Allstate Ins. Co. v. Hague, 449 U.S.

302 (1980)
Allstate Ins. Co. v. Hague No. 79938
Argued October 6, 1980 Decided January 13, 1981 449 U.S. 302
different result, since vindication of the rights of the estate of a Minnesota employee is an
important state concern. Nor does the decedent's residence in Wisconsin constitutionally
mandate application of Wisconsin law to the exclusion of forum law. Employment status is not a
sufficiently less important status than residence, when combined with the decedent's daily
commute across state lines and the other Minnesota contacts present, to prohibit the choice of
law result in this case on constitutional grounds. Pp. 449 U. S. 313-317.

CERTIORARI TO THE SUPREME COURT OF MINNESOTA
Syllabus
Respondent's husband died of injuries suffered when a motorcycle on which he was a
passenger was struck by an automobile. The accident occurred in Wisconsin near the Minnesota
border. The operators of both vehicles were Wisconsin residents, as was the decedent, who,
however, had been employed in Minnesota and had commuted daily to work from Wisconsin.
Neither vehicle operator carried valid insurance, but the decedent held a policy issued by
petitioner covering three automobiles owned by him and containing an uninsured motorist
clause insuring him against loss incurred from accidents with uninsured motorists, but limiting
such coverage to $15,000 for each automobile. After the accident, respondent moved to and
became a resident of Minnesota, and was subsequently appointed in that State as personal
representative of her husband's estate. She then brought an action in a Minnesota court
seeking a declaration under Minnesota law that the $15,000 uninsured motorist coverage on
each of her late husband's three automobiles could be "stacked" to provide total coverage of
$45,000. Petitioner defended on the ground that whether the three uninsured motorist
coverages could be stacked should be determined by Wisconsin law, since the insurance policy
was delivered in Wisconsin, the accident occurred there, and all persons involved were
Wisconsin residents at the time of the accident. The trial court, interpreting Wisconsin law to
disallow stacking, concluded that Minnesota's choice of law rules required the application of
Minnesota law permitting stacking, and granted summary judgment for respondent. The
Minnesota Supreme Court affirmed.
Held: The judgment is affirmed. Pp. 449 U. S. 307-320; 449 U. S. 322-331.
(b) Petitioner was at all times present and doing business in Minnesota. By virtue of such
presence, petitioner can hardly claim unfamiliarity with the laws of the host jurisdiction and
surprise that the state courts might apply forum law to litigation in which the company is
involved. Moreover, such presence gave Minnesota an interest in regulating the company's
insurance obligations insofar as they affected both a Minnesota resident and court-appointed
representative (respondent) and a longstanding member of Minnesota's workforce
(respondent's decedent). Pp. 449 U. S. 317-318.
(c) Respondent became a Minnesota resident prior to institution of the instant litigation. Such
residence and subsequent appointment in Minnesota as personal representative of her late
husband's estate constitute a Minnesota contact which gives Minnesota an interest in
respondent's recovery. Pp. 449 U. S. 318-319.
JUSTICE STEVENS concluded:
1. The Full Faith and Credit Clause did not require Minnesota, the forum State, to apply
Wisconsin law to the contract interpretation question presented. Although the Minnesota
courts' decision to apply Minnesota law was unsound as a matter of conflicts law, no threat to
Wisconsin's sovereignty ensued from allowing the substantive question as to the meaning of
the insurance contract to be determined by the law of another State. Pp. 449 U. S. 322-326.
2. The Due Process Clause of the Fourteenth Amendment did not prevent Minnesota from
applying its own law. Neither the "stacking" rule itself nor Minnesota's application of it to these
litigants raised any

Page 449 U. S. 304

289 N.W.2d 43, affirmed.

serious question of fairness. Nor did the Minnesota courts' decision to apply this rule violate
JUSTICE BRENNAN, joined by JUSTICE WHITE, JUSTICE MARSHALL, and JUSTICE BLACKMUN,
due process because that decision frustrated the contracting parties' reasonable expectations.
concluded that Minnesota has a significant aggregation of contacts with the parties and the
The decision was consistent with due process because it did not result unfairness to either
occurrence, creating state interests, such that application of its law is neither arbitrary nor
litigant, not because Minnesota had an interest in the plaintiff as resident or the decedent as
fundamentally unfair, and, accordingly, the choice of law by the Minnesota Supreme Court does
employee. Pp. 449 U. S. 326-331.
not violate the Due Process Clause of the Fourteenth Amendment or the Full Faith and Credit
Clause. Pp. 449 U. S. 307-320.
BRENNAN, J., announced the judgment of the Court and delivered an opinion, in which WHITE,
MARSHALL, and BLACKMUN, JJ., joined. STEVENS, J., filed an opinion concurring in the
Page 449 U. S. 303
judgment, post, p. 449 U. S. 320. POWELL, J., filed a dissenting opinion, in which BURGER, C.J.,
and REHNQUIST, J., joined, post, p. 449 U. S. 332. STEWART, J., took no part in the consideration
(a) Respondent's decedent was a member of Minnesota's workforce. The State of employment or decision of the case.
has police power responsibilities towards nonresident employees that are analogous to those it
has towards residents, as such employees use state services and amenities and may call upon
JUSTICE BRENNAN announced the judgment of the Court and delivered an opinion, in which
state facilities in appropriate circumstances. Also, the State's interest in its commuting
JUSTICE WHITE, JUSTICE MARSHALL, and JUSTICE BLACKMUN joined.
nonresident employees, such as respondent's decedent, reflects a state concern for the safety
and wellbeing of its workforce and the concomitant effect on Minnesota employers. That the
decedent was not killed while commuting to work or while in Minnesota does not dictate a
This Court granted certiorari to determine whether the Due Process Clause of the Fourteenth
Amendment [Footnote 1] or the Full Faith and Credit Clause of Art. IV, § 1, [Footnote 2] of the
United States Constitution bars the Minnesota Supreme Court's choice of substantive
Minnesota law to govern the effect of a provision in an insurance policy issued to respondent's
decedent. 44 U.S. 1070 (1980).
(5) application of the better rule of law. Although stating that the Minnesota contacts might not
be, "in themselves, sufficient to mandate application of [Minnesota] law," [Footnote 8] 289
N.W.2d 43, 49
Page 449 U. S. 307

Page 449 U. S. 305

(1978), under the first four factors, the court concluded that the fifth factor -- application of the
better rule of law -- favored selection of Minnesota law. The court emphasized that a majority
I of States allow stacking, and that legal decisions allowing stacking "are fairly recent and well
considered in light of current uses of automobiles." Ibid. In addition, the court found the
Minnesota rule superior to Wisconsin's "because it requires the cost of accidents with
Respondent's late husband, Ralph Hague, died of injuries suffered when a motorcycle on which
uninsured motorists to be spread more broadly through insurance premiums than does the
he was a passenger was struck from behind by an automobile. The accident occurred in Pierce
Wisconsin rule." Ibid. Finally, after rehearing en banc, [Footnote 9] the court buttressed its
County, Wis., which is immediately across the Minnesota border from Red Wing, Minn. The
initial opinion by indicating "that contracts of insurance on motor vehicles are in a class by
operators of both vehicles were Wisconsin residents, as was the decedent, who, at the time of
themselves," since an insurance company "knows the automobile is a movable item which will
the accident, resided with respondent in Hager City, Wis., which is one and one-half miles from
be driven from state to state." 289 N.W.2d at 50 (1979). From this premise, the court concluded
Red Wing. Mr. Hague had been employed in Red Wing for the 15 years immediately preceding
that application of Minnesota law was "not so arbitrary and unreasonable as to violate due
his death and had commuted daily from Wisconsin to his place of employment.
process." Ibid.

Neither the operator of the motorcycle nor the operator of the automobile carried valid
II
insurance. However, the decedent held a policy issued by petitioner Allstate Insurance Co.
covering three automobiles owned by him and containing an uninsured motorist clause insuring
him against loss incurred from accidents with uninsured motorists. The uninsured motorist It is not for this Court to say whether the choice of law analysis suggested by Professor Leflar is
coverage was limited to §15,000 for each automobile. [Footnote 3] to be preferred or whether we would make the same choice of law decision if sitting as the
Minnesota Supreme Court. Our sole function is to determine whether the Minnesota Supreme
Court's choice of its own substantive law in this case exceeded federal constitutional limitations.
After the accident, but prior to the initiation of this lawsuit, respondent moved to Red Wing.
Implicit in this inquiry is the recognition, long accepted by this Court, that a set of facts giving
Subsequently, she married a Minnesota resident and established residence with her new
rise to a lawsuit, or a particular issue within a lawsuit, may justify, in constitutional terms,
husband in Savage, Minn. At approximately the same time, a Minnesota Registrar of Probate
application of the law of more than one jurisdiction. See, e.g., Watson v. Employers Liability
appointed respondent personal representative of her deceased husband's estate. Following her
Assurance Corp., 348 U. S. 66, 348 U. S. 72-73 (1954); n. 11, infra. See generally Clay v. Sun
appointment, she brought this action in Minnesota District Court seeking a declaration under
Insurance Office, Ltd., 377 U.S.
Minnesota law that the $15,000 uninsured motorist coverage on each of her late husband's
three automobiles could be "stacked" to provide total coverage of $45,000. Petitioner defended
on the ground that whether the three uninsured motorist Page 449 U. S. 308

Page 449 U. S. 306
coverages could be stacked should be determined by Wisconsin law, since the insurance policy
was delivered in Wisconsin, the accident occurred in Wisconsin, and all persons involved were
Wisconsin residents at the time of the accident.
The Minnesota District Court disagreed. Interpreting Wisconsin law to disallow stacking, the
court concluded that Minnesota's choice of law rules required the application of Minnesota law
permitting stacking. The court refused to apply Wisconsin law as "inimical to the public policy of
Minnesota," and granted summary judgment for respondent. [Footnote 4]
The Minnesota Supreme Court, sitting en banc, affirmed the District Court. [Footnote 5] The
court, also interpreting Wisconsin law to prohibit stacking, [Footnote 6] applied Minnesota law
after analyzing the relevant Minnesota contacts and interests within the analytical framework
developed by Professor Leflar. [Footnote 7] See Leflar, Choice-Influencing Considerations in
Conflicts Law, 41 N.Y.U.L.Rev. 267 (1966). The state court, therefore, examined the conflict of
laws issue in terms of (1) predictability of result, (2) maintenance of interstate order, (3)
simplification of the judicial task, (4) advancement of the forum's governmental interests, and
179, 377 U. S. 181-182 (1964) (hereinafter cited as Clay II). As a result, the forum State may
have to select one law from among the laws of several jurisdictions having some contact with
the controversy.
In deciding constitutional choice of law questions, whether under the Due Process Clause or the
Full Faith and Credit Clause, [Footnote 10] this Court has traditionally examined the contacts of
the State, whose law was applied, with the parties and with the occurrence or transaction giving
rise to the litigation. See Clay II, supra at 377 U. S. 183. In order to ensure that the choice of law
is neither arbitrary nor fundamentally unfair, see Alaska Packers Assn. v. Industrial Accident
Comm'n, 294 U. S. 532, 294 U. S. 542 (1935), the Court has invalidated the choice of law of a
State which has had no significant contact or significant aggregation of contacts, creating state
interests, with the parties and the occurrence or transaction. [Footnote 11]
Page 449 U. S. 309
Two instructive examples of such invalidation are Home Ins. Co. v. Dick, 281 U. S. 397 (1930),
and John Hancock Mutual Life Ins. Co. v. Yates, 299 U. S. 178 (1936). In both cases, the selection
of forum law rested exclusively on the presence of one nonsignificant forum contact.
Home Ins. Co. v. Dick involved interpretation of an insurance policy which had been issued in Page 449 U. S. 312
Mexico, by a Mexican insurer, to a Mexican citizen, covering a Mexican risk. The policy was
subsequently assigned to Mr. Dick, who was domiciled in Mexico and "physically present and
In Cardillo v. Liberty Mutual Ins. Co., supra, a District of Columbia resident, employed by a
acting in Mexico," 281 U.S. at 281 U. S. 408, although he remained a nominal permanent
District of Columbia employer and assigned by the employer for the three years prior to his
resident of Texas. The policy restricted coverage to losses occurring in certain Mexican waters
death to work in Virginia, was killed in an automobile crash in Virginia in the course of his daily
and, indeed, the loss occurred in those waters. Dick brought suit
commute home from work. The Court found the District's contacts with the parties and the
occurrence sufficient to satisfy constitutional requirements, based on the employee's residence
Page 449 U. S. 310 in the District, his commute between home and the Virginia workplace, and his status as an
employee of a company "engaged in electrical construction work in the District of Columbia and
surrounding areas." Id. at 330 U. S. 471. [Footnote 16]
in Texas against a New York reinsurer. Neither the Mexican insurer nor the New York reinsurer
had any connection to Texas. [Footnote 12] The Court held that application of Texas law to void
the insurance contract's limitation' of actions clause violated due process. [Footnote 13] Similarly, Clay II upheld the constitutionality of the application of forum law. There, a policy of
insurance had issued in Illinois to an Illinois resident. Subsequently the insured moved to Florida
and suffered a property loss in Florida. Relying explicitly on the nationwide coverage of the
The relationship of the forum State to the parties and the transaction was similarly attenuated
policy and the presence of the insurance company in Florida and implicitly on the plaintiff's
in John Hancock Mutual Life Ins. Co. v. Yates. There, the insurer, a Massachusetts corporation,
Florida residence and the occurrence of the property loss in Florida, the Court sustained the
issued a contract of insurance on the life of a New York resident. The contract was applied for,
Florida court's choice of Florida law.
issued, and delivered in New York, where the insured and his spouse resided. After the insured
died in New York, his spouse moved to Georgia and brought suit on the policy in Georgia. Under
Georgia law, the jury was permitted to take into account oral modifications when deciding The lesson from Dick and Yates, which found insufficient forum contacts to apply forum law,
whether an insurance policy application contained material misrepresentations. Under New and from Alaska Packers, Cardillo, and Clay II, which found adequate contacts to sustain the
York law, however, such misrepresentations were to be evaluated solely on the basis of the choice of forum law, [Footnote 17] is that for a State's substantive
written application. The Georgia court applied Georgia law. This Court reversed, finding
application of Georgia law to be unconstitutional.
Page 449 U. S. 313

