KAZUHIRO HASEGAWA and NIPPON ENGINEERING CONSULTANTS CO.

,
LTD.,
vs
MINORU KITAMURA

G.R. No. 149177

November 23, 2007

FACTS:

Nippon Engineering Consultants (Nippon), a Japanese consultancy

firm providing technical and management support in the
infrastructure projects national permanently residing in the
Philippines. The agreement provides that Kitamaru was to extend
professional services to Nippon for a year. Nippon assigned
Kitamaru to work as the project manager of the
Southern Tagalog Access Road (STAR) project. When the STAR
project was near completion, DPWH engaged the consultancy
services of Nippon, this time for the detailed engineering &
construction supervision of the Bongabon-Baler Road
Improvement (BBRI) Project. Kitamaru was named as the project
manger in the contract.

Hasegawa, Nippon’s general manager for its International

Division, informed Kitamaru that the company had no more
intention of automatically renewing his ICA. His services would be
engaged by the company only up to the substantial completion of
the STAR Project.

Kitamaru demanded that he be assigned to the BBRI project.

Nippon insisted that Kitamaru’s contract was for a fixed term that
had expired. Kitamaru then filed for specific performance &
damages w/ the RTC of Lipa City. Nippon filed a MTD.

Nippon’s contention: The ICA had been perfected in Japan &

executed by & between Japanese nationals. Thus, the RTC of Lipa
City has no jurisdiction. The claim for improper pre-termination of
Kitamaru’s ICA could only be heard & ventilated in the proper
courts of Japan following the principles of lex loci celebrationis &
lex contractus.

The RTC denied the motion to dismiss. The CA ruled hat the
principle of lex loci celebrationis was not applicable to the case,
because nowhere in the pleadings was the validity of the written
agreement put in issue. It held that the RTC was correct in
applying the principle of lex loci solutionis.

ISSUE:

Whether or not the subject matter jurisdiction of Philippine courts

in civil cases for specific performance & damages involving
contracts executed outside the country by foreign nationals may
be assailed on the principles of lex loci celebrationis, lex
contractus, “the state of the most significant relationship rule,” or
forum non conveniens.

HELD:

NO. In the judicial resolution of conflicts problems, 3 consecutive

phases are involved: jurisdiction, choice of law, and recognition
and enforcement of judgments. Jurisdiction & choice of law are 2
distinct concepts.Jurisdiction considers whether it is fair to cause
a defendant to travel to this state; choice of law asks the further
question whether the application of a substantive law w/c will
determine the merits of the case is fair to both parties. The power
to exercise jurisdiction does notautomatically give a
state constitutional authority to apply forum law. While
jurisdiction and the choice of the lex foriwill often coincide, the
“minimum contacts” for one do not always provide the necessary
“significant contacts” for the other. The question of whether the
law of a state can be applied to a transaction is different from the
question of whether the courts of that state have jurisdiction to
enter a judgment.

In this case, only the 1st phase is at issue—jurisdiction.

Jurisdiction, however, has various aspects. For a court to validly
exercise its power to adjudicate a controversy, it must have
jurisdiction over the plaintiff/petitioner, over the
defendant/respondent, over the subject matter, over the issues of
the case and, in cases involving property, over the res or the
thing w/c is the subject of the litigation.In assailing the trial
court's jurisdiction herein, Nippon is actually referring to subject
matter jurisdiction.

Jurisdiction over the subject matter in a judicial proceeding is

conferred by the sovereign authority w/c establishes and
organizes the court. It is given only by law and in the manner
prescribed by law. It is further determined by the allegations of
the complaint irrespective of whether the plaintiff is entitled to all
or some of the claims asserted therein. To succeed in its motion
for the dismissal of an action for lack of jurisdiction over the
subject matter of the claim, the movant must show that the court
or tribunal cannot act on the matter submitted to it because no
lawgrants it the power to adjudicate the claims.

In the instant case, Nippon, in its MTD, does not claim that the
RTC is not properly vested by law w/ jurisdiction to hear the
subject controversy for a civil case for specific performance &
damages is one not capable of pecuniary estimation & is properly
cognizable by the RTC of Lipa City.What they rather raise as
grounds to question subject matter jurisdiction are the principles
of lex loci celebrationis and lex contractus, and the “state of the
most significant relationship rule.” The Court finds the invocation
of these grounds unsound.

Lex loci celebrationis relates to the “law of the place of the

ceremony” or the law of the place where a contract is made. The
doctrine of lex contractus or lex loci contractusmeans the “law of
the place where a contract is executed or to be performed.” It
controls the nature, construction, and validity of the contract and
it may pertain to the law voluntarily agreed upon by the parties
or the law intended by them either expressly or implicitly. Under
the “state of the most significant relationship rule,” to ascertain
what state law to apply to a dispute, the court should determine
which state has the most substantial connection to the occurrence
and the parties. In a case involving a contract, the court
should consider where the contract was made, was negotiated,
was to be performed, and the domicile, place of business, or
place of incorporation of the parties.This rule takes into account
several contacts and evaluates them according to their relative
importance with respect to the particular issue to be resolved.

Since these 3 principles in conflict of laws make reference to the

law applicable to a dispute, they are rules proper for the
2nd phase, the choice of law. They determine which state's law is
to be applied in resolving the substantive issues of a conflicts
problem. Necessarily, as the only issue in this case is that of
jurisdiction, choice-of-law rules are not only inapplicable but also
not yet called for.

Further, Nippon’s premature invocation of choice-of-law rules is

exposed by the fact that they have not yet pointed out any
conflict between the laws of Japan and ours. Before determining
which law should apply, 1st there should exist a conflict of laws
situation requiring theapplication of the conflict of laws
rules. Also, when the law of a foreign country is invoked to
provide the proper rules for the solution of a case, the existence
of such law must be pleaded and proved.

It should be noted that when a conflicts case, one involving a

foreign element, is brought before a court or administrative
agency, there are 3 alternatives open to the latter in disposing of
it: (1) dismiss the case, either because of lack of jurisdiction or
refusal to assume jurisdiction over the case; (2) assume
jurisdiction over the case and apply the internal law of the forum;
or (3) assume jurisdiction over the case and take into account or
apply the law of some other State or States. The court’s power to
hear cases and controversies is derived from the Constitution and
the laws. While it may choose to recognize laws of foreign
nations, the court is not limited by foreign sovereign law short of
treaties or other formalagreements, even in matters regarding
rights provided by foreign sovereigns.
Neither can the other ground raised, forum non conveniens, be
used to deprive the RTC of its jurisdiction. 1st, it is not a proper
basis for a motion to dismiss because Sec. 1, Rule 16 of the Rules
of Court does not include it as a ground. 2nd, whether a suit
should be entertained or dismissed on the basis of the said
doctrine depends largely upon the facts of the particular case and
is addressed to the sound discretion of the RTC. In this case, the
RTC decided to assume jurisdiction. 3rd, the propriety of
dismissing a case based on this principle requires a factual
determination; hence, this conflicts principle is more properly
considered a matter of defense.

CONFLICT OF LAWS raytheon international vs rouzie gr 162894

FACTS

Brand Marine Services, Inc. (BMSI), a corporation duly organized & existing under
the laws of Connecticut, &Stockton Rouzie, Jr., an American citizen, entered into a
contract

BMSI hired Rouzie as its representative to negotiate the sale of services in several
government projects in thePhilippines for an agreed remuneration of 10% of the
gross receipts.

Rouzie secured a service contract w/ the Rep. of Phil. on behalf of BMSI for the
dredging of rivers affected by the Mt.Pinatubo eruption & mudflows.

Rouzie filed before the NLRC a suit against BMSI and Rust International (Rust) for
alleged nonpayment of commissions, illegal termination, & breach of employment
contract.

The Labor Arbiter order

ed BMSI & Rust to pay Rouzie’s money claims.

Upon appeal, the NLRC reversed & dismissed Rouzie’s complaint on the ground of
lack of jurisdiction.
Rouzie filed an action for damages before the RTC of La Union (where he was a
resident) against Raytheon International. He reiterated that he was not paid the
commissions due him from the Pinatubo dredging project w/c hesecured on
behalf of BMSI. The complaint also averred that BMSI, RUST and Raytheon had
combined & functioned as 1 company.

RAYTHEON SOUGHT THE DISMISSAL OF THE COMPLAINT ON THE GROUNDS OF

FAILURE TO STATE ACAUSE OF ACTION & FORUM NON CONVENIENS & PRAYED
FOR DAMAGES BY WAY OF COMPULSORY
COUNTERCLAIM. THE RTC DENIED RAYTHEON’S MOTION. THE CA AFFIRMED.

Raytheon’s contention: The written contract between Rouzie & BMSI included a
valid choice of law clause, that is, that the contract shall be governed by the laws
of the State of Connecticut. It also mentions the presence of foreign elements in
the dispute, namely that the parties & witnesses involved are American
corporations & citizens & the evidence to be presented is located outside the
Philippines, that renders our local courts inconvenient forums. The foreign
elements of the dispute necessitate the immediate application of the doctrine of
forum non conveniens.

ISSUES(a) W/N the RTC had jurisdiction.(b) W/N the complaint should be
dismissed on the ground of forum non conveniens.

RULING

(a) YES.

On the matter of jurisdiction over a conflicts-of-laws problem where the case is

filed in a Philippine court and where the court has jurisdiction over the subject
matter, the parties and the res, it may or can proceed to try the case even if the
rules of conflict-of-laws or the convenience of the parties point to a foreign
forum. This is an exercise of sovereign prerogative of the country where the case
is filed.

Jurisdiction over the nature and subject matter of an action is conferred by the
Constitution and the law & by the material allegations in the complaint,
irrespective of w/n the plaintiff is entitled to recover all or some of the claims or
reliefs sought therein. The case file was an action for damages arising from an
alleged breach of contract. Undoubtedly, the nature of the action and the amount
of damages prayed are w/in the jurisdiction of the RTC.

As regards jurisdiction over the parties, the RTC acquired jurisdiction over
Rouzi upon the filing of the complaint. On the other hand, jurisdiction over the
person of Raytheon was acquired by its voluntary appearance in court.

That THE SUBJECT CONTRACT INCLUDED A STIPULATION THAT THE SAME SHALL
BE GOVERNED BYTHE LAWS OF THE STATE OF CONNECTICUT DOES NOT SUGGEST
THAT THE PHILIPPINE COURTS,
OR ANY OTHER FOREIGN TRIBUNAL FOR THAT MATTER, ARE PRECLUDED FROM H
EARING THE CIVIL ACTION.

JURISDICTION & CHOICE OF LAW ARE 2 DISTINCT CONCEPTS. Jurisdiction

considers whether it is fair to cause a defendant to travel to this state; choice of
law asks the further question whether the application of a substantive law which
will determine the merits of the case is fair to both parties. The choice of law
stipulation will be come relevant only when the substantive issues of the instant
case develop, that is, after hearing on the merits proceeds before the trial court.

(b) NO.

