Government of the Philippine Islands vs. El Monte de Piedad

The $80,000 was received by El Monte de Piedad as a mere loan or deposit, not as a donation, and the Philippine Government, as successor to the Spanish Government's sovereign functions and as parens patriae over charitable funds, was the proper party to recover it. Statutes of limitation do not run against the sovereign or government unless expressly provided by statute, and the Government's right of action to recover the loan had not prescribed.

The case concerns funds collected through a national subscription opened in the Spanish Dominions for the relief of those damaged by the earthquake of June 3, 1863, in the Philippine Islands. Approximately $400,000 were subscribed and paid into the Treasury of the Philippine Islands. A central relief board was appointed by authority of the King of Spain to distribute the moneys voluntarily contributed. The funds were governed by the law of June 20, 1849, the royal decree of April 27, 1875, and the instructions promulgated on the latter date, which constituted the fund as a special charity of a temporary nature. The Spanish Government, as initiator of the fund, had the duty to exercise supervision and control over the moneys to carry out the donors' will. The Philippine Islands were later ceded to the United States under the Treaty of Paris of December 10, 1898.

About $400,000 were subscribed and paid into the Treasury of the Philippine Islands by the inhabitants of the Spanish Dominions for the relief of those damaged by the earthquake of June 3, 1863. A central relief board was appointed on October 6 of that year, by authority of the King of Spain, to distribute the moneys voluntarily contributed. After investigation, the relief board allotted $365,703.50 to the various sufferers, and by order of the Governor-General, a list of these allotments was published in the Official Gazette of Manila dated April 7, 1870. Only $30,299.65 was later distributed, leaving a balance of $365,403.85 for distribution.

Upon the petition of the governing body of the Monte de Piedad, dated February 1, 1883, the Philippine Government directed its treasurer to turn over to the Monte de Piedad the sum of $80,000 of the relief fund in installments of $20,000 each. These amounts were received on February 15, March 12, April 14, and June 2, 1883, and remained in the possession of the Monte de Piedad. In its petition, the Monte de Piedad stated that the funds should be held "at the disposal of the Relief Board" and obligated itself to return any sums received should the transfer not be approved by His Majesty's Government. The Governor-General's resolution directed the transfer, stating that the board of directors was "solemnly bound to return, within eight days after demand, the sums it may have so received, if H. M. Government does not approve this resolution."

By the royal order of December 3, 1892, the Governor-General was ordered to inform the home Government of the total available sum of the earthquake fund, taking into consideration the sums delivered to the Monte de Piedad. The Department of Finance, in its report dated June 28, 1893, demanded the return of the $80,000 from the Monte de Piedad, characterizing the amount as "loaned" to it. The Monte de Piedad refused to return the money, claiming it had been received as a donation and that only the Governor-General, not the Department of Finance, was entitled to order the reimbursement. The record disclosed no further definite action taken by either the Philippine Government or the Spanish Government regarding the $80,000.

In the defendant's general ledger, the $80,000 was entered as received from the general treasury "as a returnable loan, and without interest." The account was carried in this manner until January 1, 1899, when it was closed by transferring the amount to an account called "Sagrada Mitra," which was a loan of $15,000 made to the defendant by the Archbishop of Manila, thereby placing the "Sagrada Mitra" account at $95,000. On March 16, 1902, the Philippine Government called upon the defendant for information concerning the status of the $80,000, and the defendant replied on March 31, 1902, stating that it received the amounts "as a reimbursable loan and without interest." On account of various petitions of the persons and heirs of those to whom allotments were made, the Philippine Legislature passed Act No. 2109, effective January 30, 1912, empowering and directing the Treasurer to bring suit to recover the $80,000, together with interest, for the benefit of those persons or their heirs. The action was instituted on May 3, 1912.

• Nature of the Transaction: The Attorney-General contended that the $80,000 was received by the Monte de Piedad as a loan, not as a donation, and that the defendant's own books and written acknowledgment of March 31, 1902, confirmed this characterization.
• Prescription: The Attorney-General argued that the right of action had not prescribed because (a) the defense of prescription cannot be set up against the Philippine Government, (b) the right of action to recover a deposit or trust funds does not prescribe, and (c) even if the defense of prescription could be interposed and the action had prescribed, the same was revived by Act No. 2109.