Dick and Yates stand for the proposition that, if a State has only an insignificant contact with the
parties and the
Page 449 U. S. 311
occurrence or transaction, application of its law is unconstitutional. [Footnote
14] Dick concluded that nominal residence -- standing alone -- was inadequate; Yates held that a
post-occurrence change of residence to the forum State -- standing alone -- was insufficient to
justify application of forum law. Although instructive as extreme examples of selection of forum
law, neither Dick nor Yates governs this case. For, in contrast to those decisions, here, the
Minnesota contacts with the parties and the occurrence are obviously significant. Thus, this
case is like Alaska Packers, Cardillo v. Liberty Mutual Ins. Co., 330 U. S. 469 (1947), and Clay II --
cases where this Court sustained choice of law decisions based on the contacts of the State,
whose law was applied, with the parties and occurrence.
In Alaska Packers, the Court upheld California's application of its Workmen's Compensation Act,
where the most significant contact of the worker with California was his execution of an
employment contract in California. The worker, a nonresident alien from Mexico, was hired in
California for seasonal work in a salmon canning factory in Alaska. As part of the employment
contract, the employer, who was doing business in California, agreed to transport the worker to
Alaska and to return him to California when the work was completed. Even though the
employee contracted to be bound by the Alaska Workmen's Compensation Law and was injured
in Alaska, he sought an award under the California Workmen's Compensation Act. The Court
held that the choice of California law was not "so arbitrary or unreasonable as to amount to a
denial of due process," 294 U.S. at 249 U. S. 542, because "[w]ithout a remedy in California, [he]
would be remediless," ibid., and because of California's interest that the worker not become a
public charge, ibid. [Footnote 15]
law to be selected in a constitutionally permissible manner, that State must have a significant
contact or significant aggregation of contacts, creating state interests, such that choice of its law
is neither arbitrary nor fundamentally unfair. Application of this principle to the facts of this
case persuades us that the Minnesota Supreme Court's choice of its own law did not offend the
Federal Constitution.
III
Minnesota has three contacts with the parties and the occurrence giving rise to the litigation. In
the aggregate, these contacts permit selection by the Minnesota Supreme Court of Minnesota
law allowing the stacking of Mr. Hague's uninsured motorist coverages.
First, and, for our purposes, a very important contact, Mr. Hague was a member of Minnesota's
workforce, having been employed by a Red Wing, Minn., enterprise for the 15
Page 449 U. S. 314
years preceding his death. While employment status may implicate a state interest less
substantial than does resident status, that interest is nevertheless important. The State of
employment has police power responsibilities towards the nonresident employee that are
analogous, if somewhat less profound, than towards residents. Thus, such employees use state
services and amenities and may call upon state facilities in appropriate circumstances.
In addition, Mr. Hague commuted to work in Minnesota, a contact which was important
in Cardillo v. Liberty Mutual Ins. Co., 330 U.S. at 330 U. S. 475-476 (daily commute between
residence in District of Columbia and workplace in Virginia), and was presumably covered by his
uninsured motorist coverage during the commute. [Footnote 18] The State's interest in its
commuting nonresident employees reflects a state concern for the safety and wellbeing of its
workforce and the concomitant effect on Minnesota employers.
That Mr. Hague was not killed while commuting to work or while in Minnesota does not dictate
a different result. To hold that the Minnesota Supreme Court's choice of Minnesota law violated
the Constitution for that reason would require too narrow a view of Minnesota's relationship
with the parties and the occurrence giving rise to the litigation. An automobile accident need
not occur within a particular jurisdiction for that jurisdiction to be connected to the occurrence.
[Footnote 19]
Page 449 U. S. 315
Similarly, the occurrence of a crash fatal to a Minnesota employee in another State is a
Minnesota contact. [Footnote 20] If Mr. Hague had only been injured and missed work for a few
weeks, the effect on the Minnesota employer would have been palpable, and Minnesota's
interest in having its employee made whole would be evident. Mr. Hague's death affects
Minnesota's interest still more acutely, even though Mr. Hague will not return to the Minnesota
workforce. Minnesota's workforce is surely affected by the level of protection the State extends
to it, either directly or indirectly. Vindication of the rights of the estate of a Minnesota
employee, therefore, is an important state concern.
Mr. Hague's residence in Wisconsin does not -- as Allstate seems to argue -- constitutionally
mandate application of Wisconsin law to the exclusion of forum law. [Footnote 21] If, in the
instant
Page 449 U. S. 316
case, the accident had occurred in Minnesota between Mr. Hague and an uninsured Minnesota
motorist, if the insurance contract had been executed in Minnesota covering a Minnesota
registered company automobile which Mr.Hague was permitted to drive, and if a Wisconsin
court sought to apply Wisconsin law, certainly Mr. Hague's residence in Wisconsin, his commute
between Wisconsin and Minnesota, and the insurer's presence in Wisconsin should be
adequate to apply Wisconsin's law. [Footnote 22] See generally Cardillo v. Liberty
Page 449 U. S. 317
Mutual Ins. Co., supra; Alaska Packers Assn. v. Industrial Accident Comm'n, 294 U. S.
532 (1935); Home Ins. Co. v. Dick, 281 U.S. at 281 U. S. 408, n. 5. Employment status is not a
sufficiently less important status than residence, see generally Carroll v. Lanza, 349 U. S.
408 (1955); Alaska Packers Assn. v. Industrial Accident Comm'n, supra, when combined with Mr.
Hague's daily commute across state lines and the other Minnesota contacts present, to prohibit
the choice of law result in this case on constitutional grounds.
Second, Allstate was at all times present and doing business in Minnesota. [Footnote 23] By
virtue of its presence, Allstate can hardly claim unfamiliarity with the laws of the host
jurisdiction and surprise that the state courts might apply forum law to litigation
Page 449 U. S. 318
in which the company is involved.
"Particularly since the company was licensed to do business in [the forum], it must have known
it might be sued there, and that [the forum] courts would feel bound by [forum] law. [Footnote
24]"
Clay v. Sun Insurance Office, Ltd., 363 U. S. 207, 363 U. S. 221 (1960) (Black, J., dissenting).
[Footnote 25] Moreover, Allstate's presence in Minnesota gave Minnesota an interest in
regulating the company's insurance obligations insofar as they affected both a Minnesota
resident and court-appointed representative -- respondent -- and a longstanding member of
Minnesota's workforce -- Mr. Hague. See Hoopeston Canning Co. v. Cullen, 318 U. S. 313, 318 U.
S. 316 (1943).
Third, respondent became a Minnesota resident prior to institution of this litigation. The
stipulated facts reveal that she first settled in Red Wing, Minn., the town in which
Page 449 U. S. 319
her late husband had worked. [Footnote 26] She subsequently moved to Savage, Minn., after
marrying a Minnesota resident who operated an automobile service station in Bloomington,
Minn. Her move to Savage occurred "almost concurrently," 289 N.W.2d at 45, with the initiation
of the instant case. [Footnote 27] There is no suggestion that Mrs. Hague moved to Minnesota
in anticipation of this litigation or for the purpose of finding a legal climate especially hospitable
to her claim. [Footnote 28] The stipulated facts, sparse as they are, negate any such inference.
While John Hancock Mutual Life Ins. Co. v. Yates, 299 U. S. 178 (1936), held that a post-
occurrence change of residence to the forum State was insufficient, in and of itself, to confer
power on the forum State to choose its law, that case did not hold that such a change of
residence was irrelevant. Here, of course, respondent's bona fide residence in Minnesota was
not the sole contact Minnesota had with this litigation. And in connection with her residence in
Minnesota, respondent was appointed personal representative of Mr. Hague's estate by the
Registrar of Probate for the County of Goodhue, Minn. Respondent's residence and subsequent
appointment in Minnesota as personal representative of her late husband's estate constitute a
Minnesota contact which gives Minnesota an interest in respondent's recovery, an interest
which the court below identified as full compensation for "resident accident victims" to keep
them "off welfare rolls" and able "to meet financial obligations." 289 N.W.2d at 49.
Page 449 U. S. 320
In sum, Minnesota had a significant aggregation [Footnote 29] of contacts with the parties and
the occurrence, creating state interests, such that application of its law was neither arbitrary
nor fundamentally unfair. Accordingly, the choice of Minnesota law by the Minnesota Supreme
Court did not violate the Due Process Clause or the Full Faith and Credit Clause. Affirmed.
G.R. No. L-12767 November 16, 1918
In the matter of the estate of EMIL H. JOHNSON. EBBA INGEBORG JOHNSON, applicant-
appellant,
Hartigan & Welch for applicant and appellant.
Hartford Beaumont for Victor Johnson and others as appellees.
Chas. E. Tenney for Alejandra Ibañez de Johnson, personally and as guardian,
and for Simeona Ibañez, appellees.
STREET, J.:
On February 4, 1916, Emil H. Johnson, a native of Sweden and a naturalized citizen of the United
States, died in the city of Manila, leaving a will, dated September 9, 1915, by which he disposed
of an estate, the value of which, as estimated by him, was P231,800. This document is an
holographic instrument, being written in the testator's own handwriting, and is signed by
himself and two witnesses only, instead of three witnesses required by section 618 of the Code
of Civil Procedure. This will, therefore, was not executed in conformity with the provisions of
law generally applicable to wills executed by inhabitants of these Islands, and hence could not
have been proved under section 618.
On February 9, 1916, however, a petition was presented in the Court of First Instance of the city
of Manila for the probate of this will, on the ground that Johnson was at the time of his death a
citizen of the State of Illinois, United States of America; that the will was duly executed in
accordance with the laws of that State; and hence could properly be probated here pursuant to
section 636 of the Code of Civil Procedure. This section reads as follows:
Will made here by alien. — A will made within the Philippine Islands by a citizen or
subject of another state or country, which is executed in accordance with the law of
the state or country of which he is a citizen or subject, and which might be proved
and allowed by the law of his own state or country, may be proved, allowed, and
recorded in the Philippine Islands, and shall have the same effect as if executed
according to the laws of these Islands.
The hearing on said application was set for March 6, 1916, and three weeks publication of
notice was ordered in the "Manila Daily Bulletin." Due publication was made pursuant to this
order of the court. On March 6, 1916, witnesses were examined relative to the execution of the
will; and upon March 16th thereafter the document was declared to be legal and was admitted
to probate. At the same time an order was made nominating Victor Johnson and John T. Pickett
as administrators of the estate, with the sill annexed. Shortly thereafter Pickett signified his
desire not to serve, and Victor Johnson was appointed sole administrator.
By the will in question the testator gives to his brother Victor one hundred shares of the
corporate stock in the Johnson-Pickett Rope Company; to his father and mother in Sweden, the
sum of P20,000; to his daughter Ebba Ingeborg, the sum of P5,000; to his wife, Alejandra Ibañez,
the sum of P75 per month, if she remains single; to Simeona Ibañez, spinster, P65 per month, if
she remains single. The rest of the property is left to the testator's five children — Mercedes,
Encarnacion, Victor, Eleonor and Alberto.
The biographical facts relative to the deceased necessary to an understanding of the case are
these: Emil H. Johnson was born in Sweden, May 25, 1877, from which country he emigrated to
the United States and lived in Chicago, Illinois, from 1893 to 1898. On May 9, 1898, at Chicago,
he was married to Rosalie Ackeson, and immediately thereafter embarked for the Philippine
Islands as a soldier in the Army of the United States. As a result of relations between Johnson
and Rosalie Ackeson a daughter, named Ebba Ingeborg, was born a few months after their
marriage. This child was christened in Chicago by a pastor of the Swedish Lutheran Church upon
October 16, 1898.
After Johnson was discharged as a soldier from the service of the United States he continued to
live in the Philippine Islands, and on November 20, 1902, the wife, Rosalie Johnson, was granted
a decree of divorce from him in the Circuit Court of Cook County, Illinois, on the ground of
desertion. A little later Johnson appeared in the United States on a visit and on January 10,
1903, procured a certificate of naturalization at Chicago. From Chicago he appears to have gone
to Sweden, where a photograph, exhibited in evidence in this case, was taken in which he
appeared in a group with his father, mother, and the little daughter, Ebba Ingeborg, who was
then living with her grandparents in Sweden. When this visit was concluded, the deceased
returned to Manila, where he prospered in business and continued to live until his death.
In this city he appears to have entered into marital relations with Alejandra Ibañez, by whom he
had three children, to wit, Mercedes, baptized May 31, 1903; Encarnacion, baptized April 29,
1906; and Victor, baptized December 9, 1907. The other two children mentioned in the will
were borne to the deceased by Simeona Ibañez.
On June 12, 1916, or about three months after the will had been probated, the attorneys for
Ebba Ingeborg Johnson entered an appearance in her behalf and noted an exception to the
other admitting the will to probate. On October 31, 1916, the same attorneys moved the court
to vacate the order of March 16 and also various other orders in the case. On February 20,
1917, this motion was denied, and from this action of the trial court the present appeal has
been perfected.
As will be discerned, the purpose of the proceeding on behalf of the petitioner is to annul the
decree of probate and put the estate into intestate administration, thus preparing the way for
the establishment of the claim of the petitioner as the sole legitimate heir of her father.
The grounds upon which the petitioner seeks to avoid the probate are four in number and may
be stated, in the same sequence in which they are set forth in the petition, as follows:
(1) Emil H. Johnson was a resident of the city of Manila and not a resident of the State of Illinois
at the time the will in question was executed;
(2) The will is invalid and inadequate to pass real and personal property in the State of Illinois;
(3) The order admitting the will to probate was made without notice to the petitioner; and
(4) The order in question was beyond the jurisdiction of the court.
It cannot of course be maintained that a court of first instance lacks essential jurisdiction over
the probate of wills. The fourth proposition above stated must, accordingly, be interpreted in
relation with the third and must be considered as a corollary deduced from the latter.
Moreover, both the third and fourth grounds stated take precedence, by reason of their more
fundamental implications, over the first two; and a logical exposition of the contentions of the
petitioner is expressed in the two following propositions:
 (I) The order admitting the will to probate was beyond the jurisdiction of the court
and void because made without notice to the petitioner;
(II) The judgment from which the petitioner seeks relief should be set aside because
the testator was not a resident of the State of Illinois and the will was not in
conformity with the laws of that State.
In the discussion which is to follow we shall consider the problems arising in this cae in the
order last above indicated. Upon the question, then, of the jurisdiction of the court, it is
apparent from an inspection of the record of the proceedings in the court below that all the
steps prescribed by law as prerequisites to the probate of a will were complied with in every
respect and that the probate was effected in external conformity with all legal requirements.
This much is unquestioned. It is, however, pointed out in the argument submitted in behalf of
the petitioner, that, at the time the court made the order of publication, it was apprised of the
fact that the petitioner lived in the United States and that as daughter and heir she was
necessarily interested in the probate of the will. It is, therefore, insisted that the court should
have appointed a date for the probate of the will sufficiently far in the future to permit the
petitioner to be present either in person or by representation; and it is said that the failure of
the court thus to postpone the probate of the will constitutes an infringement of that provision
of the Philippine Bill which declared that property shall not be taken without due process of
law.
On this point we are of the opinion that the proceedings for the probate of the will were regular
and that the publication was sufficient to give the court jurisdiction to entertain the proceeding
and to allow the will to be probated.
As was said in the case of In re Davis (136 Cal., 590, 596), "the proceeding as to the probate of a
will is essentially one in rem, and in the very nature of things the state is allowed a wide latitude
in determining the character of the constructive notice to be given to the world in a proceeding
where it has absolute possession of the res. It would be an exceptional case where a court
would declare a statute void, as depriving a party of his property without due process of law,
the proceeding being strictly in rem, and the res within the state, upon the ground that the
constructive notice prescribed by the statute was unreasonably short."
In that case the petitioner had been domiciled in the Hawaiian Islands at the time of the
testator's death; and it was impossible, in view of the distance and means of communication
then existing, for the petitioner to appear and oppose the probate on the day set for the
hearing in California. It was nevertheless held that publication in the manner prescribed by
statute constituted due process of law. (See Estate of Davis, 151 Cal., 318; Tracy vs. Muir, 151
Cal., 363.)
In the Davis case (136 Cal., 590) the court commented upon the fact that, under the laws of
California, the petitioner had a full year within which she might have instituted a proceeding to
contest the will; and this was stated as one of the reasons for holding that publication in the
manner provided by statute was sufficient. The same circumstance was commented upon in
O'Callaghan vs. O'Brien (199 U. S., 89), decided in the Supreme Court of the United States. This
case arose under the laws of the State of Washington, and it was alleged that a will had been
there probated without the notice of application for probate having been given as required by
law. It was insisted that this was an infringement of the Fourteenth Amendment of the
Constitution of the United States. This contention was, however, rejected and it was held that
the statutory right to contest the will within a year was a complete refutation of the argument
founded on the idea of a violation of the due process provision.
The laws of these Islands, in contrast with the laws in force in perhaps all of the States of the
American Union, contain no special provision, other than that allowing an appeal in the probate
proceedings, under which relief of any sort can be obtained from an order of a court of first
instance improperly allowing or disallowing a will. We do, however, have a provision of a
general nature authorizing a court under certain circumstances to set aside any judgment,
order, or other proceeding whatever. This provision is found in section 113 of the Code of Civil
Procedure, which reads as follows:
Upon such terms as may be just the court may relieve a party or his legal
representative from a judgment, order or other proceeding taken against him
through his mistake, inadvertence, surprise or excusable neglect; Provided, That
application therefor be made within a reasonable time, but in no case exceeding six
months after such judgment, order, or proceeding was taken.
The use of the word "judgment, order or other proceeding" in this section indicates an intention
on the part of the Legislature to give a wide latitude to the remedy here provided, and in our
opinion its operation is not to be restricted to judgments or orders entered in ordinary
contentious litigation where a plaintiff impleads a defendant and brings him into court by
personal service of process. In other words the utility of the provision is not limited to actions
proper but extends to all sorts of judicial proceedings.
In the second section of the Code of Civil Procedure it is declared that the provisions of this
Code shall be liberally construed to promote its object and to assist the parties in obtaining
speedy justice. We think that the intention thus exhibited should be applied in the
interpretation of section 113; and we hold that the word "party," used in this section, means
any person having an interest in the subject matter of the proceeding who is in a position to be
concluded by the judgment, order, to other proceeding taken.
The petitioner, therefore, in this case could have applied, under the section cited, at any time
within six months for March 16, 1916, and upon showing that she had been precluded from
appearing in the probate proceedings by conditions over which she had no control and that the
order admitting the will to probate had been erroneously entered upon insufficient proof or
upon a supposed state of facts contrary to the truth, the court would have been authorized to
set the probate aside and grant a rehearing. It is no doubt true that six months was, under the
circumstances, a very short period of time within which to expect the petitioner to appear and
be prepared to contest the probate with the proof which she might have desired to collect from
remote countries. Nevertheless, although the time allowed for the making of such application
was inconveniently short, the remedy existed; and the possibility of its use is proved in this case
by the circumstance that on June 12, 1916, she in fact here appeared in court by her attorneys
and excepted to the order admitting the will to probate.
It results that, in conformity with the doctrine announced in the Davis case, above cited, the
proceedings in the court below were conducted in such manner as to constitute due process of
law. The law supplied a remedy by which the petitioner might have gotten a hearing and have
obtained relief from the order by which she is supposed to have been injured; and though the
period within which the application should have been made was short, the remedy was both
possible and practicable.
From what has been said it follows that the order of March 16, 1916, admitting the will of Emil
H. Johnson to probate cannot be declared null and void merely because the petitioner was
unavoidably prevented from appearing at the original hearing upon the matter of the probate
of the will in question. Whether the result would have been the same if our system of
procedure had contained no such provision as that expressed in section 113 is a matter which
we need not here consider.
Intimately connected with the question of the jurisdiction of the court, is another matter which
may be properly discussed at this juncture. This relates to the interpretation to be placed upon
section 636 of the Code of Civil Procedure. The position is taken by the appellant that this
section is applicable only to wills of liens; and in this connection attention is directed to the fact
that the epigraph of this section speaks only of the will made here by an alien and to the further
fact that the word "state" in the body of the section is not capitalized. From this it is argued that
section 636 is not applicable to the will of a citizen of the United States residing in these
Islands.lawphil.net
We consider these suggestions of little weight and are of the opinion that, by the most
reasonable interpretation of the language used in the statute, the words "another state or
country" include the United States and the States of the American Union, and that the
operation of the statute is not limited to wills of aliens. It is a rule of hermeneutics that
punctuation and capitalization are aids of low degree in interpreting the language of a statute
and can never control against the intelligible meaning of the written words. Furthermore, the
epigraph, or heading,, of a section, being nothing more than a convenient index to the contents
of the provision, cannot have the effect of limiting the operative words contained in the body of
the text. It results that if Emil H. Johnson was at the time of his death a citizen of the United
States and of the State of Illinois, his will was provable under this section in the courts of the
Philippine Islands, provided the instrument was so executed as to be admissible to probate
under the laws of the State of Illinois.
We are thus brought to consider the second principal proposition stated at the outset of this
discussion, which raises the question whether the order f probate can be set aside in this
proceeding on the other ground stated in the petition, namely, that the testator was not a
resident of the State of Illinois and that the will was not made in conformity with the laws of
that State.
The order of the Court of First Instance admitting the will to probate recites, among other
things:
That upon the date when the will in question was executed Emil H. Johnson was a
citizen of the United States, naturalized in the State of Illinois, County of Cook, and
that the will in question was executed in conformity with the dispositions of the law f
the State of Illinois.
We consider this equivalent to a finding that upon the date of the execution of the will the
testator was a citizen of the State of Illinois and that the will was executed in conformity with
the laws of that State. Upon the last point the finding is express; and in our opinion the
statement that the testator was a citizen of the United States, naturalized in the State of Illinois,
should be taken to imply that he was a citizen of the State of Illinois, as well as of the United
States.
The naturalization laws of the United States require, as a condition precedent to the granting of
the certificate of naturalization, that the applicant should have resided at least five years in the
United States and for one year within the State or territory where the court granting the
naturalization papers is held; and in the absence of clear proof to the contrary it should be
presumed that a person naturalized in a court of a certain State thereby becomes a citizen of
that State as well as of the United States.
In this connection it should be remembered that the Fourteenth Amendment to the
Constitution of the United States declares, in its opening words, that all persons naturalized in
the United States, and subject to the jurisdiction thereof, are citizens of the United States and of
the State wherein they reside.
It is noteworthy that the petition by which it is sought to annul the probate of this will does not
assert that the testator was not a citizen of Illinois at the date when the will was executed. The
most that is said on this point is he was "never a resident of the State of Illinois after the year
1898, but became and was a resident of the city of Manila," etc. But residence in the Philippine
Islands is compatible with citizenship in Illinois; and it must be considered that the allegations of
the petition on this point are, considered in their bearing as an attempt to refute citizenship in
Illinois, wholly insufficient.
As the Court of First Instance found that the testator was a citizen of the State of Illinois and
that the will was executed in conformity with the laws of that State, the will was necessarily and
properly admitted to probate. And how is it possible to evade the effect of these findings?
In Section 625 of the Code of Civil Procedure it is declared that "the allowance by the court of a
will of real or personal property shall be conclusive as to its due execution."
The due execution of a will involves conditions relating to a number of matters, such as the age
and mental capacity of the testator, the signing of the document by the testator, or by someone
in his behalf, and the acknowledgment of the instrument by him in the presence of the required
number of witnesses who affix their signatures to the will to attest the act. The proof of all
these requisites is involved in the probate; and as to each and all of them the probate is
conclusive. (Castañeda vs. Alemany, 3 Phil. Rep., 426; Pimentel vs. Palanca, 5 Phil. Rep., 436;
Chiong Joc-Soy vs. Vaño, 8 Phil. Rep., 119; Sanchez vs. Pascual, 11 Phil. Rep., 395;
Montañano vs. Suesa, 14 Phil. Rep., 676.)
Our reported cases do not contain the slightest intimation that a will which has been probated
according to law, and without fraud, can be annulled, in any other proceeding whatever, on
account of any supposed irregularity or defect in the execution of the will or on account of any
error in the action of the court upon the proof adduced before it. This court has never been
called upon to decide whether, in case the probate of a will should be procured by fraud, relief
could be granted in some other proceeding; and no such question is now presented. But it is
readily seen that if fraud were alleged, this would introduce an entirely different factor in the
cae. In Austrua vs. Ventenilla (21 Phil. Rep., 180, 184), it was suggested but not decided that
relief might be granted in case the probate of a will were procured by fraud.
The circumstance that the judgment of the trial court recites that the will was executed in
conformity with the law of Illinois and also, in effect, that the testator was a citizen of that State
places the judgment upon an unassailable basis so far as any supposed error apparent upon the
fact of the judgment is concerned. It is, however, probable that even if the judgment had not
contained these recitals, there would have been a presumption from the admission of the will
to probate as the will of a citizen of Illinois that the facts were as recited in the order of probate.
As was said by this court in the case of Banco Español-Filipino vs. Palanca (37 Phil. Rep., 921),
"There is no principle of law better settled than that after jurisdiction has once been acquired,
every act of a court of general jurisdiction shall be presumed to have been rightly done. This
rule is applied to every judgment or decree rendered in the various stages of the proceedings
from their initiation to their completion (Voorhees vs. United States Bank, 10 Pet., 314; 35 U. S.,
449); and if the record is silent with respect to any fact which must have established before the
court could have rightly acted, it will be presumed that such fact was properly brought to its
knowledge."
The Court of First Instance is a court of original and general jurisdiction; and there is no
difference in its faculties in this respect whether exercised in matters of probate or exerted in
ordinary contentious litigation. The trial court therefore necessarily had the power to determine
the facts upon which the propriety of admitting the will to probate depended; and the recital of
those facts in the judgment was probably not essential to its validity. No express ruling is,
however, necessary on this point.
What has been said effectually disposes of the petition considered in its aspect as an attack
upon the order of probate for error apparent on the face of the record. But the petitioner seeks
to have the judgment reviewed, it being asserted that the findings of the trial court — especially
on the question of the citizenship of the testator — are not supported by the evidence. It needs
but a moment's reflection, however, to show that in such a proceeding as this it is not possible
to reverse the original order on the ground that the findings of the trial court are unsupported
by the proof adduced before that court. The only proceeding in which a review of the evidence
can be secured is by appeal, and the case is not before us upon appeal from the original order
admitting the will to probate. The present proceedings by petition to set aside the order of
probate, and the appeal herein is from the order denying this relief. It is obvious that on appeal
from an order refusing to vacate a judgment it is not possible to review the evidence upon
which the original judgment was based. To permit this would operate unduly to protract the
right of appeal.
However, for the purpose of arriving at a just conception of the case from the point of view of
the petitioner, we propose to examine the evidence submitted upon the original hearing, in
connection with the allegations of the petition, in order to see, first, whether the evidence
submitted to the trial court was sufficient to justify its findings, and, secondly, whether the
petition contains any matter which would justify the court in setting the judgment, aside. In this
connection we shall for a moment ignore the circumstance that the petition was filed after the
expiration of the six months allowed by section 113 of the Code of Civil Procedure.
The principal controversy is over the citizenship of the testator. The evidence adduced upon this
point in the trial court consists of the certificate of naturalization granted upon January 10,
1903, in the Circuit Court of Cook County, Illinois, in connection with certain biographical facts
contained in the oral evidence. The certificate of naturalization supplies incontrovertible proof
that upon the date stated the testator became a citizen of the United States, and inferentially
also a citizen of said State. In the testimony submitted to the trial court it appears that, when
Johnson first came to the United States as a boy, he took up his abode in the State of Illinois and
there remained until he came as a soldier in the United States Army to the Philippine Islands.
Although he remained in these Islands for sometime after receiving his discharge, no evidence
was adduced showing that at the time he returned to the United States, in the autumn of 1902,
he had then abandoned Illinois as the State of his permanent domicile, and on the contrary the
certificate of naturalization itself recites that at that time he claimed to be a resident of Illinois.
Now, if upon January 10, 1903, the testator became a citizen of the United States and of the
State of Illinois, how has he lost the character of citizen with respect to either of these
jurisdictions? There is no law in force by virtue of which any person of foreign nativity can
become a naturalized citizen of the Philippine Islands; and it was, therefore, impossible for the
testator, even if he had so desired, to expatriate himself from the United States and change his
political status from a citizen of the United States to a citizen of these Islands. This being true, it
is to be presumed that he retained his citizenship in the State of Illinois along with his status as
a citizen of the United States. It would be novel doctrine to Americans living in the Philippine
Islands to be told that by living here they lose their citizenship in the State of their naturalization
or nativity.
We are not unmindful of the fact that when a citizen of one State leaves it and takes up his
abode in another State with no intention of returning, he immediately acquires citizenship in
the State of his new domicile. This is in accordance with that provision of the Fourteenth
Amendment to the Constitution of the United States which says that every citizen of the United
States is a citizen of the State where in he resides. The effect of this provision necessarily is that
a person transferring his domicile from one State to another loses his citizenship in the State of
his original above upon acquiring citizenship in the State of his new abode. The acquisition of
the new State citizenship extinguishes the old. That situation, in our opinion, has no analogy to
that which arises when a citizen of an American State comes to reside in the Philippine Islands.
Here he cannot acquire a new citizenship; nor by the mere change of domicile does he lose that
which he brought with him.
The proof adduced before the trial court must therefore be taken as showing that, at the time
the will was executed, the testator was, as stated in the order of probate, a citizen of the State
of Illinois. This, in connection with the circumstance that the petition does not even so much as
deny such citizenship but only asserts that the testator was a resident of the Philippine Islands,
demonstrates the impossibility of setting the probate aside for lack of the necessary citizenship
on the part of the testator. As already observed, the allegation of the petition on this point is
wholly insufficient to justify any relief whatever.
Upon the other point — as to whether the will was executed in conformity with the statutes of
the State of Illinois — we note that it does not affirmatively appear from the transaction of the
testimony adduced in the trial court that any witness was examined with reference to the law of
Illinois on the subject of the execution of will. The trial judge no doubt was satisfied that the will
was properly executed by examining section 1874 of the Revised Statutes of Illinois, as exhibited
in volume 3 of Starr & Curtis's Annotated Illinois Statutes, 2nd ed., p. 426; and he may have
assumed that he could take judicial notice of the laws of Illinois under section 275 of the Code
of Civil Procedure. If so, he was in our opinion mistaken. that section authorizes the courts here
to take judicial notice, among other things, of the acts of the legislative department of the
United States. These words clearly have reference to Acts of the Congress of the United States;
and we would hesitate to hold that our courts can, under this provision, take judicial notice of
the multifarious laws of the various American States. Nor do we think that any such authority
can be derived from the broader language, used in the same action, where it is said that our
courts may take judicial notice of matters of public knowledge "similar" to those therein
enumerated. The proper rule we think is to require proof of the statutes of the States of the
American Union whenever their provisions are determinative of the issues in any action
litigated in the Philippine courts.
Nevertheless, even supposing that the trial court may have erred in taking judicial notice of the
law of Illinois on the point in question, such error is not now available to the petitioner, first,
because the petition does not state any fact from which it would appear that the law of Illinois
is different from what the court found, and, secondly, because the assignment of error and
argument for the appellant in this court raises no question based on such supposed error.
Though the trial court may have acted upon pure conjecture as to the law prevailing in the State
of Illinois, its judgment could not be set aside, even upon application made within six months
under section 113 of the Code of Civil procedure, unless it should be made to appear
affirmatively that the conjecture was wrong. The petitioner, it is true, states in general terms
that the will in question is invalid and inadequate to pass real and personal property in the State
of Illinois, but this is merely a conclusion of law. The affidavits by which the petition is
accompanied contain no reference to the subject, and we are cited to no authority in the
appellant's brief which might tent to raise a doubt as to the correctness of the conclusion of the
trial court. It is very clear, therefore, that this point cannot be urged as of serious moment.
But it is insisted in the brief for the appellant that the will in question was not properly
admissible to probate because it contains provisions which cannot be given effect consistently
with the laws of the Philippine Islands; and it is suggested that as the petitioner is a legitimate
heir of the testator she cannot be deprived of the legitime to which she is entitled under the law
governing testamentary successions in these Islands. Upon this point it is sufficient to say that
the probate of the will does not affect the intrinsic validity of its provisions, the decree of
probate being conclusive only as regards the due execution of the will. (Code of Civil Procedure,
secs. 625, 614; Sahagun vs. De Gorostiza, 7 Phil. Rep., 347, 349; Chiong Joc-Soy vs. Vaño, 8 Phil.
Rep., 119, 121; Limjuco vs. Ganara, 11 Phil. Rep., 393, 395.)
If, therefore, upon the distribution of this estate, it should appear that any legacy given by the
will or other disposition made therein is contrary to the law applicable in such case, the will
must necessarily yield upon that point and the law must prevail. Nevertheless, it should not be
forgotten that the intrinsic validity of the provisions of this will must be determined by the law
of Illinois and not, as the appellant apparently assumes, by the general provisions here
applicable in such matters; for in the second paragraph of article 10 of the Civil Code it is
declared that "legal and testamentary successions, with regard to the order of succession, as
well as to the amount of the successional rights and to the intrinsic validity of their provisions,
shall be regulated by the laws of the nation of the person whose succession is in question,
whatever may be the nature of the property and the country where it may be situate."
From what has been said, it is, we think, manifest that the petition submitted to the court
below on October 31, 1916, was entirely insufficient to warrant the setting aside of the other
probating the will in question, whether said petition be considered as an attack on the validity
of the decree for error apparent, or whether it be considered as an application for a rehearing
based upon the new evidence submitted in the affidavits which accompany the petition. And in
this latter aspect the petition is subject to the further fatal defect that it was not presented
within the time allowed by law.
It follows that the trial court committed no error in denying the relief sought. The order
appealed from is accordingly affirmed with costs. So ordered.
Walton
v.
Arabian American Oil Company
233 F.2d 541 (2d Cir. 1956)
FRANK, Circuit Judge.
Plaintiff is a citizen and resident of Arkansas, who, while temporarily in Saudi Arabia, was
seriously injured when an automobile he was driving collided with a truck owned by
defendant, driven by one of defendant's employees. Defendant is a corporation incorporated
in Delaware, licensed to do business in New York, and engaged in extensive business activities
in Saudi Arabia. Plaintiff's complaint did not allege pertinent Saudi Arabian "law," nor at the
trial did he prove or offer to prove it. Defendant did not, in its answer, allege such "law," and
defendant did not prove or offer to prove it. There was evidence from which it might have
been inferred, reasonably, that, under well-established New York decisions, defendant was
negligent and therefore liable to plaintiff. The trial judge, saying he would not take judicial
notice of Saudi-Arabian "law," directed a verdict in favor of the defendant and gave judgment
against the plaintiff.
1. As jurisdiction here rests on diversity of citizenship, we must apply the New York
rules of conflict of laws. It is well settled by the New York decisions that the
"substantive law" applicable to an alleged tort is the "law" of the place where the
alleged tort occurred. See, e.g., Conklin v. Canadian-Colonial Airways, Inc., 266 N.Y.
244, 248, 194 N.E. 692. This is the federal doctrine; see, e.g., Slater v. Mexican
National Railroad Co., 194 U.S. 120, 24 S. Ct. 581, 48 L.Ed. 900. Cuba R. Co. v.
Crosby, 222 U.S. 473, 32 S.Ct. 132, 56 L. Ed. 274. This doctrine is often said to be
based on the motion that to hold otherwise would be to interfere with the
authority of the foreign sovereign.
It has been suggested that, where suit is brought in an American court by an American
plaintiff against an American defendant, complaining of alleged tortious conduct by the
defendant in a foreign country, and that conduct is tortious according to the rules of the
forum, the court, in some circumstances, should apply the forum's tort rules. See Morris, The
Proper Law of a Tort, 64 Harv.L.Rev. (1951) 881, criticizing, inter alia, Slater v. Mexican
National Railroad, 194 U.S. 120, 24 S.Ct. 581, 48 L.Ed. 900. There, and in 12 Modern L.Rev.
(1949) 248, Morris decries, as "mechanical jurisprudence," the invariable reference to the
"law" of the place where the alleged tort happened. There may be much to Morris'
suggestion; and a court — particularly with reference to torts, where conduct in reliance on
precedents is ordinarily absent — should not perpetuate a doctrine which, upon re-
examination, shows up as unwise and unjust. Although in a diversity case a federal court must
apply the "substantive" conflicts rules of the state in which the court sits, that duty perhaps
does not require acceptance of state court decisions which are clearly obsolescent; see the
concurring opinion of Mr. Justice Frankfurter in Bernhardt v. Polygraphic Co. Inc., 350 U.S.
198, 76 S.Ct. 273. But we see no signs that the New York decisions pertinent here are
obsolescent
2. 2. The general federal rule is that the "law" of a foreign country is a fact which
must be proved. However, under Fed.Rules Civ.Proc. rule 43(a), 28 U.S.C.A., a
federal court must receive evidence if it is admissible according to the rules of
evidence of the state in which the court sits. At first glance, then, it may seem that
the judge erred in refusing to take judicial notice of Saudi Arabian "law" in the light
of New York Civil Practice Act, § 344-a. In Siegelman v. Cunard White Star, 2 Cir.,
221 F.2d 189, 196-197, applying that statute, we took judicial notice of English
"law" which had been neither pleaded nor proved. Our decision, in that respect,
has been criticized; but it may be justified on the ground that an American court
can easily comprehend, and therefore, under the statute, take judicial notice of,
English decisions, like those of any state in the United States. However, where, as
here, comprehension of foreign "law" is, to say the least, not easy, then, according
to the somewhat narrow interpretation of the New York statute by the New York
courts, a court "abuses" its discretion under that statute perhaps if it takes judicial
notice of foreign "law" when it is not pleaded, and surely does so unless the party,
who would otherwise have had the burden of proving that "law," has in some way
adequately assisted the court in judicially learning it.
3. 3. Plaintiff, however, argues thus: The instant case involves such rudimentary tort
principles, that the judge, absent a contrary showing, should have presumed that
 those principles are recognized in Saudi Arabia; therefore the burden of showing Since the plaintiff deliberately refrained from establishing an essential element of his case,
the contrary was on the defendant, which did not discharge that burden. But we the complaint was properly dismissed. The majority of the court thinks that, for the following
do not agree that the applicable tort principles, necessary to establish plaintiff's reasons, it is inappropriate to remand the case so that the plaintiff may have another chance:
claim, are "rudimentary": In countries where the common law does not prevail, He had abundant opportunity to supply the missing element and chose not to avail himself of
our doctrines relative to negligence, and to a master's liability for his servant's acts, it. It does not appear whether Judge Bicks or counsel for the parties considered the
may well not exist or be vastly different. Consequently, here plaintiff had the application of Section 344-a of the New York Civil Practice Act. Since Judge Bicks specifically
burden of showing, to the trial court's satisfaction, Saudi Arabian "law. determined that he would not take judicial notice of the Arabian "law", he must have
considered that in some circumstances he might take judicial notice of foreign "law". But in
This conclusion seems unjust for this reason: Both the parties are Americans. The any event, as we have pointed out, it would have been an abuse of discretion under the New
plaintiff was but a transient in Saudi Arabia when the accident occurred and has York cases to take notice of the foreign "law" here. The judgment of dismissal must therefore
not been there since that time. The defendant company engages in extensive be affirmed.
business operations there, and is therefore in a far better position to obtain
information concerning the "law" of that country. But, under the New York The writer of the opinion thinks we should remand for this reason: Apparently neither the
decisions which we must follow, plaintiff had the burden. As he did not discharge trial judge nor the parties were aware of New York Civil Practice Act, § 344-a; consequently, in
it, a majority of the court holds that the judge correctly gave judgment for the the interests of justice, we should remand with directions to permit the parties, if they so
defendant. desire, to present material which may assist the trial judge to ascertain the applicable "law"
4. In argument, plaintiff's counsel asserted that Saudi Arabia has "no law or legal of Saudi-Arabia.
system," and no courts open to plaintiff, but only a dictatorial monarch who
decides according to his whim whether a claim like plaintiff's shall be redressed, Affirmed
i.e., that Saudi Arabia is, in effect, "uncivilized." According to Holmes, J. — in Slater
v. Mexican National R. Co., 194 U.S. 120, 129, 24 S.Ct. 581, 584, 48 L.Ed. 900, in
American Banana Co. v. United Fruit Co., 213 U.S. 347, 355-356, 29 S.Ct. 511, 53
L.Ed. 826, and in Cuba R. Co. v. Crosby, 222 U.S. 473, 478, 32 S. Ct. 132 — the lex
loci does not apply "where a tort is committed in an uncivilized country" or in one
"having no law that civilized countries would recognize as adequate." If such were
the case here, we think the New York courts would apply (and therefore we
should) the substantive "law" of the country which is most closely connected with
the parties and their conduct — in this case, American "law." But plaintiff has
offered no data showing that Saudi Arabia is thus "uncivilized." We are loath to
and will not believe it, absent such a showing.
5. 5. The complaint in this action was filed on May 10, 1949. Pre-trial hearings were
held before Judge Conger on December 2, 1952; January 7, 1953; March 31, 1953;
and April 10, 1953. At these hearings the question of proving Saudi-Arabian law
was discussed. When the case came on for trial on November 7, 1953 Judge Bicks
indicated that in his view the burden was on the plaintiff to prove the foreign Leary v. Gledhill
"law". When the plaintiff's counsel said that he was not prepared to prove the Annotate this Case
"law" of Saudi-Arabia, Judge Bicks proposed that the case be adjourned long 8 N.J. 260 (1951) 84 A.2d 725
enough to allow the plaintiff to prepare such proof. It was agreed that the case be
put over for two days to enable the plaintiff to decide whether to request an The opinion of the court was delivered by VANDERBILT, C.J.
adjournment for that purpose.
When the hearing resumed on November 9, plaintiff's counsel unequivocally took the From a judgment of the Law Division of the Superior Court entered on a jury verdict in favor
position that he did not wish to prove the foreign "law" and wanted no adjournment. He of the plaintiff the defendant appealed to the Appellate Division of the Superior Court. We
chose to rely on the applicability of New York "law". To that end he proposed that he proceed have certified the appeal on our own motion.
to present his case in order to make a record for appeal. The plaintiff's evidence as to liability
was presented and on a proper motion the judge dismissed the complaint. He specifically The plaintiff and the defendant were friends who had become acquainted while in the
ruled that he would not take judicial notice of the "law" of Saudi-Arabia and that the military service. They first *263 met in 1943 and occasionally thereafter through 1945. They
plaintiff's failure to prove that "law" required dismissal. corresponded but did not meet again until Christmas, 1948, when the defendant visited the
plaintiff in Germany where he was stationed. At that time the defendant was no longer in the
military service but was in Europe attempting to sell tractors for the Franam Corporation.
Prior to the defendant's trip to Europe he had corresponded with the plaintiff with reference
to an investment in the Franam Corporation as one which would be very profitable. Their
correspondence resulted in the plaintiff purchasing $1,000 worth of stock when the
defendant went to see him in Germany, the defendant delivering to the plaintiff certificates
of stock which he had brought with him to Europe in exchange for the plaintiff's check for
$1,000.
In April, 1949, the plaintiff at the defendant's invitation visited him in Paris. The defendant
had left the United States with $500 in his possession and after arriving in Europe had been in
constant need of money to meet his expenses. In a conversation in a hotel in Paris the
defendant told the plaintiff that he needed about $4,000 and that he could raise about $2,000
by selling his Cadillac car. In the plaintiff's presence the defendant made a telephone call to
his wife in the United States and instructed her to sell the automobile. The defendant asked
the plaintiff to help him, but did not mention anything about selling the plaintiff any shares of
stock. The plaintiff said he would think it over for a few days and see what he could do. After
returning to his base in Germany the plaintiff mailed the defendant a check payable to the
defendant's order for $1,500 without indicating on the check or in the accompanying letter
what the money was for. The defendant endorsed the check and converted it into traveller's
checks. The parties did not see each other again until the day of the trial, although the
plaintiff had made many attempts to see the defendant after they both had returned to the
United States, seeking him at his home and calling him on the telephone at various times, but
always without success.
*264 The plaintiff instituted this suit against the defendant on two counts, the first for $1,000
and the second for $1,500, but at the outset of the trial the plaintiff moved for a voluntary
dismissal of the first count and the pretrial order was amended accordingly. The issue as
stated in the amended pretrial order was limited to whether the money given by the plaintiff
to the defendant was a loan or an investment in a business venture. At the trial the plaintiff
testified that the check for $1,500 was a personal loan to the defendant but this the
defendant denied, contending that he had never borrowed any money from the plaintiff. At
the end of the plaintiff's case and again at the end of the entire case the defendant moved for
an involuntary dismissal on the ground that the plaintiff's proofs were insufficient, there
being no promise to repay, no demand for repayment, and no pleading or proof of the law of
France where the transaction occurred. These motions were denied, the trial court holding
that while it would not take judicial notice of the law of France it would proceed, first, on the
presumption that the law involving loans is the same there as in other civilized countries, and,
secondly, on the ground that the issue with respect to the law of France had not been set
forth in the pretrial order. When the case was submitted to the jury, the defendant objected
to the charge on the ground that it did not instruct the jury to find as a fact what the law of
France was. The jury returned a verdict in favor of the plaintiff in the sum of $1,500, and from
the judgment entered thereon the defendant took this appeal. It is significant that the
defendant never proved or even attempted to prove either the delivery of any stock to the
plaintiff or a tender thereof. Neither did the defendant attempt to prove or even suggest that
the law of France was such as to preclude recovery in the circumstances.
The defendant argues five points on this appeal, none of which has merit:
1. "The motion to dismiss should have been granted where the complaint alleges an express
contract of loan and *265 there is a failure to prove a promise to repay." A loan may be
established by a contract implied in fact as well as by an express promise; the only difference
between the two is the kind of evidence used to prove the undertaking. At the oral argument
the defendant relied on Allen v. Bunting, 18 N.J.L. 299 (Sup. Ct. 1841) holding that a note or a
check in the hands of the maker or drawer after payment at the bank, instead of being prima
facie evidence of so much money lent, is only prima facie evidence that the maker or drawer
was indebted to the payee at the time he gave the note or check and that it was given in
satisfaction of that specific debt. It is difficult to see how this ruling as to the prima facie
effect of a cancelled check in the plaintiff's hands aids the defendant in view of the testimony
given at the trial concerning defendant's need of $4,000 to pay his expenses, his instructions
to his wife by trans-Atlantic telephone to sell his Cadillac car for $2,000, and his request to the
plaintiff for a loan, followed by the plaintiff's mailing him a check for $1,500. The issue
presented by the pretrial order as to whether or not the plaintiff had given the $1,500 to the
defendant as a loan was properly presented to the jury which reached a conclusion supported
by the evidence before it.
2. "The trial court erred in failing to dismiss the complaint where the plaintiff failed to prove a
demand for repayment of the money." This defense comes with bad grace from a defendant
who had so assiduously avoided the efforts of the plaintiff to communicate with him, and no
authorities to support it are cited by the defendant in his brief nor did he come forward with
any at the oral argument. In the circumstances here the starting of suit is all the demand the
defendant is entitled to. We consider that the answer to the defendant's contention is well
stated in section 264 of the Restatement of Contracts:
"Where a contractual promise to pay money is in terms performable on demand by the
promisee, but the duty of performance is otherwise unconditional, and neither more specific
words nor usage requires a different result, a right of action by the promisee is not
conditional on a demand being made."
*266 3. "The rules of law for a foreign country must be pleaded and proved as facts along with
the other elements of a cause of action to enable a plaintiff to recover against the
defendant." A court will in general take judicial notice of and apply the law of its own
jurisdiction without pleading or proof thereof, the judges being deemed to know the law or at
least where it is to be found, 9 Wigmore on Evidence (3d ed., 1940), 551. Under the common
law of England as adopted in this country, however, the law of other countries, including
sister states, would not be so noticed and applied by a court, but it was deemed an issue of
fact to be pleaded and proved as other material facts had to be, Title Guarantee and Trust Co.
v. Trenton Potteries Co., 56 N.J. Eq. 441, 444 (E. & A. 1897); Coryell v. Buffalo Union Furnace
Co., 88 N.J.L. 291, 294 (E. & A. 1915); Fithian v. Pennsylvania Railroad Co., 91 N.J.L. 275, 279
(E. & A. 1918); Giardini v. McAdoo, 93 N.J.L. 138, 141 (E. & A. 1919); Robins v. Mack
International Motor Truck Corp., 113 N.J.L. 377, 387 (E. & A. 1934); Coral Gables, Inc., v.
Kretschmer, 116 N.J.L. 580, 582 (E. & A. 1936); Franzen v. Equitable Life Assur. Soc., 130 N.J.L.
457, 459 (Sup. Ct. 1943); 9 Wigmore on Evidence (3d ed. 1940), 554. This common law rule
had two great disadvantages; it made every jury pass on questions of law quite beyond its
competence and the decision of the jury as to the foreign law was unappealable at common
law as were its findings on all questions of fact.
The courts, however, were reluctant to dismiss an action for a failure to plead and prove the
applicable foreign law as they would have dismissed it for a failure to prove other material
facts necessary to establish a cause of action or a defense. Accordingly the courts frequently
indulged in one or another of several presumptions: that the common law prevails in the
foreign jurisdiction; that the law of the foreign jurisdiction is the same as the law of the
forum, be it common law or statute; or that certain fundamental principles of the law exist in
all civilized countries. As a fourth alternative, instead of indulging in any presumption as to
the law of the *267 foreign jurisdiction, the courts would merely apply the law of the forum
as the only law before the court on the assumption that by failing to prove the foreign law the
parties acquiesce in having their controversy determined by reference to the law of the
forum, be it statutory or common law. By the application of these various presumptions the
courts have in effect treated the common law rule that foreign law could not be noticed but
must be pleaded and proved as if it were a matter of fact merely as a permissive rule whereby
either party could, if it were to his advantage, plead and prove the foreign law. Thus the
failure to plead and prove the foreign law has not generally been considered as fatal. For a
thorough discussion of the presumptions applied in the absence of proof of the foreign law
see the notes: "How case determined when proper foreign law not proved," 67 L.R.A. 33-61;
and "Determination of case properly governed by law of foreign country which is not proved,"
34 L.R.A. (N.S.) 261-274.
In New Jersey, in the absence of proof as to the applicable foreign law, the courts have
frequently applied the presumption that the common law exists in the foreign jurisdiction.
This presumption had long been recognized in this State when Chief Justice Beasley said in
Waln v. Waln, 53 N.J.L. 429, 432 (E. & A. 1891):
"There was no offer made at the trial to show what the law of Pennsylvania was; and
consequently, according to the general rule of law, and which rule has been repeatedly
recognized and applied by our own courts, the inference, juris et de jure, is that the system
there prevalent was that of the common law."
For more recent New Jersey cases in which this presumption has been applied or recognized
see Bodine v. Berg, 82 N.J.L. 662 (E. & A. 1911); Thayer Mercantile Co. v. First National Bank of
Milltown, 98 N.J.L. 29, 32 (Sup. Ct. 1922); Reingold v. Reingold, 115 N.J.L. 532, 534 (E. & A.
1935); Coral Gables, Inc., v. Kretschmer, 116 N.J.L. 580, 583 (E. & A. 1936); Redmond v. N.J.
Historical Society, *268 132 N.J. Eq. 464, 469 (E. & A. 1942); Kelly v. Kelly, 134 N.J. Eq. 316, 319
(Prerog. 1944); and Shepherd v. Ward, 5 N.J. 92, 106 (1950). This presumption, insofar as the
law of the states, territories and other jurisdictions of the United States is concerned, is
reenforced by the first section of the Uniform Judicial Notice of Foreign Law Act, L. 1941, c. 81,
§ 1, as amended by L. 1942, c. 104, § 1 (N.J.S.A. 2:98-28).
While our attention has not been directed to any New Jersey cases on the point, this
presumption as to the existence of the common law in a foreign jurisdiction is equally
applicable in cases involving other common law countries such as England in the absence of
proof to the contrary, see note 34 L.R.A. (N.S.) 261, 270, cited supra; 20 Am. Jur., Evidence, §
181; 31 C.J.S., Evidence, § 133, p. 767. That the presumption as to the existence of the
common law applies to all common law jurisdictions is further borne out by the fact that by
virtue of R.S. 2:98-18, originally enacted by L. 1860, c. 92, § 1:
"The reports of judicial decisions of other states of the United States and foreign countries
may be judicially noticed by the courts of this state as evidence of the common law of such
states or countries, * * *."
While the application of the presumption that the common law exists in the foreign
jurisdiction works well in many cases, it does not produce sound results in a case where the
common law on the subject involved has been substantially changed by statute here and in
the foreign state. For example, if a case involved the capacity of a married woman to contract
or to hold and convey property, resort to the common law to decide the case might well
result in a decision contrary to long established statutory enactments here and in the foreign
jurisdiction altering the common law rule. While the presumption as to the existence of the
common law in the foreign jurisdiction has the advantages of having been long indulged in by
the courts of this and other states and of being incorporated *269 in the Uniform Judicial
Notice of Foreign Law Act, in a proper case consideration might well be given to rejecting it in
favor of the presumption that the foreign law is the same as the law of the forum, be it
statutory or common law, or even more preferable, in favor of the presumption that the
parties by their failure to plead and prove the foreign law acquiesce in the application of the
law of the forum as the only law before the court.
In the instant case the transaction occurred in France. Our courts may properly take judicial
knowledge that France is not a common law, but rather a civil jurisdiction. It would,
therefore, be inappropriate and indeed contrary to elementary knowledge to presume that
the principles of the common law prevail there. This does not mean, however, that the
plaintiff must fail in his cause of action because of the absence of any proof at the trial as to
the applicable law of France. In these circumstances any one of the other three presumptions
may be indulged in, i.e., that the law of France is the same as the law of the forum; that the
law of France, like all civilized countries, recognizes certain fundamental principles, as, e.g.,
that the taking of a loan creates an obligation upon the borrower to make repayment; that
the parties by failing to prove the law of France have acquiesced in having their dispute
determined by the law of the forum.
The court below based its decision upon the presumption that the law of France in common
with that of other civilized countries recognizes a liability to make repayment under the facts
here present, and its decision is not without substantial merit in reason and support in the
authorities, see, for example, Cuba Railroad Co. v. Crosby, 222 U.S. 473 (1912), and Parrot v.
Mexican Central Railway Co., 207 Mass. 184, 93 N.E. 590 (1911). The utilization of this
presumption has decided limitations, however, for in many cases it would be difficult to
determine whether or not the question presented was of such a fundamental nature as
reasonably to warrant the assumption that it would be similarly treated by the laws of all
civilized countries. The presumption *270 that in the absence of proof the parties acquiesce in
the application of the law of the forum, be it statutory law or common law, does not present
any such difficulties for it may be universally applied regardless of the nature of the
controversy. This view, moreover, is favored by the authorities, see the notes in 67 L.R.A. 33
and 34 L.R.A. (N.S.) 261, cited supra, and appears to have been followed in at least one
instance in this State, Sturm v. Sturm, 111 N.J. Eq. 579, 587 (Ch. 1932), a case in which the law
of Austria was involved. We are of the opinion, therefore, that in the instant case the rights of
the parties are to be determined by the law of New Jersey which unquestionably permits
recovery on the facts proven.