UNDER THE DOCTRINE OF FORUM NON CONVENIENS, A COURT, IN CONFLICTS-

OF-LAWS CASES, MAY
REFUSE IMPOSITIONS ON ITS JURISDICTION WHERE IT IS NOT THE MOST
“CONVENIENT” OR
AVAILABLE FORUM AND THE PARTIES ARE NOT PRECLUDED FROM
SEEKING REMEDIES ELSEWHERE.
Raytheon’s averments of the foreign elements are not sufficient to oust the RTC
of its jurisdiction over the case and the parties involved.
Moreover, the propriety of dismissing a case based on the principle of forum non
conveniens requires a factual determination; hence, it is more properly
considered as a matter of defense. While it is w/c the discretion of the trial court
to abstain from assuming jurisdiction on this ground, it should do so only after
vital facts are established, to determine whether special circumstances require
the court’s desistance.

HONGKONG SHANGAI BANKING CORPORATION v. SHERMAN

G.R. No. 72494 August 11, 1989

FACTS
In 1981, Eastern Book Supply Service PTE, Ltd., (Eastern) a
company incorporated in Singapore applied w/, & was granted by
the Singapore branch of HSBC an overdraft facility in the max
amount of Singapore $200,000 (w/c amount was subsequently
increased to Singapore $375,000) w/ interest at 3% over HSBC
prime rate, payable monthly, on amounts due under said
overdraft facility. As a security for the repayment by Eastern of
sums advanced by HSBC to it through the aforesaid overdraft
facility, in 1982, Jack Sherman, Dodato Reloj, and a Robin de
Clive Lowe, all of whom were directors of Eastern at such time,
executed a Joint and Several Guarantee in favor of HSBC
whereby Sherman, Reloj and Lowe agreed to pay, jointly and
severally, on demand all sums owed by Eastern to HSBC under
the aforestated overdraft facility.

The Joint and Several Guarantee provides that: “This guarantee

and all rights, obligations and liabilities arising hereunder shall be
construed and determined under and may be enforced in
accordance with the laws of the Republic of Singapore. We hereby
agree that the Courts of Singapore shall have jurisdiction over all
disputes arising under this guarantee.”

Eastern failed to pay its obligation. Thus, HSBC demanded

payment of the obligation from Sherman & Reloj, conformably w/
the provisions of the Joint and Several Guarantee. Inasmuch as
Sherman & Reloj still failed to pay, HSBC filed a complaint for
collection of a sum of money against them. Sherman & Reloj filed
a motion to dismiss on the grounds that (1) the court has no
jurisdiction over the subject matter of the complaint, and (2) the
court has no jurisdiction over the person of the defendants.

ISSUE
W/N Philippine courts should have jurisdiction over the suit.

RULING
YES. While it is true that "the transaction took place in
Singaporean setting" and that the Joint and Several Guarantee
contains a choice-of-forum clause, the very essence of due
process dictates that the stipulation that "this guarantee and all
rights, obligations & liabilities arising hereunder shall be
construed & determined under & may be enforced in accordance
w/ the laws of the Republic of Singapore. We hereby agree that
the Courts in Singapore shall have jurisdiction over all disputes
arising under this guarantee" be liberally construed. One basic
principle underlies all rules of jurisdiction in International Law: 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.
Indeed, as pointed-out by HSBC at the outset, the instant case
presents a very odd situation. In the ordinary habits of life,
anyone would be disinclined to litigate before a foreign tribunal,
w/ more reason as a defendant. However, in this case, Sherman
& Reloj are Philippine residents (a fact which was not disputed by
them) who would rather face a complaint against them before a
foreign court and in the process incur considerable expenses, not
to mention inconvenience, than to have a Philippine court try and
resolve the case. Their stance is hardly comprehensible, unless
their ultimate intent is to evade, or at least delay, the payment of
a just obligation.
The defense of Sherman & Reloj that the complaint should have
been filed in Singapore is based merely on technicality. They did
not even claim, much less prove, that the filing of the action here
will cause them any unnecessary trouble, damage, or expense.
On the other hand, there is no showing that petitioner BANK filed
the action here just to harass Sherman & Reloj.

The parties did not thereby stipulate that only the courts of
Singapore, to the exclusion of all the rest, has jurisdiction.
Neither did the clause in question operate to divest Philippine
courts of jurisdiction. In International Law, jurisdiction is often
defined as the light of a State to exercise authority over persons
and things w/in its boundaries subject to certain exceptions.
Thus, a State does not assume jurisdiction over travelling
sovereigns, ambassadors and diplomatic representatives of other
States, and foreign military units stationed in or marching
through State territory w/ the permission of the latter's
authorities. This authority, which finds its source in the concept of
sovereignty, is exclusive w/in and throughout the domain of the
State. A State is competent to take hold of any judicial matter it
sees fit by making its courts and agencies assume jurisdiction
over all kinds of cases brought before them.

POLYTRADE CORPORATION, plaintiff-appellee,

vs.
VICTORIANO BLANCO, defendant-appellant.

Paredes, Poblador, Cruz and Nazareno for plaintiff-appellee.

Isidro T. Almeda and Mario T. Banzuela for defendant-appellant.

SANCHEZ, J.:

Suit before the Court of First Instance of Bulacan on four causes of action
to recover the purchase price of rawhide delivered by plaintiff to
defendant.1 Plaintiff corporation has its principal office and place of
business in Makati, Rizal. Defendant is a resident of Meycauayan, Bulacan.
Defendant moved to dismiss upon the ground of improper venue. He
claims that by contract suit may only be lodged in the courts of Manila. The
Bulacan court overruled him. He did not answer the complaint. In
consequence, a default judgment was rendered against him on September
21, 1966, thus:

WHEREFORE, judgment is hereby rendered in favor of plaintiff and

against defendant ordering defendant to pay plaintiff the following
amounts:

First Cause of — P60,845.67, with interest thereon at 1% a month from

Action May 9, 1965 until the full amount is paid.
Second Cause — P51,952.55, with interest thereon at 1% a month from
of Action March 30, 1965 until the full amount is paid.
Third Cause of — P53,973.07, with interest thereon at 1% a month from
Action July 3, 1965 until the full amount is paid.
Fourth Cause — P41,075.22, with interest thereon at 1% a month2 until the
of Action full amount is paid.

In addition, defendant shall pay plaintiff attorney's fees amounting to

25% of the principal amount due in each cause of action, and the
costs of the suit. The amount of P400.00 shall be deducted from the
total amount due plaintiff in accordance with this judgment.

Defendant appealed.

1. The forefront question is whether or not venue was properly laid in the
province of Bulacan where defendant is a resident.

Section 2 (b), Rule 4 of the Rules of Court on venue of personal actions

triable by courts of first instance — and this is one — provides that such
"actions may be commenced and tried where the defendant or any of the
defendants resides or may be found, or where the plaintiff or any of the
plaintiffs resides, at the election of the plaintiff." Qualifying this provision in
Section 3 of the same Rule which states that venue may be stipulated by
written agreement — "By written agreement of the parties the venue of an
action may be changed or transferred from one province to another."

Defendant places his case upon Section 3 of Rule 4 just quoted. According
to defendant, plaintiff and defendant, by written contracts covering the four
causes of action, stipulated that: "The parties agree to sue and be sued in
the Courts of Manila." This agreement is valid.3 Defendant says that
because of such covenant he can only be sued in the courts of Manila. We
are thus called upon to shake meaning from the terms of the agreement
just quoted.

But first to the facts. No such stipulation appears in the contracts covering
the first two causes of action. The general rule set forth in Section 2 (b),
Rule 4, governs, and as to said two causes of action, venue was properly
laid in Bulacan, the province of defendant's residence.

The stipulation adverted to is only found in the agreements covering the

third and fourth causes of action. An accurate reading, however, of the
stipulation, "The parties agree to sue and be sued in the Courts of Manila,"
does not preclude the filing of suits in the residence of plaintiff or
defendant. The plain meaning is that the parties merely consented to be
sued in Manila. Qualifying or restrictive words which would indicate that
Manila and Manila alone is the venue are totally absent therefrom. We
cannot read into that clause that plaintiff and defendant bound themselves
to file suits with respect to the last two transactions in question only or
exclusively in Manila. For, that agreement did not change or transfer venue.
It simply is permissive. The parties solely agreed to add the courts of
Manila as tribunals to which they may resort. They did not waive their right
to pursue remedy in the courts specifically mentioned in Section 2(b) of
Rule 4. Renuntiatio non praesumitur.

Illuminating on this point is Engel vs. Shubert Theatrical Co., 151 N.Y.S.
593, 594. And this, became there the stipulation as to venue is along lines
similar to the present. Said stipulation reads: "In case of dispute, both
contracting parties agree to submit to the jurisdiction of the Vienna courts."
And the ruling is: "By the clause in question the parties do not agree to
submit their disputes to the jurisdiction of the Viennese court, and to those
courts only. There is nothing exclusive in the language used. They do
agree to submit to the Viennese jurisdiction, but they say not a word in
restriction of the jurisdiction of courts elsewhere; and whatever may be said
on the subject of the legality of contracts to submit controversies to courts
of certain jurisdictions exclusively, it is entirely plain that such agreements
should be strictly construed, and should not be extended by implication."

Venue here was properly laid.

 Korea Technologies Co. Ltd vs Lerma
GR No. 143581 January 7, 2008

Facts: Petitioner Korea Technologies Co., Ltd. (KOGIES) is a Korean corporation

which is engaged in the supply and installation of Liquefied Petroleum Gas (LPG)
Cylinder manufacturing plants, while private respondent Pacific General Steel
Manufacturing Corp. (PGSMC) is a domestic corporation. On March 5, 1997,
PGSMC and KOGIES executed a Contract whereby KOGIES would set up an
LPG Cylinder Manufacturing Plant in Carmona, Cavite. The contract was executed
in the Philippines. On April 7, 1997, the parties executed, in Korea, an Amendment
for Contract No. KLP-970301 dated March 5, 1997 amending the terms of
payment. The contract and its amendment stipulated that KOGIES will ship the
machinery and facilities necessary for manufacturing LPG cylinders for which
PGSMC would pay USD 1,224,000. KOGIES would install and initiate the
operation of the plant for which PGSMC bound itself to pay USD 306,000 upon
the plants production of the 11-kg. LPG cylinder samples. Thus, the total contract
price amounted to USD 1,530,000. On October 14, 1997, PGSMC entered into a
Contract of Lease with Worth Properties, Inc. (Worth) for use of Worths 5,079-
square meter property with a 4,032-square meter warehouse building to house the
LPG manufacturing plant. The monthly rental was PhP 322,560 commencing on
January 1, 1998 with a 10% annual increment clause. Subsequently, the
machineries, equipment, and facilities for the manufacture of LPG cylinders were
shipped, delivered, and installed in the Carmona plant. PGSMC paid KOGIES
USD 1,224,000. However, gleaned from the Certificate executed by the parties on
January 22, 1998, after the installation of the plant, the initial operation could not
be conducted as PGSMC encountered financial difficulties affecting the supply of
materials, thus forcing the parties to agree that KOGIES would be deemed to have
completely complied with the terms and conditions of the March 5, 1997 contract.
For the remaining balance of USD306,000 for the installation and initial operation
of the plant, PGSMC issued two postdated checks: (1) BPI Check No. 0316412
dated January 30, 1998 for PhP 4,500,000; and (2) BPI Check No. 0316413 dated
March 30, 1998 for PhP 4,500,000. When KOGIES deposited the checks, these
were dishonored for the reason PAYMENT STOPPED. Thus, on May 8, 1998,
KOGIES sent a demand letter to PGSMC threatening criminal action for violation
of Batas Pambansa Blg. 22 in case of nonpayment. On the same date, the wife of
PGSMCs President faxed a letter dated May 7, 1998 to KOGIES President who
was then staying at a Makati City hotel. She complained that not only did KOGIES
deliver a different brand of hydraulic press from that agreed upon but it had not
delivered several equipment parts already paid for.
Issue: Whether or not the arbitration clause in the contract of the parties should
govern.

