EN BANC

G.R. No. L-2294 May 25, 1951

FILIPINAS COMPAIA DE SEGUROS, petitioner,
vs.
CHRISTERN, HUENEFELD an CO., INC., respondent.
Ramirez and Ortigas for petitioner.
Ewald Huenefeld for respondent.
PARAS, C.J.!
On October 1, 1941, the respondent corporation, Christern Huenefeld, & Co., nc., after pa!"ent of correspondin#
pre"iu", obtained fro" the petitioner ,$ilipinas Cia. de %e#uros, fire polic! No. &9''' in the su" of (1))),))),
coverin# "erchandise contained in a buildin# located at No. *11 +o"an %treet, Binondo ,anila. On $ebruar! &*,
194&, or durin# the -apanese "ilitar! occupation, the buildin# and insured "erchandise .ere burned. n due ti"e the
respondent sub"itted to the petitioner its clai" under the polic!. /he salva#e #oods .ere sold at public auction and,
after deductin# their value, the total loss suffered b! the respondent .as fi0ed at (9&,12). /he petitioner refused to
pa! the clai" on the #round that the polic! in favor of the respondent had ceased to be in force on the date the
3nited %tates declared .ar a#ainst 4er"an!, the respondent Corporation 5thou#h or#ani6ed under and b! virtue of
the la.s of the (hilippines7 bein# controlled b! the 4er"an sub8ects and the petitioner bein# a co"pan! under
A"erican 8urisdiction .hen said polic! .as issued on October 1, 1941. /he petitioner, ho.ever, in pursuance of the
order of the 9irector of Bureau of $inancin#, (hilippine E0ecutive Co""ission, dated April 9, 194', paid to the
respondent the su" of (9&,12) on April 19, 194'.
/he present action .as filed on Au#ust 1, 1941, in the Court of $irst nstance of ,anila for the purpose of recoverin#
fro" the respondent the su" of (9&,12) above "entioned. /he theor! of the petitioner is that the insured
"erchandise .ere burned up after the polic! issued in 1941 in favor of the respondent corporation has ceased to be
effective because of the outbrea: of the .ar bet.een the 3nited %tates and 4er"an! on 9ece"ber 1), 1941, and
that the pa!"ent "ade b! the petitioner to the respondent corporation durin# the -apanese "ilitar! occupation .as
under pressure. After trial, the Court of $irst nstance of ,anila dis"issed the action .ithout pronounce"ent as to
costs. 3pon appeal to the Court of Appeals, the 8ud#"ent of the Court of $irst nstance of ,anila .as affir"ed, .ith
costs. /he case is no. before us on appeal b! certiorari fro" the decision of the Court of Appeals.
/he Court of Appeals overruled the contention of the petitioner that the respondent corporation beca"e an ene"!
.hen the 3nited %tates declared .ar a#ainst 4er"an!, rel!in# on En#lish and A"erican cases .hich held that a
corporation is a citi6en of the countr! or state b! and under the la.s of .hich it .as created or or#ani6ed. t re8ected
the theor! that nationalit! of private corporation is deter"ine b! the character or citi6enship of its controllin#
stoc:holders.
/here is no ;uestion that "a8orit! of the stoc:holders of the respondent corporation .ere 4er"an sub8ects. /his
bein# so, .e have to rule that said respondent beca"e an ene"! corporation upon the outbrea: of the .ar bet.een
the 3nited %tates and 4er"an!. /he En#lish and A"erican cases relied upon b! the Court of Appeals have lost their
force in vie. of the latest decision of the %upre"e Court of the 3nited %tates in Clar: vs. 3ebersee $inan6
<orporation, decided on 9ece"ber =, 194*, 9& >a.. Ed. Advance Opinions, No. 4, pp. 14=?12', in .hich the controls
test has been adopted. n @Ene"! Corporation@ b! ,artin 9o":e, a paper presented to the %econd nternational
Conference of the >e#al (rofession held at the Ha#ue 5Netherlands7 in Au#ust. 194= the follo.in# enli#htenin#
passa#es appearA
%ince Borld Bar , the deter"ination of ene"! nationalit! of corporations has been discussion in "an!
countries, belli#erent and neutral. A corporation .as sub8ect to ene"! le#islation .hen it .as controlled b!
ene"ies, na"el! "ana#ed under the influence of individuals or corporations, the"selves considered as
ene"ies. t .as the En#lish courts .hich first the Daimler case applied this ne. concept of @piercin# the
corporate veil,@ .hich .as adopted b! the peace of /reaties of 1919 and the ,i0ed Arbitral established after
the $irst Borld Bar.
