USAFFE Veterans Association, Inc. vs. Treasurer of the Philippines

Unexpended balances of funds advanced by the United States for the mobilization, operation, and maintenance of the Philippine Army must be returned, and an executive agreement scheduling their repayment in installments, as implemented and funded by Congress, is valid and binding without Senate concurrence as a treaty.

USAFFE Veterans Association, Inc. is a domestic association representing Filipino veterans of World War II who served as members of the United States Armed Forces in the Far East. Defendants-appellees are officers of the Republic of the Philippines charged with disbursing funds from the National Treasury. The governing backdrop consists of United States congressional appropriations beginning with Public Law No. 353 of December 17, 1941 for expenses of the Philippine Army called into United States service, Executive Order No. 9011 prescribing accounting therefor, and Republic Act No. 16 as amended by Republic Act No. 213 authorizing the Philippine President to obtain loans or incur indebtedness with the United States Government.

On July 26, 1941, President Franklin D. Roosevelt called into the service of the Armed Forces of the United States, for the duration of the emergency, all organized military forces of the Philippine Commonwealth, an order published in the Philippines by Proclamation No. 740 of President Quezon on August 10, 1941. In October 1941, by two special orders, General Douglas MacArthur as Commanding General of the United States Army Forces in the Far East placed under his command all Philippine Army units including the Philippine Constabulary, about 100,000 officers and soldiers.

For expenses incident to such incorporation, mobilization and activities, the United States Congress in its Appropriation Act of December 17, 1941 (Public Law No. 353, 77th Congress) appropriated funds for all expenses necessary for mobilization, operation and maintenance of the Army of the Philippines, to be expended and accounted for in the manner prescribed by the President of the United States and to be available for payment to the Government of the Commonwealth upon written request, either in advance of or in reimbursement for estimated or actual costs as authorized by the Commanding General, USAFFE. Subsequent Acts appropriated additional sums in identical language for the fiscal years ending June 30, 1943, June 30, 1944, June 30, 1945, and June 30, 1946, the last pertinent appropriation being Public Law No. 301 (79th Congress), known as the Rescission Act. Pursuant to the power reserved under Public Law 353, President Roosevelt issued Executive Order No. 9011 on January 3, 1942, providing that necessary expenditures from funds in the Philippine Treasury for purposes authorized by the Act of December 17, 1941 would be made by disbursing officers of the Army of the Philippines on the approval and authority of the Commanding General, USAFFE, whose determination would be final and conclusive upon accounting officers of the Philippine Government.

Out of the total amounts appropriated, P570,863,000.00 was transferred directly to the Philippine Armed Forces by vouchers stating Advance of Funds under Public Law 353-77th Congress and Executive Order No. 9011. The amount was used mostly to discharge in the Philippine Islands monetary obligations assumed by the United States Government as a result of induction of the Philippine Armed Forces into the United States Army and its operations beginning in 1941, including claims of Filipino USAFFE soldiers for arrears in pay and charges for supplies used by them and the guerrillas. As of December 31, 1949, about 35 million dollars remained unexpended and uncommitted in the possession of the Philippine Armed Forces. President Quirino, through Central Bank Governor Miguel Cuaderno, then proposed retention of the 35 million dollars as a loan repayable in ten annual installments, and after protracted negotiations the Romulo-Snyder Agreement was signed in Washington on November 6, 1950 by Philippine Secretary of Foreign Affairs Carlos P. Romulo and American Secretary of the Treasury John W. Snyder. Its principal stipulation required payment in ten annual installments, the first nine of $3,500,000.00 and the final residual payment to be determined after audit under Article II, and in compliance therewith the Philippine Government appropriated by law and paid to the United States up to and including 1954 yearly installments totaling P33,187,663.24.

In October 1954, USAFFE Veterans Association, Inc., for itself and many other Filipino veterans, prayed before the Manila court of first instance that the Agreement be annulled, payments thereunder declared illegal, disbursements restrained, and available moneys instead turned over to the Finance Service of the Armed Forces of the Philippines for payment of pending veterans claims. According to plaintiff, the funds delivered were straight payments for military services vesting ownership in the Philippine Government upon delivery, leaving nothing to return, and both Secretary Snyder and Secretary Romulo lacked authority to retake or promise to return them. Defendants moved to dismiss on governmental immunity, but the court required an answer and heard the case on the merits. The trial court found the funds to have been advanced subject to accounting and return, sustained the Agreement, and dismissed the complaint.