Held: Yes. Established in this jurisdiction is the rule that the law of the place where
the contract is made governs. Lex loci contractus. The contract in this case was
perfected here in the Philippines. Therefore, our laws ought to govern.
Nonetheless, Art. 2044 of the Civil Code sanctions the validity of mutually agreed
arbitral clause or the finality and binding effect of an arbitral award. Art. 2044
provides, Any stipulation that the arbitrators award or decision shall be final, is
valid, without prejudice to Articles 2038, 2039 and 2040.

The arbitration clause was mutually and voluntarily agreed upon by the parties. It
has not been shown to be contrary to any law, or against morals, good customs,
public order, or public policy. There has been no showing that the parties have not
dealt with each other on equal footing. We find no reason why the arbitration
clause should not be respected and complied with by both parties. In Gonzales v.
Climax Mining Ltd., we held that submission to arbitration is a contract and that a
clause in a contract providing that all matters in dispute between the parties shall
be referred to arbitration is a contract. Again in Del Monte Corporation-USA v.
Court of Appeals, we likewise ruled that [t]he provision to submit to arbitration
any dispute arising therefrom and the relationship of the parties is part of that
contract and is itself a contract.

Having said that the instant arbitration clause is not against public policy, we come
to the question on what governs an arbitration clause specifying that in case of any
dispute arising from the contract, an arbitral panel will be constituted in a foreign
country and the arbitration rules of the foreign country would govern and its award
shall be final and binding.

Thus, it can be gleaned that the concept of a final and binding arbitral award is
similar to judgments or awards given by some of our quasi-judicial bodies, like the
National Labor Relations Commission and Mines Adjudication Board, whose final
judgments are stipulated to be final and binding, but not immediately executory in
the sense that they may still be judicially reviewed, upon the instance of any party.
Therefore, the final foreign arbitral awards are similarly situated in that they need
first to be confirmed by the RTC.

G.R. No. 124110 April 20, 2001UNITED AIRLINES, INC.,Petitioner vs.

COURT OF APPEALS, ANICETO FONTANILLA,
in his personal capacity and in behalf of his minor son
MYCHAL ANDREW FONTANILLA, Respondents.

FACTS:
Aniceto Fontanilla bought from United Airlines,through the Philippine Travel Bureau in
Manila,
three “Visit the U.S.A.” tickets from himself, his wife and his minors on, Mychal, to
visit the cities of Washington DC, Chicago and Los Angeles.All flights had been
confirmed previously by United Airlines.
Having used the first coupon to DC and while at the Washington Dulles Airport,
Anice to changed their itinerary, paid the penalty for rewriting their tickets
and was issued tickets with corresponding boarding passes with the words:
“Check-in-required.” They were then set to leave but were denied boarding
because the flight was overbooked. The CA ruled that private respondents’ failure to
comply with the check-in requirement will not defeat his claim as the denied boarding rules were
not complied with applying the laws of the USA, relying on the Code of Federal Regulation Part on
Oversales of the USA

ISSUE: WON the CA is correct in applying the laws of USA.

HELD: No.

According to the doctrine of “lex loci contractus”, the law of the place where a contract is made or
entered into governs with respect to its nature and validity, obligation and interpretation shall
govern. This has been said to be the rule even though the place where the contract was made is
different from the place where it is to be performed. Hence, the court should apply the law of the
place where the airline ticket was issued, where the passengers are residents and nationals of the
forum and the ticket is issued in such State by the defendant airline. Therefore, although, the
contract of carriage was to be performed in the United States, the tickets were purchased through
petitioner’s agent in Manila. It is true that the tickets were "rewritten" in D.C.,however, such fact
did not change the nature of the original contract of carriage entered Into by the parties in Manila.
The appellate court, however, erred in applying the laws of the United States
as, in the case at bar, Philippine law is the applicable law. Although, the contract of
carriage was to be performed in the United States, the tickets were purchased
through petitioners agent in Manila. It is true that the tickets were rewritten in
Washington, D.C. However, such fact did not change the nature of the original
contract of carriage entered into by the parties in Manila.
 In the case of Zalamea vs. Court of Appeals,[30] this Court applied the doctrine
of lex loci contractus. According to the doctrine, as a general rule, the law of the
place where a contract is made or entered into governs with respect to its nature
and validity, obligation and interpretation. This has been said to be the rule even
though the place where the contract was made is different from the place where it
is to be performed, and particularly so, if the place of the making and the place of
performance are the same. Hence, the court should apply the law of the place
where the airline ticket was issued, when the passengers are residents and nationals
of the forum and the ticket is issued in such State by the defendant airline.
Zalamea vs. Court of Appeals 288 SCRA 23 (1993)

FACTS:

Spouses Cesar and Suthira Zalamea, and their daughter, Liana Zalamea, purchased
three (3) airline tickets from the Manila agent of respondent TransWorld Airlines,
Inc. (TWA) for a flight from New York to Los Angeles on June 6, 1984. The tickets
of the spouses were

purchased at a discount of 75% while that of their daughter was a full fare ticket.
All three tickets represented confirmed reservations.

While in New York, on June 4, 1984, the spouses Zalamea and their daughter
received a notice of reconfirmation of their reservations for said flight. On the
appointed date, however, the spouses Zalamea and their daughter checked in at
10:00 am, an hour earlier than the scheduled flight at 11:00 am but were placed
on the wait-list because the number of passengers who checked in before tem
had already taken all the seats available on the flight.

Out of the 42 names on the wait-list, the first 22 names were eventually allowed
to board the flight to Los Angeles, including Cesar Zalamea. The two others, on
the other hand, being ranked lower than 22, were not able to fly. As it were,
those holding full-fare ticket were given first priority among the wait-listed
passengers. Mr. Zalamea, who was holding the full-fare ticket of his daughter, was
allowed to board the plane; while his wife and daughter, who presented the
discounted tickets were denied boarding. Even in the next TWA flight to Los
Angeles, Mrs. Zalamea and her daughter, could not be accommodated because it
was full booked. Thus, they were constrained to book in another flight and
purchased two tickets from American Airlines.

Upon their arrival in the Philippines, the spouses Zalamea filed an action for
damages based on breach of contract of air carriage before the RTC of Makati
which rendered a decision in their favor ordering the TWA to pay the price of the
tickets bought from American Airlines together with moral damages and
attorney’s fees. On appeal, the CA held that moral damages are recoverable in a
damage suit predicated upon a breach of contract of carriage only where there is
fraud or bad faith. It further stated that since it is a matter of record that
overbooking of flights is a common and accepted practice of airlines in the United
States and is specifically allowed under the Code of Federal Regulations by the
Civil Aeronautics Board, neither fraud nor bad faith could be imputed on TWA.

ISSUE:

Whether or not the CA erred in accepting the finding that overbooking is

specifically allowed by the US Code of Federal Regulations and in holding that
there was no fraud or bad faith on the part of TWA ?

HELD:

The CA was in error. There was fraud or bad faith on the part of TWA when it did
not allow Mrs. Zalamea and her daughter to board their flight for Los Angeles in
spite of confirmed tickets. The US law or regulation allegedly authorizing
overbooking has never been proved.
1.) Foreign laws do not prove themselves nor can the court take judicial notice of
them. Like any other fact, they must be alleged and proved. Written law may be
evidenced by an official publication thereof or by a copy attested by the officers
having legal custody of the record, or by his deputy and accompanied with a
certificate that such officer has custody. The certificate may be made by a
secretary of an embassy or legation, consul-general, consul, vice-consul, or
consular agent or by any officer in the foreign service of the Phil. stationed in the
foreign country in which the record is kept and authenticated by the seal of his
office. Here, TWA relied solely on the testimony of its customer service agent in
her deposition that the Code of Federal Regulations of the Civil Aeronautic Board
allows overbooking. Aside from said statement, no official publication of said
code was presented as evidence. Thus, the CA’s finding that overbooking is
specifically allowed by the US Code of Federal Regulations has no basis in fact.

"That there was fraud or bad faith on the part of respondent airline when it did
not allow petitioners to board their flight for Los Angeles in spite of confirmed
tickets cannot be disputed. The U.S. law or regulation allegedly authorizing
overbooking has never been proved. Foreign laws do not prove themselves nor
can the courts take judicial notice of them. Like any other fact, they must be
alleged and proved. Written law may be evidenced by an official publication
thereof or by a copy attested by the officer having the legal custody of the record,
or by his deputy, and accompanied with a certificate that such officer has custody.
The certificate may be made by a secretary of an embassy or legation, consul
general, consul, vice-consul, or consular agent or by any officer in the foreign
service of the Philippines stationed in the foreign country in which the record is
kept, and authenticated by the seal of his office.

Respondent TWA relied solely on the statement of Ms. Gwendolyn Lather, its
customer service agent, in her deposition dated January 27, 1986 that the Code of
Federal Regulations of the Civil Aeronautics Board allows overbooking. Aside from
said statement, no official publication of said code was presented as evidence.
Thus, respondent court's finding that overbooking is specifically allowed by the US
Code of Federal Regulations has no basis in fact."

"Even if the claimed U.S. Code of Federal Regulations does exist, the same is not
applicable to the case at bar in accordance with the principle of lex loci contractus
which require that the law of the place where the airline ticket was issued should
be applied by the court where the passengers are residents and nationals of the
forum and the ticket is issued in such State by the defendant airline. Since the
tickets were sold and issued in the Philippines, the applicable law in this case
would be Philippine law."

Other Issues:

2.) Even if the claimed US Code of Federal Regulations does exist, the same is not
applicable to the case at bar in accordance with the principle of lex loci contractus
which requires that the law of the place where the airline ticket was issued should
be applied by the court where the passengers are residents and nationals of the
forum and the ticket is issued in such State by the airline.

