Philippine Alien Property Administration vs. Castelo

A claim for damages for use of property vested by the Philippine Alien Property Administration cannot be maintained or executed pending appeal because congressional consent under the Trading with the Enemy Act is limited to recovery of the property itself and vested property is exempt from execution.

The Philippine Alien Property Administration is an agency of the United States of America created by Executive Order No. 9818 with authority to vest enemy-owned properties in the Philippines. Consent to sue the United States through that Administration in Philippine courts is governed by section 3 of the Philippine Property Act of 1946 and by the Trading with the Enemy Act, as amended. The Republic of the Philippines and a private mortgagee later intervened in the underlying recovery action concerning Manila properties vested under that authority.

Pedro C. Hernaez and Rafael R. Alunan claimed ownership of eight parcels of land with improvements in the City of Manila. On November 6, 1939, they had mortgaged the properties to Dr. Nicanor Jacinto to secure a P160,000 loan. The properties were later registered in the name of Hakodate Dock Co., Ltd. since March 3, 1943, following payment of P160,000 to Jacinto on February 3, 1943 and release of the mortgage.

On April 22, 1947, the Philippine Alien Property Administration vested the lots and improvements in the United States of America. According to respondents, petitioner refused to release the properties, prompting their complaint on July 7, 1949 for restoration of possession and damages at P5,000 a month from April 22, 1947. Petitioner admitted the vesting, asserting that respondents had sold the properties to Hakodate Dock Co., Ltd., and counterclaimed for P36,789.68 in rentals allegedly collected by respondents from the United States without ownership and for P123,049.94 as reimbursement for demolition, repair, and improvement expenses. Petitioner also pleaded that the court lacked jurisdiction over the P5,000 monthly damages claim for want of statutory consent to sue.

The Republic of the Philippines intervened on August 11, 1949 siding with petitioner against respondents' claim. Jacinto intervened on October 31, 1949 alleging that the February 3, 1943 payment by Hakodate Dock Co., Ltd. was made under duress and praying that the mortgage be declared subsisting regardless of ownership. According to both petitioner and respondents, the P160,000 had been paid voluntarily and the mortgage had been properly cancelled and released.

On May 8, 1950, the lower court declared Hernaez and Asuncion de la Rama Vda. de Alunan, in her own behalf and as administratrix of Rafael Alunan's estate, the legal owners and ordered return of the properties. Petitioner was ordered to pay P3,375 a month from May 1947 until possession was restored, while the Jacinto mortgage was declared cancelled, the interventions were dismissed, and petitioner's counterclaim was dismissed. Copy was received by petitioner on May 11, 1950. Before expiry of the appeal period, respondents moved on May 25, 1950 for execution pending appeal limited to the monthly payments, which petitioner opposed but the court granted on June 22, 1950.

• Lack of Jurisdiction over Damages: Petitioner argued that the court of origin had no jurisdiction to entertain the claim for P5,000 a month as damages because no statutory permission or consent had been granted to sue petitioner with respect to said damages.
• Counterclaims for Rentals and Expenses: Petitioner maintained that respondents should return P36,789.68 collected as rentals for occupation of the vested property without being owners, and reimburse P123,049.94 incurred in demolishing, repairing, and improving the buildings.
• Intervention – Voluntary Payment: Petitioner argued that the P160,000 paid by Hakodate Dock Co., Ltd. to Dr. Jacinto was paid voluntarily and that the mortgage had been properly cancelled and released.
• Abuse of Discretion in Execution Pending Appeal: Petitioner maintained that issuance of execution before expiration of the appeal period, to enforce the disputed damages award against a United States agency, was legally untenable despite the asserted good reason.

• Execution Pending Appeal – Risk of Dissolution: Respondents maintained that execution should issue notwithstanding the appeal as regards the P3,375 monthly award from May 1947, on the ground that petitioner might cease to exist before final termination of the case in the appellate court.
• Intervention – Validity of Cancellation: Respondents argued that the sum paid by Hakodate Dock Co., Ltd. to Dr. Jacinto was paid voluntarily and that the mortgage had been properly cancelled and released.

