G.R. No. L-22374 December 18, 1974
REPUBLIC OF THE PHILIPPINES, plaintiff-appellant, vs. EMILIO G. GUANZON, defendant-appellee.

FACTS

In 1943, during the Japanese occupation, defendant Emilio G. Guanzon obtained loans totaling P1,600.00 from the Bank of Taiwan, Ltd., a Japanese bank. To secure these loans, he executed a real estate mortgage on two parcels of land and a chattel mortgage on standing crops. After the liberation of the Philippines in 1945, the United States, through its Alien Property Custodian and pursuant to the Trading with the Enemy Act, vested in itself the assets of the Bank of Taiwan, including Guanzon’s credit, via Vesting Order No. P-4. Subsequently, under the Philippine Property Act of 1946, the United States transferred all its rights, title, and interest in these assets to the Republic of the Philippines through transfer agreements in 1954 and 1957. The Republic, through the Board of Liquidators, filed an action for the foreclosure of the mortgages to recover the indebtedness, which amounted to P3,722.13 as of 1961.
The lower court dismissed the complaint, holding that the Republic of the Philippines lacked the legal interest to sue over the mortgage loan. The court’s decision was based on the appellee’s contention that the vesting order and the foreign law (Trading with the Enemy Act) could not be taken judicial notice of under Philippine procedural rules, and thus the Republic failed to prove how it acquired the credit. The Republic appealed, arguing that the lower court ignored controlling statute and jurisprudence.

ISSUE

Whether the Republic of the Philippines validly acquired legal interest over the mortgage loans originally granted by the Bank of Taiwan, Ltd., and thus has a cause of action for foreclosure.

RULING

The Supreme Court reversed the lower court’s decision. The legal logic is clear and grounded in established law and doctrine. First, the vesting of enemy properties by the United States under the Trading with the Enemy Act operates as a complete transfer of title by operation of law, requiring no further court action. This principle was affirmed in Brownell, Jr. v. Sun Life Assurance Company. The subsequent transfer of these assets to the Republic of the Philippines was expressly authorized and effected by the Philippine Property Act of 1946. Consequently, the Republic acquired all rights formerly held by the United States, including the right to enforce the mortgages.
Second, the lower court erred in requiring proof of the vesting order and the foreign law. The official acts of the United States government, including the vesting order executed pursuant to its statutory authority, are matters of which Philippine courts must take judicial notice under Rule 129, Section 1 of the Rules of Court, as they pertain to the official acts of a foreign state’s executive department. The appellee’s argument displayed a lack of awareness of this doctrine and the controlling case of Brownell. Therefore, the Republic, as the lawful transferee, possesses a clear legal interest and a valid cause of action against the debtor-mortgagor. The Court emphasized the duty of lower courts to adhere to definitive pronouncements of the Supreme Court to ensure stability in legal relations. Costs were imposed on defendant Guanzon.