3.) Existing jurisprudence explicitly states that overbooking amounts to bad faith,
entitling the passengers concerned to an award of moral damages. Where an
airline had deliberately overbooked, it took the risk of having to deprive some
passengers of their seats in case all of them would show up for check in. for the
indignity and inconvenience of being refused a confirmed seat on the last minute,
said passenger is entitled to an award of moral damages. This is so, for a contract
of carriage generates a relation attended with public duty --- a duty to provide
public service and convenience to its passengers which must be paramount to
self-interest or enrichment. Even on the assumption that overbooking is allowed,
TWA is still guilty of bad faith in not informing its passengers beforehand that it
could breach the contract of carriage even if they have confirmed tickets if there
was overbooking. Moreover, TWA was also guilty of not informing its passengers
of its alleged policy of giving less priority to discounted tickets. Evidently, TWA
placed self-interest over the rights of the spouses Zalamea and their daughter
under their contract of carriage. Such conscious disregard make respondent TWA
liable for moral damages, and to deter breach of contracts by TWA in similar
fashion in the future, the SC adjudged TWA liable for exemplary damages, as well.

G.R. No. L-11622 January 28, 1961

THE COLLECTOR OF INTERNAL REVENUE, petitioner,

vs.
DOUGLAS FISHER AND BETTINA FISHER, and the COURT OF TAX
APPEALS, respondents.

x---------------------------------------------------------x

G.R. No. L-11668 January 28, 1961.

DOUGLAS FISHER AND BETTINA FISHER, petitioner,

vs.
THE COLLECTOR OF INTERNAL REVENUE, and the COURT OF TAX
APPEALS, respondents.

BARRERA, J.:

This case relates to the determination and settlement of the hereditary

estate left by the deceased Walter G. Stevenson, and the laws applicable
thereto. Walter G. Stevenson (born in the Philippines on August 9, 1874 of
British parents and married in the City of Manila on January 23, 1909 to
Beatrice Mauricia Stevenson another British subject) died on February 22,
1951 in San Francisco, California, U.S.A. whereto he and his wife moved
and established their permanent residence since May 10, 1945. In his will
executed in San Francisco on May 22, 1947, and which was duly probated
in the Superior Court of California on April 11, 1951, Stevenson instituted
his wife Beatrice as his sole heiress to the following real and personal
properties acquired by the spouses while residing in the Philippines,
described and preliminary assessed as follows:
 Gross Estate
Real Property — 2 parcels of
land in Baguio, covered by
T.C.T. Nos. 378 and 379 P43,500.00
Personal Property
(1) 177 shares of stock of
Canacao Estate at P10.00
each 1,770.00
(2) 210,000 shares of stock of
Mindanao Mother Lode Mines,
Inc. at P0.38 per share 79,800.00
(3) Cash credit with Canacao
Estate Inc. 4,870.88
(4) Cash, with the Chartered
Bank of India, Australia &
China 851.97
Total Gross Assets P130,792.85

On May 22, 1951, ancillary administration proceedings were instituted in

the Court of First Instance of Manila for the settlement of the estate in the
Philippines. In due time Stevenson's will was duly admitted to probate by
our court and Ian Murray Statt was appointed ancillary administrator of the
estate, who on July 11, 1951, filed a preliminary estate and inheritance tax
return with the reservation of having the properties declared therein finally
appraised at their values six months after the death of Stevenson.
Preliminary return was made by the ancillary administrator in order to
secure the waiver of the Collector of Internal Revenue on the inheritance
tax due on the 210,000 shares of stock in the Mindanao Mother Lode
Mines Inc. which the estate then desired to dispose in the United States.
Acting upon said return, the Collector of Internal Revenue accepted the
valuation of the personal properties declared therein, but increased the
appraisal of the two parcels of land located in Baguio City by fixing their fair
market value in the amount of P52.200.00, instead of P43,500.00. After
allowing the deductions claimed by the ancillary administrator for funeral
expenses in the amount of P2,000.00 and for judicial and administration
expenses in the sum of P5,500.00, the Collector assessed the state the
amount of P5,147.98 for estate tax and P10,875,26 or inheritance tax, or a
total of P16,023.23. Both of these assessments were paid by the estate on
June 6, 1952.

On September 27, 1952, the ancillary administrator filed in amended estate

and inheritance tax return in pursuance f his reservation made at the time
of filing of the preliminary return and for the purpose of availing of the right
granted by section 91 of the National Internal Revenue Code.

In this amended return the valuation of the 210,000 shares of stock in the
Mindanao Mother Lode Mines, Inc. was reduced from 0.38 per share, as
originally declared, to P0.20 per share, or from a total valuation of
P79,800.00 to P42,000.00. This change in price per share of stock was
based by the ancillary administrator on the market notation of the stock
obtaining at the San Francisco California) Stock Exchange six months from
the death of Stevenson, that is, As of August 22, 1931. In addition, the
ancillary administrator made claim for the following deductions:

Funeral expenses ($1,04326) P2,086.52

Judicial Expenses:
(a) Administrator's Fee P1,204.34
(b) Attorney's Fee 6.000.00
(c) Judicial and
Administration expenses
as of August 9, 1952 1,400.05
8,604.39
Real Estate Tax for 1951
on Baguio real properties
(O.R. No. B-1 686836) 652.50
Claims against the estate:
($5,000.00) P10,000.00 P10,000.00
Plus: 4% int. p.a. from
Feb. 2 to 22, 1951 22.47 10,022.47
Sub-Total P21,365.88

In the meantime, on December 1, 1952, Beatrice Mauricia Stevenson

assigned all her rights and interests in the estate to the spouses, Douglas
and Bettina Fisher, respondents herein.
On September 7, 1953, the ancillary administrator filed a second amended
estate and inheritance tax return (Exh. "M-N"). This return declared the
same assets of the estate stated in the amended return of September 22,
1952, except that it contained new claims for additional exemption and
deduction to wit: (1) deduction in the amount of P4,000.00 from the gross
estate of the decedent as provided for in Section 861 (4) of the U.S.
Federal Internal Revenue Code which the ancillary administrator averred
was allowable by way of the reciprocity granted by Section 122 of the
National Internal Revenue Code, as then held by the Board of Tax Appeals
in case No. 71 entitled "Housman vs. Collector," August 14, 1952; and (2)
exemption from the imposition of estate and inheritance taxes on the
210,000 shares of stock in the Mindanao Mother Lode Mines, Inc. also
pursuant to the reciprocity proviso of Section 122 of the National Internal
Revenue Code. In this last return, the estate claimed that it was liable only
for the amount of P525.34 for estate tax and P238.06 for inheritance tax
and that, as a consequence, it had overpaid the government. The refund of
the amount of P15,259.83, allegedly overpaid, was accordingly requested
by the estate. The Collector denied the claim. For this reason, action was
commenced in the Court of First Instance of Manila by respondents, as
assignees of Beatrice Mauricia Stevenson, for the recovery of said amount.
Pursuant to Republic Act No. 1125, the case was forwarded to the Court of
Tax Appeals which court, after hearing, rendered decision the dispositive
portion of which reads as follows:

In fine, we are of the opinion and so hold that: (a) the one-half (½)
share of the surviving spouse in the conjugal partnership property as
diminished by the obligations properly chargeable to such property
should be deducted from the net estate of the deceased Walter G.
Stevenson, pursuant to Section 89-C of the National Internal
Revenue Code; (b) the intangible personal property belonging to the
estate of said Stevenson is exempt from inheritance tax, pursuant to
the provision of section 122 of the National Internal Revenue Code in
relation to the California Inheritance Tax Law but decedent's estate is
not entitled to an exemption of P4,000.00 in the computation of the
estate tax; (c) for purposes of estate and inheritance taxation the
Baguio real estate of the spouses should be valued at P52,200.00,
and 210,000 shares of stock in the Mindanao Mother Lode Mines,
Inc. should be appraised at P0.38 per share; and (d) the estate shall
be entitled to a deduction of P2,000.00 for funeral expenses and
judicial expenses of P8,604.39.
From this decision, both parties appealed.

The Collector of Internal Revenue, hereinafter called petitioner assigned

four errors allegedly committed by the trial court, while the assignees,
Douglas and Bettina Fisher hereinafter called respondents, made six
assignments of error. Together, the assigned errors raise the following
main issues for resolution by this Court:

(1) Whether or not, in determining the taxable net estate of the decedent,
one-half (½) of the net estate should be deducted therefrom as the share of
tile surviving spouse in accordance with our law on conjugal partnership
and in relation to section 89 (c) of the National Internal revenue Code;

(2) Whether or not the estate can avail itself of the reciprocity proviso
embodied in Section 122 of the National Internal Revenue Code granting
exemption from the payment of estate and inheritance taxes on the
210,000 shares of stock in the Mindanao Mother Lode Mines Inc.;

(3) Whether or not the estate is entitled to the deduction of P4,000.00

allowed by Section 861, U.S. Internal Revenue Code in relation to section
122 of the National Internal Revenue Code;

(4) Whether or not the real estate properties of the decedent located in
Baguio City and the 210,000 shares of stock in the Mindanao Mother Lode
Mines, Inc., were correctly appraised by the lower court;

(5) Whether or not the estate is entitled to the following deductions:

P8,604.39 for judicial and administration expenses; P2,086.52 for funeral
expenses; P652.50 for real estate taxes; and P10,0,22.47 representing the
amount of indebtedness allegedly incurred by the decedent during his
lifetime; and

(6) Whether or not the estate is entitled to the payment of interest on the
amount it claims to have overpaid the government and to be refundable to
it.

In deciding the first issue, the lower court applied a well-known doctrine in
our civil law that in the absence of any ante-nuptial agreement, the
contracting parties are presumed to have adopted the system of conjugal
partnership as to the properties acquired during their marriage. The
application of this doctrine to the instant case is being disputed, however,
by petitioner Collector of Internal Revenue, who contends that pursuant to
Article 124 of the New Civil Code, the property relation of the spouses
Stevensons ought not to be determined by the Philippine law, but by the
national law of the decedent husband, in this case, the law of England. It is
alleged by petitioner that English laws do not recognize legal partnership
between spouses, and that what obtains in that jurisdiction is another
regime of property relation, wherein all properties acquired during the
marriage pertain and belong Exclusively to the husband. In further support
of his stand, petitioner cites Article 16 of the New Civil Code (Art. 10 of the
old) to the effect that in testate and intestate proceedings, the amount of
successional rights, among others, is to be determined by the national law
of the decedent.

In this connection, let it be noted that since the mariage of the Stevensons
in the Philippines took place in 1909, the applicable law is Article 1325 of
the old Civil Code and not Article 124 of the New Civil Code which became
effective only in 1950. It is true that both articles adhere to the so-called
nationality theory of determining the property relation of spouses where one
of them is a foreigner and they have made no prior agreement as to the
administration disposition, and ownership of their conjugal properties. In
such a case, the national law of the husband becomes the dominant law in
determining the property relation of the spouses. There is, however, a
difference between the two articles in that Article 1241 of the new Civil
Code expressly provides that it shall be applicable regardless of whether
the marriage was celebrated in the Philippines or abroad while Article
13252 of the old Civil Code is limited to marriages contracted in a foreign
land.

It must be noted, however, that what has just been said refers to mixed
marriages between a Filipino citizen and a foreigner. In the instant case,
both spouses are foreigners who married in the Philippines. Manresa,3 in
his Commentaries, has this to say on this point:

La regla establecida en el art. 1.315, se refiere a las capitulaciones

otorgadas en Espana y entre espanoles. El 1.325, a las celebradas
en el extranjero cuando alguno de los conyuges es espanol. En
cuanto a la regla procedente cuando dos extranjeros se casan en
Espana, o dos espanoles en el extranjero hay que atender en el
primer caso a la legislacion de pais a que aquellos pertenezean, y en
 el segundo, a las reglas generales consignadas en los articulos 9 y
10 de nuestro Codigo. (Emphasis supplied.)