• Execution Pending Appeal: Whether the respondent Judge, before expiration of the period to appeal, may issue a writ of execution upon the special reason that the party against which judgment was rendered will cease to exist before final termination of the case in the appellate court.
• Sovereign Immunity and Consent to Damages Suit: Whether a claim for damages for use of property vested by the Philippine Alien Property Administration may be maintained without express congressional consent under the Trading with the Enemy Act.
• Waiver and Exemption from Execution: Whether petitioner waived objection to jurisdiction over the damages claim by answering and appearing without a motion to dismiss, and whether vested property may be subjected to execution.

• Execution Pending Appeal: No. Although the stated purpose of securing rents in case of affirmance was addressed to discretion, execution was legally untenable because enforcement of the disputed damages award against a United States agency would allow suit without consent.
• Sovereign Immunity and Consent to Damages Suit: No. A suit against the Philippine Alien Property Administration over vested property is in substance a suit against the United States, and the Trading with the Enemy Act authorizes only recovery of the property, not damages for its use.
• Waiver and Exemption from Execution: No waiver occurred, and no execution lies. Only Congress can consent to suit, and vested property is exempt from attachment, garnishment, and execution under section 9(f).

• Execution Pending Appeal: Section 2, Rule 239 of the Rules of Court permits execution before expiration of the time to appeal in the court's discretion, on motion with notice and upon good reasons stated in a special order. The lower court treated petitioner's possible cessation of existence or function in the Philippines before appellate termination as good reason to enable collection of rents if affirmed. That reason, while ostensibly within discretion, could not sustain the writ because its ultimate effect was to enforce the damages portion of the judgment whose jurisdiction was disputed on sovereign-immunity grounds, a fundamental issue inseparable from the incident.
• Sovereign Immunity and Consent to Damages Suit: A suit against the Alien Property Custodian and Attorney General involving vested property under the Trading with the Enemy Act, as amended, is in substance a suit against the United States; the same principle applies to the Philippine Alien Property Administration over properties in the Philippines. Maintenance of such action requires a showing of congressional consent and compliance with its terms, failing which dismissal follows. Consent through section 3 of the Philippine Property Act of 1946, in relation to section 9(a) of the Trading with the Enemy Act, covers actions by persons neither enemies nor allies of enemies to establish right, title, or interest and recover ownership and possession. Nowhere in section 9(a) or any other provision is authorization found to recover damages for use of vested property, as confirmed by paragraph 4 of section 7(c). The Von Brunning vs. Sutherland damages action for use and injury during Custodian custody was held essentially different and unauthorized, the sole remedy being return of seized property in a proper case; a fortiori, the present damages claim was presented without prior United States consent.
• Waiver and Exemption from Execution: No waiver resulted from failure to file a motion to dismiss challenging jurisdiction over the person or from failure to object to damages evidence, because the United States had expressly consented to be sued for recovery of the property itself, leaving petitioner only to challenge jurisdiction over the distinct damages claim, which was done. Even if desired, waiver was impossible since only Congress, not the President, petitioner, or subordinate officers, can give the required consent. Separately, enforcement against vested moneys or properties is barred by section 9(f) of the Trading with the Enemy Act, which exempts such property from attachment, garnishment, execution, or any lien, except for First World War properties under section 30 or certain non-resident returns under section 32(f) to allow American creditors to attach before removal from jurisdiction, exemptions into which the present case does not fall.

