Conflicts Salonga Book Digest

3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO NATURE, DEFINITION, AND SCOPE C/O: VICTOR RAMOS (Salonga, CHAPTER I, 1995) Problems in Conflicts of Laws Arise Due to the Concurrence of 2 Factors: the division of the world into different states or territorial units, each state or unit having different systems of laws the presence of a situation containing a foreign element, that is to say, an event or transaction affected by the diverse laws of two or more states or territorial units Definition Salonga: Private International Law or Conflict of Laws is that part of the law of each state which determines whether in dealing with a factual situation involving a foreign element, the law or judgment of some other state will be recognized or applied in the forum Private international law is merely a part of the municipal law of each state Subject is any factual situation containing any foreign element The primary function of this department of law is to determine whether the rules of law or the judgments of some other state or states, and if so, to what extent, should be recognized or applied in the forum Other definitions of Conflict of Laws: Scoles has defined Conflict of Laws as: “the body of law that aspires to provide solutions to international or interstate legal disputes between persons or entities other than countries and states as such.”1 Leflar asserts: “Any case which involves facts occurring in more than one state or nation so that in deciding the case it is necessary to make a choice between the laws of the different states or countries, is a conflict of laws case”2 Cheshire and North state: “that part of law which comes into play when the issue before the court affects some fact, event or transaction that is so closely connected with a foreign system of law as to necessitate recourse to that system… [It is] the rules voluntarily chosen by a State for the decision of cases which have a foreign complexion.”3 Leflar, unlike the other authors, defined Conflict of Laws as a kind of controversy and not as a body of law. Regarding Conflict of Laws as a body of laws: (a) Scoles states that such laws provide a solution; (b) Cheshire and North state that such laws affect the fact, event or transaction closely connected to a foreign system of laws; and (c) Salonga first recognizes such conflict rules as being part of municipal law, and such will aid in determining whether a foreign law or judgment is to be recognized and applied. Finally, it is only Salonga who expands the scope of Conflict of Laws from foreign laws to foreign judgments. STORY, SAVIGNY AND MANCINI: Story emphasizes the exclusive sovereignty and jurisdiction of one state over its own territory; thus, the laws or judgments of one state should in no way directly affect nor bind residents and/or property in another state. This territorial system yields to two factions: (a)

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Scoles, Hay, Brochers and Symeionides, Conflict of Laws, 1 (3rd Ed.) Robert Leflar, The Law on Conflicts of Laws, 1 (1959 Ed.) Peter North and J.J. Fawcett, Cheshire and North’s Private International Law, 5 (2005 Ed.).

03-23-2006 | THROUGH THE JOINT EFFORTS OF STUDENTS OF ATENEO LAW III- C 2006 | Edited by J.C. de Veyra

vested rights acquired from a foreign law, not the foreign law itself, may be recognized by the forum; and, (b) such vested rights are recognized in the forum.4 Savigny adheres to the idea that a decision ought to be the same irrespective of the forum. Such idea is premised on the concept of an “international community” or “comity” having a single body of rules to resolve conflict of laws problems. Though there is agreement to have such single body of rules, there is divergence on the law to govern each and every legal relation.5 Mancini revokes the domiciliary rule but proposes one of nationality. He asserts that if one’s nationality is recognized, personality is easily assumed and allows such person to have legal standing in the forum. This school of thought abides to two rules: (a) legal rules are binding to all nationals irrespective of territory; and (b) legal rules are binding to all nationals within a given territory.6 Function and Object of Conflict of Laws Salonga: The Function of Private International Law is: 3 fold To prescribe the conditions under which a court or agency is competent to entertain a suit or proceeding involving facts containing a foreign element To specify the circumstances in which foreign judgment will be recognized as valid and binding in the forum To determine for each class of cases the particular system of law by reference to which the rights of the parties must be ascertained – this is the fundamental problem of choice of law 4 important points: 1. Rules of Private International Law, like all other rules of law, apply only to certain given facts not characterized as creating some legal relationship 2. The selection of legal systems open to the court is limited to those that are simultaneously valid 3. The legal effects of a certain set of facts are not always determined by one single legal system. 4. It is sometimes necessary to apply several systems, either cumulatively or alternatively Cumulative application: (1) a given set of facts may produce legal effects each of which is governed by a different legal system, (2) or a given set of facts may produce legal effects only if certain conditions common to two legal systems are fulfilled Alternative application: under the Philippine law, if an alien executes a will in the Philippines, the formal validity of the will may be judged alternatively by the requirement of internal Philippine law or of his own national law. If either law considers it formally valid, it may be admitted to probate ALSO: Promoting the peaceable intercourse of private persons, made imperative by the economic and social demands of an interdependent world, through rules that are eminently just and workable, may well be the ultimate objective of Private International Law – protection of the justified and rational expectations of parties to a transaction, the application of the law of the state having a dominant interest in a given set of facts, the 4 5 6

Id at 21-23. Id at 23-24. Salonga, 24.

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO promotion of stability and predictability by achieving uniformity of solution to a case wherever the forum may be situated, and of course, the dispensing of justice in individual cases.

In matters of succession, where a person leaves immovables in various countries, the law of the countries concerned should be applied respectively to the immovable therein situated rather than for the latter to be regulated by one and only one law

Distinguished from Public International Law

The Doctrine of Comitas Gentium • Doctrine: States are not obligated to take note of foreign laws unless imposed by treaty • Product of Netherland’s independence • Principles: Doctrine of Pure Territoriality • Laws of every state operate within the territorial limits, and such is binding to all subjects but not beyond those limits • Subjects of a state are all those who are found within the limits of its territory, whether they reside there permanently or whether their presence there is only temporary • Every sovereign, out of comity, admits that a law which has already operated in the country of origin shall retain its force everywhere, provided that this will not prejudice the subjects of the sovereign by whom its recognition is sought • This doctrine merely states that the Theory of Statutes is subordinate to the idea of Comitas Beginning of codifications • Prussian General Code of 1794 made emphasis of res magis valet quam, which as applied to Private International Law: • If a person has 2 domiciles, which is possible under European laws, that domicile is decisive under the law of which the contract or act in question is valid • If a person domiciled abroad enters into contract within Prussian territory respecting chattels there, the contract is valid if under the law is either (his domicile or that of Prussia) he is capable of entering into contracts 19th Century Jurists 2 groups of writers

PIL Character Source Recourse

Others

Rules are international in nature Common will of states Diplomatic channels, good offices, mediation, conciliation, arbitration, etc (traditional PIL) (1) deals for most part with States (2) recognizes only transactions in which sovereign states are interested

CoL R: Rules are national or municipal X: they are embodied in conventions Will of a particular state National or municipal tribunals (1) deals with private individuals (state has no direct interest) (2) assumes control over transactions strictly private in nature, in which the state as such generally has no interest (private transactions)

NB: Monists do not recognize the distinction between PIL and CoL. In their view, individuals alone are and can be the subjects of international law, public or private HISTORY AND IMPORTANCE C/O: VICTOR RAMOS (Salonga, CHAPTER II, 1995) HISTORY OF THE SUBJECT Earliest Period – Theory of Statutes to solve conflicts Bartolus (from the Italian city-states) – Father of Private International Law Determined CoL rules by differentiating 3 types of statutes real statutes personal statutes mixed statutes The French Jurists of the 16th century: 2 thinkers Charles Dumoulin Doctrine: Parties to the contract could choose the law that was to govern their agreement Bertrand D’Argentre Doctrines Whenever there was any doubt as to whether a statutory rule was personal or real, presumed it is real 03-23-2006 | THROUGH THE JOINT EFFORTS OF STUDENTS OF ATENEO LAW III- C 2006 | Edited by J.C. de Veyra

Theoretical Deductive method Begins with a set of priori principles to derive a body of consistent rules

Positive Inductive method Studies actual rules in force and reduce them to systematic order; do not claim universal validity

Joseph Story • American judge, Commentaries on the Conflict of Laws (1834) • Approach was more positive than theoretical • Maxims: • Every nation possesses an exclusive sovereignty and jurisdiction within its own territory that directly binds all properties within its territory, and all persons who are residents within it (territorial sovereignty) • No state or nation can by its law directly affect or bind property out of its own territory, or bind persons not resident therein, whether they are natural born subjects or others Friedrich Carl von Savigny • Great German jurist, System of Modern Roman Law (1849)

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO It is expedient that in cases containing a foreign element, the same legal relations have to expect the same decision whether the judgment be pronounced in this state or in that • It is essential to bear in mind the existence of an international community of nations having intercourse with one another • Comity is beneficial and advantageous to all concerned, the state and the individuals • The question is not W/N the rule is related to property, persons or acts but to classify legal relationships so as to ascertain for every legal relation that law to which, in its proper nature, it belongs or is subject and thus find out where a relation has its seat (the situs) – the seat of a particular legal relationship Pasquale Stanislao Mancini • Nationality as the Basis of the Law of Nations (1851) • Opposing the rule on domicile, Mancini asserts the rule of nationality, the components of which are: religion, customs of life, language, race of the people, historical traditions, even the landscape of the country and its climate • Personality of an individual is determined only by his nationality; an individual’s personality is recognized only if his nationality is recognized • In every kind of legal system, there are 2 kinds of rules • those created in the interest of private individuals – binding to persons who belong to the country by nationality • those for the protection of public order – binding to all within the territory Modern Developments • Neo-statutory system o Assumption: 2 or more independent laws are applicable to conflicts problem o Then proceed to devise some method to determine the law that shall prevail o Many adhere to Mancini’s theory • International system o There exists or should exist, a single body of international rules that can and should solve all legal problems that involve a foreign element o A juridical act should in all countries be governed by the law of the place in which the act has its seat (Savigny) o But while almost every adherent of the international system is agreed on this abstract principle, there are wide differences of opinion on the most appropriate law to govern each legal relation • Territorial system o Only the law of a state applies to persons and things within its territory. Foreign law is not applied in the forum o 2 Factions o only rights vested or acquired under the foreign law are recognized in the forum, but not the foreign law itself o vested rights theory is illogical and is not true in practice Second Restatement of the Conflicts of Law (by American Law Institute) In the absence of statutory rules, it holds that the applicable law in a conflicts case is the law of the most significant relationship which is determined by weighing the factors considered more relevant •

C/O: VICTOR RAMOS (Salonga, CHAPTER III, 1995) SOURCES Codifications Old Civil Code of the Philippines First 4 articles of Chapter I follow Mancini, with the exception that personal property under the New Code is subject to the law of the country where it is situated instead of the national law of the owner Code of Commerce and Insurance Code likewise have similar provisions Special legislation Foreign Investments Act of 1991 Corporation Code General Banking Act Trade Marks and Trade Names Law Patent Law Carriage of Goods by Sea Act Investment Incentives Export Incentives Act Multilateral Treaties and International Conventions 2 methods of avoiding or minimizing conflicts 1. To secure by international conventions or treaties the unification of the internal rules or laws of the various countries or territorial units upon as many legal subjects as possible These are not sources of Private International Law This would eliminate the differences which would give rise to problems of Private International Law 2. To unify the rules of Private International Law so that a case involving a foreign element may be decided in the same way, irrespective of the forum or place of litigation Conventions and treaties with this goal are primary sources of Private International Law Bipartite Treaties Case Law: Philippines: 3 categories 1. Those which are based on the assumption, though not expressed in clear language, that only Philippine internal rules govern any problem; this is noticeable in cases involving contracts and personal status 2. Those which adopt Anglo-American doctrines and precedents without regard to the provisions contained in the Civil Code; this is true in cases of validity of foreign divorces 3. Those cases which attempted to introduce Anglo-American rules and doctrines, which a view not only to filling up the gaps by the Civil Code, but also to merge and harmonize them with established Civil law principles International Customs: Law of Nations Immovable property is governed by the law of the situs] Formalities of a legal act are governed by the law of the place where it is executed Tort is governed by the law of the place where the tortuous act was committed The Constitution Indirect Sources

SOURCES OF PRIVATE INTERNATIONAL LAW 03-23-2006 | THROUGH THE JOINT EFFORTS OF STUDENTS OF ATENEO LAW III- C 2006 | Edited by J.C. de Veyra

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO Natural law – this presupposes a body of ideal precepts of universal validity for all peoples at all times and in all places derived from the idea of what an ideal man would do and would not do, would claim and would concede as the claim of others and arrived at by pure reason Treatise of jurists and writers – they have actually influenced courts and legislatures to adopt their views in the resolution of conflict problems NB: the Restatement is not a code that is binding to any state. It only has persuasive value that varies from state to state. JURISDICTION AND CHOICE OF LAW C/O: VICTOR RAMOS (Salonga, CHAPTER IV, 1995) WAYS OF DISPOSING OF CONFLICTS CASES Dismiss the case, either because of lack of jurisdiction or refusal to assume jurisdiction over the case Assume jurisdiction over the case and apply the internal law of the forum Assume jurisdiction over the case and take into account or apply the law of some other State or states JUDICIAL JURISDICTION Jurisdiction – the right of a state (due to sovereignty) to exercise authority over persons and things within its boundaries, subject to certain exceptions (ie over traveling sovereigns, ambassadors and diplomatic representatives, etc) Judicial jurisdiction – legal authority of a state to exercise authority, through its courts or agencies, to hear and adjudicate cases; power of a court or agency to hear and determine an issue upon which its decision is sought Legislative jurisdiction – the power of a state to regulate or control, through rules of law, interests or persons in a thing, event or situation TYPES OF JURISDICTION 1. Jurisdiction over the Subject Matter – the power to hear and determine cases of the general class to which the proceedings in question belong and is conferred by the sovereign authority which organizes the court and defines its powers Jurisdiction conferred to by law, not by consent of the parties or voluntary submission It is the allegations in the petition or complaint that will invest the court with the power to hear and determine the case Allegations in the complaint shows a prima facie lack of jurisdiction – dismiss If on the complaints face, there is a presence of jurisdiction, , proceed with trial. Should evidence show lack of jurisdiction, dismiss the case 2. Personal Jurisdiction – competence of a court to render a decision that will bind the parties to the suit; Bases: Presence, Domicile, Residence, Nationality or Citizenship, Consent, Appearance in an Action, Doing Business in the State, An Act done in the State, Causing an Effect in the State by an Act done Elsewhere, Ownership, Use or Possession of a Thing in the State, Other Relationships to the State which make the Exercise of Judicial Jurisdiction Reasonable

03-23-2006 | THROUGH THE JOINT EFFORTS OF STUDENTS OF ATENEO LAW III- C 2006 | Edited by J.C. de Veyra

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Jurisdiction over the Plaintiff – acquired from the moment he invokes the aid of the court and voluntarily submits himself by institution of the suit through proper pleadings 4. Jurisdiction over the Defendant • voluntary appearance • enters his appearance as defendant UNLESS he makes it clear that the purpose of his appearance is to question the jurisdiction of the court over his person • personal service, and if he refuses, tendering, of summons • substituted service of summons by • leaving copies of the summons in dwelling or residence with someone of suitable age or discretion then residing • leaving copies in defendant’s office or regular place of business with some competent person in charge • summons by publication, 3 instances • action in rem • quasi in rem • involves the personal status of the plaintiff NB: Jurisdiction continues throughout all subsequent proceedings which may arise out of the original cause of action 5. Jurisdiction over the Res (actions in rem, quasi in rem, in personam) – jurisdiction over the particular subject matter in controversy, regardless of the persons who may be interested therein. action in rem – purpose of the suit is to affect the interests of all persons in a thing, the state may render through its courts a valid judgment, as long as it has jurisdiction over the thing even though it may not have personal jurisdiction over the persons whose interests are affected proceedings quasi in rem – purpose is neither to impose a personal liability or obligation upon anyone, not to affect the interests of all persons in a thing but to affect the interests of particular persons in a thing Jurisdiction and the Due Process Clauses proceeding in rem – service of summons by publication is sufficient because the case is enforced against the rest of the world proceeding in personam – personal service of summons or voluntary appearance of the defendant, by himself or counsel, is required proceeding quasi in rem – summons by publication is sufficient NB: a state does not have jurisdiction in the absence of some reasonable basis for exercising it, whether the proceedings are in rem, quasi in rem, or in personam. To be reasonable, the jurisdiction must be based on some minimum contacts that will not offend traditional notions of fair play and substantial justice ANALYSIS OF THE 3 METHODS Dismissing the Case; the Principle of Forum Non Conveniens Can the court, authorized by law to take cognizance of a conflicts problem, still refuse to try it? The court may invoke the principle of forum non conveniens, for practical purposes eg. belief that the matter can be better tried and decided elsewhere, either because the main aspect of

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO the case transpired in a foreign jurisdiction, or the material witnesses have residence there, etc. Or it would not entertain the suit if it believes itself to be a serious inconvenient forum, provided that a more convenient forum is available to plaintiff; 3 factors are considered for “most convenient forum” Whether the forum is one to which the parties may conveniently resort Whether it is in a position to make an intelligent decision as to the law and the facts Whether it has or is likely to have power to enforce its decision (the principle of effectiveness – judge has no right to pronounce a judgment if it cannot enforce it) Application of Internal or Domestic Law The court is to take cognizance of the case and apply domestic law The only EXCEPTION: a foreign sovereign, diplomatic official, or public vessel or property of another State is involved, or where a state has, by treaty, accepted limitations upon its jurisdiction over certain persons or things Sub-group 1: Where application of International Law is decreed Where the land involved in the suit is located in the forum, the lex situs is normally applied to the case Art 80 of the Family Code, in the absence of a contrary stipulation in the marriage settlement, the property relations of Filipino spouses shall be governed by Philippine laws, regardless of the place of the celebration of the marriage and their residence Subgroup 2: Where there is Failure to Plead and Prove Foreign Law • RULE: courts don’t take judicial notice of foreign law. The foreign law so invoked must be pleaded and proved, otherwise it is presumed that such foreign law is similar to Philippine law • Written foreign law, to be proved, may be evidenced by an official publication or a coy attested by the officer having legal custody of the record and accompanied with a certificate that such officer has the custody • Unwritten foreign law may be proved by oral testimony of expert witnesses or by printed and published books of reports of decisions of the country involved, if proved to be commonly admitted in such courts. • Where a Case involves any of the Exceptions to the Application of Foreign Law Exceptions: • The enforcement of the foreign law would run counter to an important public policy of the forum • Where the application of the foreign law would infringe good morality as understood in the forum • When the foreign law is penal in nature (like Mike Mate!) • Where the foreign law is procedural in nature • When the question involves immovable property in the forum • When the foreign law is fiscal or administrative in nature • Where the application of foreign law would involve injustice or injury to the citizens or residents of the forum • Where the application of foreign law would endanger the vital interests of the state

03-23-2006 | THROUGH THE JOINT EFFORTS OF STUDENTS OF ATENEO LAW III- C 2006 | Edited by J.C. de Veyra

NB: Having these exceptions present, the court may find itself obligated to apply the internal law APPLICATION OF FOREIGN LAW C/O: MIKE MATE, JANG MORENO, TRINA GARCIA, TRINA ILLARDE (Salonga, CHAPTER V, 1995) WHY APPLY FOREIGN LAW? The ultimate explanation for the resort to foreign law should be sought in the ends of justice. Instead of being subjected to the law of the particular state that has the dominant interest in a particular act or event, parties will be induced to shop for a forum whose internal law favors their own interests, thereby encouraging evasion and frustrating the goals of predictability and uniformity of result on the other. Theory of Comity Led by Hubert and Voets – This theory asserts that the application of foreign legal systems in cases involving foreign element is proper because their non-application would constitute a disregard of foreign sovereignty ( a lack of comity towards other States) Comity is in a legal sense, neither a matter of absolute obligation nor of mere courtesy and goodwill upon the other. It is the recognition which one nation allows within the territory to the legislative, executive or judicial acts of another nation having due regard both to international duty and convenience, and to the rights of its own citizens, or of other persons who are under the protection of its laws Criticisms/Fallacies of the Doctrine of Comity: It is based on the erroneous idea that a state has a great interest in the application of its law by other States The application of foreign law does not spring from the desire of the sovereign of one State to show courtesy to the other State whose law is being applied but rather it flows from the impossibility of otherwise determining whole classes of cases without gross inconvenience and injustice to litigants, whether natives or foreigners If foreign law were to be applied as a matter of option, it would be impossible to build up a definite body of Rules of Private International Law as conflict of law cases will be resolved by unregulated discretion 2 Interpretations of What Comity Is: Hilton case: reciprocity was the basis for extending/refusing recognition to foreign judgment Johnson case: the basis was the “persuasiveness of the foreign judgment” Vested rights theory Based on the concept of territoriality under which the court can apply only its own territorial law. Cannot recognize foreign laws/enforce foreign judgments but it is one of the tenets of justice that rights acquired in one country must be recognized and legally protected in others The function of CoL is to give effect to rights acquired under the proper foreign law, and not to enforce foreign law Prof. Beale’s thesis: the location of one single most significant factor in an event/transaction should identify the State or territorial jurisdiction whose law should govern the transaction

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO If all courts were to give effect to vested rights, uniformity and predictability of results may be achieved “ it is not foreign law but the rights acquired under it which are enforced by the courts of another country” Loucks vs. Standard Oil Company of NY case: “ it is a principle of every civilized law that vested rights be protected” rights acquired follow the person wherever he goes and must be respected Goodrich: No law exists as such except the law of the land (territorial sovereignty) . . . it is however a principle of civilized law that rights once vested under the law continue until destroyed or cut off by law, and that rights once vested under the law continue until destroyed or cut-off by law, and that such rights are recognized and enforced in one state thought come into being in another, unless such enforcement, for good reason, is thought contrary to public policy of the jurisdiction where enforcement is sought. Criticisms/Fallacies of Vested Rights Theory (semantically defective): The obligation to recognize the rights implies the obligation to apply foreign law, the statement is thus merely a play of words when it is said that its not the foreign law but the rights acquired under it which are enforced by the courts Not all rights acquired under foreign law are protected elsewhere nor is their protection always desirable The protection of rights and other interests is not the only consideration to be taken into account but often, the issue is whether a disability existing under one law should be applied by a foreign court The law protects not only vested rights constituted abroad but often also foreign legal relationships, capacities, or powers out of which rights, or extinction of duties, and charges or the invalidity of acts may arise It’s difficult and impracticable to apply the theory where material aspects of a transaction or event touch two or more States equally or almost equally. (What law of what State was the right acquired? Saan galing ang karapatan?) Local Law Theory Anzilotti: A foreign rule cannot be applied unless it has been “appropriated” by the State of the forum and transformed into a domestic rule Wheeler: The court of the forum recognizes and enforces a local right and applies its own rules to the exclusion of all foreign rules but when it is confronted with a CoL case, it does not really apply the rule that would govern an analogous case purely domestic in character. But rather, it does so for social reasons and practical convenience takes into account the laws of the foreign country in question
it creates its own local right but fashions it as nearly as possible upon the law of the country in which the decisive facts have occurred By treating foreign law not as law but as a fact and considering it along with other facts and giving it whatever significance it deserves in a particular case, the court adopting the theory is able to take into account social and economic considerations and the demands of expediency in the case before it Criticisms to the Local Law Theory: When a judge applies foreign law in a conflicts case, the truth is that he is merely obeying his national conflicts rule in applying foreign law but without making it any sense part of his national law 03-23-2006 | THROUGH THE JOINT EFFORTS OF STUDENTS OF ATENEO LAW III- C 2006 | Edited by J.C. de Veyra

it is doubtful whether the process described by cook (that the forum enforces not a foreign right but a right created by its own law) results in the creation of a new right Usual Method in Disposing of CoL Cases: The court characterizes/identifies the legal category into which the case before it falls (property, domestic relations, tort, succession) Apply the proper connecting factor for that category of case in order to choose the State/territorial jurisdiction whose legal system will determine the parties’ respective rights, duties and other legal relations Revolution in US Conflicts Law The emergence of two themes concerning choice of law Jurisdiction-selection (e.g. lex loci contractus) Requires the court to apply the law of the country/jurisdiction chosen by the conflicts rule, irrespective of the content of the particular rule of law selected Rule-selection (Method of solving/approaching a solution to the choice of which of competing norms should govern) Emphasizes a choice between different substantive rules of law in light of the policies at issue The Second Restatement and the Law of the Most Significant Relationship Theory Principles for guidance for judges Choice of law rules should be designed to make the international and interstate systems work well The court should apply its own local law unless there is good reason for not doing so like using its own internal law to matters that are not likely to affect the ultimate outcome of the case The court should consider the purpose of its relevant local law rule in determining whether to apply its own law or the law of another State Choice of law rules should seek to achieve certainty, predictability, and uniformity of result. They should be easy to apply The court should seek to protect the justified expectations of the parties The court should seek to apply the law of the State of the dominant interest The court should seek to further the fundamental policy underlying the particular field of law State Interest Theory Currie led the drive to focus attention on a neglected key to intelligent analysis of conflicts problems. Rejected the rules of choice of law of the traditional type and suggested the ff: When a court is asked to apply the law of a foreign State, different from the law of the forum, it should inquire into the policies expressed in the respective laws, and into the circumstances in which it is reasonable for the respective States to assert an interest in the application of those policies thru construction and interpretation If the court finds that one state has an interest in the application of its policy in the circumstances of the case and the other has none, it should apply the law of the only interested State (e.g. lex situs rule) If the court finds an apparent conflict between the interests of States, it should reconsider If the forum is disinterested, but an unavoidable conflict exists between the interest of two other States, and the court cannot with justice decline to adjudicate the case, it should apply the law of the forum at least if the law corresponds with the law of one of the other states

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO Criticisms State interests may be legitimate in the field of public international law but in the context of private international law, the court should seek conflict justice and this requires due regard to be paid to the interest of the parties in the individual case It assumes a willingness and ability on the part of the judges to identify, evaluate the polices and interests The courts duty is not to give effect to state interest but rather to balance those interests Cavers Principles of Preference Prof. Cavers set “principles of preference” for the solution of COL problems when analysis of the purposes underlying the various competing laws indicates that there is a genuine conflict that cannot easily be avoided Caver maintains that the choice of law should not be the result of the automatic operation of a rule or principle of selection but of a search for a just decision The selection of governing law ought to be a process of choice between rules of law than a choice between jurisdictions and a court choosing between the laws of two States must look at the content of the laws with reference to the facts in the particular case and with reference to the social policies inherent in them as they relate to the facts ( to be discussed later) Functional Approach Aims at solutions that are “the rational elaboration and application of the policies and purposes underlying specific legal rules and the legal systems as a whole” Locate the concerned jurisdiction7 Construct for each concerned jurisdiction a regulating rule that takes account both of relevant policies expressed through the jurisdictions domestic rules and of policies peculiar to multi-state transactions as distinguished from wholly domestic transactions Many of the true conflicts that remain after these steps can be resolved by applying the rules of the jurisdiction “predominantly concerned” when one jurisdiction has ultimate effective control and in cases in which all concerned jurisdiction agree that one has a predominant concern Choice Influencing Considerations Espoused by Prof. Leflar, these considerations are useful in resolving choice of law problems, the ff are the said considerations: predictability of results maintenance of interstate and international order simplification of the judicial task advancement of the forums governmental interests application of the better rule of law Whether one of the competing legal rules, compared with the other domestic rule, serves the modern requirement of the international order, or whether it is anachronistic in that is behind the times

Comparative Approach Led by Ernest Rabel, the method brings out the similarities and dissimilarities, examined their purposes and effects, showed to what extent unification or reconciliation is feasible and proposes specific solution in the context of the needs and requirements of a growing international community Convenient Forum Theory Application of foreign law in such a convenient forum, which implies substantial connection with a given conflict problem, must be analytically understood as an exception from the basic rule calling for the application of the lex fori However, the state should not hesitate to apply foreign law where legislative or settled judicial rules of choice of law or the policy of the forums domestic rules require a different answer and may actually result in a greater application of the laws of other states The Harmony of Treatment and Uniformity of Result Theory Following the thesis of Savigny, followers of this movement believe that the purpose of COL is uniformity of result and harmony of treatment If to every conflict case the court were to apply only the law of the forum, the result of the suit would depend entirely on where it is instituted. Equal justice under the law requires that the decision be the same wherever the claim is brought However the quest for uniformity has become more difficult since the international order envisioned by Savigny has broken up Salonga’s Proposals: The Application of Foreign Law in the Philippines They must live with the fact that like a number of countries in Continental Europe we in the Philippines have a few codal and statutory rules that apply to conflicts problems In the absence of an applicable provision in the code or statute the various theories should be examined and weighed as they bear on a given conflicts problem because of the resulting gaps there’s a wide and desirable latitude for courts and agencies to develop new ways of solving conflicts problems, consistent with the demands of justice, the justified expectations of the parties and the requirements of a world rendered by the modern miracles of technology communication and international trade (Art. 9 and 10 of the New Civil Code) No single theory contains the whole truth no one approach is completely valid ASCERTAINMENT AND PROOF OF FOREIGN LAW C/O: MIKE MATE, JANG MORENO, TRINA GARCIA, TRINA ILLARDE (Salonga, CHAPTER VI, 1995) Rules of Substance vs. Rules of Procedure Substance

The legal effect of those facts after they have been established 7

Concerned jurisdiction means one that has expressed an interest in regulating an aspect of the multi-state transaction in question

03-23-2006 | THROUGH THE JOINT EFFORTS OF STUDENTS OF ATENEO LAW III- C 2006 | Edited by J.C. de Veyra

Procedure Methods of presenting to a court, the operative facts upon which legal relations depend Refers to available judicial machinery and its mode of operation Regulates venue form of action, sufficiency of pleadings

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO In theory at least, the procedural aspects are not decisive in that they do not determine the outcome of the case Forum Applies Its Own Laws Why apply its own procedural law? Practical necessity and simplification of the judicial task Foreign Law Limited to Substantive Aspects Rules for the ascertainment of foreign law are necessarily different from the rules on the determination of Philippine Law Every person is presumed to know local law, not foreign law as ignorance of foreign law is ignorance of a fact not law Local court takes judicial notice of all local laws but such principle does not apply with reference to foreign law HOW FOREIGN LAW IS ASCERTAINED: A COMPARATIVE STUDY In continental Europe, it’s the judge’s duty to investigate the foreign law which he is to apply and may require assistance from the parties litigant to prove the content of the foreign law. The court is not limited to the legal materials brought to his knowledge by the parties as the judge, on his initiative resort to works of reputable authorities In the Philippines, American and English Law, foreign law is like any fact which must be pleaded and proved by the party invoking it (this is influenced by the common law) Full faith and credit clause specified the method of proof of the enacted laws or Statutes Development of RP Law Code of Civil Procedure was patterned after Anglo American models and later became the Rules of Court, Sec. 300 and 301 of the Rules of Court then prescribed method of proving foreign law Court cannot take judicial notice of foreign law on the basis of its own knowledge and private information. The rule however that courts cannot take judicial notice of foreign laws was relaxed through an exception --
if courts are evidently familiar with the foreign laws (Spanish Civil Code et al) PROOF OF FOREIGN LAW The party who claims that the foreign law is applicable to the fact in issue has the burden of proving the content of foreign law How is foreign law proved? Written law Evidenced by an official publication, a copy attested by the officer having legal custody of the record, or his deputy Must be accompanied a certificate that such office has custody (by embassy, consular agent, any foreign service agent)

Unwritten law The oral testimony of an expert witness is admissible as evidence Printed and published books of reports of decisions of the court of the country concerned

Other evidence was also allowed such as testimony of an expert witness 03-23-2006 | THROUGH THE JOINT EFFORTS OF STUDENTS OF ATENEO LAW III- C 2006 | Edited by J.C. de Veyra

EFFECT OF FAILURE TO PLEAD/PROVE FOREIGN LAW Dismiss the case with judgment for the defendant That the plaintiff relying on foreign law had failed to prove an essential part of his case Not to dismiss the case, but to hold that where foreign law is not properly pleaded or proved, the presumption of identity or similarity arises namely that foreign law is the same as domestic law not to dismiss the case, but to assume that by failing to plead or prove foreign law, the parties acquiesced in having their controversy determined by the law of the forum Exception: RP court can take judicial notice evidently through its own actual knowledge and research whenever it has reason to believe it is familiar with some foreign law that is generally known or has actually been ruled upon in cases before it EXCEPTIONS TO APPLICATION OF FOREIGN LAW C/O: MIKE MATE, JANG MORENO, TRINA GARCIA, TRINA ILLARDE (Salonga, CHAPTER VII, 1995; CHAPTER VI, 1979) NATURE AND BASIS OF EXCEPTIONS Under the traditional view, foreign law is not applied in the forum in the following cases: Where its enforcement would run counter to some important public policy of the forum Its application would lead to an infringement of good morality in the wider sense of the term as understood in the forum 1. When foreign law is penal in nature 2. When the foreign law is procedural in nature 3. When the question relates to immovable property in the forum 4. When the foreign law is fiscal or administrative in nature 5. When the application of foreign law would involve injustice or injury to the nationals or residents of the forum 6. When the application of foreign law would endanger the foreign relations or vital interests of the state 7. These exceptions are not mutually exclusive as most overlap each other What are the Exceptions Recognized by RP law? RP laws which restrain or prohibit the doing of certain acts within the country and other local laws designed to uphold public order etc cannot be displaced by foreign laws or judgments or by determination or conventions agreed upon The general rule is that our penal laws are territorial and due to territorial sovereignty— should apply to all persons and things within our territory. Exceptions are in the limits on territorial jurisdiction, under Law of Nations, treaties, heads of State, diplomats, foreign public vessels, merchant vessels exercising innocent passage and foreign state property Examine Art 17 and Article 14 as these impose a duty on our courts to examine the purposes of our laws in order to determine whether in a conflicts case, a domestic rule of the forum or a rule of another State should be applied in the decision of a particular issue Savigny: Imperative Rules are of 2 Kinds Enacted merely for the sake of persons who are the possessor of rights

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO Become inapplicable where according to the rules of priv intl law, a foreign legal system governs the case. Not made solely for the benefit of individuals but rest on moral grounds/public interest Intended to be applied in all circumstances and cannot be rendered ineffective by foreign laws and judgments In short, the forums public policy or interest, whenever it is clearly at stake in a given conflicts problem, should take precedence over the application of the laws of other states Where enforcement of foreign law is contrary to an important public policy of the forum • Public policy is relative (what may be true now, may be false tomorrow) • Public policy has been identified with the civil law idea of public order however today, it means more than just the maintenance of public order and peace • But public policy (manifest will of the state), must be strong or of great importance to allow refusal to apply foreign law because a mere dissimilarity between foreign law and local law will not render the enforcement of the foreign law in violation of the forum’s public policy (e.g. tradition, prevalent conception of good morals) 2 kinds of Public Policy: • One which operates no matter where the event or transaction takes place • Operates only where the event or transaction takes place in the forum and is not offended if the transaction is completed abroad • What public policy is would not be difficult where the law so clearly worded as to govern acts occurring abroad (e.g. Article 818 of the Civil Code, p. 115) • It is in cases where the law or statute contains no definite reference to transactions involving a foreign element that the difficulty arises because courts have to weigh the requirements of another state as against the desirability of enforcing what is conceived to be the local public policy Public policy May be Used by a Court in Different Ways Refuse to entertain the case because enforcement of the action is against public policy, and dismiss it without prejudice (parties may pursue litigation in another forum) Entertain the case but apply its own domestic law to decide the controversy in favor of the plaintiff (unfair to the defendant who did not choose the forum. The public policy thus is used to defeat a defense that may be available in foreign law Forum which has sufficient connection with the factual event or transaction may entertain the case but invoke its own public policy in order to apply the forums domestic law Denying recognition to a foreign law because of public policy means that in case and only in case of strongly conflicting policies should a forum – which has a significant relationship to the occurrence or the parties follow the local public policy than a policy of another state Local public policy is superior to foreign law only to the extent that it actually and materially infringes the forums public policy (polygamous marriage may be void but the children – incidents and consequences—should be recognized as successors) Dangers of Using Public Policy as An Excuse Not to Apply Foreign Law May be no more than an intolerable affectation of superior virtue May provide an easy excuse for the forum to apply internal law and defeat the purpose of this subject 03-23-2006 | THROUGH THE JOINT EFFORTS OF STUDENTS OF ATENEO LAW III- C 2006 | Edited by J.C. de Veyra

Where application of foreign law would be against good morality in the wider sense of the term as understood in the forum Good morality or bonos mores. Includes contracts which though valid under their proper law would be illegal or immoral if they were governed by the lex fori Doctrine of disparitas cultas, consider local concepts of morality as universally established and applicable in all situations (Article 71 and article 26) Foreign Penal Law When a foreign law sought to be applied is penal, the forum may refuse its application because “no society takes concern in any crime but what is hurtful to itself”. That in the enforcement of the rules of public order of a State, other states are not concerned and should not as a general rule interfere Implies that courts will refuse foreign judgments which are penal in nature But how do you determine if law is penal? When it imposes punishment for an offense committed against the state which the executive has power to pardon The US supreme court said that a statute is penal if it imposes a duty on the defendant to pay the plaintiff anything more than is necessary to compensate him for out of the pocket losses caused by the defendant The view That one State has no concern in the enforcement if penal laws of another state has been criticized due to the rise of extradition treaties Foreign Procedural Law Generally not enforced in the forum because it is the forums procedural law that is enforced for practicality’s sake It is impractical for one court to wholesale adopt the trial machinery of another state including rules on service of process venue etc The forum is charged with the task of making a distinction between the rules that are procedural and those that are substantive Questions relating to immovable property in the forum Practically all legal systems are in accord on the principle that ownership of an immovable and other rights in immovables are subject to the lex situs (developed in the Italian doctrine of the Middle ages)…LEX REI SITAE (the law of the place where the immovable is situated) The rationale is found in the nature of real property — immobility. Immovables are part of the country and so closely connected with it that all rights over them have their natural center of gravity there. (Swank vs. Hufnagle) Foreign Fiscal or administrative law Where the foreign law is fiscal or administrative in nature, the forum may refuse its enforcement (foreign revenue law, tax law, local rates) The reason is that A sovereign has no legal duty to assist foreign governments in the financing of their activities Lord Mansfield: no country takes notice of the revenue laws of another However it does not mean that a foreign revenue law is to be totally ignored Cheshire and North: circumstances may require that the existence of a foreign fiscal law be recognized. Court may give particular importance to the policy of the forum in maintaining harmonious relations with another State and may not countenance any transaction, such as a fraudulent tax evasion scheme

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO Where application of foreign law would involve injustice or injury to the residents of the forum The traditional rule is to the effect that foreign law will not be applied where it would involve injustice/injury to the people of the forum Where the application of a foreign law would expose the residents of the forum to a just liability even tradition bound writers admit that the exception would not hold; on the other hand. Id the enforcement will result in injustice or injury to the forum,, public policy may be enough to bar application of foreign law The lack of emphasis on this exception is that it brings the fear of constant reference to it — which curtails the development of choice of law rules Where application of foreign law would endanger the foreign relations or vital interests of the state A contract raising a loan to further a revolt against a foreign government of a friendly State though valid by the law of the place where entered into will be declared void in the forum Many courts consider this particular exception as included in the first exception since it is clear that it would also be against public policy NATURE OF CONFLICT RULES AND THE PROBLEM OF CHARACTERIZATION C/O: VICTOR RAMOS (Salonga, CHAPTER VIII, 1995) THE NATURE OF CONFLICT RULES Classifying legal rules Public International Law Municipal Law Domestic or internal rules Private international law or conflict rules Difference of ordinary internal rules and conflict rules

The seat of a legal or juridical person, such as a corporation The situs of a thing, that is, the place where a thing is or is deemed to be situated. In particular the lex situs is decisive when real rights are involved The place where an act has been done, the locus actus, such as the place where a contract has been made, a marriage celebrated, a will signed or a tort committed. The lex loci actus is particularly important in contracts and torts The place where an act is intended to come into effect e.g. The place of the performance of contractual duties, or the place where a power of attorney is to be exercised The intention of the contracting parties as to the law that should govern their agreement, the lex loci intentionis The place where judicial or administrative proceedings are instituted or done. The lex fori – the law of the forum 0 is particularly important because, as we have seen earlier, matters of procedure not going to the substance of the claim involved are governed by it; and because the lex fori applies whenever the content of the otherwise applicable foreign law is excluded from application in a given case for the reason that it falls under one of the exceptions to the application of foreign law The flag of a ship, which in many cases is decisive of practically all legal relationships of the ship and of its master or owner as such. It also covers contractual relationships, particularly contracts of affreightment Arts. 15-17 NCC: are basically territorially-oriented, which raises 2 questions problem of characterization problem of renvoi Problem of Characterization Locus Actus – place of acting Situs rei – place of the thing SYSTEM OF PERSONAL LAW & NATIONALITY C/O: JULIET AZARRAGA, DINDIN CRUZ, AND ROBERT TEJERO (Salonga, CHAPTER IX - X, 1995)

Conflict Rules Decide only which law or jurisdiction will give the final solution to the question Examples: Real property as well as personal property is subject to the law of the country where it is situated

IMPORTANCE OF PERSONAL LAW Personal allow allows the courts to exercise jurisdiction over the person or determine the governing choice of law rule on the specific situation involving such person.8 His nationality serves as a permanent connection between the individual and the state. His personal law regulates his civil status and condition, his family rights and duties, the intrinsic validity of his will and the rights of succession to his properties.9

PARTS OF A CONFLICTS RULE • Defines its object – factual event or operative facts • Legal consequence of the operative facts – prescribes the municipal law to which the question should be referred or connected; essential element: o Test or connecting factor; or o Point of contact Points of Contact – May take any of the following forms: Nationality of a person, his domicile, his residence, his place of sojourn or his origin

DEFINITION OF NATIONALITY Nationality refers to membership in a political community. In the Conflict of Laws, the words nationals and citizens are used interchangeably. In the Philippine Political law however, there is a distinction between a national and a citizen.10

Ordinary Internal Rules Authorize, command or prohibit a certain mode of conduct Example: Art 796: All persons who are not expressly prohibited by law to make a will

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8 9

Jorge Coquia, Conflict of Laws (2000) at 154. Jovito Salonga (1979), Private International Law at 96. Ibid.

10

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO 3. Advantages and Disadvantages of Nationality as Personal Law Nationality was used to establish the requisite link between an individual and the state because the laws of each state were presumed to be made for an “ascertained population.” The view was since lawmakers considered the physical and moral qualities of the citizens wherever they are. Likewise, an individual’s nationality was easily verifiable from documents. However, as a criterion for personal law nationality does not solve problems relating to individuals who are stateless as well as those with multiple nationalities. Neither does it offer any decisive solutions in states with diverse legal systems. A person’s ties to his nation may be so attenuated if he has lived in another country for most of his life. It would be unreasonable for his national law to govern him or exact obligations form him if he has no shared sense of identity or belonging with the state. Importance of Nationality in the Philippines It is the nationality or citizenship of the individual that regulates his civil status, capacity, condition, his family rights and duties, laws on succession and capacity to succeed. According to the Philippine Supreme Court, the nationality law theory is a conflict of laws theory by virtue of which jurisdiction over the particular subject matter affecting a person such as status of a natural person, is determined by the latter’s nationality. Article 15 of the 1987 Philippine Constitution – “Laws relating to family rights and duties or to status, condition and capacity of persons are binding upon citizens of the Philippines even though living abroad.” This is the nationality principle as expressed by the law. 3 kinds of citizens of the Philippines: 1. Natural-born citizens – Those citizens from birth without having to perform any act to acquire or perfect their Philippine citizenship 2. Naturalized citizens – Those who are not natural born citizens and those who become such by virtue of a judicial proceeding 3. Citizens by election – Those who by law, become citizens of the Philippines by electing or choosing Philippine citizenship at the age of 21 or within a reasonable time thereafter 2 theories determine whether the place or ancestry determines citizenship. Jus Soli – Citizenship follows the place of Birth Jus Sanguinis – Citizenship follows the citizenship of his parents. General Principle – It is the State that has the authority, based on its own municipal law, to determine who are its nationals or citizens. Hague Convention – “It is for the State to determine who its nationals are. This law shall be recognized by other states insofar as it’s is consistent with international convention, international customs and principles of law generally recognized with regard to nationality.” Article 2 of the Hague Convention also states that questions as to whether a person possesses the nationality of a particular state “shall be determined in accordance with the law of that state.” Article IV of the1987 Constitution – 1. Those who are citizens of the Philippines at the time of the adoption of this Constitution; 2. Those whose fathers and mothers are citizens of the Philippines; 03-23-2006 | THROUGH THE JOINT EFFORTS OF STUDENTS OF ATENEO LAW III- C 2006 | Edited by J.C. de Veyra

4.

Those born before January 17, 1973 of Filipino mothers, who elect Philippine citizenship upon reaching the age of majority; Those who are naturalized in accordance with law11

The Supreme Court held Article 17 of the Civil Code is insufficient to show that the first paragraph affirms and recognizes jus soli. 12 Citing American jurisprudence, the Court found that the decided weight of authority was to the effect that the marriage of an American woman with an alien conferred his nationality upon her during coverture; that upon dissolution of the marriage by death of the husband, the wife reverted, ipso facto, to her former status, unless her conduct or acts showed that she elected to retain the nationality of her husband and that where the widowed mother herself thus reacquired her former nationality, her children she being their natural guardian, should follow her nationality with the proviso that they may elect for themselves upon reaching majority. The Roa decision, promulgated on October 30, 1912, set a precedent that was uniformly followed in numerous cases. The long line of decisions applied the principle of jus soli up to September 16, 1947, when the principle was renounced in the cases of Tan Chong vs Secretary of Labor and Swee Sang vs The Commonwealth of the Philippines13 cited in the appealed decision. Naturalized Citizens Naturalization confers to an alien a nationality after birth by any of the means provided by law. 14 The process of Naturalization in the Philippines is by judicial method under Commonwealth Act No. 473 as amended by RA 530. QUALIFICATIONS FOR NATURALIZATION 1. The petitioner must not be less than 21 years of age on the date of the hearing of the petition; 2. He must have, as a rule, resided in the Philippines for a continuous period of not less than ten years; 3. He must be of good moral character, and believes in the principles underlying the Philippine Constitution, and must have conducted himself in a proper and irreproachable manner during the entire period of his residence in the Philippines in his relations with the constituted government as well as with the community in which he is living xxx. 4. He must own real estate in the Philippines worth not less than P5000, Philippine currency, or must have some lucrative trade, profession, or lawful occupation. However, the minimum ten year period in paragraph (b) may be reduced to five years in any of the following cases: If the applicant has honorable held office under the Government of the Philippines or under any of the provinces, cities, municipalities, or political subdivisions thereof; If he has established a new industry or introduced a useful invention in the Philippines; If he is married to a Filipino woman;

11

Edgardo Paras, Philippine Conflict of Laws (1996) at 158. 92 PHIL. 52 (1952) ROA VS. COLLECTOR OF CUSTOMS 23 PHIL. 321. 14 Dean Honorato Aquino, Conflict of Laws (2000) at 135.. 12 13

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO If he had been engaged as a teacher in a public or recognized private school not established for the exclusive instruction of children of persons of a particular nationality or race in any of the branches of education or industry for a period of two years; If he was born in the Philippines (Sec.3, Com. Act. No. 473, as amended). Lim vs. Republic 15 – the Supreme Court pronounced that the Naturalization Law requires belief in, and not a mere recitation of, the principles of the Constitution. A requirement for naturalization as provided by Section 2 of the naturalization Law (C.A. 473) provides that the applicant must be able to speak and write English or Spanish and any of the principal Philippine languages. Hence, the law is clear, one should be able to speak and write the requisite languages. Thus, an applicant who cannot speak and write but can only understand the requisite language does not fit the requirement. A deaf-mute cannot speak; therefore, he cannot be naturalized. The law neither requires speaking and writing of BOTH English and Spanish but English OR Spanish. Another requirement is that the children of the applicant must learn and imbibe the customs and traditions and ideals of Filipinos to prepare them for a life responsible and law abiding citizenship. The law is strict as to this requirement in that it must be shown that it has been followed. Disqualifications for Naturalization. The applicant must fully establish that his nation grants reciprocal rights to Filipino citizens at the time of the hearing of his application.16 Section 4 of the Naturalization Law – The following cannot be naturalized as Philippine citizens: 1. Persons opposed to organized government or affiliated with any association or group of persons who upholds and teach doctrines opposing all organized governments; 2. Persons defending or teaching the propriety of violence, personal assault, or assassination for the success and predominance of their ideas; 3. Polygamists or believers in the practice of polygamy; 4. Persons convicted of crime involving moral turpitude; 5. Persons suffering from mental alienation or incurable contagious diseases; 6. Persons who, during the period of their residence in the Philippines have not mingles socially with the Filipinos, or who have not evinced a sincere desire to learn and embrace the customs, traditions, ideals of the Filipinos; 7. Citizens or subjects of nations with whom the United States and the Philippines are at war and 8. Citizens or subjects of a foreign country other than the United States, whose laws do not grant Filipinos the right to become naturalized citizens or subject thereof.17 Procedure Commonwealth Act No. 473 – A declaration of intention to become a citizen must first be filed, unless the applicant is exempted from this requirement (Secs 5 and 6, Com. Act. 473) The petition for naturalization must then be filed (sec 8) 15 16 17

18 SCRA 228 (1966). Jorge Coquia, Conflict of Laws (2000) at 210. Commonwealth Act 473 providing for the Revised Naturalization Law.

