1.

Exploitation of Natural Resources

G.R. No. L-6776 May 21, 1955

THE REGISTER OF DEEDS OF RIZAL, petitioner-appellee,
vs.
UNG SIU SI TEMPLE, respondent-appellant.

FACTS:
The Register of Deeds for the province of Rizal refused to accept for record a deed of donation executed in due form on
January 22, 1953, by Jesus Dy, a Filipino citizen, conveying a parcel of residential land, in Caloocan, Rizal, known as lot
No. 2, block 48-D, PSD-4212, G.L.R.O. Record No. 11267, in favor of the unregistered religious organization "Ung Siu Si
Temple", operating through three trustees all of Chinese nationality. The donation was duly accepted by Yu Juan, of
Chinese nationality, founder and deaconess of the Temple, acting in representation and in behalf of the latter and its
trustees.

The refusal of the Registrar was elevated en Consultato the IVth Branch of the Court of First Instance of Manila. On
March 14, 1953, the Court upheld the action of the Rizal Register of Deeds, saying:

The question raised by the Register of Deeds in the above transcribed consulta is whether a deed of donation of
a parcel of land executed in favor of a religious organization whose founder, trustees and administrator are
Chinese citizens should be registered or not.

It appearing from the record of the Consulta that UNG SIU SI TEMPLE is a religious organization whose
deaconess, founder, trustees and administrator are all Chinese citizens, this Court is of the opinion and so hold
that in view of the provisions of the sections 1 and 5 of Article XIII of the Constitution of the Philippines limiting
the acquisition of land in the Philippines to its citizens, or to corporations or associations at least sixty per
centum of the capital stock of which is owned by such citizens adopted after the enactment of said Act No. 271,
and the decision of the Supreme Court in the case of Krivenko vs. the Register of Deeds of Manila, the deed of
donation in question should not be admitted for admitted for registration. (Printed Rec. App. pp 17-18).

Not satisfied with the ruling of the Court of First Instance, counsel for the donee Uy Siu Si Temple has appealed to this
Court, claiming: (1) that the acquisition of the land in question, for religious purposes, is authorized and permitted by
Act No. 271 of the old Philippine Commission, providing as follows:

SECTION 1. It shall be lawful for all religious associations, of whatever sort or denomination, whether
incorporated in the Philippine Islands or in the name of other country, or not incorporated at all, to hold land in
the Philippine Islands upon which to build churches, parsonages, or educational or charitable institutions.

SEC. 2. Such religious institutions, if not incorporated, shall hold the land in the name of three Trustees for the
use of such associations; . . .. (Printed Rec. App. p. 5.)

and (2) that the refusal of the Register of Deeds violates the freedom of religion clause of our Constitution [Art. III, Sec.
1(7)].

ISSUE:
WON the acquisition of the land for religious purposes is authorized and permitted?

HELD:
We are of the opinion that the Court below has correctly held that in view of the absolute terms of section 5, Title XIII, of
the Constitution, the provisions of Act No. 271 of the old Philippine Commission must be deemed repealed since the
Constitution was enacted, in so far as incompatible therewith. In providing that, —
 Save in cases of hereditary succession, no private agricultural land shall be transferred or assigned except to
individuals, corporations or associations qualified to acquire or hold lands of the public domain in the
Philippines, the Constitution makes no exception in favor of religious associations. Neither is there any such
saving found in sections 1 and 2 of Article XIII, restricting the acquisition of public agricultural lands and other
natural resources to "corporations or associations at least sixty per centum of the capital of which is owned by
such citizens" (of the Philippines).

The fact that the appellant religious organization has no capital stock does not suffice to escape the Constitutional
inhibition, since it is admitted that its members are of foreign nationality. The purpose of the sixty per centum
requirement is obviously to ensure that corporations or associations allowed to acquire agricultural land or to exploit
natural resources shall be controlled by Filipinos; and the spirit of the Constitution demands that in the absence of
capital stock, the controlling membership should be composed of Filipino citizens.

To permit religious associations controlled by non-Filipinos to acquire agricultural lands would be to drive the opening
wedge to revive alien religious land holdings in this country. We cannot ignore the historical fact that complaints against
land holdings of that kind were among the factors that sparked the revolution of 1896.