• Donation: The defendant argued that the $80,000 was given as a donation subject to the condition that it be returned to the Spanish Government within eight days after demand if the Supreme Government of Spain should not approve the action taken by the former government, and that this donation had been cleared, making the $80,000 the exclusive property of the appellant.
• Subrogation: The defendant contended that the Government of the Philippine Islands had not subrogated the Spanish Government in its rights over the fund, arguing that the charity was an ecclesiastical pious work and that the cessionary Government, being non-Roman Catholic, could not exercise the royal vice-patronage over it.
• Constitutionality of Act No. 2109: The defendant argued that Act No. 2109 was unconstitutional, as it took property without due process of law in violation of the fifth section of the Act of Congress of July 1, 1902.
• Prescription: The defendant argued that the plaintiff's right of action had prescribed at the time the suit was instituted on May 3, 1912, citing articles 1961, 1964, and 1969 of the Civil Code, since the Monte de Piedad declined to return the $80,000 when ordered to do so by the Department of Finance in June 1893.
• Proper Party: The defendant argued that the Government was not a proper party to the action, as the only persons who could claim to be damaged by the payment were the donors or the cestuis que trustent, and the Government was neither.

• Nature of the Transaction: Whether the $80,000 was received by the Monte de Piedad as a donation or as a loan.
• Subrogation of Rights: Whether the Government of the Philippine Islands subrogated the Spanish Government in its rights over the earthquake relief fund.
• Proper Party: Whether the Philippine Government was the proper party to bring the action to recover the $80,000.
• Constitutionality of Act No. 2109: Whether Act No. 2109 is unconstitutional as taking property without due process of law.
• Prescription: Whether the plaintiff's right of action had prescribed at the time the suit was instituted.

• Nature of the Transaction: Loan. The $80,000 was received by the Monte de Piedad as a mere loan or deposit and not as a donation, as shown by the defendant's own petition, the Governor-General's resolution, the defendant's books, and its written acknowledgment of March 31, 1902.
• Subrogation of Rights: Yes. The Philippine Government subrogated the Spanish Government in its rights over the fund, as the right to recover did not rest upon the proposition that the $80,000 was "other immovable property" under article 8 of the Treaty of Paris, but upon contractual obligations incurred before the cession.
• Proper Party: Yes. The Philippine Government was the proper party to bring the action, as the money, being given to a charity, became in a measure public property, consecrated to the public use, and the Government acted as parens patriae.
• Constitutionality of Act No. 2109: Constitutional. The Act is only a manifestation of the Philippine Government's exercise of the power or right it undoubtedly had, and it does not take property without due process of law since the defendant is not the owner of the $80,000 but holds it as a loan.
• Prescription: No. The defense of prescription cannot be set up against the Philippine Government, which, in bringing and prosecuting this action, was exercising its sovereign functions and seeking to carry out a trust devolved upon it when the Philippine Islands were ceded to the United States.

• Nature of the Transaction: The Court examined the documentary evidence, including the defendant's petition of February 1, 1883, the Governor-General's resolution, the report of the Department of Finance of June 28, 1893, and the defendant's own books and correspondence. The defendant asked that the $80,000 be transferred to it "at the disposal of the Relief Board" and agreed to return the sums if the transfer was not approved by the Government of Spain. The Governor-General's resolution stated that the board of directors was "solemnly bound to return, within eight days after demand, the sums it may have so received, if H. M. Government does not approve this resolution." The first and only time the word "donation" was used in connection with the $80,000 appeared in the Governor-General's resolution, which submitted to the home Government whether the surplus should be delivered "either as a donation, or as a loan." The royal order of December 3, 1892, directed the Governor-General to take into consideration the sums delivered to the Monte de Piedad, and the Department of Finance understood that the $80,000 was transferred as a loan. The defendant's own books showed the amount was received "as a returnable loan, and without interest," and the defendant acknowledged as late as March 31, 1902, that it received the $80,000 "as a reimbursable loan, and without interest." Therefore, there could be no doubt that the Monte de Piedad received the $80,000 as a mere loan or deposit and not as a donation.

• Subrogation of Rights: The Court rejected the defendant's contention that the charity was an ecclesiastical pious work. The record showed clearly that the fund was given by the donors for a specific and definite purpose — the relief of the earthquake sufferers — and for no other purpose. All officials who took part in the disposal of the fund acted in their purely civil, official capacity, and the fact that they might have belonged to a certain church had nothing to do with their acts. The church, as such, had nothing to do with the fund until the $80,000 reached the coffers of the Monte de Piedad as a loan or deposit. The Court further held that the right to recover did not rest upon the proposition that the $80,000 must be "other immovable property" mentioned in article 8 of the Treaty of Paris, but upon contractual obligations incurred before the Philippine Islands were ceded to the United States. The law of June 20, 1849, the royal decree of April 27, 1875, and the instructions promulgated on the latter date were not political in any sense; they were among "that great body of municipal law which regulates private and domestic rights" and continued in force after the cession. Upon the cession, the prerogatives of the crown of Spain devolved upon the United States, including the prerogative of parens patriae.

