 257] be
endangered on the one hand, or the just rights and proper security of any individual
on the other. In endeavouring to form the opinion I shall now deliver, I am sure the
great object of my heart has been to discover the true principles upon which a
decision ought to be given, unbiassed by any other consideration than the most
sacred regard to justice. Happy should I have thought myself, if I could as
confidently have relied on a strength of abilities equal to the greatness of the
occasion. The cause has been spoken to, at the bar, with a degree of ability equal to
any occasion. However painfully I may at any time reflect on the inadequacy of my
own talents, I shall as long as I live remember with pleasure and respect the
arguments which I have heard on this case: they have discovered an ingenuity, a
depth of investigation, and a power of reasoning fully equal to any thing I have ever
witnessed, and some of them have been adorned with a splendor of eloquence
surpassing what I have ever felt before. Fatigue has given way under its influence,
and the heart has been warmed, while the understanding has been instructed. The
action now before the court is an action of debt, brought by a British creditor
against an American debtor, to recover upon a bond executed before the late war.
To this action there are five pleas, substantially as follow. The 1st, a plea of
payment, on which issue is joined, but not now before the court, and which is to be
tried by a jury, in case judgment be given for the Plaintiff upon the legal questions
arising on the other pleas, so as to entitle him to try the issue. The 2nd is a plea of a
payment into the treasury of the State, of part of the debt, under an act of assembly
of the 20th of October, 1777. The 3rd. plea is grounded on two acts of assembly:
One of May 1779, under which it is alledged that the debt in question became
forfeited to the State; the other of May 1782, which is relied on as a bar to the
recovery. The former part of the plea I understand to be given up by the defendant's
counsel, and certainly with great propriety, because debts are expressly excepted in
the act it refers to. The 4th plea alledges a non-compliance with the treaty on the
part of Great Britain, and, therefore, that the British creditor cannot now recover a
benefit under the same treaty. It also alledges acts of hostility by Great Britain since

the peace, as likewise forming a bar to the recovery of the Plaintiff, who is a British
creditor. The 5th plea is, that this debt was absolutely annulled by the change of
government. This also I understand to have [3 U.S. 199, 258] been given up in the
course of the argument, and undoubtedly it is not tenable. The only pleas,
therefore, for us to consider, are the second, part of the third, and the fourth. Every
thing I have to say on that part of the 3rd, not relinquished, admitting the fullest
operation of the act of 1782, as intending to affect British creditors themselves, as
well as assignees, which does not appear to me to have formed any part of its
object, will appear from my observations on the second plea; and, therefore, to
prevent unnecessary repetition, I shall not consider it separately by itself. It seems
proper to speak of the fourth plea first, because, if that can be maintained, it is
altogether immaterial to consider either of the others. I am clearly of opinion, that
the fourth plea is not maintainable. It is grounded on two allegations. 1st. The
breach of the treaty by Great Britain, as alledged in the plea. 2nd. New acts of
hostility on the part of that kingdom. 1. In regard to the first, I consider the law of
nations to be decided as to the following position, viz: 'That if a treaty be broken by
one of the contracting parties it becomes (in the expressive language of the law)
not absolutely void, but voidable; and voidable, not at the option of any individual of
the contracting country injured, however much he may be affected by it, but at the
option of the sovereign power of that country, of which such individual is a
member'. The authorities, I think, are full and decisive to that effect. Grotius, b. 2. c.
15. s. 15. ib. b. 3. c. 20. s. 35, 36, 37, 38. 2. Burl. p. 355. part 4. c. 14. in s. 8. Vattel,
b. 4. c. 4. s. 54. The gentlemen for the defendant, taking hold of some particular
expressions, without regarding the whole of these authorities, and considering the
reason of them, have argued, that true, in the present instance (for example)
Congress might have remitted the infraction, but not having done so, the Plaintiff is
barred for the present, however he might be restored to the right, in case the
infraction should hereafter be actually remitted. But to me it is very evident, that
such a position is not maintainable, either by the authorities I have recited, or the
reason of the thing. The words of Grotius are pointed and express to show, not that
the treaty shall be reputed broken until a remission is actually pronounced by the
injured party, but that it shall not be reputed as broken, until the injured party shall
think proper actually to pronounce it broken; and it is remarkable that his [3 U.S.
199, 259] words to this effect, are calculated for the very purpose of removing any
doubts which other more general expressions might occasion. His words are: 'When
there is treachery on one side, it is certainly at the choice of the innocent party to
let the peace subsist; as Scipio did formerly after many perfidious actions of the
Carthagenians. Because no man, by doing contrary to his obligation, can thereby
discharge himself from it. For though it is expressed, that by such a fact the peace
shall be reputed as broken, yet this clause is to be understood only in favour of the
innocent, if he thinks fit to make use of it.' Grotius. b. 3. c. 20. s. 38. The whole
clause of Vattel is substantially to the same purpose; and, therefore, where in one
part of the clause he says, 'the offended party may remit the infraction committed,'
this must be understood, to make the whole consistent, a remission not arising from
an express declaration, but from a tacit acquiescence in the breach. Otherwise,
what becomes of the words? 'but if he chooses not to come to a rupture, the 'treaty
remains valid and obligatory.' The treaty, therefore, must remain valid and
obligatory, until the power, authorised to come to a rupture, does come to it. The
same observations apply to Burlamaqui, who expresses himself more generally, but
states substantially the same doctrine. His expression is, 'it is at the choice of the

innocent 'party to let the peace subsist,' which certainly does not require a positive
declaration that it shall subsist. This doctrine appears to me to be grounded on the
highest reason. It is undoubtedly true, that each nation is considered as a moral
person, and the welfare and interest of all the individuals of that nation, so far as
they may be affected by its concerns with foreign nations, are in each country
entrusted to some particular power authorised to negociate with them, or to speak
the sense of the nation on any emergency. When any individual, therefore, of any
nation, has cause of complaint against another nation, or any individual of it, not
immediately amenable to the authority of his own, he may complain to that power
in his own nation, which is entrusted with the sovereignty of it as to foreign
negociations, and he will be entitled to all the redress which the nature of his case
requires, and the situation of his own country will enable him to obtain. The people
of the United States, in their present Constitution, have devolved on the President
and Senate, the power of making treaties; and upon Congress, the power of
declaring war. To one or other of these powers, in case of an infraction of a treaty
that has been entered into with the United States, I apprehend application is to be
made. [3 U.S. 199, 260] Upon such an application various important considerations
would necessarily occur. 1. Whether the treaty was first violated on the part of the
United States, or on that of the other contracting power? 2. Whether, if first violated
by the latter, it was a violation in an important or an inconsiderable article; whether
the violation was by design or accident, or owing to unforeseen obstacles; whether,
in short, it was wholly or partially without excuse? 3. Whether, admitting it was
either, it was a matter for which compensation could be made, or otherwise? 4.
Whether the injury was of such a nature as to admit of negociation, or to require
immediate satisfaction, peremptorily and without delay? 5. Whether, if the
circumstances in all other cases justified it, it was adviseable, upon an extensive
view and wise estimation of all the relative circumstances of the United States, to
declare the treaty broken, and of course void: for though the party first breaking the
treaty cannot make it absolutely void, but it is only voidable at the election of the
injured party, yet when that election is made, by declaring the treaty void, I
conceive it is totally so as to both parties, and that all rights enjoyed under the
treaty are absolutely annulled, as if no stipulation had been made for them? These
are considerations of policy, considerations of extreme magnitude, and certainly
entirely incompetent to the examination and decision of a Court of Justice. Miserable
and disgraceful indeed, would be the situation of the citizens of the United States, if
they were obliged to comply with a treaty on their part, and had no means of
redress for a non-compliance by the other contracting power. But they have, and
the law of nations points out the remedy. The remedy depends on the discretion and
sense of duty of their own government. This plea is therefore defective, so far as
concerns the breach of the treaty, not because this court hath no cognizance of a
breach of treaty, but because by the law of nations, we have no authority upon any
information or concessions of any individuals, to consider or declare it broken; but
our judgment must be grounded on the solemn declaration of Congress alone, (to
whom, I conceive, the authority is entrusted) given for the very purpose of vacating
the treaty on the principles I have stated. The paper transmitted by order of
Congress, to the Executive of Virginia, on the subject of a violation complained of on
the part of the British, certainly cannot amount to so much, especially as there is
another paper of theirs in the year 1787, transmitted to the different States,
complaining of violations [3 U.S. 199, 261] on our part. They have pronounced no
solemn decision, which committed the first infraction; much less have they declared

that in consequence of the infraction on the part of the British, they chose that the
treaty should be annulled. But it is said that a declaration by Congress, that the
treaty was broken by Great Britain, would be exercising a judicial power, which by
the Constitution in all cases of treaties is devolved on the Judges. Surely such a
thing was never in the contemplation of the Constitution. If it was, a method is still
wanting by which it could be executed; for, if we are to declare, whether Great
Britain or the United States, have violated a treaty, we ought to have some way of
bringing both the parties before us. The method contended for by the defendant's
counsel is very ill suited to another part of their doctrine, which is certainly right,
that a nation is a moral person, and that the act of a sovereign power to whom its
foreign concerns are entrusted, is the act of every individual of that nation, because
he represents the whole. But in this case, the King of Great Britain does not act on
behalf of the plaintiff, his subject, and the United States on behalf of the
defendants, their citizens; but the plaintiff is alledged to represent the sovereignty
of the United States, a dignity for aught I know, of which they may be respectively
worthy, but which certainly does not either politically or judicially belong to them.
The Judiciary is undoubtedly to determine in all cases in law and equity, coming
before them concerning treaties. The subject of treaties, Gentlemen truly say, is to
be determined by the law of nations. It is a part of the law of nations, that if a treaty
be violated by one party, it is at the option of the other party, if innocent, to
declare, in consequence of the breach, that the treaty is void. If Congress, therefore,
(who, I conceive, alone have such authority under our Government) shall make such
a declaration, in any case like the present, I shall deem it my duty to regard the
treaty as void, and then to forbear any share in executing it as a Judge. But the
same law of nations tells me, that until that declaration be made, I must regard it
(in the language of the law) valid and obligatory. The admission of the fact, stated in
the plea, cannot be taken as an admission that the fact is strictly true, because the
plaintiff had no way of avoiding the plea but by a demurrer, whether it was true or
not. If it was well pleaded, it is an admission of the entire truth, but not otherwise.
For the reasons I have given, it is clear to me that it is not well pleaded. [3 U.S. 199,
262] 2. In regard to the second branch of this plea, new acts of hostility, if meant
as constituting a breach, (which I don't understand it to be) the observations I have
already made will equally apply to this part of the plea. If meant as a proof, that a
war in fact, tho' not in name subsists, and therefore that the plaintiff is an alien
enemy, the same observations will apply still more forcibly. We must receive a
declaration, that we are in a state of war, from that part of the sovereignty of the
union to which that important subject is entrusted. We certainly want some better
information of the fact than we have at present. However, this point seems so clear,
that the defendant's counsel very faintly attempted to maintain this idea of the
case. I conclude, therefore, for these reasons, that there is nothing in the fourth plea
which is a bar to the plaintiff's action. The great difficulty of the case arises from the
second plea. This is the only part of the case, about which I have, from the
beginning, entertained any doubt. And I must confess, I have had very great doubts,
indeed, on this subject. My opinion has varied more than once in regard to it. I have
endeavoured to come to a conclusion by analysing it in all its parts; and the result
of my investigation has been, according to the best judgment I am capable of
forming, upon the most deliberate examination, that the plea is supportable. My
reasons for this opinion, I must give at considerable length, in order to show it is not
a rash one, and that Gentlemen may be enabled in the future progress of this case,
more easily to detect my errors, if I should have committed any. I will divide the

consideration of the plea into two points: 1. Whether the plea would have been a
bar, if this case had stood independently of the treaty? 2. Whether the treaty
destroys the operation of the plea? In considering the first point, I shall, for the
greater perspicuity, consider it under the following heads: 1. Whether the
Legislature of this State had a right, agreeable to the law of nations, to confiscate
the debt in question? 2. Whether, admitting that the Legislature had not a right,
agreeably to the law of nations, to confiscate the debt, yet if they in fact did so, it
would not, while it remained unrepealed by any subsequent, sufficient authority,
have been valid and obligatory within the limits of the State, so as to bar any suit
for the recovery of the debt? 3. Whether, if it shall be considered that the
Legislature did not wholly confiscate the debt, so as totally to extinguish all right in
the creditor, (as I apprehend they clearly did not) but only sequester it under the
peculiar circumstances stated in the act, the payment in question, under the
authority of the act, did not, at that time at least, wholly exonerate the debtor? [3
U.S. 199, 263] 1. It being clear that there was no absolute confiscation in this case,
I shall not give a conclusive opinion upon the right; but as I think it highly probable
such a right did exist, some observations on that subject will naturally and properly
lead to those upon which my opinion, as to the validity of the payments, is
ultimately founded. For this reason, and this reason only, I discuss the present
question.
Whatever doubt might have been entertained, by reasoning on the particular
examples of Grotius and Puffendorf, Bynkershoek, (who, I believe, is alone, a very
great authority) is full and decisive in the very point as to a general right of
confiscating debts of an enemy. His doctrine I take to be this, that the law of nations
authorises it, unless in former treaties between the belligerent powers, there be
particular stipulations to the contrary. Vattel recognises the general right, but states
a prevailing custom in Europe to the contrary; in consequence of which he says, 'As
this custom has been generally observed, he who would act contrary to it would
injure the public faith; for strangers trusted his subjects only from a firm persuasion
that the general custom would be observed.' Vattel mentions the fact, but does not
state the origin of the fact; which, I think, it is not improbable, may have arisen in
consequence of particular stipulations, as mentioned by Bynkershoek; very few of
the civilized nations of Europe, not having treaties with each other.
Whether this customary law (admitting the principle to prevail by custom only) was
binding on the American States, during the late war, in respect to Great Britain at
least, may be a question of considerable doubt. There were particular circumstances
in the relative situation of the two countries, which might possibly exempt this from
the force of such a custom, could it be supposed that when this country became an
independent nation, this customary law immediately attached upon it. However this
country might have been considered bound to observe such a law in regard to any
nation recognizing its independence, had we been unfortunately at war with such,
and who observed it on her part, (for, undoubtedly, a breach on one side would
justify a non-observance by the other) it did not necessarily follow, that the people
of this country were bound to observe it to a nation, which not only did not
recognize, but fought to destroy their very existence as an independent people,
considering them in no other light than as traitors, whose lives and fortunes were
forfeited to the law. The people of this country literally fought pro aris & focis; and,
therefore, means of defence, which, when inferior objects were in view, might not
be strictly justifiable, might in such an extremity become so, on the great principle,

on which the laws of war are [3 U.S. 199, 264]

founded, self preservation; an
object that may be attained by any means, not inconsistent with the eternal and
immutable rules of moral obligation.
The principles of the common law of England, as appears from a case I showed to
the bar, (that in Sir Thomas Parker's Reports, p. 267. the Attorney General against
Weeden and Shales) do undoubtedly recognize the forfeiture of a chose in action
due to an enemy. At the utmost it only requires, that an inquisition should be
completed during the war, so as, by ascertaining the fact, fully to establish the title
of the crown. I can see no reason why that principle of the common law should not
obtain here. If so, then independent of any act of legislation whatever, an inquisition
completed during the war, finding the fact, would have vested the title to the debt
in question absolutely in the State, unless this debt can be distinguished from any
other chose in action. Such a distinction has been attempted: 1st, Because this debt
was due before the war. 2nd, Because the State had not possession of the bond. To
these objections, I think, easy answers may be given. 1st, The right acquired by
war, (detached from custom, which I am not now considering, or any express
stipulation, if there be such) depends on the power of seizing the enemy's effects. It
is not grounded on any antecedent claim of property, but on the contrary, the
property is admitted to be the enemy's, in the very act of seizing it. Its sole
justification is, that being forced into a state of hostility, by an injury for which no
satisfaction could be obtained in a peaceable manner, reprisals may be made use
of, as a means to compel justice to be done, or to enable the injured party to obtain
satisfaction for itself. Such a power, from its nature (being grounded on necessity
only) seems incapable of limitation by any general rule, and if conscientiously used
(of which each nation must judge for itself) the principle applies as well to property,
which was in the country before the war began, as to any other which may be
accident come into its possession. The same objection would apply to the seizure of
any other property of an enemy, which had been in the country before the war
began, as of an incorporeal right. The first resolution in the case I cited is, as to
choses in action generally, tho' the chose in action there in question, was, in fact,
one which had accrued during the war. 2nd, The objection from the State not having
possession of the bond, (though countenanced by one or two writers) I think, is also,
susceptible of a satisfactory answer. The bond does not create the debt, but is only
evidence of it. Possession of it alone can give no right. A robber, or an individual
coming to the possession of it by accident, acquires no more title to the money than
he had before. The law is so even as to promissory notes payable to bearer, if the
fact can be [3 U.S. 199, 265] made to appear. If a bond be lost, equity has long
since afforded a remedy. In a modern case in a court of law, a profert of a deed has
been dispensed with, upon a special declaration stating the loss of it*. It was while
the possession and the right were confounded, that this objection was thought of
weight. It is observable also, that it would create an idle and a trifling distinction
between debts due by specialty, and simple contract debts, a distinction that might
be supported by ingenuity, but certainly not by reason. And it would found harsh, to
say that simple contract debts should be forfeitable, if the witnesses were in the
country, but otherwise not. Now, if the forfeiture of the debt in question, could have
been effected at common law, by an inquisition completed during the war, I can see
no reason why the Legislature could not, with equal propriety as to the right, have
effected the same object substantially in any other mode. The proceeding, in each
case, must be ex parte, and the object affected can be conclusively bound by

neither, if his case did not come within the principles of the law. This I argue, upon a
supposition that the customary law of nations, was not binding here, at least in this
instance. That, however, is a point of some delicacy, and not necessary for me now
to determine, because, 2nd, I am of opinion, that admitting that the Legislature had
not strictly a right, agreeably to the law of nations, to confiscate the debt in
question; yet, if they in fact did so, it would while it remained unimpeached by any
subsequent sufficient authority, have been valid and obligatory within the limits of
the State, so as to bar any suit for the recovery of the debt.
In this opinion I have the misfortune to differ from a very high authority*, for which I
have the greatest respect. But however painful it may be, to differ from gentlemen,
whose superior abilities and learning I readily acknowledge, I am under the
indispensable necessity of judging according to the best lights of my own
understanding, assisted by all the information I can acquire. I confess, therefore,
that I agree entirely with the Defendant's counsel in thinking, that the acts of the
Legislature of the State, in regard to the subject in question, so far as they were
conformable to the Constitution of the State, and not in violation of any article of
the confederation (where that was concerned) were absolutely binding de facto, and
that if, in respect to foreign nations, or any individual belonging to them, they were
not strictly warranted by the law of nations, which ought [3 U.S. 199, 266] to have
been their guide, the acts were not for that reason void, but the State was
answerable to the United States, for a violation of the law of nations, which the
nation injured might complain of to the sovereignty of the Union. There is no doubt
that an act of Parliament in Great Britain, would bind in its own country in every
possible case in which the Legislature thought proper to act. Blackstone** is precise
as to that point, even in cases manifestly unjust, if the words of the law are plain
and unequivocal. In this country, thank God, a less arbitrary principle prevails. The
power of the Legislatures is limited; of the State Legislatures by their own State
Constitutions, and that of the United States; of the Legislature of the Union by the
Constitution of the Union. Beyond these limitations, I have no doubt, their acts are
void, because they are not warranted by the authority given. But within them, I
think, they are in all cases obligatory in the country subject to their own immediate
jurisdiction, because in such cases the Legislatures only exercise a discretion
expressly confided to them by the constitution of their country, and for the abuse of
which, (if it should be abused) they alone are accountable. It is a discretion no more
controlable (as I conceive) by a Court of Justice, than a judicial determination is by
them, neither department having any right to encroach on the exclusive province of
the other, in order to rectify any error in principle, which it may suppose the other
has committed. It is sufficient for each to take care that it commits no error of its
own. As to a distinction between a State Court and this Court, in this respect, I do,
for my part, disclaim, according to my present sentiments, any authority to give a
different decision in any case whatsoever from such as a State Court would be
competent to give under the same circumstances. I have no conception that this
court is in the nature of a foreign jurisdiction. The thing itself would be as improper
as it would be odious, in cases where acts of the State have a concurrent jurisdiction
with it.
With regard to the exception I speak of, no one has suggested, that the act of
October, 1777, was in any manner inconsistent with the Constitution of the state;
and at that time the articles of Confederation were not in force; but if they had
been, I think there is no colour for alledging any inconsistency with them, since

Congress could have passed no act on this subject, but if they had wished for an
act, must have recommended to the State Legislatures to pass it. And the very
nature of a recommendation implies, that the party recommending cannot, but the
party to whom the recommendation is made, can do the thing recommended. [3
U.S. 199, 267] The third question under the present head, that I proposed, was
this: 'Whether, if it shall be considered that the Legislature did not absolutely
confiscate the debt, so as totally to extinguish all right in the creditor, (as I
apprehend they clearly did not) but only sequestered it under the peculiar
circumstances stated in the act; the payment in question, under the authority of the
act, did not, at that time at least, wholly exonerate the debtor.'
The words of the enacting clause concerning this subject, are as follow: 'That it shall
and may be lawful for any citizen of this commonwealth, owing money to a subject
of Great Britain, to pay the same, or any part thereof, from time to time, as he shall
think fit, into the said loan office, taking thereout a certificate for the said sum, in
the name of the creditor, with an indorsement under the hand of the commissioner
of the said office, expressing the name of the payer, and shall deliver such
certificate to the Governor and Council, whose receipt shall discharge him from so
much of the debt. And the Governor and Council shall in like manner say before the
General Assembly once in every year, an account of these certificates, specifying
the names of the persons, by and for whom they were paid, and shall see to the
safekeeping of the same, subject to the future direction of the Legislature.'
We are too apt, in estimating a law passed at a remote period, to combine in our
consideration, all the subsequent events which have had an influence upon it,
instead of confining ourselves (which we ought to do) to the existing circumstances
at the time of its passing. Let us, however, recollect, that at this period no British
creditor could institute a suit for the recovery of his debt, as the war constituted him
an alien enemy, and therefore his remedy stood suspended at common law, so that
he ran the risque of the entire loss of every debt, where his debtor proved insolvent
during the war. Consequently, it would, in his own estimation, have been doing him
a considerable service, that the state should authorise a receipt on his behalf, had
there been no other currency in circulation than gold or silver. It would have been
placing him in a state of security, greater than he had any reason to expect. The
extremity of the public situation, rendered paper money unavoidable, but this was
an evil to which all American as well as British creditors were liable, and the former
(as we all know) were compelled, upon a tender, under pain of being deemed
enemies of their country, to receive it at its nominal value. It was natural (and
perhaps) not altogether, if at all, unjust, if a man had 100 due to him from B. and he
himself owed C. 100, and B. paid him the 100, though in depreciated [3 U.S. 199,
268] money, that he should immediately carry it to his creditor. Many, I have no
doubt, paid their creditors upon these plain grounds of retribution, though others
undoubtedly (for no government can make all men honest) took most scandalous
advantages of depreciation in its advanced periods. When this law was passed, the
depreciation, I believe, was little felt, and not at all acknowledged. De minimis non
curat lex, is an old law maxim. I may parody it on this occasion, by saying De
minimis non curat libertas. When life, liberty, property, every thing dear to man was
at stake, few could have coldness of heart enough to watch the then scarcely
perceptible gradation in the value of money. In this situation the Legislature of the
state passed the law in question. It did all that the then situation of affairs would
admit of, even for the benefit of the British creditors themselves, and it put it in the

power of American creditors, who were compelled to receive the existing currency,
to pay their own debts with it. The depositing of money in the loan office, was at
that time by many, even in America itself, thought an eligible method of securing it,
and with some foreigners, it was a favorite object of speculation. I know, myself,
that the proceeds of some very valuable cargoes were ordered to be so applied, and
probably there were such instances of which I knew nothing. The increased
difficulties of the American war, in a great degree, disappointed the intentions of the
original law, but still, British and American creditors were placed on the same
footing, so far as it was in the power of the Legislature to effect it.
I thought it proper to say thus much, as introductory to the observations I shall
make on the legal operation of those payments.
1. If the state de jure, according to the law of nations (which I strongly incline to
think) had a right wholly to confiscate this debt, they had undoubtedly a right to
proceed a partial way towards it by receiving the money and discharging the debtor,
substituting itself in his place. We are to be governed by things, and not names,
and, consequently, if the state had a right to say to a debtor 'We confiscate the
right of your creditor, and you must pay your debt to us, and not to him,' they had a
right to say 'We do not chuse for the present, absolutely to confiscate this debt,
although we have the power so to do, but if you will pay the money to us, you shall
be as completely discharged as if we did.' In this point of view, I think there can be
no doubt but that a discharge would, under such circumstances, have as completely
extinguished the right of the creditor as to the debtor, as if, in case no war had
intervened, and therefore no right had accrued under it to the states, the debtor
had actually paid the money [3 U.S. 199, 269] to the order of the creditor, and
received a discharge from himself.
2. For the reasons I have before given, I think a confiscation, either whole or partial,
or any less exercise of that power de facto, though not de jure, would in this state
have been perfectly binding, and in legal contemplation as effectual to bar a
recovery, as if the law of nations had been strictly and unquestionably pursued.
3. I believe there can be no doubt, but that according to the law of nations, even on
the most modern notions of it, a sequestration merely for the purpose of recovering
the debts, and preventing the remittance of them to the enemy, and thereby
strengthening him, and weakening the government, would be allowable, and if so,
surely it follows, as a matter of course, ( perhaps it would follow without a solemn
declaration) that when, in virtue of any such act, the money was paid to the
government, the debtor was wholly discharged, and the government, if it thought
proper, not to proceed to confiscation afterwards, became itself liable.
The case cited from the Law of Evidence,* I think is an authority substantially in
point, to show the complete discharge of the debtor.
'In debt upon a lease, the Defendant pleaded payment, and in evidence showed, he
paid it to sequestrators of the commonwealth, the Plaintiff being a delinquent; and
it was ruled this was good payment to prove the issue, which was a payment to the
Plaintiff himself.' Clayton, 129. Anonymous Law of Evidence, (Edit of 1744) p. 196. c.
9. c. 11.

This case is certainly very strong, for it was not deemed necessary to plead it in bar,
but it was admitted in evidence, upon a plea that he paid the money to the Plaintiff
himself. It does not appear whether this action was tried under the commonwealth,
or after the restoration. If under the former, it is more parallel to the present action.
If it was tried after the restoration, it is a still stronger case, for it showed that courts
of justice thought themselves bound to protect individuals, who acted under laws of
a government they deemed an usurpation, and on all occasions treated with
contempt.k Besides an objection, which I shall notice presently, I can imagine but
one real difference between that case and the one before us; and that is, that in
England the payment was compelled, here [3 U.S. 199, 270] it was voluntary. I
once thought that circumstance of weight, but on reflection, I consider the public
faith equally pledged in one case as in the other; that the authority exercised in
both is the same, and that it not only would be unjust in itself, but of dangerous
example, to tell men that they should be protected under a compulsory obedience
to government, but not upon a cheerful submission to it.
4. My observations as to the paper money, which the necessities of this country
unfortunately constrained us to use so long, had no other tendency than to show
the circumstances of the fact as they really existed. As a judge, I conceive myself
bound to say, that that makes no difference as to the right. The competency of such
acts at that time was unquestionable. Their justice depended on the degree of
necessity which gave rise to them. A payment in paper money, then a legal tender,
I must consider as complete and effectual a payment, at that time, as payment in
gold or silver. Such was the law of the country! A law which severe necessity
dictated! and by which, in the course of the war, in which many sacrifices became
unavoidable, many thousand American citizens, as well as many British merchants,
suffered. It is the lot of our nature to experience many evils for which we can find no
remedy, and therefore nothing can be more fallacious than in any thing of a general
nature, to expect perfect exactness.
For these reasons, I am clearly of opinion, that under the act of sequestration, and
the payment and discharge, the discharge will be a complete bar in the present
case, unless there be something in the Treaty of Peace to revive the right of the
creditor against the defendant, so as to disable the latter from availing himself of
the payment into the treasury, in bar to the present action.
The operation of that Treaty comes, therefore, now to be considered. None can
reverence the obligation of treaties more than I do. The peace of mankind, the
honour of the human race, the welfare, perhaps the being of future generations,
must in no inconsiderable degree depend on the sacred observance of national
conventions. If ever any people on account of the importance of a treaty, were
under additional obligations to observe it, the people of the United States surely are
to observe the Treaty in question. It gave peace to our country, after a war attended
with many calamities, and, in some of its periods, presenting a most melancholy
prospect. It insured, so far as peace could insure them, the freest forms of
government, and the greatest share of individual liberty, of which, perhaps, the
world had seen any example. It presented boundless views of future happiness and
greatness, which almost overpower the imagination, and which, I trust, will not be
altogether [3 U.S. 199, 271] unrealized: The means are in our power; wisdom and
virtue are alone required to avail ourselves of them. Such was the peace which was
procured by the Treaty now in question a treaty which, when it shall be fully

executed in all its parts, on both sides, future generations will look up to with
gratitude and admiration, and with no small degree of fervour towards those who
had an active share in procuring it. In proceeding to examine the treaty with these
sentiments, it may well be imagined I do it with a reverential and sacred awe, left by
any misconstruction of mine, I should weaken any one of its provisions. The
question now is, whether, under this treaty, the payment into the Treasury is a bar
to so much of the Plaintiff's claim, as comprehends money to that amount? I shall
examine this question under two divisions: 1st. Whether it would have been a bar,
as the law existed, after the ratification of the treaty, and previous to the passing of
the present Constitution of the United States, even if the words of the treaty must
be construed to comprehend such a case. 2nd. Whether, under that Constitution, it
can now be considered as a bar. My opinion, I confess, as to the first question, is,
that if the treaty had plainly comprehended such cases, the Plaintiff could not have
recovered in a Court of Justice in this State, as the law stood, previous to the
ratification of the present Constitution of the United States. I feel, as I ought to do,
great diffidence, when I am under the necessity, in the execution of my duty as a
Judge, of differing from the opinions of those entitled from superior talents, and high
authority, to my utmost respect. I am compelled to do so in the present instance,
but I shall, at the same time, assign my reasons for my opinion, and if, in the future
course of this great cause, I can be convinced that in this, or in any other, instance,
I have committed an error, I shall most cheerfully acknowledge it. The opinion I
have long entertained, and still do entertain, in regard to the operation of the fourth
article is, that the stipulation in favour of creditors, so as to enable them to bring
suits, and recover the full value of their debts, could not at that time be carried into
effect in any other manner, than by a repeal of the statutes of the different States,
constituting the impediments to their recovery, and the passing of such other acts
as might be necessary to give the recovery entire efficacy, in execution of the
treaty. I consider a treaty, (speaking generally, independent of the particular
provisions on the subject, in our present Constitution, [3 U.S. 199, 272] the effect
of which I shall afterwards observe upon) as a solemn promise by the whole nation,
that such and such things shall be done, or that such and such rights shall be
enjoyed. I think the distinction taken by the Plaintiff's counsel as to stipulations in
the treaty, executed or executory, will enable me to illustrate my meaning, by
considering various stipulations in the treaty in question. 1st. I will consider what
may be deemed executed articles. In this class I would place, the acknowledgement
of independence in the first article; the permission to fish on the Banks in the third;
the acknowledgement of the right to navigate the Mississippi in the eighth. These I
call executed, because, from the nature of them, they require no further act to be
done, 2nd. The executory (so far as they concern our part in the execution) I would
place in three classes. Those which concern either, 1st, the Legislative Authority.
2nd. The Executive. 3rd. The Judicial. The fourth article in question, I consider to be
a provision, the purpose of which could only be effected by the Legislative authority;
because when a nation promises to do a thing, it is to be understood, that this
promise is to be carried into execution, in the manner which the Constitution of that
nation prescribes. When, therefore, a treaty stipulates for any thing of a legislative
nature, the manner of giving effect to this stipulation is by that power which
possesses the Legislative authority, and which consequently is authorized to
prescribe laws to the people for their obedience, passing such laws as the public
obligation requires. Laws are always seen, and through that medium people know
what they have to do. Treaties are not always seen. Some articles (being what are

called secret articles) the public never see. The present Constitution of the United
States, affords the first instance of any government, which, by saying, treaties
should be the supreme law of the land, made it indispensable that they should be
published for the information of all. At the same time I admit, that a treaty, when
executed pursuant to full power, is valid and obligatory, in point of moral obligation,
on all, as well on the Legislative, Executive, and Judicial Departments, (so far as the
authority of either extends, which in regard to the last, must, in this respect, be very
limited) as on every individual of the nation, unconnected officially with either;
because it is a promise in effect by the whole nation to another nation, and if not in
fact complied with, unless there be valid reasons for non- compliance, the public
faith is violated. I have mentioned this great article which concerns the Legislative
[3 U.S. 199, 273] department: Let me now, by way of further illustration, consider
one which concerns the Executive.
It is stipulated in one part of this treaty, 'That all prisoners on both sides shall be set
at liberty.' I very much doubt, whether the Commander in Chief, without orders from
Congress (then possessing the supreme executive authority of the Union) could
have been justified in releasing such prisoners as he had then in custody, after the
ratification. Certainly no inferior officer, in whose actual care they were, could,
without an order directly or indirectly from the Commander in Chief: And yet, I can
see no reason, if a treaty is to be considered as operating de facto, by superior
authority, notwithstanding any impediment arising from laws then in being, why the
rigour of the treaty, which in that instance is said to be uncontroulable, should not
be so in every other. If Legislative authority is superseded, why not Executive?
Surely the former is not less sacred than the latter.
In like manner as to the judicial. It is stipulated in the sixth article, 'That there shall
be no future confiscations made, nor any prosecutions commenced against any
person or persons, for, or by reason of any part, which he or they may have taken in
the present war: and that no person shall, on that account, suffer any future loss or
damage, either in his person, liberty, or property; and that those who may be in
confinement on such charges, at the time of the ratification of the treaty in America,
shall be immediately set at liberty, and the prosecutions so commenced, be
discontinued.' I apprehend this article, so far as it respected the release of prisoners
confined, could only be executed by an order from the Judges of the Court, having
judicial authority, in the cases in question, in consequence either of an actual
alteration in the law, by the Legislature, in conformity to the treaty, (where that was
necessary); or, of a particular pardon by the Executive; and that if a Jailor, merely
because the treaty was ratified, and he found this article in it, had set all such
prisoners at liberty, he would have been guilty of an escape.
This reasoning, in my opinion, derives considerable weight from the practice in
Great Britain.
The King of Great Britain certainly represents the sovereignty of the whole nation,
as to foreign negociations, as completely as the Congress of the United States ever
represented the sovereignty of the Union, in that particular. His power, as to
declaring war and making peace, is as unlimited as the respective authorities for
those purposes in the United States. The whole nation of Great Britain speaks as
effectually, and as completely through him, as all the people of the United States
can now speak through Congress, as to a declaration of [3 U.S. 199, 274] war, or

through the President and Senate as to making peace; and of course, as they ever
did through Congress, under the old articles of confederation, the power certainly
not being lessened. The law of nations equally applies to his treaties on behalf of
Great Britain, as it can apply to any treaty made on behalf of the United States. Yet,
I believe it is an invariable practice in that country, when the King makes any
stipulation of a legislative nature, that it is carried into effect by an act of
Parliament. The Parliament is considered as bound, upon a principle of moral
obligation, to preserve the public faith, pledged by the treaty, by passing such laws
as its obligation requires; but until such laws are passed, the system of law, entitled
to actual obedience, remains de facto, as before. I doubt not, if my time had
admitted of a full search, and I could have had access to the proper books for
information, that I could find many instances of this. I will, however, mention one,
which I have been able to procure here. It is a transaction of this nature, so late as
the commercial treaty between Great Britain and France, in 1786. The information I
derive is from the Annual Registers of 1786 and 1787, which I suppose, as to this
point, are correct.
One article of the treaty was in these words:
'The wines of France, imported directly from France to Great Britain, shall, in no
case, pay any higher duties than those which the wines of Portugal now pay.'
This treaty was signed at Versailles, the 26th of September, 1786.
On the 24th of January, 1787, the King met his Parliament, and among other things,
informed the two houses, 'That he had concluded a treaty of commerce with the
French King, and had ordered a copy of it to be laid before them. He recommended,
as the first object of their deliberations, the necessary measures for carrying it into
effect; and expressed his trust, that they would find the provisions, contained in it,
to be calculated for the encouragement of industry, and the extension of lawful
commerce in both countries; and by promoting a beneficial intercourse between
their respective inhabitants, likely to give additional permanency to the blessings of
peace.'
On the 15th of February, the House of Commons, being in a committee of the whole
house, Mr. Pitt, the principal Minister of the Crown, moved the following resolution:
'That the wines of France be imported into this country upon as low duties, as the
present duties paid on the importation of Portugal wines.'
I have not had time to examine them all, but, I doubt not, it will be found, on
inspection, that there was not a single provision [3 U.S. 199, 275] in the treaty,
inconsistent with former parliamentary regulations, but Parliament acted upon it by
a new law, calculated to give it effect.
The following quotation, (which is a literal one) I think, is very much to the purpose:
'On the Monday following, the report of the committee, upon the commercial treaty,
was brought up, and, on the usual motion being made, that the house do agree to
the same, notice was taken of the omission of the mention of Ireland, both in the
treaty and the Tariff; and, it was asked, whether or no she was understood to be
included in it? To this question Mr. Pitt replied, That Ireland was undoubtedly entitled

to all the benefits of the treaty; but it was entirely at her own option, whether she
would choose to avail herself of those advantages; for it was only to be done by her
passing such laws as should put the Tariff on the same footing in that country as it
was stipulated should be done in this. Had the adoption of the treaty by Ireland,
been a stipulation necessary to be performed before it could be finally concluded on
in this country, then this country would have been deprived of all the benefits
resulting from it in the event of Ireland's refusal.'
Now it is observable, that in speaking of this Tariff, in the treaty, the King of Great
Britain does not promise, that the Parliament shall pass laws to such an effect; but
the language is thus:
'The two high contracting parties have thought proper to settle the duties on certain
goods and merchandises, in order to fix invariably, the footing on which the trade
therein shall be established between the two nations. In consequence of which, they
have agreed upon the following Tariff, etc.' viz.
In another part, the King of Great Britain says,
'His Britannic Majesty reserves the right of countervailing by additional duties on
the undermentioned merchandises, the internal duties actually imposed upon the
manufactures, or the import duties which are charged on the raw materials; namely,
on all linens or cottons, stained or painted, on beer, glass-ware, plate-glass, and
iron.'
Here is no mention of the Parliament, and yet, no man living will say that a bare
proclamation of the King, upon the ground of the treaty, would be an authority for
the levying of any duties whatever; but it must be done in the constitutional mode,
by act of parliament, which affords an additional proof, that where any thing of a
legislative nature is in contemplation, it is constantly implied and understood,
(without express words) that it can alone be effected by the medium of the
legislative authority. [3 U.S. 199, 276] That this practice I have noticed is not an
occasional one, but has been constantly observed, I think is highly probable from
this circumstance; that if treaties were considered in that country as ipso facto
repealing all laws inconsistent with them, and imposing new ones, they ought to be
bound up with the statutes at large, (which they never have been) otherwise the
publication would be at least incomplete, if not deceitful.
These examples from Great Britain I consider of very high authority, as they are
taken from a kingdom equally bound by the law of nations as we are; possessing a
mixed form of government as we do; and, so far as common principles of legislation
are concerned, being the very country from which we derive the rudiments of our
legal ideas.
But I must admit that there is also a very high authority, and to which we naturally
should be more partial, against this construction. It is the authority of the Congress
of the United States in the year 1787. It is an authority derived from an unanimous
opinion of that truly respectable body, conveyed in a circular letter from Congress to
the different States on this very subject. I bow with proper deference to that great
authority: But I should be unworthy of the high station I hold, if I did not speak my
real sentiments as a judge, uninfluenced by any authority whatsoever. It is certain,
that in this particular, Congress were not exercising a judicial power; and, therefore,

the opinion is not conclusive on any court of justice. I feel, however some
consolation in differing from an opinion for which so much respect must, and ought
to be entertained, by reflecting that though this was the unanimous opinion of
Congress, it was not the unanimous opinion of the people of the United States. So
far from it, that I believe no suit was ever maintained in any court in the United
States, merely on the footing of the treaty when an act of the legislature stood in
the way. It was to remove the obstacle arising from such an opinion, that Congress
recommended the repeal of all acts inconsistent with the due execution of the
treaty. And I must with due submission say, that in my opinion without such a
repeal, no British creditor could have maintained a suit in virtue of the treaty, where
any legislative impediment existed, until the present constitution of the United
States was formed.
2nd. The article in the constitution concerning treaties I have always considered,
and do now consider, was in consequence of the conflict of opinions I have
mentioned on the subject of the treaty in question. It was found in this instance, as
in many others, that when thirteen different legislatures were necessary to act in
unison on many occasions, it was in vain to expect that they would always agree to
act as Congress might think it their duty to require. Requisitions formerly [3 U.S.
199, 277] were made binding in point of moral obligation, (so far as the amount of
money was concerned, of which Congress was the constitutional judge,) but the
right and the power being separated, it was found often impracticable to make them
act in conjunction. To obviate this difficulty, which every one knows had been the
means of greatly distressing the union, and injuring its public credit, a power was
given to the Representatives of the whole union to raise taxes by their own
authority for the good of the whole. Similar embarrassments had been found about
the treaty. This was binding in moral obligation, but could not be constitutionally
carried into effect (at least in the opinion of many,) so far as acts of legislation then
in being constituted an impediment, but by a repeal. The extreme inconveniencies
felt from such a system dictated the remedy which the constitution has now
provided, 'that all treaties made or which shall be made under the authority of the
United States, shall be the supreme law of the land; and that the judges in every
State shall be bound thereby, any thing in the constitution or laws of any State to
the contrary notwithstanding.' Under this Constitution therefore, so far as a treaty
constitutionally is binding, upon principles of moral obligation, it is also by the
vigour of its own authority to be executed in fact. It would not otherwise be the
supreme law in the new sense provided for, and it was so before in a moral sense.
The provision extends to subsisting as well as to future treaties. I consider,
therefore, that when this constitution was ratified, the case as to the treaty in
question stood upon the same footing, as if every act constituting an impediment to
a creditor's recovery had been expressly repealed, and any further act passed,
which the public obligation had before required, if a repeal alone would not have
been sufficient.
Before I go to the consideration of the words of the treaty itself, I think it material to
say a few words as to the operation which an actual repeal would have had.
I believe no one will doubt, that every thing done under the act while in existence,
so far as private rights at least were concerned, would have been unaffected by the
repeal. If a statute requires a will of lands to be executed in the presence of two

witnesses; and a will is actually executed in that manner, and the statute is
afterwards repealed, and three witnesses are made necessary, the will executed in
the presence of two others, when the former statute was in being, would be
undoubtedly good; and if I am not mistaken, a will made according to a law in being
has been held good, even though the devisor died after an alteration of it. Of this,
however, I am not sure; but the general position, I imagine, will not be questioned.
[3 U.S. 199, 278] Let us now see the words of the treaty.
They are these:
'It is agreed, that creditors on either side shall meet with no lawful impediment to
the recovery of the full value in sterling money, of all bona fide debts heretofore
contracted.'
The meaning of this provision may perhaps be better considered by an analysation
of its parts, so far as they concern the question before us.
1. Creditors There can be no creditor without two corelatives, a debtor and a debt.
Prima facie, therefore, if a debtor has been discharged, he is not the person whom
any other person can sue as a creditor. This probably may be fairly applied to the
present Defendant, who as a debtor was discharged by legal authority.
With regard to the debt, that in the present instance was not extinguished even by
the act of the State, because the right of the creditor to the money was not taken
away.
The debt, therefore, remains but not from the same debtor. The state may be
considered as substituting itself in some measure in the place of the debtor. The full
effect of that substitution, I am not now to consider, nor would it be proper for me at
present to give an opinion upon it. The question is not, whether the creditor is
entitled to his money, or in what manner, but whether he is entitled to recover it
against the present Defendant.
2. No lawful impediment. [278-Continued.]
These words must be construed as relative to the former, for the whole clause must
be taken together. Therefore, where there are a creditor and a debtor, there is to be
no lawful impediment to the former recovering against the latter.
If the present Defendant be not a debtor to the Plaintiff, how can the treaty operate
as against him?
The words 'lawful impediment,' may admit of two senses.
One 'any lawful impediment whatsoever arising from any act done to the prejudice
of a creditor's right during the war.' I add that restriction 'during the war,' because
the rules of construction as to treaties, must narrow the words as to the object, the
war, the affairs of which the Treaty of Peace was intended to operate upon.
Or, 'any impediment arising from any law then in being, or thereafter to be passed,
to the prejudice of a creditor's right.'

The latter, I think, is not an unnatural construction, and would give the words great
operation, and I think is to be preferred to the former, for the following reasons:
1. This would stipulate for what each Legislature of the Union would rightfully and
honestly do, relinquish public claims [3 U.S. 199, 279] to debts existing before the
war, and which otherwise might have stood upon a precarious footing; for though
peace alone would do away a common law disability to sue, yet I apprehend it
would not ipso facto remove a disability expressly created by statute, much less
extinguish any public right acquired under any act of confiscation.
2. Though Congress possibly might, as the price of peace, have been authorised to
give up, even rights fully acquired by private persons during the war, more
especially if derived from the laws of war only against the enemy, and in that case
the individual might have been entitled to compensation from the public, for whose
interests his own rights were sacrificed; yet, nothing but the most rigorous necessity
could justify such a sacrifice; such a sacrifice is not to be presumed even to have
been intended under the operation of general words, not making such a
construction unavoidable. For, it is reasonable to infer, that in such a case special
words would have been used to obviate the least colourable doubt.
Thus (for example) if it was stipulated in a treaty of peace between two European
powers, 'that all ships taken during the war should be restored,' I imagine this would
not be construed to include ships taken by privateers, and legally condemned
during the war, unless it had, in fact, happened that no other ships had been taken,
and then I suppose they would be understood as comprehended, and their own
nation must have indemnified them.
3. If, according to the practice in Great Britain, in conformity to the law of nations,
and upon the principles of a mixed government, in case any impediments had then
existed, by acts of Parliament in Great Britain, to the recovery of American debts,
such impediments could only have been removed by a repeal, we may presume the
British negociator had reason to conclude, that the lawful impediments in this
country could only be removed in the same manner; and if so, may we not fairly
say, that the impediments in view could be no other than such as the Legislatures in
the respective countries could do away by a repeal, or might by subsequent laws
enact? If they wanted a further act of legislation, grounded not merely on ordinary
legislative authority, but upon power to destroy private rights acquired under
legislative faith, long since pledged and relied on, very special words were proper to
effect that object, and neither in one country nor the other could it have been
effected with the least colour of justice, but by providing at the same time the
fullest means of indemnification.
4. This construction derives great weight from the recommendatory letter of
Congress I before mentioned, for I will venture to say, had the act they
recommended been passed in [3 U.S. 199, 280] the State, in the very words they
recommended, they would not have had efficacy enough to destroy those payments
as a bar. And yet, if Congress thought such a case ought to have been
comprehended, I presume they would have recommended a special provision,
clearly comprehending such cases, and accompanied with a full indemnity. I said the
words of the treaty would have great operation, without giving them the very
rigorous one contended for. And that will more fully appear when we take up the

remaining words, viz. 3. 'To the recovery of the full value in sterling money of all
bona fide debts heretofore contracted. The operation (exclusive of these payments)
would therefore be this: 1st. All creditors whose debts had not been confiscated, or
where the confiscations were not complete, and no payments had been made,
would have a right of recovering their debts. 2nd. Perhaps all creditors, whether
their debts were confiscated or not, or whether confiscations were complete or not,
excepting those only from whom the government had received the money, would be
entitled to recover, because undoubtedly the respective Legislatures were
competent to restore all these. 3rd. Another object of no small importance, was to
secure the payment of all these debts in sterling money, so that the creditors might
not suffer by paper currency, either then in existence, or that might be thereafter
emitted. When these general words, therefore, can comprehend so many cases, all
reasonable objects of the article, I cannot think I am compelled as a Judge, and
therefore I ought not to do so, to say that the general words of this article, shall
extinguish private as well as public rights. I hold public faith so sacred, when once
pledged either to citizens or to foreigners, that a violation of that faith is never to be
inferred as even in contemplation, but when it is impossible to give any other
reasonable construction to a public act. I do not clearly see that it was intended in
the present instance. I cannot therefore bring myself to say, that the present
Defendant having once lawfully paid the money, shall pay it over again. If the
matter be only doubtful, I think the doubt should incline in favour of an innocent
individual, and not against him. I should hope that the present Plaintiff will still
receive his money, as his right to the money certainly has not been divested, but I
think for all the reasons I have given, he is not entitled to recover it from the
present Defendant. My opinion, therefore, on the whole of this case is, that
judgment ought to be given for the Defendant upon the second plea; upon the third,
fourth and fifth for the Plaintiff. [3 U.S. 199, 281]
Wilson, Justice. I shall be concise in delivering my opinion, as it depends on a few
plain principles. If Virginia had a power to pass the law of October 1777, she must
be equally empowered to pass a similar law in any future war; for, the powers of
Congress were, in fact, abridged by the articles of confederation; and in relation to
the present Constitution, she still retains her sovereignty and independence as a
State, except in the instances of express delegation to the Federal Government.
There are two points involved in the discussion of this power of confiscation: The
first arising from the rule prescribed by the law of nations; and the second arising
from the construction of the treaty of peace. When the United States declared their
independence, they were bound to receive the law of nations, in its modern state of
purity and refinement. By every nation, whatever is its form of government, the
confiscation of debts has long been considered disreputable: and, we know, that not
a single confiscation of that kind stained the code of any of the European powers,
who were engaged in the war, which our revolution produced. Nor did any authority
for the confiscation of debts proceed from Congress (that body, which clearly
possessed the right of confiscation, as an incident of the powers of war and peace)
and, therefore, in no instance can the act of confiscation be considered as an act of
the nation. But even if Virginia had the power to confiscate, the treaty annuls the
confiscation. The fourth article is well expressed to meet the very case: it is not
confined to debts existing at the time of making the treaty; but is extended to debts
heretofore contracted. It is impossible by any glossary, or argument, to make the
words more perspicuous, more conclusive, than by a bare recital. Independent,

therefore, of the Constitution of the United States, (which authoritatively inculcates

the obligation of contracts) the treaty is sufficient to remove every impediment
founded on the law of Virginia. The State made the law; the State was a party to the
making of the treaty: a law does nothing more than express the will of a nation; and
a treaty does the same. Under this general view of the subject, I think the judgment
of the Circuit Court ought to be reversed.
Cushing, Justice. My state of this case will, agreeably to my view of it, be short, I
shall not question the right of a State to confiscate debts. Here is an act of the
Assembly of Virginia, passed in 1777, respecting debts; which contemplating to
prevent the enemy deriving strength by the receipt of them during the war,
provides, that if any British debtor will pay his debt into the Loan Office, obtain a
certificate and [3 U.S. 199, 282] receipt as directed, he shall be discharged from so
much of the debt. But an intent is expressed in the act not to confiscate, unless
Great Britain should set the example. This act, it is said, works a discharge and a
bar to the payer. If such payment is to be considered as a discharge, or a bar, so
long as the act had force, the question occurs; Was there a power, by the treaty,
supposing it contained proper words, entirely to remove this law, and this bar, out of
the creditor's way?
This power seems not to have been contended against, by the Defendant's council:
And, indeed, it cannot be denied; the treaty having been sanctioned, in all its parts,
by the Constitution of the United States, as the supreme law of the land.
Then arises the great question, upon the import of the fourth article of the treaty:
And to me, the plain and obvious meaning of it, goes to nullify, ab initio, all laws, or
the impediments of any law, as far as they might have been designed to impair, or
impede, the creditor's right, or remedy, against his original debtor. 'Creditors on
either side shall meet with no lawful impediment to the recovery of the full value in
sterling money, of all bona fide debts heretofore contracted.'
The article speaking of creditors, and bona fide debts heretofore contracted, plainly
contemplates debts, as originally contracted, and creditors and original debtors;
removing out of the way all legal impediments; so that a recovery might be had, as
if no such laws had particularly interposed. The words 'recovery of the full value in
sterling money,' if they have force, or meaning, must annihilate all tender laws,
making any thing a tender, but sterling money; and the other words, or at least the
whole taken together, must, in like manner, remove all other impediments of law,
aimed at the recovery of those debts.
What has some force to confirm this construction, is the sense of all Europe, that
such debts could not be touched by States, without a breach of public faith: And for
that, and other reasons, no doubt, this provision was insisted upon, in full latitude,
by the British negotiators. If the sense of the article be, as stated, it obviates, at
once, all the ingenious, metaphysical, reasoning and refinement upon the words,
debt, discharge, extinguishment, and affords an answer to the decision made in the
time of the interregnum that payment to sequestors, was payment to the creditor.
A State may make what rules it pleases; and those rules must necessarily have
place within itself.

But here is a treaty, the supreme law, which overrules all State laws upon the
subject, to all intents and purposes; and that makes the difference. Diverse
objections are made to this construction: That it is an odious one, and as such,
ought to [3 U.S. 199, 283] be avoided: That treaties regard the existing state of
things: That it would carry an imputation upon public faith: That it is founded on the
power of eminent domain, which ought not to be exercised, but upon the most
urgent occasions: That the negociators themselves did not think they had power to
repeal laws of confiscation; because they, by the fifth article, only agreed, that
Congress should recommend a repeal to the States. As to the rule respecting odious
constructions; that takes place where the meaning is doubtful, not where it is clear,
as I think it is in this case. But it can hardly be considered as an odious thing, to
inforce the payment of an honest debt, according to the true intent and meaning of
the parties contracting; especially if, as in this case, the State having received the
money, is bound in justice and honor, to indemnify the debtor, for what it in fact
received. In whatever other rights this act of Assembly may be reviewed, I consider
it in one, as containing a strong implied engagement, on the part of the State, to
indemnify every one who should pay money under it, pursuant to the invitation it
held out. Having never confiscated the debt, the State must, in the nature and
reason of things, consider itself as answerable to the value. And this seems to be
the full sense of the legislators upon this subject, in a subsequent act of assembly;
but the treaty holds the original debtor answerable to his creditor, as I understand
the matter. The State, therefore, must be responsible to the debtor. These
considerations will, in effect, exclude the idea of the power of eminent domain; and
if they did not, yet there was sufficient authority to exercise it, and the greatest
occasion that perhaps could ever happen. The same considerations will also take
away all ground of imputation upon public faith. Again, the treaty regarded the
existing state of things, by removing the laws then existing, which intended to
defeat the creditor of his usual remedy at law. As to the observations upon the
recommendatory provision of the fifth article; I do not see that we can collect the
private opinion of the negociators, respecting their powers, by what they did not do;
and if we could, this court is not bound by their opinion, unless the reasons on
which it was founded, being known, were convincing. It would be hard upon them,
to suppose they gave up all, that they might think they strictly had a right to give
up. We may allow somewhat to skill, policy and fidelity. With respect to confiscations
of real and personal estates, which had been compleated, the estates sold, and,
perhaps, passed through the hands of a number of purchasers, and improvements
made upon real estates, by the then possessors; they knew, that to give them up
absolutely, must create much confusion in this [3 U.S. 199, 284] country. Avoiding
that, (whether from an apprehension of want of power does not appear from the
instrument) they were lead only to agree, that Congress should recommend a
restitution, or composition. The fourth article, which is particularly and solely
employed about debts, makes provision, according to the doctrine then held sacred
by all the sovereigns of Europe. Although our negociators did not gain an exemption
for individuals, from bona fide debts, contracted in time of peace, yet they gained
much for this country: as rights of fishery, large boundaries, a settled peace, and
absolute independence, with their concomitant and consequent advantages: All
which, it might not have been prudent for them to risque, by obstinately insisting on
such exemption, either in whole or in part, contrary to the humane and meliorated
policy of the civilized world, in this particular. The fifth article, it is conceived, can
not affect or alter the construction of the fourth article. For, first, it is against

reason, that a special provision made respecting debts by name, should be taken
away immediately after, in the next article, by general words, or words of
implication, which words too, have, otherwise, ample matter to operate upon. 2nd.
No implication from the fifth article, can touch the present case, because that
speaks only of actual confiscations, and here was no confiscation. If we believe the
Virginia legislators, they say, 'We do not confiscate we will not confiscate debts,
unless Great Britain sets the example,' which it is not pretended she ever did. The
provision, that 'Creditors shall meet with no lawful impediment,' etc is as absolute,
unconditional, and peremptory, as words can well express, and made not to depend
on the will and pleasure, or the optional conduct of any body of men whatever. To
effect the object intended, there is no want of proper and strong language; there is
no want of power, the treaty being sanctioned as the supreme law, by the
constitution of the United States, which nobody pretends to deny to be paramount
and controlling to all state laws, and even state constitutions, wheresoever they
interfere or disagree. The treaty, then, as to the point in question, is of equal force
with the constitution itself; and certainly, with any law whatsoever. And the words,
'shall meet with no lawful impediment,' etc. are as strong as the wit of man could
devise, to avoid all effects of sequestration, confiscation, or any other obstacle
thrown in the way, by any law, particularly pointed against the recovery of such
debts. I am, therefore, of opinion, that the judgment of the Circuit Court ought to be
reversed. [3 U.S. 199, 285] BY THE COURT. All and singular the premises being
seen by the court here and fully understood, and mature deliberation had thereon,
because it appears to the court now here, that in the record and process aforesaid,
and also in the rendition of the judgment aforesaid, upon the demurrer to the
rejoinder of the Defendants in error, to the replication of the second plea, it is
manifestly erred, it is considered that the said judgment for those errors and others
in the record and process aforesaid, be revoked and annulled, and altogether held
for nought, and it is further considered by the court here, that the Plaintiff in error
recover against the Defendants, two thousand nine hundred and seventy-six
pounds, eleven shillings and six-pence, good British money, commonly called
sterling money, his debt aforesaid, and his costs by him about his suit in this behalf
expended, and the said Defendants, in mercy, etc. But this judgment is to be
discharged by the payment of the sum of 596 dollars, and interest thereon to be
computed, after the rate of five per cent per annum, from the 7th day of July, 1782,
till payment, besides the costs, and by the payment of such damages as shall be
awarded to the Plaintiff in error, on a writ of enquiry to be issued by the Circuit
Court of Virginia, to ascertain the sum really due to the Plaintiff in error, exclusively
of the said sum of 596 dollars, which was found to be due to the Plaintiff in error,
upon the trial in the said Circuit Court, on the issue joined upon the Defendant's
plea of payment, at a time when the judgment of the said Circuit Court on the said
demurrer was unreversed and in full force and vigor, and for the execution of the
judgment of the court, the cause aforesaid is remanded to the said Circuit Court of
Virginia.
Judgment reversed.
Footnotes
[ Footnote * ] As I was not present during the argument, I was in hopes to have
obtained the briefs of the counsel themselves, for a more full display of their
learning and ingenuity in this cause; but being disappointed in that respect, I have

been aided by the notes of Mr. W. Tilghman, to whose kindness, it is just on the
present occasion to acknowledge, I have been frequently indebted for similar
communications, in the course of the compilation for these Reports.
[ Footnote * ] ante, p.54.
[ Footnote * ] See the Ordinance of the 30th of November, 1781. See, also, the
Resolution of the 23rd of November, 1781, in which Congress recommended to the
states, to pass laws to punish infractions of the law of nations.
[ Footnote * ] See the oath in the act of the 24th of September, 1789. 1. vol. p. 53. f.
8. Swift's edition.
[ Footnote * ] Judges of this court have generally pursued, forbore taking any part in
this decision, as a Judge, upon the present writ of error, having declared from the
first he meant only to do so, in case of an equal division of opinion among the other
Judges. But he observed, that he thought there would be no impropriety in his
reading in his place the reasons he had given in support of the judgment in the
Circuit Court, a practice expressly authorized in the case of the District Judge, upon
an appeal to the Circuit Court from his own decision; tho' he is at the same time
excluded from voting. And Judge Iredell added, that upon consulting his brethren on
the bench, they had acquiesced in the propriety of this proceeding. He therefore
read these reasons in his place, so far as they respected the same subject of
discussion in both courts, which was only as to the effect of payments into the
treasury, every other point in contest in the Circuit Court having been relinquished.
It is, however, thought proper on this occasion, to publish the whole of the
argument as delivered in the Circuit Court, there being some observations on that
part of the subject that was relinquished which, it is conceived, serve to illustrate
the great topic of controversy that occasioned the present writ of error.
The Judge, after reading his opinion, as delivered in the court below, added, that it
had not been changed by any thing which had occurred, in arguing the case on the
present writ of error.
[ Footnote * ] Read against Brookman, 3 Term Rep. 151. By three Judges against
one, in the Court of King's Bench, in England,
___
[ Footnote * ] Chancellor Wythe, of Virginia, who had given a contrary opinion in the
High Court of Chancery of Virginia, a few days before.
[ Footnote * ] * 1 Comm. 91.
[ Footnote * ] The book commonly called 'The Old Law of Evidence; originally printed
in 1735, and afterwards in 1739 and 1744.
Upon consulting the Bibliothaca Legum, it appears that Clayton's Reports were
published in 1651, so that the decision must have been under the commonwealth.
See
more
at:
court/3/199.html#sthash.ixWIaAyY.dpuf

http://caselaw.findlaw.com/us-supreme-

2. Paquete Habana 175 US 677

United States Supreme Court
THE PAQUETE HABANA, (1900)
No. 395
Argued:

Decided: January 8, 1900

[175 U.S. 677, 678] Mr J. Parker Kirlin for appellants.

Assistant Attorney General Hoyt, Solicitor General Richards, and Messrs. Joseph K.
McCammon, James H. Hayden, George A. King, and William B. King for appellees.
Mr. Justice Gray delivered the opinion of the court:
These are two appeals from decrees of the district court of the United States for the
southern district of Florida condemning two fishing vessels and their cargoes as
prize of war.
Each vessel was a fishing smack, running in and out of Havana, and regularly
engaged in fishing on the coast of Cuba; sailed under the Spanish flag; was owned
by a Spanish subject of Cuban birth, living in the city of Havana; was commanded
by a subject of Spain, also residing in Havana; and her master and crew had no
interest in the vessel, but were entitled to shares, amounting in all to two thirds, of
her catch, the other third belonging to her owner. Her cargo consisted of fresh fish,
caught by her crew from the sea, put on board as they were caught, and kept and
sold alive. Until stopped by the blockading squadron she had no knowledge of the
existence of the war or of any blockade. She had no arms or ammunition on board,
and made on attempt to run the blockade after she knew of its existence, nor any
resistance at the time of the capture.
The Paquete Habana was a sloop, 43 feet long on the keel, [175 U.S. 677, 679] and
of 25 tons burden, and had a crew of three Cubans, including the master, who had a
fishing license from the Spanish government, and no other commission or license.
She left Havana March 25, 1898; sailed along the coast of Cuba to Cape San
Antonio, at the western end of the island, and there fished for twenty-five days,
lying between the reefs off the cape, within the territorial waters of Spain; and then
started back for Havana, with a cargo of about 40 quintals of live fish. On April 25,
1898, about 2 miles off Mariel, and 11 miles from Havana, she was captured by the
United States gunboat Castine.
The Lola was a schooner, 51 feet long on the keel, and of 35 tons burden, and had a
crew of six Cubans, including the master, and no commission or license. She left
Havana April 11, 1898, and proceeded to Campeachy sound, off Yucatan, fished
there eight days, and started back for Havana with a cargo of about 10,000 pounds
of live fish. On April 26, 1898, near Havana, she was stopped by the United States
steamship Cincinnati, and was warned not to go into Havana, but was told that she
would be allowed to land at Bahia Honda. She then changed her course, and putfor

Bahia Honda, but on the next morning, when near that port, was captured by the
United States steamship Dolphin.
Both the fishing vessels were brought by their captors into Key West. A libel for the
condemnation of each vessel and her cargo as prize of war was there filed on April
27, 1898; a claim was interposed by her master on behalf of himself and the other
members of the crew, and of her owner; evidence was taken, showing the facts
above stated; and on May 30, 1898, a final decree of condemnation and sale was
entered, 'the court not being satisfied that as a matter of law, without any
ordinance, treaty, or proclamation, fishing vessels of this class are exempt from
seizure.'
Each vessel was thereupon sold by auction; the Paquete Habana for the sum of
$490; and the Lola for the sum of $800. There was no other evidence in the record
of the value of either vessel or of her cargo.
It has been suggested, in behalf of the United States, that [175 U.S. 677, 680] this
court has no jurisdiction to hear and determine these appeals, because the matter
in dispute in either case does not exceed the sum or value of $2,000, and the
district judge has not certified that the adjudication involves a question of general
importance.
The suggestion is founded on 695 of the Revised Statutes, which provides that 'an
appeal shall be allowed to the Supreme Court from all final decrees of any district
court in prize causes, where the matter in dispute, exclusive of costs, exceeds the
sum or value of two thousand dollars; and shall be allowed, without reference to the
value of the matter in dispute, on the certificate of the district judge that the
adjudication involves a question of general importance.'
The judiciary acts of the United States, for a century after the organization of the
government under the Constitution, did impose pecuniary limits upon appellate
jurisdiction.
In actions at law and suits in equity the pecuniary limit of the appellate jurisdiction
of this court from the circuit courts of the United States was for a long time fixed at
$2000. Acts of September 24, 1789, chap. 20, 22; 1 Stat. at L. 84; March 3, 1803,
chap. 40; 2 Stat. at L. 244; Gordon v. Ogden, 3 Pet. 33, 7 L. ed. 592; Rev. Stat. 691,
692. In 1875 it was raised to $5,000. Act of February 16, 1875, chap. 77, 3; 18 Stat.
at L. 316. And in 1889 this was modified by providing that, where the judgment or
decree did not exceed the sum of $5,000, this court should have appellate
jurisdiction upon the question of the jurisdiction of the circuit court, and upon that
question only. Act of February 25, 1889, chap. 236, 1; 25 Stat. at L. 693; Parker v.
Ormsby, 141 U.S. 81 , 35 L. ed. 654, 11 Sup. Ct. Rep. 912.
As to cases of admiralty and maritime jurisdiction, including prize causes, the
judiciary act of 1789, in 9, vested the original jurisdiction in the district courts,
without regard to the sum or value in controversy; and in 21 permitted an appeal
from them to the circuit courts where the matter in dispute exceeded the sum or
value of $300. 1 Stat. at L. 77, 83, chap. 20; The Betsey, 3 Dall. 6, 16, sub nom.
Glass v. The Betsey, 1 L. ed. 485, 489; The Amiable Nancy, 3 Wheat. 546, 4 L. ed.
456; Stratton v. Jarvis, 8 Pet. 44, 11, 8 L. ed. 846, 849. By the act of March 3, 1803,
chap. 40, appeals to the circuit court were permitted from all final decrees of a

district court where [175 U.S. 677, 681] the matter in dispute exceeded the sum or
value of $50; and from the circuit courts to this court in all cases 'of admiralty and
maritime jurisdiction, and of prize or no prize' in which the matter in dispute
exceeded the sum or value of $2,000. 2 Stat. at L. 244; Jenks v. Lewis, 3 Mason,
503, Fed. Cas. No. 7,279; Stratton v. Jarvis, above cited; The Admiral, 3 Wall. 603,
612, sub nom. The Admiral v. United States, 18 L. ed. 58, 59. The acts of March 3,
1863, chap. 86, 7, and June 30, 1864, chap. 174, 13, provided that appeals from the
district courts in prize causes should lie directly to this court, where the amount in
controversy exceeded $2,000, or 'on the certificate of the district judge that the
adjudication involves a question of difficulty and general importance.' 12 Stat. at L.
760; 13 Stat. at L. 310. The provision of the act of 1803, omitting the words 'and of
prize or no prize,' was re-enacted in 692 of the Revised Statutes; and the provision
of the act of 1864, concerning prize causes, was substantially re-enacted in 695 of
the Revised Statutes, already quoted.
But all this has been changed by the act of March 3, 1891, chap. 517, establishing
the circuit courts of appeals, and creating a new and complete scheme of appellate
jurisdiction, depending upon the nature of the different cases, rater than upon the
pecuniary amount involved. 26 Stat. at L. 826.
By that act, as this court has declared, the entire appellate jurisdiction from the
circuit and district courts of the United States was distributed, 'according to the
scheme of the act,' between this court and the circuit courts of appeals thereby
established, 'by designating the classes of cases' of which each of these courts was
to have final jurisdiction. McLish v. Roff, 141 U.S. 661, 666 , 35 S. L. ed. 893, 894, 12
Sup. Ct. Rep. 118; American Constr. Co. v. Jacksonville, T. & K. W. R. Co. 148 U.S.
372, 382 , 37 S. L. ed. 486, 490, 13 Sup. Ct. Rep. 758; Carey v. Houston & T. C. R.
Co. 150 U.S. 170, 179 , 37 S. L. ed. 1041, 1043, 14 Sup. Ct. Rep. 63.
The intention of Congress, by the act of 1891, to make the nature of the case, and
not the amount in dispute, the test of the appellate jurisdiction of this court from
the district and circuit courts, clearly appears upon examination of the leading
provisions of the act.
Section 4 provides that no appeal, whether by writ of error or otherwise, shall
hereafter be taken from a district court [175 U.S. 677, 682] to a circuit court; but
that all appeals, by writ of error or otherwise, from the district courts, 'shall only be
subject to review' in this court or in the circuit court of appeal 'as is hereinafter
provided,' and 'the review by appeal, by writ of error, or otherwise' from the circuit
courts, 'shall be had only' in this court or in the circuit court of appeals, 'according
to the provisions of this act regulating the same.'
Section 5 provides that 'appeals or writs of error may be taken from the district
courts, or from the existing circuit courts, direct to the Supreme Court, in the
following cases:'
First. 'In any case in which the jurisdiction of the court is in issue; in such cases the
question of jurisdiction alone shall be certified to the Supreme Court from the court
below for decision.' This clause includes 'any case,' without regard to amount, in
which the jurisdiction of the court below is in issue; and differs in this respect from
the act of 1889, above cited.

Second. 'From the final sentences and decrees in prize causes.' This clause includes
the whole class of 'the final sentences and decrees in prize causes,' and omits all
provisions of former acts regarding amount in controversy, or certificate of a district
judge.
Third. 'In cases of conviction of a capital or otherwise infamous crime.' This clause
looks to the nature of the crime, and not to the extent of the punishment actually
imposed. A crime which might have been punished by imprisonment in a
penitentiary is an infamous crime, even if the sentence actually pronounced is of a
small fine only. Ex parte Wilson, 114 U.S. 417, 426 , 29 S. L. ed. 89, 92, 5 Sup. Ct.
Rep. 935. Consequently, such a sentence for such a crime was subject to the
appellate jurisdiction of this court, under this clause, until this jurisdiction, so far as
regards infamous crimes, was transferred to the circuit court of appeals by the act
of January 20, 1897, chap. 68. 29 Stat. at L. 492.
Fourth. 'In any case that involves the construction or application of the Constitution
of the United States.'
Fifth. 'In any case in which the constitutionality of any law of the United States, or
the validity or construction of any treaty made under its authority, is drawn in
question.' [175 U.S. 677, 683] Sixth. 'In any case in which the Constitution or law
of a state is claimed to be in contravention of the Constitution of the United States.'
Each of these last three clauses, again, includes 'any case' of the class mentioned.
They all relate to what are commonly called Federal questions, and cannot
reasonably be construed to have intended that the appellate jurisdiction of this
court over such questions should be restricted by any pecuniary limit,-especially in
their connection with the succeeding sentence of the same section: 'Nothing in this
act shall affect the jurisdiction of the Supreme Court in cases appealed from the
highest court of a state, nor the construction of the statute providing for review of
such cases.' Writs of error from this court to review the judgments of the highest
court of a state upon such questions have never been subject to any pecuniary
limit. Act of September 24, 1789, chap. 20, 25; 1 Stat. at L. 85; Buel v. Van Ness, 8
Wheat. 312, 5 L. ed. 624; Act of February 5, 1867, chap. 28, 2; 14 Stat. at L. 386;
Rev. Stat. 709.
By 6 of the act of 1891 this court is relieved of much of the appellate jurisdiction
that it had before; the appellate jurisdiction from the district and circuit courts 'in all
cases other than those provided for in the preceding section of this act, unless
otherwise provided by law,' is vested in the circuit court of appeals; and its
decisions in admiralty cases, as well as in cases arising under the cirminal laws, and
in certain other classes of cases, are made final, except that that court may certify
to this court questions of law, and that this court may order up the whole case by
writ of certiorari. It is settled that the words 'unless otherwise provided by law,' in
this section, refer only to provisions of the same act, or of contemporaneous or
subsequent acts, and do not include provisions of earlier statutes. Lau Ow Bew v.
United States, 144 U.S. 47, 57 , 36 S. L. ed. 340, 343, 12 Sup. Ct. Rep. 517; Hubbard
v. Soby, 146 U.S. 56 , 36 L. ed. 886, 13 Sup. Ct. Rep. 13; American Constr. Co. v.
Jacksonville, T. & K. W. R. Co. 148 U.S. 372, 383 , 37 S. L. ed. 486, 491, 13 Sup. Ct.
Rep. 758.

The act of 1891 nowhere imposes a pecuniary limit upon the appellate jurisdiction,
either of this court or of the circuit court of appeals, from a district or circuit court of
the United States. The only pecuniary limit imposed is one of [175 U.S. 677, 684]
$1,000 upon the appeal to this court of a case which has been once decided on
appeal in the circuit court of appeals, and in which the judgment of that court is not
made final by 6 of the act.
Section 14 of the act of 1891, after specifically repealing 691 of the Revised
Statutes and 3 of the act of February 16, 1875, further provides that 'all acts and
parts of acts relating to appeals or writs of error, inconsistent with the provisions for
review by appeals or writs of error in the preceding 5 and 6 of this act, are hereby
repealed.' 26 Stat. at L. 829, 830. The object of the specific repeal, as this court has
declared, was to get rid of the pecuniary limit in the acts referred to. McLish v. Roff,
141 U.S. 661, 667 , 35 S. L. ed. 893, 895, 12 Sup. Ct. Rep. 118. And, although
neither 692 nor 695, of the Revised Statutes is repealed by name, yet, taking into
consideration the general repealing clause, together with the affirmative provisions
of the act, the case comes within the reason of the decision in an analogous case, in
which this court said: 'The provisions relating to the subject-matter under
consideration are, however, so comprehensive, as well as so variant from those of
former acts, that we think the intention to substitute the one for the other is
necessarily to be inferred, and must prevail.' Fisk v. Henarie, 142 U.S. 459, 468 , 35
S. L. ed. 1079, 1083, 12 Sup. Ct. Rep. 207.
The decision in this court in the recent case of United States v. Rider, 163 U.S. 132 ,
41 L. ed. 101, 16 Sup. Ct. Rep. 983, affords an important, if not controlling,
precedent. From the beginning of this century until the passage of the act of 1891,
both in civil and in criminal cases, questions of law upon which two judges of the
circuit court were divided in opinion might be certified by them to this court for
decision. Act of April 29, 1802, chap. 31, 6; 2 Stat. at L. 159; June 1, 1872, chap.
255, 1; 17 Stat. at L. 196; Rev. Stat. 650-652, 693, 697; New England M. Ins. Co. v.
Dunham, 11 Wall. 1, 21, 20 L. ed. 90, 96; United States v. Sanges, 144 U.S. 310, 320
, 36 S. L. ed. 445, 449, 12 Sup. Ct. Rep. 609. But in United States v. Rider it was
adjudged by this court that the act of 1891 had superseded and repealed the earlier
acts authorizing questions of law to be certified from the circuit court to this court;
and the grounds of that adjudication sufficiently appear by [175 U.S. 677, 685] the
statement of the effect of the act of 1891 in two passages of that opinion: 'Appellate
jurisdiction was given in all criminal cases by writ of error either from this court or
from the circuit courts of appeals, and in all civil cases by appeal or error, without
regard to the amount in controversy, except as to appeals or writs of error to or
from the circuit courts of appeals in cases not made final as specified in 6.' 'It is true
that repeals by implication are not favored, but we cannot escape the conclusion
that, tested by its scope, its obvious purpose, and its terms, the act of March 3,
1891, covers the whole subject-matter under consideration, and furnishes the
exclusive rule in respect of appellate jurisdiction on appeal, writ of error, or
certificate.' 163 U.S. 138 -140, 41 L. ed. 104, 16 Sup. Ct. Rep. 986.
That judgment was thus rested upon two successive propositions: First, that the act
of 1891 gives appellate jurisdiction, either to this court or to the circuit court of
appeals, in all criminal cases, and in all civil cases 'without regard to the amount in
controversy;' second, that the act, by its terms, its scope, and its obvious purpose,

'furnishes the exclusive rule in respect of appellate jurisdiction on appeal, writ of

error, or certificate.'
As was long ago said by Chief Justice Marshall, 'the spirit as well as the letter of a
statute must be respected, and where the whole context of the law demonstrates a
particular intent in the legislature to effect a certain object, some degree of
implication may be called in to aid that intent.' Durousseau v. United States, 6
Cranch, 307, 314, 3 L. ed. 232, 234. And it is a well-settled rule in the construction
of statutes, often affirmed and applied by this court, that, 'even where two acts are
not in express terms repugnant, yet if the latter act covers the whole subject of the
first, and embraces new provisions, plainly showing that it was intended as a
substitute for the first act, it will operate as a repeal of that act.' United States v.
Tynen, 11 Wall. 88, 92, 20 L. ed. 153, 154; King v. Cornell, 106 U.S. 395, 396 , 27 S.
L. ed. 60, 1 Sup. Ct. Rep. 312; Tracy v. Tuffly, 134 U.S. 206, 223 , 33 S. L. ed. 879,
884, 10 Sup. Ct. Rep. 527; Fisk v. Henarie, 142 U.S. 459, 468 , 35 S. L. ed. 1079,
1083, 12 Sup. Ct. Rep. 207; District of Columbia v. Hutton, 143 U.S. 18, 27 , 36 S. L.
ed. 60, 62, 12 Sup. Ct. Rep. 369; United States v. Healey, 160 U.S. 136, 147 , 40 S.
L. ed. 369, 373, 16 Sup. Ct. Rep. 247.
We are of opinion that the act of 1891, upon its face, read [175 U.S. 677, 686] in
the light of settled rules of statutory construction and of the decisions of this court,
clearly manifests the intention of Congress to cover the whole subject of the
appellate jurisdiction from the district and circuit courts of the United States, so far
as regards in what cases, as well as to what courts, appeals may be taken, and to
supersede and repeal, to this extent, all the provisions of earlier acts of Congress,
including those that imposed pecuniary limits upon such jurisdiction, and, as part of
the new scheme, to confer upon this court jurisdiction of appeals from all final
sentences and decrees in prize causes, without regard to the amount in dispute,
and without any certificate of the district judge as to the importance of the
particular case.
We are then brought to the consideration of the question whether, upon the facts
appearing in these records, the fishing smacks were subject to capture by the
armed vessels of the United States during the recent war with Spain.
By an ancient usage among civilized nations, beginning centuries ago, and
gradually ripening into a rule of international law, coast fishing vessels, pursuing
their vocation of catching and bringing in fresh fish, have been recognized as
exempt, with their cargoes and crews, from capture as prize of war.
This doctrine, however, has been earnestly contested at the bar; and no complete
collection of the instances illustrating it is to be found, so far as we are aware, in a
single published work although many are referred to and discussed by the writers
on international law, notable in 2 Ortolan, Regles Internationales et Diplomatie de la
Mer (4th ed.) lib. 3, chap. 2, pp. 51-56; in 4 Calvo, Droit International (5th ed.) 23672373; in De Boeck, Propriete Privee Ennemie sous Pavillon Ennemi, 191-196; and in
Hall, International Law (4th ed.) 148. It is therefore worth the while to trace the
history of the rule, from the earliest accessible sources, through the increasing
recognition of it, with occasional setbacks, to what we may now justly consider as
its final establishment in our own country and generally throughout the civilized
world.

The earliest acts of any government on the subject, men- [175 U.S. 677, 687]
tioned in the books, either emanated from, or were approved by, a King of England.
In 1403 and 1406 Henry IV. issued orders to his admirals and other officers, entitled
'Concerning Safety for Fishermen-De Securitate pro Piscatoribus.' By an order of
October 26, 1403, reciting that it was made pursuant to a treaty between himself
and the King of France; and for the greater safety of the fishermen of either country,
and so that they could be, and carry on their industry, the more safely on the sea,
and deal with each other in peace; and that the French King had consented that
English fishermen should be treated likewise,-it was ordained that French fishermen
might, during the then pending season for the herring fishery, safely fish for
herrings and all other fish, from the harbor of Gravelines and the island of Thanet to
the mouth of the Seine and the harbor of Hautoune. And by an order of October 5,
1406, he took into his safe conduct and under his special protection, guardianship,
and defense, all and singular the fishermen of France, Flanders, and Brittany, with
their fishing vessels and boats, everywhere on the sea, through and within his
dominions, jurisdictions, and territories, in regard to their fishery, while sailing,
coming, and going, and, at their pleasure, freely and lawfully fishing, delaying, or
proceeding, and returning homeward with their catch of fish, without any
molestation or hindrance whatever; and also their fish, nets, and other property and
goods soever; and it was therefore ordered that such fishermen should not be
interfered with, provided they should comport themselves well and properly, and
should not, by color of these presents, do or attempt, or presume to do or attempt,
anything that could prejudice the King, or his Kingdom of England, or his subjects. 8
Rymer's Foedera, 336, 451.
The treaty made October 2, 1521, between the Emperor Charles V. and Francis I. of
France, through their ambassadors, recited that a great and fierce war had arisen
between them, because of which there had been, both by land and by sea, frequent
depredations and incursions on either side, to the grave detriment and intolerable
injury of the innocent [175 U.S. 677, 688] subjects of each; and that a suitable
time for the herring fishery was at hand, and, by reason of the sea being beset by
the enemy, the fishermen did not dare to go out, whereby the subject of their
industry, bestowed by heaven to allay the hunger of the poor, whould wholly fail for
the year, unless it were otherwise provided,-Quo fit, ut piscaturoe commoditas, ad
pauperum levandam famen a coelesti numine concessa, cessare hoc anno cmnino
debeat, nisi aliter provideatur. And it was therefore agreed that the subjects of each
sovereign, fishing in the sea, or exercising the calling of fishermen, could and might,
until the end of the next January, without incurring any attack, depredation,
molestation, trouble, or hindrance soever, safely and freely, everywhere in the sea,
take herrings and every other kind of fish, the existing war by land and sea
notwithstanding; and, further, that during the time aforesaid no subject of either
sovereign should commit, or attempt or presume to commit, any depredation, force,
violence, molestation, or vexation to or upon such fishermen or their vessels,
supplies, equipments, nets, and fish, or other goods soever truly appeartaining to
fishing. The treaty was made at Calais, then an English possession. It recites that
the ambassadors of the two sovereigns met there at the earnest request of Henry
VIII. and with his countenance, and in the presence of Cardinal Wolsey, his
chancellor and representative. And towards the end of the treaty it is agreed that
the said King and his said representative, 'by whose means the treaty stands

concluded, shall be conservators of the agreements therein, as if thereto by both

parties elected and chosen.' 4 Dumont, Corps Diplomatique, pt. 1, pp. 352, 353.
The herring fishery was permitted, in time of war, by French and Dutch edicts in
1536. Bynkershoek, Quaestiones Juris Publicae, lib. 1, chap. 3; 1 Emerigon des
Assurances, chap. 4, 9; chap. 12, 19, 8.
France, from remote times, set the example of alleviating the evils of war in favor of
all coast fishermen. In the compilation entitled 'Us et Coutumes de la Mer,'
published by Cleirac in 1661, and in the third part thereof, containing 'Maritime or
Admiralty Jurisdiction,-la Jurisdiction de la [175 U.S. 677, 689]
Marine ou d'
Admiraute-as well in time of peace, as in time of war,' article 80 is as follows: 'The
admiral may in time of war accord fishing truces-tresves pescheresses-to the enemy
and to his subjects; provided that the enemy will likewise accord them to
Frenchmen.' Cleirac, 544. Under this article, reference is made to articles 49 and 79
respectively of the French ordinances concerning the admiralty in 1543 and 1584, of
which it is but a reproduction. 4 Pardessus, Collection de Lois Maritimes, 319; 2
Ortolan, 51. And Cleirac adds, in a note, this quotation from Froissart's Chronicles:
'Fishermen on the sea, whatever war there were in France and England, never did
harm to one another; so they are friends, and help one another at need,-Pescheurs
sur mer, quelque guerre qui soit en France et Angleterre, jamais ne se firent mal l'un
a l'autre; aincois sont amis, et s'aydent l'un a l'autre au besoin.'
The same custom would seem to have prevailed in France until towards the end of
the seventeenth century. For example, in 1675, Louis XIV. and the States General of
Holland by mutual agreement granted to Dutch and French fishermen the liberty,
undisturbed by their vessels of war, of fishing along the coats of France, Holland,
and England. D'Hauterive et De Cussy, Traites de Commerce, pt. 1, vol. 2, p. 278.
But by the ordinances of 1681 and 1692 the practice was discontinued, because,
Valin says, of the faithless conduct of the enemies of France, who, abusing the good
faith with which she had always observed the treaties, habitually carried off her
fishermen, while their own fished in safety. 2 Valin sur l'Ordonnance de la Marine
(1776) 689, 690; 2 Ortolan, 52; De Boeck, 192.
The doctrine which exempts coast fishermen, with their vessels and cargoes, from
capture as prize of war, has been familiar to the United States from the time of the
War of Independence.
On June 5, 1779, Louis XVI., our ally in that war, addressed a letter to his admiral,
informing him that the wish he had always had of alleviating, as far as he could, the
hardships of war, had directed his attention to that class of his subjects [175 U.S.
677, 690] which devoted itself to the trade of fishing, and had no other means of
livelihood; that he had thought that the example which he should give to his
enemies, and which could have no other source than the sentiments of humanity
which inspired him, would determine them to allow to fishermen the same facilities
which he should consent to grant; and that he had therefore given orders to the
commanders of all his ships not to disturb English fishermen, nor to arrest their
vessels laden with fresh fish, even if not caught by those vessels; provided they had
no offensive arms, and were not proved to have made any signals creating a
suspicion of intelligence with the enemy; and the admiral was directed to
communicate the King's intentions to all officers under his control. By a royal order

in council of November 6, 1780, the former orders were confirmed; and the capture
and ransom, by a French cruiser, of The John and Sarah, an English vessel, coming
from Holland, laden with fresh fish, were pronounced to be illegal. 2 Code des Prises
(ed. 1784) 721, 901, 903.
Among the standing orders made by Sir James Marriott, Judge of the English High
Court of Admiralty, was one of April 11, 1780, by which it was 'ordered that all
causes of prize of fishing boats or vessels taken from the enemy may be
consolidated in one monition, and one sentence or interlocutory, if under 50 tons
burthen, and not more than 6 in number.' Marriott's Formulary, 4. But by the
statements of his successor, and of both French and English writers, it apears that
England, as well as France, during the American Revolutionary War, abstained from
interfering with the coast fisheries. The Young Jacob and Johanna, 1 C. Rob. 20; 2
Ortolan, 53; Hall, 148.
In the treaty of 1785 between the United States and Prussia, article 23 (which was
proposed by the American Commissioners, John Adams, Benjamin Franklin, and
Thomas Jefferson, and is said to have been drawn up by Franklin), provided that, if
war should arise between the contracting parties, 'all women and children, scholars
of every faculty, cultivators of the earth, artisans, manufacturers, and fishermen,
[175 U.S. 677, 691] unarmed and inhabiting unfortified towns, villages, or places,
and in general all others whose occupations are for the common subsistence and
benefit of mankind, shall be allowed to continue their respective employments, and
shall not be molested in their persons, nor shall their houses or goods be burnt or
otherwise destroyed, nor their fields wasted by the armed force of the enemy, into
whose power, by the events of war, they may happen to fall; but if anything is
necessary to be taken from them for the use of such armed force, the same shall be
paid for at a reasonable price.' 8 Stat. at L. 96; 1 Kent, Com. 91, note; Wheaton,
History of the Law of Nations, 306, 308. Here was the clearest exemption from
hostile molestation or seizure of the persons, occupations, houses, and goods of
unarmed fishermen inhabiting unfortified places. The article was repeated in the
later treaties between the United States and Prussia of 1799 and 1828. 8 Stat. at L.
174, 384. And Dana, in a note to his edition of Wheaton's International Laws, says:
'In many treaties and decrees, fishermen catching fish as an article of food are
added to the class of persons whose ocupation is not to be disturbed in war.'
Wheaton, International Law (8th ed.) 345, note 168.
Since the United States became a nation, the only serious interruptions, so far as we
are informed, of the general recognition of the exemption of coast fishing vessels
from hostile capture, arose out of the mutual suspicions and recriminations of
England and France during the wars of the French Revolution.
In the first years of those wars, England having authorized the capture of French
fishermen, a decree of the French National Convention of October 2, 1793, directed
the executive power 'to protest against this conduct, theretofore without example;
to reclaim the fishing boats seized; and, in case of refusal, to resort to reprisals.' But
in July, 1796, the Committee of Public Safety ordered the release of English
fishermen seized under the former decree, 'not considering them as prisoners of
war.' La Nostra Segnora de la Piedad (1801) cited below; 2 De Cussy, Droit Maritime,
164, 165; 1 Masse, Droit Commercial (2d ed.) 266, 267. [175 U.S. 677, 692] On
January 24, 1798, the English government by express order instructed the

commanders of its ships to seize French and Dutch fishermen with their boats. 6
Martens, Recueil des Traites (2d ed.) 505; 6 Schoell, Histoire des Traites, 119; 2
Ortolan, 53. After the promulgation of that order, Lord Stowell (then Sir William
Scott) in the High Court of Admiralty of England condemned small Dutch fishing
vessels as prize of war. In one case the capture was in April, 1798, and the decree
was made November 13, 1798. The Young Jacob and Johanna, 1 C. Rob. 20. In
another case the decree was made August 23, 1799. The Noydt Gedacht, 2 C. Rob.
137, note.
For the year 1800 the orders of the English and French governments and the
correspondence between them may be found in books already referred to. 6
Martens, 503-512; 6 Schoell, 118-120; 2 Ortolan, 53, 54. The doings for that year
may be summed up as follows: On March 27, 1800, the French government,
unwilling to resort to reprisals, re-enacted the orders given by Louis XVI. in 1780,
above mentioned, prohibiting any seizure by the French ships of English fishermen,
unless armed or proved to have made signals to the enemy. On May 30, 1800, the
English government, having received notice of that action of the French
government, revoked its order of January 24, 1798. But soon afterward the English
government complained that French fishing boats had been made into fireboats at
Flushing, as well as that the French government had impressed and had sent to
Brest, to serve in its flotilla, French fishermen and their boats, even those whom the
English had released on condition of their not serving; and on January 21, 1801,
summarily revoked its last order, and again put in force its order of January 24,
1798. On February 16, 1801, Napoleon Bonaparte, then First Consul, directed the
French commissioner at London to return at once to France, first declaring to the
English government that its conduct, 'contrary to all the usages of civilized nations,
and to the common law which governs them, even in time of war, gave to the
existing war a character of rage and bitterness which destroyed even the relations
usual in a loyal war,' [175 U.S. 677, 693] AND 'TENDED ONLY TO EXASPERATE THE
TWO nations, and to put off the term of peace;' and that the French government,
having always made it 'a maxim to alleviate as much as possible the evils of war,
could not think, on its part, of rendering wretched fishermen victims of a
prolongation of hostilities, and would abstain from all reprisals.'
On March 16, 1801, the Addington Ministry, having come into power in England,
revoked the orders of its predecessors against the French fishermen; maintaining,
however, that 'the freedom of fishing was nowise founded upon an agreement, but
upon a simple concession;' that 'this concession would be always subordinate to the
convenience of the moment,' and that 'it was never extended to the great fishery,
or to commerce in oysters or in fish.' And the freedom of the coast fisheries was
again allowed on both sides. 6 Martens, 514; 6 Schoell, 121; 2 Ortolan, 54; Manning,
Law of Nations (Amos's ed.) 206.
Lord Stowell's judgment in The Young Jacob and Johanna, 1 C. Rob. 20, above cited,
was much relied on by the counsel for the United States, and deserves careful
consideration.
The vessel there condemned is described in the report as 'a small Dutch fishing
vessel taken April, 1798, on her return from the Dogger bank to Holland;' and Lord
Stowell, in delivering judgment, said: 'In former wars it has not been usual to make
captures of these small fishing vessels; but this rule was a rule of comity only, and

not of legal decision; it has prevailed from views of mutual accommodation between
neighboring countries, and from tenderness to a poor and industrious order of
people. In the present war there has, I presume, been sufficient reason for changing
this mode of treatment; and as they are brought before me for my judgment they
must be referred to the general principles of this court; they fall under the character
and description of the last class of cases; that is, of ships constantly and exclusively
employed in the enemy's trade.' And he added: 'It is a further satisfaction to me, in
giving this judgment, to observe that the facts also bear strong marks of a false and
fraudulent transaction.' [175 U.S. 677, 694]
Both the capture and the
condemnation were within a year after the order of the English government of
January 24, 1798, instructing the commanders of its ships to seize French and Dutch
fishing vessels, and before any revocation of that order. Lord Stowell's judgment
shows that his decision was based upon the order of 1798, as well as upon strong
evidence of fraud. Nothing more was adjudged in the case.
But some expressions in his opinion have been given so much weight by English
writers that it may be well to examine them particularly. The opinion begins by
admitting the known custom in former wars not to capture such vessels; adding,
however, 'but this was a rule of comity only, and not of legal decision.' Assuming
the phrase 'legal decision' to have been there used, in the sense in which courts are
accustomed to use it, as equivalent to 'judicial decision,' it is true that, so far as
appears, there had been no such decision on the point in England. The word
'comity' was apparently used by Lord Stowell as synonymous with courtesy or
goodwill. But the period of a hundred years which has since elapsed is amply
sufficient to have enabled what originally may have rested in custom or comity,
courtesy or concession, to grow, by the general assent of civilized nations, into a
settled rule of international law. As well said by Sir James Mackintosh: 'In the
present century a slow and silent, but very substantial, mitigation has taken place in
the practice of war; and in proportion as that mitigated practice has received the
sanction of time it is raised from the rank of mere usage, and becomes part of the
law of nations.' Discourse on the Law of Nations, 38; 1 Miscellaneous Works, 360.
The French prize tribunals, both before and after Lord Stowell's decision, took a
wholly different view of the general question. In 1780, as already mentioned, an
order in council of Louis XVI. had declared illegal the capture by a French cruiser of
The John and Sarah, an English vessel coming from Holland, laden with fresh fish.
And on May 17, 1801, where a Portuguese fishing vessel, with her cargo of fish,
having no more crew than was needed for her management and for serving the
nets, on a trip of several days, had been capt- [175 U.S. 677, 695] ured in April,
1801, by a French cruiser, 3 leagues off the coast of Portugal, the Council of Prizes
held that the capture was contrary to 'the principles of humanity and the maxims of
international law,' and decreed that the vessel, with the fish on board, or the net
proceeds of any that had been sold, should be restored to her master. La Nostra
Segnora de la Piedad, 25 Merlin, Jurisprudence, Prise Maritime, 3, arts. 1, 3; S. C. 1
Pistoye et Duverdy, Prises Maritimes, 331; 2 De Cussy, Droit Maritime, 166.
The English government, soon afterwards, more than once unqualifiedly prohibited
the molestation of fishing vessels employed in catching and bringing to market
fresh fish. On May 23, 1806, it was 'ordered in council that all fishing vessels under
Prussian and other colors, and engaged for the purpose of catching fish and
conveying them fresh to market, with their crews, cargoes, and stores, shall not be

molested on their fishing voyages and bringing the same to market; and that no
fishing vessels of this description shall hereafter be molested. And the Right
Honorable the Lords Commissioners of His Majesty's Treasury, the Lords
Commissioners of the Admiralty, and the Judge of the High Court of Admiralty, are
to give the necessary directions herein as to them may respectively appertain.' 5 C.
Rob. 408. Again, in the order in council of May 2, 1810, which directed that 'all
vessels which shall have cleared out from any port so far under the control of France
or her allies as that British vessels may not freely trade thereat, and which are
employed in the whale fishery, or other fishery of any description, save as
hereinafter excepted, and are returning, or destined to return either to the port from
whence they cleared, or to any other port or place at which the British flag may not
freely trade, shall be captured and condemned together with their stores and
cargoes, as prize to the captors,' there were excepted 'vessels employed in catching
and conveying fish fresh to market, such vessels not being fitted or provided for the
curing of fish.' Edw. Adm. appx. L.
Wheaton, in his Digest of the Law of Maritime Captures and Prizes, published in
1815, wrote: 'It has been usual [175 U.S. 677, 696] in maritime wars to exempt
from capture fishing boats and their cargoes, both from views of mutual
accommodation between neighboring countries, and from tenderness to a poor and
industrious order of people. This custom, so honorable to the humanity of civilized
nations, has fallen into disuse; and it is remarkable that both France and England
mutually reproach each other with that breach of good faith which has finally
abolished it.' Wheaton, Captures, chap. 2, 18.
This statement clearly exhibits Wheaton's opinion that the custom had been a
general one, as well as that it ought to remain so. His assumption that it had been
abolished by the differences between France and England at the close of the last
century was hardly justified by the state of things when he wrote, and has not since
been borne out.
During the wars of the French Empire, as both French and English writers agree, the
coast fisheries were left in peace. 2 Ortolan, 54; De Boeck, 193; Hall, 148. De Boeck
quaintly and truly adds, 'and the incidents of 1800 and of 1801 had no morrow,n'eurent pas de lendemain.'
In the war with Mexico, in 1846, the United States recognized the exemption of
coast fishing boats from capture. In proof of this, counsel have referred to records of
the Navy Department, which this court is clearly authorized to consult upon such a
question. Jones v. United States, 137 U.S. 202 , 34 L. ed. 691, 11 Sup. Ct. Rep. 80;
Underhill v. Hernandez, 168 U.S. 250, 253 , 42 S. L. ed. 456, 457, 18 Sup. Ct. Rep.
83.
By those records it appears that Commodore Conner, commanding the Home
Squadron blockading the east coast of Mexico, on May 14, 1846, wrote a letter from
the ship Cumberland, off Brazos Santiago, near the southern point of Texas, to Mr.
Bancroft, the Secretary of the Navy, inclosing a copy of the commodore's
'instructions to the commanders of the vessels of the Home Squadron, showing the
principles to be observed in the blockade of the Mexican ports,' one of which was
that 'Mexican boats engaged in fishing on any part of the coast will be allowed to
pursue their labors unmolested;' and that on June 10, 1846, those instructions were

approved by the Navy Department, of which Mr. Bancroft was still the head, and
continued to be until he was appointed Minister to [175 U.S. 677, 697] England in
September following. Although Commodore Conner's instructions and the
Department's approval thereof do not appear in any contemporary publication of
the government, they evidently became generally known at the time, or soon after;
for it is stated in several treatises on international law (beginning with Ortolan's
second edition, published in 1853) that the United States in the Mexican war
permitted the coast fishermen of the enemy to continue the free exercise of their
industry. 2 Ortolan (2d ed.) 49, note; (4th ed.) 55; 4 Calvo (5th ed.) 2372; De Boeck,
194; Hall (4th ed.) 148.
As qualifying the effect of those statements, the counsel for the United States relied
on a proclamation of Commodore Stockton, commanding the Pacific Squadron,
dated August 20, 1846, directing officers under his command to proceed
immediately to blockade the ports of Mazatlan and San Blas, on the west coast of
Mexico, and saying to them, 'All neutral vessels that you may find there you will
allow twenty days to depart; and you will make the blockade absolute against all
vessels, except armed vessels of neutral nations. You will capture all vessels under
the Mexican flag that you may be able to take.' Navy Reports of 1846, pp. 673, 674.
But there is nothing to show that Commodore Stockton intended, or that the
government approved, the capture of coast fishing vessels.
On the contrary, General Halleck, in the preface to his work on International Law, or
Rules Regulating the Intercourse of States in Peace and War, published in 1861,
says that he began that work, during the war between the United States and
Mexico, 'while serving on the staff of the commander of the Pacific Squadron' and
'often required to give opinions on questions of international law growing out of the
operations of the war.' Had the practice of the blockading squadron on the west
coast of Mexico during that war, in regard to fishing vessels, differed from that
approved by the Navy Department on the east coast, General Halleck could hardly
have failed to mention it, when stating the prevailing doctrine upon the subject as
follows: [175 U.S. 677, 698]
'Fishing boats have also, as a general rule, been
exempted from the effects of hostilities. As early as 1521, while war was raging
between Charles V. and Francis, ambassadors from these two sovereigns met at
Calais, then English, and agreed that, whereas the herring fishery was about to
commence, the subjects of both belligerents engaged in this pursuit should be safe
and unmolested by the other party, and should have leave to fish as in time of
peace. In the war of 1800, the British and French governments issued formal
instructions exempting the fishing boats of each other's subjects from seizure. This
order was subsequently rescinded by the British government, on the alleged ground
that some French fishing boats were equipped as gunboats, and that some French
fishermen who had been prisoners in England had violated their parole not to serve,
and had gone to join the French fleet at Brest. Such excuses were evidently mere
pretexts; and after some angry discussions had taken place on the subject the
British restriction was withdrawn, and the freedom of fishing was again allowed on
both sides. French writers consider this exemption as an established principle of the
modern law of war, and it has been so recognized in the French courts, which have
restored such vessels when captured by French cruisers.' Halleck (1st ed.) chap. 20,
23.

That edition was the only one sent out under the author's own auspices, except an
abridgment, entitled 'Elements of International Law and the Law of War,' which he
published in 1866, as he said in the preface, to supply a suitable text-book for
instruction upon the subject, 'not only in our colleges, but also in our two great
national schools,-the Military and Naval Academies.' In that abridgment the
statement as to fishing boats was condensed as follows: 'Fishing boats have also, as
a general rule, been exempted from the effects of hostilities. French writers consider
this exemption as an established principle of the modern law of war, and it has been
so recognized in the French courts, which have restored such vessels when captured
by French cruisers.' Halleck's Elements, chap. 20, 21.
In the treaty of peace between the United States and Mex- [175 U.S. 677, 699] ico,
in 1848, were inserted the very words of the earlier treaties with Prussia, already
quoted, forbidding the hostile molestation or seizure in time of war of the persons,
occupations, houses, or goods of fishermen. 9 Stat. at L. 939, 940.
Wharton's Digest of the International Law of the United States, published by
authority of Congress in 1886 and 1887, embodies General Halleck's fuller
statement, above quoted, and contains nothing else upon the subject. 3 Whart. Int.
Law Dig. 345, p. 315; 2 Halleck (Eng. eds. 1873 and 1878) p. 151.
France in the Crimean war in 1854, and in her wars with Italy in 1859 and with
Germany in 1870, by general orders, forbade her cruisers to trouble the coast
fisheries, or to seize any vessel or boat engaged therein, unless naval or military
operations should make it necessary. Calvo, 2372; Hall, 148; 2 Ortolan (4th ed.) 449;
10 Revue de Droit Interantional (1878) 399. Revne de Droit International (1878)
399. her alliance with France and Italy, England did not follow the same line of
conduct; and that her cruisers in the Sea of Azof destroyed the fisheries, nets,
fishing implements, provisions, boats, and even the cabins of inhabitants of the
coast. Calvo, 2372. And a Russian writer on prize law remarks that those
depredations, 'having brought ruin on poor fishermen and inoffensive traders, could
not but leave a painful impression on the minds of the population, without impairing
in the least the resources of the Russian government.' Katchenovsky (Pratt's ed.)
148. But the contemporaneous reports of the English naval officers put a different
face on the matter, by stating that the destruction in question was part of a military
measure, conducted with the co-operation of the French ships, and pursuant to
instructions of the English admiral 'to clear the seaboard of all fish stores, all
fisheries and mills, on a scale beyond the wants of the neighboring population, and
indeed of all things destined to contribute to the maintenance of the enemy's army
in the Crimea;' and that the property destroyed consisted of large fishing
establishments and storehouses of the Russian government, numbers of heavy
launches, and enormous quantities of nets and gear, salted fish, corn, [175 U.S.
677, 700] and other provisions intended for the supply of the Russian army. United
Service Journal of 1855, pt. 3, pp. 108-112.
Since the English orders in council of 1806 and 1810, before quoted, in favor of
fishing vessels employed in catching and bringing to market fresh fish, no instance
has been found in which the exemption from capture of private coast fishing vessels
honestly pursuing their peaceful industry has been denied by England or by any
other nation. And the Empire of Japan ( the last state admitted into the rank of
civilized nations), by an ordinance promulgated at the beginning of its war with

China in August, 1894, established

enemy's vessels are exempt from
engaged in coast fisheries,' as well
scientific discovery, philanthrophy,
Law, 11, 178.

prize courts, and ordained that 'the following

detention,' including in the exemption 'boats
as 'ships engaged exclusively on a voyage of
or religious mission.' Takahashi, International

International law is part of our law, and must be ascertained and administered by
the courts of justice of appropriate jurisdiction as often as questions of right
depending upon it are duly presented for their determination. For this purpose,
where there is no treaty and no controlling executive or legislative act or judicial
decision, resort must be had to the customs and usages of eivilized nations, and, as
evidence of these, to the works of jurists and commentators who by years of labor,
research, and experience have made themselves peculiarly well acquainted with the
subjects of which they treat. Such works are resorted to by judicial tribunals, not for
the speculations of their authors concerning what the law ought to be, but for
trustworthy evidence of what the law really is. Hilton v. Guyot, 159 U.S. 113, 163 ,
164 S., 214, 215, 40 L. ed. 95, 108, 125, 126, 16 Sup. Ct. Rep. 139.
Wheaton places among the principal sourees international law 'text- writers of
authority, showing what is the approved usage of nations, or the general opinion
respecting their mutual conduct, with the definitions and modifications introduced
by general consent.' As to these he forcibly observes: 'Without wishing to
exaggerate the importance of these writers, or to substitute, in any case, their
authority for the principles of reason, it may be affirmed that they are gen- [175
U.S. 677, 701]
erally impartial in their judgment. They are witnesses of the
sentiments and usages of civilized nations, and the weight of their testimony
increases every time that their authority is invoked by statesmen, and every year
that passes without the rules laid down in their works being impugned by the
avowal of contrary principles.' Wheaton, International Law ( 8th ed.), 15.
Chancellor Kent says: 'In the absence of higher and more authoritative sanctions,
the ordinances of foreign states, the opinions of eminent statesmen, and the
writings of distinguished jurists, are regarded as of great consideration on questions
not settled by conventional law. In cases where the principal jurists agree, the
presumption will be very great in favor of the solidity of their maxims; and no
civilized nation that does not arrogantly set all ordinary law and justice at defiance
will venture to disregard the uniform sense of the established writers on
international law.' 1 Kent, Com. 18.
It will be convenient, in the first place, to refer to some leading French treatises on
international law, which deal with the question now before us, not as one of the law
of France only, but as one determined by the general consent of civilized nations.
'Enemy ships,' say Pistoye and Duverdy, in their Treatise on Maritime Prizes,
published in 1855, 'are good prize. Not all, however; for it results from the
unanimous accord of the maritime powers that an exception should be made in
favor of coast fishermen. Such fishermen are respected by the enemy so long as
they devote themselves exclusively to fishing.' 1 Pistoye et Duverdy, tit. 6, chap. 1,
p. 314.

De Cussy, in his work on the Phases and Leading Cases of the Maritime Law of
Nations,-Phases et Causes Celebres du Droit Maritime des Nations,- published in
1856, affirms in the clearest language the exemption from capture of fishing boats,
saying, in lib. 1, tit. 3, 36, that 'in time of war the freedom of fishing is respected by
belligerents; fishing boats are considered as neutral; in law, as in principle, they are
not subject either to capture or to confiscation;' and that in lib. 2, chap. 20, he will
state 'several facts and several decisions [175 U.S. 677, 702] which prove that the
perfect freedom and neutrality of fishing boats are not illusory.' 1 De Cussy, p. 291.
And in the chapter so referred to, entitled De la Liberte et de la Neutralite Parfaite
de la Peche, besides references to the edicts and decisions in France during the
French Revolution, is this general statement: 'If one consulted only positive
international law,'-le droit des gens positif,-(by which is evidently meant
international law expressed in treaties, decrees, or other public acts, as
distinguished from what may be implied from custom or usage) 'fishing boats would
be subject, like all other trading vessels, to the law of prize; a sort of tacit
agreement among all European nations frees them from it, and several official
declarations have confirmed this privilege in favor of 'a class of men whose hard
and ill-rewarded labor, commonly performed by feeble and aged hands, is so foreign
to the operations of war.' 2 De Cussy, 164, 165.
Ortolan, in the fourth edition of his Regles Internationales et Diplomatie de la Mer,
published in 1864, after stating the general rule that the vessels and cargoes of
subjects of the enemy are lawful prize, says: 'Nevertheless, custom admits an
exception in favor of boats engaged in the coast fishery; these boats, as well as
their crews, are free from capture and exempt from all hostilities. The coast-fishing
industry is, in truth, wholly pacific, and of much less importance in regard to the
national wealth that it may produce than maritime commerce or the great fisheries.
Peaceful and wholly inoffensive, those who carry it on, among whom women are
often seen, may be called the harvesters of the territorial seas, since they confine
themselves to gathering in the products thereof; they are for the most part poor
families who seek in this calling hardly more than the means of gaining their
livelihood.' 2 Ortolan, 51. Again, after observing that there are very few solemn
public treaties which make mention of the immunity of fishing boats in time of war,
he says: 'From another point of view the custom which sanctions this immunity is
not so general that it can be considered as making an absolute international rule;
but it has been so often put in practice, and, besides, it accords so well with the rule
in use in wars on [175 U.S. 677, 703] land, in regard to peasants and husbandmen,
to whom coast fishermen may be likened, that it will doubtless continue to be
followed in maritime wars to come.' 2 Ortolan, 55.
No international jurist of the present day has a wider or more deserved reputation
than Calvo, who, though writing in French, is a citizen of the Argentine Republic,
employed in its diplomatic service abroad. In the fifth edition of his great work on
international law, published in 1896, he observes, in 2366, that the international
authority of decisions in particular cases by the prize courts of France, of England,
and of the United States is lessened by the fact that the principles on which they
are based are largely derived from the internal legislation of each country; and yet
the peculiar character of maritime wars, with other considerations, gives to prize
jurisprudence a force and importance reaching beyond the limits of the country in
which it has prevailed. He therefore proposes here to group together a number of
particular cases proper to serve as precedents for the solution of grave questions of

maritime law in regard to the capture of private property as prize of war.

