APOLINARIO G. DE LOS SANTOS AND ISABELO ASTRAQUILLO, PLAINTIFFS AND APPELLEES, VS. J. HOWARD MCGRATH ATTORNEY GENERAL OF THE UNITED STATES, SUCCESSOR TO THE PHILIPPINE ALIEN PRO…

This action involves the title to 1,600,000 shares of stock of the Lepanto
Consolidated Mining Co., Inc., a corporation duly organized and existing under
the laws of the Philippines, hereinafter referred to, for the sake of brevity,
as the Lepanto. Originally, one-half of said shares of stock were claimed by
plaintiff, Apolinario de los Santos, and the other half, by his co-plaintiff
Isabelo Astraquillo. During the pendency of this case, the latter has allegedly
conveyed and assigned his interest in and to said half claimed by him to the
former. The shares of stock in question are covered by several stock
certificates issued in favor of Vicente Madrigal, who is registered in the books
of the Lepanto as owner of said stocks and whose indorsement in blank appears on
the back of said certificates, all of which, except certificates No.
2279—marked. Exhibit 2— covering 55,000 shares, are in plaintiffs’ possession.
So was said Exhibit 2, up to sometime in 1945 or 1946 when said possession was
lost under the conditions set forth in subsequent pages.

Briefly stated, plaintiffs contend that De los Santos bought 500,000 shares
from Juan Campos, in Manila, early in December 1942; that he bought 300,000
shares from Carl Hess, in the same city, several days later; and that, before
Christmas of 1942, be bought 800,000 shares from Carl Hess, this time for the
account and benefit of Astraquillo. By virtue of vesting order P-12, dated
February 18, 1945, title to the 1,600,000 shares of stock in dispute was,
however, vested in the Alien Property Custodian of the U. S. (hereinafter
referred to as the Property Custodian) as Japanese property. Hence, plaintiffs
filed their respective claims with the Property Custodian. In due course, the
Vested Property Claims Committee of the Philippine Alien Property Administration
made a “determination,” dated March 9, 1948, allowing said claims, which were
considered and heard jointly as Claim No. 535, but, upon personal review, the
Philippine Alien Property Administrator (hereinafter referred to as
“Administrator”), in an opinion dated November 26, 1948, reversed the
determination made by said Committee and decreed that “title to the shares in
question shall remain in the name of the Philippine Alien Property
Administrator.” Consequently, plaintiffs instituted the present action to
establish title to the aforementioned shares of stock. In their complaint, they
pray that judgment be rendered declaring them lawful owners of said shares of
stock, with such dividends, profits and rights as may have accrued thereto;
requiring the defendant to render accounts and to transfer said shares of stock
to plaintiffs’ names; and sentencing the former to pay the costs.

The defendant herein is the Attorney General of the U.S., successor to the
“Administrator”. He contends, substantially, that, prior to the outbreak of war
in the Pacific, said shares of stock were bought by Vicente Mad- rigal, in trust
for, and for the benefit of, the Mitsui Bussan Kaisha (hereinafter referred to
as the “Mitsuis”), a corporation organized in accordance with the laws of Japan,
the true owner thereof, with branch office in the Philippines; that on or before
March, 1942, Madrigal delivered the corresponding stock certificates, with his
blank indorsement thereon, to the Mitsuis, which kept said certificates, in the
files of its office in Manila, until the liberation of the latter by the
American forces early in 1945; that the Mitsuis had never sold, or otherwise
disposed of, said shares of stock; and that the stock certifificates
aforementioned must have been stolen or looted, therefore, during the emergency
resulting from said, liberation.

Inasmuch as, pursuant to the Philippine Property Act, all property vested in
the United States, or any of its officials, under the Trading with the Enemy
Act, as amended, located in the Philippines at the time of such vesting, or the
proceeds thereof, shall be transferred to- the Republic of the Philippines, the
latter sought permission, and was allowed, to intervene in this case and filed
an answer adopting in substance the theory of the defendant.

After due hearing, the Court of First Instance of Manila, presided over by
Honorable Higinio B. Macadaeg, Judge, rendered a decision the dispositive part
of which reads, as follows:

“In view of the foregoing consideration, judgment is hereby rendered
in favor of the plaintiffs and against the defendant, declaring the former the
absolute owners of the shares of stock of the Lepanto Consolidated Mining
Company covered by the certificates of stock, respectively, in their
(plaintiffs’) possession. The transfer of said shares of stock in favor of the
Alien Property Custodian of the U. S. of America, now Philippine Alien Property
Administration, is hereby declared null and void and of no effect. Consequently,
the Lepanto Consolidated Mining Company is ordered to cancel the certificates of
stock issued in the name of the Philippine Alien Property Custodian or
Philippine Alien Property Administrator, as the case may be. Defendant shall pay
the costs of the proceeding.” (p. 67, R.A.)

The defendant and the intervenor have appealed from this decision. The main
question for determination in this appeal is whether or not plaintiffs had
purchased the shares of stock in question. In support of the negative answer,
appellants have introduced the testimony of Vicente Madrigal, Matsune Kitajima,
Kingy Miwa, Miguel Simon, E. A. Perkins and Victor E. Lednicky, as well as
several pieces of documentary evidence.

Mr. Madrigal, whose testimony before the claims Committee of the Philippine
Alien Property Administration was admitted with plaintiffs’ consent, stated that
he purchased the shares of stock in question, among others, for the Mitsuis and
at their request; that he paid with his own funds the corresponding price, which
was later reimbursed to him by the Mitsuis; that he held the corresponding stock
certificates, which were issued in his name, with the understanding that he
would effect the necessary transfer, to the Mitsuis, upon demand; and that,
shortly before the outbreak of war, he delivered said stock certificates , with
his blank endorsement thereon, to the Mitsuis, to whom said stocks belonged.

Matsune Kitajima declared that in June 1941 he relieved one Kobayashi, as
manager of the branch office of the Mitsuis in Manila; that he then received
from Kobayashi the stock certificates for about 1,900,000 shares of the Lepanto,
belonging to the Mitsuis, but issued in favor of Vicente Madrigal, except the
certificates for 200,000 shares, which were in the name of the Mitsuis; that all
these certificates were kept in a steel safe in said office of the Mitsuis;
that, in July 1941, he returned the stock certificates to Madrigal, with the
request that he buy for the Mitsuis, from time to time, some more shares of
stock, in small lots; that Madrigal bought 200,000 additional shares of the
Lepanto for the Mitsuis; that, late in November or early in December, 1941, the
stock certificates of the aforementioned 2,100,000 shares were returned to the
Mitsuis, which had decided to stop buying, in view of the strained international
situation then prevailing; that, as branch manager of the Mitsuis, he was the
only official authorized to dispose of the shares in question, none of which was
alienated by him; and that he had the aforementioned stock certificates in his
possession continuously until early in April 1943, when he delivered the same to
his successor in office, Kingy Miwa.

Apart from corroborating Kitajima’s testimony relative to said delivery of
stock certificates in April 1943, Kingy Miwa testified that he kept the latter
in his possession, as branch manager of the Mitsuis; that said shares of stock
were never sold or otherwise disposed of by the Mitsuis; that, late in September
1944, he bade his assistant, one Miyazima, to transfer all important documents
to their residence and headquarters, at Taft Avenue, Manila, although he did not
know personally whether or not the transfer was actually carried out; and that
in January 1945, when the Japanese were about to evacuate Manila, he told his
Assistant Manager, one Shinoda, to burn all important papers before leaving the
city.

Miguel Simon, brother of Carl Hess, from whom plaintiffs claim to have
purchased 1,100,000 shares of stock, affirmed that Hess lived in front of his
(Simon’s) house; that they were close to each other and had long been associated
in business; that he was the office manager of “Hess and Zeitling” before the
war; that Hess used to tell him his daily transactions during the occupation;
that at that time, Hess did not have in his possession any certificate of stock
of the Lepanto in the name of Vicente Madrigal; that neither did Hess, during
that period, operate as a broker, for, being American, he was under Japanese
surveillance; and that Hess had made, during tne occupation, no transaction
involving mining shares, except when he sold 12,000 shares of the Benguet
Consolidated, inherited from his mother, sometime in 1943.