We recognize, of course, that in certain cases there might be present factors which would
make it unreasonable for the court to indulge in any presumption and where the court in the
exercise of its sound discretion might require proof of applicable foreign law to be laid before
the court, but such is certainly not the situation here. The defendant is in no way prejudiced
by the application of the law of this State. If he had desired to raise an issue as to the foreign
law, he might have done so in his answer or at the pretrial conference or, with permission of
the court, at the trial itself, and himself have introduced proof as to the law of France. It is
against the letter and the spirit of our practice to permit him to make the failure of the
plaintiff to plead and prove foreign law the basis of a surprise motion addressed to the court
either in the course of or at the conclusion of the case.
4. "The rules of law of a foreign country are a question of fact to be determined by the jury,
along with the other elements of a cause, to enable a plaintiff to recover against a
defendant." This contention is without merit here, for in all cases in which the court in the
absence of proof indulges in a presumption as to the applicable foreign law the question is
perforce one for the court rather than for the jury; see sections 3 and 5 of the Uniform Judicial
Notice of Foreign Law Act (N.J.S.A. 2:98-30 and 32) and *271 Franzen v. Equitable Life Assur.
Soc., 130 N.J.L. 457, 459-461 (Sup. Ct. 1943).
5. "The verdict is against the weight of the evidence." The testimony of the plaintiff and of the
defendant was in sharp conflict. The inferences to be drawn were more compatible with the
view of the $1,500 being a loan than with its being payment for stock in a business venture.
The defendant's need for $4,000, the selling of his automobile to raise $2,000, his requesting
the plaintiff for a loan, his failure to deliver any stock to the plaintiff or to tender any, and his
evasion of the plaintiff, all conspire to make his story unbelievable. Under our Constitution
and the rules of court the verdict of a jury is not to be set aside as against the weight of the
evidence unless it clearly and convincingly appears that the verdict was the result of mistake,
partiality, prejudice or passion. Rule 1:2-20(a).
The judgment below is affirmed. For affirmance Chief Justice VANDERBILT, and Justices CASE,
OLIPHANT, WACHENFELD, BURLING and ACKERSON 6.
For reversal None.
G.R. No. 104235 November 18, 1993
SPOUSES CESAR & SUTHIRA ZALAMEA and LIANA ZALAMEA, petitioners,
vs.
HONORABLE COURT OF APPEALS and TRANSWORLD AIRLINES, INC., respondents.
Sycip, Salazar, Hernandez, Gatmaitan for petitioners.
Quisumbing, Torres & Evangelista for private-respondent.
NOCON, J.:
Disgruntled over TransWorld Airlines, Inc.'s refusal to accommodate them in TWA Flight 007
departing from New York to Los Angeles on June 6, 1984 despite possession of confirmed
tickets, petitioners filed an action for damages before the Regional Trial Court of Makati,
Metro Manila, Branch 145. Advocating petitioner's position, the trial court categorically ruled
that respondent TransWorld Airlines (TWA) breached its contract of carriage with petitioners
and that said breach was "characterized by bad faith." On appeal, however, the appellate
court found that while there was a breach of contract on respondent TWA's part, there was
neither fraud nor bad faith because under the Code of Federal Regulations by the Civil
Aeronautics Board of the United States of America it is allowed to overbook flights.
The factual backdrop of the case is as follows:
Petitioners-spouses Cesar C. Zalamea and Suthira Zalamea, and their daughter, Liana
Zalamea, purchased three (3) airline tickets from the Manila agent of respondent TransWorld
Airlines, Inc. for a flight to New York to Los Angeles on June 6, 1984. The tickets of petitioners-
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, petitioners received notice of the reconfirmation of their
reservations for said flight. On the appointed date, however, petitioners checked in at 10:00
a.m., an hour earlier than the scheduled flight at 11:00 a.m. but were placed on the wait-list
because the number of passengers who had checked in before them had already taken all the
seats available on the flight. Liana Zalamea appeared as the No. 13 on the wait-list while the
two other Zalameas were listed as "No. 34, showing a party of two." Out of the 42 names on
the wait list, the first 22 names were eventually allowed to board the flight to Los Angeles,
including petitioner Cesar Zalamea. The two others, on the other hand, at No. 34, being
ranked lower than 22, were not able to fly. As it were, those holding full-fare tickets 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. According to Mr. Zalamea, it was
only later when he discovered the he was holding his daughter's full-fare ticket.
Even in the next TWA flight to Los Angeles Mrs. Zalamea and her daughter, could not be
accommodated because it was also fully booked. Thus, they were constrained to book in
another flight and purchased two tickets from American Airlines at a cost of Nine Hundred
Eighteen ($918.00) Dollars.
Upon their arrival in the Philippines, petitioners filed an action for damages based on breach
of contract of air carriage before the Regional Trial Court of Makati, Metro Manila, Branch
145. As aforesaid, the lower court ruled in favor of petitioners in its decision 1 dated January
9, 1989 the dispositive portion of which states as follows:
WHEREFORE, judgment is hereby rendered ordering the defendant to pay plaintiffs the
following amounts:
(1) US $918.00, or its peso equivalent at the time of payment representing the price of
the tickets bought by Suthira and Liana Zalamea from American Airlines, to enable them to fly
to Los Angeles from New York City;
(2) US $159.49, or its peso equivalent at the time of payment, representing the price
of Suthira Zalamea's ticket for TWA Flight 007;
(3) Eight Thousand Nine Hundred Thirty-Four Pesos and Fifty Centavos (P8,934.50,
Philippine Currency, representing the price of Liana Zalamea's ticket for TWA Flight 007,
(4) Two Hundred Fifty Thousand Pesos (P250,000.00), Philippine Currency, as moral
damages for all the plaintiffs'
(5) One Hundred Thousand Pesos (P100,000.00), Philippine Currency, as and for
attorney's fees; and
(6) The costs of suit.
SO ORDERED. 2
On appeal, the respondent Court of Appeals 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. 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, no fraud nor bad faith could be imputed on
respondent TransWorld Airlines.
Moreover, while respondent TWA was remiss in not informing petitioners that the flight was
overbooked and that even a person with a confirmed reservation may be denied
accommodation on an overbooked flight, nevertheless it ruled that such omission or
negligence cannot under the circumstances be considered to be so gross as to amount to bad
faith.
Finally, it also held that there was no bad faith in placing petitioners in the wait-list along with
forty-eight (48) other passengers where full-fare first class tickets were given priority over
discounted tickets.
The dispositive portion of the decision of respondent Court of Appeals3 dated October 25,
1991 states as follows:
WHEREFORE, in view of all the foregoing, the decision under review is hereby MODIFIED in
that the award of moral and exemplary damages to the plaintiffs is eliminated, and the
defendant-appellant is hereby ordered to pay the plaintiff the following amounts:
(1) US$159.49, or its peso equivalent at the time of the payment, representing the
price of Suthira Zalamea's ticket for TWA Flight 007;
(2) US$159.49, or its peso equivalent at the time of the payment, representing the
price of Cesar Zalamea's ticket for TWA Flight 007;
(3) P50,000.00 as and for attorney's fees.
(4) The costs of suit.
SO ORDERED.4
Not satisfied with the decision, petitioners raised the case on petition for review on certiorari
and alleged the following errors committed by the respondent Court of Appeals, to wit:
I.
. . . IN HOLDING THAT THERE WAS NO FRAUD OR BAD FAITH ON THE PART OF RESPONDENT
TWA BECAUSE IT HAS A RIGHT TO OVERBOOK FLIGHTS.
II.
. . . IN ELIMINATING THE AWARD OF EXEMPLARY DAMAGES.
III.
. . . IN NOT ORDERING THE REFUND OF LIANA ZALAMEA'S TWA TICKET AND PAYMENT FOR
THE AMERICAN AIRLINES
TICKETS.5
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.6 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.7
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.8 Since the tickets were sold and issued in the Philippines, the
applicable law in this case would be Philippine law.
Existing jurisprudence explicitly states that overbooking amounts to bad faith, entitling the
passengers concerned to an award of moral damages. In Alitalia Airways v. Court of Appeals,9
where passengers with confirmed bookings were refused carriage on the last minute, this
Court held that when an airline issues a ticket to a passenger confirmed on a particular flight,
on a certain date, a contract of carriage arises, and the passenger has every right to expect
that he would fly on that flight and on that date. If he does not, then the carrier opens itself
to a suit for breach of contract of carriage. 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 the 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.
Similarly, in Korean Airlines Co., Ltd. v. Court of Appeals, 10 where private respondent was
not allowed to board the plane because her seat had already been given to another passenger
even before the allowable period for passengers to check in had lapsed despite the fact that
she had a confirmed ticket and she had arrived on time, this Court held that petitioner airline
acted in bad faith in violating private respondent's rights under their contract of carriage and
is therefore liable for the injuries she has sustained as a result.
In fact, existing jurisprudence abounds with rulings where the breach of contract of carriage
amounts to bad faith. In Pan American World Airways, Inc. v. Intermediate Appellate Court,
11 where a would-be passenger had the necessary ticket, baggage claim and clearance from
immigration all clearly and unmistakably showing that she was, in fact, included in the
passenger manifest of said flight, and yet was denied accommodation in said flight, this Court
did not hesitate to affirm the lower court's finding awarding her damages.
A contract to transport passengers is quite different in kind and degree from any other
contractual relation. So ruled this Court in Zulueta v. Pan American World Airways, Inc. 12
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. Thus, it was also held that the switch of planes from Lockheed 1011 to
a smaller Boeing 707 because there were only 138 confirmed economy class passengers who
could very well be accommodated in the smaller planes, thereby sacrificing the comfort of its
first class passengers for the sake of economy, amounts to bad faith. Such inattention and
lack of care for the interest of its passengers who are entitled to its utmost consideration
entitles the passenger to an award of moral damages. 13
Even on the assumption that overbooking is allowed, respondent 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. Respondent TWA should have
incorporated stipulations on overbooking on the tickets issued or to properly inform its
passengers about these policies so that the latter would be prepared for such eventuality or
would have the choice to ride with another airline.
Respondent TWA contends that Exhibit I, the detached flight coupon upon which were
written the name of the passenger and the points of origin and destination, contained such a
notice. An examination of Exhibit I does not bear this out. At any rate, said exhibit was not
offered for the purpose of showing the existence of a notice of overbooking but to show that
Exhibit I was used for flight 007 in first class of June 11, 1984 from New York to Los Angeles.
Moreover, respondent TWA was also guilty of not informing its passengers of its alleged
policy of giving less priority to discounted tickets. While the petitioners had checked in at the
same time, and held confirmed tickets, yet, only one of them was allowed to board the plane
ten minutes before departure time because the full-fare ticket he was holding was given
priority over discounted tickets. The other two petitioners were left behind.
It is respondent TWA's position that the practice of overbooking and the airline system of
boarding priorities are reasonable policies, which when implemented do not amount to bad
faith. But the issue raised in this case is not the reasonableness of said policies but whether or
not said policies were incorporated or deemed written on petitioners' contracts of carriage.
Respondent TWA failed to show that there are provisions to that effect. Neither did it present
any argument of substance to show that petitioners were duly apprised of the overbooked
condition of the flight or that there is a hierarchy of boarding priorities in booking passengers.
It is evident that petitioners had the right to rely upon the assurance of respondent TWA, thru
its agent in Manila, then in New York, that their tickets represented confirmed seats without
any qualification. The failure of respondent TWA to so inform them when it could easily have
done so thereby enabling respondent to hold on to them as passengers up to the last minute
amounts to bad faith. Evidently, respondent TWA placed its self-interest over the rights of
petitioners under their contracts of carriage. Such conscious disregard of petitioners' rights
makes respondent TWA liable for moral damages. To deter breach of contracts by respondent
TWA in similar fashion in the future, we adjudge respondent TWA liable for exemplary
damages, as well.
Petitioners also assail the respondent court's decision not to require the refund of Liana
Zalamea's ticket because the ticket was used by her father. On this score, we uphold the
respondent court. Petitioners had not shown with certainty that the act of respondent TWA in
allowing Mr. Zalamea to use the ticket of her daughter was due to inadvertence or deliberate
act. Petitioners had also failed to establish that they did not accede to said agreement. The
logical conclusion, therefore, is that both petitioners and respondent TWA agreed, albeit
impliedly, to the course of action taken.
The respondent court erred, however, in not ordering the refund of the American Airlines
tickets purchased and used by petitioners Suthira and Liana. The evidence shows that
petitioners Suthira and Liana were constrained to take the American Airlines flight to Los
Angeles not because they "opted not to use their TWA tickets on another TWA flight" but
because respondent TWA could not accommodate them either on the next TWA flight which
was also fully booked. 14 The purchase of the American Airlines tickets by petitioners Suthira
and Liana was the consequence of respondent TWA's unjustifiable breach of its contracts of
carriage with petitioners. In accordance with Article 2201, New Civil Code, respondent TWA
should, therefore, be responsible for all damages which may be reasonably attributed to the
non-performance of its obligation. In the previously cited case of Alitalia Airways v. Court of
Appeals, 15 this Court explicitly held that a passenger is entitled to be reimbursed for the cost
of the tickets he had to buy for a flight to another airline. Thus, instead of simply being
refunded for the cost of the unused TWA tickets, petitioners should be awarded the actual
cost of their flight from New York to Los Angeles. On this score, we differ from the trial court's
ruling which ordered not only the reimbursement of the American Airlines tickets but also the
refund of the unused TWA tickets. To require both prestations would have enabled
petitioners to fly from New York to Los Angeles without any fare being paid. The partition of the estate left by the deceased Joseph G. Brimo is in question in this case.

The award to petitioners of attorney's fees is also justified under Article 2208(2) of the Civil
Code which allows recovery when the defendant's act or omission has compelled plaintiff to
litigate or to incur expenses to protect his interest. However, the award for moral damages
and exemplary damages by the trial court is excessive in the light of the fact that only Suthira
and Liana Zalamea were actually "bumped off." An award of P50,000.00 moral damages and
another P50,000.00 exemplary damages would suffice under the circumstances obtaining in
the instant case.
WHEREFORE, the petition is hereby GRANTED and the decision of the respondent Court of
Appeals is hereby MODIFIED to the extent of adjudging respondent TransWorld Airlines to
pay damages to petitioners in the following amounts, to wit:
(1) US$918.00 or its peso equivalent at the time of payment representing the price of
the tickets bought by Suthira and Liana Zalamea from American Airlines, to enable them to fly
to Los Angeles from New York City;
(2) P50,000.00 as moral damages;
The judicial administrator of this estate filed a scheme of partition. Andre Brimo, one of the
brothers of the deceased, opposed it. The court, however, approved it.
The errors which the oppositor-appellant assigns are:
(1) The approval of said scheme of partition; (2) denial of his participation in the inheritance;
(3) the denial of the motion for reconsideration of the order approving the partition; (4) the
approval of the purchase made by the Pietro Lana of the deceased's business and the deed of
transfer of said business; and (5) the declaration that the Turkish laws are impertinent to this
cause, and the failure not to postpone the approval of the scheme of partition and the
delivery of the deceased's business to Pietro Lanza until the receipt of the depositions
requested in reference to the Turkish laws.
The appellant's opposition is based on the fact that the partition in question puts into effect
the provisions of Joseph G. Brimo's will which are not in accordance with the laws of his
Turkish nationality, for which reason they are void as being in violation or article 10 of the
Civil Code which, among other things, provides the following:

(3) P50,000.00 as exemplary damages; Nevertheless, legal and testamentary successions, in respect to the order of succession as well
as to the amount of the successional rights and the intrinsic validity of their provisions, shall
(4) P50,000.00 as attorney's fees; and be regulated by the national law of the person whose succession is in question, whatever may
be the nature of the property or the country in which it may be situated.
(5) Costs of suit.
But the fact is that the oppositor did not prove that said testimentary dispositions are not in
SO ORDERED. accordance with the Turkish laws, inasmuch as he did not present any evidence showing what
the Turkish laws are on the matter, and in the absence of evidence on such laws, they are
presumed to be the same as those of the Philippines. (Lim and Lim vs. Collector of Customs,
36 Phil., 472.)

It has not been proved in these proceedings what the Turkish laws are. He, himself,
acknowledges it when he desires to be given an opportunity to present evidence on this
point; so much so that he assigns as an error of the court in not having deferred the approval
of the scheme of partition until the receipt of certain testimony requested regarding the
Turkish laws on the matter.
G.R. No. L-22595 November 1, 1927
The refusal to give the oppositor another opportunity to prove such laws does not constitute
Testate Estate of Joseph G. Brimo, JUAN MICIANO, administrator, petitioner-appellee, an error. It is discretionary with the trial court, and, taking into consideration that the
vs. oppositor was granted ample opportunity to introduce competent evidence, we find no abuse
ANDRE BRIMO, opponent-appellant. of discretion on the part of the court in this particular. There is, therefore, no evidence in the
record that the national law of the testator Joseph G. Brimo was violated in the testamentary
Ross, Lawrence and Selph for appellant. dispositions in question which, not being contrary to our laws in force, must be complied with
Camus and Delgado for appellee. and executed. lawphil.net

Therefore, the approval of the scheme of partition in this respect was not erroneous.
ROMUALDEZ, J.:
In regard to the first assignment of error which deals with the exclusion of the herein
appellant as a legatee, inasmuch as he is one of the persons designated as such in will, it must So ordered.
be taken into consideration that such exclusion is based on the last part of the second clause
of the will, which says:

Second. I like desire to state that although by law, I am a Turkish citizen, this citizenship
having been conferred upon me by conquest and not by free choice, nor by nationality and,
on the other hand, having resided for a considerable length of time in the Philippine Islands
where I succeeded in acquiring all of the property that I now possess, it is my wish that the
distribution of my property and everything in connection with this, my will, be made and
disposed of in accordance with the laws in force in the Philippine islands, requesting all of my
relatives to respect this wish, otherwise, I annul and cancel beforehand whatever disposition
found in this will favorable to the person or persons who fail to comply with this request.

The institution of legatees in this will is conditional, and the condition is that the instituted
legatees must respect the testator's will to distribute his property, not in accordance with the
laws of his nationality, but in accordance with the laws of the Philippines.

If this condition as it is expressed were legal and valid, any legatee who fails to comply with it,
as the herein oppositor who, by his attitude in these proceedings has not respected the will of
the testator, as expressed, is prevented from receiving his legacy.

The fact is, however, that the said condition is void, being contrary to law, for article 792 of
the civil Code provides the following:

Impossible conditions and those contrary to law or good morals shall be considered as not
imposed and shall not prejudice the heir or legatee in any manner whatsoever, even should
the testator otherwise provide.

And said condition is contrary to law because it expressly ignores the testator's national law
when, according to article 10 of the civil Code above quoted, such national law of the testator
is the one to govern his testamentary dispositions.

Said condition then, in the light of the legal provisions above cited, is considered unwritten,
and the institution of legatees in said will is unconditional and consequently valid and
effective even as to the herein oppositor.
G.R. No. L-11622 January 28, 1961
It results from all this that the second clause of the will regarding the law which shall govern
it, and to the condition imposed upon the legatees, is null and void, being contrary to law. THE COLLECTOR OF INTERNAL REVENUE, petitioner,
vs.
All of the remaining clauses of said will with all their dispositions and requests are perfectly DOUGLAS FISHER AND BETTINA FISHER, and the COURT OF TAX APPEALS, respondents.
valid and effective it not appearing that said clauses are contrary to the testator's national
law. x---------------------------------------------------------x

Therefore, the orders appealed from are modified and it is directed that the distribution of G.R. No. L-11668 January 28, 1961.
this estate be made in such a manner as to include the herein appellant Andre Brimo as one
of the legatees, and the scheme of partition submitted by the judicial administrator is DOUGLAS FISHER AND BETTINA FISHER, petitioner,
approved in all other respects, without any pronouncement as to costs. 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 expenses
2,052.55
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.
 Respondents then commenced training in Pakistan. After their training period, they began
discharging their job functions as flight attendants, with base station in Manila and flying
G.R. No. 61594 September 28, 1990 assignments to different parts of the Middle East and Europe.

PAKISTAN INTERNATIONAL AIRLINES CORPORATION, petitioner,
vs
HON. BLAS F. OPLE, in his capacity as Minister of Labor; HON. VICENTE LEOGARDO, JR., in his
capacity as Deputy Minister; ETHELYNNE B. FARRALES and MARIA MOONYEEN MAMASIG,
respondents.
Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for petitioner.
Ledesma, Saludo & Associates for private respondents.
FELICIANO, J.:
On 2 December 1978, petitioner Pakistan International Airlines Corporation ("PIA"), a foreign
corporation licensed to do business in the Philippines, executed in Manila two (2) separate
contracts of employment, one with private respondent Ethelynne B. Farrales and the other
with private respondent Ma. M.C. Mamasig. 1 The contracts, which became effective on 9
January 1979, provided in pertinent portion as follows:
On 2 August 1980, roughly one (1) year and four (4) months prior to the expiration of the
contracts of employment, PIA through Mr. Oscar Benares, counsel for and official of the local
branch of PIA, sent separate letters both dated 1 August 1980 to private respondents Farrales
and Mamasig advising both that their services as flight stewardesses would be terminated
"effective 1 September 1980, conformably to clause 6 (b) of the employment agreement [they
had) executed with [PIA]."2
On 9 September 1980, private respondents Farrales and Mamasig jointly instituted a
complaint, docketed as NCR-STF-95151-80, for illegal dismissal and non-payment of company
benefits and bonuses, against PIA with the then Ministry of Labor and Employment ("MOLE").
After several unfruitful attempts at conciliation, the MOLE hearing officer Atty. Jose M.
Pascual ordered the parties to submit their position papers and evidence supporting their
respective positions. The PIA submitted its position paper, 3 but no evidence, and there
claimed that both private respondents were habitual absentees; that both were in the habit
of bringing in from abroad sizeable quantities of "personal effects"; and that PIA personnel at
the Manila International Airport had been discreetly warned by customs officials to advise
private respondents to discontinue that practice. PIA further claimed that the services of both
private respondents were terminated pursuant to the provisions of the employment contract.

5. DURATION OF EMPLOYMENT AND PENALTY In his Order dated 22 January 1981, Regional Director Francisco L. Estrella ordered the
reinstatement of private respondents with full backwages or, in the alternative, the payment
This agreement is for a period of three (3) years, but can be extended by the mutual consent to them of the amounts equivalent to their salaries for the remainder of the fixed three-year
of the parties. period of their employment contracts; the payment to private respondent Mamasig of an
amount equivalent to the value of a round trip ticket Manila-USA Manila; and payment of a
xxx xxx xxx bonus to each of the private respondents equivalent to their one-month salary. 4 The Order
stated that private respondents had attained the status of regular employees after they had
6. TERMINATION rendered more than a year of continued service; that the stipulation limiting the period of the
employment contract to three (3) years was null and void as violative of the provisions of the
xxx xxx xxx Labor Code and its implementing rules and regulations on regular and casual employment;
and that the dismissal, having been carried out without the requisite clearance from the
Notwithstanding anything to contrary as herein provided, PIA reserves the right to terminate MOLE, was illegal and entitled private respondents to reinstatement with full backwages.
this agreement at any time by giving the EMPLOYEE notice in writing in advance one month
before the intended termination or in lieu thereof, by paying the EMPLOYEE wages equivalent On appeal, in an Order dated 12 August 1982, Hon. Vicente Leogardo, Jr., Deputy Minister,
to one month's salary. MOLE, adopted the findings of fact and conclusions of the Regional Director and affirmed the
latter's award save for the portion thereof giving PIA the option, in lieu of reinstatement, "to
xxx xxx xxx pay each of the complainants [private respondents] their salaries corresponding to the
unexpired portion of the contract[s] [of employment] . . .". 5
10. APPLICABLE LAW:
In the instant Petition for Certiorari, petitioner PIA assails the award of the Regional Director
This agreement shall be construed and governed under and by the laws of Pakistan, and only and the Order of the Deputy Minister as having been rendered without jurisdiction; for having
the Courts of Karachi, Pakistan shall have the jurisdiction to consider any matter arising out of been rendered without support in the evidence of record since, allegedly, no hearing was
or under this agreement. conducted by the hearing officer, Atty. Jose M. Pascual; and for having been issued in
disregard and in violation of petitioner's rights under the employment contracts with private
respondents.
1. Petitioner's first contention is that the Regional Director, MOLE, had no jurisdiction
over the subject matter of the complaint initiated by private respondents for illegal dismissal,
jurisdiction over the same being lodged in the Arbitration Branch of the National Labor
Relations Commission ("NLRC") It appears to us beyond dispute, however, that both at the
time the complaint was initiated in September 1980 and at the time the Orders assailed were
rendered on January 1981 (by Regional Director Francisco L. Estrella) and August 1982 (by
Deputy Minister Vicente Leogardo, Jr.), the Regional Director had jurisdiction over
termination cases.
Art. 278 of the Labor Code, as it then existed, forbade the termination of the services of
employees with at least one (1) year of service without prior clearance from the Department
of Labor and Employment:
Art. 278. Miscellaneous Provisions — . . .
(b) With or without a collective agreement, no employer may shut down his
establishment or dismiss or terminate the employment of employees with at least one year of
service during the last two (2) years, whether such service is continuous or broken, without
prior written authority issued in accordance with such rules and regulations as the Secretary
may promulgate . . . (emphasis supplied)
Rule XIV, Book No. 5 of the Rules and Regulations Implementing the Labor Code, made clear
that in case of a termination without the necessary clearance, the Regional Director was
authorized to order the reinstatement of the employee concerned and the payment of
backwages; necessarily, therefore, the Regional Director must have been given jurisdiction
over such termination cases:
Sec. 2. Shutdown or dismissal without clearance. — Any shutdown or dismissal without
prior clearance shall be conclusively presumed to be termination of employment without a
just cause. The Regional Director shall, in such case order the immediate reinstatement of the
employee and the payment of his wages from the time of the shutdown or dismissal until the
time of reinstatement. (emphasis supplied)
Policy Instruction No. 14 issued by the Secretary of Labor, dated 23 April 1976, was similarly
very explicit about the jurisdiction of the Regional Director over termination of employment
cases:
Under PD 850, termination cases — with or without CBA — are now placed under the original
jurisdiction of the Regional Director. Preventive suspension cases, now made cognizable for
the first time, are also placed under the Regional Director. Before PD 850, termination cases
where there was a CBA were under the jurisdiction of the grievance machinery and voluntary
arbitration, while termination cases where there was no CBA were under the jurisdiction of
the Conciliation Section.
In more details, the major innovations introduced by PD 850 and its implementing rules and
regulations with respect to termination and preventive suspension cases are:
1. The Regional Director is now required to rule on every application for clearance,
whether there is opposition or not, within ten days from receipt thereof.
xxx xxx xxx
(Emphasis supplied)
2. The second contention of petitioner PIA is that, even if the Regional Director had
jurisdiction, still his order was null and void because it had been issued in violation of
petitioner's right to procedural due process .6 This claim, however, cannot be given serious
consideration. Petitioner was ordered by the Regional Director to submit not only its position
paper but also such evidence in its favor as it might have. Petitioner opted to rely solely upon
its position paper; we must assume it had no evidence to sustain its assertions. Thus, even if
no formal or oral hearing was conducted, petitioner had ample opportunity to explain its side.
Moreover, petitioner PIA was able to appeal his case to the Ministry of Labor and
Employment. 7
There is another reason why petitioner's claim of denial of due process must be rejected. At
the time the complaint was filed by private respondents on 21 September 1980 and at the
time the Regional Director issued his questioned order on 22 January 1981, applicable
regulation, as noted above, specified that a "dismissal without prior clearance shall be
conclusively presumed to be termination of employment without a cause", and the Regional
Director was required in such case to" order the immediate reinstatement of the employee
and the payment of his wages from the time of the shutdown or dismiss until . . .
reinstatement." In other words, under the then applicable rule, the Regional Director did not
even have to require submission of position papers by the parties in view of the conclusive
(juris et de jure) character of the presumption created by such applicable law and regulation.
In Cebu Institute of Technology v. Minister of Labor and Employment, 8 the Court pointed out
that "under Rule 14, Section 2, of the Implementing Rules and Regulations, the termination of
[an employee] which was without previous clearance from the Ministry of Labor is
conclusively presumed to be without [just] cause . . . [a presumption which] cannot be
overturned by any contrary proof however strong."
3. In its third contention, petitioner PIA invokes paragraphs 5 and 6 of its contract of
employment with private respondents Farrales and Mamasig, arguing that its relationship
with them was governed by the provisions of its contract rather than by the general
provisions of the Labor Code. 9
Paragraph 5 of that contract set a term of three (3) years for that relationship, extendible by
agreement between the parties; while paragraph 6 provided that, notwithstanding any other
provision in the Contract, PIA had the right to terminate the employment agreement at any
time by giving one-month's notice to the employee or, in lieu of such notice, one-months
salary.
A contract freely entered into should, of course, be respected, as PIA argues, since a contract
is the law between the parties. 10 The principle of party autonomy in contracts is not,
however, an absolute principle. The rule in Article 1306, of our Civil Code is that the
contracting parties may establish such stipulations as they may deem convenient, "provided
they are not contrary to law, morals, good customs, public order or public policy." Thus,
counter-balancing the principle of autonomy of contracting parties is the equally general rule
that provisions of applicable law, especially provisions relating to matters affected with public
policy, are deemed written into the contract. 11 Put a little differently, the governing principle
is that parties may not contract away applicable provisions of law especially peremptory
provisions dealing with matters heavily impressed with public interest. The law relating to
labor and employment is clearly such an area and parties are not at liberty to insulate
themselves and their relationships from the impact of labor laws and regulations by simply
contracting with each other. It is thus necessary to appraise the contractual provisions
invoked by petitioner PIA in terms of their consistency with applicable Philippine law and
regulations.
As noted earlier, both the Labor Arbiter and the Deputy Minister, MOLE, in effect held that
paragraph 5 of that employment contract was inconsistent with Articles 280 and 281 of the
Labor Code as they existed at the time the contract of employment was entered into, and
hence refused to give effect to said paragraph 5. These Articles read as follows:
Art. 280. Security of Tenure. — In cases of regular employment, the employer shall not
terminate the services of an employee except for a just cause or when authorized by this Title
An employee who is unjustly dismissed from work shall be entitled to reinstatement without
loss of seniority rights and to his backwages computed from the time his compensation was
withheld from him up to the time his reinstatement.
Art. 281. Regular and Casual Employment. The provisions of written agreement to the
contrary notwithstanding and regardless of the oral agreements of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade of
the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of the
engagement of the employee or where the work or services to be performed is seasonal in
nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph:
provided, that, any employee who has rendered at least one year of service, whether such
service is continuous or broken, shall be considered as regular employee with respect to the
activity in which he is employed and his employment shall continue while such actually exists.
(Emphasis supplied)
In Brent School, Inc., et al. v. Ronaldo Zamora, etc., et al., 12 the Court had occasion to
examine in detail the question of whether employment for a fixed term has been outlawed
under the above quoted provisions of the Labor Code. After an extensive examination of the
history and development of Articles 280 and 281, the Court reached the conclusion that a
contract providing for employment with a fixed period was not necessarily unlawful:
There can of course be no quarrel with the proposition that where from the circumstances it
is apparent that periods have been imposed to preclude acquisition of tenurial security by the
employee, they should be struck down or disregarded as contrary to public policy, morals, etc.
But where no such intent to circumvent the law is shown, or stated otherwise, where the
reason for the law does not exist e.g. where it is indeed the employee himself who insists
upon a period or where the nature of the engagement is such that, without being seasonal or
for a specific project, a definite date of termination is a sine qua non would an agreement
fixing a period be essentially evil or illicit, therefore anathema Would such an agreement
come within the scope of Article 280 which admittedly was enacted "to prevent the
circumvention of the right of the employee to be secured in . . . (his) employment?"
As it is evident from even only the three examples already given that Article 280 of the Labor
Code, under a narrow and literal interpretation, not only fails to exhaust the gamut of
employment contracts to which the lack of a fixed period would be an anomaly, but would
also appear to restrict, without reasonable distinctions, the right of an employee to freely
stipulate with his employer the duration of his engagement, it logically follows that such a
literal interpretation should be eschewed or avoided. The law must be given reasonable
interpretation, to preclude absurdity in its application. Outlawing the whole concept of term
employment and subverting to boot the principle of freedom of contract to remedy the evil of
employers" using it as a means to prevent their employees from obtaining security of tenure
is like cutting off the nose to spite the face or, more relevantly, curing a headache by lopping
off the head.
xxx xxx xxx
Accordingly, and since the entire purpose behind the development of legislation culminating
in the present Article 280 of the Labor Code clearly appears to have been, as already
observed, to prevent circumvention of the employee's right to be secure in his tenure, the
clause in said article indiscriminately and completely ruling out all written or oral agreements
conflicting with the concept of regular employment as defined therein should be construed to
refer to the substantive evil that the Code itself has singled out: agreements entered into
precisely to circumvent security of tenure. It should have no application to instances where a
fixed period of employment was agreed upon knowingly and voluntarily by the parties,
without any force, duress or improper pressure being brought to bear upon the employee and
absent any other circumstances vitiating his consent, or where it satisfactorily appears that
the employer and employee dealt with each other on more or less equal terms with no moral
dominance whatever being exercised by the former over the latter. Unless thus limited in its
purview, the law would be made to apply to purposes other than those explicitly stated by its
framers; it thus becomes pointless and arbitrary, unjust in its effects and apt to lead to absurd
and unintended consequences. (emphasis supplied)
It is apparent from Brent School that the critical consideration is the presence or absence of a
substantial indication that the period specified in an employment agreement was designed to
circumvent the security of tenure of regular employees which is provided for in Articles 280
and 281 of the Labor Code. This indication must ordinarily rest upon some aspect of the
agreement other than the mere specification of a fixed term of the ernployment agreement,
or upon evidence aliunde of the intent to evade.
Examining the provisions of paragraphs 5 and 6 of the employment agreement between
petitioner PIA and private respondents, we consider that those provisions must be read
together and when so read, the fixed period of three (3) years specified in paragraph 5 will be
seen to have been effectively neutralized by the provisions of paragraph 6 of that agreement.
Paragraph 6 in effect took back from the employee the fixed three (3)-year period ostensibly
granted by paragraph 5 by rendering such period in effect a facultative one at the option of
the employer PIA. For petitioner PIA claims to be authorized to shorten that term, at any time
and for any cause satisfactory to itself, to a one-month period, or even less by simply paying
the employee a month's salary. Because the net effect of paragraphs 5 and 6 of the
agreement here involved is to render the employment of private respondents Farrales and
Mamasig basically employment at the pleasure of petitioner PIA, the Court considers that
paragraphs 5 and 6 were intended to prevent any security of tenure from accruing in favor of
private respondents even during the limited period of three (3) years,13 and thus to escape
completely the thrust of Articles 280 and 281 of the Labor Code.
Petitioner PIA cannot take refuge in paragraph 10 of its employment agreement which
specifies, firstly, the law of Pakistan as the applicable law of the agreement and, secondly,
lays the venue for settlement of any dispute arising out of or in connection with the
agreement "only [in] courts of Karachi Pakistan". The first clause of paragraph 10 cannot be
invoked to prevent the application of Philippine labor laws and regulations to the subject
matter of this case, i.e., the employer-employee relationship between petitioner PIA and
private respondents. We have already pointed out that the relationship is much affected with
public interest and that the otherwise applicable Philippine laws and regulations cannot be
rendered illusory by the parties agreeing upon some other law to govern their relationship.
Neither may petitioner invoke the second clause of paragraph 10, specifying the Karachi
courts as the sole venue for the settlement of dispute; between the contracting parties. Even
a cursory scrutiny of the relevant circumstances of this case will show the multiple and
substantive contacts between Philippine law and Philippine courts, on the one hand, and the
relationship between the parties, upon the other: the contract was not only executed in the
Philippines, it was also performed here, at least partially; private respondents are Philippine
citizens and respondents, while petitioner, although a foreign corporation, is licensed to do
business (and actually doing business) and hence resident in the Philippines; lastly, private
respondents were based in the Philippines in between their assigned flights to the Middle
East and Europe. All the above contacts point to the Philippine courts and administrative
agencies as a proper forum for the resolution of contractual disputes between the parties.
Under these circumstances, paragraph 10 of the employment agreement cannot be given
effect so as to oust Philippine agencies and courts of the jurisdiction vested upon them by
Philippine law. Finally, and in any event, the petitioner PIA did not undertake to plead and
prove the contents of Pakistan law on the matter; it must therefore be presumed that the
applicable provisions of the law of Pakistan are the same as the applicable provisions of
Philippine law.14
We conclude that private respondents Farrales and Mamasig were illegally dismissed and that
public respondent Deputy Minister, MOLE, had not committed any grave abuse of discretion
nor any act without or in excess of jurisdiction in ordering their reinstatement with
backwages. Private respondents are entitled to three (3) years backwages without
qualification or deduction. Should their reinstatement to their former or other substantially
equivalent positions not be feasible in view of the length of time which has gone by since
their services were unlawfully terminated, petitioner should be required to pay separation
pay to private respondents amounting to one (1) month's salary for every year of service
rendered by them, including the three (3) years service putatively rendered.
ACCORDINGLY, the Petition for certiorari is hereby DISMISSED for lack of merit, and the Order
dated 12 August 1982 of public respondent is hereby AFFIRMED, except that (1) private
respondents are entitled to three (3) years backwages, without deduction or qualification;
and (2) should reinstatement of private respondents to their former positions or to
substantially equivalent positions not be feasible, then petitioner shall, in lieu thereof, pay to
private respondents separation pay amounting to one (1)-month's salary for every year of
service actually rendered by them and for the three (3) years putative service by private
respondents. The Temporary Restraining Order issued on 13 September 1982 is hereby
LIFTED. Costs against petitioner.
SO ORDERED.
G.R. No. L-2071 September 19, 1950
Testate estate of Isabel V. Florendo, deceased. TIRSO DACANAY, petitioner-appellant,
vs.
PEDRO V. FLORENDO, ET AL., oppositor-appellees.
Sotto and Sotto for appellant.
Alafriz and Alafriz for appellees.
OZAETA, J.:
This is a special proceeding commenced in the Court of First Instance of La Union to probate a
joint and reciprocal will executed by the spouses Isabel V. Florendo and Tirso Dacanay on
October 20, 1940. Isabel V. Florendo having died, her surviving spouse Tirso Dacanay is
seeking to probate said joint and reciprocal will, which provides in substance that whoever of
the spouses, joint testators, shall survive the other, shall inherit all the properties of the
latter, with an agreement as to how the surviving spouse shall dispose of the properties in
case of his or her demise.
The relatives of the deceased Isabel V. Florendo opposed the probate of said will on various
statutory grounds.
Before hearing the evidence the trial court, after requiring and receiving from counsel for
both parties written arguments on the question of whether or not the said joint and
reciprocal will may be probated in view of article 669 of the Civil Code, issued an order
dismissing the petition for probate on the ground that said will is null and void ab initio as
having been executed in violation of article 669 of the Civil Code. From that order the
proponent of the will has appealed.
Article 669 of the Civil Code reads as follows:

ART. 669. Two or more persons cannot make a will conjointly or in the same instrument,
either for their reciprocal benefit or for the benefit of a third person.
We agree with appellant's view, supported by eminent commentators, that the prohibition of
article 669 of the Civil Code is directed against the execution of a joint will, or the expression
by two or more testators of their wills in a single document and by one act, rather than
against mutual or reciprocal wills, which may be separately executed. Upon this premise,
however, appellant argues that article 669 of the Civil Code has been repealed by Act. No.
190, which he claims provides for and regulates the extrinsic formalities of wills, contending
that whether two wills should be executed conjointly or separately is but a matter of extrinsic
formality.
The question now raised by appellant has recently been decided by this court adversely to
him in In re Will of Victor Bilbao, supra, p. 144. It appears in that case that on October 6, 1931,
the spouses Victor Bilbao and Ramona M. Navarro executed a will conjointly, whereby they
directed that "all of our respective private properties both real and personal, and all of our
conjugal properties, and any other property belonging to either or both of us, be given and
transmitted to anyone or either of us, who may survive the other, or who may remain the
surviving spouse of the other." That will was denied probate by the Court of First Instance of
Negros Oriental on the ground that it was prohibited by article 669 of the Civil Code. The
surviving spouse as proponent of the joint will also contended that said article of the Civil
Code has been repealed by sections 614 and 618 of the Code of Civil Procedure, Act No. 190.
In deciding that question this court, speaking through Mr. Justice Montemayor, said:
We cannot agree to the contention of the appellant that the provisions of the Code of Civil
Procedure on wills have completely superseded Chapter I, Title III of the Civil Code on the
same subject matter, resulting in the complete repeal of said Civil Code provisions. In the
study we have made of this subject, we have found a number of cases decided by this court
wherein several articles of the Civil Code regarding wills have not only been referred to but
have also been applied side by side with the provisions of the Code of Civil Procedure.
xxx xxx xxx
The provision of article 669 of the Civil Code prohibiting the execution of a will by two or
more persons conjointly or in the same instrument either for their reciprocal benefit or for
the benefit of a third person, is not unwise and is not against public policy. The reason for this
provision, especially as regards husband and wife, is that when a will is made jointly or in the
same instrument, the spouse who is more aggressive, stronger in will or character and
dominant is liable to dictate the terms of the will for his or her own benefit or for that of third
persons whom he or she desires to favor. And, where the will is not only joint but reciprocal,
either one of the spouses who may happen to be unscrupulous, wicked, faithless or
desperate, knowing as he or she does the terms of the will whereby the whole property of the
spouses both conjugal and paraphernal goes to the survivor, may be tempted to kill or
dispose of the other.
Considering the wisdom of the provisions of this article 669 and the fact that it has not been
repealed, at least not expressly, as well as the consideration that its provisions are not
incompatible with those of the Code of Civil Procedure on the subject of wills, we believe and
rule that said article 669 of the Civil Code is still in force. And we are not alone in this opinion.
Mr. Justice Willard as shown by his Notes on the Civil Code, on page 48 believes that this
article 669 is still in force. Sinco and Capistrano in their work on the Civil Code, Vol. II, page
33, favorably cite Justice Willard's opinion that this article is still in force. Judge Camus in his
book on the Civil Code does not include this article among those he considers repealed. Lastly,
we find that this article 669 has been reproduced word for word in article 818 of the New Civil
Code (Republic Act No. 386). The implication is that the Philippine Legislature that passed this
Act and approved the New Civil Code, including the members of the Code Commission who
prepared it, are of the opinion that the provisions of article 669 of the old Civil Code are not
incompatible with those of the Code of Civil Procedure.
In view of the foregoing, the order appealed from is affirmed, with costs against the
appellant.
G.R. No. L-55960 November 24, 1988
YAO KEE, SZE SOOK WAH, SZE LAI CHO, and SY CHUN YEN, petitioners,
vs.
AIDA SY-GONZALES, MANUEL SY, TERESITA SY-BERNABE, RODOLFO SY, and HONORABLE
COURT OF APPEALS, respondents.
Montesa, Albon, & Associates for petitioners.
De Lapa, Salonga, Fulgencio & De Lunas for respondents.
CORTES, J.:
Sy Kiat, a Chinese national. died on January 17, 1977 in Caloocan City where he was then
residing, leaving behind real and personal properties here in the Philippines worth
P300,000.00 more or less.
Thereafter, Aida Sy-Gonzales, Manuel Sy, Teresita Sy-Bernabe and Rodolfo Sy filed a petition
for the grant of letters of administration docketed as Special Proceedings Case No. C-699 of
the then Court of First Instance of Rizal Branch XXXIII, Caloocan City. In said petition they
alleged among others that (a) they are the children of the deceased with Asuncion Gillego; (b)
to their knowledge Sy Mat died intestate; (c) they do not recognize Sy Kiat's marriage to Yao
Kee nor the filiation of her children to him; and, (d) they nominate Aida Sy-Gonzales for
appointment as administratrix of the intestate estate of the deceased [Record on Appeal, pp.
4-9; Rollo, p. 107.]
The petition was opposed by Yao Kee, Sze Sook Wah, Sze Lai Cho and Sy Yun Chen who
alleged that: (a) Yao Kee is the lawful wife of Sy Kiat whom he married on January 19, 1931 in
China; (b) the other oppositors are the legitimate children of the deceased with Yao Kee; and,
(c) Sze Sook Wah is the eldest among them and is competent, willing and desirous to become
the administratrix of the estate of Sy Kiat [Record on Appeal, pp. 12-13; Rollo, p. 107.] After
hearing, the probate court, finding among others that:
(1) Sy Kiat was legally married to Yao Kee [CFI decision, pp. 12-27; Rollo, pp. 49-64;]
(2) Sze Sook Wah, Sze Lai Cho and Sze Chun Yen are the legitimate children of Yao Kee
with Sy Mat [CFI decision, pp. 28-31; Rollo. pp. 65-68;] and,
(3) Aida Sy-Gonzales, Manuel Sy, Teresita Sy-Bernabe and Rodolfo Sy are the
acknowledged illegitimate offsprings of Sy Kiat with Asuncion Gillego [CFI decision, pp. 27-28;
Rollo, pp. 64- 65.]
held if favor of the oppositors (petitioners herein) and appointed Sze Sook Wah as the
administratrix of the intestate estate of the deceased [CFI decision, pp. 68-69; Rollo, pp. 105-
106.]
On appeal the Court of Appeals rendered a decision modifying that of the probate court, the
dispositive portion of which reads:
IN VIEW OF THE FOREGOING, the decision of the lower Court is hereby MODIFIED and SET
ASIDE and a new judgment rendered as follows:
(1) Declaring petitioners Aida Sy-Gonzales, Manuel Sy, Teresita Sy- Bernabe and
Rodolfo Sy acknowledged natural children of the deceased Sy Kiat with Asuncion Gillego, an
unmarried woman with whom he lived as husband and wife without benefit of marriage for
many years:
(2) Declaring oppositors Sze Sook Wah, Sze Lai Chu and Sze Chun Yen, the
acknowledged natural children of the deceased Sy Kiat with his Chinese wife Yao Kee, also
known as Yui Yip, since the legality of the alleged marriage of Sy Mat to Yao Kee in China had
not been proven to be valid to the laws of the Chinese People's Republic of China (sic);
(3) Declaring the deed of sale executed by Sy Kiat on December 7, 1976 in favor of
Tomas Sy (Exhibit "G-1", English translation of Exhibit "G") of the Avenue Tractor and Diesel
Parts Supply to be valid and accordingly, said property should be excluded from the estate of
the deceased Sy Kiat; and
(4) Affirming the appointment by the lower court of Sze Sook Wah as judicial
administratrix of the estate of the deceased. [CA decision, pp. 11-12; Rollo, pp. 36- 37.]
From said decision both parties moved for partial reconsideration, which was however denied
by respondent court. They thus interposed their respective appeals to this Court.
Private respondents filed a petition with this Court docketed as G.R. No. 56045 entitled "Aida
Sy-Gonzales, Manuel Sy, Teresita Sy-Bernabe and Rodolfo Sy v. Court of Appeals, Yao Kee, Sze
Sook Wah, Sze Lai Cho and Sy Chun Yen" questioning paragraphs (3) and (4) of the dispositive
portion of the Court of Appeals' decision. The Supreme Court however resolved to deny the
petition and the motion for reconsideration. Thus on March 8, 1982 entry of judgment was
made in G.R. No. 56045. **
The instant petition, on the other hand, questions paragraphs (1) and (2) of the dispositive
portion of the decision of the Court of Appeals. This petition was initially denied by the
Supreme Court on June 22, 1981. Upon motion of the petitioners the Court in a resolution
dated September 16, 1981 reconsidered the denial and decided to give due course to this
petition. Herein petitioners assign the following as errors:
I. RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN DECLARING THE MARRIAGE
OF SY KIAT TO YAO YEE AS NOT HAVE (sic) BEEN PROVEN VALID IN ACCORDANCE WITH LAWS
OF THE PEOPLE'S REPUBLIC OF CHINA.
II. RESPONDENT COURT OF APPEALS GRAVELY ERRED IN DECLARING AIDA SY-
GONZALES, MANUEL SY, TERESITA SY-BERNABE AND RODOLFO SY AS NATURAL CHILDREN OF
SY KIAT WITH ASUNCION GILLEGO. [Petition, p. 2; Rollo, p. 6.]
I. Petitioners argue that the marriage of Sy Kiat to Yao Kee in accordance with
Chinese law and custom was conclusively proven. To buttress this argument they rely on the
following testimonial and documentary evidence.
First, the testimony of Yao Kee summarized by the trial court as follows:
Yao Kee testified that she was married to Sy Kiat on January 19, 1931 in Fookien, China; that
she does not have a marriage certificate because the practice during that time was for elders
to agree upon the betrothal of their children, and in her case, her elder brother was the one
who contracted or entered into [an] agreement with the parents of her husband; that the
agreement was that she and Sy Mat would be married, the wedding date was set, and
invitations were sent out; that the said agreement was complied with; that she has five
children with Sy Kiat, but two of them died; that those who are alive are Sze Sook Wah, Sze
Lai Cho, and Sze Chun Yen, the eldest being Sze Sook Wah who is already 38 years old; that
Sze Sook Wah was born on November 7, 1939; that she and her husband, Sy Mat, have been
living in FooKien, China before he went to the Philippines on several occasions; that the
practice during the time of her marriage was a written document [is exchanged] just between
the parents of the bride and the parents of the groom, or any elder for that matter; that in
China, the custom is that there is a go- between, a sort of marriage broker who is known to
both parties who would talk to the parents of the bride-to-be; that if the parents of the bride-
to-be agree to have the groom-to-be their son in-law, then they agree on a date as an
engagement day; that on engagement day, the parents of the groom would bring some pieces
of jewelry to the parents of the bride-to-be, and then one month after that, a date would be
set for the wedding, which in her case, the wedding date to Sy Kiat was set on January 19,
1931; that during the wedding the bridegroom brings with him a couch (sic) where the bride
would ride and on that same day, the parents of the bride would give the dowry for her
daughter and then the document would be signed by the parties but there is no solemnizing
officer as is known in the Philippines; that during the wedding day, the document is signed
only by the parents of the bridegroom as well as by the parents of the bride; that the parties
themselves do not sign the document; that the bride would then be placed in a carriage
where she would be brought to the town of the bridegroom and before departure the bride
would be covered with a sort of a veil; that upon reaching the town of the bridegroom, the
bridegroom takes away the veil; that during her wedding to Sy Kiat (according to said Chinese
custom), there were many persons present; that after Sy Kiat opened the door of the carriage,
two old ladies helped her go down the carriage and brought her inside the house of Sy Mat;
that during her wedding, Sy Chick, the eldest brother of Sy Kiat, signed the document with her
mother; that as to the whereabouts of that document, she and Sy Mat were married for 46
years already and the document was left in China and she doubt if that document can still be
found now; that it was left in the possession of Sy Kiat's family; that right now, she does not
know the whereabouts of that document because of the lapse of many years and because
they left it in a certain place and it was already eaten by the termites; that after her wedding
with Sy Kiat, they lived immediately together as husband and wife, and from then on, they
lived together; that Sy Kiat went to the Philippines sometime in March or April in the same
year they were married; that she went to the Philippines in 1970, and then came back to
China; that again she went back to the Philippines and lived with Sy Mat as husband and wife;
that she begot her children with Sy Kiat during the several trips by Sy Kiat made back to
China. [CFI decision, pp. 13-15; Rollo, pp. 50-52.]
Second, the testimony of Gan Ching, a younger brother of Yao Kee who stated that he was
among the many people who attended the wedding of his sister with Sy Kiat and that no
marriage certificate is issued by the Chinese government, a document signed by the parents
or elders of the parties being sufficient [CFI decision, pp. 15-16; Rollo, pp.
52-53.]
Third, the statements made by Asuncion Gillego when she testified before the trial court to
the effect that (a) Sy Mat was married to Yao Kee according to Chinese custom; and, (b) Sy
Kiat's admission to her that he has a Chinese wife whom he married according to Chinese
custom [CFI decision, p. 17; Rollo, p. 54.]
Fourth, Sy Kiat's Master Card of Registered Alien issued in Caloocan City on October 3, 1972
where the following entries are found: "Marital status—Married"; "If married give name of
spouses—Yao Kee"; "Address-China; "Date of marriage—1931"; and "Place of marriage—
China" [Exhibit "SS-1".]
Fifth, Sy Kiat's Alien Certificate of Registration issued in Manila on January 12, 1968 where the
following entries are likewise found: "Civil status—Married"; and, 'If married, state name and
address of spouse—Yao Kee Chingkang, China" [Exhibit "4".]
And lastly, the certification issued in Manila on October 28, 1977 by the Embassy of the
People's Republic of China to the effect that "according to the information available at the
Embassy Mr. Sy Kiat a Chinese national and Mrs. Yao Kee alias Yui Yip also Chinese were
married on January 19, 1931 in Fukien, the People's Republic of China" [Exhibit "5".]
These evidence may very well prove the fact of marriage between Yao Kee and Sy Kiat.
However, the same do not suffice to establish the validity of said marriage in accordance with
Chinese law or custom.
Custom is defined as "a rule of conduct formed by repetition of acts, uniformly observed
(practiced) as a social rule, legally binding and obligatory" [In the Matter of the Petition for
Authority to Continue Use of the Firm Name "Ozaeta, Romulo, de Leon, Mabanta and Reyes",
July 30, 1979, SCRA 3, 12 citing JBL Reyes & RC Puno, Outline of Phil. Civil Law, Fourth Ed., Vol.
1, p. 7.] The law requires that "a custom must be proved as a fact, according to the rules of
evidence" [Article 12, Civil Code.] On this score the Court had occasion to state that "a local
custom as a source of right can not be considered by a court of justice unless such custom is
properly established by competent evidence like any other fact" [Patriarca v. Orate, 7 Phil.
390, 395 (1907).] The same evidence, if not one of a higher degree, should be required of a
foreign custom.
The law on foreign marriages is provided by Article 71 of the Civil Code which states that:
Art. 71. All marriages performed outside the Philippines in accordance with the laws in
force in the country where they were performed and valid there as such, shall also be valid in
this country, except bigamous, Polygamous, or incestuous marriages, as determined by
Philippine law. (Emphasis supplied.) ***
Construing this provision of law the Court has held that to establish a valid foreign marriage
two things must be proven, namely: (1) the existence of the foreign law as a question of fact;
and (2) the alleged foreign marriage by convincing evidence [Adong v. Cheong Seng Gee, 43
Phil. 43, 49 (1922).]
In proving a foreign law the procedure is provided in the Rules of Court. With respect to an
unwritten foreign law, Rule 130 section 45 states that:
SEC. 45. Unwritten law.—The oral testimony of witnesses, skilled therein, is admissible as
evidence of the unwritten law of a foreign country, as are also printed and published books of
reports of decisions of the courts of the foreign country, if proved to be commonly admitted
in such courts.
Proof of a written foreign law, on the other hand, is provided for under Rule 132 section 25,
thus:
SEC. 25. Proof of public or official record.—An official record or an entry therein, when
admissible for any purpose, 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, if the record is not kept in the Philippines, with a certificate that such officer
has the custody. If the office in which the record is kept is in a foreign country, the certificate
may be made by a secretary of 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.
The Court has interpreted section 25 to include competent evidence like the testimony of a
witness to prove the existence of a written foreign law [Collector of Internal Revenue v. Fisher
110 Phil. 686, 700-701 (1961) citing Willamette Iron and Steel Works v. Muzzal, 61 Phil. 471
(1935).]
In the case at bar petitioners did not present any competent evidence relative to the law and
custom of China on marriage. The testimonies of Yao and Gan Ching cannot be considered as
proof of China's law or custom on marriage not only because they are
self-serving evidence, but more importantly, there is no showing that they are competent to
testify on the subject matter. For failure to prove the foreign law or custom, and
consequently, the validity of the marriage in accordance with said law or custom, the
marriage between Yao Kee and Sy Kiat cannot be recognized in this jurisdiction.
Petitioners contend that contrary to the Court of Appeals' ruling they are not duty bound to
prove the Chinese law on marriage as judicial notice thereof had been taken by this Court in
the case of Sy Joc Lieng v. Sy Quia [16 Phil. 137 (1910).]
This contention is erroneous. Well-established in this jurisdiction is the principle that
Philippine courts cannot take judicial notice of foreign laws. They must be alleged and proved
as any other fact [Yam Ka Lim v. Collector of Customs, 30 Phil. 46, 48 (1915); Fluemer v. Hix,
54 Phil. 610 (1930).]
Moreover a reading of said case would show that the party alleging the foreign marriage
presented a witness, one Li Ung Bieng, to prove that matrimonial letters mutually exchanged
by the contracting parties constitute the essential requisite for a marriage to be considered
duly solemnized in China. Based on his testimony, which as found by the Court is uniformly
corroborated by authors on the subject of Chinese marriage, what was left to be decided was
the issue of whether or not the fact of marriage in accordance with Chinese law was duly
proven [Sy Joc Lieng v. Sy Quia, supra., at p. 160.]
Further, even assuming for the sake of argument that the Court has indeed taken judicial
notice of the law of China on marriage in the aforecited case, petitioners however have not
shown any proof that the Chinese law or custom obtaining at the time the Sy Joc Lieng
marriage was celebrated in 1847 was still the law when the alleged marriage of Sy Kiat to Yao
Kee took place in 1931 or eighty-four (84) years later.
Petitioners moreover cite the case of U.S. v. Memoracion [34 Phil. 633 (1916)] as being
applicable to the instant case. They aver that the judicial pronouncement in the Memoracion
case, that the testimony of one of the contracting parties is competent evidence to show the
fact of marriage, holds true in this case.
The Memoracion case however is not applicable to the case at bar as said case did not
concern a foreign marriage and the issue posed was whether or not the oral testimony of a
spouse is competent evidence to prove the fact of marriage in a complaint for adultery.
Accordingly, in the absence of proof of the Chinese law on marriage, it should be presumed
that it is the same as ours *** [Wong Woo Yiu v. Vivo, G.R. No. L-21076, March 31, 1965, 13
SCRA 552, 555.] Since Yao Kee admitted in her testimony that there was no solemnizing
officer as is known here in the Philippines [See Article 56, Civil Code] when her alleged
marriage to Sy Mat was celebrated [CFI decision, p. 14; Rollo, p. 51], it therefore follows that
her marriage to Sy Kiat, even if true, cannot be recognized in this jurisdiction [Wong Woo Yiu
v. Vivo, supra., pp. 555-556.]
II. The second issue raised by petitioners concerns the status of private respondents.
Respondent court found the following evidence of petitioners' filiation:
(1) Sy Kiat's Master Card of Registered Alien where the following are entered:
"Children if any: give number of children—Four"; and, "Name—All living in China" [Exhibit
"SS-1";]
(2) the testimony of their mother Yao Kee who stated that she had five children with
Sy Kiat, only three of whom are alive namely, Sze Sook Wah, Sze Lai Chu and Sze Chin Yan
[TSN, December 12, 1977, pp. 9-11;] and,
(3) an affidavit executed on March 22,1961 by Sy Kiat for presentation to the Local
Civil Registrar of Manila to support Sze Sook Wah's application for a marriage license, wherein
Sy Kiat expressly stated that she is his daughter [Exhibit "3".]
Likewise on the record is the testimony of Asuncion Gillego that Sy Kiat told her he has three
daughters with his Chinese wife, two of whom—Sook Wah and Sze Kai Cho—she knows, and
one adopted son [TSN, December 6,1977, pp. 87-88.]
However, as petitioners failed to establish the marriage of Yao Kee with Sy Mat according to
the laws of China, they cannot be accorded the status of legitimate children but only that of
acknowledged natural children. Petitioners are natural children, it appearing that at the time
of their conception Yao Kee and Sy Kiat were not disqualified by any impediment to marry
one another [See Art. 269, Civil Code.] And they are acknowledged children of the deceased
because of Sy Kiat's recognition of Sze Sook Wah [Exhibit "3"] and its extension to Sze Lai Cho
and Sy Chun Yen who are her sisters of the full blood [See Art. 271, Civil Code.]
Private respondents on the other hand are also the deceased's acknowledged natural children
with Asuncion Gillego, a Filipina with whom he lived for twenty-five (25) years without the
benefit of marriage. They have in their favor their father's acknowledgment, evidenced by a
compromise agreement entered into by and between their parents and approved by the
Court of First Instance on February 12, 1974 wherein Sy Kiat not only acknowleged them as
his children by Asuncion Gillego but likewise made provisions for their support and future
inheritance, thus:
xxx xxx xxx
2. The parties also acknowledge that they are common-law husband and wife and
that out of such relationship, which they have likewise decided to definitely and finally
terminate effective immediately, they begot five children, namely: Aida Sy, born on May 30,
1950; Manuel Sy, born on July 1, 1953; Teresita Sy, born on January 28, 1955; Ricardo Sy now
deceased, born on December 14, 1956; and Rodolfo Sy, born on May 7, 1958.
3. With respect to the AVENUE TRACTOR AND DIESEL PARTS SUPPLY ... , the parties
mutually agree and covenant that—
(a) The stocks and merchandize and the furniture and equipments ..., shall be divided
into two equal shares between, and distributed to, Sy Kiat who shall own
one-half of the total and the other half to Asuncion Gillego who shall transfer the same to
their children, namely, Aida Sy, Manuel Sy, Teresita Sy, and Rodolfo Sy.
(b) the business name and premises ... shall be retained by Sy Kiat. However, it shall
be his obligation to give to the aforenamed children an amount of One Thousand Pesos (
Pl,000.00 ) monthly out of the rental of the two doors of the same building now occupied by
Everett Construction.
xxx xxx xxx
(5) With respect to the acquisition, during the existence of the
common-law husband-and-wife relationship between the parties, of the real estates and
properties registered and/or appearing in the name of Asuncion Gillego ... , the parties
mutually agree and covenant that the said real estates and properties shall be transferred in
equal shares to their children, namely, Aida Sy, Manuel Sy, Teresita Sy, and Rodolfo Sy, but to
be administered by Asuncion Gillego during her lifetime ... [Exhibit "D".] (Emphasis supplied.)
xxx xxx xxx
This compromise agreement constitutes a statement before a court of record by which a child
may be voluntarily acknowledged [See Art. 278, Civil Code.]
Petitioners further argue that the questions on the validity of Sy Mat's marriage to Yao Kee
and the paternity and filiation of the parties should have been ventilated in the Juvenile and
Domestic Relations Court.
Specifically, petitioners rely on the following provision of Republic Act No. 5502, entitled "An
Act Revising Rep. Act No. 3278, otherwise known as the Charter of the City of Caloocan', with
regard to the Juvenile and Domestic Relations Court:
SEC. 91-A. Creation and Jurisdiction of the Court.—
xxx xxx xxx
The provisions of the Judiciary Act to the contrary notwithstanding, the court shall have
exclusive original jurisdiction to hear and decide the following cases:
xxx xxx xxx
(2) Cases involving custody, guardianship, adoption, revocation of adoption, paternity
and acknowledgment;
(3) Annulment of marriages, relief from marital obligations, legal separation of
spouses, and actions for support;
(4) Proceedings brought under the provisions of title six and title seven, chapters one
to three of the civil code;
xxx xxx xxx
and the ruling in the case of Bartolome v. Bartolome [G.R. No. L-23661, 21 SCRA 1324]
reiterated in Divinagracia v. Rovira [G.R. No. L-42615, 72 SCRA 307.]
With the enactment of Batas Pambansa Blg. 129, otherwise known as the Judiciary
Reorganization Act of 1980, the Juvenile and Domestic Relations Courts were abolished. Their
functions and jurisdiction are now vested with the Regional Trial Courts [See Section 19 (7),
B.P. Blg. 129 and Divinagracia v. Belosillo, G.R. No. L-47407, August 12, 1986, 143 SCRA 356,
360] hence it is no longer necessary to pass upon the issue of jurisdiction raised by
petitioners.
Moreover, even without the exactment of Batas Pambansa Blg. 129 we find in Rep. Act No.
5502 sec. 91-A last paragraph that:
xxx xxx xxx
If any question involving any of the above matters should arise as an incident in any case
pending in the ordinary court, said incident shall be determined in the main case.
xxx xxx xxx
As held in the case of Divinagracia v. Rovira [G.R. No. L42615. August 10, 1976, 72 SCRA 307]:
xxx xxx xxx
It is true that under the aforequoted section 1 of Republic Act No. 4834 **** a case involving
paternity and acknowledgment may be ventilated as an incident in the intestate or testate
proceeding (See Baluyot vs. Ines Luciano, L-42215, July 13, 1976). But that legal provision
presupposes that such an administration proceeding is pending or existing and has not been
terminated. [at pp. 313-314.] (Emphasis supplied.)
xxx xxx xxx
The reason for ths rule is not only "to obviate the rendition of conflicting rulings on the same
issue by the Court of First Instance and the Juvenile and Domestic Relations Court" [Vda. de
Baluyut v. Luciano, G.R. No. L-42215, July 13, 1976, 72 SCRA 52, 63] but more importantly to
prevent multiplicity of suits. Accordingly, this Court finds no reversible error committed by
respondent court.
WHEREFORE, the decision of the Court of Appeals is hereby AFFIRMED.
SO ORDERED.
BANK OF AMERICA, NT and SA, petitioner, vs. AMERICAN REALTY CORPORATION and COURT
OF APPEALS, respondents.
DECISION
BUENA, J.:
Does a mortgage-creditor waive its remedy to foreclose the real estate mortgage constituted
over a third party mortgagors property situated in the Philippines by filing an action for the
collection of the principal loan before foreign courts?
Sought to be reversed in the instant petition for review on certiorari under Rule 45 of the
Rules of Court are the decision[1] of public respondent Court of Appeals in CA G.R. CV No.
51094, promulgated on 30 September 1997 and its resolution,[2] dated 22 May 1998, denying
petitioners motion for reconsideration.
Petitioner Bank of America NT & SA (BANTSA) is an international banking and financing
institution duly licensed to do business in the Philippines, organized and existing under and by
virtue of the laws of the State of California, United States of America while private
respondent American Realty Corporation (ARC) is a domestic corporation.
Bank of America International Limited (BAIL), on the other hand, is a limited liability company
organized and existing under the laws of England.
As borne by the records, BANTSA and BAIL on several occasions granted three major multi-
million United States (US) Dollar loans to the following corporate borrowers: (1) Liberian
Transport Navigation, S.A.; (2) El Challenger S.A. and (3) Eshley Compania Naviera S.A.
(hereinafter collectively referred to as borrowers), all of which are existing under and by
virtue of the laws of the Republic of Panama and are foreign affiliates of private
respondent.[3]
Due to the default in the payment of the loan amortizations, BANTSA and the corporate
borrowers signed and entered into restructuring agreements. As additional security for the
restructured loans, private respondent ARC as third party mortgagor executed two real estate
mortgages,[4] dated 17 February 1983 and 20 July 1984, over its parcels of land including
improvements thereon, located at Barrio Sto. Cristo, San Jose Del Monte, Bulacan, and which
are covered by Transfer Certificate of Title Nos. T-78759, T-78760, T-78761, T-78762 and T-
78763.
Eventually, the corporate borrowers defaulted in the payment of the restructured loans
prompting petitioner BANTSA to file civil actions[5] before foreign courts for the collection of
the principal loan, to wit:
a) In England, in its High Court of Justice, Queens Bench Division, Commercial Court (1992-
Folio No. 2098) against Liberian Transport Navigation S.A., Eshley Compania Naviera S.A., El
Challenger S.A., Espriona Shipping Company S.A., Eddie Navigation Corp., S.A., Eduardo
Katipunan Litonjua and Aurelio Katipunan Litonjua on June 17, 1992.
b) In England, in its High Court of Justice, Queens Bench Division, Commercial Court (1992-
Folio No. 2245) against El Challenger S.A., Espriona Shipping Company S.A., Eduardo Katipuan
Litonjua & Aurelio Katipunan Litonjua on July 2, 1992;
c) In Hongkong, in the Supreme Court of Hongkong High Court (Action No. 4039 of 1992)
against Eshley Compania Naviera S.A., El Challenger S.A., Espriona Shipping Company S.A.
Pacific Navigators Corporation, Eddie Navigation Corporation S.A., Litonjua Chartering
(Edyship) Co., Inc., Aurelio Katipunan Litonjua, Jr. and Eduardo Katipunan Litonjua on
November 19, 1992; and
d) In Hongkong, in the Supreme Court of Hongkong High Court (Action No. 4040 of 1992)
against Eshley Compania Naviera S.A., El Challenger S.A., Espriona Shipping Company, S.A.,
Pacific Navigators Corporation, Eddie Navigation Corporation S.A., Litonjua Chartering
(Edyship) Co., Jr. and Eduardo Katipunan Litonjua on November 21, 1992.
In the civil suits instituted before the foreign courts, private respondent ARC, being a third
party mortgagor, was not impleaded as party-defendant.
On 16 December 1992, petitioner BANTSA filed before the Office of the Provincial Sheriff of
Bulacan, Philippines, an application for extrajudicial foreclosure[6] of real estate mortgage.
On 22 January 1993, after due publication and notice, the mortgaged real properties were
sold at public auction in an extrajudicial foreclosure sale, with Integrated Credit and
Corporation Services Co. (ICCS) as the highest bidder for the sum of Twenty Four Million Pesos
(P24,000,000.00).[7]
On 12 February 1993, private respondent filed before the Pasig Regional Trial Court, Branch
159, an action for damages[8] against the petitioner, for the latters act of foreclosing
extrajudicially the real estate mortgages despite the pendency of civil suits before foreign
courts for the collection of the principal loan.
In its answer[9] petitioner alleged that the rule prohibiting the mortgagee from foreclosing
the mortgage after an ordinary suit for collection has been filed, is not applicable in the
present case, claiming that:
a) The plaintiff, being a mere third party mortgagor and not a party to the principal
restructuring agreements, was never made a party defendant in the civil cases filed in
Hongkong and England;
b) There is actually no civil suit for sum of money filed in the Philippines since the civil actions
were filed in Hongkong and England. As such, any decisions (sic) which may be rendered in
the abovementioned courts are not (sic) enforceable in the Philippines unless a separate
action to enforce the foreign judgments is first filed in the Philippines, pursuant to Rule 39,
Section 50 of the Revised Rules of Court.
c) Under English Law, which is the governing law under the principal agreements, the
mortgagee does not lose its security interest by filing civil actions for sums of money.
On 14 December 1993, private respondent filed a motion for suspension[10] of the
redemption period on the ground that it cannot exercise said right of redemption without at
the same time waiving or contradicting its contentions in the case that the foreclosure of the
mortgage on its properties is legally improper and therefore invalid.
In an order[11] dated 28 January 1994, the trial court granted the private respondents motion
for suspension after which a copy of said order was duly received by the Register of Deeds of
Meycauayan, Bulacan.
On 07 February 1994, ICCS, the purchaser of the mortgaged properties at the foreclosure sale,
consolidated its ownership over the real properties, resulting to the issuance of Transfer
Certificate of Title Nos. T-18627, T-186272, T-186273, T-16471 and T-16472 in its name.
On 18 March 1994, after the consolidation of ownership in its favor, ICCS sold the real
properties to Stateland Investment Corporation for the amount of Thirty Nine Million Pesos
(P39,000,000.00).[12] Accordingly, Transfer Certificate of Title Nos. T-187781(m), T-
187782(m), T-187783(m), T-16653P(m) and T-16652P(m) were issued in the latters name.
After trial, the lower court rendered a decision[13] in favor of private respondent ARC dated
12 May 1993, the decretal portion of which reads:
WHEREFORE, judgment is hereby rendered declaring that the filing in foreign courts by the
defendant of collection suits against the principal debtors operated as a waiver of the security
of the mortgages. Consequently, the plaintiffs rights as owner and possessor of the properties
then covered by Transfer Certificates of Title Nos. T-78759, T-78762, T-78763, T-78760 and T-
78761, all of the Register of Deeds of Meycauayan, Bulacan, Philippines, were violated when
the defendant caused the extrajudicial foreclosure of the mortgages constituted thereon.
Accordingly, the defendant is hereby ordered to pay the plaintiff the following sums, all with
legal interest thereon from the date of the filing of the complaint up to the date of actual
payment:
1) Actual or compensatory damages in the amount of Ninety Nine Million Pesos
(P99,000,000.00);
2) Exemplary damages in the amount of Five Million Pesos (P5,000,000.00); and
3) Costs of suit.
SO ORDERED.
On appeal, the Court of Appeals affirmed the assailed decision of the lower court prompting
petitioner to file a motion for reconsideration which the appellate court denied.
Hence, the instant petition for review[14] on certiorari where herein petitioner BANTSA
ascribes to the Court of Appeals the following assignment of errors:
1. The Honorable Court of Appeals disregarded the doctrines laid down by this Hon. Supreme
Court in the cases of Caltex Philippines, Inc. vs. Intermediate Appellate Court docketed as G.R.
No. 74730 promulgated on August 25, 1989 and Philippine Commercial International Bank vs.
IAC, 196 SCRA 29 (1991 case), although said cases were duly cited, extensively discussed and
specifically mentioned, as one of the issues in the assignment of errors found on page 5 of the
decision dated September 30, 1997.
2. The Hon. Court of Appeals acted with grave abuse of discretion when it awarded the
private respondent actual and exemplary damages totalling P171,600,000.00, as of July 12,
1998 although such huge amount was not asked nor prayed for in private respondents
complaint, is contrary to law and is totally unsupported by evidence (sic).
In fine, this Court is called upon to resolve two main issues:
1. Whether or not the petitioners act of filing a collection suit against the principal debtors for
the recovery of the loan before foreign courts constituted a waiver of the remedy of
foreclosure.
2. Whether or not the award by the lower court of actual and exemplary damages in favor of
private respondent ARC, as third-party mortgagor, is proper.
The petition is bereft of merit.
First, as to the issue of availability of remedies, petitioner submits that a waiver of the
remedy of foreclosure requires the concurrence of two requisites: an ordinary civil action for
collection should be filed and subsequently a final judgment be correspondingly rendered
therein.
According to petitioner, the mere filing of a personal action to collect the principal loan does
not suffice; a final judgment must be secured and obtained in the personal action so that
waiver of the remedy of foreclosure may be appreciated. To put it differently, absent any of
the two requisites, the mortgagee-creditor is deemed not to have waived the remedy of
foreclosure.
We do not agree.
Certainly, this Court finds petitioners arguments untenable and upholds the jurisprudence laid
down in Bachrach[15] and similar cases adjudicated thereafter, thus:
In the absence of express statutory provisions, a mortgage creditor may institute against the
mortgage debtor either a personal action for debt or a real action to foreclose the mortgage.
In other words, he may pursue either of the two remedies, but not both. By such election, his
cause of action can by no means be impaired, for each of the two remedies is complete in
itself. Thus, an election to bring a personal action will leave open to him all the properties of
the debtor for attachment and execution, even including the mortgaged property itself. And,
if he waives such personal action and pursues his remedy against the mortgaged property, an
unsatisfied judgment thereon would still give him the right to sue for a deficiency judgment,
in which case, all the properties of the defendant, other than the mortgaged property, are
again open to him for the satisfaction of the deficiency. In either case, his remedy is complete,
his cause of action undiminished, and any advantages attendant to the pursuit of one or the
other remedy are purely accidental and are all under his right of election. On the other hand,
a rule that would authorize the plaintiff to bring a personal action against the debtor and
simultaneously or successively another action against the mortgaged property, would result
not only in multiplicity of suits so offensive to justice (Soriano vs. Enriques, 24 Phil. 584) and
obnoxious to law and equity (Osorio vs. San Agustin, 25 Phil., 404), but also in subjecting the
defendant to the vexation of being sued in the place of his residence or of the residence of
the plaintiff, and then again in the place where the property lies.
In Danao vs. Court of Appeals,[16] this Court, reiterating jurisprudence enunciated in Manila
Trading and Supply Co. vs. Co Kim[17]and Movido vs. RFC,[18] invariably held:
x x x The rule is now settled that a mortgage creditor may elect to waive his security and
bring, instead, an ordinary action to recover the indebtedness with the right to execute a
judgment thereon on all the properties of the debtor, including the subject matter of the
mortgage x x x, subject to the qualification that if he fails in the remedy by him elected, he
cannot pursue further the remedy he has waived. (Underscoring Ours)
Anent real properties in particular, the Court has laid down the rule that a mortgage creditor
may institute against the mortgage debtor either a personal action for debt or a real action to
foreclose the mortgage.[19]
In our jurisdiction, the remedies available to the mortgage creditor are deemed alternative
and not cumulative. Notably, an election of one remedy operates as a waiver of the other. For
this purpose, a remedy is deemed chosen upon the filing of the suit for collection or upon the
filing of the complaint in an action for foreclosure of mortgage, pursuant to the provision of
Rule 68 of the 1997 Rules of Civil Procedure. As to extrajudicial foreclosure, such remedy is
deemed elected by the mortgage creditor upon filing of the petition not with any court of
justice but with the Office of the Sheriff of the province where the sale is to be made, in
accordance with the provisions of Act No. 3135, as amended by Act No. 4118.
In the case at bench, private respondent ARC constituted real estate mortgages over its
properties as security for the debt of the principal debtors. By doing so, private respondent
subjected itself to the liabilities of a third party mortgagor. Under the law, third persons who
are not parties to a loan may secure the latter by pledging or mortgaging their own
property.[20]
Notwithstanding, there is no legal provision nor jurisprudence in our jurisdiction which makes
a third person who secures the fulfillment of anothers obligation by mortgaging his own
property, to be solidarily bound with the principal obligor. The signatory to the principal
contractloanremains to be primarily bound. It is only upon default of the latter that the
creditor may have recourse on the mortgagors by foreclosing the mortgaged properties in lieu
of an action for the recovery of the amount of the loan.[21]
In the instant case, petitioners contention that the requisites of filing the action for collection
and rendition of final judgment therein should concur, is untenable.
Thus, in Cerna vs. Court of Appeals,[22] we agreed with the petitioner in said case, that the
filing of a collection suit barred the foreclosure of the mortgage:
A mortgagee who files a suit for collection abandons the remedy of foreclosure of the chattel
mortgage constituted over the personal property as security for the debt or value of the
promissory note when he seeks to recover in the said collection suit.
x x x When the mortgagee elects to file a suit for collection, not foreclosure, thereby
abandoning the chattel mortgage as basis for relief, he clearly manifests his lack of desire and
interest to go after the mortgaged property as security for the promissory note x x x.
Contrary to petitioners arguments, we therefore reiterate the rule, for clarity and emphasis,
that the mere act of filing of an ordinary action for collection operates as a waiver of the
mortgage-creditors remedy to foreclose the mortgage. By the mere filing of the ordinary
action for collection against the principal debtors, the petitioner in the present case is
deemed to have elected a remedy, as a result of which a waiver of the other necessarily must
arise. Corollarily, no final judgment in the collection suit is required for the rule on waiver to
apply.
Hence, in Caltex Philippines, Inc. vs. Intermediate Appellate Court,[23] a case relied upon by
petitioner, supposedly to buttress its contention, this Court had occasion to rule that the
mere act of filing a collection suit for the recovery of a debt secured by a mortgage constitutes
waiver of the other remedy of foreclosure.
In the case at bar, petitioner BANTSA only has one cause of action which is non-payment of
the debt. Nevertheless, alternative remedies are available for its enjoyment and exercise.
Petitioner then may opt to exercise only one of two remedies so as not to violate the rule
against splitting a cause of action.
As elucidated by this Court in the landmark case of Bachrach Motor Co., Inc. vs. Icarangal.[24]
For non-payment of a note secured by mortgage, the creditor has a single cause of action
against the debtor. This single cause of action consists in the recovery of the credit with
execution of the security. In other words, the creditor in his action may make two demands,
the payment of the debt and the foreclosure of his mortgage. But both demands arise from
the same cause, the non-payment of the debt, and for that reason, they constitute a single
cause of action. Though the debt and the mortgage constitute separate agreements, the latter
is subsidiary to the former, and both refer to one and the same obligation. Consequently,
there exists only one cause of action for a single breach of that obligation. Plaintiff, then, by
applying the rules above stated, cannot split up his single cause of action by filing a complaint
for payment of the debt, and thereafter another complaint for foreclosure of the mortgage. If
he does so, the filing of the first complaint will bar the subsequent complaint. By allowing the
creditor to file two separate complaints simultaneously or successively, one to recover his
credit and another to foreclose his mortgage, we will, in effect, be authorizing him plural
redress for a single breach of contract at so much cost to the courts and with so much
vexation and oppression to the debtor.
Petitioner further faults the Court of Appeals for allegedly disregarding the doctrine
enunciated in Caltex, wherein this High Court relaxed the application of the general rules to
wit:
In the present case, however, we shall not follow this rule to the letter but declare that it is
the collection suit which was waived and/or abandoned. This ruling is more in harmony with
the principles underlying our judicial system. It is of no moment that the collection suit was
filed ahead, what is determinative is the fact that the foreclosure proceedings ended even
before the decision in the collection suit was rendered. x x x
Notably, though, petitioner took the Caltex ruling out of context. We must stress that the
Caltex case was never intended to overrule the well-entrenched doctrine enunciated in
Bachrach, which to our mind still finds applicability in cases of this sort. To reiterate, Bachrach
is still good law.
We then quote the decision[25]of the trial court, in the present case, thus:
The aforequoted ruling in Caltex is the exception rather than the rule, dictated by the peculiar
circumstances obtaining therein. In the said case, the Supreme Court chastised Caltex for
making x x x a mockery of our judicial system when it initially filed a collection suit then,
during the pendency thereof, foreclosed extrajudicially the mortgaged property which
secured the indebtedness, and still pursued the collection suit to the end. Thus, to prevent a
mockery of our judicial system, the collection suit had to be nullified because the foreclosure
proceedings have already been pursued to their end and can no longer be undone.
xxxxxxxxx
In the case at bar, it has not been shown whether the defendant pursued to the end or are
still pursuing the collection suits filed in foreign courts. There is no occasion, therefore, for
this court to apply the exception laid down by the Supreme Court in Caltex, by nullifying the
collection suits. Quite obviously, too, the aforesaid collection suits are beyond the reach of
this Court. Thus the only way the court may prevent the spector of a creditor having plural
redress for a single breach of contract is by holding, as the Court hereby holds, that the
defendant has waived the right to foreclose the mortgages constituted by the plaintiff on its
properties originally covered by Transfer Certificates of Title Nos. T-78759, T-78762, T-78760
and T-78761. (RTC Decision pp., 10-11)
In this light, the actuations of Caltex are deserving of severe criticism, to say the least.[26]
Moreover, petitioner attempts to mislead this Court by citing the case of PCIB vs. IAC.[27]
Again, petitioner tried to fit a square peg in a round hole. It must be stressed that far from
overturning the doctrine laid down in Bachrach, this Court in PCIB buttressed its firm stand on
this issue by declaring:
While the law allows a mortgage creditor to either institute a personal action for the debt or a
real action to foreclosure the mortgage, he cannot pursue both remedies simultaneously or
successively as was done by PCIB in this case.
xxxxxxxxx
Thus, when the PCIB filed Civil Case No. 29392 to enforce payment of the 1.3 million
promissory note secured by real estate mortgages and subsequently filed a petition for
extrajudicial foreclosure, it violates the rule against splitting a cause of action.
Accordingly, applying the foregoing rules, we hold that petitioner, by the expediency of filing
four civil suits before foreign courts, necessarily abandoned the remedy to foreclose the real
estate mortgages constituted over the properties of third-party mortgagor and herein private
respondent ARC. Moreover, by filing the four civil actions and by eventually foreclosing
extrajudicially the mortgages, petitioner in effect transgressed the rules against splitting a
cause of action well-enshrined in jurisprudence and our statute books.
In Bachrach, this Court resolved to deny the creditor the remedy of foreclosure after the
collection suit was filed, considering that the creditor should not be afforded plural redress
for a single breach of contract. For cause of action should not be confused with the remedy
created for its enforcement.[28]
Notably, it is not the nature of the redress which is crucial but the efficacy of the remedy
chosen in addressing the creditors cause. Hence, a suit brought before a foreign court having
competence and jurisdiction to entertain the action is deemed, for this purpose, to be within
the contemplation of the remedy available to the mortgagee-creditor. This pronouncement
would best serve the interest of justice and fair play and further discourage the noxious
practice of splitting up a lone cause of action.
Incidentally, BANTSA alleges that under English Law, which according to petitioner is the
governing law with regard to the principal agreements, the mortgagee does not lose its
security interest by simply filing civil actions for sums of money.[29]
We rule in the negative.
This argument shows desperation on the part of petitioner to rivet its crumbling cause. In the
case at bench, Philippine law shall apply notwithstanding the evidence presented by
petitioner to prove the English law on the matter.
In a long line of decisions, this Court adopted the well-imbedded principle in our jurisdiction
that there is no judicial notice of any foreign law. A foreign law must be properly pleaded and
proved as a fact.[30] Thus, if the foreign law involved is not properly pleaded and proved, our
courts will presume that the foreign law is the same as our local or domestic or internal
law.[31] This is what we refer to as the doctrine of processual presumption.
In the instant case, assuming arguendo that the English Law on the matter were properly
pleaded and proved in accordance with Section 24, Rule 132 of the Rules of Court and the
jurisprudence laid down in Yao Kee, et al. vs. Sy-Gonzales,[32] said foreign law would still not
find applicability.
Thus, when the foreign law, judgment or contract is contrary to a sound and established
public policy of the forum, the said foreign law, judgment or order shall not be applied.[33]