Immediately, in 2367, he goes on to say: 'Notwithstanding the hardships to which
maritime wars subject private property, notwithstanding the extent of the
recognized rights of belligerents, there are generally exempted, from seizure and
capture, fishing vessels.' In the next section he adds: 'This exception is perfectly
justiciable,-Cette exception est parfaitement justiciable,'-that is to say, belonging to
judicial jurisdiction or cognizance. Littre, Dist. voc. Justiciable; Hans v. Louisiana,
134 U.S. 1, 15 , 33 S. L. ed. 842, 847, 10 Sup. Ct. Rep. 504. Calvo then quotes
Ortolan's description, above cited, of the nature of the coast-fishing industry; and
proceeds to refer, in detail, to some of the French precedents, to the acts of the
French and English governments in the times of Louis XVI. and of the French
Revolution, to the position of the United States in the war with Mexico, and of
France in later wars, and to the action of British cruisers in the Crimean war. And he
concludes his discussion of the subject, in 2373, by affirming the exemption of the
coast fishery, and pointing out the distinction in this regard between the coast
fishery and [175 U.S. 677, 704] what he calls the great fishery, for cod, whales, or
seals, as follows: 'The privilege of exemption from capture, which is generally
acquired by fishing vessels plying their industry near the coasts, is not extended in
any country to ships employed on the high sea in what is called the great fishery,
such as that for the cod, for the whale or the sperm whale, or for the seal or sea
calf. These ships are, in effect, considered as devoted to operations which are at
once commercial and industrial,-Ces navires sont en effect consideres comme
adonnes a des operations a la fois commerciales et industrielles.' The distinction is
generally recognized. 2 Ortolan, 54; De Boeck, 196; Hall, 148. See also The Susa, 2
C. Rob. 251; The Johan, Edw. Adm. 275, and appx. L.
The modern German books on international law, cited by the counsel for the
appellants, treat the custom by which the vessels and implements of coast
fishermen are exempt from seizure and capture as well established by the practice
of nations. Heffter, 137; 2 Kalterborn, 237, p. 480; Bluntschli, 667; Perels, 37, p.
217.
De Boeck, in his work on Enemy Private Property under Enemy's Flag,- De la
Propriete Privee Ennemie sous Pavillon Ennemi,-published in 1882, and the only
continental treatise cited by the counsel for the United States, says in 191: 'A usage
very ancient, if not universal, withdraws from the right of capture enemy vessels
engaged in the coast fishery. The reason of this exception is evident; it would have
been too hard to snatch from poor fishermen the means of earning their bread. . . .
The exemption includes the boats, the fishing implements, and the cargo of fish.'
Again, in 195: 'It is to be observed that very few treatises sanction in due form this
immunity of the coast fishery. . . . There is, then, only a custom. But what is its
character? Is it so fixed and general that it can be raised to the rank of a positive
and formal rule of international law?' After discussing the statements of other
writers, he approves the opinion of Ortolan (as expressed in the last sentence above
quoted from his work), and says that, at bottom, it differs by a shade only from that
formulated by Calvo and by some of the German jurists, and that 'it is more exact,
[175 U.S. 677, 705] without ignoring the imperative character of the humane rule
in question,- elle est plus exacte, sans meconnaitre le caractere imperatif de la
regle d'humanite dont il s'agit.' And in 196 he defines the limits of the rule as
follows: 'But the immunity of the coast fishery must be limited by the reasons which
justify it. The reasons of humanity and of harmlessness-les raisons d'humanite et

d'innocuite-which militate in its favor do not exist in the great fishery, such as the
cod fishery; ships engaged in that fishery devote themselves to truly commercial
operations, which employ a large number of seamen. And these same reasons
cease to be applicable to fishing vessels employed for a warlike purpose, to those
which conceal arms, or which exchange signals of intelligence with ships of war; but
only those taken in the fact can be rigorously treated; to allow seizure by way of
preventive would open the door to every abuse, and would be equivalent to a
suppression of the immunity.'
Two recent English text-writers cited at the bar (influenced by what Lord Stowell said
a cantury since) hesitate to recognize that the exemption of coast fishing vessels
from capture has now become a settled rule of international law. Yet they both
admit that there is little real difference in the views, or in the practice, of England
and of other maritime nations; and that no civilized nation at the present day would
molest coast fishing vessels so long as they were peaceably pursuing their calling
and there was no danger that they or their crews might be of military use to the
enemy. Hall, in 148 of the fourth edition of his Treatise on International Law, after
briefly sketching the history of the positions occupied by France and England at
different periods, and by the United States in the Mexican war, goes on to say: 'In
the foregoing facts there is nothing to show that much real difference has existed in
the practice of the maritime countries. England does not seem to have been
unwilling to spare fishing vessels so long as they are harmless, and it does not
appear that any state has accorded them immunity under circumstances of
inconvenience to itself. It is likely that all nations would now refrain from molesting
them as a general rule, and would cap- [175 U.S. 677, 706] ture them so soon as
any danger arose that they or their crews might be of military use to the enemy;
and it is also likely that it is impossible to grant them a more distinct exemption.'
So, T. J. Lawrence, in 206 of his Principles of International Law, says: 'The difference
between the English and the French view is more apparent than real; for no civilized
belligerent would now capture the boats of fishermen plying their avocation
peaceably in the territorial waters of their own state; and no jurist would seriously
argue that their immunity must be respected if they were used for warlike purposes,
as were the smacks belonging to the northern ports of France when Great Britain
gave the order to capture them in 1800.'
But there are writers of various maritime countries, not yet cited, too important to
be passed by without notice.
Jan Helenus Ferguson, Netherlands Minister to China, and previously in the naval
and in the colonial service of his country, in his Manual of International Law for the
Use of Navies, Colonies, and Consulates, published in 1882, writes: 'An exception to
the usage of capturing enemy's private vessels at sea is the coast fishery. . . . This
principle of immunity from capture of fishing boats is generally adopted by all
maritime powers, and in actual warfare they are universally spared so long as they
remain harmless.' 2 Ferguson, 212.
Ferdinand Attlmayr, captain in the Austrian Navy, in his Manual for Naval Officers,
published at Vienna in 1872 under the auspices of Admiral Tegetthoff, says:
'Regarding the capture of enemy property, an exception must be mentioned, which
is a universal custom. Fishing vessels which belong to the adjacent coast, and

whose business yields only a necessary livelihood, are, from considerations of

humanity, universally excluded from capture.' 1 Attlmayr, 61.
Ignacio de Megrin, First Official of the Spanish Board of Admiralty, in his Elementary
Treatise on Maritime International Law, adopted by royal order as a text-book in the
naval schools of Spain, and published at Madrid in 1873, concludes his chapter 'Of
the lawfulness of prizes' with these words: 'It remains to be added that the custom
of all civilized peoples excludes from capture and from all kind of hostility the [175
U.S. 677, 707] fishing vessels of the enemy's coasts, considering this industry as
absolutely inoffensive, and deserving, from its hardships and usefulness, of this
favorable exception. It has been thus expressed in very many international
conventions, so that it can be deemed an incontestable principle of law, at least
among enlightened nations.' Negrin, tit. 3, chap. 1, 310.
Carlos Testa, captain in the Portugese Navy and professor in the naval school at
Lisbon, in his work on Public International Law, published in French at Paris in 1886,
when discussing the general right of capturing enemy ships, says: 'Nevertheless, in
this, customary law establishes an exception of immunity in favor of coast fishing
vessels. Fishing is so peaceful an industry, and is generally carried on by so poor
and so hardworking a class of men, that it is likened, in the territorial waters of the
enemy's country, to the class of husbandmen who gather the fruits of the earth for
their livelihood. The examples and practice generally followed establish this humane
and beneficent exception as an international rule, and this rule may be considered
as adopted by customary law and by all civilized nations.' Testa, pt. 3, chap. 2, in 18
Bibliotheque International et Diplomatique, pp. 152, 153.
No less clearly and decisively speaks the distinguished Italian jurist, Pasquale Fiore,
in the enlarged edition of his exhaustive work on Public International Law, published
at Paris in 1885-6, saying: 'The vessels of fishermen have been generally declared
exempt from confiscation, because of the eminently peaceful object of their humble
industry, and of the principles of equity and humanity. The exemption includes the
vessel, the implements of fishing, and the cargo resulting from the fishery. This
usage, eminently humane, goes back to very ancient times; and although the
immunity of the fishery along the coasts may not have been sanctioned by treaties,
yet it is considered to-day as so defintely established that the inviolability of vessels
devoted to that fishery is proclaimed by the publicists as a positive rule of
international law, and is generally respected by the nations. Consequently we shall
lay down the following rule: (a) Vessels belonging to citizens of the enemy state,
and devoted to fish- [175 U.S. 677, 708] ing along the coasts, cannot be subject to
capture; (b) Such vessels, however, will lose all right of exemption, when employed
for a warlike purpose; (c) there may, nevertheless, be subjected to capture vessels
devoted to the great fishery in the ocean, such as those employed in the whale
fishery, or in that for seals or sea calves.' 3 Fiore, 1421
This review of the precedents and authorities on the subject appears to us
abundantly to demonstrate that at the present day, by the general consent of the
civilized nations of the world, and independently of any express treaty or other
public act, it is an established rule of international law, founded on considerations of
humanity to a poor and industrious order of men, and of the mutual convenience of
belligerent states, that coast fishing vessels, with their implements and supplies,

cargoes and crews, unarmed and honestly pursuing their peaceful calling of
catching and bringing in fresh fish, are exempt from capture as prize of war.
The exemption, of course, does not apply to coast fishermen or their vessels if
employed for a warlike purpose, or in such a way as to give aid or information to the
enemy; nor when military or naval operations create a necessity to which all private
interests must give way.
Nor has the exemption been extended to ships or vessels employed on the high sea
in taking whales or seals or cod or other fish which are not brought fresh to market,
but are salted or otherwise cured and made a regular article of commerce.
This rule of international law is one which prize courts administering the law of
nations are bound to take judicial notice of, and to give effect to, in the absence of
any treaty or other public act of their own government in relation to the matter.
Calvo, in a passage already quoted, distinctly affirms that the exemption of coast
fishing vessels from capture is perfectly justiciable, or, in other words, of judicial
jurisdiction or cognizance. Calvo, 2368. Nor are judicial precedents wanting in
support of the view that this exemption, or a somewhat analogous one, should be
recognized and declared by a prize court. [175 U.S. 677, 709] By the practice of all
civilized nations, vessels employed only for the purposes of discovery or science are
considered as exempt from the contingencies of war, and therefore not subject to
capture. It has been usual for the government sending out such an expedition to
give notice to other powers; but it is not essential. 1 Kent, Com. 91, note; Halleck,
chap. 20, 22; Calvo, 2376; Hall, 138.
In 1813, while the United States were at war with England, an American vessel on
her voyage from Italy to the United States was captured by an English ship, and
brought into Halifax, in Nova Scotia, and, with her cargo, condemned as lawful prize
by the court of vice admiralty there. But a petition for the restitution of a case of
paintings and engravings which had been presented to and were owned by the
Academy of Arts in Philadelphia was granted by Dr. Croke, the judge of that court,
who said: 'The same law of nations, which prescribes that all property belonging to
the enemy shall be liable to confiscation, has likewise its modifications and
relaxations of that rule. The arts and sciences are admitted amongst all civilized
nations, as forming an exception to the severe rights of warfare, and as entitled to
favor and protection. They are considered, not as the peculium of this or of that
nation, but as the property of mankind at large, and as belonging to the common
interests of the whole species.' And he added that there had been 'innumerable
cases of the mutual exercise of this courtesy between nations in former wars.' The
Marquis de Somerueles, Stewart Adm. (Nova Scotia) 445, 482.
In 1861, during the war of the Rebellion, a similar decision was made in the district
court of the United States for the eastern district of Pennsylvania, in regard to two
cases of books belonging and consigned to a university in North Carolina. Judge
Cadwalader, in ordering these books to be liberated from the custody of the marshal
and restored to the agent of the university, said: 'Though this claimant, as the
resident of a hostile district, would not be entitled to restitution of the subject of a
commercial adventure in books, the purpose of the shipment in question gives to it
a different [175 U.S. 677, 710]
character. The United States, in prosecuting

hostilities for the restoration of their constitutional authority, are compelled

incidentally to confiscate property captured at sea, of which the proceeds would
otherwise increase the wealth of that district. But the United States are not at war
with literature in that part of their territory.' He then referred to the decision in Nova
Scotia, and to the French decisions upon cases of fishing vessels, as precedents for
the decree which he was about to pronounce; and he added that, without any such
precedents, he should have had no difficulty in liberating these books. The Amelia,1
4 Phila. 417.
In Brown v. United States, 8 Cranch, 110, 3 L. ed. 504, there are expressions of Chief
Justice Marshall which, taken by themselves, might seem inconsistent with the
position above maintained, of the duty of a prize court to take judicial notice of a
rule of international law, established by the general usage of civilized nations, as to
the kind of property subject to capture. But the actual decision in that case, and the
leading reasons on which it was based, appear to us rather to confirm our position.
The principal question there was whether personal property of a British subject,
found on land in the United States at the beginning of the last war with Great
Britain, could lawfully be condemned as enemy's property, on a libel filed by the
attorney of the United States, without a positive act of Congress. The conclusion of
the court was 'that the power of confiscating enemy property is in the legislature,
and that the legislature has not yet declared its will to confiscate property which
was within our territory at the declaration of war.' 8 Cranch, 129, 3 L. ed. 510, 511.
In showing that the declaration of war did not, of itself, vest the Executive with
authority to order such property to be confiscated, the Chief Justice relied on the
modern usages of nations, saying: 'The universal practice of forbearing to seize and
confiscate debts and credits, the principle universally received that the right to
them revives on the restoration of peace, would seem to prove that war is not an
absolute confiscation of this property, but simply confers the right of confiscation,'
and again: 'The modern rule, then, would seem to be that tangible property [175
U.S. 677, 711]
belonging to an enemy, and found in the country at the
commencement of war, ought not to be immediately confiscated; and in almost
every commercial treaty an article is inserted stipulating for the right to withdraw
such property.' 8 Cranch, 123, 125, 3 L. ed. 509. The decision that enemy property
on land, which by the modern usage of nations is not subject to capture as prize of
war, cannot be condemned by a prize court, even by direction of the Executive,
without express authority from Congress, appears to us to repel any inference that
coast fishing vessels, which are exempt by the general consent of civilized nations
from capture, and which no act of Congress or order of the President has expressly
authorized to be taken and confiscated, must be condemned by a prize court, for
want of a distinct exemption in a treaty or other public act of the government.
To this subject in more than one aspect are singularly applicable the words uttered
by Mr. Justice Strong, speaking for this court: 'Undoubtedly no single nation can
change the law of the sea. The law is of universal obligation and no statute of one or
two nations can create obligations for the world. Like all the laws of nations, it rests
upon the common consent of civilized communities. It is of force, not because it was
prescribed by any superior power, but because it has been generally accepted as a
rule of conduct. Whatever may have been its origin, whether in the usages of
navigation, or in the ordinances of maritime states, or in both, it has become the
law of the sea only by the concurrent sanction of those nations who may be said to
constitute the commercial world. Many of the usages which prevail, and which have

the force of law, doubtless originated in the positive prescriptions of some single
state, which were at first of limited effect, but which, when generally accepted,
became of universal obligation.' 'This is not giving to the statutes of any nation
extraterritorial effect. It is not treating them as general maritime laws; but it is
recognition of the historical fact that by common consent of mankind these rules
have been acquiesced in as of general obligation. Of that fact, we think, we may
take judicial notice. Foreign municipal laws [175 U.S. 677, 712] must indeed be
proved as facts, but it is not so with the law of nations.' The Scotia, 14 Wall. 170,
187, 188, sub nom. Sears v. The Scotia, 20 L. ed. 822, 825, 826.
The position taken by the United States during the recent war with Spain was quite
in accord with the rule of international law, now generally recognized by civilized
nations, in regard to coast fishing vessels.
On April 21, 1898, the Secretary of the Navy gave instructions to Admiral Sampson,
commanding the North Atlantic Squadron, to 'immediately institute a blockade of
the north coast of Cuba, extending from Cardenas on the east to Bahia Honda on
the west.' Bureau of Navigation Report of 1898, appx. 175. The blockade was
immediately instituted accordingly. On April 22 the President issued a proclamation
declaring that the United States had instituted and would maintain that blockade,
'in pursuance of the laws of the United States, and the law of nations applicable to
such cases.' 30 Stat. at L. 1769. And by the act of Congress of April 25, 1898, chap.
189, it was declared that the war between the United States and Spain existed on
that day, and had existed since and including April 21, 30 Stat. at L. 364.
On April 26, 1898, the President issued another proclamation which, after reciting
the existence of the war as declared by Congress, contained this further recital: 'It
being desirable that such war should be conducted upon principles in harmony with
the present views of nations and sanctioned by their recent practice.' This recital
was followed by specific declarations of certain rules for the conduct of the war by
sea, making no mention of fishing vessels. 30 Stat. at L. 1770. But the proclamation
clearly manifests the general policy of the government to conduct the war in
accordance with the principles of international law sanctioned by the recent practice
of nations.
On April 28, 1898 (after the capture of the two fishing vessels now in question),
Admiral Sampson telegraphed to the Secretary of the Navy as follows: 'I find that a
large number of fishing schooners are attempting to get into Havana from their
fishing grounds near the Florida reefs and coasts. They are generally manned by
excellent seamen, belonging [175 U.S. 677, 713]
to the maritime inscription of
Spain, who have already served in the Spanish navy, and who are liable to further
service. As these trained men are naval reserves, most valuable to the Spaniards as
artillerymen, either afloat or ashore, I recommend that they should be detained
prisoners of war, and that I should be authorized to deliver them to the
commanding officer of the army at Key West.' To that communication the Secretary
of the Navy, on April 30, 1898, guardedly answered: 'Spanish fishing vessels
attempting to violate blockade are subject, with crew, to capture, and any such
vessel or crew considered likely to aid enemy may be detained.' Bureau of
Navigation Report of 1898, appx. 178. The admiral's despatch assumed that he was
not authorized, without express order, to arrest coast fishermen peaceably pursuing
their calling; and the necessary implication and evident intent of the response of the

Navy Department were that Spanish coast fishing vessels and their crews should
not be interfered with, so long as they neither attempted to violate the blockade,
nor were considered likely to aid the enemy.
The Paquete Habana, as the record shows, was a fishing sloop of 25 tons burden,
sailing under the Spanish flag, running in and out of Havana, and regularly engaged
in fishing on the coast of Cuba. Her crew consisted of but three men, including the
master, and, according to a common usage in coast fisheries, had no interest in the
vessel, but were entitled to two thirds of her catch, the other third belonging to her
Spanish owner, who, as well as the crew, resided in Havana. On her last voyage, she
sailed from Havana along the coast of Cuba, about 200 miles, and fished for twentyfive days off the cape at the west end of the island, within the territorial waters of
Spain, and was going back to Havana, with her cargo of live fish, when she was
captured by one of the blockading squadron, on April 25, 1898. She had no arms or
ammunition on board; she had no knowledge of the blockade, or even of the war,
until she was stopped by a blockading vessel; she made no attempt to run the
blockade, and no resistance at the time of the capture; nor was there any ev- [175
U.S. 677, 714] idence whatever of likelihood that she or her crew would aid the
enemy.
In the case of the Lola, the only differences in the facts were that she was a
schooner of 35 tons burden, and had a crew of six men, including the master; that
after leaving Havana, and proceeding some 200 miles along the coast of Cuba, she
went on, about 100 miles farther, to the coast of Yucatan, and there fished for eight
days; and that, on her return, when near Bahia Honda, on the coast of Cuba, she
was captured, with her cargo of live fish, on April 27, 1898. These differences afford
no ground for distinguishing the two cases.
Each vessel was of a moderate size, such as is not unusual in coast fishing smacks,
and was regularly engaged in fishing on the coast of Cuba. The crew of each were
few in number, had no interest in the vessel, and received, in return for their toil
and enterprise, two thirds of her catch, the other third going to her owner by way of
compensation for her use. Each vessel went out from Havana to her fishing ground,
and was captured when returning along the coast of Cuba. The cargo of each
consisted of fresh fish, caught by her crew from the sea, and kept alive on board.
Although one of the vessels extended her fishing trip across the Yucatan channel
and fished on the coast of Yucatan, we cannot doubt that each was engaged in the
coast fishery, and not in a commercial adventure, within the rule of international
law.
The two vessels and their cargoes were condemned by the district court as prize of
war; the vessels were sold under its decrees; and it does not appear what became
of the fresh fish of which their cargoes consisted.
Upon the facts proved in either case, it is the duty of this court, sitting as the
highest prize court of the United States, and administering the law of nations, to
declare and adjudge that the capture was unlawful and without probable cause; and
it is therefore, in each case,--

Ordered, that the decree of the District Court be reversed, and the proceeds of the
sale of the vessel, together with the proceeds of any sale of her cargo, be restored
to the claimant, with damages and costs. [175 U.S. 677, 715]
Mr. Chief Justice Fuller, with whom concurred Mr. Justice Harlan and Mr. Justice
McKenna, dissenting:
The district court held these vessels and their cargoes liable because not 'satisfied
that as a matter of law, without any ordinance, treaty, or proclamation, fishing
vessels of this class are exempt from seizure.'
This court holds otherwise, not because such exemption is to be found in any treaty,
legislation, proclamation, or instruction granting it, but on the ground that the
vessels were exempt by reason of an established rule of international law applicable
to them, which it is the duty of the court to enforce.
I am unable to conclude that there is any such established international rule, or that
this court can properly revise action which must be treated as having been taken in
the ordinary exercise of discretion in the conduct of war.
In cannot be maintained 'that modern usage constitutes a rule which acts directly
upon the thing itself by its own force, and not through the sovereign power.' That
position was disallowed in Brown v. United States, 8 Cranch, 110, 128, 3 L. ed. 510,
and Chief Justice Marshall said: 'This usage is a guide which the sovereign follows or
abandons at his will. The rule, like other precepts of morality, of humanity, and even
of wisdom, is addressed to the judgment of the sovereign; and although it cannot be
disregarded by him without obloquy, yet it may be disregarded. The rule is in its
nature flexible. It is subject to infinite modification. It is not an immutable rule of
law, but depends on political considerations which may continually vary.'
The question in that case related to the confiscation of the property of the enemy
on land within our own territory, and it was held that property so situated could not
be confiscated without an act of Congress. The Chief Justice continued: 'Commercial
nations in the situation of the United States have always a considerable quantity of
property in the possession of their neighbors. When war breaks out, the question,
What shall be done with enemy property in our country?-is a [175 U.S. 677, 716]
question rather of policy than of law. The rule which we apply to the property of our
enemy will be applied by him to the property of our citizens. Like all other questions
of policy, it is proper for the consideration of a department which can modify it at
will; not for the consideration of a department which can pursue only the law as it is
written. It is proper for the consideration of the legislature, not of the executive or
judiciary.'
This case involves the capture of enemy's property on the sea, and executive
action, and if the position that the alleged rule proprio vigore limits the sovereign
power in war be rejected, then I understand the contention to be that, by reason of
the existence of the rule, the proclamation of April 26 must be read as if it
contained the exemption in terms, or the exemption must be allowed because the
capture of fishing vessels of this class was not specifically authorized.
The preamble to the proclamation stated, it is true, that it was desirable that the
war 'should be conducted upon principles in harmony with the present views of

nations and sanctioned by their recent pratice,' but the reference was to the
intention of the government 'not to resort to privateering, but to adhere to the rules
of the Declaration of Paris;' and the proclamation spoke for itself. The language of
the preamble did not carry the exemption in terms, and the real question is whether
it must be allowed because not affirmatively withheld, or, in other words, because
such captures were not in terms directed.
These records show that the Spanish sloop Paquete Habana 'was captured as a prize
of war by the U. S. S. Castine' on April 25, and 'was delivered' by the Castine's
commander 'to Rear Admiral Wm. T. Sampson ( commanding the North Atlantic
Squardron),' and therequpon 'turned over' to a prize master with instructions to
proceed to Key West.
And that the Spanish schooner Lola 'was captured as a prize of war by the U. S. S.
Dolphin,' April 27, and 'was delivered' by the Dolphin's commander 'to Rear Admiral
Wm. T. Sampson (commanding the North Atlantic Squardron),' and thereupon
'turned over' to a prize master with instructions to proceed to Key West. [175 U.S.
677, 717] That the vessels were accordingly taken to Key West and there libeled,
and that the decrees of condemnation were entered against them May 30.
It is impossible to concede that the Admiral ratified these captures in disregard of
established international law and the proclamation, or that the President, if he had
been of opinion that there was any infraction of law or proclamation, would not have
intervened prior to condemnation.
The correspondence of April 28, 30, between the Admiral and the Secretary of the
Navy, quoted from in the principal opinion, was entirely consistent with the validity
of the captures.
The question put by the Admiral related to the detention as prisoners of war of the
persons manning the fishing schooners 'attempting to get into Havana.'
Noncombatants are not so detained except for special reasons. Sailors on board
enemy's trading vessels are made prisoners because of their fitness for immediate
use on ships of war. Therefore the Admiral pointed out the value of these fishing
seamen to the enemy, and advised their detention. They Secretary replied that if
the vessels referred to were 'attempting to violate blockade' they were subject 'with
crew' to capture, and also that they might be detained if 'considered likely to aid
enemy.' The point was whether these crews should be made prisoners of war. Of
course they would be liable to be if involved in the guilt of blockade running, and
the Secretary agreed that they might be on the other ground in the Admiral's
discretion.
All this was in accordance with the rules and usages of international law, with which,
whether in peace or war, the naval service has always been necessarily familiar.
I come then to examine the proposition 'that at the present day, by the general
consent of the civilized nations of the world, and independently of any express
treaty or other public act, it is an established rule of international law, founded on
considerations of humanity to a poor and industrious order of men, and of the
mutual convenience of belligerent states, that coast fishing vessels, with their
implements and supplies [175 U.S. 677, 718] cargoes and crews, undarmed, and

honestly pursuing their peaceful calling of catching and bringing in of fresh fish, are
exempt from capture as prize of war.'
This, it is said, is a rule 'which prize courts, administering the law of nations, are
bound to take judicial notice of, and to give effect to, in the absence of treaty or
other public act of their own government.'
At the same time it is admitted that the alleged exemption does not apply 'to coast
fishermen or their vessels, if employed for a warlike purpose, or in such a way as to
give aid or information to the enemy; nor when military or naval operations create a
necessity to which all private interests must give way;' and, further, that the
exemption has not 'been extended to ships or vessels employed on the high sea in
taking whales or seals, or cod or other fish which are not brought fresh to market,
but are salted or otherwise cured and made a regular article of commerce.'
It will be perceived that the exceptions reduce the supposed rule to very narrow
limits, requiring a careful examination of the facts in order to ascertain its
applicability; and the decision appears to me to go altogether too far in respect of
dealing with captures directed or ratified by the officer in command.
But were these two vessels within the alleged exemption? They were of 25 and 35
tons burden respectively. They carried large tanks, in which the fish taken were kept
alive. They were owned by citizens of Havana, and tha owners and the masters and
crew were to be compensated by shares of the catch. One of them had been 200
miles from Havana, off Cape San Antonio, for twenty-five days, and the other for
eight days off the coast of Yucatan. They belonged, in short, to the class of fishing or
coasting vessels of from 5 to 20 tons burden, and from 20 tons upwards, which,
when licensed or enrolled as prescribed by the Revised Statutes. are declared to be
vessels of the United States, and the shares of whose men, when the vessels are
employed in fishing, are regulated by statute. They were engaged in what were
substantially commercial ventures, and the mere fact that the fish were kept alive
by contrivances [175 U.S. 677, 719] for that purpose-a practice of considerable
antiquity-did not render them any the less an article of trade than if they had been
brought in cured.
I do not think that, under the circumstances, the considerations which have
operated to mitigate the evils of war in respect of individual harvesters of the soil
can properly be invoked on behalf of these hired vessels, as being the implements
of like harvesters of the sea. Not only so as to the owners, but as to the masters and
crews. The principle which exempts the husbandman and his instruments of labor
exempts the industry in which he is engaged, and is not applicable in protection of
the continuance of transactions of such character and extent as these.
In truth, the exemption of fishing craft is essentially an act of grace, and not a
matter of right, and it is extended or denied as the exigency is believed to demand.
It is, said Sir William Scott, 'a rule of comity only, and not of legal decision.'
The modern view is thus expressed by Mr. Hall: 'England does not seem to have
been unwilling to spare fishing vessels so long as they are harmless, and it does not
appear that any state has accorded them immumty under circumstances of
inconvenience to itself. It is likely that all nations would now refrain from molesting

them as a general rule, and would capture them so soon as any danger arose that
they or their crews might be of military use to the enemy; and it is also likely that it
is impossible to grant them a more distinct exemption.'
In the Crimean war, 1854-55, none of the orders in council, in terms, either
exempted or included fishing vessels, yet the allied squadrons swept the Sea of Azof
of all craft capable of furnishing the means of transportation, and the English
admiral in the Gulf of Finland directed the destruction of all Russian coasting
vessels, not of sufficient value to be detained as prizes, except 'boats or small craft
which may be found empty at anchor, and not trafficking.'
It is difficult to conceive of a law of the sea of universal obligation to which Great
Britain has not acceded. And I [175 U.S. 677, 720]
am not aware of adequate
foundation for imputing to this country the adoption of any other than the English
rule.
In his Lectures on International Law at the Naval Law College the late Dr. Freeman
Snow laid it down that the exemption could not be asserted as a rule of
international law. These lectures were edited by Commodore Stockton and
published under the direction of the Secretary of the Navy in 1895, and, by that
department, in a second edition, in 1898, so that in addition to the well-known
merits of their author they possess the weight to be attributed to the official
imprimatur. Neither our treaties nor settled practice are opposed to that conclusion.
In view of the circumstances surrounding the breaking out of the Mexican war,
Commodore Conner, commanding the Home Squadron, on May 14, 1846, directed
his officers, in respect of blockade, not to molest 'Mexican boats engaged
exclusively in fishing on any part of the coast,' presumably small boats in proximity
to the shore; while on the Pacific coast Commodore Stockton in the succeeding
August ordered the capture of 'all vessels under the Mexican flag.'
The treaties with Prussia of 1785, 1799, and 1828, and of 1848 with Mexico, in
exempting fishermen, 'unarmed and inhabiting unfortified towns, villages, or
places,' did not exempt fishing vessels from seizure as prize; and these captures
evidence the convictions entertained and acted on in the late war with Spain.
In is needless to review the speculations and repetitions of the writers on
international law. Ortolan, De Boeck, and others admit that the custom relied on as
consecrating the immunity is not so general as to create an absolute international
rule; Heffter, Calvo, and others are to the contrary. Their lucubrations may be
persuasive, but not authoritative.
In my judgment, the rule is that exemption from the rigors of war is in the control of
the Executive. He is bound by no immutable rule on the subject. It is for him to
apply, or to modify, or to deny altogether such immunity as may have been usually
extended. [175 U.S. 677, 721]
Exemptions may be designated in advance, or
granted according to circumstances, but carrying on was involves the inflication of
the hardships of war, at least to the extent that the seizure or destruction of
enemy's property on sea need not be specifically authorized in order to be
accomplished.

Being of opinion that these vessels were not exempt as matter of law, I am
constrained to dissent from the opinion and judgment of the court; and my brothers
Harlan and McKenna concur in this dissent.
(January 29, 1900.)
The court, in each case, on motion of the Solicitor General in behalf of the United
States, and after argument of counsel thereon, and to secure the carrying out of the
opinion and decree of this court according to their true meaning and intent, ordered
that the decree be so modified as to direct that the damages to be allowed shall be
compensatory only, and not punitive.
Footnotes
[ Footnote 1 ] Fed. Cas. No. 277.
See
more
at:
http://caselaw.findlaw.com/us-supremecourt/175/677.html#sthash.h6B0MkxT.dpuf
3. Kuroda vs Jalandoni 42 OG 4282

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-2662

March 26, 1949

SHIGENORI KURODA, petitioner,

vs.
Major General RAFAEL JALANDONI, Brigadier General CALIXTO DUQUE,
Colonel MARGARITO TORALBA, Colonel IRENEO BUENCONSEJO, Colonel
PEDRO TABUENA, Major FEDERICO ARANAS, MELVILLE S. HUSSEY and
ROBERT PORT, respondents.
Pedro Serran, Jose G. Lukban, and Liberato B. Cinco for petitioner.
Fred Ruiz Castro Federico Arenas Mariano Yengco, Jr., Ricardo A. Arcilla and S.
Melville Hussey for respondents.
MORAN, C.J.:
Shigenori Kuroda, formerly a Lieutenant-General of the Japanese Imperial Army and
Commanding General of the Japanese Imperial Forces in The Philippines during a
period covering 19433 and 19444 who is now charged before a military Commission
convened by the Chief of Staff of the Armed forces of the Philippines with having

unlawfully disregarded and failed "to discharge his duties as such command,
permitting them to commit brutal atrocities and other high crimes against
noncombatant civilians and prisoners of the Imperial Japanese Forces in violation of
the laws and customs of war" comes before this Court seeking to establish the
illegality of Executive Order No. 68 of the President of the Philippines: to enjoin and
prohibit respondents Melville S. Hussey and Robert Port from participating in the
prosecution of petitioner's case before the Military Commission and to permanently
prohibit respondents from proceeding with the case of petitioners.
In support of his case petitioner tenders the following principal arguments.
First. "That Executive Order No. 68 is illegal on the ground that it violates not only
the provision of our constitutional law but also our local laws to say nothing of the
fact (that) the Philippines is not a signatory nor an adherent to the Hague
Convention on Rules and Regulations covering Land Warfare and therefore
petitioners is charged of 'crimes' not based on law, national and international."
Hence petitioner argues "That in view off the fact that this commission has been
empanelled by virtue of an unconstitutional law an illegal order this commission is
without jurisdiction to try herein petitioner."
Second. That the participation in the prosecution of the case against petitioner
before the Commission in behalf of the United State of America of attorneys Melville
Hussey and Robert Port who are not attorneys authorized by the Supreme Court to
practice law in the Philippines is a diminution of our personality as an independent
state and their appointment as prosecutor are a violation of our Constitution for the
reason that they are not qualified to practice law in the Philippines.
Third. That Attorneys Hussey and Port have no personality as prosecution the
United State not being a party in interest in the case.
Executive Order No. 68, establishing a National War Crimes Office prescribing rule
and regulation governing the trial of accused war criminals, was issued by the
President of the Philippines on the 29th days of July, 1947 This Court holds that this
order is valid and constitutional. Article 2 of our Constitution provides in its section
3, that
The Philippines renounces war as an instrument of national policy and adopts
the generally accepted principles of international law as part of the of the
nation.
In accordance with the generally accepted principle of international law of the
present day including the Hague Convention the Geneva Convention and significant
precedents of international jurisprudence established by the United Nation all those
person military or civilian who have been guilty of planning preparing or waging a

war of aggression and of the commission of crimes and offenses consequential and
incidental thereto in violation of the laws and customs of war, of humanity and
civilization are held accountable therefor. Consequently in the promulgation and
enforcement of Execution Order No. 68 the President of the Philippines has acted in
conformity with the generally accepted and policies of international law which are
part of the our Constitution.
The promulgation of said executive order is an exercise by the President of his
power as Commander in chief of all our armed forces as upheld by this Court in the
case of Yamashita vs. Styer (L-129, 42 Off. Gaz., 664) 1when we said
War is not ended simply because hostilities have ceased. After cessation of
armed hostilities incident of war may remain pending which should be disposed
of as in time of war. An importance incident to a conduct of war is the adoption
of measure by the military command not only to repel and defeat the enemies
but to seize and subject to disciplinary measure those enemies who in their
attempt to thwart or impede our military effort have violated the law of war. ( Ex
parte Quirin 317 U.S., 1; 63 Sup. Ct., 2.) Indeed the power to create a military
commission for the trial and punishment of war criminals is an aspect of waging
war. And in the language of a writer a military commission has jurisdiction so
long as a technical state of war continues. This includes the period of an
armistice or military occupation up to the effective of a treaty of peace and may
extend beyond by treaty agreement. (Cowles Trial of War Criminals by Military
Tribunals, America Bar Association Journal June, 1944.)
Consequently, the President as Commander in Chief is fully empowered to
consummate this unfinished aspect of war namely the trial and punishment of war
criminal through the issuance and enforcement of Executive Order No. 68.
Petitioner argues that respondent Military Commission has no Jurisdiction to try
petitioner for acts committed in violation of the Hague Convention and the Geneva
Convention because the Philippines is not a signatory to the first and signed the
second only in 1947. It cannot be denied that the rules and regulation of the Hague
and Geneva conventions form, part of and are wholly based on the generally
accepted principals of international law. In facts these rules and principles were
accepted by the two belligerent nation the United State and Japan who were
signatories to the two Convention, Such rule and principles therefore form part of
the law of our nation even if the Philippines was not a signatory to the conventions
embodying them for our Constitution has been deliberately general and extensive in
its scope and is not confined to the recognition of rule and principle of international
law as continued inn treaties to which our government may have been or shall be a
signatory.

Furthermore when the crimes charged against petitioner were allegedly committed
the Philippines was under the sovereignty of United States and thus we were
equally bound together with the United States and with Japan to the right and
obligation contained in the treaties between the belligerent countries. These rights
and obligation were not erased by our assumption of full sovereignty. If at all our
emergency as a free state entitles us to enforce the right on our own of trying and
punishing those who committed crimes against crimes against our people. In this
connection it is well to remember what we have said in the case of Laurel vs. Misa
(76 Phil., 372):
. . . The change of our form government from Commonwealth to Republic does
not affect the prosecution of those charged with the crime of treason committed
during then Commonwealth because it is an offense against the same sovereign
people. . . .
By the same token war crimes committed against our people and our government
while we were a Commonwealth are triable and punishable by our present Republic.
Petitioner challenges the participation of two American attorneys namely Melville S.
Hussey and Robert Port in the prosecution of his case on the ground that said
attorney's are not qualified to practice law in Philippines in accordance with our
Rules of court and the appointment of said attorneys as prosecutors is violative of
our national sovereignty.
In the first place respondent Military Commission is a special military tribunal
governed by a special law and not by the Rules of court which govern ordinary civil
court. It has already been shown that Executive Order No. 68 which provides for the
organization of such military commission is a valid and constitutional law. There is
nothing in said executive order which requires that counsel appearing before said
commission must be attorneys qualified to practice law in the Philippines in
accordance with the Rules of Court. In facts it is common in military tribunals that
counsel for the parties are usually military personnel who are neither attorneys nor
even possessed of legal training.
Secondly the appointment of the two American attorneys is not violative of our
nation sovereignty. It is only fair and proper that United States, which has submitted
the vindication of crimes against her government and her people to a tribunal of our
nation should be allowed representation in the trial of those very crimes. If there
has been any relinquishment of sovereignty it has not been by our government but
by the United State Government which has yielded to us the trial and punishment of
her enemies. The least that we could do in the spirit of comity is to allow them
representation in said trials.

Alleging that the United State is not a party in interest in the case petitioner
challenges the personality of attorneys Hussey and Port as prosecutors. It is of
common knowledge that the United State and its people have been equally if not
more greatly aggrieved by the crimes with which petitioner stands charged before
the Military Commission. It can be considered a privilege for our Republic that a
leader nation should submit the vindication of the honor of its citizens and its
government to a military tribunal of our country.
The Military Commission having been convened by virtue of a valid law with
jurisdiction over the crimes charged which fall under the provisions of Executive
Order No. 68, and having said petitioner in its custody, this Court will not interfere
with the due process of such Military commission.
For all the foregoing the petition is denied with costs de oficio.
Paras, Feria, Pablo, Bengzon, Tuason, Montemayor and Reyes, JJ., concur.

Separate Opinions
PERFECTO, J., dissenting:
A military commission was empanelled on December 1, 1948 to try Lt. Gen.
Shigenori Kuroda for Violation of the laws and customs of land warfare.
Melville S. Hussey and Robert Port, American citizens and not authorized by the
Supreme Court to practice law were appointed prosecutor representing the
American CIC in the trial of the case.
The commission was empanelled under the authority of Executive Order No. 68 of
the President of the Philippines the validity of which is challenged by petitioner on
constitutional grounds. Petitioner has also challenged the personality of Attorneys
Hussey and Port to appear as prosecutors before the commission.
The charges against petitioner has been filed since June 26, 1948 in the name of the
people of the Philippines as accusers.
We will consideration briefly the challenge against the appearance of Attorneys
Hussey and Port. It appearing that they are aliens and have not been authorized by
the Supreme Court to practice law there could not be any question that said person
cannot appear as prosecutors in petitioner case as with such appearance they
would be practicing law against the law.

Said violation vanishes however into insignificance at the side of the momentous
question involved in the challenge against the validity of Executive Order No. 68.
Said order is challenged on several constitutional ground. To get a clear idea of the
question raised it is necessary to read the whole context of said order which is
reproduced as follows:
EXECUTIVE ORDER NO. 68.
ESTABLISHING A NATIONAL WAR CRIMES OFFICE AND PRESCRIBING RULES
AND REGULATION GOVERNING THE TRIAL OF ACCUSED WAR CRIMINAL.
I, Manuel Roxas president of the Philippines by virtue of the power vested in me
by the Constitution and laws of the Philippines do hereby establish a National
War Crimes Office charged with the responsibility of accomplishing the speedy
trial of all Japanese accused of war crimes committed in the Philippines and
prescribe the rules and regulation such trial.
The National War crimes office is established within the office of the Judge
Advocate General of the Army of the Philippines and shall function under the
direction supervision and control of the Judge Advocate General. It shall proceed
to collect from all available sources evidence of war crimes committed in the
Philippines from the commencement of hostilities by Japan in December 1941,
maintain a record thereof and bring about the prompt trial maintain a record
thereof and bring about the prompt trial of the accused.
The National War Crimes Office shall maintain direct liaison with the Legal
Section General Headquarters, Supreme Commander for the Allied power and
shall exchange with the said Office information and evidence of war crimes.
The following rules and regulation shall govern the trial off person accused as
war criminals:
ESTABLISHMENT OF MILITARY COMMISSIONS
(a) General. person accused as war criminal shall be tried by military
commission to be convened by or under the authority of the Philippines.
II. JURISDICTION
(a) Over Person. Thee military commission appointed hereunder shall have
jurisdiction over all persons charged with war crimes who are in the custody of
the convening authority at the time of the trial.

(b) Over Offenses. The military commission established hereunder shall have
jurisdiction over all offenses including but not limited to the following:
(1) The planning preparation initiation or waging of a war of aggression or a war
in violation of international treaties agreement or assurance or participation in a
common plan or conspiracy for the accomplishment of any of the foregoing.
(2) Violation of the laws or customs of war. Such violation shall include but not
be limited to murder ill-treatment or deportation to slave labor or for other
purpose of civilian population of or in occupied territory; murder or ill-treatment
of prisoners of war or internees or person on the seas or elsewhere; improper
treatment of hostage; plunder of public or private property wanton destruction
of cities towns or village; or devastation not justified by military necessity.
(3) Murder extermination enslavement deportation and other inhuman acts
committed against civilian population before or during the war or persecution on
political racial or religion ground in executive of or in connection with any crime
defined herein whether or not in violation of the local laws.
III. MEMBERSHIP OF COMMISSIONS
(a) Appointment. The members of each military commission shall be
appointed by the President of the Philippines or under authority delegated by
him. Alternates may be appointed by the convening authority. Such shall attend
all session of the commission, and in case of illness or other incapacity of any
principal member, an alternate shall take the place of that member. Any
vacancy among the members or alternates, occurring after a trial has begun,
may be filled by the convening authority but the substance of all proceeding
had evidence taken in that case shall be made known to the said new member
or alternate. This facts shall be announced by the president of the commission
in open court.
(b) Number of Members. Each commission shall consist of not less than three
(3) members.
(c) Qualifications. The convening authority shall appoint to the commission
persons whom he determines to be competent to perform the duties involved
and not disqualified by personal interest or prejudice, provided that no person
shall be appointed to hear a case in which he personally investigated or wherein
his presence as a witness is required. One specially qualified member whose
ruling is final in so far as concerns the commission on an objection to the
admissibility of evidence offered during the trial.

(d) Voting. Except as to the admissibility of evidence all rulings and finding of
the Commission shall be by majority vote except that conviction and sentence
shall be by the affirmative vote of not less than conviction and sentence shall be
by the affirmative vote of not less than two-thirds (2\3) of the member present.
(e) Presiding Member. In the event that the convening authority does not
name one of the member as the presiding member, the senior officer among the
member of the Commission present shall preside.
IV. PROSECUTORS
(a) Appointment. The convening authority shall designate one or more person
to conduct the prosecution before each commission.
(b) Duties. The duties of the prosecutor are:
(1) To prepare and present charges and specifications for reference to a
commission.
(2) To prepare cases for trial and to conduct the prosecution before the
commission of all cases referred for trial.
V. POWER AND PROCEDURE OF COMMISSION
(a) Conduct of the Trial. A Commission shall:
(1) Confine each trial strictly to fair and expeditious hearing on the issues raised
by the charges, excluding irrelevant issues or evidence and preventing any
unnecessary delay or interference.
(2) Deal summarily with any contumacy or contempt, imposing any appropriate
punishment therefor.
(3) Hold public session when otherwise decided by the commission.
(4) Hold each session at such time and place as it shall determine, or as may be
directed by the convening authority.
(b) Rights of the Accused. The accused shall be entitled:
(1) To have in advance of the trial a copy of the charges and specifications
clearly worded so as to apprise the accused of each offense charged.

(2) To be represented, prior to and during trial, by counsel appointed by the

convening authority or counsel of his own choice, or to conduct his own defense.
(3) To testify in his own behalf and have his counsel present relevant evidence
at the trial in support of his defense, and cross-examine each adverse witness
who personally appears before the commission.
(4) To have the substance of the charges and specifications, the proceedings
and any documentary evidence translated, when he is unable otherwise to
understand them.
(c) Witnesses. The Commission shall have power:
(1) To summon witnesses and require their attendance and testimony; to
administer oaths or affirmations to witnesses and other persons and to question
witnesses.
(2) To require the production of documents and other evidentiary material.
(3) To delegate the Prosecutors appointed by the convening authority the
powers and duties set forth in (1) and (2) above.
(4) To have evidence taken by a special commissioner appointed by the
commission.
(d) Evidence.
(1) The commission shall admit such evidence as in its opinion shall be of
assistance in proving or disproving the charge, or such as in the commission's
opinion would have probative value in the mind of a reasonable man. The
commission shall apply the rules of evidence and pleading set forth herein with
the greatest liberality to achieve expeditious procedure. In particular, and
without limiting in any way the scope of the foregoing general rules, the
following evidence may be admitted:
(a) Any document, irrespective of its classification, which appears to the
commission to have been signed or issued by any officer, department, agency
or member of the armed forces of any Government without proof of the
signature or of the issuance of the document.
(b) Any report which appears to the commission to have been signed or issued
by the International Red Cross or a member of any medical service personnel, or
by any investigator or intelligence officer, or by any other person whom

commission considers as possessing knowledge of the matters contained in the

report.
(c) Affidavits, depositions or other signed statements.
(d) Any diary, letter to other document, including sworn statements, appearing
to the commission to contain information relating to the charge.
(e) A copy of any document or other secondary evidence of the contents, if the
original is not immediately available.
(2) The commission shall take judicial notice of facts of common knowledge,
official government documents of any nation, and the proceedings, records and
findings of military or other agencies of any of the United Nation.
(3) A commission may require the prosecution and the defense to make a
preliminary offer of proof whereupon the commission may rule in advance on
the admissibility of such evidence.
(4) The official position of the accused shall not absolve him from responsibility
nor be considered in mitigation of punishment. Further action pursuant to an
order of the accused's superior, or of his Government, shall not constitute a
defense, but may be considered in mitigation of punishment if the commission
determines that justice so requires.
(5) All purposed confessions or statements of the accused shall bee admissible
in evidence without any showing that they were voluntarily made. If it is shown
that such confession or statement was procured by mean which the commission
believe to have been of such a character that may have caused the accused to
make a false statement the commission may strike out or disregard any such
portion thereof as was so procured.
(e) Trial Procedure. The proceedings of each trial shall be conducted
substantially as follows unless modified by the commission to suit the particular
circumstances:
(1) Each charge and specification shall be read or its substance stated in open
court.
(2) The presiding member shall ask each accused whether he pleads "Guilty" or
"Not guilty."
(3) The prosecution shall make its opening statement."(4) The presiding
member may at this or any other time require the prosecutor to state what

evidence he proposes to submit to the commission and the commission

thereupon may rule upon the admissibility of such evidence.
(4) The witnesses and other evidence for the prosecution shall be heard or
presented. At the close of the case for the prosecution, the commission may, on
motion of the defense for a finding of not guilty, consider and rule whether he
evidence before the commission may defer action on any such motion and
permit or require the prosecution to reopen its case and produce any further
available evidence.
(5) The defense may make an opening statement prior to presenting its case.
The presiding member may, at this any other time require the defense to state
what evidence it proposes to submit to the commission where upon the
commission may rule upon the admissibility of such evidence.
(6) The witnesses and other evidence for the defense shall be heard or
presented. Thereafter, the prosecution and defense may introduce such
evidence in rebuttal as the commission may rule as being admissible.
(7) The defense and thereafter the prosecution shall address the commission.
(8) The commission thereafter shall consider the case in closed session and
unless otherwise directed by the convening authority, announce in open court
its judgment and sentence if any. The commission may state the reason on
which judgment is based.
( f ) Record of Proceedings. Each commission shall make a separate record of
its proceeding in the trial of each case brought before it. The record shall be
prepared by the prosecutor under the direction of the commission and
submitted to the defense counsel. The commission shall be responsible for its
accuracy. Such record, certified by the presiding member of the commission or
his successor, shall be delivered to the convening authority as soon as possible
after the trial.
(g) Sentence. The commission may sentence an accused, upon conviction to
death by hanging or shooting, imprisonment for life or for any less term, fine or
such other punishment as the commission shall determine to be proper.
(h) Approval of Sentence. No. sentence of a military commission shall be
carried into effect until approved by the chief off Staff: Provided, That no
sentence of death or life imprisonment shall be carried into execution until
confirmed by the President of the Philippines. For the purpose of his review the
Chief of Staff shall create a Board of Review to be composed of not more than
three officers none of whom shall be on duty with or assigned to the Judge

Advocate General's Office. The Chief of Staff shall have authority to approve,
mitigate remit in whole or in part, commute, suspend, reduce or otherwise alter
the sentence imposed, or (without prejudice to the accused) remand the case
for rehearing before a new military commission; but he shall not have authority
to increase the severity of the sentence. Except as herein otherwise provided
the judgment and sentence of a commission shall final and not subject to review
by any other tribunal.
VI. RULE-MAKING POWER
Supplementary Rule and Forms. Each commission shall adopt rules and forms
to govern its procedure, not inconsistent with the provision of this Order, or such
rules and forms as may be prescribed by the convening authority]or by the
President of the Philippines.
VII. The amount of amount of seven hundred thousand pesos is hereby set aside
out of the appropriations for the Army of the Philippines for use by the National
War Crimes Office in the accomplishment of its mission as hereinabove set forth,
and shall be expended in accordance with the recommendation of the Judge
Advocate General as approved by the President. The buildings, fixtures,
installations, messing, and billeting equipment and other property herefore used
by then Legal Section, Manila Branch, of the General Headquarters, Supreme
Commander for the Allied Power, which will be turned over by the United States
Army to the Philippines Government through the Foreign Liquidation
Commission and the Surplus Property Commission are hereby specification
reserved for use off the National War Crimes Office.
Executive Order No. 64, dated August 16, 1945, is hereby repealed.
Done in the City of Manila, this 29th day of July in the year of Our Lord, nineteen
hundred and forty-seven, and of the Independence of the Philippines, the
second.
MANUEL ROXAS
President of the Philippines

By the President:
EMILIO ABELLO
Chief of the Executive Office

EXECUTIVE LEGISLATION
Executive Order No. 68 is a veritable piece of Legislative measure, without the
benefit of congressional enactment.
The first question that is trust at our face spearheading a group of other no less
important question, is whether or not the President of the Philippines may exercise
the legislative power expressly vested in Congress by the Constitution. .
The Constitution provides:
The Legislative powers shall be vested in a Congress of the Philippines which
shall consist of a Senate and House of Representatives. (Section 1, Article VI.)
While there is no express provision in the fundamental law prohibiting the exercise
of legislative power by agencies other than Congress, a reading of the whole
context of the Constitution would dispel any doubt as to the constitutional intent
that the legislative power is to be exercised exclusively by Congress, subject only to
the veto power of the President of the President of the Philippines, to the specific
provision which allow the president of the Philippines to suspend the privileges of
the writ of habeas corpus and to place any part of the Philippines under martial law,
and to the rule-making power expressly vested by the Constitution in the Supreme
Court.
There cannot be any question that the member of the Constitutional Convention
were believers in the tripartite system of government as originally enunciated by
Aristotle, further elaborated by Montequieu and accepted and practiced by modern
democracies, especially the United State of America, whose Constitution, after
which ours has been patterned, has allocated the three power of government
legislative, executive, judicial to distinct and separate department of
government.
Because the power vested by our Constitution to the several department of the
government are in the nature of grants, not recognition of pre-existing power, no
department of government may exercise any power or authority not expressly
granted by the Constitution or by law by virtue express authority of the
Constitution.
Executive Order No. 68 establishes a National War Crimes Office and the power to
establish government office is essentially legislative.
The order provides that person accused as war criminals shall be tried by military
commissions. Whether such a provision is substantive or adjective, it is clearly
legislative in nature. It confers upon military commissions jurisdiction to try all

persons charge with war crimes. The power to define and allocate jurisdiction for
the prosecution of person accused of any crime is exclusively vested by the
Constitution in Congress. .
It provides rules of procedure for the conduct of trial of trial. This provision on
procedural subject constitutes a usurpation of the rule-making power vested by
Constitution in the Supreme Court.
It authorized military commission to adopt additional rule of procedure. If the
President of the Philippines cannot exercise the rule -making power vested by the
Constitution in the Supreme Court, he cannot, with more reason, delegate that
power to military commission.
It appropriates the sum of P7000,000 for the expenses of the National War Crimes
office established by the said Executive Order No. 68. This constitutes another
usurpation of legislative power as the power to vote appropriations belongs to
Congress.
Executive Order No. 68., is, therefore, null and void, because, though it the
President of the Philippines usurped power expressly vested by the Constitution in
Congress and in the Supreme Court.
Challenged to show the constitutional or legal authority under which the President
issued Executive Order No. 68, respondent could not give any definite answer. They
attempted, however, to suggest that the President of the Philippines issued
Executive Order No. 68 under the emergency power granted to him by
Commonwealth Act No. 600, as amended by Commonwealth Act No. 620, and
Commonwealth Act No. 671, both of which are transcribed below:
COMMONWEALTH ACT NO. 600.
AN ACT DECLARING A STATE OF EMERGENCY AND AUTHORIZING THE
PRESIDENT TO PROMULGATE RULES AND REGULATION TO SAFEGUARD THE
INTEGRITY OF THE PHILIPPINES AND TO INSURE THE TRANQUILITY OF ITS
INHABITANTS.
Be it enacted by the National Assembly of the Philippines:
SECTION 1. The existence of war in many parts of the world has created a
national emergency which makes it necessary to invest the President of the
Philippines with extraordinary power in order to safeguard the integrity of the
Philippines and to insure the tranquility of its inhabitants, by suppressing
espionage, lawlessness, and all subversive to the people adequate shelter and
clothing and sufficient food supply, and by providing means for the speedy

evacuation of the civilian population the establishment of an air protective

service and the organization of volunteer guard units, and to adopt such other
measures as he may deem necessary for the interest of the public. To carry out
this policy the President is authorized to promulgate rules and regulations which
shall have the force and effect off law until the date of adjournment of the next
regulation which shall have the force and effect of law until the date of
adjournment of the next regular session of the First Congress of the Philippines,
unless sooner amended or repealed by the Congress of Philippines. Such rules
and regulation may embrace the following objects: (1) to suppress espionage
and other subversive activities; (2) to require all able-bodied citizens (a) when
not engaged in any lawful occupation, to engage in farming or other productive
activities or (b) to perform such services as may bee necessary in the public
interest; (3) to take over farm lands in order to prevent or shortage of crops and
hunger and destitution; (4) to take over industrial establishment in order to
insure adequate production, controlling wages and profits therein; (5) to prohibit
lockouts and strikes whenever necessary to prevent the unwarranted
suspension of work in productive enterprises or in the interest of national
security; (6) to regulate the normal hours of work for wage-earning and salaried
employees in industrial or business undertakings of all kinds; (7) to insure an
even distribution of labor among the productive enterprises; (8) to
commandership and other means of transportation in order to maintain, as
much as possible, adequate and continued transportation facilities; (9) to
requisition and take over any public service or enterprise for use or operation by
the Government;(10) to regulate rents and the prices of articles or commodities
of prime necessity, both imported and locally produced or manufactured; and
(11) to prevent, locally or generally, scarcity, monopolization, hoarding injurious
speculations, and private control affecting the supply, distribution and
movement of foods, clothing, fuel, fertilizer, chemical, building, material,
implements, machinery, and equipment required in agriculture and industry,
with power to requisition these commodities subject to the payment of just
compensation. (As amended by Com. Act No. 620.)
SEC. 2. For the purpose of administering this Act and carrying out its objective,
the President may designate any officer, without additional compensation, or
any department, bureau, office, or instrumentality of the National Government.
SEC. 3. Any person, firm, or corporation found guilty of the violation of any
provision of this Act or of this Act or any of the rules or regulations promulgated
by the President under the authority of section one of this Act shall be punished
by imprisonment of not more than ten years or by a fine of not more than ten
thousand pesos, or by both. If such violation is committed by a firm or
corporation, the manager, managing director, or person charge with the
management of the business of such firm, or corporation shall be criminally
responsible therefor.

SEC. 4. The President shall report to the national Assembly within the first ten
days from the date of the opening of its next regular session whatever action
has been taken by him under the authority herein granted.
SEC. 5. To carry out the purposed of this Act, the President is authorized to
spend such amounts as may be necessary from the sum appropriated under
section five Commonwealth Act Numbered four hundred and ninety-eight.
SEC. 6. If any province of this Act shall be declared by any court of competent
jurisdiction to be unconstitutional and void, such declaration shall not invalidate
the remainder of this Act.
SEC. 7. This Act shall take upon its approval.
Approved, August 19, 1940.
COMMONWEALTH ACT NO. 671
AN ACT DECLARING A STATE OF TOTAL EMERGENCY AS A RESULT OF WAR
INVOLVING THE PHILIPPINES AND AUTHORIZING THE PRESIDENT TO
PROMULGATE RULE AND REGULATIONS TO MEET SUCH EMERGENCY.
Be it enacted the National Assembly of the Philippines;
SECTION 1. The existed of war between the United State and other countries of
Europe and Asia, which involves the Philippines, makes it necessary to invest
the President with extraordinary powers in order to meet the resulting
emergency.
SEC. 2. Pursuant to the provision of Article VI, section 16, of the Constitution, the
President is hereby authorized, during the existence of the emergency, to
promulgate such rules and regulation as he may deem necessary to carry out
the national policy declared in section 1 hereof. Accordingly, he is, among other
things, empowered (a) to transfer the seat of the Government or any of its
subdivisions, branches, department, offices, agencies or instrumentalities; (b) to
reorganize the Government of the Commonwealth including the determination
of the order of precedence of the heads of the Executive Department; ( c) to
create new subdivision, branches, departments, offices, agency or
instrumentalities of government and to abolish any of those already existing; (d)
to continue in force laws and appropriation which would lapse or otherwise
became inoperative, and to modify or suspend the operation or application of
those of an administrative character; (e) to imposed new taxes or to increase,
reduce, suspend, or abolish those in existence; (f) to raise funds through the
issuance of bonds or otherwise, and to authorize the expensive of the proceeds

thereof; (g) to authorize the National, provincial, city or municipal governments

to incur in overdrafts for purposes that he may approve; (h) to declare the
suspension of the collection of credits or the payment of debts; and (i) to
exercise such other power as he may deem necessary to enable the
Government to fulfill its responsibilities and to maintain and enforce its
authority.
SEC. 3. The President of the Philippines report thereto all the rules and
regulation promulgated by him under the power herein granted.
SEC. 4. This Act shall take effect upon its approval and the rules and regulations.
promulgated hereunder shall be in force and effect until the Congress of the
Philippines shall otherwise provide.
Approved December 16, 1941.
The above Acts cannot validly be invoked, Executive Order No. 68 was issued on July
29, 1947. Said Acts had elapsed upon the liberation of the Philippines form the
Japanese forces or, at the latest, when the surrender of Japan was signed in Tokyo
on September 2, 1945.
When both Acts were enacted by the Second National Assembly, we happened to
have taken direct part in their consideration and passage, not only as one of the
members of said legislative body as chairman of the Committee on Third Reading
population Known as the "Little Senate." We are, therefore in a position to state that
said measures were enacted by the second national Assembly for the purpose of
facing the emergency of impending war and of the Pacific War that finally broke out
with the attack of Pearl Harbor on December 7, 1941. We approved said
extraordinary measures, by which under the exceptional circumstances then
prevailing legislative power were delegated to the President of the Philippines, by
virtue of the following provisions of the Constitution:
In time of war or other national emergency, the Congress may by law authorize
the President, for a limited period and subject to such restrictions as it may
prescribe to promulgate rules and regulations to carry out declared national
policy. (Article VI, section 26.)
It has never been the purpose of the National Assembly to extend the delegation
beyond the emergency created by the war as to extend it farther would be violative
of the express provision of the Constitution. We are of the opinion that there is no
doubt on this question.; but if there could still be any the same should be resolved
in favor of the presumption that the National Assembly did not intend to violate the
fundamental law.

The absurdity of the contention that the emergency Acts continued in effect even
after the surrender of Japan can not be gainsaid. Only a few months after liberation
and even before the surrender of Japan, or since the middle of 1945, the Congress
started to function normally. In the hypothesis that the contention can prevail, then,
since 1945, that is, four years ago, even after the Commonwealth was already
replaced by the Republic of the Philippines with the proclamation of our
Independence, two district, separate and independence legislative organs,
Congress and the President of the Philippines would have been and would
continue enacting laws, the former to enact laws of every nature including those of
emergency character, and the latter to enact laws, in the form of executive orders,
under the so-called emergency powers. The situation would be pregnant with
dangers to peace and order to the rights and liberties of the people and to
Philippines democracy.
Should there be any disagreement between Congress and the President of the
Philippines, a possibility that no one can dispute the President of the Philippines
may take advantage of he long recess of Congress (two-thirds of every year ) to
repeal and overrule legislative enactments of Congress, and may set up a veritable
system of dictatorship, absolutely repugnant to the letter and spirit of the
Constitution.
Executive Order No. 68 is equally offensive to the Constitution because it violates
the fundamental guarantees of the due process and equal protection of the law. It is
especially so, because it permit the admission of many kinds evidence by which no
innocent person can afford to get acquittal and by which it is impossible to
determine whether an accused is guilty or not beyond all reasonable doubt.
The rules of evidence adopted in Executive Order No. 68 are a reproduction of the
regulation governing the trial of twelve criminal, issued by General Douglas Mac
Arthur, Commander in Chief of the United State Armed Forces in Western Pacific, for
the purpose of trying among other, General Yamashita and Homma. What we said in
our concurring and dissenting opinion to the decision promulgated on December 19,
1945, in the Yamashita case, L-129, and in our concurring and dissenting opinion to
the resolution of January 23, 1946 in disposing the Homma case, L-244, are
perfectly applicable to the offensive rules of evidence in Executive Order No. 68.
Said rules of evidence are repugnant to conscience as under them no justice can
expected.
For all the foregoing, conformably with our position in the Yamashita and Homma
cases, we vote to declare Executive Order No. 68 null and void and to grant petition.

4. Exchange of Greek and Turkish Population Case, Advisory Opinion PCIJ 1925
-PDF

5. Barcelona Traction Case, 1964 ICJ Rep

- PDF
6. Brazilian Loans Case, France vs Brazil, PCIJ, 1929
File E. c. XVII.
Docket XVI.3

Judgment No. 15
12 July 1929

PERMANENT COURT OF INTERNATIONAL JUSTICE

Sixteenth (Extraordinary) Session

Case concerning the Payment in Gold of Brazilian Federal Loans Contracted

in France.

France v. Brazil
Judgment

BEFORE:

President:

Anzilotti

VicePresident:

Huber

Judges:

Loder, de Bustamante, Altamira, Oda,Pessoa, Hughes,

Deputy
Judge(s):

Beichmann,Negulesco

Judge
hoc:

Other
Parties/Victims:

ad

Fromageot

REPRESENTED
France:
BY:
Brazil:

Perm. Link:

Professor Basdevant, Assistant Legal Adviser to the

Ministry for Foreign Affairs
Professor Eduardo Espinola

http://www.worldcourts.com/pcij/eng/decisions/1929.07.12_payment
2.htm

Citation:

Payment in Gold of Brazilian Federal Loans Contracted in France (Fr.

v. Braz.), 1929 P.C.I.J. (ser. A) No. 21 (July 12)

Publication:

Publications of the Permanent Court of International Justice Series A

No. 20/21; Collection of Judgments A.W. Sijthoffs Publishing
Company, Leyden, 1929.

[p93] The Court,

composed as above,
having heard the observations and conclusions of the Parties,
delivers the following judgment: [p94]
[1] The Governments of the French Republic and of the Republic of the United States
of Brazil have submitted to the Permanent Court of International Justice by means of
a Special Agreement concluded at Rio de Janeiro, on August 27th, 1927, between the
aforesaid Governments, duly ratified by both Parties on February 23rd, 1928, and
filed with the Registry of the Court in accordance with Article 40 of the Statute and
Article 35 of the Rules of Court, by letters dated respectively April 26th and 27th,
1928, signed by the French and Brazilian Ministers at The Hague, the dispute which
has arisen between the Brazilian Federal Government and the French holders of
various Brazilian Federal loans with regard to the question whether the service of
these loans should be effected on the basis of the gold franc or of the paper franc.
[2] The letter of the French Minister reached the Registry on April 27th and that of
the Brazilian Minister on April 30th, 1928; as, however, Article II of the Special
Agreement provides that, as soon as that instrument has come into effect, the
question defined in Article I thereof shall be referred to the Court by notice of the
Special Agreement addressed to the Registry by either Party, the Court was duly
made cognizant of the case on April 27th, 1928.

[3] According to the terms of the Special Agreement, the Court is asked to give
judgment on the following question:
With regard to the Brazilian Federal Government's 5% loan of 1909 (Port of
Pernambuco), 4% loan of 1910, and 4 % loan of 1911, is payment of coupons which
have matured and are not barred by prescription at this date, and coupons which
shall mature, as also repayment of bonds drawn for redemption but not actually paid
which are not barred by prescription on the date of the Court's decision, or of bonds
subsequently to be redeemed, to be effected by delivery to the French holders, in
respect of each franc, of the value corresponding, in the currency of the place of
payment at the rate of exchange on the day, to one-twentieth of a gold piece
weighing 6.45161 grammes of 900/1000 fineness, or is such payment or repayment
to be effected as hitherto in paper francs, that is to say, in the French currency which
is compulsory legal tender?
[4] Conforming to the proposals jointly made by the Parties in Article III of the Special
Agreement, in accordance with [p95] Article 32 of the Rules of Court, the President,
having regard to that article, as also to Article 48 of the Statute and Article 33 of the
Rules, made an Order of May 1st, 1928, fixing as follows the times for the written
procedure:
For the presentation of Cases, setting out their submissions:
by the French Government, June 30th, 1928;
by the Brazilian Government, July 31st, 1928.
For the presentation of Counter-Cases:
by the French Government, October 1st, 1928;
by the Brazilian Government, October 31st, 1928.
[5] The Cases and Counter-Cases were duly filed with the Registry by the dates fixed
and were communicated to those concerned as provided in Article 43 of the Statute;
in accordance with Article III, last paragraph, of the Special Agreement, the case thus
became ready for hearing as from December 1st, 1928.
[6] In the course of public sittings held on May 25th, 27th, 28th and 29th, 1929, the
Court has heard the oral pleadings, reply and rejoinder, presented by M. de Pimentel
Brandao, Principal Adviser to the Brazilian Agent on behalf of the Government of the
United States of Brazil, and by the Agent above mentioned and Me Albert Montel,
Counsel before the Court of Appeal of Paris, on behalf of the French Government.
[7] In support of their respective statements, the Parties have submitted to the
Court, either as annexes to the documents of the written proceedings, or during the
hearing, the documents a list of which is given in the annex to this judgment [FN1].

--------------------------------------------------------------------------------------------------------------------[FN1] See p.154

--------------------------------------------------------------------------------------------------------------------[8] Under Article III of the Special Agreement, the Parties were to formulate their
submissions in their respective Cases.
[9] The Case of the Brazilian Government, however, contains no submissions. On the
other hand, the Case of the French Government formulates the following
submissions:
It is submitted as regards the following loans of the Brazilian Federal Government:
the 5% 1909 (Port of Pernambuco), the 4% 1910 and the 4% 1911, that the payment
of coupons which have matured and are not barred by prescription at this date and
coupons which [p96] shall mature, as also redemption of bonds drawn but not
actually redeemed which are not barred by prescription on the date of the Court's
decision, or of bonds subsequently to be drawn, must be effected by payment to the
French holders, in respect of each franc, of the value corresponding, in the currency
at the place of payment, at the rate of exchange of the day, to one-twentieth of a
gold piece weighing 6.45161 grammes, 900/1000 fine."
[10] The Counter-Case of the Brazilian Government contains the following final
paragraph which should be reproduced:
" .... the Brazilian Government .... is confident that the Court will be pleased to give
judgment to the effect that as regards the Brazilian Government's 5% 1909 loan
(Port of Pernambuco), 4% 1910 loan and 4% 1911 loan, payment of coupons which
have matured and are not barred by prescription at this date and coupons which
shall mature, as also redemption of bonds drawn but not actually redeemed which
are not barred by prescription on the date of the Court's decision, or of bonds
subsequently to be drawn, is to be effected by payment to the French holders, as
hitherto, in paper francs, that is to say in the French currency which is compulsory
legal tender."
[11] The French Government, for its part, in its Counter-Case repeats textually the
submissions formulated in its Case, but precedes them by an enumeration of the
grounds on which it is based, thus summarizing the French contention in regard to
the various points which are at issue.
[12] Finally, it should be noted that the representative of the Brazilian Government
before the Court concluded his first argument by declaring that his Government
maintained "with regard to the 5 % 1909 (Port of Pernambuco) loan, the 4 % 1910
loan and the 4 % 1911 loan ....that payment of coupons which have matured and are
not barred by prescription at this date and coupons which shall mature, as also

redemption of bonds drawn but not actually redeemed which are not barred by
prescription at the date of the Court's decision, or of bonds subsequently to be
drawn, should be effected, as hitherto, in paper francs". And in his oral reply he
made a summary of the contentions of the Brazilian Government.
[13] It should also be noted that the French Government's Agent concluded his first
argument by asking for judgment in [p97] accordance with the submissions as
formulated in his Case.
[14] Finally, the Special Agreement stipulates in Article VII that "in so far as concerns
any matter not provided for" by the Special Agreement, "the provisions of the
Statute of the Permanent Court of International Justice shall be applied".
THE FACTS.
I.[15] According to the documents and information laid before the Court by the
Parties, the origin of the controversy submitted to the Court is as follows:
[16] I.By a decree dated June 8th, 1903, the Government of the Republic of the
United States of Brazil established a "special regime for the carrying out of works for
the improvement of ports". This regime was subsequently modified by a presidential
decree dated February 14th, 1907, to the effect that "the works were to be carried
out under government's control and by contract", the Government being empowered
"for the expenditure necessary in connection with the carrying out of the
improvements in the ports and on the navigable rivers", "to undertake the requisite
operations for obtaining credit" and "to issue gold or paper bonds". Further, the law
of December 31st, 1907, determining the general expenditure of the Republic for the
financial year 1908, authorized the President of the Republic, amongst other things,
"to proceed with the improvement works in the ports .... in accordance with the
decree .... of February 14th, 1907, as also with the requisite credit operations".
[17] In virtue of this authority, the President appears to have called for tenders for
the carrying out of the improvement works at the port of Recife (Pernambuco) and,
by a decree of July 2nd, 1908, he approved the conditions of a contract to be
concluded between the Government and the contractors whose tenders had been
selected. The contract was actually concluded on August 4th, 1908; according to its
provisions' [p98] the works contracted for were to be paid for in bonds to bearer of
the Brazilian Public Debt issued to a maximum nominal value "equivalent to
84,528,300 francs". The issue by the Minister of Finance of a first section of a
nominal value of 40,000,000 francs was authorized by a presidential decree of
December 3rd, 1908. The prospectus of this section, dated December 30th, 1908,
states that "the loan constitutes a direct debt of the Government of the United States
of Brazil"; it indicates that subscriptions would take place on January 30th, 1909, at
Paris and provincial French exchanges. The bonds were actually signed on July 24th,

1909, by the delegate of the Brazilian Treasury in London; they will be analysed
hereinafter.
[18] II.Under a Brazilian decree of March 27th, 1907, the Goyaz Railway obtained a
concession for the construction of certain railway lines. Another decree of September
30th, 1909, revised the plan of these lines as well as the other clauses of the
concession contract. Under this latter decree, a new contract was concluded, on
October 25th, 1909, between the Federal Government of the United States of Brazil
and the Goyaz Railway Company, according to which the Government was to pay the
Company "in bonds bearing interest at 4% per annum .... the sum which will be
determined by the final plans approved by the Government"; as soon'as authorized
to do so by the Government, the Company might "sell the whole or a part of the
bonds corresponding to the railways....".
[19] In virtue of the foregoing arrangements, the Goyaz Railway Company, on
February 10th, 1910, concluded at Paris with a French bank a contract for the sale,
by the bank, of 100,000,000 francs worth of Brazilian funds, represented by 200,000
bonds, which were to be made over to the bank by the Company; "for this purpose
the same conditions as those governing the Federal loan of the Port of Pernambuco
of 1909" were "to be applied". And, on February 28th, 1910, a presidential decree
authorized the Minister of Finance "to issue bonds to an amount of 100 millions of
francs .... in payment for the works which formed the subject of a contract [p99] with
the Goyaz Railway Company". Another decree of the same date provides that the
payments referred to by the decree of September 30th, 1909, were to be effected by
means of bonds the issue of which was also authorized.
[20] The prospectus, which is dated March 2nd, 1910, states that subscription would
take place at Paris and provincial French exchanges on March 17th, 1910.
[21] The bonds were actually signed in London on March 5th, 1910, by the duly
authorized representative of the Brazilian Government; they will be analysed
hereinafter.
[22] III.By a contract duly approved by a Brazilian presidential decree dated March
31st, 1911, the Viacao Geral da Bahia Company obtained a concession for the
construction of a system of railways in the State of Bahia; the works were to be paid
for in "4 % bonds of the Federal Debt", which the Company was to sell for its own
account "immediately after the conclusion of the negotiations". Another decree
dated June 21st, 1911, authorized the Minister of Finance to issue bonds for
60,000,000 francs, "in payment for the works provided for in the contract concluded
with the Viacao Geral da Bahia Company"; the bonds were to be "of the nominal
value of 500 francs".
[23] The prospectus is dated May 12th, 1911; according to its terms, subscription

was to take place on July 12th, 1911. The place of issue is not indicated, but it is said
that "allotment will take place on Tuesday, July 25th, 1911: at Paris .... in the
provinces .... and in Brazil" (Rio de Janeiro). The bonds were signed in London on
September 21st, 1911, by the duly authorized representative of the Federal
Government of the United States of Brazil; they will be analysed hereinafter.
2.
[24] It appears from the terms of Article I of the Special Agreement that the Parties
agree on the fact that "hitherto" the payment of matured coupons and the
redemption of drawn bonds of the three loans at issue have been effected "in paper
francs, that is to say, in the French currency which is compulsory tender". And the
documents and. information [p100] laid before the Court confirm that this has indeed
been the case, except for the period from August 1st, 1914, to July 31st, 1917,
inclusive, during which the interest on the loans was in effect paid by means of
"funding bonds" (bons de consolidation) issued, with the authorization of the
Brazilian Government, by a banking house of London; these funding bonds were
bearer bonds redeemable in ten years, the interest on which was payable in pounds
sterling at London and certain continental exchanges at the exchange rate of the day
on London. This incident does not seem however to have any bearing on the present
case.
[25] It is also common ground that the yield of the loans has always been credited to
the borrower, or to the companies to which it had ceded its right, in French francs at
their current value.
[26] Finally, it is admitted by both sides that the fact that after the increasing
depreciation of the French franc, the service of the loan was effected in that currency
on the basis of its current value, ultimately led to protests and the taking of steps by
the bondholders with a view to inducing the French Government to intervene;
according to the Brazilian Government, however, this attitude on the part of the
bondholders dates only from 1924 and is explained by speculative aims, while,
according to the French Government, the discontent of the bondholders and its
earliest manifestations date from an earlier period.
[27] However that may be, on September 1st, 1924, the French Ambassador at Rio
de Janeiro intervened, in the name of his Government, with the Federal Government
"on behalf of the bondholders of the three Brazilian loans at issue, who claimed that
payment of the interest upon and the redemption of the capital of these loans should
be effected on a gold basis"; the French Government seems thus to have identified
itself with this claim, with which the Government of the United States of Brazil did
not however feel called upon to comply. Diplomatic conversations seem to have then
taken place, which, however, did not succeed in disposing of the controversy.

[28] In these conditions, the Special Agreement of August 27th, 1927, was
concluded, which, after stating in its preamble "that [p101] a dispute has arisen
between the Brazilian Federal Government and French holders of various Brazilian
federal loans concerning the question whether the service of these loans should be
on a gold or paper franc basis"a statement to which the Court will revert
hereinafterrequests the Court to give judgment on the question formulated in the
first article, which has been quoted above, of this instrument. .
The Court's Jurisdiction.
[29] The terms in which the Franco-Brazilian Special Agreement formulates the
question submitted to the Court, call for observations similar to those made under
the heading "The jurisdiction of the Court" in Judgment No. 14 relating to the case
concerning certain Serbian loans and given this day: the Court therefore refers to
those observations.
THE LAW.
[30] The bonds.The terms of the bonds of the various issues are as follows :
Loan of 1909.
Government of the United States of Brazil.
5% Loan, 1909; authorized amount 40,000,000 francs.
Port of Pernambuco.

Frs. 500.

Frs. 500.

Obligation.

Bond.

Attendu qu'en vertu des dispositions de

l'article 22, n XII, de la loi n 1841 du
31 dcembre 1907, et en excution des
clauses 55 et 59 du contrat du 4 aot
1908, faisant suite au dcret n 7003 du
2 juillet 1908, le Gouvernement des
Etats-Unis du Brsil est autoris
mettre des obligations pour un
montant
nominal
maximum
de
84.528.300 francs, dont le produit est

Whereas by virtue of the provisions of

Article 22, No. XII, of the law No. 1841 of
the 31st December 1907,
and in
execution of Clauses 55 and 59 of the
contract of the 4th August 1908,
following on Decree No. 7003 of the 2nd
July 1908, the Government of the United
States of Brazil is authorized to issue
bonds to a maximum nominal amount of
frs. 84.528.300, the proceeds whereof

destin au paiement des travaux du

port de Recife, je soussign, Jos
Antonio de Azevedo Castro, dlgu du
Trsor du Brsil Londres, dment
autoris, declare [p102]
par les
prsentes au nom et pour le compte
dudit Gouvernement que le porteur de
cette obligation a droit la somme de
500 francs faisant partie dudit emprunt
soumis aux stipulations ci-dessous:
1. Le Gouvernement met, ds
prsent, des obligations pour une valeur
nominale de 40.000.000 de francs.
2. L'emprunt est dsign sous le nom
Emprunt du Gouvernement des tatsUnis du Brsil 1909 Port de
Pernambuco Intrt annuel 5%, et
jouit, tant l'gard du paiement des
intrts que de l'amortissement, de la
garantie gnrale du Gouvernement et
notamment de celle du produit de
l'impt de 2% or, sur la valeur officielle
des importations trangres dans l'tat
de Pernambuco et de tous les revenus
nets du port et des docks aprs leur
construction.
3. Les titres sont payables au porteur et
sont de la valeur de 500 francs chacun
portant intrt 5 % l'an partir du 1er
fvrier 1909 l'chance des 1er fvrier
et Ier aot de chaque anne, le premier
paiement de 12 fr. 50 devant avoir lieu
le 1er aot 1909. Les intrts sont
reprsents par des coupons attachs
aux titres et sont payables Paris en or
la Banque franaise pour le Commerce
et l'Industrie et au Crdit mobilier
franais et sur les places de Rio-deJaneiro, Londres, Bruxelles, Amsterdam
et Hambourg au cours du change vue

are intended for the payment of the

works of the port of Recife, I the
undersigned, Jose Antonio de Azevedo
Castro, delegate of[p102] the Brazilian
Treasury in London, duly authorized, do
declare by these presents in the name
and for account of the said Government
that the bearer of this bond is entitled to
the sum of frs. 500 forming part of the
said loan subject to the provisions
hereinafter following:
1. The Government issues immediately
bonds to the nominal value of frs.
40.000.000.
2. The loan is described under the name
of "Government of the United States of
Brazil Loan 1909 Port of Pernambuco
Annual Interest 5 per cent", and
enjoys both as regards the payment of
interest and redemption the general
guarantee of the Government, and
particular that of the proceeds of the 2
per cent Gold Tax upon the official value
of the foreign imports into the State of
Pernambuco and of all the net revenue
from the port and the docks after the
construction thereof.
3. The bonds are payable to bearer and
of the value of frs. 500, each bearing
interest at 5 per cent per annum as from
the 1st February 1909, payable on the
1st February and 1st August in each
year, the first payment of frs. 12.50 to
take place on the 1st August 1909. The
interest is represented by coupons
attached to the bonds and is payable in
Paris in gold by the Banque francaise
pour le Commerce et l'lndustrie and the
Credit mobilier francais, and on the
markets of Rio de Janeiro, London,

sur Paris.
4. Le remboursement des obligations
s'effectuera au moyen d'un [p103] fonds
cumulatif de % sur le montant de la
valeur des titres, et commencera en
1915.
5. Le remboursement s'effectuera quand
les titres seront au pair ou au-dessus du
pair, par tirages au sort qui auront lieu
en prsence d'un notaire public pendant
les mois de janvier et juillet de chaque
anne, et dans le cas contraire par
rachats en bourse. Tout titre sorti au
remboursement sera rembours avec
les intrts chus le 1er fvrier ou le 1er
aot qui suivra immdiatement la date
du tirage. Les titres rembourss seront
immdiatement annuls.

Brussels, Amsterdam and Hamburg at

the sight exchange of the day on Paris.
4. The redemption of the bonds shall
take place by means of an [p103]
Accumulative Fund of percent, upon
the amount of the nominal value of the
bonds, and shall commence in 1915.
5.The redemption shall be effected,
when the bonds are at par or above par,
by drawings by lot, which shall take
place in the presence of a notary public
during the months of January and July in
each year, and in the contrary event by
purchases in the Market. Any bond
drawn for payment shall be paid off with
the accrued interest on the 1st February
or 1st August immediately following the
date of the drawing. Bonds paid off shall
be immediately cancelled.

6. Le Gouvernement pourra, dans le but

de rembourser les titres en circulation,
augmenter toute poque le fonds
d'amortissement, ou rembourser des
titres par d'autres moyens, mais, dans
ce dernier cas, en donnant un pravis
de six mois.

6. The Government may for the purpose

of paying off bonds in circulation
increase the Sinking Fund at any time or
pay off bonds by other means, but in
such latter case giving six months'
previous notice thereof.

7. Les obligations, en ce qui concerne le

capital et les intrts, sont exemptes de
tous impts brsiliens prsents et futurs.
Elles porteront la signature du dlgu
du Trsor Londres.

7. The bonds are as regards principal

and interest free from any Brazilian
taxes present or future. They shall bear
the signature of the delegate of the
Treasury in London.
Dated this 24th day of July 1909

Dat le 24 juillet 1909.

(Signed) Jose Antonio

de Azevedo Castro.

(Sign) Jos Antonio de Azevedo Castro.

We declare that the above signature is

that of the representative of the

Government of the United States of

Brazil.
Nous dclarons que la signature cidessus est celle du reprsentant du
Gouvernement des Etats-Unis du Brsil.

[31] The coupons of this issue are in the following form:

"Government of the United States of Brazil
5% Loan 1909 Due on....
Port of Pernambuco
No. .
For frs. 12.50 six months' interest
on frs. 500." [p104]
Loan of 1910.
Francs
500.

Francs
N ....

N ....

500.

Government of the United States of Brazil.

4% Loan 1910 for an authorized amount of frs. 100,000,000.

Obligation.

Bond.

Le Gouvernement de la Rpublique des

tats-Unis
du
Brsil
ayant,
en
vertudel'autorisation qui lui a t
accorde par la loi n 2221 du 30
dcembre 1909, ainsi que par les
dcrets prsidentiels ns 7877 et 7878
du 28 fvrier 1910, les pouvoirs
ncessaires pour contracter un emprunt
qui
sera
appel
Emprunt
du
Gouvernement des tats-Unis du Brsil
4 % pour la construction de chemins
de fer fdraux, pour un capital nominal

The Government of the Republic of the

United States of Brazil, having by virtue
of the authority given by Law No. 2221
of the 30th of December 1909, and by
the Presidential Decrees Nos. 7877 and
7878 of the 28th of February 1910, the
necessary powers to effect a loan to be
called
"United
States
of
Brazil
Government 4 per cent Loan" for the
construction of federal railways for the
nominal capital of frs. 100.000.000, the
undersigned Jose Antonio de Azevedo

de 100.000.000 de francs, le soussign

Jos Antonio de Azevedo Castro, en
qualit
de
reprsentant
dudit
Gouvernement et dment autoris,
dclare
solennellement
par
ces
prsentes, au nom et pour le compte
dudit Gouvernement, que le porteur de
la prsente obligation a droit la
somme de 500 francs-or faisant partie
dudit emprunt, soumis aux stipulations
ci-dessous, savoir:
Premirement.

L'emprunt
sera
reprsent par des obligations payables
au porteur, portant intrts au taux de
4% l'an, mises pour un montant de
100.000.000 de francs de capital
nominal.

Castro, as representative of the

Government
and
duly
authorized,
solemnly declares by these presents, in
the name and on behalf of the said
Government, that the bearer of the
present has the right to the sum of frs.
500 gold, part of the said loan, subject
to the following clauses, namely:

First.The loan shall be represented by

bonds payable to bearer bearing
interest at 4 per cent per annum issued
for the sum of frs. 100.000.000 nominal
capital.
Second.The interest on the bonds of
this issue, represented by coupons
attached to the same, shall be paid halfyearly to the bearers of the same on the
1st day of March and the 1st day of
September [p105] in every year, until
the whole of the bonds shall have been
paid off by the Government. The
payment of interest shall take place in
Rio de Janeiro, in Paris at the offices of
the Societe generale pour favoriser le
developpement du commerce et de
I'indusirie en France, at the Banque de
Paris et des Pays-Bas, and at the Credit
mobilier francais, at the rate of 10 frs.
gold each coupon; in London at the
Agency of the said Societe generale and
at the exchange of the day on Paris, the
first payment of 10 francs to take place
on the 1st day of September, 1910.

Deuximement. Les intrts sur les

obligations de la prsente mission,
reprsents par des coupons y attachs,
seront pays par semestre aux porteurs
de ces obligations le 1er mars et le 1er
septembre [p105] de chaque anne
jusqu'au complet remboursement de la
totalit
des
obligations
par
le
Gouvernement.
Le
paiement
des
intrts aura lieu Rio-de-Janeiro;
Paris dans les bureaux de la Socit
gnrale
pour
favoriser
le
dveloppement du commerce et de
l'industrie en France, de la Banque de
Paris et des Pays-Bas, et au Crdit
mobilier franais, raison de 10 francsor par coupon; Londres, l'agence de
ladite Socit gnrale, au change du
jour sur Paris. Le premier paiement de
10 francs aura lieu le Ier septembre Third.The redemption of bonds shall
be made by means of an Accumulative
1910.
Redemption Fund of per cent per
Troisimement. Le remboursement annum, the first redemption to take
des obligations se fera au moyen d'un place on the 1st day of September,

fonds d'amortissement cumulatif de

% par an; le premier remboursement
aura lieu le ier septembre 1912; il
s'effectuera par voie d'achat sur le
march quand les obligations seront audessous du pair, et, quand elles seront
au pair ou au-dessus du pair, au moyen
de tirages au sort qui auront lieu
pendant les mois de janvier et de juin de
chaque anne. Le tirage au sort des
obligations aura lieu en prsence d'un
notaire public, et les rsultats seront
immdiatement
publis
par
voie
d'annonce. Toutes les obligations sorties
seront rembourses 500 francs-or
avec les intrts dus le Ier mars ou le
1er septembre qui suivra le tirage.
Quatrimement. La somme principale
reprsente par les obligations sorties
sera paye contre prsentation de ces
obligations munies de tous les coupons
non chus Rio-de-Janeiro, Paris et
Londres.
Cinquimement. Les intrts sur les
obligations cesseront de [p106] courir
partir de la date fixe pour leur
remboursement, et les obligations
rembourses seront immdiatement
annules.
Siximement. Les obligations mises
conformment aux lois et dcrets
susmentionns
auront
la
garantie
absolue du Gouvernement l'gard du
remboursement du capital et au
paiement des intrts respectifs et
l'gard du service des fonds ncessaires
pour l'amortissement de l'emprunt.
Septimement. Les obligations, tant
en ce qui concerne le capital que les

1912; it shall be effected by purchases

on the market when the bonds are
below par, and when at or above par by
means of drawings which take shall
place in the months of January and June
in every year. The bonds shall be drawn
in the presence of a notary public, and
the
result
shall
be
immediately
published by advertisement. All bonds
drawn shall be paid at 500 francs gold,
with the interest due on the 1st day of
March or the 1st day of September
following the drawing.
Fourth.The capital of the bonds drawn
shall be paid in exchange for the bonds
with all coupons not due in Rio de
Janeiro, in Paris and in London.
Fifth.The bonds shall cease to bear
interest from the date on [p106] which
they are redeemable, and the bonds
redeemed
shall
be
immediately
cancelled.
Sixth.The bonds issued in conformity
with the laws and decrees above
mentioned shall have the absolute
guarantee of the Government as regards
the payment of the capital and of the
respective interest and as regards the
service of the necessary funds for the
redemption of the loan.
Seventh.The bonds, as regards the
capital and interest, shall be exempt
from all present or future Brazilian
taxes,
whether
ordinary
or
extraordinary.
Eighth.The Government may for the
purpose of paying off bonds in
circulation increase the Sinking Fund at

intrts, seront affranchies de tous

impts brsiliens prsents ou futurs, soit
ordinaires ou extraordinaires.

any time or pay off bonds by other

means, but in such latter case giving six
months' previous notice thereof.

Huitimement. Le Gouvernement
pourra, dans le but de rembourser les
titres en circulation, augmenter toute
poque le fonds d'amortissement, ou
rembourser des titres par d'autres
moyens, mais, dans ce dernier cas, en
donnant un pravis de six mois.

London, the 5th of March, 1910.

(Signed) Jose Antonio
de Azevedo Castro.
We declare the above to be the
signature of the representative of the
Government of the United States of
Brazil.

Londres, le 5 mars 1910.

(Signe) Jos Antonio de Azevedo Castro.

Nous dclarons que la signature

appose
ci-dessus
est
celle
du
reprsentant du Gouvernement des
tats-Unis du Brsil.
[32] The following is the form of the coupon :
"Government of the United States of Brazil.
4% Loan for construction of federal railways.
No. .... Due on
For frs. 10.00,
being six months' interest on frs. 500." [p107]
Loan of 1911.
Federal Government of the United States of Brazil.
4% Gold Loan 1911.
Authorized amount frs. 60,000,000.
No. ....

Obligation.

Bond.

Le Gouvernement de la Rpublique des

tats-Unis
du
Brsil
ayant,
en
vertudel'autorisation qui lui a t
accorde par la loi n 2221 du 30
dcembre 1909, ainsi que par les
dcrets prsidentiels ns 7877 et 7878
du 28 fvrier 1910, les pouvoirs
ncessaires pour contracter un emprunt
qui
sera
appel
Emprunt
du
Gouvernement des tats-Unis du Brsil
4 % pour la construction de chemins
de fer fdraux, pour un capital nominal
de 100.000.000 de francs, le soussign
Jos Antonio de Azevedo Castro, en
qualit
de
reprsentant
dudit
Gouvernement et dment autoris,
dclare
solennellement
par
ces
prsentes, au nom et pour le compte
dudit Gouvernement, que le porteur de
la prsente obligation a droit la
somme de 500 francs-or faisant partie
dudit emprunt, soumis aux stipulations
ci-dessous, savoir:

The Government of the Republic of the

United States of Brazil, having by virtue
of the authority given by Law No. 2221
of the 30th of December 1909, and by
the Presidential Decrees Nos. 7877 and
7878 of the 28th of February 1910, the
necessary powers to effect a loan to be
called
"United
States
of
Brazil
Government 4 per cent Loan" for the
construction of federal railways for the
nominal capital of frs. 100.000.000, the
undersigned Jose Antonio de Azevedo
Castro, as representative of the
Government
and
duly
authorized,
solemnly declares by these presents, in
the name and on behalf of the said
Government, that the bearer of the
present has the right to the sum of frs.
500 gold, part of the said loan, subject
to the following clauses, namely:

First.The loan shall be represented by

Premirement.

L'emprunt
sera bonds payable to bearer bearing
reprsent par des obligations payables interest at 4 per cent per annum issued
au porteur, portant intrts au taux de for the sum of frs. 100.000.000 nominal
4% l'an, mises pour un montant de capital.
100.000.000 de francs de capital
Second.The interest on the bonds of
nominal.
this issue, represented by coupons
Deuximement. Les intrts sur les attached to the same, shall be paid halfobligations de la prsente mission, yearly to the bearers of the same on the
reprsents par des coupons y attachs, 1st day of March and the 1st day of
seront pays par semestre aux porteurs September [p105] in every year, until
de ces obligations le 1er mars et le 1er the whole of the bonds shall have been
septembre [p105] de chaque anne paid off by the Government. The
jusqu'au complet remboursement de la payment of interest shall take place in
totalit
des
obligations
par
le Rio de Janeiro, in Paris at the offices of
Gouvernement.
Le
paiement
des the Societe generale pour favoriser le
intrts aura lieu Rio-de-Janeiro; developpement du commerce et de
Paris dans les bureaux de la Socit I'indusirie en France, at the Banque de

gnrale
pour
favoriser
le
dveloppement du commerce et de
l'industrie en France, de la Banque de
Paris et des Pays-Bas, et au Crdit
mobilier franais, raison de 10 francsor par coupon; Londres, l'agence de
ladite Socit gnrale, au change du
jour sur Paris. Le premier paiement de
10 francs aura lieu le Ier septembre
1910.

Paris et des Pays-Bas, and at the Credit

mobilier francais, at the rate of 10 frs.
gold each coupon; in London at the
Agency of the said Societe generale and
at the exchange of the day on Paris, the
first payment of 10 francs to take place
on the 1st day of September, 1910.

Cinquimement. Les intrts sur les

obligations cesseront de [p106] courir
partir de la date fixe pour leur
remboursement, et les obligations
rembourses seront immdiatement

Sixth.The bonds issued in conformity

with the laws and decrees above
mentioned shall have the absolute
guarantee of the Government as regards
the payment of the capital and of the

Third.The redemption of bonds shall

be made by means of an Accumulative
Redemption Fund of per cent per
Troisimement. Le remboursement annum, the first redemption to take
des obligations se fera au moyen d'un place on the 1st day of September,
fonds d'amortissement cumulatif de 1912; it shall be effected by purchases
% par an; le premier remboursement on the market when the bonds are
aura lieu le ier septembre 1912; il below par, and when at or above par by
s'effectuera par voie d'achat sur le means of drawings which take shall
march quand les obligations seront au- place in the months of January and June
dessous du pair, et, quand elles seront in every year. The bonds shall be drawn
au pair ou au-dessus du pair, au moyen in the presence of a notary public, and
de tirages au sort qui auront lieu the
result
shall
be
immediately
pendant les mois de janvier et de juin de published by advertisement. All bonds
chaque anne. Le tirage au sort des drawn shall be paid at 500 francs gold,
obligations aura lieu en prsence d'un with the interest due on the 1st day of
notaire public, et les rsultats seront March or the 1st day of September
immdiatement
publis
par
voie following the drawing.
d'annonce. Toutes les obligations sorties
seront rembourses 500 francs-or Fourth.The capital of the bonds drawn
avec les intrts dus le Ier mars ou le shall be paid in exchange for the bonds
with all coupons not due in Rio de
1er septembre qui suivra le tirage.
Janeiro, in Paris and in London.
Quatrimement. La somme principale
reprsente par les obligations sorties Fifth.The bonds shall cease to bear
sera paye contre prsentation de ces interest from the date on [p106] which
obligations munies de tous les coupons they are redeemable, and the bonds
shall
be
immediately
non chus Rio-de-Janeiro, Paris et redeemed
cancelled.
Londres.

annules.
Siximement. Les obligations mises
conformment aux lois et dcrets
susmentionns
auront
la
garantie
absolue du Gouvernement l'gard du
remboursement du capital et au
paiement des intrts respectifs et
l'gard du service des fonds ncessaires
pour l'amortissement de l'emprunt.
Septimement. Les obligations, tant
en ce qui concerne le capital que les
intrts, seront affranchies de tous
impts brsiliens prsents ou futurs, soit
ordinaires ou extraordinaires.
Huitimement. Le Gouvernement
pourra, dans le but de rembourser les
titres en circulation, augmenter toute
poque le fonds d'amortissement, ou
rembourser des titres par d'autres
moyens, mais, dans ce dernier cas, en
donnant un pravis de six mois.

respective interest and as regards the

service of the necessary funds for the
redemption of the loan.
Seventh.The bonds, as regards the
capital and interest, shall be exempt
from all present or future Brazilian
taxes,
whether
ordinary
or
extraordinary.
Eighth.The Government may for the
purpose of paying off bonds in
circulation increase the Sinking Fund at
any time or pay off bonds by other
means, but in such latter case giving six
months' previous notice thereof.
London, the 5th of March, 1910.
(Signed) Jose Antonio
de Azevedo Castro.
We declare the above to be the
signature of the representative of the
Government of the United States of
Brazil.

Londres, le 5 mars 1910.

(Signe) Jos Antonio de Azevedo Castro.

Nous dclarons que la signature

appose
ci-dessus
est
celle
du
reprsentant du Gouvernement des
tats-Unis du Brsil.

[33] The following is the form of the coupon :

"Federal Government
of the United States of Brazil.
4 % Gold Loan 1911.
Bond No. .
Coupon for 10 francs payable .
Interpretation of the provisions relating to payment. The bonds of the issue of
1909 contain an explicit promise for the payment of interest in gold. They provide:
"The interest: is represented by coupons attached to the bonds and [p110] is payable
in Paris in gold by the Banque francaise pour le Commerce et lIndustrie and the
Credit mobilier francais, and on the markets of Rio de Janeiro, London, Brussels,
Amsterdam and Hamburg at the sight exchange of the day on Paris."
[34] The coupons do not set forth this provision for payment in gold, but this silence
of the coupon cannot be deemed to detract from the express promise of the bond. As
regards bearer bonds, sometimes the coupons contain all that is necessary to make
a complete engagement of independent negotiability; sometimes they are mere
tokens which do not purport to set forth the entire obligation for the payment of
interest. Thus, in the present instance nothing is said in the coupons as to the place
of payment, which is an integral part of the promise as contained in the bond.
[35] The provision for payment of interest in gold cannot be construed as relating
solely to a method of payment (modalite de paiement), that is, as calling simply for a
payment in gold specie of the number of francs promised rather than for a payment
in gold value. In the loan of 1909, the interest on each bond semi-annually is frs.
12.50, and the right attached to each bond separately. But it was physically
impossible to pay frs. 12.50 in gold specie, as there were no gold coins of that
denomination. The reference to payment of interest in gold must be taken to be a
reference to gold value and not to a payment in gold coin.
[36] The provision for the payment of interest "on the markets of Rio de Janeiro,
London, Brussels, Amsterdam and Hamburg at the sight exchange of the day on
Paris", does not affect the question, as this merely calls for the payment, at the sight
exchange of the day, of the equivalent of the amount payable in gold value
according to the terms of the bonds.
[37] The bonds of 1909, however, contain no express provision for the payment of
principal in gold. They provide "that the bearer of this bond is entitled to the sum of
500 francs forming part of the said loan", and the loan is described as one for
"quarante millions de francs capital nominal". The recitals of the bonds refer to
"Article 22, No. XII, of the [p111] law No. 1841 of the 31st December, 1907". This
article authorizes the President of the Republic to make the appropriate financial
arrangements for the necessary works for the improvement of ports in conformity

with the decree No. 6368 of February 14th, 1907. The latter decree authorizes the
Government to issue "des titres or ou papier", that is to say, bonds payable in gold or
paper. The recitals of the bonds also refer to the "execution of clauses 55 and 59 of
the contract of the 4th August, 1908, following on decree No. 7003 of the 2nd July,
1908". This contract was between the Brazilian Government and certain persons for
the construction of works, for the payment of which the bond issue was to provide,
and the decree that is mentioned approved the contract. But neither of the articles of
the contract which the bonds recite (Nos. 55 and 59) make any mention of gold in
describing the bonds to be issued.
[38] On the other hand, Article 56 of the contract which is also approved by the
decree No. 7003 of July 2nd, 1908, to which the bonds refer, is as follows:
"Article 56.The bonds referred to in the preceding article are payable to bearer and
may be worded in French or English; they shall contain the following declaration:
Loan of the Government of the United States of Brazil 1908.
Port of Pernambuco, interest 5% per annum.
They shall have as guarantee for payment in gold both of the principal, as regards
the additional sum necessary for redemption, and of the interest, besides the general
guarantee, a special guarantee out of the proceeds of the 2% gold tax upon the
official value of the foreign imports into the State of Pernambuco and of all the net
revenue from the port and the docks after the construction thereof. These bonds
shall, as regards principal and interest, be exempt from all Brazilian taxes present or
future."
[39] The bonds themselves contain a reference to the gold tax thus described. It is
evident that the proceeds of this tax were represented as a guarantee for the
redemption of the "bonds, that is, for the payment of the principal, as well as for the
payment of interest, but the security for payment could not be regarded as
determining the amount agreed to be [p112] paid. The provision of Article 56 of the
contract, however, refers to the gold tax as one "for payment in gold, both of the
principal, as regards the additional sum necessary for redemption, and of the
interest". While the bonds refer to the decree approving the contract containing this
provision, they do not, as has been shown, refer to this provision itself, and it may be
said that the contract for the building of the works is not a part of the contract
between the Brazilian Government and the bondholders, and that only those parts of
the contract specifically mentioned in the bonds can be taken into consideration in
construing the latter.
[40] In this situation, reference is made to the prospectus inviting subscriptions for
the bonds of the issue of 1909. This prospectus contains the following:

"Prospectus of the 1909 loan.

Federal Government of the United States of Brazil.
5% gold loan 1908 for the improvement of the Port of Pernambuco.
Issue of 80,000 bonds of 500 gold francs 5%, or 40,000,000 francs, in bonds to
bearer redeemable at par in 50 years, beginning in 1914.
Net annual interest: 25 francs per half year on February 1st and August 1st of each
year.
This loan is a direct debt of the Government of the United States of Brazil. It is
authorized by laws Nos. 1837 and 1841 of December 31st, 1907, and decrees Nos.
6368 of February 14th, 1907, and 7207 of December 3rd, 1908."
[41] The law No. 1837 of December 31st, 1907, sets forth the amount of the general
receipts of the Brazilian Government in gold and in paper, and provides for a gold tax
of 2%, as above described. In addition to the law No. 1841 of December 31st, 1907,
and the decree No. 6368 of February 14th, 1907, already mentioned, the prospectus
refers to the decree No. 7207 of December 3rd, 1908, which provides as follows:
"The President of the Republic of Brazil, in virtue of the authorization contained in the
law No. 1841 of December 31st, 1907, Article 22, No. XII, decides to authorize the
Minister of Finance to issue 80,000 bonds of [p113] the Public Debt of a nominal
value of 500 francs each, carrying interest at the rate of 5 % gold per annum,
redeemable in 50 years, which bonds shall be delivered to the contractors for the
improvement works on the Port of Recife, Edmond Bartissol and Demetrio Nunes
Ribeiro, in exchange for the deposit with the delegate of the Treasury in London or
with a banking house to be appointed by the Government at its own free and
unfettered choice, of a sum of francs 38,100,000 destined for the payment of the
said works under the terms of the contract entered into on August 4th last."
[42] Thus we have the prospectus of this loan describing it as "emprunt 5% or" and
the issue as an "emission de 80.000 obligations de 500 francs 5 % or, soit 40 millions
de francs, en titres au porteur remboursables au pair en cinquante annees a partir de
1914", and referring to the issue as intended to meet the payment for public works
as provided in the contract of August 4th, 1908. What weight shall be given to this
prospectus?
[43] It is to be remembered that, in the case of government loans, the Government
may make a contract with bankers who take the entire issue of bonds and place
them on the market, and that in such a case, the bankers may issue the prospectus
and the Government may not be a Party to it. On the other hand, the Government
may itself issue, or become responsible for, the prospectus and thus invite
subscriptions for the bonds it proposes to issue. In the latter case, the prospectus

may be regarded as a continuing offer, to the terms of which each bondholder in the
future is entitled to refer in case ambiguity is found in the statements of the bonds.
For it is not to be supposed^ that the original subscribers taking the bonds pursuant
to the invitation of the prospectus are to be in a more favoured position with respect
to their rights under the bonds than those who later obtain the bonds by transfer.
Where the Government itself becomes responsible for the prospectus and invites
subscriptions for the bonds, it is reasonable to treat the prospectus as a part of the
transaction with the bondholders, at least so far as may be necessary to clarify the
meaning of the bonds. [p114]
[44] In this instance, the prospectus purports to speak for the Federal Brazilian
Government. The prospectus is so entitled, but it is not necessary to rely on
inferences, for the prospectus bears the signature of approval of the delegate of the
Brazilian Treasury, who represented the Brazilian Government in the transaction and
in that capacity signed the bonds themselves.
[45] Obviously, it would be an anomaly to have the interest of bonds payable in gold
while the principal was not so payable, and, if the prospectus is read in connection
with the bonds, it appears that the loan was represented by the Brazilian
Government and subscribed for as a gold loan. If it is said that the expressions
"emprunt 5 % or" and "emission de 80.000 obligations de 500 francs 5 % or" are to
be taken as meaning that it is only the five per cent that is to be gold, the answer is
that "or" qualifies not only "5 %" but "emprunt", and also "emission de 80.000
obligations de 500 francs". That is to say, it is the obligations themselves that are to
have gold value.
[46] Moreover, there is a familiar rule for the construction of instruments that, where
they are found to be ambiguous, they should be taken contra proferentem. In this
case, as the Brazilian Government by its representative assumed responsibility for
the prospectus, which this representative, who had signed the bonds, had "seen and
approved", it would seem to be proper to construe them in case of doubt contra
proferentem and to ascribe to them the meaning which they would naturally carry to
those taking the bonds under the prospectus. It can hardly be doubted that those
taking the bonds on the faith of the prospectus would understand that they were
receiving gold bonds, which would mean bonds payable in gold value both as to
principal and interest. And while the pledge of the 2 % gold tax would not in itself
determine what was to be paid, the fact that this security was provided not only for
the payment of interest but for the principal of the bonds redeemed, taken with the
description of the loan in the prospectus, confirms the same view. [p115]
[47] For these reasons, it is concluded that the bonds of the issue of 1909 are to be
construed as providing for the payment of principal and interest in gold.

[48] The bonds of the issue of 1910 recite that "the bearer of the present obligation
has the right to the sum of 500 gold francs, part of the said loan". There is also an
explicit promise for the payment of the principal of the bonds in gold. In the
paragraph relating to their redemption, it is provided: "All bonds drawn shall be paid
at 500 francs gold."
[49] There is an express stipulation in the bonds for the payment of interest in gold,
and while the coupon, as in the case of that of the loan of 1909, does not mention
gold, it also omits the places of payment, and is not to be taken as a complete,
independent obligation. It is simply a token and cannot be regarded as derogating
from the express engagement of the bond.
[50] In view of the terms of the bonds, it is not deemed to be necessary to refer to
the prospectus, or to the decrees for the issue, but it may be observed that these
documents do not disclose provisions which could be regarded as contradicting the
bonds. The obligation then in this case, according to its terms, is for the payment of
principal and interest in gold francs.
[51] The recital of the bonds of the issue of 1911 is similar to that of the bonds of
1910, stating that "the bearer of the present obligation has the right to the sum of
500 gold francs". There are also explicit provisions in the bonds for the payment in
gold francs of the principal of the bonds drawn for redemption, and for the payment
of the interest in gold.
[52] In view of these stipulations, it is not necessary to recapitulate the documents
which preceded the issue of this loan.
[53] Significance of the gold clauses.One argument against the efficiacy of the
provision for gold payments is that it is simply a clause of "style", or a routine form of
expression. [p116] This, in substance, would eliminate the word "gold" from the
bonds. The contract of the Parties cannot be treated in such a manner. When the
Brazilian Government promised to pay "gold francs", the reference to a well-known
standard of value cannot be considered as inserted merely for literary effect, or as a
routine expression without significance. The Court is called upon to construe the
promise, not to ignore it.
[54] On similar grounds, the argument cannot be accepted that "according to the
legislative financial system of Brazil", a reference to obligations for gold payments
simply signifies foreign loans in pounds sterling, French francs, or American dollars.
The Brazilian decree of February 14th, 1907, had itself made the distinction, not
between the Brazilian currency and the currency of other countries, but between
"gold" and "paper" obligations. The Court has not been referred to any adequate
authorities in support of the argument of the Brazilian Government, but, apart from

this, it cannot be admitted that when a Government places a foreign loan with a
promise of payment having reference to a well-known standard of value, that
reference is to be disregarded. The Government did not issue bonds simply for
"French francs" but for "gold francs", and if the expression "gold francs" did in fact
appropriately denote a standard of value, that standard must be deemed to be the
subject of the reference. Similarly, as the Court is not at liberty to disregard the
promise of "gold", the question whether gold specie, that is, gold coin, or gold value
was intended, must be answered in the same manner as in the case concerning
certain Serbian loans. It has been noted that in the case of the loan of 1909 the
promise was the payment of frs. 12.50 semi-annually in gold, obviously meaning gold
value and not gold coin as there were no gold coins for that amount. This must also
be deemed to be the significance of the explicit promise of gold francs in the
payment of the principal and interest of the later loans.
[55] As of what time is the standard of value to be taken ? Manifestly as of the time
of the bond issues. The engagement [p117] would be meaningless if it referred to an
unknown standard of a future day. The Parties, if they referred to a gold standard of
value, must be taken to have referred to an existing standard.
[56] The argument that the depreciation in French francs was unforseeable and that
the sole object was to safeguard against the depreciation of Brazilian currency,
likewise appears to be untenable. In this connection, it should be observed that in
the present case there was no reason for the borrower not to offer payment in gold;
for such payment, while constituting a security for the lender, involved no risk for the
borrower. The devalorisation of the French franc could not in fact increase the
obligations of the latter: the gold clause merely prevents the borrower from availing
itself of a possibility of discharge of the debt in depreciated currency.
[57] The argument of the Brazilian Government assumes that the purpose of the gold
clauses was to protect against depreciation of some currency. But, if this be so, the
protection was sought not simply by agreeing for payment in French francs, but in
gold francs. As this standard of value was stipulated, it should be enforced according
to its terms and not be limited as referring only to a single object not specified. It was
depreciation in value that was the object of the safeguard, not in this or that
particular currency, and it was evidently for this reason that the reference was made
to the well-known stability of gold value.
[58] What was the standard of gold value thus envisaged? The promise was for
payment of francs in gold, or gold francs, and wherever the payment was actually
made, the amount to be paid had to be computed accordingly. In the bonds of 1909,
the interest was payable in Paris, or at the sight exchange on Paris. No place was
fixed for the payment of principal, but assuming that this was to be paid in gold, the
payment was to be of gold francs. The loans of 1910 and 1911 promised payment of

principal and interest in gold francs. The interest was to be paid in each case at Rio
de Janeiro, or in Paris, or in London, at the exchange of the day on Paris. The bonds
drawn for redemption were in each [p118] case to be paid in Rio de Janeiro, in Paris,
in London.
[59] What then was the "gold franc" as a standard of value at the time of the bond
issues? There was no place of payment, other than Paris, which had the franc, and
the "gold franc" of the bonds must be the gold franc, as its definition could be
ascertained according to French monetary legislation. This could be, at that time,
none other than the standard of gold value provided for in the law of the 17th
Germinal, Year Eleven, as follows:
"Five grammes of silver, nine-tenths fine, shall constitute the monetary unit which
retains the name franc.
Head I. The minting of money.
.
Article 6.Gold pieces of 20 and 40 francs shall be minted.
Article 7.The standard of these pieces is fixed at nine-tenths fine with one-tenth of
alloy.
Article 8.The standard weight of the pieces of 20 francs shall be 145 to the
kilogramme and that of the 40 franc pieces 77 to the kilogramme."
[60] This was a definite standard. Translated into terms of a single gold franc, it is the
twentieth part of a piece of gold weighing "6 gr. 45161, au titre de 900/1000 d'or fin",
the standard specified in the question submitted by the Special Agreement. It is the
same standard of "gold franc" that is described in Article 262 of the Treaty of
Versailles as the gold franc in weight and fineness as defined by the law existing on
January 1st, 1914.
[61] While this was the standard established by the French legislation in force when
the loans were issued, it was a standard which had also been adopted by other
countries and by the Convention of the Latin Union, and thus was one well adapted
for selection by another Government as a standard of value for its external loans.
[p119]
[62] It is concluded that the bonds should be construed as providing for payment in
gold francs at the value fixed by the law of the 17th Germinal, Year Eleven.
[63] The execution of the contracts. The argument is stressed, as in the case
concerning certain Serbian loans, that from the manner in which the contracts were
executed, it should be concluded that they provided for payment in French paper
francs. It appears that at all times before the war, during the war, and after the war,
payment was made in the ordinary manner, that is, in banknotes. It is sought to

apply the familiar principle that where a contract is ambiguous, resort may be had to
the manner of performance in order to ascertain the intention of the Parties. But in
this case, there is no ambiguity, at least in the loan contracts of 1910 and 1911, as
these call in clear and precise terms for payment of principal and interest in gold
francs. Nor is there ambiguity in the contract of 1909, so far as payment of interest is
concerned, as the contract expressly provides that it shall be paid in gold and the
amount of semi-annual interest thus to be paid (frs. 12.50) shows clearly that gold
value was intended. As to the payment of principal, it has been pointed out that,
according to the prospectus issued by the Brazilian Government and which is to be
read in connection with the bonds, it appears that the bonds were offered as gold
obligations.
[64] Moreover, where reference is had to the conduct of the Parties as an aid to
interpretation, it is necessary to consider whether that conduct itself permits of but
one inference.
[65] Before the war, the parity of French currency with gold was maintained and the
manner of payment was in no way inconsistent with the right of the bondholders to
receive payment on the basis of gold francs as a standard of value. During the war
also, the manner of payment had little significance, as during that period, and until
1919if reference be made to the gold dollarthere appears to have been only a
slight difference in the value of French currency as [p120] compared with a gold
basis. The significant period is the later onethat is, between 1919 and 1924, as by
the latter date the French Government had espoused the cause of the French
bondholders and made formal complaint. In considering the conduct of the
bondholders in this period, it is to be remembered that this was a time of great
difficulties; that there were many bondholders; that as individuals they were
powerless as against the Brazilian Government, and it was necessary for them to
associate themselves together and to interest the French Government in their case;
that the French Government had to consider the matter and determine on its course
of action. When all these circumstances are considered, there is no adequate basis
for an inference from the conduct of the bondholders that they were of opinion that
they were not entitled to obtain payment on the basis of a gold standard. From
September 1924, at least, the matter was in the course of diplomatic negotiations
between the two Governments until the Special Agreement for submission to the
Court was signed in 1927. The bonds are bearer bonds which entitle the bearer to
claim, simply because he is a bearer, all the rights accruing under the bond. The
bondholders cannot be regarded as estopped to seek payment in gold value.
[66] "Force majeure."The economic dislocation caused by the Great War has not, in
legal principle, released the Brazilian Government from its obligations. As for gold
payments, there is no impossibility because of inability to obtain gold coins, if the
promise be regarded as one for the payment of gold value. The equivalent in gold

value is obtainable.
[67] The law applicable.Counsel for the Government of the United States of Brazil
has summarized the argument of his Government as follows: [p121]
" .... even were it possible to conclude that the intention of the borrower and lenders
was to set aside the French franc and adopt another franc representing a fixed and
invariable monetary unit, calculated according to its weight in gold, on that
hypothesis also, as the question concerns a loan governed by Article 1895 of the
French Civil Code and seeing that the forced currency law enacted as a result of
circumstances, unforeseen and impossible to foresee, such a clause could not be
effective in so far as concerned any payment to be made in francs."
[68] Formulated in this way, the argument raises several questions, and in the first
place the question whether it is French law which in this case governs the contractual
obligations as such.
[69] That is a question of private international law which the Court, as it has
explained in its judgment regarding the Serbian loans, must decide by reference to
the actual nature of the obligations in question and to the circumstances attendant
upon their creation, though it may also take into account the expressed or presumed
intention of the Parties.
[70] Having regard to the nature of the bonds and to the circumstances concerning
their issue, there seems to be no doubt that it is Brazilian law and not French law
which must be held to govern the obligations contracted, at all events as regards the
substance of the debt and the validity of the clause defining it.
[71] The loans in question are loans contracted by the Government of the United
States of Brazil under laws and decrees having the force of law and laying down the
conditions relating to the loans. These decrees are cited in the bonds, and
accordingly the validity of the obligations set out therein is indisputable in Brazilian
law. The bonds are bearer bonds signed by the delegate of the Brazilian Treasury in
London. It follows from the very nature of bearer bonds that the substance of the
debt, which in principle must be the same in respect of all holders, cannot be
dependent on the identity of the holder or the place where he has acquired his bond.
Only the identity of the borrower is fixed; in this case it is a sovereign State, which
cannot be presumed to have made the substance of its debt and the validity of the
obligations accepted by it in respect thereof, subject to any law other than its own.
[p122]
[72] It cannot be held that the intention of the borrowing State was to render some
law other than its own applicable as regards the substance of its debt and the

validity of the conditions laid down in respect thereof, unless there were, if not an
express provision to this effect, at all events circumstances which would irrefutably
show that such was its intention.
[73] But in the present case there is no express provision. The only circumstance
which has been brought to the knowledge of the Court and which might possibly be
cited in this connection is that, according to the statement of the Government of the
United States of Brazil, which has not been disputed, the issue of the loans took
place in France only. This circumstance, however, cannot suffice to show that the
intention was to make the obligations entered into as regards the substance of the
debt and the validity of the conditions relating to it, subject to French law, more
especially considering that not only did the bonds of all those loans also contain an
English text but also that the interest was made payable, in the case of the 1910 and
1911 loans, at Rio de Janeiro and London as well as Paris, and in the case of the 1909
loan, besides Paris, also at Brussels, Amsterdam and Hamburg. As concerns the 1910
and 1911 loans also, the bonds drawn for redemption are payable at Paris, London
and Rio de Janeiro. These provisions show that it was not the intention to place the
bonds exclusively in France. Moreover, the prospectus which has been produced in
respect of the 1911 loan states that subscription was to take place not only at Paris
and on French provincial exchanges, but also in Brazil.
[74] But though the Court is unable to admit that the intention was to make the
substance of the debt and the validity of the provisions relating to it subject to
French law, this does not prevent the currency in which payment must or may be
made in France from being governed by French law. For, as the Court has explained
in its judgment in the case of the Serbian loans, it is a generally accepted principle
that a State is entitled to regulate its own currency. The application of the laws of
such State involves no difficulty so long as it does not affect the substance of the
debt [p123] to be paid and does not conflict with the law governing such debt. And in
the present case, this situation need only be-envisaged if, as contended by the
Government of the United States of Brazil, French law rendered it impossible to claim
payment otherwise than in bank-notes which are compulsory tender, and for the
same amount of francs as are specified in the contract.
[75] The Court is of opinion that this contention is not made-out. In its judgment in
the case of the Serbian loans, the Court considered that it might confine itself to
observing that, according to the information furnished by the Parties, the doctrine of
French courts, after some oscillation, has now been established in the manner
indicated by the French Government, that is to say that, whilst a gold clause in
respect of a domestic transaction is null and void, this is not the case as regards
international contracts, even when payment is to be effected in France.
[76] Does this observation also cover the present case? The Special Agreement

under which this case has been submitted to the Court contains the following in
Article VI:
"In estimating the weight to be attached to any municipal law of either country which
may be applicable to the dispute, the Permanent Court of International Justice shall
not be bound by the decisions of the respective-courts."
[77] There are two possible interpretations. According to one keeping more strictly
to the literal meaning of the wordsthe Court is not to regard itself as legally bound
to follow the doctrine of the courts of the country the law of which it is applying; it
remains however free to do so if it considers that its task should be limited to
applying the municipal law in accordance with the construction placed thereon by
the national courts. According to another interpretation which might find support
more particularly in the fact that questions similar to that submitted to the Court had
already formed the subject of decision in French courts the Court's duty would be
to disregard the doctrine of the municipal courts and itself to determine that
interpretation of the relevant legislation which seems, in its opinion, to be the most
reasonable in the present case. [p124]
[78] The Court, in choosing between these two interpretations, must adopt that one
which is in principle compatible with a proper appreciation of its nature and
functions.
[79] Though bound to apply municipal law when circumstances so require, the Court,
which is a tribunal of international law, and which, in this capacity, is deemed itself
to know what this law is, is not obliged also to know the municipal law of the various
countries. All that can be said in this respect is that the Court may possibly be
obliged to obtain knowledge regarding the municipal law which has to be applied.
And this it must do, either by means of evidence furnished it by the Parties or by
means of any researches which the Court may think fit to undertake or to cause to
be undertaken.
[80] Once the Court has arrived at the conclusion that it is necessary to apply the
municipal law of a particular country, there seems no doubt that it must seek to
apply it as it would be applied in that country. It would not be applying the municipal
law of a country if it were to apply it in a manner different from that in which that law
would be applied in the country in which it is in force.
[81] It follows that the Court must pay the utmost regard to the decisions of the
municipal courts of a country, for it is with the aid of their jurisprudence that it will be
enabled to decide what are the rules which, in actual fact, are applied in the country
the law of which is recognized as applicable in a given case. If the Court were obliged
to disregard the decisions of municipal courts, the result would be that it might in

certain circumstances apply rules other than those actually applied; this would seem
to be contrary to the whole theory on which the application of municipal law is
based.
[82] Of course, the Court will endeavour to make a just appreciation of the
jurisprudence of municipal courts. If this is uncertain or divided, it will rest with the
Court to select the interpretation which it considers most in conformity with the law.
But to compel the Court to disregard that jurisprudence would not be in conformity
with its function when applying municipal law. As the Court has already observed in
the judgment in the case of the Serbian [p125] loans, it would be a most delicate
matter to do so, in a case concerning public policya conception the definition of
which in any particular country is largely dependent on the opinion prevailing at any
given time in such country itselfand in a case where no relevant provisions directly
relate to the question at issue. Such are the reasons according to which the Court
considers that it must construe Article VI of the Special Agreement to mean that,
while the Court is authorized to depart from the jurisprudence of the municipal
courts, it remains entirely free to decide that there is no ground for attributing to the
municipal law a meaning other than that attributed to it by that jurisprudence.
[83] Such being the sense in which the Court understands the task entrusted to it in
the present case, the Court holds that the position as regards the jurisprudence of
the French courts, as stated in the judgment in the case of the Serbian loans, holds
equally good as regards the present case, in the course of which nothing has been
adduced to weaken it.
[84] Finally, the Court observes that the forced currency regime has been terminated
in France by the law of June 25th, 1928, which abrogates the provision relating
thereto in the law of August 5th, 1914. The second article of the law of 1928 contains
the following:
"The French monetary unit, the franc, is constituted by 65.5 milligrams of gold, nine
hundred thousandths fine.
This definition shall not apply to international payments which, prior to the
promulgation of the present law, may have been validly stipulated in gold francs."
[85] This law replaces for the future the former legislation, so that the reduction in
the metallic value of the franc, as newly denned, to about one-fifth of its original
value will not affect the "international payments" which may previously have been
validly stipulated in gold francs.
[86] FOR THESE REASONS,
The Court,
having heard both Parties,

by nine votes to two, [p126]

gives judgment to the following effect:
That with regard to the Brazilian Federal Government's 5% loan of 1909 (Port of
Pernambuco), 4% loan of 1910 and 4% loan of 1911, payment of coupons which
have matured and are not barred by prescription at the date of the Special
Agreement and of coupons subsequently maturing, as also repayment of bonds
drawn for redemption but not actually repaid which are not barred by prescription on
the date of the present judgment, or of bonds subsequently to be redeemed, must
be effected by delivery to the French holders in respect of each franc, of the value
corresponding in the currency of the place of payment at the rate of exchange of the
day, to one-twentieth part of a gold piece weighing 6.45161 grammes, 900/1000
fine.
[87] This judgment having been drawn up in French in accordance with the terms of
Article 39, paragraph 1, second sentence, of the Statute of the Court, an English
translation is attached thereto.
[88] Done at the Peace Palace, The Hague, this twelfth day of July, nineteen hundred
and twenty-nine, in three copies, one of which is to be placed in the archives of the
Court and the others to be forwarded to the Agents of the Government of the French
Republic and the Government of the Republic of the United States of Brazil
respectively.
(Signed) D. Anzilotti,
President.
(Signed) A. Hammarskjold,
Registrar.
[89] MM. de Bustamante and Pessoa, Judges, declaring that they are unable to
concur in the judgment given by the Court and availing themselves of the right
conferred on them by Article 57 of the Statute, have delivered the separate opinions
which follow hereafter.
(Initialled) D. A.
(Initialled) A. H.
[p127] Dissenting Opinion by M. De Bustamante.
[Translation.]
I.
[90] According to the Special Agreement signed at Rio de Janeiro on August 27th,

1927, the Court is called upon to give judgment on the following question:
"With regard to the Brazilian Federal Government's 5 % loan of 1909 (Port of
Pernambuco), 4% loan of 1910, and 4 % loan of 1911, is payment of coupons which
have matured and are not barred by prescription at this date, and coupons which
shall mature, as also repayment of bonds drawn for redemption but not actually paid
which are not barred by prescription on the date of the Court's decision, or of bonds
subsequently to be redeemed, to be effected by delivery to the French holders, in
respect of each franc, of the value corresponding, in the currency of the place of
payment at the rate of exchange of the day, to one-twentieth of a gold piece
weighing 6.45161 grammes of 900/1000 fineness, or in such payment or repayment
to be effected as hitherto in paper francs, that is to say, in the French currency which
is compulsory legal tender?"
II.
[91] We must begin by noting certain facts, which have an undeniable influence upon
the questions to be considered, and their solution:
(a) The prospectus of the 5 % 1909 loan, under the heading "Payment of coupons",
expressly states that the coupons are payable at Paris, in gold, at the rate of frs.
12.50, [p128] half-yearly, on February 1st and August 1st of each year, and at places
abroad which are to be subsequently named, at the sight rate of exchange on Paris.
(b) No. 3 of the bonds of this loan states, in its turn, that interest is payable at Paris
in gold and at Rio de Janeiro, London, Brussels, Amsterdam and Hamburg at the sight
rate of exchange on Paris.
(c) The prospectus of the 4 % 1910 loan speaks of the payment of coupons at Paris in
gold, at the rate of 10 francs half-yearly, and in London and at Rio de Janeiro at the
sight rate of exchange on Paris.
(d) The same meaning has also been attributed to paragraphs 2 and 4 of the bonds
of this loan.
(e) The same applies in the case of the 4 % 1911 loan.
III.
[92] There is therefore only one place where payments are to be made in the local
currency, and that is Paris. It seems useless to discuss whether the theoretical or
international gold franc, or the French gold franc, is meant. There are no payments in
gold currency at Brussels or Geneva, but only at Paris, and when other places are
mentioned, payment is to be based on the sight rate of exchange on Paris.
IV.

