Laperal vs. Rogers

A deed of sale executed during the Japanese occupation is voidable on the ground of duress where the vendor acted under a reasonable and well-grounded fear of imminent serious injury to person or property instilled by specific threats and coercive acts of Japanese military authorities, and the gross inadequacy of the Japanese military notes paid as consideration corroborates the coercion. The vendor’s retention and use of the purchase price did not amount to ratification where the bank records offered to prove such use lacked probative value and the trial court’s ruling was not assigned as error. The Republic of the Philippines was not liable for rentals or attorney’s fees, and its repair expenses were not reimbursable because the repairs were for its own use.

Roberto Laperal was the registered owner of a residential lot and building situated at No. 1570 Arlegui Street, San Miguel, Manila, covered by Transfer Certificate of Title No. 41622 of the Register of Deeds of Manila. The property became entangled with wartime and post-war alien property administration: the United States Alien Property Custodian acted under the Trading With the Enemy Act, as amended, and Executive Order No. 9095, while the Philippine Alien Property Administrator later held the property pursuant to Executive Order No. 9818 and the Philippine Property Act of 1946. The Republic of the Philippines sought to intervene because the President of the United States had authorized transfer of the property to it, subject to Section 9(a) of the Trading With the Enemy Act.

Roberto Laperal owned a residential lot and building at No. 1570 Arlegui Street, San Miguel, Manila, covered by Transfer Certificate of Title No. 41622 of the Register of Deeds of Manila. Sometime during the first half of April 1944, a group of Japanese soldiers headed by an officer tried twice, unsuccessfully, to see Laperal at his store on Rizal Avenue, Manila. On their third attempt, they found his son Oliverio, who called his father. The officer angrily asked why they had been unable to see him on the two previous visits, and then ordered Laperal to go immediately to the Japanese Military Administration at Isaac Peral to see General Wachi in connection with his Arlegui property. The following day, Laperal went to the office, where two high-ranking Japanese officers told him that his Arlegui property was needed to house distinguished guests. When he said he could not sell because he had already promised it to his daughter, the officers were angered and warned him that his refusal to sell was bad because it was a sign of hostility to the Japanese. He was then told to go to Malacañang. In the afternoon, he was taken by car to his Arlegui property, where General Wachi was waiting. Asked again why he did not want to sell, Laperal reiterated that he had already given the property to his daughter. Wachi warned him that his non-cooperative attitude was dangerous, and he was taken to a building at the corner of Dewey Boulevard and Padre Faura, where Wachi again asked if he was still reluctant to sell. When Laperal replied that there was no need to buy the property because it was already being used by the Japanese, Wachi shouted at him: “Don’t you know that what you are doing is bad? Don’t you know that we have an understanding with your government, and you are not cooperating?” He was then told to go to Malacañang the following day to receive the purchase price of his property.

Early the following morning, Laperal went to Malacañang to seek President Laurel’s help, but Laurel told him that he was in no position to help under the prevailing conditions and assured him that he would be paid P500,000.00 for his property, tax-free. Later that day, Laperal received a check in that amount after signing a deed of sale that had already been prepared. The deed, dated April 12, 1944, conveyed the property to the occupation Republic of the Philippines for P500,000.00 in Japanese Military War Notes. As a result, Transfer Certificate of Title No. 41622 was cancelled and Transfer Certificate of Title No. 73102 was issued in the name of the vendee. Laperal later deposited the check with the Philippine National Bank.

After the war, on April 22, 1946, the Alien Property Custodian of the United States, acting under authority of the Trading With the Enemy Act, as amended, and Executive Order No. 9095 of the President of the United States, found that the occupation Republic was an instrumentality of the Japanese Army of occupation during the war and issued Vesting Order No. P-28 divesting the occupation Republic of its title to the property. On January 9, 1947, pursuant to Executive Order No. 9818 of the President of the United States, the property was transferred to the Philippine Alien Property Administrator, to be held, used, administered, liquidated, sold or otherwise dealt with by the latter in accordance with the Trading With the Enemy Act, as amended, and the Philippine Property Act of 1946. On April 2, 1947, Laperal filed a claim for the return of the property with the Vested Property Claims Committee of the Philippine Alien Property Administrator. Because the latter failed to decide his claim, Laperal commenced an action on July 14, 1947 in the Court of First Instance of Manila against James Mcl. Henderson, in his capacity as Philippine Alien Property Administrator of the United States, and the Register of Deeds of Manila, for annulment of the deed of sale and issuance of the corresponding certificate of title in his name. The complaint alleged that Laperal executed the deed of sale under duress and due to threats employed by representatives of the Japanese Military Administration, and that the consideration of P500,000.00 in Japanese Military notes was grossly inadequate.

