G.R. No. L-2913; April 27, 1951
Philippine Refining Company, Inc., plaintiff-appellant, vs. Cesar Ledesma, defendant-appellee.

FACTS

On February 15, 1939, the Philippine Refining Company, a domestic corporation, sold three parcels of land in Parañaque, Rizal, to Cesar Ledesma for P413,644. Ledesma paid P103,411 in cash and executed six promissory notes for the balance, each for P51,705.50, maturing successively from February 15, 1940, to 1945. The parcels were mortgaged to guarantee the notes. The first two notes were paid in due course. During the Japanese occupation, on or about October 3, 1944, Ledesma paid the remaining four promissory notes to the Office of the Enemy Property Custodian of the Japanese Army in Japanese military notes, upon the latter’s demand. Consequently, the Japanese authorities caused the mortgage to be cancelled, which cancellation was duly noted in the Registry of Deeds. The Philippine Refining Company’s capital stock was owned mostly (75 percent) by British and Dutch interests.

ISSUE

The sole issue is the validity of the payment made by the defendant to the Japanese authorities during the occupation.

RULING

The Supreme Court, applying the doctrine established in Haw Pia vs. China Banking Corporation, upheld the validity of the payment. The Court held that the Japanese military authorities had the power, under International Law, to order the liquidation or sequestration of assets belonging to enemy nationals, which included the collection of credits. This act was not considered confiscation but a permissible sequestration. The Court rejected the appellant’s arguments for re-examination and differentiation, finding them sufficiently answered by the appellee. The appealed judgment of the Court of First Instance, which released the defendant from liability, was affirmed.