[93] Now, leaving aside the question of gold value, let us simply observe the fact
that at the time when the Brazilian loans were issued, there was no legal difficulty in
speaking of the gold franc or in deciding that payments should be made in gold
francs. There was no binding rule of French law or of Brazilian law to prevent it.
[94] But while, on the one hand, gold francs might simply be spoken of for the
purpose of payment, it would, on the other hand, be possible to take steps and make
provision for fixing the meaning and scope of these words and to decide: the course
to be adopted, if the gold franc vanished from monetary circulation.
[95] It was possible, for instance, to stipulate, and this is frequently done, that the
payments must be effected in gold francs of the same weight and standard as that of
the franc in circulation at the time in France or to take other pre-cautions widely
known in the business world and very often adopted where the intention of the
Parties is to avoid indirectly the consequences of certain rules established by legal
enactments of a local character. [p129]
V.
[96] Let us now ask ourselves what is the law that governs the contractual
stipulations we have just considered.
[97] The contracts entered into between the Brazilian Government and the persons
entrusted with the carrying-out of public works in Brazil (the contracts annexed to
the written proceedings) are based on the assumption that the bonds of the loan will
be received in payment by those persons for the work in question; but that only
serves to emphasize once again that in the case we are now considering we are
concerned with private contracts coming under rules of municipal law. Our task
consequently consists of endeavouring in the first place to establish in agreement
with the rules of private international law, what this municipal law is, and after that
to apply to each hypothesis the rule of municipal law by which it is governed.
[98] There is nothing in this task, which does not come within the jurisdiction of the
Court. In the case of some problems indubitably coming within the sphere of public
international law, it often happens that no universal treaty or customary rule has
been accepted or followed, and it becomes necessary to choose an international rule
that has been followed and enforced by a single State as one of the principles of its
municipal law. In other words, and in agreement with the generally accepted practice
of Great Britain and the U.S.A., international law frequently forms a part of municipal
law. We have observed these differences between the municipal laws of different
countries last year in a case submitted to the Court and relating to a collision
between a French ship and a Turkish ship.

[99] When we have to endeavour to ascertain and apply a rule of private

international law to a question arising between two States that have submitted the
dispute to our decision, it may happen that with regard to the point at issue, the
Parties have either accepted the same rule of private international law or, on the
contrary, divergent rules. If the former is the case, the task of the Court is still more
easy and simple. [p130]
[100] Let us now see what is the problem before us in order then to find the rule that
applies.
VI.
[101] It is a question of a contract the existence or validity of which has not been
disputed. In the first place, the meaning of some of its clauses and the effect of the
terms employed were argued. Later, the meaning having been differently interpreted
by each of the Parties, the discussion turned on the execution of the contract and
particularly on the currency in which the payment had to be made.
[102] The rules of private international law that must, on principle, be looked for are
those rules which refer, on the one hand to the law that applies to contracts, and on
the other to methods of payment and to the currency employed in making such
payment. As regards the former, there is a universal consensus of opinion as to the
will of the Parties being paramount, but in this case, as in many others, the Parties
were silent as to the law that applied, and it is not even possible to construe their
will. Presumptions must consequently be made use of, and much was said about the
law of the place where the contract was made and about the law of the place of its
execution. In my opinion, since a contract of adhesion is in question, the law which,
generally speaking, should be applied is the law of the borrower.
[103] But this law is only applicable to such questions relating to the contract or to
its execution as do not come under the local laws on the grounds of international
public policy. If, from this point of view, a consideration of this case were to result in
our accepting any particular local law, the question of the construction of the
contract, as well as of the meaning and the scope of the terms "gold franc" and
"payment in gold", would be immediately covered by a specific rule of that local law.
[104] There are always matters which are outside the will of the Parties and which
require the application of imperative and territorial legal provisions. Amongst these
matters, according to the almost unanimous opinion of authors, are classed the form,
the currency and the method of payment. The Code of [p131] Private International
Law adopted at the Sixth Pan-American Conference at Havana and already ratified by
the Congress and Government of Brazil, lays down in Article 166 the following rule :

"Those obligations arising from contracts have force of law as between the
contracting Parties and should be discharged in accordance with the terms thereof,
with the exception of the limitations established by this Code."
[105] Article 169 says :
"The nature and effect of the various classes of obligations, as well as the extinction
thereof, are governed by the law of the obligation in question."
[106] But Article 170 is careful to add :
"Notwithstanding the provisions of the preceding article, the local law regulates the
conditions of payment and the money in which payment shall be made."
[107] On the other hand, the opinion of French publicists has almost always been
based on the same conceptions, and it would be easy to make for this purpose a
large number of quotations. This seems to us to be unnecessary at the moment.
[108] In the case before the Court, we must therefore consider French legislation,
France being the only country in which payment had to be made in gold francs, since
in other countries payment had to be made at the sight rate of exchange on Paris;
and any binding rule laid down on this subject at a time when the contracts of issue
began to produce their effects must be conformed to.
VII.
[109] As regards France, the law in force is quite clear and does not require
interpretation.
[110] Article 1895 of the French Civil Code runs as follows :
"The obligation resulting from a loan in money is always simply for the amount in
figures indicated in the contract, and if there has been an increase or diminution of
specie before the time of payment, the debtor must return the amount in figures
lent, and must return only this amount in the specie in currency at the time of
payment." [p132]
[111] At the time when the Brazilian loans were issued, Article 1895 of the French
Civil Code was in force, as it is at the present time. This article gave to the borrower
the right and imposed on him the duty, as regards payments to be made in France,
of assuming, at the moment of each payment, the consequences arising from the
increase or diminution of the value of the currency, in the one case to his own
advantage, in the other to the advantage of his creditors.

[112] This situation in law is a vested right for the borrower and for the holders of
bonds and coupons, and cannot be changed by subsequent legislation, which had no
retroactive effect as regards these loans. France retained the sovereign right of
changing the weight and standard of her currency and of making notes of the Bank
of France legal or compulsory tender, subject, how ever, to the specific proviso of not
depriving the debtors of the benefits arising under Article 1895 of the Civil Code
under the effects and security of which they had contracted.
[113] The law of the holders of the bonds and coupons could not change this state of
affairs by specifying at the moment when the currency was modified that this change
would not be applicable to the borrower, or, as a general rule, to the cases in which
he was concerned.
VIII.
[114] Since a claim by the French Government and the rights of French holders are
concerned, we must note that at the time when the loans were issued, from 1909 to
1911, the French franc was absolutely stable and its value in gold could not be
questioned. In France there were bank-notes, and they were legal tender; but as
these notes must be repaid at par by the Bank of France and as up till then no
important differences existed between the gold rate and silver rate, the question of
payments in gold or notes that were legal tender had no practical significance.
[115] During the world war a new French law of August 5th, 1914, had freed the
Bank of France and the Bank of Algeria from the obligation to return specie for their
notes. France certainly had the right, as we have already demonstrated, to [p133]
take such a step, and no one thought of opposing this change in the legal tender, by
which the notes become a forced currency. But this new monetary situation had to be
adopted with all its consequences, and contracts in force must always be interpreted
in conformity with Article 1895 of the Civil Code, which was in force both then and
now. Article 1895 of the Code was framed precisely for these cases. Whether that
rule be good or bad in doctrine or in theory, it was the law: Dura lex, sed lex. Since
ignorance of the law cannot be pleaded, all the holders of bonds or coupons of
Brazilian loans must be taken as knowing that, according to the law in France, the
obligation resulting from a loan in money is always simply for the amount in figures
indicated in the contract, and if there has been an increase or diminution of specie
before the time of payment, the debtor must return the amount in figures lent, and
must return only this amount in the specie in currency at the time of payment.
[116] What I have written here is merely a literal copy of Article 1895 of the French
Civil Code.

IX.
[117] The opinions of the best known authors have long ago recognized that this rule
is one of international public policy. In the first place, a distinction must be drawn
between those who wrote before the: world war and those who studied the question
after 1914. Writers of legal treatises just as much as anyone else, without wanting to
and without knowing it, come under the irresistible influence of their surroundings,
and the requirements of the national situation are reflected in their thoughts and
have a great influence on their teachings. This fact explains the existence in public
and private inter national law of systems and opinions completely corresponding to
the requirements and interests at a given moment of a State or of a continent.
[118] In order to avoid this stumbling block, we have quoted pre-war authors in
preference to others. And in order not to unduly increase the number of quotations,
we have chosen two [p134] writers of the highest authority and belonging to two
different States, France and Switzerland, both of which writers however specifically
refer to Article 1895 of the Code Napolon.
DESPAGNET (Prcis de Droit international priv, 5th ed., Paris, 1909, pages 916-917):
[Translation.]
"The payment shall consequently be made in money current at the place where the
debt must be discharged, and at the nominal value of the currency at that place. If,
during the lapse of time between the date of the contract and the date of payment,
the nominal value of the currency has increased or diminished, the debtor profits or
suffers thereby, since he has to supply a correspondingly greater or lesser number of
coins in that currency at their present nominal value, in order to make up the amount
fixed in the contract (Article 1895 Civil Code). It would moreover be impossible to
evade this consequence in a private contract since the establishment of the nominal
value of currencies is a rule of public policy."
[119] And he adds :
"There is another hypothesis to be foreseen: it may so happen that in the country
where payment has to be effected a more or less depreciated paper currency which
is compulsory tender may have been substituted for the coinage. The law
establishing the forced currency of paper being one of public policy, the creditors
may be compelled to accept this paper money at its nominal value."
BROCHER (Cours de Droit international priv, Paris, 1882, t. II, p. 242) :
Brocher remarks that this Article 1895 belongs to the category of usual rigorous
legislative measures which, as regards forced currency of money tokens or of

fiduciary securities, can be assimilated thereto.

"Those are measures", he states, "which can only be resorted to by imposing
limitations upon the will of the individual."
[120] It should be added that the exceptions set out by these authors in the works
referred to cannot be applied to the Franco-Brazilian dispute which has been
submitted to the Court for decision. [p135]
X.
[121] In this question between France and Brazil, it is useless to refer to the practice
of the courts in these countries. In fact, all reference to this source of law and any
attempt to allow oneself to be guided thereby should be avoided. Indeed, in
accordance with Article VI of the Special Agreement:
"In estimating the weight to be attached to any municipal law of either country which
may be applicable to the dispute, the Permanent. Court of International Justice shall
not be bound by the decisions of the respective courts."
[122] That means that the Court may and must take into account municipal laws in
order to decide the questions submitted to it, but at the same time it must weigh the
meaning and scope of such municipal laws in the light of its own particular views
without allowing itself to be guided or influenced by the decisions of the national
courts of the Parties in this respect.
XI
[123] By the French law of June 25th, 1928, it was decided that the franc, the French
monetary unit, should be constituted by 65.5 milligrams of gold, 900/1000 fine. And
the law goes on to say: "This definition shall not apply to international payments
which, prior to the promulgation of the present law, may have been validly stipulated
in gold francs."
[124] Why did the law of June 25th, 1928, make this declaration ?
[125] It cannot be understood without admitting that it is French law, which must
control the method of payment. If we suppose that the will of the Parties, in speaking
simply of gold francs, ensures that payment shall be in gold of the weight and
fineness then in force, whatever be the provisions of Article 1895 of the French Civil
Code, the rule laid down by the law of June 25th, 1928, which I have just quoted, is
useless and incomprehensible.

[126] This new law, then, is undoubtedly a very serious argument from the point of
view of the application to these loans of French legislation on methods of payment.
[p136]
[127] It therefore seems evident that the said law had the purpose of implicitly
derogating from Article 1895 of the French Civil Code, to the prejudice of debtors who
entered into contracts when that article was in force. It must be emphasized that
Article 1895 does not prevent a change of currency. On the contrary, it recognizes
this sovereign power of the French Government and it is precisely because the
currency may be changed at any time that the article in question was considered
necessary and inserted in the Civil Code.
[128] But what cannot be done, to the prejudice of creditors or debtors who have
made contracts for payments in France while Article 1895 was in force, is to decree
that the currency shall be changed but that the change shall not be enforce able
against such creditors or debtors. That is to say, it is impossible for one Party to a
convention to change a rule of law to which that convention has been subject from
the time of its conclusion.
[129] But there is yet another aspect of the problem which is most important.
[130] The Special Agreement concerning the Brazilian loans was signed at Rio de
Janeiro on August 27th, 1927, and it is inadmissible that one of the Parties, on June
25th, 1928, almost a year later, should be entitled to resolve in its own favour by
domestic or national legislation the international question already submitted to the
Court, or to invoke this law which it has enacted after the Special Agreement, as an
argument for its own case. It seems to me clear that the second paragraph of the
French currency law of June 25th, 1928, must be entirely disregarded in this case.
XII.
[131] The question of gold currency and of its mention in the laws, contracts and
bonds referring to these loans loses all its importance once we adopt the legal
position that we have developed. If payment is subject to the law of the place where
it is made, as concerns the currency in which the debtor must pay, Brazil can only be
obliged to deliver gold in the cases where gold currency is legal tender at the date of
each payment, at [p137] the place where payment is made, that is to say, at Paris so
far as this case is concerned. And Brazil need only repay the amount in figures in the
currency in circulation at the time of payment.
[132] And as Paris is the only place where payment in the national currency for the
amount of the sum due is to be made, it is useless to raise the question of the French
gold franc or theoretical franc. The French franc, and the French franc only, was

meant in the documents. Seeing that at the date of the loans the gold franc was
legal currency in France, there was nothing to prevent that currency from being
expressly mentioned in the bonds. But, as Article 1895 of the Civil Code was in force,
all bondholders could and ought to know what was the significance of such a
provision, which was necessarily subject, as regards payments to be made in France,
to the terms of that article. The opposite view implies that it is sufficient to conclude
contracts outside France or to make them under the name of a foreigner to render
the "Code Napolon" inapplicable.
XIII.
[133] On this application of Article 1895 is based the argument concerning the
carrying-out of the terms of the loan contracts by means of payments made and
accepted in the course of a number of years following the depreciation of French
currency. So far as Brazil is concerned, which always used this currency for her
payments, this is proof of the meaning attributed by her to the gold clause. The
same applies as regards the bondholders. They might from the very first have
refused to receive the amount of their bonds and coupons in that depreciated
currency as they did subsequently.
XIV.
[134] Regard must also be had to the fact that the bonds and coupons of these loans
must be paid to bondholders at other places at the sight rate of exchange on Paris.
Exchange rates exist for practical purposes only, and when one buys bills of
exchange or, cheques on a particular place, one is paid [p138] in the money in
circulation at that place. It is for that, and that alone, that exchange rates are
quoted. This provision affords yet another argument in favour of the obligatory
application of Article 1895 of the French Civil Code.
XV.
[135] When payments are controlled by such a legislation, it is not enough to insert
the gold clause to ensure protection against changes of the currency and against the
compulsory tender rgime. The contracting Parties have the right, and often make
use of it, to stipulate that payment shall be made in the currency of some particular
country of the same weight and standard as that in circulation at the time of the
contract.
[136] They are also entitled to stipulate for indemnities to be paid in the money,
which is legal tender, if there are changes. They may adopt other precautions to
protect themselves from what is known as "agio". If in the case before us the Parties
have done nothing in this respect, it is their own fault, and they must accept the

consequences of their lack of foresight.

XVI.
[137] To sum up, in accordance with what I have said, the question in the Special
Agreement should, in my opinion, be answered as follows :
[138] With regard to the Brazilian Federal Government's 5 % loan of 1909 (Port of
Pernambuco), 4 % loan of 1910 and 4 % loan of 1911, the payment of coupons
matured and not barred by prescription on August 27th, 1927, and coupons which
have matured or shall mature after that date, as also repayment of bonds drawn for
redemption but not actually paid which are not barred by prescription on the date of
the Court's decision, or of bonds subsequently to be redeemed, must be effected at
Paris by remittance to the French bondholders in the French currency which is legal
tender, and at the other places agreed upon, in the local currency at the sight rate of
exchange on Paris on the day of payment.
(Signed) A. S. De Bustamante.

[p139] Dissenting Opinion by M. Pessoa.

[Translation.]
I.
The Lack Of Jurisdiction.
[139] 1.The Court can only have jurisdiction under the terms of Articles 13 and 14
of the Covenant, or under the Statute, which form its constitutional laws.
[140] According to both of these instruments, for the Court to have jurisdiction it is
not enough that the Parties should be States or Members of the League of Nations
(Articles 34 and 36 of the Statute); it is also essential that the case, in itself, should
be of an "international character" and should be governed by international law
(Articles 13 and 14 of the Covenant and 38 of the Statute). The latter condition has
already been recognized and stated by the Court on more than one occasion:
Judgments No. 2, pp. 12 and 16; No. 13, pp. 27 and 28, etc. In all cases between two
States in which one has taken up the defence of the interests of its nationals, for
instance in the Wimbledon, Mavrommatis, Upper Silesian cases, etc., the Court, in
order to establish its jurisdiction, has always shown that the subject-matter of the
dispute was governed by international law and that the purpose of the decision was
to enforce principles or apply instruments of international law.

[141] Now, the Court itself admits in the judgment delivered in the Franco-Serbian
dispute (page 18), to which it refers as regards its jurisdiction in the Franco-Brazilian
affair, that this affair exclusively concerns "relations between the borrowing State
and private persons, that is to say, relations which are, in themselves, within the
domain of municipal law".
[142] It therefore seems to me clear that the Court is not competent to pass upon
this dispute.
[143] Even if an extension of the Court's jurisdiction is desirable, it is necessary to
begin by modifying the texts governing that jurisdiction.
[144] 2.In order to establish its jurisdiction in this case, the Court explains
(judgment in the Serbian affair, p. 18) that, the [p140] Brazilian Government having
"contended that the service of the loans was being effected by it in full conformity
with the obligations resulting from the contracts, this view was not shared by the
French Government. As from this point, therefore, there existed between the two
Governments a difference of opinion.... It is this difference of opinion between the
two Governments and not the dispute between the Brazilian Government and the
French holders of the loans which is submitted by the Special Agreement to the
Court."
[145] There is however no distinction between this difference of opinion and "the
dispute between the Brazilian Government and the French bondholders".
[146] Brazil hold that the service of the loans should be effected in paper; the French
holders claimed payment in gold.
[147] The French Government decided to take up the case on behalf of the
bondholders.
[148] What is the difference of opinion between the two Governments? The same,
absolutely the same as that existing between Brazil and the bondholders: the
Brazilian Government continues to defend payment in paper and the French
Government, representing the claims of the bondholders, continues to maintain that
payment should be in gold, as the bondholders contended. There is no difference.
[149] The fact that the two are identical is so evident that the Court is unable to
avoid admitting it (Franco-Serbian judgment, p. 18): ".... in substance", it says, the
difference of opinion between the two Governments is "identical with the controversy
already existing between the debtor Government and its creditors".

[150] But, if the difference of opinion between the two Governments is identical with
the controversy existing between the debtor Government and its creditors, a dispute
which, according to the judgment, "is exclusively concerned with relations at
municipal law" and consequently is outside the Court's jurisdiction, it is not easy to
see why and how the difference of opinion between the two Governments can be
within that jurisdiction.
[151] 3.The Court now contends that it is not only questions of international law
which may be submitted to it. And in favour [p141] of this new doctrine, it cites
paragraph 2 of Article 36 of the Statute, according to which States may recognize as
compulsory the Court's jurisdiction in legal disputes concerning "the existence of any
fact which, if established, would constitute a breach of an international obligation". In
support of this clause the Court observes that Article 13 of the Covenant includes the
disputes above mentioned "among those which are generally suitable for submission
to arbitration or judicial settlement".
[152] In the first place, however, the terms of Article 36, paragraph 2, only apply in
respect of the optional clause regime, a special regime, differing so widely from the
normal regime, that the Statute specifies separately the cases in which the Court has
jurisdiction under the two regimes (Articles 36 and 38). In the second place, there is
in the Franco-Brazilian case no fact which, if established, would constitute a breach
of an international obligation; there are contracts concluded between a Government
and individuals, contracts which, as is recognized by the Court itself, are governed by
the municipal law of the debtor or of the creditor, and the breach of which is
therefore merely a matter of private law.
[153] 4.Another consideration. A State may take up a case on behalf of its
nationals. It is by application of this principle that France has assumed the defence of
the interests of the French bondholders befor
the Court.
[154] But who are in this case the French nationals? Who are the French
bondholders?
[155] No one knows. No one can know. Having regard to the nature of the bonds,
which are freely transferable, the French bondholders at the time of the Special
Agreement may even no longer be the holders of the bonds. And in that case, how is
the intervention of France to be justified? The French Government itself does not
know who the nationals, whose interests it is defending, are. In the Mavrommatis,
Wimbledon and Upper Silesian cases, it was well-known who the Greek or German
nationals concerned were. The respective proceedings clearly defined them. Here it
is not so; here they are not known and there is no means of knowing them. In this

suit, we have a State taking up a case on behalf of persons unknown, anonymous,

and perhaps already non-existent. [p142]
[156] It is true that Brazil, in spite of this, has accepted the Special Agreement; but
the Court's jurisdiction cannot be based on the wishes or sufferance of the Parties.
The Court either is competent under its Statute or is not competent. If it is not
competent, no agreement between the Parties can give it powers which its
constitutional texts withhold from it.
[157] 5.For the reasons set out above, in my opinion the Court, instead of
disregarding its own jurisprudence and interfering with questions of private law at
the risk of providing serious disputes in the future, should have declared that it had
no jurisdiction and thus left France and Brazil free to have recourse to direct
agreement or arbitration, which are the only appropriate methods of settling such
disputes.
II.
The Interpretation of the Parties.
[158] 6.There is no doubt that the gold clause appears sometimes in the contracts,
sometimes in the bonds and sometimes in the prospectuses of the Brazilian loans.
But this circumstance in itself does not decide the question submitted to the Court.
[159] What must be ascertained is whether this clause really represents the result of
a previous considered and deliberate agreement between the Parties, and whether it
represents an intention and definite undertaking on the part of Brazil to bear the
depreciation of French money. Now, the contentions made in this connection by the
Brazilian Government have given rise to doubts in my mind which the reasons given
in the judgment have not succeeded in overcoming.
[160] 7.The depreciation of the franc began in 1915. In 1917, in which year,
according to the judgment, Brazil effectively resumed the payment of interest on the
loans, the pound sterling rose to frs. 27.83 (instead of frs. 25.22) and the dollar to
5.86 (instead of 5.18).
[161] As from 1919, the fall increased in alarming proportions, as is shown by the
following table of averages: [p143]

Years.

Pound sterling.

Dollar.

1919

31.844

7.307

1920

52.676

14.476

1921

52.204

13.541

1922

54.633

15.013

1923

75.689

16.572

1924

85.682

19.414

[162] In 1925 the depreciation increased still further (1 = 102.237 frs.; $1 = 21.175
frs.). In 1926, in July, a pound equalled 243 francs! Even in the second half of that
year a reaction set in: the franc was reascending in value, and since 1927 it
represents about one-fifth of its value (1 = 124.21; 1 dollar = 25.50 frs.).
[163] Now, from 1917 to 1927, or for ten yearstwenty completed period of six
months, the holders of the Brazilian loans, in spite of the enormous depreciation of
the franc and the loss of millions which this depreciation represented for them,
quietly accepted, without protest or representation, payment of the interest on their
bonds in paper francs depreciated to the extent indicated!
[164] Is it conceivable that they would have acted in this way if they had been
convinced that the contracts guaranteed them payment in gold?
[165] This seems to show that, in the eyes of the creditors themselves, the gold
clause attached to the payment of interest and redemption of the loans had not the
significance now attributed to it.
[166] 8.For the judgment, the "significant period" as regards the inactivity of
French holders is "between 1919 and 1924", for "until 1919 there appears to have
been only a slight difference in the value of French currency as compared with a gold
basis" (page 37).
[167] The "significant period" as regards the inactivity of the French holders begins
not in 1919 but in 1917, for at that date the depreciation of the franc was already
more than 10%, and this, on a total interest of more than 8,000,000 francs a year,
represents a fairly considerable sum. As regards the end of the period, the Special
Agreement, which is dated August 27th, 1927, states that payment in paper took
place up to that date ("as hitherto", says Article I). [p144]
[168] We are therefore justified in placing the period between 1917 and 1927.

[169] But let us leave this point and accept the period fixed by the judgment, that is
to say, from 1919 up to the first six months inclusive of 1924 (diplomatic
negotiations having begun on September 1st).
[170] We then find ourselves confronted with the following fact:
[171] The total value of the Brazilian loans is 200 million francs. Their annual interest
equals 8,400,000 francs. These figures, according to the judgment, represent gold
value.
[172] In 1919, the depreciation of the French bank-note was 21%. In receiving in
paper their 8,400,000 francs of interest, the bondholders lost 1,764,000 francs. In
1920, the depreciation was 53 %, and the loss 4,452,000. In 1921, the depreciation
was 52 %, and the loss 4,368,000. In 1922, the depreciation was 54 %, and the loss
4,536,000. In 1923, the depreciation was 67 %, and the loss 5,628,000. Finally, in
1924, the depreciation was 71 %, and the loss (six months) 2,982,000.
[173] So that from 1919 to 1924 the holders of the Brazilian loansincluding holders
who may be described as permanent holders, always the same, such as bankers,
companies, capitalists, possessing, from the date of subscription thousands of shares
received, instead of 46,200,000 francs, less than half, i.e. 22,470,000 francs, thus
suffering a loss of 23,730,000 francs!
[174] Notwithstanding this colossal loss, they never adressed a protest or
representation either to the Government or to the courts or even to the papers! What
explanation can be given of this fact, save that the intention of the Parties was not to
contract in gold and that the holders were sure that they had no right to payment in
gold?
[175] 9.It will be said that all the bondholders are not French bondholders, and that
the whole of this enormous loss cannot be laid upon the latter who are the only ones
represented in this case. But the great majority consists in French bondholders; thus
the greater part of the losses falls to their share and their inaction clearly shows that
they also were certain that the debtor was not obliged to pay in gold. [p145]
[176] The silence of the creditors of other nationalities shows that this conviction was
unanimous.
[177] 10.The judgment says, to explain the inaction of the creditors, that "there
were many [French] bondholders; that as individuals they were powerless as against
the Brazilian Government, and it was necessary for them to associate themselves
together and to interest the French Government in their case" (page 32).
[178] But the French bondholders had no need to organize themselves and concert

measures for the defence of their rights. This defence was organized from the very
beginning of the fall of the franc, for the Association nationale des Porteurs francais
de Valeurs mobilieres, which asked the French Government to intervene in this case,
has existed since 1898, and its object is precisely "the defence of the interests of the
French holders of French and foreign securities issued or negotiated in France", as is
expressly stated by Article I of its statutes. Furthermore, the bonds of the loans are
not only in the hands of individuals who are powerless against Governments but are
chiefly in the hands of Companies, bankers and capitalists who have lawyers at their
disposal and very well know how to approach the Government and the courts.
[179] 11.It is also contended that as bonds transferable from hand to hand are
concerned, there is no way of indentifying the holders in order to compare the
individual interpretation of each one of them with the interpretation which follows
from the actual wording of the contracts. The judgment however itself regards the
French bondholders as perfectly identified, otherwise it would not have recognized
the French Government's capacity to appear before the Court. For the purpose of our
argument, however, this identification is not necessary, since what we contend, and
what the facts show, is that none of the bondholders, whatever their name,
nationality, capacity or profession may be, has ever regarded the contracts as being
gold contracts. The transferability of the bond, instead of enfeebling, strengthens our
argument. It creates a presumption that the number of holders during the period of
five years and a half fixed by the judgment must have been really very high [p146]
and, in spite of this, there has been no opposition in any country to the payment of
the Brazilian loans in paper.
[180] 12.It is therefore an indisputable fact that from 1917, the date of the
resumption of the service of the loans, to 1927, the date of the Special Agreement,
or, according to the judgment, from 1919, the date when the depreciation became
more marked, to 1924, the date on which "it would appear" that the diplomatic
negotiations began, Brazil always paid in paper, and the subscribers and holders, in
spite of all mentions of gold, in spite of laws of authorization, decrees, contracts,
bonds, coupons and prospectuses, always received paper in payment, thus
maintaining a loss which, merely during the period from 1919 to 1924 alone,
amounted to 23,730,000 francs out of 46,200,000!
[181] Such is the interpretation placed upon the contracts by the Parties themselves.
[182] 13.But other facts, equally important, show that this interpretation
represented the general opinion. The proceedings in the Franco-Serbian case have
indeed enabled it clearly to be seen that not only the bondholders but also the
bankers and, which is more serious, the French Government itself, did not construe
differently the Serbian contracts, which are from this point of view quite identical
with the Brazilian loans.

[183] Thus, whenever Serbia asked for payments in gold on account of her loans, the
banks made her pay an additional sum described as a special premium.
[184] Thus again, in 1921, Serbia not yet having received a portion (14 million
francs) of her 1913 loan, this sum was remitted to her in paper francs which were
already much depreciated (1 = frs. 52.204; $1 = 13.541).
[185] And again, when, in consequence of difficulties arising out of the war, France,
in agreement with England, undertook to furnish Serbia with the funds necessary for
the payments due to the holders of these same loans, it is also in depreciated paper
francs that she provided the sums asked for.
[186] 14.It is said that these facts cannot be used in argument against the
bondholders who were not responsible for them. But they serve to show how the
contracts were [p147] interpreted by all those who took part in carrying them out.
Moreover, with regard to the last fact mentioned (the furnishing of sums in paper
money by the French Government), as the Party appearing before the Court is not
the bondholders but the French Government itself, the fact can, it seems to me,
perfectly well be used against the latter.
[187] 15.It is moreover easy to understand why the loans have always been
interpreted in this way.
[188] At the date of the contracts, the French bank-note had for a long time had the
same value as gold; its credit was solidly placed on universal confidence and it
offered the most complete guarantees of stability. The expressions paper franc,
French franc or gold franc were used indifferently; all were francs. Each of these
expressions conveyed the same idea, seeing that the note and gold were exactly
equivalent. Whether one paid in metal currency or in paper currency, it was always
payment in gold. No one imagined that this parity could disappear. The gold clause
was thus merely regarded as a guarantee that the French bondholder would not be
exposed to surprises resulting from the variations of foreign exchange and would be
paid in his national currency, that is to say, francs.
[189] This has been recognized by the judgment of the Tribunal of the Seine of July
26th, 1926, which, in a case to which the Brazilian Government was a Party, decided
that the gold guarantee, undertaken in that case by Brazil, was only intended to
"give to its own currency a certain stability which it did not possess at the time of the
contract". (Clunet, 1927, P. 95.)
[190] This is admitted by the French Case itself: after recalling that stipulations
regarding payment in gold were, before 1914, frequently resorted to by States whose
national currency was subject to variation and who were endeavouring to obtain
capital from abroad, it makes this admission: "It was in these conditions that Brazil

was led to insert them in the greater part of its loans."

[191] 16.It is therefore an indisputable fact that the Parties, for many years, and in
perfect harmony, interpreted and executed the contracts as paper loans, which they
were generally understood to be. Now, when the contracting Parties execute [p148]
the contract in a certain manner, in part, or for a certain time, the contract must be
executed in the future in the same manner. (Giorgi, Teor. Oblig., Sp. transl. Rev. Leg.
Jurispr., Vol. IV, p. 185.)
[192] It is of small importance that literally the terms of the contracts are not
ambiguous; as we stated at the outset, it is not the literal sense which is to be
considered in order to arrive at a sound judgment, but the intention of the Parties.
The terms of contracts, however clear, are overcome by the intention underlying
them, if the manner in which they have been executed by the Parties proves that
their intention was not precisely that resulting from the literal meaning of the words.
There is a rule of law common to most legislations and which is contained in Article
1156 of the French Civil Code, by which, in interpreting contracts, "the common
intention of the Parties must be sought for in preference to abiding by the literal
meaning of the words".
[193] 17.Let us assume however that the foregoing reasons are not juridically
sound. In that case it must at all events be recognized that this is a doubtful case,
which, moreover, appears from the very fact that it has been submitted to the Court;
but, under such conditions, the principle of law must be applied to it according to
which, "in case of doubt, the contract is to be interpreted against the person who has
stipulated and in favour of the person who has contracted the obligation" (French
Civil Code, Art. 1162).
III.
The French Civil Code and Other Public Policy Legislation.
[194] 18.But let us suppose that the gold clause in the Brazilian contracts really
constitutes an undertaking to pay in gold or its equivalent, to provide against the
risks of depreciation in French currency.
[195] In this case, the gold clause would not be valid and the contracts could not be
executed in France.
[196] The law which governs the conditions for and the currency of payments in
contracts such as those which form the subject of the present case, concluded
between a State and private [p149] subscribers or bondholders of another State, is
the territorial law of the country where payment is made. This principle is found in
almost all legal text-books, it is established by the decisions of French courts, as we

shall see later, and is already included in a Code of International Private Law,
adopted by several nations, the Bustamante Code, of which Article 170 provides that
"the local legislation governs the conditions of payment and the currency in which it
is to be made".
[197] Now Article 1895 of the French Civil Code runs as follows:
"The obligation resulting from a loan in money is always simply for the amount in
figures indicated in the contract, and if there has been an increase or diminution of
specie before the time of payment, the debtor must return the amount in figures
lent, and must return only this amount in the specie in currency at the time of
payment."
[198] Nothing could be clearer: the debtor must return the amount in figures lent and
must return this amount only in the specie in currency at the time of payment.
[199] "Any stipulation", says Duvergnier, "which would directly or indirectly result in
authorizing the lender to refuse currency at its legal value must be without effect."
(Droit civil, Vol. VI, p. 198.)
[200] And Fiore says: "If, for reasons of public interest, the law provided that banknotes should be given and received in payments as ready money at their nominal
value, in spite of any legal provision or any stipulation to the contrary, the creditor
could not refuse them or receive them only as a lesser value." (Droit international
prive, Vol. I, No. 195.)
[201] The French Civil Code, Article 1895, was in force at the time when the Brazilian
loans were contracted, and the subscribers could not be ignorant of it. They
therefore knew that, in paying in bank-notes, which are one of the currencies which
are legal tender (law of August 12th, 1870), a debtor would discharge his obligation,
and a creditor would not be entitled to refuse the payment: refusal would even
constitute an offence which is expressly provided for under Article 475, 11, of the
Penal Code.
[202] 19.In contracts, it may be said, it is the will of the Parties that controls, and
the Parties in this case might very [p150] well have intended to exclude payment in
bank-notes and to provide for payment in gold alone.
[203] No, that would not be possible: the laws governing legal tender are laws
appertaining to public policy, since they are directly concerned with the
administration of the country and with its social structure, and consequently
contracts of a private law character have no force as against such laws. This is the
principle embodied in Article 6 of the French Civil Code [Translation.]: "Contracts of a
private law character cannot derogate from laws concerning public policy."

[204] "The rule", Aubry and Rau state, "that payments of sums of money must be
made according to the nominal value of the currency at the time when these
payments were effected, being a rule founded on interests relating to public policy, it
follows that any contract infringing such rule must be considered as void." (Cours de
Droit civil, 4th ed., Vol. IV, 318, p. 159.)
[205] "Notes of the Bank of France", Planiol states, "may be used for payments in
place of gold or silver, and that is so whatever be the sum to be paid. The creditor is
not entitled to refuse payment, and ALL CONTRACTS TO THE CONTRARY ARE VOID,
the law making bank-notes legal tender being one of public policy." (Traite de Droit
civil, Vol. II, 6th ed., p. 144, No. 423.)
[206] But there is no need to have recourse to text-books to prove that Article 1895
of the French Civil Code is a provision of the nature of public policy. This nature is
recognized by the Penal Code, which, by Article 475, 11, as has already been
observed, punishes "whosoever refuses coin or money of the realm not being false or
defalsed for their current value".
[207] 20.Besides the Civil Code, other laws relating to public policy, the law of legal
tender (August 12th, 1870) and that of forced currency (August 5th, 1914) render the
gold clause illegal in France. [p151]
IV.
The Jurisdiction of French Courts.
[208] 21.The judgment in fact agrees with this affirmation as regards forced
currency but draws a distinction according to which "any gold clause is void when it
relates to a domestic transaction, but it is not so in the case of international
contracts even if payment is to be made in France".
[209] And in support of this, the jurisprudence of the French courts is cited (page 35).
[210] According to the Special Agreement, Article VI, "in estimating the weight to be
attached to any municipal law of either country which may be applicable to the
dispute, the Court .... shall not be bound by the decisions of the respective courts".
[211] That evidently means that "the Court is bound to set on one side the decisions
of international tribunals and itself to give that interpretation of the legal provisions
which may seem most just in the particular case".
[212] If the Court believed that it had not this right, nor had it the right to accept as
definitive, without any personal examination of the public policy legislation of which

we have spoken, the interpretation resulting from the jurisprudence of the French
courts, which had been expressly excluded by the common consent of the Parties,
and in that case it should have abstained from deciding the question of the
applicability of that legislation to the payments to be made in France.
[213] It is notwithstanding what the judgement has done, amidst difficulties arising
from the fact that the dispute is to be determined by private law and therefore does
not come within the Court's jurisdiction.
[214] But the jurisprudence of the French courts in this matter has not that
continuous, uniform and fixed character which is required in order to make it binding.
The pleadings before the Court have clearly shown that for the purpose of estimating
the validity or nullity of the gold clause, this jurisprudence bases itself at times on
the nationality of the Parties, at others on domicile, at others on the locality of
payment and at others on the nature of the contract. [p152]
[215] Judgments exist in support of varying opinions.
[216] Anyhow, M. Georges Hubrecht, in a book published only about five months ago,
in which he considers at length all the phases of the jurisprudence of the French
courts and not merely a few judgments, observes that after all these modifications
this jurisprudence appears to have become fixed and to have consecrated the
following principle: "It is the place of payment which is the sole determining factor
for deciding whether the gold clause or the foreign currency clause is valid or not on
grounds of forced currency."
[217] It is therefore not sufficient that there shall be an international agreement in
order to render the law on forced currency inapplicable; account must be taken of
the place of payment under the agreement; if it is in France, the French law on forced
currency is applicable.
[218] "In the case of any payments of French francs which are made in France", M.
Savatier states, "the French laws on fiduciary circulation are obligatorily applicable;
paper francs and gold francs as we have defined them are necessarily considered to
be identical.... On the contrary, there is no authority compelling the application to a
foreigner of laws of police and public safety such as those with which we are
concerned.... It is thus seen how simply and easily the question of the validity of the
gold clause in international relations may be decided; it will be sufficient to look to
the place of payment." (Dalloz, 1926, 2nd Part, p. 107.)
[219] And M. Niboyet, also cited by the Brazilian Memorial, says : "Forced currency is
obligatory in international relations in the same way as in domestic relations, in all
cases when that payment is to be made on French territory."

[220] 22.Reference is made to the law of June 25th, 1928, which abolished the
forced currency set up by the law of August 5th, 1914, and, after defining the franc,
the French monetary unit, declares (Art. 2) that: "This definition shall not apply to
international payments which, prior to the promulgation of the present law, may
have been validly stipulated in gold francs."
[221] But no argument can be drawn from that provision as regards the FrancoBrazilian affair. The law of June 25th, 1928, is two months later in date than the
Special Agreement, and a [p153] legislative act later in date than the dispute and
emanating exclusively from one of the Parties cannot be invoked against a right
previously acquired by the other Party.
[222] 23.The considerations set forth in this last chapter serve to show that, even
admitting the obligation to pay in gold as regards the Brazilian loans, the conclusions
of the judgment are too absolute: due account should have been taken of the
restrictions by which French public policy legislationthe Civil Code, the laws on
legal tender and on forced currencylimits the Court's latitude of choice in the
matter.
(Signed) Epitacio Pessoa.
[p154] Annex to Judgment No. 15.
DOCUMENTS SUBMITTED TO THE COURT BY THE PARTIES
IN THE COURSE OF THE PROCEEDINGS.
I.Documents submitted by the agent to the French government:
A. Annexes to the Case:
Special Agreement (August 27th, 1927).
Note from the French Embassy to the Brazilian Federal Minister for Foreign Affairs
(September 1st, 1924).
Decree No. 6368 of February 14th, 1907, modifying the special instructions for
carrying out the improvement works on Ports, issued by Decree No. 4859 of June 8th,
1903.
Law No. 1837 f December 31st, 1907.
,, 1841 ,, ,, ,, ,,
Decree No. 7003 of July 2nd, 1908.
Extract from contract made on August 4th, 1908, between the Brazilian Government

and MM. Bartissol and Demetrio Nunes Ribeiro for carrying out works of improvement
in the Port of Recife (Pernambuco).
Decree No. 7207 of December 3rd, 1908, authorizing an issue of bonds for the
payment of works of improvement in the port of Recife.
Prospectus of 1909 loan.
Extract from contract made on October 25th, 1909, between the Federal Government
of the United States of Brazil and the Goyaz Railway Company.
Extract from contract entered into by the Credit mobilier francais and the Goyaz
Railway Company, February 10th, 1910.
Decree No. 7877 of February 28th, 1910.
,, ,, 7878 ,, ,, ,, ,,
Prospectus of 1910 loan.
Bond of 1910 loan.
Extract from Decree No. 8648 of March 31st, 1911.
Decree No. 8794 of June 21st, 1911.
Prospectus of 1911 loan.
Bond of 1911 loan.
Extract from law of 17th Germinal Year XI (March 28th, 1803).
Extract from law of August 5th, 1914.
Law of February 12th, 1916.
Extract from a Judgment of the Court of Cassation, May 17th, 1927.
Extract from a Judgment of the Court of Appeal of Paris, April 16th, 1926.
Extract from a Judgment of the Court of Nimes, January 9th, 1928.
Extract from a Judgment of the Court of Cassation, January 23rd, 1924.
B. Annexes to Counter-Case:

Extract from monetary law of June 25th, 1928.

Judgment of the Court of Appeal of Paris (February 15th, 1924). [p155]
C.Documents filed during the hearings:
Prospectus of 1909 loan.
II.Documents submitted by the agents to the Brazilian and French Governments:
Original certificates of the bonds of the 1909, 1910 and 1911 loans.

7. Co Kim Chan vs Valdez Tan Keh, GR No. L-5, Septemeber 17, 1945

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 factogovernments.
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 facto government, 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 intowith 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 wellknown 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 wellestablished 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.

Separate Opinions
DE JOYA, J., concurring:
The principal question involved in this case is the validity of the proceedings held in
civil case No. 3012, in the Court of First Instance of the City of Manila, under the
now defunct Philippine Republic, during Japanese occupation; and the effect on said
proceedings of the proclamation of General Douglas MacArthur, dated October 23,
1944. The decision of this question requires the application of principles of
International Law, in connection with the municipal law in force in this country,
before and during Japanese occupation.
Questions of International Law must be decided as matters of general law
(Juntington vs. Attril, 146 U.S., 657; 13 Sup. Ct. 224; 36 Law. ed., 1123); and
International Law is no alien in this Tribunal, as, under the Constitution of the
Commonwealth of the Philippines, it is a part of the fundamental law of the land
(Article II, section 3).
As International Law is an integral part of our laws, it must be ascertained and
administered by this Court, whenever questions of right depending upon it are
presented for our determination, sitting as an international as well as a domestic
Tribunal (Kansas vs. Colorado, 185 U.S., 146; 22 Sup. Ct. 552; 46 Law. Ed., 838).
Since International Law is a body of rules actually accepted by nations as regulating
their mutual relations, the proof of the existence of a given rule is to be found in the
consent of nations to abide by that rule; and this consent is evidenced chiefly by the
usages and customs of nations, and to ascertain what these usages and customs
are, the universal practice is to turn to the writings of publicists and to the decisions
of the highest courts of the different countries of the world (The Habana, 175 U.S.,
677; 20 Sup. Cit., 290; 44 Law. ed., 320).

But while usage is the older and original source of International Law, great
international treaties are a later source of increasing importance, such as The
Hague Conventions of 1899 and 1907.
The Hague Conventions of 1899, respecting laws and customs of war on land,
expressly declares that:
ARTICLE XLII. Territory is considered occupied when it is actually placed under
the authority of the hostile army.
The occupation applies only to be territory where such authority is established,
and in a position to assert itself.
ARTICLE XLIII. The authority of the legitimate power having actually passed into
the hands of the occupant, the later shall take all 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. (32
Stat. II, 1821.)
The above provisions of the Hague Convention have been adopted by the nations
giving adherence to them, among which is United States of America (32 Stat. II,
1821).
The commander in chief of the invading forces or military occupant may exercise
governmental authority, but only when in actual possession of the enemy's
territory, and this authority will be exercised upon principles of international Law
(New Orleans vs. Steamship Co, [1874], 20 Wall., 387; Kelly vs. Sanders [1878], 99
U.S., 441; MacLeod vs. U.S., 229 U.S. 416; 33 Sup. Ct., 955; 57 Law Ed., 1260; II
Oppenheim of International Law, section 167).
There can be no question that the Philippines was under Japanese military
occupation, from January, 1942, up to the time of the reconquest by the armed
forces of the United States of the Island of Luzon, in February, 1945.
It will thus be readily seen that the civil laws of the invaded State continue in force,
in so far as they do not affect the hostile occupant unfavorably. The regular judicial
Tribunals of the occupied territory continue usual for the invader to take the whole
administration into his own hands, partly because it is easier to preserve order
through the agency of the native officials, and partly because it is easier to preserve
order through the agency of the native officials, and partly because the latter are
more competent to administer the laws in force within the territory and the military
occupant generally keeps in their posts such of the judicial and administrative
officers as are willing to serve under him, subjecting them only to supervision by the
military authorities, or by superior civil authorities appointed by him.(Young vs. U.S.,

39; 24 Law, ed., 992; Coleman vs. Tennessee, 97 U.S., 509; 24 Law ed., 1118;
MacLeod vs. U.S., 229 U.S., 416; 33 Sup. Ct., 955; 57 Law. ed., 1260; Taylor on
International Law, sections 576. 578; Wilson on International Law; pp. 331-37; Hall
on International Law, 6th Edition [1909], pp. 464, 465, 475, 476; Lawrence on
International Law, 7th ed., pp. 412, 413; Davis, Elements of International Law, 3rd
ed., pp. 330-332 335; Holland on International Law pp. 356, 357, 359; Westlake on
International Law, 2d ed., pp. 121-23.)
It is, therefore, evident that the establishment of the government under the socalled Philippine Republic, during Japanese occupation, respecting the laws in force
in the country, and permitting the local courts to function and administer such laws,
as proclaimed in the City of Manila, by the Commander in Chief of the Japanese
Imperial Forces, on January 3, 1942, was in accordance with the rules and principles
of International Law.
If the military occupant is thus in duly bound to establish in the territory under
military occupation governmental agencies for the preservation of peace and order
and for the proper administration of justice, in accordance with the laws in force
within territory it must necessarily follow that the judicial proceedings conducted
before the courts established by the military occupant must be considered legal and
valid, even after said government establish by the military occupant has been
displaced by the legitimate government of the territory.
Thus the judgments rendered by the Confederate Courts, during the American Civil
War, merely settling the rights of private parties actually within their jurisdiction,
not tending to defeat the legal rights of citizens of the United States, nor in
furtherance of laws passed in aid of the rebellion had been declared valid and
binding (Cock vs.Oliver, 1 Woods, 437; Fed. Cas., No. 3, 164; Coleman vs.
Tennessee, 97 U. S., 509; 24 Law. ed., 118; Williamsvs. Bruffy, 96 U. S., 176; Horn
vs. Lockhart, 17 Wall., 570; Sprott vs. United States, 20 id., 459; Texas vs. White,
7id., 700; Ketchum vs. Buckley [1878], 99 U.S., 188); and the judgment of a court of
Georgia rendered in November, 1861, for the purchase money of slaves was held
valid judgment when entered, and enforceable in 1871(French vs. Tumlin, 10 Am.
Law. Reg. [N.S.], 641; Fed. Case, No. 5104).
Said judgments rendered by the courts of the states constituting the Confederate
States of America were considered legal and valid and enforceable, even after the
termination of the American Civil War, because they had been rendered by the
courts of a de facto government. The Confederate States were a de facto
government in the sense that its citizens were bound to render the government
obedience in civil matters, and did not become responsible, as wrong-doers, for
such acts of obedience (Thorington vs. Smith, 8 Wall. [U.S.], 9; 19 Law. ed., 361).

In the case of Ketchum vs. Buckley ([1878], 99 U.S., 188), the Court held "It is
now settled law in this court that during the late civil war the same general form of
government, the same general law for the administration of justice and the
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 did
not impair or tend to impair the supremacy of the national authority, or the just and
legal rights of the citizens, under the Constitution, they are in general to be treated
as valid and binding." (William vs. Bruffy, 96 U.S., 176; Horn vs. Lockhart, 17 Wall.,
570; Sprott vs. United States, 20 id., 459; Texas vs. White, 7 id., 700.)
The government established in the Philippines, during Japanese occupation, would
seem to fall under the following definition of de facto government given by the
Supreme Court of the United States:
But there is another description of government, called also by publicists, a
government de facto, but which might, perhaps, be more aptly denominateda
government of paramount force. Its distinguishing characteristics are (1) that its
existence is maintained by active military power within the territories, and
against the rightful authority of an established and lawful government; and (2)
that while it exists it must necessarily be obeyed in civil matters by private
citizens who, by acts of obedience rendered in submission to such force, do not
become responsible, as wrong doers, for those acts, though not warranted by
the laws of the rightful government. Actual government 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, by civil authority, supported more or less directly by military
force. (Macleod vs. United States [1913] 229 U.S., 416.)
The government established in the Philippines, under the so-called Philippine
Republic, during Japanese occupation, was and should be considered as a de facto
government; and that the judicial proceedings conducted before the courts which
had been established in this country, during said Japanese occupation, are to be
considered legal and valid and enforceable, even after the liberation of this country
by the American forces, as long as the said judicial proceedings had been
conducted, under the laws of the Commonwealth of the Philippines.
The judicial proceedings involved in the case under consideration merely refer to
the settlement of property rights, under the provisions of the Civil Code, in force in
this country under the Commonwealth government, before and during Japanese
occupation.
Now, petitioner contends that the judicial proceedings in question are null and void,
under the provisions of the proclamation issued by General Douglas MacArthur,
dated October 23, 1944; as said proclamation "nullifies all the laws, regulations and

processes of any other government

Commonwealth of the Philippines."

of

the

Philippines

than

that

of

the

In other words, petitioner demands a literal interpretation of said proclamation

issued by General Douglas MacArthur, a contention which, in our opinion, is
untenable, as it would inevitably produce judicial chaos and uncertainties.
When an act is susceptible of two or more constructions, one of which will maintain
and the others destroy it, the courts will always adopt the former (U. S. vs. Coombs
[1838], 12 Pet., 72; 9 Law. ed., 1004; Board of Supervisors of Granada County vs.
Brown [1884], 112 U.S., 261; 28 Law. ed., 704; 5 Sup. Ct. Rep., 125; In re Guarina
[1913], 24 Phil., 37; Fuentes vs. Director of Prisons [1924], 46 Phil., 385). The
judiciary, always alive to the dictates of national welfare, can properly incline the
scales of its decisions in favor of that solution which will most effectively promote
the public policy (Smith, Bell & Co., Ltd. vs. Natividad [1919], 40 Phil., 136). All laws
should receive a sensible construction. General terms should be so limited in their
application as not lead to injustice, oppression or an absurd consequence. It will
always, therefore, be presumed that the legislature intended exceptions to its
language, which would avoid results of this character. The reason of the law in such
cases should prevail over its letter (U. S. vs. Kirby, 7 Wall. [U.S.], 482; 19 Law. ed.,
278; Church of Holy Trinity vs. U. S., 143 U. S. 461; 12 Sup. Ct., 511; 36 Law. ed.,
226; Jacobson vs. Massachussetts, 197 U. S., 39; 25 Sup. Ct., 358; 49 Law. ed., 643;
3 Ann. Cas., 765; In re Allen, 2 Phil., 630). The duty of the court in construing a
statute, which is reasonably susceptible of two constructions to adopt that which
saves is constitutionality, includes the duty of avoiding a construction which raises
grave and doubtful constitutional questions, if it can be avoided (U. S. vs. Delaware
& Hudson Co., U.S., 366; 29 Sup. Ct., 527; 53 Law. ed., 836).
According to the rules and principles of International Law, and the legal doctrines
cited above, the judicial proceedings conducted before the courts of justice,
established here during Japanese military occupation, merely applying the
municipal law of the territory, such as the provisions of our Civil Code, which have
no political or military significance, should be considered legal, valid and binding.
It is to be presumed that General Douglas MacArthur is familiar with said rules and
principles, as International Law is an integral part of the fundamental law of the
land, in accordance with the provisions of the Constitution of the United States. And
it is also to be presumed that General MacArthur his acted, in accordance with said
rules and principles of International Law, which have been sanctioned by the
Supreme Court of the United States, as the nullification of all judicial proceedings
conducted before our courts, during Japanese occupation would lead to injustice and
absurd results, and would be highly detrimental to the public interests.
For the foregoing reasons, I concur in the majority opinion.

PERFECTO, J., dissenting:

Law must be obeyed. To keep the bonds of society, it must not be evaded. On its
supremacy depends the stability of states and nations. No government can prevail
without it. The preservation of the human race itself hinges in law.
Since time immemorial, man has relied on law as an essential means of attaining
his purposes, his objectives, his mission in life. More than twenty-two centuries
before the Christian Era, on orders of the Assyrian King Hammurabi, the first code
was engrave in black diorite with cunie form characters. Nine centuries later
Emperor Hung Wu, in the cradle of the most ancient civilization, compiled the Code
of the Great Ming. The laws of Manu were written in the verdic India. Moses received
at Sinai the ten commandments. Draco, Lycurgus, Solon made laws in Greece. Even
ruthless Genghis Khan used laws to keep discipline among the nomad hordes with
which he conquered the greater part of the European and Asiastic continents.
Animal and plants species must follow the mendelian heredity rules and other
biological laws to survive. Thanks to them, the chalk cliffs of the infusoria show the
marvel of an animal so tiny as to be imperceptible to the naked eye creating a
whole mountain. Even the inorganic world has to conform the law. Planets and stars
follow the laws discovered by Kepler, known as the law-maker of heavens. If,
endowed with rebellious spirit, they should happen to challenge the law of universal
gravity, the immediate result would be cosmic chaos. The tiny and twinkling points
of light set above us on the velvet darkness of the night will cease to inspire us with
dreams of more beautiful and happier worlds.
Again we are called upon to do our duty. Here is a law that we must apply. Shall we
shrink? Shall we circumvent it ? Can we ignore it?
The laws enacted by the legislators shall be useless if courts are not ready to apply
them. It is actual application to real issues which gives laws the breath of life.
In the varied and confused market of human endeavor there are so many things
that might induce us to forget the elementals. There are so many events, so many
problem, so many preoccupations that are pushing among themselves to attract our
attention, and we might miss the nearest and most familiar things, like the man who
went around his house to look for a pencil perched on one of his ears.
THE OCTOBER PROCLAMATION
In October, 1944, the American Armed Forces of Liberation landed successfully in
Leyte.

When victory in islands was accomplished, after the most amazing and spectacular
war operations, General of the Army Douglas MacArthur as a commander in Chief of
the American Army, decided to reestablish, in behalf of the United States, the
Commonwealth Government.
Then he was confronted with the question as to what policy to adopt in regards to
the official acts of the governments established in the Philippines by the Japanese
regime. He might have thought of recognizing the validity of some of said acts, but,
certainly, there were acts which he should declare null and void, whether against
the policies of the American Government, whether inconsistent with military
strategy and operations, whether detrimental to the interests of the American or
Filipino peoples, whether for any other strong or valid reasons.
But, which to recognize, and which not? He was not in a position to gather enough
information for a safe basis to distinguished and classify which acts must be
nullified, and which must validated. At the same time he had to take immediate
action. More pressing military matters were requiring his immediate attention. He
followed the safe course: to nullify all the legislative, executive, and judicial acts
and processes under the Japanese regime. After all, when the Commonwealth
Government is already functioning, with proper information, he will be in a position
to declare by law, through its Congress, which acts and processes must be revived
and validated in the public interest.
So on October 23, 1944, the Commander in Chief issued the following proclamation:
GENERAL HEADQUARTERS
SOUTHWEST PACIFIC AREA
OFFICE OF THE COMMANDER IN CHIEF
PROCLAMATION
To the People of the Philippines:
WHEREAS, the military forces under my command have landed in the Philippines
soil as a prelude to the liberation of the entire territory of the Philippines; and
WHEREAS, the seat of the Government of the Commonwealth of the Philippines
has been re-established in the Philippines under President Sergio Osmea and
the members of his cabinet; and
WHEREAS, 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, and is purporting to exercise Executive, Judicial and Legislative
powers of government over the people;
Now, therefore, I, Douglas MacArthur, General, United States Army, as
Commander in Chief of the military forces committed to the liberation of the
Philippines, do hereby proclaim and declare:
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 the only government having legal and valid jurisdiction over the people
in areas of the Philippines free of enemy occupation and control;
2. The laws now existing on the statute books of the Commonwealth of the
Philippines and the regulation 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 enemy occupation and
control; and
I do hereby announce my purpose progressively to restore and extend to the
people of the Philippines the sacred right of government by constitutional
process under the regularly constituted Commonwealth Government as rapidly
as the several occupied areas are liberated to the military situation will
otherwise permit;
I do enjoin upon all loyal citizens of the Philippines full respect for and obedience
to the Constitution of the Commonwealth of the Philippines and the laws,
regulations and other acts of their duly constituted government whose seat is
now firmly re-established on Philippine soil.
October 23, 1944.
DOUGLAS MACARTHUR
General U. S. Army
Commander in Chief
IS THE OCTOBER PROCLAMATION LAW?
In times of war the Commander in Chief of an army is vested with extraordinary
inherent powers, as a natural result of the nature of the military operations aimed to

achieve the purposes of his country in the war, victory being paramount among
them.
Said Commander in Chief may establish in the occupied or reoccupied territory,
under his control, a complete system of government; he may appoint officers and
employees to manage the affairs of said government; he may issue proclamations,
instructions, orders, all with the full force of laws enacted by a duly constituted
legislature; he may set policies that should be followed by the public administration
organized by him; he may abolish the said agencies. In fact, he is the supreme ruler
and law-maker of the territory under his control, with powers limited only by the
receipts of the fundamental laws of his country.
California, or the port of San Francisco, had been conquered by the arms of the
United States as early as 1846. Shortly afterward the United States had military
possession of all upper California. Early in 1847 the President, as constitutional
commander in chief of the army and navy, authorized the military and naval
commander of our forces in California to exercise the belligerent rights of a
conqueror, and form a civil government for the conquered country, and to
impose duties on imports and tonnage as military contributions for the support
of the government, and of the army which has the conquest in possession. . .
Cross of Harrison, 16 Howard, 164, 189.)
In May, 1862, after the capture of New Orleans by the United States Army,
General Butler, then in command of the army at that place, issued a general
order appointing Major J. M. Bell, volunteer aide-de-camp, of the division staff,
provost judge of the city, and directed that he should be obeyed and respected
accordingly. The same order appointed Capt. J. H. French provost marshal of the
city, the Capt. Stafford deputy provost marshal. A few days after this order the
Union Bank lent to the plaintiffs the sum of $130,000, and subsequently, the
loan not having been repaid, brought suit before the provost judge to recover
the debt. The defense was taken that the judge had no jurisdiction over the civil
cases, but judgement was given against the borrowers, and they paid the
money under protest. To recover it back is the object of the present suit, and the
contention of the plaintiffs is that the judgement was illegal and void, because
the Provost Court had no jurisdiction of the case. The judgement of the District
Court was against the plaintiffs, and this judgement was affirmed by the
Supreme Court of the State. To this affirmance error is now assigned.
The argument of the plaintiffs in error is that the establishment of the Provost
Court, the appointment of the judge, and his action as such in the case brought
by the Union Bank against them were invalid, because in violation of the
Constitution of the United States, which vests the judicial power of the General
government in one Supreme Court and in such inferior courts as Congress may
from time to time ordain and establish, and under this constitutional provision

they were entitled to immunity from liability imposed by the judgment of the
Provost Court. Thus, it is claimed, a Federal question is presented, and the
highest court of the State having decided against the immunity claimed, our
jurisdiction is invoked.
Assuming that the case is thus brought within our right to review it, the
controlling question is whether the commanding general of the army which
captured New Orleans and held it in May 1862, had authority after the capture
of the city to establish a court and appoint a judge with power to try and
adjudicate civil causes. Did the Constitution of the United States prevent the
creation of the civil courts in captured districts during the war of the rebellion,
and their creation by military authority?
This cannot be said to be an open question. The subject came under the
consideration by this court in The Grapeshot, where it was decided that when,
during the late civil war, portions of the insurgent territory were occupied by the
National forces, it was within the constitutional authority of the President, as
commander in chief, to establish therein provisional courts for the hearing and
determination of all causes arising under the laws of the States or of the United
States, and it was ruled that a court instituted by President Lincoln for the State
of Louisiana, with authority to hear, try, and determine civil causes, was lawfully
authorized to exercise such jurisdiction. Its establishment by the military
authority was held to be no violation of the constitutional provision that "the
judicial power of the United States shall be vested in one Supreme Court and in
such inferior courts as the Congress may form time to time ordain and
establish." That clause of the Constitution has no application to the abnormal
condition of conquered territory in the occupancy of the conquering, army. It
refers only to courts of United States, which military courts are not. As was said
in the opinion of the court, delivered by Chief Justice Chase, in The Grapeshot,
"It became the duty of the National government, wherever the insurgent power
was overthrown, and the territory which had been dominated by it was occupied
by the National forces, to provide, as far as possible, so long as the war
continued, for the security of the persons and property and for the
administration of justice. The duty of the National government in this respect
was no other than that which devolves upon a regular belligerent, occupying
during war the territory of another belligerent. It was a military duty, to be
performed by the President, as Commander in Chief, and instructed as such with
the direction of the military force by which the occupation was held."
Thus it has been determined that the power to establish by military authority
courts for the administration of civil as well as criminal justice in portions of the
insurgent States occupied by the National forces, is precisely the same as that
which exists when foreign territory has been conquered and is occupied by the
conquerors. What that power is has several times been considered. In

Leitensdorfer & Houghton vs. Webb, may be found a notable illustration. Upon
the conquest of New Mexico, in 1846, the commanding officer of the conquering
army, in virtue of the power of conquest and occupancy, and with the sanction
and authority of the President, ordained a provisional government for the
country. The ordinance created courts, with both civil and criminal jurisdiction. It
did not undertake to change the municipal laws of the territory, but it
established a judicial system with a superior or appellate court, and with circuit
courts, the jurisdiction of which declared to embrace, first, all criminal causes
that should not otherwise provided for by law; and secondly, original and
exclusive cognizance of all civil cases not cognizable before the prefects and
alcades. But though these courts and this judicial system were established by
the military authority of the United States, without any legislation of Congress,
this court ruled that they were lawfully established. And there was no express
order for their establishment emanating from the President or the Commander
in Chief. The ordinance was the act of the General Kearney the commanding
officer of the army occupying the conquered territory.
In view of these decisions it is not to be questioned that the Constitution did not
prohibit the creation by the military authority of court for the trial of civil causes
during the civil war in conquered portions of the insurgent States. The
establishment of such courts is but the exercise of the ordinary rights of
conquest. The plaintiffs in error, therefore, had no constitutional immunity
against subjection to the judgements of such courts. They argue, however, that
if this be conceded, still General Butler had no authority to establish such a
court; that the President alone, as a Commander in Chief, had such authority.
We do not concur in this view. General Butler was in command of the conquering
and the occupying army. He was commissioned to carry on the war in Louisina.
He was, therefore, invested with all the powers of making war, so far as they
were denied to him by the Commander in Chief, and among these powers, as
we have seen, was of establishing courts in conquered territory. It must be
presumed that he acted under the orders of his superior officer, the President,
and that his acts, in the prosecution of the war, were the acts of his commander
in chief. (Mechanics' etc. Bank vs. Union Bank, 89 U. S. [22 Wall.], 276-298.)
There is no question, therefore, that when General of the Army Douglas MacArthur
issued on October Proclamation, he did it in the legitimate exercise of his powers.
He did it as the official representative of the supreme authority of the United States
of America. Consequently, said proclamation is legal, valid, and binding.
Said proclamation has the full force of a law. In fact, of a paramount law. Having
been issued in the exercise of the American sovereignty, in case of conflict, it can
even supersede, not only the ordinary laws of the Commonwealth of the Philippines,
but also our Constitution itself while we remain under the American flag.

"PROCESS" IN THE OCTOBER PROCLAMATION

In the third section of the dispositive part of the October Proclamation, it is declared
that all laws, regulations and processes of any other government in the Philippines
than that of the Commonwealth, are null and void.
Does the word "processes" used in the proclamation include judicial processes?
In its broadest sense, process is synonymous with proceedings or procedures and
embraces all the steps and proceedings in a judicial cause from it commencement
to its conclusion.
PROCESS. In Practice. The means of compelling a defendant to appear in
court after suing out the original writ, in civil, and after indictment, in criminal
cases.
The method taken by law to compel a compliance with the original writ or
command as of the court.
A writ, warrant, subpoena, or other formal writing issued by authority law; also
the means of accomplishing an end, including judicial proceedings; Gollobitch
vs. Rainbow, 84 la., 567; 51 N. W., 48; the means or method pointed out by a
statute, or used to acquire jurisdiction of the defendants, whether by writ or
notice. Wilson vs. R. Co. (108 Mo., 588; 18 S. W., 286; 32 Am. St. Rep., 624). (3
Bouvier's Law Dictionary, p. 2731.)
A. Process generally. 1. Definition. As a legal term process is a generic word
of every comprehensive signification and many meanings. It is broadest sense it
is equivalent to, or synonymous with, "proceedings" or "procedure," and
embraces all the steps and proceedings in a cause from its commencement to
its conclusion. Sometimes the term is also broadly defined as the means
whereby a court compels a compliance with it demands. "Process" and "writ" or
"writs" are synonymous in the sense that every writ is a process, and in a
narrow sense of the term "process" is limited to judicial writs in an action, or at
least to writs or writings issued from or out of court, under the seal thereof, and
returnable thereto; but it is not always necessary to construe the term so strictly
as to limit it to a writ issued by a court in the exercise of its ordinary jurisdiction;
the term is sometimes defined as a writ or other formal writing issued by
authority of law or by some court, body, or official having authority to issue it;
and it is frequently used to designate a means, by writ or otherwise , of
acquiring jurisdiction of defendant or his property, or of bringing defendant into,
or compelling him to appear in, court to answer.

As employed in the statutes the legal meaning of the word "process" varies
according to the context, subject matter, and spirit of the statute in which it
occurs. In some jurisdictions codes or statutes variously define "process" as
signifying or including: A writ or summons issued in the course of judicial
proceedings; all writs, warrants, summonses, and orders of courts of justice or
judicial officers; or any writ, declaration, summons, order, or subpoena whereby
any action, suit or proceeding shall be commenced, or which shall be issued in
or upon any action, suit or proceeding. (50 C. J., PP. 441, 442.)
The definition of "process" given by Lord Coke comprehends any lawful warrant,
authority, or proceeding by which a man may be arrested. He says: "Process of
law is two fold, namely, by the King's writ, or by proceeding and warrant, either
in deed or in law, without writ." (People vs. Nevins [N. Y.] Hill, 154, 169, 170;
State vs. Shaw, 50 A., 869; 73 Vt., 149.)
Baron Comyn says that process, in a large acceptance, comprehends the whole
proceedings after the original and before judgement; but generally it imports
the writs which issue out of any court to bring the party to answer, or for doing
execution, and all process out of the King's court ought to be in the name of the
King. It is called "process" because it proceeds or goes upon former matter,
either original or judicial. Gilmer, vs. Bird 15 Fla., 410, 421. (34 Words and
Phrases, permanent edition, 1940 edition, p. 147.)
In a broad sense the word "process" includes the means whereby a court
compels the appearance of the defendant before it, or a compliance with it
demands, and any every writ, rule order, notice, or decree, including any
process of execution that may issue in or upon any action, suit, or legal
proceedings, and it is not restricted to mesne process. In a narrow or restricted
sense it is means those mandates of the court intending to bring parties into
court or to require them to answer proceedings there pending. (Colquitt Nat.
Bank vs. Poitivint, 83 S. E., 198, 199; 15 Ga. App., 329. (34 Words and Phrases,
permanent edition, 1940 edition, p. 148.)
A "process" is an instrument in an epistolary from running in the name of the
sovereign of a state and issued out of a court of justice, or by a judge thereof, at
the commencement of an action or at any time during its progress or incident
thereto, usually under seal of the court, duly attested and directed to some
municipal officer or to the party to be bound by it, commanding the commission
of some act at or within a specified time, or prohibiting the doing of some act.
The cardinal requisites are that the instrument issue from a court of justice, or a
judge thereof; that it run in the name of the sovereign of the state; that it be
duly attested, but not necessarily by the judge, though usually, but not always,
under seal; and that it be directed to some one commanding or prohibiting the

commission of an act. Watson vs. Keystone Ironworks Co., 74 P., 272, 273; 70
Kan., 43. (34 Words and Phrases, permanent edition, 1940 edition, p. 148.)
Jacobs in his Law Dictionary says: "Process" has two qualifications: First, it is
largely taken for all proceedings in any action or prosecution, real or personal,
civil or criminal, from the beginning to the end; secondly, that is termed the
"process" by which a man is called into any temporal court, because the
beginning or principal part thereof, by which the rest is directed or taken.
Strictly, it is a proceeding after the original, before the judgement. A policy of
fire insurance contained the condition that if the property shall be sold or
transferred, or any change takes place in title or possession, whether by legal
process or judicial decree or voluntary transfer or convenience, then and in
every such case the policy shall be void. The term "legal process," as used in
the policy, means what is known as a writ; and, as attachment or execution on
the writs are usually employed to effect a change of title to property, they are or
are amongst the processes contemplated by the policy. The words "legal
process" mean all the proceedings in an action or proceeding. They would
necessarily embrace the decree, which ordinarily includes the proceedings.
Perry vs. Lorillard Fire Ins. Co., N. Y., 6 Lans., 201, 204. See, also, Tipton vs.
Cordova, 1 N. M., 383, 385. (34 Words and Phrases, permanent edition, 1940
edition, p. 148.)
"Process" in a large acceptation, is nearly synonymous with "proceedings," and
means the entire proceedings in an action, from the beginning to the end. In a
stricter sense, it is applied to the several judicial writs issued in an action.
Hanna vs. Russell, 12 Minn., 80, 86 (Gil., 43, 45). (34 Words and Phrases,
permanent edition, 1940, edition 149.)
The term "process" as commonly applied, intends that proceeding by which a
party is called into court, but it has more enlarged signification, and covers all
the proceedings in a court, from the beginning to the end of the suit; and, in this
view, all proceedings which may be had to bring testimony into court, whether
viva voce or in writing, may be considered the process of the court. Rich vs.
Trimple, Vt., 2 Tyler, 349, 350. Id.
"Process" in its broadest sense comprehends all proceedings to the
accomplishment of an end, including judicial proceedings. Frequently its
signification is limited to the means of bringing a party in court. In the
Constitution process which at the common law would have run in the name of
the king is intended. In the Code process issued from a court is meant. McKenna
vs. Cooper, 101 P., 662, 663; 79 Kan., 847, quoting Hanna vs. Russel, 12 Minn.,
80. (Gil., 43 ); Black Com. 279; Bou vs. Law. Dict. (34 Words and Phrases,
permanent edition 1940 edition, p. 149.)

"Judicial process" includes the mandate of a court to its officers, and a means
whereby courts compel the appearance of parties, or compliance with its
commands, and includes a summons. Ex parte Hill, 51 So., 786, 787; 165 Ala.,
365.
"Judicial process" comprehends all the acts of then court from the beginning of
the proceeding to its end, and in a narrower sense is the means of compelling a
defendant to appear in court after suing out the original writ in civil case and
after the indictment in criminal cases, and in every sense is the act of the court
and includes any means of acquiring jurisdiction and includes attachment,
garnishment, or execution, and also a writ. Blair vs. Maxbass Security Bank of
Maxbass, 176 N. W., 98, 199; 44 N. D. 12 (23 Words and Phrases, permanent
edition 1940 edition, p. 328.)
There is no question that the word process, as used in the October Proclamation,
includes all judicial processes or proceedings.
The intention of the author of the proclamation of including judicial processes
appears clearly in the preamble of the document.
The second "Whereas," states that so-called government styled as the "Republic of
the Philippines," based upon neither the free expression of the people's will nor the
sanction of the Government of the United States, and is purporting to the exercise
Executive, Judicial, and Legislative powers of government over the people."
It is evident from the above-mentioned words that it was the purpose of General
MacArthur to declare null and void all acts of government under the Japanese
regime, and he used, in section 3 of he dispositive part, the word laws, as pertaining
to the legislative branch, the word regulations, as pertaining to the executive
branch, and lastly, the word processes, as pertaining to the judicial branch of the
government which functioned under the Japanese regime.
It is reasonable to assume that he might include in the word "process." besides
those judicial character, those of executive or administrative character. At any rate,
judicial processes cannot be excluded.
THE WORDS OF PROCLAMATION EXPRESS UNMISTAKABLY
THE INTENTION OF THE AUTHOR
The October Proclamation is written in such a way that it is impossible to make a
mistake as to the intention of its author.

Oliver Wendell Holmes, perhaps the wisest man who had ever sat in the Supreme
Court of the United States, the following:
When the words in their literal sense have a plain meaning, courts must be very
cautious in allowing their imagination to give them a different one. Guild vs.
Walter, 182 Mass., 225, 226 (1902)
Upon questions of construction when arbitrary rule is involved, it is always more
important to consider the words and the circumstances than even strong
analogies decisions. The successive neglect of a series of small distinctions, in
the effort to follow precedent, is very liable to end in perverting instruments
from their plain meaning. In no other branch of the law (trusts) is so much
discretion required in dealing with authority. . . . There is a strong presumption
in favor of giving them words their natural meaning, and against reading them
as if they said something else, which they are not fitted to express. (Merrill vs.
Preston, 135 Mass., 451, 455 (1883).
When the words of an instrument are free from ambiguity and doubt, and express
plainly, clearly and distinctly the sense of the framer, there is no occasion to resort
to other means of interpretation. It is not allowable to interpret what needs no
interpretation.
Very strong expression have been used by the courts to emphasize the principle
that they are to derive their knowledge of the legislative intention from the words or
language of the statute itself which the legislature has used to express it. The
language of a statute is its most natural guide. We are not liberty to imagine an
intent and bind the letter to the intent.
The Supreme Court of the United States said: "The primary and general rule of
statutory construction is that the intent of the law-maker is to be found in the
language that he has used. He is presumed to know the meaning of the words and
the rules of grammar. The courts have no function of legislation, and simply seek to
ascertain the will of the legislator. It is true that there are cases in which the letter
of the statute is not deemed controlling, but the cases are few and exceptional and
only arise where there are cogent reasons for believing that the letter does not fully
and accurately disclose the intent. No mere ommission, no mere failure to provide
for contingencies, which it may seem wise should have specifically provided for will
justify any judicial addition to the language of the statute." (United States vs.
Goldenberg, 168 U. S., 95, 102, 103; 18 S. C. Rep., 3; 42 Law. ed., 394.)
That the Government of the Commonwealth of the Philippines shall be the sole and
only government in our country; that our laws are in full force and effect and legally
binding; that "all laws, regulations and processes of any other government are null
and void and without legal effect", are provisions clearly, distinctly, unmistakably

expressed in the October Proclamation, as to which there is no possibility of error,

and there is absolutely no reason in trying to find different meanings of the plain
words employed in the document.
As we have already seen, the annulled processes are precisely judicial processes,
procedures and proceedings, including the one which is under our consideration.
THE OCTOBER PROCLAMATION ESTABLISHES A CLEAR POLICY
Although, as we have already stated, there is no possible mistakes as to the
meaning of the words employed in the October Proclamation, and the text of the
document expresses, in clear-cut sentences, the true purposes of its author, it might
not be amiss to state here what was the policy intended to be established by said
proclamation.
It is a matter of judicial knowledge that in the global war just ended on September
2, 1945, by the signatures on the document of unconditional surrender affixed by
representatives of the Japanese government, the belligerents on both sides resorted
to what may call war weapons of psychological character.
So Japan, since its military forces occupied Manila, had waged an intensive
campaign propaganda, intended to destroy the faith of the Filipino people in
America, to wipe out all manifestations of American or occidental civilization, to
create interest in all things Japanese, which the imperial officers tried to present as
the acme of oriental culture, and to arouse racial prejudice among orientals and
occidentals, to induce the Filipinos to rally to the cause of Japan, which she tried to
make us believe is the cause of the inhabitants of all East Asia.
It is, then, natural that General MacArthur should take counter-measures to
neutralize or annul completely all vestiges of Japanese influence, specially those
which might jeopardize in any way his military operations and his means of
achieving the main objective of the campaign of the liberation, that is, to restore in
our country constitutional processes and the high ideals constitute the very essence
of democracy.
It was necessary to free, not only our territory, but also our spiritual patrimony. It
was necessary, not only to restore to us the opportunity of enjoying the physical
treasures which a beneficent Providence accumulated on this bountiful land, the
true paradise in the western Pacific, but to restore the full play of our ideology, that
wonderful admixture of sensible principles of human conduct, bequeathed to us by
our Malayan ancestors, the moral principles of the Christianity assimilated by our
people from teachers of Spain, and the common-sense rules of the American
democratic way of life.

It was necessary to free that ideology from any Japanese impurity.

Undoubtedly, the author of the proclamation thought that the laws, regulations, and
processes of all the branches of the governments established under the Japanese
regime, if allowed to continue and to have effect, might be a means of keeping and
spreading in our country the Japanese influence, with the same deadly effects as
the mines planted by the retreating enemy.
The government offices and agencies which functioned during the Japanese
occupation represented a sovereignty and ideology antagonistic to the sovereignty
and ideology which MacArthur's forces sought to restore in our country.
Under chapter I of the Japanese Constitution, it is declared that Japan shall reigned
and governed by a line Emperors unbroken for ages eternal (Article 1); that the
Emperor is sacred and inviolable (Article 3); that he is the head of the Empire,
combining in himself the rights of the sovereignty (Article 4); that he exercises the
legislative power (Article 5); that he gives sanction to laws, and orders to be
promulgated and executed (Article 6);that he has the supreme command of the
Army and Navy (Article 11); that he declares war, makes peace, and concludes
treaties (Article 13).
There is no reason for allowing to remain any vestige of Japanese ideology, the
ideology of a people which as confessed in a book we have at our desk, written by a
Japanese, insists in doing many things precisely in a way opposite to that followed
by the rest of the world.
It is the ideology of a people which insists in adopting the policy of self-delusion;
that believes that their Emperor is a direct descendant of gods and he himself is a
god, and that the typhoon which occured on August 14, 1281, which destroyed the
fleet with which Kublai Khan tried to invade Japan was the divine wind of Ise; that
defies the heinous crime of the ronin, the 47 assassins who, in order to avenge the
death of their master Asano Naganori, on February 3, 1703, entered stealthily into
the house of Yoshinaka Kiro and killed him treacherously.
It is an ideology which dignifies harakiri or sepukku, the most bloody and repugnant
from suicide, and on September 13, 1912, on the occasion of the funeral of Emperor
Meiji, induced General Maresuke Nogi and his wife to practice the abhorrent
"junshi", and example of which is offered to us in the following words of a historian:
When the Emperor's brother Yamato Hiko, died in 2 B. C., we are told that,
following the occasion, his attendants were assembled to from the hito-bashira
(pillar-men) to gird the grave. They were buried alive in circle up to the neck
around the thomb and "for several days they died not, but wept and wailed day
night. At last they died not, but wept and wailed day night. At last they did not

rotted. Dogs and cows gathered and ate them." (Gowen, an Outline of History of
Japan, p. 50.)
The practice shows that the Japanese are the spiritual descendants of the
Sumerians, the ferocious inhabitants of Babylonia who, 3500 years B. C., appeared
in history as the first human beings to honor their patesis by killing and entombing
with him his window, his ministers, and notable men and women of his kingdom,
selected by the priests to partake of such abominable honor. (Broduer, The Pageant
of Civilization, pp. 62-66.)
General MacArthur sought to annul completely the officials acts of the governments
under the Japanese occupation, because they were done at the shadow of the
Japanese dictatorship, the same which destroyed the independence of Korea, the
"Empire of Morning Frehsness"; they violated the territorial integrity of China,
invaded Manchuria, and initiated therein the deceitful system of puppet
governments, by designating irresponsible Pu Yi as Emperor of Manchukuo; they
violated the trusteeship granted by the Treaty of Versailles by usurping tha
mandated islands in the Pacific; they initiated that they call China Incident, without
war declaration, and, therefore, in complete disregard of an elemental international
duty; they attacked Pearl Harbor treacherously, and committed a long series of the
flagrant violations of international law that have logically bestowed on Japan the
title of the bandit nation in the social world.
The conduct of the Japanese during the occupation shows a shocking an anchronism
of a modern world power which seems to be re-incarnation of one whose primitive
social types of pre-history, whose proper place must be found in an archeological
collection. It represents a backward jump in the evolution of ethical and juridical
concepts, a reversion that, more than a simple pathological state, represents a
characteristics and well defined case of sociological teratology.
Since they entered the threshold of our capital, the Japanese had announced that
for every one of them killed they would kill ten prominent Filipinos. They promised
to respect our rights by submitting us to the wholesale and indiscriminate slapping,
tortures, and atrocious massacres. Driving nails in the cranium, extraction of teeth
and eyes, burnings of organs, hangings, diabolical zonings, looting of properties,
establishments of redlight districts, machine gunning of women and children,
interment of alive persons, they are just mere preludes of the promised paradised
that they called "Greater East Asia Co-Prosperity Sphere".
They promised religious liberty by compelling all protestant sects to unite, against
the religious scruples and convictions of their members, in one group, and by
profaning convents, seminaries, churches, and other cult centers of the Catholics,
utilizing them as military barracks, munitions dumps, artillery base, deposits of
bombs and gasoline, torture chambers and zone, and by compelling the

government officials and employees to face and to bow in adoration before that
caricature of divinity in the imperial palace of Tokyo.
The Japanese offered themselves to be our cultural mentors by depriving us of the
use of our schools and colleges, by destroying our books and other means of
culture, by falsifying the contents of school texts, by eliminating free press, the
radio, all elemental principles of civilized conduct, by establishing classes of
rudimentary Japanese so as to reduce the Filipinos to the mental level of the rude
Japanese guards, and by disseminating all kinds of historical, political, and cultural
falsehoods.
Invoking our geographical propinquity and race affinity, they had the insolence of
calling us their brothers, without the prejuce of placing of us in the category of
slaves, treating the most prominent Filipinos in a much lower social and political
category than that of the most ignorant and brutal subject of the Emperor.
The civil liberties of the citizens were annulled. Witnesses and litigants were slapped
and tortured during investigations. In the prosecuting attorney's offices, no one was
safe. When the Japanese arrested a person, the lawyer who dared to intercede was
also placed under arrest. Even courts were not free from their dispotic members.
There were judges who had to trample laws and shock their conscience in order not
to disgust a Nipponese.
The most noble of all professions, so much so that the universities of the world
could not conceive of higher honor that may be conferred than that of Doctor of
Laws, became the most despised. It was dangerous to practice the profession by
which faith in the effectiveness of law is maintained; citizens feel confident in the
protection of their liberties, honor, and dignity; the weak may face the powerful; the
lowest citizen is not afraid of the highest official; civil equality becomes reality;
justice is admnistered with more efficiency; and democracy becomes the best
system of government and the best guaranty for the welfare and happiness of the
individual human being. In fact, the profession of law was annulled, and the best
lawyers for the unfortunate prisoners in Fort Santiago and other centers of torture
were the military police, concubines, procurers, and spies, the providers of war
materials and shameful pleasures, and the accomplices in fraudulent transactions,
which were the specialty of many naval and military Japanese officers.
The courts and Filipino government officials were completely helpless in the
question of protecting the constitutional liberties and fundamental rights of the
citizens who happen to be unfortunate enough to fall under the dragnet of the
hated kempei. Even the highest government officials were not safe from arrest and
imprisonment in the dreaded military dungeons, where torture or horrible death
were always awaiting the defenseless victim of the Japanese brutality.

May any one be surprised if General MacArthur decided to annul all the judicial
processes?
The evident policy of the author of the October Proclamation can be seen if we take
into consideration the following provisions of the Japanese Constitution:
ART. 57. The Judicature shall be exercised by the Courts of Law according to law,
in the name of the Emperor.
ART. 61. No suit at law, which relates to rights alleged to have been infringed by
the illegal measures of the executive authority .. shall be taken cognizance of by
a Court of Law.
INTERNATIONAL LAW
Nobody dared challenge the validity of the October Proclamation.
Nobody dared challenge the authority of the military Commander in Chief who
issued it.
Certainly not because of the awe aroused by the looming figure of General of the
Army Douglas MacArthur, the Allied Supreme Commander, the military hero, the
greatest American general, the Liberator of the Philippines, the conqueror of Japan,
the gallant soldier under whose authority the Emperor of the Japan, who is
supposed to rule supreme for ages as a descendant of gods, is receiving orders with
the humility of a prisoner of war.
No challenge has been hurled against the proclamation or the authority of the
author to issue it, because everybody acknowledges the full legality of its issuance.
But because the proclamation will affect the interest and the rights of a group of
individuals, and to protect the same, a way is being sought to neutralize the effect
of the proclamation.
The way found is to invoke international law. The big and resounding word is
considered as a shibboleth powerful enough to shield the affected persons from the
annulling impact.
Even then, international law is not invoked to challenge the legality or authority of
the proclamation, but only to construe it in a convenient way so that judicial
processes during the Japanese occupation, through an exceptional effort of the
imagination, might to segregated from the processes mentioned in the
proclamation.

An author said that the law of nations, the "jus gentiun", is not a fixed nor
immutable science. On the country, it is developing incessantly, it is perpetually
changing in forms. In each turn it advances or recedes, according to the vicissitudes
of history, and following the monotonous rythm of the ebb and rise of the tide of the
sea.
Le driot des gens, en effet, n'est point une science fixe est immuable: bein au
contraire, il se developpe sans cesse, il change eternellement de formes; tour il
avance et il recule, selon less vicissitudes de histoire et suivan un rhythm
monotone qui est comme le flux et le reflux d'un mer. (M. Revon, De l'existence
du driot international sous la republique romain.)
Another author has this to say:
International law, if it is or can be a science at all, or can be, at most a
regulative science, dealing with the conduct of States, that is, human beings in
a certain capacity; and its principles and prescriptions are not, like those of
science proper, final and unchanging. The substance of science proper is
already made for man; the substance of international is actually made by man,
and different ages make differently." (Coleman Philippson, The International
Law and Custom of Ancient Greece of Rome, Vol. I, p. 50.)
"Law must be stable, and yet it cannot stand still." (Pound, Interpretations of Legal
History., p. 1. ) Justice Cardozo adds: "Here is the great antimony confronting us at
every turn. Rest and motion, unrelieved and unchecked, are equally destructive.
The law, like human kind, if life is to continue, must find some path compromise."
(The Growth of Law p. 2.) Law is just one of the manifestations of human life, and
"Life has relations not capable of division into inflexible compartments. The moulds
expand and shrink," (Glanzer vs.Shepard, 233 N.Y., 236, 241.)
The characteristic plasticity of law is very noticeable, much more than in any other
department, in international law.
In a certain matters it is clear we have made substantial progress, but in other
points, he (M. Revon) maintains, we have retrograded; for example, in the
middle ages the oath was not always respected as faithfully as in ancient Rome;
and nearer our own times, in the seventeenth century, Grotius proclaims the
unquestioned right of the belligerents to massacre the women and the children
of the enemy; and in our more modern age the due declaration of war which
Roman always conformed to has not been invariably observed. (Coleman
Philippson, The International Law and Custom of Ancient Greece and Rome, Vol.
I, p. 209.)

Now let us see if any principle of international law may effect the enforcement of
the October Proclamation.
In this study we should be cautioned not to allow ourselves to be deluded by
generalities and vagueness which are likely to lead us easily to error, in view of the
absence of codification and statutory provisions.
Our Constitution provides:
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. (Sec. 3, Art. II.)
There being no codified principles of international law, or enactments of its rules, we
cannot rely on merely legal precepts.
With the exception of international conventions and treaties and, just recently, the
Charter of the United Nations, adopted in San Francisco Conference on June 26,
1945, we have to rely on unsystemized judicial pronouncements and reasonings and
on theories, theses, and propositions that we may find in the works of authors and
publicists.
Due to that characteristic pliability and imprecision of international law, the drafters
of our Constitution had to content themselves with "generally accepted principles."
We must insists, therefore, that the principles should be specific and unmistakably
defined and that there is definite and conclusive evidence to the effect that they
generally accepted among the civilized nations of the world and that they belong to
the current era and no other epochs of history.
The temptation of assuming the role of a legislator is greater in international law
than in any other department of law, since there are no parliaments, congresses,
legislative assemblies which can enact laws and specific statutes on the subject. It
must be our concern to avoid falling in so a great temptation, as its, dangers are
incalculable. It would be like building castles in the thin air, or trying to find an exit
in the thick dark forest where we are irretrievably lost. We must also be very careful
in our logic. In so vast a field as international law, the fanciful wandering of the
imagination often impair the course of dialistics.
THE OCTOBER PROCLAMATION AND INTERNATIONAL LAW
Is there any principle of international law that may effect the October Proclamation?

We tried in vain to find out in the majority opinion anything as to the existence of
any principle of international law under which the authority of General MacArthur to
issue the proclamation can effectively be challenged.
No principle of international law has been, or could be invoked as a basis for
denying the author of the document legal authority to issue the same or any part
thereof.
We awaited in vain for any one to dare deny General MacArthur the authority, under
international law, to declare null and void and without effect, not only the laws and
regulations of the governments under the Japanese regime, but all the processes of
said governments, including judicial processes.
If General MacArthur, as commander in Chief of the American Armed Forces of
Liberation, had authority, full and legal, to issue the proclamation, the inescapable
result will be the complete viodance and nullity of all judicial processes, procedures,
and proceedings of all courts under the Japanese regime.
But those who are sponsoring the cause of said judicial processes try to achieve
their aim, not by direct means, but by following a tortuous side-road.
They accept and recognize the full authority of the author of the proclamation to
issue it and all its parts, but they maintain that General MacArthur did not and could
not have in mind the idea of nullifying the judicial processes during the Japanese
occupation, because that will be in violation of the principles of international law.
If we follow the reasoning of the majority opinion we will have to reach the
conlusion that the world "processes" does not appear at all in the October
Proclamation.
It is stated more than once, and reiterated with dogmatic emphasis, that under the
principles of international law the judicial processes under an army occupation
cannot be invalidated.
But we waited in vain for the specific principle of international law, only one of those
alluded to, to be pointed out to us.
If the law exist, it can be pointed out. If the principle exists, it can stated specifically.
The word is being used very often in plural, principles, but we need only one to be
convinced.
The imagined principles are so shrouded in a thick maze of strained analogies and
reasoning, that we confess our inability even to have a fleeting glimpse at them
through their thick and invulnerable wrappers.

At every turn international law, the blatant words, are haunting us with the
deafening bray of a trumpet, but after the transient sound has fled away, absorbed
by the resiliency of the vast atmosphere, the announced principles, which are the
very soul of international law, would disappear too with the lighting speed of a
vanishing dream.
WEAKNESS OF THE MAJORITY POSITION
In the majority opinion three questions are propounded: first, whether judicial acts
and proceedings during the Japanese occupation are valid even after liberation;
second whether the October Proclamation had invalidated all judgement and judicial
proceedings under the Japanese regime; and third, whether the present courts of
the Commonwealth may continue the judicial proceedings pending at the time of
liberation.
As regards the first question, it is stated that it is a legal tourism in political and
international law that all acts of ade facto government are good and valid, that the
governments established during the Japanese occupation. that is, the Philippine
Executive Commission and the Republic of the Philippines, were de facto
governments, and that it necessarily follows that the judicial acts and proceedings
of the courts of those governments, "which are not of a political complexion," were
good and valid, and by virtue of the principle of postliminium, remain good and valid
after the liberation.
In the above reasoning we will see right away how the alleged legal truism in
political and international law, stated as a premise in a sweeping way, as an
absolute rule, is immediately qualified by the exception as to judicial acts and
proceedings which are of a "political complexion."
So it is the majority itself which destroys the validity of what it maintains as a legal
truism in political and international law, by stating from the beginning of the
absolute proposition that all acts and proceedings of the legislative, executive, and
judicial departments of a de facto governments are good and valid.
It is be noted that no authority, absolutely no authority, has been cited to support
the absolute and sweeping character of the majority proposition as stated in their
opinion.
No authority could be cited, because the majority itself loses faith in the validity of
such absolute and sweeping proposition, by establishing an unexplained exception
as regards the judicial acts and proceedings of a "political complexion."
Besides, it is useless to try to find in the arguments of the majority anything that
may challenge the power, the authority of a de jure government to annul the official

acts of a de facto government, or the legal and indisputable authority of the

restored legitimate government to refuse to recognize the official acts, legislative,
executive and judicial, of the usurping government, once the same is ousted.
As to the second question, the majority argues that the judicial proceedings and
judgments of the de factogovernments under the Japanese regime being good and
valid, "it should be presumed that it was not, and could not have been, the intention
of General Douglas MacArthur to refer to judicial processes, when he used the last
word in the October Proclamation, and that it only refers to government processes
other than judicial processes or court proceedings."
The weakness and absolute ineffectiveness of the argument are self-evident.
It is maintained that when General MacArthur declared the processes of the
governments under the Japanese regime null and void, he could not refer to judicial
processes, because the same are valid and remained so under the legal truism
announced by the majority to the effect that, under political and international law,
all official acts of a de facto government, legislative, executive or judicial, are valid.
But we have seen already how the majority excepted from said legal truism the
judicial processes of "political complexion."
And now it is stated that in annulling the processes of the governments under
Japanese occupation, General MacArthur referred to "processes other than judicial
processes."
That is, the legislative and executive processes.
But, did not the majority maintain that all acts and proceedings of legislative and
executive departments of a de facto governments are good and valid? Did it not
maintain that they are so as a "legal truism in political and international law?"
Now if the reasoning of the majority to the effect that General MacArthur could not
refer to judicial processes because they are good and valid in accordance with
international law, why should the same reasoning not apply to legislative and
executive processes?
Why does the majority maintain that, notwithstanding the fact that, according that
said legal truism, legislative and executive official acts of de facto governments are
good and valid, General MacArthur referred to the latter in his annulling
proclamation, but not to judicial processes?

If the argument is good so as to exclude judicial processes from the effect of the
October Proclamation, we can see no logic in considering it bad with respect to
legislative and executive processes.
If the argument is bad with respect to legislative and executive processes, there is
no logic in holding that it is not good with respect to judicial processes.
Therefore, if the argument of the majority opinion is good, the inevitable conclusion
is that General MacArthur did not declare null and void any processes, at all,
whether legislative processes, executive processes, or judicial processes, and that
the word "processes" used by him in the October Proclamation is a mere surplusage
or an ornamental literary appendix.
The absurdity of the conclusion unmasks the utter futility of the position of the
majority, which is but a mere legal pretense that cannot stand the least analysis or
the test of logic.
A great legal luminary admonished that we must have courage to unmasks pretense
if we are to reach a peace that will abide beyond the fleeting hour.
It is admitted 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 exigencies of the military
occupation demand such action," but it is doubted whether the commanding
general of the army of the restored legitimate government can exercise the same
broad legislative powers.
We beg to disagree with a theory so unreasonable and subversive.
We cannot accept that the commanding general of an army of occupation, of a
rebellious army, of an invading army, or of a usurping army, should enjoy greater
legal authority during the illegal, and in the case of the Japanese, iniquitous and
bestial occupation, than the official representative of the legitimate government,
once restored in the territory wrested from the brutal invaders and aggressors. We
cannot agree with such legal travesty.
Broad and unlimited powers are granted and recognized in the commanding general
of an army of invasion, but the shadow of the vanishing alleged principle of
international law is being brandished to gag, manacle, and make completely
powerless the commander of an army of liberation to wipe out the official acts of
the government for usurpation, although said acts might impair the military
operation or neutralize the public policies of the restored legitimate government.

We are not unmindful of the interest of the persons who might be adversely affected
by the annulment of the judicial processes of the governments under the Japanese
regime, but we cannot help smiling when we hear that chaos will reign or that the
world will sink.
It is possible that some criminals will be let loose unpunished, but nobody has ever
been alarmed that the President, in the exercise of his constitutional powers of
pardon and amnesty, had in the past released many criminals from imprisonment.
And let us not forget that due to human limitations, in all countries, under all
governments, in peace or in war, there were, there are, and there will always be
unpunished criminals, and that situation never caused despair to any one.
We can conceive of inconveniences and hardships, but they are necessary
contributions to great and noble purposes. Untold sacrifices were always offered to
attain high ideals and in behalf of worthy causes.
We cannot refrain from feeling a paternal emotion for those who are trembling with
all sincerity because of the belief that the avoidance of judicial proceedings of the
governments under the Japanese regime "would paralyze the social life of the
country." To allay such fear we must remind them that the country that produced
many great hereos and martyrs; that contributed some of highest morals figures
that humanity has ever produced in all history; which inhabited by a race which was
able to traverse in immemorial times the vast expanses of the Indian Ocean and the
Pacific with inadequate means of navigation, and to inhabit in many islands so
distantly located, from Madagascar to the eastern Pacific; which made possible the
wonderful resistance of Bataan and Corregidor, can not have a social life so frail as
to be easily paralyzed by the annulment of some judicial proceedings. The Japanese
vandalisms during the last three years of nightmares and bestial oppression, during
the long period of our national slavery, and the wholesale massacres and
destructions in Manila and many other cities and municipalities and populated
areas, were not able to paralyze the social life of our people. Let us not loss faith so
easily in the inherent vitality of the social life of the people and country of Rizal and
Mabini.
It is insinuated that because of the thought that the representative of the restored
sovereign power may set aside all judicial processes of the army of occupation, in
the case to courts of a future invasions, litigants will not summit their cases to
courts whose judgement may afterwards be annulled, and criminals would not be
deterred from committing offenses in the expectancy that they may escape penalty
upon liberation of the country. We hope that Providence will never allow the
Philippines to fall again under the arms of an invading army, but if such misfortune
will happen, let the October Proclamation serve as a notice to the ruthless invaders
that the official acts of the government of occupation will not merit any recognition
from the legitimate government, especially if they should not conduct themselves,

as exemplified by the Japanese, in accordance with the rules of action of a civilized

state.
One conclusive evidence of the untenableness of the majority position is the fact
that it had to resort to Executive Order No. 37, issued on March 10, 1945, providing
"that all cases that have heretofore been appealed to the Court of Appeals shall be
transmitted to the Supreme Court for final decision." The far-fetched theory is
advanced that this provision impliedly recognizes the court processes during the
Japanese military occupation, on the false assumption that it refers to the Court of
Appeals existing during the Japanese regime. It is self-evident that the Executive
Order could have referred only to the Commonwealth Court of Appeals, which is the
one declared abolished in said order. Certainly no one will entertain the absurd idea
that the President of the Philippines could have thought of abolishing the Court of
Appeals under the government during the Japanese occupation. Said Court of
Appeals disappeared with the ouster of the Japanese military administration from
which it derived its existence and powers. The Court of Appeals existing on March
10, 1945, at the time of the issuance of Executive Order No. 37, was the
Commonwealth Court of Appeals and it was the only one that could be abolished.
Without discussing the correctness of principle stated the majority opinion quotes
from Wheaton the following: "Moreover when it is said that occupier's acts are valid
and under international law should not be abrogated by the subsequent conqueror,
it must be remembered that on 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 stored government, but the matter
can hardly be put further than this." (Wheaton, International Law, War, 7th English
edition of 1944, p. 245)
Then it says that there is no 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 the judicial of the government established by the belligerent
occupant.
It is evident that the statement just quoted is a complete diversion from the
principle stated in the in an unmistakable way by Wheaton, who says in definite
terms that "it must be remembered that no crucial instances exist to show that if his
acts (the occupant's) should be reversed, any international wrong would be
committed."
It can be clearly seen that Wheaton does not make any distinction or point out any
exception.

But in the majority opinion the principle is qualified, without stating any reason
therefore, by limiting the right of the restored government to annul "most of the
acts of the occupier" and "processes other than judicial."
The statement made by the respondent judge after quoting the above-mentioned
principle, as stated by Wheaton, to the effect that whether the acts of military
occupant should be considered valid or not, is a question that is up to the restored
government to decide, and that there is no rule of international law that denies to
the restored government the right to exercise its discretion on the matter, is quoted
without discussion in the majority opinion.
As the statement is not disputed, wee are entitled to presume that it is concurred in
and, therefore, the qualifications made in the statement in the majority opinion
seem to completely groundless.
THE DUTIES IMPOSED ON OCCUPANT ARMY ARE NOT LIMITATIONS TO THE RIGHTS
OF THE LEGITIMATE GOVERNMENT
The majority opinion is accumulating authorities to show the many duties imposed
by international law on the military occupant of an invaded country.
And from said duties it is deduced that the legitimate government, once restored in
his own territory, is bound to respect all the official acts of the government
established by the usurping army, except judicial processes political complexion.
The reasoning calls for immediate opposition. It is absolutely contrary to all
principles of logic.
Between the duties imposed in the military occupant and the legal prerogatives of
the legitimate government there are no logical relationship or connection that might
bind the ones with the others.
The military occupants is duty bound to protect the civil rights of the inhabitants,
but why should the legitimate government necessarily validate the measures
adopted by the said occupant in the performance of this duty, if the legitimate
government believes his duty to annul them for weighty reasons?
The military occupant is duty bound to establish courts of justice. Why should the
legitimate government validate the acts of said courts, if it is convinced that said
courts were absolutely powerless, as was the case during the Japanese occupation,
to stop the horrible abuses of the military police, to give relief to the victims of
zoning and Fort Santiago tortures, to protect the fundamental human rights of the
Filipinos life, property, and personal freedom?

The majority opinion recognizes in the military occupant the power to annul the
official acts of the ousted and supplanted legitimate government, a privilege which
is inversely denied to the last. This preference and predilection in favor of the
military occupant, that is in favor of the invader and usurper, and against the
legitimate government, is simply disconcerting, if we have to say the least.
PRESUMPTIONS AND SUPPOSITIONS AGAINST TRUTH AND FACTS
The invading military occupant is duty bound to establish and maintain courts of
justice in the invaded territory, for the protection of the inhabitants thereof. It is
presumed that the restored legitimate government will respect the acts of said
courts of the army of occupation. Therefore, it is a principle of international law that
said acts are valid and should be respected by the legitimate government. It is
presumed that General MacArthur is acquainted with such principle, discovered or
revealed through presumptive operations, and it is presumed that he had not the
intention of declaring null and void the judicial processes of the government during
the Japanese regime. Therefore, his October Proclamation, declaring null and void
and without effect "all processes" of said governments, in fact, did not annul the
Japanese regime judicial processes.
So run the logic of the majority.
They don't mind the that General MacArthur speaks in the October Proclamation as
follows:
NOW, THEREFORE, I, Douglas MacArthur, General, United States Army, as
Commander-in-Chief of the military forces committed to the liberation of the
Philippines, do hereby proclaim and declare:
xxx

xxx

xxx

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. (emphasis
supplied.)
General MacArthur says categorically "all processes", but the majority insists on
reading differently, that, is: "NOT ALL processes." The majority presume, suppose,
against the unequivocal meaning of simple and well known words, that when
General MacArthur said "all processes", in fact, he said "not all processes", because
it is necessary, by presumption, by supposition, to exclude judicial processes.
If where General MacArthur says "all", the majority shall insist on reading "not all", it
is impossible to foresee the consequences of such so stubborn attitude, but it is

possible to understand how they reached the unacceptable possible conclusion

which we cannot be avoid opposing and exposing.
Are we to adopt and follow the policy of deciding cases submitted to our
consideration, by presumption and suppositions putting aside truths and facts? Are
we to place in the documents presented to us, such as the October Proclamation,
different words than what are written therein? Are we to read "not all", where it is
written "all"?
We are afraid to such procedure is not precisely the most appropriate to keep public
confidence in the effectiveness of the administration of justice.
That is why we must insists that in the October Proclamation should be read what
General MacArthur has written in it, that is, that, besides laws and regulations, he
declared and proclaimed null and void "ALL PROCESSES", including naturally judicial
processes, of the governments under the Japanese regime.
THE COMMONWEALTH COURTS HAVE NO JURISDICTION TO CONTINUE JAPANESE
REGIME JUDICIAL PROCESSES
Now we come to the third and last question propounded in the majority opinion.
The jurisdiction of the Commonwealth tribunals is defined, prescribed, and
apportioned by legislative act.
It is provided so in our Constitution. (Section 2, Article VIII.)
The Commonwealth courts of justice are continuations of the courts established
before the inauguration of the Commonwealth and before the Constitution took
effect on November 15, 1935. And their jurisdiction is the same as provided by
existing laws at the time of inauguration of the Commonwealth Government.
Act No. 136 of the Philippine Commission, known as the Organic Act of the courts of
justice of the Philippines, is the one that defines the jurisdiction of justice of the
peace and municipal courts, Courts of First Instance, and the Supreme Court. It is
not necessary to mention here the jurisdiction of the Court of Appeals, because the
same has been abolished by Executive Order No. 37.
No provision may be found in Act. No. 136, nor in any other law of the Philippines,
conferring on the Commonwealth tribunals jurisdiction to continue the judicial
processes or proceedings of tribunals belonging to other governments, such as the
governments established during the Japanese occupation.