03-23-2006 | THROUGH THE JOINT EFFORTS OF STUDENTS OF ATENEO LAW III- C 2006 | Edited by J.C. de Veyra

After the publication in the Official Gazette or newspaper of general publication, the petition will be heard (sec 9) If the petition is approved, there will be a rehearing two years after the promulgation of the judgment awarding naturalization (Sec. 1, Rep. Act No. 530) The taking of the oath of allegiance to support and defend the Constitution and the laws of the Philippines (Sec 11, Com Act 473, as amended)18 Declaration of Intention One year prior to the filing of his petition for the admission to Philippine citizenship, the applicant for Philippine citizenship shall file with the Office of the Solicitor General a declaration under oath that it is his bona fide intention to become a citizen of the Philippine (Section 5, Naturalization Law). The period of one year is intended to give the state a reasonable time to screen and study the qualifications of the applicant. However, even if the same is filed one year prior to the filing of the petition for naturalization, if the filing fee was paid six months prior to the petition for naturalization, the declaration produces no effect. Effects on naturalization on wife and children Legal Background Section 15, CA 473 – “Any woman is now or may hereafter be married to a citizen of the Philippines, and who might be lawfully naturalized shall be deemed a citizen of the Philippines. Minor children of persons naturalized under this law who have been born in the Philippines shall be considered citizens thereof. A foreign-born minor child, if in the Philippines at the time of the naturalization of the parent, shall automatically become a Philippine citizen, and a foreignborn minor child, who is not in the Philippines at the time the parent is naturalized, shall be deemed a Philippine citizen only during his minority, unless he begins to reside permanently in the Philippines when still a minor, in which case, he will continue to be a Philippine citizen even after becoming of age. A child born outside of the Philippines after the naturalization of his parent shall be considered a Philippine citizen, unless within one year after reaching the age of majority, he fails to register himself as a Philippine citizen at the American Consulate of the country where he resides, and to take the necessary oath of allegiance.” Jurisprudential Development Vivo vs. Cloribel – “As to foreign born minor children, they are extended citizenship ‘if dwelling in the Philippines at the time of the naturalization of the parent.’ ‘Dwelling’ means lawful residence. Since prior to the time the father of respondent visitor was supposed to have taken his oath of citizenship x x x their lawful period of stay had already expired and they had already been required to leave, they were no longer lawfully residing here.’ Therefore: An alien woman married to a Filipino who desires to be a citizen of his country must apply therefore by filing a petition for citizenship reciting that she possesses all the qualifications and none of the disqualifications under Section 4, both of Revised Naturalization Law, Said petition must be filed in the Court of First Instance where petitioner has resided at least one year immediately preceding the filing of the petition; and 18

C. A. 473 prescribing the procedure for naturalization.

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO Any action by any other office, agency, board or official, administrative or otherwise – other than the judgment of a competent court of justice – certifying or declaring that an alien wife of the Filipino citizen is also a Filipino citizen is hereby declared null and void.

5.

6. If the wife has all the qualifications and none of the disqualifications for Philippine citizenship she becomes a Filipino, Provided, that she is able to prove these facts in a proper proceedings. If she lacks qualifications or possesses disqualifications, she cannot be considered a Filipino citizen. While it is true that under Section 15 of the Naturalization Law, “Any woman who is now or may hereafter be married to a citizen of the Philippines . . . shall be deemed a citizen of the Philippines, still the law requires that she “might herself be lawfully naturalized” implying that she must first prove that she has all the qualifications and none of the disqualifications. • Moy Ya Lim Yao vs Com of Immigration,19 – The Court reversed that ruling and held that under Section 15 of Com. Act No. 473 or the Revised Naturalization Law, an alien marrying a Filipino, native born or naturalized, becomes ipso facto a Filipino provided that she is not disqualified to be a citizen of the Philippines under Section 4 of the same law. Moreover, an alien woman married to an alien who is subsequently naturalized here follows the Philippine citizenship of her husband the moment she takes his oath as a Filipino citizen, provided that she does not suffer from any of the disqualification under said Section 4. This decision in effect ruled that it is not necessary for an alien citizen to prove in a judicial proceeding that she possesses all the qualifications and none of the disqualifications. Judicial Declaration A declaration of Philippine citizenship may not be granted in an action for declaratory relief. The summary procedure under Article 412 of the Civil Code for correction of error in the entry in the Civil Registry which might also change the citizenship or status of an individual was also disallowed. This rule, however, had been relaxed in later Philippine Supreme Court decisions. A petition for correction of errors in the entry of the Civil Registry even for a change of citizenship or status may be granted provided that an appropriate action is made wherein all parties who may be affected by the entries are notified and represented and there is a full blown adversary proceeding.20 Loss of Philippine Citizenship Commonwealth Act No. 63, as amended by RA 106 – 1. By naturalization in foreign countries. 2. By express renunciation of citizenship 3. By subscribing to an oath of allegiance to support the constitution or laws of a foreign country upon attaining twenty one years of age or more, subject to certain exceptions 4. By rendering service to, or accepting commission in, the armed forces of a foreign country, subject to certain exceptions

19 20

41 SCRA 292 (1971) Jorge Coquia, Conflict of Laws (2000) at 162.

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7.

By having been declared by competent authority a deserter of the Philippine Armed Forces in time of war, unless subsequently, a plenary pardon pr amnesty has been granted In case of a woman, upon her marriage to a foreigner, if by virtue of the laws in force in her husband’s country, she acquires his nationality By cancellation of the certificate of naturalization

Section 18 of the Naturalization Law (CA 473 as amended) provides that upon motion made in the proper proceedings by the Solicitor General, the Judge may cancel that naturalization certificate issued and its registration in the Civil Registry for any of the following reasons: If it is shown that the said naturalization certificate was obtained fraudulently or illegally; If the person naturalized shall, within the five years next following the issuance of said naturalization certificate, return to his native country or to some foreign country and establish his permanent residence therein; Provided, that the fact of the person naturalized remaining for more than one year in his native country or the country of his former nationality, or two years in any country, shall be considered as prima facie evidence of his intention of taking up his permanent residence in the same; If the petition was made on an invalid declaration of intention; If it is shown that the minor children of the person naturalized failed to graduate from public or private schools, where Philippine history, government and civics are taught or prescribed as part of the school curriculum, through the fault of their parents either by neglecting to support them or by transferring them to another school or schools. A certified copy of the decree canceling the naturalization certificate shall be forwarded by the Clerk of Court to the Office of the President and the Office of Solicitor General; If it is shown that the naturalized citizen has allowed himself to be used as a dummy in violation of the Constitution or legal provisions requiring Philippine citizenship as a requisite for exercise, use or enjoyment of a right, franchise, or privilege. A judgment directing the issuance of certificate of naturalization is a mere grant of political privilege, and that neither estoppel nor res judicata may be invoked to bar the state from initiating an action for the cancellation or nullification of the certificate of naturalization thus issued. If it is shown that the naturalization certificate was obtained fraudulently or illegally, the certificate may be cancelled. The decision in a naturalization case does not become res judicata. Problems in Applying the Nationality Principle Dual or multiple citizenship In view of the rule set in the Hague Convention on Conflict of National Laws, each state determines who its own nationals are. Any question as to whether or not a person possesses the nationality of a particular state shall be determined in accordance with the state’s internal law. Hence it is possible that an individual can be claimed as a national of two or more states. Application of the jus soli and jus sanguinis – A child born of parents who are nationals of a country applying the principle of jus sanguinis, in a country applying the jus soli principle has dual nationality. Thus: A Filipino citizen who marries an alien may acquire the citizenship of his or her spouse if the spouse’s national law so allows. A Filipino citizen however, who marries an alien shall retain Philippine citizenship, unless by his or her act or omission, he is deemed under the law, to have renounced it by

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO taking an oath of allegiance to the spouse’s country or by express renunciation. Another instance of dual or multiple nationalities is the case of an individual who is naturalized citizen of another state but has not effectively renounced his former nationality. In the determination of the rights of an individual who may claim multiple nationalities in the third state, the International Court of Justice applied the principle of “effective nationality.” • Aznar vs Comelec 21 – The statement in the 1987 Philippine Constitution that “dual allegiance of citizens is inimical to the national interest and shall be dealt with by law” has no retroactive effect. And while it is true that even before the 1987 Constitution, our country had already frowned upon the concept of dual citizenship or allegiance, the fact is it actually existed. Be it noted further that under the aforecited proviso, the effect of such dual citizenship or allegiance shall be dealt with by a future law. Said law has not yet been enacted. (NOT ANYMORE) Statelessness It refers to an individual who has been stripped of his nationality by his own former government without having an opportunity to acquire another. A person may become stateless by any of the following means: 1. He may have been deprived of his citizenship for any cause; 2. He may have renounced his nationality by certain acts, express or implied; 3. He may have voluntarily asked for a release from his original state; 4. He may have been born in a country which recognizes only the principle of jus sanguinis ---- or citizenship by blood, of parents whose law recognizes only the principle of jus soli --- citizenship by birth in a certain place. Thus he is neither a citizen of the country of his parents.22 However, The Hague Conference of 1928 on International Private Law suggested that personal law of stateless individuals shall be the law of the domicile or the law of the place of temporary residence. DOMICILE C/O: JULIET AZARRAGA, DINDIN CRUZ, AND ROBERT TEJERO (Salonga, CHAPTER XI, 1995) DEFINITION Domicile is defined as that place where a man has his true, fixed and permanent home and principal establishment.23 It is that place which, whenever he is absent, he has the intention of returning. In the Philippines, it has been defined as the place where a person, actually or constructively, has his permanent home, where he, no matter where he may be found at any given time, eventually intends to return.24 A person may have his domicile at one place but may reside at some other place. Also, a person may also have several residences but only one domicile.

It fixes the jurisdiction of the taxing authorities. It also determines where a person may exercise the privilege of voting and other legal rights and privileges. Article 50 of the Civil Code provides that for the exercise of civil rights and the fulfillment of civil obligations, the domicile of natural persons is the place of their habitual residence. Under the domiciliary theory, a person’s private rights, conditions, and status, and capacity are determined by his physical location. 25 In jurisdictions adhering to domiciliary rule of determining the personal law of a person, domicile is an important point of contact. Domicile is one of the test factors in determining the applicable law in actions involving conflict of laws26. While the Philippines follows the nationality rule with respect to citizen’s status, family rights, and duties, order of succession and amount of successional rights, there are certain matters in which our courts apply the domiciliary rule. They are provided in the following provisions of law and authorities. Article 816 of the Civil Code provides that the will of an alien who is abroad produces the effect in the Philippines if made with the formalities prescribed by the law of the place in which he resides, or according to the formalities observed in his country, or in conformity with those which the Civil Code prescribes.27 Article 828 of the Civil Code provides that the revocation of a will done outside the country, by a person who does not have his domicile in this country, is valid when it is done according to the law of the place in which the testator had his domicile at the time.28 The validity of divorce secured by a foreign spouse under Article 26 of the Family Code also depends upon his domicile acquired in good faith.29 Classification of Domicile There are 3 kinds of domicile: namely: domicile of origin, domicile of choice, and constructive domicile. Domicile of origin is received by a person at birth.30 It is the domicile of the person’s parents at the time of his birth, which is not easily lost, and it continues until, upon reaching the age of majority, he abandons it and acquires a new domicile. This new domicile is the domicile of choice.31 Domicile of choice is also called voluntary domicile.32 It is the place freely chosen by a person sui juris. To acquire a domicile of choice, there must be of the fact of physical presence in the new locality and the unqualified intention to make that place the home of that person.33 Constructive domicile is also known as domicile by operation of law.34 It is that which the law attributes to a person because of his disability to make a choice, such as when he is a minor 25

Jorge Coquia, Conflict of Laws [1995] at 176. Ruben Agpalo, Conflict of Laws [2004] at 108, cng Saudi Arabian Airlines v. Court of Appeals, 247 SCRA 469, 490 [1998]. Agpalo at 108. 28 Agpalo at 109. 29 Agpalo at 109. 30 Coquia, p 198. 31 Jovito Salonga, Private International Law [1979] at 163. 32 Coquia at 198. 33 Salonga at 173. 34 Agpalo at 110. 26 27

Importance of the Concept of Domicile 21

Ibid. Jovito Salonga, Private International Law (1976) at 109 Black’s Law Dictionary 24 Aquino v. Comelec, 248 SCRA 400 [1995] 22 23

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO or suffers from mental of physical disability, in which case he follows, as a rule, the domicile of his father.35 It is the domicile assigned by operation of law to persons legally incapable of choosing their own domicile. These include minors and infants, mentally and physically disabled persons, and married women.36 Domicile of origin and domicile of choice distinguished: In terms of nature or character, the domicile of origin enjoys the staunchest presumption in favor of its continuance. Compared to domicile of choice, its character is more stable, its hold stronger and less easily shaken off. In terms of the conditions necessary for its abandonment, the domicile of origin is not lost by mere abandonment and remains until replaced by a domicile of choice. On the other hand, since domicile of choice is acquired upon the concurrence of animo et facto, it is deemed extinguished upon removal of intent even prior to the acquisition of a new domicile. In terms of capacity for revival, it is presumed that the domicile of origin is revived once the domicile of choice is extinguished in the interregnum that a domicile has yet to be established. This is a consequence of the basic rule that no person shall be without domicile. PROBLEMS WITH DOMICILE The revival of the domicile of origin is known as the reverter doctrine. This doctrine is subject to number of criticisms. One such objection is that it violates the rule that a person retains his domicile until a new domicile of choice is established upon the concurrence of the fact and intention. In an American case, the Iowa court declared that there was neither good logic nor substantial reason for the application of an exception to that rule. But the reverter doctrine was applied where the person, whose domicile is in question, was en route to his domicile of origin. In establishing domicile of choice, the problem of the degree of permanence of abode has always arisen. For this reason, there is an increasing approval for stating this intention in a negative way. As long as there is no intention to return to the old domicile, a new domicile is created, whether the intention to remain is for the rest of one’s life, or for an indefinite period of time, or for the time being at least. Likewise, the amount of time the person has actually lived in the new domicile is irrelevant after it is established that a new domicile has been chosen and entered upon. Also in establishing domicile of choice, the motive that prompted the person to change his domicile is irrelevant in determining whether or not a new domicile has been acquired. Once proved that a person really intended to establish his permanent abode in the new place, the court will not anymore inquire into the ethical values of the motives. Motive is relevant only to gauge if there was genuine intention to acquire the new domicile.37 Infants and minors Without doubt, infants are incapable of choosing their own domicile; hence, they retain their domicile of origin. The legitimate child’s domicile of origin is that of his father and an illegitimate child‘s is that of his mother. The mere accident of birth at any particular place, other than in the place of domicile of the father, cannot affect the domicile. 38 But their domicile automatically changes when the father’s domicile changes. Whenever parental

domicile is changed, the child’s domicile necessarily follows. A minor, as a rule, cannot acquire his own domicile.39 The rule in many jurisdictions is that the minors take the domicile of their mother upon the death of their father. This rule applies to our jurisdiction by force of our rules on parental authority. Article 212 of the Family Code provides that the remarriage of the surviving parents shall not affect their parental authority over their children.40 Persons mentally disordered Together with infants and married women, person mentally disordered are deemed, by law, dependent persons. Their domicile is fixed to one which they have previously acquired, if there is any. In the absence of a previously acquired domicile of choice, the domicile of mentally deficient persons follows that of their parents with whom they live. This is justified because of the person’s perceived incompetence to make a free choice on where they want to establish a permanent abode.41 Married women Based on the concept of unity of the spouses and reinforced by gender-based presumptions that this identity is determined by the husband, the wife was presumed to take the domicile of her husband.42 Article 69 of the Family Code provides that the husband and wife shall fix the family domicile and in case of disagreement, the court shall decide. The court may exempt one spouse from living with the other if the latter should live abroad or there are other valid and compelling reasons for the exemption. Although it is unusual for Filipino couples to fix their domicile by agreement, if they so desire and could not agree to a common domicile, they can submit the matter to court for relief. The court may then decide to allow the wife to maintain a separate domicile to that of her husband.43 In the case of Romualdez-Marcos v. Comelec, the Court elaborated the legal repercussions of this rule. When there is no agreement as to a common domicile between the husband and the wife, the rule is that the wife follows that of the husband during the existence of the marriage or until the death of the husband. When a woman marries and follows the domicile of her husband, she keeps her domicile of origin and merely gains a new home. The implication of this ruling is that the termination of the marriage or the death of her husband operates to revert her domicile to her domicile of origin. But this reversion does not apply when, by her overt acts, she has chosen the domicile of her husband as her domicile of choice.44 RULES ON DOMICILE No person shall be without domicile. Hence, a person’s domicile of origin prevails until he acquires a new domicile.45 A person cannot have two simultaneous domiciles. Domicile establishes a connection between a person and a particular territorial unit. That person is bound by the legal system 39

Coquia at 205. Coquia at 205. Agpalo at 117. 42 Coquia at 208. 43 Agpalo at 116. 44 248 SCRA 300 [1995] 45 Salonga at 160. 40 41

35

Coquia at 205. Salonga at 163, 164 Coquia at 198, 199. 38 Agpalo at 117. 36 37

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO of that particular territory for some legal purposes. In practice, however, courts have varying notions of domicile and may attribute these meanings for different purposes. As a result, one may be considered a domiciliary of the state for the purpose of obtaining divorce, but not for the purpose of running for public office. Therefore, it is more accurate to say that a person can have only one domicile for a given purpose or a given time under the law of a particular state. But it should not be assumed that this determination will be binding on other states or on the same state for other purposes.46 Every natural person, as long as he is free and sui juris, may change his domicile at pleasure. But the burden of proving domicile is upon whoever alleges that a change has been secured. Without overwhelming evidence to show a change of domicile, the courts will decide in favor of the continuance of the existing domicile.47 To acquire a fresh domicile, residence and intention must concur; to retain an existing domicile, either residence there or intention to remain must be present; to abandon a domicile, residence in a new place and intention to abandon the old place must concur.48 RENVOI C/O: JULIET AZARRAGA, DINDIN CRUZ, AND ROBERT TEJERO (Salonga, CHAPTER XII, 1995) DEFINITION • Black states that the “doctrine of renvoi” is a doctrine under which the court in resorting to foreign law adopts rules of foreign law as to conflicts laws, which rules may in turn refer the court back to the law of the forum.49 • It is a doctrine whereby a jural matter is presented which the conflict of laws rules of the forum refer to a foreign law, the laws rule of which, in turn, refers the matter back to the law of the forum or a third state.50 When reference is made back to the law of the forum, this is known as remission; reference to a third state is known as transmission.51 • This doctrine is not accepted in many jurisdictions, but it has been employed situations where the domiciliary and nationality principles are applied to the same individual, in testate or intestate succession, for real property disputes and marriage issues. VARIOUS WAYS OF TREATING RENVOI PROBLEM Professor Griswold identifies 4 ways of treating a problem of renvoi.52 1. Rejection of the renvoi When the conflict rules of the forum court refer the case to the law of another state, it is deemed to mean only the internal law of that state. The internal law is that which would be

46

Coquia at 190. Salonga at 162, 163. Coquia at 190. Black’s Law Dictionary 48 Aquino v. Comelec, 248 SCRA 400 [1995] 48 Jorge Coquia, Conflict of Laws [1995] at 176. 48 Ruben Agpalo, Conflict of Laws [2004] at 108, cng Saudi Arabian Airlines v. Court of Appeals, 247 SCRA 469, 490 [1998]. 48 Coquia, p 198, citing Goodrich (3rd ed), supra note 2, at 824. 49 Black’s Law Dictionary 50 Coquia at 122. 51 Salonga at 187. 52 Coquia at 123. 47 48

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applied to a domestic case that has no conflict-of-laws complications. Hence, the forum court in applying the internal law rejects the renvoi.53 2. Acceptance of the renvoi By applying or accepting renvoi, reference is made not just to another State’s internal law but to the whole law, which includes choice-of-law rules applicable to multi-state and multinational problems. Thus the court will recognize the referral and apply local law.54 • Aznar v. Garcia – Since the deceased in that case left a will, the law that governs its validity is Article 16 of the Civil Code. This provision states, inter alia, that the intrinsic validity of the testamentary provisions shall be regulated by the national law of the deceased. The deceased was a citizen of the United States and of the State of California. The application therefore of the Civil Code provision requires the determination of the meaning of the term “national law”. The law of California applies in this case; its internal law determines the validity of the testamentary provisions. Article 946 of the Civil Code of California, which is the choice-of-law rule of the State of California on the matter, provides that the question should be referred back to the law of the decedent’s domicile, which is Philippine law. Philippine law, under Article 887(4) and 894, makes acknowledged natural children compulsory heirs. In other words, the executor asked the Court to apply the internal law of California, without regard to the applicable choice-of-law provision. The acknowledged natural child would like the Court to apply the choice of law provision on the matter of California, which referred the case back to Philippine law. The Court accepted and applied the doctrine of renvoi. It made reference not just to the internal law of California but to its whole law, including the choice-of-law rules. Since the choice-of-law rules referred the case back to Philippine law, the Court held that the Philippine court can not and should not refer the case back to California because such issue would leave the issue incapable of determination. It cannot be tossed back and forth between the two states, between the country of which the decedent was a citizen (California) and the country of his domicile (Philippines). • If the Court rejected the renvoi, the national law of the deceased, which was California law, would have been applied. Instead, the Court applied the doctrine of renvoi and thus administered justice to the acknowledged natural child of the deceased by granting them the devise in accord with law.55 3. Mutual desistment theory (shouldn’t this be desistance? Of well, our authors . . .) or Mutual disclaimer of jurisdiction theory • The third way of dealing with the problem of renvoi is desistment or mutual disclaimer of jurisdiction. The reason for desistance is that the forum court upon reference to another state’s law sees that such law is limited in application to its own national and has no provision for application to a non-national. • The forum-court upon reference to another state’s law sees that such law is limited in application to its own nationals domiciled in its territory and has no provision for application to nationals domiciled outside the territory. Hence, the local court will apply local law. 56

53

Salonga at 185. Salonga at 185. 117 Phil 106 [1963]. 56 Salonga at 185, 186. 54 55

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This theory has the same result as the acceptance of the renvoi doctrine but the process used by the court of the forum is to desist applying the foreign law. Hence, in the Aznar case, Philippine law would be applied. 4. Foreign court theory According to this theory, the local court would assume the same position the foreign court would take were the case litigated in that foreign country. Thus, if American court applies American law, Philippine judge should also apply American law. If the American judge decides the same in accordance with the Philippine law on succession, the Philippine judge will do the same and apply Philippine law. A problem however arises if both courts follow the same theory. In this case, there would be no end to the case as the courts would be tossing the law back to each other, for this reason, some commentators have coined such terms as “pingpong”, “revolving doors”, “a game of lawn tennis”, “a logical cabinet of mirrors”, and “circulus inextrabilis” to describe this theory.57 In re Ross – The testatrix, a British national, domiciled in Italy, disposed of her property by will, which excluded her son as heir. This is allowed under English internal law, but not under Italian internal law, which mandates that half of the property should go to the son as forced heir. The testatrix left land in Italy and movables in England. The English court ruled that with respect to movables, the claim of the son to the legitime must be determined by the law of the domicile or Italian law, which meant either one of two things: Italian internal law or the entire Italian law, including choice-of-law rules. As an Italian court would have applied English law, English court should do the same. Hence, testamentary provision excluding the son was held to be valid. As to the land, English choice-of-law rules provides that succession should be governed by the law of the situs. But under Italian law, this matter should be governed by the law of the nationality of the testator or English law. As an Italian court would have applied the internal law of England, the English court should do the same. The testamentary provision excluding the son was likewise held valid.58

OBJECTIONS TO RENVOI • Opponents of the doctrine of renvoi advocate that the universal application of the doctrine would place the court in a perpetually enclosed circle from which it would never emerge and that it would never find a suitable body of substantive rules to apply to a particular case. • Proponents of the doctrine point out that the objection is based on a false premise because for as long as remission is to the state’s internal law alone, there will be a stop to the endless chain of reference which inn fact, is an extremely rare apparition. • Moreover, opponents of the doctrine also observed that it cannot achieve uniformity of results if both the forum and the foreign state it refers to applies it the same way. The doctrine is workable only if one of the states rejects it and that it achieves harmony of decisions only if the states concerned do not agree on applying it the same way.

57 58

Coquia at 127. 99 LJ Ch. 67 [1930].

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In answer to this criticisms, Professor Griswold underscores that even Professor Lorenzen, who concluded that the introduction of the renvoi was most unfortunate because of its uncertainty and demoralizing effects, allowed for certain exceptional cases for reasons of necessity or expediency. Clearly therefore, the doctrine of renvoi, although selective, furthers the objectives of predictability and harmony.59

False Conflicts If the choice-of law rules of the state to which reference is made refers the case back to the forum state, the court may use this situation to determine whether or not there is merely a false conflict. In the case of Pfau v. Trent Aluminum,60 the New Jersey Supreme Court stated that since Connecticut and New Jersey have identical substantive laws and the third concerned state, Iowa, had no interest in ensuring that its law applied, there was a false conflict. Thus, the renvoi was inappropriate.61 PERSONAL STATUS & CAPACITY C/O: JULIET AZARRAGA, DINDIN CRUZ, AND ROBERT TEJERO (Salonga, CHAPTER XIII, 1995) DEFINITION • Beale defined status as “a personal quality or relationship, not temporary in its nature nor terminable at the mere will of the parties, with which third persons and the state are concerned.62 He further points out that it is a real institution of law, and in spite of its incorporeal and conceptual character is an item in the development of law and in its application by the courts. It is a creature of the law, and in that sense unreal and artificial, but it rests upon a factual basis of character or relation. It was created out of necessity to deal with and attach rights to certain facts of social importance.63 • People vs. Bellamas64 – the general term that includes both condition and capacity, and more specifically that which embraces such matters as the beginning and end of human personality, capacity to have rights in general, capacity to engage in legal transactions, protection of legal interests, and family relations. • The state’s concern in a status as defined is based upon its social interest in the personality of its “domiciliaries”, and its interest in such of their domestic relations as have to do with the procreation and nurture of citizens. Its concern is demonstrated by

59

Coquia at 137. 55 NJ 511 [1970] Coquia at 137, 138. Black’s Law Dictionary 61 Aquino v. Comelec, 248 SCRA 400 [1995] 61 Jorge Coquia, Conflict of Laws [1995] at 176. 61 Ruben Agpalo, Conflict of Laws [2004] at 108, cng Saudi Arabian Airlines v. Court of Appeals, 247 SCRA 469, 490 [1998]. 61 Coquia at 198, citing Goodrich (3rd ed), supra note 2, at 824. Black’s Law Dictionary 61 Aquino v. Comelec, 248 SCRA 400 [1995] 61 Jorge Coquia, Conflict of Laws [1995] at 176. 61 Ruben Agpalo, Conflict of Laws [2004] at 108, cng Saudi Arabian Airlines v. Court of Appeals, 247 SCRA 469, 490 [1998]. 61 Coquia at 198, citing Goodrich (3rd ed), supra note 2, at 824. 62 Joseph S. Beale, A Treatise on the Conflic of Laws, Vol. 2. (1935) at 649. 63 Ibid. 64 73 O.G. 1977. 60 61

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the care with which the relationships are created and guarded by the law. The establishment of status is a socially important element of legal order.65 However, if a status is created by the law of one state which is not regarded as a status by the law of another state, no effect will be given to the status as such in the second state.66 For instance, there are several personal conditions or relationships regarded as status by civil law, but not by common law, such as minority, prodigality and civil death. In such cases, no effect is given in a common-law state to such a status, unless a statute provides otherwise.

2 Kinds of Legal Status Beale: absolute and relative status; but also divided into domestic and non-domestic. 1. Absolute status is the “personal condition of an individual or a group of individuals which has legal characteristics and status.”67 Examples68 are the following: • Personality. • Name. • Rank, Title, and Office. • Absence. • Civil Death. • Infamy. • Prodigality. • Slavery. • Capacity. (not considered as status at common law) • Majority. 2. Relative status is defined as a relation between two persons having such legal sanction as to make it a relation falling within the term “status”. Under the category of domestic relations, examples are marriage, relationship of father and child (i.e. legitimation, custodianship, and adoption), and the relationship of guardian and ward (i.e. guardianship). Non-domestic relations, on the other hand, include the relationship between jailer and prisoner, among many others.69 STATUS APPLIED IN THE PHILIPPINE SETTING • Article 15 of the Civil Code provides that in determining the status and capacity of a person, the nationality principle applies, i.e. the person follows his national law wherever he goes, but only to Filipino Nationals. For aliens, Philippine courts may refer to the national law if the country they belong to follows the nationality principle or the law of their domicile if they follow the domiciliary principle. • Recto vs. Harden70 – “inasmuch as Mr. and Mrs. Harden are admittedly citizens of the United States, their status and dissolution thereof – as governed by Article 9 of the Civil Code of Spain (which was in force in the Philippines at the time of the execution of the contract in question) and Article 15 of the Civil Code of the Philippines – by the

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laws of the United States, which sanction divorce … the contract of services … is not contrary to law, morals, good customs, public order or policy.” It is a basic principle that status, once established by the personal law of the party, is given universal recognition. Therefore, aliens can sue and be sued in our courts subject to Philippine procedural law even on matters relating to their status and capacity. However, the law to be applied by Philippine courts in determining their capacity and status is their personal law. Barnuevo vs. Fuster 71 – The authority of jurisdictional power of courts to decree a divorce is not comprised within the personal status of the husband and wife, simply because the whole theory of statutes and of the rights which belong to everyone does not go beyond the sphere of private law, and the authority and jurisdiction of the courts are not a matter of the private law of persons, but of the public or political law of the nation. The jurisdiction of the courts and other questions relating to procedure are considered to be part of a public nature and consequently are generally submitted to the territorial principle… All persons that have to demand justice in a case in which foreigners intervene, since they can gain nothing by a simple declaration, should endeavor to apply the tribunals of the state which have coercive means (property situated in the territory) to enforce any decision they may render. Otherwise, one would expose himself to the suit to making useless expenditures which, although he won his case, would not contribute to secure his rights because of the lack of means to enforce them … In order to foster their relations and develop their commerce, all civilized nations are interested in doing justice, not alone to their own people, but to those foreigners who contract within the country or outside of it juridical ties which in some manner affect their sovereignty. One essential thing to consider within the concept of personal status is the determination of the exact moment personality begins and ends. Such determination is dependent upon the individual’s personal law. In the Philippines, Articles 40 and 41 of the New Civil Code give the internal rules on the beginning of human personality. Article 40. Birth determines personality; but the conceived child shall be considered born for all purposes that are favorable to it, provided it be born later with the conditions specified in the following article. Article 41. For civil purposes, the fetus is considered born if it is alive at the time it is completely delivered from the mother’s womb. However, if the fetus had an intrauterine life of less than seven months, it is deemed born if it dies within twenty-four hours after its complete delivery from the maternal womb. Limjoco vs. Intestate Estate of Fragante72 – With regards to absence, the domestic laws of different countries do not treat absentees alike which has given rise to difficult problems in conflict of laws. There are 3 suggested ways of dealing with the said problem: o to use the rebuttable presumption that a person is dead when he has been absent for a number of years;

65

Joseph S. Beale, A Treatise on the Conflic of Laws, Vol. 2. Baker, Voorhis & Co. (1935) at 651. Ibid. Ibid at 649. 68 Ibid at 652 to 663. 69 Beale, Joseph S. A Treatise on the Conflic of Laws, Vol. 2. Baker, Voorhis & Co. (1935) at 663. 70 100 Phil. 427 (1959). 66 67

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71 72

29 Phil. 606 (1919). 80 Phil. 776 (1948).

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO to invoke that a person’s unexplained absence is judicially investigated and established which results in legal effects similar to those of death; and, o to obtain a judicial decree declaring the person dead before legal effects of death take place.73 The New Civil Code of the Philippines follows the first method, and the said law provides Art. 390 – after the absence of 7 years, and for the purposes of opening his succession till after 10 years and Art. 391 – presumption of death for all purposes, including the division of the estate among the heirs. The legal effects of absence and restrictions on the absentee’s capacity to act are determined by his personal law.74 Beale – the determination of one’s name is not a problem of status since a person is traditionally free to assume a name and change it at will.75 However, the prevalent view as of present is that a person’s name is determined by law and cannot be changed without judicial intervention. For example, Article 376 of the New Civil Code provides that no person can change his name or surname without judicial authority.76 As for aliens, the validity of their change of name depends solely on their personal law.77 Determining the age of majority is also an aspect of personal status, more particularly the legal disability attached to minority and the rights recognized upon attainment of the age of majority. In such a case, it is the individual’s personal law which determines whether or not he has reached the age of majority.78 Upon reaching such age, parental authority over the person and property of the child ceases and is thereafter qualified and responsible for all acts of civil life,79 except those otherwise provided by special laws. In the Philippines, Republic Act No. 680980 lowered the age of majority to 18 years from 21 years. However, the same law provides that parental consent for contracting marriage is required until the age of 21. o

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DEFINITION OF CAPACITY • “Capacity”, more commonly referred to as juridical capacity, is defined as the fitness of a person to be subject of legal relations. The other component of capacity, called capacity to act, is defined as the power to do acts with juridical effects. The union of these two components produces complete civil capacity. The distinction between the two elements is that the former “is inherent in every natural persona and is lost through death,”81 while the latter “is acquired and may be lost.”82 • A person’s ability to act with legal effects is governed by his personal law. One’s personal law is viewed as best qualified to decide what restrictions should be imposed

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on the individual.83 The conclusion of such rule is that the incapacities attached to his legal status follow him wherever he is. Corollary to this is the presumption that those who contract with another must first ascertain his legal capacity. This general rule is subject to some exceptions, one of which is one’s liability in tort cases, which is subject to the law of the place of the tort. General Rule – Incapacity in one state does not affect one’s capacity in another state. This is best exemplified by the maxim lex loci contractus, which states that the capacity to enter into a contract is governed by the law of the place of contracting without reference to the law of the domicile.84

MARRIAGE C/O: FRANCO SARMIENTO, KRISTINE TRINIDAD, FRITZZIE ESPANOL, AND MIMI LAMA (Salonga, CHAPTER XIV, 1995) MARRIAGE AS INCIDENTAL QUESTION Marriage, as a subject matter in the field of private international law, is the incidental question. Incidental in this sense does not mean “minor” or “supplementary”. Marriage is an incidental question in the resolution of legal issues because its effect substantially influences the verdict. In deciding whether or not one may lawfully exercise particular acts (e.g. purchase or dispose of property), the fact that said person is married is a matter which needs to be resolved before deciding the principal issue. In this sense, the validity or lack thereof, of a marriage is an incidental question that is necessary question that requires an answer before resolving the “bigger” case. Definition of Terms • Lex Domicili - Latin for “law of the domicile” in the Conflicts of Law; In conflicts, the law of one’s domicile is applied in choice of law questions •

Lex Locii Celebrationis- the law of the place where the act was done; In conflicts, the law where the place where the act was done is applied in choice of law questions

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Lex Patriae - National Law; In conflicts, the national law of one person is applied in choice of law questions

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Marriage - a special contract of permanent union between a man and a woman entered into in accordance with law for the establishment of conjugal and family life85

•

Recognition of Marriage - that act of a State which affirms the validity of marriage in its particular jurisdiction

73

Jorge Coquia, Conflict of Laws (1995) at 243. Jorge Coquia, Conflict of Laws (1995) at 247. Ibid. 76 R.A. 9048 was later on enacted allowing change of first name or nickname in a summary proceeding by filing the necessary application with the local civil registrar. 77 Jorge Coquia, Conflict of Laws (1995) at 245. 78 Ibid. 79 FAMILY CODE, Art. 236. 80 Approved December 13, 1989. 81 NEW CIVIL CODE OF THE PHILIPPINES, Article 37. 82 Ibid. 74 75

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The Jurisdiction and Choice of Law Framework Salonga 86 – there are 3 ways by which conflicts cases are disposed. The following will be representations of the said means. 83 84 85

Jorge Coquia, Conflict of Laws (1995) at 243. Insular vs. Frank Article 1, Family Code of the Philippines.

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO Figure 1 Lack of Jurisdiction DISMISS THE CASE Refusal to assume Jurisdiction

Case not disposed of in the Philippines

Figure 2 Assume jurisdiction

Apply Lex Fori

Case is disposed the Philippines

Figure 3 Consider law of other state Case is disposed the Philippines

Assume jurisdiction Apply law of the other state

The diagrams under this framework stresses that the operative act by which cases are disposed is the choosing of what law would govern a particular issue. This framework assumes that the State has the freedom to choose the manner it takes to dispose a case. This framework is used in this paper to stress on the assumption that issues in marriage with a foreign element are primarily disposed of by a State’s choice of law which is more often than not, an institutionalized method of determining its choice. MARRIAGE AS A SPECIAL CONTRACT Article 1 of the Executive Order No. 209, otherwise known as the Family Code defines marriage as a special contract of permanent union entered into in accordance with law for the establishment of conjugal and family life. It is a special contract because it is more than a mere contract accompanied by duties and obligations unique to a “married life”. The consent of the parties is essential to its existence like any other contract. However, when the contract to marry is executed by a man and a wife, a relation between the parties is created which they cannot change except for special circumstances as will be discussed later. Other contracts may be modified, restricted or enlarged or entirely released from upon the will of the parties. Not so with marriage. The relation, once formed, calls for the law to step in and hold the parties to various obligations and liabilities. Marriage is a special contract also because it is vested with public interest. Marriage is an institution in the maintenance of which in its purity the public is deeply interested for it is the foundation of

the family and of society- without which there would be neither civilization nor progress87. It is the characteristic of permanence therefore that distinguishes marriage from a purely consensual transaction. Marriage is also a civil contract, such that no ecclesiastical elements are involved. The law does not look upon marriage as a sacrament. In the eyes of the law, marriage is a secular matter. When the requirements of law are complied with, what has been entered, is by law, a contract of marriage, whatever else a church or a religious organization may demand from its members. Marriage can be argued to be the very groundwork for other domestic relations. The state has an interest in this special contract. Marriage is the foundation of the family, and around the family, many of our present day social institutions are built. Extrinsic Validity In the Philippines, the determination of the extrinsic validity of marriage is referred to the lex loci celebrationis, or, law of the place of celebration. This is a consequence of the maxim locus regit actum, or the place governs the act. By extrinsic validity, we mean the legal sufficiency insofar as the formal requisites of a valid marriage are concerned. Story – the general principle is that between persons, sui juris, the validity of a marriage is to be decided by the law of the place where it is celebrated. If the marriage is valid in the place of celebration, it is valid everywhere. In the same line of thought, if the marriage is invalid in the place of celebration, it is invalid everywhere.88 The Hague Convention on Celebration and Recognition of the Validity of Marriages89, states that the formal requirements for marriage are governed by the law of the state of celebration, a reiteration of a recognized principle of conflict of laws. Hence, the general rule is that all states recognize as valid marriages celebrated in foreign countries if they complied with the formalities prescribed there.90 Ernst Rabel made a comparative survey of various legal systems revealing that there are three ways of applying the maxim locus regit actum: The imperative or compulsory rule. In one group of countries, including the United States, England, Denmark, Japan and the Philippines, the law of the place where the marriage is celebrated governs the matter of formal validity, irrespective of whether the marriage is concluded within or outside the forum. In short, the maxim locus regit actum or the principle that “the act is governed by the law of the place where it is done” is applied compulsorily; the law of the place of celebration, the lex loci celebrationis, is solely decisive. The optional rule. Many countries follow the optional rule—parties celebrating a marriage within the forum must comply with domestic formalities; parties marrying abroad must observe either the formalities prescribed at the place of celebration or those of the personal law of the parties. Article 7 of the Hague Convention on marriage adopts the optional rule by providing that 87

Maynard vs. Hill, 125 US 190, 8 S. Ct. 723, 31 L. Ed. 654 (1888). HERBERT F. GOODRICH, HANDBOOK OF THE CONFLICT OF LAWS(West Publishing, Minnesota, 1949). Hague Convention on Recognition of Validity of Marriages (March 14, 1978). 90 Caguioa page 255 88 89

86

JOVITO SALONGA, PRIVATE INTERNATIONAL LAW (Regina Publishing Company, 1995).

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO where the parties to a marriage are of different nationalities, a marriage not complying with the formal requirements in the country of celebration must satisfy the national laws of both parties in order to be recognized by other participating states.

to the spouses and the marriage at the time of the marriage. Thus, marriages that are contracted by parties forbidden to marry, or forbidden to enter the particular marriage in question, of those which are polygamous or incestuous are denied validity.

The modified or religious method This method is adopted by a few countries, notably, Greece, Egypt, and Spain, insofar as Spanish Catholics are concerned due to its distinctive premium on religious custom. The rule may be modified by considering the religious form prescribed by law of these countries as essential for marriage of their own nationality. A marriage by merely civil ceremony performed abroad may not be recognized in the forum.

Sources of Law Marriages between Filipino Citizens, no matter where celebrated, are valid if it complies with the requirements of Article 2 of the Family Code, which states that: “No marriage shall be valid, unless these essential requisites are present: Legal capacity of the contracting parties who must be a male and a female; and Consent freely given in the presence of the solemnizing officer.”

Sources of Law The Philippines abide by the imperative rule. For marriages celebrated outside the Philippines, Article 17 of the Civil Code embodying the rule locus regit actum, or les loci celebrationis, govern: “The forms and solemnities of contracts, wills, and other public instruments shall be governed by the laws of the country in which they are executed.” For marriages celebrated in the Philippines, the formal requirements are set forth in Article 3 of the Family Code. - 1. Authority of the solemnizing officer; 2. A valid marriage license expect in cases provided in Chapter 2 of this Title; and 3. A marriage ceremony which takes place with the appearance of the contracting parties before the solemnizing officer and their personal declaration that they take each other as husband and wife in the presence of not less than two witnesses of legal age.

JURISDICTION AND CHOICE OF LAW Philippine law on substantive validity does not exclusively adhere to the lex loci celebrationis rule. There is a distinction as to marriages celebrated abroad, and in respect to marriages in the Philippines. As to the former, what applies is a combination of the lex loci celebrationis rule and the personal law (national law) rule. This is clearly the meaning of Article 26 of the Family Code. This general rule should therefore be qualified by two exceptions. First, marriage between Filipino nationals who marry abroad before the Philippine consular or diplomatic officials, in which case whatever the law of the place of the celebration prescribes, the substantive validity is to be determined by Philippine laws. Secondly, the saving clause of Article 26, declaring as invalid marriages prohibited under Philippine laws by reason of public policy, including polygamous, incestuous marriages and those contracted through mistake. As to marriages entered into in the Philippines, the national law of the party concerned insofar as his capacity to contract marriage is concerned is decisive. Corollary to this, Article 21 of the Family Code requires that aliens must submit a certificate of legal capacity to contract marriage issued by their respective diplomatic or consular officials, before they can be issued a marriage license.

JURISDICTION AND CHOICE OF LAW The lex loci celebrationis principle is expressed in the first paragraph of Article 26 of the Family Code, which states that: “All marriages solemnized outside the Philippines, in accordance with the laws in force in the country where they were solemnized, and valid there as such, shall be valid in this country, except those prohibited under Articles 35(1) (4) (5) 36, 37 and 38….” Intrinsic Validity Intrinsic validity relates refers to the legal sufficiency insofar as the substantive requirements of a valid marriage are concerned, including the general capacity of the contracting parties. However, each legal system possesses a distinct concept of what matters are of substance as distinguished from what matters are of form. A survey of the various legal system demonstrates that there are two competing principles as to the law that should govern the substantive validity of marriage. One points to lex loci celebrationis while the other direction refers to the personal law of the contracting parties, either by the parties’ personal laws, which may either be their domicile or nationality. It is said that the principle that would govern the intrinsic validity of a marriage depends on the policies and treatment of marriage of a particular legal system. Where marriage is considered a contract, lex loci celebrationis prevails; while if considered primarily as a status or an institution, it is the law of their domicile or their nationality that is controlling. In the United States of America, the usual view is that a marriage valid where entered is valid anywhere. The Second Restatement provides that a marriage, which satisfies the requirements of the State where contracted, will be recognized everywhere as valid unless it violates the strong public policy of another State which has the most significant relationship 03-23-2006 | THROUGH THE JOINT EFFORTS OF STUDENTS OF ATENEO LAW III- C 2006 | Edited by J.C. de Veyra

DIAGRAM REPRESENTATIONS FACTUAL SITUATION

POINT OF CONTACT

If celebrated abroad

Between Filipinos

Between Foreigners

Lex Loci Celebrationis, without prejudice to Arts. 26, (1) (4) (5) 36, 37 and 38 of the Family Code.

Lex Loci Celebrationis, except if the marriage is Highly immoral (i.e., bigamous, polygamous marriages) Universally Considered Incestuous (i.e., between brothers and sisters, whether whole or half blood, legitimate or illegitimate, between

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO ascendants and descendants).

Lex Loci Celebrationis, except if the marriage is Highly immoral (i.e., bigamous, polygamous marriages) Mixed (Between Filipino and Foreigner) Universally Considered Incestuous (i.e., between brothers and sisters, whether whole or half blood, legitimate or illegitimate, between ascendants and descendants). If celebrated in the Philippines

Between Foreigners

Mixed

National Law (Art. 21, FC) provided not highly immoral or universally considered incestuous.

National law of the Filipino, (otherwise, public policy maybe militated against).

Marriage by Proxy A marriage by proxy is one where one of the parties is merely represented at the ceremony by a friend or delegate. The following are the rules governing such a marriage: If celebrated in the Philippines — the marriage is void. Article 6 of the Family Code requires the presence of both parties. It is said however that the rule holds true only in cases where the marriage is between Filipinos or between a Filipino and a foreigner. In case the contracting parties are both foreigners, then it would be a valid marriage provided their national law considers is such. It should be noted also that the place where the proxy appears is considered where the marriage is celebrated. If celebrated abroad — the rule is lex loci celebrationis, whether the marriage is between Filipinos, foreigners or mixed. This is of course subject to the usual exceptions (highly immoral etc.) and subject to special provisions as may be found in special laws (e.g., immigration laws for purpose of immigration). CRITIQUE OF THE CURRENT RULE Authors are unanimous in saying that the lex loci celebrationis rule is immediately susceptible to abuse. Parties are inclined to shop for the forum that will allow them to marry, when the laws of their own country provides an impediment to their union. An alternative suggested in found in the Hague Convention, the Treaty of Montevideo, and the Codigo Bustamante. Marriage impediments or disabilities are divided into two categories: one of international and the other of merely national applicability. Only the gravest objections are considered sufficient to prevent or nullify a marriage contracted abroad, such as marriages between ascendant and descendants, between brothers and sisters 03-23-2006 | THROUGH THE JOINT EFFORTS OF STUDENTS OF ATENEO LAW III- C 2006 | Edited by J.C. de Veyra

and the fact of an existing marriage on the part of the contracting party. All other impediments are applied only to marriages celebrated within the State. Rabel advocates, however, the alternative proposition that the personal law of the parties should continue to govern for a certain period to be fixed by the law after the parties change their domicile; marrying after this time they should be subject to the law of the place of celebration alone with effect also in their home countries. The evident purpose of the suggested rule is to avoid evasion of the effects of the personal law, without the same time upholding the exaggerated coercive power at present attached to it. Some such rational solution as exemplified in these suggested is needed in every country’s legal system. It would, of course, be more desirable to work out such a solution on an international level by means of an international convention, in order to give a measure of stability of family relationships that freely formed by the parties involved. MARRIAGE AS STATUS The resultant relationship between a man and a woman who entered in a contract of marriage is one of personal status. This status is created and destroyed by law and not by mere consent of the parties, and is of legal importance to all the world.91 Marriage therefore creates social status or relation between the contracting parties in which not only they but the state are interested and involves a personal union of those participating in it of a character unknown to any human relations, and having more to do with the morals and civilization of people than any other institution. 92 And whenever a peculiar status is assigned by law to members of any particular class of persons, affecting their general position in or with regard to the rest of the community, no one belonging to such class can vary by any contract the rights and liabilities incident to this status.93 Marriage as a status carries with it implications in two fields: the realm of personal rights and obligations of the spouses, which is a filed of personal affair between the husband and wife and as such will not ordinarily be interfered with by the courts of justice; and the realm of property relations, to which several judicial sanctions are applicable. PERSONAL RIGHTS AND OBLIGATIONS In our jurisdiction, the national law of the parties governs personal relations between the spouses. Thus, Article 15 of the Civil Code states, “Laws relating to family rights and duties, or to the status, condition and legal capacity of persons are binding upon citizens of the Philippines, even though living abroad.” SCOPE OF PERSONAL RELATIONS BETWEEN THE HUSBAND AND THE WIFE Personal rights and obligations between husband and the wife, all of which are generally governed by the national law of the husband, but subject to the principles of characterization and to the exceptions to the application of proper foreign law, include the following: Mutual identity, cohabitation, and respect; Mutual assistance and support; Right of the wife to use the husband’s name; Duty of the wife to follow the husband to his residence or domicile.

91 92 93

Beale, Conflict of Laws, 1935. MEL STA. MARIA PERSONS AND FAMILY RELATIONS LAW, pg.100 ( Freeman’s Appeal, 68 Conn 533, 37 ALL 4200, 57 ASR 112.

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO Under Article 68 of the Family Code, “the husband and wife are obliged to live together, observe mutual love, respect and fidelity, and render mutual help and support.”94 Effect of Change of Nationality If the husband will effect a subsequent change of nationality the following rules are believed applicable; If both the husband and the wife will have a common nationality – the new national law will govern their personal relations; If only one will change nationality – the common nationality will be applicable. If there never was any common nationality – the governing rule will be the national law of the husband at the time that the marriage was entered into.95 Duties of a Married Person Duty to live together Duty to observe mutual love and respect Duty to observe mutual respect and fidelity Duty to render mutual help and support Procedure to Enforce Rights To enforce rights granted by the husband’s national law, resort is had to the lex fori, hence should suits be litigated in the Philippines, our procedural rules will have to be followed. Survey of jurisprudence related to the Recognition of the Inception of Marriage • Wong Woo Yu v. Vivo – “Thus, under Article 15 of our new Civil Code provides that family rights or to the status of persons are binding upon citizens of the Philippines, even though living abroad, and it is well known that in 1929 in order that a marriage celebrated in the Philippines may be valid, it must be solemnized either by a judge of any court inferior to the Supreme Court, a justice of the peace, or a priest or minister of the gospel of any denomination duly registered in the Philippine Library and Museum (Public Act 3412, Section 2). • Apt v. Apt – “If a marriage is good by the laws of the country where it is effected, it is good all the world over, no matter whether the proceeding or ceremony which constituted marriage according to the law of the place would or would not constitute marriage in the country of domicile of one or other of the spouses. If the so-called marriage is no marriage in the place where it is celebrated, there is no marriage anywhere, although the ceremony or proceeding if conducted in the place of the parties’ domicile would be considered a good marriage. • The contract of marriage in this case was celebrated in Buenos Aires; that the ceremony was performed strictly in accordance with the law of that country; that the celebration of marriage by proxy is a matter of form of the ceremony or proceeding, and not an essential of the marriage; that there is nothing abhorrent to Christian ideas in the adoption of that form; and that, in the absence of legislation to the contrary, there is no doctrine of public policy which entitles me to hold to that the ceremony,

94 95

Don’t know what book this is (photocopy) id

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•

valid where it was performed, is not effective in this country to constitute a valid marriage.” Sottomayor v. De Barros – “It is a well settled principle of law that the question of personal capacity to enter into any contract is to be decided according to the law of the domicile….. the law of a country where a marriage is solemnized must alone decide all questions relating to the validity of the ceremony by which the marriage is alleged to have been constituted; but as in other contracts, so in that marriage, personal capacity must depend on the law of the domicile, and if the laws of any country prohibits its subjects within certain degrees of consanguinity from contracting marriage, and stamp a marriage between persons within the prohibited degrees as incestuous, this in our opinion imposes on the subjects of that country a personal incapacity which contributes to affect them so long as they are domiciled in that country where the law prevails, and renders invalid a marriage between persons, both a the time of their marriage subjects of, and domiciled in the country which imposes the restriction wherever such marriage may have been solemnized.”