The Philippine Alien Property Administrator denied the allegations for lack of knowledge and information, while the Register of Deeds of Manila was declared in default. On December 29, 1947, the Republic of the Philippines filed a motion to intervene as a party defendant on the ground that the President of the United States had authorized the transfer of the property to it, although the transfer could not be effected pending the final outcome of the case under Section 9(a) of the Trading With the Enemy Act. The motion was granted on January 31, 1948. The intervenor answered that the sale was voluntary, that its conditions were favorable to the vendor because the property was bought to be used as the official residence of the Speaker of the National Assembly, that the sum of P500,000.00 paid was adequate consideration, and that in the event the court ordered return of the property, the expenses it had incurred for rehabilitation and repair in the amount of P24,030.75 should be reimbursed. On August 23, 1949, the Philippine Alien Property Administrator filed an amended answer alleging that Laperal’s claim had been disallowed by the Vested Property Claims Committee on June 4, 1948, affirmed by the Philippine Alien Property Administrator on November 26, 1948; that Laperal had profited from the use of the purchase price and was estopped from questioning the validity of the sale; and alternatively, that if the deed was declared null and void, Laperal should return the purchase price of P500,000.00 with interest at 6% per annum from April 12, 1944, and pay P24,415.95 spent for maintenance and preservation.

At trial, Laperal presented his own testimony, that of his son Oliverio, and the deposition of General Takagi Wachi, former chief of the Japanese Military Administration in the Philippines during the Japanese occupation. Ex-Secretary Pio Pedrosa testified that he had held several positions in the occupation government, that he was one of the witnesses to the deed of sale, that all purchases of lands by the Japanese Military Administration were coursed through the Philippine Government, that the latter had to accede to all impositions of the Japanese authorities, that it was understood that all vendors of real estate would be accorded the right to repurchase their property upon termination of the Greater East Asia War, and that the money paid for Laperal’s property came from the Japanese Military forces. Documents showed the Japanese military’s need for lands and the Philippine government’s directives to comply with housing requests, including a memorandum on coercion employed by Japanese naval personnel to compel house owners to vacate their homes. Appellants presented only documents, including Exhibit 1, an alleged record of Laperal’s current account with the Philippine National Bank, and exhibits on repair costs; they presented no oral evidence other than the witness who testified in connection with Exhibit 1. The trial court found that the sale was executed under duress. It gave no probative value to Exhibit 1 because it was not properly identified by a witness with personal knowledge of the entries, and it found no sufficient link between the withdrawals shown in the account and the amounts allegedly paid for other properties.

On appeal, the defendant-appellant Attorney General of the United States and the intervenor-appellant Republic of the Philippines advanced the following contentions.

• Voluntariness and Adequacy of Consideration: The intervenor maintained that the sale of the property to the occupation Republic was voluntary, that its conditions were favorable to the vendor because the property was bought to be used as the official residence of the Speaker of the National Assembly, and that the sum of P500,000.00 paid for the property was adequate consideration.
• Estoppel and Ratification: The Philippine Alien Property Administrator alleged that Laperal had profited from the use of the purchase price and was estopped from questioning the validity of the sale; on appeal, appellants contended that Laperal ratified the sale by utilizing the proceeds thereof, citing Exhibit 1 and the deeds of sale marked as Exhibits 5 and 6.
• Rents: Appellants argued that the lower court erred in ordering the Republic of the Philippines to pay rent for the use of the property from the date of the filing of the complaint until its reconveyance to Laperal.
• Attorney’s Fees: Appellants argued that the lower court erred in awarding Laperal the sum of P10,000.00 as attorney’s fees.
• Reimbursement for Repairs: Appellants contended that the Republic of the Philippines should be reimbursed the sum of P24,030.75 representing expenses incurred for repairs made on the property.
• Alternative Refund: In the alternative, the Philippine Alien Property Administrator asked that if the deed of sale was declared null and void, Laperal be ordered to return the purchase price of P500,000.00 with interest thereon at 6% per annum from April 12, 1944, and to pay P24,415.95 spent for the maintenance and preservation of the property.

Laperal, as plaintiff-appellee, maintained the following positions.

• Duress: Laperal alleged and maintained that he executed the deed of sale of April 12, 1944 in favor of the occupation Republic of the Philippines under duress and due to the threats employed by the representatives of the Japanese Military Administration.
• Inadequate Consideration: Laperal alleged that the consideration of P500,000.00 in Japanese Military notes was grossly inadequate.
• Return of Property: Laperal sought the annulment of the deed of sale and the issuance by the Register of Deeds of the corresponding certificate of title in his name.