As to the complaint that the disqualification under article XIII is violative of the freedom of religion guaranteed by Article
III of the Constitution, we are by no means convinced (nor has it been shown) that land tenure is indispensable to the
free exercise and enjoyment of religious profession or worship; or that one may not worship the Deity according to the
dictates of his own conscience unless upon land held in fee simple.

The resolution appealed from is affirmed, with costs against appellant.

2. Public Utilities

G.R. No. L-6055 June 12, 1953

THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee,
vs.
WILLIAM H. QUASHA, defendant-appellant.

FACTS:
William H. Quasha, a member of the Philippine bar, was charged in the Court of First Instance of Manila with the crime
of falsification of a public and commercial document in that, having been entrusted with the preparation and
registration of the article of incorporation of the Pacific Airways Corporation, a domestic corporation organized for the
purpose of engaging in business as a common carrier, he caused it to appear in said article of incorporation that one
Arsenio Baylon, a Filipino citizen, had subscribed to and was the owner of 60.005 per cent of the subscribed capital stock
of the corporation when in reality, as the accused well knew, such was not the case, the truth being that the owner of
the portion of the capital stock subscribed to by Baylon and the money paid thereon were American citizen whose name
did not appear in the article of incorporation, and that the purpose for making this false statement was to circumvent
the constitutional mandate that no corporation shall be authorize to operate as a public utility in the Philippines unless
60 per cent of its capital stock is owned by Filipinos. But the amount capital stock actually subscribed was P200,000, and
the names of the subscribers were Arsenio Baylon, Eruin E. Shannahan, Albert W. Onstott, James O'Bannon, Denzel J.
Cavin, and William H. Quasha, the first being a Filipino and the other five all Americans.

Found guilty after trial and sentenced to a term of imprisonment and a fine, the accused has appealed to this Court.

ISSUE:
WON corporation shall be authorize to operate as a public utility in the Philippines unless 60 per cent of its capital stock
is owned by Filipinos?

HELD:
Now, as we see it, the falsification imputed in the accused in the present case consists in not disclosing in the articles of
incorporation that Baylon was a mere trustee (or dummy as the prosecution chooses to call him) of his American co-
incorporators, thus giving the impression that Baylon was the owner of the shares subscribed to by him which, as above
stated, amount to 60.005 per cent of the sub-scribed capital stock. This, in the opinion of the trial court, is a malicious
perversion of the truth made with the wrongful intent circumventing section 8, Article XIV of the Constitution, which
provides that " no franchise, certificate, or any other form of authorization for the operation of a public utility shall be
granted except to citizens of the Philippines or to corporation or other entities organized under the law of the
Philippines, sixty per centum of the capital of which is owned by citizens of the Philippines . . . ." Plausible though it may
appear at first glance, this opinion loses validity once it is noted that it is predicated on the erroneous assumption that
the constitutional provision just quoted was meant to prohibit the mere formation of a public utility corporation without
60 per cent of its capital being owned by the Filipinos, a mistaken belief which has induced the lower court to that the
accused was under obligation to disclose the whole truth about the nationality of the subscribed capital stock of the
corporation by revealing that Baylon was a mere trustee or dummy of his American co-incorporators, and that in not
making such disclosure defendant's intention was to circumvent the Constitution to the detriment of the public
interests. Contrary to the lower court's assumption, the Constitution does not prohibit the mere formation of a public
utility corporation without the required formation of Filipino capital. What it does prohibit is the granting of a
franchise or other form of authorization for the operation of a public utility to a corporation already in existence but
without the requisite proportion of Filipino capital. This is obvious from the context, for the constitutional provision in
question qualifies the terms " franchise", "certificate", or "any other form of authorization" with the phrase "for the
operation of a public utility," thereby making it clear that the franchise meant is not the "primary franchise" that invest a
body of men with corporate existence but the "secondary franchise" or the privilege to operate as a public utility after
the corporation has already come into being.