E.A. Perkins, a member of the law firm DeWitt, Perkins & Ponce Enrile
testified substantially as follows: On October 27, 1945, Leonardo Recio brought
stock certificate No. 2279 (Exhibit 2) and offered the same for sale to Clyde
DeWitt, who, in turn, asked Perkins, whose room adjoined that of DeWitt, to join
them. Recio showed Exhibit 2 to DeWitt stating that he (Recio) wanted P0.13 per
share. DeWitt handed Exhibit 2 over to Perkins, who, after examining the
instrument, returned it to DeWitt. The latter, thereafter, checked it with a
communication of the Property Custodian and then advised Recip that said Exhibit
2 was one of the stock certificates looted from the Mitsuis and that he (DeWitt)
would have to report the matter to said official. As DeWitt, thereupon,
telephoned one Mr. Erickson, of the Property Custodian’s office, Recio stepped
out of the room without Exhibit 2, which neither he or plaintiffs had ever tried
to recover.

Victor E. Lednicky, one of the organizers and pre-war directors of the
Lepanto, and present vice-president and member of its board of director,
asserted that, having learned from a soldier of the existence of mining papers
and securities of the Lepanto in the offices of the Mitsuis at the Ayala
Building, formerly known as the National City Bank Building, in Manila, he went
thereto in February 1945 and saw many documents scattered on the desks and floor
of said premises. Among said papers, he noticed two stock certificates of the
Lepanto, one, in the name of either a Japanese or Chinese, and the other, in the
name of Vicente Madrigal, indorsed in blank. Soon, however, he heard voices
coming from the stairs, whereupon he departed hurriedly, for fear of being
mistaken for a looter.

After analyzing the foregoing evidence for the defense, the lower court found
the same “inherently improbable” and seemingly concluded that, as a consequence,
it should accept plaintiffs’ version, for which reason judgment was rendered as
above stated. It is well settled, in this jurisdiction, that the findings of
fact—particularly those relating to the credibility of the opposing
witnesses—made by the Judge a quo, should not be disturbed on appeal,
in the absence of strong and cogent reasons therefor. This policy is predicated
upon the circumstance that the trial court has had an opportunity, denied to the
appellate court, to observe the behaviour of the witnesses during the hearing, a
potent factor in gauging their bias and veracity. In the case at bar, however,
we notice that, rejecting the theory of the defense, the court of origin was
guided, not by the conduct of the witnesses in the course of their testimony,
but by what His Honor, the trial Judge, regarded as the inherent weakness
thereof, in the evaluation of which said court does not enjoy the advantage
already adverted to.

Moreover, the decision appealed from appears to have assumed that plaintiffs’
pretense must necessarily be relied upon, owing to the infirmities said to have
been found in the theory of the defense. This view suffers from a fatal defect.
It overlooks the fact that the burden of proof is upon the plaintiffs, and that,
accordingly, a decision in their favor is not in order unless a preponderance of
the evidence supports their claim. To put it differently, the alleged
improbabilities in the testimony of the witnesses for the defense will not
justify a judgment against the latter, if the evidence for the plaintiffs is
more improbable than, or, at least, as improbable as, that of the defense. Such
is the situation obtaining in the case at bar. Indeed, upon careful examination
of the record before us, we find it impossible to share the conclusions, made in
the decision appealed from, relative to the alleged flaws in the version of the
defense.

Let us, first, examine the evidence for the plaintiffs, consisting, mainly,
of their own testimony and that of Primitivo Javier and Leonardo Recio.

According to De los Santos, on or about December 8, 1942, he purchased from
Juan Campos, in Manila, 500,000 shares of stock of the Lepanto, for the
aggregate sum of P30,000.00, or at F0.06 each share, paid in cash, in exchange
for the corresponding stock certificates, which were delivered to him. Several
days later, he bought from Carl Hess, in Manila, 300,000 shares of the Lepanto,
at the same rate. Soon after, he visited his daughter in Baguio, where he,
likewise, saw his co-plaintiff, and former secretary, Isabelo Astraquillo.
Before leaving Astraquillo’s house, De los Santos happened to mention his
aforesaid purchases of Lepanto shares, at P0.06 each, whereupon, Astraquillo
expressed the wish to buy 800,000 shares at the same price, the amount of which
he delivered to De los Santos the next day. Upon his return to Manila, De los
Santos purchased from Hess said 800,000 shares, the certificates of which were
turned over by the former to Astraquillo, in Baguio, at about Christmas time.
Over 3 years later, or in January 1946, De los Santos repaired to the offices of
the Lepanto in Manila to ascertain whether it accepted certificates of stock for
registration. He then received a negative answer. Upon further inquiry, he
learned, in February 1946, that the shares in the name of Madrigal were blocked.
So he engaged the services of Atty. A. Scheerer, who secured an order of release
from the Freezing Control Office of the United States Treasury Department. As he
brought a copy of this order to the offices of the Lepanto, on or about May 1,
1946, he was advised that no transfer could be effected without the authority of
Clyde DeWitt, the company president. Thereupon, De los Santos caused to be
filed, with the office of the Property Custodian, the corresponding claim for
the shares of stock in question, with the result already adverted to.

Astraquillo tried to corroborate the testimony of De los Santos, confining
the purchase of 800,000 shares of stock on behalf of the former. Moreover,
Astraquillo declared tnat, being in need of money, he came, to Manila in
November or December 1945, and delivered to stock broker Leonardo Recio stock
certificate No. 2279 (Exhibit 2) for 55,000 shares, with a view to disposing of
the same at a price ranging from P0.13 to P0.15 each. He advised Recio that, in
the absence of any buyer, he could see Mr. DeWitt, who, probably, would be
interested in purchasing the shares. Sometime later, Astraquillo learned that,
according to Recio, upon seeing Exhibit 2, DeWitt retained it—upon the ground
that the shares represented therein had been blocked by the United States—and
that he (Recio) got therefor a receipt, which was subsequently lost in a fire
that destroyed his (Recio’s) dwelling. As Astraquillo hurried to Manila, he was
told that representatives of the CIC would go to Baguio to investigate. So, he
returned to Baguio, but he did not wait for the investigation in that city. Late
in February or early in March, 1946, he came back to Manila and asked the
assistance of De los Santos, whereupon both contacted Atty. Scheerer for the
purpose already stated.

Primitivo Javier narrated that, late in 1945, he received Exhibit 2 from his
uncle, Astraquillo, who wanted to sell the 55,000 shares represented by said
stock certiicate (No. 2279) at a price ranging from P0.12 to P0.15 each share.
He, in turn, delivered the certificate to Recio, a licensed broker.
Subsequently, Recio reported to him that he (Recio) had brought Exhibit 2 to the
office of Mr. DeWitt, whom he did not see on his first visit; that he then left
Exhibit 2 in the hands of a person who worked in said office, one Atty. Orlina,
who issued a receipt therefor; that, when Recio came back, later on, DeWitt told
him that Exhibit 2 was defective; and that, accordingly, Exhibit 2 was left in
the possession of Mr. DeWitt. Javier relayed this information to Astraquillo,
who, thereupon, came to Manila. Both went to the temporary residence of Recio in
Sampaloc, his house in San Juan del Monte, Rizal, having been destroyed by fire
late in December 1945. Recio then advised them that said receipt had been burned
with his house.