• Duress: Whether appellee executed the Deed of Sale of April 12, 1944 under duress and due to the threats of the Japanese army.
• Ratification: If so, whether he ratified the sale by making use of the records thereof.
• Rents: Whether the lower court erred in ordering the Republic of the Philippines to pay rent for the use of the property from the filing of the complaint until its reconveyance to appellee.
• Attorney’s Fees: Whether the lower court erred in awarding appellee the sum of P10,000.00 as attorney’s fees.
• Reimbursement for Repairs: Whether the Republic of the Philippines should be reimbursed the sum of P24,030.75 representing expenses incurred for repairs made on the property.

• Duress: Yes. The sale was executed under duress; the trial court’s finding was affirmed because appellants presented no evidence to disprove it and the circumstances showed specific coercion and gross inadequacy of consideration.
• Ratification: No. The alleged use of proceeds did not establish ratification; Exhibit 1 lacked probative value and the trial court’s ruling on it was not assigned as error.
• Rents: Yes, the lower court erred. The Republic is not liable for rentals because appellee also possessed the purchase price and equity presumes equal benefits absent concrete evidence of disparity.
• Attorney’s Fees: Yes, the lower court erred. Attorney’s fees are not warranted because appellants did not act in bad faith or recklessly in sustaining the sale.
• Reimbursement for Repairs: No. The Republic is not entitled to reimbursement because the repairs were made for its own use, not to preserve the property.

• Duress: The trial court found that the sale was executed under duress. The Supreme Court affirmed because (a) under well-settled appellate practice, the trial court’s findings of fact must be accepted absent evident error or abuse of discretion, or failure to consider important and material facts; (b) appellants presented no evidence to disprove the facts testified to by Laperal and his witnesses, making those facts virtually undisputed; and (c) the circumstances supported the finding. It was common knowledge that the Japanese army of occupation occupied and took private properties in Manila and elsewhere without the owners’ consent, resorting in some cases to deeds of sale or leases. Laperal was a very rich man with extensive real estate holdings, had not disposed of a single property by sale from 1914 up to the date of the sale, and had considerable money in genuine Philippine currency and Japanese military notes; it was improbable that he would voluntarily dispose of such valuable property. The consideration was grossly inadequate: it was agreed that a pre-war Philippine peso was worth fourteen Japanese military pesos; the pre-war assessed value of the property was P92,995.00, equivalent to around P1,300,000.00 in Japanese military notes as of April 1944, while its actual value could have been around P200,000.00, equivalent to around P2,800,000.00; Laperal was paid only P500,000.00 in Japanese military notes, or around P35,000.00 in Philippine currency. The transaction was not covered by the theory of “collective” or “general” duress, because Laperal faced particular coercive acts and threats from Japanese soldiers, officers, and General Wachi. The trial court found that these incidents instilled a reasonable and well-grounded fear of imminent and serious injury to his person or property, including that of his family, and the Supreme Court affirmed that finding.
• Ratification: Appellants contended that Laperal ratified the sale by utilizing the proceeds. They presented Exhibit 1, purporting to show the status of Laperal’s current account with the Philippine National Bank during the Japanese occupation, including a deposit of P500,048.66 on April 28, 1944, several withdrawals, and a remaining balance of P4,189.27. They also presented two deeds of sale in favor of Laperal: one for P75,000.00 on May 29, 1944 covering land in Licab, Nueva Ecija, and another for P250,000.00 on April 28, 1944 covering two lots in Iloilo. The trial court held that Exhibit 1 had no probative value because it was not properly identified by any witness of the defendant; the entries were supposedly made in 1944, while the bank employee who testified was a new employee without sufficient personal knowledge of the matters he testified to. The trial court also found that appellants failed to produce evidence sufficiently linking the sums withdrawn from the account with the amounts allegedly paid for the properties in Exhibits 5, 6, 7, and 8; the dates and amounts did not tally. The Supreme Court held that it need not discuss the point further because no assignment of error in appellants’ brief assailed that particular ruling of the trial court, and under Rule 51, section 7, and Rule 56, section 1, of the Rules of Court, the ruling could not now be reviewed. Thus, ratification was not established.
• Rents: Although the property had been in the possession of the Republic of the Philippines during the years of litigation, Laperal had also been in possession of the money paid to him for the sale. In the absence of concrete evidence showing considerable disparity in the benefits respectively derived by the parties, equity presumes that the benefits are more or less the same. The award of monthly rentals was therefore improper.
• Attorney’s Fees: The award of P10,000.00 as attorney’s fees was not warranted. It did not appear that the two appellants acted in bad faith or recklessly in sustaining the validity of the sale. Neither had any part in forcing Laperal to execute the sale. After the pendente lite transfer of the property to it by the government of the United States, the intervenor-appellant Republic had no other reasonable recourse but to prosecute the pending case. The government of the United States was justified in confiscating the property upon the surrender of Japan because, although it was in the name of the occupation Republic, it appeared to have been really purchased by the Japanese army and paid for with funds of the latter. In defending the suit, the appellants could not be charged with notorious bad faith.
• Reimbursement for Repairs: The contention that the Republic of the Philippines should be reimbursed P24,030.75 for repairs was without merit. The repairs were made not to preserve the property or to save it from being lost, but to enable the intervenor-appellant to use it for its own purposes. The intervenor had enjoyed full possession and use of the property since 1944.