If we adopt the view of Manresa, the law determinative of the property

relation of the Stevensons, married in 1909, would be the English law even
if the marriage was celebrated in the Philippines, both of them being
foreigners. But, as correctly observed by the Tax Court, the pertinent
English law that allegedly vests in the decedent husband full ownership of
the properties acquired during the marriage has not been proven by
petitioner. Except for a mere allegation in his answer, which is not
sufficient, the record is bereft of any evidence as to what English law says
on the matter. In the absence of proof, the Court is justified, therefore, in
indulging in what Wharton calls "processual presumption," in presuming
that the law of England on this matter is the same as our law.4

Nor do we believe petitioner can make use of Article 16 of the New Civil
Code (art. 10, old Civil Code) to bolster his stand. A reading of Article 10 of
the old Civil Code, which incidentally is the one applicable, shows that it
does not encompass or contemplate to govern the question of property
relation between spouses. Said article distinctly speaks of amount of
successional rights and this term, in speaks in our opinion, properly refers
to the extent or amount of property that each heir is legally entitled to inherit
from the estate available for distribution. It needs to be pointed out that
the property relation of spouses, as distinguished from their successional
rights, is governed differently by the specific and express provisions of Title
VI, Chapter I of our new Civil Code (Title III, Chapter I of the old Civil
Code.) We, therefore, find that the lower court correctly deducted the half of
the conjugal property in determining the hereditary estate left by the
deceased Stevenson.

On the second issue, petitioner disputes the action of the Tax Court in the
exempting the respondents from paying inheritance tax on the 210,000
shares of stock in the Mindanao Mother Lode Mines, Inc. in virtue of the
reciprocity proviso of Section 122 of the National Internal Revenue Code, in
relation to Section 13851 of the California Revenue and Taxation Code, on
the ground that: (1) the said proviso of the California Revenue and Taxation
Code has not been duly proven by the respondents; (2) the reciprocity
exemptions granted by section 122 of the National Internal Revenue Code
can only be availed of by residents of foreign countries and not of residents
of a state in the United States; and (3) there is no "total" reciprocity
between the Philippines and the state of California in that while the former
exempts payment of both estate and inheritance taxes on intangible
personal properties, the latter only exempts the payment of inheritance tax..

To prove the pertinent California law, Attorney Allison Gibbs, counsel for
herein respondents, testified that as an active member of the California Bar
since 1931, he is familiar with the revenue and taxation laws of the State of
California. When asked by the lower court to state the pertinent California
law as regards exemption of intangible personal properties, the witness
cited article 4, section 13851 (a) and (b) of the California Internal and
Revenue Code as published in Derring's California Code, a publication of
the Bancroft-Whitney Company inc. And as part of his testimony, a full
quotation of the cited section was offered in evidence as Exhibits "V-2" by
the respondents.

It is well-settled that foreign laws do not prove themselves in our jurisdiction

and our courts are not authorized to take judicial notice of them.5 Like any
other fact, they must be alleged and proved.6

Section 41, Rule 123 of our Rules of Court prescribes the manner of
proving foreign laws before our tribunals. However, although we believe it
desirable that these laws be proved in accordance with said rule, we held in
the case of Willamette Iron and Steel Works v. Muzzal, 61 Phil. 471, that "a
reading of sections 300 and 301 of our Code of Civil Procedure (now
section 41, Rule 123) will convince one that these sections do not exclude
the presentation of other competent evidence to prove the existence of a
foreign law." In that case, we considered the testimony of an attorney-at-
law of San Francisco, California who quoted verbatim a section of
California Civil Code and who stated that the same was in force at the time
the obligations were contracted, as sufficient evidence to establish the
existence of said law. In line with this view, we find no error, therefore, on
the part of the Tax Court in considering the pertinent California law as
proved by respondents' witness.

We now take up the question of reciprocity in exemption from transfer or

death taxes, between the State of California and the Philippines.F

Section 122 of our National Internal Revenue Code, in pertinent part,

provides:
 ... And, provided, further, That no tax shall be collected under this
Title in respect of intangible personal property (a) if the decedent at
the time of his death was a resident of a foreign country which at the
time of his death did not impose a transfer of tax or death tax of any
character in respect of intangible personal property of citizens of the
Philippines not residing in that foreign country, or (b) if the laws of the
foreign country of which the decedent was a resident at the time of
his death allow a similar exemption from transfer taxes or death taxes
of every character in respect of intangible personal property owned
by citizens of the Philippines not residing in that foreign country."
(Emphasis supplied).

On the other hand, Section 13851 of the California Inheritance Tax Law,
insofar as pertinent, reads:.

"SEC. 13851, Intangibles of nonresident: Conditions. Intangible

personal property is exempt from the tax imposed by this part if the
decedent at the time of his death was a resident of a territory or
another State of the United States or of a foreign state or country
which then imposed a legacy, succession, or death tax in respect to
intangible personal property of its own residents, but either:.

(a) Did not impose a legacy, succession, or death tax of any

character in respect to intangible personal property of residents of
this State, or

(b) Had in its laws a reciprocal provision under which intangible

personal property of a non-resident was exempt from legacy,
succession, or death taxes of every character if the Territory or other
State of the United States or foreign state or country in which the
nonresident resided allowed a similar exemption in respect to
intangible personal property of residents of the Territory or State of
the United States or foreign state or country of residence of the
decedent." (Id.)

It is clear from both these quoted provisions that the reciprocity must be
total, that is, with respect to transfer or death taxes of any and every
character, in the case of the Philippine law, and to legacy, succession, or
death taxes of any and every character, in the case of the California law.
Therefore, if any of the two states collects or imposes and does not exempt
any transfer, death, legacy, or succession tax of any character, the
reciprocity does not work. This is the underlying principle of the reciprocity
clauses in both laws.

In the Philippines, upon the death of any citizen or resident, or non-resident

with properties therein, there are imposed upon his estate and its
settlement, both an estate and an inheritance tax. Under the laws of
California, only inheritance tax is imposed. On the other hand, the Federal
Internal Revenue Code imposes an estate tax on non-residents not citizens
of the United States,7 but does not provide for any exemption on the basis
of reciprocity. Applying these laws in the manner the Court of Tax Appeals
did in the instant case, we will have a situation where a Californian, who is
non-resident in the Philippines but has intangible personal properties here,
will the subject to the payment of an estate tax, although exempt from the
payment of the inheritance tax. This being the case, will a Filipino, non-
resident of California, but with intangible personal properties there, be
entitled to the exemption clause of the California law, since the Californian
has not been exempted from every character of legacy, succession, or
death tax because he is, under our law, under obligation to pay an estate
tax? Upon the other hand, if we exempt the Californian from paying the
estate tax, we do not thereby entitle a Filipino to be exempt from a similar
estate tax in California because under the Federal Law, which is equally
enforceable in California he is bound to pay the same, there being no
reciprocity recognized in respect thereto. In both instances, the Filipino
citizen is always at a disadvantage. We do not believe that our legislature
has intended such an unfair situation to the detriment of our own
government and people. We, therefore, find and declare that the lower
court erred in exempting the estate in question from payment of the
inheritance tax.

We are not unaware of our ruling in the case of Collector of Internal

Revenue vs. Lara (G.R. Nos. L-9456 & L-9481, prom. January 6, 1958, 54
O.G. 2881) exempting the estate of the deceased Hugo H. Miller from
payment of the inheritance tax imposed by the Collector of Internal
Revenue. It will be noted, however, that the issue of reciprocity between
the pertinent provisions of our tax law and that of the State of California
was not there squarely raised, and the ruling therein cannot control the
determination of the case at bar. Be that as it may, we now declare that in
view of the express provisions of both the Philippine and California laws
that the exemption would apply only if the law of the other grants an
exemption from legacy, succession, or death taxes of every character,
there could not be partial reciprocity. It would have to be total or none at all.

With respect to the question of deduction or reduction in the amount of

P4,000.00 based on the U.S. Federal Estate Tax Law which is also being
claimed by respondents, we uphold and adhere to our ruling in
the Lara case (supra) that the amount of $2,000.00 allowed under the
Federal Estate Tax Law is in the nature of a deduction and not of an
exemption regarding which reciprocity cannot be claimed under the
provision of Section 122 of our National Internal Revenue Code. Nor is
reciprocity authorized under the Federal Law. .

On the issue of the correctness of the appraisal of the two parcels of land
situated in Baguio City, it is contended that their assessed values, as
appearing in the tax rolls 6 months after the death of Stevenson, ought to
have been considered by petitioner as their fair market value, pursuant to
section 91 of the National Internal Revenue Code. It should be pointed out,
however, that in accordance with said proviso the properties are required to
be appraised at their fair market value and the assessed value thereof shall
be considered as the fair market value only when evidence to the contrary
has not been shown. After all review of the record, we are satisfied that
such evidence exists to justify the valuation made by petitioner which was
sustained by the tax court, for as the tax court aptly observed:

"The two parcels of land containing 36,264 square meters were

valued by the administrator of the estate in the Estate and Inheritance
tax returns filed by him at P43,500.00 which is the assessed value of
said properties. On the other hand, defendant appraised the same at
P52,200.00. It is of common knowledge, and this Court can take
judicial notice of it, that assessments for real estate taxation purposes
are very much lower than the true and fair market value of the
properties at a given time and place. In fact one year after decedent's
death or in 1952 the said properties were sold for a price of
P72,000.00 and there is no showing that special or extraordinary
circumstances caused the sudden increase from the price of
P43,500.00, if we were to accept this value as a fair and reasonable
one as of 1951. Even more, the counsel for plaintiffs himself admitted
in open court that he was willing to purchase the said properties at
P2.00 per square meter. In the light of these facts we believe and
therefore hold that the valuation of P52,200.00 of the real estate in
 Baguio made by defendant is fair, reasonable and justified in the
premises." (Decision, p. 19).

In respect to the valuation of the 210,000 shares of stock in the Mindanao

Mother Lode Mines, Inc., (a domestic corporation), respondents contend
that their value should be fixed on the basis of the market quotation
obtaining at the San Francisco (California) Stock Exchange, on the theory
that the certificates of stocks were then held in that place and registered
with the said stock exchange. We cannot agree with respondents'
argument. The situs of the shares of stock, for purposes of taxation, being
located here in the Philippines, as respondents themselves concede and
considering that they are sought to be taxed in this jurisdiction, consistent
with the exercise of our government's taxing authority, their fair market
value should be taxed on the basis of the price prevailing in our country.