If the Constitution does not prohibit the mere formation of a public utility corporation with the alien capital, then how
can the accused be charged with having wrongfully intended to circumvent that fundamental law by not revealing in the
articles of incorporation that Baylon was a mere trustee of his American co-incorporation and that for that reason the
subscribed capital stock of the corporation was wholly American? For the mere formation of the corporation such
revelation was not essential, and the Corporation Law does not require it. Defendant was, therefore, under no
obligation to make it. In the absence of such obligation and of the alleged wrongful intent, defendant cannot be legally
convicted of the crime with which he is charged.

It is urged, however, that the formation of the corporation with 60 per cent of its subscribed capital stock appearing in
the name of Baylon was an indispensable preparatory step to the subversion of the constitutional prohibition and the
laws implementing the policy expressed therein. This view is not correct. For a corporation to be entitled to operate a
public utility it is not necessary that it be organized with 60 per cent of its capital owned by Filipinos from the start. A
corporation formed with capital that is entirely alien may subsequently change the nationality of its capital through
transfer of shares to Filipino citizens. conversely, a corporation originally formed with Filipino capital may subsequently
change the national status of said capital through transfer of shares to foreigners. What need is there then for a
corporation that intends to operate a public utility to have, at the time of its formation, 60 per cent of its capital owned
by Filipinos alone? That condition may anytime be attained thru the necessary transfer of stocks. The moment for
determining whether a corporation is entitled to operate as a public utility is when it applies for a franchise, certificate,
or any other form of authorization for that purpose. And that can be done after the corporation has already come into
being and not while it is still being formed. And at that moment, the corporation must show that it has complied not
only with the requirement of the Constitution as to the nationality of its capital, but also with the requirements of the
Civil Aviation Law if it is a common carrier by air, the Revised Administrative Code if it is a common carrier by water, and
the Public Service Law if it is a common carrier by land or other kind of public service.

5. War-Time Test

G.R. No. L-2294 May 25, 1951

FILIPINAS COMPAÑIA DE SEGUROS, petitioner,
vs.
CHRISTERN, HUENEFELD and CO., INC., respondent.
FACTS:
On October 1, 1941, the respondent corporation, Christern Huenefeld, & Co., Inc., after payment of corresponding
premium, obtained from the petitioner ,Filipinas Cia. de Seguros, fire policy No. 29333 in the sum of P1000,000, covering
merchandise contained in a building located at No. 711 Roman Street, Binondo Manila. On February 27, 1942, or during
the Japanese military occupation, the building and insured merchandise were burned. In due time the respondent
submitted to the petitioner its claim under the policy. The salvage goods were sold at public auction and, after deducting
their value, the total loss suffered by the respondent was fixed at P92,650. The petitioner refused to pay the claim on
the ground that the policy in favor of the respondent had ceased to be in force on the date the United States declared
war against Germany, the respondent Corporation (though organized under and by virtue of the laws of the Philippines)
being controlled by the German subjects and the petitioner being a company under American jurisdiction when said
policy was issued on October 1, 1941. The petitioner, however, in pursuance of the order of the Director of Bureau of
Financing, Philippine Executive Commission, dated April 9, 1943, paid to the respondent the sum of P92,650 on April 19,
1943.

The present action was filed on August 6, 1946, in the Court of First Instance of Manila for the purpose of recovering
from the respondent the sum of P92,650 above mentioned. The theory of the petitioner is that the insured merchandise
were burned up after the policy issued in 1941 in favor of the respondent corporation has ceased to be effective
because of the outbreak of the war between the United States and Germany on December 10, 1941, and that the
payment made by the petitioner to the respondent corporation during the Japanese military occupation was under
pressure. After trial, the Court of First Instance of Manila dismissed the action without pronouncement as to costs. Upon
appeal to the Court of Appeals, the judgment of the Court of First Instance of Manila was affirmed, with costs. The case
is now before us on appeal by certiorari from the decision of the Court of Appeals.

The Court of Appeals overruled the contention of the petitioner that the respondent corporation became an enemy
when the United States declared war against Germany, relying on English and American cases which held that a
corporation is a citizen of the country or state by and under the laws of which it was created or organized. It rejected the
theory that nationality of private corporation is determine by the character or citizenship of its controlling stockholders.

ISSUE:
WON a foreign resident corporation of an enemy state will cease to be recognized in times of war between states?