• Duress as a Vice of Consent — A contract is voidable where consent is given under a reasonable and well-grounded fear of imminent and serious injury to person or property. The Court affirmed that specific threats and coercive acts by Japanese military authorities, not mere general wartime fear, invalidated the sale.
• Collective or General Duress — The general fear Filipinos felt for the Japanese during the occupation, unaccompanied by any particular coercive action, does not invalidate a contract that would otherwise be valid if entered into freely during peace time. The Court distinguished this from Laperal’s specific threats and coercive encounters.
• Ratification by Use of Proceeds — Ratification may be shown by using the proceeds of a sale, but the evidence must be competent and probative. Incomplete bank records not properly identified by a witness with personal knowledge cannot establish ratification. A trial court ruling not assigned as error cannot be reviewed on appeal.
• Equity in Reciprocal Benefits — When both parties have possessed benefits from the transaction, absent concrete evidence of considerable disparity, equity presumes that the benefits are more or less the same. This barred the award of rentals to Laperal.
• Attorney’s Fees — Attorney’s fees are not awarded absent bad faith or reckless prosecution. The appellants’ defense of the sale, including the United States government’s justified confiscation and the Republic’s necessary prosecution of the case, did not constitute notorious bad faith.
• Reimbursement for Repairs — Expenses for repairs made for the possessor’s own use, rather than to preserve the property or save it from loss, are not reimbursable.
• Appellate Review of Facts — Findings of fact of the trial court are accepted on appeal absent evident error or abuse of discretion, especially where the appellant presents no contrary evidence. (Valez vs. Pine)

• "The transaction involved in this case is not covered by the theory of "collective" or "general" duress, according to which, the general feeling of fear which Filipinos felt for the Japanese during the years of occupation, unaccompanied by any particular coercive action on the part of the latter, does not invalidate a contract which would otherwise be valid if entered into freely during peace time." — This passage defines the doctrine of collective or general duress and distinguishes it from the specific coercive acts that invalidated Laperal’s sale.
• "The evidence for the plaintiff has unmistakably shown that Roberto Laperal was inspired by a reasonable and well-grounded fear of suffering an imminent and serious injury to his person or property, including that of his family." — This is the trial court’s finding on duress, quoted and affirmed by the Supreme Court as the factual basis for annulling the sale.
• "While it is true that during all these years the property in question has been in the possession of the Republic of the Philippines, it is nonetheless true that appellee has also been in possession of the money paid to him for the sale of said property. In the absence of concrete evidence showing considerable disparity in the benefits thus respectively derived by the two parties concerned, equity will presume that they are more or less the same." — This states the equitable rationale for deleting the award of monthly rentals.
• "In connection with the sum of P10,000.00 awarded to appellee as attorney's fees, it does not appear that the two appellants here acted in bad faith or recklessly in sustaining the validity of the sale under question." — This states the basis for denying attorney’s fees.

• Valez vs. Pine, 76 Phil. 285 — Cited for the well-settled rule and judicial appellate practice that, absent evident error or abuse of discretion in evaluating the evidence, or failure or refusal of the trial court to consider some important and material fact, its findings of fact must be accepted. The Court applied this to affirm the finding of duress.

• Section 9(a), Trading With the Enemy Act (40 Stat. 411) — Cited in connection with the Republic of the Philippines’ intervention, because the transfer of the property to the Republic could not be effected pending the final outcome of the case under this provision.
• Trading With the Enemy Act, as amended — The statutory basis for the Alien Property Custodian’s vesting order and for the administration, liquidation, sale, or other disposition of the vested property.
• Executive Order No. 9095 — Authority for Vesting Order No. P-28 issued by the Alien Property Custodian of the United States.
• Executive Order No. 9818 — Transferred the property to the Philippine Alien Property Administrator.
• Philippine Property Act of 1946 — Governed the administration of the vested property by the Philippine Alien Property Administrator.
• Executive Order No. 10254 — Terminated the Philippine Alien Property Administration and transferred its functions with respect to vested property in the Philippines to the Attorney General of the United States.
• Rule 51, sec. 7, Rules of Court — Cited to hold that the trial court’s ruling on Exhibit 1, not assigned as error, may not be reviewed.
• Rule 56, sec. 1, Rules of Court — Cited together with Rule 51, section 7, for the same procedural point that an unassigned error is not reviewable.

Bengzon, C.J., Bautista Angelo, Reyes, J.B.L., Barrera, Paredes, Regala, Makalintal, Bengzon, J.P., and Zaldivar, JJ., concur. Concepcion, J., took no part.