Leonardo Recio said that sometime in 1945, Javier gave him Exhibit 2, stating
that it belonged to his uncle, who wanted to alienate the corresponding shares
of stock at P0.15, more or less, each, and suggesting that he offer the same to
Mr. DeWitt: In the latter’s office, Atty. Orlina told Recio that DeWitt was busy
and bade him {Recio) to return later. Recio delivered Exhibit 2 to Orlina, who
gave him a receipt, which, subsequently, he showed to Javier. When, soon after,
he went back to Orlina, the latter introduced him to Mr. DeWitt, who stated that
the shares of stock covered by Exhibit 2 were included in the list of questioned
shares. DeWitt, also, asked him whether he would leave the certificate, to which
Recio replied affirmatively. While he was away, several months later, or shortly
before Christmas, his house at Blumentritt Street, San Juan del Monte, Rizal,
and everything contained therein, including the aforementioned receipt, which
which was in his wallet, were destroyed by fire.

It thus appears that the only evidence on the alleged sale of the shares of
stock in question to the plaintiffs— the main issue in the case at bar—is the
testimony of Apolinario de los Santos, who now claims to be the sole owner
thereof. Juan Campos and Carl Hess, the alleged vendors, could not take the
witness stand, for Hess was executed by the Japanese, and Campos died during the
liberation of Manila. Thus, death has sealed the lips of the only persons who
could have positively corroborated or contradicted the aforementioned testimony
of De los Santos. Was this a mere accident of fate, as plaintiffs would have us
believe? Or were Campos and Hess named by the plaintiffs as their immediate
predecessors in interest precisely because, as contended by appellants, said
deceased persons could no longer impeach said testimony?

For obvious reasons, the Court can not answer these questions with absolute
certainty. It can only explore the possibilities and probabilities of the case,
in the light of human experience. And, viewed from this angle, it can not be
denied that the demise of Campos and Hess before the filing of plaintiffs claim
seriously impairs the weight thereof. That the Grim Reaper had chosen to strike
at one of the alleged predecessors of the plaintiffs is a matter that
may be attributed to sheer fortuitiousness. When, as in the case at bar, not
one, but both have thus been eliminated, it is clear, however, that
this circumstances is most unusual, and must place the Court on guard.

The need for caution becomes more imperative when we bear in mind that an
important piece of documentary evidence, which allegedly existed after
liberation, and could have effectively corroborated one phase of the plaintiffs’
contention, had, according to their evidence, disappeared through still another
unfortunate turn of the wheel of fate. It will be recalled that late in 1945,
Leonardo Recio, allegedly acting on behalf of Astraquillo, offered to sell to
Atty. DeWitt the 55,000 shares represented by stock certificate No. 2279
(Exhibit 2). Recio testified that, having been unable to see DeWitt, when he
(Recio) went to the latter’s office, for the first time, said Exhibit 2 was left
by him (Recio) in the hands of Atty. Orlina, who worked therein and gave him a
receipt therefor. This receipt, if produced, would have surely afforded us
tangible proof of the veracity of, at least this part of plaintiffs’ story. Yet,
we are now told that, one day in December, 1945, Recio’s house
accidentally caught fire, and that the latter consumed, also, said
receipt, kept in a wallet, which, by accident, he had failed to bring
with him. Aren’t there too many accidents in plaintiffs’ version? At any rate,
we – have thus been deprived of all means to check with reasonable certainty the
truth of any of the controverted portions of their pretense. In other words, the
same is based, and must stand or fall, therefore, upon the uncorroborated
testimony of plaintiff Apolinario de los Santos, and the credence and weight
that may be given thereto. Upon a review of the record, we find, however, that
said testimony is highly improbable and inherently weak, for, among other
things:

(1) De los Santos declared that, in December, 1942, he purchased 300,000;
shares from Juan Campos and 1,300,000 shares from Carl Hess, at P0.06 each
share. As an enterprise controlled by Americans, the Lepanto had been seized by
the Japanese who, accordingly, were operating it. At that time, there were no
clear, or, even, substantial, indications that changes would take place, either
in the local or in the international situation, in the near or foreseeable
future. In deed, the morale of the population in democratic countries,
particularly in the Philippines, was then at its lowest ebb. Both in Europe and
in the Pacific, the Axis powers had reached in enemy territories the highest
degree of penetration attained during the last war. Before the world had
recovered from the shock produced by the German blitz- krieg operations in the
low countries and in France, the Nazis were already knocking at the gates of
Stalingrad and the Caucasus, whereas the Japanese seemed firmly entrenched in
New Guinea and the Solomon Islands. The people had a hazy notion about the facts
pertinent to the Battle of Midway (June 3-6, 1942) and the implications thereof
were by and large unknown. In other words, the conditions were such as to
warrant the general belief that the Lepanto would remain under the authority and
management of the Japanese Imperial forces for an in- definite period of time.
As a consequence, the Lepanto stock had not merely a doubtful value, but—as
admitted by Santos—even, no market value at all (p. 132, t. s. n.). Indeed, the
stockholders could neither collect dividends nor exercise their voting power, or
otherwise participate in the operation of the enterprise. Moreover, there was a
possibility of its assets being fully confiscated, for all practical purposes,
should Japan emerge victorious in the war in the Pacific, which it appeared to
be winning, easily up to that time (December, 1942).

(2) Inasmuch as citizens of the United States held a majority of the shares
of stock of the Lepanto, the same had, from the view point of the Japanese, an
enemy char- acter, and the purchase of said stocks was, therefore, a hostile
act. As a matter of fact, in the proceedings before the Vested Property Claims
Committee, the parties—including plaintiffs herein—had stipulated “that such
transfers and dealings in said stock were prohibited by the Japanese during the
occupation and hence were dangerous.” (Record on Appeal, p. 110). Said
transactions could jeopardize the life of the parties thereto and De los Santos
was aware of the “highly dangerous” or “very risky” nature even of the “mere
possession” of the stock certificates in question, (pp. 141, 143, t. s. n.)

(3) Astraquillo is merely a former employee of De los Santos, who had,
therefore, no reason to risk his neck, not only by allegedly buying 800,000
shares of stock for Astraquillo, but, also, by avowedly bringing with him (De
los Santos) the corresponding stock certificates from Manila to Baguio, to make
delivery thereof to Astraquillo, as the defense would have us believe,
notwithstanding the many Japanese check points in the 250 kilometers highway
connecting both cities and the absence of any monetary or other gain he could
have derived from the acts he professes to have performed.

(4) According to the Ballantyne schedule—the accuracy of which has not been
impugned by plaintiffs herein—the Japanese war notes in the Philippines had the
same exchange of purchase value as the currency of our legitimate government, in
December, 1942—and this was conceded by De los Santos (p. 136J t. s. n.)—when
they claim to have purchased the Lepanto stocks. The P48,000 supposedly paid by
De los Santos, and the identical sum allegedly disbursed by Astraquillo, for
their respective stocks, represented, therefore, the same amount in legal tender
of the Commonwealth of the Philippines. In fact, according to the evidence for
the plaintiffs, part of the price allegedly paid by Astraquillo, or P6,000, were
in genuine Philippine money, representing his savings for 25 years. Said sum of
F6,000 being insufficient to cover the cost of 800,000 shares of stock,
Astraquillo, it is urged, alienated other properties to raise the amount
necessary therefor. It is very difficult to believe that the plaintiffs would
have parted with P48,000 each—precisely when, owing to the abnormal conditions
brought about by the occupation, said funds might be needed, at any time, to
meet unforeseen emergencies of the gravest and most vital nature—for shares of
stock of dubious value then and in the foreseeable future.

(5) We are not satisfied that either De los Santos or Astraquillo possessed
enough resources to have P48,000, in cash, each, in December 1942. Their
evidence on this point is too general—apart from being based exclusively upon
their respective oral testimonies, which are absolutely uncorroborated—to
support their contention. At any rate, De los Santos admitted that he is “not
yet” rich (p. 134, t. s. n.), and his testimony suggests that he did not even
own the house in which he lived.