HELD:
There is no question that majority of the stockholders of the respondent corporation were German subjects. This being
so, we have to rule that said respondent became an enemy corporation upon the outbreak of the war between the
United States and Germany.

The Philippine Insurance Law (Act No. 2427, as amended,) in section 8, provides that "anyone except a public enemy
may be insured." It stands to reason that an insurance policy ceases to be allowable as soon as an insured becomes a
public enemy.
Effect of war, generally. — All intercourse between citizens of belligerent powers which is inconsistent with a
state of war is prohibited by the law of nations. Such prohibition includes all negotiations, commerce, or trading
with the enemy; all acts which will increase, or tend to increase, its income or resources; all acts of voluntary
submission to it; or receiving its protection; also all acts concerning the transmission of money or goods; and all
contracts relating thereto are thereby nullified. It further prohibits insurance upon trade with or by the enemy,
upon the life or lives of aliens engaged in service with the enemy; this for the reason that the subjects of one
country cannot be permitted to lend their assistance to protect by insurance the commerce or property of
belligerent, alien subjects, or to do anything detrimental too their country's interest. The purpose of war is to
cripple the power and exhaust the resources of the enemy, and it is inconsistent that one country should
destroy its enemy's property and repay in insurance the value of what has been so destroyed, or that it should in
such manner increase the resources of the enemy, or render it aid, and the commencement of war determines,
for like reasons, all trading intercourse with the enemy, which prior thereto may have been lawful. All
 individuals therefore, who compose the belligerent powers, exist, as to each other, in a state of utter exclusion,
and are public enemies. (6 Couch, Cyc. of Ins. Law, pp. 5352-5353.)

In the case of an ordinary fire policy, which grants insurance only from year, or for some other specified term it
is plain that when the parties become alien enemies, the contractual tie is broken and the contractual rights of
the parties, so far as not vested. lost. (Vance, the Law on Insurance, Sec. 44, p. 112.)

The respondent having become an enemy corporation on December 10, 1941, the insurance policy issued in its favor on
October 1, 1941, by the petitioner (a Philippine corporation) had ceased to be valid and enforcible, and since the insured
goods were burned after December 10, 1941, and during the war, the respondent was not entitled to any indemnity
under said policy from the petitioner. However, elementary rules of justice (in the absence of specific provision in the
Insurance Law) require that the premium paid by the respondent for the period covered by its policy from December 11,
1941, should be returned by the petitioner.

The Court of Appeals, in deciding the case, stated that the main issue hinges on the question of whether the policy in
question became null and void upon the declaration of war between the United States and Germany on December 10,
1941, and its judgment in favor of the respondent corporation was predicated on its conclusion that the policy did not
cease to be in force. The Court of Appeals necessarily assumed that, even if the payment by the petitioner to the
respondent was involuntary, its action is not tenable in view of the ruling on the validity of the policy. As a matter of
fact, the Court of Appeals held that "any intimidation resorted to by the appellee was not unjust but the exercise of its
lawful right to claim for and received the payment of the insurance policy," and that the ruling of the Bureau of
Financing to the effect that "the appellee was entitled to payment from the appellant was, well founded." Factually,
there can be no doubt that the Director of the Bureau of Financing, in ordering the petitioner to pay the claim of the
respondent, merely obeyed the instruction of the Japanese Military Administration, as may be seen from the following:
"In view of the findings and conclusion of this office contained in its decision on Administrative Case dated February 9,
1943 copy of which was sent to your office and the concurrence therein of the Financial Department of the Japanese
Military Administration, and following the instruction of said authority, you are hereby ordered to pay the claim of
Messrs. Christern, Huenefeld & Co., Inc. The payment of said claim, however, should be made by means of crossed
check."

It results that the petitioner is entitled to recover what paid to the respondent under the circumstances on this case.
However, the petitioner will be entitled to recover only the equivalent, in actual Philippines currency of P92,650 paid on
April 19, 1943, in accordance with the rate fixed in the Ballantyne scale.
Wherefore, the appealed decision is hereby reversed and the respondent corporation is ordered to pay to the petitioner
the sum of P77,208.33, Philippine currency, less the amount of the premium, in Philippine currency, that should be
returned by the petitioner for the unexpired term of the policy in question, beginning December 11, 1941. Without
costs. So ordered.