The jurisdiction of our justice of the peace and municipal courts is provided in
section 68, chapter V, of Act No. 136. The original and appellate jurisdiction of the
Courts of First Instance is provided in the sections 56, 57, Chapter IV, of Act No. 136.
The original and appellate jurisdiction of the Supreme Court is provided in 17 and
18, Chapter II, of the same Act. The provisions of the above-cited do not authorize,
even implicitly, any of the decisions and judgements of tribunals of the
governments, nor to continue the processes or proceedings of said tribunals.
NECESSITY OF ENABLING ACT UNDER THE LEGAL DOCTRINE PREVAILING IN THE
PHILIPPINES AND IN THE UNITED STATES
Taking aside the question as to whether the judicial processes of the government
established during the Japanese occupation should be considered valid or not, in
order that said processes could be continued and the Commonwealth tribunals
could exercise proper jurisdiction to continue them, under the well- established legal
doctrine, prevailing not only in the Philippines, but also in the proper enabling law.
Almost a half a century ago, in the instructions given by President McKinley on April
7, 1900, for the guidance of the Philippine Commission, it was stated that, in all the
forms of the govenment and administrative provisions which they were authorized
to prescribed, the Commission should bear in mind that the government which they
were establishing was designed not for the satisfaction of the Americans or for the
expression of their of their theoretical views, but for the happiness, peace and
prosperity of the people of the Philippines, and the measures adopted should be
made to conform to their customs, their habits, and even their prejudices, to the
fullest extent consistent with the accomplishment of the indispensable requisites of
just and effective government.
Notwithstanding the policy so outlined, it was not enough for the Philippine
Commission to create and establish the courts of justice provided in Act No. 136, in
order that said tribunals could take cognizance and continue the judicial
proceedings of the tribunals existing in the Philippines at the time the American
occupation.
It needed specific enabling provisions in order that the new tribunals might continue
the processes pending in the tribunals established by the Spaniards, and which
continued to function until they were substituted by the courts created by the
Philippine Commission.
So it was done in regards to the transfer of the cases pending before the Spanish
Audiencia to the newly created Supreme Court, in sections 38 and 39 of Act No. 136
quoted as follows:

SEC. 38. Disposition of causes, actions, proceedings, appeals, records, papers,

and so forth, pending in the existing Supreme Court and in the "Contencioso
Administravo." All records, books, papers, causes, actions, proceedings, and
appeals logged, deposited, or pending in the existing Audiencia or Supreme
Court, or pending by appeal before the Spanish tribunal called "Contencioso
Administravo," are transferred to the Supreme Court above provided for which,
has the same power and jurisdiction over them as if they had been in the first
instance lodged, filed, or pending therein, or, in case of appeal, appealed
thereto.
SEC. 39. Abolition of existing Supreme Court. The existing Audiencia or
Supreme Court is hereby abolished, and the Supreme Court provided by this Act
is substituted in place thereof.
Sections 64 and 65 of the same Act allowed the same procedure as regards the
transfer of cases and processes pending in the abolished Spanish Courts of First
Instance to the tribunals of the same name established by the Philippine
Commission.
SEC. 64. Disposition of records, papers, causes, and appeals, now pending in
the existing Courts of First Instance. All records, books, papers, actions,
proceedings, and appeals lodged, deposited, or pending in the Court of First
Instance as now constituted of or any province are transferred to the Court of
First Instance of such province hereby established, which shall have the same
power and jurisdiction over them as if they had been primarily lodged,
deposited, filed, or commenced therein, or in case of appeal, appealed thereto.
SEC. 65. Abolition of existing Courts of First Instance. The existing Courts First
Instance are hereby abolished, and the Courts of First Instance provided by this
Act are substituted in place thereof.
The same procedure has been followed by the Philippine Commission eventhough
the courts of origin of the judicial processes to be transferred and continued
belonged to the same government and sovereignty of the courts which are
empowered to continue said processes.
So section 78 of Act No. 136, after the repeal of all acts conferring upon American
provost courts in the Philippines jurisdiction over civil actions, expressly provided
that said civil actions shall be transferred to the newly created tribunals.
And it provided specifically that "the Supreme Court, Courts of the First Instance and
courts of the justice of the peace established by this Act (No. 136) are authorized to
try and determine the actions so transferred to them respectively from the provost

courts, in the same manner and with the same legal effect as though such actions
had originally been commenced in the courts created" by virtue of said Act.
MUNICIPAL COURTS UNDER ACT NO. 183
On July 30, 1901, the Philippine Commission enacted the Organic Act of the City of
Manila, No. 183.
Two municipal courts for the city were created by section 40 of said Act, one for the
northern side of Pasig River and the other for the southern side.
They were courts with criminal jurisdiction or identical cases under the jurisdiction
of the justices of the peace then existing in Manila. Although both courts were of the
same jurisdiction, in order that the criminal cases belonging to the justice of the
peace courts may be transferred to the municipal courts just created, and the
proceedings may be continued by the same, the Philippine Commission considered
it necessary to pas the proper enabling act.
So on August 5, 1901, it enacted Act No. 186, section 2 of which provides that all
criminal cases and proceedings pending in the justices of the peace of Manila are
transferred to the municipal courts, which are conferred the jurisdiction to continue
said cases and proceedings.
THE CABANTAG CASE
On August 1, 1901, Narciso Cabantag was convicted of murder by a military
commission. (Cabantag vs. Wolfe, 6 Phil., 273.) The decision was confirmed on
December 10, 1901, and his execution by hanging was set for January 12,1902. .
On December 26, 1901, he fled, but surrendered to the authorities on July 18, 1902.
The Civil Governor on December 2, 1903, commuted the death penalty to 20 years
imprisonment. The commutation was approved by the Secretary of War, following
instructions of the President.
Cabantag filed later a writ of habeas corpus on the theory that, with the abolition of
the military commission which convicted him, there was no existing tribunal which
could order the execution of the penalty of imprisonment.
The Supreme Court denied the writ, but stated that, if the petitioner had filed the
writ before the enactment of Act No. 865, the question presented to the Supreme
Court would have been different.
Act No. 865, enacted on September 3, 1903, is enabling law, wherein it is provided
that decisions rendered by the provost courts and military commission shall be

ordered executed by the Courts of First Instance in accordance with the procedure
outlined in said Act.
It is evident from the foregoing that this Supreme Court has accepted and confirmed
the doctrine of the necessity of an enabling act in order that our Courts of First
Instance could exercise jurisdiction to execute the decision of the abolished provost
courts and military commission.
It is evident that the doctrine is applicable, with more force, to the judicial processes
coming from governments deriving their authority from a foreign enemy state.
THE DOCTRINE IN THE UNITED STATES
It is also evident that the Congress of the United States, by enacting the Bill of the
Philippines on July 1, 1902, confirmed also the same doctrine.
In effect, in section 9 of said Act, the Congress approved what the Philippine
Commission did as to the jurisdiction of the courts established and transfer of cases
and judicial processes, as provided in Acts Nos. 136, 186, and 865.
The same doctrine was adopted by the United States government as part of its
international policy, as could be seen in Article XII of the Treaty concluded with
Spain on December 10, 1898, in Paris.
Even in 1866 the Congress of the United States followed the same doctrine.
The suit, shown by the record, was originally instituted in the District Court of
the United States for the District of Louisiana, where a decree was rendered for
the libellant. From the decree an appeal was taken to the Circuit Court, where
the case was pending, when in 1861, the proceedings of the court were
interrupted by the civil war. Louisiana had become involved in the rebellion, and
the courts and officers of the United States were excluded from its limits. In
1862, however, the National authority had been partially reestablished in the
State, though still liable to the overthrown by the vicissitudes of war. The troops
of the Union occupied New Orleans, and held military possession of the city and
such other portions of the State as had submitted to the General Government.
The nature of this occupation and possession was fully explained in the case of
The Vinice.
Whilst it continued, on the 20th of October, 1862, President Lincoln, by
proclamation, instituted a Provisional Court of the State of Louisiana, with
authority, among other powers, to hear, try, and determine all causes in
admiralty. Subsequently, by consent of parties, this cause was transferred into
the Provisional Court thus, constituted, and was heard, and a decree was again

rendered in favor of the libellants. Upon the restoration of civil authority in the
State, the Provincial Court, limited in duration, according to the terms of the
proclamation, by the event, ceased to exist.
On the 28th of July, 1866, Congress enacted that all suits, causes and
proceedings in the Provisional Court, proper for the jurisdiction of the Circuit
Court of the United States for the Eastern District of Louisiana, should be
transferred to that court, and heard, and determined therein; and that all
judgements, orders, and decrees of the Provisional Court in causes transferred
to the Circuit Court should at once become the orders, judgements, and decrees
of that court, and might be enforced, pleaded, and proved accordingly.
It is questioned upon these facts whether the establishment by the President of
a Provisional Court was warranted by the Constitution.
xxx

xxx

xxx

We have no doubt that the Provisional Court of Louisiana was properly

established by the President in the exercise of this constitutional authority
during war; or that Congress had power, upon the close of the war, and the
dissolution of the Provisional Court, to provide for the transfer of cases pending
in that court, and of its judgement and decrees, to the proper courts of the
United States. (U. S. Reports, Wallace, Vol. 9, The Grapeshot, 131-133.)
JUDGEMENTS OF THE REBEL COURTS IN LOUISIANA WERE VALIDATED BY
CONSTITUTIONAL PROVISION
During the civil war in 1861, the prevailing rebel forces established their own
government in Louisiana.
When the rebel forces were overpowered by the Union Forces and the de facto
government was replaced by the de jure government, to give effect to the
judgments and other judicial acts of the rebel government, from January 26, 1861,
up to the date of the adoption of the State Constitution, a provision to said effect
was inserted in said document.
Section 149 of the Louisiana Constitution reads as follows:
All the rights, actions, prosecutions, claims, contracts, and all laws in force at
the time of the adoption of this Constitution, and not inconsistent therewith,
shall continue as if it had not been adopted; all judgments and judicial sales,
marriages, and executed contracts made in good faith and in accordance with
existing laws in this State rendered, made, or entered into, between the 26th
day of January, 1861, and the date when this constitution shall be adopted, are

hereby declared to be valid, etc. (U. S. Report, Wallace, Vol. 22, Mechanics' etc.
Bank vs. Union Bank, 281.)
EVEN AMONG SISTERS STATES OF THE UNITED STATES JUDGEMENTS ARE NOT
EXECUTORY
The member states of the United States of America belong to the same nation, to
the country, and are under the same sovereignty.
But judgements rendered in one state are not executory in other states.
To give them effect in other states it is necessary to initiate an original judicial
proceedings, and therein the defendants in the domestic suit may plead bar the
sister state judgement puis darrien continuance. (Wharton, on the Conflict of Laws,
Vol. II, p. 1411.)
Under the Constitution of the United States, when a judgement of one state in
the Union is offered in a court of a sister state as the basis of a suit nil debet
cannot be pleaded. The only proper plea is nul tielrecord. (Id., p. 1413.).
It is competent for the defendant, however, to an action on a judgement of a
sister state, as to an action on a foreign judgement, to set up as a defense, want
of jurisdiction of the court rendering the judgement; and, as indicating such
want of jurisdiction, to aver by plea that the defendant was not an inhabitant of
the state rendering the judgement, and had not been served with process, and
did not enter his appearance; or that the attorney was without authority to
appear. (Id., pp. 1414-1415.)
The inevitable consequence is that the courts of the Commonwealth of the
Philippines, in the absence of an enabling act or of an express legislative grant,
have no jurisdiction to take cognizance and continue the judicial processes,
procedures, and proceedings of the tribunals which were created by the Japanese
Military Administration and functioned under the Vargas Philippine Executive
Commission of the Laurel Republic of the Philippines, deriving their authority from
the Emperor, the absolute ruler of Japan, the invading enemy, and not from the
Filipino people in whom, according to the Constitution, sovereignty resides, and
from whom all powers of government emanate.
The position of Honorable Asenio P. Dizon, the respondent judge of the Court of the
First Instance of Manila in declaring himself without jurisdiction nor authority to
continue the proceedings which provoked the present controversy, being a judicial
process of a Japanese sponsored government, is absolutely correct, under the legal
doctrines established by the United States and the Philippine Government, and
consistently, invariably, and without exception, followed by the same.

If we accept, for the sake of argument, the false hypothesis that the Commonwealth
tribunals have jurisdiction to continue the judicial processes left pending by the
courts of the governments established under the Japanese regime, the courts which
disappeared and, automatically, ceased to function with the ouster of the enemy,
the position of the Judge Dizon, in declining to continue the case, is still
unassailable, because, for all legal purposes, it is the same as if the judicial
processes in said case were not taken at all, as inevitable result of the sweeping and
absolute annulment declared by the General MacArthur in the October
Proclamation.
In said proclamation it is declared in unmistakable and definite terms that "ALL
PROCESSES" of the Japanese sponsored governments "ARE NULL AND VOID AND
WITHOUT LEGAL EFFECT", and they shall remain so until the Commonwealth,
through its legislative power, decides otherwise in a proper validating act.
The fact that the Japanese invaders, under international law, were in duty bound to
establish courts of justice during the occupation, although they made them
completely powerless to safeguard the constitutional rights of the citizens, and
mere figureheads as regards the fundamental liberties of the helpless men, women
and children of our people, so much so that said courts could not offer even the
semblance of protection when the life, the liberty, the honor and dignity of our
individual citizens were wantonly trampled by any Japanese, military or civilian,
does not change the situation. "ALL PROCESSES" of said court are declared "NULL
AND VOID AND WITHOUT LEGAL EFFECT" in the October proclamation, and we do
not have any other alternative but to accept the law, as said proclamation has the
full force of a law.
The fact that in the past, the legitimate governments, once restored in their own
territory, condescended in many cases to recognize and to give effect to judgments
rendered by courts under the governments set up by an invading military occupant
or by a rebel army, does not elevate such condescension to the category of a
principle, when Wheaton declares that no international wrong is done if the acts of
the invader are reversed.
Many irrelevant authorities were cited to us as to the duties imposed by the
international law on military occupants, but no authority has been cited to the effect
that the representative of the restored legitimate government is a bound to
recognize and accept as valid the acts and processes of said occupants. On the
contrary, Wheaton says that if the occupant's acts are reversed "no international
wrong would be committed."
Following the authority of Wheaton, undisputed by the majority, General MacArthur
thought, as the wisest course, of declaring "NULL AND VOID AND WITHOUT EFFECT,"
by official proclamation, "ALL PROCESSES" under the Japanese regime, that is

legislative, executive and judicial processes, which fall under the absolute adjective
"ALL".
That declaration is a law. It is a law that everybody bound to accept and respect, as
all laws must be accepted and respected. It is a law that the tribunals are duty
bound to give effect and apply.
We are not unmindful of the adverse consequences to some individuals of the
annullment of all the judicial processes under the Japanese regime, as provided in
the October Proclamation, but the tribunals are not guardians of the legislative
authorities, either an army commander in chief, during war, or a normal legislature,
in peace time. The tribunals are not called upon to guide the legislative authorities
to the wisdom of the laws to be enacted. That is the legislative responsibility. Our
duty and our responsibility is to see to it that the law, once enacted, be applied and
complied with.
No matter the consequences, no matter who might be adversely affected, a judge
must have the firm resolve and the courage to do his duty, as, in the present case,
Judge Dizon did, without fear nor favor. We cannot see any reason why we should
not uphold him in his stand in upholding the law.
It is our official duty, national and international duty. Yes. Because this Supreme
Court is sitting, not only as a national court, but as an international court, as is
correctly stated in the concurring opinion of Justice De Joya, and we should feel the
full weight of the corresponding responsibility, as the American courts with
admiralty jurisdiction and the Prize Courts of England did feel. In fact, it is in the
judiciary where, more than in any point of view is more pressing, more imperative,
more unavoidable. Justice has no country. It is of all countries. The horizon of justice
cannot be limited by the scene where our tribunals are functioning and moving.
That horizon is boundless. That is why in our constitution the bill of rights has been
written not for Filipinos, but for all persons. They are rights that belong to men, not
as Filipinos, Americans, Russians, Chinese or Malayan, but as a members of
humanity. The international character of our duty to administer justice has become
more specific by the membership of our country in the United Nations. And let us
not forget, as an elemental thing, that our primary duty is to uphold and apply the
law, as it is; that we must not replace the words of the law with what we might be
inclined to surmise; that what is clearly and definitely provided should not be
substituted with conjectures and suppositions; that we should not try to deduce a
contrary intention to that which is unequivocally stated in the law; that we should
not hold valid what is conclusively declared null and void.
The October Proclamation declared "ALL PROCESSES" under the Japanese regime
"AND VOID WITHOUT EFFECT", so they must stand. There is no possible way of

evasion. "ALL PROCESSES", in view of the meaning of the absolute adjective "ALL",
include "JUDICIAL PROCESSES". Allegatio contra factum non est admittenda.

CONCLUSION
For all the foregoing reasons we conclude:
1. That General MacArthur had full legal authority to issue the October
Proclamation, and that no principle of the international law is violated by said
proclamation, no international wrong being committed by the reversal by the
legitimate government of the acts of the military invader.
2. That said proclamation was issued in full conformity with the official policies to
which the United States and Philippine Governments were committed, and the
annulment of all the facts of the governments under the Japanese regime,
legislative, executive, and judicial, is legal, and justified by the wrongs committed
by the Japanese.
3. That when General MacArthur proclaimed and declared in the October
Proclamation "That all laws, regulations and processes" of the Japanese sponsored
governments, during enemy occupation, "are null and void and without effect", he
meant exactly what he said.
4. That where General MacArthur said "all processes" we must read and understand
precisely and exactly "all processes", and not "some processes". "All" and "some"
have incompatible meanings and are not interchangeable.
5. That the word "processes" includes judicial procedures, proceedings, processes,
and cases. Therefore, "all processes" must include "all judicial processes.".
6. That we have no right to attribute General MacArthur an intention different from
what he has plainly, clearly, unmistakably expressed in unambiguous words with
familiar meaning generally understood by the common man.
7. That the judicial proceedings here in question are included among those
adversely affected by the October Proclamation.
8. That the Commonwealth tribunals have no jurisdiction to take cognizance of nor
to continue the judicial proceedings under the Japanese regime.
9. That to exercise said jurisdiction an enabling act of the Congress is necessary.

10. That respondent Judge Dizon did not commit the error complained of in the
petition, and that the petition has no merits at all.
We refuse to follow the course of action taken by the majority in the present case. It
is a course based on a mistaken conception of the principles of international law and
their interpretation and application, and on a pinchbeck. It is a course based on
misconstruction or misunderstanding of the October Proclamation, in utter disregard
of the most elemental principles of legal here meneutics. It is a course that leads to
nowhere, except to the brink of disaster, because it is following the dangerous path
of ignoring or disobeying the law.
Let us not allow ourselves to be deceived. The issue confronting us is not of passing
importance. It is an issue of awesome magnitude and transcendency. It goes to and
reaches the very bottom. It is simple. Lacking in complexities. But it may shake the
very foundation of society, the cornerstone of the state, the primary pillar of the
nation. It may dry the very foundation of social life, the source of vitalizing sap that
nurtures the body politic. The issue is between the validity of one or more Japanese
regime processes and the sanctity of the law.
That is the question, reduced to its ultimate terms. it is a simple dilemma that is
facing us. It is the alpha and the omega of the whole issue. Either the processes, or
the law. We have to select between two, which to uphold. It is a dilemma that does
not admit of middle terms, or of middle ways where we can loiter with happy
unconcern . We are in the cross road: which way shall we follow? The processes and
the law are placed in the opposite ends of the balance. Shall we inclined the balance
of justice to uphold the processes and defeat law, or vice versa?
We feel jittery because some judicial processes might be rescinded or annulled, but
we do not tremble with sincere alarm at the thought of putting the law under the
axe, of sentencing law to be executed by the guillotine. We feel uneasy, fancying
chaos and paralyzation of social life, because some litigants in cases during the
Japanese regime will be affected in their private interests, with the annulment of
some judicial processes, but we adopt an attitude of complete nonchalance in
throwing law overboard. This baffling attitude is a judicial puzzle that nobody will
understand. So it is better that we should shift to a more understandable way, that
which is conformable to the standard that the world expects in judicial action.
No amount of arguments and lucubration's, no amount of speculative gymnastics,
no amount of juggling of immaterial principles of international law, no amount of
presumptions and suppositions, surmises and conjectures, no amount of dexterity in
juridical exegesis can divert our attention from the real, simple, looming, hypostasis
of the issue before us: Law. It is Law with all its majestic grandeur which we are
defying and intending to overthrow from the sacred pedestal where the ages had
placed her as a goddess, to be enshrined, obeyed, and venerated by men, forever.

Let us not dare to lay our profaning hands on her vestal virginity, lest the oracle
should fling at us the thunder of his prophetic anathema.
We cannot therefore vote except for the denial of the petition.

HILADO, J., dissenting:

I dissent from the opinion of the majority and, pursuant to the Constitution, proceed
to state the reason for my dissent.
The proceeding involved in the case at bar were commenced by a complaint filed by
the instant petitioner, as plaintiff, on November 18, 1944, in civil case No. 3012 of
the so-called Court of First Instance of Manila, the complaint bearing this heading
and title: "The Republic of the Philippines In the Court of First Instance of Manila"
(Annex X of Exhibit A of petition for mandamus). The farthest that said proceedings
had gone before the record was burned or destroyed during the battle for Manila,
was the filing by counsel for plaintiff therein of their opposition to a motion for
dismissal filed by opposing counsel.
It is, therefore, plain that the case had not been heard on the merits when the
record was burned or destroyed.
The respondent judge, in his order dated June 6, 1945, disposing of the petition
dated May 25, 1945 filed by petitioner, as a plaintiff in said case, and of the petition
filed by respondent Eusebio Valdez Tan Keh, as defendant therein, on May 31,
19045, held: " first, that by virtue of the proclamation of General MacArthur quoted
above, all laws, regulations and processes of any other government in the
Philippines than that of the Commonwealth became null and void and without legal
effect in Manila on February 3, 1945 or, at the lates, on February 27 of the same
year; second that the proceedings and processes had in the present case having
been before a court of the Republic of the Philippines and in accordance with the
laws and regulations of said Republic, the same are now void and without legal
effect; third, that this Court as one of the different courts of general jurisdiction of
the Commonwealth of the Philippines, has no authority to take cognizance of and
continue said proceedings to final judgement, until and unless the Government of
the Commonwealth of the Philippines, in the manner and form provided by law,
shall have provided for the transfer of the jurisdiction of the courts of the now
defunct Republic of the Philippines, and the causes commenced and left pending
therein, to the courts created and organized by virtue of the provisions of Act No.
4007, as revived by Executive Order No. 36, or for the validation of all proceedings
had in said courts."

Petitioner prays that this Court declare that the respondent judge should not have
ordered the suspension of the proceedings in civil case No. 3012 and should
continue and dispose of all the incidents in said case till its complete termination. In
my opinion, the petition should denied.
In stating the reasons for this dissent, we may divide the arguments under the
following propositions:
1. The proceedings in said civil case No. 3012 are null and void under General of the
Army MacArthur's proclamation of October 23, 1944 (41 Off. Gaz., 147, 148);
2. (a) The government styled as, first, the "Philippine Executive Commission "and
later as the Republic of the Philippines", established here by the Commander in
Chief of the Imperial Japanese Forces or by his order was not a de-facto government
the so-called Court of First Instance of Manila was not a de facto court, and the
judge who presided it was not a de facto judge; (b) the rules of International Law
regarding the establishment of ade facto Government in territory belonging to a
belligerent but occupied or controlled by an opposing belligerent are inapplicable to
the governments thus established here by Japan;
3. The courts of those governments were entirely different from our Commonwealth
courts before and after the Japanese occupation;
4. The question boils down to whether the Commonwealth Government, as now
restored, is to be bound by the acts of either or both of those Japanese-sponsored
governments;
5. Even consideration of policy of practical convenience militate against petitioner's
contention.
I
The proceedings in said civil case No. 3012 are null and void under General of
the Army MacArthur's proclamation of October 23, 1944 (41 Off. Gaz., 147, 148).
In this proclamation, after reciting certain now historic facts, among which was that
the so-called government styled as the "Republic of the Philippines" was established
on October 14, 1943 "under enemy duress, . . . based upon neither the free
expression of the people's will nor the sanction of the Government of the United
States," the great Commander-in-Chief proclaimed and declared:
xxx

xxx

xxx

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; and
xxx

xxx

xxx

I do enjoin upon all loyal citizens of the Philippines full respect for and obedience
to the Constitution of the Commonwealth of the Philippines and the laws,
regulations and other acts of their duly constituted government whose seat is
now firmly re-established on Philippine soil.
The evident meaning and effect of the 3rd paragraph above quoted is, I think, that
as the different areas of the Philippines were progressively liberated, the declaration
of nullity therein contained shall attach to the laws, regulations and processes thus
condemned in so far as said areas were concerned. Mark that the proclamation did
not provide that such laws, regulations and processes shall be or are annulled, but
that they are null and void. Annulment implies some degree of the effectiveness in
the act annulled previous to the annulment, but a declaration of nullity denotes that
the act is null and void ab initio the nullity precedes the declaration. The
proclamation speaks in the present tense, not in the future. If so, the fact that the
declaration of nullity as to the condemned laws, regulations, and processes in areas
not yet free from enemy occupation and control upon the date of the proclamation,
would attach thereto at a later date, is no argument for giving them validity or
effectiveness in the interregnum. By the very terms of the proclamation itself, that
nullity had to date back from the inception of such laws, regulations and processes;
and to dispel any shadow of doubt which may still remain, we need only consider
the concluding paragraph of the proclamation wherein the Commander in Chief of
the army liberation solemnly enjoined upon all loyal citizens of the Philippines full
respect for and obedience to the Constitution of the Commonwealth of the
Philippines and the laws, regulations and other acts of their duly constituted
government. This is all-inclusive it comprises not only the loyal citizens in the
liberated areas but also those in areas still under enemy occupation and control. It
will be noticed that the complaint in said civil case No. 3012 was filed twenty-six
days after the above-quoted proclamations of General of the Army MacArthur. If the
parties to said case were to consider the proceedings therein up to the date of the
liberation of Manila valid and binding, they would hardly be complying with the
severe injunction to render full respect for and obedience to our Constitution and
the laws, regulations and other acts of our duly constituted government from
October 23, 1944, onwards. Indeed, to my mind, in choosing between these two
courses of action, they would be dangerously standing on the dividing line between
loyalty and disloyalty to this country and its government.
The proceeding in question, having been had before the liberation of Manila, were
unquestionably "processes" of the Japanese-sponsored government in the

Philippines within the meaning of the aforesaid proclamation of General of the Army
MacArthur and, consequently, fall within the condemnation of the proclamation.
Being processes of a branch of a government which had been established in the
hostility to the Commonwealth Government, as well as the United States
Government, they could not very well be considered by the parties to be valid and
binding, at least after October 23, 1944, without said parties incurring in
disobedience and contempt of the proclamation which enjoins them to render full
respect for the obedience to our Constitution and the laws, regulations and other
acts of our duly constituted government. Nine days after the inauguration of the socalled "Republic of the Philippines," President Franklin Delano Roosevelt of the
United States declared in one of his most memorable pronouncements about the
activities of the enemy in the Philippines, as follows:
One of the fourtheenth of this month, a puppet government was set up in the
Philippine Island with Jose P. Laurel, formerly a justice of the Philippine Supreme
Court, as "president." Jorge Vargas, formerly as a member of the Commonwealth
Cabinet, and Benigno Aquino, also formerly a member of that cabinet, were
closely associated with Laurel in this movement. The first act of the new puppet
regime was to sign a military alliance with Japan. The second act was a
hyphocritical appeal for American sympathy which was made in fraud and
deceit, and was designed to confuse and mislead the Filipino people.
I wish to make it clear that neither the former collaborationist "Philippine
Executive Commission" nor the present "Philippine Republic " has the
recognition or sympathy of the Government of the United States. . . .
Our symphaty goes out to those who remain loyal to the United States and the
Commonwealth that great majority of the Filipino people who have not been
deceived by the promises of the enemy.
October 23, 1943.
FRANKLIN DELANO ROOSEVELT
President of the United States
(Form U.S. Naval War College International Law Documents, 1943, pp. 93, 94.).
It is a fact of contemporary history that while President Manuel L. Quezon of the
Philippines was in Washington, D.C., with his exiled government, he also repeatedly
condemned both the "Philippine Executive Commission" and the "Philippine
Republic," as they had been established by or under orders of the Commander in
Chief of the Imperial Japanese Forces. With these two heads of the Governments of
the United States and the Commonwealth of the Philippines condemning the
"puppet regime" from its very inception, it is beyond my comprehension to see how

the proceedings in question could be considered valid and binding without adopting
an attitude incompatible with theirs. As President Roosevelt said in his above quoted
message, "Our symphaty goes out to those remain loyal to the United States and
the Commonwealth that great majority of the Filipino people who have not been
deceived by the promises of the enemy.
The most that I can concede is that while the Japanese Army of occupation was in
control in the Islands and their paramount military strength gave those of our
people who were within their reach no other alternative, these had to obey their
orders and decrees, but the only reason for such obedience would be that
paramount military strength and not any intrinsic legal validity in the enemy's
orders and decrees. And once that paramount military strength disappeared, the
reason for the obedience vanished, and obedience should likewise cease.
As was stated by the Supreme Court of the United States in the case of Williams vs.
Bruffy (96 U.S., 176; 24 Law. ed., 719), "In the face of an overwhelming force,
obedience in such matters may often be a necessity and, in the interest of order, a
duty. No concession is thus made to the rightfulness of the authority exercised."
(Emphasis ours.) The court there refers to its own former decision in Thorington vs.
Smith, and makes it clear that the doctrine in the Thorington case, so far as the
effects of the acts of the provisional government maintained by the British in
Casetine, from September, 1814 to the Treaty of Peace in 1815, and the
consideration of Tampico as United States territory, were concerned, was limited to
the period during which the British, in the first case, retained possession of Castine,
and the United States, in the second, retained possession of Tampico. In referring to
the Confederate Government during the Civil War, as mentioned in the Thorington
case, the court again says in effect that the actual supremacy of the Confederate
Government over a portion of the territory of the Union was the only reason for
holding that its inhabitants could not but obey its authority. But the court was
careful to limit this to the time when that actual supremacy existed, when it
said: . . . individual resistance to its authority then would have been futile and,
therefore, unjustifiable." (Emphasis ours.)
Because of its pertinence, we beg leave to quote the following paragraph from that
leading decision:
There is nothing in the language used in Thorington vs. Smith (supra), which
conflicts with these views. In that case, the Confederate Government is
characterized as one of paramount force, and classed among the governments
of which the one maintained by great Britain in Castine, from September 1814,
to the Treaty of Peace in 1815, and the one maintained by the United States in
Tampico, during our War with Mexico, are examples. Whilst the British retained
possession of Castine, the inhabitants were held to be subject to such laws as
the British Government chose to recognize and impose. Whilst the United

Statesretained possession of Tampico, it was held that it must regarded and

respected as their territory. The Confederate Government, the court observed,
differed from these temporary governments in the circumstance that its
authority did not justifying acts of hostility to the United States, "Made
obedience to its authority in civil and local matters not only a necessity, but a
duty." All that was meant by this language was, that as the actual supremancy
of the Confederate Government existed over certain territory, individual
resistance to its authority then would have been futile and, therefore,
unjustifiable. In the face of an overwhelming force, obedience in such matters
may often be a necessity and, in the interest of order, a duty. No concession is
thus made to the rightfulness of the authority exercised. (Williams vs. Bruffy, 24
Law ed., 719; emphasis ours.)
The majority opinion, in considering valid the proceedings in question, invokes the
rule that when a belligerent army occupies a territory belonging to the enemy, the
former through its Commander in Chief, has the power to establish thereon what
the decisions and treaties have variously denominated provisional or military
government, and the majority holds that the Japanese-sponsored government in the
Philippines was such a government. Without prejudice to later discussing the effects
which the renunciation of war as an instrument of national policy contained in our
Commonwealth Constitution, as well as in the Briand-Kellog Pact, must have
produced in this rule in so far as the Philippines is concerned, let us set forth some
considerations apropos of this conclusion of the majority. If the power to establish
here such a provisional government is recognized in the Commander in Chief of the
invasion army, why should we not recognize at least an equal power in the
Commander in Chief of the liberation army to overthrow that government will all of
its acts, at least of those of an executory nature upon the time of liberation?
Considering the theory maintained by the majority, it would seem that they would
recognize in the Japanese Commander in Chief the power to overthrow the
Commonwealth Government, and all of its acts and institutions if he had choosen to.
Why should at least an equal power be denied the Commander in Chief of the
United States Army to overthrow the substitute government thus erected by the
enemy with all of its acts and institutions which are still not beyond retrieve?
Hereafter we shall have occasion to discuss the aspects of this question from the
point of view of policy or the practical convenience of the inhabitants. If the
Japanese Commander in Chief represented sovereignty of Japan, the American
Commander in Chief represented the sovereignty of the United States, as well as
the Government of the Commonwealth. If Japan had won this war, her paramount
military supremacy would have continued to be exerted upon the Filipino people,
and out of sheer physical compulsion this country would have had to bow to the
continuance of the puppet regime that she had set up here for an indefinite time. In
such a case, we admit that, not because the acts of that government would then
have intrinsically been legal and valid, but simply because of the paramount
military force to which our people would then have continued to be subjected, they

would have had to recognize as binding and obligatory the acts of the different
departments of that government. But fortunately for the Filipinos and for the entire
civilized world, Japan was defeated. And I now ask: Now that Japan has been
defeated, why should the Filipinos be still bound to respect or recognize validity in
the acts of the Japanese-sponsored government which has been so severely
condemned by both the heads of the United States and our Commonwealth
Government throughout the duration of the war? If we were to draw a parallel
between that government and that which was established by the Confederate
States during the American Civil War, we will find that both met with ultimate
failure. And, in my opinion, the conclusion to be drawn should be the same in both
cases.
As held by the United States Supreme Court in Williams vs. Bruffy (supra), referring
to the Confederate Government, its failure carried with it the dissipation of its
pretentions and the breaking down in pieces of the whole fabric of its government.
The Court said among other things:
The immense power exercised by the government of the Confederate States for
nearly four years, the territory over which it extended, the vast resources it
wielded, and the millions who acknowledged its authority, present an imposing
spectacle well fitted to mislead the mind in considering the legal character of
that organization. It claimed to represent an independent nation and to posses
sovereign powers; as such to displace to jurisdiction and authority of the United
States from nearly half of their territory and, instead of their laws, to substitute
and enforce those of its own enactment. Its pretentions being resisted, they
were submitted to the arbitrament of war. In that contest the Confederacy
failed; and in its failure its pretentions were dissipated, its armies scattered, and
the whole fabric of its government broken in pieces. (24 Law, ed., 719;
emphasis ours.)
By analogy, if the Japanese invasion and occupation of the Philippines had been
lawful which, however, is not the case and if Japan had succeeded in
permanently maintaining the government that she established in the Philippines,
which would have been the case had victory been hers, there would be more reason
for holding the acts of that government valid, but because Japan has lost the war
and, therefore, failed in giving permanence to that government, the contrary
conclusion should legitimately follow.
The validity of legislation exercised by either contestant "depends not upon the
existence of hostilities but upon the ultimate success of the party which it is
adopted" (emphasis ours). And, referring to the overthrow of the of the
Confederacy, the Court, said, "when its military forces were overthrown, it utterly
perished, and with it all its enactments" (emphasis ours)

The majority cite on page 9-10 of their opinion a passage from the same case of
Williams vs. Bruffy, supra, which is a mere obiter dictum. The majority opinion says
that in this passage the Court was "discussing the validity of the acts of the
Confederate States." In the first place, an examination of the decision will reveal
that the controversy dealt with an act of the Confederate Government, not of the
Confederate States individually; and in the second place, the quoted passage refers
to something which was not in issue in the case, namely, the acts of the individual
States composing the Confederacy. But even this passage clearly places the case at
bar apart from the Court's pronouncement therein. The quoted passage commences
by stating that "The same general form of government the same general laws for
the administration of justice and the protection of private rights, which has existed
in the States prior to the rebellion, remanded during (its) continuance and
afterwards. "In the case at bar, the same general form of the Commonwealth
Government did not continue under the Japanese, for the simple reason that one of
the first acts of the invaders was to overthrow the Commonwealth Constitution and,
therefore, the constitutional government which existed thereunder, as an effect of
the following acts and decrees of the Commander in Chief of the Imperial Japanese
Forces:
1. Order No. 3, dated February 20, 1942 of the Commander in Chief of the Imperial
Japanese Forces to the Chairman of the Philippine Executive Commission directed
that, in the exercise of legislative, executive and judicial powers in the Philippines,
the "activities" of the "administrative organs and judicial courts in the Philippines
shall be based upon the existing status, order, ordinances and the Commonwealth
Constitution (1 Official Journal of the Japanese Military Administration, page 34).
Under the frame of government existing in this Commonwealth upon the date of the
Japanese invasion, the Constitution was the very fountain-head of the validity and
effects of all the "status, orders, and ordinances" mentioned by the Japanese
Commander in Chief, and in overthrowing the Constitution he, in effect, overthrew
all of them.
2. Instruction No. 6 of the Japanese Military Administration (Vol. 1, usages 36 et
seq., Official Gazette, edited at the Office of the Executive Commission) gave the
"Detailed Instruction Based on Guiding Principle of the Administration," and among
other things required "The entire personnel shall be required to pledge their loyalty
to the Imperial Japanese Forces. . . ." (This, of course, was repugnant to the frame of
government existing here under the Commonwealth Constitution upon the date of
invasion.)
3. Proclamation dated January 3, 19452 of the Japanese Commander in Chief
provided in paragraph 3 that "The Authorities and the People of the Commonwealth
should sever their relations with the U.S. o . . ." (This is, likewise, repugnant to the
Commonwealth Constitution and the to the Government of that Commonwealth
Constitution and to the Government of that Commonwealth which was expressly

made subject to the supreme sovereignty of the United States until complete
independence is granted, not by the mere will of the United States, but by virtue of
an agreement between that Government and ours, under the Tydings-McDuffie Act.)
The individual States of the Confederate and their governments existed prior to the
Civil War and had received the sanction and recognition of the Union Government,
for which the Federal Supreme Court was speaking in the Williams-Bruffy case; while
the Japanese-sponsored governments of the "Philippine Executive Commission" and
the Republic of the Philippines" neither existed here before the war nor had received
the recognition or sanction of either the United States or the Commonwealth
Government nay, they had received the most vigorous condemnation of both.
The Court further says in Williams vs. Bruffy (supra):
No case has been cited in argument, and we think unsuccesfully attempting to
establish a separate revolutionary government have been sustained as a matter
of legal right. As justly observed by the late Chief Justice in the case of
Shortridge vs. Macon, I Abb. U.S., 58, decided at the circuit, and, in all material
respects like the one at bar, "Those who engage in rebellion must consider the
consequences. If theysucceed, rebellion becomes revolution, and the new
government will justify is founders. If they fail, all their acts hostile to the
rightful government are violations of law, and originate no rights which can be
recognized by the courts of the nation whose authority and existence have been
alike assailed. S.C., Chase, Dec., 136. (Williams vs. Bruffy, 96 U.S., 176; 24 Law.
ed., 716, 718.) (Emphasis ours.)
I am of opinion that the principles thus enunciated for the case of an unsuccessful
rebellion should be applied with greater force to the case of a belligerent who loss
the war. And since the founding of the Japanese-sponsored government in the
Philippines was designed to supplant and did actually supplant the rightful
government and since all its acts could not but a hostile to the latter (however
blameless the officials who acted under enemy duress might be), and since Japan
failed, all said acts, particularly those of the Japanese-sponsored court in said civil
case No. 3012, "are violations of law, and originate no rights which can be
recognized by the courts of the nation whose authority and existence have been
alike assailed", quoting the language of the court in Shortridgevs. Macon, cited by
Mr. Justice Field in Williams vs. Bruffy, supra (24 Law. ed., 718).
II
(a) The government styled as, first, the "Philippine Executive Commission" and
later as the Republic of the Philippines", established here by the Commander in
Chief of the Imperial Japanese Forces or by the his order was not a de facto

government--the so-called Court of First Instance of Manila was not a de

factocourt and the who presided it was not a de facto judge;
(b) The rules of International Law regarding the establishment of a de facto
government in territory belonging to a belligerent but occupied or controlled by
an opposing belligerent are inapplicable to the governments thus established
here by Japan.
Under the doctrine of Williams vs. Bruffy, supra, and the pertinent cases therein
cited, the short-lived provisional government thus established by the Japanese in
the Philippines should be classified, at best, as a government of paramount force.
But this is not all. The Constitution of this Commonwealth which has been expressly
approved by the United States Government, in Article II, section 3, under the
heading "Declaration of Principles", renounces war as an instrument of national
policy. This renunciation of war as an instruments of national policy follows an equal
renunciation in the Briand-Kellog Pact. The rules of International Law , cited in
support of the power or right of a belligerent army of occupation to set up a
provisional government on occupied enemy territory, were evolved prior to the first
World War, but the horrors and devastations of that war convinced, at least the
governments of the United States and France, that they should thereafter renounce
war as an instrument of national policy, and they consequently subscribed the
Briand-Kellog Pact. Those horrors and devastations were increased a hundred fold, if
not more, in this second World War, but even before this war occurred, our own
people, through our Constitutional delegates, who framed the Commonwealth
Constitution also adopted the same doctrine, and embodied an express renunciation
of war as an instrument of national policy in the instrument that they drafted. It is
true that in section 3, Article II, above-cited, our Constitution adopts the generally
accepted principles of International Law as a part of the law of the Nation. But, of
course, this adoption is exclusive of those principles of International Law which
might involve recognition of war as an instrument of national policy. It is plain that
on the side of the Allies, the present war is purely defensive. When Japan started
said war, treacherously and without previous declaration, and attacked Pearl Harbor
and the Philippines on those two fateful days of December 7 and 8, 1941, she
employed war as an instrument of the national policy. Under the Briand-Kellog Pact
and our Commonwealth Constitution, the United States and the Commonwealth
Government could not possibly have recognized in Japan any right, as against them,
to employ that war as an instrument of her national policy, and, consequently, they
could not have recognized in Japan power to set up in the Philippines the puppet
government that she later set up, because such power would be a mere incident or
consequence of the war itself. The authorities agree that such a power, under the
cited rules, is said to a right derived from war. (67 C.J., p. 421, sec. 171.) There can
be no question that the United States and the Commonwealth Governments were
free to refuse to be bound by those rules when they made their respective

renunciations above referred to. Indeed, all the United Nations have exercised this
free right in their Charter recently signed at San Francisco.
As necessary consequence of this, those rules of International Law were no longer
applicable to the Philippines and to the United States at the time of the Japanese
invasion as a corollary, it follows that we have no legal foundation on which to base
the proposition that the acts of that Japanese-sponsored government in the
Philippines were valid and binding. Moreover, I am of opinion, that although at the
time of the Japanese invasion and up to the present, the United States retains over
the Philippines, a certain measure of sovereignty, it is only for certain specified
purposes enumerated in the Tydings-McDufie Act of the Commonwealth
Constitution. (Ordinance appended to the Constitution.) And our territory was at the
time of the Japanese invasion not a territory of the United States, within the
meaning of the laws of war governing war-like operations on enemy territory. Our
territory is significantly called "The National Territory" in Article I of our Constitution
and this bears the stamps of express approval of the United States Government.
The Philippines has been recognized and admitted as a member of the United
Nations. We, therefore, had our own national and territorial identity previous to that
invasion. Our nation was not at war with the Filipinos. And line with this, the
Japanese army, in time, released Filipino war prisoners captured in Bataan. Lt. Gen.
Maeda, Chief of Staff, Imperial Japanese Forces, in his speech of January 2, 1942,
said:
. . . we had not the slighest intensions to make your people our enemy; rather
we considered them as our friends who will join us has hand-in-hand in the
establishment of an orderly Greater East Asia. . . ., (Official Gazette, edited at
the Office of the Executive Commission, Vol. I, p. 55.)
If the Philippines was a neutral territory when invaded by the Japanese, the
following principles from Lawrence, International Law (7th ed.), p. 603, are
pertinent:
The Duties of Belligerent States Towards Neutral States. . . . To refrain from
carrying on hostilities within neutral territory. We have already seen that,
though this obligation was recognized in theory during the infancy of
International law, it was often very imperfectly observed in practice. But in
modern times it has been strickly enforced, and any State which knowingly
ordered warlike operations to be carried on in neutral territory . . . would bring
down upon itself the reprobation of civilized mankind. Hostilities may be carried
on in the territory of either belligerent, on the high seas, and in territory
belonging to no one. Neutral land and neutral territorial waters are sacred. No
acts of warfare may lawfully take place within them. . . . (Emphasis ours.)

In all the cases and authorities supporting the power or right to set up a provisional
government, the belligerent had the right to invade or occupy the territory in the
first instance. Such was not the case with the Philippines. President Roosevelt, in his
message to the Filipino people, soon after the landing of American Forces in Leyte,
on October 20, 1944, characterized Japan's invasion and occupation of the
Philippines as "the barbarous, unprovoked and treacherous attack upon the
Philippines," and he announced the American people's "firm determination to punish
the guilty." (41 Off. Gaz., 149.) (Emphasis ours.) The illustrious leader of the United
Nations could not have in more unmistakable terms the utter illegality of that
invasion and occupation. If the establishment of a provinsional government in
occupied territory by a belligerent is "a mere application or extension of the force by
which the invasion or occupation was effected" (67 C.J., p. 421, sec 171), the
illegality of the invasion, would necessarily permeate the government, which was its
mere application or extention.
The fact that shortly before December 8, 1941, the date of the "barbarous,
unprovoked and treacherous attack," the meager and almost untrained forces of the
Philippine Army had been inducted into the American Army, did not change the
neutral status of the Philippines. That military measure had been adopted for purely
defensive purposes. Nothing could be farther from the minds of the government and
military leaders of the United States and the Philippines in adopting it than to
embark upon any aggressive or warlike enterprise against any other nation. It is an
old and honored rule dating as far back as the 18th century that even solemn
promises of assistance made before the war by a neutral to a nation which later
becomes a belligerent, would not change the status of the neutral even if such
promises were carried out, so long as they were made for purely defensive
purposes. In the words of Vattel "when a sovereign furnishes the succor due in
virtue of a former defensive alliance, he does not associate himself in the war.
Therefore he may fulfill his engagements and yet preserve an exact neutrality."
(Lawrence, Principles of International Law [7th ed.], pp. 585, 586.)
If the Filipinos had, from contemptible cowardice and fear, allowed their shores to
be invaded, and their territory occupied by the Japanese without resistance, such
invasion occupation would undoubtedly have been considered in violation of
International Law. Should the Filipinos be punished for having had the patriotism,
bravery, and heroism to fight in defense of the sacredness of their land, the sanctity
of their homes, and the honor and dignity of their government by giving validity, in
whatever limited measure, to the lawless acts of the ruthless enemy who thus
overran their country, and robbed them of the tranquility and happiness of their
daily lives? And yet, to my mind, to give any measure of validity or binding effect to
the proceedings of the Japanese-sponsored Court of First Instance of Manila,
involved herein, would be to give that much validity or effect to the acts of those
same invaders. To equalize the consequences of a lawful and a wrongful invasion of

occupation, would be to equalize right and wrong, uphold the creed that might
makes right, and adopt "the law of the jungle."
If said Japanese-sponsored government was not a de facto government, it would
seem clearly to follow that its "Court of First Instance of Manila" was not a de facto
court. But it should additionally be stated that for it be a de facto court, its judge
had to be a de facto judge, which he could not be, as presently demonstrated.
As said by President Osmea, in replying to the speech of General of the Army
MacArthur when the latter turned over to him the full powers and responsibilities of
the Commonwealth Government, on February 27, 1945:
xxx

xxx

xxx

The time has come when the world should know that when our forces
surrendered in Bataan and Corregidor, resistance to the enemy was taken up by
the people itself resistance which was inarticulate and disorganized in its
inception but which grew from the day to day and from island until it broke out
into an open warfare against the enemy.
The fight against the enemy was truly a people's war because it counted with
the wholehearted support of the masses. From the humble peasant to the barrio
school teacher, from the volunteer guard to the women's auxilliary service units,
from the loyal local official to the barrio folk each and every one of those
contributed his share in the great crusade for liberation.
The guerrillas knew that without the support of the civilian population, they
could not survive. Whole town and villages dared enemy reprisal to oppose the
hated invader openly or give assistance to the underground movement. . . . (41
Off. Gaz., 88, 89.)
Under these facts, taken together with the General of the Army MacArthur's
accurate statement that the "Republic of the Philippines" had been established
under enemy duress, it must be presumed to say the least that the judge who
presided over the proceedings in question during the Japanese occupation, firstly,
accepted his appointment under duress; and secondly, acted by virtue of that
appointment under the same duress. In such circumstances he could not have acted
in the bona fide belief that the new "courts" created by or under the orders of the
Japanese Military Commander in chief had been legally created--among them the
"Court of first Instance of Manila," that the Chairman of the "Philippine Executive
Commission" or the President of the "Republic of the Philippines", whoever
appointed him, and conferred upon him a valid title to his office and a legitimate
jurisdiction to act as such judge. Good faith is essential for the existence of a de
facto judge (Tayko vs. Capistrano, 53 Phil., 866, 872). The very idea of enemy

duress would necessarily imply that but for the duress exerted upon him by the
enemy he would have refused to accept the appointment and to act thereunder.
And why? Because he must be presumed to know that the office to which he was
thus appointed had been created by the enemy in open defiance of the
Commonwealth Constitution and the laws and regulation promulgated by our
Commonwealth Government, and that his acceptance of said office and his acting
therein, if willfully done, would have been no less than an open hostility to the very
sovereignty of the United Sates and to the Commonwealth Government, and a
renunciation of his allegiance to both. There is no middle ground here. Either the
judge acted purely under duress, in which case his acts would be null and void; or
maliciously in defiance of said governments, in which case his acts would be null
and void for more serious reasons.
The courts created here by the Japanese government had to look for the source of
their supposed authority to the orders of the Japanese Military Commander in chief
and the so-called Constitution of the "Republic of the Philippines," which had been
adopted in a manner which would shock the conscience of democratic peoples, and
which was designed to supplant the Constitution which had been duly adopted by
the Filipino people in a Constitutional Convention of their duly elected Constitutional
Delegates. And it was decreed that the Commander in chief of the Imperial
Japanese Forces "shall exercise jurisdiction over judicial courts." (Vol. 1, p. 7, Official
Journal of the Japanese Military Administration, cited on pp. 2, 3, of the order of the
respondent judge complained of and marked Exhibit H of the petition for
mandamus.) How can our present courts legitimately recognize any efficacy in the
proceedings of such an exotic judicial system, wherein the Commander in Chief of
the Imperial Japanese Forces possessed the highest judicial jurisdiction?
III
The courts of those governments were entirely different
Commonwealth courts before and after the Japanese occupation.

from

our

Executive Order No. 36 of the President of the Philippines, dated March 10, 1945, in
its very first paragraph, states the prime concern of the government "to re-establish
the courts as fast as provinces are liberated from the Japanese occupation." If the
courts under the Japanese-sponsored government of the "Republic of the
Philippines" were the same Commonwealth courts that existed here under the
Constitution at the time of the Japanese invasion, President Osmea would not be
speaking of re-establishing those courts in his aforesaid Executive Order. For soothe,
how could those courts under the "Republic of the Philippines" be the courts of the
Commonwealth of the Philippines when they were not functioning under the
Constitution of the Commonwealth and the laws enacted in pursuance of said
Constitution? The jurisdiction of the Commonwealth courts was defined and
conferred under the Commonwealth Constitution and the pertinent legislation

enacted thereunder, that of the Japanese-sponsored courts was defined and

conferred by the orders and decrees of the Japanese Commander in Chief, and,
perhaps, the decrees of the "Philippine Executive Commission" and the laws of the
so-called Legislature under the Republic, which was not composed of the elected
representatives of the people. The Justices and Judges of the Commonwealth courts
had to be appointed by the President of the Commonwealth with confirmation by
the Commission on Appointments, pursuant to the Commonwealth Constitution. The
Chief Justice of the Supreme Court, under the "Philippine Executive Commission"
was appointed by the Commander in Chief of the Imperial Japanese Forces, and the
Associate Justices of the Supreme Court, the Presiding Justice and Associate Justices
of the Court of Appeals, the Judges of first Instance and of all inferior courts were
appointed by the Chairman of the Executive Commission, at first, and later, by the
President of the Republic, of course, without confirmation by the Commission on
Appointments under the Commonwealth Constitution. The Chief Justice and
Associate Justices of the Supreme Court, the President and Associate Justices of the
Court of Appeals, and the Judges of First Instance and of all inferior courts in the
Commonwealth judicial system, had to swear to support and defend the
Commonwealth Constitution, while this was impossible under the Japanesesponsored government. In the Commonwealth judicial system, if a Justice or Judge
should die or incapacitated to continue in the discharge of his official duties, his
successor was appointed by the Commonwealth President with confirmation by the
Commission on Appointments, and said successor had to swear to support and
defend the Commonwealth Constitution; in the exotic judicial system implanted
here by the Japanese, if a Justice or Judge should die or incapacitated, his successor
would be appointed by the Japanese Commander in Chief, if the dead or
incapacitated incumbent should be the Chief Justice of the Supreme Court, or
otherwise, by the Chairman of the "Executive Commission" or the President of the
"Republic", of course without confirmation by the Commission on Appointments of
the Commonwealth Congress, and, of course, without the successor swearing to
support and defend the Commonwealth Constitution.
If, as we believe having conclusively shown, the Japanese-sponsored courts were
not the same Commonwealth courts, the conclusion is unavoidable that any
jurisdiction possessed by the former and any cases left pending therein, were not
and could not be automatically transfered to the Commonwealth courts which we
re-established under Executive Order No. 36. For the purpose, a special legislation
was necessary.
Executive Order No. 37, in my humble opinion, does not, as held by the majority,
imply that the President recognized as valid the proceedings in all cases appealed
to the Court of Appeals. Section 2 of that order simply provides that all cases which
have been duly appealed to the Court of Appeals shall be transmitted to the
Supreme Court for final decision. The adverb "duly" would indicate that the
President foresaw the possibility of appeals not having been duly taken. All cases

appealed to the Court of Appeals before the war and the otherwise duly appealed,
would come under the phrase "duly appealed" in this section of the Executive Order.
But considering the determined and firm attitude of the Commonwealth
Government towards those Japanese-sponsored governments since the beginning, it
would seem inconceivable that the President Osmea, in section 2 of Executive
Order No. 37, intended to include therein appeals taken to the Japanese-sponsored
Court of Appeals, or from the Japanese-sponsored inferior courts. It should be
remembered that in the Executive Order immediately preceeding and issued on the
same date, the President speaks of re-establishing the courts as fast as provinces
were liberated from the Japanese occupation.
IV
The question boils down to whether the Commonwealth Government, as now
restored, is to be bound by the acts of either or both of those Japanesesponsored governments.
In the last analysis, in deciding the question of validity or nullity of the proceedings
involved herein, we are confronted with the necessity to decide whether the Court
of first Instance of Manila and this Supreme Court, as re-established under the
Commonwealth Constitution, and the entire Commonwealth Government, are to be
bound by the acts of the said Japanese-sponsored court and government. To
propound this question is, to my mind, to answer it most decidedly in the negative,
not only upon the ground of the legal principles but also for the reasons of national
dignity and international decency. To answer the question in the affirmative would
be nothing short for legalizing the Japanese invasion and occupation of the
Philippines. Indeed, it would be virtual submission to the dictation of an invader our
people's just hatred of whom gave rise to the epic Philippine resistance movement,
which has won the admiration of the entire civilized world.
V
Even considerations of policy or practical convenience militate against
petitioner's contention.
In this connection, the respondent judge, in his order of June 6, 1945, complained
of, has the following to say:
It is contended, however, that the judicial system implanted by the Philippine
Executive Commission and the Republic was the same as that of the
Commonwealth prior to Japanese occupation; that the laws administered and
enforced by said courts during the existence of said regime were the same laws
on the statute books of Commonwealth before Japanese occupation, and that
even the judges who presided them were, in many instances, the same persons

who held the position prior to the Japanese occupation. All this may be true, but
other facts are just as stubborn and pitiless. One of them is that said courts
were of 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. Case No. 16,146), as they
became later on the laws and institution of the Philippine Executive Commission
and the Republic of the Philippines. No amount of argument or legal fiction can
obliterate this fact.
Besides, I am of the opinion that the validity of the acts of the courts in the "judicial
system implanted by the Philippine Executive Commission and the Republic "would
not depend upon the laws that they "administered and enforced", but upon the
authority by virtue of which they acted. If the members of this Court were to decide
the instant case in strict accordance with the Constitution and the laws of the
Commonwealth but not by the authority that they possess in their official capacity
as the Supreme Court of the Philippines, but merely as lawyers, their decision would
surely be null and void. And yet, I am firmly of opinion that whoever was the "judge"
of the Japanese sponsored Court of First Instance of Manila who presided over the
said court when the proceedings and processes in the dispute were had, in acting
by virtue of the supposed authority which he was supposed to have received from
that government, did so with no more legal power than if he had acted as a mere
lawyer applying the same laws to the case. If duplication of work or effort, or even if
confussion, should be alleged to possibly arise from a declaration of nullity or
judicial proceedings had before those Japanese-sponsored courts, it should suffice to
answer that the party so complaining in voluntarily resorting to such courts should
be prepared to assume the consequences of his voluntary act. On the other hand,
his convenience should not be allowed to visit upon the majority of the inhabitants
of this country, the dire consequences of a sweeping and wholesale validation of
judicial proceedings in those courts. Let us set forth a few considerations apropos of
this assertion. It is a fact of general knowledge that during the Japanese occupation
of the Philippines, the overwhelming majority of our people and other resident
inhabitants were literally afraid to go any place where there were Japanese sentries,
soldiers or even civilians, and that these sentries were posted at the entrance into
cities and towns and at government offices; that the feared Japanese "M. P.'s" or
Kempeitai's" were a constant terror to them; and lastly, that the greater number
who lived or had evacuated to places for from the Japanese, were found precisely in
the cities and towns where the courts were located; and as a consequence, the
great majority of the people were very strongly adverse to traveling any
considerable distance from their homes and were, one might say, in constant
hiding. Add to these circumstances, the fact of the practical absence of
transportation facilities and the no less important fact of the economic structure
having been so dislocated as to have impoverished the many in exchange for the
enrichment of the few and we shall have a fair picture of the practical difficulties

which the ordinary litigant would in those days have encountered in defending his
rights against anyone of the favored few who would bring him to court. It should be
easy to realize how hard it was for instances, to procure the attendance of
witnesses, principally because of the fact that most of them were in hiding or, at
least, afraid to enter the cities and towns, and also because of then generally
difficult and abnormal conditions prevailing. Under such conditions, cases or denial
of a party's day in court expected. Such denial might arise from many a cause. It
might be party's fear to appear before the court because in doing so, he would have
had to get near the feared Japanese. It might be because he did not recognize any
legal authority in that court, or it might be his down-right repugnance of the hated
enemy. And I dare say that among such people would be found more than
seventeen million Filipinos. These are but a few of countless cause. So that if some
form of validation of such judicial proceedings were to be attempted, all necessary
safeguards should be provided to avoid that in any particular case the validation
should violate any litigant's constitutional right to his day in court, within the full
meaning of the phrase, or any other constitutional or statutory right of his. More
people, I am afraid, would be prejudiced than would be benefited by a wholesale
validation of said proceedings.
Much concern has been shown for the possible confusion which might result from a
decision declaring null and void the acts processes of the Japanese-sponsored
governments in the Philippines. I think, this aspect of the question has been unduly
stressed. The situation is not without remedy, but the remedy lies with the
legislature and not with the courts. As the courts cannot create a new or special
jurisdiction for themselves, which is a legislative function, and as the situation
demands such new or special jurisdiction, let the legislature act in the premises. For
instance, the Congress may enact a law conferring a special jurisdiction upon the
courts of its selection, whereby said courts may, after hearing all the parties
interested, and taking all the necessary safeguards, so that, a party's day in court or
other constitutional or statutory right under the Commonwealth Government should
not be prejudiced by any of said acts, processes or proceedings, particullarly, those
in Japanese-sponsored courts, and subject to such other conditions as the special
law may provide, validate the corresponding acts, processes or proceedings. This, to
my mind, would be more conducive to a maximum of benefit and a minimum of
prejudice to the inhabitants of this country, rather than the procedure favored by
the majority.
Finally, let us not equalize the conditions then prevailing in Manila to that prevailing
in the provinces, where the greater number of the people where then living outside
the towns, in the farms and the hills. These people constitute the great majority of
the eighteen million Filipinos. To them the semblance of an administration of justice
which Japanese allowed, was practically unknown. But they constituted the majority
of loyal citizens to whom President Roosevelt's message of October 23, 1943 refers.
They the majority of our people had an unshaken faith in the arrival of

American aid here and the final triumph of the Allied cause. They were willing to
wait for the restoration of their rightful government, with its courts and other
institutions, for the settlement of their differences. May in their common hardship
and sufferings under yoke of foreign oppression, they had not much time to think of
such differences, if they did not utterly forget them. Their undoubted hatred of the
invader was enough to keep them away from the judicial system that said invader
allowed to have. Those who voluntarily went to the courts in those tragic days
belong to the small minority.
As to the public order why! any public order which then existed was not due to
the courts or other departments of the puppet government. It was maintained at
the point of the bayonet by the Japanese army, and in their own unique fashion.

Footnotes
1

Resolution on motion for reconsideration, see p. 371, post.

8. Mejoff vs Director of Prisons, 90 Phil 70 (1951)

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-2855

July 30, 1949

BORIS MEJOFF, petitioner,

vs.
DIRECTOR OF PRISONS, respondent.
First Assistant Solicitor General Roberto A. Gianzon and Solicitor Lucas Lacson for
respondent.
BENGZON, J.:
The petitioner Boris Mejoff is an alien of Russian descent who was brought to this
country from Shanghai as a secret operative by the Japanese forces during the
latter's regime in these Islands. Upon liberation he was arrested aa a Japanese spy,
by U. S. Army Counter Intelligence Corps. Later he was handed to the

Commonwealth Government for disposition in accordance with Commonwealth Act

No. 682. Thereafter the People's Court ordered his release. But the deportation
board taking his case up, found that having no travel documents Mejoff was illegally
in this country, and consequently refferd the matter to the immigration authorities.
After the corresponding investigation, the Board oF Commissioners of Immigration
on April 5, 1948, declared that Mejoff had entered the Philippines illegally in 1944,
withoutinspection and admission by the immigration officials at a designated port of
entry and, therefore, it ordered that he be deported on the first available
transportation to Russia. The petitioner was then under custody, he having been
arrested on March 18, 1948. In May, 1948, he was transferred to the Cebu Provincial
Jail together with three other Russians to await the arrival of some Russian vessels.
In July and in August of that year two boats of Russian nationality called at the Cebu
Port. But their masters refused to take petitioner and his companions alleging lack
of authority to do so. In October, 1948, after repeated failures to ship this deportee
abroad, the authorities removed him to Bilibid Prison at Muntinglupa where he has
been confined up to the present time, inasmuch as the Commissioner of
Immigration believes it is for the best interest of the country to keep him under
detention while arrangements for his deportation are being made.
It is contended on behalf of petitioner that having been brought to the Philippines
legally by the Japanese forces, he may not now be deported. It is enough to say that
the argument would deny to this Government the power and the authority to eject
from the Islands any and all of that members of the Nipponese Army of occupation
who may still be found hiding in remote places. Which is absurd. Petitioner likewise
contends that he may not be deported because the statutory period to do that
under the laws has long expired. The proposition has no basis. Under section 37 of
the Philippine Immigration Act of 1940 any alien who enters this country "without
inspection and admission by the immigration authorities at a designated point of
entry" is subject to deportation within five years. In a recent decision of a similar
litigation (Borovsky vs. Commissioner of Immigration) we denied the request for
habeas corpus, saying:
"It must be admitted that temporary detention is a necessary step in the process of
exclusion or expulsion of undesirable aliens and that pending arrangements for his
deportation, the Government has the right to hold the undesirable alien under
confinement for a reasonable lenght of time. However, under established
precedents, too long a detention may justify the issuance of a writ of habeas
corpus.1
"The meaning of "reasonable time" depends upon the circumstances, specially the
difficulties of obtaining a passport, the availability of transfortation, the diplomatic
arrangements concerned and the efforts displayed to send the deportee away. 2
Considering that this Government desires to expel the alien, and does not relish
keeping him at the people's expense, we must presume it is making efforts to carry

out the decree of exclusion by the highest officer of the land. On top of this
presumption assurances were made during the oral argument that the Government
is really trying to expedite the expulsion of this petitioner. On the other hand, the
record fails to show how long he has been under confinement since the last time he
was apprehended. Neither does he indicate neglected opportunities to send him
abroad. And unless it is shown that the deportee is being indefinitely imprisoned
under the pretense of awaiting a chance for deportation 3 or unless the Government
admits that itcan not deport him 4 or unless the detainee is being held for too long a
period our courts will not interfere.
"In the United States there were at least two instances in which courts fixed a time
limit within which the imprisoned aliens should be deported 5 otherwise their release
would be ordered by writ of habeas corpus. Nevertheless, supposing such
precedents apply in this jurisdiction, still we have no sufficient data fairly to fix a
definite deadline."
The difference between this and the Borovsky case lies in the fact that the record
shows this petitioner has been detained since March, 1948. However, considering
that in the United States (where transportation facilities are much greater and
diplomatic arrangements are easier to make) a delay of twenty months in carrying
out an order of deportation has not been held sufficient to justify the issuance of the
writ of habeas corpus,6 this petition must be, and it is hereby denied. So ordered.
Moran, C.J., Ozaeta, Padilla, Montemayor and Reyes, JJ., concur.
Paras, J., I dissent for the same reasons stated in my dissenting opinion in case No.
L-2852.
Feria, J., I dissent on the same ground stated in my dissent in case G. R. No. L-2852.

Separate Opinions
PERFECTO, J., dissenting:
To continue keeping petitioner under confinement is a thing that shocks conscience.
Under the circumstances, petitioner is entitled to be released from confinement. He
has not been convicted for any offense for which he may be imprisoned.
Government's inability to deport him no pretext to keep him imprisoned for an
indefinite length of time. The constitutional guarantee that no person shall be
deprived of liberty without due process of law has been intended to protect all
inhabitants or residents who may happen to be under the shadows of Philippine
flag.

Our vote is the same as one we cast when the case of Borovsky vs. Commissioner
of Immigration, L-2852, was submitted for decision although, for some
misunderstanding, our vote was overlooked at the time of the decision was
promulgated. Our vote is to grant the petition and to order the immediate release of
petitioner, without prejudice for the government to deport him as soon as the
government could have the means to do so. In the meantime, petitioner is entitled
to live a normal life in a peaceful country, ruled by the principles of law and justice.
Tuason, J., I dissent on the same ground stated in my dissent in case No. L-2852.

Footnotes
1

Wong wing vs. U. S., 163 U. S., 228; Administrative Control of Aliensby Van
Vleck p. 184, citing Chumura vs. Smith, 29 Fed. (2d), 287, and Ex parte
Mathews, 227 Fed., 857.
2

Cf. Clark, Deportation of Aliens p. 423; Van Vleck op. cit. p. 183 et seq., Rose
vs. Wallis, 279 Fed., 401.
3

Rose vs. Wallis, supra.

Bonder vs. Johnson, 5 Fed. (2d), 238.

Two months, Caranica vs. Nagle, 28 Fed. (2d), 955; four months, Rose vs.
Wallis, supra.
6

Rose vs. Wallis, 279 Fed., 401. May 1920 to January 1922.

9. Agustin vs Edu 88 SCRA 195, 213 (Feb 2, 1979)

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-49112 February 2, 1979
LEOVILLO C. AGUSTIN, petitioner,
vs.

HON. ROMEO F. EDU, in his capacity as Land Transportation Commissioner;

HON. JUAN PONCE ENRILE, in his capacity as Minister of National Defense;
HON. ALFREDO L. JUINIO, in his capacity as Minister Of Public Works,
Transportation and Communications; and HON: BALTAZAR AQUINO, in his
capacity as Minister of Public Highways, respondents.
Leovillo C. Agustin Law Office for petitioner.
Solicitor General Estelito P. Mendoza, Assistant Solicitor General Ruben E. Agpalo
and Solicitor Amado D. Aquino for respondents.

FERNANDO, J.:
The validity of a letter of Instruction 1 providing for an early seaming device for
motor vehicles is assailed in this prohibition proceeding as being violative of the
constitutional guarantee of due process and, insofar as the rules and regulations for
its implementation are concerned, for transgressing the fundamental principle of
non- delegation of legislative power. The Letter of Instruction is stigmatized by
petitioner who is possessed of the requisite standing, as being arbitrary and
oppressive. A temporary restraining order as issued and respondents Romeo F. Edu,
Land Transportation Commissioner Juan Ponce Enrile, Minister of National Defense;
Alfredo L. Juinio, Minister of Public Works, Transportation and Communications; and
Baltazar Aquino, Minister of Public Highways; were to answer. That they did in a
pleading submitted by Solicitor General Estelito P. Mendoza. 2 Impressed with a
highly persuasive quality, it makes devoid clear that the imputation of a
constitutional infirmity is devoid of justification The Letter of Instruction on is a valid
police power measure. Nor could the implementing rules and regulations issued by
respondent Edu be considered as amounting to an exercise of legislative power.
Accordingly, the petition must be dismissed.
The facts are undisputed. The assailed Letter of Instruction No. 229 of President
Marcos, issued on December 2, 1974, reads in full: "[Whereas], statistics show that
one of the major causes of fatal or serious accidents in land transportation is the
presence of disabled, stalled or parked motor vehicles along streets or highways
without any appropriate early warning device to signal approaching motorists of
their presence; [Whereas], the hazards posed by such obstructions to traffic have
been recognized by international bodies concerned with traffic safety, the 1968
Vienna Convention on Road Signs and Signals and the United Nations Organization
(U.N.); [Whereas], the said Vienna Convention which was ratified by the Philippine
Government under P.D. No. 207, recommended the enactment of local legislation for
the installation of road safety signs and devices; [Now, therefore, I, Ferdinand E.
Marcos], President of the Philippines, in the interest of safety on all streets and

highways, including expressways or limited access roads, do hereby direct: 1. That

all owners, users or drivers of motor vehicles shall have at all times in their motor
vehicles at least one (1) pair of early warning device consisting of triangular,
collapsible reflectorized plates in red and yellow colors at least 15 cms. at the base
and 40 cms. at the sides. 2. Whenever any motor vehicle is stalled or disabled or is
parked for thirty (30) minutes or more on any street or highway, including
expressways or limited access roads, the owner, user or driver thereof shall cause
the warning device mentioned herein to be installed at least four meters away to
the front and rear of the motor vehicle staged, disabled or parked. 3. The Land
Transportation Commissioner shall cause Reflectorized Triangular Early Warning
Devices, as herein described, to be prepared and issued to registered owners of
motor vehicles, except motorcycles and trailers, charging for each piece not more
than 15 % of the acquisition cost. He shall also promulgate such rules and
regulations as are appropriate to effectively implement this order. 4. All hereby
concerned shall closely coordinate and take such measures as are necessary or
appropriate to carry into effect then instruction. 3 Thereafter, on November 15,
1976, it was amended by Letter of Instruction No. 479 in this wise. "Paragraph 3 of
Letter of Instruction No. 229 is hereby amended to read as follows: 3. The Land
transportation Commissioner shall require every motor vehicle owner to procure
from any and present at the registration of his vehicle, one pair of a reflectorized
early warning device, as d bed of any brand or make chosen by mid motor vehicle .
The Land Transportation Commissioner shall also promulgate such rule and
regulations as are appropriate to effectively implement this order.'" 4 There was
issued accordingly, by respondent Edu, the implementing rules and regulations on
December 10, 1976. 5 They were not enforced as President Marcos on January 25,
1977, ordered a six-month period of suspension insofar as the installation of early
warning device as a pre-registration requirement for motor vehicle was concerned. 6
Then on June 30, 1978, another Letter of Instruction 7 the lifting of such suspension
and directed the immediate implementation of Letter of Instruction No. 229 as
amended. 8 It was not until August 29, 1978 that respondent Edu issued
Memorandum Circular No. 32, worded thus: "In pursuance of Letter of Instruction
No. 716, dated June 30, 1978, the implementation of Letter of Instruction No. 229,
as amended by Letter of Instructions No. 479, requiring the use of Early Warning
Devices (EWD) on motor vehicle, the following rules and regulations are hereby
issued: 1. LTC Administrative Order No. 1, dated December 10, 1976; shall now be
implemented provided that the device may come from whatever source and that it
shall have substantially complied with the EWD specifications contained in Section 2
of said administrative order; 2. In order to insure that every motor vehicle , except
motorcycles, is equipped with the device, a pair of serially numbered stickers, to be
issued free of charge by this Commission, shall be attached to each EWD. The EWD.
serial number shall be indicated on the registration certificate and official receipt of
payment of current registration fees of the motor vehicle concerned. All Orders,
Circulars, and Memoranda in conflict herewith are hereby superseded, This Order

shall take effect immediately. 9 It was for immediate implementation by respondent

Alfredo L. Juinio, as Minister of Public Works, transportation, and Communications. 10

Petitioner, after setting forth that he "is the owner of a Volkswagen Beetle Car,
Model 13035, already properly equipped when it came out from the assembly lines
with blinking lights fore and aft, which could very well serve as an early warning
device in case of the emergencies mentioned in Letter of Instructions No. 229, as
amended, as well as the implementing rules and regulations in Administrative Order
No. 1 issued by the land transportation Commission," 11 alleged that said Letter of
Instruction No. 229, as amended, "clearly violates the provisions and delegation of
police power, [sic] * * *: " For him they are "oppressive, unreasonable, arbitrary,
confiscatory, nay unconstitutional and contrary to the precepts of our
compassionate New Society." 12 He contended that they are "infected with
arbitrariness because it is harsh, cruel and unconscionable to the motoring public;"
13
are "one-sided, onerous and patently illegal and immoral because [they] will
make manufacturers and dealers instant millionaires at the expense of car owners
who are compelled to buy a set of the so-called early warning device at the rate of P
56.00 to P72.00 per set." 14are unlawful and unconstitutional and contrary to the
precepts of a compassionate New Society [as being] compulsory and confiscatory
on the part of the motorists who could very well provide a practical alternative road
safety device, or a better substitute to the specified set of EWD's." 15 He therefore
prayed for a judgment both the assailed Letters of Instructions and Memorandum
Circular void and unconstitutional and for a restraining order in the meanwhile.
A resolution to this effect was handed down by this Court on October 19, 1978: "L49112 (Leovillo C. Agustin v. Hon. Romeo F. Edu, etc., et al.) Considering the
allegations contained, the issues raised and the arguments adduced in the petition
for prohibition with writ of p prohibitory and/or mandatory injunction, the Court
Resolved to (require) the respondents to file an answer thereto within ton (10) days
from notice and not to move to dismiss the petition. The Court further Resolved to
[issue] a [temporary restraining order] effective as of this date and continuing until
otherwise ordered by this Court. 16
Two motions for extension were filed by the Office of the Solicitor General and
granted. Then on November 15, 1978, he Answer for respondents was submitted.
After admitting the factual allegations and stating that they lacked knowledge or
information sufficient to form a belief as to petitioner owning a Volkswagen Beetle
car," they "specifically deny the allegations and stating they lacked knowledge or
information sufficient to form a belief as to petitioner owning a Volkswagen Beetle
Car, 17 they specifically deny the allegations in paragraphs X and XI (including its
subparagraphs 1, 2, 3, 4) of Petition to the effect that Letter of Instruction No. 229
as amended by Letters of Instructions Nos. 479 and 716 as well as Land

transportation Commission Administrative Order No. 1 and its Memorandum Circular

No. 32 violates the constitutional provisions on due process of law, equal protection
of law and undue delegation of police power, and that the same are likewise
oppressive, arbitrary, confiscatory, one-sided, onerous, immoral unreasonable and
illegal the truth being that said allegations are without legal and factual basis and
for the reasons alleged in the Special and Affirmative Defenses of this Answer." 18
Unlike petitioner who contented himself with a rhetorical recital of his litany of
grievances and merely invoked the sacramental phrases of constitutional litigation,
the Answer, in demonstrating that the assailed Letter of Instruction was a valid
exercise of the police power and implementing rules and regulations of respondent
Edu not susceptible to the charge that there was unlawful delegation of legislative
power, there was in the portion captioned Special and Affirmative Defenses, a
citation of what respondents believed to be the authoritative decisions of this
Tribunal calling for application. They are Calalang v. Williams, 19 Morfe v. Mutuc, 20
and Edu v. Ericta. 21 Reference was likewise made to the 1968 Vienna Conventions
of the United Nations on road traffic, road signs, and signals, of which the
Philippines was a signatory and which was duly ratified. 22 Solicitor General Mendoza
took pains to refute in detail, in language calm and dispassionate, the vigorous, at
times intemperate, accusation of petitioner that the assailed Letter of Instruction
and the implementing rules and regulations cannot survive the test of rigorous
scrutiny. To repeat, its highly-persuasive quality cannot be denied.
This Court thus considered the petition submitted for decision, the issues being
clearly joined. As noted at the outset, it is far from meritorious and must be
dismissed.
1. The Letter of Instruction in question was issued in the exercise of the police
power. That is conceded by petitioner and is the main reliance of respondents. It is
the submission of the former, however, that while embraced in such a category, it
has offended against the due process and equal protection safeguards of the
Constitution, although the latter point was mentioned only in passing. The broad
and expansive scope of the police power which was originally Identified by Chief
Justice Taney of the American Supreme Court in an 1847 decision as "nothing more
or less than the powers of government inherent in every sovereignty" 23 was
stressed in the aforementioned case of Edu v. Ericta thus: "Justice Laurel, in the first
leading decision after the Constitution came into force, Calalang v. Williams,
Identified police power with state authority to enact legislation that may interfere
with personal liberty or property in order to promote the general welfare. Persons
and property could thus 'be subjected to all kinds of restraints and burdens in order
to we the general comfort, health and prosperity of the state.' Shortly after
independence in 1948, Primicias v. Fugoso reiterated the doctrine, such a
competence being referred to as 'the power to prescribe regulations to promote the
health, morals, peace, education, good order or safety, and general welfare of the
people. The concept was set forth in negative terms by Justice Malcolm in a pre-

Commonwealth decision as 'that inherent and plenary power in the State which
enables it to prohibit all things hurtful to the comfort, safety and welfare of society.
In that sense it could be hardly distinguishable as noted by this Court in Morfe v.
Mutuc with the totality of legislative power. It is in the above sense the greatest and
most powerful at. tribute of government. It is, to quote Justice Malcolm anew, 'the
most essential, insistent, and at least table powers, I extending as Justice Holmes
aptly pointed out 'to all the great public needs.' Its scope, ever-expanding to meet
the exigencies of the times, even to anticipate the future where it could be done,
provides enough room for an efficient and flexible response to conditions and
circumstances thus assuring the greatest benefits. In the language of Justice
Cardozo: 'Needs that were narrow or parochial in the past may be interwoven in the
present with the well-being of the nation. What is critical or urgent changes with the
time.' The police power is thus a dynamic agency, suitably vague and far from
precisely defined, rooted in the conception that men in organizing the state and
imposing upon its government limitations to safeguard constitutional rights did not
intend thereby to enable an individual citizen or a group of citizens to obstruct
unreasonably the enactment of such salutary measures calculated to communal
peace, safety, good order, and welfare." 24

2. It was thus a heavy burden to be shouldered by petitioner, compounded by the

fact that the particular police power measure challenged was clearly intended to
promote public safety. It would be a rare occurrence indeed for this Court to
invalidate a legislative or executive act of that character. None has been called to
our attention, an indication of its being non-existent. The latest decision in point,
Edu v. Ericta, sustained the validity of the Reflector Law, 25 an enactment conceived
with the same end in view. Calalang v. Williams found nothing objectionable in a
statute, the purpose of which was: "To promote safe transit upon, and. avoid
obstruction on roads and streets designated as national roads * * *. 26 As a matter of
fact, the first law sought to be nullified after the effectivity of the 1935 Constitution,
the National Defense Act, 27 with petitioner failing in his quest, was likewise
prompted by the imperative demands of public safety.
3. The futility of petitioner's effort to nullify both the Letter of Instruction and the
implementing rules and regulations becomes even more apparent considering his
failure to lay the necessary factual foundation to rebut the presumption of validity.
So it was held in Ermita-Malate Hotel and Motel Operators Association, Inc. v. City
Mayor of Manila. 28 The rationale was clearly set forth in an excerpt from a decision
of Justice Branders of the American Supreme Court, quoted in the opinion: "The
statute here questioned deals with a subject clearly within the scope of the police
power. We are asked to declare it void on the ground that the specific method of
regulation prescribed is unreasonable and hence deprives the plaintiff of due
process of law. As underlying questions of fact may condition the constitutionality of

legislation of this character, the presumption of constitutionality must prevail in the

absence of some factual foundation of record in overthrowing the statute. 29
4. Nor did the Solicitor General as he very well could, rely solely on such rebutted
presumption of validity. As was pointed out in his Answer "The President certainly
had in his possession the necessary statistical information and data at the time he
issued said letter of instructions, and such factual foundation cannot be defeated by
petitioner's naked assertion that early warning devices 'are not too vital to the
prevention of nighttime vehicular accidents' because allegedly only 390 or 1.5 per
cent of the supposed 26,000 motor vehicle accidents that in 1976 involved rear-end
collisions (p. 12 of petition). Petitioner's statistics is not backed up by demonstrable
data on record. As aptly stated by this Honorable Court: Further: "It admits of no
doubt therefore that there being a presumption of validity, the necessity for
evidence to rebut it is unavoidable, unless the statute or ordinance is void on its
face, which is not the case here"' * * *. But even as g the verity of petitioner's
statistics, is that not reason enough to require the installation of early warning
devices to prevent another 390 rear-end collisions that could mean the death of 390
or more Filipinos and the deaths that could likewise result from head-on or frontal
collisions with stalled vehicles?" 30 It is quite manifest then that the issuance of such
Letter of Instruction is encased in the armor of prior, careful study by the Executive
Department. To set it aside for alleged repugnancy to the due process clause is to
give sanction to conjectural claims that exceeded even the broadest permissible
limits of a pleader's well known penchant for exaggeration.
5. The rather wild and fantastic nature of the charge of oppressiveness of this Letter
of Instruction was exposed in the Answer of the Solicitor General thus: "Such early
warning device requirement is not an expensive redundancy, nor oppressive, for car
owners whose cars are already equipped with 1) blinking lights in the fore and aft of
said motor vehicles,' 2) "battery-powered blinking lights inside motor vehicles," 3)
"built-in reflectorized tapes on front and rear bumpers of motor vehicles," or 4)
"well-lighted two (2) petroleum lamps (the Kinke) * * * because: Being universal
among the signatory countries to the said 1968 Vienna Conventions, and visible
even under adverse conditions at a distance of at least 400 meters, any motorist
from this country or from any part of the world, who sees a reflectorized rectangular
early seaming device installed on the roads, highways or expressways, will
conclude, without thinking, that somewhere along the travelled portion of that road,
highway, or expressway, there is a motor vehicle which is stationary, stalled or
disabled which obstructs or endangers passing traffic. On the other hand, a motorist
who sees any of the aforementioned other built in warning devices or the petroleum
lamps will not immediately get adequate advance warning because he will still think
what that blinking light is all about. Is it an emergency vehicle? Is it a law
enforcement car? Is it an ambulance? Such confusion or uncertainty in the mind of
the motorist will thus increase, rather than decrease, the danger of collision. 31

6. Nor did the other extravagant assertions of constitutional deficiency go unrefuted

in the Answer of the Solicitor General "There is nothing in the questioned Letter of
Instruction No. 229, as amended, or in Administrative Order No. 1, which requires or
compels motor vehicle owners to purchase the early warning device prescribed
thereby. All that is required is for motor vehicle owners concerned like petitioner, to
equip their motor vehicles with a pair of this early warning device in question,
procuring or obtaining the same from whatever source. In fact, with a little of
industry and practical ingenuity, motor vehicle owners can even personally make or
produce this early warning device so long as the same substantially conforms with
the specifications laid down in said letter of instruction and administrative order.
Accordingly the early warning device requirement can neither be oppressive,
onerous, immoral, nor confiscatory, much less does it make manufacturers and
dealers of said devices 'instant millionaires at the expense of car owners' as
petitioner so sweepingly concludes * * *. Petitioner's fear that with the early warning
device requirement 'a more subtle racket may be committed by those called upon
to enforce it * * * is an unfounded speculation. Besides, that unscrupulous officials
may try to enforce said requirement in an unreasonable manner or to an
unreasonable degree, does not render the same illegal or immoral where, as in the
instant case, the challenged Letter of Instruction No. 229 and implementing order
disclose none of the constitutional defects alleged against it. 32

7 It does appear clearly that petitioner's objection to this Letter of Instruction is not
premised on lack of power, the justification for a finding of unconstitutionality, but
on the pessimistic, not to say negative, view he entertains as to its wisdom. That
approach, it put it at its mildest, is distinguished, if that is the appropriate word, by
its unorthodoxy. It bears repeating "that this Court, in the language of Justice Laurel,
'does not pass upon questions of wisdom justice or expediency of legislation.' As
expressed by Justice Tuason: 'It is not the province of the courts to supervise
legislation and keep it within the bounds of propriety and common sense. That is
primarily and exclusively a legislative concern.' There can be no possible objection
then to the observation of Justice Montemayor. 'As long as laws do not violate any
Constitutional provision, the Courts merely interpret and apply them regardless of
whether or not they are wise or salutary. For they, according to Justice Labrador,
'are not supposed to override legitimate policy and * * * never inquire into the
wisdom of the law.' It is thus settled, to paraphrase Chief Justice Concepcion in
Gonzales v. Commission on Elections, that only congressional power or competence,
not the wisdom of the action taken, may be the basis for declaring a statute invalid.
This is as it ought to be. The principle of separation of powers has in the main wisely
allocated the respective authority of each department and confined its jurisdiction
to such a sphere. There would then be intrusion not allowable under the

Constitution if on a matter left to the discretion of a coordinate branch, the judiciary

would substitute its own. If there be adherence to the rule of law, as there ought to
be, the last offender should be courts of justice, to which rightly litigants submit
their controversy precisely to maintain unimpaired the supremacy of legal norms
and prescriptions. The attack on the validity of the challenged provision likewise
insofar as there may be objections, even if valid and cogent on is wisdom cannot be
sustained. 33

8. The alleged infringement of the fundamental principle of non-delegation of

legislative power is equally without any support well-settled legal doctrines. Had
petitioner taken the trouble to acquaint himself with authoritative pronouncements
from this Tribunal, he would not have the temerity to make such an assertion. An
exempt from the aforecited decision of Edu v. Ericta sheds light on the matter: "To
avoid the taint of unlawful delegation, there must be a standard, which implies at
the very least that the legislature itself determines matters of principle and lays
down fundamental policy. Otherwise, the charge of complete abdication may be
hard to repel A standard thus defines legislative policy, marks its maps out its
boundaries and specifies the public agency to apply it. It indicates the
circumstances under which the legislative command is to be effected. It is the
criterion by which legislative purpose may be carried out. Thereafter, the executive
or administrative office designated may in pursuance of the above guidelines
promulgate supplemental rules and regulations. The standard may be either
express or implied. If the former, the non-delegation objection is easily met. The
standard though does not have to be spelled out specifically. It could be implied
from the policy and purpose of the act considered as a whole. In the Reflector Law
clearly, the legislative objective is public safety. What is sought to be attained as in
Calalang v. Williams is "safe transit upon the roads.' This is to adhere to the
recognition given expression by Justice Laurel in a decision announced not too long
after the Constitution came into force and effect that the principle of non-delegation
"has been made to adapt itself to the complexities of modern governments, giving
rise to the adoption, within certain limits, of the principle of "subordinate legislation"
not only in the United States and England but in practically all modern
governments.' He continued: 'Accordingly, with the growing complexity of modern
life, the multiplication of the subjects of governmental regulation, and the increased
difficulty of administering the laws, there is a constantly growing tendency toward
the delegation of greater powers by the legislature and toward the approval of the
practice by the courts.' Consistency with the conceptual approach requires the
reminder that what is delegated is authority non-legislative in character, the
completeness of the statute when it leaves the hands of Congress being assumed."
34

9. The conclusion reached by this Court that this petition must be dismissed is
reinforced by this consideration. The petition itself quoted these two whereas
clauses of the assailed Letter of Instruction: "[Whereas], the hazards posed by such
obstructions to traffic have been recognized by international bodies concerned with
traffic safety, the 1968 Vienna Convention on Road Signs and Signals and the United
Nations Organization (U.N.); [Whereas], the said Vionna Convention, which was
ratified by the Philippine Government under P.D. No. 207, recommended the
enactment of local legislation for the installation of road safety signs and devices; *
* * " 35 It cannot be disputed then that this Declaration of Principle found in the
Constitution possesses relevance: "The Philippines * * * adopts the generally
accepted principles of international law as part of the law of the land * * *." 36 The
1968 Vienna Convention on Road Signs and Signals is impressed with such a
character. It is not for this country to repudiate a commitment to which it had
pledged its word. The concept of Pacta sunt servanda stands in the way of such an
attitude, which is, moreover, at war with the principle of international morality.
10. That is about all that needs be said. The rather court reference to equal
protection did not even elicit any attempt on the Part of Petitioner to substantiate in
a manner clear, positive, and categorical why such a casual observation should be
taken seriously. In no case is there a more appropriate occasion for insistence on
what was referred to as "the general rule" in Santiago v. Far Eastern Broadcasting
Co., 37 namely, "that the constitutionality of a law wig not be considered unless the
point is specially pleaded, insisted upon, and adequately argued." 38 "Equal
protection" is not a talismanic formula at the mere invocation of which a party to a
lawsuit can rightfully expect that success will crown his efforts. The law is anything
but that.
WHEREFORE, this petition is dismissed. The restraining order is lifted. This decision
is immediately executory. No costs.
Castro, C.J., Barredo, Antonio, Santos, Fernandez, Guerrero, Abad Santos, De Castro
and Melencio-Herrera, concur.
Makasiar, J, reserves the right to file a separate opinion.
Aquino J., took no part.
Concepcion J., is on leave.
Castro, C.J., certifies that Justice Concepcion concurs in their decision.

# Separate Opinions

TEEHANKEE, J., dissenting:

I dissent from the majority's peremptory dismissal of the petition and lifting of the
restraining order issued on October 19, 1978 against the blanket enforcement of the
requirement that all motor vehicles be equipped with the so-called early warning
device, without even hearing the parties in oral argument as generally required by
the Court in original cases of far-reaching consequence such as the case at bar.
Lack of time presents my filing an extended dissent. I only wish to state that the
petition advances grave and serious grounds of assailing "the rules and regulations
issued by the Land Transportation Commission under Administrative Order No. 1
and Memorandum Circular No. 32 [which] do not reflect the real intent, noble
objectives and spirit of Letter of Instructions No. 229, as amended by Letter of
Instructions Nos. 479 and 716, because it is oppressive, unreasonable, arbitrary,
confiscatory, nay unconstitutional and contrary to the precepts of our
compassionate New Society," because of the following considerations, inter alia:
1. It is oppressive, arbitrary and discriminatory to require owners of motor vehicles
with built-in and more effective and efficient E.W.D.'S such as "a) blinking lights in
the fore and aft of said motor vehicles, 1)) battery-powered blinking lights inside
motor vehicles, c) built-in reflectorized tapes on front and rear bumpers of motor
vehicles....... to purchase the E.W.D. specified in the challenged administrative
order, whose effectivity and utility have yet to be demonstrated.
2. The public necessity for the challenged order has yet to be shown. No valid
refutation has been made of petitioner's assertion that the "E.W.D.'s are not too
vital to the prevention of nighttime vehicular accidents. Statistics shows that of the
26,000 motor vehicle accidents that occurred in 1976, only 390 or 1.5 per cent
involved rear-end collisions," as to require the purchase and installation of the
questioned E.W.D. for almost 900,000 vehicles throughout the country;
3. The big financial burden to be imposed on all motorists is staggering, and
petitioner's assertion that "as of 1975, there were at least 865,037 motor vehicles
all over the country requiring E.W.D.'S and at the minimum price of 1156.00 per set,
this would mean a consumer outlay of P 48,451,872.00, or close to P 50 million for
the questioned E.W.D.'S "stands unchallenged;
4. No real effort has been made to show that there can be practical and less
burdensome alternative road safety devices for stalled vehicles than the prescribed
E.W.D., such as the common petroleum lamps "kinke" which can be placed just as
effectively in front of stalled vehicles on the highways; and
5. There is no imperative need for imposing such a bet requirement on all vehicles.
The respondents have not shown that they have availed of the powers and

prerogatives vested in their offices such as ridding the country of dilapidated trucks
and vehicles which are the main cause of the deplorable -highway accidents due to
stoned vehicles, establishing an honest and foolproof system of examination and
licensing of motor vehicle drivers so as to ban the reckless and irresponsible and a
sustained education campaign to instill safe driving habits and attitudes that can be
carried out for much less than the P 50 million burden that would be imposed by the
challenged order.
I do feel that a greater "degree of receptivity and sympathy" could be extended to
the petitioner for his civic mindedness in having filed the present petition g as
capricious and unreasonable the "all pervading police power" of the State instead of
throwing the case out of court and leaving the wrong impression that the exercise of
police power insofar as it may affect the life, liberty and property of any person is no
longer subject to judicial inquiry.

10.JBL Reyes vs Bagatsing, October 25, 1983

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-65366 November 9, 1983
JOSE B.L. REYES, in behalf of the ANTI-BASES COALITION (ABC), petitioner,
vs.
RAMON BAGATSING, as Mayor of the City of Manila, respondent.
Lorenzo M. Taada Jose W. Diokno and Haydee B. Yorac for petitioner.
The Solicitor General for respondent.

FERNANDO, C.J.:+.wph!1
This Court, in this case of first impression, at least as to some aspects, is called
upon to delineate the boundaries of the protected area of the cognate rights to free
speech and peaceable assembly, 1 against an alleged intrusion by respondent
Mayor Ramon Bagatsing. Petitioner, retired Justice JB L. Reyes, on behalf of the AntiBases Coalition sought a permit from the City of Manila to hold a peaceful march

and rally on October 26, 1983 from 2:00 to 5:00 in the afternoon, starting from the
Luneta, a public park, to the gates of the United States Embassy, hardly two blocks
away. Once there, and in an open space of public property, a short program would
be held. 2 During the course of the oral argument, 3 it was stated that after the
delivery of two brief speeches, a petition based on the resolution adopted on the
last day by the International Conference for General Disbarmament, World Peace
and the Removal of All Foreign Military Bases held in Manila, would be presented to
a representative of the Embassy or any of its personnel who may be there so that it
may be delivered to the United States Ambassador. The march would be attended
by the local and foreign participants of such conference. There was likewise an
assurance in the petition that in the exercise of the constitutional rights to free
speech and assembly, all the necessary steps would be taken by it "to ensure a
peaceful march and rally." 4
The filing of this suit for mandamus with alternative prayer for writ of preliminary
mandatory injunction on October 20, 1983 was due to the fact that as of that date,
petitioner had not been informed of any action taken on his request on behalf of the
organization to hold a rally. On October 25, 1983, the answer of respondent Mayor
was filed on his behalf by Assistant Solicitor General Eduardo G. Montenegro. 5 It
turned out that on October 19, such permit was denied. Petitioner was unaware of
such a fact as the denial was sent by ordinary mail. The reason for refusing a permit
was due to police intelligence reports which strongly militate against the advisability
of issuing such permit at this time and at the place applied for." 6 To be more
specific, reference was made to persistent intelligence reports affirm[ing] the plans
of subversive/criminal elements to infiltrate and/or disrupt any assembly or
congregations where a large number of people is expected to attend." 7 Respondent
Mayor suggested, however, in accordance with the recommendation of the police
authorities, that "a permit may be issued for the rally if it is to be held at the Rizal
Coliseum or any other enclosed area where the safety of the participants
themselves and the general public may be ensured." 8

The oral argument was heard on October 25, 1983, the very same day the answer
was filed. The Court then deliberated on the matter. That same afternoon, a minute
resolution was issued by the Court granting the mandatory injunction prayed for on
the ground that there was no showing of the existence of a clear and present
danger of a substantive evil that could justify the denial of a permit. On this point,
the Court was unanimous, but there was a dissent by Justice Aquino on the ground
that the holding of a rally in front of the US Embassy would be violative of
Ordinance No. 7295 of the City of Manila. The last sentence of such minute
resolution reads: "This resolution is without prejudice to a more extended opinion." 9
Hence this detailed exposition of the Court's stand on the matter.

1. It is thus clear that the Court is called upon to protect the exercise of the cognate
rights to free speech and peaceful assembly, arising from the denial of a permit.
The Constitution is quite explicit: "No law shall be passed abridging the freedom of
speech, or of the press, or the right of the people peaceably to assemble and
petition the Government for redress of grievances." 10 Free speech, like free press,
may be Identified with the liberty to discuss publicly and truthfully any matter of
public concern without censorship or punishment. 11 There is to be then no previous
restraint on the communication of views or subsequent liability whether in libel
suits, 12 prosecution for sedition, 13 or action for damages, 14 or contempt
proceedings 15 unless there be a clear and present danger of a substantive evil that
[the State] has a right to prevent." 16 Freedom of assembly connotes the right
people to meet peaceably for consultation and discussion of matters Of public
concern. 17 It is entitled to be accorded the utmost deference and respect. It is hot to
be limited, much less denied, except on a showing, as 's the case with freedom of
expression, of a clear and present danger of a substantive evil that the state has a
right to prevent. 18 Even prior to the 1935 Constitution, Justice Maicolm had
occasion to stress that it is a necessary consequence of our republican institutions
and complements the right of free speech. 19 To paraphrase opinion of Justice
Rutledge speaking for the majority of the American Supreme Court Thomas v.
Collins, 20 it was not by accident or coincidence that the right to freedom of speech
and of the press were toupled in a single guarantee with the and to petition the
rights of the people peaceably to assemble and to petition the government for
redress of grievances. All these rights, while not Identical, are inseparable. the
every case, therefo re there is a limitation placed on the exercise of this right, the
judiciary is called upon to examine the effects of the challenged governmental
actuation. The sole justification for a limitation on the exercise of this right, so
fundamental to the maintenance of democratic institutions, is the danger, of a
character both grave and imminent, of a serious evil to public safety, public morals,
public health, or any other legitimate public interest. 21

2. Nowhere is the rationale that underlies the freedom of expression and peaceable
assembly better expressed than in this excerpt from an opinion of Justice
Frankfurter: "It must never be forgotten, however, that the Bill of Rights was the
child of the Enlightenment. Back of the guaranty of free speech lay faith in the
power of an appeal to reason by all the peaceful means for gaining access to the
mind. It was in order to avert force and explosions due to restrictions upon rational
modes of communication that the guaranty of free speech was given a generous
scope. But utterance in a context of violence can lose its significance as an appeal
to reason and become part of an instrument of force. Such utterance was not meant
to be sheltered by the Constitution." 22 What was rightfully stressed is the
abandonment of reason, the utterance, whether verbal or printed, being in a
context of violence. It must always be remembered that this right likewise provides

for a safety valve, allowing parties the opportunity to give vent to their-views, even
if contrary to the prevailing climate of opinion. For if the peaceful means of
communication cannot be availed of, resort to non-peaceful means may be the only
alternative. Nor is this the sole reason for the expression of dissent. It means more
than just the right to be heard of the person who feels aggrieved or who is
dissatisfied with things as they are. Its value may lie in the fact that there may be
something worth hearing from the dissenter. That is to ensure a true ferment of
Ideas. There are, of course, well-defined limits. What is guaranteed is peaceable
assembly. One may not advocate disorder in the name of protest, much less preach
rebellion under the cloak of dissent. The Constitution frowns on disorder or tumult
attending a rally or assembly. resort to force is ruled out and outbreaks of violence
to be avoided. The utmost calm though is not required. As pointed out in an early
Philippine case, penned in 1907 to be precise, United States v. Apurado: 23 "It is
rather to be expected that more or less disorder will mark the public assembly of
the people to protest against grievances whether real or imaginary, because on
such occasions feeling is always wrought to a high pitch of excitement, and the
greater the grievance and the more intense the feeling, the less perfect, as a rule,
will be the disciplinary control of the leaders over their irresponsible followers." 24 It
bears repeating that for the constitutional right to be invoked, riotous conduct,
injury to property, and acts of vandalism must be avoided, To give free rein to one's
destructive urges is to call for condemnation. It is to make a mockery of the high
estate occupied by intellectual liberty in our scheme of values.
3. There can be no legal objection, absent the existence of a clear and present
danger of a substantive evil, on the choice of Luneta as the place where the peace
rally would start. The Philippines is committed to the view expressed in the plurality
opinion, of 1939 vintage, of Justice Roberts in Hague v. CIO: 25 Whenever the title of
streets and parks may rest, they have immemorially been held in trust for the use of
the public and, time out of mind, have been used for purposes of assembly,
communicating thoughts between citizens, and discussing public questions. Such
use of the streets and public places has, from ancient times, been a part of the
privileges, immunities, rights, and liberties of citizens. The privilege of a citizen of
the United States to use the streets and parks for communication of views on
national questions may be regulated in the interest of all; it is not absolute, but
relative, and must be exercised in subordination to the general comfort and
convenience, and in consonance with peace and good order; but it must not, in the
guise of regulation, be abridged or denied. 26 The above excerpt was quoted with
approval in Primicias v. Fugoso. 27 Primicias made explicit what was implicit in
Municipality of Cavite v. Rojas," 28 a 1915 decision, where this Court categorically
affirmed that plazas or parks and streets are outside the commerce of man and thus
nullified a contract that leased Plaza Soledad of plaintiff-municipality. Reference was
made to such plaza "being a promenade for public use," 29 which certainly is not the
only purpose that it could serve. To repeat, there can be no valid reason why a

permit should not be granted for the or oposed march and rally starting from a
public dark that is the Luneta.
4. Neither can there be any valid objection to the use of the streets, to the gates of
the US Embassy, hardly two block-away at the Roxas Boulevard. Primicias v. Fugoso
has resolved any lurking doubt on the matter. In holding that the then Mayor Fugoso
of the City of Manila should grant a permit for a public meeting at Plaza Miranda in
Quiapo, this Court categorically declared: "Our conclusion finds support in the
decision in the case of Willis Cox vs. State of New Hampshire, 312 U.S., 569. In that
case, the statute of New Hampshire P. L. chap. 145, section 2, providing that 'no
parade or procession upon any ground abutting thereon, shall 'De permitted unless
a special license therefor shall first be explained from the selectmen of the town or
from licensing committee,' was construed by the Supreme Court of New Hampshire
as not conferring upon the licensing board unfettered discretion to refuse to grant
the license, and held valid. And the Supreme Court of the United States, in its
decision (1941) penned by Chief Justice Hughes affirming the judgment of the State
Supreme Court, held that 'a statute requiring persons using the public streets for a
parade or procession to procure a special license therefor from the local authorities
is not an unconstitutional abridgment of the rights of assembly or of freedom of
speech and press, where, as the statute is construed by the state courts, the
licensing authorities are strictly limited, in the issuance of licenses, to a
consideration of the time, place, and manner of the parade or procession, with a
view to conserving the public convenience and of affording an opportunity to
provide proper policing, and are not invested with arbitrary discretion to issue or
refuse license, ... " 30 Nor should the point made by Chief Justice Hughes in a
subsequent portion of the opinion be ignored, "Civil liberties, as guaranteed by the
Constitution, imply the existence of an organized society maintaining public order
without which liberty itself would be lost in the excesses of unrestricted abuses. The
authority of a municipality to impose regulations in order to assure the safety and
convenience of the people in the use of public highways has never been regarded
as inconsistent with civil liberties but rather as one of the means of safeguarding
the good order upon which they ultimately depend. The control of travel on the
streets of cities is the most familiar illustration of this recognition of social need.
Where a restriction of the use of highways in that relation is designed to promote
the public convenience in the interest of all, it cannot be disregarded by the
attempted exercise of some civil right which in other circumstances would be
entitled to protection." 31

5. There is a novel aspect to this case, If the rally were confined to Luneta, no
question, as noted, would have arisen. So, too, if the march would end at another
park. As previously mentioned though, there would be a short program upon
reaching the public space between the two gates of the United States Embassy at

Roxas Boulevard. That would be followed by the handing over of a petition based on
the resolution adopted at the closing session of the Anti-Bases Coalition. The
Philippines is a signatory of the Vienna Convention on Diplomatic Relations adopted
in 1961. It was concurred in by the then Philippine Senate on May 3, 1965 and the
instrument of ratification was signed by the President on October 11, 1965, and was
thereafter deposited with the Secretary General of the United Nations on November
15. As of that date then, it was binding on the Philippines. The second paragraph of
the Article 22 reads: "2. The receiving State is under a special duty to take
appropriate steps to protect the premises of the mission against any intrusion or
damage and to prevent any disturbance of the peace of the mission or impairment
of its dignity. " 32 The Constitution "adopts the generally accepted principles of
international law as part of the law of the land. ..." 33 To the extent that the Vienna
Convention is a restatement of the generally accepted principles of international
law, it should be a part of the law of the land. 34 That being the case, if there were a
clear and present danger of any intrusion or damage, or disturbance of the peace of
the mission, or impairment of its dignity, there would be a justification for the denial
of the permit insofar as the terminal point would be the Embassy. Moreover,
respondent Mayor relied on Ordinance No. 7295 of the City of Manila prohibiting the
holding or staging of rallies or demonstrations within a radius of five hundred (500)
feet from any foreign mission or chancery and for other purposes. Unless the
ordinance is nullified, or declared ultra vires, its invocation as a defense is
understandable but not decisive, in view of the primacy accorded the constitutional
rights of free speech and peaceable assembly. Even if shown then to be applicable,
that question the confronts this Court.
6. There is merit to the observation that except as to the novel aspects of a
litigation, the judgment must be confined within the limits of previous decisions. The
law declared on past occasions is, on the whole, a safe guide, So it has been here.
Hence, as noted, on the afternoon of the hearing, October 25, 1983, this Court
issued the minute resolution granting the mandatory injunction allowing the
proposed march and rally scheduled for the next day. That conclusion was inevitable
ill the absence of a clear and present danger of a substantive, evil to a legitimate
public interest. There was no justification then to deny the exercise of the
constitutional rights of tree speech and peaceable assembly. These rights are
assured by our Constitution and the Universal Declaration of Human Rights. 35 The
participants to such assembly, composed primarily of those in attendance at the
International Conference for General Disbarmament, World Peace and the Removal
of All Foreign Military Bases would start from the Luneta. proceeding through Roxas
Boulevard to the gates of the United States Embassy located at the same street. To
repeat, it is settled law that as to public places, especially so as to parks and
streets, there is freedom of access. Nor is their use dependent on who is the
applicant for the permit, whether an individual or a group. If it were, then the
freedom of access becomes discriminatory access, giving rise to an equal protection
question. The principle under American doctrines was given utterance by Chief

Justice Hughes in these words: "The question, if the rights of free speech and
peaceable assembly are to be preserved, is not as to the auspices under which the
meeting is held but as to its purpose; not as to The relations of the speakers, but
whether their utterances transcend the bounds of the freedom of speech which the
Constitution protects." 36 There could be danger to public peace and safety if such a
gathering were marked by turbulence. That would deprive it of its peaceful
character. Even then, only the guilty parties should be held accountable. It is true
that the licensing official, here respondent Mayor, is not devoid of discretion in
determining whether or not a permit would be granted. It is not, however,
unfettered discretion. While prudence requires that there be a realistic appraisal not
of what may possibly occur but of what may probably occur, given all the relevant
circumstances, still the assumption especially so where the assembly is
scheduled for a specific public place is that the permit must be for the assembly
being held there. The exercise of such a right, in the language of Justice Roberts,
speaking for the American Supreme Court, is not to be "abridged on the plea that it
may be exercised in some other place." 37

7. In fairness to respondent Mayor, he acted on the belief that Navarro v. Villegas 38

and Pagkakaisa ng Manggagawang Pilipino (PMP.) v. Bagatsing, 39 called for
application. While the General rule is that a permit should recognize the right of the
applicants to hold their assembly at a public place of their choice, another place
may be designated by the licensing authority if it be shown that there is a clear and
present danger of a substantive evil if no such change were made. In the Navarro
and the Pagkakaisa decisions, this Court was persuaded that the clear and present
danger test was satisfied. The present situation is quite different. Hence the
decision reached by the Court. The mere assertion that subversives may infiltrate
the ranks of the demonstrators does not suffice. Not that it should be overlooked.
There was in this case, however, the assurance of General Narciso Cabrera,
Superintendent, Western Police District, Metropolitan Police Force, that the police
force is in a position to cope with such emergency should it arise That is to comply
with its duty to extend protection to the participants of such peaceable assembly.
Also from him came the commendable admission that there were the least five
previous demonstrations at the Bayview hotel Area and Plaza Ferguson in front of
the United States Embassy where no untoward event occurred. It was made clear by
petitioner, through counsel, that no act offensive to the dignity of the United States
Mission in the Philippines would take place and that, as mentioned at the outset of
this opinion, "all the necessary steps would be taken by it 'to ensure a peaceful
march and rally.' " 40 Assistant Solicitor General Montenegro expressed the view that
the presence of policemen may in itself be a provocation. It is a sufficient answer
that they should stay at a discreet distance, but ever ready and alert to cope with
any contingency. There is no need to repeat what was pointed out by Chief Justice
Hughes in Cox that precisely, it is the duty of the city authorities to provide the

proper police protection to those exercising their right to peaceable assembly and
freedom of expression.
8. By way of a summary The applicants for a permit to hold an assembly should
inform the licensing authority of the date, the public place where and the time when
it will take place. If it were a private place, only the consent of the owner or the one
entitled to its legal possession is required. Such application should be filed well
ahead in time to enable the public official concerned to appraise whether there may
be valid objections to the grant of the permit or to its grant but at another public
place. It is an indispensable condition to such refusal or modification that the clear
and present danger test be the standard for the decision reached. If he is of the
view that there is such an imminent and grave danger of a substantive evil, the
applicants must be heard on the matter. Thereafter, his decision, whether favorable
or adverse, must be transmitted to them at the earliest opportunity. Thus if so
minded, then, can have recourse to the proper judicial authority. Free speech and
peaceable assembly, along with the other intellectual freedoms, are highly ranked
in our scheme of constitutional values. It cannot be too strongly stressed that on the
judiciary, even more so than on the other departments rests the grave and
delicate responsibility of assuring respect for and deference to such preferred rights.
No verbal formula, no sanctifying phrase can, of course, dispense with what has
been so felicitiously termed by Justice Holmes "as the sovereign prerogative of
judgment." Nonetheless, the presumption must be to incline the weight of the
scales of justice on the side of such rights, enjoying as they do precedence and
primacy. Clearly then, to the extent that there may be inconsistencies between this
resolution and that of Navarro v. Villegas, that case is pro tantomodified. So it was
made clear in the original resolution of October 25, 1983.
9. Respondent Mayor posed the issue of the applicability of Ordinance No. 7295 of
the City of Manila prohibiting the holding or staging of rallies or demonstrations
within a radius of five hundred (500) feet from any foreign mission or chancery and
for other purposes. It is to be admitted that it finds support In the previously quoted
Article 22 of the Vienna Convention on Diplomatic Relations. There was no showing,
however, that the distance between the chancery and the embassy gate is less than
500 feet. Even if it could be shown that such a condition is satisfied. it does not
follow that respondent Mayor could legally act the way he did. The validity of his
denial of the permit sought could still be challenged. It could be argued that a case
of unconstitutional application of such ordinance to the exercise of the right of
peaceable assembly presents itself. As in this case there was no proof that the
distance is less than 500 feet, the need to pass on that issue was obviated, Should
it come, then the qualification and observation of Justices Makasiar and Plana
certainly cannot be summarily brushed aside. The high estate accorded the rights to
free speech and peaceable assembly demands nothing less.

10. Ordinarily, the remedy in cases of this character is to set aside the denial or the
modification of the permit sought and order the respondent official, to grant it.
Nonetheless, as there was urgency in this case, the proposed march and rally being
scheduled for the next day after the hearing, this Court. in the exercise of its
conceded authority, granted the mandatory injunction in the resolution of October
25, 1983. It may be noted that the peaceful character of the peace march and rally
on October 26 was not marred by any untoward incident. So it has been in other
assemblies held elsewhere. It is quite reassuring such that both on the part of the
national government and the citizens, reason and moderation have prevailed. That
is as it should be.
WHEREFORE, the mandatory injunction prayed for is granted. No costs.
Concepcion, Jr., Guerrero, Melencio-Herrera, Escolin, Relova and Gutierrez, , Jr.,JJ.,
concur.
De Castro, J, is on leave.