Additionally, prohibitive laws concerning persons, their acts or property, and those which
have for their object public order, public policy and good customs shall not be rendered
ineffective by laws or judgments promulgated, or by determinations or conventions agreed
upon in a foreign country.[34]
The public policy sought to be protected in the instant case is the principle imbedded in our
jurisdiction proscribing the splitting up of a single cause of action.
Section 4, Rule 2 of the 1997 Rules of Civil Procedure is pertinent -
If two or more suits are instituted on the basis of the same cause of action, the filing of one or
a judgment upon the merits in any one is available as a ground for the dismissal of the others.
Moreover, foreign law should not be applied when its application would work undeniable
injustice to the citizens or residents of the forum. To give justice is the most important
function of law; hence, a law, or judgment or contract that is obviously unjust negates the
fundamental principles of Conflict of Laws.[35]
Clearly then, English Law is not applicable.
As to the second pivotal issue, we hold that the private respondent is entitled to the award of
actual or compensatory damages inasmuch as the act of petitioner BANTSA in extrajudicially
foreclosing the real estate mortgages constituted a clear violation of the rights of herein
private respondent ARC, as third-party mortgagor.
Actual or compensatory damages are those recoverable because of pecuniary loss in business,
trade, property, profession, job or occupation and the same must be proved, otherwise if the
proof is flimsy and non-substantial, no damages will be given.[36] Indeed, the question of the
value of property is always a difficult one to settle as valuation of real property is an
imprecise process since real estate has no inherent value readily ascertainable by an appraiser
or by the court.[37] The opinions of men vary so much concerning the real value of property
that the best the courts can do is hear all of the witnesses which the respective parties desire
to present, and then, by carefully weighing that testimony, arrive at a conclusion which is just
and equitable.[38]
In the instant case, petitioner assails the Court of Appeals for relying heavily on the valuation
made by Philippine Appraisal Company. In effect, BANTSA questions the act of the appellate
court in giving due weight to the appraisal report composed of twenty three pages, signed by
Mr. Lauro Marquez and submitted as evidence by private respondent. The appraisal report, as
the records would readily show, was corroborated by the testimony of Mr. Reynaldo Flores,
witness for private respondent.
On this matter, the trial court observed:
The record herein reveals that plaintiff-appellee formally offered as evidence the appraisal
report dated March 29, 1993 (Exhibit J, Records, p. 409), consisting of twenty three (23) pages
which set out in detail the valuation of the property to determine its fair market value (TSN,
April 22, 1994, p. 4), in the amount of P99,986,592.00 (TSN, ibid., p. 5), together with the
corroborative testimony of one Mr. Reynaldo F. Flores, an appraiser and director of Philippine
Appraisal Company, Inc. (TSN, ibid., p. 3). The latters testimony was subjected to extensive
cross-examination by counsel for defendant-appellant (TSN, April 22, 1994, pp. 6-22).[39]
In the matter of credibility of witnesses, the Court reiterates the familiar and well-entrenched
rule that the factual findings of the trial court should be respected.[40] The time-tested
jurisprudence is that the findings and conclusions of the trial court on the credibility of
witnesses enjoy a badge of respect for the reason that trial courts have the advantage of
observing the demeanor of witnesses as they testify.[41]
This Court will not alter the findings of the trial court on the credibility of witnesses,
principally because they are in a better position to assess the same than the appellate
court.[42] Besides, trial courts are in a better position to examine real evidence as well as
observe the demeanor of witnesses.[43]
Similarly, the appreciation of evidence and the assessment of the credibility of witnesses rest
primarily with the trial court.[44] In the case at bar, we see no reason that would justify this
Court to disturb the factual findings of the trial court, as affirmed by the Court of Appeals,
with regard to the award of actual damages.
In arriving at the amount of actual damages, the trial court justified the award by presenting
the following ratiocination in its assailed decision[45], to wit:
Indeed, the Court has its own mind in the matter of valuation. The size of the subject real
properties are (sic) set forth in their individual titles, and the Court itself has seen the
character and nature of said properties during the ocular inspection it conducted. Based
principally on the foregoing, the Court makes the following observations:
1. The properties consist of about 39 hectares in Bo. Sto. Cristo, San Jose del Monte, Bulacan,
which is (sic) not distant from Metro Manila the biggest urban center in the Philippines and
are easily accessible through well-paved roads;
2. The properties are suitable for development into a subdivision for low cost housing, as
admitted by defendants own appraiser (TSN, May 30, 1994, p. 31);
3. The pigpens which used to exist in the property have already been demolished. Houses of
strong materials are found in the vicinity of the property (Exhs. 2, 2-1 to 2-7), and the vicinity
is a growing community. It has even been shown that the house of the Barangay Chairman is
located adjacent to the property in question (Exh. 27), and the only remaining piggery (named
Cherry Farm) in the vicinity is about 2 kilometers away from the western boundary of the
property in question (TSN, November 19, p. 3);
4. It will not be hard to find interested buyers of the property, as indubitably shown by the
fact that on March 18, 1994, ICCS (the buyer during the foreclosure sale) sold the consolidated
real estate properties to Stateland Investment Corporation, in whose favor new titles were
issued, i.e., TCT Nos. T-187781(m); T-187782(m), T-187783(m); T-16653P(m) and T-166521(m)
by the Register of Deeds of Meycauayan (sic), Bulacan;

5. The fact that ICCS was able to sell the subject properties to Stateland Investment
Corporation for Thirty Nine Million (P39,000,000.00) Pesos, which is more than triple
defendants appraisal (Exh. 2) clearly shows that the Court cannot rely on defendants
aforesaid estimate (Decision, Records, p. 603).
It is a fundamental legal aphorism that the conclusions of the trial judge on the credibility of
witnesses command great respect and consideration especially when the conclusions are
supported by the evidence on record.[46] Applying the foregoing principle, we therefore hold
that the trial court committed no palpable error in giving credence to the testimony of
Reynaldo Flores, who according to the records, is a licensed real estate broker, appraiser and
director of Philippine Appraisal Company, Inc. since 1990.[47] As the records show, Flores had
been with the company for 26 years at the time of his testimony.
Of equal importance is the fact that the trial court did not confine itself to the appraisal report
dated 29 March 1993, and the testimony given by Mr. Reynaldo Flores, in determining the fair
market value of the real property. Above all these, the record would likewise show that the
trial judge in order to appraise himself of the characteristics and condition of the property,
conducted an ocular inspection where the opposing parties appeared and were duly
represented.
Based on these considerations and the evidence submitted, we affirm the ruling of the trial
court as regards the valuation of the property
x x x a valuation of Ninety Nine Million Pesos (P99,000,000.00) for the 39-hectare properties
(sic) translates to just about Two Hundred Fifty Four Pesos (P254.00) per square meter. This
appears to be, as the court so holds, a better approximation of the fair market value of the
subject properties. This is the amount which should be restituted by the defendant to the
plaintiff by way of actual or compensatory damages x x x.[48]
Further, petitioner ascribes error to the lower court for awarding an amount allegedly not
asked nor prayed for in private respondents complaint.
Notwithstanding the fact that the award of actual and compensatory damages by the lower
court exceeded that prayed for in the complaint, the same is nonetheless valid, subject to
certain qualifications.
On this issue, Rule 10, Section 5 of the Rules of Court is pertinent:
SEC. 5. Amendment to conform to or authorize presentation of evidence. When issues not
raised by the pleadings are tried with the express or implied consent of the parties, they shall
be treated in all respects as if they had been raised in the pleadings. Such amendment of the
pleadings as may be necessary to cause them to conform to the evidence and to raise these
issues may be made upon motion of any party at any time, even after judgement; but failure
to amend does not affect the result of the trial of these issues. If evidence is objected to at
the trial on the ground that it is not within the issues made by the pleadings, the court may
allow the pleadings to be amended and shall do so with liberality if the presentation of the
merits of the action and the ends of substantial justice will be subserved thereby. The court
may grant a continuance to enable the amendment to be made.
The jurisprudence enunciated in Talisay-Silay Milling Co., Inc. vs. Asociacion de Agricultures de
Talisay-Silay, Inc.[49] citing Northern Cement Corporation vs. Intermediate Appellate Court
[50] is enlightening:
There have been instances where the Court has held that even without the necessary
amendment, the amount proved at the trial may be validly awarded, as in Tuazon v. Bolanos
(95 Phil. 106), where we said that if the facts shown entitled plaintiff to relief other than that
asked for, no amendment to the complaint was necessary, especially where defendant had
himself raised the point on which recovery was based. The appellate court could treat the
pleading as amended to conform to the evidence although the pleadings were actually not
amended. Amendment is also unnecessary when only clerical error or non substantial matters
are involved, as we held in Bank of the Philippine Islands vs. Laguna (48 Phil. 5). In Co Tiamco
vs. Diaz (75 Phil. 672), we stressed that the rule on amendment need not be applied rigidly,
particularly where no surprise or prejudice is caused the objecting party. And in the recent
case of National Power Corporation vs. Court of Appeals (113 SCRA 556), we held that where
there is a variance in the defendants pleadings and the evidence adduced by it at the trial, the
Court may treat the pleading as amended to conform with the evidence.
It is the view of the Court that pursuant to the above-mentioned rule and in light of the
decisions cited, the trial court should not be precluded from awarding an amount higher than
that claimed in the pleading notwithstanding the absence of the required amendment. But it
is upon the condition that the evidence of such higher amount has been presented properly,
with full opportunity on the part of the opposing parties to support their respective
contentions and to refute each others evidence.
The failure of a party to amend a pleading to conform to the evidence adduced during trial
does not preclude an adjudication by the court on the basis of such evidence which may
embody new issues not raised in the pleadings, or serve as a basis for a higher award of
damages. Although the pleading may not have been amended to conform to the evidence
submitted during trial, judgment may nonetheless be rendered, not simply on the basis of the
issues alleged but also on the basis of issues discussed and the assertions of fact proved in the
course of trial. The court may treat the pleading as if it had been amended to conform to the
evidence, although it had not been actually so amended. Former Chief Justice Moran put the
matter in this way:
`When evidence is presented by one party, with the expressed or implied consent of the
adverse party, as to issues not alleged in the pleadings, judgment may be rendered validly as
regards those issues, which shall be considered as if they have been raised in the pleadings.
There is implied consent to the evidence thus presented when the adverse party fails to
object thereto.
Clearly, a court may rule and render judgment on the basis of the evidence before it even
though the relevant pleading had not been previously amended, so long as no surprise or
prejudice is thereby caused to the adverse party. Put a little differently, so long as the basis
requirements of fair play had been met, as where litigants were given full opportunity to
support their respective contentions and to object to or refute each others evidence, the
court may validly treat the pleadings as if they had been amended to conform to the evidence
and proceed to adjudicate on the basis of all the evidence before it.
In the instant case, inasmuch as the petitioner was afforded the opportunity to refute and
object to the evidence, both documentary and testimonial, formally offered by private
respondent, the rudiments of fair play are deemed satisfied. In fact, the testimony of
Reynaldo Flores was put under scrutiny during the course of the cross-examination. Under
these circumstances, the court acted within the bounds of its jurisdiction and committed no
reversible error in awarding actual damages the amount of which is higher than that prayed
for. Verily, the lower courts actuations are sanctioned by the Rules and supported by
jurisprudence.
Similarly, we affirm the grant of exemplary damages although the amount of Five Million
Pesos (P5,000,000.00) awarded, being excessive, is subject to reduction. Exemplary or
corrective damages are imposed, by way of example or correction for the public good, in
addition to the moral, temperate, liquidated or compensatory damages.[51] Considering its
purpose, it must be fair and reasonable in every case and should not be awarded to unjustly
enrich a prevailing party.[52] In our view, an award of P50,000.00 as exemplary damages in
the present case qualifies the test of reasonableness.
WHEREFORE, premises considered, the instant petition is DENIED for lack of merit. The
decision of the Court of Appeals is hereby AFFIRMED with MODIFICATION of the amount
awarded as exemplary damages. Accordingly, petitioner is hereby ordered to pay private
respondent the sum of P99,000,000.00 as actual or compensatory damages; P50,000.00 as
exemplary damage and the costs of suit.
SO ORDERED.
G.R. No. L-43082 June 18, 1937
PABLO LORENZO, as trustee of the estate of Thomas Hanley, deceased, plaintiff-appellant,
vs.
JUAN POSADAS, JR., Collector of Internal Revenue, defendant-appellant.
Pablo Lorenzo and Delfin Joven for plaintiff-appellant.
Office of the Solicitor-General Hilado for defendant-appellant.
LAUREL, J.:
On October 4, 1932, the plaintiff Pablo Lorenzo, in his capacity as trustee of the estate of
Thomas Hanley, deceased, brought this action in the Court of First Instance of Zamboanga
against the defendant, Juan Posadas, Jr., then the Collector of Internal Revenue, for the
refund of the amount of P2,052.74, paid by the plaintiff as inheritance tax on the estate of the
deceased, and for the collection of interst thereon at the rate of 6 per cent per annum,
computed from September 15, 1932, the date when the aforesaid tax was [paid under
protest. The defendant set up a counterclaim for P1,191.27 alleged to be interest due on the
tax in question and which was not included in the original assessment. From the decision of
the Court of First Instance of Zamboanga dismissing both the plaintiff's complaint and the
defendant's counterclaim, both parties appealed to this court.
It appears that on May 27, 1922, one Thomas Hanley died in Zamboanga, Zamboanga, leaving
a will (Exhibit 5) and considerable amount of real and personal properties. On june 14, 1922,
proceedings for the probate of his will and the settlement and distribution of his estate were
begun in the Court of First Instance of Zamboanga. The will was admitted to probate. Said will
provides, among other things, as follows:
4. I direct that any money left by me be given to my nephew Matthew Hanley.
5. I direct that all real estate owned by me at the time of my death be not sold or otherwise
disposed of for a period of ten (10) years after my death, and that the same be handled and
managed by the executors, and proceeds thereof to be given to my nephew, Matthew Hanley,
at Castlemore, Ballaghaderine, County of Rosecommon, Ireland, and that he be directed that
the same be used only for the education of my brother's children and their descendants.
6. I direct that ten (10) years after my death my property be given to the above mentioned
Matthew Hanley to be disposed of in the way he thinks most advantageous.
xxx xxx xxx
8. I state at this time I have one brother living, named Malachi Hanley, and that my nephew,
Matthew Hanley, is a son of my said brother, Malachi Hanley.
The Court of First Instance of Zamboanga considered it proper for the best interests of ther
estate to appoint a trustee to administer the real properties which, under the will, were to
pass to Matthew Hanley ten years after the two executors named in the will, was, on March
8, 1924, appointed trustee. Moore took his oath of office and gave bond on March 10, 1924.
He acted as trustee until February 29, 1932, when he resigned and the plaintiff herein was
appointed in his stead.
During the incumbency of the plaintiff as trustee, the defendant Collector of Internal
Revenue, alleging that the estate left by the deceased at the time of his death consisted of
realty valued at P27,920 and personalty valued at P1,465, and allowing a deduction of
P480.81, assessed against the estate an inheritance tax in the amount of P1,434.24 which,
together with the penalties for deliquency in payment consisting of a 1 per cent monthly
interest from July 1, 1931 to the date of payment and a surcharge of 25 per cent on the tax,
amounted to P2,052.74. On March 15, 1932, the defendant filed a motion in the testamentary
proceedings pending before the Court of First Instance of Zamboanga (Special proceedings
No. 302) praying that the trustee, plaintiff herein, be ordered to pay to the Government the
said sum of P2,052.74. The motion was granted. On September 15, 1932, the plaintiff paid
said amount under protest, notifying the defendant at the same time that unless the amount
was promptly refunded suit would be brought for its recovery. The defendant overruled the
plaintiff's protest and refused to refund the said amount hausted, plaintiff went to court with
the result herein above indicated.