Upon the other hand, we find merit in respondents' other contention that
the said shares of stock commanded a lesser value at the Manila Stock
Exchange six months after the death of Stevenson. Through Atty. Allison
Gibbs, respondents have shown that at that time a share of said stock was
bid for at only P.325 (p. 103, t.s.n.). Significantly, the testimony of Atty.
Gibbs in this respect has never been questioned nor refuted by petitioner
either before this court or in the court below. In the absence of evidence to
the contrary, we are, therefore, constrained to reverse the Tax Court on this
point and to hold that the value of a share in the said mining company on
August 22, 1951 in the Philippine market was P.325 as claimed by
respondents..

It should be noted that the petitioner and the Tax Court valued each share
of stock of P.38 on the basis of the declaration made by the estate in its
preliminary return. Patently, this should not have been the case, in view of
the fact that the ancillary administrator had reserved and availed of his
legal right to have the properties of the estate declared at their fair market
value as of six months from the time the decedent died..

On the fifth issue, we shall consider the various deductions, from the
allowance or disallowance of which by the Tax Court, both petitioner and
respondents have appealed..

Petitioner, in this regard, contends that no evidence of record exists to

support the allowance of the sum of P8,604.39 for the following expenses:.
 1) Administrator's fee P1,204.34
2) Attorney's fee 6,000.00
3) Judicial and Administrative 2,052.55
expenses
Total Deductions P8,604.39

An examination of the record discloses, however, that the foregoing items

were considered deductible by the Tax Court on the basis of their approval
by the probate court to which said expenses, we may presume, had also
been presented for consideration. It is to be supposed that the probate
court would not have approved said items were they not supported by
evidence presented by the estate. In allowing the items in question, the Tax
Court had before it the pertinent order of the probate court which was
submitted in evidence by respondents. (Exh. "AA-2", p. 100, record). As the
Tax Court said, it found no basis for departing from the findings of the
probate court, as it must have been satisfied that those expenses were
actually incurred. Under the circumstances, we see no ground to reverse
this finding of fact which, under Republic Act of California National
Association, which it would appear, that while still living, Walter G.
Stevenson obtained we are not inclined to pass upon the claim of
respondents in respect to the additional amount of P86.52 for funeral
expenses which was disapproved by the court a quo for lack of evidence.

In connection with the deduction of P652.50 representing the amount of

realty taxes paid in 1951 on the decedent's two parcels of land in Baguio
City, which respondents claim was disallowed by the Tax Court, we find
that this claim has in fact been allowed. What happened here, which a
careful review of the record will reveal, was that the Tax Court, in itemizing
the liabilities of the estate, viz:

1) Administrator's fee P1,204.34

2) Attorney's fee 6,000.00
3) Judicial and Administration
expenses as of August 9, 1952 2,052.55
Total P9,256.89

added the P652.50 for realty taxes as a liability of the estate, to the
P1,400.05 for judicial and administration expenses approved by the court,
making a total of P2,052.55, exactly the same figure which was arrived at
by the Tax Court for judicial and administration expenses. Hence, the
difference between the total of P9,256.98 allowed by the Tax Court as
deductions, and the P8,604.39 as found by the probate court, which is
P652.50, the same amount allowed for realty taxes. An evident oversight
has involuntarily been made in omitting the P2,000.00 for funeral expenses
in the final computation. This amount has been expressly allowed by the
lower court and there is no reason why it should not be. .

We come now to the other claim of respondents that pursuant to section

89(b) (1) in relation to section 89(a) (1) (E) and section 89(d), National
Internal Revenue Code, the amount of P10,022.47 should have been
allowed the estate as a deduction, because it represented an indebtedness
of the decedent incurred during his lifetime. In support thereof, they offered
in evidence a duly certified claim, presented to the probate court in
California by the Bank of California National Association, which it would
appear, that while still living, Walter G. Stevenson obtained a loan of
$5,000.00 secured by pledge on 140,000 of his shares of stock in the
Mindanao Mother Lode Mines, Inc. (Exhs. "Q-Q4", pp. 53-59, record). The
Tax Court disallowed this item on the ground that the local probate court
had not approved the same as a valid claim against the estate and
because it constituted an indebtedness in respect to intangible personal
property which the Tax Court held to be exempt from inheritance tax.

For two reasons, we uphold the action of the lower court in disallowing the
deduction.

Firstly, we believe that the approval of the Philippine probate court of this
particular indebtedness of the decedent is necessary. This is so although
the same, it is averred has been already admitted and approved by the
corresponding probate court in California, situs of the principal or
domiciliary administration. It is true that we have here in the Philippines
only an ancillary administration in this case, but, it has been held, the
distinction between domiciliary or principal administration and ancillary
administration serves only to distinguish one administration from the other,
for the two proceedings are separate and independent.8 The reason for the
ancillary administration is that, a grant of administration does not ex proprio
vigore, have any effect beyond the limits of the country in which it was
granted. Hence, we have the requirement that before a will duly probated
outside of the Philippines can have effect here, it must first be proved and
allowed before our courts, in much the same manner as wills originally
presented for allowance therein.9 And the estate shall be administered
under letters testamentary, or letters of administration granted by the court,
and disposed of according to the will as probated, after payment of just
debts and expenses of administration.10 In other words, there is a regular
administration under the control of the court, where claims must be
presented and approved, and expenses of administration allowed before
deductions from the estate can be authorized. Otherwise, we would have
the actuations of our own probate court, in the settlement and distribution of
the estate situated here, subject to the proceedings before the foreign court
over which our courts have no control. We do not believe such a procedure
is countenanced or contemplated in the Rules of Court.

Another reason for the disallowance of this indebtedness as a deduction,

springs from the provisions of Section 89, letter (d), number (1), of the
National Internal Revenue Code which reads:

(d) Miscellaneous provisions — (1) No deductions shall be allowed in

the case of a non-resident not a citizen of the Philippines unless the
executor, administrator or anyone of the heirs, as the case may be,
includes in the return required to be filed under section ninety-three
the value at the time of his death of that part of the gross estate of the
non-resident not situated in the Philippines."

In the case at bar, no such statement of the gross estate of the non-
resident Stevenson not situated in the Philippines appears in the three
returns submitted to the court or to the office of the petitioner Collector of
Internal Revenue. The purpose of this requirement is to enable the revenue
officer to determine how much of the indebtedness may be allowed to be
deducted, pursuant to (b), number (1) of the same section 89 of the Internal
Revenue Code which provides:

(b) Deductions allowed to non-resident estates. — In the case of a

non-resident not a citizen of the Philippines, by deducting from the
value of that part of his gross estate which at the time of his death is
situated in the Philippines —

(1) Expenses, losses, indebtedness, and taxes. — That proportion of

the deductions specified in paragraph (1) of subjection (a) of this
 section11 which the value of such part bears the value of his entire
gross estate wherever situated;"

In other words, the allowable deduction is only to the extent of

the portion of the indebtedness which is equivalent to the proportion that
the estate in the Philippines bears to the total estate wherever situated.
Stated differently, if the properties in the Philippines constitute but 1/5 of
the entire assets wherever situated, then only 1/5 of the indebtedness may
be deducted. But since, as heretofore adverted to, there is no statement of
the value of the estate situated outside the Philippines, no part of the
indebtedness can be allowed to be deducted, pursuant to Section 89, letter
(d), number (1) of the Internal Revenue Code.

For the reasons thus stated, we affirm the ruling of the lower court
disallowing the deduction of the alleged indebtedness in the sum of
P10,022.47.

In recapitulation, we hold and declare that:

(a) only the one-half (1/2) share of the decedent Stevenson in the
conjugal partnership property constitutes his hereditary estate subject
to the estate and inheritance taxes;

(b) the intangible personal property is not exempt from inheritance

tax, there existing no complete total reciprocity as required in section
122 of the National Internal Revenue Code, nor is the decedent's
estate entitled to an exemption of P4,000.00 in the computation of the
estate tax;

(c) for the purpose of the estate and inheritance taxes, the 210,000
shares of stock in the Mindanao Mother Lode Mines, Inc. are to be
appraised at P0.325 per share; and

(d) the P2,000.00 for funeral expenses should be deducted in the

determination of the net asset of the deceased Stevenson.

In all other respects, the decision of the Court of Tax Appeals is affirmed.

Respondent's claim for interest on the amount allegedly overpaid, if any

actually results after a recomputation on the basis of this decision is hereby
denied in line with our recent decision in Collector of Internal Revenue v.
St. Paul's Hospital (G.R. No. L-12127, May 29, 1959) wherein we held that,
"in the absence of a statutory provision clearly or expressly directing or
authorizing such payment, and none has been cited by respondents, the
National Government cannot be required to pay interest."

WHEREFORE, as modified in the manner heretofore indicated, the

judgment of the lower court is hereby affirmed in all other respects not
inconsistent herewith. No costs. So ordered.

Paras, C.J., Bengzon, Bautista Angelo, Labrador, Concepcion, Reyes,

J.B.L., Gutierrez David, Paredes and Dizon, JJ., concur.

1. ADONG VS. CHEONG SENG GEE, 43 PHIL 43

FACTS
 Cheong Boo, a native of China, died intestate in Zamboanga and left
property worth nearly P100,000.
 The estate of the deceased was claimed by Cheong Seng Gee, an alleged
legitimate child by a marriage contracted by Cheong Boo with Tan Dit in
China in 1895. On the other hand, Mora Adong, the alleged lawful wife of
the deceased who married him in 1896 in Basilan, and her daughters are
also claiming as heirs of the decedent.
 The conflicting claims to the estate were ventilated in the CFI of
Zamboanga.
 The trial judge reached the conclusion that the proof of the marriage of
Tan Dit to the decedent was not sufficient.
 Cheong Seng Gee should share in the estate as a natural child.
 On the other hand, the trial judge reached the conclusion that the
marriage between the Mora Adong and the deceased had been
adequately proved, but, under the laws of the Philippine Islands, it could
not be held to be a lawful marriage; thus, the daughters Payang and
Rosalia would inherit as natural children.
 The order of the trial judge, following these conclusions, was that there
should be a partition of the property of the deceased Cheong Boo
between the natural children, Cheong Seng Gee, Payang, and Rosalia.
 Thus, both parties appealed.

ISSUE:
1. W/N the marriage between Tan Dit and the decedent is valid.
2. W/N the marriage between Mora and the decedent is valid
considering that it is a Mohammedan marriage.