• Ownership of Funds: Petitioner maintained that the money delivered by the United States to the Armed Forces of the Philippine Islands were straight payments for military services, ownership thereof having vested in the Philippine Government upon delivery, so there was nothing to return and nothing to consider as a loan.
• Authority of Signatories: Petitioner argued that U.S. Secretary of the Treasury Snyder had no authority to retake such funds from the Philippine Government, and Philippine Secretary of Foreign Affairs Carlos P. Romulo had no authority to return or promise to return the sums through the Romulo-Snyder Agreement.
• Need for Senate Concurrence and Protection of Veterans Claims: Petitioner maintained that the Agreement was void for lack of authority to bind the Government, emphasizing lack of ratification by the Philippine Senate, and sought to prevent return so that moneys kept in the country could be used to pay unprocessed veterans claims after the December 31, 1949 deadline for presentation and payment.

• Governmental Immunity: Respondents moved to dismiss on the ground of governmental immunity from suit.
• Executive Agreement Not Requiring Senate Concurrence: Respondents countered that the Agreement is not a treaty within Art. VII, Sec. 10 (7) of the Constitution and was never submitted for Senate concurrence, but executive agreements may be entered with other states and are effective even without Senate concurrence, there being no international legal difference in binding effect where negotiators remained within their powers.
• Legislative Authorization and Nature of Agreement: Respondents argued that the Romulo-Snyder Agreement falls under either class of executive agreements, having been authorized by Republic Act No. 16 of September 18, 1946 as amended by Republic Act No. 213, and even without legislative authorization would be valid as an executive act settling pecuniary claims, the usual method for such matters.
• Legislative Recognition and Ratification: Respondents maintained that Senate Resolution No. 15 practically admits the validity and binding force of the Agreement, and acts of Congress appropriating funds for yearly installments constitute ratification placing validity beyond judicial reach, no constitutional limit on plenary appropriation power having been invoked.

• Nature of Funds: Whether the moneys delivered by the United States to the Philippine Armed Forces were outright payments vesting ownership in the Philippine Government or advances subject to accounting and return of the unexpended balance.
• Validity of Romulo-Snyder Agreement: Whether the Romulo-Snyder Agreement obligating repayment in ten annual installments is valid and binding on the Philippine Government despite absence of Senate concurrence and alleged lack of authority of the signatories.

• Nature of Funds: No. The moneys were not straight payments but funds advanced, the appropriation laws authorizing payment in advance of or in reimbursement for costs, the vouchers expressly stating advances, and accounting under Executive Order No. 9011 being required.
• Validity of Romulo-Snyder Agreement: Yes. Valid and binding, the obligation to return the superabit of at least 35 million dollars being established and the installment arrangement being supported by presidential approval, statutory loan authority, Senate Resolution No. 15, and subsequent appropriations constituting ratification.

• Nature of Funds: The appropriation language was decisive, making funds available upon written request either in advance of or in reimbursement for estimated or actual costs as authorized by the Commanding General, USAFFE, with expenditure and accounting in the manner prescribed by the United States President. Applied to the record, all vouchers stated Advance of funds under Public Law 353-77th Congress and Executive Order No. 9011, Executive Order No. 9011 required approval of the Commanding General whose determination was final upon Philippine accounting officers, and army officers of both nations consistently treated the money as advanced to be accounted for. Thus the thesis of absolute Philippine control was contradicted, and upon final rendition showing at least 35 million dollars unexpended and uncommitted as of December 31, 1949, an obligation to return in one lump sum existed, making an installment schedule prima facie unobjectionable.
• Validity of Romulo-Snyder Agreement: President Quirino approved the negotiations and had power to contract budgetary loans under Republic Act No. 213 amending Republic Act No. 16, under which Congress on September 18, 1946 specifically authorized the President to obtain loans or incur indebtedness with the United States Government. Although Senate concurrence was not obtained, the Agreement as an executive agreement did not require it under respondents' persuasive authorities distinguishing treaties from executive agreements, including presidential agreements and congressional-executive agreements. Without definitively passing on those authorities, validity was placed beyond question by Senate Resolution No. 15 of May 19, 1954 practically admitting binding force and by congressional acts appropriating funds for yearly installments, constituting ratification within Congress's plenary appropriation power where no constitutional restriction was invoked.

