Hernaez v. McGrath
REITERATIONFacts
The Antecedents: Plaintiffs Pedro C. Hernaez and Asuncion de la Rama Vda. de Alunan (administratrix of her deceased husband Rafael R. Alunan's estate) filed an action for ejectment and damages against the Philippine Alien Property Administration (PAPA). The property in question, eight contiguous parcels of land with houses, was allegedly sold by Alunan and Hernaez to Hakodate Dock Co., Ltd., a Japanese firm, on February 20, 1943, for P170,000. Transfer certificates of title were issued in the name of Hakodate Dock Co., Ltd. PAPA vested the property as enemy national property. The Republic of the Philippines and Dr. Nicanor Jacinto intervened. Dr. Jacinto had a mortgage on the property, which was allegedly paid and cancelled in 1943. Procedural History: The Court of First Instance of Manila rendered judgment for the plaintiffs, ordering the dismissal of the complaints in intervention. The defendant and intervenors appealed. The Petition: The defendant and intervenors appealed the decision of the lower court.
Issue(s)
Whether the deed of sale between Alunan and Hernaez and Hakodate Dock Co., Ltd. is genuine and valid. Whether parol evidence is admissible to prove the execution of the lost deed of sale. Whether the cancellation of Dr. Nicanor Jacinto's mortgage was valid, despite payment being made in Japanese war notes under alleged duress. Whether the sale to Hakodate Dock Co., Ltd. is null and void on constitutional or corporate law grounds.
Ruling
The Supreme Court reversed the decision of the lower court regarding the defendant and absolved the defendant. The judgment as to intervenor Dr. Jacinto was affirmed. Costs were against the plaintiffs and appellees.
Ratio Decidendi
On the genuineness and validity of the deed of sale: The Court found that the overwhelming preponderance of evidence, including the testimonies of Satoru Watanabe, Napoleon Garcia, and Jose Ma. Recto, established the due execution of the sale by Alunan and Hernaez. The Court discredited Hernaez's testimony due to inconsistencies and evasiveness, particularly regarding the signing of the deed and the possession of the titles. The fact that Hakodate Dock Co. settled the mortgage, paying an amount close to the purchase price, further indicated good faith. The Court also noted that the sale price was not demonstrably inadequate, considering the portion of land sold and the prevailing currency values at the time. On the admissibility of parol evidence: The Court clarified that the lower court erred in holding that parol evidence was barred. The Court distinguished between proving the execution of a document and proving its contents. While the contents of a lost document may require secondary evidence, the execution of the document, especially when its authenticity is contested, can be proven by parol testimony or collateral documents. The Court cited Sections 46 and 51 of Rule 123 of the Rules of Court, emphasizing that proof of execution, along with proof of loss, is a foundation for introducing secondary evidence of the contents. On the validity of the mortgage cancellation: The Court affirmed the lower court's ruling regarding intervenor Dr. Jacinto. The Court held that payment made in Japanese war notes during the occupation was enforceable, as these were the authorized currency. Even if the mortgagee was reluctant, the payment released the mortgage. The Court noted that the disparity in value between Japanese war notes and Philippine pesos was not significant in February 1943. Furthermore, Dr. Jacinto accepted the payment, deposited it, and could have used it, thus estopping him from repudiating the cancellation. On the alleged illegality of the acquisition: The Court found that the plaintiffs did not raise the issue of the sale's illegality on constitutional grounds in their pleadings. Even if they had, the Philippine Constitution was not in force during the Japanese occupation, and Japanese subjects were excluded from certain prohibitions by Military Ordinance No. 2. Regarding the corporation law issue, the Court stated that there was no law prohibiting an unauthorized business concern from buying or owning real property. Any defect in the authority of the acting manager to represent the company could only be invoked by the company itself.
Main Doctrine
The Supreme Court held that parol evidence is admissible to prove the execution of a lost document, even if the document itself is not produced, provided that the loss or destruction of the original is satisfactorily established. The Court also ruled that payment made in Japanese war notes during the occupation, if accepted by the creditor, is valid and enforceable, releasing the mortgage obligation.