/he 3nited %tates of A"erica did not adopt the control test durin# the $irst Borld Bar. Courts refused to
reco#ni6ed the concept .hereb! A"erican?re#istered corporations could be considered as ene"ies and
thus sub8ect to do"estic le#islation and ad"inistrative "easures re#ardin# ene"! propert!.
Borld Bar revived the proble" a#ain. t .as :no.n that 4er"an and other ene"! interests .ere cloa:ed
b! do"estic corporation structure. t .as not onl! b! le#al o.nership of shares that a "aterial influence
could be e0ercised on the "ana#e"ent of the corporation but also b! lon# ter" loans and other factual
situations. $or that reason, le#islation on ene"! propert! enacted in various countries durin# Borld Bar
adopted b! statutor! provisions to the control test and deter"ined, to various de#rees, the incidents of
control. Court decisions .ere rendered on the basis of such ne.l! enacted statutor! provisions in
deter"inin# ene"! character of do"estic corporation.
/he 3nited %tates did not, in the a"end"ents of the /radin# .ith the Ene"! Act durin# the last .ar, include
as did other le#islations the applications of the control test and a#ain, as in Borld Bar , courts refused to
appl! this concept .hereb! the ene"! character of an A"erican or neutral?re#istered corporation is
deter"ined b! the ene"! nationalit! of the controllin# stoc:holders.
,easures of bloc:in# forei#n funds, the so called free6in# re#ulations, and other ad"inistrative practice in
the treat"ent of forei#n?o.ned propert! in the 3nited %tates allo.ed to lar#e de#ree the deter"ination of
ene"! interest in do"estic corporations and thus the application of the control test. Court decisions
sanctioned such ad"inistrative practice enacted under the $irst Bar (o.ers Act of 1941, and "ore recentl!,
on 9ece"ber =, 194*, the %upre"e Court of the 3nited %tates definitel! approved of the control theor!. n
Clar: vs. 3ebersee $inan6 <orporation, A. 4., dealin# .ith a %.iss corporation alle#edl! controlled b!
4er"an interest, the CourtA @/he propert! of all forei#n interest .as placed .ithin the reach of the vestin#
po.er 5of the Alien (ropert! Custodian7 not to appropriate friendl! or neutral assets but to reach ene"!
interest .hich "as;ueraded under those innocent fronts. . . . /he po.er of sei6ure and vestin# .as
e0tended to all propert! of an! forei#n countr! or national so that no innocent appearin# device could
beco"e a /ro8an horse.@
t beco"es unnecessar!, therefore, to d.ell at len#th on the authorities cited in support of the appealed decision.
Ho.ever, .e "a! add that, in Haw Pia vs. China Banking Corporation
C
42 Off 4a6., 5%upp. 97 &99, .e alread! held
that China Ban:in# Corporation ca"e .ithin the "eanin# of the .ord @ene"!@ as used in the /radin# .ith the Ene"!
Acts of civili6ed countries not onl! because it .as incorporated under the la.s of an ene"! countr! but because it
.as controlled b! ene"ies.
/he (hilippine nsurance >a. 5Act No. &4&*, as a"ended,7 in section =, provides that @an!one e0cept a public ene"!
"a! be insured.@ t stands to reason that an insurance polic! ceases to be allo.able as soon as an insured beco"es
a public ene"!.