ANNULMENT AND DIVORCE C/O: FRANCO SARMIENTO, KRISTINE TRINIDAD, FRITZZIE ESPANOL, AND MIMI LAMA (Salonga, CHAPTER XV, 1995) THE RECOGNITION OF THE TERMINATION OF MARRIAGE, LEGAL SEPARATION AND OTHER RELATED-ISSUES DIVORCE Overview of divorce/ kinds of divorce Divorce is the legal dissolution of the marriage bond rendered by a competent court for causes defined by law which arose after marriage. It presupposes that marriage is valid.96 Generally, there are two kinds of divorce: (1) absolute (divorce a vinculo matrimoniee) where marital ties are dissolved and (2) relative (divorce a mensaet thoro) where parties remain married although they are allowed to live separately from each other.97 Upon the enactment of the Civil Code, absolute divorce was no longer recognized except under Article 26 of the Family code wherein a divorce validly obtained by foreign spouse against the Filipino spouse is recognized and given effect and the latter is free to re-marry as an exception to the general rule and when obtained by alien spouses. However, relative divorce or more known as legal separation is allowed as provided for under Article 55 of the Family Code. The importance in determining whether a decree of divorce is valid or not is to ascertain the status of the parties and to fix and make certain the property rights and interest of the parties such as custody, care and support of the children. Philippine Conflicts Rule on Divorce With the abolition of the absolute divorce under the Civil Code, the rule with reference to Filipino couples became rigid and simple: as long as they are Filipino citizens, they cannot obtain a divorce decree abroad which would be recognized in the Philippines. Likewise, 96 97

Agpalo p. 324 Paras p. 266

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO Philippine courts are not available to aliens for the purpose of obtaining absolute divorce decrees.98 The rule on divorce in this jurisdiction was reiterated in the case of Tenchavez vs. Escano, as follows:99 “The Civil Code of the Philippines, now in force, does not admit absolute divorce, quo ad vinculo matrimonii; and in fact does not even use that term, to further emphasize its restrictive policy on the matter, in contrast to the preceding legislation that admitted absolute divorce on grounds of adultery of the wife or concubinage of the husband (Act No. 2710). Instead of divorce, the present Civil Code only provides for legal separation (Title IV, Book I, Arts. 97 to 108), and, even in that case, it expressly prescribes that bonds shall not be severed (Art. 106, subpar. 1).” Although as a rule divorce is not recognized in this jurisdiction, divorce is allowed in the following instances: between foreign spouses and by a foreigner in his country or in a country which grants divorce, who is married to a Filipino citizen is recognized insofar as the foreigner is concerned. As to the first instance wherein divorce is between foreign spouses, the Court considers the absolute divorce between foreign spouse as valid and binding in the Philippines on the ground that the status and dissolution of the marriage are governed by their national law except when they contravene the law or public policy of the country. On the other hand, divorce legally obtained by foreign spouse against the Filipino spouse is expressly provided for under the second paragraph of Article 26 of the Family Code: “Where a marriage between a Filipino citizen and a foreigner is validly celebrated and a divorce is thereafter validly obtained abroad by the alien spouse capacitating him or her to remarry, the Filipino spouse shall likewise have capacity to remarry under Philippine Law.” The above-quoted provision was enacted to correct the unfair situation, where the status of a person would depend on the territory where the question arises: in the Philippines, the Filipino spouse would still be legally married and cannot re-marry; while abroad, the person who secured the divorce was no longer married to the former and could thus remarry. However, said article does not recognize the divorce between an alien spouse and a Filipino spouse if the divorce is obtained by the latter nor does a divorce between Filipino spouses. But the Filipino spouse may go around the prohibition by first acquiring a foreign citizenship, as by naturalization in a foreign country, and having done so, he/ she as a foreigner can then obtain a divorce, which will then be recognized under Article 26, if done in good faith.100 Law governing divorce Since Article 26 of the Family Code recognizes divorce obtained by an alien spouse married to a Filipino spouse, the question which law governs the divorce is important to determine whether the divorce obtained by the alien spouse is valid. In the United States, the “local law of the domiciliary state in which the action is brought will be applied to determine the right to divorce.” Thus, the plaintiff or petitioner must have his domicile in the state or country where the complaint for divorce is filed by him/her.101 The rationale for the above rule is based on the fact that the state of a person’s domicile has the dominant interest in the person’s marital status and therefore has judicial jurisdiction to grant him a divorce. So long as the alien spouse has acquired a domicile in the country

where he/she secured the divorce, the divorce obtained therein from his/her Filipino spouse may be regarded as valid in the country, under Section 26 of the Family Code, and will entitle the former Filipino spouse to remarry. Philippine courts have no jurisdiction over a petition for divorce, it being outlawed in the country.102 The Hague Convention Relating to Divorce and Separation of 1902 provides that the granting of divorce or separation must comply with the national law of the spouses and the law of the place where the application for divorce is made.103 LEGAL SEPARATION Relative divorce or otherwise known as legal separation under the Family Code was developed by the ecclesiastical courts at a time when, following the downfall of Rome, the supremacy of the Church was recognized and the marriage tie regarded as indissoluble. The Siete Partidas, the governing Law here during the Spanish regime, allowed relative divorce only.104 Article 55 of the Family Code provides the grounds by which the innocent spouse may file an action for legal separation. An action for legal separation must be filed within five (5) years from the time of the occurrence105 but such action shall in no case be tried before six months shall have elapsed since the filing of the petition to give the spouse the chance to reconcile. The laws governing absolute divorce are applicable to legal separation as provided for in the Hague Convention Relating to Divorce and Legal Separation of 1902. LEGAL CONSEQUENCES OF MARRIAGE C/O: FRANCO SARMIENTO, KRISTINE TRINIDAD, FRITZZIE ESPANOL, AND MIMI LAMA (Salonga, CHAPTER XVI, 1995) PROPERTY RELATIONS AND MARRIAGE Marital Property Relations in the Philippines The pertinent provision regarding the property relations that govern between husband and wife in the Philippines can be found in Title IV of the Family Code, particularly in the General Provisions found in Chapter 1 of the same Title. Art. 74. The property relationship between husband and wife shall be governed in the following order: (1) By marriage settlements executed before the marriage; (2) By the provisions of this Code; and (3) By the local custom. (118)"106 The law recognizes that the property relation between spouses may be set by express agreement through a proper and valid marriage settlement. Article 77 prescribes the conditions for the validity of a marriage settlement that it must be in writing, signed by the parties, and made prior to the celebration of marriage.107 Generally the parties may stipulate

102

Agpalo Coquia p. 275 Salonga p. 300 105 Article 57 of the FC 106 Article 74 of the Family Code 107 Article 77 of the Family Code 103

98

Salonga p. 289 Tenchavez vs. Escano, 15 SCRA 355. Agpalo p. 329 101 Agpalo 99

100

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104

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO or agree to any arrangement in the marriage settlement for as long as it is not contrary to law and public policy and is within the limits provided for in the Family Code.108 • Article 91 states that the absolute community property regime encompasses all the property owned by the spouses at the time of the celebration of the marriage or acquired thereafter. Art 93 further provides that a presumption exists that all property acquired during the marriage belongs to the absolute community. • Under the Conjugal Partnership of Gains regime 109 , the spouses place in a common fund the proceeds, products, fruit and income from their separate properties, through effort or chance. In the event of dissolution of the marriage or partnership, the benefit that accrued to the spouses shall be divided equally between them, unless otherwise stated in the marriage settlement. • The third property regime is called the regime of Separation of Property in which case each spouse shall own, dispose of, possess, administer and enjoy his or her own separate estate, without need of the consent of the other110. Conflict of law problems arising from the property of the spouses are easily disposed of when there is a marriage settlement that has been executed by the parties. But how does one face the same problem in the absence of such settlement? The same Title and Chapter on the General Provisions provide the answer in the form of Article 80. Art. 80. In the absence of a contrary stipulation in a marriage settlement, the property relations of the spouses shall be governed by Philippine laws, regardless of the place of the celebration of the marriage and their residence. This rule shall not apply: Where both spouses are aliens; With respect to the extrinsic validity of contracts affecting property not situated in the Philippines and executed in the country where the property is located; and With respect to the extrinsic validity of contracts entered into in the Philippines but affecting property situated in a foreign country whose laws require different formalities for its extrinsic validity. (124a) • The provision imposes the Philippine law in the absence of any agreement to the contrary where the contracting parties are Filipino citizens. It further claims application even if the parties contracted marriage in another jurisdiction or even if they decided to take up residence abroad. This takes into consideration Art 16 of the Civil Code of the Philippines, the Situs Rule subjects the real and personal property to the law of the country where it is located or situated. • The provision cites 3 exceptions when the Philippine law does not apply. First, the law defers application to spouses who are both nationals of another state. Second, in case the parties entered into a contract which involves properties abroad the extrinsic validity of such contract, whether executed here or abroad, will not be governed by Philippine laws. And lastly, the law of the place where the property is situated outside the Philippines shall govern the extrinsic validity of the contract entered into in the Philippines. • Article 80 seems to make reference only to the law of the place of the property concerned without distinction as to whether the property involved is immovable or not. This is where we think Scoles' distinction between immovable and movable

property and his different treatment thereof would be helpful in filling the gaps in Art 80 of the Civil Code. Immovables • Immovables owned before the celebration of marriage is regulated by the lex situs. In the United States, this area is usually is a non-conflict problem, since the Situs rule provides a uniform solution. The immovable is characterized as an isolated object of rights so that the interests of various persons such as the buyer, or a spouse, or a mortgagee is determined by the law of the place where the land is situated111. • However the significant conflict of law issue arises when we speak of marital property relations involving immovables acquires after the marriage. In this situation, the application of the straight Situs rule poses certain problems. • Hughes vs Hughes112 – Spouses Hughes were married in Washington DC, however they established their marital domicile following the domicile of the husband in Iowa. After a few years, as a result of the income of the husband, they were able to buy a land in New Mexico and thereafter established it as their new domicile. After a few years their marriage was terminated. The issue was whether the New Mexico land that was bought using the assets acquired in Iowa shall be governed by the Iowa law or the New Mexico law. The court ruled that the property relation was governed by the laws of Iowa as to the assets accumulated that time they were still domiciled there, and that upon moving these assets to New Mexico , that rights in the New Mexico land purchased with those assets would continue to be recognized with the incidents that they had in Iowa. This is the so-called Tracing Rule which Scoles states: “Thus the marital interest which attaches to movable assets acquired by the spouses according to the law of their domicile at the time of acquisition is recognized and traceable into real property located in another state in which those assets are invested.”113 The reason given by the court for such an outcome is that a person’s title is not lost when the property is transferred to another state, based on choice of law consideration that protect the reasonable expectation of the parties in their interests under the law of the state of their domicile. Movables • One author points out that the old law on movables was mobilia sequuntur personam which meant that the rights over movables were governed by the law of the owner’s domicile. Movables, by their nature are capable of being transferred easily from place to place and as a result it was difficult to anticipate where they could be situated at a given time.114 Thus in order to provide for convenience, they deemed it better that the law to govern movables would be the domicile of the owner. • US jurisprudence concerning the question of marital right in movables owned at the time of marriage seems devoid of conflict of laws issue since no state provides for immediate marital interest upon such movable asset. These issues are usually resolved as succession issues related to the law of the decedent-owner’s domicile. Making reference to older cases from the past century and beyond, Scoles pointed out that 111

108

Sta Maria p.361 109 Art 106 110 Art 145

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Scoles 91 N.M. 339, 573 P.2d 1194 (1978) Scoles 114 Coquia 112 113

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO

•

•

•

•

before the matrimonial domicile of the couple will determine the interest that each spouse has in the movable property of the other owned at the time of the marriage. This “marital domicile” is the common domicile of the parties at the time of the marriage or that which they establish immediately after the marriage. This rule on the first common domicile has distinct advantages because it subjects the parties to a uniformly single governing law and there is a reasonable assumption that the parties were submitting themselves to the law of their first common domicile when they decided to contract the marriage. Because of these distinct advantages discussed, in most instance where the courts are asked to determine questions arising from movables acquired subsequent to marriage, it will be decided applying the same principles governing property relations involving movables acquired at the time of marriage. In other words, what is to be applied is also the law of their common domicile. The change of the situs of the movables does not affect the interest of the individual spouses in the assets, since the court recognizes that vested interests of the spouses continues insofar as the properties in issue are concerned. This remains true even though the spouses would decide to transfer their domicile to another place. However if upon changing their domicile they acquire new property there, the question arises as to what their marital rights are in the newly acquired properties. The rule is that the law of the domicile of the owner at the time of the acquisition shall govern the property relation unless for some reason the original domicile of the parties would continue to prevail.115 The reason for this is obviously the domicile at the time of the acquisition is the state having the dominant interest in the determination of the issues. The latter qualification refers to one wherein the property regime of the party would change subsequently during marriage. Thus, concluded by Scoles, the marital rights in property are imposed by the law as an incident of the state’s interest in the marriage relationship and the protection of it’s domiciliaries. In case of income from movables, the current marital domicile controls movables at the time of acquisition should also apply. Although the new marital domicile cannot change the nature of ownership of acquisitions that occurred during a domicile elsewhere, it can reasonably govern its present domiciliaries by its marital property rule. The laws of the state on marital property are often reflective of the protective policy on the family as the basic unit of society. States that give such importance to the family often prescribe a number of legislation for its protection. In the Philippines, these protective policies are scattered from the Constitution to the Family Code and even in Special Penal Laws. Legislation of this sort is the product of a balancing act between the protection of the family against the individual rights of the spouses like freedom to alienate the property.

MARITAL PROPERTY AS CONFLICT OF LAWS ISSUE When we speak of Marriage as a conflict of laws issue, it inevitably touches upon property relations since in every legal system, marriage has an important impact on the property rights of the husband and wife. 116 From the time of the celebration of the marriage the law recognizes property regimes that begins to govern their property relation.

In the United States, two such property regime systems had often times been the subject of confict of laws issues, the common law system and the community or marital property system. In addition to this, conflict of laws question also arise concerning both property owned by the parties at the time of the marriage, and that acquired subsequently thereto. This is so because the property regimes of different states prescribe different rights and interests on the spouses who acquire assets before or after the marriage. Jurisprudence tells us that the marital property regime of a married couple shall be governed by express contract between the parties. A pre-nuptial agreement validly entered into by the parties in the proper form and substance prescribed by law shall determine the outcome of any issue concerning property relations that may arise during the existence of marriage. This is the easy answer. However, in the absence of a contract, the law imposes or assumes a particular type of property regime that governs the marriage. It may be Common Law system, Community or Marital Property system, or in the Philippines, we have what is called the Absolute Community Property regime as the default system in absence of such antenuptial agreement. The type of system governs the marriage depends on the law of the “state of dominant interest” 117 . In most cases, this so-called “state of dominant interest” is the domicile of the parties. The usual course of proceeding when a court is confronted with the issue of conflict of laws regarding property is to determine whether it is an immovable or a movable, and thereafter they will be able to apply what controlling legal system is appropriate. THE DOCTRINE OF IMMUTABILITY What is the doctrine of immutability? The doctrine states that marital rights and movables are fixed by law of the first marital domicile and continue notwithstanding the acquisition of a new domicile. 118 This doctrine has been easily discarded by many jurisdiction because of inherent failures. First, the rigidity of the principle ignores the inevitable fact that circumstances could and would change between the parties, and if it does so the doctrine provides no relief from the effects of change of circumstances. Second, Many countries have become signatories to the Hague Convention on Matrimonial Property which provides that the original habitual domicile or designated state may be replaced by a subsequent habitual residence in several circumstances. 119 But this is not to say that the opposite end of the spectrum is the solution to this problem. Full mutability, like when you apply the law of the last domicile would result to tampering of vested rights. Scoles then points out that partial mutability, i.e, to determine marital rights by the marital domicile at the time the issues arise except as to vested rights acquired under the law of a former domicile is an effective compromise.120 LEGITIMACY, LEGITIMATION & ADOPTION, SUCCESSION & ADMINISTRATION C/O: JOYCE BRIONES, JORDAN PUGEDA, VICTOR RAMOS, HENRY VILLANUEVA (Salonga, CHAPTER XXII, 1995) LEGITIMACY 117

ibid ibid 479 Hague Convention on the Law Applicable to Matrimonial Property Regimes, Arts 4,6, 7 (1976), 25 Am J Comp. L. 394, 395-96 (1977) 120 ibid. 118

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Scoles 479 116 Scoles

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119

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO DEFINITION – the status acquired by a person who is born in lawful wedlock or to parents who are married to each other at the time of his birth.121 Legitimacy according to Black122 is “lawful birth; the condition of being born in wedlock; the opposite of illegitimacy or bartardy.” NATURE – the relation between parent and child is a relative domestic status based on natural tie of blood. The child may be the legitimate child of the father but illegitimate with respect to the mother or vice-versa.123 Legitimacy at Birth.124 Legitimacy being a domestic status, it must, on general principles, be governed by the domicile of the parties to it.125 Where one obtains a valid divorce, and then marries again and has children, the marriage being polygamous and void, the children are illegitimate, whether the person who obtained the divorce was domiciled in the state which granted it126 or in another state.127 Legitimacy of a child is submitted to the personal law of the parents, either Domicile or Nationality.128 Under the common law and civil law, the personal law of the parents provides for the following principles:129 Nationality principle, national law of the male parent is decisive Domiciliary principle, the domicile of the male parent is decisive. For most countries the personal law of the father is applied. For example, German law provides for the personal law of the “husband of the mother”. Its purpose is the preservation of the stability of the family.130 In the United States, a wholly distinct rule obtains: the child’s relationship to each parent is determined separately. Considering family stability and unity, honor of the married woman and marital rights the application of personal law of the parent is considered sound. PHILIPPINE LAW Article 15131 New Civil Code provides that the national law determines the question of legitimacy of the child. The national law of the male parent governs the question as to: What time and under what circumstances the presumption of legitimacy may be established or rebutted, Within what period, What events terminate the right to disown the child, and Whether the alleged recognition of paternity may be revoked. The National law of the male governs – If different nationalities, legitimacy is determined by the national law of the father.132 As a child of Filipino fathers are concerned, irrespective of the nationality of their spouses, the provisions of the Family Code of the Philippines enumerating the persons who may be considered legitimate children, indicating who are the 121

Salonga, 329. Black’s Law Dictionary (6th ed.) p.901 JOSEPH H. BEALE, A TREATISE ON THE CONFLICT OF LAWS (1995) 124 Id. 125 Adams v. Adams, 154 Mass. 290, 28 N.E. 260, 13 L. R.A. 275 (1891) 126 Olmsted v. Olmsted, 190 N.Y. 458, 83 N.E. 569, 123 A.S.R. 585 (1908) 127 Adams v. Adamss, 154 Mass. 290, 28 N.E. 260, 13 L.R.A. 275 (1891) 128 JORGE COQUIA AND ELIZABETH AGUILING-PANGALANGAN, CONFLICT OF LAWS: CASES, MATERIALS AND COMMENTS (1995 edition) 129 Salonga, 329. 130 Coquia and Elizabeth Aguiling-Pangalangan. 131 NCC Art. 15. Laws relating to family rights and duties, or to the status, condition and legal capacity of persons are binding upon citizens of the Philippines, even though living abroad. (9a) 132 JORGE COQUIA AND ELIZABETH AGUILING-PANGALANGAN, CONFLICT OF LAWS: CASES, MATERIALS AND COMMENTS (1995 edition)

122 123

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persons who may contest the legitimacy of a child, prescribing the rights of legitimate children, and providing for proof of filiation, are properly applicable. Presumptions of legitimacy governed by the national law of the male parent – Light may be shed by the law that provides that presumptions of legitimacy are not mere rules of evidence, they are rules of substantive law; presumptions are the very substance of legitimacy cases Art. 10 of the NCC, by virtue of which the national law of the persons whose succession is in question governs all questions in respect to the order of succession, the amount of successional rights, and the intrinsic validity, of testamentary provisions, whatever may be the nature of the property and the country in which it is found was seemingly overlooked. DETERMINATION OF LEGITIMACY OF A CHILD133 As per Philippine Law Article 163 to 165 of the Family Code on Paternity & Filiation. The personal law of the illegitimate child is governed by the national law of the mother. If later legitimated, personal law of the child follows that of the father. Under Common Law, the rule that children born within lawful wedlock are legitimate had been modified in many states by statute which may provide that the offspring of certain invalid marriages shall be legitimate. Those born illegitimate can be legitimated by events occurring after their birth such as marriage of their parents or some form of recognition on the part of one or both. The difference in states raises the choice of law problems for it may be possible that the child is legitimate to a parent yet illegitimate to the other. Second Restatement on legitimacy of the American Law Institute provides: Section 287. Laws governing legitimacy – (1) the child will usually be held legitimate if this would be his status under the local law of the state where either (a) the parent was domiciled when the child’s status of legitimacy is claimed to have been created or (b) the child was domiciled when the parent acknowledged the child as his own Section 288. Incidents of Legitimacy Created by Foreign Law – a state usually gives the same incidents to a status of legitimacy created by foreign law under the principles stated in Sec 287 that it gives to the status when created by its own local law. / Persons legitimated under the principles stated in Sec 287 will usually be permitted to inherit land in the state of the forum to the extent, and under the same circumstances, as those legitimated under the forum’s local law LEGITIMATION DEFINITION - The subsequent marriage of the child’s parents otherwise called legitimation per subsequens matrimonium, recognition of the child by the father or legitimation per rescriptum principis, or by such conduct of public repute on the part of the parent which may be considered sufficient to elevate a child to the status of legitimacy134 relates back to the birth of the child. Other laws, only from the time of legitimation. Black’s 135 provides that legitimation is the making legitimate or lawful that which was not ordinarily so; especially the statutory procedure of legalizing (legitimating) the status of an illegitimate child. Such is usually necessary to assure inheritance rights to the child. THEORIES As provided by Padilla, 136 Theories concerning legitimation are: 133 134 135

Coquia and Elizabeth Aguiling-Pangalangan. Salonga, 329. Black’s Law Dictionary (6th ed.) p. 901

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO 1.

the common law theory under which bastards cannot be legitimized by any supervening act 2. the theory that the subsequent intermarriage of the parents is sufficient to legitimize 3. the theory that the father’s acknowledgment is sufficient to legitimize 4. the theory that both an intermarriage and an acknowledgment by the parents are necessary Orthodox common law theory states that: “the illegitimate could not be legitimated by any supervening act.” 137 Philippine Law Article 178. Legitmation shall take place by a subsequent valid marriage between parents. The annulment of a voidable marriage shall not affect the legitimation. Article 177. Only children conceived and born outside of wedlock of parents who at the time of conception of the former, were not disqualified by any impediment to marry each other, may be legitimated. Article 179. Legitimated children shall enjoy the same rights as legitimate children. Article 180. The effects of legitimation shall retroact to the time of the child’s birth. The Problem in conflicts of laws is choosing the system of law which shall determine whether legitimation has been effected or not. As matter of personal status, the personal law of the parent is considered decisive in all legal systems. The National law of the father at the time of marriage (or recognition in some legal systems) determines all questions involving legitimation. One limitation is that where under the national law of the child his consent is required to the legitimation, there is a decided tendency to apply the provisions of the child’s law, as a measure of protection to the child. Forms of Legitimation 1. Legitimation from Birth.138 It happens that a child who at birth is apparently an illegitimate child of his father may by a later event be legitimated from birth: for instance, by recognition of paternity by the father or by the marriage of the parents. 2. Legitimation by Subsequent Marriage.139 By a principle of the Canon law, the marriage of the parents of an illegitimate child at any time after the birth of the child resulted in legitimating it ex post facto form the moment of birth. 3. Legitimation by Recognition.140 If the law of the state of domicile of either parent at the birth of the child provides for legitimizing that child from birth by recognition of paternity after birth, the child becomes the legitimate child of that parent from birth if he subsequently recognizes the child while there domiciled. 4. Legitimation after Birth. 141 A sovereign of the domicile of the parties may legitimate a natural born child at any time. 5. Recognized Natural Child.142 A relation less that legitimation, that of recognized natural child, may arise by the law of several European states, between a parent and natural child.

Legitimate or Legitimated Child and Parents143 The personal law of the father refers to the national law of the domiciliary law depending on the theory followed by the particular legal system. Except for immovable properties of the child which may be regulated by lex situs, the personal law of the father governs. According to some civil law writers: personal law of the child should prevail, the argument being that it is the welfare of the child that should be considered of prime importance. This is not an argument for the outright application of the child’s national law since it may even be less favorable to the child than the father’s national law. A posed Symmetrical solution is the Greek Civil Code providing for the relation between legitimate parents and their children dependent as follows: The national law that was last common to the father and the child In the absence of such, upon the law of the father at the birth of the child If the father is dead, upon the last law common to the mother and the child In the absence of such, upon the law of the mother at the death of the father Legitimacy once created under the personal law of the parent, either by the birth of the child or by legitimation is a permanent status. The nature and extent of the rights and duties, may be modified by a change of the personal law deemed to be decisive for the child’s status. The child’s legitimacy is immutable; but the incidents of his status are mutable. COMPARATIVE ANALYSIS OF LEGITIMACY AND LEGITIMATION144 Status Legitimation may occur pursuant to several acts of the parent after birth. The subsequent marriage of parents is recognized as such an act in all of the states in the United States;145 however, in many states, acknowledgment of paternity is also required. Acknowledgment without marriage is sufficient in some states although the necessary form of acknowledgment varies greatly. From such variations it becomes relevant to determine what state’s law is significant in determining whether a child is to be treated as having the character of legitimacy. Domicile has a significant interest in the resolution of legitimacy cases. Where neither parent nor child is domiciled in the sate by the law of which legitimation is claimed to have occurred, the child usually would be treated as illegitimate.146 Where the parent and the child have been domiciled in a state from the time of the child’s birth, legitimation of the child according to the law of the state147 will be recognized everywhere.148 If the acts relied upon for legitimation are insufficient by the law of both parties at all times, legitimacy will not result.149 However, the child may still claim the right of inheritance without legitimation. An act sufficient for legitimation by the law of the father’s domicile legitimates the offspring.150 Conversely, the law of the child’s domicile should suffice to legitimate the child, particularly when the parent has acknowledged the child in a manner or form sufficient under the laws. The underlying reason is that the status of legitimacy is to be preferred to that of 143

136

Padilla, 187. 137 Salonga, 329. 138 Beale. 139 Id. 140 Id. 141 Id. 142 Beale.

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Salonga, 329. EUGENE F. SCOLES AND PETER HAY, CONFLICT OF LAWS (1992 Second Ed.) p. 553 Krause, Illegitimacy, p. 14 to 17 146 Smith v. Kelly’s Heirs, 23 miss. 167, 55 Am.Dec. 87 (1851); Eddie v. Eddie, 8 N.D. 376, 79 N.W. 856 (1899) 147 Estate of Baker, 105 Misc.2d 365, 432 N.W.S.2d 78 (1980) 148 Peirce v. Peirce, 379 Ill. 185, 39 N.E.2d 990 (1942); Scott v. Key, 11 La.Ann. 232 (1956) 149 In re: Bassi’s Estate, 234 Cal.App.2d 529, 44 Cal.Rptr. 541 (1965) 150 Restatement, Second, Conflict of Laws. Sec. 287; Pfeifer v. Wright, 41 F.2d 464 (10th Cir. 1930) 144 145

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO illegitimacy and that no countervailing issues of fairness to the parent arise when the parent has done some affirmative act.151 Inheritance Rights of Legitimate and Legitimated Children Olmsted v. Olmsted152 – the United States Supreme Court held that the Full Faith and Credit Clause does not require states to recognize a foreign status of legitimacy for purposes of inheritance of local land. Inheritance rights are thus incidents of the status to be determined by local succession laws. Despite this technical distinction, it now seems established that “ a state will give the same incidents to the status of legitimacy created by a foreign law . . . that it gives to the status when created by its own law. . .153 2 important California decisions have taken a wide view in favor of legitimacy and accompanying inheritance rights: In re Lund’s Estate 154 extended the rights of a pre-termitted legitimated child to a child acknowledged by his father at times when neither the law of the child’s or of the father’s domicile would legitimate but which acknowledgments would have been sufficient in California where the father died domiciled. In In re Bassi’s Estate155 the court, following Lund, again found that legitimation was to be determined in accordance with California law, as the law of the decedent’s domicile at death, regardless of whether the parent’s acknowledgment was sufficient to create that status of legitimacy at the time or place where made: “there is nothing which precluded the application of the laws of succession of this sate, as interpreted in the light of local statutes and policy governing the determination of legitimacy, so as to permit inheritance . . .” 156 Thus, “the factual status between the father, the decedent, and claimants, having once been established it follows the decedent to California. The claimants are entitled to inherit through their father, not only as heirs of his estate if he had died here, but also form their half-brother or other paternal relatives who do leave estate here.”157

At common law, an illegitimate child inherited from no one; by statute, however, most states granted inheritance rights to such a child with respect to its mother, but rarely as against the father.162 A number of decisions by the United States Supreme Court have now substantially equalized the rights of the illegitimate and legitimated children. According to Levy163 and Glona164, the court permitted children born out of wedlock to sue in wrongful death for the loss of their mother and , likewise, for a mother to bring such an action for the loss of her child. Lower court decisions interpreted Levy and Glona to “require equality between marital and nonmarital children in their legal relationship with their fathers,”165 as well as mothers including inheritance rights. A different question arises in the case of testate succession. Since the testator was free to provide or not to provide for any of his children, the testator’s use of the words “children” or “issue” must therefore be construed to include or to exclude children born out of wedlock. At least tin the case in which the testator’s paternity was established in his lifetime, the principles of Lalli v. Lalli166 would seem to require an inclusive construction.167 The same result should obtain when state law grants “children: a statutory share or support allowance.

Illegitimate Children One who is born at a time when his parents, though alive, are not married to each other.158 Such child however is legitimate if they were married after his conception and before his birth.159 In most countries, the personal law of the mother – nationality or her domicile – governs for illegitimate children. Some countries refer the matter to the personal law of the child. For the United States, lex fori not the personal law is considered decisive. In England, only English law is applied and then only if the child is born in England or, if born abroad, of English parents.160

ADOPTION DEFINITION – Adoption has been defined as “the process which creates the relation of parent and child between persons who are strangers in blood.”168 The Second Restatement defines adoption as: “the process whereby the adoptive parent is substituted for the natural parents.”169 However, as pointed out by Salonga, such definitions do not encompass adoptions by parents of their own children. Pursuant to this, he gives a more accurate definition: “an act which renders a child legitimate in relation to the adopting parents, to whom the child may or may not be related.”170 1. To effect an adoption, there must be a formal legal act or process, and not simply by contract or compromise. Authors further emphasize this when they state that since adoption is unknown in common law, it can only be effected by strict compliance to the terms of some statute.171 2. The relationship created makes the adoptee a legitimate child of the adopter(s); and, such relationship is strictly bound between such parties only by legal fiction. 3. Adoption is seen as to affect the status of the said parties; hence, governed by lex domicilii.172 These inferences make one to conclude that a conflict of laws issue would arise when the prospective adopters and adoptee are domiciled in different states. In such a case, there is an issue with respect to (1) choice of law, (2) the court’s jurisdiction to grant an adoption, and (3) effects of adoption.

Inheritance Rights of Illegitimate Children161

CHOICE OF LAW 162

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Restatement, Second, Conflict of Laws. Sec. 287; In re Spano’s Estate, 49 N.J. 263 152 216 U.S. 386, 30 S.Ct. 292, 54 L.Ed. 530 (1910) 153 Restatement, Second, Conflict of Laws, Sec. 288, the rule applies equally to succession to land and to personality. 154 26 Cal.2d 472, 159 P.2d 643 (1945) 155 234 Cal.App.2d 529, 44 Cal.Rptr. 541 (1965) 156 234 Cal.App.2d at 553, 44 Cal.Rptr. at 555 (1965) 157 234 Cal.App.2d at 55o, 44 Cal.Rptr. at 553 (1965) 158 Black’s Law Dictionary (6th ed.). p. 747 159 Home of Holy Infancy v. Kaska, Tex., 397 S.W.2d 208. 160 Salonga, 329. 161 EUGENE F. SCOLES AND PETER HAY, CONFLICT OF LAWS (1992 Second Ed.)

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Krause, Equal Protection for the Illegitimate, 65 Mich. L. rev. 477, 487 (1967) Levy v. Leouisiana, 391 U.S. 68, 88 S.Ct. 1509, 20 L.Ed.2d 436 (1968) Glona v. American Guarantee & Liability ins. Co., 391 U.S. 73, 88 S.Ct. 1515, 20 L.Ed.2d 441 (1968) 165 Krause, Child Support in America: The Legal Perspective 124 and 119 et seq. (1981) 166 439 U.S. 259, 99 S.Ct. 518, 58 L.Ed.2d 503 (1978) 167 Restatement, Second, Conflict of Law Sec. 288 168 Eugene F. Scoles and Peter Hay, Conflict of Laws 559 (1992 Second Ed.); Herbert F. Goodrich and Eugene F. Scoles, Conflict of Laws Hornbook Series 288 1964. 169 Introductory Note, Second Restatement, Section 298 170 Salonga, 329. 171 Beale, 713. 172 Coquia and Elizabeth Aguiling-Pangalangan, 292. 163 164

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO Some writers assert that choice of law is an issue in conflict of laws.173 As Coquia points out the choice of law becomes a conflict rules issue with regard to the potential adoptee’s best interest. As will be later explained, the adoptee’s interest and welfare shall be paramount; as such, adoption “laws should be construed liberally, in a manner that will sustain rather than defeat the purpose… [but it] cannot be sustained when to do so would violate the proscription against judicial legislation”174 Others assert that it’s a non-issue. 175 Scoles, while affirming the issues of jurisdiction and effects of adoption, points out that “choice of law issues are not involved in the adoption itself as the court applies the law of the forum.”176 However, upon discussing international adoptions, he makes express mention contrary to the aforequoted: The applicable law is not that of the forum, but the personal law of the adopter or child. The personal law of the adopter may govern the prerequisites of adoption, while the personal law of the child is applicable in some jurisdictions for the question of whose consent to adoption is necessary.177 Would be Adopter and Adoptee Scoles makes mention that personal laws of the would-be adopter and adoptee have to be taken into consideration. The former will determine the would-be adopter’s eligibility to adopt; while the latter will determine the would-be adoptee’s eligibility to be adopted. He likewise points out, as do other authors, that there is diversity in requisites among states. Some of these requisites are: 1. Consent of the would-be adoptee’s natural parents or guardian to the proposed adoption 2. Consent of the would be-adoptee, if he has already reached a certain age. The said age ranges from 10 to 21 years of age 3. The would-be adopter(s) must be of minimum age, such ranging from 18 to 50 years old 4. The would be adopters and adoptee must have a minimum age differential, ranging from 10 to 30 years 5. The limitation of (a) single sex adoptions, (b) the would-be adopters must have no other children 6. The condition of rescission of adoption upon subsequent birth to the adopter JURISDICTION Some writers assert that the interest and welfare of the child is best served by following the adoptee’s personal law. However, as Coquia states, such argument is inherently weak since: (1) it does not encompass situations wherein the adoptee does not actually reside (constructive domicile or nationality) in the forum’s state, thus, the forum would have little basis to protect the adoptee’s interest; and (2) the adopter’s personal law, as compared to the adoptee’s laws, may provide a better protection for the adoptee’s interest and welfare.178 In the case of the latter, the adopter’s jurisdiction has been considered either exclusively or concurrently.

In support for the concurrent jurisdiction, some writers assert that the best interest of the child cannot be prejudiced by parties’ the inability to find a court with proper jurisdiction. As asserted by Scoles:179 Adoptions at the domicile of the child, through voluntary acts of the adopting parents performed there, has been held valid both in the state of adoption180 and elsewhere,181 even where the adoptive parents had no domicile within the state. Decisions denying jurisdiction to adopt upon these facts182 seem to be based upon interpretation of a particular statute, rather than upon any general principle of jurisdiction. Beale, on another perspective on the matter of jurisdiction, asserts that the action must be with the domicile shared by both potential adopters and adoptee. This is founded on the effect of adoption, the change of status between the parties. It is only the court with jurisdiction over both parties that may alter their respective statutes.183 However, based on the discussion on jurisdiction, Beale seems to center more on the change of status rather than the would-be adoptee’s best interest. EFFECT OF ADOPTION Governing Law The effect of an adoption depends on two orders depending on which law governed the creation of adoption: (1) if the adopter’s personal law effected the adoption, the same law governs the effects of adoption; (2) if the adoptee’s personal law effected the adoption, such law shall cease to govern the adopter-adoptee relationship, yielding to the adopter’s personal law to govern the effects of adoption.184 The question of the decree’s effect arises most often in the context of succession and is governed by the law applicable to the succession, i.e., in most cases the law of the decedent’s domicile at death. In most cases, the decree will have the same effect as a local decree.185 In Succession In some jurisdictions, a decree of adoption extinguishes all successional rights prior to the said decree and vests it with the adopter. This is present in English law and many United States state laws. Other jurisdictions limit the said effects of adoption. This is present in the Philippines where the Family Code and Adoption Statutes provide the effects of an adoption decree. Despite the varying difference between states, “practically all legal systems makes the child legitimate in relation to the adopting parents.”186 The effects adoption is separate and distinct if made into a substantial issue in a given controversy. Succession is one such case – whether or not an adoptee may inherit from his biological parents. The effect of an adoption is also in issue when the adopted child claims inheritance rights from its natural parents. Again, the issue will be decided by the applicable local succession law.187 With respect to the substantive issue, the courts are split: some view the adoption 179

Eugene F. Scoles and Peter Hay, Conflict of Laws 560 (1992 Second Ed.); Goodrich and Scoles, 289. Scoles citing Appeal of Wolf, 13 A. 760, 10 Sad. 139 (Pa. 1888). See Martinez v. Reed, 490 So.2d 303 (La.App. 1986) Scoles citing Van Matre v. Sankey, 148 Ill. 536, 36 N.E. 638 (1893) 182 Scoles citing Foster v. Waterman, 124 mass. 592 (1878) 183 Beale, 714. 184 Coquia and Elizabeth Aguiling-Pangalangan, 292. 185 Scoles citing Matter of Estate of Chase, 127 A.D.2d 415, 515 N.Y.S.2d 348 (1987) 186 Salonga, 329. 187 Scoles citing Pazzi v. Taylor, 342 N.W.2d 481 (Iowa 1984) (law of decedent’s domicile at death governs issue whether natural son, adopted by stepfather out-of-state, inherits) 180 181

173

Ibid. Ruben E. Agpalo, Conflict of Laws (Private International Law) 284 (2004 ed.). Restatement, Second, Conflict of Laws Sec. 289 (1971) 176 Eugene F. Scoles and Peter Hay, Conflict of Laws 559 (1992 Second Ed.); Goodrich and Scoles, 288 177 Ibid, p563; Ibid 283. 178 Coquia and Elizabeth Aguiling-Pangalangan, 292. 174

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO as effecting a complete substitution of the adoptive parents for the natural parents thus severing all links and ending all inheritance claims, 188 while others preserve the right to inherit from or through the natural parents.189 Foreign Judgment and Recognition Aside from the similarity in governing law, there are two more incidents that remain the same, namely: (1) a decree of adoption is in effect a form of a foreign judgment; and, (2) principles on recognition and enforcement of such foreign judgment shall govern.190 As Beale states: An adopted child, the status once having been created by the requisite legal form, remains such in spite of change of residence or domicile.191 He will be treated in every other state than the one in which he was adopted just as adopted children are treated in such other state; that is, if adopted children are recognized by its law he will be regarded there as an adopted child,192 while if its law does not recognize the status of adoption he will there be treated like a stranger in blood.193 PHILIPPINE CONTEXT The Philippines adheres to Salonga’s definition of adoption. It has been consistently held in Philippine law that a foreign citizen may adopt a relative, provided that (a) the foreign citizen was formerly a Filipino citizen; and (b) the relative to be adopted qualifies with accordance to law (degree of consanguinity and/or affinity). Adoption cases likewise follow lex domicilii as the law requires a foreign national to have resided in the Philippines for at least 3 continuous years prior to filing the petition for domestic adoption;194 moreover, the said petition ought to be filed with the Family Court where the petitioners reside.195 CHOICE OF LAW In the Philippines a valid adoption must have a court decree predicated from a judicial proceeding. There is no adoption pursuant to an agreement or contract. The adoption procedure followed by the Philippine courts considers paramount the best interest of the would-be adoptee, with due consideration for the would-be foreign adopters’s laws. The paramount consideration of the would-be adoptee’s interest and welfare is seen in the objectives stated in law.196 Another aspect of the adoptee’s best interest is the exhaustion of

remedies to maintain the adoptee with the natural parents or guardian, if known; thus, requiring the latter to undergo counseling and to provide consent for the proposed adoption. Finally the paramount consideration is emphasized by requiring the would-be adopters to submit documents, such as certifications: (a) to allow the adoptee to enter the country of the adopter; (b) to show the adopter’s capacity to adopt in his own country; and, (c) by the government or appropriate office or agency that the adopter is able to discharge emotional, financial and psychological parental authority over the adoptee.197 It would appear that the Philippines adheres to both the personal laws of the would-be adopter and adoptee, while applying the forum’s procedural law. As mentioned by Scoles, there is diversity in requisites for adoption. In the PhilippinesAs held in Armstrong v. Manzo,198 failure to notify or obtain the consent of the natural parents of the adoptee is a serious defect to the proceeding. Capacity of Aliens to Adopt The current adoption law has reverted to the former policy, favoring alien capacity, to wit: Section 4(2). Any alien possessing the same qualifications as above-stated for Filipino nationals: Provided, That his country has diplomatic relations with the Republic of the Philippines, that he has been living in the Philippines for at least three (3) continuous years prior to the filing of the petition for adoption and maintains such residence until the adoption decree is entered, that he has been certified by his diplomatic or consular office or any appropriate government agency to have the legal capacity to adopt in his country, and that his government allows the adoptee to enter his country as his adopted child. Provided, further, That the requirements on residency and certification of the alien’s qualification to adopt in his country may be waived for the following: a former Filipino citizen who seeks to adopt a relative within the fourth (4th) degree of consanguinity or affinity; or one who seeks to adopt the legitimate child of his Filipino spouse; or one who is married to a Filipino citizen and seeks to adopt jointly with his spouse a relative within the fourth (4th) degree of consanguinity or affinity of the Filipino spouse.199 In the event the foreigner would be adopter, formerly a Filipino citizen, would want to adopt a Filipino relative by consanguinity, it has been held that the courts are justified in applying Philippine laws with respect to procedural and substantial issues.200

188

Scoles citing Shehady v. Richards, 83 N.M. 311, 491 P.2d 528 (1971) Scoles citing Go International Inc. v. Lewis, 601 S.W.2d 495 (Tx.Civ.App. 1980) Coquia and Elizabeth Aguiling-Pangalangan, 297. 191 Beale citing Woodward’s Appeal, 81 Conn. 152, 70 A. 453 (1908) 192 Beale citing Van Matre v. Sankey 148 Ill. 536, 36 N.E. 628, 23 L.R.A. 665, 39 A.S.R. 196n (1893) 193 Beale citing Brown v. Findley, 157 ala. 424, 47 S. 577, 21 L.R.A. (N.S.) 679, 131 A.S.R. 68, 16 A.C. 779 (1908) 194 Republic Act No. 8552, Section 7(b). 195 AM No. 02-06-02-SC, Section 6. 196 AM No. 02-06-02-SC dated July 31, 2002 SEC. 2. Objectives. – (a) The best interests of the child shall be the paramount consideration in all matters relating to his care, custody and adoption, in accordance with Philippine laws, the United Nations (UN) Convention on the Rights of the Child, UN Declaration on Social and Legal Principles Relating to the Protection and Welfare of Children with Special Reference to Foster Placement and Adoption, Nationally and Internationally, and the Hague Convention on the Protection of Children and Cooperation in Respect of Intercountry Adoption. (b) The State shall provide alternative protection and assistance through foster care or adoption for every child who is a foundling, neglected, orphaned, or abandoned. To this end, the State shall: i. ensure that every child remains under the care and custody of his parents and is provided with love, care, understanding and security for the full and harmonious development of his personality. Only when such efforts prove insufficient and no appropriate placement or adoption within the child’s extended family is available shall adoption by an unrelated person be considered. 189 190

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ii. iii. iv. v.

safeguard the biological parents from making hasty decisions in relinquishing their parental authority over their child; prevent the child from unnecessary separation from his biological parents; conduct public information and educational campaigns to promote a positive environment for adoption; ensure that government and private sector agencies have the capacity to handle adoption inquiries, process domestic adoption applications and offer adoption-related services including, but not limited to, parent preparation and postadoption education and counseling; vi. encourage domestic adoption so as to preserve the child’s identity and culture in his native land, and only when this is not available shall inter-country adoption be considered as a last resort; and vii. protect adoptive parents from attempts to disturb their parental authority and custody over their adopted child. Any voluntary or involuntary termination of parental authority shall be administratively or judicially declared so as to establish the status of the child as “legally available for adoption” and his custody transferred to the Department of Social Welfare and Development or to any duly licensed and accredited child-placing or child-caring agency, which entity shall be authorized to take steps for the permanent placement of the child. 197 Republic Act No. 8552; AM No. 02-06-02-SC dated July 31, 2002 198 Armstrong v Manzo, 380 US 545, S. Ct. 1187 (1965). 199 Republic Act No. 8552; AM No. 02-06-02-SC dated July 31, 2002 200 People v Toledano, G.R. No. 94147, June 8, 1994.

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO Jurisdiction Philippine laws do not require foreign-adopters to be residents of the Philippines. As shown in the Adoption Rules, 201 there are provisions for inter-country adoptions and domestic adoptions. Inter-country adoption rules govern foreign nationals and Filipino citizens permanently residing abroad wishing to adopt Filipino adoptees.202 These rules state that an application for adoption may filed either with the Family Courts or directly to the InterCountry Adoption Board. For domestic adoptions, among the requisites that have to be alleged and duly proved is at least three years203 residency.204 Ellis v Republic205 and Katancik v Republic206 are cases that exemplify a foreigner-adopter’s non-observance of the residency requirement then applicable. Effects of Adoption It is well recognized that the effects of adoption are: (a) creation of successional rights and obligations between adopters and adoptee; and, (b) the parties are vested with rights, civil rights for the adopters, such as parental authority and the adoptee’s legitimacy, and the right to use the adopter’s surname for the adoptee.207 Art. 189. Adoption shall have the following effects: For civil purposes, the adopted shall be deemed to be a legitimate child of the adopters and both shall acquire the reciprocal rights and obligations arising from the relationship of parent and child, including the right of the adopted to use the surname of the adopters; The parental authority of the parents by nature over the adopted shall terminate and be vested in the adopters, except that if the adopter is the spouse of the parent by nature of the adopted, parental authority over the adopted shall be exercised jointly by both spouses; and The adopted shall remain an intestate heir of his parents and other blood relatives. With regard Foreign Adoptions The Philippine recognizes the principle of foreign adoptions validly rendered and recognized where effected. However, such foreign adoption is still subject to Philippine municipal law, i.e., the right to register the said adoption in the civil register.208 By way of exception, such adoptions shall not be recognized in the Philippines when public policy or residents’ interest forbid its enforcement, thus demand the substitution of the lex fori.209 201

Republic Act No. 8552; AM No. 02-06-02-SC dated July 31, 2002 AM No. 02-06-02-SC, Section 26. Agpalo notes that temporary absences for professional, business, health or emergency reasons not exceeding 60 days in one year does not break the continuity requirement. He notes further that the law states “residence” thus the foreign would-be adopter need not be domiciled in the Philippines. Ruben E. Agpalo, Conflict of Laws (Private International Law) 292 (2004 ed.). 204 Republic Act No. 8552; AM No. 02-06-02-SC dated July 31, 2002: Section 4(2) (2) Any alien possessing the same qualifications as above-stated for Filipino nationals: Provided, That his country has diplomatic relations with the Republic of the Philippines, that he has been living in the Philippines for at least three (3) continuous years prior to the filing of the petition for adoption and maintains such residence until the adoption decree is entered, that he has been certified by his diplomatic or consular office or any appropriate government agency to have the legal capacity to adopt in his country, and that his government allows the adoptee to enter his country as his adopted child. Provided, further, That the requirements on residency and certification of the alien’s qualification to adopt in his country may be waived for the following: (i) a former Filipino citizen who seeks to adopt a relative within the fourth (4th) degree of consanguinity or affinity; or (ii) one who seeks to adopt the legitimate child of his Filipino spouse; or (iii) one who is married to a Filipino citizen and seeks to adopt jointly with his spouse a relative within the fourth (4th) degree of consanguinity or affinity of the Filipino spouse. 205 G.R. No. L-16922, April 30, 1963. This case law has been superseded by the Child and Youth Welfare Code or PD 603. 206 G.R. No. L-15472, June 30, 1962 207 Salonga, 333-334. 208 Mercida v Aglubay, 12 SCRA 1033 (1962) 209 Ruben E. Agpalo, Conflict of Laws (Private International Law) 278 (2004 ed.).