• Proper Party: The Court held that the Government was the proper party to bring the action. The earthquake fund was the result of a great number of small contributions; the names of the contributors did not appear in the record, and their whereabouts were unknown. The beneficiaries, consisting of the original sufferers and their heirs, were numerous, and it would be impracticable for them to institute actions individually or collectively. The true ground upon which the right of the Government to maintain the action rested was that the money, being given to a charity, became in a measure public property, only applicable to the specific purposes to which it was intended to be devoted, but within those limits consecrated to the public use and became part of the public resources for promoting the happiness and welfare of the Philippine Government. To deny the Government's right to maintain the action would be contrary to sound public policy, as tending to discourage the prompt exercise of similar acts of humanity and Christian benevolence in the future.

• Constitutionality of Act No. 2109: The Court held that little needed to be said on this issue because the Philippine Government was the proper party to the action. The Act was only a manifestation of the Philippine Government's exercise of the power or right it undoubtedly had. The Act was not in conflict with the fifth section of the Act of Congress of July 1, 1902, because it did not take property without due process of law. The defendant was not the owner of the $80,000 but held it as a loan subject to the disposal of the central relief board. Therefore, there could be nothing in the Act which transcended the power of the Philippine Legislature.

• Prescription: The Court held that the Philippine Government was not bound by the statute of limitations. Citing the Supreme Court of the United States in U.S. vs. Nashville, Chattanooga & St. Louis Railway Co., the Court stated that it was "settled beyond doubt or controversy upon the foundation of the great principle of public policy, applicable to all governments alike, which forbids that the public interests should be prejudiced by the negligence of the officers or agents to whose care they are confided" that the United States, asserting rights vested in it as a sovereign government, is not bound by any statute of limitations unless Congress has clearly manifested its intention that it should be so bound. The rule was that statutes of limitation do not run against the sovereign or government, whether state or federal, in the absence of express statutory provision to the contrary. In the instant case, the Philippine Government was not a mere nominal party because it was exercising its sovereign functions and seeking to carry out a trust devolved upon it when the Philippine Islands were ceded to the United States. These principles, being based upon the great principle of public policy, were applicable to the Philippine Government.

• Parens Patriae Doctrine — The sovereign, as parens patriae, has the right to enforce all charities of a public nature by virtue of its general superintending authority over the public interests, where no other person is entrusted with it. The Court applied this doctrine in holding that the Philippine Government was the proper party to sue to recover the $80,000, as the money, being given to a charity, became in a measure public property, consecrated to the public use, and the beneficiaries were numerous and incapable of vindicating their rights individually.

• Prescription Does Not Run Against the Sovereign — Statutes of limitation do not run against the sovereign or government, whether state or federal, in the absence of express statutory provision to the contrary. The rule is otherwise where the mischiefs to be remedied are of such a nature that the state must necessarily be included, where the state goes into business in concert or in competition with her citizens, or where a party seeks to enforce his private rights by suit in the name of the state or government, so that the latter is only a nominal party. The Court applied this doctrine in holding that the Philippine Government, in bringing and prosecuting the action, was exercising its sovereign functions and seeking to carry out a trust devolved upon it, and therefore the defense of prescription could not be set up against it.

• Continuity of Municipal Law After Cession of Territory — Upon the cession of territory, all laws theretofore in force which are in conflict with the political character, constitution, or institutions of the substituted sovereign lose their force, but that great body of municipal law which regulates private and domestic rights continues in force until abrogated or changed by the new ruler. The Court applied this doctrine in holding that the law of June 20, 1849, the royal decree of April 27, 1875, and the instructions promulgated on the latter date, which governed the earthquake relief fund, continued in force after the cession of the Philippine Islands to the United States.

• "Therefore, there cannot be the slightest doubt about the fact that the Monte de Piedad received the $80,000 as a mere loan or deposit and not as a donation." — This passage states the Court's conclusion on the central issue of the case, determining the nature of the transaction between the Government and the defendant.