RULING
First issue:
 SC ruled that to establish a valid foreign marriage pursuant to this comity
provision, it is first necessary to prove before the Philippine courts the
existence of the foreign law as a question of fact, and it is then necessary
to prove the alleged foreign marriage by convincing evidence.
 THE PROOF PRESENTED IN COURT DID NOT SUSTAIN THE VALIDITY OF
THE MARRIAGE OF TAN BIT AND THE DECEDENT.
 The Court noted a strong inclination on the part of the Chinese
witnesses, especially the brother of Cheong Boo, to protect the interests
of the alleged son, Cheong Seng Gee, by overstepping the limits of
truthfulness. The Court also noted that reliable witnesses stated that in
the year 1895, when Cheong Boo was supposed to have been in China,
he was in reality in Jolo, in the Philippine Islands.
 The immigration documents only go to show the relation of parent and
child existing between the deceased Cheong Boo and his son Cheong
 Seng Gee and do not establish the marriage between the deceased and
the mother of Cheong Seng Gee.
 ALSO THERE IS NO COMPETENT TESTIMONY AS TO WHAT THE LAWS
OF CHINA IN THE PROVINCE OF AMOY CONCERNING MARRIAGE WERE
IN 1895.
 As in the Encarnacion case, there is lacking proof so clear, strong, and
unequivocal as to produce a moral conviction of the existence of the
alleged prior Chinese marriage. Substitute twenty-three years for forty
years and the two cases are the same.
 AS TO THE TESTAMENTARY RIGHTS OF CHEONG SENG GEE AS AN
ACKNOWLEDGED NATURAL CHILD, SUCH WAS NOT PRONOUNCED AS
AN ERROR SINCE THE OPPOSITORS FAILED TO ASSIGNED IT AS AN
ERROR AND MERELY KEPT SILENCE.

second issue:
 YES. MARRIAGE MAY BE SOLEMNIZED BY EITHER A JUDGE OF ANY
COURT INFERIOR TO THE SUPREME COURT, JUSTICE OF THE PEACE, OR
PRIEST OR MINISTER OF THE GOSPEL OF ANY DENOMINATION . . ."
 "Priest," according to the lexicographers, means one especially
consecrated to the service of a divinity and considered as the medium
through whom worship, prayer, sacrifice, or other service is to be offered
to the being worshipped, and pardon, blessing, deliverance, etc.,
obtained by the worshipper, as a priest of Baal or of Jehovah; a Buddhist
priest. "Minister of the Gospel" means all clergymen of every
denomination and faith. A "denomination" is a religious sect having a
particular name.
 A MOHAMMEDAN IMAN IS A "PRIEST OR MINISTER OF THE GOSPEL,"
AND MOHAMMEDANISM IS A "DENOMINATION," WITHIN THE
MEANING OF THE MARRIAGE LAW.
 "NO PARTICULAR FORM FOR THE CEREMONY OF MARRIAGE IS
REQUIRED, BUT THE PARTIES MUST DECLARE, IN THE PRESENCE OF THE
PERSON SOLEMNIZING THE MARRIAGE, THAT THEY TAKE EACH OTHER
AS HUSBAND AND WIFE."
 The law is quite correct in affirming that no precise ceremonial is
indispensable requisite for the creation of the marriage contract. The two
essentials of a valid marriage are capacity and consent. The latter
element may be inferred from the ceremony performed, the acts of the
parties, and habit or repute. In this instance, there is no question of
capacity. Nor do we think there can exist any doubt as to consent. While
it is true that during the Mohammedan ceremony, the remarks of the
priest were addressed more to the elders than to the participants, it is
likewise true that the Chinaman and the Mora woman did in fact take
each other to be husband and wife and did thereafter live together as
husband and wife.
 IT WAS SHOWN BY EVIDENCE THAT THE DECEDENT WAS MARRIED TO
THE MORA ADONG ACCORDING TO THE CEREMONIES PRESCRIBED BY
THE BOOK ON MARRIAGE OF THE KORAN, BY THE MOHAMMEDAN
IMAN (PRIEST) HABUBAKAR. THAT A MARRIAGE CEREMONY TOOK
PLACE IS ESTABLISHED BY ONE OF THE PARTIES TO THE MARRIAGE,
THE MORA ADONG, BY THE IMAN WHO SOLEMNIZED THE MARRIAGE,
AND BY OTHER EYEWITNESSES, ONE OF WHOM WAS THE FATHER OF
 THE BRIDE, AND ANOTHER, THE CHIEF OF THE RANCHERIA, NOW A
MUNICIPAL COUNCILOR.
 The groom complied with Quranic law by giving to the bride a dowry of
P250 in money and P250 in goods. From the marriage day until the
death of Cheong Boo, twenty-three years later, the Chinaman and the
Mora Adong cohabited as husband and wife. To them were born five
children, two of whom, Payang and Rosalia, are living. Both in his
relations with Mora Adong and with third persons during his lifetime,
Cheong Boo treated Adong as his lawful wife. He admitted this
relationship in several private and public documents. Thus, when different
legal documents were executed, including decrees of registration,
Cheong Boo stated that he was married to the Mora Adong while as late
as 1918, he gave written consent to the marriage of his minor daughter,
Payang.
 THE COURT RULED THAT THE MARRIAGE WAS VALID. THE LAW OF THE
PHILIPPINE ISLANDS HAS LONG RECOGNIZED THE RIGHT OF THE
PEOPLE TO THE FREE EXERCISE OF RELIGION. VARIOUS RESPONSIBLE
OFFICIALS HAVE SO OFT ANNOUNCED THE PURPOSE OF THE
GOVERNMENT NOT TO INTERFERE WITH THE CUSTOMS OF THE
MOROS, ESPECIALLY THEIR RELIGIOUS CUSTOMS.

Other digested version:

 FACTS: Estate of Cheong Boo is claimed by two parties (1) his
allegedlegitimate child from a marriage contracted in China in 1895,
and(2) his alleged legitimate spouse from a marriage in Basilan
in1896.
  ISSUE: WON a marriage contracted in China and proven mainly by
amatrimonial letter is valid in the Philippines
 HELD: NO;
o To establish a valid foreign marriage, it is first necessary
toprove before the courts of the Islands the existence of the
foreign law as a question of fact,
o and it is then necessary to prove the allegedforeign marriage
by convincing evidence.
o There is a need forproof that is clear, strong and unequivocal
so as to produce amoral conviction of the existence of such
impediment (priormarriage).
AZNAR vs. GARCIA
Facts:
Edward S. Christensen, though born in New York, migrated to
California where he resided and consequently was considered a California
Citizen for a period of nine years to 1913. He came to the Philippines
where he became a domiciliary until the time of his death. However, during
the entire period of his residence in this country, he had always considered
himself as a citizen of California.
In his will, executed on March 5, 1951, he instituted an
acknowledged natural daughter, Maria Lucy Christensen as his only heir
but left a legacy of some money in favor of Helen Christensen Garcia who,
in a decision rendered by the Supreme Court had been declared as an
acknowledged natural daughter of his. Counsel of Helen claims that under
Art. 16 (2) of the civil code, California law should be applied, the matter is
returned back to the law of domicile, that Philippine law is ultimately
applicable, that the share of Helen must be increased in view of
successional rights of illegitimate children under Philippine laws. On the
other hand, counsel for daughter Maria , in as much that it is clear under
Art, 16 (2) of the Mew Civil Code, the national of the deceased must apply,
our courts must apply internal law of California on the matter. Under
California law, there are no compulsory heirs and consequently a testator
should dispose any property possessed by him in absolute dominion.

Issue:
Whether Philippine Law or California Law should apply.

Held:
The Supreme Court deciding to grant more successional rights to
Helen Christensen Garcia said in effect that there be two rules in California
on the matter.
1. The conflict rule which should apply to Californian’s outside the
California, and
2. The internal Law which should apply to California domiciles in
califronia.
The California conflict rule, found on Art. 946 of the California Civil
code States that “if there is no law to the contrary in the place where
personal property is situated, it is deemed to follow the decree of its owner
and is governed by the law of the domicile.”
Christensen being domiciled outside california, the law of his
domicile, the Philippines is ought to be followed.
Wherefore, the decision appealed is reversed and case is remanded
to the lower court with instructions that partition be made as that of
the Philippine law provides.
AZNAR vs GARCIA 7 SCRA 95

Facts:

Edward Christensen is a citizen of the State of California and domiciled in

the Philippines. He executed in his will acknowledging his natural daughter Maria
Lucy Christensen as sole heir but left a legacy of some money in favor of Helen
Christensen Garcia who is declared by the Supreme Court in its decision as
acknowledged natural daughter of Edward C. Counsel of Helen asserts that her
claim must be increased in view of the successional rights of illegitimate children
under Phil. law. Counsel of Maria insists that Art. 16 (2) provides that the
NATIONAL LAW OF THE PERSON applies in intestate and testamentary
successions and since Edward C. is a citizen of CA, its law should be applied. Lower
court ruled that CA law should be applied thus this petition for review.

Issue:

What law should be applicable – Philippine or California Law?

Ruling:

The court refers to Art. 16 (2) providing that intestate and testamentary
successions with respect to order of succession and amt. of successional right is
regulated by the NATIONAL LAW OF THE PERSON.

California Probate Code provides that a testator may dispose of his property in
the form and manner he desires.

Art. 946 of the Civil Code of California provides that if no law on the contrary, the
place where the personal property is situated is deemed to follow the person of
its owner and is governed by the LAW OF HIS DOMICILE.

These provisions are cases when the Doctrine of Renvoi may be applied where the
question of validity of the testamentary provision in question is referred back to
the decedent’s domicile – the Philippines.
S.C. noted the California law provides 2 sets of laws for its citizens: One for
residents therein as provided by the CA Probate Code and another for citizens
domiciled in other countries as provided by Art. 946 of the Civil Code of California.

The conflicts of law rule in CA (Art. 946) authorize the return of question of law to
the testator’s domicile. The court must apply its own rule in the Philippines as
directed in the conflicts of law rule in CA, otherwise the case/issue will not be
resolved if the issue is referred back and forth between 2 states.

The SC reversed the lower court’s decision and remanded the case back to it for
decision with an instruction that partition be made applying the Philippine law.

VAN DORN VS. ROMILLO AND UPTON

MARCH 28, 2013 ~ VBDIAZ

VAN DORN vs. HON. ROMILLO and RICHARD UPTON

G.R. No. L-68470
October 8, 1985
FACTS: Petitioner Alice Van Dorn is a citizen of the Philippines while private
respondent Richard Upton is a citizen of the USA. They were married in
Hongkong in 1972 and begot two children. The parties were divorced in Nevada,
USA in 1982. Alice has then re-married also in Nevada, this time to Theodore Van
Dorn.
In 1983, Richard filed suit against Alice in the RTC-Pasay, stating that Alice’s
business in Ermita, Manila is conjugal property of the parties, and asking that Alice
be ordered to render an accounting of that business, and that Richard be declared
with right to manage the conjugal property.
Alice moved to dismiss the case on the ground that the cause of action is barred by
previous judgment in the divorce proceedings before the Nevada Court wherein
respondent had acknowledged that he and petitioner had “no community property”
as of June 11, 1982.
The Court below (presiding judge: Judge Romillo) denied the MTD in the
mentioned case on the ground that the property involved is located in the
Philippines so that the Divorce Decree has no bearing in the case. The denial is
now the subject of this certiorari proceeding.

ISSUE: What is the effect of the foreign divorce on the parties and their alleged
conjugal property in the Philippines?
HELD: Petition is granted, and respondent Judge is hereby ordered to dismiss the
Complaint…
For the resolution of this case, it is not necessary to determine whether the property
relations between Alice and Richard, after their marriage, were upon absolute or
relative community property, upon complete separation of property, or upon any
other regime. The pivotal fact in this case is the Nevada divorce of the parties.

The Nevada District Court, which decreed the divorce, had obtained jurisdiction
over petitioner who appeared in person before the Court during the trial of the case.
It also obtained jurisdiction over private respondent who authorized his attorneys
in the divorce case to agree to the divorce on the ground of incompatibility in the
understanding that there were neither community property nor community
obligations.