Effect of war generall!. D All intercourse bet.een citi6ens of belli#erent po.ers .hich is inconsistent .ith a
state of .ar is prohibited b! the la. of nations. %uch prohibition includes all ne#otiations, co""erce, or
tradin# .ith the ene"!E all acts .hich .ill increase, or tend to increase, its inco"e or resourcesE all acts of
voluntar! sub"ission to itE or receivin# its protectionE also all acts concernin# the trans"ission of "one! or
#oodsE and all contracts relatin# thereto are thereb! nullified. t further prohibits insurance upon trade .ith or
b! the ene"!, upon the life or lives of aliens en#a#ed in service .ith the ene"!E this for the reason that the
sub8ects of one countr! cannot be per"itted to lend their assistance to protect b! insurance the co""erce
or propert! of belli#erent, alien sub8ects, or to do an!thin# detri"ental too their countr!Fs interest. /he
purpose of .ar is to cripple the po.er and e0haust the resources of the ene"!, and it is inconsistent that
one countr! should destro! its ene"!Fs propert! and repa! in insurance the value of .hat has been so
destro!ed, or that it should in such "anner increase the resources of the ene"!, or render it aid, and the
co""ence"ent of .ar deter"ines, for li:e reasons, all tradin# intercourse .ith the ene"!, .hich prior
thereto "a! have been la.ful. All individuals therefore, .ho co"pose the belli#erent po.ers, e0ist, as to
each other, in a state of utter e0clusion, and are public ene"ies. 51 Couch, C!c. of ns. >a., pp. 2'2&?2'2'.7
n the case of an ordinar! fire polic!, .hich #rants insurance onl! fro" !ear, or for so"e other specified ter"
it is plain that .hen the parties beco"e alien ene"ies, the contractual tie is bro:en and the contractual
ri#hts of the parties, so far as not vested. lost. 5Gance, the >a. on nsurance, %ec. 44, p. 11&.7
/he respondent havin# beco"e an ene"! corporation on 9ece"ber 1), 1941, the insurance polic! issued in its favor
on October 1, 1941, b! the petitioner 5a (hilippine corporation7 had ceased to be valid and enforcible, and since the
insured #oods .ere burned after 9ece"ber 1), 1941, and durin# the .ar, the respondent .as not entitled to an!
inde"nit! under said polic! fro" the petitioner. Ho.ever, ele"entar! rules of 8ustice 5in the absence of specific
provision in the nsurance >a.7 re;uire that the pre"iu" paid b! the respondent for the period covered b! its polic!
fro" 9ece"ber 11, 1941, should be returned b! the petitioner.
/he Court of Appeals, in decidin# the case, stated that the "ain issue hin#es on the ;uestion of .hether the polic! in
;uestion beca"e null and void upon the declaration of .ar bet.een the 3nited %tates and 4er"an! on 9ece"ber
1), 1941, and its 8ud#"ent in favor of the respondent corporation .as predicated on its conclusion that the polic! did
not cease to be in force. /he Court of Appeals necessaril! assu"ed that, even if the pa!"ent b! the petitioner to the
respondent .as involuntar!, its action is not tenable in vie. of the rulin# on the validit! of the polic!. As a "atter of
fact, the Court of Appeals held that @an! inti"idation resorted to b! the appellee .as not un8ust but the e0ercise of its
la.ful ri#ht to clai" for and received the pa!"ent of the insurance polic!,@ and that the rulin# of the Bureau of
$inancin# to the effect that @the appellee .as entitled to pa!"ent fro" the appellant .as, .ell founded.@ $actuall!,
there can be no doubt that the 9irector of the Bureau of $inancin#, in orderin# the petitioner to pa! the clai" of the
respondent, "erel! obe!ed the instruction of the -apanese ,ilitar! Ad"inistration, as "a! be seen fro" the
follo.in#A @n vie. of the findin#s and conclusion of this office contained in its decision on Ad"inistrative Case dated
$ebruar! 9, 194' cop! of .hich .as sent to !our office and the concurrence therein of the $inancial 9epart"ent of
the -apanese ,ilitar! Ad"inistration, and following the instruction of said authorit! !ou are hereb! ordered to pa! the
clai" of ,essrs. Christern, Huenefeld & Co., nc. /he pa!"ent of said clai", ho.ever, should be "ade b! "eans of
crossed chec:.@ 5E"phasis supplied.7
t results that the petitioner is entitled to recover .hat paid to the respondent under the circu"stances on this case.
Ho.ever, the petitioner .ill be entitled to recover onl! the e;uivalent, in actual (hilippines currenc! of (9&,12) paid
on April 19, 194', in accordance .ith the rate fi0ed in the Ballant!ne scale.
Bherefore, the appealed decision is hereb! reversed and the respondent corporation is ordered to pa! to the
petitioner the su" of (**,&)=.'', (hilippine currenc!, less the a"ount of the pre"iu", in (hilippine currenc!, that
should be returned b! the petitioner for the une0pired ter" of the polic! in ;uestion, be#innin# 9ece"ber 11, 1941.
Bithout costs. %o ordered.
"eria Pa#lo Bengzon $uason %ontema!or &ugo and Bautista 'ngelo &&. concur.
Foo"no"#$
C
=) (hil., 1)4.