202 203

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With regard to Citizenship Philippine courts have declared that adoption relates to a civil right and does not affect changes in the political rights of the adopted child including the child’s eligibility to acquire the citizenship of the adopter. 210 Adoption is not a means to acquire or dispense one’s Filipino citizenship.211 With regard to Succession and Inheritance Philippine law follows the national law of the decedent for succession purposes: “intestate and testamentary succession, both with respect to the order of succession and to the amount of succesional rights… shall be regulated by the national law of the person whose succession is under consideration, regardless of the nature of the property and regardless of the country wherein said property may be found”212 The succession of the adopted child to the estate of the adopters depends on where the forum is situated. If presented to Philippine courts, Article 16 of the New Civil Code shall be made applicable. The same rule applies when the adopted claims an inheritance from his natural parents. On this point, there is a divergence of opinions: On one hand, it is stated that the adopted is an intestate heir to his biological parents by express provision of law. Section 16 of the Domestic Adoption Law merely ceases the natural parents’ parental authority and vests it to the adopters. Such provision cannot be considered as an implied repeal of Articles 189-190 of the Family Code;213 On the other hand, it is also stated that the reciprocal rights and obligations to the biological parents have ceased and is established with regard to the adopters.214 Thus, the only manner in which the adoptee and his biological parents may inherit from one another is through testamentary disposition. As Salonga points out, the effect of harmonizing these two provisions yield to a dual gain for the adopted. He may inherit both from his adoptive and natural parents.215 SUCCESSION • In Philippine jurisdiction the term “succession” has been defined as “the mode of acquisition by virtue of which the property, rights and obligations to the extent of the value of the inheritance, of a person are transmitted through his death to another or others either by his will or by operation of law. “216 • A conflict of laws situation arises where there is a foreign element involved in a succession problem, as illustrated by this situation: • Eulogio Lopez, a Filipino businessman, dies domiciled in California. He leaves real and personal properties in various places: a house and lot in California, big parcels of land in Metro Manila and suburbs, substantial shares of stock in a number of multinational corporations, and considerable bank deposits in Manila and New York. 217 210

Coquia and Elizabeth Aguiling-Pangalangan, 297. Ching Leng v Galang, G.R. No. L-11931, October 7, 1958 New Civil Code, Article 16. 213 Ibid. 214 Republic Act No. 8552, “Domestic Adoption Law of 1998” Sec. 18. Succession. — In legal and intestate succession, the adopter(s) and the adoptee shall have reciprocal rights of succession without distinction from legitimate filiation. However, if the adoptee and his/her biological parent(s) had left a will, the law on testamentary succession shall govern. 215 Salonga, 334-335. 216 New Civil Code, Article 774. 217 Salonga, 503. 211 212

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO In this situation, two questions arise: (1) What law/s determine who will succeed, to what extent, to Lopez’s assets? (2) Does it matter whether proceedings for the administration of the Lopez estate take place in California, his domicile at the time of his death, or in the Philippines, his country?218 Theories 2 divergent ideas: (1) universal succession/unitary system and (2) split/division system.219 • The universal succession or unitary system assumes that the individuality of the decedent continues to exist after his death in the person of his heir, for juridical purposes.220 Thus, whatever personal law governed the decedent governs succession to his entire estate after his death.221 The national law of a decedent whose country of nationality adopts the nationality principle applies while the domiciliary law of the decedent whose country of domicile adopts domiciliary principle. 222 Countries that follow this system include Italy, Spain and the Philippines. Philippine conflicts rule on succession has a civil law derivation, but rules on probate of wills and the settlement and administration of estates are Anglo-American in origin.223 • Applying the universal system to the problem of Eulogio Lopez, if the proceedings are instituted in the Philippines, a Philippine court will hold that the Philippine law will govern the succession to his properties as provided under paragraph 2 of Article 16 of the Civil Code224.225 • On the other hand, the split or division system has its roots in the feudalistic system of law. Under that system, feudal lords could not permit the rights of succession to their land to be affected should their vassals acquire a foreign domicile.226 Thus, the split system seeks to distinguish between immovables and movables. Countries that adopt this system are England, US and France.227 In the US, succession to land upon the death of the owner is governed by the law of the place where the land is situated, while the devolution of personalty is governed by the law of the domicile of the testator at the time of his death. • According to the Second Restatement, lex situs should be applied in succession to land because the state of the situs has an obvious interest in having interests in local land decided in a manner that complies with its notion of what is reasonable and just. On the other hand, the law of the domicile should be applied to movables because it is desirable insofar as an estate would be treated as a unit, and the state that has the dominant interest in the application of its laws is the state of the decedent’s domicile at the time of his death. The domicile law is the law which the decedent is most familiar with and its application coincides with the expectations of the decedent and his family. •

•

Applying the split system to Eulogio’s problem, the land in California will be regulated by California law while the land in the Philippines will be regulated by Philippine law. The personalty will be regulated by law of his last domicile, that is, California law.

SUCCESSIONAL RIGHTS AND CAPACITY TO SUCCEED Philippine Conflicts Rules In intestate and testamentary successions, the national law of the decedent governs the order of succession, amount of successional rights and intrinsic validity of testamentary provisions, whatever may be the nature of the property and regardless of the country wherein said property may be found228, as well as capacity to succeed.229 The rights to the succession of a person are deemed transmitted from the moment of death. The Philippine view that the entire property of the deceased passes directly to the heirs, testate or intestate, has its origin in Roman Law and is observed in civil countries in Europe 230 Civil law and common law conflicts rules Under the common law system, in so far as personalty is concerned, distribution of the decedent’s property is governed by the law of the last domicile of the decedent at the time of death.231 As regards immovable property, the proper law is the lex situs.232 Moreover, in English law, no such transmission of successional rights upon death occurs. The only person entitled to deal with the property is he who has been granted the right of administration by public authority i.e., either the executor or administrators.233 CAPACITY TO SUCCEED Philippine Conflicts Rules Article 1039 of the Civil Code provides that capacity to succeed is governed by the national law of the decedent. Persons not incapacitated by law may succeed, be it by will or by intestacy.234 In order to be capacitated to inherit, paragraph 1 of Article 1025 of the Civil Code provides that the heir, devisee or legatee must be living at the moment the succession opens, except in case of representation, when it is proper. However, a child already conceived at the time of the death of the decedent is capable of succeeding provided it be born later under the conditions prescribed in Article 41.235 The national law of the decedent governs such questions as to whether a given person is unworthy to succeed on the ground of certain crimes committed by him against the deceased, whether a corporation or an unborn child can acquire property by succession, and whether an heir can validly renounce his rights to succession by a solemn agreement of renunciation executed between the heir and the deceased during the latter’s lifetime. 236

218

Id. Id. Id at 504. 221 Id at 503. 222 Salonga, 504. 223 Id at 518. 224 Par. 2 of Article 16 of the New Civil Code provides: However, intestate and testamentary successions, both with respect to the order of succession and to the amount of successional rights and to the intrinsic validity of testamentary provisions, shall be regulated by the national law of the person whose succession is under consideration, whatever may be the nature of the property and regardless of the country wherein said property may be found. 225 Salonga, 505. 226 Id at 506. 227 Id at 504. 219 220

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228

New Civil Code, Art. 16 (2). Id, Art. 1039. Salonga, 518. 231 Minor, 328 as cited in AMBROSIO PADILLA, CONFLICT OF LAWS (PRIVATE INTERNATIONAL LAW) OF THE PHILIPPINES 263 (1976 edition). 232 Padilla, 264. 233 Salonga, 518. 234 New Civil Code, Art. 1024 (1). 235 Article 41 of the Civil Code provides: Art. 41. For civil purposes, the fetus is considered born if it is alive at the time it is completely delivered from the mother's womb. However, if the fetus had an intra-uterine life of less than seven months, it is not deemed born if it dies within twenty-four hours after its complete delivery from the maternal womb. (30a) 236 Bellis v. Bellis 20 SCRA 358. 229 230

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO Aznar v. Christensen Garcia237 – the testator was an alien domiciled in the Philippines but who had always considered himself a citizen of California. He had an acknowledged natural daughter, a Filipino citizen, who contended that under Art. 16 par. 2, California law should be applied but under California law, the matter is referred back to the domicile i.e., Philippine law such that the share of the daughter must be increased in view of the successional rights of illegitimate children under Philippine law. The counsel for the other sister who was named by the testator as the only heir, contended that under Art. 16 par. 2, the national law of the deceased must apply, and that under California law, there are no compulsory heirs, the testator being completely free to dispose of his property in absolute dominion. Since illegitimate children not being entitled to anything under California law, the will of the testator giving the bulk of the property to her must remain undisturbed. The issue raised was whether or not an acknowledged natural daughter of the testator --- an alien domiciled in the Philippines but who had always considered himself a citizen of California --- was entitled to succeed under internal Philippine law. The Supreme Court stated that there are two rules in California on the matter: internal law and conflicts laws. The Court quoted Art. 946 of the California Civil Code: “If there is no law to the contrary in the place where personal property is situated, it is deemed to follow the person of its owner and is governed by the law of his domicile.” Christensen, being domiciled outside California, the law of his domicile (Philippines) ought to be followed. The Court held that were it to throw the matter back to California, the problem would be tossed back and forth between the states concerned resulting in “international football.” It remanded to the lower court for determination of successional rights under Philippine internal law. Civil law and common law conflicts rules In the US, the law of the state where the land is determines who is heir, and his interests, duties and liabilities.238 Questions concerning a will disposing of personal estate at the death of the owner are in general, governed by the law of the decedent at the time of his death; this is applicable to questions of capacity, forms, substantive, validity and construction. 239 Capacity to receive a legacy is ordinarily governed by the law of the domicil of the testator at his death.240

intervention of a notary public and participation of attesting witnesses242 while a holographic will is a will that is entirely written, dated and signed by the hand of the testator himself.243

Validity of wills A will is a personal, solemn, revocable and free act by which a capacitated person disposes of his property and rights and declares or complies with duties to take effect after his death. It is essentially ambulatory such that at any time prior to the testator’s death, it may be changed or revoked. Until admitted to probate, it has no effect whatever and no right can be claimed thereunder, the law being explicit. A will is a specie of conveyance whereby a person is permitted, with the formalities prescribed by law, to control to a certain degree the disposition of his estate after his death.241 In Philippine internal law, there are two kinds of wills: (a) notarial will and (b) holographic will. A notarial will is executed with the

242

•

237

7 SCRA 1957. Restatement of Law, p. 329 as cited in Padilla, 265. Goodrich, 377 as cited in Padilla, 279. 240 Beale, 1036. 241 Agpalo, 167. 238 239

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Extrinsic or formal validity Philippine conflicts rules Extrinsic or formal validity refers to requirements of writing, of attesting witnesses, and of acknowledgment.244 It also refers to testamentary capacity. The validity of a will as to its form depends upon the observance of the law in force at the time it is made.245 Under Philippine internal law, legal capacity of persons, including testamentary capacity is governed by the national law of the decedent.246 Under the Civil Code of the Philippines, those who have testamentary capacity are: all persons not expressly prohibited by law may make a will,247 who may be of either sex but not under eighteen years of age248 and must be of sound mind at the time of the execution of the will.249 In Philippine conflicts law, the general rule is that the extrinsic validity of a will is governed by the laws of the country in which it is executed.250 The general rule is modified by the liberal provision of the Civil Code of the Philippines with respect to extrinsic validity of wills.251 This rule is modified in the Philippines as to permit a will: (a) by a Filipino in a foreign country; (b) by an alien abroad; (c) by alien in the Philippines.252 When a Filipino is in a foreign country, he is authorized to make a will in any of the forms established by the law of the country in which he may be, and such will may be probated in the Philippines. 253 Thus, in this instance, the rule followed is lex loci celebrationis seen in Article 17.254 The will of an alien who is abroad produces effect in the Philippines if made with the formalities prescribed by the law of the place in which he resides, or according to the formalities observed in his country, or in conformity with those which the Civil Code prescribes.255 A will made in the Philippines by a citizen or subject of another country, executed in accordance with the law of the country in which he is citizen or subject, and which might be proved and allowed by the law of his own country, shall have the same effect as if executed according to the laws of the Philippines.256

New Civil Code, Arts. 804-809. Id, Art. 810. Salonga, 518. 245 New Civil Code, Art. 795. 246 Article 15 of the Civil Code provides: Art. 15. Laws relating to family rights and duties, or to the status, condition and legal capacity of persons are binding upon citizens of the Philippines, even though living abroad. (9a) 247 New Civil Code, Art. 796 . 248 Id, Art. 797. 249 Id, Art. 798. 250 Art. 17 par. 1 of the Civil Code provides: Art. 17. The forms and solemnities of contracts, wills, and other public instruments shall be governed by the laws of the country in which they are executed. 251 Salonga, 519. 252 Padilla, 281. 253 New Civil Code, Art. 815. 254 Art. 17 Civil Code provides: Art. 17. The forms and solemnities of contracts, wills, and other public instruments shall be governed by the laws of the country in which they are executed. When the acts referred to are executed before the diplomatic or consular officials of the Republic of the Philippines in a foreign country, the solemnities established by Philippine laws shall be observed in their execution. Prohibitive laws concerning persons, their acts or property, and those which have, for their object, public order, public policy and good customs shall not be rendered ineffective by laws or judgments promulgated, or by determinations or conventions agreed upon in a foreign country. (11a) 255 New Civil Code, Art. 816. 256 Id, Art. 817. 243 244

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO Civil law and common law conflicts rules The formal validity of wills of personalty is determined by the law of the last domicile of the testator at the time his death. 257 In particular, the same law determines the capacity of the testator to bequeath personalty.258 All formal requirements of a will of real property must satisfy the law of the state of situs of the land.259 Intrinsic validity Philippine Conflicts Rules Paragraph 2 of Article 16 of the Civil Code provides that the intrinsic validity of testamentary provisions is governed by the national law of the decedent, whatever may be the nature of the property and regardless of the country wherein said property may be found. • Cayetano v. Leonidas,260 – Adoracion Campos was an American citizen and a permanent domiciliary of Philadelphia, Pennsylvania, at the time of her death. Prior to her death, while in Manila, she executed a last will and testament in Philadelphia. The will was admitted and granted probate by the probate court of the Commonwealth of Pennsylvania. It was also allowed probate in the Philippines two years after her death, on the petition of her sister. Petitioner Cayetano contended that Hermogenes Campos, Adoracion’s father and a forced heir, was divested of his legitime under Campos’ will and that therefore, Pennsylvania law which allows her to giver her estate away to a complete stranger should not apply “because it would run counter to the specific provisions of Philippine law.” The lower court applied the law of Pennsylvania. The Supreme Court, in affirming the order of the lower court, said that “it is a settled rule that as regards the intrinsic validity of the provisions of the will, as provided by Art. 16(2) and 1039 CC, the national law of the decedent must apply. • Bellis v. Bellis,261 – Amos G. Bellis was a citizen and domiciliary of Texas at the time of his death. He executed 2 wills: one disposing of Texas properties and the other disposing of Philippine properties. Both wills did not make any provision for his recognized illegitimate children. Under Texas law, there are no compulsory heirs and therefore there are no legitimes. Bellis’ illegitimate children opposed the will and argued that they have been deprived of their legitimes under Philippine law and that by executing two wills, the decedent intended Philippine law to govern the Philippine estate. The Supreme Court held that the said children were not entitled to their legitimes, since under Texas law, the decedent’s national law, there are no legitimes. The renvoi doctrine cannot apply either since the doctrine is usually pertinent where the decedent is a national of one country, and a domiciliary of another. In the present case, Bellis was a national and domiciliary of Texas at the time of his death. If Texas has a conflicts rule adopting the situs theory calling for the application of the law of the place where the properties are situated, renvoi would arise since the properties here involved are found in the Philippines. However, in the absence of proof as to the conflict of law rule in Texas, it should not be presumed different from ours.

257

Minor, 344 as cited by Padilla, 280. Minor, 136-137 as cited in Padilla. Beale, 171 Padilla, 280. 260 129 SCRA 522 (1984). 261 20 SCRA 358 (1967). 258 259

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It has been held that where a foreign decedent who made his will in the Philippines stated that his property be distributed in accordance with Philippine law and not that of his country, the disposition of the property in his will should be made in accordance with his national law and that the provision of the will is invalid as it is against Article 16 of the Civil Code.262 Under Philippine conflicts rule, two or more persons cannot make a will jointly, or in the same instrument.263 A joint will264 executed by Filipinos in a foreign country shall not be valid in the Philippines, even though authorized by the laws of the country where they may have been executed.265 The law is silent, however, about joint wills executed in the Philippines by aliens whose national laws do not prohibit it.266 The rules on extrinsic and intrinsic validity in Philippine conflicts rules may be summarized as follows:267 • Extrinsic – refers to requirement of form • Governing law as to time • Filipinos – law in force when the will was executed (Art. 795) • For foreigners – same rule (assuming it’s being probated here) • Governing law as to place • Filipinos – law of citizenship, domicile, residence, place of execution, Philippine law (Articles 815-817) • Foreigners –same choices • Intrinsic – refers to substance of the provisions • Governing law as to time • Filipinos – law as of the time of death (Art. 2263)268 • Foreigners – depends on their personal law (Art. 16, par. 2) • Governing law as to place: • Filipinos – Philippine law (Art. 16, par. 2; 1039) • Foreigners – their national law (Art. 16, par. 2; 1039) •

Civil law and common law conflicts rules Under American and English rule, substantial validity of a will is determined by the law of the testator’s domicile at the time of his death as regards personal property.269 This rules rests on the presumed intention or preference of the testator for the application of the law of his domicile, since the domicile represents the legal system with which he is most familiar.270 On

262

Miciano v. Brimo 50 Phil 867. New Civil Code, Art. 818. A joint will is one document which constitutes the wills of two or more individuals and is prohibited for several reasons: limitation on the modes of revocation, diminution of testamentary secrecy, danger of undue influence (RUBEN F. BALANE, JOTTINGS AND JURISPRUDENCE IN CIVIL LAW (SUCCESSION) 141 (Revised Edition 2000). 265 New Civil Code, Art. 819. 266 Coquia and Elizabeth Aguiling-Pangalangan. 267 Balane, 41. 268 Art. 2263. Rights to the inheritance of a person who died, with or without a will, before the effectivity of this Code, shall be governed by the Civil Code of 1889, by other previous laws, and by the Rules of Court. The inheritance of those who, with or without a will, die after the beginning of the effectivity of this Code, shall be adjudicated and distributed in accordance with this new body of laws and by the Rules of Court; but the testamentary provisions shall be carried out insofar as they may be permitted by this Code. Therefore, legitimes, betterments, legacies and bequests shall be respected; however, their amount shall be reduced if in no other manner can every compulsory heir be given his full share according to this Code. (Rule 12a) 269 Minor, 335 as cited in Padilla, 291; Beale, 1034. 270 Goodrich and Scoles, 332. 263 264

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO the other hand, the substantial validity of a will disposing real property is determined by the law where the same is situated.271 Revocation of wills Philippine conflicts rules Under Philippine internal law, a will may be revoked by the testator either expressly or impliedly because he has full ownership and control of the properties bequeathed during his lifetime.272 A will may be revoked by means of the following modes: (1) by implication of law (2) by some will, codicil or other writing executed as provided in the case of wills (3) by burning, tearing, cancelling, or obliterating the will with the intention of revoking it.273 Under Article 829 of the Civil Code of the Philippines, revocation made outside the Philippines by a person who does not have a domicile in this country is valid when done according to either of the following laws: (1) law of the place where will was made or lex loci celebrationis (2) law of the place where testator had his domicile at that time or lex domicilii.274 Revocation made by a resident of the Philippines outside the Philippines is valid when it is done according to either: (1) Philippine law or (2) the law of the place of revocation. Civil law and common law conflicts rules Revocation of a will of personalty is generally determined by the whole law of the domicile of the testator at the time of his death.275 The lex situs governs the grounds of revocation of real property.276 A problem arises where a testator revokes his will in the state where he is domiciled and then changes his domicile to another state where he dies. If the revocation of his will was valid by the laws of the state where he revoked it but invalid by the laws of the state of domicile at the time of his death, which law will control? Under Philippine conflicts rule, the law of the place of revocation controls the situation.277 Under common law, the law of the domicile at the time of the testator’s death controls and not the law of the place of revocation.278 Probate of wills Philippine conflicts rules • Probate is the proof or establishment, before the appropriate tribunal, that the document produced is the valid last will of the deceased. It is a certification of such court that the will was executed by a competent testator in the manner prescribed by law.279 Under Article 838 of the Civil Code, no will shall pass real or personal property unless it is proved and allowed with the Rules of Court. Just like in Anglo-American law, Philippine internal law provides that the probate of a will is conclusive as to its due execution and as to the testamentary capacity of the testator but does not affect the

•

•

•

•

intrinsic validity of the provisions of the will. There is no period for prescription for the probate of will. 280 Philippine law follows the American rule, in that probate is a proceeding a proceeding in rem, and for the validity of such proceedings personal notice or notice by publication or both shall be made to all interested parties.281 A will executed abroad but not yet admitted to probate in a foreign country may be admitted to probate in the Philippines. The due execution of the will and the testamentary capacity of the testator must be proved as in regular probate proceedings.282 A will may be probated outside the Philippines under Rule 77 of the Rules of Court.283 When the will is allowed, it will have the same effect as if originally proved and allowed in the Philippine court.284 A will probated outside the Philippines may be reprobated in the Philippines. The evidence necessary of the reprobate or allowance in the Philippines are: (1) the due execution of the will in accordance with the foreign law; (2) the testator has his domicile in the foreign country and not in the Philippines; (3) the will has been admitted to probate in such country; (4) the fact that the foreign tribunal is a probate court; (5) the laws of a foreign country on probate and allowance of wills. Philippine courts cannot take judicial notice of the foreign laws upon which the probate of a foreign country was done . In the absence of proof as to the probate law and procedure of a foreign country, it is presumed that the same is similar to that of the Philippines, in which case the validity of the foreign will may have to be decided in accordance with Philippine law.285

Civil law and common law conflicts rules • In the US, the will of a decedent will customarily be admitted to probate and an executor or administrator appointed in a state where the decedent was domiciled at the time of his death; or where there are assets of estate at the time of the decedent’s death or at the time of the appointment of the executor or administrator. 286 The principal place of probate and administration of the will of a testator is normally at his domicile – where the family and property interests center and usually those most concerned with the decedent’s estate are located.287 • Furthermore, a will admitted to probate at the domicile of the decedent will be recognized as valid elsewhere as to disposition of movables. Probate of a will in a state other than the domicile of the decedent may be conclusive elsewhere as to the disposition of property in that state.288 The denial of probate elsewhere than at the domicile of the testator will govern as to its effect upon property in the state denying probate, but will not, in absence of litigation, affect the question of the validity of the

280

Salonga, 523. Id 524. Id 525. 283 Rule 77 Sec. 1. Will proved outside Philippines may be allowed here. - Wills proved and allowed in a foreign country, according to the laws of such country, may be allowed, filed, and recorded by the proper Court of First Instance in the Philippines. 284 Sec. 3 Rule 77 of the Rules of Court. 285 Agpalo, 172. 286 § 314 US Restatement of the Law, Second, Conflict of Laws 2d, as cited in Agpalo. 287 Goodrich and Scoles, 340. 288 Id.

271

281

272

282

Padilla, 291; Goodrich and Scoles, 326. Agpalo, 168. 273 New Civil Code, Art. 830. 274 Coquia. 275 Goodrich and Scoles, 337. 276 Restatement of Law, Sec. 250, p. 334 as cited by Padilla, 293. 277 Coquia. 278 Id. 279 Goodrich and Scoles, 340.

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO

•

will when it arises elsewhere. Probate of a will of land is required or excused as the situs statutes provide. Under these statutes some form of probate or registration is required in nearly all instances although title to land may occasionally be established for practical purposes without probate.289 Under common law, where a will admitted to probate as a valid will at the last domicile of the testator is regarded as valid everywhere with respect to movable property. The state where movables are found is interested only in what the domiciliary state declares as to be things owned by the testator. Thus, once the will is probated at the domicile there ceases to be a problem. Since personal property is governed by lex domicilii where the deceased left real property, the probate of the will in his last domicile does not affect the conveyance of land which is subject to the lex situs.290

Interpretation of Wills Philippine conflicts rules • Under all legal systems, interpretation of wills is a process of ascertaining the meaning which the testator intended his words to convey. • However, it is the means employed in order to achieve this objective where the differences arise. 291 Interpretation is governed by the rules of interpretation of the decedent’s national law. If the terms are clear and unambiguous, the lex intentionis of the party should be followed . In case of ambiguity, the intention of the party or the exact meaning he may have ascribed to them can be inferred by referring to the context of the instrument itself or the testator’s contemporaneous and subsequent acts in keeping with the nature and object of the document.292 • If there is still no absolute assurance as to the intention, settled presumptions of law may be resorted to.293 If a testamentary provision admits of different interpretations, in case of doubt, that interpretation by which the disposition is to operative shall be preferred.294 The will is to be interpreted as a whole so that every expression may be given effect, rather than one which will render any of the expressions inoperative; and of two modes of interpreting a will, that is to be preferred which will prevent intestacy.295 Civil law and common law conflicts rules In interpreting wills, the intention of the person using the language must be ascertained and followed.296 However, there are authorities that with respect to real property, the lex situs governs the interpretation.297 In the US, if a will of a person domiciled in an English-speaking country is written in a foreign language, the technical meaning of the foreign words must be taken into consideration, though the domiciliary usage prevails after the actual meaning of the foreign language has been fixed. 298 Where the domicile of the testator was in one state when the will was

executed, and in another at the time of his death, interpretation will be according to the law of the former state. This is based on the presumption that the testator was using language with which he was then familiar. 299 In a litigation among beneficiaries, circumstances of the testator, his family, the law of his domicile at the time of execution of the will, are relevant considerations by the court in reaching a solution consistent with the reasonable expectations of the parties. The law of the domicile at time of execution is relevant.300 Intestate Succession Philippine conflicts rules Intestate succession takes place by operation of law in the absence of a valid will.301 It takes place (a) if a person dies without a will, or with a void will, or one which has subsequently lost its validity; (b) when the will does not institute an heir to, or dispose of all the property belonging to the testator (only with respect to the property of which the testator has not disposed); (c) if the suspensive condition attached to the institution of heir does not happen or is not fulfilled, or if the heir dies before the testator, or repudiates the inheritance, there being no substitution, and no right of accretion takes place; (d) when the heir instituted is incapable of succeeding, except in cases provided in this Code.302 In default of testamentary heirs, the law vests the inheritance in the legitimate and illegitimate relatives of the deceased, in the surviving spouse, and in the State.303 The relative nearest in degree excludes the more distant ones, saving the right of representation when it properly takes place. Relatives in the same degree shall inherit in equal shares, subject to the provisions of Article 1006 of the Civil Code with respect to relatives of the full and half blood, and of paragraph 2 of Article 987 of the Civil Code concerning division between the paternal and maternal lines.304 Civil law and common law conflicts rules In the US, since the split system is followed, there is a difference between intestate succession concerning immovables and intestate succession concerning movables. In the former, descent of land upon the death of the intestate owner is governed by the law of the situs of the land. The land will pass in accordance with the whole law prevailing at the place where it is located.305 In intestate succession concerning movables, the devolution of movables upon the death of the intestate owner is governed by the law of the domicile of the decedent at the time of his death. The underlying theory is that the law of the situs of the property controls the devolution, but for convenience the law of the domicile is looked to in order that all the property may pass as a single estate. It is presumed that he prefer that it descend as a unit to his family, even in absence of an adequately stated intention. It is also presumed that he would prefer that single law to be that with which he normally would be most familiar --that of his domicile.306 APPLICABILITY OF CIVIL AND COMMON LAW

289

Id at 342. 290 Coquia, 491. 291 Id. 292 Coquia, 486. 293 Id at 487. 294 New Civil Code, Art. 788. 295 Id, Art. 791. 296 Minor, 338, as cited by Padilla, 292; Goodrich and Scoles, 329. 297 Minor, 338-341, Id. 298 Beale, 1039; Goodrich and Scoles, 335.

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299

Goodrich and Scoles, 335. Goodrich and Scoles, 331. Balane, 23. 302 New Civil Code, Art. 960. 303 Id, Art. 961. 304 Id, Art. 962. 305 Goodrich and Scoles, 323. 306 Id. 300 301

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO • •

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As a general proposition, it is submitted that civil and common law conflicts rules are not applicable to Philippine conflicts rules. The Philippine legal system on succession adopts the unitary or universal system which treats the entire estate of the decedent as a whole, without distinguishing between real property and personal property. As such, in the Philippines, the entire estate of the decedent is governed by only one law, the personal law of the decedent. On the other hand, civil and common law countries adopt the split or division system which distinguishes between real property and personal property. Real property is governed by the law where it is situated while personal property is governed by the personal law of the decedent, particularly the law of the domicile of the decedent at the time of his death. The sharp difference between the two systems has been demonstrated in the six aspects of succession already discussed: (1) successional rights and capacity to succeed; (2) validity of wills; (3) revocation of wills; (4) probate of wills; (5) interpretation of wills; (6) intestate succession. Under Philippine conflicts rules, the national law of the decedent determines successional rights, capacity to succeed, testamentary capacity, extrinsic and intrinsic validity of wills and interpretation of wills. In contrast, under civil and common law conflicts rules, personal property and real property are treated separately: matters of succession to personal property are determined by the law of the domicile of the decedent at the time of his death while matters of succession to real property are determined by the law where such property is situated. With regard to revocation and probate of wills, Philippine conflicts rules are more flexible in that both Filipinos and aliens may execute, revoke their wills or have them probate in either and/or both Philippine and foreign jurisdictions. Hence, under Philippine conflicts rules, execution, revocation and probate of wills are governed generally by personal law of the testator (national or domiciliary law), the law where the act was made or Philippine law. On the other hand, civil and common law conflicts rules on the same matters are not flexible since they are determined according to the type of property involved. Because of the stark differences between Philippine conflicts rules and civil and common law conflicts rules, there is a high probability of conflict between the two sets of rules in cases where foreign elements are involved. We go back to the case of Eulogio Lopez, Filipino businessman who dies domiciled in California and leaves real and personal properties in various places: (a) house and lot in California; (b) big parcels of land in Metro Manila and suburbs; (c) substantial shares of stock in a number of multinational corporations; and (d) considerable bank deposits in Manila and New York. Under Philippine conflicts rules, the entire estate will be treated as one unit, the disposition of which will be governed by the national law of Lopez, Philippine internal law on succession. Under US law, however, the real and personal properties will be treated separately. Thus, the real property will be governed by the law of the place where they are situated --- the house and lot in California will be governed by the law of California while the big parcels of land in Metro Manila and suburbs will be governed by the law of the Philippines. On the other hand, the personal property will be governed by the law of the domicile of Lopez at the time of his death --- the substantial shares of stock and considerable bank deposits in Manila and New York will be governed by the law of his last domicile, the law of California.

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SUCCESSION ADDENDUM Theories Unitary/Universal assumes that the individuality of the decedent continues to exist after his death in the person of his heir, for judicial purposes -
THUS: whatever personal law governed the decedent governs succession to his estate after his death national law of the decedent governs in countries that adopt the nationality principle domiciliary law of the decedent governs in countries that adopt the domiciliary principle followed by: Italy, Spain, Philippines

Split/Division has its roots in the feudalistic system of law where feudal lords could not permit the rights of succession to their land to be affected should their vassals acquire a foreign domicile -
THUS, the split system seeks to distinguish between immovables and movables US: succession to land - governed by the law of the place where the land is situated -
because of the obvious interest in having interests in local land decided in a manner that complies with the notion of what is reasonable and just devolution to personalty - governed by the law of the domicile of the testator at the time of his death -
because it is desirable insofar as an estate would be treated as a unit, and the state that has the dominant interest in the application of its laws is the state of the decedent’s domicile at the time of his death; the domicile law is the law that the decedent is most familiar with and its application coincides with the expectations of the decedent and his family followed by: England, US, France

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO Comparative Analysis Philippines Successional rights

Capacity to succeed

national law of decedent (Art. 16 par. 2CC)

national law of decedent (Art. 1039CC) Aznar v. Garcia

Common law personalty – law of last domicile of the immovabledecedent at the time lex situs of his death law of the place where personalty - law of the land is last domicile of the determines decedent at the time who is the of his death heir, duties and liabilities (US)

Revocation

Extrinsic validity of wills

General rule: where executed (Art. 1 par. 1 CC) Exceptions: by Filipino in foreign country - country in which he may be (lex celebrationis) (Art. 815CC) by alien abroad – (Art. 816CC) lex domicilii (resides) lex national Civil Code of the Philippines by alien, made in the Philippines – (Art. 817CC) national law lex domicilii

Probate

Common law – proper law: domicile law immovable lex situs

if clear and unambiguous: no more need for interpretation

Interpretation

English and American rule: national law of the decedent (Art. 16 par. 2 CC) Intrinsic validity of wills

Miciano v. Brimo Bellis v. Bellis Cayetano v. Leonidas

will may be probated outside the Philippines (Rule 77 Sec. 1 Rules of Court) will may be reprobated in the Philippines

Civil law – proper law: national law

personalty law of last domicile of the decedent at the time of his death

otherwise: ascertain the testator’s intention through the context of the instrument, contemporaneous acts, settled presumptions e.g. interpret the will as a whole to prevent intestacy national law of the decedent

personalty law of last domicile of the decedent at the time of his death

immovable lex situs

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personalty – law of last domicile of the decedent at the time of his death

immovable- lex situs

US: principal place – domicile at the time of the decedent’s death ALSO: where his assets may be found

law in force at the time it is made (Art. 795CC) testamentary capacity national law of the decedent (Art. 15 CC)

made outside the Philippines by a person not domiciled in the Philippines – (Art. 829CC) lex celebrationis lex domicilii made by a resident of the Philippines outside the Philippines Philippine law place of revocation

Intestate

unitary system

personalty immovable will admitted to lex situs probate at the last domicile is valid everywhere with respect to the movable property US: foreign words must be taken into consideration domiciliary usage prevails if the testator changed his domicile after the execution of the will: former domicile’s interpretation (where will was executed) prevails personalty law of last domicile of the decedent at the time of his death US:

immovable lex situs

personalty law of last domicile of the

immovable lex situs

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO decedent at the time of his death

The national law of the decedent mentioned in Art. 16 par. 2 CC is Section 946. This provision contains the conflicts rules of California which authorizes reference to the law of the testator’s domicile. The Philippine court, therefore, must apply its own law, especially since there is no legitime for children under California law.

Cases • Aznar v. Garcia FACTS: Edward E. Christensen, the testator, is an alien domiciled in the Philippines but had always considered himself a citizen of California. He died in Manila. He had 2 acknowledged natural daughters, Filipino citizens named Maria Helen Christensen-Garcia and Maria Lucy Christensen-Daney. Maria Helen was residing at Davao and was given the sum of P3,600 as a legacy by Edward’s will. Maria Lucy was referred to by Edward as his “only child”, residing in California, USA. In his final account and project of partition of Edward’s estate, the executor ratified payment of only P3,600 to Maria Helen and proposed that the residue be transferred to Maria Lucy. Maria Helen opposed the partition, arguing that it deprived her of her legitime. She argued that she was held to be an acknowledged natural child in the case with G. R. No. L-11483-84. She insisted that the court should apply Sec. 946 of the California Civil Code such that the entire California law should be applied, not just the internal law, because the case involves foreign elements. In contrast, the executor argued that the internal law should be applied. The TC held that since Edward is a citizen of US and California, successional rights and intrinsic validity of his will is governed by the law of California. ISSUE: WON an acknowledged natural daughter of the testator who is an alien domiciled in the Philippines but a citizen of California was entitled to succeed under Philippine internal law HELD: Philippine internal law applies. (Maria Helen is entitled to her legitime under Philippine law) The domicile of Edward is the Philippines. He was born in New York, migrated to California and resided there for 9 years. Since he came to the Philippines in 1913 he returned to California very rarely and just for short visits. He never owned or acquired a home or property in California. Therefore, he did not abandon the Philippines and make home in California. Edward never lost his citizenship acquired in California by his stay in the Philippines. When Edward executed his will in 1951 he declared he’s a citizen of California. Therefore, he never intended to abandon his California citizenship. The law that governs is Art. 16 CC par. 2. This provision states that the national law of the decedent will govern successional rights. In this case, the national law of Edward is the private law of California. Section 946 of the California Code provides that no law to the contrary, in the place where personal property is located, it is deemed to follow the person of its owner and is governed by the law of his domicile. Reason demands that the court enforce the internal law of California for citizens residing therein while conflicts rules are applied as regards citizens of California residing abroad. The court recognizes the principle of comity. 03-23-2006 | THROUGH THE JOINT EFFORTS OF STUDENTS OF ATENEO LAW III- C 2006 | Edited by J.C. de Veyra

• Miciano v. Brimo FACTS: Joseph Brimo is a Turkish citizen, residing in the Philippines, with properties in the Philippines. He executed a will in accordance with Philippine law. In his will, he imposed a condition to respect his wish to distribute his estate using Philippine law; otherwise, legatees will be prevented from receiving their legacies. The judicial administrator filed a scheme of partition. Brimo’s brother, Andre, opposed it but did not prove that the testamentary provisions are not in accordance with Turkish law. He argued that the will is not in accordance with Turkish law, the law of the nationality of the testator Joseph Brimo. ISSUE: WON the Philippine law applies according to the testator’s intent notwithstanding the Civil Code provision that the national law of the decedent applies. HELD: The Philippine law does not apply. The national law of the decedent, Turkish law, governs. The national law of the decedent, Turkish law, governs. Under then Article 10 of the old Civil Code (now Art. 16 CC), the national law of the decedent governs the intrinsic validity of the will. Here, the national law of Brimo, Turkish law, governs. However, Andre did not prove that the testamentary provisions are not in accordance with Turkish laws. Therefore, it is assumed that Turkish law is the same as Philippine law. The condition that the will shall be implemented following Philippine law) is contrary to law i.e., Article 10 of the old Civil Code. Hence, it is considered as not written. • Bellis v. Bellis FACTS: Amos G. Bellis was born in Texas, a citizen of Texas and US, and a resident of Texas when he died. His first wife was Mary (whom he divorced), with whom he had 5 legitimate children. His second wife is Violet, with whom he had 3 illegitimate children and 3 legitimate children. He executed 2 wills: one that involves his Texas estate, the other involves his Philippine estate. Under Texas law, there are no legitimes. His will contained the following dispositions: (a) $240K to his first wife Mary; (b) P120K to his 3 illegitimate children by his second wife Violet (P40K each); (c) remainder of his estate to his 7 surviving children in equal shares. Amos’ will was admitted to probate in CFI Manila. The executor, People’s Bank & Trust Co. paid all bequests, submitted and filed its “Executor’s Final Account, Report of Administration and Project of Partition.” Two illegitimate children opposed, arguing that the will deprived them of their legitimes. The lower court approved the project of partition. The two illegitimate children further argued that Article 17 par. 3 CC prevails as an exception to Art. 16 par. 2 CC. Art. 17 par. 3 provides: Prohibitive laws concerning persons, their acts or property, and those which have for their

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO object public order, public policy and good customs shall not be rendered ineffective by laws or judgments promulgated, or by determinations or conventions agreed upon in a foreign country.” ISSUE: Which law applies: Texas law or Philippine law HELD: Texas law applies. Renvoi does not apply. The parties did not put the application renvoi in issue. Furthermore, Renvoi applies only if there’s a conflicts rule adopting the situs theory. Amos was both a national and domiciliary of Texas. Hence, there is no situation for renvoi. Article 17 par. 3 does not apply as an exception to Art. 16 par. 2 CC. Art. 16 par. 2 is a specific provision that governs intrinsic validity of testamentary provisions. Also, Article 1039 CC provides that capacity to succeed is governed by the law of the nation of the decedent. Texas law applies, following Article 16 CC and the ruling in Miciano v. Brimo. • Cayetano v. Leonidas FACTS: Adoracion Campos was an American citizen and a resident of Pennsylvania. She executed a will according to Pennsylvania law. She died in Manila where she had properties, and was survived by her father and 3 sisters. Her father, Hermogenes Campos, as an only compulsory heir, adjudicated unto himself the ownership of the entire estate. Eleven months later, the sister, Nenita, filed a petition for reprobate of Adoracion’s will and for her appointment as administratrix of her estate. Nenita alleged that the will was probated earlier in Philadelphia. The father, Hermogenes, opposed the petition, contending that the intrinsic provisions of the will are void, if American laws are invoked and that the will work injustice and injury to him. The trial court granted reprobate. Polly Cayetano substituted her father in the case when he died. She argued that her father was divested of his legitime when the Court allowed the will to reprobate. ISSUE: WON Pennsylvania law applies HELD: Pennsylvania law applies. Art. 16 par. 2 CC states that the intrinsic validity of testamentary provisions will be governed by the national law of the decedent. Art. 1039 CC provides that capacity to succeed is governed by the national law of the decedent. In Bellis v. Bellis, it was held that: “whatever public policy or goods customs may be involved in our system of legitimes, Congress has not intended the same to extend to succession of foreign nationals.” The Congress specifically chose to leave it to the national law of the decedent, as shown by Article 16 par. 2 CC. ADMINISTRATION The collection of assets, particularly personal assets, and with them paying debts until debts are all paid or the assets exhausted.307 The payment of the balance to those entitled to it is called distribution.

Administration is usually effected through an officer appointed by the proper probate court. If the person appointed was named in the will, he is called an executor. If no person is named in the will, or if there is no will at all, the person appointed is an administrator.308 A conflict of laws issue would arise when the decedent leaves property in two or more different States. Administration of the estates of the same decedent in different estates where there are creditors and property belonging to the same estate, are regarded as wholly independent of each other; that there is no privity between the different administrations; but that each is sovereign within its own limits.309 In the case of Johannes v. Harvey310, Mr. and Mrs. Johannes were British nationals. Mrs. Johannes died intestate, leaving her husband in Singapore and her brother in Manila. According to the British law, the husband, Mr. Johannes, is entitled to the whole of the estate of the wife; he was appointed administrator of the property of the deceased in Singapore. The Manila court, on petition of her brother, appointed the latter as administrator of the Manila estates, which consisted of bank deposits. Mr. Johannes filed a petition for certiorari, contending that the Manila court acted in excess of jurisdiction in appointing the brother of the deceased as administrator, since he is entitled to the whole estate of the wife and he had already been appointed administrator. The Supreme Court denied the petition. It held that when a person died intestate owning property in the country of his domicile as well as in a foreign country, administration is had in both countries. The principal administration is granted in the jurisdiction of decedent’s last domicile. Ancillary administration is any other administration.311 An administrator appointed at the domicile of the decedent is called the principal administrator, or the domiciliary administrator; one appointed in another state is an ancillary administrator. But this does not indicate any inferiority or any difference in function.312 COMPARATIVE ANALYSIS Jurisdiction for Administration Philippine law and procedure on administration of estates follow closely Anglo-American models, the main principle of which is territorialism. The Axiom followed is the law of the domicile governs distribution but the law of the state appointing the administrator or executor governs administration.313 Under Rule 73 Sec. 1 of the Philippine Rules of Court, if the decedent was inhabitant of the Philippines at the time of his death, irrespective of whether he was a citizen or alien, the RTC of the province in which he was residing at the time of his death shall have the probate jurisdiction. If the decedent was an inhabitant of a foreign country at the time of his death, the RTC of any province in which he may have his property314 Philippine law subscribes to this principle that “wills proved and allowed in a foreign country, according to the laws of such country, may be allowed in the Philippines” and “when a will is thus allowed, the court shall grant letters of administration with the will annexed, and such letters of administration shall extend to all estate of the testator in the Philippines315

308

Salonga, 527 Fowle v Code, 63 Me. 245 (1871) Johannes v. Harvey 43 Phil 175 (1922) 311 Salonga, 528 312 Beale, 1445 313 Salonga, 527 314 Id 315 Philippine Rules of Court, Rule 78 Sections 1 and 4 309 310

307

Thomas v Morristown State Bank, 53 S.D. 499, 221 N.W. 257 (1928)

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO In the United States, the courts of the state where the decedent died domiciled have jurisdiction to appoint an administrator even though the decedent left no property within the state.316 Anyone may be appointed administrator, even one from another state,317 unless a statute provides otherwise. Jurisdiction where there is property A rule universally recognized is that administration extends only to the assets of the decedent found within the State or country where it was granted. To administer property situated in a foreign state, the administrator must be reappointed, or a new one named, in that state.318 If decedent left personal property in two states, the domiciliary administrator would have no right to take the assets or collect the debts in the other state; for his statute would have no extra-territorial force to empower him. • Tayag v. Benguet Consolidated, Inc319 – Idonah Slade Parkins died domiciled in New York in 1960. She had properties in New York and Philippines. The domiciliary administrator was appointed by the New York court, while the ancillary administrator was appointed in the Philippines by a Philippine court. To satisfy the claims of creditors, the ancillary administrator in the Philippines asked the New York administrator to surrender to him two stock certificates owned by Idonah Slade Perkins in the Benguet Consolidated, Inc., a Philippine corporation. The New York administrator refused to surrender them despite order by the Philippine court. The court considered them as lost certificates, ordered Benguet Consolidated to cancel said certificates and issue new ones for delivery to the ancillary administrator or to the probate court. The corporation refused, alleging: (a) the old certificates still exist (b) it may be held liable in the future because of conflicting certificates. The Supreme Court held that Benguet must issue the certificates. The ancillary administrator in the Philippines is entitled to the possession of said certificates so he can perform his duty as such administrator. An administrator appointed in one state has no power over property in another state. In order to administer the assets in a 2nd state, it is necessary to appoint an ancillary administrator there. It has been asserted at times that the domiciliary representative, will be preferred over other applicants for appointment as ancillary representative.320 However, this is not a rule of Conflicts of Law, and that the matter is almost wholly statutory. In Fishell v Dixon, a domiciliary rep in Ohio applied to be ancillary rep in Kentucky. Application was denied, because the laws of Kentucky require an administrator to be a resident. An ancillary administrator may be appointed even if no administrator has been appointed at the domicile. 321 What is important is that there are properties present in the state appointing such ancillary administrator. Value of the property is immaterial. In some cases, a pistol, pocket change, gold watch, were held to be sufficient assets. A decree, regular on its face, appointing an ancillary administrator, may not be collaterally attacked in litigation in another state by showing that here were no assets within the state at the time of appointment. But such an appointment may be collaterally attacked in the state of appointment.