Separate Opinions
TEEHANKEE, J., concurring:
The Chief Justice's opinion of the Court reaffirms the doctrine of Primicias vs. Fugoso
1
that "the right to freedom of speech and to peacefully assemble and petition the
government for redress of grievances are fundamental personal rights of the people
recognized and guaranteed by the constitutions of democratic countries" and that
the city or town mayors are not conferred "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." The most recent graphic demonstration of what this great right of peaceful
assembly and petition for redress of grievances could accomplish was the civil
rights march on Washington twenty years ago under the late assassinated black
leader Martin Luther King, Jr. (whose birthday has now been declared an American
national holiday) which subpoenaed the conscience of the nation," and awakened
the conscience of millions of previously indifferent Americans and eventually (after
many disorders and riots yet to come) was to put an end to segregation and
discrimination against the American Negro.
The procedure for the securing of such permits for peaceable assembly is succintly
set forth in the summary given by the Court Justice in paragraph 8 of the Court's
opinion, with the injunction that "the presumption must be to incline the weight of
the scales of justice on the side of such rights, enjoying as they do, precedence and

primacy," The exception of the clear and present danger rule, which alone would
warrant a limitation of these fundamental rights, is therein restated in paragraph 1,
thus: "The sole justification for a limitation on the exercise of this right, so
fundamental to the maintenance of democratic institutions, is the danger, of a
character both grave and imminent, of a serious evil to public safety, public morals,
public health, or any other legitimate public interest. "
It bears emphasis that the burden to show the existence of grave and imminent
danger that would justify adverse action on the application lies on the mayor as
licensing authority. There must be objective and convincing, not subjective or
conjectural proof of the existence of such clear and present danger. As stated in our
Resolution of October 25, 1983, which granted the mandatory injunction as prayed
for, "It is essential for the validity of a denial of a permit which amounts to a
previous restraint or censorship that the licensing authority does not rely solely on
his own appraisal of what public welfare, peace or safety may require. To justify
such a limitation there must be proof of such weight and sufficiency to satisfy the
clear and present danger test. The possibility that subversives may infiltrate the
ranks of the demonstrators is not enough." As stated by Justice Brandeis in his
concurring opinion in Whitney vs. California. 2 t.hqw
Fear of serious injury cannot alone justify suppression of free speech and
assembly. Men feared witches and burned women. It is the function of
speech to free men from the bondage of irrational fears. To justify
suppression of free speech there must be reasonable ground to fear that
serious evil will result if free speech is practiced. There must be reasonable
ground to believe that the danger apprehended is imminent. There must be
reasonable ground to believe that the evil to be prevented is a serious one *
* *.
Those who won our independence by revolution were not cowards. They did
not fear political change. They did not exalt order at the cost of liberty. * * *
Moreover, even imminent danger cannot justify resort to prohibition of these
functions essential (for) effective democracy, unless the evil apprehended is
relatively serious. Prohibition of free speech and assembly is a measure so
stringent that it would be inappropriate as the means for averting a
relatively trivial harm to a society. * * * The fact that speech is likely to result
in some violence or in destruction of property is not enough to justify its
suppression. There must be the probability of serious injury to the state.
Among freemen the deterrents ordinarily to be applied to prevent crimes
are education and punishment for violations of the law, not abridgment of
the rights of free speech and assembly. (Emphasis supplied)

The Court's opinion underscores that the exercise of the right is not to be "abridged
on the plea that it may be exercised in some other place" (paragraph 6), and that "it
is the duty of the city authorities to provide the proper police protection to those
exercising their right to peaceable assembly and freedom of expression," (at page
14) The U.S. Supreme Court's pronouncement in Hague vs. Committee for Industrial
Organization 3 cited in Fugoso is worth repeating: t.hqw
* * * Wherever the title of streets and parks may rest, they have
immemorially been held in trust for the use of the public and, time out of
mind, have been used for purposes of assembly, communicating thoughts
between citizens, and discussing public questions. Such use of the streets
and public places has, from ancient times, been a part of the privileges,
immunities, rights, and liberties of citizens. The privilege of a citizen * * * to
use the streets and parks for communication of views on national questions
may be regulated in the interest of all; it is not absolute, but relative, and
must be exercised in subordination to the general comfort and convenience,
and in consonance with peace and good order; but it must not, in the guise
of regulation, be abridged or denied.
We think the court below was right in holding the ordinance quoted in Note I
void upon its face. It does not make comfort or convenience in the use of
streets or parks the standard of official action. It enables the Director of
Safety to refuse a permit on his mere opinion that such refusal will prevent
'riots, disturbances or disorderly assemblage. It can thus, as the record
discloses, be made theinstrument of arbitrary suppression of free
expression of views on national affairs for the prohibition of all speaking will
undoubtedly 'prevent' such eventualities. But uncontrolled official
suppression of the privilege cannot be made a substitute for the duty to
maintain order in connection with the exercise of the right. (Emphasis
supplied)
Needless to say, the leaders of the peaceable assembly should take all the
necessary measures to ensure a peaceful march and assembly and to avoid the
possibility of infiltrators and troublemakers disrupting the same, concommitantly
with the duty of the police to extend protection to the participants "staying at a
discreet distance, but ever ready and alert to perform their duty." But should any
disorderly conduct or incidents occur, whether provoked or otherwise, it is well to
recall former Chief Justice Ricardo Paras' injunction in his concurring opinion
inFugoso, citing the 1907 case of U.S. vs. Apurado, 4 that such instances of
"disorderly conduct by individual members of a crowd (be not seized) as an excuse
to characterize the assembly as a seditious and tumultuous rising against the
authorities" and render illusory the right of peaceable assembly, thus: t.hqw

It is rather to be expected that more or less disorder will mark the public
assembly of the people to protest against grievances whether real or
imaginary, because on such occasions feeling is always wrought to a high
pitch of excitement, and the greater the grievance and the more intense the
feeling, the less perfect, as a rule, will the disciplinary control of the leaders
over their irresponsible followers. But if the prosecution be permitted to
seize upon every instance of such disorderly conduct by individual members
of a crowd as an excuse to characterize the assembly as a seditious and
tumultous rising against the authorities, 'then the right to assemble and to
petition for redress of grievances would become a delusion and snare and
the attempt to exercise it on the most righteous occasion and in the most
peaceable manner would expose all those who took part therein to the
severest and most unmerited punishment, if the purposes which they
sought to attain did not happen to be pleasing to the prosecuting
authorities. If instances of disorderly conduct occur on such occasions, the
guilty individuals should be sought out and punished therefor. (Emphasis
supplied).
As it turned out, the demonstration was held on October 26, 1983 peaceably and
without any untoward event or evil result, as pledged by the organizers (like at least
five previous peaceful demonstrations in the area). However, even if there had been
any incidents of disorder, this would in no way show the Court's mandatory
injunction to have been wrongfully issued. The salutary desire on the part of
respondent to prevent disorder cannot be pursued by the unjustified denial and
suppression of the people's basic rights, which would thereby turn out to be mere
paper rights.

MAKASIAR, J., concurring:

With the justification that in case of conflict, the Philippine Constitution
particularly the Bill of Rights should prevail over the Vienna Convention.

ABAD SANTOS, J., concurring:

To add anything to the learned opinion of the Chief Justice is like bringing coal to
Newcastle, I just want to state for the record that I voted for the issuance ex-parte
of a preliminary mandatory injunction.

PLANA, J., concurring:

On the whole, I concur in the learned views of the distinguished Chief Justice. I
would like however to voice a reservation regarding Ordinance No. 7295 of the City
of Manila which has been invoked by the respondent.
The main opinion yields the implication that a rally or demonstration made within
500 feet from the chancery of a foreign embassy would be banned for coming
within the terms of the prohibition of the cited Ordinance which was adopted, so it is
said, precisely to implement a treaty obligation of the Philippines under the 1961
Vienna Convention on Diplomatic Relations.
In my view, without saying that the Ordinance is obnoxious per
constitution, it cannot be validly invoked whenever its application would
a constitutionally guaranteed right such as freedom of assembly and/or
as in the case at bar, regardless of whether the chancery of any foreign
beyond or within 500 feet from the situs of the rally or demonstration.

se to the
collide with
expression,
embassy is

AQUINO, J., dissenting:

Voted to dismiss the petition on the ground that the holding of the rally in front of
the US Embassy violates Ordinance No. 7295 of the City of Manila.

11.Baer vs Tizon, 57 SCRA 1, 6-8 (May 3, 1974)

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. No. L-24294 May 3, 1974

DONALD BAER, Commander U.S. Naval Base, Subic Bay, Olongapo,
Zambales, petitioner,
vs.
HON. TITO V. TIZON, as Presiding Judge of the Court of First Instance of
Bataan, and EDGARDO GENER,respondents.

Sycip, Salazar, Luna Manalo & Feliciano for petitioner.

A. E. Dacanay for private respondent.
Office of the Solicitor General Camilo D. Quiason as amicus curiae.

FERNANDO, J.:p

There is nothing novel about the question raised in this certiorari proceeding
against the then Judge Tito V. Tizon, filed by petitioner Donald Baer, then
Commander of the United States Naval Base, Subic Bay, Olongapo, Zambales,
seeking to nullify the orders of respondent Judge denying his motion to dismiss a
complaint filed against him by the private respondent, Edgardo Gener, on the
ground of sovereign immunity of a foreign power, his contention being that it was in
effect a suit against the United States, which had not given its consent. The answer
given is supplied by a number of cases coming from this Tribunal starting from a
1945 decision, Raquiza v. Bradford 1 to Johnson v. Turner, 2 promulgated in 1954.
The doctrine of immunity from suit is of undoubted applicability in this jurisdiction. It
cannot be otherwise, for under the 1935 Constitution, as now, it is expressly made
clear that the Philippines "adopts the generally accepted principles of international
law as part of the law of the Nation." 3 As will subsequently be shown, there was a
failure on the part of the lower court to accord deference and respect to such a
basic doctrine, a failure compounded by its refusal to take note of the absence of
any legal right on the part of petitioner. Hence, certiorari is the proper remedy.
The facts are not in dispute. On November 17, 1964, respondent Edgardo Gener, as
plaintiff, filed a complaint for injunction with the Court of First Instance of Bataan
against petitioner, Donald Baer, Commander of the United States Naval Base in
Olongapo. It was docketed as Civil Case No. 2984 of the Court of First Instance of
Bataan. He alleged that he was engaged in the business of logging in an area
situated in Barrio Mabayo, Municipality of Morong, Bataan and that the American
Naval Base authorities stopped his logging operations. He prayed for a writ of
preliminary injunction restraining petitioner from interfering with his logging
operations. A restraining order was issued by respondent Judge on November 23,
1964. 4 Counsel for petitioner, upon instructions of the American Ambassador to the
Philippines, entered their appearance for the purpose of contesting the jurisdiction
of respondent Judge on the ground that the suit was one against a foreign sovereign
without its consent. 5 Then, on December 12, 1964, petitioner filed a motion to
dismiss, wherein such ground was reiterated. It was therein pointed out that he is
the chief or head of an agency or instrumentality of the United States of America,

with the subject matter of the action being official acts done by him for and in
behalf of the United States of America. It was added that in directing the cessation
of logging operations by respondent Gener within the Naval Base, petitioner was
entirely within the scope of his authority and official duty, the maintenance of the
security of the Naval Base and of the installations therein being the first concern
and most important duty of the Commander of the Base. 6 There was, on December
14, 1964, an opposition and reply to petitioner's motion to dismiss by respondent
Gener, relying on the principle that "a private citizen claiming title and right of
possession of certain property may, to recover possession of said property, sue as
individuals, officers and agents of the Government, who are said to be illegally
withholding the same from him, though in doing so, said officers and agents claim
that they are acting for the Government." That was his basis for sustaining the
jurisdiction of respondent Judge. 7 Petitioner, thereafter, on January 12, 1965, made
a written offer of documentary evidence, including certified copies of telegrams of
the Forestry Director to Forestry personnel in Balanga, Bataan dated January 8, and
January 11, 1965, directing immediate investigation of illegal timber cutting in
Bataan and calling attention to the fact that the records of the office show no new
renewal of timber license or temporary extension permits. 8 The above
notwithstanding, respondent Judge, on January 12, 1965, issued an order granting
respondent Gener's application for the issuance of a writ of preliminary injunction
and denying petitioner's motion to dismiss the opposition to the application for a
writ of preliminary injunction. 9
A motion for reconsideration having proved futile, this petition for certiorari was
filed with this Court. The prayer was for the nullification and setting aside of the writ
of preliminary injunction issued by respondent Judge in the aforesaid Civil Case No.
2984 of the Court of First Instance of Bataan. A resolution of March 17, 1965 was
issued by this Court requiring respondents to file an answer and upon petitioner's
posting a bond of P5,000.00 enjoining them from enforcing such writ of preliminary
injunction. The answer was duly forthcoming. It sought to meet the judicial question
raised by the legal proposition that a private citizen claiming title and right of
possession of a certain property may, to recover the same, sue as individuals
officers and agents of the government alleged to be illegally withholding such
property even if there is an assertion on their part that they are acting for the
government. Support for such a view is found in the American Supreme Court
decisions of United States v. Lee 10and Land v. Dollar. 11 Thus the issue is squarely
joined whether or not the doctrine of immunity from suit without consent is
applicable. Thereafter, extensive memoranda were filed both by petitioner and
respondents. In addition, there was a manifestation and memorandum of the
Republic of the Philippines as amicus curiae where, after a citation of American
Supreme Court decisions going back to Schooner Exchange v. M'faddon, 12 an 1812
decision, to United States v. Belmont,13 decided in 1937, the plea was made that the
petition for certiorari be granted..

A careful study of the crucial issue posed in this dispute yields the conclusion, as
already announced, that petitioner should prevail.
1. The invocation of the doctrine of immunity from suit of a foreign state without its
consent is appropriate. More specifically, insofar as alien armed forces is concerned,
the starting point is Raquiza v. Bradford, a 1945 decision.14 In dismissing a habeas
corpus petition for the release of petitioners confined by American army authorities,
Justice Hilado, speaking for the Court, cited from Coleman v. Tennessee, 15 where it
was explicitly declared: "It is well settled that a foreign army, permitted to march
through a friendly country or to be stationed in it, by permission of its government
or sovereign, is exempt from the civil and criminal jurisdiction of the place." 16 Two
years later, in Tubb and Tedrow v. Griess,17 this Court relied on the ruling in Raquiza
v. Bradford and cited in support thereof excerpts from the works of the following
authoritative writers: Vattel, Wheaton, Hall, Lawrence, Oppenhein, Westlake, Hyde,
and McNair and Lauterpacht. 18Accuracy demands the clarification that after the
conclusion of the Philippine-American Military Bases Agreement, the treaty
provisions should control on such matter, the assumption being that there was a
manifestation of the submission to jurisdiction on the part of the foreign power
whenever appropriate. 19 More to the point is Syquia v. Almeda Lopez, 20 where
plaintiffs as lessors sued the Commanding General of the United States Army in the
Philippines, seeking the restoration to them of the apartment buildings they owned
leased to United States armed forces stationed in the Manila area. A motion to
dismiss on the ground of non-suability was filed and upheld by respondent Judge.
The matter was taken to this Court in a mandamus proceeding. It failed. It was the
ruling that respondent Judge acted correctly considering that the "action must be
considered as one against the U.S. Government." 21 The opinion of Justice
Montemayor continued: "It is clear that the courts of the Philippines including the
Municipal Court of Manila have no jurisdiction over the present case for unlawful
detainer. The question of lack of jurisdiction was raised and interposed at the very
beginning of the action. The U.S. Government has not given its consent to the filing
of this suit which is essentially against her, though not in name. Moreover, this is
not only a case of a citizen filing a suit against his own Government without the
latter's consent but it is of a citizen filing an action against a foreign government
without said government's consent, which renders more obvious the lack of
jurisdiction of the courts of his country. The principles of law behind this rule are so
elementary and of such general acceptance that we deem it unnecessary to cite
authorities in support thereof." 22 Then came Marvel Building Corporation v.
Philippine War Damage Commission, 23 where respondent, a United States agency
established to compensate damages suffered by the Philippines during World War II
was held as falling within the above doctrine as the suit against it "would eventually
be a charge against or financial liability of the United States Government
because ..., the Commission has no funds of its own for the purpose of paying
money judgments." 24 The Syquia ruling was again explicitly relied upon inMarquez
Lim v. Nelson, 25 involving a complaint for the recovery of a motor launch, plus

damages, the special defense interposed being "that the vessel belonged to the
United States Government, that the defendants merely acted as agents of said
Government, and that the United States Government is therefore the real party in
interest." 26 So it was in Philippine Alien Property Administration v. Castelo, 27 where
it was held that a suit against the Alien Property Custodian and the Attorney General
of the United States involving vested property under the Trading with the Enemy Act
is in substance a suit against the United States. To the same effect is Parreno v.
McGranery, 28 as the following excerpt from the opinion of Justice Tuason clearly
shows: "It is a widely accepted principle of international law, which is made a part of
the law of the land (Article II, Section 3 of the Constitution), that a foreign state may
not be brought to suit before the courts of another state or its own courts without its
consent." 29 Finally, there is Johnson v. Turner, 30 an appeal by the defendant, then
Commanding General, Philippine Command (Air Force, with office at Clark Field)
from a decision ordering the return to plaintiff of the confiscated military payment
certificates known as scrip money. In reversing the lower court decision, this
Tribunal, through Justice Montemayor, relied on Syquia v. Almeda Lopez, 31
explaining why it could not be sustained.
The solidity of the stand of petitioner is therefore evident. What was sought by
private respondent and what was granted by respondent Judge amounted to an
interference with the performance of the duties of petitioner in the base area in
accordance with the powers possessed by him under the Philippine-American
Military Bases Agreement. This point was made clear in these words: "Assuming, for
purposes of argument, that the Philippine Government, through the Bureau of
Forestry, possesses the "authority to issue a Timber License to cut logs" inside a
military base, the Bases Agreement subjects the exercise of rights under a timber
license issued by the Philippine Government to the exercise by the United States of
its rights, power and authority of control within the bases; and the findings of the
Mutual Defense Board, an agency of both the Philippine and United States
Governments, that "continued logging operation by Mr. Gener within the boundaries
of the U.S. Naval Base would not be consistent with the security and operation of
the Base," is conclusive upon the respondent Judge. .. The doctrine of state
immunity is not limited to cases which would result in a pecuniary charge against
the sovereign or would require the doing of an affirmative act by it. Prevention of a
sovereign from doing an affirmative act pertaining directly and immediately to the
most important public function of any government - the defense of the state is
equally as untenable as requiring it to do an affirmative act." 32 That such an
appraisal is not opposed to the interpretation of the relevant treaty provision by our
government is made clear in the aforesaid manifestation and memorandum as
amicus curiae, wherein it joined petitioner for the grant of the remedy prayed for.
2. There should be no misinterpretation of the scope of the decision reached by this
Court. Petitioner, as the Commander of the United States Naval Base in Olongapo,
does not possess diplomatic immunity. He may therefore be proceeded against in

his personal capacity, or when the action taken by him cannot be imputed to the
government which he represents. Thus, after the Military Bases Agreement, in
Miquiabas v. Commanding General 33 and Dizon v. The Commanding General of the
Philippine-Ryukus Command, 34 both of them being habeas corpus petitions, there
was no question as to the submission to jurisdiction of the respondents. As a matter
of fact, inMiquiabas v. Commanding General, 35 the immediate release of the
petitioner was ordered, it being apparent that the general court martial appointed
by respondent Commanding General was without jurisdiction to try petitioner.
Thereafter, in the cited cases of Syquia, Marquez Lim, and Johnson, the parties
proceeded against were American army commanding officers stationed in the
Philippines. The insuperable obstacle to the jurisdiction of respondent Judge is that a
foreign sovereign without its consent is haled into court in connection with acts
performed by it pursuant to treaty provisions and thus impressed with a
governmental character.
3. The infirmity of the actuation of respondent Judge becomes even more glaring
when it is considered that private respondent had ceased to have any right of
entering within the base area. This is made clear in the petition in these words: "In
1962, respondent Gener was issued by the Bureau of Forestry an ordinary timber
license to cut logs in Barrio Mabayo, Morong, Bataan. The license was renewed on
July 10, 1963. In 1963, he commenced logging operation inside the United States
Naval Base, Subic Bay, but in November 1963 he was apprehended and stopped by
the Base authorities from logging inside the Base. The renewal of his license expired
on July 30, 1964, and to date his license has not been renewed by the Bureau of
Forestry. .. In July 1964, the Mutual Defense Board, a joint Philippines-United States
agency established pursuant to an exchange of diplomatic notes between the
Secretary of Foreign Affairs and the United States Ambassador to provide "direct
liaison and consultation between appropriate Philippine and United States
authorities on military matters of mutual concern,' advised the Secretary of Foreign
Affairs in writing that: "The enclosed map shows that the area in which Mr. Gener
was logging definitely falls within the boundaries of the base. This map also depicts
certain contiguous and overlapping areas whose functional usage would be
interfered with by the logging operations.'" 36 Nowhere in the answer of
respondents, nor in their memorandum, was this point met. It remained unrefuted.
WHEREFORE, the writ of certiorari prayed for is granted, nullifying and setting aside
the writ of preliminary injunction issued by respondent Judge in Civil Case No. 2984
of the Court of First Instance of Bataan. The injunction issued by this Court on March
18, 1965 enjoining the enforcement of the aforesaid writ of preliminary injunction of
respondent Judge is hereby made permanent. Costs against private respondent
Edgardo Gener.
Zaldivar, Antonio, Fernandez and Aquino, JJ., concur.

Barredo, J., took no part.

12.Tanada vs Angara, May 2, 1997

EN BANC

[G.R. No. 118295. May 2, 1997]

WIGBERTO E. TAADA and ANNA DOMINIQUE COSETENG, as members of the

Philippine Senate and as taxpayers; GREGORIO ANDOLANA and
JOKER ARROYO as members of the House of Representatives and as
taxpayers; NICANOR P. PERLAS and HORACIO R. MORALES, both as
taxpayers;
CIVIL
LIBERTIES
UNION,
NATIONAL
ECONOMIC
PROTECTIONISM
ASSOCIATION,
CENTER
FOR
ALTERNATIVE
DEVELOPMENT
INITIATIVES,
LIKAS-KAYANG
KAUNLARAN
FOUNDATION,
INC.,
PHILIPPINE
RURAL
RECONSTRUCTION
MOVEMENT, DEMOKRATIKONG KILUSAN NG MAGBUBUKID NG
PILIPINAS,
INC.,
and
PHILIPPINE
PEASANT
INSTITUTE,
in
representation of various taxpayers and as non-governmental
organizations, petitioners, vs. EDGARDO ANGARA, ALBERTO
ROMULO, LETICIA RAMOS-SHAHANI, HEHERSON ALVAREZ, AGAPITO
AQUINO, RODOLFO BIAZON, NEPTALI GONZALES, ERNESTO HERRERA,
JOSE LINA, GLORIA MACAPAGAL-ARROYO, ORLANDO MERCADO, BLAS
OPLE, JOHN OSMEA, SANTANINA RASUL, RAMON REVILLA, RAUL
ROCO, FRANCISCO TATAD and FREDDIE WEBB, in their respective
capacities as members of the Philippine Senate who concurred in the
ratification by the President of the Philippines of the Agreement
Establishing the World Trade Organization; SALVADOR ENRIQUEZ, in
his capacity as Secretary of Budget and Management; CARIDAD
VALDEHUESA, in her capacity as National Treasurer; RIZALINO
NAVARRO, in his capacity as Secretary of Trade and Industry;
ROBERTO SEBASTIAN, in his capacity as Secretary of Agriculture;
ROBERTO DE OCAMPO, in his capacity as Secretary of Finance;
ROBERTO ROMULO, in his capacity as Secretary of Foreign Affairs;
and TEOFISTO T. GUINGONA, in his capacity as Executive Secretary,
respondents.
DECISION

PANGANIBAN, J.:
The emergence on January 1, 1995 of the World Trade Organization, abetted by
the membership thereto of the vast majority of countries has revolutionized
international business and economic relations amongst states. It has irreversibly
propelled the world towards trade liberalization and economic globalization.
Liberalization, globalization, deregulation and privatization, the third-millennium
buzz words, are ushering in a new borderless world of business by sweeping away
as mere historical relics the heretofore traditional modes of promoting and
protecting national economies like tariffs, export subsidies, import quotas,
quantitative restrictions, tax exemptions and currency controls. Finding market
niches and becoming the best in specific industries in a market-driven and exportoriented global scenario are replacing age-old beggar-thy-neighbor policies that
unilaterally protect weak and inefficient domestic producers of goods and services.
In the words of Peter Drucker, the well-known management guru, Increased
participation in the world economy has become the key to domestic economic
growth and prosperity.

Brief Historical Background

To hasten worldwide recovery from the devastation wrought by the Second
World War, plans for the establishment of three multilateral institutions -- inspired
by that grand political body, the United Nations -- were discussed at Dumbarton
Oaks and Bretton Woods. The first was the World Bank (WB) which was to address
the rehabilitation and reconstruction of war-ravaged and later developing countries;
the second, the International Monetary Fund (IMF) which was to deal with currency
problems; and the third, the International Trade Organization (ITO), which was to
foster order and predictability in world trade and to minimize unilateral protectionist
policies that invite challenge, even retaliation, from other states. However, for a
variety of reasons, including its non-ratification by the United States, the ITO, unlike
the IMF and WB, never took off. What remained was only GATT -- the General
Agreement on Tariffs and Trade. GATT was a collection of treaties governing access
to the economies of treaty adherents with no institutionalized body administering
the agreements or dependable system of dispute settlement.
After half a century and several dizzying rounds of negotiations, principally the
Kennedy Round, the Tokyo Round and the Uruguay Round, the world finally gave
birth to that administering body -- the World Trade Organization -- with the signing
of the Final Act in Marrakesh, Morocco and the ratification of the WTO Agreement by
its members.[1]
Like many other developing countries, the Philippines joined WTO as a founding
member with the goal, as articulated by President Fidel V. Ramos in two letters to

the Senate (infra), of improving Philippine access to foreign markets, especially its
major trading partners, through the reduction of tariffs on its exports, particularly
agricultural and industrial products. The President also saw in the WTO the opening
of new opportunities for the services sector x x x, (the reduction of) costs and
uncertainty associated with exporting x x x, and (the attraction of) more
investments into the country. Although the Chief Executive did not expressly
mention it in his letter, the Philippines - - and this is of special interest to the legal
profession - - will benefit from the WTO system of dispute settlement by judicial
adjudication through the independent WTO settlement bodies called (1) Dispute
Settlement Panels and (2) Appellate Tribunal.Heretofore, trade disputes were settled
mainly through negotiations where solutions were arrived at frequently on the basis
of relative bargaining strengths, and where naturally, weak and underdeveloped
countries were at a disadvantage.

The Petition in Brief

Arguing mainly (1) that the WTO requires the Philippines to place nationals and
products of member-countries on the same footing as Filipinos and local products
and (2) that the WTO intrudes, limits and/or impairs the constitutional powers of
both Congress and the Supreme Court, the instant petition before this Court assails
the WTO Agreement for violating the mandate of the 1987 Constitution to develop a
self-reliant and independent national economy effectively controlled by Filipinos x x
x (to) give preference to qualified Filipinos (and to) promote the preferential use of
Filipino labor, domestic materials and locally produced goods.
Simply stated, does the Philippine Constitution prohibit Philippine participation
in worldwide trade liberalization and economic globalization? Does it prescribe
Philippine integration into a global economy that is liberalized, deregulated and
privatized? These are the main questions raised in this petition for certiorari,
prohibition and mandamus under Rule 65 of the Rules of Court praying (1) for the
nullification, on constitutional grounds, of the concurrence of the Philippine Senate
in the ratification by the President of the Philippines of the Agreement Establishing
the World Trade Organization (WTO Agreement, for brevity) and (2) for the
prohibition of its implementation and enforcement through the release and
utilization of public funds, the assignment of public officials and employees, as well
as the use of government properties and resources by respondent-heads of various
executive offices concerned therewith. This concurrence is embodied in Senate
Resolution No. 97, dated December 14, 1994.

The Facts

On April 15, 1994, Respondent Rizalino Navarro, then Secretary of the

Department of Trade and Industry (Secretary Navarro, for brevity), representing the
Government of the Republic of the Philippines, signed in Marrakesh, Morocco, the
Final Act Embodying the Results of the Uruguay Round of Multilateral Negotiations
(Final Act, for brevity).
By signing the Final Act, [2] Secretary Navarro on behalf of the Republic of the
Philippines, agreed:
(a) to submit, as appropriate, the WTO Agreement for the consideration of their
respective competent authorities, with a view to seeking approval of the Agreement
in accordance with their procedures; and
(b) to adopt the Ministerial Declarations and Decisions.
On August 12, 1994, the members of the Philippine Senate received a letter
dated August 11, 1994 from the President of the Philippines, [3] stating among others
that the Uruguay Round Final Act is hereby submitted to the Senate for its
concurrence pursuant to Section 21, Article VII of the Constitution.
On August 13, 1994, the members of the Philippine Senate received another
letter from the President of the Philippines[4] likewise dated August 11, 1994, which
stated among others that the Uruguay Round Final Act, the Agreement Establishing
the World Trade Organization, the Ministerial Declarations and Decisions, and the
Understanding on Commitments in Financial Services are hereby submitted to the
Senate for its concurrence pursuant to Section 21, Article VII of the Constitution.
On December 9, 1994, the President of the Philippines certified the necessity of
the immediate adoption of P.S. 1083, a resolution entitled Concurring in the
Ratification of the Agreement Establishing the World Trade Organization. [5]
On December 14, 1994, the Philippine Senate adopted Resolution No. 97 which
Resolved, as it is hereby resolved, that the Senate concur, as it hereby concurs, in
the ratification by the President of the Philippines of the Agreement Establishing the
World Trade Organization.[6] The text of the WTO Agreement is written on pages 137
et seq. of Volume I of the 36-volumeUruguay Round of Multilateral Trade
Negotiations and includes various agreements and associated legal instruments
(identified in the said Agreement as Annexes 1, 2 and 3 thereto and collectively
referred to as Multilateral Trade Agreements, for brevity) as follows:
ANNEX 1
Annex 1A: Multilateral Agreement on Trade in Goods
General Agreement on Tariffs and Trade 1994

Agreement on Agriculture
Agreement on the Application of Sanitary and
Phytosanitary Measures
Agreement on Textiles and Clothing
Agreement on Technical Barriers to Trade
Agreement on Trade-Related Investment Measures
Agreement on Implementation of Article VI of the General
Agreement on Tariffs and Trade 1994
Agreement on Implementation of Article VII of the General on
Tariffs and Trade 1994
Agreement on Pre-Shipment Inspection
Agreement on Rules of Origin
Agreement on Imports Licensing Procedures
Agreement on Subsidies and Coordinating Measures
Agreement on Safeguards
Annex 1B: General Agreement on Trade in Services and Annexes
Annex 1C: Agreement on Trade-Related Aspects of Intellectual Property Rights
ANNEX 2
Understanding on Rules
Settlement of Disputes

and

Procedures

Governing

the

ANNEX 3
Trade Policy Review Mechanism
On December 16, 1994, the President of the Philippines signed [7] the Instrument
of Ratification, declaring:

NOW THEREFORE, be it known that I, FIDEL V. RAMOS, President of the Republic of

the Philippines, after having seen and considered the aforementioned Agreement
Establishing the World Trade Organization and the agreements and associated legal
instruments included in Annexes one (1), two (2) and three (3) of that Agreement
which are integral parts thereof, signed at Marrakesh, Morocco on 15 April 1994, do
hereby ratify and confirm the same and every Article and Clause thereof.
To emphasize, the WTO Agreement ratified by the President of the Philippines is
composed of the Agreement Proper and the associated legal instruments included in
Annexes one (1), two (2) and three (3) of that Agreement which are integral parts
thereof.
On the other hand, the Final Act signed by Secretary Navarro embodies not only
the WTO Agreement (and its integral annexes aforementioned) but also (1) the
Ministerial Declarations and Decisions and (2) the Understanding on Commitments
in Financial Services. In his Memorandum dated May 13, 1996, [8] the Solicitor
General describes these two latter documents as follows:
The Ministerial Decisions and Declarations are twenty-five declarations and
decisions on a wide range of matters, such as measures in favor of least developed
countries, notification procedures, relationship of WTO with the International
Monetary Fund (IMF), and agreements on technical barriers to trade and on dispute
settlement.
The Understanding on Commitments in Financial Services dwell on, among other
things, standstill or limitations and qualifications of commitments to existing nonconforming measures, market access, national treatment, and definitions of nonresident supplier of financial services, commercial presence and new financial
service.
On December 29, 1994, the present petition was filed. After careful deliberation
on respondents comment and petitioners reply thereto, the Court resolved on
December 12, 1995, to give due course to the petition, and the parties thereafter
filed their respective memoranda. The Court also requested the Honorable Lilia R.
Bautista, the Philippine Ambassador to the United Nations stationed in Geneva,
Switzerland, to submit a paper, hereafter referred to as Bautista Paper, [9] for brevity,
(1) providing a historical background of and (2) summarizing the said agreements.
During the Oral Argument held on August 27, 1996, the Court directed:
(a) the petitioners to submit the (1) Senate Committee Report on the matter in
controversy and (2) the transcript of proceedings/hearings in the Senate; and
(b) the Solicitor General, as counsel for respondents, to file (1) a list of Philippine
treaties signed prior to the Philippine adherence to the WTO Agreement, which

derogate from Philippine sovereignty and (2) copies of the multi-volume WTO
Agreement and other documents mentioned in the Final Act, as soon as possible.
After receipt of the foregoing documents, the Court said it would consider the
case submitted for resolution. In a Compliance dated September 16, 1996, the
Solicitor General submitted a printed copy of the 36-volume Uruguay Round of
Multilateral Trade Negotiations, and in another Compliance dated October 24, 1996,
he listed the various bilateral or multilateral treaties or international instruments
involving derogation of Philippine sovereignty. Petitioners, on the other hand,
submitted their Compliance dated January 28, 1997, on January 30, 1997.

The Issues
In their Memorandum dated March 11, 1996, petitioners summarized the issues
as follows:
A. Whether the petition presents a political question or is otherwise not justiciable.
B. Whether the petitioner members of the Senate who participated in the
deliberations and voting leading to the concurrence are estopped from
impugning the validity of the Agreement Establishing the World Trade
Organization or of the validity of the concurrence.
C. Whether the provisions of the Agreement Establishing the World Trade
Organization contravene the provisions of Sec. 19, Article II, and Secs. 10
and 12, Article XII, all of the 1987 Philippine Constitution.
D. Whether provisions of the Agreement Establishing the World Trade
Organization unduly limit, restrict and impair Philippine sovereignty
specifically the legislative power which, under Sec. 2, Article VI, 1987
Philippine Constitution is vested in the Congress of the Philippines;
E. Whether provisions of the Agreement Establishing the World Trade
Organization interfere with the exercise of judicial power.
F. Whether the respondent members of the Senate acted in grave abuse of
discretion amounting to lack or excess of jurisdiction when they voted for
concurrence in the ratification of the constitutionally-infirm Agreement
Establishing the World Trade Organization.
G. Whether the respondent members of the Senate acted in grave abuse of
discretion amounting to lack or excess of jurisdiction when they concurred
only in the ratification of the Agreement Establishing the World Trade

Organization, and not with the Presidential submission which included the
Final Act, Ministerial Declaration and Decisions, and the Understanding on
Commitments in Financial Services.
On the other hand, the Solicitor General as counsel for respondents synthesized
the several issues raised by petitioners into the following: [10]
1. Whether or not the provisions of the Agreement Establishing the World Trade
Organization and the Agreements and Associated Legal Instruments included in
Annexes one (1), two (2) and three (3) of that agreement cited by petitioners
directly contravene or undermine the letter, spirit and intent of Section 19, Article II
and Sections 10 and 12, Article XII of the 1987 Constitution.
2. Whether or not certain provisions of the Agreement unduly limit, restrict or impair
the exercise of legislative power by Congress.
3. Whether or not certain provisions of the Agreement impair the exercise of judicial
power by this Honorable Court in promulgating the rules of evidence.
4. Whether or not the concurrence of the Senate in the ratification by the President
of the Philippines of the Agreement establishing the World Trade Organization
implied rejection of the treaty embodied in the Final Act.
By raising and arguing only four issues against the seven presented by
petitioners, the Solicitor General has effectively ignored three, namely: (1) whether
the petition presents a political question or is otherwise not justiciable; (2) whether
petitioner-members of the Senate (Wigberto E. Taada and Anna Dominique
Coseteng) are estopped from joining this suit; and (3) whether the respondentmembers of the Senate acted in grave abuse of discretion when they voted for
concurrence in the ratification of the WTO Agreement. The foregoing
notwithstanding, this Court resolved to deal with these three issues thus:
(1) The political question issue -- being very fundamental and vital, and being a
matter that probes into the very jurisdiction of this Court to hear and decide this
case -- was deliberated upon by the Court and will thus be ruled upon as the first
issue;
(2) The matter of estoppel will not be taken up because this defense is waivable and
the respondents have effectively waived it by not pursuing it in any of their
pleadings; in any event, this issue, even if ruled in respondents favor, will not cause
the petitions dismissal as there are petitioners other than the two senators, who are
not vulnerable to the defense of estoppel; and

(3) The issue of alleged grave abuse of discretion on the part of the respondent
senators will be taken up as an integral part of the disposition of the four issues
raised by the Solicitor General.
During its deliberations on the case, the Court noted that the respondents did
not question the locus standi of petitioners. Hence, they are also deemed to have
waived the benefit of such issue. They probably realized that grave constitutional
issues, expenditures of public funds and serious international commitments of the
nation are involved here, and that transcendental public interest requires that the
substantive issues be met head on and decided on the merits, rather than skirted or
deflected by procedural matters.[11]
To recapitulate, the issues that will be ruled upon shortly are:
(1)

DOES THE PETITION PRESENT A JUSTICIABLE CONTROVERSY?

OTHERWISE STATED, DOES THE PETITION INVOLVE A POLITICAL
QUESTION OVER WHICH THIS COURT HAS NO JURISDICTION?

(2) DO THE PROVISIONS OF THE WTO AGREEMENT AND ITS THREE ANNEXES
CONTRAVENE SEC. 19, ARTICLE II, AND SECS. 10 AND 12, ARTICLE XII,
OF THE PHILIPPINE CONSTITUTION?
(3) DO THE PROVISIONS OF SAID AGREEMENT AND ITS ANNEXES LIMIT,
RESTRICT, OR IMPAIR THE EXERCISE OF LEGISLATIVE POWER BY
CONGRESS?
(4) DO SAID PROVISIONS UNDULY IMPAIR OR INTERFERE WITH THE EXERCISE
OF JUDICIAL POWER BY THIS COURT IN PROMULGATING RULES ON
EVIDENCE?
(5) WAS THE CONCURRENCE OF THE SENATE IN THE WTO AGREEMENT AND
ITS ANNEXES SUFFICIENT AND/OR VALID, CONSIDERING THAT IT DID
NOT INCLUDE THE FINAL ACT, MINISTERIAL DECLARATIONS AND
DECISIONS, AND THE UNDERSTANDING ON COMMITMENTS IN FINANCIAL
SERVICES?

The First Issue: Does the Court Have Jurisdiction Over the Controversy?
In seeking to nullify an act of the Philippine Senate on the ground that it
contravenes the Constitution, the petition no doubt raises a justiciable controversy.
Where an action of the legislative branch is seriously alleged to have infringed the
Constitution, it becomes not only the right but in fact the duty of the judiciary to
settle the dispute. The question thus posed is judicial rather than political. The duty
(to adjudicate) remains to assure that the supremacy of the Constitution is upheld.
[12]
Once a controversy as to the application or interpretation of a constitutional

provision is raised before this Court (as in the instant case), it becomes a legal issue
which the Court is bound by constitutional mandate to decide. [13]
The jurisdiction of this Court to adjudicate the matters [14] raised in the petition is
clearly set out in the 1987 Constitution,[15] as follows:
Judicial power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to determine
whether or not there has been a grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of any branch or instrumentality of the
government.
The foregoing text emphasizes the judicial departments duty and power to
strike down grave abuse of discretion on the part of any branch or instrumentality of
government including Congress. It is an innovation in our political law. [16] As
explained by former Chief Justice Roberto Concepcion, [17] the judiciary is the final
arbiter on the question of whether or not a branch of government or any of its
officials has acted without jurisdiction or in excess of jurisdiction or so capriciously
as to constitute an abuse of discretion amounting to excess of jurisdiction. This is
not only a judicial power but a duty to pass judgment on matters of this nature.
As this Court has repeatedly and firmly emphasized in many cases, [18] it will not
shirk, digress from or abandon its sacred duty and authority to uphold the
Constitution in matters that involve grave abuse of discretion brought before it in
appropriate cases, committed by any officer, agency, instrumentality or department
of the government.
As the petition alleges grave abuse of discretion and as there is no other plain,
speedy or adequate remedy in the ordinary course of law, we have no hesitation at
all in holding that this petition should be given due course and the vital questions
raised therein ruled upon under Rule 65 of the Rules of Court. Indeed, certiorari,
prohibition and mandamus are appropriate remedies to raise constitutional issues
and to review and/or prohibit/nullify, when proper, acts of legislative and executive
officials. On this, we have no equivocation.
We should stress that, in deciding to take jurisdiction over this petition, this
Court will not review the wisdom of the decision of the President and the Senate in
enlisting the country into the WTO, or pass upon the merits of trade liberalization as
a policy espoused by said international body. Neither will it rule on the propriety of
the governments economic policy of reducing/removing tariffs, taxes, subsidies,
quantitative restrictions, and other import/trade barriers. Rather, it will only exercise
its constitutional duty to determine whether or not there had been a grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of the Senate in
ratifying the WTO Agreement and its three annexes.

Second Issue: The WTO Agreement and Economic Nationalism

This is the lis mota, the main issue, raised by the petition.
Petitioners vigorously argue that the letter, spirit and intent of the Constitution
mandating economic nationalism are violated by the so-called parity provisions and
national treatment clauses scattered in various parts not only of the WTO
Agreement and its annexes but also in the Ministerial Decisions and Declarations
and in the Understanding on Commitments in Financial Services.
Specifically, the flagship constitutional provisions referred to are Sec. 19, Article
II, and Secs. 10 and 12, Article XII, of the Constitution, which are worded as follows:
Article II
DECLARATION OF PRINCIPLES AND STATE POLICIES
xx xx xx xx
Sec. 19. The State shall develop a self-reliant and independent national economy
effectively controlled by Filipinos.
xx xx xx xx
Article XII
NATIONAL ECONOMY AND PATRIMONY
xx xx xx xx
Sec. 10. x x x. The Congress shall enact measures that will encourage the formation
and operation of enterprises whose capital is wholly owned by Filipinos.
In the grant of rights, privileges, and concessions covering the national economy
and patrimony, the State shall give preference to qualified Filipinos.
xx xx xx xx
Sec. 12. The State shall promote the preferential use of Filipino labor, domestic
materials and locally produced goods, and adopt measures that help make them
competitive.
Petitioners aver that these sacred constitutional principles are desecrated by
the following WTO provisions quoted in their memorandum: [19]

a) In the area of investment measures related to trade in goods (TRIMS,

for brevity):
Article 2
National Treatment and Quantitative Restrictions.
1. Without prejudice to other rights and obligations under GATT 1994. no
Member shall apply any TRIM that is inconsistent with the provisions of
Article III or Article XI of GATT 1994.
2. An Illustrative list of TRIMS that are inconsistent with the obligations of
general elimination of quantitative restrictions provided for in paragraph I
of Article XI of GATT 1994 is contained in the Annex to this Agreement.
(Agreement on Trade-Related Investment Measures, Vol. 27, Uruguay
Round, Legal Instruments, p.22121, emphasis supplied).
The Annex referred to reads as follows:
ANNEX
Illustrative List
1. TRIMS that are inconsistent with the obligation of national treatment
provided for in paragraph 4 of Article III of GATT 1994 include those
which are mandatory or enforceable under domestic law or under
administrative rulings, or compliance with which is necessary to
obtain an advantage, and which require:
(a) the purchase or use by an enterprise of products of domestic origin or
from any domestic source, whether specified in terms of particular
products, in terms of volume or value of products, or in terms of
proportion of volume or value of its local production; or
(b) that an enterprises purchases or use of imported products be limited to
an amount related to the volume or value of local products that it
exports.
2. TRIMS that are inconsistent with the obligations of general elimination of
quantitative restrictions provided for in paragraph 1 of Article XI of GATT 1994
include those which are mandatory or enforceable under domestic laws or
under administrative rulings, or compliance with which is necessary to obtain
an advantage, and which restrict:

(a) the importation by an enterprise of products used in or related to the

local production that it exports;
(b) the importation by an enterprise of products used in or related to its
local production by restricting its access to foreign exchange inflows
attributable to the enterprise; or
(c) the exportation or sale for export specified in terms of particular
products, in terms of volume or value of products, or in terms of a
preparation of volume or value of its local production. (Annex to the
Agreement on Trade-Related Investment Measures, Vol. 27, Uruguay
Round Legal Documents, p.22125, emphasis supplied).
The paragraph 4 of Article III of GATT 1994 referred to is quoted as follows:
The products of the territory of any contracting party imported into the territory of
any other contracting party shall be accorded treatment no less favorable
than that accorded to like products of national origin in respect of laws,
regulations and requirements affecting their internal sale, offering for sale,
purchase, transportation, distribution or use. the provisions of this paragraph shall
not prevent the application of differential internal transportation charges which are
based exclusively on the economic operation of the means of transport and not on
the nationality of the product. (Article III, GATT 1947, as amended by the Protocol
Modifying Part II, and Article XXVI of GATT, 14 September 1948, 62 UMTS 82-84 in
relation to paragraph 1(a) of the General Agreement on Tariffs and Trade 1994, Vol.
1, Uruguay Round, Legal Instruments p.177, emphasis supplied).
b) In the area of trade related aspects of intellectual property rights
(TRIPS, for brevity):
Each Member shall accord to the nationals of other Members treatment no
less favourable than that it accords to its own nationals with regard to the
protection of intellectual property... (par. 1, Article 3, Agreement on Trade-Related
Aspect of Intellectual Property rights, Vol. 31, Uruguay Round, Legal Instruments,
p.25432 (emphasis supplied)
(c) In the area of the General Agreement on Trade in Services:
National Treatment
1. In the sectors inscribed in its schedule, and subject to any conditions and
qualifications set out therein, each Member shall accord to services and
service suppliers of any other Member, in respect of all measures affecting

the supply of services, treatment no less favourable than it accords

to its own like services and service suppliers.
2. A Member may meet the requirement of paragraph I by according to
services and service suppliers of any other Member, either formally
identical treatment or formally different treatment to that it accords to its
own like services and service suppliers.
3. Formally identical or formally different treatment shall be considered to
be less favourable if it modifies the conditions of completion in favour of
services or service suppliers of the Member compared to like services or
service suppliers of any other Member. (Article XVII, General Agreement
on Trade in Services, Vol. 28, Uruguay Round Legal Instruments, p.22610
emphasis supplied).
It is petitioners position that the foregoing national treatment and parity
provisions of the WTO Agreement place nationals and products of member countries
on the same footing as Filipinos and local products, in contravention of the Filipino
First policy of the Constitution. They allegedly render meaningless the phrase
effectively controlled by Filipinos. The constitutional conflict becomes more manifest
when viewed in the context of the clear duty imposed on the Philippines as a WTO
member to ensure the conformity of its laws, regulations and administrative
procedures with its obligations as provided in the annexed agreements. [20]
Petitioners further argue that these provisions contravene constitutional limitations
on the role exports play in national development and negate the preferential
treatment accorded to Filipino labor, domestic materials and locally produced
goods.
On the other hand, respondents through the Solicitor General counter (1) that
such Charter provisions are not self-executing and merely set out general policies;
(2) that these nationalistic portions of the Constitution invoked by petitioners should
not be read in isolation but should be related to other relevant provisions of Art. XII,
particularly Secs. 1 and 13 thereof; (3) that read properly, the cited WTO clauses do
not conflict with the Constitution; and (4) that the WTO Agreement contains
sufficient provisions to protect developing countries like the Philippines from the
harshness of sudden trade liberalization.
We shall now discuss and rule on these arguments.

Declaration of Principles Not Self-Executing

By its very title, Article II of the Constitution is a declaration of principles and
state policies. The counterpart of this article in the 1935 Constitution [21] is called the

basic political creed of the nation by Dean Vicente Sinco. [22] These principles in
Article II are not intended to be self-executing principles ready for enforcement
through the courts. [23] They are used by the judiciary as aids or as guides in the
exercise of its power of judicial review, and by the legislature in its enactment of
laws. As held in the leading case of Kilosbayan, Incorporated vs. Morato,[24] the
principles and state policies enumerated in Article II and some sections of Article XII
are not self-executing provisions, the disregard of which can give rise to a cause of
action in the courts.They do not embody judicially enforceable constitutional rights
but guidelines for legislation.
In the same light, we held in Basco vs. Pagcor[25] that broad constitutional
principles need legislative enactments to implement them, thus:
On petitioners allegation that P.D. 1869 violates Sections 11 (Personal Dignity) 12
(Family) and 13 (Role of Youth) of Article II; Section 13 (Social Justice) of Article XIII
and Section 2 (Educational Values) of Article XIV of the 1987 Constitution, suffice it
to state also that these are merely statements of principles and policies. As such,
they are basically not self-executing, meaning a law should be passed by Congress
to clearly define and effectuate such principles.
In general, therefore, the 1935 provisions were not intended to be self-executing
principles ready for enforcement through the courts. They were rather directives
addressed to the executive and to the legislature. If the executive and the
legislature failed to heed the directives of the article, the available remedy was not
judicial but political. The electorate could express their displeasure with the failure
of the executive and the legislature through the language of the ballot. (Bernas, Vol.
II, p. 2).
The reasons for denying a cause of action to an alleged infringement of broad
constitutional principles are sourced from basic considerations of due process and
the lack of judicial authority to wade into the uncharted ocean of social and
economic policy making. Mr. Justice Florentino P. Feliciano in his concurring opinion
in Oposa vs. Factoran, Jr.,[26] explained these reasons as follows:
My suggestion is simply that petitioners must, before the trial court, show a more
specific legal right -- a right cast in language of a significantly lower order of
generality than Article II (15) of the Constitution -- that is or may be violated by the
actions, or failures to act, imputed to the public respondent by petitioners so that
the trial court can validly render judgment granting all or part of the relief prayed
for. To my mind, the court should be understood as simply saying that such a more
specific legal right or rights may well exist in our corpus of law, considering the
general policy principles found in the Constitution and the existence of the
Philippine Environment Code, and that the trial court should have given petitioners

an effective opportunity so to demonstrate, instead of aborting the proceedings on

a motion to dismiss.
It seems to me important that the legal right which is an essential component of a
cause of action be a specific, operable legal right, rather than a constitutional or
statutory policy, for at least two (2) reasons.One is that unless the legal right
claimed to have been violated or disregarded is given specification in operational
terms, defendants may well be unable to defend themselves intelligently and
effectively; in other words, there are due process dimensions to this matter.
The second is a broader-gauge consideration -- where a specific violation of law or
applicable regulation is not alleged or proved, petitioners can be expected to fall
back on the expanded conception of judicial power in the second paragraph of
Section 1 of Article VIII of the Constitution which reads:
Section 1. x x x
Judicial power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to determine
whether or not there has been a grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of any branch or instrumentality of the
Government. (Emphases supplied)
When substantive standards as general as the right to a balanced and healthy
ecology and the right to health are combined with remedial standards as broad
ranging as a grave abuse of discretion amounting to lack or excess of jurisdiction,
the result will be, it is respectfully submitted, to propel courts into the uncharted
ocean of social and economic policy making. At least in respect of the vast area of
environmental protection and management, our courts have no claim to special
technical competence and experience and professional qualification. Where no
specific, operable norms and standards are shown to exist, then the policy making
departments -- the legislative and executive departments -- must be given a real
and effective opportunity to fashion and promulgate those norms and standards,
and to implement them before the courts should intervene.

Economic Nationalism Should Be Read with Other Constitutional Mandates

to Attain Balanced Development of Economy
On the other hand, Secs. 10 and 12 of Article XII, apart from merely laying down
general principles relating to the national economy and patrimony, should be read
and understood in relation to the other sections in said article, especially Secs. 1
and 13 thereof which read:

Section 1. The goals of the national economy are a more equitable distribution of
opportunities, income, and wealth; a sustained increase in the amount of goods and
services produced by the nation for the benefit of the people; and an expanding
productivity as the key to raising the quality of life for all, especially the
underprivileged.
The State shall promote industrialization and full employment based on sound
agricultural development and agrarian reform, through industries that make full and
efficient use of human and natural resources, and which are competitive in both
domestic and foreign markets. However, the State shall protect Filipino enterprises
against unfair foreign competition and trade practices.
In the pursuit of these goals, all sectors of the economy and all regions of the
country shall be given optimum opportunity to develop. x x x
xxxxxxxxx
Sec. 13. The State shall pursue a trade policy that serves the general welfare and
utilizes all forms and arrangements of exchange on the basis of equality and
reciprocity.
As pointed out by the Solicitor General, Sec. 1 lays down the basic goals of
national economic development, as follows:
1. A more equitable distribution of opportunities, income and wealth;
2. A sustained increase in the amount of goods and services provided by the
nation for the benefit of the people; and
3. An expanding productivity as the key to raising the quality of life for all
especially the underprivileged.
With these goals in context, the Constitution then ordains the ideals of economic
nationalism (1) by expressing preference in favor of qualified Filipinos in the grant of
rights, privileges and concessions covering the national economy and patrimony [27]
and in the use of Filipino labor, domestic materials and locally-produced goods; (2)
by mandating the State to adopt measures that help make them competitive; [28] and
(3) by requiring the State to develop a self-reliant and independent national
economy effectively controlled by Filipinos. [29] In similar language, the Constitution
takes into account the realities of the outside world as it requires the pursuit of a
trade policy that serves the general welfare and utilizes all forms and arrangements
of exchange on the basis of equality and reciprocity; [30] and speaks of industries
which are competitive in both domestic and foreign markets as well as of the
protection of Filipino enterprises against unfair foreign competition and trade
practices.

It is true that in the recent case of Manila Prince Hotel vs. Government Service
Insurance System, et al.,[31] this Court held that Sec. 10, second par., Art. XII of the
1987 Constitution is a mandatory, positive command which is complete in itself and
which needs no further guidelines or implementing laws or rules for its enforcement.
From its very words the provision does not require any legislation to put it in
operation. It is per se judicially enforceable. However, as the constitutional provision
itself states, it is enforceable only in regard to the grants of rights, privileges and
concessions covering national economy and patrimony and not to every aspect of
trade and commerce. It refers to exceptions rather than the rule. The issue here is
not whether this paragraph of Sec. 10 of Art. XII is self-executing or not. Rather, the
issue is whether, as a rule, there are enough balancing provisions in the
Constitution to allow the Senate to ratify the Philippine concurrence in the WTO
Agreement. And we hold that there are.
All told, while the Constitution indeed mandates a bias in favor of Filipino goods,
services, labor and enterprises, at the same time, it recognizes the need for
business exchange with the rest of the world on the bases of equality and
reciprocity and limits protection of Filipino enterprises only against foreign
competition and trade practices that are unfair. [32] In other words, the Constitution
did not intend to pursue an isolationist policy. It did not shut out foreign
investments, goods and services in the development of the Philippine economy.
While the Constitution does not encourage the unlimited entry of foreign goods,
services and investments into the country, it does not prohibit them either. In fact, it
allows an exchange on the basis of equality and reciprocity, frowning only on foreign
competition that is unfair.

WTO Recognizes Need to Protect Weak Economies

Upon the other hand, respondents maintain that the WTO itself has some builtin advantages to protect weak and developing economies, which comprise the vast
majority of its members. Unlike in the UN where major states have permanent seats
and veto powers in the Security Council, in the WTO, decisions are made on the
basis of sovereign equality, with each members vote equal in weight to that of any
other. There is no WTO equivalent of the UN Security Council.
WTO decides by consensus whenever possible, otherwise, decisions of the
Ministerial Conference and the General Council shall be taken by the majority of the
votes cast, except in cases of interpretation of the Agreement or waiver of the
obligation of a member which would require three fourths vote. Amendments would
require two thirds vote in general. Amendments to MFN provisions and the
Amendments provision will require assent of all members. Any member may
withdraw from the Agreement upon the expiration of six months from the date of
notice of withdrawals.[33]

Hence, poor countries can protect their common interests more effectively
through the WTO than through one-on-one negotiations with developed countries.
Within the WTO, developing countries can form powerful blocs to push their
economic agenda more decisively than outside the Organization. This is not merely
a matter of practical alliances but a negotiating strategy rooted in law. Thus, the
basic principles underlying the WTO Agreement recognize the need of developing
countries like the Philippines to share in the growth in international trade
commensurate with the needs of their economic development. These basic
principles are found in the preamble[34] of the WTO Agreement as follows:
The Parties to this Agreement,
Recognizing that their relations in the field of trade and economic endeavour should
be conducted with a view to raising standards of living, ensuring full employment
and a large and steadily growing volume of real income and effective demand, and
expanding the production of and trade in goods and services, while allowing for the
optimal use of the worlds resources in accordance with the objective of sustainable
development, seeking both to protect and preserve the environment and to
enhance the means for doing so in a manner consistent with their respective needs
and concerns at different levels of economic development,
Recognizing further that there is need for positive efforts designed to ensure that
developing countries, and especially the least developed among them, secure a
share in the growth in international trade commensurate with the needs of their
economic development,
Being desirous of contributing to these objectives by entering into reciprocal and
mutually advantageous arrangements directed to the substantial reduction of tariffs
and other barriers to trade and to theelimination of discriminatory treatment in
international trade relations,
Resolved, therefore, to develop an integrated, more viable and durable multilateral
trading system encompassing the General Agreement on Tariffs and Trade, the
results of past trade liberalization efforts, and all of the results of the Uruguay
Round of Multilateral Trade Negotiations,
Determined to preserve the basic principles and to further the objectives underlying
this multilateral trading system, x x x. (underscoring supplied.)

Specific WTO Provisos Protect Developing Countries

So too, the Solicitor General points out that pursuant to and consistent with the
foregoing basic principles, the WTO Agreement grants developing countries a more

lenient treatment, giving their domestic industries some protection from the rush of
foreign competition. Thus, with respect to tariffs in general, preferential treatment is
given to developing countries in terms of the amount of tariff reduction and the
period within which the reduction is to be spread out. Specifically, GATT requires an
average tariff reduction rate of 36% for developed countries to be effected within a
period of six (6) years while developing countries -- including the Philippines -- are
required to effect an average tariff reduction of only 24% within ten (10) years.
In respect to domestic subsidy, GATT requires developed countries to reduce
domestic support to agricultural products by 20% over six (6) years, as compared to
only 13% for developing countries to be effected within ten (10) years.
In regard to export subsidy for agricultural products, GATT requires developed
countries to reduce their budgetary outlays for export subsidy by 36% and export
volumes receiving export subsidy by 21% within a period of six (6) years. For
developing countries, however, the reduction rate is only two-thirds of that
prescribed for developed countries and a longer period of ten (10) years within
which to effect such reduction.
Moreover, GATT itself has provided built-in protection from unfair foreign
competition and trade practices including anti-dumping measures, countervailing
measures and safeguards against import surges. Where local businesses are
jeopardized by unfair foreign competition, the Philippines can avail of these
measures. There is hardly therefore any basis for the statement that under the
WTO, local industries and enterprises will all be wiped out and that Filipinos will be
deprived of control of the economy. Quite the contrary, the weaker situations of
developing nations like the Philippines have been taken into account; thus, there
would be no basis to say that in joining the WTO, the respondents have gravely
abused their discretion.True, they have made a bold decision to steer the ship of
state into the yet uncharted sea of economic liberalization. But such decision cannot
be set aside on the ground of grave abuse of discretion, simply because we
disagree with it or simply because we believe only in other economic policies. As
earlier stated, the Court in taking jurisdiction of this case will not pass upon the
advantages and disadvantages of trade liberalization as an economic policy. It will
only perform its constitutional duty of determining whether the Senate committed
grave abuse of discretion.

Constitution Does Not Rule Out Foreign Competition

Furthermore, the constitutional policy of a self-reliant and independent national
economy[35] does not necessarily rule out the entry of foreign investments, goods
and services. It contemplates neither economic seclusion nor mendicancy in the
international community. As explained by Constitutional Commissioner Bernardo
Villegas, sponsor of this constitutional policy:

Economic self-reliance is a primary objective of a developing country that is keenly

aware of overdependence on external assistance for even its most basic needs. It
does not mean autarky or economic seclusion; rather, it means avoiding
mendicancy in the international community. Independence refers to the freedom
from undue foreign control of the national economy, especially in such strategic
industries as in the development of natural resources and public utilities. [36]
The WTO reliance on most favored nation, national treatment, and trade without
discrimination cannot be struck down as unconstitutional as in fact they are rules of
equality and reciprocity that apply to all WTO members. Aside from envisioning a
trade policy based on equality and reciprocity, [37] the fundamental law encourages
industries that are competitive in both domestic and foreign markets, thereby
demonstrating a clear policy against a sheltered domestic trade environment, but
one in favor of the gradual development of robust industries that can compete with
the best in the foreign markets. Indeed, Filipino managers and Filipino enterprises
have shown capability and tenacity to compete internationally. And given a free
trade environment, Filipino entrepreneurs and managers in Hongkong have
demonstrated the Filipino capacity to grow and to prosper against the best offered
under a policy of laissez faire.

Constitution Favors Consumers, Not Industries or Enterprises

The Constitution has not really shown any unbalanced bias in favor of any
business or enterprise, nor does it contain any specific pronouncement that Filipino
companies should be pampered with a total proscription of foreign competition. On
the other hand, respondents claim that WTO/GATT aims to make available to the
Filipino consumer the best goods and services obtainable anywhere in the world at
the most reasonable prices. Consequently, the question boils down to whether
WTO/GATT will favor the general welfare of the public at large.
Will adherence to the WTO treaty bring this ideal (of favoring the general
welfare) to reality?
Will WTO/GATT succeed in promoting the Filipinos general welfare because it will
-- as promised by its promoters -- expand the countrys exports and generate more
employment?
Will it bring more prosperity, employment, purchasing power and quality
products at the most reasonable rates to the Filipino public?
The responses to these questions involve judgment calls by our policy makers,
for which they are answerable to our people during appropriate electoral exercises.
Such questions and the answers thereto are not subject to judicial pronouncements
based on grave abuse of discretion.

Constitution Designed to Meet Future Events and Contingencies

No doubt, the WTO Agreement was not yet in existence when the Constitution
was drafted and ratified in 1987. That does not mean however that the Charter is
necessarily flawed in the sense that its framers might not have anticipated the
advent of a borderless world of business. By the same token, the United Nations
was not yet in existence when the 1935 Constitution became effective. Did that
necessarily mean that the then Constitution might not have contemplated a
diminution of the absoluteness of sovereignty when the Philippines signed the UN
Charter, thereby effectively surrendering part of its control over its foreign relations
to the decisions of various UN organs like the Security Council?
It is not difficult to answer this question. Constitutions are designed to meet not
only the vagaries of contemporary events. They should be interpreted to cover even
future and unknown circumstances. It is to the credit of its drafters that a
Constitution can withstand the assaults of bigots and infidels but at the same time
bend with the refreshing winds of change necessitated by unfolding events. As one
eminent political law writer and respected jurist [38] explains:
The Constitution must be quintessential rather than superficial, the root and not the
blossom, the base and framework only of the edifice that is yet to rise. It is but the
core of the dream that must take shape, not in a twinkling by mandate of our
delegates, but slowly in the crucible of Filipino minds and hearts, where it will in
time develop its sinews and gradually gather its strength and finally achieve its
substance. In fine, the Constitution cannot, like the goddess Athena, rise full-grown
from the brow of the Constitutional Convention, nor can it conjure by mere fiat an
instant Utopia. It must grow with the society it seeks to re-structure and march
apace with the progress of the race, drawing from the vicissitudes of history the
dynamism and vitality that will keep it, far from becoming a petrified rule, a pulsing,
living law attuned to the heartbeat of the nation.

Third Issue: The WTO Agreement and Legislative Power

The WTO Agreement provides that (e)ach Member shall ensure the conformity
of its laws, regulations and administrative procedures with its obligations as
provided in the annexed Agreements. [39] Petitioners maintain that this undertaking
unduly limits, restricts and impairs Philippine sovereignty, specifically the legislative
power which under Sec. 2, Article VI of the 1987 Philippine Constitution is vested in
the Congress of the Philippines. It is an assault on the sovereign powers of the
Philippines because this means that Congress could not pass legislation that will be
good for our national interest and general welfare if such legislation will not conform
with the WTO Agreement, which not only relates to the trade in goods x x x but also

to the flow of investments and money x x x as well as to a whole slew of

agreements on socio-cultural matters x x x.[40]
More specifically, petitioners claim that said WTO proviso derogates from the
power to tax, which is lodged in the Congress. [41] And while the Constitution allows
Congress to authorize the President to fix tariff rates, import and export quotas,
tonnage and wharfage dues, and other duties or imposts, such authority is subject
to specified limits and x x x such limitations and restrictions as Congress may
provide,[42] as in fact it did under Sec. 401 of the Tariff and Customs Code.

Sovereignty Limited by International Law and Treaties

This Court notes and appreciates the ferocity and passion by which petitioners
stressed their arguments on this issue. However, while sovereignty has traditionally
been deemed absolute and all-encompassing on the domestic level, it is however
subject to restrictions and limitations voluntarily agreed to by the Philippines,
expressly or impliedly, as a member of the family of nations. Unquestionably, the
Constitution did not envision a hermit-type isolation of the country from the rest of
the world. In its Declaration of Principles and State Policies, the Constitution adopts
the generally accepted principles of international law as part of the law of the land,
and adheres to the policy of peace, equality, justice, freedom, cooperation and
amity, with all nations."[43] By the doctrine of incorporation, the country is bound by
generally accepted principles of international law, which are considered to be
automatically part of our own laws. [44] One of the oldest and most fundamental rules
in international law is pacta sunt servanda -- international agreements must be
performed in good faith. A treaty engagement is not a mere moral obligation but
creates a legally binding obligation on the parties x x x. A state which has
contracted valid international obligations is bound to make in its legislations such
modifications as may be necessary to ensure the fulfillment of the obligations
undertaken.[45]
By their inherent nature, treaties really limit or restrict the absoluteness of
sovereignty. By their voluntary act, nations may surrender some aspects of their
state power in exchange for greater benefits granted by or derived from a
convention or pact. After all, states, like individuals, live with coequals, and in
pursuit of mutually covenanted objectives and benefits, they also commonly agree
to limit the exercise of their otherwise absolute rights. Thus, treaties have been
used to record agreements between States concerning such widely diverse matters
as, for example, the lease of naval bases, the sale or cession of territory, the
termination of war, the regulation of conduct of hostilities, the formation of
alliances, the regulation of commercial relations, the settling of claims, the laying
down of rules governing conduct in peace and the establishment of international
organizations.[46] The sovereignty of a state therefore cannot in fact and in reality be

considered absolute. Certain restrictions enter into the picture: (1) limitations
imposed by the very nature of membership in the family of nations and (2)
limitations imposed by treaty stipulations. As aptly put by John F. Kennedy, Today,
no nation can build its destiny alone. The age of self-sufficient nationalism is over.
The age of interdependence is here.[47]

UN Charter and Other Treaties Limit Sovereignty

Thus, when the Philippines joined the United Nations as one of its 51 charter
members, it consented to restrict its sovereign rights under the concept of
sovereignty as auto-limitation.47-A Under Article 2 of the UN Charter, (a)ll members
shall give the United Nations every assistance in any action it takes in accordance
with the present Charter, and shall refrain from giving assistance to any state
against which the United Nations is taking preventive or enforcement action. Such
assistance includes payment of its corresponding share not merely in administrative
expenses but also in expenditures for the peace-keeping operations of the
organization. In its advisory opinion of July 20, 1961, the International Court of
Justice held that money used by the United Nations Emergency Force in the Middle
East and in the Congo were expenses of the United Nations under Article 17,
paragraph 2, of the UN Charter. Hence, all its members must bear their
corresponding share in such expenses. In this sense, the Philippine Congress is
restricted in its power to appropriate. It is compelled to appropriate funds whether it
agrees with such peace-keeping expenses or not. So too, under Article 105 of the
said Charter, the UN and its representatives enjoy diplomatic privileges and
immunities, thereby limiting again the exercise of sovereignty of members within
their own territory. Another example: although sovereign equality and domestic
jurisdiction of all members are set forth as underlying principles in the UN Charter,
such provisos are however subject to enforcement measures decided by the
Security Council for the maintenance of international peace and security under
Chapter VII of the Charter. A final example: under Article 103, (i)n the event of a
conflict between the obligations of the Members of the United Nations under the
present Charter and their obligations under any other international agreement, their
obligation under the present charter shall prevail, thus unquestionably denying the
Philippines -- as a member -- the sovereign power to make a choice as to which of
conflicting obligations, if any, to honor.
Apart from the UN Treaty, the Philippines has entered into many other
international pacts -- both bilateral and multilateral -- that involve limitations on
Philippine sovereignty. These are enumerated by the Solicitor General in his
Compliance dated October 24, 1996, as follows:
(a) Bilateral convention with the United States regarding taxes on income,
where the Philippines agreed, among others, to exempt from tax, income

received in the Philippines by, among others, the Federal Reserve Bank of
the United States, the Export/Import Bank of the United States, the
Overseas Private Investment Corporation of the United States. Likewise, in
said convention, wages, salaries and similar remunerations paid by the
United States to its citizens for labor and personal services performed by
them as employees or officials of the United States are exempt from income
tax by the Philippines.
(b) Bilateral agreement with Belgium, providing, among others, for the
avoidance of double taxation with respect to taxes on income.
(c) Bilateral convention with the Kingdom of Sweden for the avoidance of double
taxation.
(d) Bilateral convention with the French Republic for the avoidance of double
taxation.
(e) Bilateral air transport agreement with Korea where the Philippines agreed to
exempt from all customs duties, inspection fees and other duties or taxes
aircrafts of South Korea and the regular equipment, spare parts and supplies
arriving with said aircrafts.
(f) Bilateral air service agreement with Japan, where the Philippines agreed to
exempt from customs duties, excise taxes, inspection fees and other similar
duties, taxes or charges fuel, lubricating oils, spare parts, regular equipment,
stores on board Japanese aircrafts while on Philippine soil.
(g) Bilateral air service agreement with Belgium where the Philippines granted
Belgian air carriers the same privileges as those granted to Japanese and
Korean air carriers under separate air service agreements.
(h) Bilateral notes with Israel for the abolition of transit and visitor visas where
the Philippines exempted Israeli nationals from the requirement of obtaining
transit or visitor visas for a sojourn in the Philippines not exceeding 59 days.
(I) Bilateral agreement with France exempting French nationals from the
requirement of obtaining transit and visitor visa for a sojourn not exceeding
59 days.
(j) Multilateral Convention on Special Missions, where the Philippines agreed
that premises of Special Missions in the Philippines are inviolable and its
agents can not enter said premises without consent of the Head of Mission
concerned. Special Missions are also exempted from customs duties, taxes
and related charges.

(k) Multilateral Convention on the Law of Treaties. In this convention, the

Philippines agreed to be governed by the Vienna Convention on the Law of
Treaties.
(l) Declaration of the President of the Philippines accepting compulsory
jurisdiction of the International Court of Justice. The International Court of
Justice has jurisdiction in all legal disputes concerning the interpretation of a
treaty, any question of international law, the existence of any fact which, if
established, would constitute a breach of international obligation.
In the foregoing treaties, the Philippines has effectively agreed to limit the
exercise of its sovereign powers of taxation, eminent domain and police power. The
underlying consideration in this partial surrender of sovereignty is the reciprocal
commitment of the other contracting states in granting the same privilege and
immunities to the Philippines, its officials and its citizens. The same reciprocity
characterizes the Philippine commitments under WTO-GATT.
International treaties, whether relating to nuclear disarmament, human rights, the
environment, the law of the sea, or trade, constrain domestic political sovereignty
through the assumption of external obligations. But unless anarchy in international
relations is preferred as an alternative, in most cases we accept that the benefits of
the reciprocal obligations involved outweigh the costs associated with any loss of
political sovereignty. (T)rade treaties that structure relations by reference to
durable, well-defined substantive norms and objective dispute resolution procedures
reduce the risks of larger countries exploiting raw economic power to bully smaller
countries, by subjecting power relations to some form of legal ordering. In addition,
smaller countries typically stand to gain disproportionately from trade liberalization.
This is due to the simple fact that liberalization will provide access to a larger set of
potential new trading relationship than in case of the larger country gaining
enhanced success to the smaller countrys market. [48]
The point is that, as shown by the foregoing treaties, a portion of sovereignty
may be waived without violating the Constitution, based on the rationale that the
Philippines adopts the generally accepted principles of international law as part of
the law of the land and adheres to the policy of x x x cooperation and amity with all
nations.

Fourth Issue: The WTO Agreement and Judicial Power

Petitioners aver that paragraph 1, Article 34 of the General Provisions and Basic
Principles of the Agreement on Trade-Related Aspects of Intellectual Property Rights

(TRIPS)[49]intrudes on the power of the Supreme Court to promulgate rules

concerning pleading, practice and procedures. [50]
To understand the scope and meaning of Article 34, TRIPS, [51] it will be fruitful to
restate its full text as follows:
Article 34
Process Patents: Burden of Proof
1. For the purposes of civil proceedings in respect of the infringement of the
rights of the owner referred to in paragraph 1(b) of Article 28, if the subject
matter of a patent is a process for obtaining a product, the judicial authorities
shall have the authority to order the defendant to prove that the process to
obtain an identical product is different from the patented process. Therefore,
Members shall provide, in at least one of the following circumstances, that any
identical product when produced without the consent of the patent owner shall,
in the absence of proof to the contrary, be deemed to have been obtained by
the patented process:
(a) if the product obtained by the patented process is new;
(b) if there is a substantial likelihood that the identical product was made by
the process and the owner of the patent has been unable through
reasonable efforts to determine the process actually used.
2. Any Member shall be free to provide that the burden of proof indicated in
paragraph 1 shall be on the alleged infringer only if the condition referred to in
subparagraph (a) is fulfilled or only if the condition referred to in subparagraph
(b) is fulfilled.
3. In the adduction of proof to the contrary, the legitimate interests of
defendants in protecting their manufacturing and business secrets shall be
taken into account.
From the above, a WTO Member is required to provide a rule of disputable (note
the words in the absence of proof to the contrary) presumption that a product
shown to be identical to one produced with the use of a patented process shall be
deemed to have been obtained by the (illegal) use of the said patented process, (1)
where such product obtained by the patented product is new, or (2) where there is
substantial likelihood that the identical product was made with the use of the said
patented process but the owner of the patent could not determine the exact process
used in obtaining such identical product. Hence, the burden of proof contemplated
by Article 34 should actually be understood as the duty of the alleged patent
infringer to overthrow such presumption. Such burden, properly understood,

actually refers to the burden of evidence (burden of going forward) placed on the
producer of the identical (or fake) product to show that his product was produced
without the use of the patented process.
The foregoing notwithstanding, the patent owner still has the burden of proof
since, regardless of the presumption provided under paragraph 1 of Article 34, such
owner still has to introduce evidence of the existence of the alleged identical
product, the fact that it is identical to the genuine one produced by the patented
process and the fact of newness of the genuine product or the fact of substantial
likelihood that the identical product was made by the patented process.
The foregoing should really present no problem in changing the rules of
evidence as the present law on the subject, Republic Act No. 165, as amended,
otherwise known as the Patent Law, provides a similar presumption in cases of
infringement of patented design or utility model, thus:
SEC. 60. Infringement. - Infringement of a design patent or of a patent for utility
model shall consist in unauthorized copying of the patented design or utility model
for the purpose of trade or industry in the article or product and in the making,
using or selling of the article or product copying the patented design or utility
model. Identity or substantial identity with the patented design or utility model shall
constitute evidence of copying. (underscoring supplied)
Moreover, it should be noted that the requirement of Article 34 to provide a
disputable presumption applies only if (1) the product obtained by the patented
process is NEW or (2) there is a substantial likelihood that the identical product was
made by the process and the process owner has not been able through reasonable
effort to determine the process used. Where either of these two provisos does not
obtain, members shall be free to determine the appropriate method of
implementing the provisions of TRIPS within their own internal systems and
processes.
By and large, the arguments adduced in connection with our disposition of the
third issue -- derogation of legislative power - will apply to this fourth issue also.
Suffice it to say that the reciprocity clause more than justifies such intrusion, if any
actually exists. Besides, Article 34 does not contain an unreasonable burden,
consistent as it is with due process and the concept of adversarial dispute
settlement inherent in our judicial system.
So too, since the Philippine is a signatory to most international conventions on
patents, trademarks and copyrights, the adjustment in legislation and rules of
procedure will not be substantial.[52]

Fifth Issue: Concurrence Only in the WTO Agreement and Not in Other
Documents Contained in the Final Act

Petitioners allege that the Senate concurrence in the WTO Agreement and its
annexes -- but not in the other documents referred to in the Final Act, namely the
Ministerial Declaration and Decisions and the Understanding on Commitments in
Financial Services -- is defective and insufficient and thus constitutes abuse of
discretion. They submit that such concurrence in the WTO Agreement alone is
flawed because it is in effect a rejection of the Final Act, which in turn was the
document signed by Secretary Navarro, in representation of the Republic upon
authority of the President. They contend that the second letter of the President to
the Senate[53] which enumerated what constitutes the Final Act should have been
the subject of concurrence of the Senate.
A final act, sometimes called protocol de clture, is an instrument which
records the winding up of the proceedings of a diplomatic conference and usually
includes a reproduction of the texts of treaties, conventions, recommendations and
other acts agreed upon and signed by the plenipotentiaries attending the
conference.[54] It is not the treaty itself. It is rather a summary of the proceedings of
a protracted conference which may have taken place over several years. The text of
the Final Act Embodying the Results of the Uruguay Round of Multilateral Trade
Negotiations is contained in just one page [55] in Vol. I of the 36-volume Uruguay
Round of Multilateral Trade Negotiations. By signing said Final Act, Secretary
Navarro as representative of the Republic of the Philippines undertook:
"(a) to submit, as appropriate, the WTO Agreement for the consideration of their
respective competent authorities with a view to seeking approval of the
Agreement in accordance with their procedures; and
(b) to adopt the Ministerial Declarations and Decisions."
The assailed Senate Resolution No. 97 expressed concurrence in exactly what
the Final Act required from its signatories, namely, concurrence of the Senate in the
WTO Agreement.
The Ministerial Declarations and Decisions were deemed adopted without need
for ratification. They were approved by the ministers by virtue of Article XXV: 1 of
GATT which provides that representatives of the members can meet to give effect to
those provisions of this Agreement which invoke joint action, and generally with a
view to facilitating the operation and furthering the objectives of this Agreement. [56]
The Understanding on Commitments in Financial Services also approved in
Marrakesh does not apply to the Philippines. It applies only to those 27 Members
which have indicated in their respective schedules of commitments on standstill,
elimination of monopoly, expansion of operation of existing financial service
suppliers, temporary entry of personnel, free transfer and processing of information,
and national treatment with respect to access to payment, clearing systems and
refinancing available in the normal course of business. [57]

On the other hand, the WTO Agreement itself expresses what multilateral
agreements are deemed included as its integral parts, [58] as follows:
Article II
Scope of the WTO
1. The WTO shall provide the common institutional framework for the conduct of
trade relations among its Members in matters to the agreements and
associated legal instruments included in the Annexes to this Agreement.
2. The Agreements and associated legal instruments included in Annexes 1, 2,
and 3 (hereinafter referred to as Multilateral Agreements) are integral parts of
this Agreement, binding on all Members.
3. The Agreements and associated legal instruments included in Annex 4
(hereinafter referred to as Plurilateral Trade Agreements) are also part of this
Agreement for those Members that have accepted them, and are binding on
those Members. The Plurilateral Trade Agreements do not create either
obligation or rights for Members that have not accepted them.
4. The General Agreement on Tariffs and Trade 1994 as specified in annex 1A
(hereinafter referred to as GATT 1994) is legally distinct from the General
Agreement on Tariffs and Trade, dated 30 October 1947, annexed to the Final
Act adopted at the conclusion of the Second Session of the Preparatory
Committee of the United Nations Conference on Trade and Employment, as
subsequently rectified, amended or modified (hereinafter referred to as GATT
1947).
It should be added that the Senate was well-aware of what it was concurring in
as shown by the members deliberation on August 25, 1994. After reading the letter
of President Ramos dated August 11, 1994,[59] the senators of the Republic minutely
dissected what the Senate was concurring in, as follows: [60]
THE CHAIRMAN: Yes. Now, the question of the validity of the submission came up in
the first day hearing of this Committee yesterday. Was the observation made by
Senator Taada that what was submitted to the Senate was not the agreement on
establishing the World Trade Organization by the final act of the Uruguay Round
which is not the same as the agreement establishing the World Trade Organization?
And on that basis, Senator Tolentino raised a point of order which, however, he
agreed to withdraw upon understanding that his suggestion for an alternative
solution at that time was acceptable. That suggestion was to treat the proceedings
of the Committee as being in the nature of briefings for Senators until the question
of the submission could be clarified.

And so, Secretary Romulo, in effect, is the President submitting a new... is he

making a new submission which improves on the clarity of the first submission?
MR. ROMULO: Mr. Chairman, to make sure that it is clear cut and there should be no
misunderstanding, it was his intention to clarify all matters by giving this letter.
THE CHAIRMAN: Thank you.
Can this Committee hear from Senator Taada and later on Senator Tolentino since
they were the ones that raised this question yesterday?
Senator Taada, please.
SEN. TAADA: Thank you, Mr. Chairman.
Based on what Secretary Romulo has read, it would now clearly appear that what is
being submitted to the Senate for ratification is not the Final Act of the Uruguay
Round, but rather the Agreement on the World Trade Organization as well as the
Ministerial Declarations and Decisions, and the Understanding and Commitments in
Financial Services.
I am now satisfied with the wording of the new submission of President Ramos.
SEN. TAADA. . . . of President Ramos, Mr. Chairman.
THE CHAIRMAN. Thank you, Senator Taada. Can we hear from Senator Tolentino?
And after him Senator Neptali Gonzales and Senator Lina.
SEN TOLENTINO, Mr. Chairman, I have not seen the new submission actually
transmitted to us but I saw the draft of his earlier, and I think it now complies with
the provisions of the Constitution, and with the Final Act itself. The Constitution does
not require us to ratify the Final Act. It requires us to ratify the Agreement which is
now being submitted. The Final Act itself specifies what is going to be submitted to
with the governments of the participants.
In paragraph 2 of the Final Act, we read and I quote:
By signing the present Final Act, the representatives agree: (a) to submit as
appropriate the WTO Agreement for the consideration of the respective competent
authorities with a view to seeking approval of the Agreement in accordance with
their procedures.
In other words, it is not the Final Act that was agreed to be submitted to the
governments for ratification or acceptance as whatever their constitutional

procedures may provide but it is the World Trade Organization Agreement. And if
that is the one that is being submitted now, I think it satisfies both the Constitution
and the Final Act itself.
Thank you, Mr. Chairman.
THE CHAIRMAN. Thank you, Senator Tolentino, May I call on Senator Gonzales.
SEN. GONZALES. Mr. Chairman, my views on this matter are already a matter of
record. And they had been adequately reflected in the journal of yesterdays session
and I dont see any need for repeating the same.
Now, I would consider the new submission as an act ex abudante cautela.
THE CHAIRMAN. Thank you, Senator Gonzales. Senator Lina, do you want to make
any comment on this?
SEN. LINA. Mr. President, I agree with the observation just made by Senator
Gonzales out of the abundance of question. Then the new submission is, I believe,
stating the obvious and therefore I have no further comment to make.

Epilogue
In praying for the nullification of the Philippine ratification of the WTO
Agreement, petitioners are invoking this Courts constitutionally imposed duty to
determine whether or not there has been grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of the Senate in giving its concurrence
therein via Senate Resolution No. 97. Procedurally, a writ ofcertiorari grounded on
grave abuse of discretion may be issued by the Court under Rule 65 of the Rules of
Court when it is amply shown that petitioners have no other plain, speedy and
adequate remedy in the ordinary course of law.
By grave abuse of discretion is meant such capricious and whimsical exercise of
judgment as is equivalent to lack of jurisdiction. [61] Mere abuse of discretion is not
enough. It must begrave abuse of discretion as when the power is exercised in an
arbitrary or despotic manner by reason of passion or personal hostility, and must be
so patent and so gross as to amount to an evasion of a positive duty or to a virtual
refusal to perform the duty enjoined or to act at all in contemplation of law. [62]
Failure on the part of the petitioner to show grave abuse of discretion will result in
the dismissal of the petition.[63]
In rendering this Decision, this Court never forgets that the Senate, whose act is
under review, is one of two sovereign houses of Congress and is thus entitled to
great respect in its actions. It is itself a constitutional body independent and

coordinate, and thus its actions are presumed regular and done in good faith. Unless
convincing proof and persuasive arguments are presented to overthrow such
presumptions, this Court will resolve every doubt in its favor. Using the foregoing
well-accepted definition of grave abuse of discretion and the presumption of
regularity in the Senates processes, this Court cannot find any cogent reason to
impute grave abuse of discretion to the Senates exercise of its power of
concurrence in the WTO Agreement granted it by Sec. 21 of Article VII of the
Constitution.[64]
It is true, as alleged by petitioners, that broad constitutional principles require
the State to develop an independent national economy effectively controlled by
Filipinos; and to protect and/or prefer Filipino labor, products, domestic materials
and locally produced goods. But it is equally true that such principles -- while
serving as judicial and legislative guides -- are not in themselves sources of causes
of action. Moreover, there are other equally fundamental constitutional principles
relied upon by the Senate which mandate the pursuit of a trade policy that serves
the general welfare and utilizes all forms and arrangements of exchange on the
basis of equality and reciprocity and the promotion of industries which are
competitive in both domestic and foreign markets, thereby justifying its acceptance
of said treaty. So too, the alleged impairment of sovereignty in the exercise of
legislative and judicial powers is balanced by the adoption of the generally accepted
principles of international law as part of the law of the land and the adherence of
the Constitution to the policy of cooperation and amity with all nations.
That the Senate, after deliberation and voting, voluntarily and overwhelmingly
gave its consent to the WTO Agreement thereby making it a part of the law of the
land is a legitimate exercise of its sovereign duty and power. We find no patent and
gross arbitrariness or despotism by reason of passion or personal hostility in such
exercise. It is not impossible to surmise that this Court, or at least some of its
members, may even agree with petitioners that it is more advantageous to the
national interest to strike down Senate Resolution No. 97. But that isnot a legal
reason to attribute grave abuse of discretion to the Senate and to nullify its
decision. To do so would constitute grave abuse in the exercise of our own judicial
power and duty.Ineludably, what the Senate did was a valid exercise of its authority.
As to whether such exercise was wise, beneficial or viable is outside the realm of
judicial inquiry and review. That is a matter between the elected policy makers and
the people. As to whether the nation should join the worldwide march toward trade
liberalization and economic globalization is a matter that our people should
determine in electing their policy makers. After all, the WTO Agreement allows
withdrawal of membership, should this be the political desire of a member.
The eminent futurist John Naisbitt, author of the best seller Megatrends, predicts
an Asian Renaissance[65] where the East will become the dominant region of the
world economically, politically and culturally in the next century. He refers to the
free market espoused by WTO as the catalyst in this coming Asian ascendancy.

There are at present about 31 countries including China, Russia and Saudi Arabia
negotiating for membership in the WTO. Notwithstanding objections against
possible limitations on national sovereignty, the WTO remains as the only viable
structure for multilateral trading and the veritable forum for the development of
international trade law. The alternative to WTO is isolation, stagnation, if not
economic self-destruction. Duly enriched with original membership, keenly aware of
the advantages and disadvantages of globalization with its on-line experience, and
endowed with a vision of the future, the Philippines now straddles the crossroads of
an international strategy for economic prosperity and stability in the new
millennium. Let the people, through their duly authorized elected officers, make
their free choice.
WHEREFORE, the petition is DISMISSED for lack of merit.
SO ORDERED.
Narvasa, C.J., Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno, Kapunan,
Mendoza, Francisco, Hermosisima, Jr., and Torres, Jr., JJ., concur.
Padilla, and Vitug, JJ., in the result.

[1]

In Annex A of her Memorandum, dated August 8, 1996, received by this Court on

August 12, 1996, Philippine Ambassador to the United Nations, World Trade
Organization and other international organizations Lilia R. Bautista (hereafter
referred to as Bautista Paper) submitted a 46-year Chronology of GATT as follows:
1947 The birth of GATT. On 30 October 1947, the General Agreement
on Tariffs and Trade (GATT) was signed by 23 nations at the
Palais des Nations in Geneva. The Agreement contained tariff
concessions agreed to in the first multilateral trade negotiations
and a set of rules designed to prevent these concessions from
being frustrated by restrictive trade measures.
The 23 founding contracting parties were members of the Preparatory
Committee established by the United Nations Economic and
Social Council in 1946 to draft the charter of the International
Trade Organization (ITO). The ITO was envisaged as the final leg
of a triad of post-War economic agencies (the other two were the
International Monetary Fund and the International Bank for
Reconstruction - later the World Bank).
In parallel with this task, the Committee members decided to negotiate
tariff concessions among themselves. From April to October

1947, the participants completed some 123 negotiations and

established 20 schedules containing the tariff reductions and
bindings which became an integral part of GATT. These
schedules resulting from the first Round covered some 45,000
tariff concessions and about $10 billion in trade.
GATT was conceived as an interim measure that put into effect the
commercial-policy provisions of the ITO. In November,
delegations from 56 countries met in Havana, Cuba, to consider
the ITO draft as a whole.After long and difficult negotiations,
some 53 countries signed the Final Act authenticating the text of
the Havana Charter in March 1948. There was no commitment,
however, from governments to ratification and, in the end, the
ITO was stillborn, leaving GATT as the only international
instrument governing the conduct of world trade.
1948 Entry into force. On 1 January 1948, GATT entered into force.
The 23 founding members were: Australia, Belgium, Brazil,
Burma, Canada, Ceylon, Chile, China, Cuba, Czechoslovakia,
France, India, Lebanon, Luxemburg, Netherlands, New Zealand,
Norway, Pakistan, Southern Rhodesia, Syria, South Africa, United
Kingdom and United States. The first Session of the contracting
parties was held from February to March in Havana, Cuba. The
secretariat of the Interim Commission for the ITO, which served
as the ad hoc secretariat of GATT, move from lake Placid, New
York, to Geneva. The Contracting Parties held their second
session in Geneva from August to September.
1949 Second Round at Annecy. During the second Round of trade
negotiations, held from April to August at Annecy, France, the
contracting parties exchange some 5,000 tariff concession. At
their third Session, they also dealt with the accession of ten
more countries.
1950 Third Round At Torquay. From September 1950 to April 1951,
the contracting parties exchange some 8,700 tariff concessions
in the English town, yielding tariff reduction of about 25 per cent
in relation to the 1948 level. Four more countries acceded to
GATT. During the fifth Session of the Contracting Parties, the
United States indicated that the ITO Charter would not be resubmitted to the US congress; this, in effect, meant that ITO
would not come into operation.
1956 Fourth Round at Geneva. The fourth Round was completed in
May and produce some $2.5 billion worth of tariff reductions. At

the beginning of the year, the GATT commercial policy course for
officials of developing countries was inaugurated.
1958 The Haberler Report. GATT published Trends in International
Trade in October. Known as the "Haberler Report" in honour of
Professor Gottfried Haberler, the chairman of the panel of
imminent economist, it provided initial guidelines for the work of
GATT. The Contracting Parties at their 13th Sessions, attended
by Ministers, subsequently established 3 committees in GATT:
Committee I to convene a further tariff negotiating conference;
Committee II To review the agricultural policies of member
governments and Committee III to tackle the problems facing
developing countries in their trade. The establishment of the
European Economic Community during the previous year also
demanded large scale tariff negotiation under Article XXIV 6 of
the General Agreement.
1960 The Dillon Round. The fifth Round opened in September and
was divided into two phases: the first was concerned with EEC
members states for the creation of a single schedule of
concessions for the Community based on its Common External
Tariff; and the second was a further general round of tariff
negotiations. Named in honor of US Under-Secretary of State
Douglas Dillon who proposed the negotiations, the Round was
concluded in July 1962 and resulted in about 4,400 tariff
concessions covering $4.9 billion of trade.
1961 The Short-Term Arrangement covering cotton textiles was
agreed as an exception to the GATT rules. The arrangement
permitted the negotiation of quota restrictions affecting the
exports of cotton-producing countries. In 1962 the "Short Term "
Arrangement become the "Long term" Arrangement, lasting until
1974 when the Multifibre Arrangement entered into force.
1964 The Kennedy Round. Meeting at Ministerial Level, a Trade
Negotiations Committee formally opened the Kennedy Round in
May. In June 1967, the Round's Final Act was signed by some 50
participating countries which together accounted for 75 per cent
of world trade. For the first time, negotiation departed from
product-by-product approach used in the previous Rounds to an
across-the-board or linear method of cutting tariffs for industrial
goods. The working hypothesis of a 50 per cent target cut in
tariff levels was achieved in many areas. Concessions covered
an estimated total value of trade of about $40 billion. Separate
agreements were reached on grains, chemical products and a
Code on Anti-Dumping.

1965 A New Chapter. The early 1960s marked the accession to the
General Agreement of many newly-independent developing
countries. In February, the Contracting Parties, meeting in a
special session, adopted the text of Part IV on Trade and
Development. The additional chapter to the GATT required
developed countries to accord high priority to the reduction of
trade barriers to products of developing countries. A committee
on Trade and Development was established to oversee the
functioning of the new GATT provisions. In the preceding year,
GATT had established the International Trade Center (ITC) to help
developing countries in trade promotion and identification of
potential markets. Since 1968, the ITC had been jointly operated
by GATT and the UN Conference on Trade and Development
(UNCTAD).
1973 The Tokyo Round. The seventh Round was launched by
Ministers in September at the Japanese capital. Some 99
countries participated in negotiating a comprehensive body of
agreements covering both tariff and non-tariff matters. At the
end of the Round in November 1979, participants exchange tariff
reduction and bindings which covered more than $300 billion of
trade. As a result of these cuts, the weighted average tariff on
manufactured goods in the world's nine major Industrial Markets
declined from 7.0 to 4.7 per cent. Agreements were reached in
the following areas; subsidies and countervailing measures,
technical barriers to trade, import licensing procedures,
government procurement, customs valuation, a revised antidumping code, trade in bovine meat, trade in daily products and
trade in civil aircraft. The first concrete result of the Round was
the reduction of import duties and other trade barriers by
industrial countries on tropical products exported by developing
countries.
1974 On 1 January 1974, the Arrangement Regarding International
Trade in textiles, otherwise known as the Multifibre
Arrangement (MFA), entered into force. Its superseded the
arrangement that had been governing trade in cotton textiles
since 1961. The MFA seeks to promote the expansion and
progressive liberalization of trade in textile product while at the
same time avoiding disruptive effects in individual markets in
lines of production. The MFA was extended in 1978, 1982, 1986,
1991 and 1992. MFA members account for most of the world
exports of textiles and clothing which in 1986 amounted to
US$128 billion.

1982 Ministerial Meeting. Meeting for the first time in nearly ten
years, the GATT Ministers in November at Geneva reaffirmed the
validity of GATT rules for the conduct of international trade and
committed themselves to combating protectionist pressures.
They also established a wide-ranging work programme for the
GATT which was to laid down the ground work for a new Round.
1986 The Uruguay Round. The GATT Trade Ministers meeting
at Punta del Este, Uruguay, launched the eighth Round of Trade
Negotiations on 20 September. The Punta del Este, declarations,
while representing a single political undertaking, was divided
into two section. The First covered negotiations on Trade in
goods and the second initiated negotiation on trade in services.
In the area of trade in goods, the Ministers committed
themselves to a "standstill" on new trade measures inconsistent
with their GATT obligations and to a "rollback" programme aimed
at phasing out existing inconsistent measures. Envisaged to last
four years, negotiations started in early February 1987 in the
following areas: tariffs, non-tariff measures, tropical products,
natural resource-based products, textiles and clothing,
agriculture, subsidies, safeguards, trade-related aspects of
intellectual property rights including trade in counterfeit goods,
in trade- related investment measures. The work of other groups
included a review of GATT articles, the GATT dispute-settlement
procedure, the Tokyo Round agreements, as well as functioning
of the GATT system as a whole.
1994 "GATT 1994" is the updated version of GATT 1947 and takes into
account the substantive and institutional changes negotiated in the
Uruguay Round. GATT 1994 is an integral part of the World Trade
Organization established on 1 January 1995. It is agreed that there be
a one year transition period during which certain GATT 1947 bodies
and commitments would co-exist with those of the World Trade
Organization."
[2]

The Final Act was signed by representatives of 125 entities, namely Algeria,
Angola, Antigua and Barbuda, Argentine Republic, Australia, Republic of
Austria, State of Bahrain, Peoples Republic of Bangladesh, Barbados, The
Kingdom of Belgium, Belize, Republic of Benin, Bolivia, Botswana, Brazil,
Brunei Darussalam, Burkina Faso, Burundi, Cameroon, Canada, Central
African Republic, Chad, Chile, Peoples Republic of China, Colombia, Congo,
Costa Rica, Republic of Cote dIvoire, Cuba, Cyprus, Czech Republic, Kingdom
of Denmark, Commonwealth of Dominica, Dominican Republic, Arab Republic
of Egypt, El Salvador, European Communities, Republic of Fiji, Finland, French
Republic, Gabonese Republic, Gambia, Federal Republic of Germany, Ghana,
Hellenic Republic, Grenada, Guatemala, Republic of Guinea-Bissau, Republic

of Guyana, Haiti, Honduras, Hong Kong, Hungary, Iceland, India, Indonesia,

Ireland, State of Israel, Italian Republic, Jamaica, Japan, Kenya, Korea, State of
Kuwait, Kingdom of Lesotho, Principality of Liechtenstein, Grand Duchy of
Luxembourg, Macau, Republic of Madagascar, Republic of Malawi, Malaysia,
Republic of Maldives, Republic of Mali, Republic of Malta, Islamic Republic of
Mauritania, Republic of Mauritius, United Mexican States, Kingdom of
Morocco, Republic of Mozambique, Union of Myanmar, Republic of Namibia,
Kingdom of the Netherlands, New Zealand, Nicaragua, Republic of Niger,
Federal Republic of Nigeria, Kingdom of Norway, Islamic Republic of Pakistan,
Paraguay, Peru, Philippines, Poland, Portuguese Republic, State of Qatar,
Romania, Rwandese Republic, Saint Kitts and Nevis, Saint Lucia, Saint Vincent
and the Grenadines, Senegal, Sierra Leone, Singapore, Slovak Republic, South
Africa, Kingdom of Spain, Democratic Socialist Republic of Sri Lanka, Republic
of Surinam, Kingdom of Swaziland, Kingdom of Sweden, Swiss Confederation,
United Republic of Tanzania, Kingdom of Thailand, Togolese Republic, Republic
of Trinidad and Tobago, Tunisia, Turkey, Uganda, United Arab Emirates, United
Kingdom of Great Britain and Northern Ireland, United States of America,
Eastern Republic of Uruguay, Venezuela, Republic of Zaire, Republic of
Zambia, Republic of Zimbabwe; see pp. 6-25, Vol. 1, Uruguay Round of
Multilateral Trade Negotiations.
[3]

11 August 1994

The Honorable Members

Senate
Through Senate President Edgardo Angara
Manila
Ladies and Gentlemen:
I have the honor to forward herewith an authenticated copy of the Uruguay Round
Final Act signed by Department of Trade and Industry Secretary Rizalino S.
Navarro for the Philippines on 15 April 1994 in Marrakesh, Morocco.
The Uruguay Round Final Act aims to liberalize and expand world trade and
strengthen the interrelationship between trade and economic policies
affecting growth and development.
The Final Act will improve Philippine access to foreign markets, especially its major
trading partners through the reduction of tariffs on its exports particularly
agricultural and industrial products. These concessions may be availed of by
the Philippines, only if it is a member of the World Trade Organization. By
GATT estimates, the Philippines can acquire additional export revenues from
$2.2 to $2.7 Billion annually under Uruguay Round. This will be on top of the
normal increase in exports that the Philippines may experience.

The Final Act will also open up new opportunities for the services sector in such
areas as the movement of personnel, (e.g. professional services and
construction services), cross-border supply (e.g. computer-related services),
consumption abroad (e.g. tourism, convention services, etc.) and commercial
presence.
The clarified and improved rules and disciplines on anti-dumping and countervailing
measures will also benefit Philippine exporters by reducing the costs and
uncertainty associated with exporting while at the same time providing a
means for domestic industries to safeguard themselves against unfair
imports.
Likewise, the provision of adequate protection for intellectual property rights is
expected to attract more investments into the country and to make it less
vulnerable to unilateral actions by its trading partners (e.g. Sec. 301 of the
United States Omnibus Trade Law).
In view of the foregoing, the Uruguay Round Final Act is hereby submitted to the
Senate for its concurrence pursuant to Section 21, Article VII of the
Constitution.
A draft of a proposed Resolution giving its concurrence to the aforesaid Agreement
is enclosed.
Very truly yours,
(SGD.) FIDEL V. RAMOS
[4]

11 August 1994

The Honorable Members

Senate
Through Senate President Edgardo Angara
Manila
Ladies and Gentlemen:
I have the honor to forward herewith an authenticated copy of the
Uruguay Round Final Act signed by Department of Trade and Industry
Secretary Rizalino S. Navarro for the Philippines on 13 April 1994 in
Marrakech (sic), Morocco.
Members of the trade negotiations committee, which included the
Philippines, agreed that the Agreement Establishing the World Trade
Organization, the Ministerial Declarations and Decisions, and the
Understanding on Commitments in Financial Services embody the results of
their negotiations and form an integral part of the Uruguay Round Final Act.

By signing the Uruguay Round Final Act, the Philippines, through

Secretary Navarro, agreed:
(a) To submit the Agreement Establishing the World Trade Organization to the
Senate for its concurrence pursuant to Section 21, Article VII of the
Constitution; and
(b) To adopt the Ministerial Declarations and Decisions.
The Uruguay Round Final Act aims to liberalize and expand world trade and
strengthen the interrelationship between trade and economic policies
affecting growth and development.
The Final Act will improve Philippine access to foreign markets,
especially its major trading partners through the reduction of tariffs on its
exports particularly agricultural and industrial products. These concessions
may be availed of by the Philippines, only if it is a member of the World Trade
Organization. By GATT estimates, the Philippines can acquire additional
export revenues from $2.2 to $2.7 Billion annually under Uruguay Round. This
will be on top of the normal increase in the exports that the Philippines may
experience.
The Final Act will also open up new opportunities for the services sector
in such areas as the movement of personnel, (e.g., professional services and
construction services), cross-border supply (e.g., computer-related services),
consumption abroad (e.g., tourism, convention services, etc.) and commercial
presence.
The clarified and improved rules and disciplines on anti-dumping and
countervailing measures will also benefit Philippine exporters by reducing the
costs and uncertainty associated with exporting while at the same time
providing a means for domestic industries to safeguard themselves against
unfair imports.
Likewise, the provision of adequate protection for intellectual property
rights is expected to attract more investments into the country and to make it
a less vulnerable to unilateral actions by its trading partners (e.g., Sec. 301 of
the United States Omnibus Trade Law).
In view of the foregoing, the Uruguay Round Final Act, the Agreement
Establishing the World Trade Organization, the Ministerial Declarations and
Decisions, and the Understanding on Commitments in Financial Services, as
embodied in the Uruguay Round Final Act and forming and integral part
thereof are hereby submitted to the Senate for its concurrence pursuant to
Section 21, Article VII of the Constitution.
A draft of a proposed Resolution giving its concurrence to the aforesaid
Agreement is enclosed.

Very truly yours,

(SGD.) FIDEL V. RAMOS
[5]

December 9, 1994

HON. EDGARDO J. ANGARA

Senate President
Senate, Manila
Dear Senate President Angara:
Pursuant to the provisions of Sec. 26 (2) Article VI of the Constitution, I
hereby certify to the necessity of the immediate adoption of P.S. 1083,
entitled:
CONCURRING IN THE RATIFICATION OF THE AGREEMENT ESTABLISHING THE WORLD
TRADE ORGANIZATION
to meet a public emergency consisting of the need for immediate
membership in the WTO in order to assure the benefits to the Philippine
economy arising from such membership.
Very truly yours,
(SGD.) FIDEL V. RAMOS
[6]

Attached as Annex A, Petition; rollo, p. 52. P.S. 1083 is the forerunner of assailed
Senate Resolution No. 97. It was prepared by the Committee of the Whole on
the General Agreement on Tariffs and Trade chaired by Sen. Blas F. Ople and
co-chaired by Sen. Gloria Macapagal-Arroyo; see Annex C, Compliance of
petitioners dated January 28, 1997.

[7]

The Philippines is thus considered an original or founding member of WTO, which

as of July 26, 1996 had 123 members as follows: Antigua and Barbuda,
Argentina, Australia, Austria, Bahrain, Bangladesh, Barbados, Belgium, Belize,
Benin, Bolivia, Botswana, Brazil, Brunei Darussalam, Burkina Faso, Burundi,
Cameroon, Canada, Central African Republic, Chili, Colombia, Costa Rica,
Cote dIvoire, Cuba, Cyprus, Czech Republic, Denmark, Djibouti, Dominica,
Dominican Republic, Ecuador, Egypt, El Salvador, European Community, Fiji,
Finland, France, Gabon, Germany, Ghana, Greece, Grenada, Guatemala,
Guinea, Guinea Bissau, Guyana, Haiti, Honduras, Hongkong, Hungary,
Iceland, India, Indonesia, Ireland, Israel, Italy, Jamaica, Japan, Kenya, Korea,
Kuwait, Lesotho, Liechtenstein, Luxembourg, Macau, Madagascar, Malawi,
Malaysia, Maldives, Mali, Malta, Mauritania, Mauritius, Mexico, Morocco,
Mozambique, Myanmar, Namibia, Netherlands -- for the Kingdom in Europe
and for the Netherlands Antilles, New Zealand, Nicaragua, Nigeria, Norway,
Pakistan, Papua New Guinea, Paraguay, Peru, Philippines, Poland, Portugal,

Qatar, Romania, Rwanda, Saint Kitts and Nevis, Saint Lucia, Saint Vincent &
the Grenadines, Senegal, Sierra Leone, Singapore, Slovak Republic, Slovenia,
Solomon Islands, South Africa, Spain, Sri Lanka, Surinam, Swaziland, Sweden,
Switzerland, Tanzania, Thailand, Togo, Trinidad and Tobago, Tunisia, Turkey,
Uganda, United Arab Emirates, United Kingdom, United States, Uruguay,
Venezuela, Zambia, and Zimbabwe. See Annex A, Bautista Paper, infra.
[8]

Page 6; rollo, p. 261.

[9]

In compliance, Ambassador Bautista submitted to the Court on August 12, 1996,

a Memorandum (the Bautista Paper) consisting of 56 pages excluding
annexes. This is the same document mentioned in footnote no. 1.

[10]

Memorandum for Respondents, p. 13; rollo, p. 268.

[11]

Cf. Kilosbayan, Incorporated vs. Morato, 246 SCRA 540, July 17, 1995 for a
discussion on locus standi. See also the Concurring Opinion of Mr. Justice
Vicente V. Mendoza in Tatad vs. Garcia, Jr., 243 SCRA 473, April 6, 1995, as
well as Kilusang Mayo Uno Labor Center vs. Garcia, Jr., 239 SCRA 386, 414,
December 23, 1994.

[12]

Aquino, Jr. vs. Ponce Enrile, 59 SCRA 183, 196, September 17, 1974, cited in
Bondoc vs. Pineda, 201 SCRA 792, 795, September 26, 1991.

[13]

Guingona, Jr. vs. Gonzales, 219 SCRA 326, 337, March 1, 1993.

[14]

See Tanada and Macapagal vs. Cuenco, et al., 103 Phil. 1051 for a discussion on
the scope of political question.

[15]

Section 1, Article VIII, (par. 2).

[16]

In a privilege speech on May 17, 1993, entitled Supreme Court -- Potential

Tyrant? Senator Arturo Tolentino concedes that this new provision gives the
Supreme Court a duty to intrude into the jurisdiction of the Congress or the
President.

[17]

I Record of the Constitutional Commission 436.

[18]

Cf. Daza vs. Singson, 180 SCRA 496, December 21, 1989.

[19]

Memorandum for Petitioners, pp. 14-16; rollo, pp. 204-206.

[20]

Par. 4, Article XVI, WTO Agreement, Uruguay Round of Multilateral Trade

Negotiations, Vol. 1, p. 146.

[21]

Also entitled Declaration of Principles. The nomenclature in the 1973 Charter is

identical with that in the 1987s.

[22]

Philippine Political Law, 1962 Ed., p. 116.

[23]

Bernas, The Constitution of the Philippines: A Commentary, Vol. II, 1988 Ed., p. 2.
In the very recent case of Manila Prince Hotel vs. GSIS, G.R. No. 122156,

February 3, 1997, p. 8, it was held that A provision which lays down a general
principle, such as those found in Art. II of the 1987 Constitution, is usually not
self-executing.
[24]

246 SCRA 540, 564, July 17, 1995. See also Tolentino vs. Secretary of Finance,
G.R. No. 115455 and consolidated cases, August 25, 1995.

[25]

197 SCRA 52, 68, May 14, 1991.

[26]

224 SCRA 792, 817, July 30, 1993.

[27]

Sec. 10, Article XII.

[28]

Sec. 12, Article XII.

[29]

Sec. 19, Art. II.

[30]

Sec. 13, Art. XII.

[31]

G.R. No. 122156, February 3, 1997, pp. 13-14.

[32]

Sec. 1, Art. XII.

[33]

Bautista Paper, p. 19.

[34]

Preamble, WTO Agreement p. 137, Vol. 1, Uruguay Round of Multilateral Trade

Negotiations. Underscoring supplied.

[35]

Sec. - 19, Article II, Constitution.

[36]

III Records of the Constitutional Commission 252.

[37]

Sec. 13, Article XII, Constitution.

[38]

Justice Isagani A. Cruz, Philippine Political Law, 1995 Ed., p. 13, quoting his own
article entitled, A Quintessential Constitution earlier published in the San
Beda Law Journal, April 1972; underscoring supplied.

[39]

Par. 4, Article XVI (Miscellaneous Provisions), WTO Agreement, p.146, Vol. 1,

Uruguay Round of Multilateral Trade Negotiations.

[40]

Memorandum for the Petitioners, p. 29; rollo, p. 219.

[41]

Sec. 24, Article VI, Constitution.

[42]

Subsection (2), Sec. 28, Article, VI Constitution.

[43]

Sec. 2, Article II, Constitution.

[44]

Cruz, Philippine Political Law, 1995 Ed., p. 55.

[45]

Salonga and Yap, op cit 305.

[46]

Salonga, op. cit., p. 287.

[47]

Quoted in Paras and Paras, Jr., International Law and World Politics, 1994 Ed., p.
178.

47-A

Reagan vs. Commission of Internal Revenue, 30 SCRA 968, 973, December 27,
1969.
[48]

Trebilcock and Howse. The Regulation of International Trade, p. 14, London, 1995,
cited on p. 55-56, Bautista Paper.

[49]

Uruguay Round of Multilateral Trade Negotiations, Vol. 31, p. 25445.

[50]

Item 5, Sec. 5, Article VIII, Constitution.

[51]

Uruguay Round of Multilateral Trade Negotiations, Vol. 31, p. 25445.

[52]

Bautista Paper, p. 13.

[53]

See footnote 3 of the text of this letter.

[54]

Salonga and Yap, op cit., pp. 289-290.

[55]

The full text, without the signatures, of the Final Act is as follows:

Final Act Embodying the Results of the

Uruguay Round of Multilateral Trade Negotiations
1. Having met in order to conclude the Uruguay Round of Multilateral Trade
Negotiations, representatives of the governments and of the European
Communities, members of the Trade Negotiations Committee, agree that the
Agreement Establishing the World Trade Organization (referred to in the Final
Act as the WTO Agreement), the Ministerial Declarations and Decisions, and
the Understanding on Commitments in Financial Services, as annexed hereto,
embody the results of their negotiations and form an integral part of this Final
Act.
2. By signing to the present Final Act, the representatives agree.
(a) to submit, as appropriate, the WTO Agreement for the consideration of their
respective competent authorities with a view to seeking approval of the
Agreement in accordance with their procedures; and
(b) to adopt the Ministerial Declarations and Decisions.
3. The representatives agree on the desirability of acceptance of the WTO
Agreement by all participants in the Uruguay Round of Multilateral Trade
Negotiations (hereinafter referred to as participants) with a view to its entry
into force by 1 January 1995, or as early as possible thereafter. Not later than
late 1994, Ministers will meet, in accordance with the final paragraph of the
Punta del Este Ministerial Declarations, to decide on the international
implementation of the results, including the timing of their entry into force.

4. The representatives agree that the WTO Agreement shall be opened for
acceptance as a whole, by signature or otherwise, by all participants
pursuant to Article XIV thereof. The acceptance and entry into force of a
Plurilateral Trade Agreement included in Annex 4 of the WTO Agreement shall
be governed by the provisions of that Plurilateral Trade Agreement.
5. Before accepting the WTO Agreement, participants which are not contracting
parties to the General Agreement on Tariffs and Trade must first have
concluded negotiations for their accession to the General Agreement and
become contracting parties thereto. For participants which are not
contracting parties to the general Agreement as of the date of the Final Act,
the Schedules are not definitive and shall be subsequently completed for the
purpose of their accession to the General Agreement and acceptance of the
WTO Agreement.
6. This Final Act and the Texts annexed hereto shall be deposited with the DirectorGeneral to the CONTRACTING PARTIES to the General Agreement on Tariffs
and Trade who shall promptly furnish to each participant a certified copy
thereof.
DONE at Marrakesh this fifteenth day of April One thousand nine hundred and
ninety-four, in a single copy, in the English, French and Spanish languages,
each text being authentic."
[56]

Bautista Paper, p. 16.

[57]

Bautista Paper, p. 16.

[58]

Uruguay Round of Multilateral Trade Negotiations, Vol. I, pp. 137-138.

[59]

See footnote 3 for complete text.

[60]

Taken from pp. 63-85, Respondent Memorandum.

[61]

Zarate vs. Olegario, G.R. No. 90655, October 7, 1996.

[62]

San Sebastian College vs. Court of Appeals, 197 SCRA 138, 144, May 15, 1991;
Commissioner of Internal Revenue vs. Court of Tax Appeals, 195 SCRA 444,
458 March 20, 1991; Simon vs. Civil Service Commission, 215 SCRA 410,
November 5, 1992; Bustamante vs. Commissioner on Audit, 216 SCRA 134,
136, November 27, 1992.

[63]

Paredes vs. Civil Service Commission, 192 SCRA 84, 94, December 4, 1990.

[64]

Sec. 21. No treaty or international agreement shall be valid and effective unless
concurred in by at least two-thirds of all the Members of the Senate.

[65]

Readers Digest, December 1996 issue, p. 28.