• Suit Against the United States Through Alien Property Administration — A suit against the Alien Property Custodian and Attorney General, or against the Philippine Alien Property Administration, involving vested property under the Trading with the Enemy Act is in substance a suit against the United States. Applied to require respondents to show congressional consent and compliance with its terms before maintaining the action.
• Congressional Consent Strictly Construed; Only Congress May Consent — Consent to sue the United States must be expressly given by Congress and cannot be supplied by the President, the Administration, or subordinate officers, nor waived by appearance or failure to move to dismiss. Applied to reject the claim that answering and trial appearance submitted petitioner to jurisdiction over the separate damages claim.
• Limited Remedy Under Section 9(a), Trading with the Enemy Act — Section 9(a) authorizes only suits by non-enemies to establish interest, right, or title and to obtain conveyance or transfer of seized property; it does not authorize damages for use or injury while in Custodian custody. Applied to treat the monthly-rentals award as an essentially different, unauthorized cause of action.
• Discretionary Execution Pending Appeal Upon Good Reasons — Before expiration of the time to appeal, execution may issue in the court's discretion on motion with notice upon good reasons stated in a special order, stayable by supersedeas bond. Applied to hold that possible dissolution of the judgment debtor, though invoked as good reason, cannot justify execution where sovereign immunity bars the underlying monetary relief.
• Exemption of Vested Property from Execution Under Section 9(f) — Property vested under the Trading with the Enemy Act is exempt from attachment, garnishment, execution, or lien, save narrow exceptions for First World War properties and certain intended returns to non-residents. Applied to provide an independent bar to the writ against vested moneys or properties.

• "It is well settled 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, as amended, is in substance a suit against the United States." — States the controlling characterization that triggers the requirement of express congressional consent in the present action.
• "This is the only suit authorized by section 9 of the act,, and the sole remedy afforded by its the return of the seized property in proper case to the claimant." — Defines the limited section 9(a) remedy, excluding damages for use or injury during custody.
• "Such a suit is in effect against the United States, and cannot be sustained without permission first given by the United States. . . . (p. 632)." — Reproduces the Von Brunning vs. Sutherland rule adopted to dismiss the analogous damages claim as unauthorized.
• "before the expiration of the time to appeal execution may issue in the discretion of the court, on motion of the prevailing party with notice with the adverse party, upon good reason to be stated in special order." — Recites the discretionary-execution standard whose application was held legally untenable against an immune sovereign agency.

• Syquia vs. General Moore, et al., 84 Phil. 312 — Cited as authority that failure to show congressional consent and compliance requires dismissal of a suit in substance against the United States.
• Marvel Building Corp. vs. War Damage Commission, 85 Phil. 27 — Cited for the same dismissal consequence absent the required sovereign consent.
• Marquez Lim vs. Nelson, et al., 87 Phil. 328 — Cited for the same consent requirement governing suits against United States agencies.
• Von Brunning vs. Sutherland, 29 F. (2d) — Followed as strikingly similar authority holding that damages for use and injury during Alien Property Custodian custody is a different, unauthorized cause of action whose sole remedy is return of the property.
• Carr vs. U.S., 98 U.S. 433; Minnesota vs. U.S., 305 U.S. 386; U.S. vs. Shaw, 309 U.S. 501 — Cited to establish that only Congress, not the President or subordinate officers, can give consent to sue the United States.

• Section 2, Rule 239, Rules of Court — Governs discretionary execution before expiration of the time to appeal upon good reasons stated in a special order, subject to stay by supersedeas bond; invoked by the lower court but held inapplicable to enforce the barred damages award.
• Section 3, Philippine Property Act of 1946 — Source of congressional consent to sue the United States through the Philippine Alien Property Administration in Philippine courts in proper cases; presumed basis for the recovery-of-property action.
• Section 9(a), Trading with the Enemy Act, as amended — Authorizes non-enemy claimants to sue in equity to establish interest, right, or title and obtain transfer of seized property; construed to exclude damages for use of vested property.
• Paragraph 4, Section 7(c), Trading with the Enemy Act — Expressly limits relief for vested enemy property and confirms absence of authorization for damages suits against the Custodian.
• Section 9(f), Trading with the Enemy Act — Exempts vested property from attachment, garnishment, execution, or lien, with only section 30 and section 32(f) exceptions; applied as an independent bar to the writ.
• Executive Order No. 9818 — Created petitioner with authority to vest enemy-owned properties in the Philippines, establishing its status as a United States agency.

Paras, C.J., Feria, Pablo, Bengzon, Padilla, Tuason, Montemayor, and Jugo, JJ., concur.