In his appeal, plaintiff contends that the lower court erred:
I. In holding that the real property of Thomas Hanley, deceased, passed to his instituted heir,
Matthew Hanley, from the moment of the death of the former, and that from the time, the
latter became the owner thereof.
II. In holding, in effect, that there was deliquency in the payment of inheritance tax due on
the estate of said deceased.
III. In holding that the inheritance tax in question be based upon the value of the estate upon
the death of the testator, and not, as it should have been held, upon the value thereof at the
expiration of the period of ten years after which, according to the testator's will, the property
could be and was to be delivered to the instituted heir.
IV. In not allowing as lawful deductions, in the determination of the net amount of the estate
subject to said tax, the amounts allowed by the court as compensation to the "trustees" and
paid to them from the decedent's estate.
V. In not rendering judgment in favor of the plaintiff and in denying his motion for new trial.
The defendant-appellant contradicts the theories of the plaintiff and assigns the following
error besides:
The lower court erred in not ordering the plaintiff to pay to the defendant the sum of
P1,191.27, representing part of the interest at the rate of 1 per cent per month from April 10,
1924, to June 30, 1931, which the plaintiff had failed to pay on the inheritance tax assessed by
the defendant against the estate of Thomas Hanley.
The following are the principal questions to be decided by this court in this appeal: (a) When
does the inheritance tax accrue and when must it be satisfied? (b) Should the inheritance tax
be computed on the basis of the value of the estate at the time of the testator's death, or on
its value ten years later? (c) In determining the net value of the estate subject to tax, is it
proper to deduct the compensation due to trustees? (d) What law governs the case at bar?
Should the provisions of Act No. 3606 favorable to the tax-payer be given retroactive effect?
(e) Has there been deliquency in the payment of the inheritance tax? If so, should the
additional interest claimed by the defendant in his appeal be paid by the estate? Other points
of incidental importance, raised by the parties in their briefs, will be touched upon in the
course of this opinion.
(a) The accrual of the inheritance tax is distinct from the obligation to pay the same. Section
1536 as amended, of the Administrative Code, imposes the tax upon "every transmission by
virtue of inheritance, devise, bequest, gift mortis causa, or advance in anticipation of
inheritance,devise, or bequest." The tax therefore is upon transmission or the transfer or
devolution of property of a decedent, made effective by his death. (61 C. J., p. 1592.) It is in
reality an excise or privilege tax imposed on the right to succeed to, receive, or take property
by or under a will or the intestacy law, or deed, grant, or gift to become operative at or after
death. Acording to article 657 of the Civil Code, "the rights to the succession of a person are
transmitted from the moment of his death." "In other words", said Arellano, C. J., ". . . the
heirs succeed immediately to all of the property of the deceased ancestor. The property
belongs to the heirs at the moment of the death of the ancestor as completely as if the
ancestor had executed and delivered to them a deed for the same before his death." (Bondad
vs. Bondad, 34 Phil., 232. See also, Mijares vs. Nery, 3 Phil., 195; Suilong & Co., vs. Chio-
Taysan, 12 Phil., 13; Lubrico vs. Arbado, 12 Phil., 391; Innocencio vs. Gat-Pandan, 14 Phil., 491;
Aliasas vs.Alcantara, 16 Phil., 489; Ilustre vs. Alaras Frondosa, 17 Phil., 321; Malahacan vs.
Ignacio, 19 Phil., 434; Bowa vs. Briones, 38 Phil., 27; Osario vs. Osario & Yuchausti Steamship
Co., 41 Phil., 531; Fule vs. Fule, 46 Phil., 317; Dais vs. Court of First Instance of Capiz, 51 Phil.,
396; Baun vs. Heirs of Baun, 53 Phil., 654.) Plaintiff, however, asserts that while article 657 of
the Civil Code is applicable to testate as well as intestate succession, it operates only in so far
as forced heirs are concerned. But the language of article 657 of the Civil Code is broad and
makes no distinction between different classes of heirs. That article does not speak of forced
heirs; it does not even use the word "heir". It speaks of the rights of succession and the
transmission thereof from the moment of death. The provision of section 625 of the Code of
Civil Procedure regarding the authentication and probate of a will as a necessary condition to
effect transmission of property does not affect the general rule laid down in article 657 of the
Civil Code. The authentication of a will implies its due execution but once probated and
allowed the transmission is effective as of the death of the testator in accordance with article
657 of the Civil Code. Whatever may be the time when actual transmission of the inheritance
takes place, succession takes place in any event at the moment of the decedent's death. The
time when the heirs legally succeed to the inheritance may differ from the time when the
heirs actually receive such inheritance. "Poco importa", says Manresa commenting on article
657 of the Civil Code, "que desde el falleimiento del causante, hasta que el heredero o
legatario entre en posesion de los bienes de la herencia o del legado, transcurra mucho o
poco tiempo, pues la adquisicion ha de retrotraerse al momento de la muerte, y asi lo ordena
el articulo 989, que debe considerarse como complemento del presente." (5 Manresa, 305;
see also, art. 440, par. 1, Civil Code.) Thomas Hanley having died on May 27, 1922, the
inheritance tax accrued as of the date.
From the fact, however, that Thomas Hanley died on May 27, 1922, it does not follow that the
obligation to pay the tax arose as of the date. The time for the payment on inheritance tax is
clearly fixed by section 1544 of the Revised Administrative Code as amended by Act No. 3031,
in relation to section 1543 of the same Code. The two sections follow:
SEC. 1543. Exemption of certain acquisitions and transmissions. — The following shall not be
taxed:
(a) The merger of the usufruct in the owner of the naked title.
(b) The transmission or delivery of the inheritance or legacy by the fiduciary heir or legatee to
the trustees.
(c) The transmission from the first heir, legatee, or donee in favor of another beneficiary, in
accordance with the desire of the predecessor.
In the last two cases, if the scale of taxation appropriate to the new beneficiary is greater
than that paid by the first, the former must pay the difference.
SEC. 1544. When tax to be paid. — The tax fixed in this article shall be paid:
(a) In the second and third cases of the next preceding section, before entrance into
possession of the property.
(b) In other cases, within the six months subsequent to the death of the predecessor; but if
judicial testamentary or intestate proceedings shall be instituted prior to the expiration of
said period, the payment shall be made by the executor or administrator before delivering to
each beneficiary his share.
If the tax is not paid within the time hereinbefore prescribed, interest at the rate of twelve
per centum per annum shall be added as part of the tax; and to the tax and interest due and
unpaid within ten days after the date of notice and demand thereof by the collector, there
shall be further added a surcharge of twenty-five per centum.
A certified of all letters testamentary or of admisitration shall be furnished the Collector of
Internal Revenue by the Clerk of Court within thirty days after their issuance.
It should be observed in passing that the word "trustee", appearing in subsection (b) of
section 1543, should read "fideicommissary" or "cestui que trust". There was an obvious
mistake in translation from the Spanish to the English version.
The instant case does fall under subsection (a), but under subsection (b), of section 1544
above-quoted, as there is here no fiduciary heirs, first heirs, legatee or donee. Under the
subsection, the tax should have been paid before the delivery of the properties in question to
P. J. M. Moore as trustee on March 10, 1924.
(b) The plaintiff contends that the estate of Thomas Hanley, in so far as the real properties are
concerned, did not and could not legally pass to the instituted heir, Matthew Hanley, until
after the expiration of ten years from the death of the testator on May 27, 1922 and, that the
inheritance tax should be based on the value of the estate in 1932, or ten years after the
testator's death. The plaintiff introduced evidence tending to show that in 1932 the real
properties in question had a reasonable value of only P5,787. This amount added to the value
of the personal property left by the deceased, which the plaintiff admits is P1,465, would
generate an inheritance tax which, excluding deductions, interest and surcharge, would
amount only to about P169.52.
If death is the generating source from which the power of the estate to impose inheritance
taxes takes its being and if, upon the death of the decedent, succession takes place and the
right of the estate to tax vests instantly, the tax should be measured by the vlaue of the
estate as it stood at the time of the decedent's death, regardless of any subsequent
contingency value of any subsequent increase or decrease in value. (61 C. J., pp. 1692, 1693;
26 R. C. L., p. 232; Blakemore and Bancroft, Inheritance Taxes, p. 137. See also Knowlton vs.
Moore, 178 U.S., 41; 20 Sup. Ct. Rep., 747; 44 Law. ed., 969.) "The right of the state to an
inheritance tax accrues at the moment of death, and hence is ordinarily measured as to any
beneficiary by the value at that time of such property as passes to him. Subsequent
appreciation or depriciation is immaterial." (Ross, Inheritance Taxation, p. 72.)
Our attention is directed to the statement of the rule in Cyclopedia of Law of and Procedure
(vol. 37, pp. 1574, 1575) that, in the case of contingent remainders, taxation is postponed
until the estate vests in possession or the contingency is settled. This rule was formerly
followed in New York and has been adopted in Illinois, Minnesota, Massachusetts, Ohio,
Pennsylvania and Wisconsin. This rule, horever, is by no means entirely satisfactory either to
the estate or to those interested in the property (26 R. C. L., p. 231.). Realizing, perhaps, the
defects of its anterior system, we find upon examination of cases and authorities that New
York has varied and now requires the immediate appraisal of the postponed estate at its clear
market value and the payment forthwith of the tax on its out of the corpus of the estate
transferred. (In re Vanderbilt, 172 N. Y., 69; 69 N. E., 782; In re Huber, 86 N. Y. App. Div., 458;
83 N. Y. Supp., 769; Estate of Tracy, 179 N. Y., 501; 72 N. Y., 519; Estate of Brez, 172 N. Y., 609;
64 N. E., 958; Estate of Post, 85 App. Div., 611; 82 N. Y. Supp., 1079. Vide also, Saltoun vs. Lord
Advocate, 1 Peter. Sc. App., 970; 3 Macq. H. L., 659; 23 Eng. Rul. Cas., 888.) California adheres
to this new rule (Stats. 1905, sec. 5, p. 343).
But whatever may be the rule in other jurisdictions, we hold that a transmission by
inheritance is taxable at the time of the predecessor's death, notwithstanding the
postponement of the actual possession or enjoyment of the estate by the beneficiary, and the
tax measured by the value of the property transmitted at that time regardless of its
appreciation or depreciation.
(c) Certain items are required by law to be deducted from the appraised gross in arriving at
the net value of the estate on which the inheritance tax is to be computed (sec. 1539, Revised
Administrative Code). In the case at bar, the defendant and the trial court allowed a
deduction of only P480.81. This sum represents the expenses and disbursements of the
executors until March 10, 1924, among which were their fees and the proven debts of the
deceased. The plaintiff contends that the compensation and fees of the trustees, which
aggregate P1,187.28 (Exhibits C, AA, EE, PP, HH, JJ, LL, NN, OO), should also be deducted
under section 1539 of the Revised Administrative Code which provides, in part, as follows: "In
order to determine the net sum which must bear the tax, when an inheritance is concerned,
there shall be deducted, in case of a resident, . . . the judicial expenses of the testamentary or
intestate proceedings, . . . ."
A trustee, no doubt, is entitled to receive a fair compensation for his services (Barney vs.
Saunders, 16 How., 535; 14 Law. ed., 1047). But from this it does not follow that the
compensation due him may lawfully be deducted in arriving at the net value of the estate
subject to tax. There is no statute in the Philippines which requires trustees' commissions to
be deducted in determining the net value of the estate subject to inheritance tax (61 C. J., p.
1705). Furthermore, though a testamentary trust has been created, it does not appear that
the testator intended that the duties of his executors and trustees should be separated. (Ibid.;
In re Vanneck's Estate, 161 N. Y. Supp., 893; 175 App. Div., 363; In re Collard's Estate, 161 N. Y.
Supp., 455.) On the contrary, in paragraph 5 of his will, the testator expressed the desire that
his real estate be handled and managed by his executors until the expiration of the period of
ten years therein provided. Judicial expenses are expenses of administration (61 C. J., p. 1705)
but, in State vs. Hennepin County Probate Court (112 N. W., 878; 101 Minn., 485), it was said:
". . . The compensation of a trustee, earned, not in the administration of the estate, but in the
management thereof for the benefit of the legatees or devises, does not come properly
within the class or reason for exempting administration expenses. . . . Service rendered in that
behalf have no reference to closing the estate for the purpose of a distribution thereof to
those entitled to it, and are not required or essential to the perfection of the rights of the
heirs or legatees. . . . Trusts . . . of the character of that here before the court, are created for
the the benefit of those to whom the property ultimately passes, are of voluntary creation,
and intended for the preservation of the estate. No sound reason is given to support the
contention that such expenses should be taken into consideration in fixing the value of the
estate for the purpose of this tax."
(d) The defendant levied and assessed the inheritance tax due from the estate of Thomas
Hanley under the provisions of section 1544 of the Revised Administrative Code, as amended
by section 3 of Act No. 3606. But Act No. 3606 went into effect on January 1, 1930. It,
therefore, was not the law in force when the testator died on May 27, 1922. The law at the
time was section 1544 above-mentioned, as amended by Act No. 3031, which took effect on
March 9, 1922.
It is well-settled that inheritance taxation is governed by the statute in force at the time of
the death of the decedent (26 R. C. L., p. 206; 4 Cooley on Taxation, 4th ed., p. 3461). The
taxpayer can not foresee and ought not to be required to guess the outcome of pending
measures. Of course, a tax statute may be made retroactive in its operation. Liability for taxes
under retroactive legislation has been "one of the incidents of social life." (Seattle vs.
Kelleher, 195 U. S., 360; 49 Law. ed., 232 Sup. Ct. Rep., 44.) But legislative intent that a tax
statute should operate retroactively should be perfectly clear. (Scwab vs. Doyle, 42 Sup. Ct.
Rep., 491; Smietanka vs. First Trust & Savings Bank, 257 U. S., 602; Stockdale vs. Insurance
Co., 20 Wall., 323; Lunch vs. Turrish, 247 U. S., 221.) "A statute should be considered as
prospective in its operation, whether it enacts, amends, or repeals an inheritance tax, unless
the language of the statute clearly demands or expresses that it shall have a retroactive
effect, . . . ." (61 C. J., P. 1602.) Though the last paragraph of section 5 of Regulations No. 65 of
the Department of Finance makes section 3 of Act No. 3606, amending section 1544 of the
Revised Administrative Code, applicable to all estates the inheritance taxes due from which
have not been paid, Act No. 3606 itself contains no provisions indicating legislative intent to
give it retroactive effect. No such effect can begiven the statute by this court.
The defendant Collector of Internal Revenue maintains, however, that certain provisions of
Act No. 3606 are more favorable to the taxpayer than those of Act No. 3031, that said
provisions are penal in nature and, therefore, should operate retroactively in conformity with
the provisions of article 22 of the Revised Penal Code. This is the reason why he applied Act
No. 3606 instead of Act No. 3031. Indeed, under Act No. 3606, (1) the surcharge of 25 per cent
is based on the tax only, instead of on both the tax and the interest, as provided for in Act No.
3031, and (2) the taxpayer is allowed twenty days from notice and demand by rthe Collector
of Internal Revenue within which to pay the tax, instead of ten days only as required by the
old law.
Properly speaking, a statute is penal when it imposes punishment for an offense committed
against the state which, under the Constitution, the Executive has the power to pardon. In
common use, however, this sense has been enlarged to include within the term "penal
statutes" all status which command or prohibit certain acts, and establish penalties for their
violation, and even those which, without expressly prohibiting certain acts, impose a penalty
upon their commission (59 C. J., p. 1110). Revenue laws, generally, which impose taxes
collected by the means ordinarily resorted to for the collection of taxes are not classed as
penal laws, although there are authorities to the contrary. (See Sutherland, Statutory
Construction, 361; Twine Co. vs. Worthington, 141 U. S., 468; 12 Sup. Ct., 55; Rice vs. U. S., 4 C.
C. A., 104; 53 Fed., 910; Com. vs. Standard Oil Co., 101 Pa. St., 150; State vs. Wheeler, 44 P.,
430; 25 Nev. 143.) Article 22 of the Revised Penal Code is not applicable to the case at bar,
and in the absence of clear legislative intent, we cannot give Act No. 3606 a retroactive effect.
(e) The plaintiff correctly states that the liability to pay a tax may arise at a certain time and
the tax may be paid within another given time. As stated by this court, "the mere failure to
pay one's tax does not render one delinqent until and unless the entire period has eplased
within which the taxpayer is authorized by law to make such payment without being
subjected to the payment of penalties for fasilure to pay his taxes within the prescribed
period." (U. S. vs. Labadan, 26 Phil., 239.)
The defendant maintains that it was the duty of the executor to pay the inheritance tax
before the delivery of the decedent's property to the trustee. Stated otherwise, the
defendant contends that delivery to the trustee was delivery to the cestui que trust, the
beneficiery in this case, within the meaning of the first paragraph of subsection (b) of section
1544 of the Revised Administrative Code. This contention is well taken and is sustained. The
appointment of P. J. M. Moore as trustee was made by the trial court in conformity with the
wishes of the testator as expressed in his will. It is true that the word "trust" is not mentioned
or used in the will but the intention to create one is clear. No particular or technical words are
required to create a testamentary trust (69 C. J., p. 711). The words "trust" and "trustee",
though apt for the purpose, are not necessary. In fact, the use of these two words is not
conclusive on the question that a trust is created (69 C. J., p. 714). "To create a trust by will
the testator must indicate in the will his intention so to do by using language sufficient to
separate the legal from the equitable estate, and with sufficient certainty designate the
beneficiaries, their interest in the ttrust, the purpose or object of the trust, and the property
or subject matter thereof. Stated otherwise, to constitute a valid testamentary trust there
must be a concurrence of three circumstances: (1) Sufficient words to raise a trust; (2) a
definite subject; (3) a certain or ascertain object; statutes in some jurisdictions expressly or in
effect so providing." (69 C. J., pp. 705,706.) There is no doubt that the testator intended to
create a trust. He ordered in his will that certain of his properties be kept together
undisposed during a fixed period, for a stated purpose. The probate court certainly exercised
sound judgment in appointment a trustee to carry into effect the provisions of the will (see
sec. 582, Code of Civil Procedure).
P. J. M. Moore became trustee on March 10, 1924. On that date trust estate vested in him
(sec. 582 in relation to sec. 590, Code of Civil Procedure). The mere fact that the estate of the
deceased was placed in trust did not remove it from the operation of our inheritance tax laws
or exempt it from the payment of the inheritance tax. The corresponding inheritance tax
should have been paid on or before March 10, 1924, to escape the penalties of the laws. This
is so for the reason already stated that the delivery of the estate to the trustee was in esse
delivery of the same estate to the cestui que trust, the beneficiary in this case. A trustee is but
an instrument or agent for the cestui que trust (Shelton vs. King, 299 U. S., 90; 33 Sup. Ct.
Rep., 689; 57 Law. ed., 1086). When Moore accepted the trust and took possesson of the trust
estate he thereby admitted that the estate belonged not to him but to his cestui que trust
(Tolentino vs. Vitug, 39 Phil.,126, cited in 65 C. J., p. 692, n. 63). He did not acquire any
beneficial interest in the estate. He took such legal estate only as the proper execution of the
trust required (65 C. J., p. 528) and, his estate ceased upon the fulfillment of the testator's
wishes. The estate then vested absolutely in the beneficiary (65 C. J., p. 542).
The highest considerations of public policy also justify the conclusion we have reached. Were
we to hold that the payment of the tax could be postponed or delayed by the creation of a
trust of the type at hand, the result would be plainly disastrous. Testators may provide, as
Thomas Hanley has provided, that their estates be not delivered to their beneficiaries until
after the lapse of a certain period of time. In the case at bar, the period is ten years. In other
cases, the trust may last for fifty years, or for a longer period which does not offend the rule
against petuities. The collection of the tax would then be left to the will of a private
individual. The mere suggestion of this result is a sufficient warning against the accpetance of
the essential to the very exeistence of government. (Dobbins vs. Erie Country, 16 Pet., 435; 10
Law. ed., 1022; Kirkland vs. Hotchkiss, 100 U. S., 491; 25 Law. ed., 558; Lane County vs.
Oregon, 7 Wall., 71; 19 Law. ed., 101; Union Refrigerator Transit Co. vs. Kentucky, 199 U. S.,
194; 26 Sup. Ct. Rep., 36; 50 Law. ed., 150; Charles River Bridge vs. Warren Bridge, 11 Pet.,
420; 9 Law. ed., 773.) The obligation to pay taxes rests not upon the privileges enjoyed by, or
the protection afforded to, a citizen by the government but upon the necessity of money for
the support of the state (Dobbins vs. Erie Country, supra). For this reason, no one is allowed
to object to or resist the payment of taxes solely because no personal benefit to him can be
pointed out. (Thomas vs. Gay, 169 U. S., 264; 18 Sup. Ct. Rep., 340; 43 Law. ed., 740.) While
courts will not enlarge, by construction, the government's power of taxation (Bromley vs.
McCaughn, 280 U. S., 124; 74 Law. ed., 226; 50 Sup. Ct. Rep., 46) they also will not place upon
tax laws so loose a construction as to permit evasions on merely fanciful and insubstantial
distictions. (U. S. vs. Watts, 1 Bond., 580; Fed. Cas. No. 16,653; U. S. vs. Wigglesirth, 2 Story,
369; Fed. Cas. No. 16,690, followed in Froelich & Kuttner vs. Collector of Customs, 18 Phil.,
461, 481; Castle Bros., Wolf & Sons vs. McCoy, 21 Phil., 300; Muñoz & Co. vs. Hord, 12 Phil.,
624; Hongkong & Shanghai Banking Corporation vs. Rafferty, 39 Phil., 145; Luzon Stevedoring
Co. vs. Trinidad, 43 Phil., 803.) When proper, a tax statute should be construed to avoid the
possibilities of tax evasion. Construed this way, the statute, without resulting in injustice to
the taxpayer, becomes fair to the government.
That taxes must be collected promptly is a policy deeply intrenched in our tax system. Thus,
no court is allowed to grant injunction to restrain the collection of any internal revenue tax (
sec. 1578, Revised Administrative Code; Sarasola vs. Trinidad, 40 Phil., 252). In the case of Lim
Co Chui vs. Posadas (47 Phil., 461), this court had occassion to demonstrate trenchment
adherence to this policy of the law. It held that "the fact that on account of riots directed
against the Chinese on October 18, 19, and 20, 1924, they were prevented from praying their
internal revenue taxes on time and by mutual agreement closed their homes and stores and
remained therein, does not authorize the Collector of Internal Revenue to extend the time
prescribed for the payment of the taxes or to accept them without the additional penalty of
twenty five per cent." (Syllabus, No. 3.)
". . . It is of the utmost importance," said the Supreme Court of the United States, ". . . that
the modes adopted to enforce the taxes levied should be interfered with as little as possible.
Any delay in the proceedings of the officers, upon whom the duty is developed of collecting
the taxes, may derange the operations of government, and thereby, cause serious detriment
to the public." (Dows vs. Chicago, 11 Wall., 108; 20 Law. ed., 65, 66; Churchill and Tait vs.
Rafferty, 32 Phil., 580.)
It results that the estate which plaintiff represents has been delinquent in the payment of
inheritance tax and, therefore, liable for the payment of interest and surcharge provided by
law in such cases.
The delinquency in payment occurred on March 10, 1924, the date when Moore became
trustee. The interest due should be computed from that date and it is error on the part of the
defendant to compute it one month later. The provisions cases is mandatory (see and cf. Lim
Co Chui vs. Posadas, supra), and neither the Collector of Internal Revenuen or this court may
remit or decrease such interest, no matter how heavily it may burden the taxpayer.
To the tax and interest due and unpaid within ten days after the date of notice and demand
thereof by the Collector of Internal Revenue, a surcharge of twenty-five per centum should be
added (sec. 1544, subsec. (b), par. 2, Revised Administrative Code). Demand was made by the
Deputy Collector of Internal Revenue upon Moore in a communiction dated October 16, 1931
(Exhibit 29). The date fixed for the payment of the tax and interest was November 30, 1931.
November 30 being an official holiday, the tenth day fell on December 1, 1931. As the tax and
interest due were not paid on that date, the estate became liable for the payment of the
surcharge.
In view of the foregoing, it becomes unnecessary for us to discuss the fifth error assigned by
the plaintiff in his brief.
We shall now compute the tax, together with the interest and surcharge due from the estate
of Thomas Hanley inaccordance with the conclusions we have reached.
At the time of his death, the deceased left real properties valued at P27,920 and personal
properties worth P1,465, or a total of P29,385. Deducting from this amount the sum of
P480.81, representing allowable deductions under secftion 1539 of the Revised
Administrative Code, we have P28,904.19 as the net value of the estate subject to inheritance
tax.
The primary tax, according to section 1536, subsection (c), of the Revised Administrative
Code, should be imposed at the rate of one per centum upon the first ten thousand pesos and
two per centum upon the amount by which the share exceed thirty thousand pesos, plus an
additional two hundred per centum. One per centum of ten thousand pesos is P100. Two per
centum of P18,904.19 is P378.08. Adding to these two sums an additional two hundred per
centum, or P965.16, we have as primary tax, correctly computed by the defendant, the sum of
P1,434.24.
To the primary tax thus computed should be added the sums collectible under section 1544 of
the Revised Administrative Code. First should be added P1,465.31 which stands for interest at
the rate of twelve per centum per annum from March 10, 1924, the date of delinquency, to
September 15, 1932, the date of payment under protest, a period covering 8 years, 6 months
and 5 days. To the tax and interest thus computed should be added the sum of P724.88,
representing a surhcarge of 25 per cent on both the tax and interest, and also P10, the
compromise sum fixed by the defendant (Exh. 29), giving a grand total of P3,634.43.
As the plaintiff has already paid the sum of P2,052.74, only the sums of P1,581.69 is legally
due from the estate. This last sum is P390.42 more than the amount demanded by the
defendant in his counterclaim. But, as we cannot give the defendant more than what he
claims, we must hold that the plaintiff is liable only in the sum of P1,191.27 the amount
stated in the counterclaim.
The judgment of the lower court is accordingly modified, with costs against the plaintiff in
both instances. So ordered.
G.R. No. 72494 August 11, 1989
HONGKONG AND SHANGHAI BANKING CORPORATION, petitioner,
vs.
JACK ROBERT SHERMAN, DEODATO RELOJ and THE INTERMEDIATE APPELLATE COURT,
respondents.
Quiason, Makalintal, Barot & Torres for petitioner.
Alejandro, Aranzaso & Associates for private respondents.
MEDIALDEA, J.:
This is a petition for review on certiorari of the decision of the Intermediate Appellate Court
(now Court of Appeals) dated August 2, 1985, which reversed the order of the Regional Trial
Court dated February 28,1985 denying the Motion to Dismiss filed by private respondents
Jack Robert Sherman and Deodato Reloj.
A complaint for collection of a sum of money (pp. 49-52, Rollo) was filed by petitioner
Hongkong and Shanghai Banking Corporation (hereinafter referred to as petitioner BANK)
against private respondents Jack Robert Sherman and Deodato Reloj, docketed as Civil Case
No. Q-42850 before the Regional Trial Court of Quezon City, Branch 84.
It appears that sometime in 1981, Eastern Book Supply Service PTE, Ltd. (hereinafter referred
to as COMPANY), a company incorporated in Singapore applied with, and was granted by, the
Singapore branch of petitioner BANK an overdraft facility in the maximum amount of
Singapore dollars 200,000.00 (which amount was subsequently increased to Singapore dollars
375,000.00) with interest at 3% over petitioner BANK prime rate, payable monthly, on
amounts due under said overdraft facility; as a security for the repayment by the COMPANY
of sums advanced by petitioner BANK to it through the aforesaid overdraft facility, on
October 7, 1982, both private respondents and a certain Robin de Clive Lowe, all of whom
were directors of the COMPANY at such time, executed a Joint and Several Guarantee (p. 53,
Rollo) in favor of petitioner BANK whereby private respondents and Lowe agreed to pay,
jointly and severally, on demand all sums owed by the COMPANY to petitioner BANK under
the aforestated overdraft facility.
The Joint and Several Guarantee provides, inter alia, 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. ... (p. 33-A, Rollo).
The COMPANY failed to pay its obligation. Thus, petitioner BANK demanded payment of the
obligation from private respondents, conformably with the provisions of the Joint and Several
Guarantee. Inasmuch as the private respondents still failed to pay, petitioner BANK filed the
above-mentioned complaint.
On December 14,1984, private respondents filed a motion to dismiss (pp 54-56, Rollo) which
was opposed by petitioner BANK (pp. 58-62, Rollo). Acting on the motion, the trial court
issued an order dated February 28, 1985 (pp, 64-65, Rollo), which read as follows:
In a Motion to Dismiss filed on December 14, 1984, the defendants seek the dismissal of the
complaint on two grounds, namely:
1. That the court has no jurisdiction over the subject matter of the complaint; and
2. That the court has no jurisdiction over the persons of the defendants.
In the light of the Opposition thereto filed by plaintiff, the Court finds no merit in the motion.
"On the first ground, defendants claim that by virtue of the provision in the Guarantee (the
actionable document) which reads —
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 in Singapore shall have jurisdiction over all
disputes arising under this guarantee,
the Court has no jurisdiction over the subject matter of the case. The Court finds and
concludes otherwise. There is nothing in the Guarantee which says that the courts of
Singapore shall have jurisdiction to the exclusion of the courts of other countries or nations.
Also, it has long been established in law and jurisprudence that jurisdiction of courts is fixed
by law; it cannot be conferred by the will, submission or consent of the parties.
On the second ground, it is asserted that defendant Robert' , Sherman is not a citizen nor a
resident of the Philippines. This argument holds no water. Jurisdiction over the persons of
defendants is acquired by service of summons and copy of the complaint on them. There has
been a valid service of summons on both defendants and in fact the same is admitted when
said defendants filed a 'Motion for Extension of Time to File Responsive Pleading on
December 5, 1984.
WHEREFORE, the Motion to Dismiss is hereby DENIED.
SO ORDERED.
A motion for reconsideration of the said order was filed by private respondents which was,
however, denied (p. 66, Rollo).
Private respondents then filed before the respondent Intermediate Appellate Court (now
Court of Appeals) a petition for prohibition with preliminary injunction and/or prayer for a
restraining order (pp. 39-48, Rollo). On August 2, 1985, the respondent Court rendered a
decision (p. 37, Rollo), the dispositive portion of which reads:
WHEREFORE, the petition for prohibition with preliminary injuction is hereby GRANTED. The
respondent Court is enjoined from taking further cognizance of the case and to dismiss the
same for filing with the proper court of Singapore which is the proper forum. No costs.
SO ORDERED.
The motion for reconsideration was denied (p. 38, Rollo), hence, the present petition.
The main issue is whether or not Philippine courts have jurisdiction over the suit.
The controversy stems from the interpretation of a provision in the Joint and Several
Guarantee, to wit:
(14) This guarantee and all rights, obligations and liabilites 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 in Singapore shall have jurisdiction
over all disputes arising under this guarantee. ... (p. 53-A, Rollo)
In rendering the decision in favor of private respondents, the Court of Appeals made, the
following observations (pp. 35-36, Rollo):
There are significant aspects of the case to which our attention is invited. The loan was
obtained by Eastern Book Service PTE, Ltd., a company incorporated in Singapore. The loan
was granted by the Singapore Branch of Hongkong and Shanghai Banking Corporation. The
Joint and Several Guarantee was also concluded in Singapore. The loan was in Singaporean
dollars and the repayment thereof also in the same currency. The transaction, to say the least,
took place in Singporean setting in which the law of that country is the measure by which that
relationship of the parties will be governed.
xxx xxx xxx
Contrary to the position taken by respondents, the guarantee agreement compliance that any
litigation will be before the courts of Singapore and that the rights and obligations of the
parties shall be construed and determined in accordance with the laws of the Republic of
Singapore. A closer examination of paragraph 14 of the Guarantee Agreement upon which the
motion to dismiss is based, employs in clear and unmistakeable (sic) terms the word 'shall'
which under statutory construction is mandatory.
Thus it was ruled that:
... the word 'shall' is imperative, operating to impose a duty which may be enforced (Dizon vs.
Encarnacion, 9 SCRA 714).lâwphî1.ñèt
There is nothing more imperative and restrictive than what the agreement categorically
commands that '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.'
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 "[t]his 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 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 (J. Salonga, Private International Law, 1981, p. 46). Indeed, as pointed-out by
petitioner BANK 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, with more
reason as a defendant. However, in this case, private respondents 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. Private respondents' stance is hardly
comprehensible, unless their ultimate intent is to evade, or at least delay, the payment of a
just obligation.
The defense of private respondents 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 private
respondents.
In the case of Polytrade Corporation vs. Blanco, G.R. No. L-27033, October 31, 1969, 30 SCRA
187, it was ruled:
... 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.
This ruling was reiterated in the case of Neville Y. Lamis Ents., et al. v. Lagamon, etc., et al.,
G.R. No. 57250, October 30, 1981, 108 SCRA 740, where the stipulation was "[i]n case of
litigation, jurisdiction shall be vested in the Court of Davao City." We held:
Anent the claim that Davao City had been stipulated as the venue, suffice it to say that a
stipulation as to venue does not preclude the filing of suits in the residence of plaintiff or
defendant under Section 2 (b), Rule 4, Rules of Court, in the absence of qualifying or
restrictive words in the agreement which would indicate that the place named is the only
venue agreed upon by the parties.
Applying the foregoing to the case at bar, 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 within 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 with the permission of
the latter's authorities. This authority, which finds its source in the concept of sovereignty, is
exclusive within 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 (J. Salonga, Private International Law, 1981, pp. 37-
38).lâwphî1.ñèt
As regards the issue on improper venue, petitioner BANK avers that the objection to improper
venue has been waived. However, We agree with the ruling of the respondent Court that:
While in the main, the motion to dismiss fails to categorically use with exactitude the words
'improper venue' it can be perceived from the general thrust and context of the motion that
what is meant is improper venue, The use of the word 'jurisdiction' was merely an attempt to
copy-cat the same word employed in the guarantee agreement but conveys the concept of
venue. Brushing aside all technicalities, it would appear that jurisdiction was used loosely as
to be synonymous with venue. It is in this spirit that this Court must view the motion to
dismiss. ... (p. 35, Rollo).
At any rate, this issue is now of no moment because We hold that venue here was properly
laid for the same reasons discussed above.
The respondent Court likewise ruled that (pp. 36-37, Rollo):
... In a conflict problem, a court will simply refuse to entertain the case if it is not authorized
by law to exercise jurisdiction. And even if it is so authorized, it may still refuse to entertain
the case by applying the principle of forum non conveniens. ...
However, whether a suit should be entertained or dismissed on the basis of the principle of
forum non conveniens depends largely upon the facts of the particular case and is addressed
to the sound discretion of the trial court (J. Salonga, Private International Law, 1981, p.
49).lâwphî1.ñèt Thus, the respondent Court should not have relied on such principle.
Although the Joint and Several Guarantee prepared by petitioner BANK is a contract of
adhesion and that consequently, it cannot be permitted to take a stand contrary to the
stipulations of the contract, substantial bases exist for petitioner Bank's choice of forum, as
discussed earlier.
Lastly, private respondents allege that neither the petitioner based at Hongkong nor its
Philippine branch is involved in the transaction sued upon. This is a vain attempt on their part
to further thwart the proceedings below inasmuch as well-known is the rule that a defendant
cannot plead any defense that has not been interposed in the court below.
ACCORDINGLY, the decision of the respondent Court is hereby REVERSED and the decision of
the Regional Trial Court is REINSTATED, with costs against private respondents. This decision
is immediately executory.
SO ORDERED.
Annette M. GRAY v. John Robert GRAY.
2980193.
Decided: April 30, 1999
Ellen L. Turner, Mobile, for appellant. No brief filed for appellee.
Annette M. Gray (“the mother”) appeals from the trial court's order, dated October 6, 1998,
granting a motion by John Robert Gray (“the father”) for relief from a judgment pursuant to
Rule 60(b), Ala. R. Civ. P. The mother contends that the trial court abused its discretion when
it granted the father's Rule 60(b) motion. We agree.
In April 1989, the parties were divorced and the father was awarded custody of the minor
daughter. At the time of the divorce, the minor daughter was in the custody of the
Department of Human Resources.
In February 1996, the mother moved the trial court to set an amount of child support for the
father to pay and to require the father to pay the minor daughter's college expenses. In her
motion, the mother stated that while the parties' minor daughter did not live with either
party at the time of the divorce, the mother obtained custody of the minor daughter a few
months after the divorce. The mother further stated that the father's child-support
obligation had not been established and that she had not received any child support from the
father.
After a hearing on the motion, the trial court issued an order, dated April 30, 1996, which
ordered the father to pay the mother $206 per month in child support. The order also
stated:
“1. THAT the [mother] is awarded a judgment against the [father] in the amount of
$4,967.52, representing the arrearage in child support as of this date. This judgment is less
any monies that may be owed and payable to the State of Alabama for monies paid for
support of the child. Further, after the court determines what is owed to the State, the court
shall set a pay-back amount for the judgment.”
In July 1996 the State moved to intervene, alleging that it had expended $9,516 in Aid for
Dependent Children (“AFDC”) benefits for the family in this case, and, thus, was entitled to
the entire amount of the judgment awarded to the mother in the April 30, 1996, order.
After a hearing, the trial court issued an order, dated January 6, 1997, which stated:
“1. THAT [the mother] is hereby awarded a judgment against [the father] in the amount of
$4,500.00, said amount representing the existing arrearage in child support as of November
15, 1996;  said judgment is in addition to the prior judgment rendered herein.
“2. THAT the child support payments heretofore ordered by the court are hereby
reaffirmed.”
Thereafter, the father filed a timely post-judgment motion, contending that, because the
parties' minor daughter had reached 19 years of age in November 1996, his child-support
payments should terminate, and contending that “[t]he facts and circumstances of this case
[do] not warrant an additional judgment of $4,500.00 against [the father].” The State also
moved to alter, amend, or vacate the January 6, 1997, order, requesting that the trial court
“award the entire arrearage judgment for unpaid child support which accrued during the
child's minority to the State of Alabama for AFDC benefits expended on behalf of the minor
child.”
After a hearing on the motions, the trial court issued an order, dated April 3, 1997,
terminating the father's child-support obligation as of November 1996 (by agreement of the
parties), denying the remainder of the father's post-judgment motion, and denying the State's
post-judgment motion. The time for appeal expired on May 15, 1997. Neither the father
nor the State appealed.
In August 1998, the father moved for relief from the January 6, 1997, order, pursuant to Rule
60(b). The mother filed a response to the motion, contending that the father's motion
should be denied because, she says, “[t]he [father's] basis for his attack is that the court
mistakenly ordered a judgment for $4,500.00 to the [mother], without any additional
evidence to support such a judgment” and that “[the father] presents no evidence or
argument that was not known at the time of the January 6, 1997 ruling.”
After a hearing in October 1998, the trial court, with a different trial judge sitting on the
bench, issued an order, which granted the father's Rule 60(b) motion “as it relates to the
judgment in the amount of $4,500.00 entered on January 6, 1997, in paragraph one (1).”
This appeal followed.
At the hearing on his motion for relief from judgment, the father's attorney argued:
“I think [the father] is clearly entitled to relief from that second judgment that was awarded,
though the judgment supposedly set an additional arrearage. The time period involved is
not-it doesn't support an additional forty-five hundred dollars. It's our position, [the
father's] position, that because of the argument about the amount of money owed the State
of Alabama being presented to Judge Kennedy-there's no other way to explain the amount of
the two judgments, forty-five hundred dollars and the forty-nine sixty-seven, other than the
fact that he related that sum of money to the amount of money claimed by the State for three
children.”
Thus, it appears that the basis for the father's Rule 60(b) motion was subsection (1), which
encompasses “mistake, inadvertence, surprise, or excusable neglect.” However, when
questioned about what subsection of Rule 60(b) the father was relying upon, the father's
attorney stated that the father was entitled to relief under Rule 60(b)(6), Ala. R. Civ. P., which
encompasses “any other reason justifying relief from the operation of the judgment.”
In Ex parte Dowling, 477 So.2d 400, 403 (Ala.1985), our supreme court stated:
“A Rule 60(b)(6) motion should be granted only in those exceptional circumstances when the
party can show the court sufficient equitable grounds to be entitled to relief. The party
making such a motion must meet two prerequisites before it is justified. First, the motion
must be based on some reason other than those stated in 60(b)(1) through 60(b)(5), and
second, the reason urged for relief must be such as to justify relief.”
(Citations omitted.) (Emphasis added.)
As previously noted, the father did not appeal from the trial court's April 1997 denial of his
post-judgment motion. Instead, in August 1998, he filed a Rule 60(b) motion, once again
seeking to have the January 6, 1997, judgment vacated. In Ex parte Dowling, 477 So.2d at
403-04, our supreme court stated:
“The denial of a motion under Rule 59 or Rule 60 is usually appealable. That avenue, then,
should be pursued by an aggrieved party. A motion to reconsider cannot be used as a
substitute for an appeal. This Court has been presented from time to time several instances
when losing parties have attempted to get trial judges to reconsider action taken on their
post-judgment motions. Most attempt to draft their motions to come within the provisions
of Rule 60(b). In view of the fact that this case presents to us that situation, we take this
opportunity to point out to the bench and bar that the Rules of Civil Procedure do not
authorize a movant to file a motion to reconsider the trial judge's ruling on his own post-
judgment motion․ In the usual case, after a post-judgment motion has been denied, the
only review of that denial is by appeal;  a judge has no jurisdiction to ‘reconsider’ the denial.”
(Citations omitted.)
In light of the foregoing, that portion of the October 6, 1998, judgment of the trial court that
granted the father's Rule 60(b) motion “as it relates to the judgment in the amount of
$4,500.00 entered on January 6, 1997, in paragraph one (1)” is hereby reversed and the cause
is remanded for proceedings consistent with this opinion.
The mother's request for an attorney fee on appeal is granted in the amount of $1,000.
REVERSED AND REMANDED WITH INSTRUCTIONS.
Alabama Great Southern Rail Road Co.
v.
Carroll.
11 So. 803
97 Ala. 126 - 1892
The plaintiff W. D. Carroll is, and was [127] at the time of being injured in that service, a
citizen of Alabama. The defendant is an Alabama corporation operating a railroad extending
from Chattanooga in the State of Tennessee through Alabama to Meridian in the State
Mississippi. At the time of the casualty complained of, plaintiff was in the service of the
defendant in the capacity of brakeman on freight trains running from Birmingham, Alabama,
to Meridian, Mississippi, under a contract which was made in the state of Alabama. The injury
was caused by the breaking of a link between two cars in a freight train which was proceeding
from Birmingham to Meridian. The point at which the link broke and the injury was suffered
was in the State of Mississippi. The evidence tended to show that the link which broke was a
defective link and that it was in a defective condition when the train left Birmingham. It was
shown that this link, had come to the defendant's road at Chattanooga, Tennessee, with a car
which belonged to and came to that point over a road which was foreign to the A.G.S. road.
That at Chattanooga, this foreign car was coupled into a train of the defendant by means of
this link, the destination of the car next in rear of it being Birmingham, and the destination of
the second car in the rear of it, which belonged to defendant, being Meridian, to which point
the foreign car was also bound. At Birmingham the car between this foreign car and the A.G.S.
car which were billed to Meridian was cut out, and these two were coupled together by
means of the link which had come to the defendant with the foreign car. The evidence went
also to show that the defect in this link consisted in or resulted from its having been bent
while cold, that this tended to weaken the iron and in this instance had cracked the link
somewhat on the outer curve of the bend, and that the link broke at the point of this crack. It
was shown to be the duty of certain employees of defendant stationed along its line to
inspect the links attached to cars to be put in trains or forming the couplings between cars in
trains at Chattanooga, Birmingham, and some points between Birmingham and the place
where this link broke, and [128] also that it was the duty of the conductor of freight trains and
the other train-men to maintain such inspection as occasion afforded throughout the runs or
trips of such trains; and the evidence affords ground for inference that there was a negligent
omission on the part of such employees to perform this duty, or if performed, the failure to
discover the defect in and to remove this link was the result of negligence..
The foregoing statement of facts, either proved or finding lodgment in the tendencies of the
evidence, together with. the evidence of the law of Mississippi, as to the master's liability for
injuries sustained by an employee in his service, will suffice for the consideration and
determination of the question which is of chief importance in this case, namely, whether the
defendant is liable at all on the facts presented by this record for an injury sustained by the
defendant in the State of Mississippi. The affirmative of this inquiry is sought to be rested and
maintained upon two distinct propositions. In the first place, it is insisted that the. negligence
which one aspect of the evidence tends to establish Is that of the defendant m respect of a
duty which the law imposes upon the master and which whether performed or undertaken to
be performed in the particular instance by the hand of the master or by the hand of one to
whom he had delegated its performance is yet to be taken as being performed or attempted
to be performed by the master himself, in such sort that the employer is responsible for its
misperformance or non-performance whereby injury results to one of his employees under
the doctrine of the common-law and wholly irrespective of statutory provisions. These
doctrines are presumed, and also shown by the evidence in this case, to obtain in the State of
Mississippi; and the defendant being an Alabama corporation it can- not be questioned that
an action may be maintained in this State to recover damages for an injury sustained in
Mississippi, by one of its servants, if the facts present a good cause of action under the law of
that State. It is manifest beyond adverse inference on the evidence, conceding the link, the
breaking of which caused the accident, to have been in a defective condition when it came to
defendant's road at Chattanooga attached to, and intended to be used in the further
transportation, of the foreign car, that it was so used from that point to the place of the
accident, that this defective condition of the link was patent to such observation as should
have been bestowed upon it and that the defect in it was the proximate cause of the injury to
the plaintiff, it [129] is, we say clear upon every aspect of the testimony, conceding all this to
be true, that the use of that link in coupling the foreign car to the defendant's train and also in
its use throughout the voyage from Chattanooga into Mississippi was due to the negligence of
employees of the defendant who were charged by it with the duty of inspecting the link
before and at the time of incorporating the foreign car into this train and at the several points
in Alabama where inspectors were stationed as shown by the evidence, and also of the train-
men charged with the duty of inspection as the train was en route. There is no pretense that
the defendant had not been sufficiently careful in the selection of these inspectors or that
they were incompetent. It is not pretended that they were insufficient in number or stationed
at points too widely separated along the line. There is no such idea advanced as that the
defendant was negligent in the purchasing of links of adequate strength, and supplying them
to these inspectors and to trains gene- rally; or that there was any necessity for the continued
use of this link upon a discovery of its defective condition; but on the contrary it is
affirmatively shown that the defend- ant purchased and supplied its trains and employees
with all necessary links of good quality and perfect condition to be used in its trains, to supply
the places of links which be- came defective from use, and to substitute for defective links
coming to this road with foreign cars. The only negligence, in other words and in short, which
finds support by direction or inference in any tendency of the evidence, is that of per- sons
whose duty it was to inspect the links of the train, and remove such as were defective and
replace them with others which were not defective. This was the negligence not of the
master, the defendant, but of fellow-servants of the plaintiff, for which at common-law the
defendant is not liable. Thus it is said in McKinney on Fellow-Servants, § 127 : "It is a very
common thing for train hands to receive injury through the negligence of persons employed
by the company to inspect their cars to discover defects and repair them. The weight of
authority, perhaps, is to the effect that the negligence of such employees in the performance
of such duties cannot be attributed to the company, and it is consequently not liable for it."
Citing among other cases Smith v. Potter, 46 Mich. 258; s. c. 2 Am. & Eng. R. R. Cas. 140;
Mackin v. Railroad Co., 135 Mass. 201; s. c.
15 Am. & Eng. R. R. Cas. 196; Railroad Co. v. Webb, 12 Ohio St. 475; Railroad Co. v. Rice, 11 So.
West Rep. (Ark.) 699; Kidwell v. Railroad Co. 3 Wood (U. S.) 313; and our own case