• Advances vs. Outright Payments — Funds delivered in advance of expenditures, subject to approval of expenditures and to accounting with return of unexpended sums, do not vest as absolute property of the recipient. Applied here, the express in advance of or in reimbursement language, voucher designations as advances, and required accounting under Executive Order No. 9011 established that the unexpended 35-million-dollar balance remained returnable to the United States.
• Executive Agreements vs. Treaties — A treaty is not the only form of international agreement; executive agreements may be entered with other states and are effective even without Senate concurrence, with no difference in international binding effect as long as negotiators remained within their powers. The distinction was invoked to sustain the Romulo-Snyder Agreement although never submitted to the Senate under Art. VII, Sec. 10 (7), the Agreement having been concluded by the Executive and, according to respondents, within statutory loan authority.
• Classes of Executive Agreements — Executive agreements fall into (1) presidential agreements made purely as executive acts affecting external relations independent of or without legislative authorization, and (2) congressional-executive agreements entered pursuant to acts of Congress. The Romulo-Snyder Agreement was said to fall under either class, having been authorized by Republic Act No. 16 as amended by Republic Act No. 213, and alternatively as an executive settlement of pecuniary claims.
• Ratification by Legislative Appropriation — Acts of Congress appropriating funds for yearly installments necessary to comply with an agreement constitute ratification thereof, placing validity beyond judicial reach absent an invoked constitutional restriction on plenary appropriation power. Applied here through appropriations totaling P33,187,663.24 up to 1954 and Senate Resolution No. 15 admitting binding force.

• "In any system of accounting, advances of funds for expenditures contemplate disbursements to be reported, and credited if approved, against such advances, the unexpended sums to be returned later." — States the accounting principle defeating the claim that U.S. transfers were outright payments vesting ownership in the Philippines.
• "The distinction between so-called executive agreements" and "treaties" is purely a constitutional one and has no international legal significance" (Research in International Law Draft Convention on the Law of Treaties (Harvard Law School), Comment, 29 Am. J. Int.) Law Supp. 653, 897." — Reproduces respondents' cited formulation distinguishing Senate-concurred treaties from binding executive agreements.
• "Furthermore, the acts of Congress Appropriating funds for the yearly installments necessary to comply with such Agreements constitute a ratification thereof, which places the question the validity out of the Court's reach, no constitutional principle having been invoked to restrict Congress' plenary power to appropriate funds-loan or no loan." — Provides the alternative ground sustaining the Agreement through legislative funding and recognition.
• "In fact, the respective army officers of both nations, who are presumed to know their business, have consistently regarded the money as funds advanced, to be subsequently accounted for — which means submission of expenditures, and if approved, return of unexpended balance." — Supports the factual finding that contemporaneous military treatment confirmed advance status rather than outright payment.

• Altman and Co. vs. United States, 224 U.S. 583 — Cited for the proposition that an international compact negotiated between representatives of sovereign nations dealing with important commercial relations is a treaty internationally although as an executive agreement it is not technically a treaty requiring Senate advice and consent.
• United States vs. Belmont, 301 U.S. 342 — Cited among authorities for the rule that there is no international legal difference between treaties and executive agreements in binding effect where negotiators remained within powers.
• United States vs. Pink, 315 U.S. 203 — Cited to the same effect on binding force of executive agreements under international law.
• State of Russia vs. National City Bank of New York, 69 F. (2d) 44 — Cited as supporting authority on binding effect of executive agreements.

• Public Law No. 353, 77th Congress (Appropriation Act of December 17, 1941), and succeeding appropriation laws — Provided funds for mobilization, operation and maintenance of the Philippine Army, available in advance of or in reimbursement for costs as authorized by the Commanding General, USAFFE, and expended and accounted for as prescribed by the United States President; applied to characterize transfers as advances.
• Executive Order No. 9011 (January 3, 1942) — Required expenditures from Philippine Treasury funds for authorized purposes to be made on approval of the Commanding General, USAFFE, final upon Philippine accounting officers, under Commonwealth accounting procedures; applied to prove approval and accounting conditions inconsistent with outright payment.
• Article VII, Section 10 (7), Constitution; Republic Act No. 16 (September 18, 1946) as amended by Republic Act No. 213 (June 1, 1948) — Treaty-concurrence clause conceded inapplicable as the Agreement was never submitted to the Senate; loan-authorization statutes specifically empowering the President to obtain loans or incur indebtedness with the United States Government were invoked as authority for the installment repayment agreement.
• Senate Resolution No. 15 (May 19, 1954); Congressional appropriation acts — Legislative recognition practically admitting validity and funding of yearly installments totaling P33,187,663.24 through 1954; treated as ratification sustaining the Agreement.

Paras, C.J., Padilla, Montemayor, Bautista Angelo, Labrador, Concepcion, Endencia and Barrera, JJ., concur.