(6) Campos offered to sell his stocks, according to De los Santos, at P0.06
each (although its par value was P0.10), stating that “he (Campos) needed money”
(p. 43, t. s. n.), and advised him that Hess was, also, willing to dispose of
his own stocks at the same price. Being, accordingly, aware that Campos and Hess
were in need of money and considering the risks attending the transaction, it is
but logical to expect De los Santos, an experienced trader in stocks, to bargain
for a lower price. Yet, the evidence for the plaintiffs shows that neither he
nor Astraquillo tried to do so, contrary to the normal course of events.

(7) De los Santos could not have purchased 1,300,000 shares of stock, from
Hess, and received from him the corresponding stock certificates, indorsed in
blank by Vicente Madrigal, for Hess had never had such stock certificates in his
possession during the occupation. There is no plausible reason to doubt the
veracity of the testimony of Miguel Simon to this effect, for the latter had no
possible motive to commit perjury, and was in a position to know what he was
talking about. Apart from being a brother-in-law of Hess, Simon was manager of
the firm Hess & Zeitling, of which Hess was the senior partner, who used to
inform him (Simon) of his (Hess) business transactions.

(8) Campos and Hess could not have delivered the stock certificates for the
1,600,000 shares of stock in question, and, consequently, said shares of stock
could not have been sold by them, to De los Santos in December 1942, inasmuch as
from December 1941 to April 1943, said stock certificates were continuously in
the custody of Matsume Kitajima, manager of the Mitsuis in Manila, whose
testimony was corroborated by his successor in office, Kingy Miwa, to whom
Kitajima turned over the stock certificates in April 1943. The sincerity of
Matsume Kitajima and Kingy Miwa can not be doubted, for neither appears to have
any possible reason to trifle with the facts. Indeed, their testimony, if
accepted as true, would ultimately result in the confiscation, by the Republic
of the Philippines, of the shares of stock in question and, thus, place the same
beyond the reach of the Mitsuis.

It has been intimated that Kitajima and Kingy may have testified as they did,
either to protect themselves, because they might have disposed of the shares of
stock in question for their personal benefit, or because there had been undue
influence or pressure from the authorities —presumably officers of the
government of the United States. But these are mere speculations, without
sufficient actual basis. Besides, judicial notice may be taken of the
circumstance that, during the occupation, even minor Japanese officials could
easily make money, in the Philippines, if they wanted to, without
misappropriating Japanese properties. Again, in December, 1942, the Japanese in
the Philippines appeared to have no doubts that, in effect, Japan had already
won the war. In short, Kitajima and Kingy must have thought that, sooner or
later, Japan would own the Lepanto and that, therefore, they would have to
account for the shares of stock under consideration. Consequently, it is most
unlikely that either would have misappropriated said shares of stock as
suggested by the plaintiffs.

The benefits which the Mitsuis and Japan may derive from a decision against
the plaintiffs—inasmuch as the value of the shares of stock in question would
then be credited in payment of the reparations which may be demanded by the
Philippines and/or the United States— has been pointed out, in the dissenting
opinion, as a possible motive for the commission of perjury by Kitajima and
Kingy. Besides being purely conjectural in nature, this line of thought—which
not even the plaintiffs have taken would have no leg to stand on, unless we
assume that the Mitsuis had sold or otherwise disposed of said stocks during the
year 1942, but before the alleged transactions between Campos and Hess, on the
one hand, and the plaintiffs on the other, in December of that year. It is
inconceivable, however, that the Mitsuis would part with the stocks in question,
precisely when Japan was at the crest of its military and political victories.
Indeed, even if its officers had already foreseen, at that time, the eventual
defeat of the axis powers—and everything then appeared to indicate the
contrary—the Mitsuis could not have disposed of said stocks without thereby
revealing their own lack of faith in the ability of Japan to achieve final
victory. Thus, the Mitsuis would have caused a grave injury upon the
Japanese propaganda and thereby earned severe punishment from the Imperial
Government. Nothing, absolutely nothing, in the record, or in contemporary
history, warrants the belief that the Mitsuis, who were closely associated with
the Japanese Government, could be guilty of such folly.

Let us now turn our attention to the evidence for the defense, beginning with
the testimony of Victor E. Lednicky. It will be recalled that this witness
claimed to have gone to the premises of the Mitsuis, sometime in February 1945,
and to have seen many documents scattered about the place, including two (2)
Lepanto certificates of stock, one of which was in the name of Vicente Madrigal,
whose blank indorsement appeared thereon. Thus, the defense sought to prove that
the certincates of the shares of stock involved in this case have probably been
looted. The lower court found Lednicky’s story inherently improbable and then
concluded that the theory of the looting must, consequently, be “ruled out”. To
our mind, however, the testimony of Lednicky is not inherently improbable.
Besides, it is a matter of common knowledge, of which judicial notice may be
taken, that many offices and dwellings were looted during the liberation of
Manila. The possibility that possession of the stock certificates in question
may have been secured by looting should not be “ruled out,” therefore,
irrespective of the credence and weight given to the testimony of Lednicky.
Actually, said certificates are included in the list of stocks certificates of
the Lepanto which, soon after liberation, were reported and considered looted
from the Mitsuis, and, accordingly, “blocked” or “frozen” by the authorities.
Irrespective of the foregoing, De los Santos could not have obtained those
certificates from Campos and Hess in December 1942, inasmuch as, from December
1941 to April 1943, Kitajima had been continuously in possession of said
documents, none of which had been held by Hess during the occupation.

The lower court considered against the defense the circumstance that
Lednicky, Simon and Perkins had not testified before the Vested Property Claims
Committee. There is no evidence, however, that any of them knew of the
proceedings before said committee. Furthermore, none of them has any personal
interest in the outcome of this action. Consequently, they have no possible
motive to distort the truth, unlike De los Santos, who, as the present claimant
of all the shares of stock in dispute, will be directly affected by the outcome
of the case at bar. His testimony, therefore, cannot be more weighty than that
of the aforementioned witnesses for the defense.

The decision appealed from criticises the testimony of Perkins upon the
following grounds:

(1) Having taken no part in the alleged looting of Exhibit 2, Recio had
nothing to fear in connection therewith and, so, he could not have left the
office of Mr. DeWitt, while the latter was talking over the telephone with a
representative of the Alien Property Custodian;

(2) Inasmuch as DeWitt had stated that Exhibit 2 was included in the list of
looted stock certificates, Perkins should have known that, as holder of the
certificate, Recio is presumed to be the one who stole the same. Why
then—plaintiffs inquire—did Perkins fail to prevent Recio from leaving said
office?

As regards the first observation, suffice it to say that, as bearer of the
Exhibit 2, Recio—who, according to the lower court, is an intelligent man—must
have realized 1 the danger, probably unforeseen by him, of being considered a
privy to the looting of said stock certificate, of which he might have been
unaware before the conference with Mr. DeWitt. Hence, Recio’s fright and virtual
flight. Verily, the testimony of Perkins on this point is borne out by the
undisputed fact that Exhibit 2 was left by Recio in the hands of DeWitt, and
that neither Astraquillo, nor his alleged successor in interest, De los Santos,
has ever demanded from DeWitt the return of said certificate, or even
recriminated Recio for having voluntarily parted with its possession, as he
would have us believe, without authority therefor, as a broker or agent who was
supposed merely to find a buyer.

As to the second observation, Perkins knew that Recio was acting solely as a
broker or agent. As such, he was not the real holder of Exhibit 2, and,
consequently, the presumption adverted to did not apply to him. Even if it did,
however, what could Perkins have done? Use force or violence upon the person of
Recio, or ask a policeman to detain him? Neither step, however, could have been
taken without some risks. To begin with, Perkins could not have properly taken
the law in his own hands. Had he done so, Recio could have legally used force
against force. Moreover, said presumption is rebuttable and would have easily
been offset by the undeniable fact that Recio had acted merely in a
representative capacity. Again, why should Perkins take the initiative in the
matter? Was it not being handled by his associate in the law firm, Mr. DeWitt,
one of the most able members of the Philippine Bar? It may not be amiss to add
that the record before us discloses absolutely nothing that may cast even a
shadow of doubt upon the honesty of Mr. Perkins.