13.Manila Prince Hotel vs GSIS February 3, 1997

EN BANC

[G.R. No. 122156. February 3, 1997]

MANILA PRINCE HOTEL, petitioner, vs. GOVERNMENT SERVICE INSURANCE

SYSTEM,
MANILA
HOTEL
CORPORATION,
COMMITTEE
ON
PRIVATIZATION and OFFICE OF THE GOVERNMENT CORPORATE
COUNSEL, respondents.
DECISION
BELLOSILLO, J.:
The Filipino First Policy enshrined in the 1987 Constitution, i.e., in the grant of
rights, privileges, and concessions covering the national economy and patrimony,
the State shall give preference to qualified Filipinos,[1] is invoked by petitioner in its
bid to acquire 51% of the shares of the Manila Hotel Corporation (MHC) which owns
the historic Manila Hotel. Opposing, respondents maintain that the provision is not
self-executing but requires an implementing legislation for its enforcement.
Corollarily, they ask whether the 51% shares form part of the national economy and
patrimony covered by the protective mantle of the Constitution.
The controversy arose when respondent Government Service Insurance System
(GSIS), pursuant to the privatization program of the Philippine Government under
Proclamation No. 50 dated 8 December 1986, decided to sell through public bidding
30% to 51% of the issued and outstanding shares of respondent MHC. The winning
bidder, or the eventual strategic partner, is to provide management expertise
and/or an international marketing/reservation system, and financial support to
strengthen the profitability and performance of the Manila Hotel.[2] In a close bidding
held on 18 September 1995 only two (2) bidders participated: petitioner Manila
Prince Hotel Corporation, a Filipino corporation, which offered to buy 51% of the
MHC or 15,300,000 shares at P41.58 per share, and Renong Berhad, a Malaysian
firm, with ITT-Sheraton as its hotel operator, which bid for the same number of
shares at P44.00 per share, orP2.42 more than the bid of petitioner.
Pertinent provisions of the bidding rules prepared by respondent GSIS state I. EXECUTION OF THE NECESSARY CONTRACTS WITH GSIS/MHC -

1. The Highest Bidder must comply with the conditions set forth below by October
23, 1995 (reset to November 3, 1995) or the Highest Bidder will lose the right to
purchase the Block of Shares and GSIS will instead offer the Block of Shares to the
other Qualified Bidders:
a. The Highest Bidder must negotiate and execute with the GSIS/MHC the
Management Contract, International Marketing/Reservation System Contract or
other type of contract specified by the Highest Bidder in its strategic plan for the
Manila Hotel x x x x
b. The Highest Bidder must execute the Stock Purchase and Sale Agreement with
GSIS x x x x
K. DECLARATION OF THE WINNING BIDDER/STRATEGIC PARTNER The Highest Bidder will be declared the Winning Bidder/Strategic Partner after the
following conditions are met:
a. Execution of the necessary contracts with GSIS/MHC not later than October 23,
1995 (reset to November 3, 1995); and
b. Requisite approvals from the GSIS/MHC and COP (Committee on Privatization)/
OGCC (Office of the Government Corporate Counsel) are obtained. [3]
Pending the declaration of Renong Berhard as the winning bidder/strategic
partner and the execution of the necessary contracts, petitioner in a letter to
respondent GSIS dated 28 September 1995 matched the bid price of P44.00 per
share tendered by Renong Berhad. [4] In a subsequent letter dated 10 October 1995
petitioner sent a managers check issued by Philtrust Bank for Thirty-three Million
Pesos (P33,000,000.00) as Bid Security to match the bid of the Malaysian Group,
Messrs. Renong Berhad x x x x[5] which respondent GSIS refused to accept.
On 17 October 1995, perhaps apprehensive that respondent GSIS has
disregarded the tender of the matching bid and that the sale of 51% of the MHC
may be hastened by respondent GSIS and consummated with Renong Berhad,
petitioner came to this Court on prohibition and mandamus. On 18 October 1995
the Court issued a temporary restraining order enjoining respondents from
perfecting and consummating the sale to the Malaysian firm.
On 10 September 1996 the instant case was accepted by the Court En Banc
after it was referred to it by the First Division. The case was then set for oral
arguments with former Chief Justice Enrique M. Fernando and Fr. Joaquin G. Bernas,
S.J., as amici curiae.
In the main, petitioner invokes Sec. 10, second par., Art. XII, of the 1987
Constitution and submits that the Manila Hotel has been identified with the Filipino

nation and has practically become a historical monument which reflects the
vibrancy of Philippine heritage and culture. It is a proud legacy of an earlier
generation of Filipinos who believed in the nobility and sacredness of independence
and its power and capacity to release the full potential of the Filipino people. To all
intents and purposes, it has become a part of the national patrimony.[6]Petitioner
also argues that since 51% of the shares of the MHC carries with it the ownership of
the business of the hotel which is owned by respondent GSIS, a government-owned
and controlled corporation, the hotel business of respondent GSIS being a part of
the tourism industry is unquestionably a part of the national economy. Thus, any
transaction involving 51% of the shares of stock of the MHC is clearly covered by
the term national economy, to which Sec. 10, second par., Art. XII, 1987
Constitution, applies.[7]
It is also the thesis of petitioner that since Manila Hotel is part of the national
patrimony and its business also unquestionably part of the national economy
petitioner should be preferred after it has matched the bid offer of the Malaysian
firm. For the bidding rules mandate that if for any reason, the Highest Bidder cannot
be awarded the Block of Shares, GSIS may offer this to the other Qualified Bidders
that have validly submitted bids provided that these Qualified Bidders are willing to
match the highest bid in terms of price per share. [8]
Respondents except. They maintain that: First, Sec. 10, second par., Art. XII, of
the 1987 Constitution is merely a statement of principle and policy since it is not a
self-executing provision and requires implementing legislation(s) x x x x Thus, for
the said provision to operate, there must be existing laws to lay down conditions
under which business may be done.[9]
Second, granting that this provision is self-executing, Manila Hotel does not fall
under the term national patrimony which only refers to lands of the public domain,
waters, minerals, coal, petroleum and other mineral oils, all forces of potential
energy, fisheries, forests or timber, wildlife, flora and fauna and all marine wealth in
its territorial sea, and exclusive marine zone as cited in the first and second
paragraphs of Sec. 2, Art. XII, 1987 Constitution. According to respondents, while
petitioner speaks of the guests who have slept in the hotel and the events that have
transpired therein which make the hotel historic, these alone do not make the hotel
fall under the patrimony of the nation. What is more, the mandate of the
Constitution is addressed to the State, not to respondent GSIS which possesses a
personality of its own separate and distinct from the Philippines as a State.
Third, granting that the Manila Hotel forms part of the national patrimony, the
constitutional provision invoked is still inapplicable since what is being sold is only
51% of the outstanding shares of the corporation, not the hotel building nor the land
upon which the building stands. Certainly, 51% of the equity of the MHC cannot be
considered part of the national patrimony.Moreover, if the disposition of the shares
of the MHC is really contrary to the Constitution, petitioner should have questioned
it right from the beginning and not after it had lost in the bidding.

Fourth, the reliance by petitioner on par. V., subpar. J. 1., of the bidding rules
which provides that if for any reason, the Highest Bidder cannot be awarded the
Block of Shares, GSIS may offer this to the other Qualified Bidders that have validly
submitted bids provided that these Qualified Bidders are willing to match the
highest bid in terms of price per share, is misplaced. Respondents postulate that the
privilege of submitting a matching bid has not yet arisen since it only takes place if
for any reason, the Highest Bidder cannot be awarded the Block of Shares. Thus the
submission by petitioner of a matching bid is premature since Renong Berhad could
still very well be awarded the block of shares and the condition giving rise to the
exercise of the privilege to submit a matching bid had not yet taken place.
Finally, the prayer for prohibition grounded on grave abuse of discretion should
fail since respondent GSIS did not exercise its discretion in a capricious, whimsical
manner, and if ever it did abuse its discretion it was not so patent and gross as to
amount to an evasion of a positive duty or a virtual refusal to perform a duty
enjoined by law. Similarly, the petition for mandamus should fail as petitioner has
no clear legal right to what it demands and respondents do not have an imperative
duty to perform the act required of them by petitioner.
We now resolve. A constitution is a system of fundamental laws for the
governance and administration of a nation. It is supreme, imperious, absolute and
unalterable except by the authority from which it emanates. It has been defined as
the fundamental and paramount law of the nation. [10] It prescribes the permanent
framework of a system of government, assigns to the different departments their
respective powers and duties, and establishes certain fixed principles on which
government is founded. The fundamental conception in other words is that it is a
supreme law to which all other laws must conform and in accordance with which all
private rights must be determined and all public authority administered. [11] Under
the doctrine of constitutional supremacy, if a law or contract violates any norm of
the constitution that law or contract whether promulgated by the legislative or by
the executive branch or entered into by private persons for private purposes is null
and void and without any force and effect. Thus, since the Constitution is the
fundamental, paramount and supreme law of the nation, it is deemed written in
every statute and contract.
Admittedly, some constitutions are merely declarations of policies and
principles. Their provisions command the legislature to enact laws and carry out the
purposes of the framers who merely establish an outline of government providing
for the different departments of the governmental machinery and securing certain
fundamental and inalienable rights of citizens. [12] A provision which lays down a
general principle, such as those found in Art. II of the 1987 Constitution, is usually
not self-executing. But a provision which is complete in itself and becomes operative
without the aid of supplementary or enabling legislation, or that which supplies
sufficient rule by means of which the right it grants may be enjoyed or protected, is
self-executing.Thus a constitutional provision is self-executing if the nature and

extent of the right conferred and the liability imposed are fixed by the constitution
itself, so that they can be determined by an examination and construction of its
terms, and there is no language indicating that the subject is referred to the
legislature for action.[13]
As against constitutions of the past, modern constitutions have been generally
drafted upon a different principle and have often become in effect extensive codes
of laws intended to operate directly upon the people in a manner similar to that of
statutory enactments, and the function of constitutional conventions has evolved
into one more like that of a legislative body.Hence, unless it is expressly provided
that a legislative act is necessary to enforce a constitutional mandate, the
presumption now is that all provisions of the constitution are self-executing.If the
constitutional provisions are treated as requiring legislation instead of selfexecuting, the legislature would have the power to ignore and practically nullify the
mandate of the fundamental law.[14] This can be cataclysmic. That is why the
prevailing view is, as it has always been, that x x x x in case of doubt, the Constitution should be considered self-executing rather
than non-self-executing x x x x Unless the contrary is clearly intended, the
provisions of the Constitution should be considered self-executing, as a contrary rule
would give the legislature discretion to determine when, or whether, they shall be
effective. These provisions would be subordinated to the will of the lawmaking body,
which could make them entirely meaningless by simply refusing to pass the needed
implementing statute.[15]
Respondents argue that Sec. 10, second par., Art. XII, of the 1987 Constitution is
clearly not self-executing, as they quote from discussions on the floor of the 1986
Constitutional Commission MR. RODRIGO. Madam President, I am asking this question as the Chairman
of the Committee on Style. If the wording of PREFERENCE is given to
QUALIFIED FILIPINOS, can it be understood as a preference to qualified
Filipinos vis-a-vis Filipinos who are not qualified. So, why do we not make
it clear? To qualified Filipinos as against aliens?
THE PRESIDENT. What is the question of Commissioner Rodrigo? Is it to
remove the word QUALIFIED?
MR. RODRIGO. No, no, but say definitely TO QUALIFIED FILIPINOS as against
whom? As against aliens or over aliens ?
MR. NOLLEDO. Madam President, I think that is understood. We use the word
QUALIFIED because the existing laws or prospective laws will always lay
down conditions under which business may be done. For example,
qualifications on capital, qualifications on the setting up of other
financial structures, et cetera (underscoring supplied by respondents).

MR. RODRIGO. It is just a matter of style.

MR. NOLLEDO. Yes.[16]
Quite apparently, Sec. 10, second par., of Art XII is couched in such a way as not
to make it appear that it is non-self-executing but simply for purposes of style. But,
certainly, the legislature is not precluded from enacting further laws to enforce the
constitutional provision so long as the contemplated statute squares with the
Constitution. Minor details may be left to the legislature without impairing the selfexecuting nature of constitutional provisions.
In self-executing constitutional provisions, the legislature may still enact
legislation to facilitate the exercise of powers directly granted by the constitution,
further the operation of such a provision, prescribe a practice to be used for its
enforcement, provide a convenient remedy for the protection of the rights secured
or the determination thereof, or place reasonable safeguards around the exercise of
the right. The mere fact that legislation may supplement and add to or prescribe a
penalty for the violation of a self-executing constitutional provision does not render
such a provision ineffective in the absence of such legislation. The omission from a
constitution of any express provision for a remedy for enforcing a right or liability is
not necessarily an indication that it was not intended to be self-executing. The rule
is that a self-executing provision of the constitution does not necessarily exhaust
legislative power on the subject, but any legislation must be in harmony with the
constitution, further the exercise of constitutional right and make it more available.
[17]
Subsequent legislation however does not necessarily mean that the subject
constitutional provision is not, by itself, fully enforceable.
Respondents also argue that the non-self-executing nature of Sec. 10, second
par., of Art. XII is implied from the tenor of the first and third paragraphs of the
same section which undoubtedly are not self-executing. [18] The argument is flawed.
If the first and third paragraphs are not self-executing because Congress is still to
enact measures to encourage the formation and operation of enterprises fully
owned by Filipinos, as in the first paragraph, and the State still needs legislation to
regulate and exercise authority over foreign investments within its national
jurisdiction, as in the third paragraph, then a fortiori, by the same logic, the second
paragraph can only be self-executing as it does not by its language require any
legislation in order to give preference to qualified Filipinos in the grant of rights,
privileges and concessions covering the national economy and patrimony. A
constitutional provision may be self-executing in one part and non-self-executing in
another.[19]
Even the cases cited by respondents holding that certain constitutional
provisions are merely statements of principles and policies, which are basically not
self-executing and only placed in the Constitution as moral incentives to legislation,
not as judicially enforceable rights - are simply not in point. Basco v. Philippine
Amusements and Gaming Corporation [20] speaks of constitutional provisions on

personal dignity,[21] the sanctity of family life,[22] the vital role of the youth in nationbuilding,[23] the promotion of social justice,[24] and the values of education.
[25]
Tolentino v. Secretary of Finance [26] refers to constitutional provisions on social
justice and human rights[27] and on education.[28] Lastly, Kilosbayan, Inc. v. Morato [29]
cites provisions on the promotion of general welfare, [30] the sanctity of family life,[31]
the vital role of the youth in nation-building [32] and the promotion of total human
liberation and development.[33] A reading of these provisions indeed clearly shows
that they are not judicially enforceable constitutional rights but merely guidelines
for legislation. The very terms of the provisions manifest that they are only
principles upon which legislations must be based. Res ipsa loquitur.
On the other hand, Sec. 10, second par., Art. XII of the 1987 Constitution is a
mandatory, positive command which is complete in itself and which needs no
further guidelines or implementing laws or rules for its enforcement. From its very
words the provision does not require any legislation to put it in operation. It is per
se judicially enforceable. When our Constitution mandates that [i]n the grant of
rights, privileges, and concessions covering national economy and patrimony, the
State shall give preference to qualified Filipinos, it means just that - qualified
Filipinos shall be preferred. And when our Constitution declares that a right exists in
certain specified circumstances an action may be maintained to enforce such right
notwithstanding the absence of any legislation on the subject; consequently, if there
is no statute especially enacted to enforce such constitutional right, such right
enforces itself by its own inherent potency and puissance, and from which all
legislations must take their bearings. Where there is a right there is a remedy. Ubi
jus ibi remedium.
As regards our national patrimony, a member of the 1986 Constitutional
Commission[34] explains The patrimony of the Nation that should be conserved and developed
refers not only to our rich natural resources but also to the cultural heritage
of our race. It also refers to our intelligence in arts, sciences and letters.
Therefore, we should develop not only our lands, forests, mines and other
natural resources but also the mental ability or faculty of our people.
We agree. In its plain and ordinary meaning, the term patrimony pertains to
heritage.[35] When the Constitution speaks of national patrimony, it refers not only to
the natural resources of the Philippines, as the Constitution could have very well
used the term natural resources, but also to the cultural heritage of the Filipinos.
Manila Hotel has become a landmark - a living testimonial of Philippine heritage.
While it was restrictively an American hotel when it first opened in 1912, it
immediately evolved to be truly Filipino. Formerly a concourse for the elite, it has
since then become the venue of various significant events which have shaped
Philippine history. It was called the Cultural Center of the 1930s. It was the site of

the festivities during the inauguration of the Philippine Commonwealth. Dubbed as

the Official Guest House of the Philippine Government it plays host to dignitaries
and official visitors who are accorded the traditional Philippine hospitality. [36]
The history of the hotel has been chronicled in the book The Manila Hotel: The
Heart and Memory of a City.[37] During World War II the hotel was converted by the
Japanese Military Administration into a military headquarters. When the American
forces returned to recapture Manila the hotel was selected by the Japanese together
with Intramuros as the two (2) places for their final stand. Thereafter, in the 1950s
and 1960s, the hotel became the center of political activities, playing host to almost
every political convention. In 1970 the hotel reopened after a renovation and
reaped numerous international recognitions, an acknowledgment of the Filipino
talent and ingenuity. In 1986 the hotel was the site of a failed coup d etat where an
aspirant for vice-president was proclaimed President of the Philippine Republic.
For more than eight (8) decades Manila Hotel has bore mute witness to the
triumphs and failures, loves and frustrations of the Filipinos; its existence is
impressed with public interest; its own historicity associated with our struggle for
sovereignty, independence and nationhood. Verily, Manila Hotel has become part of
our national economy and patrimony. For sure, 51% of the equity of the MHC comes
within the purview of the constitutional shelter for it comprises the majority and
controlling stock, so that anyone who acquires or owns the 51% will have actual
control and management of the hotel. In this instance, 51% of the MHC cannot be
disassociated from the hotel and the land on which the hotel edifice stands.
Consequently, we cannot sustain respondents claim that the Filipino First Policy
provision is not applicable since what is being sold is only 51% of the outstanding
shares of the corporation, not the Hotel building nor the land upon which the
building stands.[38]
The argument is pure sophistry. The term qualified Filipinos as used in our
Constitution also includes corporations at least 60% of which is owned by Filipinos.
This is very clear from the proceedings of the 1986 Constitutional Commission THE PRESIDENT. Commissioner Davide is recognized.
MR. DAVIDE. I would like to introduce an amendment to the Nolledo
amendment. And the amendment would consist in substituting the
words QUALIFIED FILIPINOS with the following: CITIZENS OF THE
PHILIPPINES OR CORPORATIONS OR ASSOCIATIONS WHOSE CAPITAL OR
CONTROLLING STOCK IS WHOLLY OWNED BY SUCH CITIZENS.
xxxx
MR. MONSOD. Madam President, apparently the proponent is agreeable, but
we have to raise a question. Suppose it is a corporation that is 80percent Filipino, do we not give it preference?

MR. DAVIDE. The Nolledo amendment would refer to an individual Filipino.

What about a corporation wholly owned by Filipino citizens?
MR. MONSOD. At least 60 percent, Madam President.
MR. DAVIDE. Is that the intention?
MR. MONSOD. Yes, because, in fact, we would be limiting it if we say that
the preference should only be 100-percent Filipino.
MR. DAVIDE. I want to get that meaning clear because QUALIFIED FILIPINOS
may refer only to individuals and not to juridical personalities or entities.
MR. MONSOD. We agree, Madam President.[39]
xxxx
MR. RODRIGO. Before we vote, may I request that the amendment be read
again.
MR. NOLLEDO. The amendment will read: IN THE GRANT OF RIGHTS,
PRIVILEGES AND CONCESSIONS COVERING THE NATIONAL ECONOMY
AND PATRIMONY, THE STATE SHALL GIVE PREFERENCE TO QUALIFIED
FILIPINOS. And the word Filipinos here, as intended by the proponents,
will include not only individual Filipinos but also Filipino-controlled
entities or entities fully-controlled by Filipinos. [40]
The phrase preference to qualified Filipinos was explained thus MR. FOZ. Madam President, I would like to request Commissioner Nolledo to
please restate his amendment so that I can ask a question.
MR. NOLLEDO. IN THE GRANT OF RIGHTS, PRIVILEGES AND CONCESSIONS
COVERING THE NATIONAL ECONOMY AND PATRIMONY, THE STATE SHALL
GIVE PREFERENCE TO QUALIFIED FILIPINOS.
MR. FOZ. In connection with that amendment, if a foreign enterprise is
qualified and a Filipino enterprise is also qualified, will the Filipino
enterprise still be given a preference?
MR. NOLLEDO. Obviously.
MR. FOZ. If the foreigner is more qualified in some aspects than the Filipino
enterprise, will the Filipino still be preferred?
MR. NOLLEDO. The answer is yes.
MR. FOZ. Thank you.[41]
Expounding further on the Filipino First Policy provision Commissioner Nolledo
continues

MR. NOLLEDO. Yes, Madam President. Instead of MUST, it will be SHALL THE STATE SHALL GIVE PREFERENCE TO QUALIFIED FILIPINOS. This
embodies the so-called Filipino First policy.That means that Filipinos
should be given preference in the grant of concessions, privileges and
rights covering the national patrimony. [42]
The exchange of views in the sessions of the Constitutional Commission
regarding the subject provision was still further clarified by Commissioner Nolledo [43]
Paragraph 2 of Section 10 explicitly mandates the Pro-Filipino bias in all economic
concerns. It is better known as the FILIPINO FIRST Policy x x x x This provision was
never found in previous Constitutions x x x x
The term qualified Filipinos simply means that preference shall be given to those
citizens who can make a viable contribution to the common good, because of
credible competence and efficiency. It certainly does NOT mandate the pampering
and preferential treatment to Filipino citizens or organizations that are incompetent
or inefficient, since such an indiscriminate preference would be counterproductive
and inimical to the common good.
In the granting of economic rights, privileges, and concessions, when a choice has
to be made between a qualified foreigner and a qualified Filipino, the latter shall be
chosen over the former.
Lastly, the word qualified is also determinable. Petitioner was so considered by
respondent GSIS and selected as one of the qualified bidders. It was pre-qualified by
respondent GSIS in accordance with its own guidelines so that the sole inference
here is that petitioner has been found to be possessed of proven management
expertise in the hotel industry, or it has significant equity ownership in another
hotel company, or it has an overall management and marketing proficiency to
successfully operate the Manila Hotel.[44]
The penchant to try to whittle away the mandate of the Constitution by arguing
that the subject provision is not self-executory and requires implementing legislation
is quite disturbing.The attempt to violate a clear constitutional provision - by the
government itself - is only too distressing. To adopt such a line of reasoning is to
renounce the duty to ensure faithfulness to the Constitution. For, even some of the
provisions of the Constitution which evidently need implementing legislation have
juridical life of their own and can be the source of a judicial remedy. We cannot
simply afford the government a defense that arises out of the failure to enact
further enabling, implementing or guiding legislation. In fine, the discourse of Fr.
Joaquin G. Bernas, S.J., on constitutional government is apt -

The executive department has a constitutional duty to implement laws, including

the Constitution, even before Congress acts - provided that there are discoverable
legal standards for executive action. When the executive acts, it must be guided by
its own understanding of the constitutional command and of applicable laws. The
responsibility for reading and understanding the Constitution and the laws is not the
sole prerogative of Congress. If it were, the executive would have to ask Congress,
or perhaps the Court, for an interpretation every time the executive is confronted by
a constitutional command. That is not how constitutional government operates. [45]
Respondents further argue that the constitutional provision is addressed to the
State, not to respondent GSIS which by itself possesses a separate and distinct
personality. This argument again is at best specious. It is undisputed that the sale of
51% of the MHC could only be carried out with the prior approval of the State acting
through respondent Committee on Privatization. As correctly pointed out by Fr.
Joaquin G. Bernas, S.J., this fact alone makes the sale of the assets of respondents
GSIS and MHC a state action. In constitutional jurisprudence, the acts of persons
distinct from the government are considered state action covered by the
Constitution (1) when the activity it engages in is a public function; (2) when the
government is so significantly involved with the private actor as to make the
government responsible for his action; and, (3) when the government has approved
or authorized the action. It is evident that the act of respondent GSIS in selling 51%
of its share in respondent MHC comes under the second and third categories of
state action. Without doubt therefore the transaction, although entered into by
respondent GSIS, is in fact a transaction of the State and therefore subject to the
constitutional command.[46]
When the Constitution addresses the State it refers not only to the people but
also to the government as elements of the State. After all, government is composed
of three (3) divisions of power - legislative, executive and judicial. Accordingly, a
constitutional mandate directed to the State is correspondingly directed to the three
(3) branches of government. It is undeniable that in this case the subject
constitutional injunction is addressed among others to the Executive Department
and respondent GSIS, a government instrumentality deriving its authority from the
State.
It should be stressed that while the Malaysian firm offered the higher bid it is
not yet the winning bidder. The bidding rules expressly provide that the highest
bidder shall only be declared the winning bidder after it has negotiated and
executed the necessary contracts, and secured the requisite approvals. Since the
Filipino First Policy provision of the Constitution bestows preference on qualified
Filipinos the mere tending of the highest bid is not an assurance that the highest
bidder will be declared the winning bidder. Resultantly, respondents are not bound
to make the award yet, nor are they under obligation to enter into one with the
highest bidder. For in choosing the awardee respondents are mandated to abide by

the dictates of the 1987 Constitution the provisions of which are presumed to be
known to all the bidders and other interested parties.
Adhering to the doctrine of constitutional supremacy, the subject constitutional
provision is, as it should be, impliedly written in the bidding rules issued by
respondent GSIS, lest the bidding rules be nullified for being violative of the
Constitution. It is a basic principle in constitutional law that all laws and contracts
must conform with the fundamental law of the land.Those which violate the
Constitution lose their reason for being.
Paragraph V. J. 1 of the bidding rules provides that [i]f for any reason the
Highest Bidder cannot be awarded the Block of Shares, GSIS may offer this to other
Qualified Bidders that have validly submitted bids provided that these Qualified
Bidders are willing to match the highest bid in terms of price per share. [47] Certainly,
the constitutional mandate itself is reason enough not to award the block of shares
immediately to the foreign bidder notwithstanding its submission of a higher, or
even the highest, bid. In fact, we cannot conceive of a strongerreason than the
constitutional injunction itself.
In the instant case, where a foreign firm submits the highest bid in a public
bidding concerning the grant of rights, privileges and concessions covering the
national economy and patrimony, thereby exceeding the bid of a Filipino, there is no
question that the Filipino will have to be allowed to match the bid of the foreign
entity. And if the Filipino matches the bid of a foreign firm the award should go to
the Filipino. It must be so if we are to give life and meaning to the Filipino First
Policy provision of the 1987 Constitution. For, while this may neither be expressly
stated nor contemplated in the bidding rules, the constitutional fiat is omnipresent
to be simply disregarded. To ignore it would be to sanction a perilous skirting of the
basic law.
This Court does not discount the apprehension that this policy may discourage
foreign investors. But the Constitution and laws of the Philippines are understood to
be always open to public scrutiny. These are given factors which investors must
consider when venturing into business in a foreign jurisdiction. Any person therefore
desiring to do business in the Philippines or with any of its agencies or
instrumentalities is presumed to know his rights and obligations under the
Constitution and the laws of the forum.
The argument of respondents that petitioner is now estopped from questioning
the sale to Renong Berhad since petitioner was well aware from the beginning that a
foreigner could participate in the bidding is meritless. Undoubtedly, Filipinos and
foreigners alike were invited to the bidding. But foreigners may be awarded the sale
only if no Filipino qualifies, or if the qualified Filipino fails to match the highest bid
tendered by the foreign entity. In the case before us, while petitioner was already
preferred at the inception of the bidding because of the constitutional mandate,
petitioner had not yet matched the bid offered by Renong Berhad. Thus it did not

have the right or personality then to compel respondent GSIS to accept its earlier
bid. Rightly, only after it had matched the bid of the foreign firm and the apparent
disregard by respondent GSIS of petitioners matching bid did the latter have a
cause of action.
Besides, there is no time frame for invoking the constitutional safeguard unless
perhaps the award has been finally made. To insist on selling the Manila Hotel to
foreigners when there is a Filipino group willing to match the bid of the foreign
group is to insist that government be treated as any other ordinary market player,
and bound by its mistakes or gross errors of judgment, regardless of the
consequences to the Filipino people. The miscomprehension of the Constitution is
regrettable. Thus we would rather remedy the indiscretion while there is still an
opportunity to do so than let the government develop the habit of forgetting that
the Constitution lays down the basic conditions and parameters for its actions.
Since petitioner has already matched the bid price tendered by Renong Berhad
pursuant to the bidding rules, respondent GSIS is left with no alternative but to
award to petitioner the block of shares of MHC and to execute the necessary
agreements and documents to effect the sale in accordance not only with the
bidding guidelines and procedures but with the Constitution as well. The refusal of
respondent GSIS to execute the corresponding documents with petitioner as
provided in the bidding rules after the latter has matched the bid of the Malaysian
firm clearly constitutes grave abuse of discretion.
The Filipino First Policy is a product of Philippine nationalism. It is embodied in
the 1987 Constitution not merely to be used as a guideline for future legislation but
primarily to be enforced; so must it be enforced. This Court as the ultimate guardian
of the Constitution will never shun, under any reasonable circumstance, the duty of
upholding the majesty of the Constitution which it is tasked to defend. It is worth
emphasizing that it is not the intention of this Court to impede and diminish, much
less undermine, the influx of foreign investments. Far from it, the Court encourages
and welcomes more business opportunities but avowedly sanctions the preference
for Filipinos whenever such preference is ordained by the Constitution. The position
of the Court on this matter could have not been more appropriately articulated by
Chief Justice Narvasa As scrupulously as it has tried to observe that it is not its function to substitute its
judgment for that of the legislature or the executive about the wisdom and
feasibility of legislation economic in nature, the Supreme Court has not been spared
criticism for decisions perceived as obstacles to economic progress and
development x x x x in connection with a temporary injunction issued by the Courts
First Division against the sale of the Manila Hotel to a Malaysian Firm and its
partner, certain statements were published in a major daily to the effect that that
injunction again demonstrates that the Philippine legal system can be a major
obstacle to doing business here.

Let it be stated for the record once again that while it is no business of the Court to
intervene in contracts of the kind referred to or set itself up as the judge of whether
they are viable or attainable, it is its bounden duty to make sure that they do not
violate the Constitution or the laws, or are not adopted or implemented with grave
abuse of discretion amounting to lack or excess of jurisdiction. It will never shirk
that duty, no matter how buffeted by winds of unfair and ill-informed criticism. [48]
Privatization of a business asset for purposes of enhancing its business viability
and preventing further losses, regardless of the character of the asset, should not
take precedence over non-material values. A commercial, nay even a budgetary,
objective should not be pursued at the expense of national pride and dignity. For the
Constitution enshrines higher and nobler non-material values. Indeed, the Court will
always defer to the Constitution in the proper governance of a free society; after all,
there is nothing so sacrosanct in any economic policy as to draw itself beyond
judicial review when the Constitution is involved. [49]
Nationalism is inherent in the very concept of the Philippines being a democratic
and republican state, with sovereignty residing in the Filipino people and from whom
all government authority emanates. In nationalism, the happiness and welfare of
the people must be the goal. The nation-state can have no higher purpose. Any
interpretation of any constitutional provision must adhere to such basic concept.
Protection of foreign investments, while laudible, is merely a policy. It cannot
override the demands of nationalism. [50]
The Manila Hotel or, for that matter, 51% of the MHC, is not just any commodity
to be sold to the highest bidder solely for the sake of privatization. We are not
talking about an ordinary piece of property in a commercial district. We are talking
about a historic relic that has hosted many of the most important events in the
short history of the Philippines as a nation. We are talking about a hotel where
heads of states would prefer to be housed as a strong manifestation of their desire
to cloak the dignity of the highest state function to their official visits to the
Philippines. Thus the Manila Hotel has played and continues to play a significant role
as an authentic repository of twentieth century Philippine history and culture. In this
sense, it has become truly a reflection of the Filipino soul - a place with a history of
grandeur; a most historical setting that has played a part in the shaping of a
country.[51]
This Court cannot extract rhyme nor reason from the determined efforts of
respondents to sell the historical landmark - this Grand Old Dame of hotels in Asia to a total stranger. For, indeed, the conveyance of this epic exponent of the Filipino
psyche to alien hands cannot be less than mephistophelian for it is, in whatever
manner viewed, a veritable alienation of a nations soul for some pieces of foreign
silver. And so we ask: What advantage, which cannot be equally drawn from a
qualified Filipino, can be gained by the Filipinos if Manila Hotel - and all that it
stands for - is sold to a non-Filipino? How much of national pride will vanish if the

nations cultural heritage is entrusted to a foreign entity? On the other hand, how
much dignity will be preserved and realized if the national patrimony is safekept in
the hands of a qualified, zealous and well-meaning Filipino? This is the plain and
simple meaning of the Filipino First Policyprovision of the Philippine Constitution.
And this Court, heeding the clarion call of the Constitution and accepting the duty of
being the elderly watchman of the nation, will continue to respect and protect the
sanctity of the Constitution.
WHEREFORE, respondents GOVERNMENT SERVICE INSURANCE SYSTEM,
MANILA HOTEL CORPORATION, COMMITTEE ON PRIVATIZATION and OFFICE OF THE
GOVERNMENT CORPORATE COUNSEL are directed to CEASE and DESIST from selling
51% of the shares of the Manila Hotel Corporation to RENONG BERHAD, and to
ACCEPT the matching bid of petitioner MANILA PRINCE HOTEL CORPORATION to
purchase the subject 51% of the shares of the Manila Hotel Corporation at P44.00
per share and thereafter to execute the necessary agreements and documents to
effect the sale, to issue the necessary clearances and to do such other acts and
deeds as may be necessary for the purpose.
SO ORDERED.
Regalado, Davide, Jr., Romero, Kapunan, Francisco, and Hermosisima, Jr., JJ,
concur.
Narvasa, C.J., (Chairman), and Melo, J., joins J. Puno in his dissent.
Padilla, J., see concurring opinion.
Vitug, J., see separate concurring opinion
Mendoza, J., see concurring opinion
Torres, J., with separate opinion
Puno, J., see dissent.
Panganiban J., with separate dissenting opinion.

CONCURRING OPINION
PADILLA, J.:
I concur with the ponencia of Mr. Justice Bellosillo. At the same time, I would like
to expound a bit more on the concept of national patrimony as including with in its
scope and meaning institutions such as the Manila Hotel.

It is argued by petitioner that the Manila Hotel comes under national patrimony
over which qualified Filipinos have the preference, in ownership and operation. The
Constitutional provision on point states:
xxxxxxxxx
In the grant of rights, privileges, and concessions covering the national
economy and patrimony, the State shall give preference to qualified Filipinos. [1]
Petitioners argument, I believe, is well taken. Under the 1987 Constitution,
national patrimony consists of the natural resources provided by almighty God
(Preamble) in our territory (Article 1) consisting of land, sea, and air. [2] A study of the
1935 Constitution, where the concept of national patrimony originated, would show
that its framers decided to adopt the even more comprehensive expression
Patrimony of the Nation in the belief that the phrase encircles a concept embracing
not only the natural resources of the country but practically everything that belongs
to the Filipino people, the tangible and the material as well as the intangible and the
spiritual assets and possessions of the people. It is to be noted that the framers did
not stop with conservation. They knew that conservation alone does not spell
progress; and that this may be achieved only through development as a correlative
factor to assure to the people not only the exclusive ownership, but also the
exclusive benefits of their national patrimony. [3]
Moreover, the concept of national patrimony has been viewed as referring not
only to our rich natural resources but also to the cultural heritage of our race. [4]
There is no doubt in my mind that the Manila Hotel is very much a part of our
national patrimony and, as such, deserves constitutional protection as to who shall
own it and benefit from its operation. This institution has played an important role in
our nations history, having been the venue of many a historical event, and serving
as it did, and as it does, as the Philippine Guest House for visiting foreign heads of
state, dignitaries, celebrities, and others. [5]
It is therefore our duty to protect and preserve it for future generations of
Filipinos. As President Manuel L. Quezon once said, we must exploit the natural
resources of our country, but we should do so with an eye to the welfare of the
future generations. In other words, the leaders of today are the trustees of the
patrimony of our race. To preserve our national patrimony and reserve it for Filipinos
was the intent of the distinguished gentlemen who first framed our Constitution.
Thus, in debating the need for nationalization of our lands and natural resources,
one expounded that we should put more teeth into our laws, and; not make the
nationalization of our lands and natural resources a subject of ordinary legislation
but of constitutional enactment.[6] To quote further: Let not our children be mere
tenants and trespassers in their own country. Let us preserve and bequeath to them
what is rightfully theirs, free from all foreign liens and encumbrances. [7]

Now a word on preference. In my view preference to qualified Filipinos, to be

meaningful, must refer not only to things that are peripheral, collateral, or
tangential. It must touch and affect the very heart of the existing order. In the field
of public bidding in the acquisition of things that pertain to the national patrimony,
preference to qualified Filipinos must allow a qualified Filipino to match or equal the
higher bid of a non-Filipino; the preference shall not operate only when the bids of
the qualified Filipino and the non-Filipino are equal in which case, the award should
undisputedly be made to the qualified Filipino. The Constitutional preference should
give the qualified Filipino an opportunity to match or equal the higher bid of the
non-Filipino bidder if the preference of the qualified Filipino bidder is to be
significant at all.
It is true that in this present age of globalization of attitude towards foreign
investments in our country, stress is on the elimination of barriers to foreign trade
and investments in the country. While government agencies, including the courts
should re-condition their thinking to such a trend, and make it easy and even
attractive for foreign investors to come to our shores, yet we should not preclude
ourselves from reserving to us Filipinos certain areas where our national identity,
culture and heritage are involved. In the hotel industry, for instance, foreign
investors have established themselves creditably, such as in the Shangri-La, the
Nikko, the Peninsula, and Mandarin Hotels. This should not stop us from retaining
51% of the capital stock of the Manila Hotel Corporation in the hands of Filipinos.
This would be in keeping with the intent of the Filipino people to preserve our
national patrimony, including our historical and cultural heritage in the hands of
Filipinos.

Separate Concurring Opinion

VITUG, J.:
I agree with Mr. Justice Josue N. Bellosillo on his clear-cut statements, shared by
Mr. Justice Reynato S. Puno in a well written separate (dissenting) opinion, that:
First, the provision in our fundamental law which provides that (i)n the grants of
rights, priveleges, and concessions covering the national economy and patrimony,
the State shall give preference to qualified Filipinos [1] is self-executory. The provision
verily does not need, although it can obviously be amplified or regulated by, an
enabling law or a set of rules.
Second, the term patrimony does not merely refer to the countrys natural
resources but also to its cultural heritage. A historical landmark, to use the words of
Mr. Justice Justo P. Torres, Jr., Manila Hotel has now indeed become part of Philippine
Heritage.

Third, the act of the Government Service Insurance System (GSIS), a

government entity which derives its authorirty from the State, in selling 51% of its
share in MHC should be considered an act of the State subject to the Constitutional
mandate.
On the pivotal issue of the degree of preference to qualified Filipinos, I find it
somewhat difficult to take the same path traversed by the forceful reasoning of
Justice Puno. In the particular case before us, the only meaningful preference, it
seems, would really be to allow the qualified Filipino to match the foreign bid for, as
practical matter, I cannot see any bid that literally calls for millions of dollars to be
at par (to the last cent) with another. The magnitude of the bids is such that it
becomes hardly possible for the competing bids to stand exactly equal which alone,
under the dissenting view, could trigger the right of preference.
It is most unfortunate that Renong Berhad has not been spared this great
disappointment, a letdown that it did not deserve, by a simple and timely advise of
the proper rules of bidding along with the peculiar constitutional implications of the
proposed transaction. It is also regrettable that the Court at times is seen to,
instead, be the refuge for bureaucratic inadequacies which create the perception
that it even takes on non-justiciable controversies.
All told, I am constrained to vote for granting the petition.

Separate Concurring Opinion

MENDOZA, J.:
I take the view that in the context of the present controversy the only way to
enforce the constitutional mandate that [i]n the grant of rights, privileges and
concessions covering the national patrimony the State shall give preference to
qualified Filipinos[1] is to allow petitioner Philippine corporation to equal the bid of
the Mlaysian firm Renong Berhad for the purchase of the controlling shares of stocks
in the Manila Hotel Corporation. Indeed, it is the only way a qualified Filipino or
Philippine corporation can be given preference in the enjoyment of a right, privilege
or concession given by the State, by favoring it over a foreign national or
corporation.
Under the rules on public bidding of the government Service and Insurance
System, if petitioner and the Malaysian firm had offered the same price per share,
priority [would be given] to the bidder seeking the larger ownership interest in MHC,
[2]
so that if petitioner bid for more shares, it would be preferred to the Malaysian
corporation for that reason and not because it is a Philippine corporation.
Consequently, it is only in cases like the present one, where an alien corporation is
the highest bidder, that preferential treatment of the Philippine corporation is

mandated not by declaring it winner but by allowing it to match the highest bid in
terms of price per share before it is awarded the share of stocks. [3]That, to me, is
what preference to qualified Filipinos means in the context of this case by favoring
Filipinos whenever they are at a disadvantage vis-avis foreigners.
This was the meaning given in Co Chiong v. Cuaderno[4] to a 1947 statute giving
preference to Filipino citizens in the lease of public market stalls. [5] This Court upheld
the cancellation of existing leases covering market stalls occupied by persons who
were not Filipinos and the award thereafter of the stalls to qualified Filipino vendors
as ordered by the Department of Finance. Similarly, in Vda. de Salgado v. De la
Fuente,[6] this Court sustained the validity of a municipal ordinance passed pursuant
to the statute (R.A. No. 37), terminating existing leases of public market stalls and
granting preference to Filipino citizens in the issuance of new licences for the
occupancy of the stalls. In Chua Lao v. Raymundo,[7] the preference granted under
the statute was held to apply to cases in which Filipino vendors sought the same
stalls occupied by alien vendors in the public markets even it there were available
other stalls as good as those occupied by aliens. The law, apparently, is applicable
whenever there is a conflict of interest between Filipino applicants and aliens for
lease of stalls in public markets, in which situation the right to preference
immediately arises.[8]
Our legislation on the matter thus antedated by a quarter of a century efforts
began only in the 1970s in America to realize the promise of equality, through
affirmative action and reverse discrimination programs designed to remedy past
discrimination against colored people in such areas as employment, contracting and
licensing.[9] Indeed, in vital areas of our national economy, there are situations in
which the only way to place Filipinos in control of the national economy as
contemplated in the Constitution [10] is to give them preferential treatment where
they can at least stand on equal footing with aliens.
There need be no fear that thus preferring Filipinos would either invite foreign
retaliation or deprive the country of the benefit of foreign capital on know-how. We
are dealing here not with common trades or common means of livelihood which are
open to aliens in our midst, [11] but with the sale of government property, which is
like the grant of government largess or benefits. In the words of Art. XII, 10, we are
dealing here with rights, privileges, and concessions covering the national economy
and therefore no one should begrudge us if we give preferential treatment to our
citizens. That at any rate is the command of the Constitution. For the Manila Hotel is
a business owned by the Government. It is being privatized. Privatization should
result in the relinquishment of the business in favor of private individuals and
groups who are Filipino citizens, not in favor of aliens.
Nor should there be any doubt that by awarding the shares of stocks to
petitioner we would be trading competence and capability for nationalism. Both
petitioner and the Malaysian firm are qualified, having hurdled the prequalification

process.[12] It is only the result of the public bidding that is sought to be modified by
enabling petitioner to up its bid to equal the highest bid.
Nor, finally, is there any basis for the suggestion that allow a Filipino bidder to
match the highest bid of an alien could encourage speculation, since all that a
Filipino entity would then do would be not to make a bid or make only a token one
and, after it is known that a foreign bidder has submitted the highest bid, make an
offer matching that of the foreign firm. This is not possible under the rules on public
bidding of the GSIS. Under these rules there is a minimum bid required (P36.67 per
share for a range of 9 to 15 million shares). [13] Bids below the minimum will not be
considered. On the other hand, if the Filipino entity, after passing the
prequalification process, does not submit a bid, he will not be allowed to match the
highest bid of the foreign firm because this is a privilege allowed only to those who
have validly submitted bids.[14] The suggestion is, to say the least, fanciful and has
no basis in fact.
For the foregoing reasons, I vote to grant the petition.

Separate Concurring Opinion

TORRES, JR., J.:
Constancy in law is not an attribute of judicious mind. I say this as we are
confronted in the case at bar with legal and constitutional issues and yet I am
driven so to speak, on the side of history. The reason perhaps is due to the belief
that, in the words of Justice Oliver Wendell Holmes, Jr., a page of history is worth a
volume of logic.
I will, however, attempt to share my thoughts on whether the Manila Hotel has a
historical and cultural aspect within the meaning of the constitution and thus,
forming part of the patrimony of the nation.
Section 10, Article XII of the 1987 Constitution provides:
xxx
In the grant of rights, privileges, and concessions covering the national economy
and patrimony, the State shall give preference to qualified Filipinos.
The State shall regulate and exercise authority over foreign investments within its
national goals and priorities.
The foregoing provisions should be read in conjunction with Article II of the
same Constitution pertaining to Declaration of Principles and State Policies which
ordain

The State shall develop a self-reliant and independent national economy effectively
controlled by Filipinos. (Sec. 19).
Interestingly, the matter of giving preference to qualified Filipinos was one of the
highlights in the 1987 Constitution Commission proceedings, thus:
xxx
MR. NOLLEDO. The Amendment will read: IN THE GRANT OF THE RIGHTS,
PRIVILEGES AND CONCESSIONS COVERING THE NATIONAL ECONOMY
PATRIMONY, THE STATE SHALL GIVE PREFERENCE TO QUALIFIED
FILIPINOS. And the word Filipinos here, as intended by the proponents,
will include not only individual Filipinos but also Filipino-Controlled
entities fully controlled by Filipinos (Vol. III, Records of the Constitutional
Commission, p. 608).
MR. MONSOD. We also wanted to add, as Commissioner Villegas said, this
committee and this body already approved what is known as the Filipino
First policy which was suggested by Commissioner de Castro. So that it
is now in our Constitution (Vol. IV, Records of the Constitutional
Commission, p. 225).
Commissioner Jose Nolledo explaining the provision adverted to above, said:
MR NOLLEDO. In the grant of rights, privileges and concession covering the
national economy and patrimony, the State shall give preference to
qualified Filipinos.
MR. FOZ. In connection with that amendment, if a foreign enterprise is
qualified and the Filipinos enterprise is also qualified, will the Filipino
enterprise still be given a preference?
MR. NOLLEDO. Obviously.
MR. FOZ. If the foreigner is more qualified in some aspect than the Filipino
enterprise, will the Filipino still be preferred?
MR. NOLLEDO. The answer is yes. (Vol. III, p. 616, Records of the
Constitutional Commission).
The nationalistic provisions of the 1987 Constitution reflect the history and spirit of
the Malolos Constitution of 1898, the 1935 Constitution and the 1973 Constitutions.
That we have not reneged on this nationalist policy is articulated in one of the
earliest cases, this Court said
The nationalistic tendency is manifested in various provisions of the Constitution. x
x x It cannot therefore be said that a law imbued with the same purpose and spirit

underlying many of the provisions of the Constitution is unreasonable, invalid or

unconstitutional (Ichong, et al. vs. Hernandez, et al., 101 Phil. 1155).
I subscribe to the view that history, culture, heritage, and tradition are not
legislated and is the product of events, customs, usages and practices. It is actually
a product of growth and acceptance by the collective mores of a race. It is the spirit
and soul of a people.
The Manila Hotel is part of our history, culture and heritage. Every inch of the
Manila Hotel is witness to historic events (too numerous to mention) which shaped
our history for almost 84 years.
As I intimated earlier, it is not my position in this opinion, to examine the single
instances of the legal largesse which have given rise to this controversy, as I believe
that has been exhaustively discussed in the ponencia. Suffice it to say at this point,
that the history of the Manila Hotel should not be placed in the auction block of a
purely business transaction, where profits subverts the cherished historical values
of our people.
As a historical landmark in this Pearl of the Orient Seas, it has its enviable
tradition which, in the words of the philosopher Salvador de Madarriaga, (tradition)
is more of a river than a stone, it keeps flowing, and one must view the flowing, and
one must view the flow in both directions. If you look towards the hill from which the
river flows, you see tradition in the form of forceful currents that push the river or
people towards the future; and if you look the other way, you progress.
Indeed, tradition and progress are the same, for progress depends on the kind
of tradition. Let us not jettison the tradition of the Manila Hotel and thereby repeat
our colonial history.
I grant, of course, that men of the law can see the same subject in different
lights.
I remember, however, a Spanish proverb which says He is always right who
suspects that he makes mistakes. On this note, I say that if I have to make a
mistake, I would rather err upholding the belief that the Filipino be first under his
Constitution and in his own land.
I vote to GRANT the petition.

Separate Dissenting Opinion

PUNO, J.:

This is a petition for prohibition and mandamus filed by the Manila Prince Hotel
Corporation, a domestic corporation, to stop the government Service Insurance
System (GSIS) from selling the controlling shares of the Manila Hotel Corporation
to a foreign corporation. Allegedly, the sale violates the second paragraph of
section 10, Article XII of the Constitution.
Respondent GSIS is a government-owned and controlled corporation. It is the
sole owner of the Manila Hotel which it operates through its subsidiary, the Manila
Hotel Corporation.Manila Hotel was included in the privatization program of the
government. In 1995, GSIS proposed to sell to interested buyers 30% to 51% of its
shares, ranging from 9,000,000 to 15,300,000 shares, in the Manila Hotel
Corporation. After the absence of bids at the first public bidding, the block of shares
offered for sale was increased from a maximum of 30% to 51%.Also, the winning
bidder, or the eventual strategic partner of the GSIS was required to provide
management expertise and/or an international marketing/reservation system, and
financial support to strengthen the profitability and performance of the Manila Hotel.
[1]
The proposal was approved by respondent Committee on Privatization.
In July 1995, a conference was held where prequalification documents and the
bidding rules were furnished interested parties. Petitioner Manila Prince Hotel, a
domestic corporation, and Renong Berhad, a Malaysian firm with ITT
Sheraton as operator, prequalified.[2]
The bidding rules and procedures entitled Guidelines and Procedures: Second
Prequalification and Public Bidding of the MHC Privatization provide:
I INTRODUCTION AND HIGHLIGHTS
DETERMINING THE WINNING BIDDER/STRATEGIC PARTNER
The party that accomplishes the steps set forth below will be declared the Winning
Bidder/Strategic Partner and will be awarded the Block of Shares:
First -- Pass the prequalification process;
Second -- Submit the highest bid on a price per share basis for the Block of Shares;
Third -- Negotiate and execute the necessary contracts with GSIS/MHC not later
than October 23, 1995.
xxx
IV GUIDELINES FOR PREQUALIFICATION
A. PARTIES WHO MAY APPLY FOR PREQUALIFICATION

The Winning Bidder/Strategic Partner will be expected to provide

management expertise and/or an international marketing reservation
system, and financial support to strengthen the profitability and
performance of The Manila Hotel. In this context, the GSIS is inviting to the
prequalification
process
any
local
and/or
foreign
corporation,
consortium/joint venture or juridical entity with at least one of the following
qualifications:
a. Proven management expertise in the hotel industry; or
b. Significant equity ownership (i.e. board representation) in another hotel
company; or
c. Overall management and marketing expertise to successfully operate the Manila
Hotel.
Parties interested in bidding for MHC should be able to provide access to the
requisite management expertise and/or international marketing/reservation system
for The Manila Hotel.
x x x.
D. PREQUALIFICATION DOCUMENTS
x x x.
E. APPLICATION PROCEDURE
1. DOCUMENTS AVAILABLE AT THE REGISTRATION OFFICE
The prequalification documents can be secured at the Registration Office
between 9:00 AM to 4:00 PM during working days within the period
specified in Section III. Each set of documents consists of the following:
a. Guidelines and Procedures: Second Prequalification and Public Bidding
of the MHC Privatization
b. Confidential Information Memorandum: The Manila Hotel Corporation
c. Letter of Invitation to the Prequalification and Bidding Conference
xxx
4. PREQUALIFICATION AND BIDDING CONFERENCE
A prequalification and bidding conference will be held at the Manila Hotel on
the date specified in Section III to allow the Applicant to seek clarifications

and further information regarding the guidelines and procedures. Only those
who purchased the prequalification documents will be allowed in this
conference. Attendance to this conference is strongly advised, although the
Applicant will not be penalized if it does not attend.
5. SUBMISSION OF PREQUALIFICATION DOCUMENTS
The Applicant should submit 5 sets of the prequalification documents (1
original set plus 4 copies) at the Registration Office between 9:00 AM to
4:00 PM during working days within the period specified in Section III.
F. PREQUALIFICATION PROCESS
1. The Applicant will be evaluated by the PBAC with the assistance of the
TEC based on the Information Package and other information available to
the PBAC.
2. If the Applicant is a Consortium/Joint Venture, the evaluation will consider
the overall qualifications of the group, taking into account the
contribution of each member to the venture.
3. The decision of the PBAC with respect to the results of the PBAC
evaluation will be final.
4. The Applicant shall be evaluated according to the criteria set forth below:
a. Business management expertise, track record, and experience
b. Financial capability
c. Feasibility and acceptability of the proposed strategic plan for the Manila Hotel
5. The PBAC will shortlist such number of Applicants as it may deem
appropriate.
6. The parties that prequalified in the first MHC public bidding ITT Sheraton,
Marriot International Inc., Renaissance Hotel International Inc., consortium
of RCBC Capital/Ritz Carlton may participate in the Public Bidding without
having to undergo the prequalification process again.
G. SHORTLIST OF QUALIFIED BIDDERS
1. A notice of prequalification results containing the shortlist of Qualified
Bidders will be posted at the Registration Office at the date specified in
Section III.

2. In the case of a Consortium/Joint Venture, the withdrawal by a member

whose qualification was a material consideration for being included in the
shortlist is a ground for disqualification of the Applicant.
V. GUIDELINES FOR THE PUBLIC BIDDING
A. PARTIES WHO MAY PARTICIPATE IN THE PUBLIC BIDDING
All parties in the shortlist of Qualified Bidders will be eligible to participate in the
Public Bidding.
B. BLOCK OF SHARES
A range of Nine Million (9,000,000) to Fifteen Million Three Hundred
Thousand (15,300,000) shares of stock, representing Thirty Percent to FiftyOne Percent (30%-51%) of the issued and outstanding shares of MHC, will
be offered in the Public Bidding by the GSIS. The Qualified Bidders will have
the option of determining the number of shares within the range to bid for.
The range is intended to attract bidders with different preferences and
objectives for the operation and management of The Manila Hotel.
C. MINIMUM BID REQUIRED ON A PRICE PER SHARE BASIS
1. Bids will be evaluated on a price per share basis. The minimum bid
required on a price per share basis for the Block of shares is Thirty-Six
Pesos and Sixty-Seven Centavos (P36.67).
2. Bids should be in the Philippine currency payable to the GSIS.
3. Bids submitted with an equivalent price per share below the minimum required
will not considered.
D. TRANSFER COSTS
xxx
E. OFFICIAL BID FORM
1. Bids must be contained in the prescribed Official Bid Form, a copy of
which is attached as Annex IV. The Official Bid Form must be properly
accomplished in all details; improper accomplishment may be a sufficient
basis for disqualification.
2. During the Public Bidding, the Qualified Bidders will submit the Official bid
Form, which will indicate the offered purchase price, in a sealed envelope
marked OFFICIAL BID.
F. SUPPORTING DOCUMENTS

During the Public Bidding, the following documents should be submitted

along with the bid in a separate envelop marked SUPPORTING DOCUMENTS:
1. WRITTEN AUTHORITY TO BID (UNDER OATH)
If the Qualified Bidder is a corporation, the representative of the Qualified
Bidder should submit a Board resolution which adequately authorizes such
representative to bid for and in behalf of the corporation with full authority
to perform such acts necessary or requisite to bind the Qualified Bidder.
If the Qualified Bidder is a Consortium/Joint Venture, each member of the
Consortium/Joint Venture should submit a Board Resolution authorizing one
of its members and such members representative to make the bid on behalf
of the group with full authority to perform such acts necessary or requisite
to bind the Qualified Bidder.
2. BID SECURITY
a.

The Qualified Bidder should deposit Thirty-Three Million Pesos

(P33,000,000), in the Philippine currency as Bid Security in the form of:
i. Managers cheque or unconditional demand draft payable to the
Government Service Insurance System and issued by a reputable banking
institution duly licensed to do business in the Philippines and acceptable
to GSIS; or
ii. Stand-by letter of credit issued by a reputable banking institution
acceptable to the GSIS.

b. The GSIS will reject a bid if:

i. The bid does not have a Bid Security; or
ii. The Bid Security accompanying the bid is for less than the required amount.
c. If the Bid Security is in the form of a managers check or unconditional
demand draft, the interest earned on the Bid Security will be for the
account of GSIS.
d. If the Qualified Bidder becomes the Winning Bidder/Strategic Partner, the
Bid Security will be applied as the downpayment on the Qualified Bidders
offered purchase price.
e. The Bid Security of the Qualified Bidder will be returned immediately after
the Public Bidding if the Qualified bidder is not declared the Highest
Bidder.

f. The Bid Security will be returned by October 23, 1995 if the Highest Bidder
is unable to negotiate and execute with GSIS/MHC the Management
Contract, International Marketing/Reservation System Contract or other
types of contract specified by the Highest Bidder in its strategic plan for
The Manila Hotel.
g. The Bid Security of the highest Bidder will be forfeited in favor of GSIS if
the Highest Bidder, after negotiating and executing the Management
Contract, International Marketing/Reservation System Contact or other
types of contract specified by the Highest Bidder in its strategic plan for
The Manila Hotel, fails or refuses to:
i. Execute the Stock Purchase and Sale Agreement with GSIS not later than
October 23, 1995; or
ii. Pay the full amount of the offered purchase price not later than October 23, 1995;
or
iii. Consummate the sale of the Block of Shares for any other reason.
G. SUBMISSION OF BIDS
1. The Public Bidding will be held on September 7, 1995 at the following
location:
New GSIS Headquarters Building
Financial Center, Reclamation Area
Roxas Boulevard, Pasay City, Metro Manila
2. The Secretariat of the PBAC will be stationed at the Public Bidding to
accept any and all bids and supporting requirements. Representatives
from the Commission on Audit and COP will be invited to witness the
proceedings.
3.

The Qualified Bidder should submit its bid using the Official Bid Form.
The accomplished Official Bid Form should be submitted in a sealed
envelope marked OFFICIAL BID.

4.

The Qualified Bidder should submit the following documents in another

sealed envelope marked SUPPORTING BID DOCUMENTS

a. Written Authority Bid

b. Bid Security

5. The two sealed envelopes marked OFFICIAL BID and SUPPORTING BID
DOCUMENTS must be submitted simultaneously to the Secretariat
between 9:00 AM and 2:00 PM, Philippine Standard Time, on the date of
the Public Bidding. No bid shall be accepted after the closing time.
Opened or tampered bids shall not be accepted.
6. The Secretariat will log and record the actual time of submission of the
two sealed envelopes. The actual time of submission will also be
indicated by the Secretariat on the face of the two envelopes.
7. After Step No. 6, the two sealed envelopes will be dropped in the
corresponding bid boxes provided for the purpose. These boxes will be in
full view of the invited public.
H. OPENING AND READING OF BIDS
1. After the closing time of 2:00 PM on the date of the Public Bidding , the
PBAC will open all sealed envelopes marked SUPPORTING BID
DOCUMENTS for screening, evaluation and acceptance.Those who
submitted incomplete/insufficient documents or document/s which is/are
not substantially in the form required by PBAC will be disqualified. The
envelope containing their Official Bid Form will be immediately returned
to the disqualified bidders.
2. The sealed envelopes marked OFFICIAL BID will be opened at 3:00 PM.
The name of the bidder and the amount of its bid price will be read
publicly as the envelopes are opened.
3. Immediately following the reading of the bids, the PBAC will formally
announce the highest bid and the Highest Bidder.
4. The highest bid will be determined on a price per share basis. In the
event of a tie wherein two or more bids have the same equivalent price
per share, priority will be given to the bidder seeking the larger
ownership interest in MHC.
5. The Public Bidding will be declared a failed bidding in case:
a. No single bid is submitted within the prescribed period; or
b. There is only one (1) bid that is submitted and acceptable to the PABC.
I. EXECUTION OF THE NECESSARY CONTRACTS WITH GSIS/MHC
1. The Highest Bidder must comply with the conditions set forth below by
October 23, 1995 or the Highest Bidder will lose the right to purchase the
Block of Shares and GSIS will instead offer the Block of Shares to the
other Qualified Bidders:

a. The Highest Bidder must negotiate and execute with GSIS/MHC the
Management Contract, International Marketing/Reservation system
Contract or other type of contract specified by the Highest Bidder in its
strategic plan for The Manila Hotel. If the Highest Bidder is intending to
provide only financial support to The Manila Hotel, a separate institution
may enter into the aforementioned contract/s with GSIS/MHC.
b. The Highest Bidder must execute the Stock Purchase and Sale Agreement
with GSIS, a copy of which will be distributed to each of the Qualified
Bidder after the prequalification process is completed.
2. In the event that the Highest Bidder chooses a Management Contract for
The Manila Hotel, the maximum levels for the management fee structure
that GSIS/MHC are prepared to accept in the Management Contract are as
follows:
a. Basic management fee: Maximum of 2.5% of gross revenues. (1)
b. Incentive fee: Maximum of 8.0% of gross operating profit (1) after
deducting undistributed overhead expenses and the basic management
fee.
c. Fixed component of the international marketing/reservation system fee:
Maximum of 2.0% of gross room revenues. (1) The Applicant should
indicate in its Information Package if it is wishes to charge fee.
Note (1): As defined in the uniform system of account for hotels.
The GSIS/MHC have indicated above the acceptable parameters for the
hotel management fees to facilitate the negotiations with the Highest
Bidder for the Management Contract after the Public Bidding.
A Qualified Bidder envisioning a Management Contract for The Manila Hotel
should determine whether or not the management fee structure above is
acceptable before submitting their prequalification documents to GSIS.
J. BLOCK SALE TO THE OTHER QUALIFIED BIDDERS
1. If for any reason the Highest Bidder cannot be awarded the Block of
Shares, GSIS may offer this to the other Qualified Bidders that have
validly submitted bids provided that these Qualified are willing to match
the highest bid in terms of price per share.
2. The order of priority among the interested Qualified Bidders will be in
accordance with the equivalent price per share of their respective bids in

the Public Bidding, i.e. first and second priority will be given to the
Qualified Bidders that submitted the second and third highest bids on the
price per share basis, respectively, and so on.
K. DECLARATION OF THE WINNING BIDDER/STRATEGIC PARTNER
The Highest Bidder will be declared the Winning Bidder/Strategic Partner
after the following conditions are met:
a. Execution of the necessary contract with GSIS/MHC not later than October 23,
1995; and
b. Requisite approvals from the GSIS/MHC and COP/OGCC are obtained.
I. FULL PAYMENT FOR THE BLOCK OF SHARES
1. Upon execution of the necessary contracts with GSIS/MHC, the Winning
Bidder/Strategic Partner must fully pay, not later than October 23, 1995,
the offered purchase price for the Block of Shares after deducting the Bid
Security applied as downpayment.
2. All payments should be made in the form of a Managers Cheque or
unconditional Demand Draft, payable to the Government Service
Insurance System, issued by a reputable banking institution licensed to
do business in the Philippines and acceptable to GSIS.
M. GENERAL CONDITIONS
1. The GSIS unconditionally reserves the right to reject any or all
applications, waive any formality therein, or accept such application as
may be considered most advantageous to the GSIS. The GSIS similarly
reserves the right to require the submission of any additional information
from the Applicant as the PBAC may deem necessary.
2. The GSIS further reserves the right to call off the Public Bidding prior to
acceptance of the bids and call for a new public bidding under amended
rules, and without any liability whatsoever to any or all the Qualified
Bidders, except the obligation to return the Bid Security.
3.

The GSIS reserves the right to reset the date of the

prequalification/bidding conference, the deadline for the submission of
the prequalification documents, the date of the Public Bidding or other
pertinent activities at least three (3) calendar days prior to the respective
deadlines/target dates.

4. The GSIS sells only whatever rights, interest and participation it has on
the Block of Shares.

5. All documents and materials submitted by the Qualified Bidders, except

the Bid Security, may be returned upon request.
6. The decision of the PBAC/GSIS on the results of the Public Bidding is final.
The Qualified Bidders, by participating in the Public Bidding, are deemed
to have agreed to accept and abide by these results.
7. The GSIS will be held free and harmless from any liability, suit or
allegation arising out of the Public Bidding by the Qualified Bidders who
have participated in the Public Bidding. [3]
The second public bidding was held on September 18, 1995. Petitioner bidded
P41.00 per share for 15,300,000 shares and Renong Berhad bidded P44.00 per
share also for 15,300,000 shares. The GSIS declared Renong Berhad the highest
bidder and immediately returned petitioners bid security.
On September 28, 1995, ten days after the bidding, petitioner wrote to GSIS
offering to match the bid price of Renong Berhad. It requested that the award be
made to itself citing the second paragraph of Section 10, Article XII of the
Constitution. It sent a manager's check for thirty-three million pesos
(P33,000,000.00) as bid security.
Respondent GSIS, then in the process of negotiating with Renong Berhad the
terms and conditions of the contract and technical agreements in the operation of
the Hotel, refused to entertain petitioners request.
Hence, petitioner filed the present petition. We issued a temporary restraining
order on October 18, 1995.
Petitioner anchors its plea on the second paragraph of Article XII, Section 10 of
the Constitution[4] on the National Economy and Patrimony which provides:
xxx
In the grant of rights, privileges, and concessions covering the national economy
and patrimony, the State shall give preference to qualified Filipinos.
x x x.
The vital issues can be summed up as follows:
(1) Whether section 10, paragraph 2 of Article XII of the Constitution is a
self-executing provision and does not need implementing legislation to
carry it into effect;
(2) Assuming section 10, paragraph 2 of Article XII is self-executing, whether
the controlling shares of the Manila Hotel Corporation form part of our
patrimony as a nation;

(3) Whether GSIS is included in the term State, hence, mandated to

implement section 10, paragraph 2 of Article XII of the Constitution;
(4) Assuming GSIS is part of the State, whether it failed to give preference to
petitioner, a qualified Filipino corporation, over and above Renong
Berhad, a foreign corporation, in the sale of the controlling shares of the
Manila Hotel Corporation;
(5) Whether petitioner is estopped from questioning the sale of the shares
to Renong Berhad, a foreign corporation.
Anent the first issue, it is now familiar learning that a Constitution provides the
guiding policies and principles upon which is built the substantial foundation and
general framework of the law and government.[5] As a rule, its provisions are
deemed self-executing and can be enforced without further legislative action. [6]
Some of its provisions, however, can be implemented only through appropriate laws
enacted by the Legislature, hence not self-executing.
To determine whether a particular provision of a Constitution is self-executing is
a hard row to hoe. The key lies on the intent of the framers of the fundamental law
oftentimes submerged in its language. A searching inquiry should be made to find
out if the provision is intended as a present enactment, complete in itself as a
definitive law, or if it needs future legislation for completion and enforcement. [7] The
inquiry demands a micro-analysis of the text and the context of the provision in
question.[8]
Courts as a rule consider the provisions of the Constitution as self-executing, [9]
rather than as requiring future legislation for their enforcement. [10] The reason is not
difficult to discern.For if they are not treated as self-executing, the mandate of the
fundamental law ratified by the sovereign people can be easily ignored and nullified
by Congress.[11] Suffused with wisdom of the ages is the unyielding rule that
legislative actions may give breath to constitutional rights but congressional
inaction should not suffocate them.[12]
Thus, we have treated as self-executing the provisions in the Bill of Rights on
arrests, searches and seizures,[13] the rights of a person under custodial
investigation,[14] the rights of an accused,[15] and the privilege against selfincrimination.[16] It is recognized that legislation is unnecessary to enable courts to
effectuate constitutional provisions guaranteeing the fundamental rights of life,
liberty and the protection of property. [17] The same treatment is accorded to
constitutional provisions forbidding the taking or damaging of property for public
use without just compensation.[18]
Contrariwise, case law lays down the rule that a constitutional provision is not
self-executing where it merely announces a policy and its language empowers the
Legislature to prescribe the means by which the policy shall be carried into effect. [19]
Accordingly, we have held that the provisions in Article II of our Constitution entitled

Declaration of Principles and State Policies should generally be construed as mere

statements of principles of the State. [20] We have also ruled that some provisions of
Article XIII of Social Justice and Human Rights, [21] and Article XIV on Education,
Science and Technology, Arts, Culture and Sports [22] cannot be the basis of judicially
enforceable rights. Their enforcement is addressed to the discretion of Congress
though they provide the framework of legislation [23] to effectuate their policy
content.[24]
Guided by this map of settled jurisprudence, we now consider whether Section
10, Article XII of the 1987 Constitution is self-executing or not. It reads:
Sec. 10. The Congress shall, upon recommendation of the economic and planning
agency, when the national interest dictates, reserve to citizens of the Philippines or
to corporations or associations at least sixty per centum of whose capital is owned
by such citizens, or such higher percentage as Congress may prescribe, certain
areas of investments. The Congress shall enact measures that will encourage the
formation and operation of enterprises whose capital is wholly owned by Filipinos.
In the grant of rights, privileges, and concessions covering the national economy
and patrimony, the State shall give preference to qualified Filipinos.
The State shall regulate and exercise authority over foreign investments within its
national jurisdiction and in accordance with its national goals and priorities.
The first paragraph directs Congress to reserve certain areas of investments in the
country[25] to Filipino citizens or to corporations sixty per cent [26] of whose capital
stock is owned by Filipinos. It further commands Congress to enact laws that will
encourage the formation and operation of one hundred percent Filipino-owned
enterprises. In checkered contrast, the second paragraph orders the entire State to
give preference to qualified Filipinos in grant of rights and privileges covering the
national economy and patrimony. The third paragraph also directs the State to
regulate foreign investments in line with our national goals and well-set priorities.
The first paragraph of Section 10 is not self-executing. By its express text, there
is a categorical command for Congress to enact laws restricting foreign ownership in
certain areas of investments in the country and to encourage the formation and
operation of wholly-owned Filipino enterprises. The right granted by the provision is
clearly still in ease. Congress has to breath life to the right by means of legislation.
Parenthetically, this paragraph was plucked from section 3, Article XIV of the 1973
Constitution.[27] The provision in the 1973 Constitution affirmed our ruling in the
landmark case of Lao Ichong v. Hernandez,[28] where we upheld the discretionary
authority of Congress of Filipinize certain areas of investments. [29] By reenacting the
1973 provision, the first paragraph of section 10 affirmed the power of Congress to
nationalize certain areas of investments in favor of Filipinos.

The second and third paragraphs of Section 10 are different. They are directed
to the State and not to Congress alone which is but one of the three great branches
of our government.Their coverage is also broader for they cover the national
economy and patrimony and foreign investments within [the] national jurisdiction
and not merely certain areas of investments.Beyond debate, they cannot be read as
granting Congress the exclusive power to implement by law the policy of giving
preference to qualified Filipinos in the conferral of rights and privileges covering our
national economy and patrimony. Their language does not suggest that any of the
State agency or instrumentality has the privilege to hedge or to refuse its
implementation for any reason whatsoever. Their duty to implement is unconditional
and it is now. The second and the third paragraphs of Section 10, Article XII are thus
self-executing.
This submission is strengthened by Article II of the Constitution entitled
Declaration of Principles and State Policies. Its Section 19 provides that [T]he State
shall develop a self-reliant and independent national economy effectively controlled
by Filipinos. It engrafts the all-important Filipino First Policy in our fundamental law
and by the use of the mandatory word shall, directs its enforcement by the whole
State without any pause or a half-pause in time.
The second issue is whether the sale of a majority of the stocks of the Manila
Hotel Corporation involves the disposition of part of our national patrimony. The
records of the Constitutional Commission show that the Commissioners entertained
the same view as to its meaning. According to Commissioner Nolledo, patrimony
refers not only to our rich natural resources but also to the cultural heritage of our
race.[30] By this yardstick, the sale of Manila Hotel falls within the coverage of the
constitutional provision giving preferential treatment to qualified Filipinos in the
grant of rights involving our national patrimony. The unique value to the Manila
Hotel to our history and culture cannot be viewed with a myopic eye. The value to
hotel goes beyond pesos and centavos. As chronicled by Beth Day Romulo, [31] the
hotel first opened on July 4, 1912 as a first-class Hotel built by the American Insular
Government for Americans living in, or passing through, Manila while travelling to
the Orient. Indigenous materials and Filipino craftsmanship were utilized in its
construction. For sometime, it was exclusively used by American and Caucasian
travelers and served as the official guesthouse of the American Insular Government
for visiting foreign dignitaries. Filipinos began coming to the Hotel as guests during
the Commonwealth period. When the Japanese occupied Manila, it served as
military headquarters and lodging fo the highest-ranking officers from Tokyo. It was
at the Hotel and the Intramuros that the Japanese made their last stand during the
Liberation of Manila. After the war, the Hotel again served foreign guests and
Filipinos alike. Presidents and kings, premiers and potentates, as well as glamorous
international film and sports celebrities were house in the Hotel. It was also the
situs of international conventions and conferences.In the local scene, it was the
venue of historic meetings, parties and conventions of political parties. The Hotel
has reaped and continues reaping numerous recognitions and awards from

international hotel and travel award-giving bodies, a fitting acknowledgment of

Filipino talent and ingenuity. These are judicially cognizable facts which cannot be
bent by a biased mind.
The Hotel may not, as yet, have been declared a national cultural treasure
pursuant to Republic Act No. 4846 but that does not exclude it from our national
patrimony. Republic Act. No. 4846, The Cultural Properties Preservation and
Protection Acts, merely provides a procedure whereby a particular cultural property
may be classified a national cultural treasure or an important cultural property. [32]
Approved on June 18, 1966 and amended by P.D. 374 in 1974, the law is limited in
its reach and cannot be read as the exclusive law implementing section 10, Article
XII of the 1987 Constitution. to be sure, the law does not equate cultural treasure
and cultural property as synonymous to the phrase patrimony of the nation.
The third issue is whether the constitutional command to the State includes the
respondent GSIS. A look at its charter will reveal that GSIS is a government-owned
and controlled corporation that administers funds that come from the monthly
contributions of government employees and the government. [33] The funds are held
in trust for a distinct purpose which cannot be disposed of indifferently. [34] They are
to be used to finance the retirement, disability and life insurance benefits of the
employees and the administrative and operational expenses of the GSIS. [35] Excess
funds, however, are allowed to be invested in business and other ventures for the
benefit of the employees.[36] It is thus contended that the GSIS investment in the
Manila Hotel Corporation is a simple business venture, hence, an act beyond the
contemplation of section 10, paragraph 2 of Article XII of the Constitution.
The submission is unimpressive. The GSIS in not a pure private corporation. It is
essentially a public corporation created by Congress and granted an original charter
to serve a public purpose. It is subject to the jurisdictions of the Civil Service
Commission.[37] and the Commission on Audit.[38] As a state-owned and controlled
corporation, it is skin-bound to adhere to the policies spelled out in the Constitution
especially those designed to promote the general welfare of the people. One of
these policies is the Filipino First policy which the people elevated as a constitutional
command.
The fourth issue demands that we look at the content of the phrase qualified
Filipinos and their preferential right. The Constitution desisted from defining their
contents. This is as it ought to be for a Constitution only lays down flexible policies
and principles which can be bent to meet todays manifest needs and tomorrows
unmanifested demands. Only a constitution strung with elasticity can grow as a
living constitution.
Thus, during the deliberation in the Constitutional Commission, Commissioner
Nolledo brushed aside a suggestion to define the phrase qualified Filipinos. He
explained that present and prospective laws will take care of the problem of its
interpretation, viz:

xxx
THE PRESIDENT. What is the suggestion of Commissioner Rodrigo? Is it to
remove the word QUALIFIED?
MR. RODRIGO. No, no, but say definitely TO QUALIFIED FILIPINOS as against
whom? As against aliens over aliens?
MR. NOLLEDO. Madam President, I think that is understood. We use the word
QUALIFIED because the existing laws or the prospective laws will always
lay down conditions under which business may be done. For example,
qualifications on capital, qualifications on the setting up of other
financial structures, et cetera.
MR. RODRIGO. It is just a matter of style.
MR. NOLLEDO. Yes.
MR. RODRIGO. If we say, PREFERENCE TO QUALIFIED FILIPINOS, it can be
understood as giving preference to qualified Filipinos as against Filipinos
who are not qualified.
MR. NOLLEDO. Madam President, that was the intention of the proponents.
The committee has accepted the amendment.
x x x.
As previously discussed, the constitutional command to enforce the Filipino First
policy is addressed to the State and not to Congress alone. Hence, the word laws
should not be understood as limited to legislations but all state actions which
include applicable rules and regulations adopted by agencies and instrumentalities
of the State in the exercise of their rule-making power. In the case at bar, the
bidding rules and regulations set forth the standards to measure the qualifications
of bidders Filipinos and foreigners alike. It is not seriously disputed that petitioner
qualified to bid as did Renong Berhad. [39]
Thus, we come to the critical issue of the degree preference which GSIS should
have accorded petitioner, qualified Filipino, over Renong Berhad, a foreigner, in the
purchase of the controlling shares of the Manila Hotel. Petitioner claims that after
losing the bid, this right of preference gives it a second chance to match the highest
bid or Renong Berhad.
With due respect, I cannot sustain petitioners submission. I prescind from the
premise that the second paragraph of section 10, Article XII of the Constitution is
pro-Filipino but not anti-Alien. It is pro-Filipino for it gives preference to Filipinos. It is
not, however, anti-alien per se for it does not absolutely bar aliens in the grant of
rights, privileges and concessions covering the national economy and patrimony.
Indeed, in the absence of qualified Filipinos, the State is not prohibited from

granting these rights, privileges and concessions to foreigners if the act will
promote the wealth of the nation.
In implementing the policy articulated in section 10, Article XII of the
Constitution, the stellar task of our State policy-makers is to maintain a creative
tension between two desiderata - - first, the need to develop our economy and
patrimony with the help of foreigners it necessary, and, second, the need to keep
our economy controlled by Filipinos. Rightfully, the framers of the Constitution did
not define the degree of the right of preference to be given to qualified Filipinos.
They knew that for the right to serve the general welfare, it must have a malleable
content that can be adjusted by our policy-makers to meet the changing needs of
our people. In fine, the right of preference of qualified Filipinos is to be determined
by degree as time dictates and circumstances warrant. The lesser the need for alien
assistance, the greater the degree of the right of preference can be given to
Filipinos and vice versa.
Again, it should be stressed that the right and the duty to determine the degree
of this privilege at any given time is addressed to the entire State. While under our
constitutional scheme, the right primarily belongs to Congress as the lawmaking
department of our government, other branches of government, and all their
agencies and instrumentalities, share the power to enforce this state policy. Within
the limits of their authority, they can act or promulgate rules and regulations
defining the degree of this right of preference in cases where they have to make
grants involving the national economy and judicial duty. On the other hand, our duty
is to strike down acts of the State that violate the policy.
To date, Congress has not enacted a law defining the degree of the preferential
right. Consequently, we must turn to the rules and regulations of respondents
Committee on Privatization and GSIS to determine the degree of preference that
petitioner in entitled to a qualified Filipino in the subject sale. A tearless look at the
rules and regulations will show that they are silent on the degree of preferential
right to be accorded a qualified Filipino bidder. Despite their silence, however, they
cannot be read to mean that they do not grant any degree of preference to
petitioner for paragraph 2, section 10, Article XII of the Constitution is deemed part
of said rules and regulations. Pursuant to legal hermeneutics which demand that we
interpret rules to save them from unconstitutionality, I submit that the right of
preference of petitioner arises only if it tied the bid of Renong Berhad. In that
instance, all things stand equal, and petitioner, as a qualified Filipino bidder, should
be preferred.
It is with deep regret that I cannot subscribe to the view that petitioner has a
right to match the bid of Renong Berhad. Petitioners submission must be supported
by the rules but even if we examine the rules inside-out a thousand times, they can
not justify the claimed right. Under the rules, the right to match the highest bid
arises only if the for any reason, the highest bidder cannot be awarded the block of
shares x x x. No reason has arisen that will prevent the award to Renong Berhad. It

qualified as a bidder. It complied with the procedure of bidding. It tendered the

highest bid. It was declared as the highest bidder by the GSIS and the rules say this
decision is final. It deserves the award as a matter of right for the rules clearly did
not give to the petitioner as a qualified Filipino the privilege to match the higher bid
of a foreigner. What the rules did not grant, petitioner cannot demand. Our
sympathies may be with petitioner but the court has no power to extend the
latitude and longtitude of the right of preference as defined by the rules. The
parameters of the right of preference depend on a galaxy of facts and factors whose
determination belongs to the province of the policy-making branches and agencies
of the State. We are duty-bound to respect that determination even if we differ with
the wisdom of their judgment. The right they grant may be little but we must uphold
the grant for as long as the right of preference is not denied. It is only when the
State action amounts to a denial of the right that the Court can come in and strike
down the denial as unconstitutional.
Finally, I submit that petitioner is estopped from assailing the winning bid of
Renong Berhad. Petitioner was aware of the rules and regulations of the bidding. It
knew that the rules and regulations do not provide that a qualified Filipino bidder
can match the winning bid after submitting an inferior bid. It knew that the bid was
open to foreigners and that foreigners qualified even during the first bidding.
Petitioner cannot be allowed to repudiate the rules which it agreed to respect. It
cannot be allowed to obey the rules when it wins and disregard them when it loses.
If sustained, petitioners stance will wreak havoc of the essence of bidding. Our laws,
rules and regulations require highest bidding to raise as much funds as possible for
the government to maximize its capacity to deliver essential services to our people.
This is a duty that must be discharged by Filipinos and foreigners participating in a
bidding contest and the rules are carefully written to attain this objective. Among
others, bidders are prequalified to insure their financial capability. The bidding is
secret and the bids are sealed to prevent collusion among the parties. This objective
will be undermined if we grant petitioner the privilege to know the winning bid and
a chance to match it. For plainly, a second chance to bid will encourage a bidder not
to strive to give a highest bid in the first bidding.
We support the Filipino First policy without any reservation. The visionary
nationalist Don Claro M. Recto has warned us that the greatest tragedy that can
befall a Filipino is to be an alien in his own land. The Constitution has embodied
Rectos counsel as a state policy and our decision should be in sync with this policy.
But while the Filipino First policy requires that we incline to a Filipino, it does not
demand that we wrong an alien. Our policy makers can write laws and rules giving
favored treatment to the Filipino but we are not free to be unfair to a foreigner after
writing the laws and the rules. After the laws are written, they must be obeyed as
written, by Filipinos and foreigners alike. The equal protection clause of the
Constitution protects all against unfairness. We ca be pro-Filipino without unfairness
to foreigners.

I vote to dismiss the petition.

Separate Dissenting Opinion

PANGANIBAN, J.:
I regret I cannot join the majority. To the incisive Dissenting Opinion of Mr.
Justice Reynato S. Puno, may I just add:
1. The majority contends the Constitution should be interpreted to mean that,
after a bidding process is concluded, the losing Filipino bidder should be given the
right to equal the highest foreign bid, and thus to win. However, the Constitution
[Sec. 10 (2), Art. XII] simply states that in the grant of rights x x x covering the
national economy and patrimony, the State shall give preference to qualified
Filipinos. The majority concedes that there is no law defining the extent or degree of
such preference. Specifically, no statute empowers a losing Filipino bidder to
increase his bid and equal that of the winning foreigner. In the absence of such
empowering law, the majoritys strained interpretation, I respectfully submit,
constitutes unadulterated judicial legislation, which makes bidding a ridiculous
sham where no Filipino can lose and where no foreigner can win. Only in the
Philippines!
2. Aside from being prohibited by the Constitution, such judicial legislation is
short-sighted and, viewed properly, gravely prejudicial to long-term Filipino interest.
It encourages other countries in the guise of reverse comity or worse, unabashed
retaliation to discriminate against us in their own jurisdictions by authorizing their
own nationals to similarly equal and defeat the higher bids of Filipino enterprises
solely, while on the other hand, allowing similar bids of other foreigners to remain
unchallenged by their nationals. The majoritys thesis will thus marginalize Filipinos
as pariahs in the global marketplace with absolutely no chance of winning any
bidding outside our country. Even authoritarian regimes and hermits kingdoms have
long ago found out that unfairness, greed and isolation are self-defeating and in the
long-term self-destructing.
The moral lesson here is simple: Do to do unto others what you do not want
others to do unto you.
3. In the absence of a law specifying the degree or extent of the Filipino First
policy of the Constitution, the constitutional preference for the qualified Filipinos
may be allowed only where all the bids are equal. In this manner, we put the Filipino
ahead without self-destructing him and without being unfair to the foreigner.
In short, the Constitution mandates a victory for the qualified Filipino only when
the scores are tied. But not when the ballgame is over and the foreigner clearly
posted the highest score.

14.Philip Morris Inc vs CA, 224 SCRA 576,593 (1993)

Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 91332 July 16, 1993

PHILIP MORRIS, INC., BENSON & HEDGES (CANADA), INC., AND FABRIQUES
OF TABAC REUNIES, S.A.,petitioners
vs.
THE COURT OF APPEALS AND FORTUNE TOBACCO CORPORATION,
respondents.
Quasha, Asperilla, Ancheta, Pea & Nolasco Law Office for petitioners.
Teresita Gandionco-Oledan for private respondent.

MELO, J.:
In the petition before us, petitioners Philip Morris, Inc., Benson and Hedges
(Canada), Inc., and Fabriques of Tabac Reunies, S.A., are ascribing whimsical
exercise of the faculty conferred upon magistrates by Section 6, Rule 58 of the
Revised Rules of Court when respondent Court of Appeals lifted the writ of
preliminary injunction it earlier had issued against Fortune Tobacco Corporation,
herein private respondent, from manufacturing and selling "MARK" cigarettes in the
local market.
Banking on the thesis that petitioners' respective symbols "MARK VII", "MARK TEN",
and "LARK", also for cigarettes, must be protected against unauthorized
appropriation, petitioners twice solicited the ancillary writ in the course the main
suit for infringement but the court of origin was unpersuaded.
Before we proceed to the generative facts of the case at bar, it must be emphasized
that resolution of the issue on the propriety of lifting the writ of preliminary
injunction should not be construed as a prejudgment of the suit below. Aware of the
fact that the discussion we are about to enter into involves a mere interlocutory

order, a discourse on the aspect infringement must thus be avoided. With these
caveat, we shall now shift our attention to the events which spawned the
controversy.
As averred in the initial pleading, Philip Morris, Incorporated is a corporation
organized under the laws of the State of Virginia, United States of America, and
does business at 100 Park Avenue, New York, New York, United States of America.
The two other plaintiff foreign corporations, which are wholly-owned subsidiaries of
Philip Morris, Inc., are similarly not doing business in the Philippines but are suing on
an isolated transaction. As registered owners "MARK VII", "MARK TEN", and "LARK"
per certificates of registration issued by the Philippine Patent Office on April 26,
1973, May 28, 1964, and March 25, 1964, plaintiffs-petitioners asserted that
defendant Fortune Tobacco Corporation has no right to manufacture and sell
cigarettes bearing the allegedly identical or confusingly similar trademark "MARK" in
contravention of Section 22 of the Trademark Law, and should, therefore, be
precluded during the pendency of the case from performing the acts complained of
via a preliminary injunction (p. 75, Court of Appeals Rollo in AC-G.R. SP No. 13132).
For its part, Fortune Tobacco Corporation admitted petitioners' certificates of
registration with the Philippine Patent Office subject to the affirmative and special
defense on misjoinder of party plaintiffs. Private respondent alleged further that it
has been authorized by the Bureau of Internal Revenue to manufacture and sell
cigarettes bearing the trademark "MARK", and that "MARK" is a common word which
cannot be exclusively appropriated (p.158, Court of Appeals Rollo in A.C.-G.R. SP No.
13132). On March 28, 1983, petitioners' prayer for preliminary injunction was
denied by the Presiding Judge of Branch 166 of the Regional Trial Court of the
National Capital Judicial Region stationed at Pasig, premised upon the following
propositions:
Plaintiffs admit in paragraph 2 of the complaint that ". . . they are
not doing business in the Philippines and are suing on an isolated
transaction . . .". This simply means that they are not engaged in the sale,
manufacture, importation, expor[t]ation and advertisement of their cigarette
products in the Philippines. With this admission, defendant asks: ". . . how
could defendant's "MARK" cigarettes cause the former "irreparable damage"
within the territorial limits of the Philippines?" Plaintiffs maintain that since
their trademarks are entitled to protection by treaty obligation under Article
2 of the Paris Convention of which the Philippines is a member and ratified
by Resolution No. 69 of the Senate of the Philippines and as such, have the
force and effect of law under Section 12, Article XVII of our Constitution and
since this is an action for a violation or infringement of a trademark or trade
name by defendant, such mere allegation is sufficient even in the absence
of proof to support it. To the mind of the Court, precisely, this is the issue in
the main case to determine whether or not there has been an invasion of

plaintiffs' right of property to such trademark or trade name. This claim of

plaintiffs is disputed by defendant in paragraphs 6 and 7 of the Answer;
hence, this cannot be made a basis for the issuance of a writ of preliminary
injunction.
There is no dispute that the First Plaintiff is the registered owner of
trademar[k] "MARK VII" with Certificate of Registration No. 18723, dated
April 26,1973 while the Second Plaintiff is likewise the registered owner of
trademark "MARK TEN" under Certificate of Registration No. 11147, dated
May 28, 1963 and the Third Plaintiff is a registrant of trademark "LARK" as
shown by Certificate of Registration No. 10953 dated March 23, 1964, in
addition to a pending application for registration of trademark "MARK VII"
filed on November 21, 1980 under Application Serial No. 43243, all in the
Philippine Patent Office. In same the manner, defendant has a pending
application for registration of the trademark "LARK" cigarettes with the
Philippine Patent Office under Application Serial No. 44008. Defendant
contends that since plaintiffs are "not doing business in the Philippines"
coupled the fact that the Director of Patents has not denied their pending
application for registration of its trademark "MARK", the grant of a writ of
preliminary injunction is premature. Plaintiffs contend that this act(s) of
defendant is but a subterfuge to give semblance of good faith intended to
deceive the public and patronizers into buying the products and create the
impression that defendant's goods are identical with or come from the same
source as plaintiffs' products or that the defendant is a licensee of plaintiffs
when in truth and in fact the former is not. But the fact remains that with its
pending application, defendant has embarked in the manufacturing, selling,
distributing and advertising of "MARK" cigarettes. The question of good faith
or bad faith on the part of defendant are matters which are evidentiary in
character which have to be proven during the hearing on the merits; hence,
until and unless the Director of Patents has denied defendant's application,
the Court is of the opinion and so holds that issuance a writ of preliminary
injunction would not lie.
There is no question that defendant has been authorized by the Bureau of
Internal Revenue to manufacture cigarettes bearing the trademark "MARK"
(Letter of Ruben B. Ancheta, Acting Commissioner addressed to Fortune
Tobacco Corporation dated April 3, 1981, marked as Annex "A", defendant's
"OPPOSITION, etc." dated September 24, 1982). However, this authority is
qualified . . . that the said brands have been accepted and registered by the
Patent Office not later than six (6) months after you have been
manufacturing the cigarettes and placed the same in the market." However,
this grant ". . . does not give you protection against any person or entity
whose rights may be prejudiced by infringement or unfair competition in
relation to your indicated trademarks/brands". As aforestated, the

registration of defendant's application is still pending in the Philippine Patent

Office.
It has been repeatedly held in this jurisdiction as well as in the United States
that the right or title of the applicant for injunction remedy must be clear
and free from doubt. Because of the disastrous and painful effects of an
injunction, Courts should be extremely careful, cautious and conscionable in
the exercise of its discretion consistent with justice, equity and fair play.
There is no power the exercise of which is more delicate which
requires greater caution, deliberation, and sound discretion, or
(which is) more dangerous in a doubtful case than the issuing of an
injunction; it is the strong arm of equity that never ought to be
extended unless to cases of great injury, where courts of law cannot
afford an adequate or commensurate remedy in damages. The right
must be clear, the injury impending or threatened, so as to be
averted only by the protecting preventive process of injunction.
(Bonaparte v. Camden, etc. N. Co., 3 F. Cas. No. 1, 617, Baldw. 205,
217.)
Courts of equity constantly decline to lay down any rule which
injunction shall be granted or withheld. There is wisdom in this
course, for it is impossible to foresee all exigencies of society which
may require their aid to protect rights and restrain wrongs. (Merced
M. Go v. Freemont, 7 Gal. 317, 321; 68 Am. Dec. 262.)
It is the strong arm of the court; and to render its operation begin
and useful, it must be exercised with great discretion, and when
necessary requires it. (Attorney-General v. Utica Inc. Co., P. John Ch.
(N.Y.) 371.)
Having taken a panoramic view of the position[s] of both parties as viewed
from their pleadings, the picture reduced to its minimum size would be this:
At the crossroads are the two (2) contending parties, plaintiffs vigorously
asserting the rights granted by law, treaty and jurisprudence to restrain
defendant in its activities of manufacturing, selling, distributing and
advertising its "MARK" cigarettes and now comes defendant who countered
and refused to be restrained claiming that it has been authorized
temporarily by the Bureau of Internal Revenue under certain conditions to
do so as aforestated coupled by its pending application for registration of
trademark "MARK" in the Philippine Patent Office. This circumstance in itself
has created a dispute between the parties which to the mind of the Court
does not warrant the issuance of a writ of preliminary injunction.

It is well-settled principle that courts of equity will refuse an

application for the injunctive remedy where the principle of law on
which the right to preliminary injunction rests is disputed and will
admit of doubt, without a decision of the court of law establishing
such principle although satisfied as to what is a correct conclusion of
law upon the facts. The fact, however, that there is no such dispute
or conflict does not in itself constitute a justifiable ground for the
court to refuse an application for the injunctive relief. (Hackensack
Impr. Commn. v. New Jersey Midland P. Co., 22 N.J. Eg. 94.)
Hence, the status quo existing between the parties prior to the filing of this
case should be maintained. For after all, an injunction, without reference to
the parties, should be violent, vicious nor even vindictive. (pp. 338-341,
Rollo in G.R. No. 91332.)
In the process of denying petitioners' subsequent motion for reconsideration of the
order denying issuance of the requested writ, the court of origin took cognizance of
the certification executed on January 30, 1984 by the Philippine Patent Office
attesting to the fact that private respondent's application for registration is still
pending appropriate action. Apart from this communication, what prompted the trial
court judge to entertain the idea of prematurity and untimeliness of petitioners'
application for a writ of preliminary injunction was the letter from the Bureau of
Internal Revenue date February 2, 1984 which reads:
MRS. TERESITA GANDIONGCO OLEDAN
Legal Counsel
Fortune Tobacco Corporation
Madam:
In connection with your letter dated January 25, 1984, reiterating your query
as to whether your label approval automatically expires or becomes null and
void after six (6) months if the brand is not accepted and by the patent
office, please be informed that no provision in the Tax Code or revenue
regulation that requires an applicant to comply with the aforementioned
condition order that his label approved will remain valid and existing.
Based on the document you presented, it shows that registration of this
particular label still pending resolution by the Patent Office. These being so ,
you may therefore continue with the production said brand of cigarette until
this Office is officially notified that the question of ownership of "MARK"
brand is finally resolved.
Very truly yours,

TEODORO D. PAREO
Chief, Manufactured Tobacco
Tax Division
TAN-P6531-D2830-A-6
(p. 348, Rollo.)
It appears from the testimony of Atty. Enrique Madarang, Chief of the Trademark
Division of the then Philippine Patent Office that Fortune's application for its
trademark is still pending before said office (p. 311, Rollo).
Petitioners thereafter cited supervening events which supposedly transpired since
March 28, 1983, when the trial court first declined issuing a writ of preliminary
injunction, that could alter the results of the case in that Fortune's application had
been rejected, nay, barred by the Philippine Patent Office, and that the application
had been forfeited by abandonment, but the trial court nonetheless denied the
second motion for issuance of the injunctive writ on April 22, 1987, thus:
For all the prolixity of their pleadings and testimonial evidence, the plaintiffsmovants have fallen far short of the legal requisites that would justify the
grant of the writ of preliminary injunction prayed for. For one, they did not
even bother to establish by competent evidence that the products
supposedly affected adversely by defendant's trademark now subject of an
application for registration with the Philippine Patents Office, are in actual
use in the Philippines. For another, they concentrated their fire on the
alleged abandonment and forfeiture by defendant of said application for
registration.
The Court cannot help but take note of the fact that in their complaint
plaintiffs included a prayer for issuance preliminary injunction. The petition
was duly heard, and thereafter matter was assiduously discussed lengthily
and resolved against plaintiffs in a 15-page Order issued by the
undersigned's predecessor on March 28, 1983. Plaintiffs' motion for
reconsideration was denied in another well-argued 8 page Order issued on
April 5, 1984,, and the matter was made to rest.
However, on the strength of supposed changes in the material facts of this
case, plaintiffs came up with the present motion citing therein the said
changes which are: that defendant's application had been rejected and
barred by the Philippine Patents Office, and that said application has been
deemed abandoned and forfeited. But defendant has refiled the same.
Plaintiffs' arguments in support of the present motion appear to be a mere
rehash of their stand in the first above-mentioned petition which has already

been ruled upon adversely against them. Granting that the alleged changes
in the material facts are sufficient grounds for a motion seeking a favorable
grant of what has already been denied, this motion just the same cannot
prosper.
In the first place there is no proof whatsoever that any of plaintiffs' products
which they seek to protect from any adverse effect of the trademark applied
for by defendant, is in actual use and available for commercial purposes
anywhere in the Philippines. Secondly as shown by plaintiffs' own evidence
furnished by no less than the chief of Trademarks Division of the Philippine
Patent Office, Atty. Enrique Madarang, the abandonment of an application is
of no moment, for the same can always be refiled. He said there is no
specific provision in the rules prohibiting such refiling (TSN, November 21,
1986, pp. 60 & 64, Raviera). In fact, according to Madarang, the refiled
application of defendant is now pending before the Patents Office. Hence, it
appears that the motion has no leg to stand on. (pp. 350-351, Rollo in G. R.
No. 91332.)
Confronted with this rebuff, petitioners filed a previous petition for certiorari before
the Court, docketed as G.R. No. 78141, but the petition was referred to the Court of
Appeals.
The Court of Appeals initially issued a resolution which set aside the court of origin's
order dated April 22, 1987, and granted the issuance of a writ of preliminary
injunction enjoining Fortune, its agents, employees, and representatives, from
manufacturing, selling, and advertising "MARK" cigarettes. The late Justice Cacdac,
speaking for the First Division of the Court of Appeals in CA-G.R. SP No. 13132,
remarked:
There is no dispute that petitioners are the registered owners of the
trademarks for cigarettes "MARK VII", "MARK TEN", and "LARK".(Annexes B,
C and D, petition). As found and reiterated by the Philippine Patent Office in
two (2) official communications dated April 6, 1983 and January 24, 1984,
the trademark "MARK" is "confusingly similar" to the trademarks of
petitioners, hence registration was barred under Sec. 4 (d) of Rep. Act. No.
166, as amended (pp. 106, 139, SCA rollo). In a third official communication
dated April 8, 1986, the trademark application of private respondent for the
"MARK" under Serial No. 44008 filed on February 13, 1981 which was
declared abandoned as of February 16, 1986, is now deemed forfeited, there
being no revival made pursuant to Rule 98 of the Revised Rules of
Practitioners in Trademark Cases." (p. 107, CA rollo). The foregoing
documents or communications mentioned by petitioners as "the changes in
material facts which occurred after March 28, 1983", are not also questioned
by respondents.

Pitted against the petitioners' documentary evidence, respondents pointed

to (1) the letter dated January 30, 1979 (p. 137, CA rollo) of Conrado P. Diaz,
then Acting Commissioner of Internal Revenue, temporarily granting the
request of private respondent for a permit to manufacture two (2) new
brands of cigarettes one of which is brand "MARK" filter-type blend, and (2)
the certification dated September 26, 1986 of Cesar G. Sandico, Director of
Patents (p. 138, CA rollo) issued upon the written request of private
respondents' counsel dated September 17, 1986 attesting that the records
of his office would show that the "trademark MARK" for cigarettes is now the
subject of a pending application under Serial No. 59872 filed on September
16, 1986.
Private respondent's documentary evidence provides the reasons
neutralizing or weakening their probative values. The penultimate paragraph
of Commissioner Diaz' letter of authority reads:
Please be informed further that the authority herein granted does
not give you protection against any person or entity whose rights
may be prejudiced by infringement or unfair competition in relation
to your above-named brands/trademark.
while Director Sandico's certification contained similar conditions as follows:
This Certification, however, does not give protection as against any
person or entity whose right may be prejudiced by infringement or
unfair competition in relation to the aforesaid trademark nor the
right to register if contrary to the provisions of the Trademark Law,
Rep. Act No. 166 as amended and the Revised Rules of Practice in
Trademark Cases.
The temporary permit to manufacture under the trademark "MARK" for
cigarettes and the acceptance of the second application filed by private
respondent in the height of their dispute in the main case were evidently
made subject to the outcome of the said main case or Civil Case No. 47374
of the respondent Court. Thus, the Court has not missed to note the absence
of a mention in the Sandico letter of September 26, 1986 of any reference to
the pendency of the instant action filed on August 18, 1982. We believe and
hold that petitioners have shown a prima facie case for the issuance of the
writ of prohibitory injunction for the purposes stated in their complaint and
subsequent motions for the issuance of the prohibitory writ. (Buayan Cattle
Co. vs. Quintillan, 125 SCRA 276)
The requisites for the granting of preliminary injunction are the existence of
the right protected and the facts against which the injunction is to be

directed as violative of said right. (Buayan Cattle Co. vs. Quintillan, supra;
Ortigas & Co. vs. Ruiz, 148 SCRA 326). It is a writ framed according to the
circumstances of the case commanding an act which the Court regards as
essential to justice and restraining an act it deems contrary to equity and
good conscience (Rosauro vs. Cuneta, 151 SCRA 570). If it is not issued, the
defendant may, before final judgment, do or continue the doing of the act
which the plaintiff asks the court to restrain, and thus make ineffectual the
final judgment rendered afterwards granting the relief sought by the plaintiff
(Calo vs. Roldan, 76 Phil. 445). Generally, its grant or denial rests upon the
sound discretion of the Court except on a clear case of abuse (Belish
Investment & Finance Co. vs. State House, 151 SCRA 636). Petitioners' right
of exclusivity to their registered trademarks being clear and beyond
question, the respondent court's denial of the prohibitive writ constituted
excess of jurisdiction and grave abuse discretion. If the lower court does not
grant preliminary injunction, the appellate court may grant the same.
(Service Specialists, Inc. vs. Sheriff of Manila, 145 SCRA 139). (pp. 165-167,
Rollo in G.R. No. 91332.)
After private respondent Fortune's motion for reconsideration was rejected, a
motion to dissolve the disputed writ of preliminary injunction with offer to post a
counterbond was submitted which was favorably acted upon by the Court of
Appeals, premised on the filing of a sufficient counterbond to answer for whatever
perjuicio petitioners may suffer as a result thereof, to wit:
The private respondent seeks to dissolve the preliminary injunction
previously granted by this Court with an offer to file a counterbond. It was
pointed out in its supplemental motion that lots of workers employed will be
laid off as a consequence of the injunction and that the government will
stand to lose the amount of specific taxes being paid by the
private respondent. The specific taxes being paid is the sum total of
P120,120, 295.98 from January to July 1989.
The petitioners argued in their comment that the damages caused by the
infringement of their trademark as well as the goodwill it generates are
incapable of pecuniary estimation and monetary evaluation and not even
the counterbond could adequately compensate for the damages it will incur
as a result of the dissolution of the bond. In addition, the petitioner further
argued that doing business in the Philippines is not relevant as the
injunction pertains to an infringement of a trademark right.
After a thorough re-examination of the issues involved and the arguments
advanced by both parties in the offer to file a counterbond and the
opposition thereto, WE believe that there are sound and cogent reasons for
US to grant the dissolution of the writ of preliminary injunction by the offer

of the private respondent to put up a counterbond to answer for whatever

damages the petitioner may suffer as a consequence of the dissolution of
the preliminary injunction.
The petitioner will not be prejudiced nor stand to suffer irreparably as a
consequence of the lifting of the preliminary injunction considering that they
are not actually engaged in the manufacture of the cigarettes with the
trademark in question and the filing of the counterbond will amply answer
for such damages.
While the rule is that an offer of a counterbond does not operate to dissolve
an injunction previously granted, nevertheless, it is equally true that an
injunction could be dissolved only upon good and valid grounds subject to
the sound discretion of the court. As WE have maintained the view that
there are sound and good reasons to lift the preliminary injunction, the
motion to file a counterbond is granted. (pp. 53-54, Rollo in G.R. No. 91332.)
Petitioners, in turn, filed their own motion for re-examination geared towards
reimposition of the writ of preliminary injunction but to no avail (p. 55, Rollo in G.R.
No. 91332).
Hence, the instant petition casting three aspersions that respondent court gravely
abused its discretion tantamount to excess of jurisdiction when:
I. . . . it required, contrary to law and jurisprudence, that in order that
petitioners may suffer irreparable injury due to the lifting of the injunction,
petitioners should be using actually their registered trademarks in
commerce in the Philippines;
II. . . . it lifted the injunction in violation of section 6 of Rule 58 of the Rules
of Court; and
III. . . . after having found that the trial court had committed grave abuse of
discretion and exceeded its jurisdiction for having refused to issue the writ
of injunction to restrain private respondent's acts that are contrary to equity
and good conscience, it made a complete about face for legally insufficient
grounds and authorized the private respondent to continue performing the
very same acts that it had considered contrary to equity and good
conscience, thereby ignoring not only the mandates of the Trademark Law,
the international commitments of the Philippines, the judicial admission of
private respondent that it will have no more right to use the trademark
"MARK" after the Director of Patents shall have rejected the application to
register it, and the admonitions of the Supreme Court. (pp. 24-25, Petition;
pp. 25-26, Rollo.)

To sustain a successful prosecution of their suit for infringement, petitioners, as

foreign corporations not engaged in local commerce, rely on section 21-A of the
Trademark Law reading as follows:
Sec. 21-A. Any foreign corporation or juristic person to which a mark or
trade-name has been registered or assigned under this act may bring an
action hereunder for infringement, for unfair competition, or false
designation of origin and false description, whether or not it has been
licensed to do business in the Philippines under Act Numbered Fourteen
hundred and fifty-nine, as amended, otherwise known as the Corporation
Law, at the time it brings complaint: Provided, That the country of which the
said foreign corporation or juristic person is a citizen or in which it is
domiciled, by treaty, convention or law, grants a similar privilege to
corporate or juristic persons of the Philippines. (As inserted by Sec. 7 of
Republic Act No. 638.)
to drive home the point that they are not precluded from initiating a cause
of action in the Philippines on account of the principal perception that
another entity is pirating their symbol without any lawful authority to do so.
Judging from a perusal of the aforequoted Section 21-A, the conclusion
reached by petitioners is certainly correct for the proposition in support
thereof is embedded in the Philippine legal jurisprudence.

Indeed, it was stressed in General Garments Corporation vs. Director of Patents (41
SCRA 50 [1971]) by then Justice (later Chief Justice) Makalintal that:
Parenthetically, it may be stated that the ruling in the Mentholatum case
was subsequently derogated when Congress, purposely to "counteract the
effects" of said case, enacted Republic Act No. 638, inserting Section 21-A in
the Trademark Law, which allows a foreign corporation or juristic person to
bring an action in Philippine courts for infringement of a mark or tradename,
for unfair competition, or false designation of origin and false description,
"whether or not it has been licensed to do business in the Philippines under
Act Numbered Fourteen hundred and fifty-nine, as amended, otherwise
known as the Corporation Law, at the time it brings complaint."
Petitioner argues that Section 21-A militates against respondent's capacity
to maintain a suit for cancellation, since it requires, before a foreign
corporation may bring an action, that its trademark or tradename has been
registered under the Trademark Law. The argument misses the essential
point in the said provision, which is that the foreign corporation is allowed
thereunder to sue "whether or not it has been licensed to do business in the

Philippines" pursuant to the Corporation Law (precisely to counteract the

effects of the decision in the Mentholatum case). (at p. 57.)
However, on May, 21, 1984, Section 21-A, the provision under consideration, was
qualified by this Court in La Chemise Lacoste S.A. vs. Fernandez (129 SCRA 373
[1984]), to the effect that a foreign corporation not doing business in the Philippines
may have the right to sue before Philippine Courts, but existing adjective axioms
require that qualifying circumstances necessary for the assertion of such right
should first be affirmatively pleaded (2 Agbayani Commercial Laws of the
Philippines, 1991 Ed., p. 598; 4 Martin, Philippine Commercial Laws, Rev. Ed., 1986,
p. 381). Indeed, it is not sufficient for a foreign corporation suing under Section 21-A
to simply allege its alien origin. Rather, it must additionally allege its personality to
sue. Relative to this condition precedent, it may be observed that petitioners were
not remiss in averring their personality to lodge a complaint for infringement (p.
75,Rollo in AC-G.R. SP No. 13132) especially so when they asserted that the main
action for infringement is anchored on an isolated transaction (p. 75, Rollo in ACG.R. SP No. 13132; Atlantic Mutual Ins. Co. vs. Cebu Stevedoring Co., Inc., 17 SCRA
1037 (1966), 1 Regalado, Remedial Law Compendium, Fifth Rev. Ed., 1988, p. 103).
Another point which petitioners considered to be of significant interest, and which
they desire to impress upon us is the protection they enjoy under the Paris
Convention of 1965 to which the Philippines is a signatory. Yet, insofar as this
discourse is concerned, there is no necessity to treat the matter with an extensive
response because adherence of the Philippines to the 1965 international covenant
due to pact sunt servanda had been acknowledged in La Chemise (supra at page
390).
Given these confluence of existing laws amidst the cases involving trademarks,
there can be no disagreement to the guiding principle in commercial law that
foreign corporations not engaged in business in the Philippines may maintain a
cause of action for infringement primarily because of Section 21-A of the Trademark
Law when the legal standing to sue is alleged, which petitioners have done in the
case at hand.
In assailing the justification arrived at by respondent court when it recalled the writ
of preliminary injunction, petitioners are of the impression that actual use of their
trademarks in Philippine commercial dealings is not an indispensable element under
Article 2 of the Paris Convention in that:
(2) . . . . no condition as to the possession of a domicile or establishment in
the country where protection is claimed may be required of persons entitled
to the benefits of the Union for the enjoyment of any industrial property of
any industrial property rights. (p. 28, Petition; p. 29, Rollo in G.R. No. 91332.)

Yet petitioners' perception along this line is nonetheless resolved by Sections 2 and
2-A of the Trademark Law which speak loudly, about necessity of actual commercial
use of the trademark in the local forum:
Sec. 2. What are registrable. Trademarks, tradenames and service marks
owned by persons, corporations, partnerships or associations domiciled in
the Philippines and by persons, corporations, partnerships or associations
domiciled in any foreign country may be registered in accordance with the
provisions of this Act; Provided, That said trademarks, tradenames, or
service marks are actually in use in commerce and services not less than
two months in the Philippines before the time the applications for
registration are filed; And provided, further, That the country of which the
applicant for registration is a citizen grants by law substantially similar
privileges to citizens of the Philippines, and such fact is officially certified,
with a certified true copy of the foreign law translated into the English
language, by the government of the foreign country to the Government of
the Republic of the Philippines. (As amended by R.A. No. 865).
Sec. 2-A. Ownership of trademarks, tradenames and service marks; how
acquired. Anyone who lawfully produces or deals in merchandise of any
kind or who engages in any lawful business, or who renders any lawful
service in commerce, by actual use thereof in manufacture or trade, in
business,and in the service rendered, may appropriate to his exclusive use a
trademark, a tradename, or a service mark not so appropriated by another,
to distinguish his merchandise, business or service from the merchandise,
business or service of others. The ownership or possession of a trademark,
tradename, service mark, heretofore or hereafter appropriated, as in this
section provided, shall be recognized and protected in the same manner and
to the same extent as are other property rights known to the law. (As
amended by R.A. No. 638). (Kabushi Kaisha Isetan vs. Intermediate Appellate
Court, 203 SCRA 583 [1991], at pp. 589-590; emphasis supplied.)
Following universal acquiescence and comity, our municipal law on trademarks
regarding the requirement of actual use in the Philippines must subordinate an
international agreement inasmuch as the apparent clash is being decided by a
municipal tribunal (Mortensen vs. Peters, Great Britain, High Court of Judiciary of
Scotland, 1906, 8 Sessions 93; Paras, International Law and World Organization,
1971 Ed., p. 20). Withal, the fact that international law has been made part of the
law of the land does not by any means imply the primacy of international law over
national law in the municipal sphere. Under the doctrine of incorporation as applied
in most countries, rules of international law are given a standing equal, not superior,
to national legislative enactments (Salonga and Yap, Public International Law, Fourth
ed., 1974, p. 16).

