G.R. No. L-554; April 9, 1948
HAW PIA, plaintiff-appellant, vs. THE CHINA BANKING CORPORATION, defendant-appellee.

FACTS

Haw Pia filed an action to compel China Banking Corporation to cancel a mortgage on her property, claiming her pre-war debt had been fully paid to the Bank of Taiwan, Ltd., which was appointed by the Japanese Military Administration as liquidator of the defendant bank. The defendant bank counterclaimed for payment of the original debt. The trial court ruled the payment to the Bank of Taiwan did not extinguish the obligation, as the bank was not authorized to accept payment under international law, and ordered Haw Pia to pay the debt.

ISSUE

(1) Did the Japanese Military Administration have the authority to order the liquidation of China Banking Corporation and appoint the Bank of Taiwan as liquidator authorized to accept payment from the debtor? (2) Did the payment by Haw Pia to the Bank of Taiwan extinguish her obligation to China Banking Corporation?

RULING

(1) Yes. The Japanese military authorities had the power under international law to order the liquidation and appoint a liquidator. This act was a permissible sequestration or control of enemy assets to prevent their use against the occupant, not a prohibited confiscation of private property under the Hague Regulations.
(2) No. The payment did not extinguish the obligation. The Bank of Taiwan, as liquidator, was merely a custodian or depositary of the sequestered assets, not an agent of the defendant bank authorized to collect debts. Payment to a depositary, without the creditor’s consent, does not constitute payment to the creditor under the Civil Code (Article 1162). The debt remains outstanding. The Court affirmed the trial court’s decision, absolving the defendant bank and ordering Haw Pia to pay her original debt.

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