The language of the lower court in commenting on the testimony of Miwa
was:

* * * In general, the testimony of Miwa is unreliable. His behaviour in Court
in denying first and then in accepting later his own signature throws him to a
position where the Court must look upon him with suspicion and distrust. His
prevarication before the Court as to the genuineness of his own signature was
probably due to the conscience of a man who came to Court with a mental
reservation, but who may have been compelled under the circumstances to play the
role of a willing tool.” (p. 54, R. A.)

The following portion of Miwa’s testimony illustrates the point referred to
in the decision appealed from:

“Atty. Quirino:

Q.	Will you please go over this paper which for purposes of identification we request that it be marked as Exhibit M for the plaintiffs and which was marked as Exhibit 6-b before the Vested Property Claims Committee, and tell us if you know that document? —A. No. I do not remember this paper.
Q.	Mr. Miwa, at the bottom of this certificate or Exhibit M, which was Exhibit 6-b in the Committee and submitted by the Alien Property Administration, there is a typewritten name, Kingy Miwa, and above it is a signature. Will you kindly tell the Court if that is your signature or not? Please look over it again.—A. No. It is not mine.
Q.	Please examine it carefully and tell the Court afterwards if you recognize that signature. Examine it carefully.—A. It looks very similar to my signature.
Q.	But would you want or are you willing to go on record and say that it is not your signature?—A. I can not say. I don’t exactly remember that I signed this, but it looks very similar to my signature.
Q.	You will not testify under oath that this is your signature? —A. Yes, sir.
Q.	What do you mean to say by ‘yes, sir? Do you swear that this is your signature or not your signature?—A. I think this is my signature.
Q.	So, you are willing to go on record now that that signature appearing in Exhibit ‘M’ is your signature?—A. Yes, I think so.” (pp. 125-126, t. s. n.)

We do not agree with its appraisal by the lower court. It is clear that, as
he did not remember the execution of I Exhibit M several years before the
hearing of this case, Miwa had doubts about the genuineness of the signature
thereon, but the appearance thereof, similar or identical to that of his own
signature, prevented him from denying its authenticity. This does not indicate
lack of veracity on his part. At any rate, plaintiffs claim to have bought the
shares of stock in question in December, 1942, or during the management of
Kitajima, who held the corresponding stock certificates continuously from
December, 1941, to April, 1943, when Miwa substituted him, so that neither
Campos nor Hess could have delivered those certificates to De los Santos in
December 1942. Apart from this, if there are flaws in the proof for the defense,
those of the evidence for the plaintiffs are much bigger and more substantial
and vital. Consequently, we hold that plaintiffs have not established their
pretense by a preponderance of the evidence.

Even, however, if Juan Campos and Carl Hess had sold the shares of stock in
question, as testified to by De los Santos, the result, insofar as plaintiffs
are concerned, would be the same. It is not disputed that said shares of stock
were registered, in the records of the Lepanto, in the name of Vicente Madrigal.
Neither is it denied that the latter was, as regards said shares of stock, a
mere trustee for the benefit of the Mitsuis. The record shows— and there is no
evidence to the contrary—that Madrigal had never disposed of said shares of
stock in any manner whatsoever, except by turning over the corresponding stock
certificates, late in 1941, to the Mitsuis, the beneficial and true owners
thereof. It has, moreover, been established, by the uncontradicted testimony of
Kitajima and Miwa, the managers of the Mitsuis in the Philippines, from 1941 to
1945, that the Mitsuis had neither sold, conveyed, or alienated said shares of
stock, nor delivered the aforementioned stock certificates, to anybody during
said period. Section 35 of the Corporation Law reads:

“The capital stock of stock corporations shall be divided into shares for
which certificates signed by the president or the vice- president, countersigned
by the secretary or clerk and sealed with the seal of the corporation, shall be
issued in accordance with the by-laws. Shares of stock so issued are personal
property and may be transferred by delivery of the certificate indorsed by the
owner or his attorney in fact or other person legally authorized to make the
transfer. No transfer, however, shall be valid, except as between the
parties, until the transfer is entered and noted upon the books of the
corporation so as to show the names of the parties to the transaction, the
date of the transfer, the number of the certificate, and the number of shares
transferred.

“No shares of stock against which the corporation holds any unpaid claim
shall be transferable on the books of the corporation.” (Italics
supplied.)

Pursuant to this provision, a share ot stock may be transferred by
endorsement of the corresponding stock certificate, coupled with its delivery.
However, the transfer shall “not be valid, except as between the
parties/’ until it is “entered and noted upon the books of the corporation.” No
such entry in the name of the plaintiffs herein having been made, it follows
that the transfer allegedly effected by Juan Campos and Carl Hess in their favor
is “not valid, except as between” themselves. It does not bind either Madrigal
or the Mitsuis, who are not parties to said alleged transaction. What is more,
the game is “not valid,” or, in the words of the Supreme Court of Wisconsin (Re
Murphy, 51 Wise. 519, 8 N. W. 419) — which were quoted approval in Uson
vs. Diosomito (61 Phil., 535)—”absolutely void” and, hence, as good as
non-existent, insofar as Madrigal and the Mitsuis are concerned. For this
reason, although a stock certificate is sometimes regarded as quasi-negotiable,
in the sense that it may be transferred by endorsement, coupled with delivery,
it is well settled that the instrument is non-negotiable, because the holder
thereof takes it without prejudice to such rights or defenses as the registered
owner or creditor may have under the law, except insofar as such rights or
defenses are subject to the limitations imposed by the principles governing
estoppel.

“Certificates of stock are not negotiable instruments (post, Par.
102), consequently, a transferee under a forged assignment acquires no title
which can be asserted against the true owner, unless his own negligence has been
such as to create an estoppel against him (Clarke on Corporations, Sec. Ed. p.
415). If the owner of the certificate has endorsed it in blank, and it is
stolen from him, no title is acquired by an innocent purchaser for value
(East Birmingham Land Co. vs. Dennis, 85 Ala. 565, 2 L.R.A. 836;
Sherwood vs. Mining Co., 50 Calif. 412). As was said by the Supreme
Court of the United States in a leading case (Western Union Telegraph Co.
vs. Davenfort, 97 U.S. 369; 24 L. Ed. 1047)—

‘Neither the absence of blame on the part of the officers of the company
in allowing an unauthorized transfer of stock, nor the good faith of the
purchaser of stolen property, will avail as an answer to the demand of the true
owner. The great principle that no one can be deprived of his property
without his assent, except by processes of the law, requires, in the case
mentioned, that the property wrongfully transferred or stolen should be restored
to its rightful owner.'” (The Philippine Law of Stock Corporations by Fisher, p.
132.) (Italics ours.)