The aforequoted basic provisions of our Trademark Law, according to Justice

Gutierrez, Jr., in Kabushi Kaisha Isetan vs. Intermediate Appellate Court (203 SCRA
583 [1991]), have been construed in this manner:
A fundamental principle of Philippine Trademark Law is that actual use in
commerce in the Philippines is a pre-requisite to the acquisition of ownership
over a trademark or a tradename.
xxx xxx xxx
These provisions have been interpreted in Sterling Products International,
Inc. v. Farbenfabriken Bayer Actiengesellschaft (27 SCRA 1214 [1969]) in
this way:
A rule widely accepted and firmly entrenched because it has come
down through the years is that actual use in commerce or business is
a prerequisite to the acquisition of the right of ownership over a
trademark.
xxx xxx xxx
. . . Adoption alone of a trademark would not give exclusive right
thereto. Such right grows out of their actual use. Adoption is not use.
One may make advertisements, issue circulars, give out price lists on
certain goods; but these alone would not give exclusive right of use.
For trademark is a creation of use. The underlying reason for all
these is that purchasers have come to understand the mark as
indicating the origin of the wares. Flowing from this is the trader's
right to protection in the trade he has built up and the goodwill he
has accumulated from use of the trademark. . . .
In fact, a prior registrant cannot claim exclusive use of the trademark unless
it uses it in commerce.
We rule[d] in Pagasa Industrial Corporation v. Court of Appeals (118 SCRA
526 [1982]):
3. The Trademark law is very clear. It requires actual commercial use of the
mark prior to its registration. There is no dispute that respondent
corporation was the first registrant, yet it failed to fully substantiate its claim
that it used in trade or business in the Philippines the subject mark; it did
not present proof to invest it with exclusive, continuous adoption of the
trademark which should consist among others, of considerable sales since
its first use. The invoices (Exhibits 7, 7-a, and 8-b) submitted by respondent

which were dated way back in 1957 show that the zippers sent to the
Philippines were to be used as "samples" and "of no commercial value". The
evidence for respondent must be clear, definite and free from
inconsistencies. (Sy Ching v. Gaw Lui, 44 SCRA 148-149) "Samples" are not
for sale and therefore, the fact of exporting them to the Philippines cannot
be considered to be equivalent to the "use" contemplated by the law.
Respondent did not expect income from such "samples". There were no
receipts to establish sale, and no proof were presented to show that they
were subsequently sold in the Philippines. (Pagasa Industrial Corp. v. Court
of Appeals, 118 SCRA 526 [1982]; Emphasis Supplied)
The records show that the petitioner has never conducted any business in
the Philippines. It has never promoted its tradename or trademark in the
Philippines. It is unknown to Filipino except the very few who may have
noticed it while travelling abroad. It has never paid a single centavo of tax to
the Philippine government. Under the law, it has no right to the remedy it
seeks. (at pp. 589-591.)
In other words, petitioners may have the capacity to sue for infringement
irrespective of lack of business activity in the Philippines on account of Section 21-A
of the Trademark Law but the question whether they have an exclusive right over
their symbol as to justify issuance of the controversial writ will depend on actual use
of their trademarks in the Philippines in line with Sections 2 and 2-A of the same
law. It is thus incongruous for petitioners to claim that when a foreign corporation
not licensed to do business in Philippines files a complaint for infringement, the
entity need not be actually using its trademark in commerce in the Philippines. Such
a foreign corporation may have the personality to file a suit for infringement but it
may not necessarily be entitled to protection due to absence of actual use of the
emblem in the local market.
Going back to the first assigned error, we can not help but notice the manner the
ascription was framed which carries with it the implied but unwarranted assumption
of the existence of petitioners' right to relief. It must be emphasized that this aspect
of exclusive dominion to the trademarks, together with the corollary allegation of
irreparable injury, has yet to be established by petitioners by the requisite quantum
of evidence in civil cases. It cannot be denied that our reluctance to issue a writ of
preliminary injunction is due to judicial deference to the lower courts, involved as
there is mere interlocutory order (Villarosa vs. Teodoro, Sr., 100 Phil. 25 [1956]). In
point of adjective law, the petition has its roots on a remedial measure which is but
ancillary to the main action for infringement still pending factual determination
before the court of origin. It is virtually needless to stress the obvious reality that
critical facts in an infringement case are not before us more so when even Justice
Feliciano's opinion observes that "the evidence is scanty" and that petitioners "have
yet to submit copies or photographs of their registered marks as used in cigarettes"

while private respondent has not, for its part, "submitted the actual labels or
packaging materials used in selling its "Mark" cigarettes." Petitioners therefore, may
not be permitted to presume a given state of facts on their so called right to the
trademarks which could be subjected to irreparable injury and in the process,
suggest the fact of infringement. Such a ploy would practically place the cart ahead
of the horse. To our mind, what appears to be the insurmountable barrier to
petitioners' portrayal of whimsical exercise of discretion by the Court of Appeals is
the well-taken remark of said court that:
The petitioner[s] will not be prejudiced nor stand to suffer irreparably as a
consequence of the lifting of the preliminary injunction considering that they
are not actually engaged in the manufacture of the cigarettes with the
trademark in question and the filing of the counterbond will amply answer
for such damages. (p. 54. Rollo in G.R. No. 91332.)
More telling are the allegations of petitioners in their complaint (p. 319, Rollo G.R.
No. 91332) as well as in the very petition filed with this Court (p. 2, Rollo in G.R. No.
91332) indicating that they are not doing business in the Philippines, for these frank
representations are inconsistent and incongruent with any pretense of a right which
can breached (Article 1431, New Civil Code; Section 4, Rule 129; Section 3, Rule 58,
Revised Rules of Court). Indeed, to be entitled to an injunctive writ, petitioner must
show that there exists a right to be protected and that the facts against which
injunction is directed are violative of said right (Searth Commodities Corporation vs.
Court of Appeals, 207 SCRA 622 [1992]). It may be added in this connection that
albeit petitioners are holders of certificate of registration in the Philippines of their
symbols as admitted by private respondent, the fact of exclusive ownership cannot
be made to rest solely on these documents since dominion over trademarks is not
acquired by the mere fact of registration alone and does not perfect a trademark
right (Unno Commercial Enterprises, Inc. vs. General Milling Corporation, 120 SCRA
804 [1983]).
Even if we disregard the candid statements of petitioners anent the absence of
business activity here and rely on the remaining statements of the complaint below,
still, when these averments are juxtaposed with the denials and propositions of the
answer submitted by private respondent, the supposed right of petitioners to the
symbol have thereby been controverted. This is not to say, however, that the
manner the complaint was traversed by the answer is sufficient to tilt the scales of
justice in favor of private respondent. Far from it. What we are simply conveying is
another basic tenet in remedial law that before injunctive relief may properly issue,
complainant's right or title must be undisputed and demonstrated on the strength of
one's own title to such a degree as to unquestionably exclude dark clouds of doubt,
rather than on the weakness of the adversary's evidence, inasmuch as the
possibility of irreparable damage, without prior proof of transgression of an actual
existing right, is no ground for injunction being mere damnum absque injuria

(Talisay-Silay Milling Co., Inc. vs. CFI of Negros Occidental, 42 SCRA 577 [1971];
Francisco, Rules of Court, Second ed., 1985, p. 225; 3 Martin, Rules of Court, 1986
ed., p. 82).
On the economic repercussion of this case, we are extremely bothered by the
thought of having to participate in throwing into the streets Filipino workers
engaged in the manufacture and sale of private respondent's "MARK" cigarettes
who might be retrenched and forced to join the ranks of the many unemployed and
unproductive as a result of the issuance of a simple writ of preliminary injunction
and this, during the pendency of the case before the trial court, not to mention the
diminution of tax revenues represented to be close to a quarter million pesos
annually. On the other hand, if the status quo is maintained, there will be no
damage that would be suffered by petitioners inasmuch as they are not doing
business in the Philippines.
With reference to the second and third issues raised by petitioners on the lifting of
the writ of preliminary injunction, it cannot be gainsaid that respondent court acted
well within its prerogatives under Section 6, Rule 58 of the Revised Rules of Court:
Sec. 6. Grounds for objection to, or for motion of dissolution of injunction.
The injunction may be refused or, if granted ex parte, may be dissolved,
upon the insufficiency of the complaint as shown by the complaint itself,
with or without notice to the adverse party. It may also be refused or
dissolved on other grounds upon affidavits on the part of the defendants
which may be opposed by the plaintiff also by affidavits. It may further be
refused or, if granted, may be dissolved, if it appears after hearing that
although the plaintiff is entitled to the injunction, the issuance or
continuance thereof, as the case may be, would cause great damage to the
defendant while the plaintiff can be fully compensated for such damages as
he may suffer, and the defendant files a bond in an amount fixed by the
judge conditioned that he will pay all damages which the plaintiff may suffer
by the refusal or the dissolution of the injunction. If it appears that the
extent of the preliminary injunction granted is too great, it must be modified.
Under the foregoing rule, injunction may be refused, or, if granted, may be
dissolved, on the following instances:
(1) If there is insufficiency of the complaint as shown by the allegations
therein. Refusal or dissolution may be granted in this case with or without
notice to the adverse party.
(2) If it appears after hearing that although the plaintiff is entitled to the
injunction, the issuance or continuance thereof would cause great damage
to the defendant, while the plaintiff can be fully compensated for such

damages as he may suffer. The defendant, in this case, must file a bond in
an amount fixed by the judge conditioned that he will pay all damages which
plaintiff may suffer by the refusal or the dissolution of the injunction.
(3) On the other grounds upon affidavits on the part of the defendant which
may be opposed by the plaintiff also affidavits.
Modification of the injunction may also be ordered by the court if it appears
that the extent of the preliminary injunction granted is too great. (3 Martin,
Rules of Court, 1986 ed., p. 99; Francisco,supra, at p. 268.)
In view of the explicit representation of petitioners in the complaint that they are
not engaged in business in the Philippines, it inevitably follows that no conceivable
damage can be suffered by them not to mention the foremost consideration
heretofore discussed on the absence of their "right" to be protected. At any rate,
and assuming in gratia argumenti that respondent court erroneously lifted the writ it
previously issued, the same may be cured by appeal and not in the form of a
petition for certiorari (Clark vs. Philippine Ready Mix Concrete Co., 88 Phil. 460
[1951]). Verily, and mindful of the rule that a writ of preliminary injunction is an
interlocutory order which is always under the control of the court before final
judgment, petitioners' criticism must fall flat on the ground, so to speak, more so
when extinction of the previously issued writ can even be made without previous
notice to the adverse party and without a hearing (Caluya vs. Ramos, 79 Phil. 640
[1974]; 3 Moran, Rules of Court, 1970 ed., p. 81).
WHEREFORE, the petition is hereby DISMISSED and the Resolutions of the Court of
Appeals dated September 14, 1989 and November 29, 1989 are hereby AFFIRMED.
SO ORDERED.
Bidin, J., concurs.
Davide, Jr., concurs in the result.
Romero, J. took no part.

Separate Opinions

FELICIANO, J., dissenting:

I find myself unable to join in the opinion prepared by my distinguished brother,
Melo, J.
It seems to me that the issues involved in this case are rather more complex than
what has been assumed to be the case by the majority opinion. For this and related
reasons, there is set out below a statement of the relevant facts (as I see them) that
is more extensive than what is ordinarily found in dissenting opinions.
Petitioner Philip Morris, Inc. is a corporation organized and existing under the law of
Virginia, U.S.A. Petitioners Benson & Hedges (Canada), Inc. and Fabriques de Tabac
Reunies, S.A., both wholly owned subsidiaries of Philip Morris, Inc., are organized
and existing under the law of Canada and Switzerland, respectively.
Philip Morris, Inc. is registered owner of the trademark "MARK VII" for cigarettes. Its
ownership thereof is evidenced by Philippine Patent Office Trademark Certificate of
Registration No. 18723, dated 26 April 1973. The statement attached to the
Certificate of Registration states that the trademark "MARK VII" had been registered
in the United States Patent Office, on the Principal Register, under Certificate of
Registration No. 888,931 issued on 7 April 1970. The statement also requested that
the trademark be registered in the Philippine Patent Office on the Principal Register
in accordance with Section 37 of R.A. No. 166, as amended.
Benson & Hedges (Canada), Inc. is the registered owner of the trademark "MARK
TEN" also for cigarettes, as evidenced by Philippine Patent Office Trademark
Certificate of Registration No. 11147, dated 28 May 1964, on the Principal Register.
This Trademark Certificate of Registration was originally issued in the name of
Canadian Tabacofina Ltd. and later assigned to Benson & Hedges (Canada), Inc.
Petitioners alleged that the name Canadian Tabacofina Ltd. was later changed to
Benson & Hedges (Canada) Ltd. This trademark Certificate of Registration was
renewed on 28 May 1984. The statement attached thereto stated that the "date of
first use of the trademark 'MARK TEN' in trade in or with the Philippines is April 15,
1963," and that trademark had "been in actual use in commerce over the
Philippines continuously for two months."
Fabriques de Tabac Reunies, S.A. is registered owner of the trademark "LARK" also
for cigarettes, as evidenced by Philippine Patent Office Trademark Certificate of
Registration No. 10953, dated 25 March 1964. This Trademark Certificate of
Registration was originally issued in the name of Ligget and Myres Tobacco
Company was later assigned to Fabriques de Tabac Reunies, S.A. Petitioners alleged
that the name of Liggett and Myres Tobacco Company was changed later to
Fabriques de Tabac Reunies, S.A. The statement attached to this Certificate of
Registration states that the trademark "LARK" was first used by Ligget and Myres

Tobacco Company on 31 May 1920, and first used by it "in commerce in or with the
Philippines on February 6, 1963" and has been continuously used by it "in trade in
or with the Philippines since February 6, 1963."
Sometime before 17 October 1981, private respondent Fortune Tobacco Corporation
("Fortune") commenced manufacturing and selling in the Philippines cigarettes
under the brandname "MARK." Fortune also filed on 13 February 1981 with the
Philippine Patent Office an application for registration of "MARK" as a trademark for
cigarettes.
By a letter dated 17 October 1981, petitioner through their lawyers wrote to Fortune
stating that the manufacturing, selling and advertising of "MARK" cigarettes by
Fortune constituted an "infringement or an act of unfair competition with"
petitioners' "well-known international trademarks used on cigarettes and tobacco
products which were registered worldwide and with the Philippine Patent Office."
Petitioners listed their Philippine Certificates of Registration for the trademarks
"MARK VII," "MARK TEN," and "LARK." Petitioners then asked Fortune "to cease and
desist from further manufacturing; selling or advertising 'MARK' cigarettes,"
otherwise appropriate court actions would be filed without further notice.
On 18 August 1982, petitioners commenced action before the Court of First Instance
of Pasig, Metro Manila (Civil Case No. 47374). In their complaint, petitioners alleged
that they were not doing business in the Philippines but had nonetheless the right
and the capacity to bring the instant suit; that they were owners of Philippine Patent
Office Trademark Certificates of Registration which were in full force and effect,
covering "MARK VII," "MARK TEN," and "LARK," all for cigarettes (except the last
which also covered chewing and smoking tobacco); that they had registered those
trademarks in their respective countries of origin and in other countries the world
and that by virtue of their "long and extensive use [had] gained international fame
and acceptance;" that they had their respective real and effective industrial or
commercial establishments in the United States, Canada and Switzerland, which
countries were, like the Philippines, members of the Convention of Paris for the
Protection of Industrial Property; that under that Convention each member-country
undertakes to prohibit the use of a trademark which constitutes a reproduction,
imitation or translation of a mark already belonging to a person entitled to the
benefits of the Convention and use for identical or similar goods; that petitioner
Fabriques de Tabac Reunies, S.A. had long been using trademark "LARK" throughout
the world, including the Philippines where its products bearing the trademark
"LARK" had been sold in the duty-free market, and advertised and marketted in the
Philippines at least since 1964 and have continued to be so to present; that Fortune
had without previous consent, authority or license from petitioners, with knowledge
of the popularity of petitioners' marks and their Philippine registrations,
manufactured, advertised and sold cigarettes bearing the identical or confusingly
similar trademark "MARK" which unauthorized use constituted an act of

infringement under Section 22 of R.A. No. 166, as amended; that thereby the public
and the patronizers of petitioners' products were being deceived into buying
Fortune's cigarettes under the impression and mistaken belief that Fortune's
cigarettes were identical with, or came from the same source as, petitioners'
products or that Fortune was licensee of petitioners, which it was not; that the
infringement by Fortune of petitioners' trademarks have inflicted damages upon
petitioners; that the continued unauthorized and unlicensed manufacture and sale
by Fortune of its infringing products during the litigation would work injustice and
cause irreparable injury to petitioners in violation of their property rights and
moreover tend to render the judgment which the court might render ineffectual.
Petitioners accordingly asked for a writ of preliminary injunction to restrain Fortune
from manufacturing or selling "MARK" cigarettes, and after trial, to make such
preliminary injunction permanent and to order Fortune's infringing materials to be
destroyed, and for damages.
Fortune filed an Opposition to petitioners' prayer for preliminary injunction. On 28
March 1983, the trial court 1issued an Order denying petitioners' motion for
preliminary injunction. In rendering that order, the trial court, while noting that
petitioners were holders of Philippine Certificates of Trademark Registration, relied
heavily on three (3) factors:
Firstly, that petitioners were foreign corporations not doing business in the
Philippines;
Secondly, that Fortune's application for a registration as trademark of the
word "MARK" for cigarettes was then pending before the Philippine Patent
Office; and
Thirdly, that Fortune was the "only party authorized" by the Bureau of
Internal Revenue ("BIR") to manufacture cigarettes bearing the mark "MARK"
in the Philippines.
In respect of the first point, the trial court was obviously heavily influenced by
Fortune's argument that because petitioners were not doing business in the
Philippines, which meant that "they [were] not engaged in the sale,
manufacture, importation, exportation and advertisement of their cigarette
products in the Philippines," Fortune's manufacture and sale of its "MARK"
cigarettes could not be said to be causing petitioners "irreparable damage"
within the Philippines. In respect to the second point, the trial judge felt that
because the Director of Patents had not, at that point, denied Fortune's pending
application for registration of its trademark "MARK," the grant of a preliminary
injunction was premature. With regard to the third point, the judge noted a letter
dated 30 January 1979 2 of the then Acting Commissioner of Internal Revenue
Mr. Conrado P. Diaz, temporarily granting the request of Fortune for a permit to

manufacture two (2) new brands of cigarettes, one of which was "MARK." The
trial judge also noted that the BIR letter contained the following paragraph:
Please be informed further that this authority herein granted does not give
you protection against any person or entity whose rights may be prejudiced
by infringement or unfair competition in relation to your above named
brands/trademarks. 3
The trial judge, however, apparently gave no weight at all to this caveat.
Petitioners sought, on 15 April 1983, reconsideration of Judge Reyes' Order denying
preliminary injunction. After Fortune had filed an Opposition to petitioners' Motion
for Reconsideration, and petitioners had filed their Reply and Fortune a Rejoinder,
and after an offer of exhibits by the parties respectively, Judge Reyes issued on 5
April 1984 another Order denying the Motion for Reconsideration. In his second
order, the trial judge laid great stress on the fact that Fortune's application for
registration of its trademark "MARK" for cigarettes remained subsisting. On the
basis, Judge Reyes denied petitioners' motion for reconsideration.
More than two (2) years later, petitioners filed a "Second Motion for Issuance of
Preliminary Injunction" dated 1 September 1986. In their Second Motion, petitioners
invited attention to Paper No. 3, dated 6 April 1983, relating to Fortune's application
for registration of its brandname "MARK." This Paper No. 3 reproduced a letter to
Fortune's counsel by Bienvenido A. Palisoc, Senior Trademark Examiner, and
Wilfredo T. Jaramillo, Trademark Examiner, stating that:
This application [for registration of "Mark"] has been examined.
Caption mark of the application must tally with the drawing on file.
Subject mark is confusingly similar with the following marks on file:
a. "Mark" with Reg. No. SR-2659 for cigarettes.
b. "Mark VII" with Reg. No. 18723 for cigarettes.
c. "Mark Ten" with Reg. No. 11147 for cigarettes.
d. "Lark" with Reg. No. 10953 for cigarettes.
Hence, registration is barred under Sec. 4 (d) of Rep. Act No. 166 as
amended.

Subject mark has no trademark significance and can not serve its purpose
as to indicate the source and origin of goods.
Furthermore, the word "Mark" is generic and therefore incapable of
exclusive appropriation.
Makati, Metro Manila, April 6, 1983.

(Emphasis supplied)

Petitioners also invited attention to a certification dated 8 August 1986 issued

by Mr. Luis M. Daca, Jr., Assistant Director, Philippine Patent Office, to the effect
that Fortune's application for the mark "MARK" for cigarettes was declared
abandoned as of 16 February 1986 and was now deemed forfeited. In addition,
petitioners explained in some detail how Fortune's use of its mark "MARK" was
"destructive of [petitioners'] property right to [their] registered trademarks." 5
Further, petitioners assailed Fortune's argument that issuance of preliminary
injunction would cause "loss of revenue and taxes to the Government" and that
more damages would be sustained by Fortune than by petitioners since the
petitioners do not market their cigarettes in the Philippines.
After Fortune had filed an Opposition to petitioners' Second Motion, the trial court,
this time presided over by Judge Nicolas Galing, issued an Order dated 22 April
1987 denying once more the motion for issuance of a writ of preliminary injunction.
In this order, Judge Galing relied on two (2) points: firstly, according to the trial
judge, petitioners had not shown that the products they sought to protect from
Fortune's "MARK" cigarettes were "in actual use and available for commercial
purposes anywhere in the Philippines;" and secondly, it appeared that while
Fortune's original application had been abandoned, it could be refiled and was in
fact re-filed. Thus, Judge Galing in effect reiterated Judge Reyes's position that until
the Director of Patents had definitely acted upon Fortune's application for
registration of "MARK," petitioners' prayer for preliminary injunction could not be
granted.
Petitioners then filed a Petition for Review with the Supreme Court, which Petition
was docketed as G.R. No. 78141. The Court ordered respondents to file their
Comments on the Petition and on 30 September 1987, the Court referred the
Petition to the Court of Appeals.
In due course of time, the Court of Appeals, through Cacdac, Jr., J., 6 rendered a
decision on 5 May 1989 setting aside the 22 April 1987 order of the trial court and
ordering issuance of a writ of preliminary injunction upon filing of a bond by
petitioners in the sum of P200,000.00 to be approved by the appellate court,
"enjoining the private respondents, its agents, employees and representatives from
manufacturing, selling and/or advertising "MARK" cigarettes until further orders."
The Court of Appeals said in pertinent part:

There is no dispute that petitioners are the registered owners of the

trademarks for cigarettes "MARK VII," "MARK TEN," and "LARK". (Annexes B,
C and D, Petition). As found and reiterated by the Philippine Patent Office in
two (2) official communications dated April 6, 1983 and January 24, 1984,
the trademark "MARK" is "confusingly similar" to the trademarks of
petitioners, hence, registration was barred under Sec. 4(d) of Rep. Act No.
166, as amended (pp. 106, 139 SCA rollo). In a third official communication
dated April 8, 1986, the trademark application of private respondent for the
mark "MARK" under Serial No. 44008 filed on February 13, 1981 which was
declared abandoned as of February 16, 1986, is now deemed forfeited, there
being no revival made pursuant to Rule 98 of the Revised Rules of
Practitioners in Trademark Cases.' (p. 107, CA rollo). The foregoing
documents or communications mentioned by petitioners as "the changes in
material facts which occurred after March 28, 1983", are not also questioned
by respondents. 7 (Emphasis supplied)
The Court of Appeals also noted the BIR letter of 30 January 1979 temporarily
granting Fortune's request for a permit to manufacture two (2) new brands of
cigarettes, including one branded "MARK," and the caveat (earlier noted) 8 that the
BIR's authorization would not give Fortune any protection against any person or
entity whose rights may be prejudiced by infringement or unfair competition on the
part of Fortune. The Court of Appeals also referred to the certificate dated 26
September 1986 of Mr. Cesar G. Sandico, then Director of Patents, issued upon
request of Fortune's counsel stating that there was a pending application for
registration of the trademark "MARK" for cigarettes under Serial No. 59872, filed on
16 September 1986, noting at the same time, that Director Sandico's certification
contained the followingcaveat or qualification:
This certification, however, does not give protection as against any person
or entity whose right may be prejudiced by infringement or unfair
competition in relation to the aforesaid trademark nor the right to register as
contrary to the provisions of the Trademark Law, Republic Act No. 166 as
amended and the Revised Rules of Practice in Trademark Cases. (Emphasis
supplied)
The Court of Appeals then went on to say that:
[We] believe and hold that petitioners have shown a prima facie case for the
issuance of the writ of prohibitory injunction for the purposes stated in their
complaint and subsequent motions for the issuance of the prohibitory writ.
(Buayan Cattle Co. v. Quintillan, 125 SCRA 276).
The requisites for the granting of preliminary injunction are the existence of
the right protected andthe facts against which the injunction is to be

directed as violative of said right. (Buayan Cattle Co. v. Quintillan, supra;

Ortigas & Co. vs. Ruiz, 148 SCRA 326). It is a writ framed according to the
circumstances of the case commanding an act which the Court regards as
essential to justice and restraining an act it deems contrary to equity and
good conscience (Rosauro vs. Cuneta, 151 SCRA 570). If it is not issued, the
defendant may, before final judgment, do or continue the doing of the act
which the plaintiff asks the court to restrain, and thus make ineffectual the
final judgment rendered afterwards granting the relief sought by the
plaintiff (Calo vs. Roldan, 76 Phil. 445). Generally, its grant or denial rests
upon the sound discretion of the Court except on a clear case of abuse
(Belish Investment & Finance Co. vs. Statement House, 151 SCRA 636).
Petitioners' right of exclusivity to their registered trademarks being clear
and beyond question, the respondent court's denial of the prohibitive writ
constituted excess of jurisdiction and grave abuse of discretion. If the lower
court does not grant preliminary injunction, the appellate court may grant
the same (Service Specialists, Inc. v. Sheriff of Manila. 145 SCRA 139). 9
(Emphasis supplied)
Fortune moved for reconsideration of the Decision of the Court of Appeals insisting
that petitioners must first prove their "clear, unmistakable and unquestioned right
to the writ, coupled with the possible damages it would suffer;" that petitioners had
not suffered any "great and irreparable injury to speak of" because "petitioners
have never done business in this country in the past nor in the future;" that, on the
other hand, Fortune had been authorized by the BIR to manufacture "MARK"
cigarettes, "thereby generating much needed funds for the Government;" that
Fortune's application for registration of its brandname "MARK" with the Philippine
Patent Office "still pending" and not "finally rejected" by the Director of Patents. On
12 July 1989, the Court of Appeals issued a Minute Resolution stating that the issues
and arguments in Fortune's motion for reconsideration had been "fully discussed" in
the Decision sought to be reconsidered, that no new arguments were raised, and
accordingly denied the Motion for Reconsideration.
Fortune then filed a "Motion to Dissolve Writ of Preliminary Injunction with Offer to
File Counterbond" date 25 July 1989, where it reiterated the basic arguments it
previously made.
A "Supplemental Motion to Lift Writ of Preliminary Injunction with Offer of
Counterbond" dated 17 August 1989 was next filed by Fortune. In this
"Supplemental Motion," Fortune averred that it had paid to the BIR for 1988 the
amount of P181,940,177.38 for specific taxes; while for January to July 1989, it had
paid the amount of P120,120,735.28. Fortune also referred to its employees
assigned to the manufacture of "MARK" cigarettes who were apparently
apprehensive that their services would eventually be terminated and that they
would join the ranks of the unemployed.

Petitioners filed an Opposition to the "Motion to Dissolve" and a Comment on the

"Supplemental Motion" of Fortune.
On 14 September 1989, the Court of Appeals once more through Cacdac, Jr., J.
issued a Resolution lifting the preliminary injunction it had earlier granted upon the
filing of counterbond by private respondent in the amount of P400,000.00 to answer
for any damages petitioners may suffer as a consequence of such lifting. In its
Resolution, the Court of Appeals referred to the "lots of workers employed [who] will
be laid off as a consequence of the injunction" and that Government "will stand to
lose the amount of specific taxes being paid by" Fortune. It when went on to say:
After a thorough re-examination of the issues involved and the arguments
advanced by both parties in the offer to file a counterbond and the
opposition thereto, WE believe that there are sound and cogent reasons for
Us to grant the dissolution of the writ of preliminary injunction by the offer of
the private respondent to put up a counterbond to answer for whatever
damages the petitioner may suffer as a consequence of the dissolution of
the preliminary injunction.
The petitioner will not be prejudiced nor stand to suffer irreparably as a
consequence of the lifting of the preliminary injunction considering that they
are not actually engaged in the manufacture of the cigarettes with the
trademarks in question and the filing of the counterbond will amply answer
for such damages.
While the rule is that an offer of a counterbond does not operate to dissolve
an injunction previously granted, nevertheless, it is equally true that an
injunction could be dissolved only upon good and valid grounds subject to
the sound discretion of the court. As WE have maintained the view that
there are sound and good reasons to lift the preliminary injunction the
motion to file a counterbond is granted. 10 (Emphasis supplied)

Petitioners filed a Motion for Reconsideration, without success.

In the instant Petition, petitioners make the following basic submissions:
1. that the Court of Appeals gravely abused its discretion amounting to
excess of jurisdiction when it required, contrary to law and jurisprudence
that in order that petitioners may suffer irreparable injury due to the lifting
of the injunction, petitioners should be using actually their registered
trademarks in commerce in the Philippines;

2. that the Court of Appeals gravely abused its discretion amounting to

excess of jurisdiction when it lifted the injunction in violation of Section 6 of
Rule 58 of the rules of Court;
3. that the Court of Appeals gravely abused its discretion amounting to
excess of jurisdiction when, after having found that the trial court had
committed grave abuse of discretion and exceeded its jurisdiction for having
refused to issue the writ of injunction to restrain respondent's acts that are
contrary to equity and good conscience, it made a complete about face for
legally insufficient grounds and authorized private respondent to continue
performing the very same acts that it had considered contrary to equity and
good conscience, thereby ignoring not only the mandates of the trademark
law, the international commitments of the Philippines, the judicial admission
of private respondent that it will have no more right to use the trademark
"MARK" after the Director of Patents shall have rejected the application to
register it, and the admonitions of the Supreme Court. 11
The Court required private respondent to file a comment. The comment reiterated
the basic arguments made by private respondent before the Court of Appeals:
a. the petitioners are not suffering any irreparable damage by the lifting of
the preliminary injunction by the Court of appeals. Whatever damages they
might suffer are "based purely on speculation, since by judicial admission,
petitioners are not doing business in the Philippines. Private respondent
stressed that petitioners "are not manufacturing, importing or selling "MARK
TEN," "MARK VII" or "LARK" in this country," notwithstanding "false
allegation" that petitioners have been "using" the said trademarks "in
commerce and trade" in the Philippines since 1963 up to the present.
b. that whatever damage petitioners may be suffering is negligible when
compared to the taxes that would have to be foregone by the Government
considering that private respondent "paid an annual specific tax of P240
Million only on the manufacture and sale of "MARK cigarettes." Private
respondent claims that, in contrast, petitioners which are foreign
corporations "based in three different countries" have not contributed
anything to Government tax revenues.
c. that the Court of Appeals lifted the writ of preliminary injunction it had
earlier issued upon the submission of a counter bond in double the amount
of the bond submitted by petitioners, under Section 6, Rule 58 of the Rules
of Court, which act was within the sound discretion of the Court of Appeals.
Private respondent also stresses that the right of petitioners to the
injunction was still being litigated before the trial court.

Reformulating the issues raised by the petitioners here, we think the principal issues
may be reduced to the following: firstly, is there a clear legal right to the relief
asked by petitioners in the form of a preliminary injunction to restrain private
respondent from manufacturing, selling and distributing cigarettes under the
trademark "MARK"? The second question is: are private respondent's acts
complained of by petitioners causing irreparable injury to petitioners' rights in the
premises? These two (2) basic issues are obviously related and need to be
addressed together.
I
The first point that needs to be stressed is that petitioners have Philippine
Certificates of Registration for their trademarks "MARK TEN", "MARK VII," and
"LARK" in the Principal Register.
Upon the other hand, private respondent's trademark "MARK" is not registered in
the Principal Register in the Office of the Director of Patents; private respondents is
simply an applicant for registration of a mark, the status of which application may
be noted later.
It is important to stress the legal effects of registration of a trademark in the
Principal Register in the Office of the Director of Patents. Section 20 of R.A. No. 166,
as amended, sets out the principal legal effects of such registration:
Sec. 20. Certificate of registration prima facie evidence of validity. A
certificate of registration, of a mark or a trade name shall be prima facie
evidence of the validity of the registration, the registrant's ownership of the
mark or trade name, and of the registrant's exclusive right to use the same
in connection with the goods, business or services specified in the
certificate, subject to any conditions and limitations stated therein.
(Emphasis supplied)
In Lorenzana v. Macagba, 12 the Court distinguished between the effects of
registration in the Principal Register and registration in the Supplemental Register in
the following manner:
(1) Registration in the Principal Register gives rise to a presumption of the
validity of the registration, the registrant's ownership of the mark, and his
right to the exclusive use thereof. There is no such presumption in
registrations in the Supplemental Register.
(2) Registration in the Principal Register is limited to the actual owner of the
trademark (Unno Commercial Enterprises v. Gen. Milling Corp., 120 SCRA
804 [1983]) and proceedings therein pass on the issue of ownership, which

may be contested through opposition or interference proceedings, or after

registration, in a petition for cancellation.
Registration in the Principal Register is constructive notice of the registrant's
claims of ownership, while registration in the Supplemental Register is
merely proof of actual use of the trademark and notice that the registrant
has used or appropriated it. (Le Chemise Lacoste, S.A. v. Fernandez, 129
SCRA 373 [1984]: "Registration in the Supplemental Register . . . serves as
notice that the registrant is using or has appropriated the trademark.") It is
not subject to opposition although it may be cancelled after its issuance.
Corollarilly, registration in the Principal Register is a basis for an action for
infringement, while registration in the Supplemental Register is not.
(3) In application for registration in the Principal Register, publication of the
application is necessary. This is not so in applications for registration in the
Supplemental Register. Certificates of registration under both Registers are
also different from each other.
(4) Proof of registration in the Principal Register may be filed with the
Bureau of Customs to exclude foreign goods bearing infringing marks while
it does not hold true for registrations in the Supplemental Register. 13
(Emphasis supplied)

When taken with the companion presumption of regularity of performance of official

duty, it will be seen that issuance of a Certificate of Registration of a trademark in
the Principal Register also gives rise to the presumption that
all requirements of Philippine law necessary for a valid registration (including prior
use in commerce in the Philippines for at least two [2] months) were complied with
and satisfied.
In contrast, private respondent filed an application for registration of its mark
"MARK" for cigarettes with the Director of Patents soon after it commenced
manufacturing and selling cigarettes trademark with "MARK." This application was
abandoned or "forfeited", 14 for failure of private respondent to file a necessary
Paper with the Director of Patent. It also appears, however, that private respondent
later re-filed or reinstated its application for registration of "MARK" 15 and that, so
far as the record here before us is concerned, this application remains merely an
application and has not been granted and a Certificate of Registration in the
Principal Register issued. 16 While final action does not appear as yet to have been
taken by the Director of Patents on private respondent's application, there was at
least a preliminary determination of the trademark examiners that the trademark
"MARK" was "confusingly similar" with petitioners' marks "MARK VII," "MARK TEN"

and "LARK" and that accordingly, registration was barred under Section 4 (d) of R.A.
No. 166, as amended. 17

In the trial court, both Judge Reyes and Judge Galing took the position that until the
Director of Patents shall have finally acted on private respondent's application for
registration of "MARK," petitioners cannot be granted the relief of preliminary
injunction. It is respectfully submitted that this position is both erroneous and
unfortunate. In reliance upon that position, private respondent has kept its
application for registration alive and pending. The Director of Patents in turn may
well have refrained from taking final action on that application, even in the absence
of a restraining order from the courts, out of deference to the courts. The pendency
of the application before the Director of Patents is not in itself a reason for denying
preliminary injunction. Our courts have jurisdiction and authority to determine
whether or not "MARK" is an infringement on petitioners' registered trademarks.
Under our case law, the issuance of a Certificate of Registration of a trademark in
the Principal Register by the Director of Patents would not prevent a court from
ruling on whether or not the trademark so granted registration is confusingly similar
with a previously registered trademark, where such issue is essential for resolution
of a case properly before the court. A fortiori, a mere application for registration
cannot be a sufficient reason for denying injunctive relief, whether preliminary or
definitive. In the case at bar, petitioners' suit for injunction and for damages for
infringement, and their application for a preliminary injunction against private
respondent, cannot be resolved without resolving the issue of claimed confusing
similarity.
In the case at bar, the evidence of record is scanty. Petitioners have not submitted
actual copies or photographs of their registered marks as used in cigarettes. Private
respondent has not, for its part, submitted the actual labels or packaging material
used in selling its "MARK" cigarettes. Petitioners have appended to their Petition a
photocopy of an advertisement of "MARK" cigarettes. Private respondent has not
included in the record a copy of its application for registration of "MARK" for
cigarettes, which would include a facsimile of the trademark being applied for. It
should be noted that "MARK" and "LARK," when read or pronounced orally,
constitute idem sonansin striking degree. Further, "MARK" has taken over the
dominant word in "MARK VII" and "MARK TEN." These circumstances, coupled with
private respondent's failure to explain how or why it chose, out of all the words in
the English language, the word "mark" to refer to its cigarettes, lead me to the
submission that there is a prima faciebasis for holding, as the Patent Office has held
and as the Court of Appeals did hold originally, that private respondent's "MARK"
infringes upon petitioners' registered trademarks.
II

There is thus no question as to the legal rights of petitioners as holders of

trademarks registered in the Philippines. Private respondent, however, resists and
assails petitioners' effort to enforce their legal rights by heavily underscoring the
fact that petitioners are not registered to do business in the Philippines and are not
in fact doing business in the Philippines. It is thus necessary to determine what
consequences, if any, flow from this circumstance so far as enforcement of
petitioners' rights as holders of registered Philippine trademarks is concerned.
It should be stressed at the outset that circumstance has no legal impact upon the
right of petitioners to own and register their trademarks in the Philippines. Section 2
of R.A. No. 166 as amended expressly recognizes as registrable, under this statute,
marks which are owned by corporations domiciled in any foreign country:
Sec. 2. What are registrable. Trademarks, trade names and service marks
owned by persons, corporations, partnerships or associations domiciled in
the Philippines and by persons, corporations, partnerships or associations
domiciled in any foreign country may be registered in accordance with the
provisions of this Act; Provided, That said trade marks, trade names or
service marks are actually in use in commerce and services not less than
two months in the Philippines before the time the applications for
registration are filed: And provided further, That the country of which the
applicant for registration is a citizen grants by law substantially similar
privileges to citizens of the Philippines, and such fact is officially certified,
with a certified true copy of the foreign law translated into the English
language, by the government of the foreign country to the Government of
the Republic of the Philippines. (Emphasis suppplied)
It is also entirely clear that foreign corporations and corporations domiciled in a
foreign country are not disabled from bringing suit in Philippine courts to protect
their rights as holders of trademarks registered in the Philippines. Under Section 21A of R.A. No. 166, as amended, any foreign corporation which is a holder of a
trademark registered under Philippine law may bring an action for infringement of
such mark or for unfair competition or false designation of origin and false
description "whether or not it has been licensed to do business in the Philippines
under the [Corporation Law] at the time it brings complaint, subject to the proviso
that:
. . . that the country of which the said foreign corporation or juristic person is
a citizen or in which it is domiciled by treaty, convention or law, grants
similar privilege to corporate or juristic persons of the Philippines. (Emphasis
supplied)
The rule thus embodied in Section 21-A of R.A. No. 166 as amended is also set out
in Article 2 of the Paris Convention for the Protection of Industrial Property ("Paris

Convention"), to which the Philippines, the United States, Canada and Switzerland
are all parties. 18 Article 2 of the Paris Convention provides in relevant part:
Article 2
(1) Nationals of any country of the Union shall, as regards the protection of
industrial property, enjoy in all the other countries of the Union the
advantages that their respective laws now grant, or may hereafter grant, to
nationals; all without prejudice to the rights specially provided for by this
Convention. Consequently, they shall have the same protection as the latter,
and the same legal remedy against any infringement of their rights,
provided that the conditions and formalities imposed upon national are
complied with.
(2) However, no requirement as to domicile or establishment in the country
where protection is claimed may be imposed upon nationals of countries of
the Union for the enjoyment of any industrial property rights.
xxx xxx xxx
(Emphasis supplied)
Article 2, paragraph 1 of the Paris Convention embodies the principle of "national
treatment" or "assimilation with nationals," one of the basic rules of the Convention.
19
Under Article 2, paragraph 1 of the Paris Convention, nationals of Canada,
Switzerland and the United States who are all countries of the Paris Union are
entitled to enjoy in the Philippines, also a country of the Union, the advantages and
protections which Philippine law grants to Philippine nationals. Article 2 paragraph 2
of the Paris Convention restrains the Philippines from imposing a requirement of
local incorporation or establishment of a local domicile as a pre-requisite for
granting to foreign nationals the protection which nationals of the Philippines are
entitled to under Philippine law in respect of their industrial property rights. It
should be noted that Article 2, paragraph 2 also constitutes proof of compliance
with the requirement of reciprocity between, on the one hand, the Philippines and,
on the other hand, Canada, Switzerland and the United States required under
Section 21-A of R.A. No. 166 as amended.
The net effect of the statutory and treaty provisions above referred to is that a
corporate national of a member country of the Paris Union is entitled to bring in
Philippine courts an action for infringement of trademarks, or for unfair competition,
without necessity for obtaining registration or a license to do business in the
Philippines. Article 2 as quoted above is in effect with respect to all four (4)
countries.

Such has been the rule in our jurisdiction even before the enactment of R.A. No. 166
and before the Philippines became a party to the Paris Convention. In Western
Equipment and Supplies Company, et al. v. Reyes, etc., et al., 20 petitioner Western
Electrical Company, a U.S. manufacturer of electrical and telephone equipment and
supplies not doing business in the Philippines, commenced action in a Philippine
court to protect its corporate name from unauthorized use thereof by certain
Philippine residents. The Philippine residents sought to organize a Philippine
corporation to be known as "Western Electrical Company" for the purpose of
manufacturing and selling electrical and telephone equipment in the Philippines.
The local residents resisted the suit by contending, inter alia, that the petitioner
Western Electrical Company had never transacted business in the Philippines and
that registration of private respondent's articles of incorporation could not in any
way injure petitioner. The Supreme Court, in rejecting this argument, stated that:
. . . a foreign corporation which has never done business in the Philippines
but is widely and favorably known in the Philippines through the use therein
of its products bearing its corporate name and tradename has a legal right
to maintain an action in the [Philippines]. The purpose of such a suit is to
protect its reputation, corporate name and goodwill which has been
established through the natural development of its trade for a long period of
years in the doing of which it does not seek to enforce any legal or contract
rights arising from or closing out of any business which it has transacted in
the Philippines. . . . 21 (Emphasis supplied)

Similarly, in Asari Yoko v. Kee Boc, 22 a Japanese corporation, also not engaged in
any business in the Philippines, successfully opposed an application for registration
of its trademark "Race Brand" on shirts and undershirts by a local businessman,
even though the Japanese company had not previously registered its own mark
"Race Brand" in the Philippines.
Again, in General Garments Corporation v. Director of Patents and Puritan
Sportswear Corporation, 23 Puritan Sportswear Corporation, an entity organized in
Pennsylvania U.S.A. and not doing business in the Philippines, filed a petition for
cancellation of the mark "Puritan" which was registered in the name of petitioner
General Garments Corporation for assorted men's wear, undershirts, briefs, shirts,
sweaters and jackets. Puritan Sportswear alleged ownership and prior use of the
trademark "Puritan" in the Philippines. Petitioner General Garments, on the other
hand, contended that Puritan Sportswear, being a foreign corporation not licensed
to do, and not doing, business in the Philippines, could not maintain an action for
cancellation of a trademark. The Court, in upholding the Director of Patents'
cancellation of the registration of the mark "Puritan" in the name of General
Garments, said:

. . . .such mark should not have been registered in the first place (and
consequently may be cancelled if so required) if it consists of
or comprises a mark or tradename which so resembles a mark or tradename
. . . . previously used in the Philippines by another and not abandoned, as to
be likely, when applied to or used in connection with goods, business or
services of the applicant, to cause confusion or mistake or to deceive
purchasers. 24 (Emphasis supplied)

In Converse Rubber Corporation v. Universal Rubber Products, Inc., 25 petitioner

Converse Rubber Corporation was an American manufacturer of rubber shoes, not
doing business on its own in the Philippines and not licensed to do business in the
Philippines, opposed the application for registration of the trademark "Universal
Converse and Device" to be used also in rubber shoes and rubber slippers by
private respondent Universal Rubber Products, Inc. ("Universal"). In reversing the
Director of Patents and holding that Universal's application must be rejected, the
Supreme Court said:
The sales of 12 to 20 pairs a month of petitioner's rubber shoes cannot be
considered insignificant, considering that they appear to be of high
expensive quality, which not too many basketball players can afford to buy.
Any sale made by a legitimate trader from his store is a commercial act
establishing trademark rights since such sales are made in due course of
business to the general public, not only to limited individuals. It is a matter
of public knowledge that all brands of goods filter into the market,
indiscriminately sold by jobbers, dealers and merchants not necessarily with
the knowledge or consent of the manufacturer. Such actual sale of goods in
the local market establishes trademark use which serves as the basis for
any action aimed at trademark pre-emption. It is a corollary logical
deduction that while Converse Rubber Corporation is not licensed to do
business in the country and is not actually doing business here, it does not
mean that its goods are not being sold here or that it has not earned a
reputation or goodwill as regards its products. The Director of Patents was,
therefore, remiss in ruling that the proofs sales presented "was made by a
single witness who had never dealt with nor had never known opposer
{petitioner} . . . without Opposer having a direct or indirect hand in the
transaction to be the basis of trademark pre-exemption. 26(Emphasis
supplied)

Three (3) other cases may be noted. The first is La Chemise Lacoste, S.A. v.
Fernandez 27 La Chemise Lacoste, S.A. although a foreign corporation not engaged

in and not licensed to do business in the Philippines, was accorded protection for its
trademarks "Lacoste", "Chemise Lacoste," and "Crocodile Device" for clothing and
sporting apparel. The Court recognized that those marks were "world famous
trademarks which the Philippines, as a party to the Paris Union, is bound to protect."
Similarly, in Del Monte Corporation, et al. v. Court of Appeals, et al., 28 petitioner Del
Monte Corporation was a company organized under the laws of the United States
and not engaged in business in the Philippines. Because both the Philippines and
the United States are signatories to the Convention of Paris, which grants to
nationals of the parties the rights and advantages which their own nationals enjoy
for the repression of acts of infringement and unfair competition, the Court, having
found that private respondent's label was an infringement of Del Monte's
trademark, held Del Monte entitled to recover damages.
In Puma Sportschuhfabriken Rudolf Dassler, K.G. v. Intermediate appellate Court, et
al, 29 petitioner Puma was a foreign corporation existing under the laws of the
Federal Republic of Germany not registered to do business and not doing business
in the Philippines, filed a complaint for infringement of trademark and for issuance
of a writ of preliminary injunction against a local manufacturing company. Reversing
the Court of Appeals, this Court held that Puma had legal capacity to bring the suit
in the Philippines under Section 21-A of R.A. No. 166 as amended and under the
provisions of the Paris Convention to which both the Philippines and the Federal
Republic of Germany are parties. The Court also noted that "Puma" is an
internationally known brandname.
The relevancy of the doctrines set out in the cases above cited are conceded by my
distinguished brother Melo, J. in the majority opinion. The majority opinion, however,
goes on to say:
In other words, petitioners may have the capacity to sue for infringement
irrespective of lack of business activity in the Philippines on account of
Section 21-A of the Trademark Law but the question of whether they have an
exclusive right over their symbols as to justify issuance of the controversial
writ will depend on actual use of their trademarks in the Philippines in line
with Sections 2 and 2-A of the same law. It is thus incongruous for
petitioners to claim that when a foreign corporation not licensed to do
business in the Philippines files a complaint for infringement, the entity
need not be actually using its trademark in commerce in the Philippines.
Such a foreign corporation may have the personality to file a suit for
infringement but it may not necessarily be entitled to protection due to
absence of actual use of the emblem in the local market.
With great respect, certain essential qualifications must be made respecting the
above paragraph. Firstly, of the petitioners' three (3) marks here involved, two (2) of
them i.e., "MARK TEN" and "LARK" were registered in the Philippines on the

basis of actual use in the Philippines, precisely in accordance with the requirements
of Section 2-A and Section 5 (A) of R.A. No. 166 as amended. The pre-registration
use in commerce and trade in the Philippines for at least two (2) months as required
by the statute, is explicitly stated in the Certificates of Registration. The very fact
that the appropriate Philippine Government office issued the Certificates of
Registration necessarily gave rise to the presumption that such pre-registration use
had in fact been shown to the satisfaction of the Philippine Patent Office (now the
Bureau of Patents, Trademark and Technology Transfer ["BPTTT"]). It is important to
note that respondent Fortune has not purported to attack the validity of the
trademarks "Mark Ten" and "Lark" by pretending that no pre-registration use in
commerce in the Philippines had been shown. 30
The third mark of petitioners "MARK VII" was registered in the Philippines on
the basis of Section 37 of R.A. No. 166 as amended, i.e., on the basis of registration
in the country of origin and under the Paris Convention. In such registration, by the
express provisions of Section 37 (b) of R.A. No. 166 as amended, prior (preregistration) use in commerce in the Philippines need not be alleged.
Whether the Philippine trademark was based on actual use in the Philippines (under
Section 2-A) or on registration in a foreign country of origin (under Section 37), the
statute appears to require that trademarks (at least trademarks not shown to be
internationally "well-known") must continue to be used in trade and commerce in
the Philippines. It is, however, essential to point out that such continued use, as a
requirement for the continued right to the exclusive use of the registered
trademark, is presumed so long as the Certificate of Registration remains
outstanding and so long as the registered trademark owner complies with the
requirements of Section 12 of R.A. No. 166 as amended of filing affidavits with the
BPTTT on the 5th, 10th and 15th anniversaries of the date of issuance of the
Certificate of Registration, showing that the trademark is still in use or showing that
its non-use is not due to any intention to abandon the same. In the case at bar,
again, respondent Fortune has not explicitly pretended that the petitioners'
trademarks have been abandoned by non-use in trade and commerce in the
Philippines although it appears to insinuate such non-use and abandonment by
stressing that petitioners are not doing business in the Philippines.
That petitioners are not doing business and are not licensed to do business in the
Philippines, does not by any means mean either that petitioners have not complied
with the requirements of Section 12 of R.A. No. 166 relating to affidavits of
continued use, or that petitioners' trademarks are not in fact used in trade and
commerce in the Philippines. In the Converse case, as earlier noted, the Court held
that the circumstance that the foreign owner of a Philippine trademark is not
licensed to do business and is not doing business in the Philippines, does not mean
that petitioner's goods (that is, goods bearing petitioner's trademark) are not sold in
the Philippines. For cigarettes bearing petitioners' trademarks may in fact be

imported into and be available for sale in the Philippines through the acts of
importers or distributors. Petitioners have stated that their "Mark VII," "Mark Ten"
and "Lark" cigarettes are in fact brought into the country and available for sale here
in, e.g., duty-free shops, though not imported into or sold in the Philippines by
petitioners themselves. There is no legal requirement that the foreign registrant
itself manufacture and sell its products here. All the statute requires is the use in
trade and commerce in the Philippines, and that can be carried out by third party
manufacturers operating under license granted by the foreign registrant or by the
importation and distribution of finished products by independent importers or
traders. The "use" of the trademark in such instances by the independent third
parties constitutes use of the foreign registrant's trademarks to the benefit of the
foreign registrant. 31
III
We turn to petitioners' claim that they are suffering irreparable damage by reason of
the manufacture and sale of cigarettes under the trademark "MARK." Here again, a
basic argument of private respondent was that petitioners had not shown any
damages because they are not doing business in the Philippines. I respectfully
maintain that this argument is specious and without merit.
That petitioners are not doing business and are not licensed to do business in the
Philippines, does notnecessarily mean that petitioners are not in a position to
sustain, and do not in fact sustain, damage through trademark infringement on the
part of a local enterprise. 32 Such trademark infringement by a local company may,
for one thing, affect the volume of importation into the Philippines of cigarettes
bearing petitioners' trademarks by independent or third party traders.
The damage which the petitioners claim they are sustaining by reason of the acts of
private respondents, are not limited to impact upon the volume of actual imports
into the Philippines of petitioners' cigarettes. Petitioners urge that private
respondent's use of its confusingly similar trademark "MARK" is invasive and
destructive of petitioners property right in their registered trademarks because.
a) Plaintiffs' undeniable right to the exclusive use of their registered
trademarks is effectively effaced by defendant's use of a confusingly similar
trademark;
b) Plaintiffs would lose control of the reputation of their products as their
reputation will depend on defendant's commercial activities and the quality
of defendant's products;
c) The market in the Philippines for plaintiffs' products will be pre-empted;

d) Purchasers will think that defendant's goods are approved or sponsored

by plaintiff;
e) Defendant will be allowed to benefit from the reputation of the plaintiffs'
goods and trademarks;
f) Defendant will be effectively authorized to continually invade plaintiffs'
property rights, for which invasion no fair and reasonable redness can be
had in a court of law; and
g) Plaintiffs will lose their goodwill and trade and the value of their
registered trademarks will irreparably diluted and the damages to be
suffered by plaintiffs cannot be redressed fairly in terms of money. 33
Modern authorities on trademark law view trademarks as symbols which perform
three (3) distinct functions: first, they indicate origin or ownership of the articles to
which they are attached; second, they guarantee that those articles come up to a
certain standard of quality; third, they advertise the articles they symbolize. 34

The first two (2) functions have long been recognized in trademark law which
characterizes the goodwill or business reputation symbolized by a trademark as a
property right protected by law. Thus, the owner of a trademark is held entitled to
exclude others from the use of the same, or of a confusingly similar, mark where
confusion results in diversion of trade or financial injury. At the same time,
trademarks warn against the imitation or faking of products and prevent the
imposition of fraud upon the public. The first two (2) functions of trademarks were
aptly stressed in e.g., the La Chemise Lacoste case where the objectives of
trademark protection were described in the following terms:
. . . to stem the tide of fake and counterfeit consumer items flooding the
Philippine market or exported abroad from our country. The greater victim is
not so much the manufacturer whose product is being faked but
the Filipino consuming public and in the case of exportations, our image
abroad . . . . We buy a kitchen appliance, a household tool, perfume, a face
powder, other toilet articles, watches, brandy or whisky, and items of
clothing like jeans, T-shirts, neckties, etc. the list is quite lengthy and
pay good money relying on the brand name as guarantee of its quality and
genuine nature only to explode in bitter frustration and helpless anger
because the purchased item turns out to be a shoddy imitation, albeit a
clever looking counterfeit, of the quality product . . . . 35

The third or advertisement function of trademark has become of especial

importance given the modern technology of communication and transportation and
the growth of international trade. 36 Through advertisement in the broadcast and
print media, the owner of the trademark is able to establish a nexus between its
trademark products and the public in regions where the owner does not itself
manufacture or sell its own products. 37 Through advertisement, a well-established
and well-earned reputation may be gained in countries where the trademark owner
has itself no established business connection. 38 Goodwill may thus be seen to be
much less closely confined territorially than, say, a hundred or fifty years ago. 39 It is
no longer true that "a trademark of itself cannot travel to markets where there is no
article to wear the badge and no trader to offer the article." 40 Advertisement of
trademarks is geared towards the promotion of use of the marked article and the
attraction of potential buyers and users; 41 by fixing the identity of the marked
article in the public mind, it prepares the way for growth in such commerce whether
the commerce be handled by the trademark owner itself or by its licensees or
independent traders.

That a registered trademark has value in itself apart from the trade physically
accompanying its use, has been recognized by our Court. In Ang v. Teodoro, 42 the
Court was called upon the determine whether there was infringement in the use of
the same trademark on articles which do not belong to the same class of goods
which the lawful trademark owner manufactures and sells. In holding that there was
infringing use in such case, the Court said:
. . . . such unfair trading can cause injury or damage to the first user of a
given trade-mark, first, by prevention of the natural expansion of his
business and, second, by having his business reputation confused with and
put at the mercy of the second user. When noncompetitive products are sold
under the same mark, the gradual whittling away or dispersion of the
identity and hold upon the public mind of the mark created by its first user,
inevitably result. The original owner is entitled to the preservation of the
valuable link between him and the public that has been created by his
ingenuity and the merit of his wares or services. Experience has
demonstrated that when a well-known trade-mark is adopted by another
even for a totally different class of goods, it is done to get the benefit of the
reputation and advertisements of the originator of said mark, to convey to
the public a false impression of some supposed connection between the
manufacturer of the article sold under the original mark and the new articles
being tendered to the public under the same or similar mark . . . The owner
of a trademark or tradename has a property right in which he is entitled to
protection, since there is damage to him in the form of confusion of

reputation or goodwill in the mind of the public as well as from confusion of

goods. (Emphasis supplied)
In Sta. Ana v. Maliwat, 43 the Court, through J.B.L. Reyes, J., in holding that the
use of the name "Flormen" with respect to shoes was infringement of the mark
"Flormann" used in the men's wear such as shirts, polo shirts and pants, said:
Modern law recognizes that the protection to which the owner of a trademark is entitled is not limited to guarding his goods or business from actual
market competition with identical or similar products of the parties, but
extends to all cases in which the use by a junior appropriator of a trademark or trade-name is likely to lead to a confusing of source, as where
prospective purchasers would be misled into thinking that the complaining
party has extended his business into the field (see 148 ALR 56 et seq; 52
Am. Jur. 576) or is in any way connected with the activities of the infringer;
or when itforestalls the normal potential expansion of his business (v. 148
ALR, 77, 84; 52 Am. Jur. 576, 577). . . . . 44 (Emphasis supplied)

Petitioners did not try to put a peso figure on their claimed damage arising from the
erosion and possible eventual destruction of the symbolic value of their trademark.
Such damage, while not easily quantifiable, is nonetheless real and effective. I
submit, with respect, that such continuing damage falls clearly within the concept of
irreparable damage or injury described in Social Security Commission v. Bayona 45 in
the following terms:
Damages are irreparable within the meaning of the rule relative to the
issuance of injunction where there is no standard by which their amount can
be measured with reasonable accuracy (Crouc v. Central Labor Council, 83
ALR, 193). "An irreparable injury which a court of equity will enjoin includes
that degree of wrong of a repeated and continuing kind which produce hurt,
inconvenience, or damage that can be estimated only by conjecture, and
not by any accurate standard of measurement" (Phipps v. Rogue River Valley
Canal Co., 7 ALR, 741). An irreparable injury to authorize an injunction
consists of a serious charge of, or is destructive to, the property if affects,
either physically or in the character in which it has been held and enjoined,
or when the property has some peculiar quality or use, so that its pecuniary
value will not fairly recompense the owner of the loss thereof' (Dunker v.
Field and Tub Club, 92 P., 502).
Respondent corporations made a lengthy discourse on the matter of
irreparable injury they may suffer if the injunction were not issued, but the
array of figures they have laid out merely succeeded in proving that the

damage, if any they may suffer, is susceptible of mathematical computation.

It is not then irreparable. As already stated, this term has a definite meaning
in law. It does not have reference to the amount of damages that may be
caused but rather to the difficulty of measuring the damages inflicted. If full
compensation can be obtained by way of damages, equity will not apply the
remedy of injunction (28 Am. Jur., 244; 43 C.J.S., 427, 446). 46
I next turn to private respondent's claim that issuance of an injunction would
impose heavy damage upon itself and upon Government. As noted, private
respondent stated that it had paid many millions of pesos as ad valoremand VAT
taxes to the Government in 1988 and 1989 in connection with its "MARK" cigarettes.
47
Presumably, the total volume of its business associated with the manufacture and
sale of cigarettes trademarked "MARK" would be even larger. In addition, private
respondent suggests, albeit indirectly only, that hundreds if not thousands of its
employees would find themselves unemployed if it were restrained from the
manufacture and sale of "MARK" cigarettes.
Private respondent's claims concerning alleged damages both to itself and to the
Government, which obviously loomed very large in the mind of the majority here,
and of the Court of Appeals when it lifted the injunction it had issued, appear to me
to be extravagant indeed. Petitioners cannot claim to be entitled to an injunction
which could restrain private respondent from manufacturing and selling cigarettes
completely; petitioner do not pretend to be so entitled to such a comprehensive
injunction. Petitioners seek only the reinstatement of the original injunction issued
by the Court of Appeals, i.e., one that restrains private respondent from using the
trademark "MARK" on its cigarettes. There is nothing to prevent private respondent
from continuing to manufacture and sell cigarettes under any of its already existing
and registered trademarks, of which it has several, or under some new and specially
created trademark(s). Realistically, private respondent, if enjoined, would lose only
the value of the packaging material imprinted with the same trademark (which
cigarettes and material may well be amenable to re-cycling) and the cost of past
advertisements of "MARK" in media, if any. Thus, the apprehension on the part of
the majority which private respondent tried diligently to foment that the
Government would lose many millions of pesos in tax revenues and that many
employees would lose their jobs, if an injunction is issued is more apparent than
real. The damages private respondent would sustain from reinstatement of the
preliminary injunction are clearly quantifiable in pesos.
Besides, as pointed out by petitioners, to pay heed to private respondent's creative
economic argument would ultimately mean that the greater the volume of sales and
the profits of the infringer, the greater would be the infringer's claim to be entitled
to continue infringement. I respectfully submit that the law should not countenance
such a cynical result.

My conclusion is that private respondent's claims concerning damage which it would

sustain if the petitioners were granted the injunction they seek, did not constitute a
sufficient basis for overturning the original decision of the Court of Appeals. The
Resolution of the Court of Appeals granting private respondent's Motion to Dissolve,
in effect disregarded everything that Court had set out in its original Decision. The
mere offer and filing of a counterbond does not, by itself, provide a sufficient basis
for lifting the preliminary injunction earlier granted. For all the elements which
supported the original issuance of a preliminary injunction continued to exist.
Private respondent's hyperbolic claims concerning the damages that it and the
Government would sustain by reason of an injunction, had been made earlier both
before the trial court and the Court of Appeals. Finally, it is not enough to say as
private respondent says, that the Court of Appeals in granting its Motion to Dissolve
the preliminary injunction was merely exercising its discretion; for the Court of
Appeals obviously was also exercising its discretion when it rendered its original
Decision granting the preliminary injunction.
I vote to grant due course to the petition for Certiorari, to set aside the Resolution of
the respondent Court of Appeals dated 14 September 1989 in C.A.-G.R. SP No.
13132 and to reinstate the Decision of that same Court dated 5 May 1989.

# Separate Opinions
FELICIANO, J., dissenting:
I find myself unable to join in the opinion prepared by my distinguished brother,
Melo, J.
It seems to me that the issues involved in this case are rather more complex than
what has been assumed to be the case by the majority opinion. For this and related
reasons, there is set out below a statement of the relevant facts (as I see them) that
is more extensive than what is ordinarily found in dissenting opinions.
Petitioner Philip Morris, Inc. is a corporation organized and existing under the law of
Virginia, U.S.A. Petitioners Benson & Hedges (Canada), Inc. and Fabriques de Tabac
Reunies, S.A., both wholly owned subsidiaries of Philip Morris, Inc., are organized
and existing under the law of Canada and Switzerland, respectively.
Philip Morris, Inc. is registered owner of the trademark "MARK VII" for cigarettes. Its
ownership thereof is evidenced by Philippine Patent Office Trademark Certificate of
Registration No. 18723, dated 26 April 1973. The statement attached to the
Certificate of Registration states that the trademark "MARK VII" had been registered
in the United States Patent Office, on the Principal Register, under Certificate of

Registration No. 888,931 issued on 7 April 1970. The statement also requested that
the trademark be registered in the Philippine Patent Office on the Principal Register
in accordance with Section 37 of R.A. No. 166, as amended.
Benson & Hedges (Canada), Inc. is the registered owner of the trademark "MARK
TEN" also for cigarettes, as evidenced by Philippine Patent Office Trademark
Certificate of Registration No. 11147, dated 28 May 1964, on the Principal Register.
This Trademark Certificate of Registration was originally issued in the name of
Canadian Tabacofina Ltd. and later assigned to Benson & Hedges (Canada), Inc.
Petitioners alleged that the name Canadian Tabacofina Ltd. was later changed to
Benson & Hedges (Canada) Ltd. This trademark Certificate of Registration was
renewed on 28 May 1984. The statement attached thereto stated that the "date of
first use of the trademark 'MARK TEN' in trade in or with the Philippines is April 15,
1963," and that trademark had "been in actual use in commerce over the
Philippines continuously for two months."
Fabriques de Tabac Reunies, S.A. is registered owner of the trademark "LARK" also
for cigarettes, as evidenced by Philippine Patent Office Trademark Certificate of
Registration No. 10953, dated 25 March 1964. This Trademark Certificate of
Registration was originally issued in the name of Ligget and Myres Tobacco
Company was later assigned to Fabriques de Tabac Reunies, S.A. Petitioners alleged
that the name of Liggett and Myres Tobacco Company was changed later to
Fabriques de Tabac Reunies, S.A. The statement attached to this Certificate of
Registration states that the trademark "LARK" was first used by Ligget and Myres
Tobacco Company on 31 May 1920, and first used by it "in commerce in or with the
Philippines on February 6, 1963" and has been continuously used by it "in trade in
or with the Philippines since February 6, 1963."
Sometime before 17 October 1981, private respondent Fortune Tobacco Corporation
("Fortune") commenced manufacturing and selling in the Philippines cigarettes
under the brandname "MARK." Fortune also filed on 13 February 1981 with the
Philippine Patent Office an application for registration of "MARK" as a trademark for
cigarettes.
By a letter dated 17 October 1981, petitioner through their lawyers wrote to Fortune
stating that the manufacturing, selling and advertising of "MARK" cigarettes by
Fortune constituted an "infringement or an act of unfair competition with"
petitioners' "well-known international trademarks used on cigarettes and tobacco
products which were registered worldwide and with the Philippine Patent Office."
Petitioners listed their Philippine Certificates of Registration for the trademarks
"MARK VII," "MARK TEN," and "LARK." Petitioners then asked Fortune "to cease and
desist from further manufacturing; selling or advertising 'MARK' cigarettes,"
otherwise appropriate court actions would be filed without further notice.

On 18 August 1982, petitioners commenced action before the Court of First Instance
of Pasig, Metro Manila (Civil Case No. 47374). In their complaint, petitioners alleged
that they were not doing business in the Philippines but had nonetheless the right
and the capacity to bring the instant suit; that they were owners of Philippine Patent
Office Trademark Certificates of Registration which were in full force and effect,
covering "MARK VII," "MARK TEN," and "LARK," all for cigarettes (except the last
which also covered chewing and smoking tobacco); that they had registered those
trademarks in their respective countries of origin and in other countries the world
and that by virtue of their "long and extensive use [had] gained international fame
and acceptance;" that they had their respective real and effective industrial or
commercial establishments in the United States, Canada and Switzerland, which
countries were, like the Philippines, members of the Convention of Paris for the
Protection of Industrial Property; that under that Convention each member-country
undertakes to prohibit the use of a trademark which constitutes a reproduction,
imitation or translation of a mark already belonging to a person entitled to the
benefits of the Convention and use for identical or similar goods; that petitioner
Fabriques de Tabac Reunies, S.A. had long been using trademark "LARK" throughout
the world, including the Philippines where its products bearing the trademark
"LARK" had been sold in the duty-free market, and advertised and marketted in the
Philippines at least since 1964 and have continued to be so to present; that Fortune
had without previous consent, authority or license from petitioners, with knowledge
of the popularity of petitioners' marks and their Philippine registrations,
manufactured, advertised and sold cigarettes bearing the identical or confusingly
similar trademark "MARK" which unauthorized use constituted an act of
infringement under Section 22 of R.A. No. 166, as amended; that thereby the public
and the patronizers of petitioners' products were being deceived into buying
Fortune's cigarettes under the impression and mistaken belief that Fortune's
cigarettes were identical with, or came from the same source as, petitioners'
products or that Fortune was licensee of petitioners, which it was not; that the
infringement by Fortune of petitioners' trademarks have inflicted damages upon
petitioners; that the continued unauthorized and unlicensed manufacture and sale
by Fortune of its infringing products during the litigation would work injustice and
cause irreparable injury to petitioners in violation of their property rights and
moreover tend to render the judgment which the court might render ineffectual.
Petitioners accordingly asked for a writ of preliminary injunction to restrain Fortune
from manufacturing or selling "MARK" cigarettes, and after trial, to make such
preliminary injunction permanent and to order Fortune's infringing materials to be
destroyed, and for damages.
Fortune filed an Opposition to petitioners' prayer for preliminary injunction. On 28
March 1983, the trial court 1issued an Order denying petitioners' motion for
preliminary injunction. In rendering that order, the trial court, while noting that
petitioners were holders of Philippine Certificates of Trademark Registration, relied
heavily on three (3) factors:

Firstly, that petitioners were foreign corporations not doing business in the
Philippines;
Secondly, that Fortune's application for a registration as trademark of the
word "MARK" for cigarettes was then pending before the Philippine Patent
Office; and
Thirdly, that Fortune was the "only party authorized" by the Bureau of
Internal Revenue ("BIR") to manufacture cigarettes bearing the mark "MARK"
in the Philippines.
In respect of the first point, the trial court was obviously heavily influenced by
Fortune's argument that because petitioners were not doing business in the
Philippines, which meant that "they [were] not engaged in the sale,
manufacture, importation, exportation and advertisement of their cigarette
products in the Philippines," Fortune's manufacture and sale of its "MARK"
cigarettes could not be said to be causing petitioners "irreparable damage"
within the Philippines. In respect to the second point, the trial judge felt that
because the Director of Patents had not, at that point, denied Fortune's pending
application for registration of its trademark "MARK," the grant of a preliminary
injunction was premature. With regard to the third point, the judge noted a letter
dated 30 January 1979 2 of the then Acting Commissioner of Internal Revenue
Mr. Conrado P. Diaz, temporarily granting the request of Fortune for a permit to
manufacture two (2) new brands of cigarettes, one of which was "MARK." The
trial judge also noted that the BIR letter contained the following paragraph:
Please be informed further that this authority herein granted does not give
you protection against any person or entity whose rights may be prejudiced
by infringement or unfair competition in relation to your above named
brands/trademarks. 3
The trial judge, however, apparently gave no weight at all to this caveat.
Petitioners sought, on 15 April 1983, reconsideration of Judge Reyes' Order denying
preliminary injunction. After Fortune had filed an Opposition to petitioners' Motion
for Reconsideration, and petitioners had filed their Reply and Fortune a Rejoinder,
and after an offer of exhibits by the parties respectively, Judge Reyes issued on 5
April 1984 another Order denying the Motion for Reconsideration. In his second
order, the trial judge laid great stress on the fact that Fortune's application for
registration of its trademark "MARK" for cigarettes remained subsisting. On the
basis, Judge Reyes denied petitioners' motion for reconsideration.
More than two (2) years later, petitioners filed a "Second Motion for Issuance of
Preliminary Injunction" dated 1 September 1986. In their Second Motion, petitioners

invited attention to Paper No. 3, dated 6 April 1983, relating to Fortune's application
for registration of its brandname "MARK." This Paper No. 3 reproduced a letter to
Fortune's counsel by Bienvenido A. Palisoc, Senior Trademark Examiner, and
Wilfredo T. Jaramillo, Trademark Examiner, stating that:
This application [for registration of "Mark"] has been examined.
Caption mark of the application must tally with the drawing on file.
Subject mark is confusingly similar with the following marks on file:
a. "Mark" with Reg. No. SR-2659 for cigarettes.
b. "Mark VII" with Reg. No. 18723 for cigarettes.
c. "Mark Ten" with Reg. No. 11147 for cigarettes.
d. "Lark" with Reg. No. 10953 for cigarettes.
Hence, registration is barred under Sec. 4 (d) of Rep. Act No. 166 as
amended.
Subject mark has no trademark significance and can not serve its purpose
as to indicate the source and origin of goods.
Furthermore, the word "Mark" is generic and therefore incapable of
exclusive appropriation.
Makati, Metro Manila, April 6, 1983."

(Emphasis supplied)

Petitioners also invited attention to a certification dated 8 August 1986 issued

by Mr. Luis M. Daca, Jr., Assistant Director, Philippine Patent Office, to the effect
that Fortune's application for the mark "MARK" for cigarettes was declared
abandoned as of 16 February 1986 and was now deemed forfeited. In addition,
petitioners explained in some detail how Fortune's use of its mark "MARK" was
"destructive of [petitioners'] property right to [their] registered trademarks." 5
Further, petitioners assailed Fortune's argument that issuance of preliminary
injunction would cause "loss of revenue and taxes to the Government" and that
more damages would be sustained by Fortune than by petitioners since the
petitioners do not market their cigarettes in the Philippines.
After Fortune had filed an Opposition to petitioners' Second Motion, the trial court,
this time presided over by Judge Nicolas Galing, issued an Order dated 22 April
1987 denying once more the motion for issuance of a writ of preliminary injunction.

In this order, Judge Galing relied on two (2) points: firstly, according to the trial
judge, petitioners had not shown that the products they sought to protect from
Fortune's "MARK" cigarettes were "in actual use and available for commercial
purposes anywhere in the Philippines;" and secondly, it appeared that while
Fortune's original application had been abandoned, it could be refiled and was in
fact re-filed. Thus, Judge Galing in effect reiterated Judge Reyes's position that until
the Director of Patents had definitely acted upon Fortune's application for
registration of "MARK," petitioners' prayer for preliminary injunction could not be
granted.
Petitioners then filed a Petition for Review with the Supreme Court, which Petition
was docketed as G.R. No. 78141. The Court ordered respondents to file their
Comments on the Petition and on 30 September 1987, the Court referred the
Petition to the Court of Appeals.
In due course of time, the Court of Appeals, through Cacdac, Jr., J., 6 rendered a
decision on 5 May 1989 setting aside the 22 April 1987 order of the trial court and
ordering issuance of a writ of preliminary injunction upon filing of a bond by
petitioners in the sum of P200,000.00 to be approved by the appellate court,
"enjoining the private respondents, its agents, employees and representatives from
manufacturing, selling and/or advertising "MARK" cigarettes until further orders."
The Court of Appeals said in pertinent part:
There is no dispute that petitioners are the registered owners of the
trademarks for cigarettes "MARK VII," "MARK TEN," and "LARK". (Annexes B,
C and D, Petition). As found and reiterated by the Philippine Patent Office in
two (2) official communications dated April 6, 1983 and January 24, 1984,
the trademark "MARK" is "confusingly similar" to the trademarks of
petitioners, hence, registration was barred under Sec. 4(d) of Rep. Act No.
166, as amended (pp. 106, 139 SCA rollo). In a third official communication
dated April 8, 1986, the trademark application of private respondent for the
mark "MARK" under Serial No. 44008 filed on February 13, 1981 which was
declared abandoned as of February 16, 1986, is now deemed forfeited, there
being no revival made pursuant to Rule 98 of the Revised Rules of
Practitioners in Trademark Cases. (p. 107, CA rollo). The foregoing
documents or communications mentioned by petitioners as "the changes in
material facts which occurred after March 28, 1983", are not also questioned
by respondents. 7 (Emphasis supplied)
The Court of Appeals also noted the BIR letter of 30 January 1979 temporarily
granting Fortune's request for a permit to manufacture two (2) new brands of
cigarettes, including one branded "MARK," and the caveat (earlier noted) 8 that the
BIR's authorization would not give Fortune any protection against any person or
entity whose rights may be prejudiced by infringement or unfair competition on the

part of Fortune. The Court of Appeals also referred to the certificate dated 26
September 1986 of Mr. Cesar G. Sandico, then Director of Patents, issued upon
request of Fortune's counsel stating that there was a pending application for
registration of the trademark "MARK" for cigarettes under Serial No. 59872, filed on
16 September 1986, noting at the same time, that Director Sandico's certification
contained the followingcaveat or qualification:
This certification, however, does not give protection as against any person
or entity whose right may be prejudiced by infringement or unfair
competition in relation to the aforesaid trademark nor the right to register as
contrary to the provisions of the Trademark Law, Republic Act No. 166 as
amended and the Revised Rules of Practice in Trademark Cases. (Emphasis
supplied)
The Court of Appeals then went on to say that:
[We] believe and hold that petitioners have shown a prima facie case for the
issuance of the writ of prohibitory injunction for the purposes stated in their
complaint and subsequent motions for the issuance of the prohibitory writ.
(Buayan Cattle Co. v. Quintillan, 125 SCRA 276).
The requisites for the granting of preliminary injunction are the existence of
the right protected andthe facts against which the injunction is to be
directed as violative of said right. (Buayan Cattle Co. v. Quintillan, supra;
Ortigas & Co. vs. Ruiz, 148 SCRA 326). It is a writ framed according to the
circumstances of the case commanding an act which the Court regards as
essential to justice and restraining an act it deems contrary to equity and
good conscience (Rosauro vs. Cuneta, 151 SCRA 570). If it is not issued, the
defendant may, before final judgment, do or continue the doing of the act
which the plaintiff asks the court to restrain, and thus make ineffectual the
final judgment rendered afterwards granting the relief sought by the
plaintiff (Calo vs. Roldan, 76 Phil. 445). Generally, its grant or denial rests
upon the sound discretion of the Court except on a clear case of abuse
(Belish Investment & Finance Co. vs. Statement House, 151 SCRA 636).
Petitioners' right of exclusivity to their registered trademarks being clear
and beyond question, the respondent court's denial of the prohibitive writ
constituted excess of jurisdiction and grave abuse of discretion. If the lower
court does not grant preliminary injunction, the appellate court may grant
the same (Service Specialists, Inc. v. Sheriff of Manila. 145 SCRA 139). 9
(Emphasis supplied)
Fortune moved for reconsideration of the Decision of the Court of Appeals insisting
that petitioners must first prove their "clear, unmistakable and unquestioned right
to the writ, coupled with the possible damages it would suffer;" that petitioners had

not suffered any "great and irreparable injury to speak of" because "petitioners
have never done business in this country in the past nor in the future;" that, on the
other hand, Fortune had been authorized by the BIR to manufacture "MARK"
cigarettes, "thereby generating much needed funds for the Government;" that
Fortune's application for registration of its brandname "MARK" with the Philippine
Patent Office "still pending" and not "finally rejected" by the Director of Patents. On
12 July 1989, the Court of Appeals issued a Minute Resolution stating that the issues
and arguments in Fortune's motion for reconsideration had been "fully discussed" in
the Decision sought to be reconsidered, that no new arguments were raised, and
accordingly denied the Motion for Reconsideration.
Fortune then filed a "Motion to Dissolve Writ of Preliminary Injunction with Offer to
File Counterbond" date 25 July 1989, where it reiterated the basic arguments it
previously made.
A "Supplemental Motion to Lift Writ of Preliminary Injunction with Offer of
Counterbond" dated 17 August 1989 was next filed by Fortune. In this
"Supplemental Motion," Fortune averred that it had paid to the BIR for 1988 the
amount of P181,940,177.38 for specific taxes; while for January to July 1989, it had
paid the amount of P120,120,735.28. Fortune also referred to its employees
assigned to the manufacture of "MARK" cigarettes who were apparently
apprehensive that their services would eventually be terminated and that they
would join the ranks of the unemployed.
Petitioners filed an Opposition to the "Motion to Dissolve" and a Comment on the
"Supplemental Motion" of Fortune.
On 14 September 1989, the Court of Appeals once more through Cacdac, Jr., J.
issued a Resolution lifting the preliminary injunction it had earlier granted upon the
filing of counterbond by private respondent in the amount of P400,000.00 to answer
for any damages petitioners may suffer as a consequence of such lifting. In its
Resolution, the Court of Appeals referred to the "lots of workers employed [who] will
be laid off as a consequence of the injunction" and that Government "will stand to
lose the amount of specific taxes being paid by" Fortune. It when went on to say:
After a thorough re-examination of the issues involved and the arguments
advanced by both parties in the offer to file a counterbond and the
opposition thereto, WE believe that there are sound and cogent reasons for
Us to grant the dissolution of the writ of preliminary injunction by the offer of
the private respondent to put up a counterbond to answer for whatever
damages the petitioner may suffer as a consequence of the dissolution of
the preliminary injunction.

The petitioner will not be prejudiced nor stand to suffer irreparably as a

consequence of the lifting of the preliminary injunction considering that they
are not actually engaged in the manufacture of the cigarettes with the
trademarks in question and the filing of the counterbond will amply answer
for such damages.
While the rule is that an offer of a counterbond does not operate to dissolve
an injunction previously granted, nevertheless, it is equally true that an
injunction could be dissolved only upon good and valid grounds subject to
the sound discretion of the court. As WE have maintained the view that
there are sound and good reasons to lift the preliminary injunction the
motion to file a counterbond is granted. 10 (Emphasis supplied)

Petitioners filed a Motion for Reconsideration, without success.

In the instant Petition, petitioners make the following basic submissions:
1. that the Court of Appeals gravely abused its discretion amounting to
excess of jurisdiction when it required, contrary to law and jurisprudence
that in order that petitioners may suffer irreparable injury due to the lifting
of the injunction, petitioners should be using actually their registered
trademarks in commerce in the Philippines;
2. that the Court of Appeals gravely abused its discretion amounting to
excess of jurisdiction when it lifted the injunction in violation of Section 6 of
Rule 58 of the rules of Court;
3. that the Court of Appeals gravely abused its discretion amounting to
excess of jurisdiction when, after having found that the trial court had
committed grave abuse of discretion and exceeded its jurisdiction for having
refused to issue the writ of injunction to restrain respondent's acts that are
contrary to equity and good conscience, it made a complete about face for
legally insufficient grounds and authorized private respondent to continue
performing the very same acts that it had considered contrary to equity and
good conscience, thereby ignoring not only the mandates of the trademark
law, the international commitments of the Philippines, the judicial admission
of private respondent that it will have no more right to use the trademark
"MARK" after the Director of Patents shall have rejected the application to
register it, and the admonitions of the Supreme Court. 11
The Court required private respondent to file a comment. The comment reiterated
the basic arguments made by private respondent before the Court of Appeals:

a. the petitioners are not suffering any irreparable damage by the lifting of
the preliminary injunction by the Court of appeals. Whatever damages they
might suffer are "based purely on speculation, since by judicial admission,
petitioners are not doing business in the Philippines. Private respondent
stressed that petitioners "are not manufacturing, importing or selling "MARK
TEN," "MARK VII" or "LARK" in this country," notwithstanding "false
allegation" that petitioners have been "using" the said trademarks "in
commerce and trade" in the Philippines since 1963 up to the present.
b. that whatever damage petitioners may be suffering is negligible when
compared to the taxes that would have to be foregone by the Government
considering that private respondent "paid an annual specific tax of P240
Million only on the manufacture and sale of "MARK cigarettes." Private
respondent claims that, in contrast, petitioners which are foreign
corporations "based in three different countries" have not contributed
anything to Government tax revenues.
c. that the Court of Appeals lifted the writ of preliminary injunction it had
earlier issued upon the submission of a counter bond in double the amount
of the bond submitted by petitioners, under Section 6, Rule 58 of the Rules
of Court, which act was within the sound discretion of the Court of Appeals.
Private respondent also stresses that the right of petitioners to the
injunction was still being litigated before the trial court.
Reformulating the issues raised by the petitioners here, we think the principal issues
may be reduced to the following: firstly, is there a clear legal right to the relief
asked by petitioners in the form of a preliminary injunction to restrain private
respondent from manufacturing, selling and distributing cigarettes under the
trademark "MARK"? The second question is: are private respondent's acts
complained of by petitioners causing irreparable injury to petitioners' rights in the
premises? These two (2) basic issues are obviously related and need to be
addressed together.
I
The first point that needs to be stressed is that petitioners have Philippine
Certificates of Registration for their trademarks "MARK TEN", "MARK VII," and
"LARK" in the Principal Register.
Upon the other hand, private respondent's trademark "MARK" is not registered in
the Principal Register in the Office of the Director of Patents; private respondents is
simply an applicant for registration of a mark, the status of which application may
be noted later.

It is important to stress the legal effects of registration of a trademark in the

Principal Register in the Office of the Director of Patents. Section 20 of R.A. No. 166,
as amended, sets out the principal legal effects of such registration:
Sec. 20. Certificate of registration prima facie evidence of validity. A
certificate of registration, of a mark or a trade name shall be prima facie
evidence of the validity of the registration, the registrant's ownership of the
mark or trade name, and of the registrant's exclusive right to use the same
in connection with the goods, business or services specified in the
certificate, subject to any conditions and limitations stated therein.
(Emphasis supplied)
In Lorenzana v. Macagba, 12 the Court distinguished between the effects of
registration in the Principal Register and registration in the Supplemental Register in
the following manner:
(1) Registration in the Principal Register gives rise to a presumption of the
validity of the registration, the registrant's ownership of the mark, and his
right to the exclusive use thereof. There is no such presumption in
registrations in the Supplemental Register.
(2) Registration in the Principal Register is limited to the actual owner of the
trademark (Unno Commercial Enterprises v. Gen. Milling Corp., 120 SCRA
804 [1983]) and proceedings therein pass on the issue of ownership, which
may be contested through opposition or interference proceedings, or after
registration, in a petition for cancellation.
Registration in the Principal Register is constructive notice of the registrant's
claims of ownership, while registration in the Supplemental Register is
merely proof of actual use of the trademark and notice that the registrant
has used or appropriated it. (Le Chemise Lacoste, S.A. v. Fernandez, 129
SCRA 373 [1984]: "Registration in the Supplemental Register . . . serves as
notice that the registrant is using or has appropriated the trademark.") It is
not subject to opposition although it may be cancelled after its issuance.
Corollarilly, registration in the Principal Register is a basis for an action for
infringement, while registration in the Supplemental Register is not.
(3) In application for registration in the Principal Register, publication of the
application is necessary. This is not so in applications for registration in the
Supplemental Register. Certificates of registration under both Registers are
also different from each other.
(4) Proof of registration in the Principal Register may be filed with the
Bureau of Customs to exclude foreign goods bearing infringing marks while

it does not hold true for registrations in the Supplemental Register.

(Emphasis supplied)

13

When taken with the companion presumption of regularity of performance of official

duty, it will be seen that issuance of a Certificate of Registration of a trademark in
the Principal Register also gives rise to the presumption that
all requirements of Philippine law necessary for a valid registration (including prior
use in commerce in the Philippines for at least two [2] months) were complied with
and satisfied.
In contrast, private respondent filed an application for registration of its mark
"MARK" for cigarettes with the Director of Patents soon after it commenced
manufacturing and selling cigarettes trademark with "MARK." This application was
abandoned or "forfeited", 14 for failure of private respondent to file a necessary
Paper with the Director of Patent. It also appears, however, that private respondent
later re-filed or reinstated its application for registration of "MARK" 15 and that, so
far as the record here before us is concerned, this application remains merely an
application and has not been granted and a Certificate of Registration in the
Principal Register issued. 16 While final action does not appear as yet to have been
taken by the Director of Patents on private respondent's application, there was at
least a preliminary determination of the trademark examiners that the trademark
"MARK" was "confusingly similar" with petitioners' marks "MARK VII," "MARK TEN"
and "LARK" and that accordingly, registration was barred under Section 4 (d) of R.A.
No. 166, as amended. 17

In the trial court, both Judge Reyes and Judge Galing took the position that until the
Director of Patents shall have finally acted on private respondent's application for
registration of "MARK," petitioners cannot be granted the relief of preliminary
injunction. It is respectfully submitted that this position is both erroneous and
unfortunate. In reliance upon that position, private respondent has kept its
application for registration alive and pending. The Director of Patents in turn may
well have refrained from taking final action on that application, even in the absence
of a restraining order from the courts, out of deference to the courts. The pendency
of the application before the Director of Patents is not in itself a reason for denying
preliminary injunction. Our courts have jurisdiction and authority to determine
whether or not "MARK" is an infringement on petitioners' registered trademarks.
Under our case law, the issuance of a Certificate of Registration of a trademark in
the Principal Register by the Director of Patents would not prevent a court from
ruling on whether or not the trademark so granted registration is confusingly similar
with a previously registered trademark, where such issue is essential for resolution

of a case properly before the court. A fortiori, a mere application for registration
cannot be a sufficient reason for denying injunctive relief, whether preliminary or
definitive. In the case at bar, petitioners' suit for injunction and for damages for
infringement, and their application for a preliminary injunction against private
respondent, cannot be resolved without resolving the issue of claimed confusing
similarity.
In the case at bar, the evidence of record is scanty. Petitioners have not submitted
actual copies or photographs of their registered marks as used in cigarettes. Private
respondent has not, for its part, submitted the actual labels or packaging material
used in selling its "MARK" cigarettes. Petitioners have appended to their Petition a
photocopy of an advertisement of "MARK" cigarettes. Private respondent has not
included in the record a copy of its application for registration of "MARK" for
cigarettes, which would include a facsimile of the trademark being applied for. It
should be noted that "MARK" and "LARK," when read or pronounced orally,
constitute idem sonansin striking degree. Further, "MARK" has taken over the
dominant word in "MARK VII" and "MARK TEN." These circumstances, coupled with
private respondent's failure to explain how or why it chose, out of all the words in
the English language, the word "mark" to refer to its cigarettes, lead me to the
submission that there is a prima faciebasis for holding, as the Patent Office has held
and as the Court of Appeals did hold originally, that private respondent's "MARK"
infringes upon petitioners' registered trademarks.
II
There is thus no question as to the legal rights of petitioners as holders of
trademarks registered in the Philippines. Private respondent, however, resists and
assails petitioners' effort to enforce their legal rights by heavily underscoring the
fact that petitioners are not registered to do business in the Philippines and are not
in fact doing business in the Philippines. It is thus necessary to determine what
consequences, if any, flow from this circumstance so far as enforcement of
petitioners' rights as holders of registered Philippine trademarks is concerned.
It should be stressed at the outset that circumstance has no legal impact upon the
right of petitioners to own and register their trademarks in the Philippines. Section 2
of R.A. No. 166 as amended expressly recognizes as registrable, under this statute,
marks which are owned by corporations domiciled in any foreign country:
Sec. 2. What are registrable. Trademarks, trade names and service marks
owned by persons, corporations, partnerships or associations domiciled in
the Philippines and by persons, corporations, partnerships or associations
domiciled in any foreign country may be registered in accordance with the
provisions of this Act; Provided, That said trade marks, trade names or
service marks are actually in use in commerce and services not less than

two months in the Philippines before the time the applications for
registration are filed: And provided further, That the country of which the
applicant for registration is a citizen grants by law substantially similar
privileges to citizens of the Philippines, and such fact is officially certified,
with a certified true copy of the foreign law translated into the English
language, by the government of the foreign country to the Government of
the Republic of the Philippines. (Emphasis in the original)
It is also entirely clear that foreign corporations and corporations domiciled in a
foreign country are not disabled from bringing suit in Philippine courts to protect
their rights as holders of trademarks registered in the Philippines. Under Section 21A of R.A. No. 166, as amended, any foreign corporation which is a holder of a
trademark registered under Philippine law may bring an action for infringement of
such mark or for unfair competition or false designation of origin and false
description "whether or not it has been licensed to do business in the Philippines
under the [Corporation Law] at the time it brings complaint, subject to the proviso
that:
. . . that the country of which the said foreign corporation or juristic person is
a citizen or in which it is domiciled by treaty, convention or law, grants
similar privilege to corporate or juristic persons of the Philippines. (Emphasis
supplied)
The rule thus embodied in Section 21-A of R.A. No. 166 as amended is also set out
in Article 2 of the Paris Convention for the Protection of Industrial Property ("Paris
Convention"), to which the Philippines, the United States, Canada and Switzerland
are all parties. 18 Article 2 of the Paris Convention provides in relevant part:
Article 2
(1) Nationals of any country of the Union shall, as regards the protection of
industrial property, enjoy in all the other countries of the Union the
advantages that their respective laws now grant, or may hereafter grant, to
nationals; all without prejudice to the rights specially provided for by this
Convention. Consequently, they shall have the same protection as the latter,
and the same legal remedy against any infringement of their rights,
provided that the conditions and formalities imposed upon national are
complied with.
(2) However, no requirement as to domicile or establishment in the country
where protection is claimed may be imposed upon nationals of countries of
the Union for the enjoyment of any industrial property rights.
xxx xxx xxx

(Emphasis supplied)
Article 2, paragraph 1 of the Paris Convention embodies the principle of "national
treatment" or "assimilation with nationals," one of the basic rules of the Convention.
19
Under Article 2, paragraph 1 of the Paris Convention, nationals of Canada,
Switzerland and the United States who are all countries of the Paris Union are
entitled to enjoy in the Philippines, also a country of the Union, the advantages and
protections which Philippine law grants to Philippine nationals. Article 2 paragraph 2
of the Paris Convention restrains the Philippines from imposing a requirement of
local incorporation or establishment of a local domicile as a pre-requisite for
granting to foreign nationals the protection which nationals of the Philippines are
entitled to under Philippine law in respect of their industrial property rights. It
should be noted that Article 2, paragraph 2 also constitutes proof of compliance
with the requirement of reciprocity between, on the one hand, the Philippines and,
on the other hand, Canada, Switzerland and the United States required under
Section 21-A of R.A. No. 166 as amended.
The net effect of the statutory and treaty provisions above referred to is that a
corporate national of a member country of the Paris Union is entitled to bring in
Philippine courts an action for infringement of trademarks, or for unfair competition,
without necessity for obtaining registration or a license to do business in the
Philippines. Article 2 as quoted above is in effect with respect to all four (4)
countries.
Such has been the rule in our jurisdiction even before the enactment of R.A. No. 166
and before the Philippines became a party to the Paris Convention. In Western
Equipment and Supplies Company, et al. v. Reyes, etc., et al., 20 petitioner Western
Electrical Company, a U.S. manufacturer of electrical and telephone equipment and
supplies not doing business in the Philippines, commenced action in a Philippine
court to protect its corporate name from unauthorized use thereof by certain
Philippine residents. The Philippine residents sought to organize a Philippine
corporation to be known as "Western Electrical Company" for the purpose of
manufacturing and selling electrical and telephone equipment in the Philippines.
The local residents resisted the suit by contending, inter alia, that the petitioner
Western Electrical Company had never transacted business in the Philippines and
that registration of private respondent's articles of incorporation could not in any
way injure petitioner. The Supreme Court, in rejecting this argument, stated that:
. . . a foreign corporation which has never done business in the Philippines
but is widely and favorably known in the Philippines through the use therein
of its products bearing its corporate name and tradename has a legal right
to maintain an action in the [Philippines]. The purpose of such a suit is to
protect its reputation, corporate name and goodwill which has been
established through the natural development of its trade for a long period of

years in the doing of which it does not seek to enforce any legal or contract
rights arising from or closing out of any business which it has transacted in
the Philippines. . . . 21 (Emphasis supplied)

Similarly, in Asari Yoko v. Kee Boc, 22 a Japanese corporation, also not engaged in
any business in the Philippines, successfully opposed an application for registration
of its trademark "Race Brand" on shirts and undershirts by a local businessman,
even though the Japanese company had not previously registered its own mark
"Race Brand" in the Philippines.

Again, in General Garments Corporation v. Director of Patents and Puritan

Sportswear Corporation, 23 Puritan Sportswear Corporation, an entity organized in
Pennsylvania U.S.A. and not doing business in the Philippines, filed a petition for
cancellation of the mark "Puritan" which was registered in the name of petitioner
General Garments Corporation for assorted men's wear, undershirts, briefs, shirts,
sweaters and jackets. Puritan Sportswear alleged ownership and prior use of the
trademark "Puritan" in the Philippines. Petitioner General Garments, on the other
hand, contended that Puritan Sportswear, being a foreign corporation not licensed
to do, and not doing, business in the Philippines, could not maintain an action for
cancellation of a trademark. The Court, in upholding the Director of Patents'
cancellation of the registration of the mark "Puritan" in the name of General
Garments, said:
. . . .such mark should not have been registered in the first place (and
consequently may be cancelled if so required) if it consists of
or comprises a mark or tradename which so resembles a mark or tradename
. . . . previously used in the Philippines by another and not abandoned, as to
be likely, when applied to or used in connection with goods, business or
services of the applicant, to cause confusion or mistake or to deceive
purchasers. 24 (Emphasis supplied)

In Converse Rubber Corporation v. Universal Rubber Products, Inc., 25 petitioner

Converse Rubber Corporation was an American manufacturer of rubber shoes, not
doing business on its own in the Philippines and not licensed to do business in the
Philippines, opposed the application for registration of the trademark "Universal
Converse and Device" to be used also in rubber shoes and rubber slippers by
private respondent Universal Rubber Products, Inc. ("Universal"). In reversing the

Director of Patents and holding that Universal's application must be rejected, the
Supreme Court said:
The sales of 12 to 20 pairs a month of petitioner's rubber shoes cannot be
considered insignificant, considering that they appear to be of high
expensive quality, which not too many basketball players can afford to buy.
Any sale made by a legitimate trader from his store is a commercial act
establishing trademark rights since such sales are made in due course of
business to the general public, not only to limited individuals. It is a matter
of public knowledge that all brands of goods filter into the market,
indiscriminately sold by jobbers, dealers and merchants not necessarily with
the knowledge or consent of the manufacturer. Such actual sale of goods in
the local market establishes trademark use which serves as the basis for
any action aimed at trademark pre-emption. It is a corollary logical
deduction that while Converse Rubber Corporation is not licensed to do
business in the country and is not actually doing business here, it does not
mean that its goods are not being sold here or that it has not earned a
reputation or goodwill as regards its products. The Director of Patents was,
therefore, remiss in ruling that the proofs sales presented "was made by a
single witness who had never dealt with nor had never known opposer
(petitioner) . . . without Opposer having a direct or indirect hand in the
transaction to be the basis of trademark pre-exemption. 26(Emphasis
supplied)

Three (3) other cases may be noted. The first is La Chemise Lacoste, S.A. v.
Fernandez 27 La Chemise Lacoste, S.A. although a foreign corporation not engaged
in and not licensed to do business in the Philippines, was accorded protection for its
trademarks "Lacoste", "Chemise Lacoste," and "Crocodile Device" for clothing and
sporting apparel. The Court recognized that those marks were "world famous
trademarks which the Philippines, as a party to the Paris Union, is bound to protect."
Similarly, in Del Monte Corporation, et al. v. Court of Appeals, et al., 28 petitioner Del
Monte Corporation was a company organized under the laws of the United States
and not engaged in business in the Philippines. Because both the Philippines and
the United States are signatories to the Convention of Paris, which grants to
nationals of the parties the rights and advantages which their own nationals enjoy
for the repression of acts of infringement and unfair competition, the Court, having
found that private respondent's label was an infringement of Del Monte's
trademark, held Del Monte entitled to recover damages.
In Puma Sportschuhfabriken Rudolf Dassler, K.G. v. Intermediate appellate Court, et
al, 29 petitioner Puma was a foreign corporation existing under the laws of the
Federal Republic of Germany not registered to do business and not doing business

in the Philippines, filed a complaint for infringement of trademark and for issuance
of a writ of preliminary injunction against a local manufacturing company. Reversing
the Court of Appeals, this Court held that Puma had legal capacity to bring the suit
in the Philippines under Section 21-A of R.A. No. 166 as amended and under the
provisions of the Paris Convention to which both the Philippines and the Federal
Republic of Germany are parties. The Court also noted that "Puma" is an
internationally known brandname.
The relevancy of the doctrines set out in the cases above cited are conceded by my
distinguished brother Melo, J. in the majority opinion. The majority opinion, however,
goes on to say:
In other words, petitioners may have the capacity to sue for infringement
irrespective of lack of business activity in the Philippines on account of
Section 21-A of the Trademark Law but the question of whether they have an
exclusive right over their symbols as to justify issuance of the controversial
writ will depend on actual use of their trademarks in the Philippines in line
with Sections 2 and 2-A of the same law. It is thus incongruous for
petitioners to claim that when a foreign corporation not licensed to do
business in the Philippines files a complaint for infringement, the entity
need not be actually using its trademark in commerce in the Philippines.
Such a foreign corporation may have the personality to file a suit for
infringement but it may not necessarily be entitled to protection due to
absence of actual use of the emblem in the local market.
With great respect, certain essential qualifications must be made respecting the
above paragraph. Firstly, of the petitioners' three (3) marks here involved, two (2) of
them i.e., "MARK TEN" and "LARK" were registered in the Philippines on the
basis of actual use in the Philippines, precisely in accordance with the requirements
of Section 2-A and Section 5 (A) of R.A. No. 166 as amended. The pre-registration
use in commerce and trade in the Philippines for at least two (2) months as required
by the statute, is explicitly stated in the Certificates of Registration. The very fact
that the appropriate Philippine Government office issued the Certificates of
Registration necessarily gave rise to the presumption that such pre-registration use
had in fact been shown to the satisfaction of the Philippine Patent Office (now the
Bureau of Patents, Trademark and Technology Transfer ["BPTTT"]). It is important to
note that respondent Fortune has not purported to attack the validity of the
trademarks "Mark Ten" and "Lark" by pretending that no pre-registration use in
commerce in the Philippines had been shown. 30

The third mark of petitioners "MARK VII" was registered in the Philippines on
the basis of Section 37 of R.A. No. 166 as amended, i.e., on the basis of registration

in the country of origin and under the Paris Convention. In such registration, by the
express provisions of Section 37 (b) of R.A. No. 166 as amended, prior (preregistration) use in commerce in the Philippines need not be alleged.
Whether the Philippine trademark was based on actual use in the Philippines (under
Section 2-A) or on registration in a foreign country of origin (under Section 37), the
statute appears to require that trademarks (at least trademarks not shown to be
internationally "well-known") must continue to be used in trade and commerce in
the Philippines. It is, however, essential to point out that such continued use, as a
requirement for the continued right to the exclusive use of the registered
trademark, is presumed so long as the Certificate of Registration remains
outstanding and so long as the registered trademark owner complies with the
requirements of Section 12 of R.A. No. 166 as amended of filing affidavits with the
BPTTT on the 5th, 10th and 15th anniversaries of the date of issuance of the
Certificate of Registration, showing that the trademark is still in use or showing that
its non-use is not due to any intention to abandon the same. In the case at bar,
again, respondent Fortune has not explicitly pretended that the petitioners'
trademarks have been abandoned by non-use in trade and commerce in the
Philippines although it appears to insinuate such non-use and abandonment by
stressing that petitioners are not doing business in the Philippines.
That petitioners are not doing business and are not licensed to do business in the
Philippines, does not by any means mean either that petitioners have not complied
with the requirements of Section 12 of R.A. No. 166 relating to affidavits of
continued use, or that petitioners' trademarks are not in fact used in trade and
commerce in the Philippines. In the Converse case, as earlier noted, the Court held
that the circumstance that the foreign owner of a Philippine trademark is not
licensed to do business and is not doing business in the Philippines, does not mean
that petitioner's goods (that is, goods bearing petitioner's trademark) are not sold in
the Philippines. For cigarettes bearing petitioners' trademarks may in fact be
imported into and be available for sale in the Philippines through the acts of
importers or distributors. Petitioners have stated that their "Mark VII," "Mark Ten"
and "Lark" cigarettes are in fact brought into the country and available for sale here
in, e.g., duty-free shops, though not imported into or sold in the Philippines by
petitioners themselves. There is no legal requirement that the foreign registrant
itself manufacture and sell its products here. All the statute requires is the use in
trade and commerce in the Philippines, and that can be carried out by third party
manufacturers operating under license granted by the foreign registrant or by the
importation and distribution of finished products by independent importers or
traders. The "use" of the trademark in such instances by the independent third
parties constitutes use of the foreign registrant's trademarks to the benefit of the
foreign registrant. 31

III
We turn to petitioners' claim that they are suffering irreparable damage by reason of
the manufacture and sale of cigarettes under the trademark "MARK." Here again, a
basic argument of private respondent was that petitioners had not shown any
damages because they are not doing business in the Philippines. I respectfully
maintain that this argument is specious and without merit.
That petitioners are not doing business and are not licensed to do business in the
Philippines, does notnecessarily mean that petitioners are not in a position to
sustain, and do not in fact sustain, damage through trademark infringement on the
part of a local enterprise. 32 Such trademark infringement by a local company may,
for one thing, affect the volume of importation into the Philippines of cigarettes
bearing petitioners' trademarks by independent or third party traders.
The damage which the petitioners claim they are sustaining by reason of the acts of
private respondents, are not limited to impact upon the volume of actual imports
into the Philippines of petitioners' cigarettes. Petitioners urge that private
respondent's use of its confusingly similar trademark "MARK" is invasive and
destructive of petitioners property right in their registered trademarks because.
a) Plaintiffs' undeniable right to the exclusive use of their registered
trademarks is effectively effaced by defendant's use of a confusingly similar
trademark;
b) Plaintiffs would lose control of the reputation of their products as their
reputation will depend on defendant's commercial activities and the quality
of defendant's products;
c) The market in the Philippines for plaintiffs' products will be pre-empted;
d) Purchasers will think that defendant's goods are approved or sponsored
by plaintiff;
e) Defendant will be allowed to benefit from the reputation of the plaintiffs'
goods and trademarks;
f) Defendant will be effectively authorized to continually invade plaintiffs'
property rights, for which invasion no fair and reasonable redness can be
had in a court of law; and
g) Plaintiffs will lose their goodwill and trade and the value of their
registered trademarks will irreparably diluted and the damages to be
suffered by plaintiffs cannot be redressed fairly in terms of money. 33

Modern authorities on trademark law view trademarks as symbols which perform

three (3) distinct functions: first, they indicate origin or ownership of the articles to
which they are attached; second, they guarantee that those articles come up to a
certain standard of quality; third, they advertise the articles they symbolize. 34

The first two (2) functions have long been recognized in trademark law which
characterizes the goodwill or business reputation symbolized by a trademark as a
property right protected by law. Thus, the owner of a trademark is held entitled to
exclude others from the use of the same, or of a confusingly similar, mark where
confusion results in diversion of trade or financial injury. At the same time,
trademarks warn against the imitation or faking of products and prevent the
imposition of fraud upon the public. The first two (2) functions of trademarks were
aptly stressed in e.g., the La Chemise Lacoste case where the objectives of
trademark protection were described in the following terms:
. . . to stem the tide of fake and counterfeit consumer items flooding the
Philippine market or exported abroad from our country. The greater victim is
not so much the manufacturer whose product is being faked but
the Filipino consuming public and in the case of exportations, our image
abroad . . . . We buy a kitchen appliance, a household tool, perfume, a face
powder, other toilet articles, watches, brandy or whisky, and items of
clothing like jeans, T-shirts, neckties, etc. the list is quite lengthy and
pay good money relying on the brand name as guarantee of its quality and
genuine nature only to explode in bitter frustration and helpless anger
because the purchased item turns out to be a shoddy imitation, albeit a
clever looking counterfeit, of the quality product . . . . 35
The third or advertisement function of trademark has become of especial
importance given the modern technology of communication and transportation and
the growth of international trade. 36 Through advertisement in the broadcast and
print media, the owner of the trademark is able to establish a nexus between its
trademark products and the public in regions where the owner does not itself
manufacture or sell its own products. 37 Through advertisement, a well-established
and well-earned reputation may be gained in countries where the trademark owner
has itself no established business connection. 38 Goodwill may thus be seen to be
much less closely confined territorially than, say, a hundred or fifty years ago. 39 It is
no longer true that "a trademark of itself cannot travel to markets where there is no
article to wear the badge and no trader to offer the article." 40 Advertisement of
trademarks is geared towards the promotion of use of the marked article and the
attraction of potential buyers and users; 41 by fixing the identity of the marked
article in the public mind, it prepares the way for growth in such commerce whether

the commerce be handled by the trademark owner itself or by its licensees or

independent traders.
That a registered trademark has value in itself apart from the trade physically
accompanying its use, has been recognized by our Court. In Ang v. Teodoro, 42 the
Court was called upon the determine whether there was infringement in the use of
the same trademark on articles which do not belong to the same class of goods
which the lawful trademark owner manufactures and sells. In holding that there was
infringing use in such case, the Court said:
. . . . such unfair trading can cause injury or damage to the first user of a
given trade-mark, first, by prevention of the natural expansion of his
business and, second, by having his business reputation confused with and
put at the mercy of the second user. When noncompetitive products are sold
under the same mark, the gradual whittling away or dispersion of the
identity and hold upon the public mind of the mark created by its first user,
inevitably result. The original owner is entitled to the preservation of the
valuable link between him and the public that has been created by his
ingenuity and the merit of his wares or services. Experience has
demonstrated that when a well-known trade-mark is adopted by another
even for a totally different class of goods, it is done to get the benefit of the
reputation and advertisements of the originator of said mark, to convey to
the public a false impression of some supposed connection between the
manufacturer of the article sold under the original mark and the new articles
being tendered to the public under the same or similar mark . . . The owner
of a trademark or tradename has a property right in which he is entitled to
protection, since there is damage to him in the form of confusion of
reputation or goodwill in the mind of the public as well as from confusion of
goods. (Emphasis supplied)
In Sta. Ana v. Maliwat, 43 the Court, through J.B.L. Reyes, J., in holding that the
use of the name "Flormen" with respect to shoes was infringement of the mark
"Flormann" used in the men's wear such as shirts, polo shirts and pants, said:
Modern law recognizes that the protection to which the owner of a trademark is entitled is not limited to guarding his goods or business from actual
market competition with identical or similar products of the parties, but
extends to all cases in which the use by a junior appropriator of a trademark or trade-name is likely to lead to a confusing of source, as where
prospective purchasers would be misled into thinking that the complaining
party has extended his business into the field (see 148 ALR 56 et seq; 52
Am. Jur. 576) or is in any way connected with the activities of the infringer;
or when itforestalls the normal potential expansion of his business (v. 148
ALR, 77, 84; 52 Am. Jur. 576, 577). . . .. 44 (Emphasis supplied)

Petitioners did not try to put a peso figure on their claimed damage arising from the
erosion and possible eventual destruction of the symbolic value of their trademark.
Such damage, while not easily quantifiable, is nonetheless real and effective. I
submit, with respect, that such continuing damage falls clearly within the concept of
irreparable damage or injury described in Social Security Commission v. Bayona 45 in
the following terms:
Damages are irreparable within the meaning of the rule relative to the
issuance of injunction where there is no standard by which their amount can
be measured with reasonable accuracy (Crouc v. Central Labor Council, 83
ALR, 193). "An irreparable injury which a court of equity will enjoin includes
that degree of wrong of a repeated and continuing kind which produce hurt,
inconvenience, or damage that can be estimated only by conjecture, and
not by any accurate standard of measurement" (Phipps v. Rogue River Valley
Canal Co., 7 ALR, 741). An irreparable injury to authorize an injunction
consists of a serious charge of, or is destructive to, the property if affects,
either physically or in the character in which it has been held and enjoined,
or when the property has some peculiar quality or use, so that its pecuniary
value will not fairly recompense the owner of the loss thereof' (Dunker v.
Field and Tub Club, 92 P., 502).
Respondent corporations made a lengthy discourse on the matter of
irreparable injury they may suffer if the injunction were not issued, but the
array of figures they have laid out merely succeeded in proving that the
damage, if any they may suffer, is susceptible of mathematical computation.
It is not then irreparable. As already stated, this term has a definite meaning
in law. It does not have reference to the amount of damages that may be
caused but rather to the difficulty of measuring the damages inflicted. If full
compensation can be obtained by way of damages, equity will not apply the
remedy of injunction (28 Am. Jur., 244; 43 C.J.S., 427, 446). 46
I next turn to private respondent's claim that issuance of an injunction would
impose heavy damage upon itself and upon Government. As noted, private
respondent stated that it had paid many millions of pesos as ad valoremand VAT
taxes to the Government in 1988 and 1989 in connection with its "MARK" cigarettes.
47
Presumably, the total volume of its business associated with the manufacture and
sale of cigarettes trademarked "MARK" would be even larger. In addition, private
respondent suggests, albeit indirectly only, that hundreds if not thousands of its
employees would find themselves unemployed if it were restrained from the
manufacture and sale of "MARK" cigarettes.
Private respondent's claims concerning alleged damages both to itself and to the
Government, which obviously loomed very large in the mind of the majority here,
and of the Court of Appeals when it lifted the injunction it had issued, appear to me

to be extravagant indeed. Petitioners cannot claim to be entitled to an injunction

which could restrain private respondent from manufacturing and selling cigarettes
completely; petitioner do not pretend to be so entitled to such a comprehensive
injunction. Petitioners seek only the reinstatement of the original injunction issued
by the Court of Appeals, i.e., one that restrains private respondent from using the
trademark "MARK" on its cigarettes. There is nothing to prevent private respondent
from continuing to manufacture and sell cigarettes under any of its already existing
and registered trademarks, of which it has several, or under some new and specially
created trademark(s). Realistically, private respondent, if enjoined, would lose only
the value of the packaging material imprinted with the same trademark (which
cigarettes and material may well be amenable to re-cycling) and the cost of past
advertisements of "MARK" in media, if any. Thus, the apprehension on the part of
the majority which private respondent tried diligently to foment that the
Government would lose many millions of pesos in tax revenues and that many
employees would lose their jobs, if an injunction is issued is more apparent than
real. The damages private respondent would sustain from reinstatement of the
preliminary injunction are clearly quantifiable in pesos.
Besides, as pointed out by petitioners, to pay heed to private respondent's creative
economic argument would ultimately mean that the greater the volume of sales and
the profits of the infringer, the greater would be the infringer's claim to be entitled
to continue infringement. I respectfully submit that the law should not countenance
such a cynical result.
My conclusion is that private respondent's claims concerning damage which it would
sustain if the petitioners were granted the injunction they seek, did not constitute a
sufficient basis for overturning the original decision of the Court of Appeals. The
Resolution of the Court of Appeals granting private respondent's Motion to Dissolve,
in effect disregarded everything that Court had set out in its original Decision. The
mere offer and filing of a counterbond does not, by itself, provide a sufficient basis
for lifting the preliminary injunction earlier granted. For all the elements which
supported the original issuance of a preliminary injunction continued to exist.
Private respondent's hyperbolic claims concerning the damages that it and the
Government would sustain by reason of an injunction, had been made earlier both
before the trial court and the Court of Appeals. Finally, it is not enough to say as
private respondent says, that the Court of Appeals in granting its Motion to Dissolve
the preliminary injunction was merely exercising its discretion; for the Court of
Appeals obviously was also exercising its discretion when it rendered its original
Decision granting the preliminary injunction.
I vote to grant due course to the petition for Certiorari, to set aside the Resolution of
the respondent Court of Appeals dated 14 September 1989 in C.A.-G.R. SP No.
13132 and to reinstate the Decision of that same Court dated 5 May 1989.

15.Gonzales vs Hechanova, 9 SCRA 230

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-21897

October 22, 1963

RAMON A. GONZALES, petitioner,

vs.
RUFINO G. HECHANOVA, as Executive Secretary, MACARIO PERALTA, JR., as
Secretary of Defense, PEDRO GIMENEZ, as Auditor General, CORNELIO
BALMACEDA, as Secretary of Commerce and Industry, and SALVADOR
MARINO, Secretary of Justice, respondents.
Ramon A. Gonzales in his own behalf as petitioner.
Office of the Solicitor General and Estanislao Fernandez for respondents.
CONCEPCION, J.:
This is an original action for prohibition with preliminary injunction.
It is not disputed that on September 22, 1963, respondent Executive Secretary
authorized the importation of 67,000 tons of foreign rice to be purchased from
private sources, and created a rice procurement committee composed of the other
respondents herein1 for the implementation of said proposed importation.
Thereupon, or September 25, 1963, herein petitioner, Ramon A. Gonzales a rice
planter, and president of the Iloilo Palay and Corn Planters Association, whose
members are, likewise, engaged in the production of rice and corn filed the
petition herein, averring that, in making or attempting to make said importation of
foreign rice, the aforementioned respondents "are acting without jurisdiction or in
excess of jurisdiction", because Republic Act No. 3452 which allegedly repeals or
amends Republic Act No. 220 explicitly prohibits the importation of rice and corn
"the Rice and Corn Administration or any other government agency;" that petitioner
has no other plain, speedy and adequate remedy in the ordinary course of law; and
that a preliminary injunction is necessary for the preservation of the rights of the
parties during the pendency this case and to prevent the judgment therein from
coming ineffectual. Petitioner prayed, therefore, that said petition be given due
course; that a writ of preliminary injunction be forthwith issued restraining
respondent their agents or representatives from implementing the decision of the

Executive Secretary to import the aforementioned foreign rice; and that, after due
hearing, judgment be rendered making said injunction permanent.
Forthwith, respondents were required to file their answer to the petition which they
did, and petitioner's pray for a writ of preliminary injunction was set for hearing at
which both parties appeared and argued orally. Moreover, a memorandum was filed,
shortly thereafter, by the respondents. Considering, later on, that the resolution said
incident may require some pronouncements that would be more appropriate in a
decision on the merits of the case, the same was set for hearing on the merits
thereafter. The parties, however, waived the right to argue orally, although counsel
for respondents filed their memoranda.
I. Sufficiency of petitioner's interest.
Respondents maintain that the status of petitioner as a rice planter does not give
him sufficient interest to file the petition herein and secure the relief therein prayed
for. We find no merit in this pretense. Apart from prohibiting the importation of rice
and corn "by the Rice and Corn Administration or any other government agency".
Republic Act No. 3452 declares, in Section 1 thereof, that "the policy of the
Government" is to "engage in the purchase of these basic foods directly from those
tenants, farmers, growers, producers and landowners in the Philippines who wish to
dispose of their products at a price that will afford them a fair and just return for
their labor and capital investment. ... ." Pursuant to this provision, petitioner, as a
planter with a rice land of substantial proportion, 2 is entitled to a chance to sell to
the Government the rice it now seeks to buy abroad. Moreover, since the purchase
of said commodity will have to be effected with public funds mainly raised by
taxation, and as a rice producer and landowner petitioner must necessarily be a
taxpayer, it follows that he has sufficient personality and interest to seek judicial
assistance with a view to restraining what he believes to be an attempt to
unlawfully disburse said funds.
II. Exhaustion of administrative remedies.
Respondents assail petitioner's right to the reliefs prayed for because he "has not
exhausted all administrative remedies available to him before coming to court". We
have already held, however, that the principle requiring the previous exhaustion of
administrative remedies is not applicable where the question in dispute is purely a
legal one",3 or where the controverted act is "patently illegal" or was performed
without jurisdiction or in excess of jurisdiction, 4 or where the respondent is a
department secretary, whose acts as an alter-ego of the President bear the implied
or assumed approval of the latter, 5 unless actually disapproved by him, 6 or where
there are circumstances indicating the urgency of judicial intervention. 7 The case at
bar fails under each one of the foregoing exceptions to the general rule.
Respondents' contention is, therefore, untenable.