When an ancillary administrator is appointed for the estate of a deceased person in the Philippines, such estate, once just debts and the expenses of administration have been paid, shall be disposed of according to the will so far as such will may operate upon it. If there be any residue, the same shall be disposed of as is provided by law in cases of estates in the Philippines belonging to persons who are inhabitants of another state or country.322 Administrator takes Assets to Another State If an administrator takes possession of assets in his own state and then takes or sends them into another state, they cannot be seized there either by creditors or by a local administrator.323 Property Brought in After Owner’s Death Jurisdiction is sometimes asserted to administer property brought into a state after the death of the owner. This is open to objection on logic, but can be sustained because of the benefit of those interested in the estate. Can the courts of a state assume jurisdiction of such property? If the property is within the state at the time of the owner’s death, that state may control its administration through any court it pleases. Other considerations arise when the jurisdiction is claimed over tangibles brought into the state after the owner’s death; the usual place of administration of such property is in the state where the property was at the time of the owner’s death. Jurisdiction to administer property brought into the state after the death of the owner has been asserted. The most important thing to consider is that the property be taken care of, accounted for, and used to pay claims against the decedent and the remainder finally distributed. If the property is handled, and no rights of persons in the first state are prejudiced by reason of the administration in the second, ignoring the usual procedure probably does no harm.324 • Crescent C.I. Co. v Stafford,325 – The court held that if a chattel is carried into another state after the death of the owner, the administrator in the first state is entitled to it and may sue for it without further administration. However, if there is no administrator appointed in the first state, the administration in the second may serve to prevent waste or conversion of the property. Also, property cannot be made subject of administration in the second state if it was brought there by the administrator appointed in the first state, for sale or other purpose.326

316

Connors v Cunard S.S Co., 204 Mass 310, 90 N.E. 601 (1910) Finnerty v Shad, 210 Ia. 1338, 228 N.W. 886 (1930) Salonga, 527 319 Tayag v Benguet Consolidated, GR No. 1-23145, November 29, 1968 320 Fletcher v Sanders, 7 Dana 345, 249 (Ky 1838) 321 Stevens v Gaylord, 11 Mass 256 (1814) 317

322

318

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Salonga, 528 Crescent C.I. Co. v Stafford, 3 Woods, 94, 6 Fed. Cas No. 3387 (1877) Goodrich and Scoles, 350 325 Crescent C.I. Co. v Stafford, 3 Woods, 94, 6 Fed. Cas. No. 3387 (1877) 326 Goodrich and Scoles, 351 324

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO Administrator Receiving Property Outside his State A domiciliary administrator should not take assets which were outside his state at the death of the decedent. But if there is no ancillary administrator, and no local creditors, no harm is done to anyone by the domiciliary administrator taking the assets, provided he brings them into his account in his own state.327 Probate of the Will Probate done at the domicile of the decedent – Probate must be made primarily at the domicile of the decedent, the will being governed by that law. Probate there is binding on all questions as to the legality of the will with regard to personal estate elsewhere, but not on the existence of domicile there, if it is disputed in another court by anyone not a party to the prior proceedings, for the question of domicile being jurisdictional so far as establishing the validity of the will outside the state of domicile is concerned, that cannot be established if the domicile is disputed.328 Probate done at another State – A will may be probated in a foreign state though it has not been so probated at the domicile.329 Effect of Judgment on Validity of the Will – It seems that the New York Statute provides for the probate of the will of a non-resident testator if such will is executed according to the law of New York even though it is invalid by the law of the domicile.330 Where the will has been admitted to probate in 1 state without awaiting decision on its validity by the courts of the domicile this determination is not conclusive of its validity when the will is subsequently offered for probate at the domicile.331 Validity of a will is to be determined by the law of the domicile. If the will has once been admitted to probate at the domicile, this would be conclusive of the validity of the will, so far as personalty is concerned, in all other jurisdictions.332 Under the Philippine laws, wills proved and allowed in a foreign country, according to the laws of such country, may be allowed in the Philippines.333 Powers and Rights of the Administrator The corollary rule is that the powers and rights of an executor or administrator, as well as his liabilities and duties, are determined by the State where he is appointed and qualified as such. Administration is governed by the law of the country from which administration derives his authority. The Second Restatement provides that the duties of an executor or administrator with regards to the conduct of the administration are usually determined by the local law of the state of appointment. It is generally conceded that an administrator can convey title to assets situated, or even transiently found, in the state of his appointment. He can neither sue nor be sued outside the jurisdiction of the court from which he derives his authority, unless his is appointed anew and qualifies as such therein. However, he may enforce by action a right which is personal to himself and which he is entitled to assert his own individual capacity, even though it is contended with the estate he is administering.334 327

Beale, 1497 Beale, 1463 Thomas v Sprague, 259 F. 338 (1919) 330 Matter of Rubens, 128 A.D. 628, 112 NYS 941, affd. 195 NY 527, 88 N.E. 1130 (1909) 331 Estate of Clark, 148 Cal. 108, 82 P. 760 (1905) 332 Thomas v Morrisett, 76 Ga. 384 (1885) 333 Philippine Rules of Court Article 77 Section 1 334 Salonga, 530 328

Suit By and Against the Administrator In the Philippines, the law governing suits by and against the administrator is found in Rule 87 of the Philippine Rules of Court. In the Unites States, an administrator may sue in the state of his appointment to get in any claim due the estate. In the same way an administrator, even an ancillary administrator may be sued in his own state by a creditor from any other state. There is usually no need for a suit against an administrator in his state, since a claim against the deceased is to be proved in the probate court; only if it is disallowed by the probate court or referred by that court to another court does the creditor of an estate sue the administrator. But, the probate court cannot entertain a claim created after the death of the decedent, such as a claim on a contract made with the administrator, it must be brought against the administrator personally, and as it is not against him in his representative capacity it may be brought in any state in which he may be found.335 The general rule is that executors and administrators are not liable to actions as such in a state where they have obtained no letters of administration. Minor provided for some exceptions336 to this general rule, to wit: suit involves the assertion of his own right, rather one of the deceased’s e.g. when the executor has already obtained a judgment in the state of his appointment right of action accrues to the executor directly through his contract or transaction, and was not originally an asset of the estate in his charge if the executor appointed in one state removes with the assets to another state and misapplies the funds of the estate in a latter place in cases where executor and administrator qualifies in State where he sues or is sued The exceptions provided by the courts and statutes as summarized by Goodrich and Scoles337 are the following: • on obligations incurred by the representative after the death of the decedent • when he has assets of the estate there which he is wasting or converting to his own use • when he has assets of the estate there which he is wasting or converting to his own use • where he or the decedent has consented to the court’s jurisdiction • the trend is to further extend the liability to suit Suit by Foreign Administrator At common law a foreign administrator could not bring suit. This is often called an incapacity and that unless the incapacity is called to the attention of the court in due time and in the proper way the suit will be allowed to go on.338 However, there are some statutes in States in the United States that have given power to a foreign administrator to sue. Suit against Foreign Administrator No action will lie against a foreign executor or administrator. The reason usually given is the impossibility of enforcing a judgment. The judgment is by its terms payable out of the estate

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335

Beale, 1529 Minor, 235-236 Goodrich and Scoles, 365 338 Champlin v Tilley, 3 Day, 303, 5 Fed. Cas. No. 2568 (Conn 1809) 336 337

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO only. It is submitted that the rule is based upon a much more fundamental reason than mere expedience. The court in this case is attempting to impose an obligation owed by the deceased upon another person, his executor. Such an imposition could be made only by a sovereign having power over the executor; and then only in connection with some act done under the sovereign’s jurisdiction.339 Despite the general rule as to the non-suability of foreign representatives, courts of equity have recognized a limited jurisdiction to entertain suits against foreign executors or administrators, in respect of assets within the state, in order to prevent a failure of justice.340 A judgment against a foreign administrator pursuant to a statute authorizing such action would not be valid in the state which appointed such representative. This was illustrated in the case In re Cowhan’s Estate,341 the Court held there that a Michigan Administrator has no authority outside of Michigan to bind the Michigan estate, the courts of other states acquire no greater power in the premises merely because the legislature of such other state has purported to authorize suit against foreign representatives. It is more generally held that a foreign representative does not become suable because of his own consent, manifested by an appearance or otherwise.342 According to Beale, to allow a judgment against a foreign administrator, even by his consent, would transgress 2 of the basic principles of administration; first, it would give one creditor payment, without regard to others. Second, it would withdraw assets from the estate in another state.343 Accountability of Administrator Under Philippine laws, an administrator should, in his final accounting, be held responsible for all assets that may have come to him anywhere, by reason of his local appointment, but he cannot be accountable in any other State than that of his appointment, and if the same person has served as administrator in more than one state he must account separately for assets received under such appointment. In the United States, an administrator must render his account in the state where he was appointed, even though he may have received property from another state. Only personal assets are charged to the administrator. If he collected rents and profits of lands, in his own or any other state, he is not accountable for them as administrator.344 There are instances when the domiciliary administrator qualifies in another state as an ancillary administrator, or that one person qualifies as ancillary administrator in 2 states. In such a case he is accountable to each state for assets received in that state, and for no assets received elsewhere.345 The domiciliary and ancillary administrations are far independent of each other, despite the fact that the same man is the representative of the estate in both jurisdictions.346 Distribution After the payment of debts in the ancillary administration, it is usually stated that it is within the sound judicial discretion of the ancillary probate court whether to proceed with the distribution of the personal estate in accordance with the law of the domicile or to remit the

surplus to the domiciliary administration.347 If debts remain in the ancillary state there can be no remission348 However, in several cases there has seemed sufficient reason on the facts for distributing a balance in the ancillary state. The most common reason is the presence of all legatees in the court, or their residence in the ancillary state.349 If to send the estate to the domicile will subject it to a heavy inheritance tax or death duty it will not be done. The administrator of another state, even the state of the domicile, has no right to demand the payment of a balance to him; until the court has ordered payment to him, has no standing. 350 But after the balance has been ordered paid to domiciliary administrator the ancillary state has no longer any claim to the assets, and the domiciliary administrator if necessary may maintain an action for it. A legatee has no right until the court orders distribution and until the will has been probated in the state. In case of overpayment to legatee or other party, there is a duty to pay the amount back to the estate in accordance with the law of the state where it occurred. Repayment may be enforced in any other state where there is an administrator.351 Receiver A receiver is an officer appointed by a court of equity primarily to preserve property or to sequester it for creditors. The receiver in order to preserve the property must be ordered to carry on the business. Receivers for the property of an individual or corporation may be appointed in several states. But it must be obvious that if business is to be carried on to preserve value, it must be done by one receiver, under the direction of a single court. There must then be one receiver at the head of the business, he is called the principal receiver. The appointment of the principal receiver would depend on the entity whose property it is to preserve. If it the entity is a corporation, the principal receiver is the one appointed in the state of incorporation though there is no property of the corporation in that state. If the entity is an unincorporated association, the principal receiver is the one appointed at the principal place of business. As for an individual, the principal receiver is the first one appointed. Nevertheless, the ancillary administrator may deal with the problems that arise in his own state without sending the question for decision to the principal state.352 The receiver may not exceed the powers granted to him by the court. While traditionally there is no privity between receivers of the same estate, even if the same person acts as both principal and ancillary receiver, more recent authority indicates that suits by or against one receiver are res judicata with respect to another receiver. Payment to a particular receiver will prevent other receivers from asserting claims against the debtor.353 The Philippine law on receivership is found in Rule 59 of the Rules of Court. Guardianship The general approach taken in conflict of laws problems in administration of estates of deceased persons are also applicable to estates under the control of guardians. A guardian occupies a fiduciary position and handles matters committed to his charge for the benefit of another. His function is to manage and conserve the property for the benefit of the ward

339

Beale, 1553 Id In re Cowhans estate, 220 Mich 560, 190 N.W. 680 (1922) 342 Lawrence v Nelson, 143 U.S. 215, 222, 36 L. ed. 130, 12 Sup. 440 (1891) 343 Beale, 1556 344 Morill v Morill, 1 All 132 (Mass. 1861). 345 Boston v Boylston, 2 Mass. 384 (1807) 346 Beale, 1561 - 1562 340

347

341

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Thomas Kay W.M. Co. v Sprague, 259 F. 328 (1919) Hensley v Rich, 191 Ind 294, 132 N.E. 632 (1921) Harvey v Richards, 1 Mass 381 (1818) 350 Banta v Moore, 15 N.J. Eq. 97 (1862) 351 Beale, 1565 352 Beaver Boards Co. v Imbrie & Co., 282 F. 654 (1922) 353 Goodrich and Scoles, 385 349

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO until such time as the latter is legally capable of conducting his own affairs. The guardian does not take title to the ward’s property. The term “guardian” is used to denote both the individual who has charge of the person of the ward, and the individual of the person of the ward, and the individual in whom is vested the management of the ward’s property. The two functions are separate, and were so recognized by the common law. The same person may perform both functions.354 The law on guardianship in the Philippines is governed by the Philippine Rules of Court. The general power and duties of guardians can be found in Rule 96 Section 1. Right of the State to Claim the Estate of the Decedent Theory 1 – As the property has become ownerless (bona vacantia), the State can exercise the old jus regale of occupying it; the property must therefore revert by escheat to the State. This theory is upheld in England (claim is known as caduciary rights), most American states, Austria, France, Belgium, and majority of Latin-American countries.355 Theory 2 – As the usual heirs are non-existent, the State should succeed as heir, jure hereditario. The State becomes universal heir. This theory is followed in Italy, Germany, Switzerland, Spain, and the Philippines.356 The rationale for both theories is that abandonment of the property would be detrimental to the public interest. As the property can no longer be enjoyed because there are no other persons entitled to own and enjoy it, it is necessary and proper that the State which alone can extend protection to its use lay claim to the entire estate.357 ADDENDUM Why We Follow the Father’s Personal Law to Prove Filiation 1. Proving Filiation to a Filipino Father Art. 15 NCC: Laws relating to family rights and duties, or to the status, condition and legal capacity of persons are binding upon citizens of the Philippines, even though living abroad. Though Art 15 makes no claim that the personal law of the father shall be used to establish filiation, such is supplied by the Family Code, to wit: Art. 172. The filiation of legitimate children is established by any of the following: (1) The record of birth appearing in the civil register or a final judgment; or (2) An admission of legitimate filiation in a public document or a private handwritten instrument and signed by the parent concerned. In the absence of the foregoing evidence, the legitimate filiation shall be proved by: (1) The open and continuous possession of the status of a legitimate child; or (2) Any other means allowed by the Rules of Court and special laws. Considering that maternity is conclusive and paternity is disputable, proving filiation is thus dependent upon the personal law of the alleged father. Putting Art 15 of the NCC and Article 172 of the FC together would show that: No matter where the Filipino Father is domiciled, proving filiation must follow the Philippine law

This is further emphasized in the context of citizenship. 2. Why the Filipino Father’s Personal Law Recognition of the Philippine Constitution Article IV of the 1987 Philippine Constitution recognizes that the following are citizens: Section 1. The following are citizens of the Philippines: [1] Those who are citizens of the Philippines at the time of the adoption of this Constitution; [2] Those whose fathers or mothers are citizens of the Philippines; [3] Those born before January 17, 1973, of Filipino mothers, who elect Philippine citizenship upon reaching the age of majority; and [4] Those who are naturalized in accordance with law. Section 4. Citizens of the Philippines who marry aliens shall retain their citizenship, unless by their act or omission, they are deemed, under the law, to have renounced it. Firstly, the Constitution establishes that a child of either a Filipino father or mother are considered citizens. In this context, proving filiation to a Filipino father, thus allows such child a dual-citizenship status under Philippine law. Secondly, the Constitution likewise recognizes situations where in a Filipino woman may lose her status as a citizen due to her marriage to a foreigner. This is shown in section 4, Art. 4. Effect of Proving Filiation • It has been held that the State has the right to decipher who are and aren’t its citizens. 358 This is manifested in Article IV of the 1987 Philippine Constitution. Corollary, the State has the privilege of deciphering how such citizenship may be acquired or lost, such as establishing naturalization procedures, and the recognition that adoption is not a means of acquiring citizenship. • In the case of proving filiation: if successful, the child has the option of choosing his/her father’s citizenship. Depending on the father’s personal law, the child may automatically be a state’s citizen or hold dual citizenship until a certain age, usually the age of majority. In the Philippine context, proving filiation is an accepted means of acquiring Filipino citizenship as proven in par two of the 1987 Constitution, implemented by the Family Code above quoted. Corollary to the effects of such citizenship is (1) the acquisition of all rights, duties, abilities and privileges that are incidental to the acquired citizenship; and, (2) the determination of the child’s personal law in other conflict issues relating to such him. To emphasize the latter’s importance: conflict issues decided by the personal law of the parties would be affected if the child, a party to the conflict issue, has acquired his father’s citizenship. • Salonga points out that there will be difficulty when the father is a naturalized Filipino citizen:

354

Goodrich and Scoles, 376 Salonga, 532 Id 357 Id 355 356

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358

According to Salonga, such privilege of the state is not absolute. “It must be consistent with international treaties, international customs, and principles of law generally recognized with regard to nationality” p 164

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO •

The law lays emphasis on the date and place of birth of the minor child in relation to the date of the naturalization of his father. Thus a minor child born in the Philippines either before or after the naturalization of the father is a Filipino citizen. However, in the case of a minor child born outside the Philippines, a distinction must be made. If he is born before the naturalization and is dwelling in the Philippines at the time of the parent’s naturalization, he is a Filipino. However, if the child is born before the naturalization but residing outside the Philippines at the time of the naturalization, he is a Filipino only during his minority unless he resides permanently here when still a minor, in which case he will continue to be a Filipino citizen even after he becomes of age. On the other hand, a child born after naturalization shall be considered a Filipino citizen, unless within one year after reaching the age of majority he fails to register himself as a Filipino citizen at the Philippine consulate of the country where he resides and take the necessary oath of allegiance.359

CONTRACTS C/O: CHRIS GERONA, MACE WONG, INXS SINGSON, DINGDONG POQUIZ, ERIC BACSAL, PAUL IMPERIAL (Salonga, CHAPTER XVIII, 1995) CONTRACTS The fundamental policy in the broad local law of contracts is to give effect to the justified expectations of the parties. This is reflected in the strength of the view which attempts to carry out their intention. Underlying the conflict of laws policy in contracts is this same policy of the local law.360 When ambiguity exists with regard to what law parties intended, their intent normally can be given effect by a reference to the law that will sustain their agreement.361 Article 1159 of the Civil Code provides: “Obligations arising from contracts have the force of law between the contracting parties and must be complied with in good faith.” This provision, which was lifted from the Spanish Code, embodies the importance of upholding agreements entered into in good faith by the various parties. The traditional method in cases involving contracts with Conflict of Laws situation is for the forum either (1) to refuse to entertain the case on the ground of forum non conveniens, thus leaving the parties free to litigate elsewhere; or (2) deny enforcement of the contract and the foreign law that upholds it for being against its notions of public policy and morality.362 Law Governing Formalities State law may require a contract to be executed with certain formalities to be enforceable. The statuists led by Bartolus, maintained that the formalities of an act of transaction, such as a contract, should be governed by the law of the loci contractus and is derived from the broad proposition that the place governs the act, locus regit actum. There are two theories in support of loci contractus. The first is premised on the theory of sovereignty, whereas the

359

Salonga, pp 178-179. Scoles Scoles, citing Pritchard v. Norton, 106 U.S. 124, 1 S.Ct. 102 (1882) 362 Salonga, p. 274, Chapter 12

360 361

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second is premised on the concept of voluntary submission. Both theories have given way to a more practical consideration – that of business expediency and convenience.363 To determine where the contract was made, we look to the place where the “last act is done which is necessary to bring the binding agreement into being so far as the acts of the parties are concerned.”364 One of advantages of the lex loci contractus is the relative ease in establishing the place of contracting. Furthermore, in applying it consistently, the principal purposes of contract which are certainty and stability are achieved.365 While a majority of the decided cases in the United States refer the matter of formal validity to the place of making, results have been reached through recourse to other principles.366 In this connection, two decisions by the Supreme Court of the United States offer conflicting views. Scudder v. Union National Bank – It was said by way of dictum that “matters bearing upon the execution, interpretation and validity of the contract are determined by the law of place where the contract is made,” but in Hall vs. Cordell a question of form was referred to the place of performance.367 • Hall vs. Cordell Facts: The defendants had orally agreed with the plaintiffs in Missouri to accept and pay in Illinois all drafts drawn on them by one Farlow. They failed to pay a draft upon presentation. Under the law of Missouri an agreement to accept a bill of exchange must be in writing, but not in Illinois. Held: Illinois law controlled. “Nothing in the case shows that the parties had in view, in respect to the execution of the contract any other law than the law of the place of performance.” Although the lex loci contractus rule respecting formalities is generally adhered to, there is however, a disagreement as to the degree of submission to it. Some courts give it a compulsory, imperative effect; others consider it merely permissive or optional.368 The rule before as advocated by Mr. Justice Story was the compulsory approach whereby with respect to formalities of a contract the law of the place where the contract was executed was controlling. As embodied in the Original Restatement, it was the law of the place of the contracting that determines the formal validity of a contract.369 Today, however, there is more adherence to the rule that lex loci contractus is merely permissive and optional. The Second American Restatement, in abandoning the compulsory approach, laid down two rules: (1) the formalities required to make a valid contract are determined by the local law of the State chosen by the parties to govern their contract or, in default thereof, by the local law of the state which has the most significant relationship in the transaction; and (2) formalities which meet the requirements of the place where the parties execute the contract will usually be acceptable. 370 In England this is reflected in views sustaining the formal validity of a contract if the required formalities of either the place of making or the proper law are satisfied.371 363

Salonga, p. 274, Chapter 12 Coquia, citing Goodrich, p 243, 244 Coquia 366 Stolenberg, 367 Stolenberg, citing Scudder v. Union National Bank, 91 U.S. 406, 23 L.Ed. 245 (1875) and Hall v. Cordell, 142 U.S. 116, 12 S.Ct 154, 35 L.Ed. 956 (1891) 368 Salonga, p. 274, Chapter 12 369 Salonga, p. 275, Chapter 12 370 Salonga, p. 274, Chapter 12, citing the Second American Restatement, Section 199; Sections 187, 188. 371 Scoles, citing Dicey Conflict of Laws 774 (7th ed. 1958); Cheshire, Private International Law 234 (6th ed. 1961) 364 365

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO Philippine Conflicts Rule of Formal Validity The Philippines follows the lex loci contractus rule as embodied in Article 17 of the Civil Code which states to wit: “The forms and solemnities of contracts, wills, and other public instruments shall be governed by the laws of the country in which they are executed. When the acts referred to are executed before diplomatic or consular officials of the Republic of the Philippines in a foreign country, the solemnities established by Philippine Laws shall be observed in their execution.” As to whether or not the Philippines follows the optional or compulsory approach, there are diverse views, however, the optional approach seems to be more prevalent. In cases where execution cannot be localized due to multi-state contacts, Philippine courts in interpreting Article 17, would do well to adopt the rule of validation that is established in the laws of all civilized states. As formulated by eminent civil law authority, Prof. Ehrenzweig, the rule means that “parties entering into a contract upon equal terms intended their agreement to be binding,” and the law will give effect to their intent whenever it can do so “under any law whose application the parties can reasonably be assumed to have taken into account.”372 The reason is simple: if a court is convinced that the contract was made as alleged and there has been no fraud or perjury, it should have no sympathy for a party whose only excuse for repudiation is lack of statutory formality.373 Under the rule of validation, the validity of the contract will be upheld as long as it satisfies the requirements of any proper law.374 The policy favoring enforcement of the reasonable expectations of parties arising out of transactions seriously entered supports the validation rule.375 Capacity to Enter Into Contracts Status is a basic concern in Conflict of Laws involving contracts entered into involving minors and married women. There are two views with respect to status. First, is the nationality principle whereby the capacity of an individual to enter into a contract is referred to his national law. Second, is the domiciliary principle whereby a persons capacity to enter into a contract should be determined by the law of his domicile.376 The latter, which involves the lex loci contractus rule with reference to capacity to enter into a contract, has now been abandoned. The rule followed nowadays is that the law that should govern a contract is the law of the state with which the contract has its more significant relationship.377 As to the capacity for a corporation to enter into a contract, it has long been established that a foreign corporation, though considered as domiciled in the state where chartered, can nevertheless make a contract in another state.378 It has been held however, that the law of the place of contracting, rather than that of the state of incorporation, determines whether or not a corporation is precluded - when sued on the contract - from setting up the defenses of ultra vires.379 372

Salonga, page 277, Chapter 12, citing Ehrenzweig, secs 174, 175, 176 373 Salonga, page 277, Chapter 12, citing Corbin, Contracts, sec. 293 374 Salonga, page 277, Chapter 12, citing Ehrenzweig, 471 375 Scoles 376 Salonga, page 279, Chapter 12 377 Scoles, p. 208 378 Scoles, citing Bank of Augusta v. Earle, 38 U.S.(13 Pet.) 519, 10 L.Ed. 274 (1839) 379 Scoles, citing Illinois Fuel Co. v. Mobile & Ohio R. Co., 319 Mo. 899, 8 S.W.2d 834 (1928)

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Philippine Law on Capacity to Contract • In the Philippines one’s capacity to enter into a contract is regulated by Article 15 of the Civil Code which states to wit: • “Laws relating to family rights and duties or to status, condition and legal capacity of persons are binding upon citizens of the Philippines even though living abroad.” • The common scenario dwelt into in Conflicts of Laws is: can a person otherwise disqualified to enter into a contract based on his status laws in his home country later repudiate a contract he entered into with a foreigner by simply raising such disqualification which the latter in good faith did not know of? • One prevailing rule in the Philippines is that the doctrine of estoppel will prevent a minor from repudiating a contract by later alleging that he was not of age in contracting with a party that dealt with him in good faith. • As to married women however, Article 39 of the Civil Code provides to wit: • “A married woman, 21 years of age or over, is qualified for all acts of civil life, except in cases specified by law.” • Furthermore, Article 165 of the Civil Code provides that the wife is incapacitated to bind the conjugal partnership without the husband’s consent. It is therefore apparent that in cases wherein the wife enters into a contract wherein she is disqualified to enter into by Philippine law but otherwise capacitated in another country where she contracts with would arise a dilemma as to whether or not such a contract is valid. • It is therefore the opinion of Salonga that Article 15 of the Civil Code has to be recast or the courts may limit its liability so as to arrive at a better result. A good model to follow may be found in the Geneva Conflicts Rules on Bills of Exchange and Promissory Notes of 1930. Under the said rules, the capacity of a person to bind himself by a bill of exchange is initially determined by his national law; but a person who lacks capacity under his national law is nevertheless bound, if his signature is given in any territory in which according to the law in force there, he would have the requisite capacity. The Swiss Code provides that an alien who enters into a transaction in Switzerland cannot plead his lack of capacity if he has the capacity under Swiss Law. • As a way of reconciling the different viewpoints with respect to status and ones capacity to contract, Article 15 of the Civil Code would be best if limited by the courts by applying it only to agreements involving family rights and domestic relations and not to commercial transactions. The wording of the law supports such a proposition because again as worded, “laws relating to family rights and duties or to status, condition and legal capacity of persons are binding upon citizens of the Philippines even though living abroad.” Thus, the capacity of a person to enter into a contract commercial in nature should not be regulated by his personal law but rather by the law which governs the entire contract. Essential or Intrinsic Validity “Essential” or “intrinsic” validity refers to the nature, content, and effects of the contract. Furthermore, it refers to the essence and substance of the obligation. Article 1318 of the Civil Code states that the following requisites must concur for there to be a contract: (1) Consent of the contracting parties; (2) Object certain which is the subject matter of the contract; and (3) Cause of the obligation which is established.

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO Learned commentators have proposed three possible laws that could govern the questions relating to the intrinsic validity of contracts: (1) The law of the place of making; (2) The law of place of performance; or (3) The law intended by the parties.380 Philippine Law on Essential Validity • There is no provision in the Philippine Civil Code which provides for the essential validity of the contract. Furthermore, there is a scarcity of case law on the matter which is attributed to the practice of the courts to treat Conflicts of Law cases as domestic cases thereby applying the local laws. Such treatment is premised on expediency and convenience to the courts as well as to the litigants in not being burdened anymore with the duty to prove a foreign law. • Furthermore, Philippine domestic law promotes the policy of giving effect to the intention of the parties as embodied in Article 1306 of the Civil Code. • This doctrine of party autonomy is recognized today in most codes and in great majority of countries.381 • Questions of construction and interpretation of contracts are within the contractual capacity of the parties. Article 1370 of the Civil Code – “If the terms of the contract are clear and leave no doubt as to the intention of the parties, the literal meaning of its stipulations must control. If the words appear to be contrary to the evident intention of the parties, the latter shall prevail over the former.” • Furthermore, Article 1371 provides that the intention of the contracting parties is judged by their contemporaneous and subsequent acts. Moreover, the law looks at the acts of the parties and their surrounding circumstances which may possibly have exerted some influence upon their actions, and then assumes that their intentions are in harmony with such acts and circumstances.382 • In the United States, Prof. Weintraub posited that there are two rules which have gained great acceptance: (1) The parties may choose the governing law; (2) In the absence of such a choice, the applicable law is that of the State that “has the most significant relationship to the transaction and the parties.”383 The rule as posited by Prof. Weintraub is actually expressed in Sections 187 and 188 of the Second Restatement of Conflict of Laws which provide: Section 187. Law of the State Chosen by the Parties (1) The law of the state chosen by the parties to govern their contractual rights and duties will be applied if the particular issue is one which the parties could have resolved by an explicit provision in their agreement directed to that issue. (2) The law of the state chosen by the parties to govern their contractual rights and duties will be applied if the particular issue is one which the parties could not have resolved by an explicit provision in their agreement directed to that issue, either: (a) The chosen state has no substantial relationship to the parties or the transaction and there is not other reasonable basis for the parties’ choice, or

(b) Application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the section 188, would be the state of the applicable law in the absence of an effective choice of law by the parties. (3) In the absence of a contrary indication of intention, the reference is to the local law of state of the chosen law. Section 188. Law Governing in Absence of Effective Choice by the Parties (1) The rights and duties of the parties with respect to an issue in contract are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the transaction and the parties under the principles stated in section 6. (2) In the absence of an effective choice of law by the parties, the contracts to be taken into account in applying the principles of section 6 to determine the law applicable to an issue include: (a) place of contracting (b) place of negotiation of the contract (c) the place of performance (d) the location of the subject matter of the contract (e) the domicile, residence, nationality, place of incorporation and place of business of the parties. These contacts are to be evaluated according to their relative importance with respect to the particular issue. (3) If the place of negotiating the contract and the place of performance are in the same state, the local law of the state will usually be applied, except as otherwise provided in sections 189-203. As to the second part of the rule as mentioned by Prof. Weintraub, although inherently ambiguous it means that the courts will consider the various contacts that states have with the transaction, and after weighing their relative significance to the case at hand, not merely counting them, conclude that one state should govern the transaction because its total relationship is the most important.384 If the contract is negotiated, completed, and performed all in one state, this state ordinarily determines its validity. 385 If however, a contract is negotiated, completed and performed in different states the court will then have to consider various factors such as the domicile of the contracting parties, place of business, place of incorporation, place of performance, place of payment and others. In commercial undertakings, for example, which call for repayment of money, the law applicable to most substantial issues will be that of the place of payment. However, in a personal family transactions, such as a contract to will property, greater weight will attach to the domicile.386

380

Coquia Salonga, page 287, Chapter 12, citing II Rabel, 370-371 Coquia, citing Grand v. Livingston, 4 App. Div. 589, 38 NYS 490 (1896) 383 Salonga, page 277, Chapter 12, citing Cheshire, 214 381

384

382

385

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386

Scoles, citing Vanston Committee v. Green, 329 U.S.156, 67 S.Ct. 237 (1946) Scoles, citing the Second Restatement, 3326 Scoles, citing, Emery v. Burbank, 163 Mass. 326, 39 N.E. 1026 (1895)

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO Particular Contracts Money Deposits Specific sums of money taken and held on account by a bank, as a service to its clients. Such deposits of money, whether in sum or in specie are naturally bound to the place of the banking or financial institution to which they are entrusted. Logically, the law of that place governs the deposit.387 Dr. Ernst Rabel, cited 2 reasons for the rule that money deposits are governed by law of the place where they are deposited: (1) The money is brought to that place to be conserved and repaid there; and (2) The transaction is one of a mass of similar transactions by the institution.388 Ruben Martinez vs. Court of Appeals,389 – the Supreme Court, citing Rabel, maintained the rule that money deposits are naturally bound to the place of the banking or financial institution to which they are entrusted. Hence, if a Filipino makes a deposit with the Swiss Credit Bank in Zurich, all questions arising from the deposit such as service charges, the manner of keeping the deposit, the effects of currency fluctuations, the mode of withdrawal of the deposits in Switzerland will usually be determined by the law prevailing in that place. Thus, Swiss banking privacy laws have made it possible for persons of all nationalities to safeguard their assets and to keep them away from inquiry. In protecting their customers’ privacy, Swiss banks have also become an instrument in the money laundering practices of businesses and individuals. Contracts With Arbitration and Choice of Forum Clauses An Arbitration Clause is a commonly used clause in a contract that requires the parties to resolve their disputes through an arbitration process. Although such a clause may or may not specify that arbitration occur within a specific jurisdiction, it always binds the parties to a type of resolution outside of the courts, and is therefore considered a kind of forum selection clause. Providing for arbitration or choice-of-forum clauses are considered to be a fast and relatively inexpensive means for ensuring that a construction dispute is correctly and fairly resolved. In the past, however, Philippine courts have looked with disfavor on contracts that provided for arbitration on the ground that such arbitration clauses would oust them of their rightful jurisdiction. The courts at that time believed that arbitration is merely a matter of procedure rather than of substance such that judicial remedies at the forum should be controlling. • Companie de Commerce vs. Hamburg-Amerika390 – A French shipper of goods aboard a German vessel that had taken refuge in Manila due to the outbreak of the first World War, sued the carrier in Manila for damages. The Supreme Court held that in spite of the arbitration clause under the charter party, Philippine courts had jurisdiction, adding that it was not alleged and proved that compliance with the provision was a condition precedent for the enforcement of the contract. Fortunately, in view of the changing times, this old view has become obsolete. Arbitration is now an accepted mode of setting disputes, regardless of whether or not the contract

387

Jovito R. Salonga, Private International Law (1995) Ernst Rabel, The Conflict of Laws: A Comparative Study, 2nd edition (1958) Ruben Martinez vs. Court of Appeals, G.R. No. 131673, September 10, 2004 390 Companie de Commerce vs. Hamburg-Amerika, G.R. No. L-10986, March 31, 1917

388

389

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involves a foreign element. Apart from the Civil Code provisions on arbitration,391 Congress enacted Republic Act 876 in 1953, and Republic Act 9285 in 2004, both of which embody a clear legislative policy in favor of settling controversies by a means of arbitration – a method considered more expeditious, less expensive, and with a greater chance for substantial justice. • LM Power Engineering Corp. vs. Capitol Industrial Construction 392 – The Supreme Court upheld the validity of an arbitration clause in the subcontracting agreement. It further stated that alternative dispute resolution methods or ADRs -- like arbitration, mediation, negotiation and conciliation – should be encouraged because “enabling parties to resolve their disputes amicably, they provide solutions that are less timeconsuming, less tedious, less confrontational, and more productive of goodwill and lasting relationships.” An arbitration clause may nevertheless be challenged and held invalid if it designates a biased party as the arbitrator.393 Choice-of-Forum A Choice-of-Forum or forum selection clause, on the other hand, is a provision subjecting any litigation or controversy between the parties to a specified court or forum. It points to two things: First, it determines the specific process by which parties agree expressly to litigate all disputes concerning a contract and secondly, it can specify the venue by implication.394 Thu s, a choice-of-forum clause or forum selection clause simply designates whether a dispute is to be resolved by a court and/or an alternative adjudication process such as an arbitration panel. As with arbitration clauses, Philippine courts have also looked with disfavor on contracts with choice-of-forum clauses on the ground that such a clause would oust them of their rightful jurisdiction. They have consistently held in the past that such clauses are unenforceable if the effect would be to oust the jurisdiction of the local courts. • Rafael Molina vs. Antonio dela Riva395 – An American corporation delivered to a German company a consignment of agricultural machinery to be carried on a German steamer with Russia as its destination. The bill of lading stipulated that in case of disputes under the contract, the question would be, at the carrier’s option, decided exclusively by German courts applying German law. During the voyage, however, war broke out between Germany and Russia. The ship was forced to dock in Manila and the shipper asked for either a transshipment of goods to Russia or surrender by the carrier. The carrier refused and the shipper instituted a suit in Manila. The carrier challenged the jurisdiction of Philippine courts, pursuant to the terms of the bill of lading. The Supreme Court held that the Philippine courts have jurisdiction since the contractual stipulations cannot operate to oust the courts of their rightful jurisdiction.

391

Art. 2042 The same persons who may enter into a compromise may submit their controversies to one or more arbitrators for decision. Art. 2043. The provisions of the preceding Chapter upon compromises shall also be applicable to arbitrations. Art. 2044. Any stipulation that the arbitrators' award or decision shall be final, is valid, without prejudice to Articles 2038, 2039, and 2040. Art. 2045. Any clause giving one of the parties power to choose more arbitrators than the other is void and of no effect. Art. 2046. The appointment of arbitrators and the procedure for arbitration shall be governed by the provisions of such rules of court as the Supreme Court shall promulgate. 392 LM Power Engineering Corp. vs. Capitol Industrial Construction, G.R. No. 141833, March 26, 2003 393 Salonga 394 Javad Heydary, Anatomy of an IT Contract -- Choice of Law, Forum, Venue (2005) 395 Rafael S. Molina vs. Antonio de la Riva, G.R. No. L-2521, March 22, 1906

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO Fortunately, to reduce the burden on court systems in resolving disputes and to protect the interest of the parties in a contract, the Supreme Court has abandoned the old view and adopted a new rule regarding choice-of-forum clauses in contracts. Where there is no fraud or overreaching, and there is no showing that the enforcement of the choice-of-forum clause would be unreasonable or unjust, the clause must be given effect.396 • Unterweser Reederei GMBH vs. Zapata Off-Shore Co. Facts: Zapata disregarded the choice-of-forum clause in the agreement and commenced a suit for damages in the Federal Court in Tampa, Florida. On the other hand, Unterweser sought damages for breach of contract in the High Court of Justice in London and obtained permission to serve process on Zapata. Zapata appeared there to challenge the assumption of jurisdiction. The English judge found that Zapata had failed to show unfairness of the choice-of-forum clause and held that Zapata should be required to stick to its bargain. The decision was upheld on appeal. Held: The Supreme Court held that the choice-of-forum clause in a contract should be upheld unless it is unreasonable and unjust. “The expansion of American business and industry will hardly be encouraged if, notwithstanding solemn contracts, we insist on a parochial concept that all disputes must be resolved under our law and in our courts. There are compelling reasons why a freely negotiated private international agreement, unaffected by fraud, undue influence, or overwheening bargaining power such as that here should be given effect. The choice of neutral forum with experience in shipping litigation was not unreasonable. There is strong evidence that the forum clause was a vital part of the agreement.“ Elimination of uncertainties as to the place of litigation by agreeing in advance on a forum acceptable to both parties is an indispensable element in international trade, commerce and contract. Moreover, in the case of Scherk vs. Alberto-Culver Co., the Supreme Court concluded that a "forum clause should control absent a strong showing that it should be set aside. Much uncertainty and possibly great inconvenience to both parties could arise if a suit could be maintained in any jurisdiction in which an accident might occur or if jurisdiction were left to any place where personal or in rem jurisdiction might be established. The elimination of all such uncertainties by agreeing in advance on a forum acceptable to both parties is an indispensable element in international trade, commerce, and contracting."397 Other Notable Views From Jurisprudence • Pakistan International Airlines vs. Ople 398 – the Supreme Court held that where the relationship between the parties is affected with public interest and the multiple and substantive contacts of the contract are with Philippine law, Philippine courts and agencies may not be ousted of their jurisdiction. • K.K. Shell Sekiyu Osaka Hatsubaisho vs. Court of Appeals399 – the Supreme Court held that when the choice-of-forum clause in a contract or agreement has not been conclusively shown to be binding due to ambiguity or lack of evidence, it will not operate to oust the local courts of their jurisdiction. Air Transportation Contracts

•

•

Since 1934, the international air transportation of passengers has been governed primarily by the Warsaw Convention, a multilateral treaty governing international aviation, adhered to by the Philippines and by most other countries whose airlines have international routes. It is an international convention which regulates liability for international carriage of persons, luggage or goods performed by aircraft for reward. The Convention was originally signed in 1929 in Warsaw, was amended in 1955 at The Hague, and in 1975 in Montreal. The Convention was concurred in by the Philippine Senate, per Resolution No. 19, on May 16, 1950. The instrument of accession was signed by President Quirino on October 13, 1950 and became applicable to the Philippines on February 9, 1951. On September 23, 1955, President Magsaysay issued Proclamation No. 201, declaring the Philippines’ formal adherence to the Convention.400 Thus, by the principle of pacta sunt servanda, 401 the Warsaw Convention became binding to all the parties to the treaty including the Philippines.

Applicability of the Warsaw Convention • The Warsaw Convention was designed to protect the then infant air industry and to alleviate the complexity of potential litigation in various States with conflicting choice-oflaw rules differing limits on damages that may be recovered. The Convention limits the available places of instituting suits and applies to all international carriage of persons, baggage, or goods performed by aircraft for hire, as that term is defined. It does not, however, apply to carriage of mail and postal packages.402 • In order for the Warsaw Convention to apply, the passenger must be informed of this fact. Article III requires airlines to deliver to the passenger a ticket containing a "statement that the transportation is subject to the rules relating to liability established by this convention". Further, the ticket must be delivered in time to allow the passenger to take out insurance if he so desires. • The Convention does not cover all possible questions or definitions. Among those not expressly defined are the definition of injury as including or excluding mental anguish caused by hijacking or flight delay, the definition of embarkation or disembarkation as extending to waiting room areas, the definition of willful misconduct which removes the limitation on damages, the contributory negligence defense, and the tolling of statutes of limitations. On these and other questions, the lex fori403 may provide the answer, which may lead to the applicability of a number of divergent laws.404 • Where the passengers are residents and nationals of the forum and the ticket is issued in such State by the defendant airline, the court may justifiably apply the law of the forum in a suit covered by the provisions of the Warsaw Convention. • In cases where the Convention does not apply, the validity of the contract of carriage as well as the rights created thereby are determined, in the absence of an effective choice of law by the parties, by the local law of the State from which the passenger departs or

400

Salonga Pacta sunt servanda, the “Fundamental principle of the law of treaties,” is the notion that every treaty in force is binding upon the parties to it and must be performed by them in good faith. 402 Article 1 and 2, Warsaw Convention 403 “Law of the forum” - law of the court in which proceedings are being conducted. In other words, it refers to the jurisdiction where the lawsuit in question has been instituted. 404 Salonga 401

396

Salonga Scherk v. Alberto-Culver Co., 417 U.S. 506, 1974 Pakistan International Airlines vs. Hon. Blas Ople, GR No. 61594 September 28, 1990 399 K.K. Shell Sekiyu Osaka Hatsubaisho, et al. vs. Court of Appeals, G.R. Nos. 90306-07, July 30, 1990

397 398

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO •

the goods are dispatched, unless with respect to the particular issue, some other State has a more significant relationship to the contract and to the parties. In the absence of an effective choice of law, the courts have usually applied the local law of the State of departure, sometimes on the stated ground that is was the place of making or the center of gravity of the contract. The forum has a sound legitimate basis for the application of the policy found on its own internal law “when it is the center of gravity of the contract and has the most significant relationship to the parties and the contract.”405

Liabilities Under the Convention • Chapter III of the Warsaw Convention, as amended, regulates the liability of the carrier. Article 17 makes the carrier liable in the event of death or wounding of any passenger or any other bodily injury suffered by the passenger if the accident which caused the damage took place on board the aircraft or in the course of the operation of embarking or disembarking. Likewise, the carrier is liable for damage sustained in the event of loss of, or damage to, any checked baggage if the occurrence which caused the damage took place during the transportation by air – a term which comprises the period during which the baggage or goods are in the charge of the carrier, whether in an airport or on board an aircraft or, in the case of landing outside of an airport, in any place whatsoever.406 • The carrier is liable for damage occasioned by delay in the transportation by air of passenger, baggage or goods. 407 The Convention only applies to the air carrier and does not apply to the airplane manufacturer or component part manufacturer which may bear responsibility for the loss. • Article 22 of the original Warsaw Convention limited the maximum compensation for the death of a passenger to approximately $8300 US. At the same time, it provided for unlimited liability if the damage was caused by the willful misconduct of the carrier or any of its employees. The amended Convention now limits the maximum compensation for injury or death to passengers on a journey to or from the United States to $75,000 US per passenger inclusive of legal fees and costs; if exclusive of legal fees and costs, the limit is $58,000 US. Liability up to such limit does not depend on the negligence on the part of the carrier. Where the journey is not to, from, or has no agreed stopping place in the United States, the liability of the carrier for death of or personal injury to passengers is limited in most cases to approximately $10,000 $20,000 US. • Article 25, as amended, provides that the limits of liability specified in Article 22 will not apply if it is proved that the damage resulted from an act or omission of the carrier, his servants or agents, done with intent to case damage or recklessly and with knowledge that damage would probably result, provided that in such a case, it is proved that the servant or agent was acting within the scope of his authority. • Alitalia vs. Intermediate Appelate Court 408 – the Supreme Court held that the Warsaw Convention does not operate as an absolute limit of the extent of an airline’s liability; it

•

does not regulate or exclude liability for other breaches of contract by the carrier, or misconduct of its employees, or for some particular or exceptional type of damage. A passenger is entitled to an award of nominal damages due to the carrier’s failure to deliver her luggage on time. The Warsaw Convention creates a presumption of liability against the air carrier for injury to and death of passengers engaged in international travel. However, certain defenses are provided whereby the carrier may avoid liability entirely.

The Montreal Convention • The Montreal Convention is a treaty adopted by a meeting of ICAO409 member states in 1999. It replaced the Warsaw Convention's regulations concerning compensation for the victims of air disasters. Under the Montreal Convention, air carriers are liable for up to $135,000 per passenger in case of an accident, with unlimited liability if the carrier itself is at fault. The Convention also allows victims' families to sue foreign carriers in their own country of citizenship, and requires all air carriers to carry liability insurance. • The Montreal Convention, will replace the Warsaw Convention system, once Montreal has been ratified by all States. Until then, however, there will be a patchwork of rules governing international carriage by air, as different States will be parties to different agreements (or no agreement at all). As additional countries ratify the Montreal Convention, it will ultimately replace the Warsaw Convention of 1929. • Santos III vs. Northwest Airlines Facts: On October 21, 1986, Santos, a minor and a resident of the Philippines, purchased from Northwest Orient Airlines (NOA) a round-trip ticket in San Francisco, U.S. for his flight from San Francisco to Manila via Tokyo and back. The scheduled departure date from Tokyo was December 20, 1986. No date was specified for his return to San Francisco. On December 19, 1986, Santos checked in at the NOA counter in the San Francisco airport for his scheduled departure to Manila. Despite a previous confirmation and reconfirmation, he was informed that he had no reservation for his flight from Tokyo to Manila. He therefore had to be waitlisted. On March 12, 1987, Santos, through his father and legal guardian, sued NOA for damages in the RTC of Makati. NOA moved to dismiss the complaint on the ground of lack of jurisdiction, citing Article 28(1) of the Warsaw Convention, which provides that at the option of the plaintiff, an action for damages must be brought in the territory of one of the High Contracting Parties, either before the court of the domicile of the carrier or of his principal place of business, or where he has a place of business through which the contract has been made, or before the court at the place of destination. In February 1988, the lower court granted the motion and dismissed the case. Santos appealed to the Court of Appeals, which affirmed the decision of the lower court. A motion for reconsideration was denied. Hence, this appeal, which raises several questions, including the proper interpretation of Article 28(1) of the Warsaw Convention. Held: The Supreme Court, through Mr. Justice Cruz, held, among other things, that Article 28(1) is a jurisdiction and not a venue provision. Venue and jurisdiction are entirely distinct matters. Jurisdiction may not be conferred by consent or waiver upon a court which

405

Salonga Article 18, Warsaw Convention Article 19, Warsaw Convention 408 Alitalia Airways vs. Court of Appeals, G.R. No. 77011, July 24, 1990 406 407

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International Civil Aviation Organization (ICAO), an agency of the United Nations, develops the principles and techniques of international air navigation and fosters the planning and development of international air transport to ensure safe and orderly growth.

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO otherwise would have no jurisdiction over the subject matter of an action; but the venue of an action as fixed by statute may be changed by consent of the parties. The place of destination, within the meaning of the Warsaw Convention, is determined by the terms of the contract of carriage, or, specifically in this case, the ticket between the passenger and the carrier. Examination of the petitioner’s ticket shows that his ultimate destination is San Francisco. Although the date of the return flight was left open, the contract of carriage between the parties indicates that NOA was bound to transport the petitioner to San Francisco from Manila. Manila should therefore be considered merely an agreed stopping place and not the destination. • Article 1(2) also draws a distinction between a “destination” and an “agreed stopping place.” It is the “destination” and not an “agreed stopping place” that controls for purposes of ascertaining jurisdiction under the Convention. • The contract is a single undivided operation, beginning with the place of departure and ending with the ultimate destination. The use of the singular in this expression indicates the understanding of the parties to the Convention that every contract of carriage has one place of departure and one place of destination. An intermediate place where the carriage may be broken is not regarded as a “place of destination.” • With respect to transportation by successive carriers, as long as they fall within the definition of Article 1, each carrier who accepts passengers of baggage shall be subject to the rules set out in the Convention, and shall be deemed as one of the contracting parties insofar as the contract deals with that part of the transportation which is performed under his supervision. In case of transportation of this nature, the passenger or representative can take action only against the carrier who performed the transportation during which the accident or delay occurred, save in the case where by express agreement the first carrier has assumed liability for the whole journey. As regards baggage or goods, the passenger or consignor shall have a right of action against the first carrier, and the passenger or consignee who is entitled to delivery shall have a right of action against the last carrier. Furthermore, each may take action against the carrier who performed the transportation during which the loss, damage or delay took place. These carriers shall be jointly and severally liable to the passenger, or to the consignor or consignee. • In case where the Convention does not apply, the Second Restatement holds that the validity of the contract of carriage as well as the rights created thereby are determined, in the absence of an effective choice of law by the parties, by the local law of the State from which the passenger departs or the goods are dispatched, unless with respect to the particular issue, some other State has a more significant relationship to the contract and to the parties. • Where the passengers are residents and nationals of the forum and the ticket is issued in such State by the defendant airline, the court may justifiable apply the law of the forum in a suit covered by the provisions of the Warsaw Convention. • Japan Airlines vs. Court of Appeals Facts: On June 13, 1991, Jose Miranda boarded a JAL flight from San Francisco to Manila. Enrique Agana,Maria Angela Agana, and Adelia Francisco were also passengers of a JAL flight from LA to Manila. As an incentive for traveling with JAL, the flights made an overnight stopover in Japan at the airline’s expense. Upon arrival in Japan on June 14, the passengers were billeted in Hotel Nikko Narita for the night. The following day, they learned that Mt. Pinatubo erupted, and all flights to Manila 03-23-2006 | THROUGH THE JOINT EFFORTS OF STUDENTS OF ATENEO LAW III- C 2006 | Edited by J.C. de Veyra

were cancelled indefinitely because NAIA was closed. JAL rebooked them on flights due to depart on June 16. JAL paid for their unexpected overnight stay. Unfortunately, the June 16 flight was also cancelled. JAL informed the stranded passengers that it would no longer shoulder their expenses. The passengers stayed in Japan until the 22nd and were forced to pay meals and accommodations from their personal funds. The passengers filed an action for damages against JAL, claiming that JAL failed to live up to its duty to provide care and comfort to its stranded passengers when it refused to pay for their hotel and accommodation expenses from June 16 to 21. the unexpected eruption of Mt. Pinatubo. Held: JAL is cannot be faulted for a fortuitous event. However, JAL is liable for nominal damages. JAL is not liable for the expenses incurred by the passengers, since the reason why JAL was prevented from resuming its flight to Manila was due to the effects of the Mt. Pinatubo eruption, which was a fortuitous event. However, JAL is not completely absolved from liability. It must be noted that the passengers bought tickets from the US with Manila as their final destination. While JAL was no longer required to defray the passengers’ living expenses during their stay in Japan on account of the fortuitous event, JAL had the duty to make the necessary arrangements to transport the passenger on the first available connecting flight to Manila. JAL reneged on its obligation to look after the comfort and convenience of its passengers when it declassified them from “transit passengers” to “new passengers,” as a result of which they were obliged to make the necessary arrangements themselves for the next flight to Manila. • Because of JAL’s failure to make the necessary arrangements to transport the passengers on its first available flight to Manila, an award of P100,000 as nominal damages, in favor of each passenger, is proper. • Singapore Airlines Limited vs. Court of Appeals Facts: Sancho Rayos was an overseas contract worker who had a contract with Arabian American Oil Company (ARAMCO). As part of ARAMCO’s policy, its employees returning to Saudi from Manila were allowed to claim reimbursement for amounts paid for excess baggage up to 50Kg as long as supported by receipt. Rayos took a Singapore Airlines (SLA) flight to Saudi with a 50Kg excess baggage for which he paid about 4K. ARAMCO reimbursed the amount upon presentation of the excess baggage ticket. Later, Rayos learned that he was being investigated by ARAMCO for fraudulent claims. He asked his wife in Manila to obtain a written confirmation from SLA the he paid an excess baggage of 50Kg. SLA’s manager notified the wife of its inability to issue the certification because the records showed that only 3Kg were entered and charged as excess baggage. SLA issued the certification four months later, after the wife threatened it with a lawsuit. When the year ended, Rayos’ contract with ARAMCO was not renewed. Convinced that SLA was responsible for the non-renewal of the contract, the spouses Rayos filed an action for damages against SLA. SLA filed a third-party complaint against its handling agent PAL, claiming that the tampering was committed not by SLA but by PAL. PAL denied any participation in the tampering and attributed it to the SLA personnel. The lower court held SLA liable to the spouses for damages and ordered PAL as third party defendant to pay SLA whatever it will pay the Rayos spouses. Held: SLA is entitled to reimbursement from PAL, but only to the extent of one-half (½) of the amount that it paid to the Rayos spouses. PAL cannot be held solely liable for the satisfaction of the entire judgment. While the proximate cause of the nonrenewal of Rayos’ employment contract was the tampering of his excess baggage ticket by PAL’s personnel, the

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO immediate cause of such non-renewal was SLA’s delayed transmittal of the certification needed by Rayos to prove his innocence to his employer. Thus, the non-renewal of Rayos’ employment contract was the natural and probable consequence of the separate tortious acts of SLA and PAL. Under Article 2176, Rayos is entitled to compensation for such damages. Inasmuch as the responsibility of two or more persons, or tort-feasors, liable for a quasi-delict is joint and several and the sharing as between such solidary debtors is pro-rata, it is but logical, fair, and equitable to require PAL to contribute to the amount awarded to the Rayos spouses already paid by SIA, instead of totally indemnifying the latter.

o o

o o o

Cyberspace Transactions • “Cyberspace has no territorially based boundaries, because the cost and speed of message transmission on the Internet is almost entirely independent of physical location. Messages can be transmitted from one physical location to any other location without degradation, decay, or substantial delay, and without any physical barriers that might otherwise keep certain geographically remote places and people separate from one another. The Internet enables transactions between people who do not know, and in many cases cannot know, each other's physical location. The power to control activity in cyberspace has only the most tenuous connections to physical location.410” • The advent of the Age of Cyberspace has created a global environment wherein one country's laws may conflict with another's. In this situation, contracts and transactions may be completed over the internet thus causing confusion as to the applicability and enforceability of laws on such contracts or transactions. • Although Philippine laws are somewhat lacking with respect to transactions over the internet, several steps have already been made to respond to such deficiency. Most notably, at the start of the new millennium, Philippine Congress enacted the ECommerce Act.411 Not only did the law recognize the legality and validity of electronic documents412, it also laid down the rules on the use of electronic documents, especially for transactions. The Supreme Court also affirmed this doctrine in the Rules on Electronic Evidence.413 • In terms of electronic commerce, the E-Commerce Act recognized the validity of contracts formed and entered into by the parties through electronic means.414 For the purpose of determining the place of execution of the electronic contract, Section 23 of the law is illuminating: • SEC. 23. Place of Dispatch and Receipt of Electronic Data Messages or Electronic Documents. o Unless otherwise agreed between the originator and the addressee, an electronic data message or electronic document is deemed to be dispatched at the place where the originator has its place of business and received at the place where the addressee has its place of business. This rule shall apply even if the originator or addressee had used a laptop or other portable device to transmit or receive his electronic data message or electronic document. This rule shall also apply to determine the tax situs of such transaction.