In the language of Fletcher’s Cyclopedia Corporations (Vol. 12, pp. 521-534)
:

“The doctrine that a bona fide purchaser of shares under a forged or
unauthorized transfer acquires no title as against the true owner does not apply
where the circumstances are such as to estop the latter from asserting his
title. * * *

* * * * * * *

“A reason often given for the rule is that it is a case for the application
of the maxim that where one of two innocent parties must suffer by reason of a
wrongful or unauthorized act, the loss must fall on the one who first trusted
the wrongdoer and put in his hands the means of inflicting such loss. But
‘negligence which will work an estoppel of this kind must be a proximate cause
of the purchase or advancement of money by the holder of the property, and must
enter into the transaction itself; the negligence must be in or immediately
connected with the transfer itself. Furthermore, ‘to establish this
estoppel it must appear that the true owner had conferred upon the person who
has diverted the security the indicia of ownership, or an apparent title or
authority to transfer the title.’ So the owner is not guilty of negligence in
merely intrusting another with the possession of his certificate of stock, if
he, does not, by assignment or otherwise, clothe him with the apparent title.
Nor is he deprived of his title or his remedy against the corporation because he
intrusts a third person with the key of a box in which the certificate are kept,
where the latter takes them from the box and by forging the owner’s name to a
power of attorney procures their transfer on the corporate books. Nor is the
mere indorsement of an assignment and power of attorney in blank on a
certificate of stock, which is afterwards lost or stolen, such negligence
as will estop the owner from asserting his title as against a bona fide
purchaser from the finder or thief, or from holding the corporation liable for
allowing a transfer on its books, where the loss or theft of the certificate was
not due to any negligence on the part of the owner, although there is some
dangerous and wholly unjustifiable dictum to the contrary. So it has been held
that the fact that stock pledged to a bank is indorsed in blank by the owner
does not estop him from asserting title thereto as against a bona fide purchaser
for value who derives his title from one who stole the certificate from the
pledgee. And this has also been held to be true though the thief was an officer
of the pledgee, since his act in wrongfully appropriating the certificate cannot
be regarded as a misappropriation by the bank to whose custody the certificate
was intrusted by the owner, even though the bank may be liable to the
pledgor. * * *. A person is not guilty of negligence in leaving a
certificate of stock indorsed in blank in a safe deposit box used by
himself and another jointly, so as to be estopped from asserting his
title after the certificate has been stolen by the other, and sold or pledged to
a bona fide purchaser or pledgee. Nor is he negligent in putting a
certificate so indorsed in a place to which an employee had access, where he has
no reason to doubt the tatter’s honesty, * * *.” (Italics ours.)

In the leading case of Knox vs. Eden Muscee American Co. (42 N. E. 988,
992-993), the rule has been forcefully stated as follows:

“The courts have been frequently importuned to extend the qualities of
negotiability of stock certificates beyond the limits mentioned, and clothe them
with the same character of complete negotiability as attaches to commercial
paper, so as to make a transfer to a purchaser in good faith for value
equivalent to actual title, although there was no agency in the transferror, and
the certificate had been lost without the fault of the true owner, or had been
obtained by theft or robbery. But the courts have refused to accede to this
view, and we have found no case entitled to be regarded as authority which
denies to the owner of a stock certificate which has been lost without his
negligence, or stolen, the right to reclaim it from the hands of any person in
whose possession it subsequently comes, although the holder may have taken it in
good faith and for value. The precise question has not often been presented
to the courts, for the reason, probably, that they have with great uniformity
held that stock certificates were not negotiable instruments in the broad
meaning of that phrase; but whenever the question has arisen it has been held
that the title of the true oumer of a lost or stolen certificate may be
asserted against any one subsequently obtaining its possession although
the holder may be a bona fide purchaser. Anderson vs. Nicholas, 28
N. Y. 600; Power Co. vs. Robinson, 52 Fed. 520; Biddle vs.
Bayard, 13 Pa. St. 150; Barstow vs. Mining Co., 64 Cal. 388, 1 Pac.
349. See Shaw vs. Railroad Co., 101 U. S. 557. * * * It is plain, we
think, that the argument in support of the judgment in this case, based on the
complete negotiability of stock certificates, is not supported by, but is
contrary to, the decisions. If public policy requires that a further advance
should be made in more completely assimilating them to commercial paper in the
qualities of negotiability, the legislature, and not the courts, should so
declare. Under the law as it has hitherto prevailed there does not seem to
have been any serious hindrance in dealing with property of this character. It
may, perhaps, be doubted, taking into consideration the interests of investors
as well as dealers, whether it would be wise to remove the protection which the
true owner of a stock certificate now has against accident, theft, or robbery.
The system of registry of negotiable bonds, which prevails to a considerable
extent, authorized By statutes of some of the states and of the United States,
seems to indicate a tendency to restrict, rather than to extend, the
range of negotiable instruments.” (Italics ours.)

The status of quasi-negotiability generally accorded to, and at present
enjoyed by, certificates of stock, under the Philippine law, is in itself a
recognition of the fact that the certificates are non-negotiable.
Instead of sustaining appellees’ claim, section 5 of the Uniform Stock Transfer
Act, which “gives full negotiability to certificates of stock,” refutes said
claim and confirms the non-negotiable character of stock certificates in the
absence of said Uniform Act, for, obviously, the same could not have
given, negotiability to an instrument already possessing this attribute
prior thereto. Again, apart from being distinct from the
general Corporation Law, the aforementioned Uniform Act is not in force
in the Philippines. In this connection, it should be noted that this
special piece of legislation was adopted in some states of the union as
early as the year 1910. The failure of the Philippine government to incorporate
its provisions in our statute books, for a period of almost 45 years, is, to our
mind, clear proof of the unwillingness of our legislative department to change
the policy set forth in section 35 of Act No. 1459, Needless to say, this fact
negates our authority—which is limited to the interpretation of the law, and its
application, with all its imperfections—to abandon what the dissenting
opinion characterizes as the “civil law standpoint,” and substitute, in lieu
thereof, the commercial viewpoint, by applying said section 5 of the Uniform
Stock Transfer Act, although not a part of the law of the land. Indeed, even in
matters generally considered as falling within “commercial territory”, the Roman
Law concept has not given way in the Philippines to the Common Law approach,
except when there is explicit statutory provision to the contrary.

In the case at bar, neither Madrigal nor the Mitsuis had alienated the shares
of stock in question. It is not even claimed that either had, through
negligence, given— occasion for an improper or ‘irregular disposition of the
corresponding stock certificates. Plaintiffs merely argue without any
evidence whatsoever thereon—that Kitajima might have, or must
have, assigned the certificates on or before December 1942, although,
as above stated, this is, not only, improbable, under the conditions, then
obtaining, but. also, impossible, considering that, in April 1943,
Kitajima delivered the instruments to Miwa, who kept them in its possession
until 1945. At any rate, such assignment by Miwa—granting for the sake
of argument the accuracy of the surmise of plaintiffs herein—was unauthorized by
the Mitsuis, who, in the light of the precedents cited above, are not chargeable
with negligence. In other words, assuming that Kitajima had been guilty of
embezzlement, by negotiating the stock certificates in question for his personal
benefit, as claimed by the plaintiffs, the title of his assignees and successors
in interest would still be subject to the rights of the registered owner,
namely, Madrigal, and, consequently, of the party for whose benefit and account
the latter held the corresponding shares of stock, that is to say, the
Mitsuis.

At any rate, at the time of the alleged sales in their favor, plaintiffs were
aware of sufficient facts to put them on notice of the need of inquiring into
the regularity of the transactions and the title of the supposed vendors.
Indeed, the certificates of stock in question were in the name of Madrigal.
Obviously, therefore, the alleged sellers (Campos and Hess) were not
registered owners of the corresponding shares of stock. Being presumed to know
the law—particularly the provisions of section 35 of Act No. 1459—and, also, as
experienced traders in shares of stock, plaintiffs must have, accordingly, been
conscious of the consequent infirmities in the title of the supposed vendors, or
of. the handicaps thereof. Moreover, the aforementioned sales were admittedly
hostile to the Japanese, who had prohibited it and plaintiffs had
actual knowledge of these facts and of the risks attendant to the alleged
transaction. In other words, plaintiffs advisely assumed those risks and, hence,
they can not validly claim, against the registered stockholder, the status of
purchasers in good faith.

The lower court held, and plaintiffs maintain that, not being the registered
owners of the shares of stock in question, the Mitsuis can not assert a better
right than said plaintiffs. This pretense is untenable. Inasmuch as Madrigal,
the registered owner of said shares of stock, has always acknowledged that he
held the same merely as an agent of, or trustee for, the Mitsuis—and this is not
denied —it follows that the latter are entitled to invoke such rights as
Madrigal had as registered stockholder. Upon the other hand, even the alleged
sale by Juan Campos and Carl Hess to plaintiffs herein is contested by the
defense and, to our mind, has not been established by a preponderance of the
evidence. Hence, as the undisputed principal or beneficiary of the registered
owner (Madrigal), the Mitsuis may claim his rights, which cannot be exercised by
the plaintiffs, not only because their alleged title is not derived
either from Madrigal or from the Mitsuis, but, also, because it is in
derogation, of said rights. Madrigal and the Mitsuis are c privies
to the alleged sales by Campos and Hess to the plaintiffs, contrary to the
latter’s pretense.