[130] of Smoot v. Mobile & Montgomery R. R. Co. 67 Ala. 13; and these and other cases are
cited to the same proposition in 7 Am. & En. Encyc. of Law p. 864, note.
There are cases which hold to the contrary, but the law is and has long been settled in this
State as we have stated it, the case of Smoot v. Mobile (t Montgomery R. R. Co. supra, being
directly in point.—Mobile & Ohio R. R. Co. v. Thomas, 42 Ala. 672, 720 et seq; Mobile &
Montgomery Ry. Co. v. Smith, 59 Ala. 245; Louisville & Nashville R. R. Co. v. A.llen, 78 Ala.
494.
This being the common-law applicable to the premises as understood and declared in
Alabama, it will be presumed in our courts as thus declared to be the common-law of
Mississippi, unless the evidence shows a different rule to have been announced by the
Supreme Court of the State as being the common-law thereof. The evidence adduced here
fails to show any such thing; but to the contrary it is made to appear from the testimony of
Judge Arnold and by the decisions of the Supreme Court of Mississippi which were introduced
on the trial below that that court is in full accord with this one in this respect. Indeed, if any
thing, those decisions go further than this court has ever gone in applying the doctrine of
fellow-servants to the exemption of railway companies from liability to one servant for
injuries resulting from the negligence of another, holding in one case that a hostler whose
only duty it was to supply an engine with sufficient sand before turning it over to the engineer
to go on the road is a fellow-servant of the engineer for whose negligent failure to supply the
same the company would not be liable.–L. & N. R. R. Co. v. Petty, 67 Miss. 255; in another,
that a section foreman and a laborer working under him were fellow-servants in such sort
that their common master would not be liable for the negligence of the former in attempting
to repair a fishbar which he ought to have discarded and applied for a new one.—Lagrave v.
Mobile & Ohio R. R. Co. 67 Miss. 532; and in yet another case, that a section foreman and
train-man are fellow-servants in respect of the Ifegligence of the former unknown to the
company in failing to keep the track in repair, and that an engineer on a passing train who
was injured in consequence could not recover against common employer.–N. 0. J. & G. N. R.
R. Co. v. Hughes, 49 Miss. 258; and the doctrine of this case is said by Mr. McKinney to be
"substantially the rule recognized by the English common-law decisions." McKinney on
Fellow-servants, p. 82 § 29. See also McMaster v. Illinois Central R. R. Co. 65 Miss. 264.
[131] Proceeding therefore on the presumptions we are authorized to indulge and also on the
evidence adduced in this case as to the law of Mississippi in this connection, and upon the
testimony most favorable to the plaintiff as to the cause of his injuries, we feel entirely safe in
declaring that plaintiff has shown no cause of action under the common-law as it is
understood and applied both here and in Mississippi.
It is, however, further contended that the plaintiff, if his evidence be believed, has made out a
case for the recovery sought under the Employer's Liability Act of Alabama, it being clearly
shown that there is no such, or similar law of force in the State of Mississippi. Considering this
position in the abstract, that is dissociated from the facts of this particular case which are
supposed to exert an important influence upon it, there can not be two opinions as to its
being unsound and untenable. So looked at, we do not understand appellee's counsel even to
deny either the proposition or its application to this case, that there can be no recovery in one
State for injuries to the person sustained in another unless the infliction of the injuries is
actionable under the law of the State in which they were received. Certainly this is the well
established rule of law subject in some jurisdictions to the qualification that the infliction of
the injuries would also support an action in the State where the suit is brought, had they been
received within that State. 3 Am. & Eng. Encyc. of Law, p. 508-9; Hyde’s Admr. v. Wabash, St.
Louis & Pacfic Ry. Co. 61 Iowa, 441; East Tenn. Va. & Gu. R. R. Co. v. Lewis., 14 S. W. Rep. 603;
Buckles v. Ellers, 72 Incl. 220; Willis v. Mo. Pac. Ry. Co. 61 Texas, 432; Woodward v. M.S. & N. I
R. R. Co. 10 Ohio St. 121; Whitford v. Panama Railroad Co. 23 N. Y. 465; Debovois v. .N. Y. L. E.
& W. R. R. Co. 98 N. Y. 377; N C. & St. L. Ry. Co..v. Foster, 11 Amer. & Eng. R. R. Cas. 180; 2
Rover on Railroads, p. 1149 ; Kahl v. M & C. R. R. Co. 95 Ala. 337; C. St. L. & JJio. R. R. Co. v.
Doyle, 60 Miss. 977; Davis 1'. N. Y. & N E. R. R. Co. 143 Mass. 301; LeForest v. Tolman, 117
Mass. 109; s. c. 19 Amer. Rep. 400; Lime- killer v. H. & St. J. R. R. Co. 33 Kan. 83; The Scotland,
105 U. S. 24; The Santa Cruz, 1 C. Rob. 50; A. '1'. & S. F. R. R. Co. v. Moore, 11 Am. & Eng. R. R.
Cas. 243.
But it is claimed that the facts of this ease take it out of the general rule which the authorities
cited above abundantly support, and authorize the courts of Alabama to subject the
defendant to the payment of damages under section 2590 of the Code, although the injuries
counted on were sustained in Mississippi under circumstances which involved no liability on
the defendant by the laws of that State.
[132] This insistence is in the first instance based on that aspect of the evidence which goes to
show that the negligence which produced the casualty transpired in Alabama, and the theory
that wherever the consequence of that negligence manifested itself, a recovery can be had in
Alabama. We are referred to no authority in support of this proposition, and exhaustive
investigation on our part has failed to disclose close any. There are at least two well
considered cases against it, one of which involved an effort to recover for personal injuries
sustained in Alabama under circumstances which afforded no cause of action in Alabama in
the courts of Tennessee where the causal negligence occurred and where also had the
negligence manifested itself in the results complained of there, the plaintiff would have been
entitled to recover. The accident happened on a train going from Nashville to Chattanooga, in
Tennessee, on a railway which runs for a comparatively short distance through Alabama. The
negligence relied on consisted in the failure of employees of the defendant charged in that
behalf to discover and remedy a defective brake before the train left Nashville as well as
during its passage through Tennessee. While the train was running through Alabama, a
brakeman was killed in consequence of the defect in this brake. All this is precisely on all fours
with our case in those of its aspects most favorable to the plaintiff. That plaintiff, the court
conceded, would have had a good cause o · action under the law of Tennessee, the place of
the negligence, if his intestate had been injured within its limits. So here, the plaintiff on one
aspect of the evidence would have had a good cause for ac ion in Alabama, the place of the
negligence, had he been injured in Alabama. But it was found in that case that the law of
Alabama gave no cause of action for the negligent failure to inspect the appliances used in
operating a train, but held the brakeman and the inspectors to be fellow-servants in respect
thereto, just as here the laws of Mississippi afforded no redress for the consequence of such
negligence, though our statutes have since the Tennessee decision provided therefor; and it
was held on the authority of Mobile & Ohio R. R. Co. v. Thomas, 42 Ala. 672, that there could
have been no recovery in Alabama and that of consequence no cause of action existed in
Tennessee, the court saying: '·There is no question but the laws of Alabama· · · controlled the
rights of the parties in this case, and whether there was error in this part of the charge
(referring to an instruction as to defendant's liability on the negligence shown) as given, or
the refusal of the specific instructions asked for (substantial-[133]-ly that the negligence of a
car inspector from which a brakeman suffers injury is no ground for action against their
common employer,) depends wholly upon the laws of that State. Nashville, Chattanooga & St.
Louis By. Co. v. Foster, 10 Lea, 352 ; s. o. 11 Amer. & Eng. E. E. Ca's. 180. In the other case the
precise point here under consideration was brought before the Supreme Court of Mississippi,
in an action instituted in that State sounding in damages for fatal injuries inflicted upon
plaintiff's intestate in the State of Tennessee. It was insisted that inasmuch as the death of
the deceased resulted from the negligent failure of a train dispatcher in Mississippi to give
requisite orders to the trainmen at a certain point in Tennessee, the rights of the parties were
de- terminable by the laws of Mississippi the place of the disastrous negligent omission. But
the court held to the contrary, saying: "The right of the appellee is determinable by the laws
of Tennessee, in which State the killing of her husband occurred. The view that no recovery
could be had here, except for a result traceable to an omission of duty in Mississippi is
unfounded. Physical force proceeding from this State and inflicting injury in another State
might give rise to an action in either State, and vice versa but the omission of duty in
Mississippi cannot transfer a consequence of it manifested physically in another State to
Mississippi. The cases of injuries commenced in one jurisdiction and completed in another
illustrate our views on this subject. The true view is that the legal entity called the
corporation is omni-present on its railroad, and the presence or absence of negligence with
respect to an occurrence at any point of the line is not to be resolved by the place at which an
officer or employe was stationed for duty. The question is as to duty operating effectually at
the place where its alleged failure caused harm to result. The locality of the collision was in
Tennessee. It was there, if any where, that the company was remiss in duty, for there is
where its proper caution should have been used."–Chicago, St. Louis & New Orleans R. R. Co.
v. Doyle, 60 Miss. 977, 984. If this doctrine was properly applied to the facts of that case
where the act to be performed, the failure to perform which caused the in- jury, could only be
performed at a point in Mississippi and by an employe who was stationed and remained at
that place, it would seem to address itself with more force to the case at bar where it appears
the corporation was in fact present with the train and with the defective link every inch of the
journey from Birmingham to the point of the accident in the person of the conductor and
other trainmen who were charg-[134]-ed with the duty all along the line of discovering and
removing the unsafe appliances.
The position of the Mississippi court appears to us to be eminently sound in principle and
upon logic. It is admitted, or at least cannot be denied, that negligence of duty unproductive
of damnifying results will not authorize or support a recovery. Up to the time train passed out
of Alabama no injury had resulted. For all that occurred in Alabama, therefore, no cause of
action whatever arose. The face which created the right to sue, the injury without which
confessedly no action would lie anywhere, transpired in the State of Mississippi. It was in that
State, therefore, necessarily that the cause of action, if any, arose; and whether a cause of
action arose and existed at all or not must in all reason be determined by the law which
obtained at the time and place when and where the fact which is relied on to justify a
recovery transpired. Section 2590 of the Code of Alabama had no efficiency beyond the lines
of Alabama. It cannot be allowed to operate upon facts occurring in another State so as to
evolve out of them rights and liabilities which do not exist under the law of that State which is
of course paramount in the premises. ·where the facts occur in Alabama and a liability
becomes fixed in Alabama, it may be enforced in another State having like enactments, or
whose policy is not opposed to the spirit of such enactments, but this is quite a different
matter. This is hut enforcing the statute upon facts to which it is applicable all of which occur
within the territory for the government of which it was enacted. Section 2590 of the Code, in
other words is to be interpreted in the light of universally recognized principles of private
international or interstate law, as if its operation had been expressly limited to this State and
as if its first line read as follows: ''When a personal injury is received in Alabama by a servant
or employee," &c., &c. The negligent infliction of an injury here under statutory circumstances
creates a right of action here, which, being transitory, may be enforced in any other State or
country the comity of which admits of it; but for an injury inflicted elsewhere than in Alabama
our statute gives no right of recovery, and the aggrieved party must look to the local law to
ascertain what his rights are. Under that law this plaintiff had no cause of action, as we have
seen, and hence he has no rights which our courts can enforce, unless it be upon a
consideration to be presently adverted to. We have not been inattentive to the suggestions of
counsel in this connection, which are based upon that rule of the statutory and common crim-
[135]-inal law under which a murderer is punishable where the fatal blow is delivered,
regardless of the place where death ensues.—Green v. State, 66 Ala. 40. This principle is
patently without application here. There would be some analogy if the plaintiff had been
stricken in Alabama and suffered in Mississippi, which is not the fact. I here is, however, an
analogy which is afforded by the criminal law, but which points away from the conclusion
appellee's counsel desire us to reach. This is found in that well established doctrine of
criminal law, that where the unlawful act is committed in one jurisdiction or State and takes
effect-produces the result which it is the purpose of the law to prevent, or, it having ensued,
punish for-in another jurisdiction or State, the crime is deemed to have been committed and
is punished in that jurisdiction or State in which the result is manifested, and not where the
act was committed. 1 Bish. Cr. Law, § 110 et seq.; 1 Bish. Cr. Pro. §53 et seq.
Another consideration-that referred to above-it is insisted, entitles this plaintiff to recover
here under the Employer's Liability Act for an injury inflicted beyond the territorial operation
of that act. This is claimed upon the fact that at the time :plaintiff was injured he was in the
dis- charge of duties which rested on him by the terms of a contract between him and
defendant which had been entered into in Alabama, and, hence, was an Alabama contract, in
connection with the facts that plaintiff was and is a citizen of this State, and the defendant is
an Alabama corporation. These latter facts-of citizenship and domicile respectively of plaintiff
and defendant–are of no importance in this connection, it seems to us, further than this: they
may tend to show that the contract was made here, which is not controverted, and if the
plaintiff has a cause of action at all, he, by reason of them, may prosecute it in our courts.
They have no bearing on the primary question of existence of a cause of action, and as that is
the question before us, we need not further advert to the fact of plaintiff's citizenship or
defendant's domicile.
The contract was that plaintiff should serve the defendant in the capacity of a brakeman on
its freight train between Birmingham, Alabama, and Meridian, Mississippi, and should receive
as compensation a stipulated sum for each trip from Birmingham to Meridian and return. The
theory is that the Employer's Liability Act became a part of this contract; that the duties and
liabilities which It prescribes became contractual duties and liabilities, or duties and liabilities
springing out of the contract, and that these duties [136] attended upon the execution
whenever its performance was required—in Mississippi as well as in Alabama—and that the
liability prescribed for a failure to perform any of such duties attached upon such failure and
consequent injury wherever it occurred, and was enforceable here because imposed by an
Alabama contract notwithstanding the remission of duty and the resulting injury occurred in
Mississippi, under whose laws no liability was incurred by such remission. The argument is
that a contract for service is a condition precedent to the application of the statute, and that
"as soon as the contract is made the rights and obligations of the parties, under the
Employer's Act, became vested and fixed," so that "no subsequent repeal of the law could
deprive the injured party of his rights nor discharge the master from his liabilities," &c., &c. I£
this argument is sound, and it is sound if the duties and liabilities pre- scribed by the act can
be said to be contractual duties and obligations at all, it would lead to conclusions the
possibility of which has not hitherto been suggested by any court or law writer, and which, to
say the least, would be astounding to the profession. For instance: If the act of 1885 becomes
a part of every contract of service entered into since its passage, just "as if such law were in so
many words expressly included in the contract as a part thereof," as counsel insist it did, so as
to make the liability of the master to pay damages from injuries to a fellow-servant of his
negligent employe, a contractual obligation, no reason can be conceived why the law existing
in this regard prior to the pas- sage of that act did not become in like manner a part of every
contract of service then entered into, so that every such contract would be deemed to contain
stipulations for the non-liability of the master for injuries flowing from the negligence of a
fellow-servant, and confining the injured servant's right to damage to a claim against his
negligent fellow-servant-the former, in other words, agreeing to look alone to the latter.
There were many thousands of such contracts existing in this country and England at the time
when statutes similar to section 2590 of our Code were enacted, there were indeed many
thousands of such contracts existing in Alabama when that section became the law of this
State. Each of these contracts, if the position of plaintiff as to our statute being embodied into
the terms of his contract so that its duties were contractual duties, and its liabilities
contractual obligations to pay money can be maintained, involved the assurances of organic
provisions, State and Federal, of the continued non-liability of the master for the [137]
negligence of his servants, notwithstanding the passage of such statutes. Yet these statutes
were passed, and they have been applied to servants under pre-existing contracts as fully as
to servants under subsequent contracts, and there has never been a suggestion even in any
part of the commonlaw world that they were not rightly so applied. If plaintiff's contention is
well taken, many a judgment has gone on the rolls in this State, and throughout the country,
and has been satisfied, which palpably overrode vested rights without the least suspicion on
the part of court or counsel that one of the most familiar ordinances of the fundamental law
was being violated. Nay more, another result not heretofore at all contemplated would
ensue. Contracts for serving partly in Alabama might be now entered into in adjoining States
where the common-law rule still obtains, as in Mississippi, for instance, where the servant has
no right to recover for the negligence of his fellow, and the assumption of this risk under the
law becoming, according to the argument of counsel, a contractual obligation to bear it, such
contracts would be good in Alabama and as to servants entering into them, our statute would
have no operation even upon negligence and resulting injury within its terms occurring wholly
in Alabama. And on the other hand, if this defendant is under a contractual obligation to pay
the plaintiff the dam- ages sustained by him because of the injury inflicted in Mississippi, the
contract could be of course enforced in Mississippi and damages there awarded by its courts,
not- withstanding the law of that State provides that there can be no recovery under any
circumstances whatever by one servant for the negligence of his fellow employe. We do not
suppose that such a proposition ever has been or ever will be made in the courts of
Mississippi. Yet that it should be made and sustained is the. natural and necessary sequence
of the position advanced in this case. These considerations demonstrate the infirmity of
plaintiff's position in this connection, and serve to show the necessity and propriety of the
conclusion we propose to announce on this part of the case. That conclusion is, that the
duties and liabilities incident to the relation between the plaintiff and the defendant which
are involved in this case, are not imposed by and do not rest in or spring from the contract
between the parties. The only office of the contract, under section 2590 of the Code, is the
establishment of a relation between them, that of master and servant; and it is upon that
relation, that incident or consequence of the contract, and not upon the rights of the parties
under the contract, that our statute operates. The law is not con-[138]-cerned with the
contractual stipulations, except in so far as to determine from them that the relation upon
which it is to operate exists. Finding this relation the statute imposes certain duties and
liabilities on the parties to it wholly regardless of the stipulations of the contract as to the
rights of the parties under it, and, it may be, in the teeth of. such stipulations. It is the
purpose of the statute and must bethe limit of its operation to govern persons standing in the
relation of master and servants to each other in respect of their conduct in certain particulars
within the State of Alabama. Mississippi has the same right to establish govern- mental rules
for such persons within her borders as Alabama; and she has established rules which are
different from those of our law. And the conduct of such persons toward each other is, when
its legality is brought in question, to he adjudged by the rules of the one or the other States as
it falls territorially within the one or the other. The doctrine is like that which prevails in
respect of other relations, as that of man and wife. Marriage is a contract. The entering into
this contract raises up certain duties and imposes certain liabilities in all civilized countries.
What these duties and liabilities are at the place of the contract are determinable by the law
of that place ; but when the parties go into other jurisdictions, the relation created by the
contract under the laws of the place of its execution will he recognized, but the personal
duties, obligations and liabilities incident to the relation are such as exist under the law of the
jurisdiction in which an act is done or omitted as to the legality, effect or consequence of
which the question arises. It might as well he said where there is a marriage in Alabama and
the parties remove to Mississippi, and the wife there makes a contract which is void in
Mississippi but valid under our statute, and subsequently they return to Alabama, that our
courts will enforce that contract, or if such husband while in Mississippi does an act which is
innocuous and lawful in that State, but which if done here would entail liability upon him, and
the parties afterwards return here, that the liability imposed by our laws could be enforced
here, because the parties entered into the contract here, as that a master is liable here for
conduct towards his servant which was proper, or at least involved no liability, where it took
place, simply because the contract which created the relation was entered into in this State.
The whole argument is at fault. The only true doctrine is that each sovereignty, state or
nation, has the exclusive power to finally determine and declare what acts or [139] omission
in the conduct of one to another, whether they be strangers or sustain relations to each other
which the law recognizes, as parent and child, husband and wife, master and servant, and the
like, shall impose a liability in damages for the consequent injury, and the courts of no other
sovereignty can impute a damnifying quality to an act or omission which afforded no cause of
action where it transpired. These propositions find illustration and support in the case of
Whitford v. The Panama R. R. Co., 23 N.Y. 465, where the relation involved was that of carrier
and passenger, a relation which had been created by a contract made in New York, between a
corporation and a citizen thereof for carriage, commencing in that State and ending in San
Francisco, via Panama and over the Panama railroad. The passenger was killed through the
fault of the corporation's servants while being transported along this railroad. The law of New
York gave to the personal representative of a person whose death was caused by the
wrongful act or omission of another, a right of action therefor in all cases where the
deceased, had the injury fallen short of death, could have recovered. It did not appear that
the laws of New Granada where the injury was inflicted, authorized any recovery on the facts
alleged and proved. It was urged, as here, that the domicile of the parties and the fact that
they contracted in New York took the case out of general rules as to territorial limitations
upon the operation of statutes, but the plaintiff was non-suited, it being held in effect that
the laws of New Granada where controlling as to the duties and liabilities incident to the
relation which existed between them, while the contract of carriage was being performed in
that country, and that the carrier so far as care and diligence were concerned owed the
passenger no duties there except such as were imposed upon the relation by the local law,
and that no liability for negligence and its results not prescribed by that law rested on the
company. And the court, inter alia, said: ·'Suppose the government of New Granada to have
enacted that the proprietors of a railroad company should not be responsible for the
negligence of its servants, provided there was no want of due care in selecting them; it could
not be pretended that its will could be set at naught by prosecuting the corporation in the
courts of another State where the law was different. . . . The true theory is, that no suit
whatever respecting this injury could be sustained in the courts of this State, except pursuant
to the law of international comity. By that law foreign contracts and foreign transactions, out
of which liabilities have arisen, [140] may be prosecuted in our tribunals by the implied assent
of the government of this State ; but in all such cases, we administer the foreign law as from
the proofs we find it to be, or as without proofs, we presume it to be." So, in the case of Gray
v. Jackson & Co., 51 N. H., 9, there was a contract of affreightment by the terms of which
goods were to be carried out of one State into and through other States. They were lost in a
State other than that in which the con- tract was made and the carriage commenced. By the
law of the place of the contract the carrier was liable for the loss under the circumstances
shown in evidence had it occurred in that State. By the law of the State where the loss
occurred, however, the carrier was not liable. In an action for the loss prosecuted in the State
of the contract, the law, not of that State, but of the place of the loss which operated as to
the particular transaction on the relation of shipper and carrier and prescribed the duties and
liabilities incident to that relation in that State, regardless of the place where the contract
creating the relation was entered into, was applied and made to determine the rights of the
parties to be other than they were under the law of the place of the contract which was also,
as here, the place of the forum.
The foregoing views will suffice to indicate the grounds of our opinion that the rights of this
plaintiff are determinable solely by the law of the State of Mississippi, and of our conclusion
that upon no aspect or tendency of the evidence as to the circumstances under which the
injury was sustained and as to the laws of Mississippi obtaining in the premises was the
plaintiff entitled to recover.
The general affirmative charge requested for defendant should have been given. The other
very numerous assignments of error need not be considered.
For the error in refusing to instruct the jury to find for the defendant if they believed the
evidence, the judgment is reversed and the cause will be remanded.
MARGARITE AUTEN, Appellant, v. HAROLD AUTEN, Respondent.
Court of Appeals of New York
308 N.Y. 155; 124 N.E.2d 99; 1954 N.Y. LEXIS 930; 50 A.L.R.2d 246
FULD, J. In this action to recover installments allegedly due for support and maintenance
under a separation agreement executed in this state in 1933, the wife's complaint has been
dismissed, on motion for summary judgment, upon the ground that her institution of an
action for separation in England constituted a repudiation and a rescission of the agreement
under New [***8] York law. Determination of the appeal, involving as it does a question of
conflict of laws, requires examination of the facts disclosed by the papers before us.
Married in England in 1917, Mr. and Mrs. Auten continued to live there with their two
children until 1931. In that year, according to plaintiff, defendant deserted her, came to this
country and, in the following year, obtained a Mexican divorce and proceeded to "marry"
another woman. Unable to come to terms with the ocean between them, plaintiff made a trip
to New York City to see and talk to defendant about adjustment of their differences. The
outcome was the separation agreement of June, 1933, upon which the present action is
predicated. It obligated the husband to pay to a trustee, for the "account of" the wife, who
was to return to England, the sum of 50 a month for the support of herself and the children. In
addition, the agreement provided that the parties were to continue to live separate and
apart, that neither should sue "in any action relating to their separation" and that the wife
should not "cause any complaint to be lodged against * * * [the husband], in any jurisdiction,
by reason of the said alleged [***9] divorce or remarriage".
Immediately after the agreement was signed, plaintiff returned to England, where she has
since lived with her children, and it is alleged by her - but disputed by defendant - that the
latter is also domiciled in that country. Be that as it may, defendant failed to live up to his
agreement, making but a few payments under it, with the result that plaintiff was left more
or less destitute in England with the children. About a year after the agreement had been
executed, in August of 1934, plaintiff filed a petition for separation in an English court,
charging defendant with adultery. Defendant was served in New York with process in that suit
on December 4, 1936, and, in July, 1938, an order was entered requiring defendant to pay
alimony pendente lite. This English action - which, we are told [*159] never proceeded to
trial - was instituted upon advice of English counsel that it "was the only method" by which
she "could collect money" from defendant; it was done, plaintiff expressly declares, to
"enable" her "to enforce" the separation agreement, and not with any thought or intention of
repudiating it.
The years passed, and in 1947, having realized [***10] nothing as a result of the English
action and little by reason of the New York separation agreement, plaintiff brought the
present suit to recover the sum of $26,564, which represents the amount allegedly due her,
under the agreement, from January 1, 1935 to September 1, 1947.
[**101] In his answer, defendant admitted making the agreement, but, by way of a separate
defense - one of several - claimed that plaintiff's institution of the separation suit in England
operated as a repudiation of the agreement and effected a forfeiture of her right to any
payments under it. Following a motion by the wife for summary judgment and a cross motion
by the husband for like relief, the court at Special Term granted the husband's cross motion
and dismissed the complaint. The Appellate Division affirmed, with leave to the wife,
however, to serve an amended complaint, asserting any cause of action which accrued prior
to the date of the commencement of the English suit. The ensuing judgment, dismissing all of
the wife's claims which accrued subsequent to that date, is a final judgment of modification,
and the wife's appeal therefrom is properly before us as of right. (306 N.Y. 752; see, also,
[***11] Cohen and Karger, Powers of the New York Court of Appeals, pp. 88-91, 222-223.)
Both of the courts below, concluding that New York law was to be applied, held that under
such law plaintiff's commencement of the English action and the award of temporary alimony
constituted a rescission and repudiation of the separation agreement, requiring dismissal of
the complaint. Whether that is the law of this state, or whether something more must be
shown to effect a repudiation of the agreement (cf. Hettich v. Hettich, 304 N.Y. 8, 13-14;
Woods v. Bard, 285 N.Y. 11; Butler v. Butler, 206 App. Div. 214), need not detain us, since in
our view it is the law of England, not that of New York, which is here controlling.
Choosing the law to be applied to a contractual transaction with elements in different
jurisdictions is a matter not free from [*160] difficulty. The New York decisions evidence a
number of different approaches to the question. (See, e.g., Jones v. Metropolitan Life Ins. Co.,
158 Misc. 466.)
Most of the cases rely upon the generally accepted rules that "All matters bearing upon the
execution, the interpretation and the validity of contracts [***12] * * * are determined by
the law of the place where the contract is made", while "All matters connected with its
performance * * * are regulated by the law of the place where the contract, by its terms, is to
be performed." ( Swift & Co. v. Bankers Trust Co., 280 N.Y. 135, 141; Union Nat. Bank v.
Chapman, 169 N.Y. 538, 543; see, also, Zwirn v. Galento, 288 N.Y. 428; United States Mtge. &
Trust Co. v. Ruggles, 258 N.Y. 32, 38; Restatement, Conflict of Laws, §§ 332, 358; Goodrich on
Conflict of Laws [2d ed., 1938], p. 293.) What constitutes a breach of the contract and what
circumstances excuse a breach are considered matters of performance, governable, within
this rule, by the law of the place of performance. (See Richard v. American Union Bank, 241
N.Y. 163, 166-167; Restatement, Conflict of Laws, § 370; Goodrich, op. cit., p. 293.)
Many cases appear to treat these rules as conclusive. Others consider controlling the
intention of the parties and treat the general rules merely as presumptions or guideposts, to
be considered along with all the other circumstances. (See Wilson v. Lewiston Mill Co., 150
N.Y. 314, 322-323; Stumpf [***13] v. Hallahan, 101 App. Div. 383, 386, affd. 185 N.Y. 550;
Grand v. Livingston, 4 App. Div. 589, affd. 158 N.Y. 688.) And still other decisions, including
the most recent one in this court, have resorted to a method - first employed to rationalize
the results achieved by the courts in decided cases (see Barber Co. v. Hughes, 223 Ind. 570,
586) - which has come to be called the "center of gravity" or the "grouping of contacts" theory
of the conflict of laws. Under this theory, the courts, instead of regarding as conclusive
[**102] the parties' intention or the place of making or performance, lay emphasis rather
upon the law of the place "which has the most significant contacts with the matter in
dispute". ( Rubin v. Irving Trust Co., 305 N.Y. 288, 305; see, also, Jones v. Metropolitan Life
Ins. Co., supra, 158 Misc. 466, 469-470; Jansson v. Swedish American Line, 185 F. 2d 212;
[*161] Barber Co. v. Hughes, supra, 223 Ind. 570; Boissevain v. Weil, [1949] 1 K.B. 482, 490-
492; Cook, "Contracts" and the Conflict of Laws: "Intention" of the Parties, 32 Ill. L. Rev. 899,
918-919; Harper, Policy Bases of the Conflict of [***14] Laws: Reflections on Rereading
Professor Lorenzen's Essays, 56 Yale L.J. 1155, 1163-1168; Note, Choice of Law Problems in
Direct Actions Against Indemnification Insurers, 3 Utah L. Rev. 490, 498-499.)
Although this "grouping of contacts" theory may, perhaps, afford less certainty and
predictability than the rigid general rules (see Note, op. cit., 3 Utah L. Rev. 490, 498), the merit
of its approach is that it gives to the place "having the most interest in the problem"
paramount control over the legal issues arising out of a particular factual context, thus
allowing the forum to apply the policy of the jurisdiction "most intimately concerned with the
outcome of [the] particular litigation" (3 Utah L. Rev., pp. 498-499). Moreover, by stressing
the significant contacts, it enables the court, not only to reflect the relative interests of the
several jurisdictions involved (see Vanston Committee v. Green, 329 U.S. 156, 161-162), but
also to give effect to the probable intention of the parties and consideration to "whether one
rule or the other produces the best practical result". ( Swift & Co. v. Bankers Trust Co., supra,
280 N.Y. 135, 141; see Vanston Committee [***15] v. Green, supra, 329 U.S. 156, 161-162.)
Turning to the case before us, examination of the respective contacts with New York and
England compels the conclusion that it is English law which must be applied to determine the
impact and effect to be given the wife's institution of the separation suit n1. It hardly needs
stating that it is England which has all the truly significant contacts, while this state's sole
nexus with the matter in dispute - entirely fortuitous, at that - is that it is the place where the
agreement was made and where the trustee, to whom the moneys were in the first [*162]
instance to be paid, had his office. The agreement effected a separation between British
subjects, who had been married in England, had children there and lived there as a family for
fourteen years. It involved a husband who, according to the papers before us, had willfully
deserted and abandoned his wife and children in England and was in the United States, when
the agreement was signed, merely on a temporary visa. And it concerned an English wife who
came to this country at that time because it was the only way she could see her husband to
discuss their differences. The sole [***16] purpose of her trip to New York was to get
defendant to agree to the support of his family, and she returned to England immediately
after the agreement was executed. While the moneys were to be paid through the medium of
a New York trustee, such payments were "for account of" the wife and children, who, it was
thoroughly understood, were to live in England. The agreement is instinct with that
understanding; not only does it speak in terms of English currency in providing for payments
to the wife, not only does it recite that the first payment be made to her "immediately before
sailing for England", but it specifies that the husband may visit the children "if he should go to
England".
n1. Our decision in Rennie v. Rennie (287 N.Y. 86) casts no light on the problem. The court did
not there consider whether it is the law of the place where the separation agreement was
made or of the jurisdiction where the separation suit or other judicial proceeding was brought
which determines the effect that such action may have upon the agreement.
[**103] In short, then, the agreement determined and fixed the marital responsibilities of an
English husband and father and provided [***17] for the support and maintenance of the
allegedly abandoned wife and children who were to remain in England. It merely substituted
the arrangements arrived at by voluntary agreement of the parties for the duties and
responsibilities of support that would otherwise attach by English law. There is no question
that England has the greatest concern in prescribing and governing those obligations, and in
securing to the wife and children essential support and maintenance. And the paramount
interest of that country is not affected by the fact that the parties separate and provide for
such support by a voluntary agreement. It is still England, as the jurisdiction of marital
domicile and the place where the wife and children were to be, that has the greatest concern
in defining and regulating the rights and duties existing under that agreement, and,
specifically, in determining the circumstances that effect a termination or repudiation of the
agreement.
[*163] Nor could the parties have expected or believed that any law other than England's
would govern the effect of the wife's institution of a separation action. It is most unlikely that
the wife could have intended to subject her [***18] rights under English law to the law of a
jurisdiction several thousand miles distant, with which she had not the slightest familiarity.
On the contrary, since it was known that she was returning to England to live, both parties
necessarily realized that any action which she took, whether in accordance with the
agreement or in violation of it, would have to occur in England. If any thought was given to
the matter at all, it was that the law of the place where she and the children would be should
determine the effect of acts performed by her.
It is, perhaps, not inappropriate to note that, even if we were not to place our emphasis on
the law of the place with the most significant contacts, but were instead simply to apply the
rule that matters of performance and breach are governed by the law of the place of
performance, the same result would follow. Whether or not there was a repudiation,
essentially a form of breach (see Restatement, Contracts, § 318; 4 Corbin on Contracts [1951],
§ 954, pp. 829-834), is also to be determined by the law of the place of performance (cf.
Wester v. Casein Co. of America, 206 N.Y. 506; Restatement, Conflict of Laws, § 370, Caveat
[***19] ), and that place, so far as the wife's performance is concerned, is England. Whatever
she had to do under the agreement - "live separate and apart from" her husband, "maintain,
educate and support" the children and refrain from bringing "any action relating to [the]
separation" - was to be done in England. True, the husband's payments were to be made to a
New York trustee for forwarding to plaintiff in England, but that is of no consequence in this
case. It might be, if the question before us involved the manner or effect of payment to the
trustee, but that is not the problem; we are here concerned only with the effect of the wife's
performance. (Cf. Zwirn v. Galento, supra, 288 N.Y. 428, 433.)
Since, then, the law of England must be applied, and since, at the very least, an issue exists as
to whether the courts of that country treat the commencement of a separation action as a
[*164] repudiation of an earlier-made separation agreement, summary judgment should not
have been granted n2.
n2. In point of fact, the English lawyers, whose affidavits have been submitted by plaintiff,
unequivocally opine that the institution of a separation suit and the award of alimony
pendente lite did not, under the law of England, constitute a repudiation of the separation
agreement or bar the present action to recover amounts due under it. [***20]
As to defendant's further contention that, in any event, plaintiff's commencement of the
English action amounted to a [**104] material breach of her covenant not to sue, barring
recovery upon the agreement, we need but say that this question, too, must be governed by
English law, and for the same reasons already set forth.
The judgment of the Appellate Division and that of Special Term insofar as they dismiss the
complaint should be reversed, with costs in all courts, and the matter remitted for further
proceedings in accordance with this opinion.
Haag
v.
Barnes
9 N.Y.2d 554 (N.Y. 1961)
FULD, J.
This appeal is concerned with the effect in New York of an agreement made in another State
for the support of a child born out of wedlock.
The complainant Dorothy Haag alleges that in 1947 she moved from Minnesota and took up
residence in New York City and that since then she has been a resident of this State. The
defendant Norman Barnes, on the other hand, is now and was, during the period involved in
this litigation, a resident of Illinois.
According to the statements contained in the complainant's affidavits, she met the defendant
in the spring of 1954 in New York. She was a law secretary and had been hired by the
defendant through an agency to do work for him while he was in New York on one of his
business trips. The relationship between the man and the girl soon "ripened into friendship"
and, on the basis of representations that he loved her and planned to divorce his wife and
marry her, she was "importuned" into having sexual relations with him.
The complainant further alleges that she became pregnant as a result of having sexual
relations with the defendant and that, upon being informed of this, he asked her to move to
Illinois to be near him. She refused and, instead, went to live in California with her sister to
await the birth of her child. Fearing that the defendant was losing interest in her, however,
she returned to Chicago before the child was born and, upon attempting to communicate
with the defendant, was referred to his attorney. The latter told Dorothy to choose a hospital
in Chicago, which she did, and the baby was born there in December, 1955, the defendant
paying the expenses.
Shortly after the birth of the child, her attempts to see the defendant in New York failed and
she was advised by his attorney to return to Chicago in order that an agreement might be
made for the support of her and her child. Returning to that city, she procured an attorney,
recommended by a friend in New York, and signed an agreement on January 12, 1956. The
agreement provides, in pertinent part, as follows:
1. It recites payment to the complainant by the defendant of $2,000 between September,
1955 and January, 1956 and a willingness on his part to support her child in the future, on
condition that such payments "shall not constitute an admission" that he is the child's father;