III. Merits of petitioner's cause of action.

Respondents question the sufficiency of petitioner's cause of action upon the theory
that the proposed importation in question is not governed by Republic Acts Nos.
2207 and 3452, but was authorized by the President as Commander-in-Chief "for
military stock pile purposes" in the exercise of his alleged authority under Section 2
of Commonwealth Act No. 1;8 that in cases of necessity, the President "or his
subordinates may take such preventive measure for the restoration of good order
and maintenance of peace"; and that, as Commander-in-Chief of our armed forces,
"the President ... is duty-bound to prepare for the challenge of threats of war or
emergency without waiting for any special authority".
Regardless of whether Republic Act No. 3452 repeals Republic Act No. 2207, as
contended by petitioner herein - on which our view need not be expressed we are
unanimously of the opinion - assuming that said Republic Act No. 2207 is still in
force that the two Acts are applicable to the proposed importation in question
because the language of said laws is such as to include within the purview thereof
all importations of rice and corn into the Philippines". Pursuant to Republic Act No.
2207, "it shall be unlawful for any person, association, corporation orgovernment
agency to import rice and corn into any point in the Philippines", although, by way
of exception, it adds, that "the President of the Philippines may authorize the
importation of these commodities through any government agency that he may
designate", is the conditions prescribed in Section 2 of said Act are present.
Similarly, Republic Act No. 3452 explicitly enjoins "the Rice and Corn Administration
or any government agency" from importing rice and corn.
Respondents allege, however, that said provisions of Republic Act Nos. 2207 and
3452, prohibiting the importation of rice and corn by any "government agency", do
not apply to importations "made by the Government itself", because the latter is not
a "government agency". This theory is devoid of merit. The Department of National
Defense and the Armed Forces of the Philippines, as well as respondents herein, and
each and every officer and employee of our Government, our government agencies
and/or agents. The applicability of said laws even to importations by the
Government as such, becomes more apparent when we consider that:
1. The importation permitted in Republic Act No. 2207 is to be authorized by the
"President of the Philippines"and, hence, by or on behalf of the Government of the
Philippines;
2. Immediately after enjoining the Rice and Corn administration and any other
government agency from importing rice and corn, Section 10 of Republic Act No.
3452 adds "that the importation of rice and corn is left to private parties upon
payment of the corresponding taxes", thus indicating that only "private parties"
may import rice under its provisions; and

3. Aside from prescribing a fine not exceeding P10,000.00 and imprisonment of not
more than five (5) years for those who shall violate any provision of Republic Act No.
3452 or any rule and regulation promulgated pursuant thereto, Section 15 of said
Act provides that "if the offender is a public official and/or employees", he shall be
subject to the additional penalty specified therein. A public official is an officer of
the Government itself, as distinguished from officers or employees of
instrumentalities of the Government. Hence, the duly authorized acts of the former
are those of the Government, unlike those of a government instrumentality which
may have a personality of its own, distinct and separate from that of the
Government, as such. The provisions of Republic Act No. 2207 are, in this respect,
even more explicit. Section 3 thereof provides a similar additional penalty for any
"officer or employee of the Government" who "violates, abets or tolerates the
violation of any provision" of said Act. Hence, the intent to apply the same to
transactions made by the very government is patent.
Indeed, the restrictions imposed in said Republic Acts are merely additional to those
prescribed in Commonwealth Act No. 138, entitled "An Act to give native products
and domestic entities the preference in the purchase of articles for the
Government." Pursuant to Section 1 thereof:
The Purchase and Equipment Division of the Government of the Philippines and
other officers and employees of the municipal and provincial governments and
the Government of the Philippines and of chartered cities, boards, commissions,
bureaus, departments, offices, agencies, branches, and bodies of any
description, including government-owned companies, authorized to requisition,
purchase, or contract or make disbursements for articles, materials, and
supplies for public use, public buildings, or public works shall give preference to
materials ... produced ... in the Philippines or in the United States, and to
domestic entities, subject to the conditions hereinbelow specified. (Emphasis
supplied.)
Under this provision, in all purchases by the Government, including those made by
and/or for the armed forces,preference shall be given to materials produced in the
Philippines. The importation involved in the case at bar violates this general policy
of our Government, aside from the provisions of Republic Acts Nos. 2207 and 3452.
The attempt to justify the proposed importation by invoking reasons of national
security predicated upon the "worsening situation in Laos and Vietnam", and "the
recent tension created by the Malaysia problem" - and the alleged powers of the
President as Commander-in-Chief of all armed forces in the Philippines, under
Section 2 of the National Defense Act (Commonwealth Act No. 1), overlooks the fact
that the protection of local planters of rice and corn in a manner that would foster
and accelerate self-sufficiency in the local production of said commodities
constitutes a factor that is vital to our ability to meet possible national emergency.

Even if the intent in importing goods in anticipation of such emergency were to

bolster up that ability, the latter would, instead, be impaired if the importation were
so made as to discourage our farmers from engaging in the production of rice.
Besides, the stockpiling of rice and corn for purpose of national security and/or
national emergency is within the purview of Republic Act No. 3452. Section 3
thereof expressly authorizes the Rice and Corn Administration "to accumulate
stocks as a national reserve in such quantities as it may deem proper and necessary
to meet any contingencies". Moreover, it ordains that "the buffer stocks held as a
national reserve ... be deposited by the administration throughout the country
under the proper dispersal plans ... and may be released only upon the occurrence
of calamities or emergencies ...". (Emphasis applied.)
Again, the provisions of Section 2 of Commonwealth Act No. 1, upon which
respondents rely so much, are not self-executory. They merely outline the general
objectives of said legislation. The means for the attainment of those objectives are
subject to congressional legislation. Thus, the conditions under which the services of
citizens, as indicated in said Section 2, may be availed of, are provided for in
Sections 3, 4 and 51 to 88 of said Commonwealth Act No. 1. Similarly, Section 5
thereof specifies the manner in which resources necessary for our national defense
may be secured by the Government of the Philippines, but only "during a national
mobilization",9which does not exist. Inferentially, therefore, in the absence of a
national mobilization, said resources shall be produced in such manner as Congress
may by other laws provide from time to time. Insofar as rice and corn are
concerned, Republic Acts Nos. 2207 and 3452, and Commonwealth Act No. 138 are
such laws.
Respondents cite Corwin in support of their pretense, but in vain. An examination of
the work cited10 shows that Corwin referred to the powers of the President during
"war time"11 or when he has placed the country or a part thereof under "martial
law".12 Since neither condition obtains in the case at bar, said work merely proves
that respondents' theory, if accepted, would, in effect, place the Philippines under
martial law, without a declaration of the Executive to that effect. What is worse, it
would keep us perpetually under martial law.
It has been suggested that even if the proposed importation violated Republic Acts
Nos. 2207 and 3452, it should, nevertheless, be permitted because "it redounds to
the benefit of the people". Salus populi est suprema lex, it is said.
If there were a local shortage of rice, the argument might have some value. But the
respondents, as officials of this Government, have expressly affirmed again and
again that there is no rice shortage. And the importation is avowedly for stockpile of
the Army not the civilian population.

But let us follow the respondents' trend of thought. It has a more serious implication
that appears on the surface. It implies that if an executive officer believes that
compliance with a certain statute will not benefit the people, he is at liberty to
disregard it. That idea must be rejected - we still live under a rule of law.
And then, "the people" are either producers or consumers. Now as respondents
explicitly admit Republic Acts Nos. 2207 and 3452 were approved by the
Legislature for the benefit of producers and consumers, i.e., the people, it must
follow that the welfare of the people lies precisely in the compliance with said Acts.
It is not for respondent executive officers now to set their own opinions against that
of the Legislature, and adopt means or ways to set those Acts at naught. Anyway,
those laws permit importation but under certain conditions, which have not been,
and should be complied with.
IV. The contracts with Vietnam and Burma
It is lastly contended that the Government of the Philippines has already entered
into two (2) contracts for the Purchase of rice, one with the Republic of Vietnam, and
another with the Government of Burma; that these contracts constitute valid
executive agreements under international law; that such agreements became
binding effective upon the signing thereof by representatives the parties thereto;
that in case of conflict between Republic Acts Nos. 2207 and 3452 on the one hand,
and aforementioned contracts, on the other, the latter should prevail, because, if a
treaty and a statute are inconsistent with each other, the conflict must be resolved
under the American jurisprudence in favor of the one which is latest in point of
time; that petitioner herein assails the validity of acts of the Executive relative to
foreign relations in the conduct of which the Supreme Court cannot interfere; and
the aforementioned contracts have already been consummated, the Government of
the Philippines having already paid the price of the rice involved therein through
irrevocable letters of credit in favor of the sell of the said commodity. We find no
merit in this pretense.
The Court is not satisfied that the status of said tracts as alleged executive
agreements has been sufficiently established. The parties to said contracts do not
pear to have regarded the same as executive agreements. But, even assuming that
said contracts may properly considered as executive agreements, the same are
unlawful, as well as null and void, from a constitutional viewpoint, said agreements
being inconsistent with the provisions of Republic Acts Nos. 2207 and 3452.
Although the President may, under the American constitutional system enter into
executive agreements without previous legislative authority, he may not, by
executive agreement, enter into a transaction which is prohibited by statutes
enacted prior thereto. Under the Constitution, the main function of the Executive is
to enforce laws enacted by Congress. The former may not interfere in the

performance of the legislative powers of the latter, except in the exercise of his veto
power. He may not defeat legislative enactments that have acquired the status of
law, by indirectly repealing the same through an executive agreement providing for
the performance of the very act prohibited by said laws.
The American theory to the effect that, in the event of conflict between a treaty and
a statute, the one which is latest in point of time shall prevail, is not applicable to
the case at bar, for respondents not only admit, but, alsoinsist that the contracts
adverted to are not treaties. Said theory may be justified upon the ground that
treaties to which the United States is signatory require the advice and consent of its
Senate, and, hence, of a branch of the legislative department. No such justification
can be given as regards executive agreements not authorized by previous
legislation, without completely upsetting the principle of separation of powers and
the system of checks and balances which are fundamental in our constitutional set
up and that of the United States.
As regards the question whether an international agreement may be invalidated by
our courts, suffice it to say that the Constitution of the Philippines has clearly settled
it in the affirmative, by providing, in Section 2 of Article VIII thereof, that the
Supreme Court may not be deprived "of its jurisdiction to review, revise, reverse,
modify, or affirm on appeal, certiorari, or writ of error as the law or the rules of court
may provide, final judgments and decrees of inferior courts in (1) All cases in
which the constitutionality or validity of any treaty, law, ordinance, or executive
order or regulation is in question". In other words, our Constitution authorizes the
nullification of a treaty, not only when it conflicts with the fundamental law, but,
also, when it runs counter to an act of Congress.
The alleged consummation of the aforementioned contracts with Vietnam and
Burma does not render this case academic, Republic Act No. 2207 enjoins our
Government not from entering into contracts for the purchase of rice, but from
importing rice, except under the conditions Prescribed in said Act. Upon the other
hand, Republic Act No. 3452 has two (2) main features, namely: (a) it requires the
Government to purchase rice and corn directlyfrom our local planters, growers or
landowners; and (b) it prohibits importations of rice by the Government, and leaves
such importations to private parties. The pivotal issue in this case is whether the
proposed importation which has not been consummated as yet is legally
feasible.
Lastly, a judicial declaration of illegality of the proposed importation would not
compel our Government to default in the performance of such obligations as it may
have contracted with the sellers of the rice in question, because, aside from the fact
that said obligations may be complied with without importing the commodity into
the Philippines, the proposed importation may still be legalized by complying with
the provisions of the aforementioned laws.

V. The writ of preliminary injunction.

The members of the Court have divergent opinions on the question whether or not
respondents herein should be enjoined from implementing the aforementioned
proposed importation. However, the majority favors the negative view, for which
reason the injunction prayed for cannot be granted.
WHEREFORE, judgment is hereby rendered declaring that respondent Executive
Secretary had and has no power to authorize the importation in question; that he
exceeded his jurisdiction in granting said authority; said importation is not
sanctioned by law and is contrary to its provisions; and that, for lack of the requisite
majority, the injunction prayed for must be and is, accordingly denied. It is so
ordered.
Bengzon, CJ, Padilla, Labrador, Reyes, J.B.L., Dizon and Makalintal, JJ., concur.
Paredes and Regala, JJ., concur in the result.

Separate Opinions
BAUTISTA ANGELO, J., concurring:
Under Republic Act No. 2207, which took effect on May 15, 1959, it is unlawful for
any person, association, corporation or government agency to import rice and corn
into any point in the Philippines. The exception is if there is an existing or imminent
shortage of such commodity of much gravity as to constitute national emergency in
which case an importation may be authorized by the President when so certified by
the National Economic Council.
However, on June 14, 1962, Republic Act 3452 was enacted providing that the
importation of rice and corn canonly be made by private parties thereby prohibiting
from doing so the Rice and Corn Administration or any other government agency.
Republic Act 3452 does not expressly repeal Republic Act 2207, but only repeals or
modified those parts thereof that are inconsistent with its provisions. The question
that now arises is: Has the enactment of Republic Act 3452 the effect of prohibiting
completely the government from importing rice and corn into the Philippines?
My answer is in the negative. Since this Act does not in any manner provide for the
importation of rice and corn in case of national emergency, the provision of the
former law on that matter should stand, for that is not inconsistent with any
provision embodied in Republic Act 3452. The Rice and Corn Administration, or any
other government agency, may therefore still import rice and corn into the

Philippines as provided in Republic Act 2207 if there is a declared national

emergency.
The next question that arises is: Can the government authorize the importation of
rice and corn regardless of Republic Act 2207 if that is authorized by the President
as Commander-in-Chief of the Philippine Army as a military precautionary measure
for military stockpile?
Respondents answer this question in the affirmative. They advance the argument
that it is the President's duty to see to it that the Armed Forces of the Philippines are
geared to the defenses of the country as well as to the fulfillment of our
international commitments in Southeast Asia in the event the peace and security of
the area are in danger. The stockpiling of rice, they aver, is an essential requirement
of defense preparation in view of the limited local supply and the probable
disruption of trade and commerce with outside countries in the event of armed
hostilities, and this military precautionary measure is necessary because of the
unsettled conditions in the Southeast Asia bordering on actual threats of armed
conflicts as evaluated by the Intelligence Service of the Military Department of our
Government. This advocacy, they contend, finds support in the national defense
policy embodied in Section 2 of our National Defense Act (Commonwealth Act No.
1), which provides:
(a) The preservation of the State is the obligation of every citizen. The security
of the Philippines and the freedom, independence and perpetual neutrality of
the Philippine Republic shall be guaranteed by the employment of all citizens,
without distinction of sex or age, and all resources.
(b) The employment of the nation's citizens and resources for national defense
shall be effected by a national mobilization.
(c) The national mobilization shall include the execution of all measures
necessary to pass from a peace to a war footing.
(d) The civil authority shall always be supreme. The President of the Philippines
as the Commander-in-Chief of all military forces, shall be responsible that
mobilization measures are prepared at all times.(Emphasis supplied)
Indeed, I find in that declaration of policy that the security of the Philippines and its
freedom constitutes the core of the preservation of our State which is the basic duty
of every citizen and that to secure which it is enjoined that the President employ all
the resources at his command. But over and above all that power and duty,
fundamental as they may seem, there is the injunction that the civil authority shall
always be supreme. This injunction can only mean that while all precautions should
be taken to insure the security and preservation of the State and to this effect the

employment of all resources may be resorted to, the action must always be taken
within the framework of the civil authority. Military authority should be harmonized
and coordinated with civil authority, the only exception being when the law clearly
ordains otherwise. Neither Republic Act 2207, nor Republic Act 3452, contains any
exception in favor of military action concerning importation of rice and corn. An
exception must be strictly construed.
A distinction is made between the government and government agency in an
attempt to take the former out of the operation of Republic Act 2207. I disagree. The
Government of the Republic of the Philippines under the Revised Administrative
Code refers to that entity through which the functions of government are exercised,
including the various arms through which political authority is made effective
whether they be provincial, municipal or other form of local government, whereas a
government instrumentality refers to corporations owned or controlled by the
government to promote certain aspects of the economic life of our people. A
government agency, therefore, must necessarily refer to the government itself of
the Republic, as distinguished from any government instrumentality which has a
personality distinct and separate from it (Section 2).
The important point to determine, however, is whether we should enjoin
respondents from carrying out the importation of the rice which according to the
record has been authorized to be imported on government to government level, it
appearing that the arrangement to this effect has already been concluded, the only
thing lacking being its implementation. This is evident from the manifestation
submitted by the Solicitor General wherein it appears that the contract for the
purchase of 47,000 tons of rice from had been sign on October 5, 1963, and for the
purchase of 20,000 tons from Burma on October 8, 1963, by the authorized
representatives of both our government and the governments of Vietnam and
Burma, respectively. If it is true that, our government has already made a formal
commitment with the selling countries there arises the question as to whether the
act can still be impeded at this stage of the negotiations. Though on this score there
is a divergence of opinion, it is gratifying to note that the majority has expressed
itself against it. This is a plausible attitude for, had the writ been issued, our
government would have been placed in a predicament where, as a necessary
consequence, it would have to repudiate a duly formalized agreement to its great
embarrassment and loss of face. This was avoided by the judicial statesmanship
evinced by the Court.

BARRERA, J., concurring:

Because of possible complications that might be aggravated by misrepresentation
of the true nature and scope of the case before this Court, it is well to restate as

clearly as possible, the real and only issue presented by the respondents
representing the government.
From the answer filed by the Solicitor General, in behalf of respondents, we quote:
The importation of the rice in question by the Armed Forces of the Philippines is
for military stockpilingauthorized by the President pursuant to his inherent
power as commander-in-chief and as a military precautionary measure in view
the worsening situation in Laos and Vietnam and, it may added, the recent,
tension created by the Malaysia problem (Answer, p. 2; emphasis supplied.)
During the oral argument, Senator Fernandez, appealing in behalf of the
respondents, likewise reiterated the imported rice was for military stockpiling, and
which he admitted that some of it went to the Rice and Corn Administration, he
emphasized again and again that rice was not intended for the RCA for distribution
to people, as there was no shortage of rice for that purpose but it was only
exchanged for palay because this could better preserved.
From the memorandum filed thereafter by the Solicits General, again the claim was
made:
We respectfully reiterate the arguments in our answer dated October 4, 1963
that the importation of rice sought be enjoined in this petition is in the exercise
of the authority vested in the President of the Philippines as Commander-inChief of the Armed Forces, as a measure of military preparedness demanded by
a real and actual threat of emergency in the South East Asian countries. (p. 1,
Emphasis supplied.)
xxx

xxx

xxx

It (the stressing of the unsettled conditions in Southeast Asia) is merely our

intention to show the necessity for the stockpiling of rice for army purposes,
which is the very reason for the importation.
xxx

xxx

xxx

As it is, the importation in question is being made by the Republic of the

Philippines for its own use, and the rice is not supposed to be poured into the
open market as to affect the price to be paid by the public. (p. 4, Emphasis
supplied.)
xxx

xxx

xxx

What we do contend is that the law, for want of express and clear provision to
that effect, does not include in its prohibition importation by the Government of
rice for its own use and not for the consuming public, regardless of whether
there is or there is no emergency. (p. 5, Emphasis supplied.)
From the above, it not only appears but is evident that the respondents were not
concerned with the present rice situation confronting the consuming public, but
were solely and exclusively after the stockpiling of rice for thefuture use of the
army. The issue, therefore, in which the Government was interested is not whether
rice is imported to give the people a bigger or greater supply to maintain the price
at P.80 per ganta for, to quote again their contention: "the rice is not supposed to
be poured into the open market to affect the price to be paid by the public, as it is
not for the consuming public, regardless of whether there is or there is no
emergency", but whether rice can legally be imported by the Armed Forces of the
Philippines avowedly for its future use, notwithstanding the prohibitory provisions of
Republic Acts Nos. 2207 and 3452. The majority opinion ably sets forth the reasons
why this Court can not accept the contention of the respondents that this
importation is beyond and outside the operation of these statutes. I can only
emphasize that I see in the theory advanced by the Solicitor General a dangerous
trend that because the policies enunciated in the cited laws are for the protection
of the producers and the consumers, the army is removed from their application. To
adopt this theory is to proclaim the existence in the Philippines of three economic
groups or classes: the producers, the consumers, and the Armed Forces of the
Philippines. What is more portentous is the effect to equate the army with the
Government itself.
Then again, the importation of this rice for military stockpiling is sought to be
justified by the alleged threat of emergency in the Southeast Asian countries. But
the existence of this supposed threat was unilaterally determined by the
Department of National Defense alone. We recall that there exists a body called the
National Security Council in which are represented the Executive as well as the
Legislative department. In it sit not only members of the party in power but of the
opposition as well. To our knowledge, this is the highest consultative body which
deliberates precisely in times of emergency threatening to affect the security of the
state. The democratic composition of this council is to guarantee that its
deliberations would be non-partisan and only the best interests of the nation will be
considered. Being a deliberative body, it insures against precipitate action. This is
as it should be. Otherwise, in these days of ever present cold war, any change or
development in the political climate in any region of the world is apt to be taken as
an excuse for the military to conjure up a crisis or emergency and thereupon
attempt to override our laws and legal processes, and imperceptibly institute some
kind of martial law on the pretext of precautionary mobilization measure avowedly
in the interest of the security of the state. One need not, be too imaginative to
perceive a hint of this in the present case.

The Supreme Court, in arriving at the conclusion unanimously reached, is fully

aware of the difficult and delicate task it had to discharge. Its position is liable to be
exploited by some for their own purposes by claiming and making it appear that the
Court is unmindful of the plight of our people during these days of hardship; that it
preferred to give substance to the "niceties of the law than heed the needs of the
people. Our answer is that the Court was left no alternative. It had, in compliance
with its duty, to decide the case upon the facts presented to it. The respondents,
representing the administration, steadfastly maintained and insisted that there is no
rice shortage; that the imported rice is not for the consuming public and is not
supposed to be placed in the open market to affect the price to be paid by the
public; that it is solely for stockpiling of the army for future use as a measure of
mobilization in the face of what the Department of National Defense unilaterally
deemed a threatened armed conflict in Southeast Asia. Confronted with these facts
upon, which the Government has built and rested its case, we have searched in vain
for legal authority or cogent reasons to justify this importation made admittedly
contrary to the provisions of Republic Acts Nos. 2207 and 3452. I say admittedly,
because respondents never as much as pretended that the importation fulfills the
conditions specified in these laws, but limited themselves to the contention, which
is their sole defense that this importation does not fall within the scope of said laws.
In our view, however, the laws are clear. The laws are comprehensive and their
application does not admit of any exception. The laws are adequate. Compliance
therewith is not difficult, much less impossible. The avowed emergency, if at all, is
not urgently immediate.
In this connection, it is pertinent to bear in mind that the Supreme Court has a duty
to perform under the Constitution. It has to decide, when called upon to do so in an
appropriate proceeding, all cases in which the constitutionality or validity of any
treaty, law, ordinance, executive order or regulation is in question. We can not elude
this duty. To do so would be culpable dereliction on our part. While we sympathize
with the public that might be adversely affected as a result of this decision yet our
sympathy does not authorize us to sanction an act contrary to applicable laws. The
fault lies with those who stubbornly contended and represented before this Court
that there is no rice shortage, that the imported rice is not intended for the
consuming public, but for stockpiling of the army. And, if as now claimed before the
public, contrary to the Government's stand in this case, that there is need for
imported rice to stave off hunger, our legislature has provided for such a situation.
As already stated, the laws are adequate. The importation of rice under the
conditions set forth in the laws may be authorized not only where there is an
existing shortage, but also when the shortage is imminent. In other words, lawful
remedy to solve the situation is available, if only those who have the duty to
execute the laws perform their duty. If there is really need for the importation of
rice, who adopt some dubious means which necessitates resort to doubtful exercise
of the power of the President as Commander-in-Chief of the Army? Why not comply
with the mandate of the law? Ours is supposed to be a regime under the rule of law.

Adoption as a government policy of the theory of the end justifies the means
brushing aside constitutional and legal restraints, must be rejected, lest we end up
with the end of freedom.
For these reasons, I concur in the decision of the Court.

Separate Opinions
Footnotes
1

The Secretary of National Defense, the Auditor General, the Secretary of

Commerce and Industry, and the Secretary Justice.
2

275 hectares.

Tapales vs. The President and the Board of Regents of the U.P., L-17523, March
30, 1963.
4

Mangubat vs. Osmea, L-12837, April 30, 1959; Baguio vs. Hon. Jose
Rodriguez, L-11078, May 27, 1959; Pascual Provincial Board, L-11959, October
31, 1959.
5

Marinduque Iron Mines Agents, Inc. vs. Secretary of Public Works, L-15982, May
31, 1963.
6

In the present case, respondents allege in their answer that "the importation ...
in question ... is authorized by the President.
7

Alzate vs. Aldaba, L-14407, February 29, 1960; Demaisip vs. Court of Appeals,
L-13000, September 25, 1959.
8

Which provides that the national defense policy of the Philippines shall be
follows:
(a) The preservation of the state is the obligation of every citizen. The
security of the Philippines and the freedom, independence and perpetual
neutrality of the Philippine Republic shall be guaranteed by the employment
of all citizens, without distinction of sex or age, and all resources.
(b) The employment of the nation's citizens and resources for national
defense shall be effected by a national mobilization.

(c) The national mobilization shall include the execution of all measures
necessary to pass from a peace to a war footing.
(d) The civil authority shall always be supreme. The President of the
Philippines as the Commander-in-Chief of all military forces, shall be
responsible that mobilization measures are prepared at all times.
xxx

xxx

xxx

In line with the provisions of paragraphs b), c), e), and f) of section 2 of said
Act.
10

The Constitution and What It Means Today, pp. 95-96.

11

The Power of the President as Commander-in-Chief is primarily that of military

command in wartime, and as such includes, as against the persons and property
of enemies of the United States encountered within the theater of military
operations, all the powers allowed a military commander in such cases by the
Law of Nations. President Lincoln's famous Proclamation of Emancipation rested
upon this ground. It was effective within the theater of military operations while
the war lasted, but no longer. (p. 93, Emphasis supplied.)
12

From an early date the Commander-in-Chief power came to be merged with

the President's duty to take care that the laws be faithfully executed. So, while
in using military force against unlawful combinations too strong to be dealt with
through the ordinary processes of law the President acts by authorization of
statute, his powers are still those of Commander-in-Chief. ...
Under "preventive martial law", so-called because it authorizes "preventive"
arrests and detentions, the military acts as an adjunct of the civil authorities but
not necessarily subject to their orders. It may be established whenever the
executive organ, State or national, deems it to be necessary for the restoration
of good order. The concept, being of judicial origin, is of course for judicial
application, and ultimately for application by the Supreme Court, in enforcement
of the due process clauses. (See, also, Section III of this Article, and Article IV,
Section IV.) (Pp. 95-96, Emphasis supplied.)

16.Ichong vs Hernandez, GR No. L-7995, May 31, 1957

Republic of the Philippines

SUPREME COURT
Manila

EN BANC
G.R. No. L-7995

May 31, 1957

LAO H. ICHONG, in his own behalf and in behalf of other alien residents,
corporations and partnerships adversely affected. by Republic Act No.
1180, petitioner,
vs.
JAIME HERNANDEZ, Secretary of Finance, and MARCELINO SARMIENTO,
City Treasurer of Manila,respondents.
Ozaeta, Lichauco and Picazo and Sycip, Quisumbing, Salazar and Associates for
petitioner.
Office of the Solicitor General Ambrosio Padilla and Solicitor Pacifico P. de Castro for
respondent Secretary of Finance.
City Fiscal Eugenio Angeles and Assistant City Fiscal Eulogio S. Serrano for
respondent City Treasurer.
Dionisio Reyes as Amicus Curiae.
Marcial G. Mendiola as Amicus Curiae.
Emiliano R. Navarro as Amicus Curiae.
LABRADOR, J.:
I. The case and issue, in general
This Court has before it the delicate task of passing upon the validity and
constitutionality of a legislative enactment, fundamental and far-reaching in
significance. The enactment poses questions of due process, police power and equal
protection of the laws. It also poses an important issue of fact, that is whether the
conditions which the disputed law purports to remedy really or actually exist.
Admittedly springing from a deep, militant, and positive nationalistic impulse, the
law purports to protect citizen and country from the alien retailer. Through it, and
within the field of economy it regulates, Congress attempts to translate national
aspirations for economic independence and national security, rooted in the drive
and urge for national survival and welfare, into a concrete and tangible measures
designed to free the national retailer from the competing dominance of the alien, so
that the country and the nation may be free from a supposed economic dependence
and bondage. Do the facts and circumstances justify the enactment?
II. Pertinent provisions of Republic Act No. 1180
Republic Act No. 1180 is entitled "An Act to Regulate the Retail Business." In effect it
nationalizes the retail trade business. The main provisions of the Act are: (1) a
prohibition against persons, not citizens of the Philippines, and against associations,

partnerships, or corporations the capital of which are not wholly owned by citizens
of the Philippines, from engaging directly or indirectly in the retail trade; (2) an
exception from the above prohibition in favor of aliens actually engaged in said
business on May 15, 1954, who are allowed to continue to engaged therein, unless
their licenses are forfeited in accordance with the law, until their death or voluntary
retirement in case of natural persons, and for ten years after the approval of the Act
or until the expiration of term in case of juridical persons; (3) an exception
therefrom in favor of citizens and juridical entities of the United States; (4) a
provision for the forfeiture of licenses (to engage in the retail business) for violation
of the laws on nationalization, control weights and measures and labor and other
laws relating to trade, commerce and industry; (5) a prohibition against the
establishment or opening by aliens actually engaged in the retail business of
additional stores or branches of retail business, (6) a provision requiring aliens
actually engaged in the retail business to present for registration with the proper
authorities a verified statement concerning their businesses, giving, among other
matters, the nature of the business, their assets and liabilities and their offices and
principal offices of judicial entities; and (7) a provision allowing the heirs of aliens
now engaged in the retail business who die, to continue such business for a period
of six months for purposes of liquidation.
III. Grounds upon which petition is based-Answer thereto
Petitioner, for and in his own behalf and on behalf of other alien residents
corporations and partnerships adversely affected by the provisions of Republic Act.
No. 1180, brought this action to obtain a judicial declaration that said Act is
unconstitutional, and to enjoin the Secretary of Finance and all other persons acting
under him, particularly city and municipal treasurers, from enforcing its provisions.
Petitioner attacks the constitutionality of the Act, contending that: (1) it denies to
alien residents the equal protection of the laws and deprives of their liberty and
property without due process of law ; (2) the subject of the Act is not expressed or
comprehended in the title thereof; (3) the Act violates international and treaty
obligations of the Republic of the Philippines; (4) the provisions of the Act against
the transmission by aliens of their retail business thru hereditary succession, and
those requiring 100% Filipino capitalization for a corporation or entity to entitle it to
engage in the retail business, violate the spirit of Sections 1 and 5, Article XIII and
Section 8 of Article XIV of the Constitution.
In answer, the Solicitor-General and the Fiscal of the City of Manila contend that: (1)
the Act was passed in the valid exercise of the police power of the State, which
exercise is authorized in the Constitution in the interest of national economic
survival; (2) the Act has only one subject embraced in the title; (3) no treaty or
international obligations are infringed; (4) as regards hereditary succession, only the
form is affected but the value of the property is not impaired, and the institution of
inheritance is only of statutory origin.

IV. Preliminary consideration of legal principles involved

a. The police power.
There is no question that the Act was approved in the exercise of the police power,
but petitioner claims that its exercise in this instance is attended by a violation of
the constitutional requirements of due process and equal protection of the laws. But
before proceeding to the consideration and resolution of the ultimate issue involved,
it would be well to bear in mind certain basic and fundamental, albeit preliminary,
considerations in the determination of the ever recurrent conflict between police
power and the guarantees of due process and equal protection of the laws. What is
the scope of police power, and how are the due process and equal protection
clauses related to it? What is the province and power of the legislature, and what is
the function and duty of the courts? These consideration must be clearly and
correctly understood that their application to the facts of the case may be brought
forth with clarity and the issue accordingly resolved.
It has been said the police power is so far - reaching in scope, that it has become
almost impossible to limit its sweep. As it derives its existence from the very
existence of the State itself, it does not need to be expressed or defined in its
scope; it is said to be co-extensive with self-protection and survival, and as such it is
the most positive and active of all governmental processes, the most essential,
insistent and illimitable. Especially is it so under a modern democratic framework
where the demands of society and of nations have multiplied to almost
unimaginable proportions; the field and scope of police power has become almost
boundless, just as the fields of public interest and public welfare have become
almost all-embracing and have transcended human foresight. Otherwise stated, as
we cannot foresee the needs and demands of public interest and welfare in this
constantly changing and progressive world, so we cannot delimit beforehand the
extent or scope of police power by which and through which the State seeks to
attain or achieve interest or welfare. So it is that Constitutions do not define the
scope or extent of the police power of the State; what they do is to set forth the
limitations thereof. The most important of these are the due process clause and the
equal protection clause.
b. Limitations on police power.
The basic limitations of due process and equal protection are found in the following
provisions of our Constitution:
SECTION 1.(1) No person shall be deprived of life, liberty or property without
due process of law, nor any person be denied the equal protection of the laws.
(Article III, Phil. Constitution)

These constitutional guarantees which embody the essence of individual liberty and
freedom in democracies, are not limited to citizens alone but are admittedly
universal in their application, without regard to any differences of race, of color, or
of nationality. (Yick Wo vs. Hopkins, 30, L. ed. 220, 226.)
c. The, equal protection clause.
The equal protection of the law clause is against undue favor and individual or class
privilege, as well as hostile discrimination or the oppression of inequality. It is not
intended to prohibit legislation, which is limited either in the object to which it is
directed or by territory within which is to operate. It does not demand absolute
equality among residents; it merely requires that all persons shall be treated alike,
under like circumstances and conditions both as to privileges conferred and
liabilities enforced. The equal protection clause is not infringed by legislation which
applies only to those persons falling within a specified class, if it applies alike to all
persons within such class, and reasonable grounds exists for making a distinction
between those who fall within such class and those who do not. (2 Cooley,
Constitutional Limitations, 824-825.)
d. The due process clause.
The due process clause has to do with the reasonableness of legislation enacted in
pursuance of the police power. Is there public interest, a public purpose; is public
welfare involved? Is the Act reasonably necessary for the accomplishment of the
legislature's purpose; is it not unreasonable, arbitrary or oppressive? Is there
sufficient foundation or reason in connection with the matter involved; or has there
not been a capricious use of the legislative power? Can the aims conceived be
achieved by the means used, or is it not merely an unjustified interference with
private interest? These are the questions that we ask when the due process test is
applied.
The conflict, therefore, between police power and the guarantees of due process
and equal protection of the laws is more apparent than real. Properly related, the
power and the guarantees are supposed to coexist. The balancing is the essence or,
shall it be said, the indispensable means for the attainment of legitimate aspirations
of any democratic society. There can be no absolute power, whoever exercise it, for
that would be tyranny. Yet there can neither be absolute liberty, for that would
mean license and anarchy. So the State can deprive persons of life, liberty and
property, provided there is due process of law; and persons may be classified into
classes and groups, provided everyone is given the equal protection of the law. The
test or standard, as always, is reason. The police power legislation must be firmly
grounded on public interest and welfare, and a reasonable relation must exist
between purposes and means. And if distinction and classification has been made,
there must be a reasonable basis for said distinction.

e. Legislative discretion not subject to judicial review.

Now, in this matter of equitable balancing, what is the proper place and role of the
courts? It must not be overlooked, in the first place, that the legislature, which is the
constitutional repository of police power and exercises the prerogative of
determining the policy of the State, is by force of circumstances primarily the judge
of necessity, adequacy or reasonableness and wisdom, of any law promulgated in
the exercise of the police power, or of the measures adopted to implement the
public policy or to achieve public interest. On the other hand, courts, although
zealous guardians of individual liberty and right, have nevertheless evinced a
reluctance to interfere with the exercise of the legislative prerogative. They have
done so early where there has been a clear, patent or palpable arbitrary and
unreasonable abuse of the legislative prerogative. Moreover, courts are not
supposed to override legitimate policy, and courts never inquire into the wisdom of
the law.
V. Economic problems sought to be remedied
With the above considerations in mind, we will now proceed to delve directly into
the issue involved. If the disputed legislation were merely a regulation, as its title
indicates, there would be no question that it falls within the legitimate scope of
legislative power. But it goes further and prohibits a group of residents, the aliens,
from engaging therein. The problem becomes more complex because its subject is a
common, trade or occupation, as old as society itself, which from the immemorial
has always been open to residents, irrespective of race, color or citizenship.
a. Importance of retail trade in the economy of the nation.
In a primitive economy where families produce all that they consume and consume
all that they produce, the dealer, of course, is unknown. But as group life develops
and families begin to live in communities producing more than what they consume
and needing an infinite number of things they do not produce, the dealer comes
into existence. As villages develop into big communities and specialization in
production begins, the dealer's importance is enhanced. Under modern conditions
and standards of living, in which man's needs have multiplied and diversified to
unlimited extents and proportions, the retailer comes as essential as the producer,
because thru him the infinite variety of articles, goods and needed for daily life are
placed within the easy reach of consumers. Retail dealers perform the functions of
capillaries in the human body, thru which all the needed food and supplies are
ministered to members of the communities comprising the nation.
There cannot be any question about the importance of the retailer in the life of the
community. He ministers to the resident's daily needs, food in all its increasing
forms, and the various little gadgets and things needed for home and daily life. He

provides his customers around his store with the rice or corn, the fish, the salt, the
vinegar, the spices needed for the daily cooking. He has cloths to sell, even the
needle and the thread to sew them or darn the clothes that wear out. The retailer,
therefore, from the lowly peddler, the owner of a small sari-sari store, to the
operator of a department store or, a supermarket is so much a part of day-to-day
existence.
b. The alien retailer's trait.
The alien retailer must have started plying his trades in this country in the bigger
centers of population (Time there was when he was unknown in provincial towns
and villages). Slowly but gradually be invaded towns and villages; now he
predominates in the cities and big centers of population. He even pioneers, in far
away nooks where the beginnings of community life appear, ministering to the daily
needs of the residents and purchasing their agricultural produce for sale in the
towns. It is an undeniable fact that in many communities the alien has replaced the
native retailer. He has shown in this trade, industry without limit, and the patience
and forbearance of a slave.
Derogatory epithets are hurled at him, but he laughs these off without murmur;
insults of ill-bred and insolent neighbors and customers are made in his face, but he
heeds them not, and he forgets and forgives. The community takes note of him, as
he appears to be harmless and extremely useful.
c. Alleged alien control and dominance.
There is a general feeling on the part of the public, which appears to be true to fact,
about the controlling and dominant position that the alien retailer holds in the
nation's economy. Food and other essentials, clothing, almost all articles of daily life
reach the residents mostly through him. In big cities and centers of population he
has acquired not only predominance, but apparent control over distribution of
almost all kinds of goods, such as lumber, hardware, textiles, groceries, drugs,
sugar, flour, garlic, and scores of other goods and articles. And were it not for some
national corporations like the Naric, the Namarco, the Facomas and the Acefa, his
control over principal foods and products would easily become full and complete.
Petitioner denies that there is alien predominance and control in the retail trade. In
one breath it is said that the fear is unfounded and the threat is imagined; in
another, it is charged that the law is merely the result of radicalism and pure and
unabashed nationalism. Alienage, it is said, is not an element of control; also so
many unmanageable factors in the retail business make control virtually impossible.
The first argument which brings up an issue of fact merits serious consideration.
The others are matters of opinion within the exclusive competence of the legislature
and beyond our prerogative to pass upon and decide.

The best evidence are the statistics on the retail trade, which put down the figures
in black and white. Between the constitutional convention year (1935), when the
fear of alien domination and control of the retail trade already filled the minds of our
leaders with fears and misgivings, and the year of the enactment of the
nationalization of the retail trade act (1954), official statistics unmistakably point
out to the ever-increasing dominance and control by the alien of the retail trade, as
witness the following tables:
Assets
Year and Retailers
Nationality

No.Establishments

Pesos

Gross Sales
Per cent
Distributi Pesos
on

Per cent
Distributi
on

194
1:
Filipino ......... 106,671
.

200,323,1 55.82
38

174,181,9 51.74
24

Chinese ....... 15,356

....

118,348,6 32.98
92

148,813,2 44.21
39

Others ......... 1,646

...

40,187,09 11.20
0

13,630,23 4.05
9

Filipino ......... 111,107

.

208,658,9 65.05
46

279,583,3 57.03
33

Chinese ....... 13,774

....

106,156,2 33.56
18

205,701,1 41.96
34

Others ......... 354

..

8,761,260 .49

4,927,168 1.01

213,342,2 67.30
64

467,161,6 60.51
67

194
7:

194 (Census)
8:
Filipino ......... 113,631
.

Chinese ....... 12,087

...

93,155,45 29.38
9

294,894,2 38.20
27

Others ......... 422

.

10,514,67 3.32
5

9,995,402 1.29

Filipino ......... 113,659

.

213,451,6 60.89
02

462,532,9 53.47
01

Chinese ....... 16,248

...

125,223,3 35.72
36

392,414,8 45.36
75

Others ......... 486

.

12,056,36 3.39
5

10,078,36 1.17
4

Filipino ......... 119,352

224,053,6 61.09
20

466,058,0 53.07
52

Chinese ....... 17,429

...

134,325,3 36.60
03

404,481,3 46.06
84

Others ......... 347

.

8,614,025 2.31

7,645,327 87

194
9:

195
1:

AVERAGE
ASSETS AND GROSS SALES PER ESTABLISHMENT

Year and Retailer's

Nationality

1941
:

Item
Assets
(Pesos)

Gross
Sales
(Pesos)

Filipino .............................................

1,878

1,633

Chinese ............................................
..

7,707

9,691

Others ..............................................
.

24,415

8,281

Filipino .............................................

1,878

2,516

Chinese ...........................................

7,707

14,934

Others ..............................................

24,749

13,919

Filipino .............................................

1,878

4,111

Chinese ............................................
.

7,707

24,398

Others ..............................................

24,916

23,686

Filipino .............................................

1,878

4,069

Chinese ............................................
..

7,707

24,152

Others ..............................................

24,807

20,737

1947
:

1948
:

(Census)

1949
:

1951
:
Filipino .............................................

1,877

3,905

Chinese ............................................
.

7,707

33,207

Others ..............................................
.

24,824

22,033

(Estimated Assets and Gross Sales of Retail Establishments, By Year and

Nationality of Owners, Benchmark: 1948 Census, issued by the Bureau of
Census and Statistics, Department of Commerce and Industry; pp. 18-19 of
Answer.)
The above statistics do not include corporations and partnerships, while the figures
on Filipino establishments already include mere market vendors, whose capital is
necessarily small..
The above figures reveal that in percentage distribution of assests and gross sales,
alien participation has steadily increased during the years. It is true, of course, that
Filipinos have the edge in the number of retailers, but aliens more than make up for
the numerical gap through their assests and gross sales which average between six
and seven times those of the very many Filipino retailers. Numbers in retailers,
here, do not imply superiority; the alien invests more capital, buys and sells six to
seven times more, and gains much more. The same official report, pointing out to
the known predominance of foreign elements in the retail trade, remarks that the
Filipino retailers were largely engaged in minor retailer enterprises. As observed by
respondents, the native investment is thinly spread, and the Filipino retailer is
practically helpless in matters of capital, credit, price and supply.
d. Alien control and threat, subject of apprehension in Constitutional convention.
It is this domination and control, which we believe has been sufficiently shown to
exist, that is the legislature's target in the enactment of the disputed nationalization
would never have been adopted. The framers of our Constitution also believed in
the existence of this alien dominance and control when they approved a resolution
categorically declaring among other things, that "it is the sense of the Convention
that the public interest requires the nationalization of the retail trade; . . . ." (II
Aruego, The Framing of the Philippine Constitution, 662-663, quoted on page 67 of

Petitioner.) That was twenty-two years ago; and the events since then have not
been either pleasant or comforting. Dean Sinco of the University of the Philippines
College of Law, commenting on the patrimony clause of the Preamble opines that
the fathers of our Constitution were merely translating the general preoccupation of
Filipinos "of the dangers from alien interests that had already brought under their
control the commercial and other economic activities of the country" (Sinco, Phil.
Political Law, 10th ed., p. 114); and analyzing the concern of the members of the
constitutional convention for the economic life of the citizens, in connection with the
nationalistic provisions of the Constitution, he says:
But there has been a general feeling that alien dominance over the economic
life of the country is not desirable and that if such a situation should remain,
political independence alone is no guarantee to national stability and strength.
Filipino private capital is not big enough to wrest from alien hands the control of
the national economy. Moreover, it is but of recent formation and hence, largely
inexperienced, timid and hesitant. Under such conditions, the government as
the instrumentality of the national will, has to step in and assume the initiative,
if not the leadership, in the struggle for the economic freedom of the nation in
somewhat the same way that it did in the crusade for political freedom. Thus . . .
it (the Constitution) envisages an organized movement for the protection of the
nation not only against the possibilities of armed invasion but also against its
economic subjugation by alien interests in the economic field. (Phil. Political Law
by Sinco, 10th ed., p. 476.)
Belief in the existence of alien control and predominance is felt in other quarters.
Filipino businessmen, manufacturers and producers believe so; they fear the
dangers coming from alien control, and they express sentiments of economic
independence. Witness thereto is Resolution No. 1, approved on July 18, 1953, of
the Fifth National convention of Filipino Businessmen, and a similar resolution,
approved on March 20, 1954, of the Second National Convention of Manufacturers
and Producers. The man in the street also believes, and fears, alien predominance
and control; so our newspapers, which have editorially pointed out not only to
control but to alien stranglehold. We, therefore, find alien domination and control to
be a fact, a reality proved by official statistics, and felt by all the sections and
groups that compose the Filipino community.
e. Dangers of alien control and dominance in retail.
But the dangers arising from alien participation in the retail trade does not seem to
lie in the predominance alone; there is a prevailing feeling that such predominance
may truly endanger the national interest. With ample capital, unity of purpose and
action and thorough organization, alien retailers and merchants can act in such
complete unison and concert on such vital matters as the fixing of prices, the
determination of the amount of goods or articles to be made available in the

market, and even the choice of the goods or articles they would or would not
patronize or distribute, that fears of dislocation of the national economy and of the
complete subservience of national economy and of the consuming public are not
entirely unfounded. Nationals, producers and consumers alike can be placed
completely at their mercy. This is easily illustrated. Suppose an article of daily use is
desired to be prescribed by the aliens, because the producer or importer does not
offer them sufficient profits, or because a new competing article offers bigger profits
for its introduction. All that aliens would do is to agree to refuse to sell the first
article, eliminating it from their stocks, offering the new one as a substitute. Hence,
the producers or importers of the prescribed article, or its consumers, find the
article suddenly out of the prescribed article, or its consumers, find the article
suddenly out of circulation. Freedom of trade is thus curtailed and free enterprise
correspondingly suppressed.
We can even go farther than theoretical illustrations to show the pernicious
influences of alien domination. Grave abuses have characterized the exercise of the
retail trade by aliens. It is a fact within judicial notice, which courts of justice may
not properly overlook or ignore in the interests of truth and justice, that there exists
a general feeling on the part of the public that alien participation in the retail trade
has been attended by a pernicious and intolerable practices, the mention of a few of
which would suffice for our purposes; that at some time or other they have cornered
the market of essential commodities, like corn and rice, creating artificial scarcities
to justify and enhance profits to unreasonable proportions; that they have hoarded
essential foods to the inconvenience and prejudice of the consuming public, so
much so that the Government has had to establish the National Rice and Corn
Corporation to save the public from their continuous hoarding practices and
tendencies; that they have violated price control laws, especially on foods and
essential commodities, such that the legislature had to enact a law (Sec. 9, Republic
Act No. 1168), authorizing their immediate and automatic deportation for price
control convictions; that they have secret combinations among themselves to
control prices, cheating the operation of the law of supply and demand; that they
have connived to boycott honest merchants and traders who would not cater or
yield to their demands, in unlawful restraint of freedom of trade and enterprise.
They are believed by the public to have evaded tax laws, smuggled goods and
money into and out of the land, violated import and export prohibitions, control laws
and the like, in derision and contempt of lawful authority. It is also believed that
they have engaged in corrupting public officials with fabulous bribes, indirectly
causing the prevalence of graft and corruption in the Government. As a matter of
fact appeals to unscrupulous aliens have been made both by the Government and
by their own lawful diplomatic representatives, action which impliedly admits a
prevailing feeling about the existence of many of the above practices.
The circumstances above set forth create well founded fears that worse things may
come in the future. The present dominance of the alien retailer, especially in the big

centers of population, therefore, becomes a potential source of danger on occasions

of war or other calamity. We do not have here in this country isolated groups of
harmless aliens retailing goods among nationals; what we have are well organized
and powerful groups that dominate the distribution of goods and commodities in the
communities and big centers of population. They owe no allegiance or loyalty to the
State, and the State cannot rely upon them in times of crisis or emergency. While
the national holds his life, his person and his property subject to the needs of his
country, the alien may even become the potential enemy of the State.
f. Law enacted in interest of national economic survival and security.
We are fully satisfied upon a consideration of all the facts and circumstances that
the disputed law is not the product of racial hostility, prejudice or discrimination, but
the expression of the legitimate desire and determination of the people, thru their
authorized representatives, to free the nation from the economic situation that has
unfortunately been saddled upon it rightly or wrongly, to its disadvantage. The law
is clearly in the interest of the public, nay of the national security itself, and
indisputably falls within the scope of police power, thru which and by which the
State insures its existence and security and the supreme welfare of its citizens.
VI. The Equal Protection Limitation
a. Objections to alien participation in retail trade. The next question that now
poses solution is, Does the law deny the equal protection of the laws? As pointed
out above, the mere fact of alienage is the root and cause of the distinction
between the alien and the national as a trader. The alien resident owes allegiance to
the country of his birth or his adopted country; his stay here is for personal
convenience; he is attracted by the lure of gain and profit. His aim or purpose of
stay, we admit, is neither illegitimate nor immoral, but he is naturally lacking in that
spirit of loyalty and enthusiasm for this country where he temporarily stays and
makes his living, or of that spirit of regard, sympathy and consideration for his
Filipino customers as would prevent him from taking advantage of their weakness
and exploiting them. The faster he makes his pile, the earlier can the alien go back
to his beloved country and his beloved kin and countrymen. The experience of the
country is that the alien retailer has shown such utter disregard for his customers
and the people on whom he makes his profit, that it has been found necessary to
adopt the legislation, radical as it may seem.
Another objection to the alien retailer in this country is that he never really makes a
genuine contribution to national income and wealth. He undoubtedly contributes to
general distribution, but the gains and profits he makes are not invested in
industries that would help the country's economy and increase national wealth. The
alien's interest in this country being merely transient and temporary, it would

indeed be ill-advised to continue entrusting the very important function of retail

distribution to his hands.
The practices resorted to by aliens in the control of distribution, as already pointed
out above, their secret manipulations of stocks of commodities and prices, their
utter disregard of the welfare of their customers and of the ultimate happiness of
the people of the nation of which they are mere guests, which practices,
manipulations and disregard do not attend the exercise of the trade by the
nationals, show the existence of real and actual, positive and fundamental
differences between an alien and a national which fully justify the legislative
classification adopted in the retail trade measure. These differences are certainly a
valid reason for the State to prefer the national over the alien in the retail trade. We
would be doing violence to fact and reality were we to hold that no reason or ground
for a legitimate distinction can be found between one and the other.
b. Difference in alien aims and purposes sufficient basis for distinction.
The above objectionable characteristics of the exercise of the retail trade by the
aliens, which are actual and real, furnish sufficient grounds for legislative
classification of retail traders into nationals and aliens. Some may disagree with the
wisdom of the legislature's classification. To this we answer, that this is the
prerogative of the law-making power. Since the Court finds that the classification is
actual, real and reasonable, and all persons of one class are treated alike, and as it
cannot be said that the classification is patently unreasonable and unfounded, it is
in duty bound to declare that the legislature acted within its legitimate prerogative
and it can not declare that the act transcends the limit of equal protection
established by the Constitution.
Broadly speaking, the power of the legislature to make distinctions and
classifications among persons is not curtailed or denied by the equal protection of
the laws clause. The legislative power admits of a wide scope of discretion, and a
law can be violative of the constitutional limitation only when the classification is
without reasonable basis. In addition to the authorities we have earlier cited, we can
also refer to the case of Linsey vs. Natural Carbonic Fas Co. (1911), 55 L. ed., 369,
which clearly and succinctly defined the application of equal protection clause to a
law sought to be voided as contrary thereto:
. . . . "1. The equal protection clause of the Fourteenth Amendment does not
take from the state the power to classify in the adoption of police laws, but
admits of the exercise of the wide scope of discretion in that regard, and avoids
what is done only when it is without any reasonable basis, and therefore is
purely arbitrary. 2. A classification having some reasonable basis does not
offend against that clause merely because it is not made with mathematical
nicety, or because in practice it results in some inequality. 3. When the

classification in such a law is called in question, if any state of facts reasonably

can be conceived that would sustain it, the existence of that state of facts at the
time the law was enacted must be assumed. 4. One who assails the
classification in such a law must carry the burden of showing that it does not
rest upon any reasonable basis but is essentially arbitrary."
c. Authorities recognizing citizenship as basis for classification.
The question as to whether or not citizenship is a legal and valid ground for
classification has already been affirmatively decided in this jurisdiction as well as in
various courts in the United States. In the case of Smith Bell & Co. vs. Natividad, 40
Phil. 136, where the validity of Act No. 2761 of the Philippine Legislature was in
issue, because of a condition therein limiting the ownership of vessels engaged in
coastwise trade to corporations formed by citizens of the Philippine Islands or the
United States, thus denying the right to aliens, it was held that the Philippine
Legislature did not violate the equal protection clause of the Philippine Bill of Rights.
The legislature in enacting the law had as ultimate purpose the encouragement of
Philippine shipbuilding and the safety for these Islands from foreign interlopers. We
held that this was a valid exercise of the police power, and all presumptions are in
favor of its constitutionality. In substance, we held that the limitation of domestic
ownership of vessels engaged in coastwise trade to citizens of the Philippines does
not violate the equal protection of the law and due process or law clauses of the
Philippine Bill of Rights. In rendering said decision we quoted with approval the
concurring opinion of Justice Johnson in the case of Gibbons vs. Ogden, 9 Wheat., I,
as follows:
"Licensing acts, in fact, in legislation, are universally restraining acts; as, for
example, acts licensing gaming houses, retailers of spirituous liquors, etc. The
act, in this instance, is distinctly of that character, and forms part of an
extensive system, the object of which is to encourage American shipping, and
place them on an equal footing with the shipping of other nations. Almost every
commercial nation reserves to its own subjects a monopoly of its coasting trade;
and a countervailing privilege in favor of American shipping is contemplated, in
the whole legislation of the United States on this subject. It is not to give the
vessel an American character, that the license is granted; that effect has been
correctly attributed to the act of her enrollment. But it is to confer on her
American privileges, as contra distinguished from foreign; and to preserve the
Government from fraud by foreigners; in surreptitiously intruding themselves
into the American commercial marine, as well as frauds upon the revenue in the
trade coastwise, that this whole system is projected."
The rule in general is as follows:

Aliens are under no special constitutional protection which forbids a

classification otherwise justified simply because the limitation of the class falls
along the lines of nationality. That would be requiring a higher degree of
protection for aliens as a class than for similar classes than for similar classes of
American citizens. Broadly speaking, the difference in status between citizens
and aliens constitutes a basis for reasonable classification in the exercise of
police power. (2 Am., Jur. 468-469.)
In Commonwealth vs. Hana, 81 N. E. 149 (Massachusetts, 1907), a statute on the
licensing of hawkers and peddlers, which provided that no one can obtain a license
unless he is, or has declared his intention, to become a citizen of the United States,
was held valid, for the following reason: It may seem wise to the legislature to limit
the business of those who are supposed to have regard for the welfare, good order
and happiness of the community, and the court cannot question this judgment and
conclusion. In Bloomfield vs. State, 99 N. E. 309 (Ohio, 1912), a statute which
prevented certain persons, among them aliens, from engaging in the traffic of
liquors, was found not to be the result of race hatred, or in hospitality, or a
deliberate purpose to discriminate, but was based on the belief that an alien cannot
be sufficiently acquainted with "our institutions and our life as to enable him to
appreciate the relation of this particular business to our entire social fabric", and
was not, therefore, invalid. In Ohio ex rel. Clarke vs. Deckebach, 274 U. S. 392, 71 L.
ed. 115 (1926), the U.S. Supreme Court had under consideration an ordinance of
the city of Cincinnati prohibiting the issuance of licenses (pools and billiard rooms)
to aliens. It held that plainly irrational discrimination against aliens is prohibited, but
it does not follow that alien race and allegiance may not bear in some instances
such a relation to a legitimate object of legislation as to be made the basis of
permitted classification, and that it could not state that the legislation is clearly
wrong; and that latitude must be allowed for the legislative appraisement of local
conditions and for the legislative choice of methods for controlling an apprehended
evil. The case of State vs. Carrol, 124 N. E. 129 (Ohio, 1919) is a parallel case to the
one at bar. In Asakura vs. City of Seattle, 210 P. 30 (Washington, 1922), the business
of pawn brooking was considered as having tendencies injuring public interest, and
limiting it to citizens is within the scope of police power. A similar statute denying
aliens the right to engage in auctioneering was also sustained in Wright vs. May,
L.R.A., 1915 P. 151 (Minnesota, 1914). So also in Anton vs. Van Winkle, 297 F. 340
(Oregon, 1924), the court said that aliens are judicially known to have different
interests, knowledge, attitude, psychology and loyalty, hence the prohibitions of
issuance of licenses to them for the business of pawnbroker, pool, billiard, card
room, dance hall, is not an infringement of constitutional rights. In Templar vs.
Michigan State Board of Examiners, 90 N.W. 1058 (Michigan, 1902), a law
prohibiting the licensing of aliens as barbers was held void, but the reason for the
decision was the court's findings that the exercise of the business by the aliens does
not in any way affect the morals, the health, or even the convenience of the
community. In Takahashi vs. Fish and Game Commission, 92 L. ed. 1479 (1947), a

California statute banning the issuance of commercial fishing licenses to person

ineligible to citizenship was held void, because the law conflicts with Federal power
over immigration, and because there is no public interest in the mere claim of
ownership of the waters and the fish in them, so there was no adequate justification
for the discrimination. It further added that the law was the outgrowth of
antagonism toward the persons of Japanese ancestry. However, two Justices
dissented on the theory that fishing rights have been treated traditionally as natural
resources. In Fraser vs. McConway & Tarley Co., 82 Fed. 257 (Pennsylvania, 1897), a
state law which imposed a tax on every employer of foreign-born unnaturalized
male persons over 21 years of age, was declared void because the court found that
there was no reason for the classification and the tax was an arbitrary deduction
from the daily wage of an employee.
d. Authorities contra explained.
It is true that some decisions of the Federal court and of the State courts in the
United States hold that the distinction between aliens and citizens is not a valid
ground for classification. But in this decision the laws declared invalid were found to
be either arbitrary, unreasonable or capricious, or were the result or product of
racial antagonism and hostility, and there was no question of public interest
involved or pursued. In Yu Cong Eng vs. Trinidad, 70 L. ed. 1059 (1925), the United
States Supreme Court declared invalid a Philippine law making unlawful the keeping
of books of account in any language other than English, Spanish or any other local
dialect, but the main reasons for the decisions are: (1) that if Chinese were driven
out of business there would be no other system of distribution, and (2) that the
Chinese would fall prey to all kinds of fraud, because they would be deprived of
their right to be advised of their business and to direct its conduct. The real reason
for the decision, therefore, is the court's belief that no public benefit would be
derived from the operations of the law and on the other hand it would deprive
Chinese of something indispensable for carrying on their business. In Yick Wo vs.
Hopkins, 30 L. ed 220 (1885) an ordinance conferring powers on officials to withhold
consent in the operation of laundries both as to persons and place, was declared
invalid, but the court said that the power granted was arbitrary, that there was no
reason for the discrimination which attended the administration and implementation
of the law, and that the motive thereof was mere racial hostility. In State vs.
Montgomery, 47 A. 165 (Maine, 1900), a law prohibiting aliens to engage as
hawkers and peddlers was declared void, because the discrimination bore no
reasonable and just relation to the act in respect to which the classification was
proposed.
The case at bar is radically different, and the facts make them so. As we already
have said, aliens do not naturally possess the sympathetic consideration and regard
for the customers with whom they come in daily contact, nor the patriotic desire to
help bolster the nation's economy, except in so far as it enhances their profit, nor

the loyalty and allegiance which the national owes to the land. These limitations on
the qualifications of the aliens have been shown on many occasions and instances,
especially in times of crisis and emergency. We can do no better than borrow the
language of Anton vs. Van Winkle, 297 F. 340, 342, to drive home the reality and
significance of the distinction between the alien and the national, thus:
. . . . It may be judicially known, however, that alien coming into this country are
without the intimate knowledge of our laws, customs, and usages that our own
people have. So it is likewise known that certain classes of aliens are of different
psychology from our fellow countrymen. Furthermore, it is natural and
reasonable to suppose that the foreign born, whose allegiance is first to their
own country, and whose ideals of governmental environment and control have
been engendered and formed under entirely different regimes and political
systems, have not the same inspiration for the public weal, nor are they as well
disposed toward the United States, as those who by citizenship, are a part of the
government itself. Further enlargement, is unnecessary. I have said enough so
that obviously it cannot be affirmed with absolute confidence that the
Legislature was without plausible reason for making the classification, and
therefore appropriate discriminations against aliens as it relates to the subject
of legislation. . . . .
VII. The Due Process of Law Limitation.
a. Reasonability, the test of the limitation; determination by legislature decisive.
We now come to due process as a limitation on the exercise of the police power. It
has been stated by the highest authority in the United States that:
. . . . And the guaranty of due process, as has often been held, demands only
that the law shall not be unreasonable, arbitrary or capricious, and that the
means selected shall have a real and substantial relation to the subject sought
to be attained. . . . .
xxx

xxx

xxx

So far as the requirement of due process is concerned and in the absence of

other constitutional restriction a state is free to adopt whatever economic policy
may reasonably be deemed to promote public welfare, and to enforce that
policy by legislation adapted to its purpose. The courts are without authority
either to declare such policy, or, when it is declared by the legislature, to
override it. If the laws passed are seen to have a reasonable relation to a proper
legislative purpose, and are neither arbitrary nor discriminatory, the
requirements of due process are satisfied, and judicial determination to that

effect renders a court functus officio. . . . (Nebbia vs. New York, 78 L. ed. 940,
950, 957.)
Another authority states the principle thus:
. . . . Too much significance cannot be given to the word "reasonable" in
considering the scope of the police power in a constitutional sense, for the test
used to determine the constitutionality of the means employed by the
legislature is to inquire whether the restriction it imposes on rights secured to
individuals by the Bill of Rights are unreasonable, and not whether it imposes
any restrictions on such rights. . . .
xxx

xxx

xxx

. . . . A statute to be within this power must also be reasonable in its operation

upon the persons whom it affects, must not be for the annoyance of a particular
class, and must not be unduly oppressive. (11 Am. Jur. Sec. 302., 1:1)- 10741075.)
In the case of Lawton vs. Steele, 38 L. ed. 385, 388. it was also held:
. . . . To justify the state in thus interposing its authority in behalf of the public, it
must appear, first, that the interests of the public generally, as distinguished
from those of a particular class, require such interference; and second, that the
means are reasonably necessary for the accomplishment of the purpose, and
not unduly oppressive upon individuals. . . .
Prata Undertaking Co. vs. State Board of Embalming, 104 ALR, 389, 395, fixes this
test of constitutionality:
In determining whether a given act of the Legislature, passed in the exercise of
the police power to regulate the operation of a business, is or is not
constitutional, one of the first questions to be considered by the court is
whether the power as exercised has a sufficient foundation in reason in
connection with the matter involved, or is an arbitrary, oppressive, and
capricious use of that power, without substantial relation to the health, safety,
morals, comfort, and general welfare of the public.
b. Petitioner's argument considered.
Petitioner's main argument is that retail is a common, ordinary occupation, one of
those privileges long ago recognized as essential to the orderly pursuant of
happiness by free men; that it is a gainful and honest occupation and therefore
beyond the power of the legislature to prohibit and penalized. This arguments

overlooks fact and reality and rests on an incorrect assumption and premise, i.e.,
that in this country where the occupation is engaged in by petitioner, it has been so
engaged by him, by the alien in an honest creditable and unimpeachable manner,
without harm or injury to the citizens and without ultimate danger to their economic
peace, tranquility and welfare. But the Legislature has found, as we have also found
and indicated, that the privilege has been so grossly abused by the alien, thru the
illegitimate use of pernicious designs and practices, that he now enjoys a
monopolistic control of the occupation and threatens a deadly stranglehold on the
nation's economy endangering the national security in times of crisis and
emergency.
The real question at issue, therefore, is not that posed by petitioner, which
overlooks and ignores the facts and circumstances, but this, Is the exclusion in the
future of aliens from the retail trade unreasonable. Arbitrary capricious, taking into
account the illegitimate and pernicious form and manner in which the aliens have
heretofore engaged therein? As thus correctly stated the answer is clear. The law in
question is deemed absolutely necessary to bring about the desired legislative
objective, i.e., to free national economy from alien control and dominance. It is not
necessarily unreasonable because it affects private rights and privileges (11 Am. Jur.
pp. 1080-1081.) The test of reasonableness of a law is the appropriateness or
adequacy under all circumstances of the means adopted to carry out its purpose
into effect (Id.) Judged by this test, disputed legislation, which is not merely
reasonable but actually necessary, must be considered not to have infringed the
constitutional limitation of reasonableness.
The necessity of the law in question is explained in the explanatory note that
accompanied the bill, which later was enacted into law:
This bill proposes to regulate the retail business. Its purpose is to prevent
persons who are not citizens of the Philippines from having a strangle hold upon
our economic life. If the persons who control this vital artery of our economic life
are the ones who owe no allegiance to this Republic, who have no profound
devotion to our free institutions, and who have no permanent stake in our
people's welfare, we are not really the masters of our destiny. All aspects of our
life, even our national security, will be at the mercy of other people.
In seeking to accomplish the foregoing purpose, we do not propose to deprive
persons who are not citizens of the Philippines of their means of livelihood.
While this bill seeks to take away from the hands of persons who are not citizens
of the Philippines a power that can be wielded to paralyze all aspects of our
national life and endanger our national security it respects existing rights.
The approval of this bill is necessary for our national survival.

If political independence is a legitimate aspiration of a people, then economic

independence is none the less legitimate. Freedom and liberty are not real and
positive if the people are subject to the economic control and domination of others,
especially if not of their own race or country. The removal and eradication of the
shackles of foreign economic control and domination, is one of the noblest motives
that a national legislature may pursue. It is impossible to conceive that legislation
that seeks to bring it about can infringe the constitutional limitation of due process.
The attainment of a legitimate aspiration of a people can never be beyond the limits
of legislative authority.
c. Law expressly held by Constitutional Convention to be within the sphere of
legislative action.
The framers of the Constitution could not have intended to impose the
constitutional restrictions of due process on the attainment of such a noble motive
as freedom from economic control and domination, thru the exercise of the police
power. The fathers of the Constitution must have given to the legislature full
authority and power to enact legislation that would promote the supreme happiness
of the people, their freedom and liberty. On the precise issue now before us, they
expressly made their voice clear; they adopted a resolution expressing their belief
that the legislation in question is within the scope of the legislative power. Thus
they declared the their Resolution:
That it is the sense of the Convention that the public interest requires the
nationalization of retail trade; but it abstain from approving the amendment
introduced by the Delegate for Manila, Mr. Araneta, and others on this matter
because it is convinced that the National Assembly is authorized to promulgate
a law which limits to Filipino and American citizens the privilege to engage in the
retail trade. (11 Aruego, The Framing of the Philippine Constitution, quoted on
pages 66 and 67 of the Memorandum for the Petitioner.)
It would do well to refer to the nationalistic tendency manifested in various
provisions of the Constitution. Thus in the preamble, a principle objective is the
conservation of the patrimony of the nation and as corollary the provision limiting to
citizens of the Philippines the exploitation, development and utilization of its natural
resources. And in Section 8 of Article XIV, it is provided that "no franchise,
certificate, or any other form of authorization for the operation of the public utility
shall be granted except to citizens of the Philippines." The nationalization of the
retail trade is only a continuance of the nationalistic protective policy laid down as a
primary objective of the Constitution. Can it be said that a law imbued with the
same purpose and spirit underlying many of the provisions of the Constitution is
unreasonable, invalid and unconstitutional?

The seriousness of the Legislature's concern for the plight of the nationals as
manifested in the approval of the radical measures is, therefore, fully justified. It
would have been recreant to its duties towards the country and its people would it
view the sorry plight of the nationals with the complacency and refuse or neglect to
adopt a remedy commensurate with the demands of public interest and national
survival. As the repository of the sovereign power of legislation, the Legislature was
in duty bound to face the problem and meet, through adequate measures, the
danger and threat that alien domination of retail trade poses to national economy.
d. Provisions of law not unreasonable.
A cursory study of the provisions of the law immediately reveals how tolerant, how
reasonable the Legislature has been. The law is made prospective and recognizes
the right and privilege of those already engaged in the occupation to continue
therein during the rest of their lives; and similar recognition of the right to continue
is accorded associations of aliens. The right or privilege is denied to those only upon
conviction of certain offenses. In the deliberations of the Court on this case,
attention was called to the fact that the privilege should not have been denied to
children and heirs of aliens now engaged in the retail trade. Such provision would
defeat the law itself, its aims and purposes. Beside, the exercise of legislative
discretion is not subject to judicial review. It is well settled that the Court will not
inquire into the motives of the Legislature, nor pass upon general matters of
legislative judgment. The Legislature is primarily the judge of the necessity of an
enactment or of any of its provisions, and every presumption is in favor of its
validity, and though the Court may hold views inconsistent with the wisdom of the
law, it may not annul the legislation if not palpably in excess of the legislative
power. Furthermore, the test of the validity of a law attacked as a violation of due
process, is not its reasonableness, but its unreasonableness, and we find the
provisions are not unreasonable. These principles also answer various other
arguments raised against the law, some of which are: that the law does not promote
general welfare; that thousands of aliens would be thrown out of employment; that
prices will increase because of the elimination of competition; that there is no need
for the legislation; that adequate replacement is problematical; that there may be
general breakdown; that there would be repercussions from foreigners; etc. Many of
these arguments are directed against the supposed wisdom of the law which lies
solely within the legislative prerogative; they do not import invalidity.
VIII. Alleged defect in the title of the law
A subordinate ground or reason for the alleged invalidity of the law is the claim that
the title thereof is misleading or deceptive, as it conceals the real purpose of the bill
which is to nationalize the retail business and prohibit aliens from engaging therein.
The constitutional provision which is claimed to be violated in Section 21 (1) of
Article VI, which reads:

No bill which may be enacted in the law shall embrace more than one subject
which shall be expressed in the title of the bill.
What the above provision prohibits is duplicity, that is, if its title completely fails to
appraise the legislators or the public of the nature, scope and consequences of the
law or its operation (I Sutherland, Statutory Construction, Sec. 1707, p. 297.) A
cursory consideration of the title and the provisions of the bill fails to show the
presence of duplicity. It is true that the term "regulate" does not and may not
readily and at first glance convey the idea of "nationalization" and "prohibition",
which terms express the two main purposes and objectives of the law. But
"regulate" is a broader term than either prohibition or nationalization. Both of these
have always been included within the term regulation.
Under the title of an act to "regulate", the sale of intoxicating liquors, the
Legislature may prohibit the sale of intoxicating liquors. (Sweet vs. City of
Wabash, 41 Ind., 7; quoted in page 41 of Answer.)
Within the meaning of the Constitution requiring that the subject of every act of
the Legislature shall be stated in the tale, the title to regulate the sale of
intoxicating liquors, etc." sufficiently expresses the subject of an act prohibiting
the sale of such liquors to minors and to persons in the habit of getting
intoxicated; such matters being properly included within the subject of
regulating the sale. (Williams vs. State, 48 Ind. 306, 308, quoted in p. 42 of
Answer.)
The word "regulate" is of broad import, and necessarily implies some degree of
restraint and prohibition of acts usually done in connection with the thing to be
regulated. While word regulate does not ordinarily convey meaning of prohibit,
there is no absolute reason why it should not have such meaning when used in
delegating police power in connection with a thing the best or only efficacious
regulation of which involves suppression. (State vs. Morton, 162 So. 718, 182 La.
887, quoted in p. 42 of Answer.)
The general rule is for the use of general terms in the title of a bill; it has also been
said that the title need not be an index to the entire contents of the law (I
Sutherland, Statutory Construction, See. 4803, p. 345.) The above rule was followed
the title of the Act in question adopted the more general term "regulate" instead of
"nationalize" or "prohibit". Furthermore, the law also contains other rules for the
regulation of the retail trade which may not be included in the terms
"nationalization" or "prohibition"; so were the title changed from "regulate" to
"nationalize" or "prohibit", there would have been many provisions not falling within
the scope of the title which would have made the Act invalid. The use of the term
"regulate", therefore, is in accord with the principle governing the drafting of

statutes, under which a simple or general term should be adopted in the title, which
would include all other provisions found in the body of the Act.
One purpose of the constitutional directive that the subject of a bill should be
embraced in its title is to apprise the legislators of the purposes, the nature and
scope of its provisions, and prevent the enactment into law of matters which have
received the notice, action and study of the legislators or of the public. In the case
at bar it cannot be claimed that the legislators have been appraised of the nature of
the law, especially the nationalization and the prohibition provisions. The legislators
took active interest in the discussion of the law, and a great many of the persons
affected by the prohibitions in the law conducted a campaign against its approval. It
cannot be claimed, therefore, that the reasons for declaring the law invalid ever
existed. The objection must therefore, be overruled.
IX. Alleged violation of international treaties and obligations
Another subordinate argument against the validity of the law is the supposed
violation thereby of the Charter of the United Nations and of the Declaration of the
Human Rights adopted by the United Nations General Assembly. We find no merit in
the Nations Charter imposes no strict or legal obligations regarding the rights and
freedom of their subjects (Hans Kelsen, The Law of the United Nations, 1951 ed. pp.
29-32), and the Declaration of Human Rights contains nothing more than a mere
recommendation or a common standard of achievement for all peoples and all
nations (Id. p. 39.) That such is the import of the United Nations Charter aid of the
Declaration of Human Rights can be inferred the fact that members of the United
Nations Organizations, such as Norway and Denmark, prohibit foreigners from
engaging in retail trade, and in most nations of the world laws against foreigners
engaged in domestic trade are adopted.
The Treaty of Amity between the Republic of the Philippines and the Republic of
China of April 18, 1947 is also claimed to be violated by the law in question. All that
the treaty guarantees is equality of treatment to the Chinese nationals "upon the
same terms as the nationals of any other country." But the nationals of China are
not discriminating against because nationals of all other countries, except those of
the United States, who are granted special rights by the Constitution, are all
prohibited from engaging in the retail trade. But even supposing that the law
infringes upon the said treaty, the treaty is always subject to qualification or
amendment by a subsequent law (U. S. vs. Thompson, 258, Fed. 257, 260), and the
same may never curtail or restrict the scope of the police power of the State
(plaston vs. Pennsylvania, 58 L. ed. 539.)
X. Conclusion

Resuming what we have set forth above we hold that the disputed law was enacted
to remedy a real actual threat and danger to national economy posed by alien
dominance and control of the retail business and free citizens and country from
dominance and control; that the enactment clearly falls within the scope of the
police power of the State, thru which and by which it protects its own personality
and insures its security and future; that the law does not violate the equal
protection clause of the Constitution because sufficient grounds exist for the
distinction between alien and citizen in the exercise of the occupation regulated, nor
the due process of law clause, because the law is prospective in operation and
recognizes the privilege of aliens already engaged in the occupation and reasonably
protects their privilege; that the wisdom and efficacy of the law to carry out its
objectives appear to us to be plainly evident as a matter of fact it seems not only
appropriate but actually necessary and that in any case such matter falls within
the prerogative of the Legislature, with whose power and discretion the Judicial
department of the Government may not interfere; that the provisions of the law are
clearly embraced in the title, and this suffers from no duplicity and has not misled
the legislators or the segment of the population affected; and that it cannot be said
to be void for supposed conflict with treaty obligations because no treaty has
actually been entered into on the subject and the police power may not be curtailed
or surrendered by any treaty or any other conventional agreement.
Some members of the Court are of the opinion that the radical effects of the law
could have been made less harsh in its impact on the aliens. Thus it is stated that
the more time should have been given in the law for the liquidation of existing
businesses when the time comes for them to close. Our legal duty, however, is
merely to determine if the law falls within the scope of legislative authority and
does not transcend the limitations of due process and equal protection guaranteed
in the Constitution. Remedies against the harshness of the law should be addressed
to the Legislature; they are beyond our power and jurisdiction.
The petition is hereby denied, with costs against petitioner.
Paras, C.J., Bengzon, Reyes, A., Bautista Angelo, Concepcion, Reyes, J.B.L., Endencia
and Felix, JJ., concur.

Separate Opinions
PADILLA, J., concurring and dissenting:
I agree to the proposition, principle or rule that courts may not inquire into the
wisdom of an the Act passed by the Congress and duly approved by the President of
the Republic. But the rule does not preclude courts from inquiring and determining

whether the Act offends against a provision or provisions of the Constitution. I am

satisfied that the Act assailed as violative of the due process of law and the equal
protection of the laws clauses of the Constitution does not infringe upon them,
insofar as it affects associations, partnership or corporations, the capital of which is
not wholly owned by the citizens of the Philippines, and aliens, who are not and
have not been engaged in the retail business. I am, however, unable to persuade
myself that it does not violate said clauses insofar as the Act applies to associations
and partnerships referred to in the Act and to aliens, who are and have heretofore
been engaged in said business. When they did engage in the retail business there
was no prohibition on or against them to engage in it. They assumed and believed
in good faith they were entitled to engaged in the business. The Act allows aliens to
continue in business until their death or voluntary retirement from the business or
forfeiture of their license; and corporations, associations or partnership, the capital
of which is not wholly owned by the citizens of the Philippines to continue in the
business for a period of ten years from the date of the approval of the Act (19 June
1954) or until the expiry of term of the existence of the association or partnership or
corporation, whichever event comes first. The prohibition on corporations, the
capital of which is not wholly owned by citizens of the Philippines, to engage in the
retail business for a period of more than ten years from the date of the approval of
the Act or beyond the term of their corporate existence, whichever event comes
first, is valid and lawful, because the continuance of the existence of such
corporations is subject to whatever the Congress may impose reasonably upon
them by subsequent legislation. 1 But the prohibition to engage in the retail business
by associations and partnerships, the capital of which is not wholly owned by citizen
of the Philippines, after ten years from the date of the approval of the Act, even
before the end of the term of their existence as agreed upon by the associates and
partners, and by alien heirs to whom the retail business is transmitted by the death
of an alien engaged in the business, or by his executor or administrator, amounts to
a deprivation of their property without due process of law. To my mind, the ten-year
period from the date of the approval of the Act or until the expiration of the term of
the existence of the association and partnership, whichever event comes first, and
the six-month period granted to alien heirs of a deceased alien, his executor or
administrator, to liquidate the business, do not cure the defect of the law, because
the effect of the prohibition is to compel them to sell or dispose of their business.
The price obtainable at such forced sale of the business would be inadequate to
reimburse and compensate the associates or partners of the associations or
partnership, and the alien heirs of a deceased alien, engaged in the retail business
for the capital invested in it. The stock of merchandise bought and sold at retail
does not alone constitute the business. The goodwill that the association,
partnership and the alien had built up during a long period of effort, patience and
perseverance forms part of such business. The constitutional provisions that no
person shall be deprived of his property without due process of law 2 and that no
person shall be denied the equal protection of the laws 3 would have no meaning as
applied to associations or partnership and alien heirs of an alien engaged in the

retail business if they were to be compelled to sell or dispose of their business

within ten years from the date of the approval of the Act and before the end of the
term of the existence of the associations and partnership as agreed upon by the
associations and partners and within six months after the death of their
predecessor-in-interest.
The authors of the Constitution were vigilant, careful and zealous in the safeguard
of the ownership of private agricultural lands which together with the lands of the
public domain constitute the priceless patrimony and mainstay of the nation; yet,
they did not deem it wise and prudent to deprive aliens and their heirs of such
lands.4
For these reasons, I am of the opinion that section 1 of the Act, insofar as it compels
associations and partnership referred to therein to wind up their retail business
within ten years from the date of the approval of the Act even before the expiry of
the term of their existence as agreed upon by the associates and partners and
section 3 of the Act, insofar as it compels the aliens engaged in the retail business
in his lifetime his executor or administrator, to liquidate the business, are invalid, for
they violate the due process of law and the equal protection of the laws clauses of
the Constitution.

17.Head Money Cases, Edye vs Robertson 112 US 580 (1884)

United States Supreme Court
EDYE v. ROBERTSON, (1884)

Argued:

Decided: December 8, 1884

[112 U.S. 580, 582] Geo. De Forest Lord, for Cunard Steam-ship Co.
[112 U.S. 580, 584]
others.

Philip J. Joachimsen and Edwards Pierrepont, for Edye and

[112 U.S. 580, 586] Sol. Gen. Phillips, for Robertson, Collector, etc.
MILLER, J.
These cases all involve the same questions of law, and have been argued before
this court together. The case at the head of the list presents all the facts in the form
of an agreed statement signed by counsel, and it therefore brings the questions
before us very fully. The other two were decided by the circuit court on demurrer to
the declaration. They will be disposed of here in one opinion, which will have
reference to the case as made by the record in Edye et al. v. Robertson. The suit is

brought to recover from Robertson the sum of money received by him, as collector
of the port of New York, from plaintiffs, on account of their landing in that port
passengers from foreign ports, not citizens of the United States, at the rate of 50
cents for each of such passengers, under the act of congress of August 3, 1882,
entitled 'An act to regulate immigration.' The petition of plaintiffs and the agreed
facts, which are [112 U.S. 580, 587] also made the finding of the court to which
the case was submitted without a jury, are the same with regard to each of many
arrivals of vessels of the plaintiffs, except as to the name of the vessel and the
number and age of the passengers. The statement as to the arrival first named,
which is here given, will be sufficient for them all, for the purposes of this opinion.
The following are admitted to be the facts in this action: '(1) That the plaintiffs are
partners in trade in the city of New York under the firm name of Funch, Edye & Co.,
and carry on the business of transporting passengers and freight upon the high seas
between Holland and the United States of America as consignees and agents. That
on the second day of October, 1882, there arrived, consigned to the plaintiffs, the
Dutch ship Leerdam, owned by certain citizens or subjects of the kingdom of
Holland, and belonging to the nationality of Holland, at the port of New York. She
had sailed from the foreign port of Rotterdam, in Holland, bound to New York, and
carried 382 persons not citizens of the United States. That among said 382 persons
20 were severally under the age of one year and 59 were severally between the
ages of one year and eight years. That upon the arrival of said steam-ship Leerdam
within the collection district of New York, the master thereof gave, in pursuance to
section 9 of the passenger act of 1882, and delivered to the custom-house officer,
who first came on board the vessel and made demand therefor, a correct list, signed
by the master, of all the passengers taken on board of said Leerdam at said
Rotterdam, specifying separately the names of the cabin passengers, their age, sex,
calling, and the country of which they are citizens, and also the name, age, sex,
calling, and native country of each emigrant passenger or passengers other than
cabin passengers, and their intended destination or location, and in all other
respects complying with said ninth section, and a duplicate of the aforesaid list of
passengers, verified by the oath of the master, was, with the manifest of the cargo,
delivered by the master to the defendant as col- [112 U.S. 580, 588]
lector of
customs of the port of New York on the entry of said vessel. That it appears from the
said list of passengers and duplicate that the said 382 persons were each and every
one subjects of Holland or other foreign powers in treaty of peace, amity, and
commerce with the United States. That the said passenger manifest also states the
total number of passengers, and shows that 20 of them were under one year of age,
and 59 between the ages of one year and eight years. That said collector, before
allowing complete entry of said vessel, as collector decided, on the twelfth day of
October, 1882, that the plaintiffs must pay a duty of one hundred and ninety-one
dollars for said passengers, being fifty cents for each of said 382 passengers. That
by the regulations of the treasury department the non-payment of said 191 dollars
would have permitted the defendant to refuse the complete entry of the vessel, or
to refuse to give her a clearance from the port of New York to her home port, and
such imposition would have created an apparent lien on said vessel for said sum of
191 dollars. On the defendants making such demand the plaintiffs paid the same
and protested against the payment thereof. That a copy of the protest in regard to
said Leerdam is annexed to the complaint, marked 'No. 1,' and is a correct copy of
the protest. That on the same day the plaintiffs duly appealed to the secretary of

treasury from such decision of the collector, and that the paper marked 'Appeal No.
2,' annexed to the complaint, is a copy of said appeal. On the eighteenth October,
1882, the secretary of the treasury sustained the action of the defendant, and this
action is brought within ninety days after the rendering of such decision. That the
payment set forth in the complaint herein was levied and collected by defendant,
and the same was paid under and in pursuance of an act of congress entitled 'An
act to regulate emigration,' approved August 3, 1882.' [112 U.S. 580, 589] On the
facts as thus agreed and as found by the circuit court, a judgment was rendered in
favor of defendant, which we are called upon to review. There is no complaint by
plaintiffs that the defendant violated this act in any respect but one, namely, that it
did not authorize him to demand anything for the 20 children under one year old,
and for the 59 who were between the ages of one year and eight years. The
supposed exception of this class of passengers does not arise out of any language
found in this act to regulate immigration, nor any policy on which it is founded, but
it is based by counsel on a provision of an act approved one day earlier than this,
entitled 'An act to regulate the carriage of passengers by sea.' This provision limits
the number of passengers which the vessel may carry by the number of cubic feet
of space in which they are to be carried, and it declares that, in making this
calculation, children of the ages mentioned need not be counted. In reference to the
space they will occupy this principle is reasonable. But, as regards the purpose of
the immigration act to raise a fund for the sick, the poor, and the helpless
immigrant, children are as likely to require its aid as adults, probably more so. They
are certainly within the definition of the word 'passenger,' when otherwise within
the purview of the act. This branch of the case requires no further consideration.
The other errors assigned, however numerous or in whatever language presented,
all rest on the proposition that the act of congress requiring the collector to demand
and receive from the master, owner, or consignee of each vessel arriving from a
foreign port, 50 cents for every passenger whom he brings into a port of the United
States who is not a citizen, is without warrant in the constitution and is void. The
substance of the act is found in its first section, namely:
'AN ACT TO REGULATE IMMIGRATION.
'Be it enacted by the Senate and House of Representatives of the United States of
America in Congress assembled, that there shall be levied, collected, and paid a
duty of fifty cents [112 U.S. 580, 590] for each and every passenger, not a citizen
of the United States, who shall come by steam or sail vessel from a foreign port to
any port within the United States. The said duty shall be paid to the collector of
customs of the port to which such passenger shall come, or if there be no collector
at such port, then to the collector of customs nearest thereto, by the master, owner,
agent, or consignee of every such vessel, within twenty-four hours after the entry
thereof into such port. The money thus collected shall be paid into the United States
treasury, and shall constitute a fund to be called the immigrant fund, and shall be
used, under the direction of the secretary of the treasury, to defray the expenses of
regulating immigration under this act, and for the care of immigrants arriving in the
United States, for the relief of such as are in distress, and for the general purposes
and expenses of carrying this act into effect.'
The act further authorizes the secretary to use the aid of any state organization or
officer for carrying into effect the beneficent objects of this law, by distributing the

fund in accordance with the purpose for which it was raised, not exceeding in any
port the sum received from it, under rules and regulations to be prescribed by him.
It directs that such officers shall go on board vessels arriving from abroad, and if, on
examination, they shall find any convict, lunatic, idiot, or any person unable to take
care of himself or herself, without becoming a public charge, they shall report to the
collector, and such person shall not be permitted to land. It is also enacted that
convicts, except for political offenses, shall be returned to the nations to which they
belong. And the secretary is directed to prepare rules for the protection of the
immigrant who needs it, and for the return of those who are not permitted to land.
This act of congress is similar, in its essential features, to many statutes enacted by
states of the Union for the protection of their own citizens, and for the good of the
immigrants who land at sea-ports within their borders. That the purpose of these
statutes is humane, is highly beneficial to the poor and helpless immigrant, and is
essential to [112 U.S. 580, 591] the protection of the people in whose midst they
are deposited by the steam-ships, is beyond dispute. That the power to pass such
laws should exist in some legislative body in this country is equally clear. This court
has decided distinctly and frequently, and always after a full hearing from able
counsel, that it does not belong to the states. That decision did not rest in any case
on the ground that the state and its people were not deeply interested in the
existence and enforcement of such laws, and were not capable of enforcing them if
they had the power to enact them, but on the ground that the constitution, in the
division of powers which it declares between the states and the general
government, has conferred this power on the latter to the exclusion of the former.
We are now asked to decide that it does not exist in congress, which is to hold that
it does not exist at all; that the framers of the constitution have so worded that
remarkable instrument that the ships of all nations, including our own, can, without
restraint or regulation, deposit here, if they find it to their interest to do so, the
entire European population of criminals, paupers, and diseased persons, without
making any provision to preserve them from sharvation, and its concomitant
sufferings, even for the first few days after they have left the vessel. This court is
not only asked to decide this, but is asked to overrule its decision, several times
made with unanimity, that the power does reside in congress, is conferred upon that
body by the express language of the constitution, and the attention of congress
called to the duty which arises from that language to pass the very law which is
here in question. That these statutes are regulations of commerce,-of commerce
with foreign nations,-is conceded in the argument in this case, and that they
constitute a regulation of that class which belongs exclusively to congress is held in
all the cases in this court. It is upon these propositions that the court has decided in
all these cases that the state laws are void. Let us examine those decisions for a
moment.
In The Passenger Cases, so called, the report of which occupies the pages of 7
Howard from page 283 to 573, mostly with opinions of the judges, the order of the
court is that 'it is the [112 U.S. 580, 592] opinion of the court that the statute of
New York, by which the health commissioner of the city of New York is declared
entitled to demand and receive from the master of every vessel from a foreign port
that shall arrive in the port of that city the sum of one dollar for each steerage
passenger brought in such vessel, is repugnant to the constitution and laws of the
United States, and therefore void.' An examination of the opinions of the judges
shows that if the majority agreed upon any one reason for this order, it was because

the law was a regulation of commerce, the power over which that constitution had
placed exclusively in congress. The same examination will show that several judges
denied this, because they held that this power belonged to the class which the
states might exercise until it was assumed by congress. It is very clear that if any
such act of congress had existed then as the one now before us, the decision of the
court would have been nearer to unanimity.
In the case of Henderson v. Mayor of New York, 92 U.S. 259 , the whole subject is
reviewed, and, in the light of the division in this court in The Passenger Cases, it is
considered, on principle, as if for the first time. In that case, after the statute of New
York had been modified in such a manner as was supposed to remove the objections
held good against it in The Passenger Cases, the question of its constitutional
validity was again brought before this court, when it was held void by the
unanimous judgment of all its members. And this was upon the distinct ground that
it was a regulation of commerce solely within the power of congress. 'As already
indicated,' says the court, 'the provision of the constitution of the United States, on
which the principal reliance is placed, is that which gives to congress the right 'to
regulate commerce with foreign nations." The court then, referring to the
transportation of passengers from European ports to those of the United States,
says: 'It has become a part of our commerce with foreign nations, of vast interest to
this country as well as to the immigrants who come among us, to find a welcome
and a home within our bor- [112 U.S. 580, 593] ders.' 'Is the regulation of this
great system a regulation of commerce? Can it be doubted that a law which
prescribes the terms on which vessels shall engage in it is a law regulating this
branch of commerce?' The court adds: 'We are of opinion that this whole subject has
been confided to congress by the constitution; that congress can more appropriately
and with more acceptance exercise it than any other body known to our law, state
or national; that by providing a system of laws in these matters, applicable to all
ports and to all vessels, a serious question which has long been matter of contest
and complaint may be effectually and satisfactorily settled.' And for this reason the
statute of New York was held void.
In the case of Commissioners of Immigration v. North German Lloyd, 92 U.S. 259 , a
similar statute of Louisiana was held void for the same reason. And in the case of
Chy Lung v. Freeman,-decided at the same term,- 92 U.S. 275 , the statute of
California, on the same subject, was also held void, because, in the language of the
head-note to the report, 'it invades the right of congress to regulate commerce with
foreign nations.'
In the case of People v. Compagnie Generale Transatlantique, 107 U.S. 59 , S. C. 2
SUP. CT. REP. 87, where the state of New York, having again modified her statute, it
was again held void, the court said: 'It has been so repeatedly decided by this court
that such a tax is a regulation of commerce with foreign nations, confided by the
constitution to the exclusive control of congress,' (referring to the cases just cited,)
'that there is little to say beyond affirming the judgment of the circuit court, which
was based on those decisions.'
It cannot be said that these cases do not govern the present, though there was not
then before us any act of congress whose validity was in question, for the decisions
rest upon the ground that the state statutes were void only because congress, and
not the states, was authorized by the constitution to pass them, and for the reason

that congress could enact such laws, and for that reason alone, were the acts of the
state held void. It was, therefore, of the essence of the decision which held the [112
U.S. 580, 594] state statutes invalid, that a similar statute by congress would be
valid. We are not disposed to reconsider those cases, or to resort to other reasons
for holding that they were well decided. Nor do we feel that further argument in
support of them is needed. But counsel for plaintiffs, assuming that congress, in the
enactment of this law, is exercising the taxing power conferred by the first clause of
section 8, art. 1, Const., and can derive no aid in support of its action from any
other grant of power in that instrument, argues that all the restraints and
qualifications found there in regard to any form of taxation are limitations upon the
exercise of the power in this case. The clause is in the following language: 'The
congress shall have power to lay and collect taxes, duties, imposts, and excises, to
pay the debts and provide for the common defense and the general welfare of the
United States; but all duties, imposts, and excises shall be uniform throughout the
United States.'
In this view it is objected that the tax is not levied to provide for the common
defense and general welfare of the United States, and that it is not uniform
throughout the United States. The uniformity here prescribed has reference to the
various localities in which the tax is intended to operate. 'It shall be uniform
throughout the United States.' Is the tax on tobacco void because in many of the
state no tobacco is raised or manufactured? Is the tax on distilled spirits void
because a few states pay three-fourths of the revenue arising from it? The tax is
uniform when it operates with the same force and effect in every place where the
subject of it is found. The tax in this case, which, as far as it can be called a tax, is
an excise duty on the business of bringing passengers from foreign countries into
this by ocean navigation, is uniform and operates precisely alike in every port of the
United States where such passengers can be landed. It is said that the statute
violates the rule of uniformity and the provision of the constitution that 'no
preference shall be given by any regulation of commerce or revenue to the ports of
one state over those of [112 U.S. 580, 595] another,' because it does not apply to
passengers arriving in this country by railroad or other inland mode of conveyance.
But the law applies to all ports alike, and evidently gives no preference to one over
another, but is uniform in its operation in all ports of the United States. It may be
added that the evil to be remedied by this legislation has no existence on our inland
borders, and immigration in that quarter needed no such regulation. Perfect
uniformity and perfect equality of taxation, in all the aspects in which the human
mind can view it, is a baseless dream, as this court has said more than once. State
Railroad Tax Cases, 92 U.S. 612 . Here there is substantial uniformity within the
meaning and purpose of the constitution.
If it were necessary to prove that the imposition of this contribution on owners of
ships is made for the general welfare of the United States, it would not be difficult to
show that it is so, and particularly that it is among the means which congress may
deem necessary and proper for that purpose, and beyond this we are not permitted
to inquire. But the true answer to all these objections is that the power exercised in
this instance is not the taxing power. The burden imposed on the ship-owner by this
statute is the mere incident of the regulation of commerce-of that branch of foreign
commerce which is involved in immigration. The title of the act, 'An act to regulate
immigration,' is well chosen. It describes, as well as any short sentence can
describe it, the real purpose and effect of the statute. Its provisions, from beginning

to end, relate to the subject of immigration, and they are aptly designed to mitigate
the evils inherent in the business of bringing foreigners to this country, as those
evils affect both the immigrant and the people among whom he is suddenly brought
and left to his own resources.
It is true, not much is said about protecting the ship-owner. But he is the man who
reaps the profit from the transaction, who has the means to protect himself, and
knows well how to do it, and whose obligations in the premises need the aid of the
statute for their enforcement. The sum demanded of him is not, therefore, strictly
speaking, a tax or duty within the [112 U.S. 580, 596] meaning of the constitution.
The money thus raised, though paid into the treasury, is appropriated in advance to
the uses of the statute, and does not go to the general support of the government.
It constitutes a fund raised from those who are engaged in the transportation of
these passengers, and who make profit out of it, for the temporary care of the
passengers whom they bring among us, and for the protection of the citizens among
whom they are landed. It this is an expedient regulation of commerce by congress,
and the end to be attained is one falling within that power, the act is not void
because, within a loose and more extended sense than was used in the constitution,
it is called a tax. In the case of Veazie Bank v. Fenno, 8 Wall. 549, the enormous tax
of 8 per cent. per annum on the circulation of state banks, which was designed, and
did have the effect, to drive all such circulation out of existence, was upheld
because it was a means properly adopted by congress to protect the currency which
it had created; namely, the legal-tender notes and the notes of the national banks.
It was not subject, therefore, to the rules which would invalidate an ordinary tax
pure and simple. So, also, in the case of Packet Co. v. Keokuk, 95 U.S. 80 , the city of
Keokuk having by ordinance imposed a wharfage fee or tax, for the use of a wharf
owned by the city, the amount of which was regulated by the tonnage of the vessel,
this was held not to be a tonnage tax within the meaning of the constitutional
provision that 'no state shall, without the consent of congress, lay any duty of
tonnage.' The reason of this is that, though it was a burden or tax in some sense,
and measured by the tonnage of the vessel, it was but a charge for services
rendered, or for conveniences furnished by the city, and was not a tonnage tax
within the meaning of the constitution. This principle was reaffirmed in the case of
Same Plaintiff v. City of St. Louis, 100 U.S. 423 .
We are clearly of opinion that, in the exercise of its power to regulate immigration,
and in the very act of exercising that power, it was competent for congress to
impose this contribution on the ship-owner engaged in that business. [112 U.S. 580,
597]
Another objection to the validity of this act of congress is that it violates
provisions contained in numerous treaties of our government with friendly nations.
And several of the articles of these treaties are annexed to the careful brief of
counsel. We are not satisfied that this act of congress violates any of these treaties,
on any just construction of them. Though laws similar to this have long been
enforced by the state of New York in the great metropolis of foreign trade, where
four-fifths of these passengers have been landed, no complaint has been made by
any foreign nation to ours of the violation of treaty obligations by the enforcement
of those laws. But we do not place the defense of the act of congress against this
objection upon that suggestion. We are of opinion that, so far as the provisions in
that act may be found to be in conflict with any treaty with a foreign nation, they
must prevail in all the judicial courts of this country. We had supposed that the
question here raised was set at rest in this court by the decision in the case of The

Cherokee Tobacco, 11 Wall. 616. It is true, as suggested by counsel, that three

judges of the court did not sit in the case, and two others dissented. But six judges
took part in the decision, and the two who dissented placed that dissent upon the
ground that congress did not intend that the tax on tobacco should extend to the
Cherokee tribe. They referred to the existence of the treaty which would be violated
if the statute was so construed as persuasive against such a construction, but they
nowhere intimated that, if the statute was correctly construed by the court, it was
void because it conflicted with the treaty, which they would have done if they had
held that view. On the point now in controversy it was therefore the opinion of all
the judges who heard the case. See U. S. v. McBratney, 104 U.S. 621 -623.
The precise question involved here, namely, a supposed conflict between an act of
congress imposing a customs duty, and a treaty with Russia on that subject, in force
when the act was passed, came before the circuit court for the district of
Massachusetts in 1855. It received the consideration of that eminent jurist, Mr.
Justice CURTIS, of this court, who in a very learned [112 U.S. 580, 598] opinion
exhausted the sources of argument on the subject, holding that if there were such
conflict the act of congress must prevail in a judicial forum. Taylor v. Morton, 2 Curt.
C. C. 454. And Mr. Justice FIELD, in a very recent case in the Ninth circuit, that of In
re Ah Lung, on a writ of habeas corpus, has delivered an opinion sustaining the
same doctrine in reference to a statute regulating the immigration of Chinamen into
this country. 18 Fed. Rep. 28. In the Clinton Bridge Case, Woolw. 156, the writer of
this opinion expressed the same views as did Judge WOODRUFF, on full
consideration, in Ropes v. Clinch, 8 Blatchf. 304, and Judge WALLACE, in the same
circuit, in Bartram v. Robertson, 15 Fed. Rep. 212.
It is very difficult to understand how any different doctrine can be sustained. A
treaty is primarily a compact between independent nations. It depends for the
enforcement of its provisions on the interest and the honor of the governments
which are parties to it. If these fail, its infraction becomes the subject of
international negotiations and reclamations, so far as the injured party chooses to
seek redress, which may in the end be enforced by actual war. It is obvious that with
all this the judicial courts have nothing to do and can give no redress. But a treaty
may also contain provisions which confer certain rights upon the citizens or subjects
of one of the nations residing in the territorial limits of the other, which partake of
the nature of municipal law, and which are capable of enforcement as between
private parties in the courts of the country. An illustration of this character is found
in treaties, which regulate the mutual rights of citizens and subjects of the
contracting nations in regard to rights of property by descent or inheritance, when
the individuals concerned are aliens. The constitution of the United States places
such provisions as these in the same category as other laws of congress by its
declaration that 'this constitution and the laws made in pursuance thereof, and all
treaties made or which shall be made under authority of the United States, shall be
the supreme law of the land.' A treaty, then, is a law of the land as an act of
congress is, whenever its provisions prescribe a rule by which the rights of the
private [112 U.S. 580, 599] citizen or subject may be determined. And when such
rights are of a nature to be enforced in a court of justice, that court resorts to the
treaty for a rule of decision for the case before it as it would to a statute. But even
in this aspect of the case there is nothing in this law which makes it irrepealable or
unchangeable. The constitution gives it no superiority over an act of congress in this
respect, which may be repealed or modified by an act of a later date. Nor is there

anything in its essential character, or in the branches of the government by which

the treaty is made, which gives it this superior sanctity. A treaty is made by the
president and the senate. Statutes are made by the president, the senate, and the
house of representatives. The addition of the latter body to the other two in making
a law certainly does not render it less entitled to respect in the matter of its repeal
or modification than a treaty made by the other two. If there be any difference in
this regard, it would seem to be in favor of an act in which all three of the bodies
participate. And such is, in fact, the case in a declaration of war, which must be
made by congress, and which, when made, usually suspends or destroys existing
treaties between the nations thus at war. In short, we are of opinion that, so far as a
treaty made by the United States with any foreign nation can become the subject of
judicial cognizance in the courts of this country, it is subject to such acts as
congress may pass for its enforcement, modification, or repeal.
Other objections are made to this statute. Some of these relate, not to the power of
congress to pass the act, but to the measure, of which congress, and not the courts,
measure, f which congress, and not the courts, are the sole judges-such as its
unequal operation on persons not paupers or criminals, and its effect in compelling
the ultimate payment of the sum demanded for each passenger by that passenger
himself. Also, that the money is to be drawn from the treasury without an
appropriation by congress. The act itself makes the appropriation, and even if this
be not warranted by the constitution, it does not make void the demand for
contribution, which may yet be ap- [112 U.S. 580, 600] propriated by congress, if
that be necessary, by another statute. It is enough to say that, congress having the
power to pass a law regulating immigration as a part of the commerce of this
country with foreign nations, we see nothing in the statute by which it has here
exercised that power forbidden by any other part of the constitution. The judgment
of the circuit court in all the cases is affirmed.
See
more
at:
court/112/580.html#sthash.pp2wIDHr.dpuf

http://caselaw.findlaw.com/us-supreme-

18.Whitney vs Robertson, 124 US 190 (1888)

U.S. Supreme Court
Whitney v. Robertson, 124 U.S. 190 (1888)
Argued December 13-14, 1887
Decided January 9, 1888
124 U.S. 190

ERROR TO THE CIRCUIT COURT OF THE UNITED

STATES FOR THE SOUTHERN DISTRICT OF NEW YORK
Syllabus
The Treaty of February 8, 1861, with the Dominican Republic (art. 9) provides that
"No higher or other duty shall be imposed on the importation into the United states
of any article the growth, produce, or manufacture of the Dominican Republic, or of
her fisheries, than are or shall be payable on the like articles the growth, produce,
or manufacture of any other foreign country or of its fisheries."
The Convention of January 30, 1575, with the King of the Hawaiian Islands provides
for the importation into the United States, free of duty, of various articles, the
produce and manufacture of those islands (among which were sugars), in
consideration of certain concessions made by the King of the Hawaiian Islands to
the United States. Held that this provision in the treaty with the Dominican Republic
did not authorize the admission into the United States, duty free, of similar sugars,
the growth, produce, or manufacture of that republic as a consequence of the
agreement made with the King of the Hawaiian Islands, and that there was no
distinction in principle between this case and Bartram v. Robertson, 122 U. S. 116.
By the Constitution of the United States, a treaty and a statute are placed on the
same footing, and if the two are inconsistent, the one last in date will control,
provided the stipulation of the treaty on the subject is self-executing.
This was an action to recover back duties alleged to have been illegally exacted.
Verdict for the defendant and judgment on the verdict. The plaintiffs sued out this
writ of error.
MR. JUSTICE FIELD delivered the opinion of the Court.
The plaintiffs are merchants doing business in the City of New York, and in August,
1882, they imported a large quantity
Page 124 U. S. 191
of "centrifugal and molasses sugars," the produce and manufacture of the Island of
San Domingo. These goods were similar in kind to sugars produced in the Hawaiian

Islands, which are admitted free of duty under the treaty with the King of those
islands and the act of Congress passed to carry the treaty into effect. They were
duly entered at the custom house at the port of New York, the plaintiffs claiming
that by the treaty with the Republic of San Domingo, the goods should be admitted
on the same terms -- that is, free of duty -- as similar articles the produce and
manufacture of the Hawaiian Islands. The defendant, who was at the time collector
of the port, refused to allow this claim, treated the goods as dutiable articles under
the acts of Congress, and exacted duties on them to the amount of $21,936. The
plaintiffs appealed from the collector's decision to the Secretary of the Treasury, by
whom the appeal was denied. They then paid, under protest, the duties exacted,
and brought the present action to recover the amount.
The complaint set forth the facts as to the importation of the goods; the claim of the
plaintiffs that they should be admitted free of duty, because like articles from the
Hawaiian Islands were thus admitted; the refusal of the collector to allow the claim;
the appeal from his decision to the Secretary of the Treasury, and its denial by him,
and the payment, under protest, of the duties exacted, and concluded with a prayer
for judgment for the amount. The defendant demurred to the complaint, the
demurrer was sustained, and final judgment was entered in his favor; to review
which the case is brought here.
The treaty with the King of the Hawaiian Islands provides for the importation into
the United States, free of duty, of various articles, the produce and manufacture of
those islands, in consideration, among other things, of like exemption from duty on
the importation into that country of sundry specified articles which are the produce
and manufacture of the United States. 19 Stat. 625. The language of the first two
articles of the treaty, which recite the reciprocal engagements of the two countries,
declares that they are made in consideration
Page 124 U. S. 192
"of the rights and privileges," and "as an equivalent therefor," which one concedes
to the other.
The plaintiffs rely for a like exemption of the sugars imported by them from San
Domingo upon the ninth article of the treaty with the Dominican Republic, which is
as follows:

"No higher or other duty shall be imposed on the importation into the United States
of any article, the growth, produce, or manufacture of the Dominican Republic, or of
her fisheries, and no higher or other duty shall be imposed on the importation into
the Dominican Republic of any article, the growth, produce, or manufacture of the
United States, or their fisheries, than are or shall be payable on the like articles, the
growth, produce, or manufacture of any other foreign country, or its fisheries."
15 Stat. 475.
In Bartram v. Robertson, decided at the last term, 122 U. S. 116, we held that brown
and unrefined sugars, the produce and manufacture of the Island of St. Croix, which
is part of the dominions of the King of Denmark, were not exempt from duty by
force of the treaty with that country, because similar goods from the Hawaiian
Islands were thus exempt. The first article of the treaty with Denmark provided that
the contracting parties should not grant "any particular favor" to other nations in
respect to commerce and navigation which should not immediately become
common to the other party, who should "enjoy the same freely if the concession
were freely made, and upon allowing the same compensation if the concession were
conditional." 11 Stat. 719. The fourth article provided that no "higher or other
duties" should be imposed by either party on the importation of any article which is
its produce or manufacture into the country of the other party than is payable on
like articles, being the produce or manufacture of any other foreign country. And we
held in the case mentioned that
"Those stipulations, even if conceded to be self-executing by the way of a proviso or
exception to the general law imposing the duties, do not cover concessions like
those made to the Hawaiian Islands for a valuable consideration. They were pledges
of the two contracting parties, the United States and the King of
Page 124 U. S. 193
Denmark, to each other that, in the imposition of duties on goods imported into one
of the countries which were the produce or manufacture of the other, there should
be no discrimination against them in favor of goods of like character imported from
any other country. They imposed an obligation upon both countries to avoid hostile
legislation in that respect, but they were not intended to interfere with special
arrangements with other countries founded upon a concession of special privileges."

The counsel for the plaintiffs meet this position by pointing to the omission in the
treaty with the Republic of San Domingo of the provision as to free concessions, and
concessions upon compensation, contending that the omission precludes any
concession, in respect of commerce and navigation, by our government to another
country without that concession's being at once extended to San Domingo. We do
not think that the absence of this provision changes the obligations of the United
States. The ninth article of the treaty with that republic, in the clause quoted, is
substantially like the fourth article in the treaty with the King of Denmark, and as we
said of the latter, we may say of the former -- that it is a pledge of the contracting
parties that there shall be no discriminating legislation, against the importation of
articles which are the growth, produce, or manufacture of their respective countries,
in favor of articles of like character imported from any other country. It has no
greater extent. It was never designed to prevent special concessions, upon
sufficient considerations, touching the importation of specific articles into the
country of the other. It would require the clearest language to justify a conclusion
that our government intended to preclude itself from such engagements with other
countries which might in the future be of the highest importance to its interests.
But independently of considerations of this nature, there is another and complete
answer to the pretensions of the plaintiffs. The act of Congress under which the
duties were collected authorized their exaction. It is of general application, making
no exception in favor of goods of any country. It was passed
Page 124 U. S. 194
after the treaty with the Dominican Republic, and, if there be any conflict between
the stipulations of the treaty and the requirements of the law, the latter must
control. A treaty is primarily a contract between two or more independent nations,
and is so regarded by writers on public law. For the infraction of its provisions, a
remedy must be sought by the injured party through reclamations upon the other.
When the stipulations are not self-executing, they can only be enforced pursuant to
legislation to carry them into effect, and such legislation is as much subject to
modification and repeal by Congress as legislation upon any other subject. If the
treaty contains stipulations which are self-executing -- that is, require no legislation
to make them operative -- to that extent they have the force and effect of a
legislative enactment. Congress may modify such provisions so far as they bind the
United States, or supersede them altogether. By the Constitution, a treaty is placed

on the same footing, and made of like obligation, with an act of legislation. Both are
declared by that instrument to be the supreme law of the land, and no superior
efficacy is given to either over the other. When the two relate to the same subject,
the courts will always endeavor to construe them so as to give effect to both, if that
can be done without violating the language of either; but if the two are inconsistent,
the one last in date will control the other, provided always the stipulation of the
treaty on the subject is self-executing. If the country with which the treaty is made
is dissatisfied with the action of the legislative department, it may present its
complaint to the executive head of the government and take such other measures
as it may deem essential for the protection of its interests. The courts can afford no
redress. Whether the complaining nation has just cause of complaint or our country
was justified in its legislation are not matters for judicial cognizance. In Taylor v.
Morton, 2 Curtis 454, 459, this subject was very elaborately considered at the circuit
by Mr. Justice Curtis of this Court, and he held that whether a treaty with a foreign
sovereign had been violated by him; whether the consideration of a particular
stipulation of the treaty had been voluntarily withdrawn by
Page 124 U. S. 195
one party so that it was no longer obligatory on the other; whether the views and
acts of a foreign sovereign had given just occasion to the legislative department of
our government to withhold the execution of a promise contained in a treaty, or to
act in direct contravention of such promise were not judicial questions; that the
power to determine these matters had not been confided to the judiciary, which has
no suitable means to exercise it, but to the executive and legislative departments of
our government, and that they belong to diplomacy and legislation, and not to the
administration of the laws. And he justly observed as a necessary consequence of
these views that if the power to determine these matters is vested in Congress, it is
wholly immaterial to inquire whether by the act assailed it has departed from the
treaty or not, or whether such departure was by accident or design, and if the latter,
whether the reasons were good or bad.
In these views we fully concur. It follows, therefore, that when a law is clear in its
provisions, its validity cannot be assailed before the courts for want of conformity to
stipulations of a previous treaty not already executed. Considerations of that
character belong to another department of the government. The duty of the courts
is to construe and give effect to the latest expression of the sovereign will. In Head

Money Cases, 112 U. S. 580, it was objected to an act of Congress that it violated
provisions contained in treaties with foreign nations, but the Court replied that so
far as the provisions of the act were in conflict with any treaty, they must prevail in
all the courts of the country, and after a full and elaborate consideration of the
subject it held that
"so far as a treaty made by the United States with any foreign nation can be the
subject of judicial cognizance in the courts of this country, it is subject to such acts
as Congress may pass for its enforcement, modification, or repeal."
Judgment affirmed.
Disclaimer: Official Supreme Court case law is only found in the print version of the
United States Reports. Justia case law is provided for general informational purposes
only, and may not reflect current legal developments, verdicts or settlements. We
make no warranties or guarantees about the accuracy, completeness, or adequacy
of the information contained on this site or information linked to from this site.
Please check official sources.