As explicitly stated in the Power of Attorney he executed in favor of the law firm
of KARP & GRAD LTD. to represent him in the divorce proceedings:
xxx xxx xxx
You are hereby authorized to accept service of Summons, to file an Answer,
appear on my behalf and do all things necessary and proper to represent me,
without further contesting, subject to the following:

1. That my spouse seeks a divorce on the ground of incompatibility.

2. That there is no community of property to be adjudicated by the Court.
3. That there are no community obligations to be adjudicated by the court.
xxx xxx xxx

There can be no question as to the validity of that Nevada divorce in any of the
States of the United States. The decree is binding on private respondent as an
American citizen. What he is contending in this case is that the divorce is not valid
and binding in this jurisdiction, the same being contrary to local law and public
policy.

It is true that owing to the nationality principle embodied in Article 15 of the Civil
Code, only Philippine nationals are covered by the policy against absolute divorces
the same being considered contrary to our concept of public police and morality.
However, aliens may obtain divorces abroad, which may be recognized in the
Philippines, provided they are valid according to their national law. In this case,
the divorce in Nevada released private respondent from the marriage from the
standards of American law, under which divorce dissolves the marriage.

Thus, pursuant to his national law, private respondent is no longer the husband of
petitioner. He would have no standing to sue in the case below as petitioner’s
husband entitled to exercise control over conjugal assets. As he is bound by the
Decision of his own country’s Court, which validly exercised jurisdiction over
him, and whose decision he does not repudiate, he is estopped by his own
representation before said Court from asserting his right over the alleged conjugal
property.

Van Dorn v.
Romillo Digest
Van Dorn vs Romillo
G.R. No. L-68470 October 8, 1985
Ponente: Melencio-Herrera, J.:

Facts:

After a divorce was granted by a United States court

between petitioner Alice Reyes Van Dorn, a Filipina
and her American husband, the latter filed a civil
case in a trial court here in the Philippines alleging
that the her business was conjugal property and
praying that she be ordered to render an accounting
and that the plaintiff be granted the right to manage
the business.

Issue: Whether or not the divorce is valid

YES.

There can be no question as to the validity of the

Nevada divorce in any of the States of the US. The
decree is binding on private respondent as an
American citizen. Owing to the nationality principle
embodied in Article 15 of the Civil Code, only
Philippine nationals are covered by the policy
against absolute divorces the same being considered
contrary to our concept of public policy and
morality. However, aliens may obtain divorces
abroad, which may be recognized in the Philippines,
provided they are valid according to their national
law. The divorce is likewise valid as to the
petitioner.

As such, pursuant to his national law, he is no longer

the husband of the petitioner. He has no standing to
sue as husband of the petitioner over their conjugal
assets. He is estopped by his own representation
before his own country's court from asserting that
right to exercise control over their conjugal assets.
As to Richard Upton the divorce is binding on him as
an American Citizen. As he is bound by the Decision
of his own country’s Court, which validly exercised
jurisdiction over him, and whose decision he does
not repudiate, he is estopped by his own
representation before said Court from asserting his
right over the alleged conjugal property. Only
Philippine Nationals are covered by the policy
against absolute divorce the same being considered
contrary to our concept of public policy
and morality. Alicia Reyes under our National law is
still considered married to private respondent.
However, petitioner should not be obliged to live
together with, observe respect and fidelity, and
render support to private respondent. The latter
should not continue to be one of her heirs with
possible rights to conjugal property. She should not
be discriminated against her own country if the ends
of justice are to be served.
G.R. No. L-24170, Illuh Asaali vs Commissioner of
Customs26 SCRA 382 – Civil Law – Preliminary Title –
Territoriality of Philippine Laws
Criminal Law – Characteristics of Penal Laws –
Territoriality
In 1950, customs officers intercepted 5 ships owned by
Illuh Asaali et al. Said ships were found to be from
Borneo and were on their way to a port in Tawi-tawi,
Sulu. On board the ships were rattan products and
cigarettes. The customs confiscated said items on the
ground that Asaali et al do not have the required import
permits for the said goods.
Asaali questioned the legality of the seizure as he
contended that the customs officers did not intercept
them within Philippine waters but rather, they were
intercepted in the high seas. Hence, according to
Asaali, Philippine import laws have no application to the
case at bar.
ISSUE: Whether or not Asaali’s contention is correct.
HELD: No. Asaali’s contention is without merit. The
Revised Penal Code leaves no doubt as to its
applicability and enforceability not only within the
Philippines, its interior waters and maritime zone, but
also outside of its jurisdiction against those committing
offense while on a Philippine ship. The ships
intercepted were of Philippine registry.
Further, it has been an establish principle that a state
has the right to protect itself and its revenues, a right
not limited to its own territory but extending to the high
seas. The authority of a nation within its own territory is
absolute and exclusive. The seizure of a vessel within
the range of its cannon by a foreign force is an invasion
of that territory, and is a hostile act which it is its duty to
repel. But its power to secure itself from injury may
certainly be exercised beyond the limits of its territory.
GOVERNMENT VS. FRANK
MARCH 28, 2013 ~ VBDIAZ
THE GOVT OF THE PHILIPPINE ISLANDS vs. FRANK
G. R. No. 2935
March 23, 1909
FACTS: In 1903, in the city of Chicago, Illinois, Frank entered into a
contract for a period of 2 years with the Plaintiff, by which Frank was to
receive a salary as a stenographer in the service of the said Plaintiff, and
in addition thereto was to be paid in advance the expenses incurred in
traveling from the said city of Chicago to Manila, and one-half salary
during said period of travel.

Said contract contained a provision that in case of a violation of its terms

on the part of Frank, he should become liable to the Plaintiff for the
amount expended by the Government by way of expenses incurred in
traveling from Chicago to Manila and the one-half salary paid during
such period.

Frank entered upon the performance of his contract and was paid half-
salary from the date until the date of his arrival in the Philippine Islands.

Thereafter, Frank left the service of the Plaintiff and refused to make a
further compliance with the terms of the contract.

The Plaintiff commenced an action in the CFI-Manila to recover from

Frank the sum of money, which amount the Plaintiff claimed had been
paid to Frank as expenses incurred in traveling from Chicago to Manila,
and as half-salary for the period consumed in travel.
It was expressly agreed between the parties to said contract that Laws
No. 80 and No. 224 should constitute a part of said contract.

The Defendant filed a general denial and a special defense, alleging in

his special defense that
(1) the Government of the Philippine Islands had amended Laws No. 80
and No. 224 and had thereby materially altered the said contract, and
also that
(2) he was a minor at the time the contract was entered into and was
therefore not responsible under the law.
the lower court rendered a judgment against Frank and in favor of the
Plaintiff for the sum of 265. 90 dollars

ISSUE:
1. Did the amendment of the laws altered the tenor of the contract
entered into between Plaintiff and Defendant?
2. Can the defendant allege minority/infancy?

HELD: the judgment of the lower court is affirmed

1. NO; It may be said that the mere fact that the legislative department of
the Government of the Philippine Islands had amended said Acts No. 80
and No. 224 by Acts No. 643 and No. 1040 did not have the effect of
changing the terms of the contract made between the Plaintiff and the
Defendant. The legislative department of the Government is expressly
prohibited by section 5 of the Act of Congress of 1902 from altering or
changing the terms of a contract. The right which the Defendant had
acquired by virtue of Acts No. 80 and No. 224 had not been changed in
any respect by the fact that said laws had been amended. These acts,
constituting the terms of the contract, still constituted a part of said
contract and were enforceable in favor of the Defendant.
2. NO; The Defendant alleged in his special defense that he was a minor
and therefore the contract could not be enforced against him. The record
discloses that, at the time the contract was entered into in the State of
Illinois, he was an adult under the laws of that State and had full
authority to contract. Frank claims that, by reason of the fact that, under
that laws of the Philippine Islands at the time the contract was made,
made persons in said Islands did not reach their majority until they had
attained the age of 23 years, he was not liable under said contract,
contending that the laws of the Philippine Islands governed.

It is not disputed — upon the contrary the fact is admitted — that at the
time and place of the making of the contract in question the Defendant
had full capacity to make the same. No rule is better settled in law than
that matters bearing upon the execution, interpretation and validity of a
contract are determined b the law of the place where the contract is
made. Matters connected with its performance are regulated by the law
prevailing at the place of performance. Matters respecting a remedy,
such as the bringing of suit, admissibility of evidence, and statutes of
limitations, depend upon the law of the place where the suit is brought.
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Miciano vs Brimo
TITLE: Juan Miciano v Andre Brimo
CITATION: GR No.22595, November 1, 1927| 50 Phil
867

FACTS:

Juan Miciano, judicial administrator of the estate in

question, filed a scheme of partition. Andre Brimo, one of
the brothers of the deceased (Joseph Brimo) opposed
Miciano’s participation in the inheritance. Joseph Brimo is
a Turkish citizen.

ISSUE: Whether Turkish law or Philippine law will be the

basis on the distribution of Joseph Brimo’s estates.

HELD:

Though the last part of the second clause of the will

expressly said that “it be made and disposed of in
accordance with the laws in force in the Philippine Island”,
this condition, described as impossible conditions, shall be
considered as not imposed and shall not prejudice the heir
or legatee in any manner whatsoever, even should the
testator otherwise provide. Impossible conditions are
further defined as those contrary to law or good morals.
Thus, national law of the testator shall govern in his
testamentary dispositions.
The court approved the scheme of partition submitted by
the judicial administrator, in such manner as to include
Andre Brimo, as one of the legatees.

G.R. No. L-23678 (June 6, 1967)

Testate of Amos Bellis vs. Edward A. Bellis, et al
FACTS:
Amos G. Bellis was a citizen of the State of Texas and of
the United States. He had five legitimate children with his
first wife (whom he divorced), three legitimate children with
his second wife (who survived him) and, finally, three
illegitimate children.
6 years prior Amos Bellis’ death, he executed two(2) wills,
apportioning the remainder of his estate and properties to
his seven surviving children. The appellants filed their
oppositions to the project of partition claiming that they have
been deprived of their legitimes to which they were entitled
according to the Philippine law. Appellants argued that the
deceased wanted his Philippine estate to be governed by
the Philippine law, thus the creation of two separate wills.
ISSUE:
Whether or not the Philippine law be applied in the case in
the determination of the illegitimate children’s successional
rights
RULING:
Court ruled that provision in a foreigner’s will to the effect
that his properties shall be distributed in accordance with
Philippine law and not with his national law, is illegal and
void, for his national law cannot be ignored in view of those
matters that Article 10 — now Article 16 — of the Civil Code
states said national law should govern.
Where the testator was a citizen of Texas and domiciled in
Texas, the intrinsic validity of his will should be governed by
his national law. Since Texas law does not require legitimes,
then his will, which deprived his illegitimate children of the
legitimes, is valid.
The Supreme Court held that the illegitimate children are not
entitled to the legitimes under the texas law, which is the
national law of the deceased.