60. Haw Pia vs. The China Banking Corp.

GR No. L-554 April 9, 1948

Facts: The invading Japanese Military authorities appointed Bank of Taiwan Ltd. as liquidator of herein defendant,
China Banking Corporation to whom herein plaintiff, Haw Pia, was indebted in the sum of P5,103.35 with a
property mortgaged as security.

Claiming that the full amount had been completely paid together with the incurred interests thereof to the Bank of
Taiwan Ltd. on two different occasions between October 7, 1942 to August 29, 1944, plaintiff filed an action before
the CFI of Manila compelling China Banking Corporation to execute a Deed of Cancellation of the Mortgage on
plaintiff’s property and to deliver the Transfer Certificate of Title (TCT) No. 47634 of the Register of Deeds of
Manila with the mortgage annotated therein already cancelled. Defendant, in its answer, raised a counter-claim
against plaintiff denying the full settlement of the latter’s debt, thus, demanding payment.

CFI of Manila, finding therein, after hearing, the lack of evidence showing that China Banking had indeed
authorized the Bank of Taiwan to accept payment on its behalf, rendered a decision against plaintiff. It further held
that the invading Japanese Army, in appointing Bank of Taiwan as liquidator of China Banking Corp., was not
authorized under the international law to liquidate the business of herein defendant, hence, the payment made by
plaintiff through the Japanese-appointed Bank liquidator did not extinguish such obligation.

Issue: WON the invading Japanese Military authorities had the power, under international law, to order the
liquidation or winding up of the business of the China Banking Corp., and to appoint and authorize the Bank of
Taiwan as liquidator and accept payment on behalf of defendant.

Held: Yes.

The appointment and authorization made by the Japanese Military Authorities to the Bank of Taiwan as liquidator,
and therefor accept payment on behalf of China Banking Corp. was permitted under, and not contradictory to, the
prevailing international law, specifically section III of Article 46, on the Military Authority over Hostile Territory of
Hague Regulations of 1907, which was part of the Hague Convention respecting the laws and customs of war on
land.

Such acts of the belligerent occupants—Japanese Military Authorities—were considered an act of sequestration of
defendant’s assets as a matter of right conferred upon the former to order liquidation or winding up of the
business of said bank, rather than an act of straight confiscation or appropriation of private properties which was
considered repugnant to the above stated provision which prohibited the confiscation of private properties in
times of war.

This act of sequestration or liquidation of enemy banks, or the act of impounding, freezing, blocking of enemy
properties in occupied territories was expressly authorized not only by the United States, but also of other
countries, and was similarly supported by well-known writers of international law.

Thus, SC, in its decision, reversed the lower court’s ruling; and ordered the execution of the Deed of Cancellation of
Mortgage of the property by herein defendant.