• "The true ground is that the money being given to a charity became, in a measure, public property, only applicable, it is true, to the specific purposes to which it was intended to be devoted, but within those limits consecrated to the public use, and became part of the public resources for promoting the happiness and welfare of the Philippine Government." — This passage articulates the doctrinal basis for the Government's right to maintain the action as parens patriae over charitable funds.

• "It is settled beyond doubt or controversy upon the foundation of the great principle of public policy, applicable to all governments alike, which forbids that the public interests should be prejudiced by the negligence of the officers or agents to whose care they are confided that the United States, asserting rights vested in it as a sovereign government, is not bound by any statute of limitations, unless Congress has clearly manifested its intention that it should be so bound." — This passage, quoted from U.S. vs. Nashville, Chattanooga & St. Louis Railway Co., states the controlling principle that statutes of limitation do not run against the sovereign.

• U.S. vs. Nashville, Chattanooga & St. Louis Railway Co., 118 U.S. 120 — Controlling precedent on the principle that the sovereign is not bound by statutes of limitation unless Congress has clearly manifested its intention that it should be so bound. The Court quoted this case at length and applied its principle to the Philippine Government.

• Vilas vs. Manila, 220 U.S. 345 — Followed on the doctrine that the great body of municipal law which regulates private and domestic rights continues in force after cession of territory until abrogated or changed by the new ruler. The Court also cited this case for the proposition that the present municipality is the successor of the old and entitled to its property and property rights.

• Mormon Church vs. United States, 136 U.S. 1 — Followed on the parens patriae doctrine, holding that the prerogative of parens patriae is inherent in the supreme power of every State and that the beneficiaries of charities look for protection to the sovereign authority. The Court quoted this case in support of the Government's right to maintain the action.

• Gibson vs. Chouteau, 13 Wall. 92 — Followed on the principle that statutes of limitation do not run against the State and that no laches can be imputed to the King. The Court quoted this case in support of its holding on prescription.

• Magill vs. Brown, 16 Fed. Cas. 408 — Quoted with approval in Mormon Church vs. United States, cited for the proposition that the Revolution devolved on the State all the transcendent power of Parliament and the prerogative of the crown.

• Fontain vs. Ravenel, 17 How. 369 — Cited for the proposition that the State as a sovereign is the parens patriae and has the right to enforce all charities of a public nature.

• People vs. Cogswell, 113 Cal. 129 — Cited for the proposition that it is not only the right but the duty of the Attorney-General to prosecute actions relating to charities.

• Benedicto vs. De la Rama, 3 Phil. Rep. 34 — Cited for the proposition that the law of June 20, 1849, the royal decree of April 27, 1875, and the instructions promulgated on the latter date were applicable to the Philippine Islands.

• Article 8, Treaty of Paris of December 10, 1898 — Spain relinquished to the United States "all buildings, wharves, barracks, forts, structures, public highways, and other immovable property which, in conformity with law, belonged to the public domain, and as such belonged to the crown of Spain." The Court held that the right to recover the $80,000 did not rest upon this provision but upon contractual obligations incurred before the cession.

• Section 5, Act of Congress of July 1, 1902 — The defendant argued that Act No. 2109 was in conflict with this provision because it took property without due process of law. The Court held that the Act did not take property without due process of law because the defendant was not the owner of the $80,000 but held it as a loan.

• Act No. 2109, Philippine Legislature — The Act empowered and directed the Treasurer of the Philippine Islands to bring suit against the Monte de Piedad to recover the $80,000, together with interest, for the benefit of the persons or their heirs appearing in the list of names published in the Official Gazette of April 7, 1870. The Court held that the Act was constitutional and was only a manifestation of the Philippine Government's exercise of the power or right it undoubtedly had.

• Articles 1961, 1964, and 1969, Civil Code — Cited by the defendant in support of its prescription defense. The Court held that the defense of prescription could not be set up against the Philippine Government.

• Sections 38, 43, and 50, Code of Civil Procedure — The Court noted that if the defendant's theory on prescription were correct, the action may have prescribed on May 3, 1912, because more than ten full years had elapsed after March 31, 1902, but the defendant's written acknowledgment of the loan on that date would have interrupted the running of the statute under section 50.

• Law of June 20, 1849; Royal Decree of April 27, 1875; Instructions promulgated on the latter date — These legal provisions governed the earthquake relief fund, constituting it as a special charity of a temporary nature. The Court held that these provisions were not political in nature and continued in force after the cession of the Philippine Islands to the United States.

Torres, Johnson, and Araullo, JJ., concurred. Moreland, J., did not sign.