Enforcement of Foreign Contract Claims • The enforcement of a foreign contract claim involves a process where a local court recognizes and enforces a foreign contract claim. To avoid possible confusion and to simplify litigation, the parties to such contracts usually include arbitration or choice-offorum clauses which would subject any litigation or controversy between the parties to a specified court or forum. • In the absence of an effective choice, the state with which the contract has its most significant relationship could assume jurisdiction. Under Philippine rules of procedure, as long as the court can assume jurisdiction over the person of the defendant in what is essentially a personal action, then it has competence to hear and adjudicate the case. •

•

• 410

David Johnson & David R Post, Law and Borders - The Rise of Law in Cyberspace, 48 Stan. L. Rev. 137, 1370-71, 1996 R.A. 8792 E-Commerce Law, Sec. 6 and 7. 413 Rule 3, Section 1. 414 Sec. 16.

For the purpose hereof If the originator or the addressee has more than one place of business, the place of business is that which has the closest relationship to the underlying transaction or, where there is no underlying transaction, the principal place of business. If the originator of the addressee does not have a place of business, reference is to be made to its habitual residence; or The usual place of residence. in relation to a body corporate, means the place where it is incorporated or otherwise legally constituted. The Rules on Electronic Evidence thus give a presumption on the place where the transaction occurred. This is important in resolving conflict of laws because it determines the real seat of the transaction. Such determination may be the basis for Philippine courts to assume jurisdiction. It must be noted, however, that the determination is merely a presumption that is not conclusive and may give way to proof showing the contrary.

The Supreme Court demonstrated such assumption of jurisdiction in King Mau Wu v. Sycip,415 which involved a contract of agency executed in New York between plaintiff, a non-resident, and defendant, a resident of the Philippines. It was contended by the latter that as the contract was executed abroad, the Court had no jurisdiction over the case. The Supreme Court held that the contention was without merit “because a nonresident may sue a resident in the courts of this country where the defendant may be summoned and his property leviable upon execution in case of a favorable, final and executory judgment. It is a personal action for the collection of a sum of money which Courts of First Instance have jurisdiction to try and decide.” Whether jurisdiction is based on the presence or residence of the defendant in the forum or the existence of defendant’s property or business within the territory, or on the fact that the forum has some connection with the transaction or event in question, it seems clear that the forum has the freedom to refuse to assume jurisdiction for such reason as it may consider justifiable. Thus, courts have occasionally refused to hear cases on the ground of either forum non conveniens or because of some purported adverse public policy.416 Where, for example, a non-resident plaintiff is merely engaged in forum-shopping or where the main facts of the case occurred, let us say, in New York, and the witnesses

411 412

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King Mau Wu vs. Francisco Sycip, G.R. No. L-5897, April 23, 1954 Scoles, citing Klein vs. Keller, 42 Okl. 592, 594, 141 P. 1117, 1118 (1914)

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO •

•

•

•

and the evidence are readily available there, a Philippine court may refuse to assume jurisdiction over the case on the ground of forum non conveniens.417 No principle or doctrine of Public International Law is violated by such refusal.418 The forum may assume jurisdiction but nevertheless refuse to apply the foreign law normally applicable on the ground that the plaintiff’s claim is contrary to an important public policy or concept of morality of the forum. It should however, take a very strong case to bar recovery on a foreign contract on the ground of supposed conflict with local public policy of morality, since, as stated by Judge Goodrich,419 “It is hard to think of many transactions which have the stamp of approval of the law of some civilized state upon them which reek so of immorality that to give money judgment upon the claim will jeopardize the ethical standards of the forum.” There is much to be said for the policy of enforcing obligations deliberately contracted and legally entered into. A paramount public policy is a day of easy communication and unlimited international business is the enforcement of contractual undertakings. Otherwise, the forum could be a “sanctuary for those seeking to avoid their legal obligations.” Where the forum refuses to assume jurisdiction over the plaintiff’s claim or, assuming jurisdiction, nevertheless dismisses the case on the ground of countervailing public policy, the plaintiff is prejudiced but is not without remedy. Since there has been no adjudication on the merits, he can sue the defendant in a more appropriate forum and perhaps obtain a favorable judgment. However, the situation is different if the court assumes jurisdiction over the case and receives the evidence of the parties, but strikes down defendant’s defenses which would be valid under the foreign law normally applicable, on the ground that such defenses are allegedly against the public policy of the forum. Here, the court may be imposing upon the defendant a liability not contemplated by the parties and unrelated to the law with reference to which they entered into their contract. As there has been a final disposition on the merits of the case in favor of the plaintiff, the defendant may have been exposed to an irremediable liability. This is why public policy should be used sparingly by a court, unless there is a gross contradiction between a party’s claim and an important policy of the forum. Although the court has the freedom to assume or refuse jurisdiction for such reason as it may consider justifiable, the fundamental policy in the broad local law of contracts is to give effect to the justified expectations of the parties. Because the economic and industrial system is based on the need for performing agreements, this protection of justified expectations responds to the need for certainty, predictability and commercial convenience.

BUSINESS ASSOCIATIONS AND MULTINATIONAL ENTERPRISES C/O: CHRIS GERONA, MACE WONG, INXS SINGSON, DINGDONG POQUIZ, ERIC BACSAL, PAUL IMPERIAL (Salonga, CHAPTER XXX, 1995)

DEFINITION OF BUSINESS ASSOCIATIONS • A group of persons who join together for the purpose of engaging in business is considered an ordinary business association. The association may or may not be endowed with a distinct legal personality, depending on the nature and character of the organization and the applicable law. In the Philippines, business associations may either be incorporated or unincorporated. The most popular way of doing business today is through a corporation. For a small enterprise, a partnership is usually preferred. It is the best example of an unincorporated business association. DEFINITION OF CORPORATIONS • According to Chief Justice Marshall in a leading case,420 “A corporation is an artificial being, invisible, intangible, and existing only in contemplation of law. Being a mere creature of the law, it possesses only those properties which the charter of its creation confers upon it, either expressly, or as incidental to its very existence. It is a body, which in its corporate capacity is the mere creature of the act to which it owes its existence.” • More particularly, the Corporation Code of the Philippines has given us a statutory definition of the corporation, in Sec. 2: • A corporation is an artificial being created by operation of law, having the right of succession and powers, attributes and properties expressly authorized by law or incident to its existence. • In Joseph Beale’s point of view, as explained in his book, Treaties on the Conflicts of Laws, “It is however, possible for the State to confer personality on a group, so that it shall have a personality of its own, apart from that of its members; and this is now so commonly done that most states by general statute provide a means for doing this in the case of any lawful business or charitable group that cares to take advantage of it. The process is called incorporation, and the group a corporation. Incorporation therefore is the process of giving legal personality to a group.” It would seem that such explanation as to the nature of a corporate entity is a more simple yet easier to understand than the explanation of the previous learned author. However, a corporation is a complex entity and cannot be explained fully in simple words. Such entity has to be dissected and discussed piecemeal. Domicile • A corporation, according to the theory of our law, must be located somewhere within the country which creates it. So strictly was this theory once held in England that it was thought essential that a corporation should be named as of some place in England; and such corporations were created as “The Hospital of St. Lazarus of Jerusalem in England” and “The Prior and Brothers of St. Mary of Mt. Carmel in England,” the allegation that the place was in England not being assumable. Even after the corporations began to be formed for trading purposes, they were still located in England. • According to Article 51 of the Civil Code of the Philippines:

417

Forum non conveniens – a doctrine upon which a local court may find a foreign court to be more appropriate than the local court to deal with the issue in question 418 Salonga 419 Goodrich, Herbert F. and Scoles, Eugene F. Conflict of Laws. West Publishing Company, St. Paul, Minnesota. 1976 198-199

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420

Marshall, C.J., in Dartmouth College v. Woodward, 4 Wheat. 518, 636, 4 L. ed. 629 (1819).

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO When the law creating or recognizing them, or any other provision does not fix the domicile of juridical persons, the same shall be understood to be the place where their legal representation is established or where they exercise their principal functions. • In order to understand further, the Supreme Court explained fully how to consider Philippine branches or units as “residents of the Philippine Islands.” • State Investment House, Inc. vs. Citibank, N.A. Facts: Bank of America N.T. and S.A., Citibank N.A. and Hongkong and Shanghai Banking Corporation jointly field with the CFI of Rizal a petition for involuntary solvency of Consolidated Mine, Inc. It was alleged that CMI obtained loans from the three banks and that CMI committed specific acts of insolvency for the purpose of delaying or defrauding creditors. The petition was opposed by State Investment House and State Financing, Inc. which had earlier instituted actions for collection of sums of money and damages against CMI claiming among others, that the court had no jurisdiction to take cognizance of the petition for insolvency because petitioners are not resident creditors of CMI in contemplation of the Insolvency Law. CMI likewise alleged petitioner’s lack of capacity to sue. The trial court rendered a summary judgment dismissing the petition for lack of jurisdiction over the subject matter, ruling that an insolvency court could not acquire jurisdiction to adjudicate the debtor as insolvent if the creditors petitioning for adjudication of insolvency are not residents of the Philippines. Since petitioners had been merely licensed to do business in the Philippines, they could not be deemed residents thereof. The appellate court reversed the decision of the trial court. Held: The Supreme Court opined that it cannot accept the petitioner’s theory that corporations may not have residence separate from their domicile and that they may be considered by other states as residents only for limited and exclusive purposes. Of course, as petitioners correctly aver, it is not really the grant of license to a foreign corporation to do business in this country that makes it’s a resident; the license merely gives legitimacy to its doing business here. What effectively makes such corporation in the Philippines is its actually being in the Philippines and licitly doing business here, “locality of existence” being, to repeat, the necessary element in the signification of the term resident corporation. •

Nationality of Corporations • The nationality of the corporation serves as a legal basis for subjecting the enterprise or its activities to the laws, the economic and fiscal powers, and the various social and financial policies of the State to which it is supposed to belong. Thus, nationality may be used in order to classify a corporation as “national” or “foreign” for the purpose of applying certain protectionist, or for economic assistance, exemptions, incentives or subsidies, or for “national treatment” under commercial or trade treaties such as GATT, or entitle it to the diplomatic protection of the State that claims it to be its national. • According to Salonga, there are two competing theories as to the nationality of a corporation or business association: Under the Orthodox Common Law Rule: (England and United States) a corporation’s nationality coincides with the place where it is incorporated or with the jurisdiction that chartered it. The theory is that a corporation is the creation of the State of incorporation. Under the Civil Law Rule (Continental Europe, including Spain, France, and Germany), the nationality of a corporation or business entity coincides with the principal place of business or central administration---the company seat, sitz sometimes called the siege social. The rationale is that the most pivotal decisions of the business, regarding the management and 03-23-2006 | THROUGH THE JOINT EFFORTS OF STUDENTS OF ATENEO LAW III- C 2006 | Edited by J.C. de Veyra

•

• 421 422

control of the enterprise, may be found in the business seat, which is the principal place of business. Through the passage of time, jurisprudential and statutory laws have given us several tests to determine a corporation’s nationality. o The Place of Incorporation Test means that a corporation is a national of the country under whose laws it has been organized and registered. This is specifically embodied in Sec. 123 of the Corporation Code which provides: o A foreign corporation is one formed, organized or existing under any laws other than those of the Philippines and whose laws allow Filipino citizens and corporation to do business in its own country or state. o Under the Place of Principal Business Test, the corporation is a “national” or subject to the jurisdiction of the place where its principal office or center of management (siege social) is located. o The Grandfather Test is the method by which the percentage of Filipino equity in a corporation engaged in nationalized and/or partly nationalized areas of activities, provided for under the Constitution and other nationalization laws, is computed, in cases where corporation shareholders are present in the situation, by attributing the nationality of the second or even subsequent tier of ownership to determine the nationality of the corporate shareholder. o In recognizing and applying the grandfather rule, the SEC has adopted the formula of the Secretary of Justice in DOJ Opinion No. 18 saying: Shares belonging to corporations or partnerships at least 60% of the capital of which is owned by Filipino citizens shall be considered as Philippine nationality, but if the percentage of Filipino ownership in the corporation or partnership is less than 60%, only the number of shares corresponding to such percentage shall be counted as of Philippine nationality. It must be remembered that the SEC Rule applies only with the objective of determining the issues on investments. As added by the SEC: “However, while a corporation with sixty (60%) percent Filipino and forty (40%) foreign equity ownership is considered a Philippine national for purposes of investment, it is not qualified to invest in or enter into a joint venture agreement with corporations or partnerships, the capital or ownership of which under the constitution or other special laws are limited to Filipino citizens only.”421 o Under the War-Time Test, the nationality of a private corporation during times of war in such country is determined by the character or citizenship of its controlling stockholders. A corporation which was organized and created under the laws of the Philippines may be regarded as an enemy alien during times of war, where the shares are controlled by foreigners whose country is at war with the Philippines. For the objective of determining the nationality of the corporation, the corporate personality is ignored and the nationality of the human structure who directly dominates the corporation is taken into consideration. Such test was first enunciated in the English case of Daimler Co. vs. Continental Tire and Rubber Company.422 Filipinas Compania de Seguros vs. Christern Ibid, at pp 46-57. I K.B. 893: 2 A.C. 307.

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO Facts: On October 1941, Christern, Huenefeld, and Company obtained from Filipinas Compania de Seguros a fire policy in the sum of P100, 000 covering merchandise contained in a building in Manila. The building and insured merchandise were burned. Christern submitted to Filipinas its claim under the policy. Filipinas refused to pay the claim on the ground that the policy in favor of Christern had ceased to be in force on the date the United States declared war on Germany. But pursuant to the order of the Director of Bureau of Financing, Philippine Executive Commission, Filipinas, in April 1943, paid Christern the sum of the total loss suffered. After the liberation of the Philippines, suit was instituted in 1946 to recover from Christern the sum Filipinas had paid, the theory being that the insured merchandise was burned after the insurance policy ceased to be effective because of the outbreak of war between U.S. and Germany and that payment made by Filipinas during the Japanese occupation was under pressure. The Court of First Instance dismissed the action and upon appeal to the Court of Appeals, the judgment of dismissal was affirmed. Held: There is no question that majority of the stockholders of the respondent corporation were German subjects. This being so, we have to rule that said respondent became enemy corporation upon the outbreak of the war between U.S. and Germany. The Philippine Insurance Law (Act No. 2427, as amended), in Sec. 8, provides that “anyone except a public enemy may be insured.” The Control Test relies on Section 2 of Article XII of the 1987 Philippine Constitution which provides that: • The Investment Law made clarifications regarding the Control Test. Under the Philippine Investment Incentives Act (RA 5186) and the Foreign Investment Act of 1991 (RA 7042), Philippine national means “a citizen of the Philippines or a partnership or association wholly owned by citizens of the Philippines, or a corporation organized under the laws of the Philippines of which at least 60% of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines.” RA 5186, Sec. 3, provides: • The Control Test may be applicable only to corporations engaged in businesses as authorized by the foreign investment law, as amended, which specifies the percentage of ownership of Filipino nationals in corporations allowed to engage in such business. The control test may not be applicable to corporations authorized to engage certain business activities specified in the 1987 Constitution, as to which the grandfather rule applies.423

•

•

•

• •

Jurisdiction Over Corporations • The question of jurisdiction in personam over a domestic corporation presents no great difficulties. A state which forms a corporation has jurisdiction over the corporation and may grant jurisdiction upon its courts to render judgment against the corporation. The corporation is domiciled within the state from which it obtains its charter. The state which creates a corporation has power over it because of the fact that it has created it and that it continues to exist under the authority of the state. • It is a fundamental rule of international jurisdiction that no state can by its laws, and no court (which is only a creature of the state) can by its judgment or decrees, directly bind or affect property or persons beyond the limits of the state. However, under the doctrine of comity in international laws, “A corporation created by the laws of one 424 425 423

Ibid at p. 124.

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state is usually allowed to transact business in other states and to sue in the courts of the forum.” The legal standing of foreign corporations in the host state therefore is founded on international law on the basis of consent, and the extent by which a hosting state can enforce its laws and jurisdiction over corporations created by other states has been the subject of jurisprudential rules and municipal legislations, especially in the fields of taxation, foreign investments, and capacity to obtain relief in local courts and administrative bodies.424 Bank of August vs. Earle425 – Chief Justice Taney reiterated that “It is very true that a corporation can have no legal existence out of the boundaries of the sovereignty by which it is created… It must dwell in the place of its creation and cannot migrate to another sovereignty.” Evidently, this doctrine had to be discarded soon after it was promulgated, to cope with the demands of an expanding capitalistic economy. As stated in the Second Restatement:” A State has power to exercise judicial jurisdiction over a foreign corporation which has consented to the exercise of such jurisdiction.”426 In the Philippines, consent is the method on acquiring jurisdiction over foreign corporations, as can be found in Sec. 128 of the Corporation Code: Section 128. Resident agent; service of process. o The Securities and Exchange Commission shall require as a condition precedent to the issuance of the license to transact business in the Philippines by any foreign corporation that such corporation file with the Securities and Exchange Commission a written power of attorney designating some person who must be a resident of the Philippines, on whom any summons and other legal processes may be served in all actions or other legal proceedings against such corporation, and consenting that service upon such resident agent shall be admitted and held as valid as if served upon the duly authorized officers of the foreign corporation at its home office. Any such foreign corporation shall likewise execute and file with the Securities and Exchange Commission an agreement or stipulation, executed by the proper authorities of said corporation, in form and substance as follows: o "The (name of foreign corporation) does hereby stipulate and agree, in consideration of its being granted by the Securities and Exchange Commission a license to transact business in the Philippines, that if at any time said corporation shall cease to transact business in the Philippines, or shall be without any resident agent in the Philippines on whom any summons or other legal processes may be served, then in any action or proceeding arising out of any business or transaction which occurred in the Philippines, service of any summons or other legal process may be made upon the Securities and Exchange Commission and that such service shall have the same force and effect as if made upon the dulyauthorized officers of the corporation at its home office."

Ibid at p. 781. 38 U.S. 13 Pet. 519, 588, 10 L. Ed. 274, 308 (1939). Ibid at p.440.

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO In cases where the foreign corporation has not been given a license to do business in the Philippines, Sec. 12 of The Revised Rules of Court provides the following procedure to acquire jurisdiction: • Sec. 12. Service upon foreign private juridical entity. When the defendant is a foreign private juridical entity which has transacted business in the Philippines, service may be made on its resident agent designated in accordance with law for that purpose, or, if there be no such agent, on the government official designated by law to that effect, or on any of its officers or agents within the Philippines. • Sec. 13. Service upon public corporations. When the defendant is the Republic of the Philippines, service may be effected on the Solicitor General; in case of a province, city or municipality, or like public corporations, service may be effected on its executive head, or on such other officer or officers as the law or the court may direct. Consent, as a requisite for jurisdiction over foreign corporations, is founded on considerations of due process and fair play. • Pennoyer vs. Neff Facts: This action was brought by Neff against Pennoyer for the recovery of a tract of land situated in Oregon. Pennoyer, in his answer, denied Neff's title and right to possession, and set up a title in himself. The parties respectively claimed title as follows: Neff under a patent issued to him by the United States and Pennoyer by virtue of a sale made by the sheriff of said county, under an execution sued out upon a judgment against Neff by the Circuit Court for said county, in an action wherein he was defendant and J. H. Mitchell was plaintiff. Neff was then a nonresident of Oregon.In Mitchell v. Neff, jurisdiction of Neff was obtained by service of summons by publication. The plaintiff objected because, said judgment is in personam, and appears to have been given without the appearance of the defendant in the action or personal service of the summons upon him Held: A statute of Oregon, after providing for service of summons upon parties or their representatives, personally or at their residence, declares that, when service cannot be thus made, and the defendant, after due diligence, cannot be found within the State, and that fact appears, by affidavit, to the satisfaction of the court or judge thereof, and it, in like manner, appears that a cause of action exists against the defendant, or that he is a proper party to an action relating to real property in the State, such court or judge may grant an order that the service be made by publication of summons . . . when the defendant is not a resident of the State, but has property therein, and the court has jurisdiction of the subject of the action, the order to designate a newspaper of the county where the action is commenced in which the publication shall be made - and that proof of such publication shall be "the affidavit of the printer, or his foreman, or his principal clerk." that defects in the affidavit for the order can only be taken advantage of on appeal, or by some other direct proceeding, and cannot be urged to impeach the judgment collaterally, and that the provision as to proof of the publication is satisfied when the affidavit is made by the editor of the paper. A personal judgment is without any validity if it be rendered by a State court in an action upon a money demand against a nonresident of the State who was served by a publication of summons, but upon whom no personal service of process within the State was made, and who did not appear; and no title to property passes by a sale under an execution issued upon such a judgment. The State, having within her territory property of a nonresident, may hold and appropriate it to satisfy the claims of her citizens against him, and her tribunals may inquire into his 03-23-2006 | THROUGH THE JOINT EFFORTS OF STUDENTS OF ATENEO LAW III- C 2006 | Edited by J.C. de Veyra

obligations to the extent necessary to control the disposition of that property. If he has no property in the State, there is nothing upon which her tribunals can adjudicate. Substituted service by publication, or in any other authorized form, is sufficient to inform a nonresident of the object of proceedings taken where property is once brought under the control of the court by seizure or some equivalent act, but where the suit is brought to determine his personal rights and obligations, that is, where it is merely in personam, such service upon him is ineffectual for any purpose. Process from the tribunals of one State cannot run into another State and summon a party there domiciled to respond to proceedings against him, and publication of process or of notice within the State in which the tribunal sits cannot create any greater obligation upon him to appear. Process sent to him out of the State, and process published within it, are equally unavailing in proceedings to establish his personal liability. Except in cases affecting the personal status of the plaintiff, and in those wherein that mode of service may be considered to have been assented to in advance, the substituted service of process by publication allowed by the law of Oregon and by similar laws in other States where actions are brought against nonresidents is effectual only where, in connection with process against the person for commencing the action, property in the State is brought under the control of the court and subjected to its disposition by process adapted to that purpose, or where the judgment is sought as a means of reaching such property or affecting some interest therein; in other words, where the action is in the nature of a proceeding in rem.. While the courts of the United States are not foreign tribunals in their relations to the State courts, they are tribunals of a different sovereignty, and are bound to give a judgment of a State court only the same faith and credit to which it is entitled in the courts of another State. The term "due process of law," when applied to judicial proceedings, means a course of legal proceedings according to those rules and principles which have been established by our jurisprudence for the protection and enforcement of private rights. To give such proceedings any validity, there must be a competent tribunal to pass upon their subject matter, and if that involves merely a determination of the personal liability of the defendant, he must be brought within its jurisdiction by service of process within the State, or by his voluntary appearance. According to Salonga, in the present time, most significantly in the United States, jurisdiction over foreign corporations does not necessarily depend on whether it has been licensed to do business in the forum. Jurisdiction over corporations and individuals rests on the following basis: reasonableness in relation to the suit and the activities or contacts with the forum. • International Shoe Co. vs. State of Washington Facts: International Shoe is a Delaware Corporation headquartered in St Louis, Missouri that makes shoes and footwear. It has places of business in several states, but not the State of Washington, where the corporation manufactures and distributes its products. The corporation does not: (1) have a physical office, (2) contract for the sale of its products, (3) maintain an inventory of footwear and (4) make intrastate deliveries, in the State of Washington. However, between 1937 and 1940, the appellant employed 3 salesmen who resided in the State of Washington. The statute requires employers located in Washington to fund the program by making annual contributions based on percentages of employee salaries. The statute authorizes the Commissioner of the program to “issue and order and notice of assessment” of delinquent contributions by personal service if the employer is found in the State or by registered mail if the employer is outside the State. The statute also gives the employer the right to a hearing and administrative and judicial review of any order. The State

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO of Washington personally served a “notice of assessment” with one of appellant’s salesman and mailed a copy of the notice to appellant’s headquarters. In response, appellant appeared before the office of unemployment asking that the order and assessment be set aside because (1) the service on the salesman was not service on appellant, (2) appellant was not a Washington corporation and does not do business there, (3) appellant does not have any agents in Washington upon whom service may be made and (4) appellant is not an employer under the statute. The appeal tribunal denied appellant’s motion. Held: The Courts of the State of Washington had in personam jurisdiction over International Shoe because its business activities in that state rendered it amenable to suit in Washington. Due process permits a state court to impose a judgment in personam on an out-of state defendant provided that the defendant have “minimum contacts” with that state so that the maintenance of the suit does not offend traditional notions of fair play and substantial justice. Minimum contacts, formerly treated as “presence,” do not require the actual physical presence of a corporation in the state. Rather, whether a corporation is present in a jurisdiction is measured by the nature and quality of its activities there, the relationship between those activities and the legal action and whether the maintenance of the suit would offend traditional notions of fair play and substantial justice. Applying these principles to the case, the Court found that International Shoe had continuous and systematic contacts with the State of Washington through its marketing efforts and sales. Moreover, the Court found that serving process upon the salesman and mailing the order and notice to appellant’s headquarters in St. Louis gave reasonable notice of the proceedings to appellant. Therefore, it was not unreasonable, nor did it offend due process or traditional notions of fair play, to require International Shoe to litigate its claims in the State of Washington. International Shoe adheres to Pennoyer’s jurisdiction model but modifies that model to incorporate corporations and the growth of interstate commerce. Corporations, being fictitious entities, cannot be physically positioned like a person. Rather, corporations are present by their business activities, behavior of agents and profit-maximizing conduct in a particular jurisdiction. Consequently, a foreign corporation is subject to suit in state court if it has minimum contacts with that state and maintenance of the suit would not offend justice nor be unreasonable. Personal Law of a Corporation • Normally, the Philippine laws applicable to a domestic corporations are also applicable to any foreign corporation lawfully doing business in the Philippines save for those which are considered internal matters and affairs of the foreign corporation. What constitutes “internal matters” covers the creation, formation, organization or dissolution of the foreign corporation and those which fix the relations, liabilities, responsibilities or duties of stockholders, members, or officers of foreign corporations to each other or to the corporation. Because of the nature and scope of these internal matters, it has often been described as the “personal law” of the corporation. • Those that govern the relations, liabilities, responsibilities, or duties of stockholders, members, or officers of foreign corporations to each other or to the corporation refer to intra-corporate dispute. An Intra-corporate dispute is a controversy which: a.) arises out of intra-corporate or partnership relations between and among stockholders, members, or associates; between any or all of them and the corporation, partnership or association of which they are stockholders, members or associates, respectively; and between such corporation, partnership or association and the State insofar as it concerns their individual franchise or right to exist and; b.) is intrinsically connected 03-23-2006 | THROUGH THE JOINT EFFORTS OF STUDENTS OF ATENEO LAW III- C 2006 | Edited by J.C. de Veyra

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with the regulation of corporations, partnership or associations or with those dealing with the internal affairs of such entities.427 2 theories on what law determines the personal law of a business corporation. The first theory believes that the personal law of a business corporation is the law under which it has been created or incorporated. This theory is supported in all commonlaw countries and in legal systems influenced by Anglo-American Law.428 Philippine law follows the incorporation principle. Under Section 129 of the Corporation Code: Any foreign corporation lawfully doing business in the Philippines shall be bound by all laws, rules and regulations applicable to domestic corporations of the same class, except such only as provide for the creation, formation, organization or dissolution of corporations or those which fix the relations, liabilities, responsibilities, or duties of stockholders, members, or officers of corporations to each other or to the corporation. The second theory on the other hand states that the personal law of a corporation is the law prevailing in the State in which the business has its center of control or administration. What is stated in the by-laws can only considered prima facie evidence of the fact of central administration. When there is evidence of fraud, the by-laws will be disregarded and the place where central control actually resides will prevail.429

• M.E. Gray vs. Insular Lumber Company Facts: Insular Lumber Co, is a corporation organized and exiting under the laws of New York and licensed to engage in business in the Philippines. M.E. Gray is the owner of 57 shares of capital stock of such corporation. Gray wishes to examine the books and records of the business of Insular Lumber but was not allowed to do so. Insular Lumber says that under New York law, the right of stockholder to examine is limited by Sec. 77 of the Stock Corporation Law, which provides that only stockholders owning 3% of the shares of a corporation may make a written request for a statement of its affairs. Gray does not own 3% of the total capital stock of the corporation, nor does he represent stockholders who own 3% of its capital. Gray filed a complaint in the Court of First Instance in the Philippines to allow him to inspect the books and records of business of Insular Lumber because under our Corporation Law, under which Insular lumber was registered to do business in the Philippines, he is entitled as a stockholder, to inspect the corporate books and records of the corporation. Held: The New York Statute is controlling. Under the law of New York, to examine the books and records of a corporation organized under the laws of said State are only those provided in Section 77 of the Stock Corporation Law of New York. Philippine Law on Foreign Corporations There are 5 lawful ways or modes of entry of foreign corporations in the Philippines430. 1. The first mode is by establishing a branch or agency in the Philippines. Under Section 125 of the Corporation Code, a foreign corporation shall have the right to transact business in the Philippines after it shall have obtained a license to transact business in this country 427

Dee v. Sec, 199 SCRA 278 [1991] Salonga, Private International Law, p. 445 Ibid. p. 446 430 Salonga, Private International Law, p. 448 428 429

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO in accordance with this Code and a certificate of authority from the appropriate government agency. In this mode no separate corporate entity is created and the foreign corporation actually considered as the one transacting or doing business in the country. 2. The second mode is by investing in a local subsidiary here in the Philippines. Under the Foreign Investment Act of 1991, R.A. No. 7042, non-Philippine nationals may own up to one hundred percent of domestic market enterprises unless foreign ownership therein is prohibited or limited by the Constitution. In this case two corporate entities exist, the parent corporation and the domestic subsidiary corporation. The subsidiary corporation is entirely governed by Philippine law. Examples of these corporations are GM Philippines and Proctor and Gamble Philippines. 3. The third mode is by engaging in a joint venture with new or existing domestic corporation. The Constitution expressly recognizes this mode of entry. Under Article XII Section 2 of the 1987 Constitution, the State may directly undertake such activities, or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by such citizens. There is no need to obtain a license since investment does not constitute doing business. 4. The Fourth mode of entry is by the establishment regional or area headquarters. Under Section 22 sub-section DD of the 1997 National Internal Revenue Code, a regional or area headquarters shall mean a branch established in the Philippines by multinational companies and which headquarters do not earn or derive income from the Philippines and which act as supervisory, communications and coordinating center for their affiliates, subsidiaries, or branches in the Asia-Pacific Region and other foreign markets. Since it does not earn income, it is not subject to tax under RA. 9294. 5. The Fifth mode of entry is by a service contract entered into by a foreign corporation with a domestic corporation under specific presidential decrees or special laws on oil exploration, mining, forestry and the development of public lands, for financial, technical, management, or other forms of assistance.431 Once a case involving internal dispute or intra-corporate controversy in a foreign corporation licensed to do business in the Philippines is filed in a Philippine court, the courts may not assume jurisdiction even though the courts may have complete jurisdiction over the parties, both the corporation and its officers. A court may decline to act from a lack of power to enforce its decrees, or because the court of other jurisdiction is better entitled to settle the dispute. American Courts follow the same rule. 432 The internal affairs of a corporation which is governed by the State of Incorporation by Philippine and American courts govern the existence and dissolution of a corporation, title to stock, internal management and the right to share in a corporation, election of officers in a foreign corporation, proceedings for accounting and restoration of property. However, the US courts permit a foreign corporation to permit the inspection by a stockholder of such of its books, papers and records as are within the state433 which is not allowed in the Philippines. Recognition of Foreign Business Associations

Originally it was believed that a corporation, being a creature of law, has no legal status beyond the bounds of the sovereignty within which it was created. 434 Such view can no longer be followed in modern conditions. Before a corporation can actually transact or do business in a State, it must be first recognized by that State to exist. Recognition is the affirmation of the existence of a foreign business associated, created under the law of one State, given or extended by the authorities of other States.435 The obviously obsolete theory is that which considers a corporation being an artificial entity created by a state, could receive recognition only in the courts of the state of its creation.436 This theory is called the territorial theory. 2 conflicting theories which are considered by countries today both recognize the existence of foreign corporations: • The first one immediately recognizes the existence of foreign corporations without further formality. • The second theory restricts admission of foreign business corporations by imposing a comprehensive examination, supervision and control of foreign enterprises. In the Philippines, this principle is recognized. However in recent years, local laws have been made more attractive to encourage foreign investors by giving them incentives and tax concessions.437 • Paul vs. Virginia – the U.S. Supreme Court decided that a state may impose any term it may desire as a prerequisite to admission. This rule is not absolute and subject to certain exceptions, one of which is the commerce clause. This clause prohibits a state from imposing conditions on corporations engaged in interstate commercial activities and provides the basis of federal power to regulate interstate commerce. Likewise, since a corporation is considered a “person” protected by the due process and equal protection clauses of the Federal Constitution, once it has been allowed to enter a state and acquire property there, it cannot be discriminated against by domestic corporations. American case law has also advanced the principle of “unconstitutional conditions” which forbids a state from requiring the foreign corporation to give up its constitutional rights either as a prerequisite to allowing it to do business or to avoid being removed from that state438. Personality of Foreign Corporation in the Philippines • A foreign corporation can transact or do business in this jurisdiction even without a license. However, such unlicensed foreign corporation suffers a disability. The law denies it legal standing to sue and seek for redress but permits it to be sued or proceeded against in any judicial or administrative proceeding.439 • The purpose of the law is to provide a basis for the court to acquire jurisdiction over foreign corporations transacting business in the Philippines and make it amenable to state regulation and legal process. If a foreign corporation could do business without being amenable to process, it would possess an undue advantage over both domestic corporations and individuals, since both could always be reached by process. 440 434

Ruben E. Agpalo. Conflict of Laws. Private International Law. (Manila. Rex Book Store. 2004), p. 475 Salonga, Private International Law, p. 456 George Stumberg. Conflict of Laws, 3rd Edition (Brooklyn, The Foundation Press, Inc. 1951), p. 369 437 Salonga, Private International Law, 457 438 Coquia, Conflict of Laws, p. 476 439 Corporation Code, Sec. 133. 440 Stumberg, Conflict of Laws (1951) p. 826. 435 436

431 432 433

Salonga, Private International Law, p. 450 Goodrich, Herbert F. and Scoles, Eugene F. Conflict of Laws. West Publishing Company, St. Paul, Minnesota. 1976 p. 885 Goodrich, Herbert F. and Scoles, Eugene F. Conflict of Laws. West Publishing Company, St. Paul, Minnesota. 1976. p. 901

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Furthermore, by getting a license, a foreign corporation gives assurance that it will follow the decisions of the local courts, even if adverse to it.441 The Supreme Court also noted that: The object of the statute was to subject the foreign corporation doing business in the Philippines to the jurisdiction of its courts. The object of the statute was not to prevent the foreign corporation from performing single acts, but to prevent it from acquiring a domicile for the purpose of business without taking the steps necessary to render it amenable to suit in the local courts. The implication of the law is that it was never the purpose of the Legislature to exclude a foreign corporation which happens to obtain an isolated order for business from the Philippines, from securing redress in the Philippine courts, and thus, in effect, to permit persons to avoid their contracts made with such foreign corporations.442

Meaning of Doing Business A cursory look at Section 123 of the Corporation Code reveals that the right given to a foreign corporation is the “right to transact business in the Philippines.” The Supreme Court has occasion to note that “there is no exact rule or governing principle as to what constitutes "doing" or "engaging" or "transacting" business.” 443 Consequently, “each case must be judged in the light of its peculiar environmental circumstances.”444 • To add to the uncertainty, the term doing business is used in two distinct situations under Philippine jurisdiction.445 The first situation refers to Section 28 of the National Internal Revenue Code which provides for the tax imposed on foreign corporation. Section 28 (A) (1) provides that a resident foreign corporation is a foreign corporation that is engaged in trade or business within the Philippines and is subject to an income tax of thirty-two (32%) percent of its net or taxable income from sources within the Philippines.446 In contrast, a resident foreign corporation is a foreign corporation not engaged in trade or business in the Philippines and is subject to an income tax of thirtytwo (32%) percent of its gross income from sources within the Philippines.447 The law provides that a foreign corporation is taxed on income derived from sources in the Philippines whether it may be engaged in trade or business or not. The difference lies in the application of deductions wherein the foreign corporation that is engaged in trade or business may apply personal and additional exemptions to arrive at the taxable income.

The second situation refers to the Corporation Code. Again, if a foreign corporation is deemed to be doing business in the Philippines, then it must obtain a license for the Securities and Exchange Commission (SEC) in order that it may legally transact business in the Philippines.448 Without such license, such foreign corporation may not sue but can be sued in Philippine courts.449 The circumstances that determine whether a foreign corporation is doing business in the Philippines are not found in the Corporation Code. However, Republic Act 7042 or the Foreign Investments Act of 1991 (FIA) and Executive Order 226 or the Omnibus Investments Code of 1987 (OIC) gives a definition that may be adopted for the purposes of the Corporation Code. Furthermore, various Supreme Court decisions also reveal the activities included in the term doing business. The Foreign Investments Act450 and the Omnibus Investments Code451 has enumerated the activities that constitutes doing business in the Philippines. It is significant to note that the two laws have exactly the same provisions defining doing business. According to these two laws the phrase doing business includes: • soliciting orders, service contracts, opening offices, whether called "liaison" offices or branches; • appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country for a period or periods totalling one hundred eighty [180] days or more; • participating in the management, supervision or control of any domestic business, firm, entity or corporation in the Philippines; and • any other act or acts that imply a continuity of commercial dealings or arrangements and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of commercial gain or of the purpose and object of the business organization. Furthermore, both the FIA and its IRR negatively defines doing business. Section 1 (f) of the IRR provides that the following acts shall NOT be considered as doing business in the Philippines: • Mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor; • Having a nominee director or officer to represent its interest in such corporation; •

448

Corporation Code, Sec. 123. Corporation Code, Sec. 133. Sec. 3 (d). The phrase "doing business" shall include soliciting orders, service contracts, opening offices, whether called "liaison" offices or branches; appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country for a period or periods totalling one hundred eighty [180] days or more; participating in the management, supervision or control of any domestic business, firm, entity or corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of commercial gain or of the purpose and object of the business organization: Provided, however, That the phrase "doing business" shall not be deemed to include mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor; nor having a nominee director or officer to represent its interests in such corporation; nor appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own account. 451 Art. 44 As used in this Book, the term "investment" shall mean equity participation in any enterprise formed, organized or existing under the laws of the Philippines; and the phrase "doing business" shall include soliciting orders, purchases, service contracts, opening offices, whether called "liaison" offices or branches; appointing representatives or distributors who are domiciled in the Philippines for a period or periods totalling one hundred eighty (180) days or more; participating in the management, supervision or control of any domestic business firm, entity or corporation in the Philippines, and any other act or acts that imply a continuity of commercial dealings or arrangements and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization.

449 441

Eriks Pre. Ltd. Vs. Court of Appeals, 267 SCRA 567 (1997). 442 Marshall-Wells Co. vs. Henry W. Elser & Co., 46 Phil. 70 (1924). 443 Communication Materials and Design, Inc. vs. CA, G.R. No. 102223 (1996). 444 The Mentholatum Co., Inc. et al. vs. Mangaliman et al, G.R. No. 47701 (1941). 445 Salonga, 458. The author said perceived three distinct situations in the United States. I believe that the first and third situation is the same in the Philippine scenario. 446 Sec 28 (A) (1) In General. - Except as otherwise provided in this Code, a corporation organized, authorized, or existing under the laws of any foreign country, engaged in trade or business within the Philippines, shall be subject to an income tax equivalent to thirty-five percent (35%) of the taxable income derived in the preceding taxable year from all sources within the Philippines: provided, That effective January 1, 1998, the rate of income tax shall be thirty-four percent (34%); effective January 1, 1999, the rate shall be thirty-three percent (33%), and effective January 1, 2000 and thereafter, the rate shall be thirty-two percent (32%). 447 Sec 28 (B) (1) In General. - Except as otherwise provided in this Code, a foreign corporation not engaged in trade or business in the Philippines shall pay a tax equal to thirty-five percent (35%) of the gross income received during each taxable year from all sources within the Philippines, such as interests, dividends, rents, royalties, salaries, premiums (except reinsurance premiums), annuities, emoluments or other fixed or determinable annual, periodic or casual gains, profits and income, and capital gains, except capital gains subject to tax under subparagraphs (C) and (d): Provided, That effective 1, 1998, the rate of income tax shall be thirty-four percent (34%); effective January 1, 1999, the rate shall be thirty-three percent (33%); and, effective January 1, 2000 and thereafter, the rate shall be thirty-two percent (32%).

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450

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452 453

Appointing a representative or distributor domiciled in the Philippines which transacts business in the representative's or distributor's own name and account; The publication of a general advertisement through any print or broadcast media; Maintaining a stock of goods in the Philippines solely for the purpose of having the same processed by another entity in the Philippines; Consignment by a foreign entity of equipment with a local company to be used in the processing of products for export; Collecting information in the Philippines; and Performing services auxiliary to an existing isolated contract of sale which are not on a continuing basis, such as installing in the Philippines machinery it has manufactured or exported to the Philippines, servicing the same, training domestic workers to operate it, and similar incidental services. Aside from the two laws, one must also take into account judicial interpretation of the term doing business. Mentholatum Co. vs. Mangaliman, 452 – Mentholatum, a foreign corporation, sells its product “Mentholatum” thru its exclusive distributing agent, Philippine-American Drug Co. Mentholatum has not acquired a business license. It instituted a suit against Mangaliman for infringement of trade mark and unfair competition. The Supreme Court held that Mentholatum is doing business in the Philippines thru its agent, PhilippineAmerican Drug Co. The Court pronounced that there is no general rule or governing principle can be laid down as to what constitutes “doing” or “engaging in” “transacting” business. Indeed, each case must be judged in the light of its peculiar environmental circumstances. The true test, however, seems to be whether the foreign corporation is continuing the body or substance of the business or enterprise for which it was organized or whether it has substantially retired from it and turned it over to another. The Court then defined continuing the substance of the business. It implies a continuity of commercial dealings and arrangements, and contemplates, to that extent, the performance of acts or works or the exercise of some of the functions normally incident to, and in progressive prosecution of, the purpose and object of its organization. Columbia Pictures, Inc. vs. Court of Appeal453– In said case, Columbia Pictures, a foreign corporation, is a copyright owner of films and videos. It petitioned for against Sunshine Home Video, Inc. for violation of Presidential Decree 49 or the “Decree on the Protection of Intellectual Property." The Supreme Court held that Columbia Pictures is not doing business in the Philippines. The Court stated that a foreign corporation is "doing," "transacting," "engaging in," or "carrying on" business in the State when, and ordinarily only when, it has entered the State by its agents and is there engaged in carrying on and transacting through them some substantial part of its ordinary or customary business, usually continuous in the sense that it may be distinguished from merely casual, sporadic, or occasional transactions and isolated acts. Mere ownership of copyright or exclusive distribution rights in the Philippines is not doing business. The Court further stated that exercising one's legal and property rights and taking steps for the vigilant protection of said rights is not tantamount to doing business.

G.R. No. 47701 (1941). G.R. No. 110318 (1996).

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•

Eriks Pte. Ltd. vs. CA 454 – Eriks Pte. Ltd. is a foreign corporation engaged in the manufacture and sale of elements used in pumps, valves and pipes. It sold several elements used in pumps, valves and pipes to Delfin Enriquez. It instituted a suit against Enriquez for recovery of sum of money owed by the latter. The Court held that Eriks Pte. Ltd. is doing business in the Philippines. Thus, we hold that the series of transactions in question could not have been isolated or casual transactions. What is determinative of "doing business" is not really the number or the quantity of the transactions, but more importantly, the intention of an entity to continue the body of its business in the country. The number and quantity are merely evidence of such intention. The phrase "isolated transaction" has a definite and fixed meaning, i.e. a transaction or series of transactions set apart from the common business of a foreign enterprise in the sense that there is no intention to engage in a progressive pursuit of the purpose and object of the business organization. Whether a foreign corporation is "doing business" does not necessarily depend upon the frequency of its transactions, but more upon the nature and character of the transactions. The Court noted that Eriks Pte. Ltd. would have indefinitely continued its commercial transactions with Enriquez if Enriquez had not turned out to be a bad risk.

Allegation in a Complaint • A foreign corporation, in maintaining a suit must allege in the complaint the fact that it has legal personality to sue. The allegations must conform to its status in the Philippines. Thus, a foreign corporation doing business in the Philippines must allege that it is duly licensed to do business. On the other hand, a foreign corporation not doing business in the Philippines must allege that it is suing on an isolated transaction or to protect its trademark or trade name.455 A foreign corporation’s capacity to maintain a suit must therefore be established by appropriate allegations in the complaint. Disabilities Attendant to an Unlicensed Foreign Corporation Sec. 133 of the Corporation Code provides: • Doing business without a license. - No foreign corporation transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws. • The Corporation Code specifically denies to a foreign corporation doing business in the Philippines without a license the right to recourse to local remedies. The denial of such right is comprehensive in two ways. First, the refection pertains not only to the foreign corporation but also to its successors, assigns, or agents. Second, the denial concerns not only actions or suits in judicial courts but also in administrative tribunals. • The purpose of securing a license is to allow the local authorities to exercise jurisdiction over the foreign corporation. This is to enable the local authorities to regulate the activities of such foreign corporations. The Supreme Court has said that a foreign corporation must submit to the jurisdiction of the local authorities for it to 454 455

G.R. No. 118843 (1997). Ruben E. Agpalo. Conflict of Laws. Private International Law. (Manila. Rex Book Store. 2004), p. 483.