In conclusion, when the Property Custodian issued the Vesting Order
complained of, the shares of stock in question belonged to the Mitsuis,
admittedly an enemy corporration, so that said Vesting Order is in conformity
with law and should be upheld. Wherefore, the decision appealed from is hereby
reversed, and the complaint, accordingly, dismissed, with costs against the
plaintiffs-appellees.

It is so ordered.

Paras, C.J., Pablo, Padilla, Montemayor, Reyes, A., Jugo and
Labrador, JJ., concur.

---

DISSENTING OPINION

BENGZON, J., dissenting:

Unable to agree with my distinguished colleagues, I find it necessary to
write a rather extended dissent, due principally to the far-reaching effect of
their ruling upon future operations of the local stock market and corporate
business. A dissent may at least indicate what is not the law.

During the Japanese occupation two Filipinos—the plaintiffs—secretly
purchased shares of an American corporation, whose assets had been seized by the
enemy invader. Risking Japanese wrath, they staked their funds (perhaps their
freedom or lives) on the eventual return of the American forces. After two
years, these came back in victorious liberation; but oddly enough plaintiffs
lose their money and the shares.

Such anti-climax is brought about by this decision of the Philippine Supreme
Court, upon the initiative or opposition of Americans and Filipinos, resulting
ultimately to the benefit of the Japanese.^[1] Not that I believe property rights should
be apportioned on the basis of nationality; but the impact of plaintiffs’
misadventure may not be fully realized unless these details are described.

Just the luck of plaintiffs: They won before the U.S. Treasury, and later
before the Vested Property Aliens Committee but they lost before the
Administrator because this officer applied an erroneous legal principle.^[2] Thereafter they resort to the courts,
winning the first round. Now again they lose.

Perspective, imperfect I believe, accounts for this their second defeat. We
take the viewpoint of a trial judge passing on conflicting testimony,
and thusly adjudicate: “evidence for the plaintiff is as improbable as that of
the defense’; yet the burden of proof is upon plaintiffs’, therefore judgment
for defendants.” On appeal our coign of vantage lies on higher ground; and,
following established practice, the issue involving credibility of witnesses, we
should uphold the judgment for plaintiffs—unless the trial judge unduly
discarded significant evidentiary pieces for the defendants. Reading the
testimony in black and white, we might disagree with his estimate of the factual
probabilities; nevertheless we should, as usual, make allowance for his peculiar
advantage of having seen the witnesses testifying on the chair; and
then affirm, realizing that this distance we cannot perceive minor movements of
the pointer in the judicial balance.

The majority attempt to justify their deviation from accepted practice with
the statement that “in rejecting the theory of the defense” His Honor “was
guided not by the conduct of the witnesses in the course of their testimony”,
but by the inherent “weakness” of such theory. For the application of the
principle recognizing the advantage of the trial judge, it is not necessary in
my opinion-for the said officer to declare explicitly, that in appraising the
witnesses’ versions he was guided by their conduct on the witness-stand;
normally, in matters of credibility he weighs their testimony against the
background of the sense-images they produced, their demeanor, expression of
their faces etc.

Nevertheless, admitting arguendo, that this appeal must be decided upon the
finding that plaintiffs’ theory of purchase “is as improbable as defendant’s
theory” (of looting), I submit that, inasmuch as the plaintiffs have
possession of the certificates which were indorsed in blank, and
inasmuch as the burden of proof shifted to the defendants to prove the
alleged looting, plaintiffs should receive the award. In addition to plaintiffs’
testimony,—it must be emphasized—they have the certificates in proper order,
indorsed in blank. Such documentary proof, speaking for itself, should tip the
scales, whenever,—as this court declares now—the testimonial evidence “is
even.”

The presumption is that * * * stock which was endorsed in blank was delivered
to the parties who had possession of stock (Hess and Campos) and transferred it
to bona fide purchasers (plaintiffs). (See Lilley vs. First Federal Savings
& Loan Association, La. App. 1940, 194 So. 901.)

Furthermore, there are these presumptions: (1) Hess and Campos, and
Plaintiffs are innocent of crime or wrong, and (2) things which a person
possesses are owned by him. (Rule 123 sec. 69).

Listed in the majority decision are eight grounds to disbelieve Santos’
declarations. Let me comment briefly on them: Anent the first, Santos was
positive the American forces would eventually return, and he bought the shares.
As to the second; and the third, he braved the dangers, for the sake of sure
financial gain. As to the fourth and the fifth, it must be remembered that
Santos had a monthly income of P6,000, and was co-owner of ten hectares of land
in Tondo. His living in a rented apartment does not imply financial inability;
many landed provincial folk were ordinary tenants in Manila during the war. As
to the price, Santos who had been dabbling in other stock knew that at P0.06 the
Lepanto shares were a bargain; so he did not hesitate and grabbed the chance. As
to the 7th, Miguel Simon could not affirm under oath that Carl Hess “had
imparted all his activities to me” (p. 29 s. n.) ; and because the
handling of these shares was “dangerous” at that time, most probably Hess did’nt
inform him about it. And what about the shares Santos bought from Campos?

Concerning the 8th, remember that although Kitajima and Miwa said the Lepanto
certificates were in their possession, they did’nt mean physical
personal possession, but official possession, in the vaults or cabinets
of the Mitsui office. Yet they admitted that other officials had access
to the same certificates (p. 115 testimony of Miwa). Inference: such other
officials could have—and probably-disposed of the certificates.

As to Kitajima’s testimony that in April 1943 he delivered these certificates
to his successor Kenji Miwa, no satisfactory explanation exists for defendants’
failure to present the inventory admittedly prepared at that time. The document
was the best evidence, since Kitajima might not have been sincere, for he would
be personally responsible to the Mitsui higher-ups for the
certificates; and the temptation to palm off responsibility is great where
opportunity offers.

And Miwa could not have received and kept these shares, because he swore to
having seen to it—when ordered to leave Manila in 1945—that the important
documents including the Lepanto shares were burned. How come these shares
are now in the possession of Santos? Obviously, because they were not
among those shares burned, nor shares delivered to Miwa or kept by him in
the Manila offices.

The Mitsui Company it must be underscored—stands to benefit from a
declaration that these shares still belong to it. True, they will be confiscated
now, for defendants. They are nevertheless Japanese assets which may
ultimately have to be credited to the said corporation.

Supposing Kitajima told the whole truth that he did not dispose of the
shares, then the probabilities are that such shares had been disposed of by
other Mitsui officials without his knowledge.

Now then, the question arises, if the shares had been disposed of by
unauthorized officials of Mitsui Bussan Kaisha do the plaintiffs have a valid
title? They have acquired the shares for value and in good faith, without notice
that Campos and Hess had defective titles.

Parenthetically, the defendants—and this decision— doubt the plaintiffs’
purchase partly because Campos died during the liberation of Manila and Hess was
executed by the Japanese. That both of them died is quite a suspicious
circumstance, says the majority. I might agree, if both occurred during normal
times. Yet during the Japanese occupation and the battle of liberation, death
was no unusual occurrence in the city. And then, who knows but that Hess was
executed by the Japanese for having engaged in dangerous activities, such as the
handling of this stock?