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO solicit the latter’s assistance later. A foreign corporation must be prepared to respect and be bound by local laws.456 On the other hand, a foreign corporation may be sued or proceeded against before Philippine courts or administrative tribunals. The Supreme Court has held that a foreign corporation doing business in the country should and will be amenable to process and jurisdiction of local courts whether it has or does not have a license. 457 The Court emphatically reiterated the doctrine in the case of Marubeni Nederland B.V. vs. Tensuan.458 In the said case, the Court said that “a foreign corporation doing business in the Philippines with or without license is subject to process and jurisdiction of the local courts. If such corporation is properly licensed, well and good. But it shall not be allowed, under any circumstances, to invoke its lack of license to impugn the jurisdiction of our courts.” 1. One view is that a transaction or contract entered into by a foreign corporation doing business without a license is void. The theory is the foreign corporation has no rights on its own. The foreign corporation only has rights that are given to it by law. The law requires a condition precedent before the foreign corporation may transact business. The faithful observance of the condition is mandatory therefore contracts or transactions entered into without compliance are necessarily void.459 Under this view, Salonga460 notes that the United States have two different ways in looking at the situation. One, “the corporation is deprived not only of the right to be a party in the courts of the Sate in question but of its rights under the contract.” The other is that “the contract is considered void ab initio and no action is granted to either party in any court.” 2. The other view is that the transaction or contract entered into by a foreign corporation is valid notwithstanding its lack of license. This view recognizes the power of the corporation to contract anywhere. The penalty provided for non-compliance is exclusive. The penalty is its inability to sue but being susceptible to suit. Since this is the only consequence granted by the statue then no other disability should be attached to the foreign corporation.461 Under this opposing view, Salonga462 has again noted of two different ways that the United States considered the situation. “Non-compliance with requirements does not in any way prejudice the rights and duties arising from a contract concluded in the in the State whose permission was not obtained.” The alternative perspective states that “the contract may be considered valid, but the foreign corporation is disqualified from suing on the contracts in the courts of the State whose permission was not obtained.” • The Home Insurance Co. vs. Hon. Melencio Herrera et al 463 – The very fact that the prohibition against maintaining an action in the courts of the state was inserted in the statute ought to be conclusive proof that the legislature did not intend or understand that contracts made without compliance with the law were void. The statute does not fix any time within which foreign corporations shall comply with the Act. If such contracts were void, no suits could be prosecuted on them in any court. . . . The primary purpose of our statute is to compel a foreign corporation desiring to do 456

Granger Associates vs. Microwave Systems, Inc., G.R. No. 79986 (1990). Gen. Corp. of the Philippines vs. Union Ins., G.R. No. L-2684 (1950). G.R. No. 61950 (1990). 459 Rumpert, p. 855-856. 460 p. 467. 461 Rumpert, p. 855. 462 p. 467. 463 G.R. No. L-34382 (1983) citing Peter & Burghard Stone Co. v. Carper, 172 N.E. 319 (1930). 457

business within the state to submit itself to the jurisdiction of the courts of this state. The statute was not intended to exclude foreign corporations from the state. It does not, in terms, render invalid contracts made in this state by non-complying corporations. The better reason, the wiser and fairer policy, and the greater weight lie with those decisions which hold that where, as here, there is a prohibition with a penalty, with no express or implied declarations respecting the validity of enforceability of contracts made by qualified foreign corporations, the contracts . . . are enforceable . . . upon compliance with the law. It is, therefore, not necessary to declare the contract null and void even as against the erring foreign corporation. The penal sanction for the violation and the denial of access to our courts and administrative bodies are sufficient from the viewpoint of legislative policy. Subsequent Acquisition of License • The Home Insurance Co. vs. Hon. Melencio Herrera et al. 464 – Eastern Shipping Lines transported coils of ‘Black Hot Rolled Copper Wire Rods’ to Manila. The shipment was insured by Home Insurance, a foreign insurance company. The consignee received some of the cargo in bad order. Home Insurance paid the consignee under the insurance policy, by virtue of which plaintiff became subrogated to the rights and actions of the consignee. Home Insurance thereafter made demands to CARRIER and subsequently brought a suit against the latter. CARRIER argued that Home Insurance has no capacity to sue since when the insurance contracts were executed, Home Insurance has not yet secured a license. The Court held in favor of Home Insurance. It made a finding that when Home Insurance filed its complaint, it had already secured the necessary license to conduct its insurance business in the Philippines. It could already file suits. Exceptions It is not the absence of the prescribed license but "doing business" in the Philippines without such license which bars the foreign corporation from access to our courts. In other words, although a foreign corporation is without license to transact business in the Philippines, it does not follow that it has no capacity to bring an action. Such license is not necessary if it is not engaged in business in the Philippines.465 An isolated act of business is not doing business within the purview of the law. It is considered to be unreasonable and incongruous to require a foreign corporation to acquire a license as a prerequisite of doing a single act of business or executing a single contract.466 • General Corp. of the Phil. vs. Union Insurance467 – Union Insurance is a foreign insurance corporation, without a license, acting as settling agent of and settling insurance claims against the Fireman’s Fund, also a foreign corporation without a license. General Corp. and Mayon Investment sued both Union Insurance and Fireman’s Fund for payment of insurance claims. Firemen’s Fund argued that Union Insurance has no authority to receive summons in behalf of the former. The Supreme Court held that summons was properly served. The Court noted that the Rules of Court did not qualify the term doing business. Thus, whether the act of doing business was done legally or not is

458

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464

G.R. No. L-34382 (1983). La Chemise Lacoste. S.A. vs. Fernandez, etc., et al., G.R. Nos. 63795-97 (1984). Rumpert, p. 830. 467 G.R. No. L-2684 (1950). 465 466

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immaterial. The Court further said that Firemen’s Fund is doing business in the Philippines. The Court found that issuance of twelve marine insurance policies covering different goods is doing business. It cannot be said that these are casual or isolated business transaction. It is a rule generally accepted that one single or isolated business transaction does not constitute "doing business" within the meaning of the law, and that transactions which are occasional, incidental and casual, not of a character to indicate a purpose to engage in business do not constitute the doing or engaging in business contemplated by law. In order that a foreign corporation may be regarded as doing business within a State, there must be continuity of conduct and intention to establish a continuous business, such as the appointment of a local agent, and not one of a temporary character. The Court found that the evidence conclusively proves continuity of business. It must however be borne in mind that not all instances where there is only one contract or transaction is a case of an isolated transaction. The intent of the foreign corporation must be determined. A foreign corporation intending to do business in the Philippines and entering into its initial transaction shall be deemed to be doing business even though it is just one activity.468 Far East International Corporation v. Nankai Kogyo Co. Ltd., et al.469 – Nankai is a foreign corporation without a license to do business in the Philippines. It entered into a contract with Far East wherein the latter is to ship to the former five thousand (5,000) metric tons of steel scrap. Far East was able to make partial delivery only. When Far East requested for the bill of lading, Nankai refused. Far East then filed a complaint against Nankai. Nankai sought to dismiss the complaint on the ground of lack of jurisdiction over the person of the defendant. It posited the view that it is not doing business and that the buying of scrap was its only transaction in the Philippines, thus it is not amenable to summons. The Supreme Court ruled in favor of Far East. The pronounced that the rule stating that doing of a single act does not constitute doing business must be qualified. A single act may bring the corporation within the purview of the statute where it is, an act of the ordinary business of the corporation. In such a case, the single act or transaction is not merely incidental or casual, but is of such character as distinctly to indicate a purpose on the part of the foreign corporation to do other business in the state, and to make the state a basis of operations for the conduct of a part of the corporation's ordinary business. The Court found that Nankai is doing business in the Philippines because of its desire to continue engaging in business in the country, making the Philippines its base.

Action to Protect Trademark, Trade Name, Goodwill, Patent or for Unfair Competition • A foreign corporation ordinarily may not successfully protect its corporate name in another jurisdiction. The view is that a foreign corporation does not come to the local jurisdiction as a matter of right, but only by comity, and cannot be permitted to come for the purpose of asserting rights in contravention of law or public policy.470 The local

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corporation applying for a corporate name that is the same of as that of a foreign corporation is not barred by law nor by public policy to assume such name. However, a foreign corporation that has a distinctive name that has so far become its trademark or trade name that it is entitled to protection by local courts.471 La Chemise Lacoste S.A., vs. Hon. Fernandez et al.472 – Lacoste is a foreign corporation not doing business in the Philippines, and is the owner of trademarks LACOSTE, CHEMISE LACOSTE, and CROCODILE DEVICE. Hemandas is the registered owner of the aforementioned trademarks in the Philippine Patent Office. Lacoste filed a lettercomplaint against Hemandas for unfair competition. Hemandas argued that Lacoste has no capacity to sue in the Philippines. The Supreme Court ruled in favor of Lacoste. The Court held that Lacoste is not doing business in the Philippines and thus is not required to get a license to successfully sue. In addition, the Court also held that even if Lacoste is doing business in the Philippines, it may still maintain the action. A foreign corporation may maintain a suit to restrain local residents from organizing a corporation having the same name as the foreign corporation if the residents have personal knowledge of the existence of the foreign corporation and the primary purpose of the proposed domestic corporation is to trade in the same goods as that of the foreign corporation. A foreign corporation’s use of its corporate and trade name is a property right which it may assert anywhere.

Estoppel • Another exception is estoppel on the part of the local firm or entity which entered into the transaction with a foreign corporation. The local resident knowing the absence of a license of its counterpart and receiving the benefits of the contract, it is now estopped from raising lack of capacity of the foreign corporation. The reasoning being that the local resident is taking advantage of the foreign corporation by raising its noncompliance and at the same time receiving the benefits.473 • Subic Bay Metropolitan Authority v. Universal International Group of Taiwan 474 – UIG is a foreign corporation without a license to do business in the Philippines. UIG leased from SBMA the Binictican Golf Course to be transformed into a world class 18-hole golf course. UIG sued SBMA for pre-termination of the contract due to default of UIG. SBMA attacked the capacity of UIG to sue. • The Supreme Court ruled in favor of UIG. It stressed that the licensing requirement was never intended to favor domestic corporations who enter into solitary transactions with unwary foreign firms and then repudiate their obligations simply because the latter are not licensed to do business in this country. It noted that the scheme is a common ploy of defaulting local companies which are sued by unlicensed foreign companies not engaged in business in the Philippines to invoke lack of capacity to sue. The Court then concluded that SBMA effectively recognized the personality and capacity to institute suit of UIG. • Agpalo rejects estoppel as an exception to the requirement of getting a license. Agpalo argues that estoppel may not invalidate that which is against the law. He further argues that estoppel is grounded on equity. A foreign corporation cannot be in good faith 471

468

Rumpert., p. 831. 469 G.R. No. L-13525, (1962). 470 Rumpert, p. 803.

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Ibid., p. 802-803. G.R. No. L-63796-97, (1984) Salonga citing Communication Materials and Design, Inc. v. CA, 260 SCRA 673 (1996), p. 464. 474 G.R. No. 131680, (2000). 472 473

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO when it has not complied with a positive requirement of the law. Thus, allowing the foreign corporation to sue, even without a license, would be a rewarding such corporation for breach of law. Agpalo opines that the better solution would be to require the foreign corporation to acquire the license and pay the fines and penalties that is imposed.475 Partnership • Partnership is a business association wherein two or more persons bind themselves to contribute to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves.476 This association has a personality distinct and separate from its members.477 Thus, the common fund that is contributed is owned by the partnership itself and not by the partners. However, one must also note that each partner is generally the agent of each other and the partnership.478 Thus the act of the partner may be considered as the act of the partnership itself. • Salonga opines that a partnership created under local jurisdiction is also considered a partnership in other jurisdictions. There is a difference however, in the applicable personal law that the partnership has. In Civil law countries, the personal law of the partnership is determined by its central office. On the other hand, in the United States, a common law jurisdiction, the personal law of the partnership is with the place of creation of such partnership.479 • The personal law applicable would determine the rights and duties of the partners in relation to themselves, the partnership, and to third parties. A limited partner’s liability cannot be enlarged in another jurisdiction merely because such jurisdiction allows it. The local jurisdiction respects the foreign partnerships laws with respect to its liabilities.480 Religious Societies and Corporation Sole • Religious societies are religious corporations that are governed by Chapter II of the Corporation Code. • Register of Deeds of Rizal v. Ung Siu Si Temple481 – Ung Siu Si is a religious organization whose deaconess, founder, trustees and administrator are all Chinese citizens. Ung Siu Si seeks to register to its name, a parcel of land donated to it. The Supreme Court held that since the religious society is admittedly composed of Chinese nationals, it may not acquire land because of the Constitutional inhibition. The Court further said that to permit religious associations controlled by non-Filipinos to acquire agricultural lands would be to drive the opening wedge to revive alien religious land holdings in this country. • On the other hand, a corporation sole is an incorporated office composed of only one person.482 Section 113 of the Corporation Code explicitly gives the corporation sole

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the capacity to purchase and hold real estate and personal property for its church. This capacity exists even if the chief archbishop, bishop, priest, minister, or other presiding elder who is the corporation sole is in fact a foreign citizen and personally cannot own and hold real property. Roman Catholic Apostolic Administrator of Davao v. Land Registration Commissioner483 – In the case the corporation sole is the Roman Catholic Administrator of Davao who is a Canadian citizen. The Supreme Court allowed the registration of the donated parcel of land. The Court held that a corporation sole is a special form of corporation usually associated with the clergy. Conceived and introduced into the common law by sheer necessity, this legal creation was designed to facilitate the exercise of the functions of ownership carried on by the clerics for and on behalf of the church which was regarded as the property owner. The bishops or archbishops, as the case may be, as corporation's sole are merely administrators of the church properties that come to their possession, and which they hold in trust for the church. Since the real owners of the property are the lay Filipino people, the citizenship of the administrator or bishop is of no concern.

Multinational Corporations • A multinational corporation is a single enterprise composed of several corporations, each with a separate entity and different nationalities. • According to Coquia, the problem lies in the ability or disability of a host country to affect or hold liable parent corporation or the entire multinational corporation and not merely the subsidiary or branch within its jurisdiction. He opined that local courts may exercise jurisdiction over the parent corporation if the parent has such control and domination over its subsidiary that would indicate that the subsidiary has no separate corporate existence. This relationship between the parent and the subsidiary would then be more like an agency relationship that would enable local courts to go after the parent/principal. This can also used in the converse situation, jurisdiction over the parent corporation may give rise to an exercise of jurisdiction over the subsidiary if the separate corporate existence has not been adequately maintained.484

475

p. 465-466. Art. 1737, Republic Act 386 or The Civil Code of the Philippines (hereinafter Civil Code). Art. 1768, id. 478 Art. 1818, id. 479 Salonga, p. 470. 480 Ibid., pp. 470-471. 481 G.R. No. L-6776. (1955). 482 Jorge Coquia and Elizabeth Aguiling-Pangalangan. Conflicts of Laws. Casses, Materials & Comments. (Quezon City, Phoenix Press. 2000), p. 522. (hereinafter Coquia) 476 477

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483 484

G.R. No. L-8451. (1957). Coquia, pp. 524-525.

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO TORTS AND CRIMES C/O: JOSEPH DORIA, GB BARROA, AND MERLIN ANG (Salonga, CHAPTER XIX, 1995) CONCEPT OF TORT What are Torts? •The concept of torts, however, is quite different in each country •In Anglo-American Common Law, the concept of tort covers: a) intentional and negligent injury b) strict liability, which serves to distribute losses due to such fault or negligence. Requisites of Tort Liability: 1. Existence of a legal duty 2. Breach of Duty 3. Damage as a proximate result 4. Occurrence of an Actionable Wrong Historical Development a) Obligation Theory –Though the act complained of was subject to no law having force in the forum, it gives rise to an obligation which follows a person and may be enforced anywhere the person may be found b) English Rule –In order to found a suit in the forum for a wrong committed abroad, the said wrong must be of such character that it would be punishable in the forum and the said act is not justifiable under the law of the place where the act was done. Confronted with a Torts case with a “foreign element”, what can the forum do? 1.Dismiss the case on the basis of “forum non conveniens” 2.Admit jurisdiction and apply lex fori 3.Admit jurisdiction and apply foreign law LEX LOCI DELICTI COMMISSII Law of the place where the wrong was committed Civil Law •The locus delicti is where the wrongful act began or occurred. This is because rules on tort are intended to regulate human conduct; hence, a person who willfully or negligently acts contrary to social norms must be held liable for any injury caused Criticism: Unfairness may eventually occur in its application as a defendant’s acts may cause injury outside the place of execution. Such act may not even be considered punishable in such jurisdiction. Common Law •The locus delicti is where the tortious act first became effective. This is due to the fact that until there is produced some effect, some result, no injury or wrong has really been committed, despite the disregard of human norms. The law on torts seeks to give protection and redress; without injury, there is no necessity for judicial relief and intervention. Criticism 03-23-2006 | THROUGH THE JOINT EFFORTS OF STUDENTS OF ATENEO LAW III- C 2006 | Edited by J.C. de Veyra

In fact it can lead to incongruous judgments, to wit: a) The place where the injury was sustained may be entirely fortuitous, say an airplane accident. b) Where the conduct of the actor is required or permitted by the law of the state of execution, it would be unfair to subject him to liability under the law of the State of the alleged injury. Conversely, where the act is actionable by the law of the State of injury, the latter may have no interest in shielding the actor from liability, whereas the place of execution may have a more significant relationship to the parties and to the occurrence. Rabel’s Theory •The locus delicti is the place which has the most substantial or essential connection with the act. Criticism. Whether or not a particular contact with a State is significant for conflicts purposes cannot be known until one first knows exactly what domestic tort rules are in conflict and what policies underlying those are in issue. Modern Theories in Tort Liability 1. Doctrine of Elective Concurrence In this theory, it is held that both the state where the actor engaged in his conduct and the place of injury has jurisdiction over the case as it can be said that the said tort was committed in both places. 2. State of the Most Significant Relationship To apply this rule, the state with the most significant relationship to the case at hand must be determined. Factors to be considered a) the place where the injury occurred b) the place where the conduct causing the injury occurred c) the domicile, residence, nationality, place of incorporation and place of business of the parties, and d) the place where the relationship, or any, between the parties centered. 3. State-Interest Analysis All relevant and governmental concerns of a state in an issue, not only as a sovereign in a set of facts or an entity but as a repository of justice, must be considered by a court of law in determining which law to apply . Carver’s Principle of Preference • More of a guideline to be followed by states in applying rules on tort acts. Such principles must guide contending states in determining which or what law to apply in particular cases. • Apply only when there is no statutory rule applicable st 1 Guideline Where the liability of the State of injury set a higher standard of conduct or of financial protection against injury than do the laws of the State where the person causing the injury

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO has acted or has his home, the laws of the State of injury should determine the standard and the protection applicable to the case nd 2 Guideline Where the liability laws of the state in which the defendant acted and caused the injury set a lower standard of conduct or of financial protection than do the laws of the home State of the person suffering the injury, the laws of the State of conduct and injury should determine the standard of conduct or protection applicable to the case rd 3 Guideline Where the State in which a defendant has acted has established special controls, including the sanction of civil liability, over conduct of the kind in which the defendant was engaged when he caused a foreseeable injury to the plaintiff in another state, the plaintiff, though having no relationship to the defendant, should be accorded the benefit of the special standard of conduct and of financial protection in the State of the defendant’s conduct, eventhough the State of injury had imposed no such controls or sanction th 4 Guideline Where the law of the State in which a relationship has its seat has imposed a standard of conduct or of financial protection on one party to that relationship for the benefit of the other party which is higher than the like standard imposed by the State of injury, the law of the former State should determine the standard of conduct or financial protection applicable to the case for the benefit of the party protected by the State’s law.

• • • • •

Residency Place of Business Place of injury or instigation of the tortuous action Citizenship Place where a relationship is centered

INTEREST OF THE STATE WHERE THE INJURY TAKES PLACE Compensation will prevent the victim from becoming a public burden or charge of the State INTEREST OF THE STATE WHERE THE TORTUOUS ACT WAS INITIATED Interest in regulating the conduct of persons found in its territory. Persons within a State have the right to shape their conduct in accordance to its law. THE PLACE WHERE tortuous ACT IS CARRIED OUT MAY BE GIVEN DECISIVE WEIGHT When the injury occurs in two (2) or more different States When the place of injury is not easily ascertainable or is fortuitous and bears little relation to the occurrence and the parties NOT A HARD AND FAST RULE Example: Libel Plaintiff: A (Filipino national) Defendant: B (Magazine printed in HK enjoying worldwide circulation) Forum should be the Philippines since it is there that A stands to suffer the greatest injury since it is there that people are familiar with his reputation (assuming B does business in the Philippines).

PHILIPPINE CONFLICT RULES ON TORTS FORUM INTEREST Method in which the primary consideration in determining what law should apply is the interest of the forum. DOES THE PHILIPPINES HAVE AN INTEREST IN THE CASE OTHER THAN AS A FORUM? If NO, then the law of the other state should govern. If YES, the next question that needs to be answered is: IS THERE A CONFLICT BETWEEN THE PHILIPPINE LAW AND THE LAW OF THE OTHER STATE? If NO, then apply Philippine law. If YES, then there is a need to bear in mind two (2) considerations in determining which law should govern. FIRST ASCERTAIN AND WEIGH THE PURPOSE OF THE TORT LAW OF THE PHILIPPINES SECOND, EXAMINE AND WEIGH THE INTEREST OF THE OTHER STATE HOW DO YOU DETERMINE THE INTEREST OF THE OTHER STATE? • Domicile 03-23-2006 | THROUGH THE JOINT EFFORTS OF STUDENTS OF ATENEO LAW III- C 2006 | Edited by J.C. de Veyra

LEX LOCI DELICTI RULE • The law of the place where the action causing injury, wrong or death took place should govern • Most authorities consider this as the traditional rule on the determination of the applicable law involving tort or damages in the Philippines 2 REASONS FOR THE RULE 1. First, the state where social disturbance occurred has the primary duty to redress the wrong, and to determine the effects of injury 2. Second, the law of the state must be presumed to have been foremost in the mid of the parties concerned, thus they acted with knowledge of the resultant consequences under the said law DIFFERENT DEFINITIONS OF LEX LOCI DELICTI Civil law countries: the place where the act began Common law countries: the place where the act first became effective. 3 THEORIES ON WHERE THE LOCUS IS • Civil Theory: where the action began • Rules on tort are intended to regulate human conduct, hence a person who acts contrary to social norms must be held liable • Common Law Theory: where the tortuous act first became effective.

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO • • •

Until the action has caused some effect, no injury has really been committed. Dr. Rabel’s Theory: where the most substantial connection to the act is present. Libel cases by means of a foreign publication enjoying circulation elsewhere and causing injury in another State.

STATE OF THE MOST SIGNIFICANT CONTRACTS RULE • The rule arose because of the opinion of some that the rule on lex loci delicti has become inadequate to meet the modern complexities of life today • Applies where the tortuous acts occurred in two (2) or more states and ripens into a cause of action in another State. • Also applies when the attendant facts occurred in two or more States, not one of which constitutes an actionable wrong by itself • Also known as: • State of the Most Significant Relationship Rule • Center of Gravity Rule • Grouping of Contracts Rule THE FOLLOWING CONTRACTS ARE TO BE CONSIDERED AND EVALUATED ACCORDING TO THEIR RELATIVE IMPORTANCE WITH RESPECT TO THE PARTICULAR FACTS IN ISSUE: • Place where the injury occurred • Place where the act causing the injury occurred • The domicile, place of incorporation and place of business of the parties • Place where the relationship of the parties is centered STATE OF THE MOST SIGNIFICANT CONTRACT RULE (continued) An action may be maintained wherever the wrongdoer can be found provided that: The law of the nationality of the wrongdoer and the law of the forum (Philippines) make the wrongful act actionable The two countries have similar statutes on the matter AGREEMENT OF THE PARTIES Parties to an agreement may stipulate as to the law which will govern in case of dispute arising therefrom and such stipulation shall be respected except in so far as prohibitive law or public policy prohibits its application CARRIAGE OF GOODS BY SEA ACT C.O.G.S.A. is a suppletory law applicable in cases involving the carriage of goods to the Philippine ports in foreign trade. The rights and obligations of common carriers in all contracts of carriage of goods by sea to Philippine ports from foreign ports shall be governed by the Civil Code, in default of such provisions, by that of the Code of Commerce and other special laws, and in the absence of both, by the C.O.G.S.A. Article 1753 of the New Civil Code states that “the law of the country to which the goods are to be transported shall govern the liability of the common carrier for their loss, destruction or deterioration” 03-23-2006 | THROUGH THE JOINT EFFORTS OF STUDENTS OF ATENEO LAW III- C 2006 | Edited by J.C. de Veyra

Article 1766 of the New Civil Code states that “in all matters not regulated by this Code, the rights and obligations of common carriers shall be governed by the Code of Commerce and by special laws” REGISTRY OF VESSEL Also known as the Law of the Flag The rule states that when a vessel of foreign registry or ownership is enters Philippine ports, such a vessel is beyond our jurisdiction However, a vessel of foreign registry or ownership shall be subject to Philippine jurisdiction on matters which involve the peace and tranquility of the party. The Law of the Flag generally supercedes the lex loci delicti test for tort jurisdiction. The law of the flag, however, will not be applied where considerations against its application outweigh those in its favor Example: where the wrongful act or omission caused injury to the country’s citizen or where the local law is designed to protect seamen in Philippine ports FILIPINO OVERSEAS EMPLOYMENT • The traditional rule is that the law of the country where the physical injury or death of a person occurs governs the liability of the person responsible thereof • The Kilberg doctrine states that the forum is not bound by the law of the place of death as to the limitation on damages for wrongful deaths because such rule is procedural and hence the law of the forum should govern on the issues involved • In cases where the law of the flag applies, the law of the country where the vessel is registered governs the terms and conditions of employment of its crew. • The limitation of these rules on conflicts of law is that it does not apply in cases where there is a contrary rule in the forum where the case is filed. • Therefore, foreign employers are bound by the law creating the Philippine Overseas Employment Administration and such other laws specifying the amount of compensation and benefits during the term of the contract. ENFORCEMENT OF FOREIGN JUDGMENT • Foreign torts may be properly be the subject of suits provided certain conditions are met, aside from the requisite that courts must have jurisdiction over the case • The general rule for an action for a foreign tort, may be brought in any place where the defendant may be served with process or is subject to suit CONDITIONS FOR ENFORCEMENT OF FOREIGN TORT • Foreign tort must not be penal in character • Enforcement of the tortuous liability should not go against the public policy • Judicial machinery must be adequate for such enforcement PARTICULAR TORT PROBLEMS 1. Tort Liability arising from acts of Torture Conflicts of law issue: Whether foreign courts have jurisdiction to entertain tort suits for acts of torture committed against political detainees or prisoners in their home countries, in violation of international and municipal law.

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO Proposed choice of law: Official acts of torture may be prosecuted in foreign countries, i.e. in U.S. Courts in view of the Alien Torts Acts. 2. Injury to Intangible Values 2.1. Fraud or Misrepresentation Conflicts of law issue:When the defendant’s fraud or misrepresentation and the defendant’s reliance occur in the same state, no problem arises, but if they do not, what will be the choice of law principle that will govern? Proposed choice of law: In cases of fraud or misrepresentation, the principal concern is the protection of the plaintiff and this will therefore normally lead to the place where he acted in reliance. The “Most Significant Relationship” principle applies in this case. Factors relevant in determining the place of the “most significant relationship” are the following: a) The place where the plaintiff relied; b) Where he received the representations; c) Where the defendant made the representation; d) Domicile, residence, nationality, and the place of business of the parties; e) Where the tangible involved in the transaction was situated; and f) Where the plaintiff was to render performance under the contract that he was induced to conclude. 2.2 Unfair Competition Conflicts of law issue: Torts in unfair competition presents Conflicts of Laws issue when the defendant (one exercising unfair competition) acts in one state and the plaintiff’s business (one who suffers injury as a result of the unfair competition) is injured or the public, in general, is deceived in another. Proposed Choice of Law: There are essentially three interests or policies to be considered—regulation of conduct, protection of the injured party’s business, and protection of the public. Under the Second Restatement the most significant factor is not the place of the injury, but the place of the defendant’s conduct. (criticized) •The better approach is to protect the plaintiff in his market and with respect to his customers or other competitors. (European choice of law test) 2.3 Alienation of Affections Conflicts of law issue: Alienation of affection is defined as: “a tort based upon willful and malicious interference with marriage relation by third party, without justification or excuse.” (Black’s Law Dictionary, Page 66, 5th Ed.) In case the defendant is domiciled in a different State, whose law shall govern? Proposed choice of law: The rule focuses on the place of the defendant’s conduct. The reason for preferring the defendant’s place of conduct rather than the that of the spouses’ domicile, if different, is said to be that the primary policy for affording these causes of action is deterrence and punishment rather than payment of compensation. 2.4. Defamation and Invasion of Privacy Conflicts of law issue: If the publication of the libel or slander or the invasion of privacy occurs in a single state, the distinction is usually unnecessary: conduct and injury coincide. It does become important in cases of multi-state publication. An initial question is whether the plaintiff has a single or multiple causes of action. 03-23-2006 | THROUGH THE JOINT EFFORTS OF STUDENTS OF ATENEO LAW III- C 2006 | Edited by J.C. de Veyra

Proposed choice of law: The majority of the States adopted the “Single Publication Rule” whereby plaintiff may only bring one suit for the particular publication. But what law should apply? Recent decisions opt for the law more favorable to the plaintiff which is usually the law of his domicile, following the “Most Significant Relationship” Principle. For natural persons, this place “will usually be the place where the person was domiciled at the time,” while for Corporation it “will be the principal place of business at the time.” (Eliah v. Ucaton Corp., 433 F.Supp.309 W.D.N.Y. 1977) 3. Products Liability Conflicts of law issue: Products liability suits are a hybrid of tort and contract claims, usually involving claims of negligence and strict liability or breach of warranty. Mass torts, which may or may not include product liability, involve injury to many victims as a result of a single act (explosion) or of continuous acts (toxic or polluting emissions). To which law shall the defendant be subjected to? The courts have struggled to apply choice-of-law rules in such a way that the plaintiff is favorably compensated for the injury and yet the defendant is not unfairly surprised by the law governing his liability. What now is the generally accepted choice-of-law rule? Proposed choice of law: The Second Restatement applies its “Most-significant Relationship” test to products liability, which allows the court to take account of the “legal, social, and economic consequences of the total contract-tort situation.” This considerations will often place primary emphasis on the interests of the injured plaintiff and give rise to the suggestion that “the law most favorable to the plaintiff ought to be applied…” • The Hague Convention on the law applicable to Products Liability takes a similar approach. Article 4 of the Convention provides that the applicable law shall be the internal law of the State of the place of the injury, if that State is also: a) the place of the habitual residence of the person directly suffering damage b) the principal place of business of the person claimed to be liable c) the place where the product was acquired by the person directly suffering damage. Article 5 of the Convention goes on to provide that the applicable law shall be the law of the State of the habitual residence of the injured person, if the State is also the principal place of business or the place where the product is acquired. In essence therefore, the plaintiff has the option to choose between the law of his habitual residence or the law of the principal place of business of the defendant in case the 2 coincide. 4. Statutory Liability Conflicts of law issue: Choice-of-law problems also exist when statutes provide for no-fault liability. Choice-of-law problems may arise in a variety of situations: when tort-state parties are injured in a no-fault state and a no-fault liability is imposed on the tort-state driver, when the reverse is the case, when the cars each occupied by the parties from both types of States collide, or when different no-fault statutes are in issue. Proposed choice-of-law: There are 2 basic no-fault statutes: 1.Territorial Legislation: provides benefits for every person injured in the state regardless of the domicile. Criticism: What if the non-resident driver comes from a tort state? Tort driver may incur liability beyond his expectation that may lead to his economic ruin. To resolve criticism: Threshold Test

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO 2. Domiciliary Legislation: Awards no-fault benefits on the basis of the victim’s in-state residence. Criticism: leads to confusing results.

thing is to be treated as a movable or an immovable for most purposes depends upon the law of the state in which the thing is located.485 Transactions involving transfers inter vivos of an interest in land generally follow the traditional rule, which continues to receive general recognition. In practice, the validity and effect of a conveyance of an interest in land and the nature of the interest, which is

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Torts and Crimes Distinguished

Torts

Crimes

Wrong committed against a private person

Wrong committed against the State

A tort action is a civil proceeding commenced and maintained by the injured person against the wrong doer for the purpose of obtaining compensation for the damage suffered.

It is the state, as the representative of the public, that brings a criminal action against the offender, for the purpose of protecting and vindicating the interests of the public as a whole.

Generally, the law of torts does not depend upon intention.

Criminal Liability is essentially based on intention— there can be no criminal without criminal intent.

Principles of Criminal Liability (1) Territoriality Principle – Criminal Jurisdiction is determined by reference to the place where the offense is committed. (2) Nationality theory – it is the recognized rule that a State has the power to enact criminal laws which apply even to violations thereof committed by its citizens in other states. (3) Protective Principle – is the determination of jurisdiction by reference to the national interest injured by the offense. (4) Universality Principle – the determination of the jurisdiction is referenced to the study of the person committing the offense. (5) Passive Personality Principle – The determination of jurisdiction is made by the reference to the nationality or national character of the person injured by the offense. What is the governing principle in the Philippines? • The prevailing principle in Criminal law is the Territoriality Principle, with a mixture of the protective principle. • Examples: Article of the Revised Penal Code of the Philippines, Article 14 of the Civil Code, and special penal laws such as Anti Hi-Jacking Law R.A. 6235. PROPERTY C/O: AVELINO “BOY-BASTOS” TOLENTINO, CLIFTON “CLIFORIS” SAWIT, FELIX “RICKY” CABRAL AND JC de VEYRA (Salonga, CHAPTER XXI, 1995) THE LEX SITUS RULE • Choice of law issues relating to property have been subjected to different choice of law rules depending on whether the property interest is attached to either a movable or an immovable. Therefore, it is imperative that before any issue relating to the abovestated is discussed, the character of the interest involved, as well as the nature of the property, has already been determined. At any rate, whether an interest in a tangible 03-23-2006 | THROUGH THE JOINT EFFORTS OF STUDENTS OF ATENEO LAW III- C 2006 | Edited by J.C. de Veyra

transferred, are determined by the law, which would be applied by the courts of the situs, and those courts would usually apply their own law, thus upholding the traditional view. 486 This view is supported by statutes in many states when such provide alternative references to validate a conveyance of local land as to form if the instrument complies with either the law of the state where the land is located, or the law of the place where the deed is executed.487 Therefore, it is appropriate to say that a foreign court will apply whatever law would be applied by the situs to resolve the controversy relating to formal validity. Contract and Conveyance Distinctions Policy Analysis-Capacity • The law of the situs of the land, as a general rule, dictates the capacity of the parties to convey an interest on land. However, multi-faceted transactions in land do not fall squarely into the categorization that is assumed by the situs rule. The courts, having observed such trend, have refused to apply the situs rule outright in every case arising from land transactions. In such instances, the courts have relied on the distinction between contracts and conveyances. Particular Issues Conveyances: Effect and Construction • The relevancy of the situs rule to the determination of the effects of an instrument of conveyance involving land had already been discussed in the previous chapters. These discussions centered on the protection of state interests and convenience during transactions. However, a thorough analysis of the rule would require a discussion on the construction of the instruments of conveyance containing the same. • Obviously, the goal is to promote the security of land titles, that the precise interest conveyed by an instrument be ascertainable, as much as possible, from the face of the instrument. Therefore, it would seem beneficial if a single rule were adhered to in the 485 486 487

Restatement, Second, Conflict of Laws, Intro., Chap 9 Top 2 (1971); DICEY AND MORRIS, CONFLICT OF LAWS 899 (11th ed. 1987). Nebraska v. Iowa, 406 U.S. 117, 92 S Ct. 1379, 31 L. Ed. 2d 733 (1972); Restatement, Second, Conflict of Laws. Lorenzen, The Validity of Wills, Deeds and Contracts as Regards Form in the Conflict of Laws, 20 YALE L.J. 427, 433 (1911)

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construction of these instruments. As pointed out by Scoles, if by the situs law a phrase in a conveyance has a certain meaning, irrespective of the intention of the grantor, or a phrase is presumed to have a particular meaning in the absence of a contrary provision, an instrument containing such phrases should be given the same effect. Under this approach, the meaning prevailing at the place of execution or at the domicile of the grantor would not be controlling, the law of the situs must be applied.488 Nevertheless, certain transactions, as enumerated by Scoles, should be construed without regard to the law of the situs. These are usually conveyances, which are the result of arms length negotiated commercial transactions or gratuitous transfers amongst individuals. Such is the better rule since the parties intended meaning should be respected over the law of the situs, as these transactions do not undermine any of the three situs policies and because the freedom to contract must be observed.

Covenants • Blacks’ dictionary defines covenants as involving the laying down of conditions. Or as Scoles puts it, in relation to land transactions, covenants are those rights not technically expressed in the operative words of a grant, however, the same cannot be separated from the land, and transferred without it, but goes with the land as being annexed to the estate. Simply put, covenants are solemn conditions that are innate to the estate and must be observed unconditionally. Such being the case, it would be highly convenient if a certain rule be applied regardless of the domicile of the parties involved in the property being transacted, or the place of execution of the same. As Scoles observed, “Documents are recorded at the situs of the land, the rules of that jurisdiction form the basis of the opinions on the title. Deeds need to follow a form prescribed by the law of the situs to transfer title. Hence, it would be extremely inconvenient to have a covenant contained in the same instrument governed by a different rule.” 489 The said observation clearly explains why the situs rule is being applied in cases involving covenants. • Some quarters, however, argue that covenant must be appreciated in two senses. They argue that a distinction should be made between those covenants for title that run with the land and those, which are called purely personal. They insist that when the covenant involved is of the latter sense, the law of the contract must be applied instead. However, such distinction is very technical, and courts have refused to apply the same. In the end, it still seems preferable to refer all questions pertaining to covenants, personal or otherwise, to the law of the situs of the land. Equitable Interests Generally • The general rule observed in equitable interests in immovables follow the same rule as the creation of interests in lands, both adhere to the land situs rule. This stems from the same considerations of convenience and control discussed in the immediately preceding subheading. The law of the situs, for example, determines whether, as a result of certain transactions, a trust in land is created, even though under such

circumstances the law of the forum would not have created a trust.490 This is because a trust when created must be respected and recognized elsewhere to prevent undue disallowance of perfected rights. Equitable Servitudes • Equitable servitudes, as defined in Black’s dictionary, is a right in respect of an object in virtue of which the object is subject to a specified use or enjoyment by another person or for the benefit of another. It is thus important to have a choice of law rule ensuring the enforcement of the same, in cases wherein the said servitude extends to a different jurisdiction. • Most of the issues involve land located in a single state and are occasioned by attempted enforcement of the covenant by contract action elsewhere. Also, issues on equitable servitudes may involve land on both sides of a state line, as in interstate real estate development subject to mutual covenants involving building or use restrictions.491 Since most equitable servitudes arise out of covenants and contracts, it is possible to view them as obligations separate from the land itself. 492 Even so, as equitable servitudes relate to use and enjoyment of land, it appears that the situs has to protect or enforce the rights arising out of equitable servitudes. At any rate, if enforcement of a servitude is to occur at a non-situs forum by application of a law different from that of the situs, it would seem that the enforcement would have to be based upon express contracts between the parties or their privies and would not extend to third parties relying upon the record with regard to equitable interests in the land itself.493 Equitable Remedies • Lord Cranstown v. Johnston, 3 Ves. Jr. 170 (1796) – The plaintiff was a debtor of the defendant. The latter, in England, refused plaintiff’s offers of payment and requests for an account, and by such procrastination evidently “lulled him into security.” In the meantime, the defendant brought suit against the plaintiff in the Island of St. Christopher, secured a judgment against him, and had the plaintiff’s land there sold in satisfaction, buying it himself at a sum which was but a small part of its value. All of this was done without the plaintiff’s knowledge. After discovery of the facts, the plaintiff sought relief in an equity court in England. In this proceeding he could not ask the English court to enforce a constructive trust created by the law of the situs, because so far as it appeared, all the defendant did in St. Christopher was in accordance with the law there prevailing. Hence, it is assumed that by the law of the situs there was no trust existing in the land. However, according to Massie v. Watts494, a court, having a defendant before it, may in a proper case order him to convey foreign land, if the degree can be complied with at the forum. • Matarese v. Calise495 – The plaintiff, an Italian citizen, arranged with the defendant, an American citizen, to negotiate the purchase of Italian land from the owner who lived in 490

Id. at 754, citing Acker v. Priest, 92 Iowa 610, 61 N.W. 235 (1984). Id. at 754. Reno, The Enforcement of Equitable Servitudes in Land: Part II, 28 VA. I. REV 1067 (1942). 493 Graham v. Hamilton County, 224 Tenn. 82, 450 S.W. 2d 571 (1969). 494 10 U.S. (6 Cranch) 148, 3 L.Ed. 181 (1810). 491

488

HERBERT GOODRICH & EUGENE SCOLES, CONFLICT OF LAWS (hereinafter SCOLES) 751 citing Restatement, Second, Conflict of Laws 224, comment (b) (1971). 489 Id. at 752.

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the United States. The defendant made the purchase and took title in his own name, making payment with the plaintiff’s funds. The defendant then told the plaintiff that the land was available only at seven times the original price. Upon discovery of this, the Italian citizen sued the defendant in Rhode Island, and the Rhode Island Court ordered the defendant, because of his fraud to convey the land, to reconvey the land to the plaintiff. This case is said to be in accord with the Massie ruling. In these cases, redress is being afforded to the plaintiff because of the personal wrong he encountered in dealing with the transaction. Also, that the breach gave rise to the remedy of a constructive trust which created a personal obligation on the part of the defendant to fulfill. Generally, when third parties are involved, the situs law will protect the third party absent knowledge of the wrongful conveyance. However, if the third party’s acceptance of the conveyance is tortuous, the third party may be compelled to reconvey for the benefit of the injured person, even though by the situs law the conveyance may have given an indefeasible title. Irving Trust Co.v. Maryland Casualty Co. 496 – A corporation on the verge of insolvency transferred to certain creditors in New York property which included land in other states. The corporation subsequently became bankrupt, and in a suit in the federal district court in New York, the trustee sought to compel the transferees, over whom the court had personal jurisdiction, to reconvey the land, on the ground that a New York statute made the conveyance and acceptance of the title illegal under the circumstances. The U.S. Court of Appeals held that if a violation of the statute could be proven, the defendants could be compelled to reconvey not only the land in New York, but also the land in other states by whose law the defendants had secured good title. The acceptance of the title being a tort, “Any court, said Judge Learned Hand, “may compel the tortfeasor specifically to reatore the property, whatever the law of the situs.497 In sum, the rules on equitable remedies hinge on whether the interest involve is inherent to the immovable being transacted, or it results merely to a personal obligation. If it involves the former, the law of the situs rule is respected, as held in the Lord Cranstown case. On the other hand, if the breach results into a personal obligation by a party over which the court has jurisdiction, then even the forum may apply its own law as it really involves torts and the settlement of the same through damages. It is said that a decree of a nonsitus court having personal jurisdiction over the parties is entitled to full faith and credit even at the situs.

Encumbrances • Encumbrances in land transactions often involve the foreclosure of land or other security interest in land. According to Scoles 498 , in cases involving such acts or interests, the law that would be applied is that of the situs’. This approach has obtained even though the validity and the effect of the obligation, which the encumbrance secures, may be determined by the appropriate laws relating to the contract. Such is the case because, the situs rule holds in most aspects of land transactions. The formal

•

validity of a mortgage, the capacity of the mortgagor, the nature of the interest in the land, which the secured creditor acquires, the foreclosure proceedings, all fall under the situs rule, and thus, making it highly convenient to apply the same rule in determining and/or settling interests arising from encumbrances. Moreover, matters that relate closely to remedies and procedures are normally available and within enforceability only at the situs. Thus, it is said that the diverging approaches of the traditional view and the policy interest analysis approach actually agree that situs rule be applied. This is because, in al probability, the situs of the land will also obtain the primary interest, which is the basis of the former view. Another matter worthy of discussion in encumbrances in land is the issue relating to deficiencies after foreclosure. In the event of deficiency remaining after foreclosure and sale, where both note and mortgage are governed by the same law and suit is brought in another state for the deficiency, the existence and the extent of the right to recover are determined by the law of the situs and that appropriate to the contract. Recovery would not be limited by provisions of the internal law of the forum prohibiting deficiency judgments499 or restricting recovery to the difference between the debt and the true value of the land, rather than the amount realized on the sale500. However, the cases of Stumpf v. Hallahan501 and California Federal Savings and Loan Asso. V. Bell502, presented a brilliant compromise between upholding the contract law between the parties and the situs rule stated that: “by holding that the contract is governed by the law intended bynthe parties, and they must have intended it to be governed by the law of the situs of the land.

EXCEPTIONS TO THE LEX SITUS RULE • 4 notable exceptions. 1. Firstly, the lex situs rule does not apply when it is the rights and liabilities of the parties to a contract where the subject matter of the contract is an immovable that is at issue, and not the effect of the transaction upon the title to the land. Instead, it is the law that regulates the contract itself that will govern, though the land itself is in another state.503 o Lijedahl v. Glasgow 504 – The plaintiff held a mortgage on a piece of land located in Colorado as a security for an obligation payable in Iowa. The mortgagor made a deed out to the land, leaving the space for the grantee’s name blank. The deed contained a clause stating that it was made subject to the mortgage, which the grantee agreed to pay. This deed was delivered for consideration to A, who in turn transferred it, for consideration, to B, who then filled his name as grantee in the blank space. Since the debt was not paid, the holder of the mortgage sought to hold A for the claim. According to Colorado law, the blank deed to the grantee passed no interest to the purchaser until his name was written therein, which A never did. On the other hand, Iowa law held that interest was passed to A. The question was whether the contract’s 499

Catchpole v. Narramore, 102 Ariz. 248, 428 P. 2d 105 (1967); Colodny v. Krause, 141 Ga. App134, 232 S.E. 2d 597 (1977). Belmont v. Cornen, 48 Conn. 338 (1880); Provident Savigs Bank & Trust Co. v. Steinmetz, 270 N.Y. 129, 200 N.E. 669 (1936); Bullington v. Mize, 25 Utah 2d 173 478 P. 2d 500 (1970). 501 101 App.Div. 383, 91 N.Y.S. 1062 (1905). 502 6 Hawaii App. 597, 735 P 2d 499 (1987). 503 JOVITO SALONGA, PRIVATE INTERNATIONAL LAW, 383 (1979). (hereinafter SALONGA) 504 100 Iowa 827, 180 NW 870, 1921 500

495

111 R.I. 551, 305 A. 2d 112 (1973). 83 f. 2d 168 (2d Cir.1936). 83 F.2d at 172 Cf. Widmer v. Wood, 243 Ark. 457, 420 S. W. 2d 828 (1967). 498 SCOLES, supra note 5, at 759. 496 497

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validity was governed by Colorado or Iowa law. The court ruled that the assumption of the encumbrance and the obligation to pay it were personal covenants, and as they were made and performable in Iowa, the contract must be governed by Iowa law. Secondly, although the lex situs rule determines what law governs the validity and effect of a mortgage upon immovable property, the validity and effect obligation which that mortgage secures are governed by principles applicable to contracts generally.505 o Problems arise when there is a deficiency after the foreclosure on the mortgage has been made, as the cases regarding this matter have not been uniform.506 If the bond and the mortgage are governed by the same law, and suit has been brought in another state for the deficiency, the existence and extent of the right to recover are governed by the law of the situs and contract, and recovery would not be limited by provisions of the law of the forum prohibiting deficiency judgments,507 or restricting recovery to the difference between the debt and the true value of the land, rather than the amount realized on sale 508 . However, when the bond is executed in one state and the land mortgaged lies in another, and the provisions of these states regarding deficiency judgments differ, it is not clear which law governs. 509 The case of Stumpf v. Hallahan 510 sidesteps the problem by stating that the contract was governed by the law intended by the parties, and they must have intended it to be governed by the law of the situs of the land. If the law governing the contract limits the recovery to the amount realized out of the land, there would seem to be no basis for the recovery of a deficiency anywhere, irrespective of the law of the situs, unless, as is quite likely, the law of the place of contracting is interpreted as intended to protect only holders of land situated within that state.511 o A more difficult problem arises where the law of the contract permits recovery of the deficiency, while the law of the situs restricts or denies it.512 One view is that since in some states a mortgagee may recover the entire amount of the bond, disregarding the requirement of the law of the situs that the security first must be exhausted,513 it might seem that he should likewise be able to disregard a law of the situs which completely confines his recovery to the security. Bit the better view would seem to be that if he chooses to avail himself of the procedure of the situs to obtain a foreclosure decree, he should be held to have submitted himself and the disposition of his entire claim to the

505

Id at 467. SCOLES, supra note 5, at 760. GOODRICH, supra note 22, at 468, citing McGirl v. Brewer, 132 Or. 422, 280 P. 508, 285 P. 208, 1929 508 Id., citing Belmont v. Cornen, 48 Conn. 338, 1880; Provident Savings Bank & Trust Co. v. Stelametz, 270 NY 129, 200 NW 669, 1936 (land in Florida, place of execution of bond not indicated). 509 GOODRICH, supra note 22, at 468-469 510 101 App. Div 383, 91 NYS 1062, 1905, affirmed 185 NY 550, 77 NE 1196, 1906. 511 GOODRICH, supra note 22, at 469, citing Cf. Harris v. Metropolitan Casualty Ins. Co. of New York, 156 Misc. 692, 282 NYS 449, 1935; 36 Col. L. Rev. 487, 1936. 512 Id. 513 Hall v. Hoff, 295 Pa. 276, 145 A. 301, 1929. 506 507

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3.

4.

jurisdiction of the courts of the situs, in whose decree his entire right would thereby be merged.514 A third exception cited by Salonga515 is the validity of a contract to transfer which is determined by the proper law of the contract, in contrast with the validity of a transfer of land which is determined by lex rei sitae. o Polson v. Steward516 – There was an action to enforce a covenant made by the defendant to his wife in North Carolina to surrender all his marital rights in a certain land situated in Massachusetts. The parties were domiciled in North Carolina, and practically every significant act connected with the covenant was done in North Carolina. The wife took steps which under North Carolina law gave her the right to contract as a femme sole with her husband as well as with others, and afterwards release her dower in the defendant’s hands. In consideration of this release, and to induce his wife to forbear suing for divorce, for which she had just cause and for other adequate considerations, the defendant executed the covenant. Defendant demurred and contended that North Carolina law could not authorize a contract between them as to lands in Massachusetts. o Justice Holmes said in the decision that “It is true that the laws of other States cannot render valid conveyances of property within our borders which our laws say are void, for the plain reason that we have exclusive power over the res. But for the same reason inverted establishes that the lex rei sitae cannot control personal covenants, not purporting to be conveyances, between persons outside the jurisdiction, concerning a thing within it. Whatever the covenant is the laws of North Carolina could sucject the defendant’s property to seizure on execution, and his person to imprisonment, for a failure to perform it. Therefore, on principle, the law of North Carolina determines the validity of the contract. If valid by the law of North Carolina there is no reason why to contract should not be enforced in Massachusetts. Finally, the last exception, which has its origin in civil law codes that adopted Mancini’s nationality principle even with respect to problems of succession, is based upon two codal provisions517. Article 16, paragraph 2 of the Civil Code of the Philippines, states that whether succession is testate or intestate, whether the property is moveable or immovable, and wherever the property may be located, it is the national law of the person whose succession is in question, not the lex situs, that determines the order of succession, the amount of successional rights, and the intrinsic validity of testamentary provisions. Under Article 1039 of the Civil Code, the capacity to succeed is also governed by the national law of the deceased.

THE LEX SITUS RULE: MOVEABLES • In the Middle Ages, the rule of mobilia personam sequuntur, the rule that movables follow the person of the owner, was initiated by Italian statutists. This was because 514

GOODRICH, supra note 22, at 469, citing Cf. Battle v. Battjes, 274 Mich. 267, 264 NW 367, 1936. SCOLES, supra note 5, at 384. 167 Mass. 211, 45 NE 737, 36 LRA 771, 57 Am. St. Rep. 452, 1897. 517 SCOLES, supra note 5, at 385. 515 516

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•

•

• •

•

•

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travel was not very common and the location of the property and the owner was generally the at the abode of the owner. This rule was embodied in various European civil codes, such as the old Italian Civil Code of 1865 and the Civil Code of Spain of 1888, which was extended to the Philippines. Later on this was adopted by English and early American law.518 According to this rule, the personal law of the owner controlled questions regarding movable property. This personal law was either based on the owner’s domicile or nationality. The justifications of the rule were threefold. First, that since the very character of movables was that they could be moved from place to place at will, the location of the movable at any given time was largely a matter of chance. Second, that since movables had no fixed situation, an artificial situation could be ascribed to them. Finally, the rule of mobilia personam sequuntur was simple and convenient, since one law would be applied to a particular movable property regardless of where it was located. Unfortunately, there was difficulty in applying the rule in practice. It was unfair to expect that all persons dealing with the owner would know his domicile or nationality, particularly because it may change from time to time. It was also unfair to expect that persons dealing with the owner would know the personal law that was applicable to him. This difficulty was an obstacle to trade and commerce because of the uncertainty it caused.519 In modern times, the rule of the situs has largely replaced the rule of mobilia personam sequuntur in many countries, including the Philippines. Article 16, paragraph 1 of the Civil Code of the Philippines provides: “Real property as well as personal property is subject to the law of the country where it is situated.” This replaces the rule found in the Spanish Civil Code that states that real property is governed by lex situs and personal property is governed by the national law of the owner. According to Prof. Wolff, the rationale of applying the lex situs rule to movables is as follows: “Real rights should be as manifest as possible; third parties who intend to acquire a right in a thing must be protected against the risk that such a thing might be subject to a foreign law under which the acquisition would be voice. While under the law of contracts, the contracting parties have a choice as to the applicable law because they alone are affected by the contract, the acquisition of a right in rem is something which concerns or may concern a great number of unknown strangers. As the place where a thing is situated is the natural center of rights over it, everybody concerned with the thing may be expected to reckon with the law of such place.”520 Another important point is that the place where a movable is located possesses coercive power over the thing, and final authority rests with the law of that place, which is something that parties to a voluntary transfer of that movable should be expected to take into account.521 Professor Cheshire states: Where claimants have different domiciles or where they rely upon transactions in different countries, the lex situs has the great advantage of being a single and exclusive

system that can act as an independent arbiter of conflicting claims. Moreover, its right of control satisfies the expectations of the reasonable man, for a party to a transfer naturally concludes that the transaction will be subject to the law of the country in which the subject-matter is at present situated…522 CRITICISM ON LEX SITUS • It has been argued that the rule applying lex situs to movables, as embodied in Article 16 of the Civil Code of the Philippines is too inflexible. This is based on the fallacy that “the possible questions arising out of a transfer of movables all fall into the same category and are all of the same juridical nature. This is not so.”523 • Another problem with the rule is that it lumps together all kinds of movable property and subjects all of them to the rule of the place where they are situated, regardless of whether these movables are tangible or intangible, or are ‘choses in possession’ or ‘choses in action’, in which case their situs cannot technically be said to be at any particular location. There is also a problem with regard to objects that are in transit, or means of transport, in which case there is a question of what is regarded as their situs.524 The classes of movables are: • Choses in possession: tangible physical objects • Choses in action: debts, patents, copyright, goodwill, trademarks, trade names, shares of stock CHOSES IN POSSESSION • The general rule for choses in possession is that the law of the State where the property is located at the time of the transaction in question determines the creation and transfer of the interests.525 This is because commerce depends on the protection of the purchaser who must buy without investigation of the applicable law, at least not beyond where the goods are located, which is usually the place of transaction as well.526 • This is easily seen in cases where the movable is delivered as part of the transaction, because the situs is the clear focal point of the transaction. However, where the delivery is to be made at a future date after the transaction, and the location of the movable during the transaction bears no significant relationship to the transaction until delivery is made, it is suggested that the proper law of the transaction is that law most significantly related to the issue presented.527 • Cammell v. Sewell (1858)528 – A Russian seller shipped in Russia a cargo of timber on a Prussian vessel to an English merchant in England. The vessel was wrecked off the coast of Norway, and the timber was sold to X at a public auction held at the instance of the master of the ship in Norway. According to the law of Norway, the title of the

522

Cheshire (North), 525. Cheshire, 523. SCOLES, supra note 5, at 388. 525 Id, 389 526 Goodrich, Section 153, at 304 527 SCOLES, supra note 5, at 389. 528 3 H & N 617; on appeal (1860) 5 H & N 728. 523 524

518

Id. SCOLES, supra note 5, at 386. Wolff, 520 521 SCOLES, supra note 5, at 387. 519 520

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purchaser was good and valid, but not according to English law. It was held that the law of Norway must govern. “If personal property is disposed of in a manner binding according to the law of the country where it is, that disposition is binding everywhere.” Shanahan v. George B. Landers Cosntruction Co. Inc. 529 – the plaintiff, a construction worker in New Hampshire, agreed to buy a power trench hoe from Shanahan. The contract for a conditional sale was finally executed in Massachusetts. Deliver was made in Vermont, where the hoe was used on a single job. The how was taken, as contemplated by the parties, to P’s headquarters in New Hampshire, out of which it was thereafter used. P’s contract and notes were assigned by Shanahan to a finance company, one of the defendants. P failed to make his payments when due, and defendants repossessed the hoe in New Hampshire, then took it back to Massachusetts where they resold it. The resale was lawful under Massachusetts law, though what the defendants did would constitute a conversion under New Hampshire law because the defendants did not give P a 10-day notice of the resale required by New Hampshire law. It was held by the Massachusetts law that New Hampshire’s law, not that of Massachusetts, should govern. Vermont’s law was disregarded, though it was the place of delivery of the hoe, and presumably also the situs when title passed. New Hampshire law was selected due to its substantial connection with the transaction; the buyer signed the contract there, its business and corporate headquarters were located there, the hoe was kept there most of the time, and the alleged conversion took place there contrary to that State’s law. The decision in Shanahan can be better explained in terms of the Second American Restatement, as New Hampshire law was the law of the most significant relationship. With regards to voluntary transfers of interests in chattels, other than assignment for the benefit of creditors, the Second Restatement provides: The validity and effect of a conveyance of an interest in a chattel as between the parties to the conveyance are determined by the local low of the state which, with respect to the particular issue, has the most significant relationship to the parties, the chattel, and the conveyance…530 The Second Restatement holds that in the absence of an effective choice of law by the parties, the greater weight will usually be given to the lex situs of the chattel at the time of the conveyance than to any other contact in determining the State of the applicable law. With respect to acquisition of title by operation of law, the Second Restatement holds that they should be governed by the lex situs. This covers title acquired by prescription or adverse possession, validity and priority of attachments, levies of execution, the creation of statutory liens, all of which are to be governed by the place where the chattel is located. 531 This is because the State where the chattel is located has the dominant interest in determining the circumstances under which an interest in chattel may be acquired by operation of law.

2 categories of movables where the lex situs rule cannot be easily applied: 1. goods in transitu and 529 530 531

266 F 2nd 400 (1st Cir. 1959). Section 244, Second Restatement. Section 246, Second Restatement.

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means of transport In the case of goods in transit, the practice of treating the documents of title to the goods as representative of the goods themselves mitigates the potential difficulties, because in effect the situs is that of the documents of title. But Cheshire maintains that no one law can be made the exclusive arbiter of disputes arising out of a transfer of goods in transit: The problems must be broken down. A dispute between the parties to a particular transaction, as, for example, a mortgage of the goods granted by the assignee, will be governed by the proper law of the transaction. If the movables come to rest sufficiently to admit of a dealing with them, as where they are seized by creditors in accordance with the local law or wrongfully sold by the carries, the question of title must clearly be determined by the lex situs. If the transit is by sea in a single ship, there is much to be said for applying the law of the flag.532 As to what law should govern rights in movables, the two most important events upon which what law should govern rights in movables according to Wolff533 are: o Seizure and arrest: When the owner’s creditors seize good in transit, the transport is discontinued and a temporary resting place is thereby created, on which law depends the legality of the seizure, and if a lien, pledge, privilege, or similar right is acquired. o Disposition of the goods: The owner of the goods may treat a temporary resting place as if it were a real situs and transfer ownership or mortgage of the goods according to the law of that place. However, the owner may choose between other legal systems, including the lex loci actus or the country of destination. Means of transport or conveyances such as trains, motor cars, vessels and aircraft generally have fixed stations or resting places where they are resident even if temporarily absent. For example, a seagoing vessel may have the law of the flag replace the lex situs, although the owner or his creditors may use the lex situs if the vessel is in a foreign port.

CHOSES IN ACTION • Choses in action are equivalent to “intangible movables”. They are roughly divided into three classes: debts, negotiable instruments, and corporate stocks or shares. Debts • The law on voluntary transfer of debts is still unsettled. Early theories hold that a voluntary transfer or assignment of debt should be governed by the law of the domicile of the owner, although modern doctrine has abandoned this theory. • A second theory is that the assignment of a debt is governed by the law of the place where the assignment is executed. However, the place of assignment may be the least important of all points of contact and may be entirely fortuitous. Also, there may be several leges actus in the case of multiple assignments where several assignees contend for priority.

532 533

Cheshire, 536-537. Private International Law, 529.

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO A second theory is that the assignment of a debt is governed by the law of the place where the assignment is executed. 534 However, the place of assignment may be the least important of all points of contact and may be entirely fortuitous.535 Also, there may be several leges actus in the case of multiple assignments where several assignees contend for priority. • A third view is that a quasi-situs, that is, the place where the debt is “properly recoverable”, should be ascribed and the debt should be governed by the law of the place where the performance of the duty would normally be expected.536 • Finally, there is the view that if a debt is created by a contract between assignor and debtor, the proper law of the original transaction out of which the choses in action arises should likewise govern the transfer or assignment of the debt.537 • Involuntary assignments of choses in action are usually effected by garnishment, and questions as to their validity and effect are governed by the law of the State where jurisdiction is effectively exercisable against to the garnishee.538A third view is that a quasi-situs, that is, the place where the debt is “properly recoverable”, should be ascribed and the debt should be governed by the law of the place where the performance of the duty would normally be expected. Negotiable Instruments • Goodrich describes a negotiable instrument in the following manner: • If the subject matter of the transaction is an negotiable instrument, such as a promissory note or a bill of exchange, further considerations enter into the question. The paper on which the promise in the one case ore the order in the other is written, may be only the evidence of the chose in action in which the holder has ‘property’. But such paper is treated in the commercial world and by the law as having a significance not given to the ordinary written evidence of a contract of the parties. Bills and notes developed under the law merchant; common law rules about the non-assignability of choses in action played small part in their history. They pass from hand to hand by endorsement and delivery; are subject to larceny; are subject to attachment and may be levied upon in execution; in other words, they are treated as tangible property.539 • There are two important questions that must be answered in connection with negotiable instruments. o First, what law decides whether a given instrument is negotiable or not? This is important because laws on bills and notes vary from country to country. The original Restatement under Section 348 held that the law of the place of contracting governs negotiability of a note, but Will contends that the law governing the rights embodied in the note decides whether it is negotiable or not. o Second, what law determines how negotiable instruments and the rights merged in them are to be transferred, and what are the effects of a transfer? The original Restatement adopted the principle that “the validity and effect of a transfer of a negotiable instrument are

determined by the law of the place where the instrument is at the time of the transfer.” Lorenzen has suggested on the other hand that the respective party should be bound if the holder of the negotiable instrument has acquired title either in accordance with lex loci contractus or the law of the place of the transfer. 540

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Corporate Stock • What laws govern the transfer of shares of stock? Where the transfer or assignment has the consequence of changing the relations of the parties with the corporation, the law of the place of incorporation governs, because “the interest of the stockholder can be effected only though the corporation itself, by a transfer of ownership on the books,” as embodied in the Corporation Code. • As between the assignor and assignee, however, the effect of a transfer or assignment of the share certificate will be governed by the law most closely connected to the transaction. 541 INTELLECTUAL PROPERTY Conceptual Basis The concept of intellectual property, as a chose in action, must first be determined before an analysis on its impact on Conflict of Laws rules may be appreciated. The challenge however is that it is more than difficult to arrive at a basic concept of what is and is not intellectual property. Legalists, authors, and regulatory bodies, over the years, have endeavored to provide as many parameters as possible to what may be classified intellectual property. What can be appreciated from these examples is that though such property itself is necessarily “ofthe-mind,” the effects and usage thereof is capable of pecuniary estimation and regulation. One author writes: In the Philippines The Intellectual Property Code of the Philippines (Republic Act 8293) which was signed into law by then President Fidel Ramos on June 16, 1997 and took effect on January 1, 1998, defines intellectual property as consisting of patents, industrial designs, trade marks and service marks, copyrights and related rights, geographical indications, layout designs of integrated circuits, and undisclosed information. Moreover, the Code provides protection for utility models and new plant varieties under Republic Act 9168, which was signed into law and took effect on July 20, 2002.542 • Patent Patent refers to titles granted to inventions only. In the Philippines, patent had been used in its generic sense, to include titles to inventions, utility models, and industrial designs.543 • Utility Model A utility model is any technical solution of a problem in any field of human activity which is new and industrially applicable. A utility model may be, or may relate to, a useful machine, an implement or tool, product or composition, or an improvement of any of the foregoing.544 • Industrial Design, Trademark, and Trade Name

534

Second Restatement, 348-350. Cheshire, 495-496; Wolff, 552. Swiss Bank Corp. v. Boehmische Industrial Bank, KB 673, 678 (1923). 537 Wolff, 548; Cheshire (North) 541; Foote, 296. 538 SCOLES, supra note 5, at 395. 539 Goodrich (Scoles) Sec. 163. 535

540

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541

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Lorenzen, Conflict of Laws Relating to Bills and Nots (1919), p. 140. Beale, Foreign Corporations, s. 376. THE LAW ON INTELLECTUAL PROPERTY (A PRIMER), Office of the Press Secretary, Bureau of Communication Services, Manila, p. 1. 543 Id. 544 Id., at 2. 542

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO An industrial design is any composition, lines or colors or any three-dimensional form, whether or not associated with lines or colors; provided, that such composition or form, gives a special appearance and can serve as a pattern for an industrial, product or handicraft.545 A trademark is a system providing for protection for mark, collective mark, or trade name.546 Trade name means the name or designation identifying or distinguishing an enterprise.547 • Copyright and Related Rights A copyright is a protection extended to expressions and not to ideas, procedures, methods of operation or mathematical concepts. Such expressions may be in the form of literary, scholarly, scientific and artistic works. Related rights refer to the protection extended to derivative works, to include among others, dramatizations, translations, adaptations, abridgements, arrangements, and other alterations of literary or artistic works.548 • Geographical indications Geographical indications are indications that identify a good as originating in the territory of a country or a region or locality in the territory, where a given quality, reputation or other characteristics is essentially attributable to its geographical origin.549 • International Instruments “When we speak of the law of intellectual property, we are generally speaking of the law of a particular jurisdiction like the United States, France or China. A practitioner is, in the common case, only concerned with the law of his or her jurisdiction. However, intellectual property is interesting because of the number of multilateral conventions that have been concluded in an effort to harmonize national laws. And increasingly these conventions have had direct effects on national law. With the increases in trade, and now, with the Internet, it has become important to understand not only the law of one’s own jurisdiction, but also the law of other jurisdictions and the international conventions that regulate intellectual property by means of bilateral and multilateral commitments.”550 The TRIPS Agreement • At the conclusion of the last round of trade negotiations under General Agreement on Tariffs and Trade ("GATT"), the Agreement on Trade Related Aspects of Intellectual Property ("TRIPS") was signed by the participating nations. This agreement defines standards of intellectual property rights and enforcement mechanisms for individual countries to follow, and incorporates those into the existing Dispute Settlement mechanism of the WTO. It defines these standards by reference to existing agreements concluded under the auspices of the World Intellectual Property Organization. In some cases nations are required to harmonize their intellectual property laws with these existing agreements. • The WTO and the World Intellectual Property Organization ("WIPO") are working together. There is an Agreement between the World Intellectual Property Organization and the World Trade Organization where WIPO agrees to facilitate the WTO implement TRIPs. 545

Id. Id. Id. 548 Ibid., at 3. 549 Ibid. 550 WEIGMANN, supra note 62. 546 547

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WIPO was established in 1967 and charged with promoting the protection of intellectual property throughout the world and ensuring administrative cooperation among the various agreements dealing with intellectual property (Art. 3). WIPO is part of the UN system, and has been the sponsoring entity for many of the important conventions in this area. The texts of treaties administered by WIPO can be found at the WIPO website. It is important also to recognize that choice of law issues persist despite the overlay of a well-developed system of international norms imposed by multilateral treaties such as the WTO TRIPs Accord, the Berne Convention, and the Paris Convention. Treaty obligations include minimum standards of protection in addition to the requirement of national treatment (non discrimination against foreign rightowners), but do not as a general rule prescribe applicable law.551

INTELLECTUAL PROPERTY IN THE CONFLICT OF LAWS The Territorial Framework • Similar to other choses in action, intellectual property is without a definite situs and must therefore follow the place of its registration or protection. Lex loci protectionis, also known as the "territorial principle", enables each country to apply its own law to the infringement of an intellectual property right that is in force in its territory. This is because “intellectual property rights arise, though creation or registration, in each country for which a work seeks protection; infringements are governed by the laws of the countries where the alleged infringing acts take place. In intellectual property, cross-border acts may best be localized, for purposes of resolving conflicts of laws, by considering consequences for judicial remedies. 552 This has tended to mean that the forum, as the place of registration or of infringement, will apply its own substantive intellectual property laws.” 553 Drawing from the fact that this principle has been adopted by both the Berne Convention for the Protection of Literary and Artistic Works of 1886 as well as the Paris Convention for the Protection of Industrial Property of 1883, it can be confirmed that the rights held in each country are independent. Whereas in copyright cases, the courts apply the law of the country where the violation is committed, the counterfeiting of an industrial property right is governed by the law of the country in which the patent is issued or the trademark or model is registered.554 • Świerczyński – The special conflict rule concerning international infringements of intellectual property rights was put forward in the Proposal for the Regulation of the European Parliament and the Council on the Law Applicable to Non-Contractual Obligations ("Rome II Proposal"). The aim of this proposal is to unify Member States' rules on the conflict of laws regarding non-contractual obligations and thus further the harmonization of private international law in relation to civil and commercial obligations. Unfortunately, the wording is ambiguous, which may lead to different interpretations in identical cases. It is essential that the future conflict rule precisely

551 Jane C. Ginsburg, Conflicts of Law and Intellectual Property, Columbia University School of Law at http://www.aals.org/profdev/international/ginsburg.html. (last visited Feb, 2006) (hereinafter GINSBURG) 552 Paul Edward Geller, International Intellectual Property, Conflicts of Laws, and Internet Remedies, EUROPEAN INTELLECTUAL PROPERTY REVIEW (2000), vol. 22, no. 3, at p. 125. (hereinafter GELLER) 553 GINSBURG, supra note 75. 554 ŚWIERCZYŃSKI, supra note 76.

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO determines the law applicable to non-contractual obligations arising from infringements of intellectual property rights and also Internet-related torts. • Wolff – General Rule: “A state will protect only such patents, designs, trade marks, trade names, and copyrights as it has itself granted either by particular act or general statute. No state applies foreign laws to questions of patents, copyrights, and the like or recognizes rights of this class created under foreign law.” 555 Thus, if an inventor would like his creation be protected by a patent in States A and B, then he has to have patents granted by both states. In the Philippines • Under the Intellectual Property Code of the Philippines, a patent has a term of protection of twenty years from the date of application; for utility models, seven years; for industrial design, five years; for trade mark, ten years; for layout designs, ten years; for copyrights, the lifetime of the author and fifty years thereafter; for new plant varieties, twenty-five years from the date of granting of certificate of registration for trees and vines, and twenty years for all other types of plants. After the expiration of the forgoing terms of protection, the intellectual property becomes a public property.556 • Western Equipment vs. Reyes – The Court ruled that the right to use the company’s corporate and trade name is a property right which may be asserted against the whole world. In that case, defendants filed an Articles of Incorporation with the intention of organizing a domestic corporation under the Philippines Corporation law to be known as “Western Electric Company, Inc.,” for the purpose of manufacturing and dealing in electrical and telephone apparatus and supplies. To protect its trade name, Western Electric Company, Inc., a foreign corporation organized under the laws of New York, USA, which was not licensed or engaged in business in the Philippines, prayed for a temporary injunction to restrain the issuance of Certificate of Incorporation to the defendants. The defendants opposed the move, contending that WEC (USA) did not have the capacity to sue for not being licensed to operate nor being engaged in the business in the country. In the case, the Court ruled that the right to use the company’s corporate and trade name is a property right which may be asserted against the whole world.557 • General Garments Corporation vs. Director of Patents – The Puritans Garments Corporation , a corporation duly registered under the laws of Pennsylvania but not under Philippines law, was allowed to maintain a suit in the Philippine Patent Office for cancellation of the trade mark “Puritan,” which had been registered under the name of General Garments Corporation, a Philippine Corporation. According to the Supreme Court: “A foreign corporation which has never done . . . business in the Philippine Islands and which is unlicensed and unregistered to do business in the Philippines, but is widely and favorably known in the Islands through the use therein of its products bearing its corporate and trade name has a legal right to maintain action in the islands. “The right to the use of the corporate and trade name is property right, a right in rem, which it may assert and protect in any courts of the world . . . “558

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The pronouncement of the Supreme Court in the foregoing cases were in contravention of its ruling in the Mentholatum case, where it held that a foreign corporation doing business in the Philippines without the necessary license cannot prosecute an action for infringement of its trademark. Philips Export vs. Court of Appeals – which was decided in 1992, Philips Export (Philips), a foreign corporation not engaged in business here, was the registered owner of the trademark “Philips.” Respondent Standards Philips Corporation (Standard), on the other hand, was the holder of a Certificate of Registration issued by the Securities and Exchange Commission. Philips Export then filed a letter of complain with the Securities and Exchange Commission praying for cancellation of the word “Philips “ from Standard’s Philips Corporation’s corporate name on the ground of prior registration in the Bureau of Patents of such trademark and logo. Standard contended that Philips did not have the capacity to sue, not having been licensed to do business in the Philippines. The Supreme Court ruled in the case that “. . . a corporation’s right to use its corporate and trade name is a property right, a right in rem, which if may assert and protect against the world in the same manner as it may protect its tangible property, real or personal, against trespass or conversion. It is regarded , to a certain extent, as a property right and one which cannot be impaired or defeated by subsequent appropriation by another corporation in the same field.”559 Emerald Garment Manufacturing Corporation vs. Court of Appeals – the policy of the Court in allowing foreign corporations not licensed to do business in the Philippines to sue in Philippine Courts was upheld. In that case, H.D. Lee Co., inc. a foreign corporation not engaged to do business in the Philippines, filed with the bureau of Patents, Trademarks and Technology Transfer a Petition for Cancellation of Registration for the trademark “ Stylistic Mr. Lee used on different lines of clothing under the name of Emerald Garment Manufacturing Corporation, a domestic corporation. As a defense, Emerald questioned the capacity to sue of Lee Co., being a foreign corporation not licensed to do business in the country. The Supreme Court ruled in the case that H.D. Lee Co., Inc. had the capacity to sue for infringement irrespective of its lack of license to engage in business in the country but denied the company protection for it failed to prove actual use of the emblem in the local market, a requirement of Sections 2 and 2-a of the same law560 Finally, in 1998, the Intellectual Property Code of the Philippine (Republic Act 8293) was passed into law. This law allowed foreign corporation not engaged in business in the Philippines to file civil or administrative action for opposition, cancellation, infringement, or unfair competition.561

The Ambiguity of Territoriality • It would seem ideal in many circumstances to apply the law of the territorial location. However, given the nature of intellectual property, especially with the advent of the internet and multiple-situs databases, it has become increasingly difficult to determine the territorial location of infringement.

555

Wollf, 558, as cited in Salonga. Id., pp. 11,12. 51 Phil. 115 (1927). 558 41 SCRA 50 (1971).

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206 SCRA 457 (1992). 251 SCRA 600 (1995). COQUIA, supra note 84, at 322.

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO Geller – Unfortunately, the key category here, the place of infringing acts, can be doubly ambiguous. To start, before knowing what place that is, a court must localize the acts in question, but authorities differ about what law or laws provide terms in which to characterize infringing acts. In addition, the place of such acts can be extended backwards to that of preliminary acts, like organizing the infringement, or forwards to the place of damages. At the end of the twentieth century, the meaning of this place, once apparently obvious in geographical space, is becoming impossible to pin down in cyberspace. Now transactions cross multiple borders simultaneously in global, interactive networks. Localizing acts taking place within the Internet dramatizes the policies at stake in conflicts analysis. In localizing an infringing act in one spot or another, a court might apply the law of one country or another throughout any global network. That is, improper localization, especially of Internet transactions, can lead to extraterritorially spilling the policy effects of one country’s law over into another country. In particular, if the law of one country provides too little protection, or another too much protection, applying one or the other law can result in pirate havens or choke points for data flow in the network. For example, what law should govern transmitting raw data from a European database via the Internet to the United States or China? Suppose, on the one hand, that a court localizes the relevant acts in the United States or China, where data is received but not strongly protected: then, to European eyes, pirates may find havens in these countries, from which data might be more or less freely retransmitted. Suppose, on the other hand, that a court localizes inside Europe all unauthorized transmissions of raw data from Europe: then a European law granting property rights in the data might apply to the transmissions, even to the United States or China. That choice of law might well choke off data flow to or at points within the Internet that policies in these countries would still leave open. Resolving the Ambiguity • “There are two principal areas of tension, one technology neutral [and] the other technology-prompted. In the technology neutral category come questions regarding the law applicable to ownership of copyright. In the second category are issues concerning the law applicable to infringements when these occur pervasively and simultaneously through new forms of communications such as satellites and the Internet.”562 Geller opines that the Courts have a choice of either utilizing a static or dynamic approach – “either they treat conflicting laws as arising out of communities that are static and unchanging, or they resolve conflicts in the light of the historical dynamics that have been bringing communities together. Under the static view, it is difficult to transcend the incoherence that tends to arise when courts respectively follow their own established laws in formulating conflicts of laws. Under the dynamic view, it is possible to look to globalizing law that is emerging to govern many smaller communities as they come together into larger communities.”563 • Geller – The first desideratum, a globally seamless fabric of remedies, should lead courts to stop infringing transactions in their tracks. A distinction may be drawn between inward-bound and outward-bound transactions relative to any given

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GINSBURG, supra at note 75. GELLER, supra at note 77.

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country, often but not always the forum country, which this article will call the "home" country. o Inward-bound transactions commence outside the home country, for example, with preparatory acts such as authorizing and organizing infringement and fabricating infringing copies or products abroad, but end up in acts of marketing inside the home country; o outward-bound transactions commence in the home country but are consummated in acts of exploitation in foreign markets. The case law provides instances of U.S. and European courts that, with jurisdiction over parties abroad who are engaging in inward-bound infringing transactions that threaten markets at home, localize these transactions as taking place in the home country in that they enjoin them under that country's law. By parity of reasoning, courts should localize outward-bound transactions, not where they commence in the home country, but in the other countries whose markets they target, and should apply the laws of these foreign countries, respectively, to enjoin acts at home that authorize or otherwise generate infringing exploitation abroad. Some cases fall outside this distinction, notably where copies that are illicit under the law of the home country transit that country's territory on their way to another country where they may be marketed, perhaps legitimately. Special provisions may still mandate seizure in the home country. Playboy Enterprises v. Playmen – Playboy had the Italian magazine Playmen enjoined from infringing its trademark in the United States. In the 1990s, the Italian publisher set up a Playmen website in Italy, after having registered that title as a trademark in Italy. The Southern District of New York then ordered the publisher either to stop access to the website in the United States or to shut down the site entirely. In imposing the latter alternative, the court would seem to have lapsed into the questionably extraterritorial application of domestic trademark law. One fact, however, distinguishes the case: as the court noted, Playboy Enterprises had succeeded in asserting its mark against Playmen in European countries besides Italy. Thus the website effectively also infringed foreign marks, making the case one in which infringing transactions were potentially inward-bound relative to many countries at once, although infringement outside the United States was neither pleaded nor remedied as such. It has been argued that, in such cases where infringement ostensibly takes place in many jurisdictions at once, the courts should apply the most protective of the laws effective in all these possible protecting countries. This argument has the merit of providing grounds for a preliminary injunction to stop the unauthorized hemorrhaging of protected materials into a global network, but it risks imposing the policy effects of one country’s law on other countries. Optimally, a court would explore more differentiated solutions, for example, as the facts would have allowed in the Playmen case, basing a wide-ranging injunction on law common to most of the overall marketplace threatened by the infringing act. The second desideratum, a coherent web of remedies, becomes critical as courts reach final judgment, specifically in granting monetary awards. The international regime of intellectual property is predicated on national treatment, so that enterprises normally consult the law of a country before marketing in that country. To be coherent with this principle, the law of a given country should apply to ascertaining monetary awards to remedy infringement which prejudices or usurps the market for protected materials in that country. Unfortunately, national courts have not adopted fully consistent

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO approaches to granting monetary awards in cross-border cases, sometimes applying their own home laws in ascertaining damages or profits incurred abroad. Consider this pair of cases with similar holdings but not necessarily consistent results across borders. This analysis then localizes the place of infringement in the country of the targeted market. Thus the law of this country will generally apply to incoming transactions to the extent that these threaten or actually prejudice this country's market, but this law will not normally apply to outgoing transactions aiming at foreign markets. In Internet cases where many markets are targeted at once, the court may find it sufficient to base a provisional injunction on law common to most of the overall marketplace being threatened; however, the court should base final monetary awards on the law of each country whose market is prejudiced. In extreme cases, it might be possible to argue for exceptions to this general approach by invoking international public policy, the ordre public international, that underlies the treaty regime of intellectual property. Such policy is most authoritatively manifest in the TRIPs Agreement, which provides for specific injunctive remedies to stop cross-border piracy, while it generally contemplates "remedies which constitute a deterrent to further infringements.” Thus, in a case where no other remedy is available to stop proliferating cross-border infringement, this policy could be invoked to support applying home law which specifically contemplates relief against outgoing transactions that target foreign markets.

RECOGNITION & ENFORCEMENT C/O: MIKE MATE, JANG MORENO, TRINA GARCIA, TRINA ILLARDE (Salonga, CHAPTER XXIII, 1995) RECOGNITION • A foreign judgment is given the same effect that it has in the State where it was rendered with respect to the parties, the subject matter and the issues involved • The extension to another State of the res judicata effect of a judgment obtained in one State ENFORCEMENT • In addition to the recognition of a foreign judgment, affirmative relief is given to a party entitled to the same because of such judgment DISTINCTION 1. RECOGNITION Foreign judgment is given the same effect in another State The extension of the foreign judgment’s res judicata effect Enforcement of the foreign judgment is not necessarily implied 2. ENFORCEMENT Recognition of the foreign judgment Giving affirmative relief to a party entitled to it because of such foreign judgment Recognition of the foreign judgment is necessarily implied

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Hang Lung Bank vs. Saulog – Although petitioner asserts that it is merely seeking the recognition of its claims based on the contract sued upon and not the enforcement of the Hong Kong judgment, it should be noted that in the prayer of the complaint, petitioner simply copied such judgment with respect to private respondent’s liability. The complaint thus appeared to be an enforcement of the Hong Kong judgment because it prayed for the grant of the affirmative relief given by said foreign judgment. The enforcement of judgment entails more than recognition, it presupposes its recognition and it requires an affirmative relief from the court. Therefore, a foreign judgment may not be enforced if it is not recognized in the jurisdiction where affirmative relief is being sought Prof. Ehrenzweig – o All divergent opinions and attitudes obtain, ranging from o A flat denial of recognition by insistence upon a trial de novo; through o A law granting recognition on condition of reciprocity; to o A nearly unconditional enforcement of foreign judgments Rose vs. Himely (1808) Chief Justice Marshall Foreign judgments could be subjected to inquiry into the rendering court’s lawful jurisdiction over the cause and the parties involved French hostility to foreign judgments rendered against its respective citizens was fully reciprocated by the practice of “reciprocal retaliation”

Judgments rendered in a foreign country, by the laws of which another country’s judgments were reviewable upon the merits, are not entitled to full credit and conclusive effect when sued upon in the latter, but are prima facie evidence only of the justice of the plaintiff’s claim

Hilton vs. Guyot (1895) French hostility to foreign judgments rendered against its respective citizens was fully reciprocated by the practice of “reciprocal retaliation” Judgments rendered in a foreign country, by the laws of which another country’s judgments were reviewable upon the merits, are not entitled to full credit and conclusive effect when sued upon in the latter, but are prima facie evidence only of the justice of the plaintiff’s claim

The present Philippine Rules on Foreign Judgments System of Qualified Recognition Story – • Judgments in rem are conclusive upon the title to the thing • Judgments in personam are subject to examination into the merits if sued upon by the successful plaintiff • In either case, such judgments may be repelled by evidence of want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact (Section 48, Rule 39, Rules of Court) INTERNATIONAL SETTING

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO COMITY AND RECIPROCITY
According to Salonga, earlier cases held that recognition of foreign judgments is based on comity
Comity necessarily involves the issue of reciprocity and reciprocity could lead to retaliation (eg. In case of 2 states, where one of them refuses to recognize judgments rendered in the other state)
English Rule (creation of obligation): recognition and enforcement is not based merely on comity. Foreign judgments create “obligations” between the parties. BUT..foreign judgments may still be reviewed in exceptional cases (fraud, etc.)
American Rule (regularity of proceedings): There is no reason to deny enforcement of foreign judgment when the proceedings had in the foreign country was fair and regular. (note: the same is true in Italy)
French Rule: foreign judgments obtained by Frenchmen are automatically enforced; but if obtained against Frenchmen, they have to be subject to a new suit. •

Hilton vs. Guyot – In this case, the US Court went beyond regularity of the proceedings had in the French Court. The Court deemed it immaterial to discuss whether or not irregularities in the proceedings were actually present. Due to lack of reciprocity on the part of France, the foreign judgment cannot be enforced without a re-examination of the merits of the case.

ARGUMENTS AGAINST RECIPROCITY
Reciprocity should not be a bar to enforcing the foreign judgment which appears not to have been tainted with any of the exceptions since the presence or absence of reciprocity is a political than a legal question. • Stumberg – Judicial policy should be determined by reference to the desirability of giving effect to foreign judgments and not by reference to a supposed foreign policy against enforcing judgments obtained in other countries.

PRIMA FACIE CHARACTER OF FOREIGN JUDGMENTS

McElmoyle v. Cohen – the adjudications of the English courts have now established the rule to be that foreign judgments are prima facie evidence of the right and matter they purport to decide.
Being prima facie, a foreign judgment may be impeached by showing lack of jurisdiction, fraud, mistake or irregularity in the proceedings.
Another ground for impeachment: The Disconto Gesellschaft vs. Umbreit A foreign judgment may not be enforced if the same would be detrimental to the citizens of the country where the enforcing court sits. But the detriment or injury contemplated must be so grave in character in order that enforcement may be validly denied. •

RES JUDICATA AND THE POLICY OF PRECLUSION • Baldwin v. Iowa State Travelling Men’s Association – “Public policy dictates that there be an end of litigation; that those who have contested an issue shall be bound by the result of 03-23-2006 | THROUGH THE JOINT EFFORTS OF STUDENTS OF ATENEO LAW III- C 2006 | Edited by J.C. de Veyra

the contest, and that the matters once tried shall be considered forever settled as between the parties”
Policy of Preclusion: One trial of an issue is enough! Judgments should be enforced unless there are reasons for denying the enforcement such as lack of jurisdiction, irregularity in the proceedings, fraud, etc. THE PHILIPPINE SETTING

The lex fori always governs recognition and enforcement.

Theoretical Basis • Object of recognition/enforcement = protection of the reasonable expectations of the parties
equivalent to policy of preclusion, which is equivalent to res judicata
thus, res judicata may be the current theoretical basis (but only according to authors) • Salonga believes is only the basis for the earliest cases • But today, the SC believes that comity is the theoretical basis for recognition • Exception
the basis is an obligation which is given rise to by a foreign judgment
it is assumed that the parties willingly submit themselves to be bound by the judgment
thus, the obligation is created by the will parties, not by the State (Perkins v. Benguet Consolidated) Requirements S.48, R.39, Rules of Court Sec. 48 – “The effect of a judgment or final order of a tribunal of a foreign country, having jurisdiction to render the judgment or final order is as follows… In either case the judgment or final order may be repelled by evidence of want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact.” - These are the basic requirements and defenses Asiavest Merchant Bankers v. CA – “In this jurisdiction, a valid judgment rendered by a foreign tribunal may be recognized insofar as the immediate parties and the underlying cause of action are concerned so long as it is convincingly shown that there has been an opportunity for a full and fair hearing before a court of competent jurisdiction; that the trial upon regular proceedings has been conducted, following due citation or voluntary appearance of the defendant and under a system of jurisprudence likely to secure an impartial administration of justice; and that there is nothing to indicate either a prejudice in court and in the system of laws under which it is sitting or fraud in procuring the judgment.” • Salonga’s requirements – [A] foreign judgment may be recognized and enforced if it constitutes a final adjudication on a civil or commercial subject matter, including questions of status, issued by an impartial court or agency of competent jurisdiction and is neither inconsistent with our fundamental principles of public policy nor tainted with collusion or fraud Basically, these are needed: •

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO • • •

the foreign tribunal must have had jurisdiction to render the judgment there must have been an observance of the fundamental principles of due process and fairness the proceedings must not have been tainted with fraud, prejudice or unfairness

Defenses Sources: jurisprudence + Rules of Court (S.48, R.39 and S.29, R.132 (how to impeach a judicial record)) - basically, all the means by which the foreign judgment may be repelled under S.48, R.39 - system of qualified recognition = the foreign judgment will only be recognized if it is not repelled (through the means provided for by law and jurisprudence) Jurisdiction over the Subject Matter • Jurisdiction over the subject matter = the nature of the cause of action and of the relief sought, and this is conferred by the sovereign authority which organizes the court, and is to be sought for in general nature of its powers, or in authority specially conferred. • Has to be affirmatively shown (by competent proof), and a mere recital of jurisdictional facts is not enough • So, a false return showing service of summons which was never made, or an unauthorized appearance by an attorney does not confer the foreign court with jurisdiction over the subject matter • The main question is: by whose laws is jurisdiction measured? • View 1: need JD in the international sense
ie: has to be valid according to the forum state • View 2: if valid in foreign state, then valid elsewhere
but this doesn’t preclude an inquiry into jurisdiction, etc.
US and UK rule (vs. Italy rule [no inquiries] and French rule [need new trial on the merits])

Ma’am agrees that View 2 should be followed. But, even if the foreign court did have jurisdiction, the judgment may not be given recognition/effect here if the assumption of the jurisdiction was unfair. This is because Conflicts of Laws Rules are based on fairness. So, if it was unfair, then don’t follow it.

1st view • Gorayeb v. Hashim – The failure to get jurisdiction over the person in accordance with RP jurisprudence makes the foreign judgment invalid
here, the foreign court could not pronounce a divorce decree without at least one spouse having domicile in the foreign country o The basis of the SC’s ruling was Phil. jurisprudence
ie: RP law was used to test the assumption of jurisdiction of the foreign court o But, this was subsequently undercut by other pronouncements of the court. 03-23-2006 | THROUGH THE JOINT EFFORTS OF STUDENTS OF ATENEO LAW III- C 2006 | Edited by J.C. de Veyra

o

o

In later cases involving almost exactly the same facts, the SC held that regardless of whether or not the domicile rule still prevailed, the foreign judgment should still be denied effect. However, the new basis was not the invalidity of assumption of jurisdiction vis-à-vis foreign law, but rather the foreign judgment was denied because the spouses violated the nationality principle. In other words, the foreign court’s jurisdiction was not tested, but rather it became a question of violation of our substantive law. This shows the trend to not consider jurisdiction via RP law

o 2nd view • Supported by the Rules of Court
S.48, R.39 + the disputable presumptions relating to lawful exercise of JD and regularity of official acts •

•

Asiavest v. CA – The Court found for the validity of the foreign judgment on proof that it complies with foreign law (eg: appearance of counsel in compromise, that facts and law must be shown in decision) o However, these were, according to the SC, only procedural matters
so, the lex fori governed o But, one issue raised was that the facts and law on which the decision were based were not given in the decision. The SC held that under Malaysian law, this was ok. As we all know, this is a constitutional mandate. o Basically, the SC held that even if our Constitution is violated, as long as it’s ok in the foreign country, it’s ok here.
ie: judge jurisdiction via the foreign law only Goodrich and Scoles – o An oversight in the procedural law of one country, allowing the foreign court to exercise jurisdiction, may be treated by the forum court as a limitation on the competence of foreign court
ie: foreign substantive law is the basis

Jurisdiction over the Person • Involves giving both parties reasonable notice and an opportunity to be heard
ie: due process • Party attacking it has to overcome presumption of validity of foreign court’s jurisdiction and the presumption that the judgment is presumptive of a right b/w the parties • Remember that the lex fori governs procedural law
and this includes service of summons • Generally, however, the SC will only refuse recognition and enforcement if there is a complete lack of due process
eg: if a foreign judgment is rendered against a party, for an act committed there, when it is later shown that that party was never in the foreign country and he is not given notice and has no knowledge of the proceedings, then that judgment is void for utter lack of due process • Otherwise, the presumption in favor of validity of the foreign judgment places the burden upon the party attacking the lack of jurisdiction over his person to plead and prove the foreign law and to show that the process used was contrary to that law
failure to do so means that it is presumed that the foreign court validly acquired jurisdiction

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This is an exception to processual presumption
since here, the foreign law is presumed valid in the first instance and the burden shifts to another to show that it wasn’t
and this burden is relieved by pleading and proving the foreign law

3. The action must be a judicial or quasi-judicial action • The body pronouncing the judgment must have been judicial or quasi-judicial
eg: SEC • So, a declaration by a minister of a de facto government is not conclusive on the issue • Includes arbitration awards because: a) voluntarily submitted to by the parties; b) enforceable under the concept of res judicata (since they end litigations) 4. Judgment on the Merits • Under S.48, R.39, the foreign judgment is evidence of a right or title
so, if no right or title adjudged, no occasion for recognition or enforcement to come into play • So, a dismissal due to prescription or due to a demurrer doesn’t allow recognition or enforcement, or bar a new trial based on the original cause of action • But, if the judgment is barred by the procedural law of the forum, then no recognition
since lex fori governs
eg: if statute of limitations shorter in the forum, the claim is barred in the forum 5. Final Judgment • Final judgment = whether or not the judgment conclusively establishes the fact upon which the plaintiff rests his claim and sets the issue between the parties at rest forever • Eg: if no appeal taken, the foreign judgment is conclusive upon the parties • Provisional or interlocutory decrees will not be recognized or enforced 6. Fraud • Why is it a defense? a) shows that defendant doesn’t have to comply with the obligation imposed by the judgment; b) shows that the foreign court did not have jurisdiction • Has to be extrinsic
extrinsic fraud = fraud based on facts not controverted or resolved in the case where judgment is rendered, or that which would go to the jurisdiction of the court or would deprive the party against whom judgment is rendered a chance to defend the action to which he has a meritorious defense • Intrinsic fraud = goes to the very existence of the cause of action is deemed already adjudged, and it, therefore, cannot militate against the recognition or enforcement of the foreign judgment • So, the latter precludes retrial since it’s considered to have been considered in the foreign judgment
but the former doesn’t because it precludes a fair trial ab initio 7. Clear Mistake of Law • Some authors think that this shouldn’t even be considered a ground
since there’s nothing to show that the forum court will apply the law better than the foreign court • Example of mistake = foreign court concluded that a sale made of a business only affected the business’ property within the Philippines (Ingenohl v. Olsen)
but this was reversed by the US SC
reversal is supported by Salonga, who claims that authors and judges alike subscribe to this view, and also that it is fair and equitable
they hold that the remedy is to appeal 03-23-2006 | THROUGH THE JOINT EFFORTS OF STUDENTS OF ATENEO LAW III- C 2006 | Edited by J.C. de Veyra

• • •

But, the answer to this is that it this ground, as a defense, is clearly found in our laws, so we have to follow it Another example is when the foreign court denied the right of a party to rescind the contract based on delay Another example is divorce obtained abroad
this is a violation of the nationality principle, and thus granting the divorce is a mistake of law on the part of the foreign court

8. Contrary to Public Policy • Some authors think that this may be a ground, but should only be used under exceptional circumstances
since it potentially comes up in every conflicts case • Another view holds that it’s not a valid ground • But there is difference between public policy as regards the nature of the proceedings and public policy as regards the nature of the claim • “Nature of the proceedins” deals more with questions of lack of justice (ie: DP, full and fair trial, etc.)
so, it falls under jurisdiction • “Nature of the claim“ is the ground explained here • RP courts tend to accept it as a ground for non-recognition
but, it’s mostly intertwined with some law that is believed to be based on public policy
very rarely is it used as a ground by itself
in other words, we subscribe to the view that it’s only used under exceptional circumstance • Examples: a) obtaining a divorce abroad is contrary to our public policy regarding the sanctity of marriage
divorce obtained on grounds not found in RP divorce law; b) forum shopping, and abandoning a foreign judgment when adverse = against public policy (manifested by orderly administration of justice) • The only time when the foreign decree was not recognized on the ground of its solely being contrary to public policy (ie: not attached to a violation of the law) is when it was against the best interests of the child (to be placed in the custody of an adulterous mom) 9. No Court available in the forum • Generally, it shouldn’t be considered as precluding recognition and enforcement because no state is allowed to devise methods to deny JD to courts otherwise competent to hear the proceedings on recognition/enforcement • The same applies to forum law that makes too time-consuming, expensive and complex to bring suit for recognition/enforcement
has the same effect as a statute depriving the forum court of JD
eg: when the law only allows recognition of a foreign judgment for or against a corporation when all the stockholders of a large multinational are impleaded • According to Stumberg, whether or not the forum should be allowed to deny recognition through this method depends on the situation
so, if it’s a judgment for wrongful death, it has to be enforced (since denial would amount to no enforcement anywhere); but if it’s a judgment between corporations, then enforcement is only partially affected 10. Penal Judgments and Penalties According to Salonga, the judgment has to be on civil or commercial matters

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Test for penalties
whether it appears, to the tribunal which is called upon to enforce it, to be, in its essential character and effect, a punishment of an offense against the public, or a grant of a civil right to a private person
in the US, this is construed as referring only to fines in favor of state or judgments in favor of informers
so in a suit by creditors against a director for a judgment, the judgment granting damages should be recognized In other words, if a judgment is not for a penalty in favor of a state, it must be given effect in another state The rule also applies to strictly administrative proceedings

11. Other Defenses • Must be for a sum certain
since the 2nd state should only be involved in enforcing or recognizing the right/title, not fixing the amount thereof • Appeal or writ of error on the original judgment
depends on the law of the foreign state
if the foreign judgment is stayed by the appeal or writ, then a subsequent action may be maintained in a 2nd state • Taxes
generally not considered a defense because of: a) inherent difficulty in enforcing; b) embarrassing to pass upon the fiscal laws of another state • The court has to be an impartial tribunal
eg: king rendering judgment over thing which he has an interest
could be subsumed under the defenses of jurisdiction or fraud Remember that the discussion on the defenses not explicitly stated in our law (S.48, R.39, Rules of Court) are based on foreign jurisprudence. So, they should be used here with a measure of caution. Ma’am (and Jang) did point out that the forum court may also refuse to recognize the a foreign judgment on the grounds of forum non conveniens. This is generally applied when, under the foreign law, the judgments of the Phils. are never granted recognition and enforcement
ie: the foreign courts will always review RP judgments on the merits This is based on the principle of reciprocal retaliation, adopted by the US SC in Hilton v. Guyot
that doctrine was never explicitly adopted here, but Ma’am said that forum non conveniens is basically another form of refusing recognition to a foreign judgment because the foreign court does the same automatically.

Effects of Foreign Judgment = Rule 39, Section 48, 1997 Rules of Court The effect of a judgment or final order of a tribunal of a foreign country, having jurisdiction to render the judgment or final order is as follows: a. In case of a judgment or final order upon a specific thing, the judgment or final order is conclusive upon the title to the thing; and b. In case of a judgment or final order against a person, the judgment or final order is presumptive evidence of a right as between the parties and their successors in interest by a subsequent title Paragraph (a) are judgments in rem = • When the action affects personal status • When the action relates to, or the subject of which is property within the Philippines • When the relief demanded consists in excluding a party from any interest in property located in the Philippines • When the non-resident’s property has been attached in the Philippines. Rule 14, Section 15 Effects of Judgments in rem • Once a foreign judgment in rem is proved to be valid, the title adjudicated under such foreign judgment is as good as if it had been adjudicated originally under a Philippine court • Conclusive upon the title to the thing • Thus, party can only present defenses concerning the judgment Paragraph (b) are judgments in personam = • Where the complaint does not involve the personal status of the plaintiff or any property in the Philippines in which defendants have or claim an interest. Rule 14, Section 15 • Effect of Judgments in personam • Presumptive evidence of a right as between the parties and their successors in interest by a subsequent title • A party can question the right granted or the judgment itself • Judgment is not conclusive WHEN FOREIGN JUDGMENT CANNOT BE GIVEN EFFECT 1. Section 48, Rule 39 (last paragraph) = In either case, the judgment or final order may be repelled by evidence of a want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact - thus, both types of judgments are open to an inquiry as to the invalidity of the judgment, for the existence of one of the many grounds specified 2. When other defenses not included in the rules of court are available. defenses under the rules of court are not exclusive. Sources of other defenses = jurisprudence Foreign Judgments may be Enforced or may be Presented as a Defense Enforcement Where the judgment is in favor of the plaintiff, he may sue upon the judgment

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3C 2006 CONFLICT OF LAWS REVIEWER for ATTY. JO SABIO Defense • A foreign judgment in favor of the defendant operates as a bar to a suit on the original claim • Defense involves the recognition of a foreign judgment • Perkins vs. Benguet Consolidated Mining Co. – One should not confuse the execution of a foreign judgment with the exception of res judicata. There exists a difference between asking for the enforcement of a foreign judgment and presenting the defense of res judicata. Ordering the enforcement of a foreign judgment implies a direct act of sovereignty, recognizing res judicata merely requires the intervention of a sentiment of justice • Res judicata is the same as recognition as to its effects • Enforcement of Foreign Judgment = The Plaintiff must File a Separate Action or Proceeding • Perkins vs. Benguet Consolidated Mining Co – o The judgment of a foreign tribunal cannot be enforced by execution in the Philippines o Such judgment only creates a right of action and its non-satisfaction, a cause of action, and it is necessary that a suit be brought upon said foreign judgment in our local courts o Thus, in conformity with our rules, a separate action or proceeding must be instituted in the Philippine court based on the foreign judgment o Foreign Judgment presented as a Defense = No Action or Special Proceeding is needed o If the foreign judgment is presented as a defense to the claim of the plaintiff, what is involved is the recognition of a foreign judgment. Perkins vs. Benguet Consolidated Mining Co. • Salonga – The party raising the foreign judgment as a defense must plead and prove the foreign judgment in his favor. • The foreign judgment may be raised by the defendant as a defense by including it in his answer. No action or special proceeding need be instituted. That purpose was perfectly accomplished when the judgment was relied upon in an Answer as when an original action is brought by the holder of the judgment. Gorayeb vs. Hashim

•

Gorayeb v. Hashim - Philippine courts should have an opportunity to pass upon the judgment. That purpose was perfectly accomplished when the judgment was relied upon in an Answer as when an original action is brought by the holder of the judgment

Condition for Recognition or Enforcement • Philsec Investment Corp. vs. Court of Appeals - For recognition and enforcement to properly operate, there has to be a showing first that the grounds for its exclusion do not exist o Therefore, the adverse party must be given an opportunity to refute the judgment by the grounds provided for in law or jurisprudence whether such foreign judgment is recognized or enforced Duty of the Court • Philsec Investment Corp. vs. Court of Appeals - The remedy granted by the Supreme Court was a remand of the case for the opportunity for a full dress hearing on the matter • Hang Lung Bank v. Saulog - The Court found it necessary to remand the case in order to determine the issue of possibility of recognition and enforcement

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