By the way, the Foreign Funds Control of the U. S. Treasury Department; the
Vested Property Aliens Committee, the Alien Property Administrator and the court
of first instance never doubted such sale by Campos and Hess. And this
controversy would not have reached the courts had not the Alien Property
Administrator held that admitting the sale, the plaintiffs failed to
trace their chain of title to these shares, beginning from Madrigal, (the
registered owner) and Mitsui all the way down to Hess and Campos. Which is
error, because as aptly pointed out in appellees’ brief:

“A purchaser for value is not bound to show affirmatively that the
certificates were delivered by a former owner to his own grantor,” (Helbrook
vs. New Jersey Line, 57 N. Y. 616) (Fletchers, Cyclopedia of the Law of
Private Corporation, Vol. 12, Sec. 5474.) (Italics ours).

“Such a contention is quite fallacious because neither the law nor the
established custom of the trade requires a purchaser in good faith to trace back
all its predecessors in interest. That would be requiring the purchaser to prove
an utter impossibility, because as shown by the cases cited and also in the
actual practice if trade, a certificate endorsed in blank may travel through
different hands which may number 10, 20, 50 or 100.” (p. 169 brief.) (cf. Hager
vs. Bryan, infra.)

“The holder of corporate stock containing blank assignment and power of
attorney to transfer stock on books of company, signed and indorsed on back
thereof, has prima facie good title to the shares.” (Jones vs. Courts
(1940) Ga. App. 239, 12 S. E. 2d 446.)

That the shares were disposed of by officers of the Mitsui in 1942, is not
improbable, considering: (a) the shares were purposely kept indorsed in
blank before and during the war; (b) the Mitsui did not report the
shares to the American High Commissioner, violating the latter’s order of July
1941 (c) the shares were valueless during the war because the Japanese
government had seized the corporate property; (d) the officers of
Mitsui possibly foresaw the final result of the Pacific war, and made the most
of their belongings before the oncoming disaster; and (e) the only
other alternative that may explain how the shares reached the hands of Hess and
Campos in 1942—theft or loss before 1945—is not asserted nor proven.

Against this probability—which must be accepted,^[3] because the shares were subsequently found
in the possession of Hess and Campos, who cannot he declared to have stolen
them—the defendants countered with a possibility that those shares had been
looted after the arrival of the Americans in Manila in 1945.

Interesting to note that no evidence supporting such possibility was given
during the hearings before the American Claims Committee, that decided for
herein plaintiffs. Moreover, the American Aliens Property Administrator,
dismissed it too, although he decided against plaintiffs, on a mistaken view of
the controlling legal principle, as hereinbefore indicated.

However, when the matter was brought to the court, the defendants, perceiving
the weakness of their stand, presented Victor Lednicky, Vice President of the
Lepanto Consolidated, the Corporation that, without waiting for a court
determination of plaintiffs’ right to the shares issued new certificates
cancelling (prematurely and illegally) the certificates in plaintiffs’ custody,
with actual knowledge of the latters’ claims.

Lednicky testified that on or about February 12 or 13, 1945 he went to the
office of Mitsui Bussan Kaisha on the Ayala Building, across the Pasig River and
saw Lepanto papers and other documents scattered over the floor; that he picked
up two certificates of the Lepanto, one in the name of Madrigal and the
other in the name of a Japanese or Chinese; that upon hearing some noises, he
threw the certificates away and left. The trial judge considered his testimony
inherently improbable, giving among other reasons :

Here is an old man who had been imprisoned in the concentration camp during
the occupation, suffering brutalities at the hands of the Japanese, and whose
escape from death may perhaps be even termed providential, yet when finally
saved and liberated, he ventured into the areas where bombing, shelling, and
fighting were still going on, thus risking his dear life only to salvage the
papers, document, and securities belonging to the Lepanto Consolidated Mining
Company, which, according to the information of an American soldier, were all
scattered on the floor of the offices of the Mitsui Bussan Kaisha in the Ayala
Building. * * *

* * * In explaining his failure to pick up the documents which was contrary
to his avowed desire to save the records of the Lepanto Consolidated Mining
Company, he said that he and the American soldier with him heard noises around,
and fearing lest they be shot as looters, they took to their heels.

* * * The fear of being taken for looters, likewise does not appear logical,
because he was with an American soldier in uniform” (pp. 41-43 Record on
Appeal.)

His Honor was right. Those who were in Manila remember that on February 12 or
13, 1945 and subsequent days, the battle of liberation was raging in Ermita and
Malate; Intramuros was besieged; and unless compelled by absolute
necessity nobody—except looters—dared to circulate around the places
surrounding Intramuros or other points near the scene of fighting.^[4] It is hard to believe that Lednicky, a
substantial resident of advanced age, would care to go sight-seeing, to satisfy
his curiosity about some Lepanto shares. Unless we yield to the uncharitable
suspicion that he too wanted to lay hands on those Lepanto shares of the
Japanese, Which would not, of course, exactly bolster his personal credibility.
Anyway as plaintiffs reasoned out,

“Conceding, however, that Mr. Lednicky did find some certificates of the
Lepanto Consolidated on the Third Floor of the Ayala Building—it does not prove
that the shares adjudicated to the plaintiffs were precisely the ones looted
there, for the simple reason that the 1,600,000 shares in the possession of the
plaintiffs were not the only certificates of the Lepanto Consolidated. And
Lednicky saw only one^[4a]—if he
saw anything at all. It will be remembered that Mitsui purchased a total of
1,900,000 shares in the name of Madrigal, all of them endorsed in blank. So
conceding, arguendo, that Mr. Lednicky found some shares of the Lepanto on the
Third Floor of the Ayala Building—it is nonetheless possible that the
certificates he had seen were part of what might have been left of the 1,900,000
shares after the certificates of the plaintiffs had left the safe of the
company.” (pp. 56-57 brief.)

On this issue, another line of thought suggests itself. Because of the
Japanese war, Hess and Campos cannot now confirm the sale to plaintiffs nor help
them trace their chain of title; because of war conditions, plaintiffs could not
and did not ask from Hess and Campos who their predecessors were; because of
war, looting occurred in the city and planted the seed, of suspicion against
plaintiffs’ title; because of war, plaintiffs find themselves litigating with
their own government. Should the Japanese profit from such mix-up?

In fine, the probability of looting of these particular shares in
1945 (to make it stronger for defendants) should yield to the uncontradicted
evidence of sale to plaintiffs in 1942 by Hess and Campos.

Again, in support of their thesis of looting, the defendants presented Atty.
Eugene E. Perkins who testified about the alleged unceremonious departure of
Leonardo Recio when Atty. DeWitt (to whom he offered one of the certificates for
sale) happened to mention looted certificates. Recio denied, and gave a
plausible explanation of the incident. The matter is controversial. Yet
supposing the facts were as Atty. Perkins had described, Recio’s “flight” could
at most demonstrate that he (Recio) had some doubts about the origin of said
particular certificate—one only ^[5].
Looting was an ugly word and may be he wanted to avoid all discussion with big
lawyers. Nevertheless, his private notions cannot legally reflect plaintiffs’
state of mind. Recio’s opinions were his own. And mark well, the shares were not
placed in his hands by plaintiffs directly, but by Primitivo Javier.

Once the theory of looting is discarded, defendants’ remaining line of
defense would fall on the proposition that the shares must have been disposed of
by officers of the Mitsui Company, who had no authority to sell. And plaintiffs
would counter with the assertion that they bought the shares from Hess and
Campos in good faith without knowledge of such breach of trust or excess of
authority. What is then the governing principle? This is the last and decisive
issue.

At the outset it should be clear that the situation is the same as if Mitsui
litigated with the plaintiffs, considering that, having paid nothing for the
shares, defendants may not assert better rights than the Mitsui Company had.

It should also be observed that the blank indorsements of these shares signed
by V. Madrigal are worded as follows:

For value received, ………………………………………… hereby
sell, assign, and transfer unto
………………………………………………………………….
shares of the Capital Stock represented by the within Certificate, and to hereby
irrevocably constitute and appoint ……………………..
………………………………………………………… to transfer
the said Stock on the books of the within named Corporation with full power of
substitution in the premises.

Dated ………………………………………… 19

…………………………………………………….

V. Madrigal