2. The defendant promises to pay $50 a week and $75 a month, i.e., a total of $275 a month,
"continuing while [the child] is alive and until she attains the age of sixteen years";
3. The complainant agrees "to properly support, maintain, educate, and care for [the child]";
4. The complainant agrees to keep the child in Illinois for at least two years, except if she
marries within that period;
5. The complainant "remise[s], release[s] and forever discharge[s] NORMAN BARNES * * *
from all manner of actions * * * which [she] now has against [him] or ever had or which she *
* * hereafter can, shall or may have, for, upon or by reason of any matter, cause or thing
whatsoever * * * including * * * the support of [the child]"; and
6. The parties agree that their agreement "shall in all respects be interpreted, construed and
governed by the laws of the State of Illinois".
Shortly after the agreement was signed, the complainant received permission, pursuant to
one of its provisions, to live in California where she remained for two years. She then
returned to New York where she and her child have ever since been supported by the
defendant in full compliance with the terms of his agreement. In fact, he has provided sums
far in excess of his agreement; all told, we were informed on oral argument, the defendant
has paid the complainant some $30,000.
The present proceeding was instituted in 1959 by the service of a complaint and the
defendant was thereafter arrested pursuant to section 64 of the New York City Criminal
Courts Act. A motion, made by the defendant, to dismiss the proceeding was granted by the
Court of Special Sessions and the resulting order was affirmed by the Appellate Division.
The ground urged for dismissal was that the parties had entered into an agreement providing
for the support of the child which has been fully performed; that in this agreement the
complainant relinquished the right to bring any action for the support of the child; and that,
in any event, the action is precluded by the laws of the State of Illinois which, the parties
expressly agreed, would govern their rights under the agreement. In opposition, the
complainant contended that New York, not Illinois, law applies; that the agreement in
question is not a sufficient basis for a motion to dismiss under either section 63 of the New
York City Criminal Courts Act or section 121 of the Domestic Relations Law, since both of
these provisions provide that "An agreement or compromise made by the mother * * * shall
be binding only when the court shall have determined that adequate provision has been
made"; and that, even were the Illinois law to apply, it does not bar the present proceeding.
The motion to dismiss was properly granted; the complainant may not upset a support
agreement which is itself perfectly consistent with the public policy of this State, which was
entered into in Illinois with the understanding that it would be governed by the laws of that
State and which constitutes a bar to a suit for further support under Illinois law.
The complainant is correct in her position that, since the agreement was not court approved,
it may not be held to be a bar to her suit under New York internal law. (See N.Y. City Crim.
Cts. Act, § 63; Domestic Relations Law, § 121.) On the other hand, it is clear that the
agreement is a bar under the internal law of Illinois since it provides, in the language of that
State's statute, for a "sum not less than eight hundred dollars". (See Ill. Rev. Stat., former ch.
17, § 18, amd. by former ch. 17, § 52 [now ch. 106 3/4, § 65].) The simple question before us,
therefore, is whether the law of New York or of Illinois applies.
The traditional view was that the law governing a contract is to be determined by the
intention of the parties. (See Wilson v. Lewiston Mill Co., 150 N.Y. 314, 322-323; Stumpf v.
Hallahan, 101 App. Div. 383, 386, affd. 185 N.Y. 550; Grand v. Livingston, 4 App. Div. 589, affd.
158 N.Y. 688.) The more modern view is that "the courts, instead of regarding as conclusive
the parties' intention or the place of making or performance, lay emphasis rather upon the
law of the place `which has the most significant contacts with the matter in dispute'". (See
Auten v. Auten, 308 N.Y. 155, 160; see, also, Rubin v. Irving Trust Co., 305 N.Y. 288, 305.)
Whichever of these views one applies in this case, however, the answer is the same, namely,
that Illinois law applies.
The agreement, in so many words, recites that it "shall in all respects be interpreted,
construed and governed by the laws of the State of Illinois" and, since it was also drawn and
signed by the complainant in Illinois, the traditional conflicts rule would, without doubt, treat
these factors as conclusive and result in applying Illinois law. But, even if the parties' intention
and the place of the making of the contract are not given decisive effect, they are
nevertheless to be given heavy weight in determining which jurisdiction "`has the most
significant contacts with the matter in dispute'". ( Auten v. Auten, 308 N.Y. 155, 160, supra.)
And, when these important factors are taken together with other of the "significant contacts"
in the case, they likewise point to Illinois law. Among these other Illinois contacts are the
following: (1) both parties are designated in the agreement as being "of Chicago, Illinois", and
the defendant's place of business is and always has been in Illinois; (2) the child was born in
Illinois; (3) the persons designated to act as agents for the principals (except for a third
alternate) are Illinois residents, as are the attorneys for both parties who drew the
agreement; and (4) all contributions for support always have been, and still are being, made
from Chicago.
Contrasted with these Illinois contacts, the New York contacts are of far less weight and
significance. Chief among these is the fact that child and mother presently live in New York
and that part of the "liaison" took place in New York. When these contacts are measured
against the parties' clearly expressed intention to have their agreement governed by Illinois
law and the more numerous and more substantial Illinois contacts, it may not be gainsaid that
the "center of gravity" of this agreement is Illinois and that, absent compelling public policy to
the contrary (see Straus Co. v. Canadian Pacific Ry. Co., 254 N.Y. 407, 414), Illinois law should
apply.
As to the question of public policy, we would emphasize that the issue is not whether the
New York statute reflects a different public policy from that of the Illinois statute, but rather
whether enforcement of the particular agreement before us under Illinois law represents an
affront to our public policy. (Cf. Loucks v. Standard Oil Co., 224 N.Y. 99, 111; Mertz v. Mertz,
271 N.Y. 466, 471; Restatement 2d, Conflict of Laws, Tentative Draft No. 6, § 332a, comment
g.) It is settled that the New York Paternity Law requires something more than the provision
of "the bare necessities otherwise required to be supplied by the community", that,
"although providing for indemnification of the community, [it] is chiefly concerned with the
welfare of the child". (See Schaschlo v. Taishoff, 2 N.Y.2d 408, 411.) In our judgment,
enforcement of the support agreement in this case under Illinois law and the refusal to allow
its provisions to be reopened in the present proceeding does not do violence to this policy.
As matter of fact, the agreement before us clearly goes beyond "indemnification of the
community" and the provision of "bare necessities". Whether we read it as a whole, or look
only to the financial provisions concerned ($275 a month until the child reaches the age of
16), we must conclude that "the welfare of the child" is fully protected. (See Rhyne v.
Katleman, 285 App. Div. 114 0, affg. 206 Misc. 202 [$10,000 lump sum held sufficient].) The
public policy of this State having been satisfied, there is no reason why we should not enforce
the provisions of the parties' support agreement under Illinois law and treat the agreement as
a bar to the present action for support.
The order of the Appellate Division should be affirmed.
Chief Judge DESMOND and Judges DYE, FROESSEL, VAN VOORHIS, BURKE and FOSTER concur.
Order affirmed.
Babcock
v.
Jackson
17 A.D.2d 694 (N.Y. App. Div. 1962)
HALPERN, J. (dissenting).
The plaintiff and the defendant's testator (hereinafter referred to as the defendant) were
both residents of the City of Rochester, New York. The plaintiff and the defendant started
from Rochester on a trip which took them through the Province of Ontario. The defendant
was the owner and operator of the automobile used on the trip; the plaintiff was a passenger.
While the automobile was being driven in Ontario on September 16, 1960, the car went out of
control, left the highway, and collided with a stone wall. No collision with any other vehicle
was involved. The plaintiff suffered serious personal injuries as a result of the accident.
Upon their return to New York State, the plaintiff instituted the present action against the
defendant to recover for her injuries. The defendant moved to dismiss the complaint upon
the ground that the Ontario guest statute barred a recovery. The Special Term granted the
motion and judgment was accordingly entered unconditionally dismissing the complaint.
The Ontario statute (Ontario Highway Traffic Act, § 105, subd. 2; Rev. Stat. of Ontario [1960],
ch. 172, § 105, subd. [2]) reads: "(2) Notwithstanding subsection 1, the owner or driver of a
motor vehicle, other than a vehicle operated in the business of carrying passengers for
compensation, is not liable for any loss or damage resulting from bodily injury to, or the death
of, any person being carried in, or upon, or entering or getting on to, or alighting from such
motor vehicle."
If this case had arisen a decade ago, there would have been no question but that Ontario law
governed the case. Under the choice-of-law rules then generally accepted, the law of the
place of the accident governed and, once it appeared that the accident had occurred in
Ontario, it would have been held automatically that the Ontario guest statute applied. But
under the modern view now prevailing in many States and, in large measure, adopted in this
State in Kilberg v. Northeast Airlines ( 9 N.Y.2d 34) this result no longer necessarily follows.
The courts have come to realize that, in many cases, even though the accident and the
resulting injury occurred in a single State, other States may have "significant contacts with the
matter in dispute" and that such States may be justified in applying their own law and policy
to the issues as to which they have "the most significant contacts". (Cf. Auten v. Auten, 308
N.Y. 155, 160.) (The word "State" will be used in this opinion for convenience as including
both foreign countries and the States of this country.) There may be multi-State contacts even
though the tort was physically committed in a single State. Thus, in a case like the present
one, in which the relationship of guest and host was created by an arrangement made in New
York between New York residents, New York clearly has a vital interest in the determination
of the incidents of the relationship. This has long been recognized in the workmen's
compensation cases in which the view that the law of the place of the injury was solely
controlling was abandoned many years ago, and the legitimate interest of the State in which
the employment relationship was created was given recognition. ( Alaska Packers Assn. v.
Comm., 294 U.S. 532; Matter of Nashko v. Standard Water-Proofing Co., 4 N.Y.2d 199, 201; 2
Larson, Workmen's Compensation Law, §§ 86, 87.)
Under the modern view, in a common-law tort action, the law of the State which has "the
most significant contacts with the matter in dispute" and which has the dominant interest in
it is accepted as the governing law. This is the doctrine of "the proper law of the tort" (Morris,
Proper Law of a Tort, 64 Harv. L. Rev. 881; Stumberg, Place of the Wrong, 34 Wn. L. Rev. 388).
It represents, in effect, an extension to the law of torts of the "center of gravity" theory
adopted by the Court of Appeals in Auten v. Auten ( 308 N.Y. 155, supra) and approved by the
American Law Institute in the Restatement of Conflict of Laws 2d (§ 332), with respect to the
law of contracts. (See Note on the Kilberg case, 46 Cornell L.Q. 637; 1961 Annual Survey of
American Law, p. 45, Leflar.) "The merit of [this] approach is that it gives to the place `having
the most interest in the problem' paramount control over the legal issues arising out of a
particular factual context, thus allowing the forum to apply the policy of the jurisdiction `most
intimately concerned with the outcome of [the] particular litigation'". ( Auten v. Auten, supra,
p. 161.) There is even less reason in tort cases than there is in contract cases to sacrifice the
legitimate policy interests of the State "most intimately concerned" with the case to the
abstract objectives of "certainty and predictability", which concededly are more readily
attainable by "rigid general rules" (cf. Auten v. Auten, supra, p. 161).
In our case, there can be no doubt but that New York had the most significant contacts with
the matter in controversy and the dominant interest in it. The plaintiff and the defendant
were residents of this State; the arrangements for the trip were made in New York; their trip
was initiated here and was expected to terminate here. The defendant's automobile was kept
by him regularly in New York and was subject to New York's compulsory insurance law.
The question of whether a guest should be barred from recovering from his host for the host's
negligence in the operation of his automobile is a question of policy to be decided by the
appropriate legislative body. New York's policy is in favor of allowing a recovery by the
gratuitous passenger. The New York Legislature has repeatedly refused to enact a statute
denying or limiting the right of a guest to recover from his host (for the latest attempt, see
Senate Introductory No. 3662, Pr. No. 3967, 1960 Session, which died in Committee).
Ontario's policy, since 1935 (ch. 26, § 11, Statutes of 1935), has been contrary to that of New
York, denying recovery to a gratuitous passenger even for gross or wanton negligence. The
Ontario statute is sweeping in its terms. No other Province of Canada has such a sweeping
statute and no State in this country has a guest statute in terms as broad as those of the
Ontario statute. Indeed, it has been held in this country that a statute couched in such terms
is unconstitutional ( Stewart v. Houk, 127 Or. 589; see Ann. 111 A.L.R. 1011).
The primary purpose of the Ontario statute was stated by an academic commentator, shortly
after its enactment, as follows: "Undoubtedly the object of this provision is to prevent the
fraudulent assertion of claims by passengers, in collusion with the drivers, against insurance
companies" (Survey of Canadian Legislation, 1 U. Toronto L.J. 358, 366 [1935]). In the light of
this purpose, it is apparent that the interest of Ontario in the enforcement of its legislative
policy is limited to accidents involving Ontario residents. Ontario is concerned only with the
adverse effect of guest-host recoveries upon Ontario insurance premiums. Ontario insurance
premiums would not be affected by a recovery chargeable against an insurance policy issued
in a foreign jurisdiction covering a foreign car. At any rate, the interest of Ontario in having its
policy apply to nonresidents traveling through Ontario is a minimal one.
The interest of New York is obviously the dominant one as to this issue. New York has a
strong interest in the application of its policy allowing a recovery by guest passengers, to an
accident involving New York residents who were injured while traveling in an automobile
registered and insured in New York, upon a trip originating and terminating in New York,
under an arrangement made in New York. It would be against the strong public policy of New
York to apply a foreign statute denying a guest the right to recover from his host to a case in
which New York plainly had the dominant interest. As the Court of Appeals said in Kilberg v.
Northeast Airlines ( 9 N.Y.2d 34, 39) "Modern conditions make it unjust and anomalous to
subject the traveling citizen of this State to the varying laws of other States through and over
which they move. * * * The place of injury becomes entirely fortuitous. Our courts should if
possible provide protection for our own State's people against unfair and anachronistic
treatment of the lawsuits which result from these disasters."
The Ontario guest statute, as interpreted by the Ontario courts, does not rest upon any notion
that negligence on the part of a host driver causing injury to his passenger is not wrongful.
The statute does not purport to give a license to drivers to operate their vehicles negligently
to the injury of their passengers. Negligent driving is a breach of a duty owing to the
passengers as well as to others within the zone of danger but the statute denies a remedy to
the passengers, for reasons of policy which appealed to the Ontario Legislature. As the
Ontario courts held shortly after the enactment of the guest statute in 1935: "The plain
meaning of that statute is that a passenger or the dependent of the passenger has now no
remedy against an owner or a driver of a motor vehicle for damages for injury or death
caused by his negligence" ( Quick v. Robinson, [1936], Ont. W.N. 490, 492-493). The meaning
of the Ontario statute was again elucidated in Coutts v. Smith ([1949] Ont. W.N. 155). The
effect of the Ontario guest statute, the court said, was that "the plaintiff was precluded from
recovering", despite a finding by the trial court that the driver had been negligent with
respect to his passenger. These statements by the Ontario courts make it clear that the
Ontario guest statute is an expression of state policy with respect to conduct which is
concededly wrongful.
The problem in this case can be stated as a question of characterization or classification, the
answer to which may determine the selection of the choice-of-law rule to be applied. The
question in this case is not one of ordinary tort law, dealing with rules of conduct, as to which,
under the traditional view, the law of the place of the wrong is controlling. The question is
rather one of State policy with respect to the incidents to be attached to the relationship of
guest and host. As to this question, the policy of the State in which the relationship was
created should be held to be controlling, even under the traditional view (cf. Dyke v. Erie Ry.
Co., 45 N.Y. 113).
The law of Ontario will undoubtedly be controlling, in determining whether the defendant
was guilty of negligence in the manner in which he operated his automobile. The State in
which the accident occurred has the most significant contacts with, and the dominant interest
in, issues of that kind. The rules of conduct laid down by the laws of each State (sometimes
referred to as admonitory laws) must be obeyed, not only by the permanent residents of the
State but also by persons temporarily residing in the State or traveling through it. Conversely,
all the persons within the State have the right to rely upon the rules of conduct laid down by
the laws of the State as guide lines for their behavior. Therefore, the question of whether the
defendant's conduct was wrongful or innocent must be determined by the law of the place of
the alleged wrong. But that law is not necessarily controlling with respect to other questions
of law or policy which may be involved in the case. Once it is determined by the law of the
State in which the accident occurred that the defendant's conduct was wrongful, the question
of the availability of a remedy for the wrong and the extent of the remedy and its collateral
incidents may well be determined by the law of some other State. The law and policy of the
State having the most significant contacts and the dominant interest with respect to the
particular issue should govern. The leading illustration of the application of this principle in
New York State is the Kilberg case. It was there held that the limitation of damages in a death
action fixed by the law of the place of the occurrence of the accident would not be applied to
an action in the courts of this State brought against an airline company for the death of a
resident of this State which occurred upon a trip originating in this State, but that the New
York law and policy would be applied instead.
In other States, the principle has been applied to many other issues of substantive law in tort
actions. Thus it has been held that the question of the survival of a personal injury claim upon
the death of the tort-feasor should be determined by the law of the tort-feasor's domicile
rather than by the law of the fortuitous place of the happening of the accident ( Grant v.
McAuliffe, 41 Cal.2d 859; Currie, Survival of Actions: 10 Stan. L. Rev. 205; cf. Herzog v. Stern,
264 N.Y. 379; Riley v. Capital Airlines, 13 A.D.2d 889). Similarly, it has been held that the
questions of interspousal immunity and of the right of a child to sue his parent for negligence
should be determined by the law of the residence of the parties rather than by the laws of
the place of the injury ( Haumschild v. Continental Cas. Co., 7 Wis.2d 130, overruling Buckeye
v. Buckeye, 203 Wis. 248; Emery v. Emery, 45 Cal.2d 421; Mertz v. Mertz, 271 N.Y. 466, 473;
but see Coster v. Coster, 289 N.Y. 438, which followed Buckeye v. Buckeye; see Hancock, Rise
and Fall of Buckeye v. Buckeye, 29 U. Chi. L. Rev. 237; Ford, Interspousal Liability for
Automobile Accidents in Conflict of Laws, 15 U. Pitt. L. Rev. 397; Ehrenzweig, Parental
Immunity in the Conflict of Laws, 23 U. Chi. L. Rev. 474). The right of a guest to recover from
his host should likewise be determined by the law of the place in which the parties resided
and in which the relationship of guest and host was created rather than by the law of the
fortuitous place of the accident (see McLean v. Pettigrew, [1945] 2 D.L.R. 65; Ehrenzweig,
Guest Statutes in the Conflict of Laws, 69 Yale L.J. 595; Morris, Proper Law of a Tort, 64 Harv.
L. Rev. 881, 885-886).
The opinion in the Kilberg case gave two reasons for the decision: (1) that the Massachusetts
limitation of damages in death actions was against the public policy of New York, at least as
applied to a resident of New York under the circumstances of that case; (2) that the
determination of the amount of the damages was a matter of procedure and not of
substantive law and that therefore it was governed by the law of the forum. The second
ground of the decision was withdrawn by the court in Davenport v. Webb ( 11 N.Y.2d 392).
This left only the public policy ground of the Kilberg decision in effect. Implicit in the court's
reasoning, with respect to that ground, was a preliminary finding that under the
circumstances of the case New York State had a dominant interest which justified it in
rejecting the Massachusetts policy and applying its own policy instead. In the absence of such
a finding, the New York courts would not have been justified in substituting New York's policy
for that of Massachusetts (Paulsen and Sovern, "Public Policy" in the Conflict of Laws, 56
Colum. L. Rev. 969). The court emphasized at several points in its opinion the numerous
significant contacts which New York State had with the case. Not only was the plaintiff's
intestate a resident of New York, but the contract for the trip had been made in New York by
the purchase of a ticket in New York from an airline company doing business in New York, and
the contract had been partly performed in New York. The action was one between the parties
to the New York created relationship. It was not an action against a third person charged with
having caused an injury to the plaintiff's intestate in Massachusetts; it was an action against
the carrier who had entered into the relationship of carrier and passenger in New York. Thus
analyzed, the Kilberg case can be said to have adopted the "proper law of the tort" approach.
Under that approach, the court must first find the significant contacts which give rise to the
State's dominant interest and then the door is open to the application of the law and policy of
the State.
The recent decision in Davenport v. Webb ( supra) is not inconsistent with the adoption of the
"proper law of the tort" approach. In that case, it appeared that the decedents, residents of
New York, were killed in Maryland as a result of a collision between the automobile which
one of them was driving and in which the others were riding as passengers, and a truck
owned by a Virginia corporation and leased to a resident of Virginia. The only connection of
New York State with the case was that the decedents were residents of the State. In that
situation, there was no basis for a claim that New York State had a dominant interest in the
case. The Maryland law would therefore have been applicable, even under the "proper law of
the tort" approach. In the Davenport case, the action was brought against a third person
residing in another State whose vehicle happened to have collided with the vehicle in which
the plaintiffs' intestates were riding. In our case, the litigation is between New York residents
who were parties to the New York created relationship of guest and host. New York State has
a vital interest in the enforcement of its policy in determining the incidents of the guest-host
relationship created in New York. The "proper law of the tort" approach would recognize and
give effect to this interest.
The United States Supreme Court, during its current term, has taken cognizance of the
modern trend discussed above. It noted that: "Recently there has been a tendency on the
part of some States to depart from the general conflicts rule in order to take into account the
interests of the State having significant contact with the parties to the litigation", citing some
of the cases cited supra and others. It accordingly construed the provision of the Federal Tort
Claims Act referring to "the law of the place where the act or omission occurred", as meaning
"the whole law" of the place, including its choice-of-law rules, so that there would be "a
degree of flexibility [in] the law to be applied in federal courts" and the Federal courts would
be free to implement the new "policy in choice-of-law rules" where the State involved had
adopted it, and to apply the law of the place having the most significant contacts with the
matter ( Richards v. United States, 369 U.S. 1, 12-13). The Supreme Court indicated, quoting
from Vanston Committee v. Green ( 329 U.S. 156, 161-162) that the task of the courts under
this view would be to "exercise * * * an informed judgment in the balancing of all the
interests of the states with the most significant contacts in order best to accommodate the
equities among the parties to the policies of those states" (footnote 27).
A conflict of laws case very similar to ours dealing with the Ontario guest statute has been
decided by the Supreme Court of Canada. Two residents of Quebec went on an automobile
trip through Ontario. The owner of the automobile was driving it and the other Quebec
resident was a passenger, when an accident occurred in Ontario because of the alleged
negligence of the driver. There is no guest statute in Quebec. The court held that an action
could be maintained in the courts of Quebec by the passenger to recover against his host for
his injuries, notwithstanding the Ontario guest statute ( McLean v. Pettigrew, [1945], 2 D.L.R.
65 supra). The decision was based upon the English conflict-of-laws rule that, if the act alleged
to have been committed in a foreign country was actionable under the law of the forum, a
recovery would be allowed for it in the forum, provided that the act charged was wrongful or,
at least, was not justifiable under the law of the place where the act had been committed (
Phillips v. Eyre, [1870] L.R. 6 Q.B. 1, 28-29). The Canadian Supreme Court held that, under the
Ontario law, the conduct of the driver in negligently injuring his passenger was wrongful,
since the Ontario statutes made any negligent driving punishable as an offense, citing Ontario
Highway Traffic Act, (§ 27, now § 60). A recovery was therefore allowed. The "proper law of
the tort" approach would produce the same result as the English conflicts rule in a case, like
our case and like the McLean case, in which the forum State happened to be the State which
had the most significant contacts with the matter in controversy. While it used a different
route from the "proper law of the tort" approach, the Canadian Supreme Court reached the
sound result of protecting the interest of the residents of other provinces, injured while
traveling as passengers on trips through Ontario. We ought to try to evolve a choice-of-law
rule which would reach the same result with respect to the residents of this State, and which
would not give any greater effect in the courts of this State to the Ontario guest statute than
the courts of the other provinces of Canada give it, with respect to injuries to their residents.
While the complaint does not contain any allegation with respect to the insurance of the
defendant's automobile, it may be presumed, in view of the fact that the defendant was a
resident of New York and was subject to the requirements of the New York compulsory
insurance law, that the defendant carried a standard automobile liability insurance policy in
accordance with New York statute. Such a policy would cover the defendant's liability to all
persons injured by his negligence, including gratuitous passengers in his automobile. The
insurance premiums are computed upon the basis of the experience of insurance companies
in New York State; the New York law as to the liability of insured owners to gratuitous
passengers is reflected in this experience. These facts provide an additional reason for holding
that the New York law should be applied to the issue of the liability of a New York host to his
guest, rather than that of the place where the accident happened to have occurred (see
Ehrenzweig, Guest Statutes in the Conflict of Laws, 69 Yale L.J. 595).
The same result may be reached by another line of reasoning. The relationship between the
plaintiff as passenger and the defendant as host was contractual in origin. It may reasonably
be inferred from the complaint that an arrangement for the joint trip was made in Rochester,
New York, before the parties started out, although the exact nature of the arrangement is not
alleged. If it should appear upon the trial, that there was an agreement for the sharing of the
expenses of the trip, this would constitute a mutually binding contract for the breach of which
an action could obviously be maintained. (Under most guest statutes, it is held that an
agreement to share expenses will take the case out of the scope of the statute entirely on the
ground that the passenger is then not a gratuitous one ( Smith v. Clute, 277 N.Y. 407; Ann. 10
A.L.R. 2d 1351, 1373) but this holding cannot be applied to the Ontario statute in view of its
broad terms [ Csehi v. Dixon, [1953] 2 D.L.R. 202].) But even if it should appear that the
defendant agreed to bear all the expenses and that the plaintiff was a wholly gratuitous
passenger, the implied promise by the defendant to drive the automobile with care, even
though gratuitous in origin, would become an enforcible one, once the plaintiff had become a
passenger in the defendant's automobile in reliance upon the defendant's promise. The
defendant would then be liable for any injury suffered by the plaintiff by reason of the
defendant's breach of his voluntary promise ( Siegel v. Spear Co., 234 N.Y. 479; Glanzer v.
Shepard, 233 N.Y. 236, 239). The action could be brought either in contract or in tort
(Restatement, Contracts, § 90; 9 N.Y. Jur., Contracts, § 66; Restatement, Torts, § 324,
comment a, § 325). The law of New York would be the governing law of the contract, either
under the traditional choice-of-law rule in contracts or under the "center of gravity" rule of
Auten v. Auten ( 308 N.Y. 155, supra). If the present action were brought in contract, the
plaintiff would plainly be entitled to the benefit of the New York law and the Ontario statute
would not be allowed to bar a recovery. Dyke v. Erie Ry. ( 45 N.Y. 113) is directly in point. In
that case, a passenger on a railroad trip initiated in New York and intended to terminate in
New York, was held to be entitled to recover his full damages for a personal injury suffered in
an accident in Pennsylvania, notwithstanding a Pennsylvania statute limiting recovery in
personal injury actions against railroads to $3,000. The court said (p. 119): "The actions are
not given by the laws of Pennsylvania. They grow out of the contracts and the duties resulting
from the contracts, and are given by the common law, and, therefore, the laws of another
State in an action brought here cannot prescribe the measure of damages, or limit the liability
of the parties".
This theory was not available in the Kilberg case because that case involved an action for
wrongful death, not maintainable at common law but maintainable only under the death
statute of the place where the accident causing the death occurred. As the Court of Appeals
noted in its opinion: "If the alleged contract breach had caused injuries not resulting in death,
a New York-governed contract suit would, we will assume, be available" ( 9 N.Y.2d 34, 38).
Even though the present action was brought in tort, the New York law is still the governing
law. Again, the Dyke case is directly in point. The action in that case was an ordinary action
for damages for personal injuries, like the present one. The court said (p. 118): "Whether the
actions are regarded as actions of assumpsit upon the contracts, or as actions upon the case
for negligence, the rights and liabilities of the parties must be judged by the same standard.
The form of the action concerns the remedy, but does not affect the legal obligations of the
parties. In either form of action the liability of the defendant, and the rights of the plaintiffs,
are based upon the contracts".
It therefore follows that the New York law governs the right of the plaintiff to recover in this
case for injuries suffered as a passenger by reason of the defendant's breach of his New York-
governed promise. To put the point in another way, the fact that the contract was governed
by New York law determines that New York law is the "proper law of the tort" in the
passenger's action for a tort committed in breach of the duties assumed by the contract.
A word should be added about the sufficiency of the allegations of the complaint. The
complaint alleges that both parties were, at the time of the accident and still were at the time
of the commencement of the action, residents of Rochester, New York. It does not explicitly
allege that the trip originated in Rochester and that it was to terminate there. But this is fairly
inferable from the allegations of the complaint; it will certainly be permissible for the plaintiff
to prove these facts under the allegations of the complaint. Upon a motion to dismiss the
complaint, the plaintiff is entitled to the benefit of all reasonable intendments ( Dyer v.
Broadway Cent. Bank, 252 N.Y. 430). In any event, if the "proper law of the tort" approach is
adopted, the mere fact that it appears on the face of the complaint that the accident occurred
in Ontario is not sufficient to authorize the dismissal of the complaint. The question of the
respective interests of the jurisdictions involved must be determined upon the trial after a
development of all the relevant factors. If, however, it should be thought than an explicit
statement in the complaint of the factors relied upon by the plaintiff should be required,
leave to amend the complaint should be given; the unconditional dismissal of the complaint is
unjustifiable.
Finally, even if the traditional choice-of-law rule should be applied and it should be held that
the Ontario law governed all issues in the case, it would still be the whole law of Ontario,
including its choice-of-law rules, which we would be called upon to apply. So far as I have
been able to find, there is no decision by the courts of Ontario on the question of whether the
Ontario guest statute would be applied to an action in Ontario between the residents of
another jurisdiction who were traveling through the Province when an accident occurred
there. The Ontario courts might well hold that they would look to the law of the residence of
the parties or to the law of the State in which the trip originated and the relationship of guest
and driver was created, to determine whether there was any bar against the guest recovering
from the driver. Or the Ontario courts might hold, simply as a matter of the construction of
the Ontario statute, that the statute is not intended to apply to nonresidents traveling
through the Province (see Freund, Chief Justice Stone and the Conflict of Laws, 59 Harv. L.
Rev. 1193, 1209-1210, 1223-1224). As has been pointed out above, the primary purpose of the
enactment of the Ontario statute was to prevent collusion among its residents affecting the
insurance premiums payable by its residents. This purpose would be fully served even if the
statute were construed as applying only to accidents involving Ontario drivers or owners. In
view of the uncertainty as to the Ontario law on this point, the courts of this State should not
undertake to decide what the Ontario holding would be, without the benefit of advice or
proof by experts in Canadian law. The court ought to decline to take judicial notice of the
Ontario statute, in the exercise of its discretion under section 344-a of the Civil Practice Act,
for the purpose of the motion to dismiss the complaint (cf. Pfleuger v. Pfleuger, 304 N.Y. 148),
and ought to allow the matter to go to trial, so that Canadian experts could be presented and
examined on this unsettled point of Ontario law. Upon this view of the case, the motion to
dismiss the complaint should be denied, with leave to the defendant executrix to set up her
interpretation of the Ontario law as an affirmative defense in her answer.
For these reasons, I would reverse the judgment of dismissal and I would deny the motion to
dismiss the complaint.
Bastow, J.P., Goldman, McClusky and Henry, JJ., concur in decision; Halpern, J., dissents in
opinion and votes to reverse the judgment and order and to deny the motion to dismiss the
complaint.
Judgment and the order insofar as appealed from affirmed, without costs of this appeal to
either party.
G.R. No. L-35694 December 23, 1933
ALLISON G. GIBBS, petitioner-appelle,
vs.
THE GOVERNMENT OF THE PHILIPPINE ISLANDS, oppositor-appellant.
THE REGISTER OF DEEDS OF THE CITY OF MANILA, respondent-appellant.
Office of the Solicitor-General Hilado for appellants.
Allison D. Gibbs in his own behalf.
BUTTE, J.:
This is an appeal from a final order of the Court of First Instance of Manila, requiring the
register of deeds of the City of Manila to cancel certificates of title Nos. 20880, 28336 and
28331, covering lands located in the City of Manila, Philippine Islands, and issue in lieu
thereof new certificates of transfer of title in favor of Allison D. Gibbs without requiring him
to present any document showing that the succession tax due under Article XI of Chapter 40
of the Administrative Code has been paid.
The said order of the court of March 10, 1931, recites that the parcels of land covered by said
certificates of title formerly belonged to the conjugal partnership of Allison D. Gibbs and Eva
Johnson Gibbs; that the latter died intestate in Palo Alto, California, on November 28, 1929;
that at the time of her death she and her husband were citizens of the State of California and
domiciled therein.
It appears further from said order that Allison D. Gibbs was appointed administrator of the
state of his said deceased wife in case No. 36795 in the same court, entitled "In the Matter of
the Intestate Estate of Eva Johnson Gibbs, Deceased"; that in said intestate proceedings, the
said Allison D. Gibbs, on September 22,1930, filed an ex parte petition in which he alleged
"that the parcels of land hereunder described belong to the conjugal partnership of your
petitioner and his wife, Eva Johnson Gibbs", describing in detail the three facts here involved;
and further alleging that his said wife, a citizen and resident of California, died on November
28,1929; that in accordance with the law of California, the community property of spouses
who are citizens of California, upon the death of the wife previous to that of the husband,
belongs absolutely to the surviving husband without administration; that the conjugal
partnership of Allison D. Gibbs and Eva Johnson Gibbs, deceased, has no obligations or debts
and no one will be prejudiced by adjucating said parcels of land (and seventeen others not
here involved) to be the absolute property of the said Allison D. Gibbs as sole owner. The
court granted said petition and on September 22, 1930, entered a decree adjucating the said
Allison D. Gibbs to be the sole and absolute owner of said lands, applying section 1401 of the
Civil Code of California. Gibbs presented this decree to the register of deeds of Manila and
demanded that the latter issue to him a "transfer certificate of title".
Section 1547 of Article XI of Chapter 40 of the Administrative Code provides in part that:
Registers of deeds shall not register in the registry of property any document transferring real
property or real rights therein or any chattel mortgage, by way of gifts mortis causa, legacy or
inheritance, unless the payment of the tax fixed in this article and actually due thereon shall
be shown. And they shall immediately notify the Collector of Internal Revenue or the
corresponding provincial treasurer of the non payment of the tax discovered by them. . . .
Acting upon the authority of said section, the register of deeds of the City of Manila, declined
to accept as binding said decree of court of September 22,1930, and refused to register the
transfer of title of the said conjugal property to Allison D. Gibbs, on the ground that the
corresponding inheritance tax had not been paid. Thereupon, under date of December 26,
1930, Allison D. Gibbs filed in the said court a petition for an order requiring the said register
of deeds "to issue the corresponding titles" to the petitioner without requiring previous
payment of any inheritance tax. After due hearing of the parties, the court reaffirmed said
order of September 22, 1930, and entered the order of March 10, 1931, which is under review
on this appeal.
On January 3, 1933, this court remanded the case to the court of origin for new trial upon
additional evidence in regard to the pertinent law of California in force at the time of the
death of Mrs. Gibbs, also authorizing the introduction of evidence with reference to the dates
of the acquisition of the property involved in this suit and with reference to the California law
in force at the time of such acquisition. The case is now before us with the supplementary
evidence.
For the purposes of this case, we shall consider the following facts as established by the
evidence or the admissions of the parties: Allison D. Gibbs has been continuously, since the
year 1902, a citizen of the State of California and domiciled therein; that he and Eva Johnson
Gibbs were married at Columbus, Ohio, in July 1906; that there was no antenuptial marriage
contract between the parties; that during the existence of said marriage the spouses acquired
the following lands, among others, in the Philippine Islands, as conjugal property:lawphil.net
1. A parcel of land in the City of Manila represented by transfer certificate of title No.
20880, dated March 16, 1920, and registered in the name of "Allison D. Gibbs casado con Eva
Johnson Gibbs".

2. A parcel of land in the City of Manila, represented by transfer certificate of title No.
28336, dated May 14, 1927, in which it is certified "that spouses Allison D. Gibbs and Eva
Johnson Gibbs are the owners in fee simple" of the land therein described.
3. A parcel of land in the City of Manila, represented by transfer certificate of title No.
28331, dated April 6, 1927, which it states "that Allison D. Gibbs married to Eva Johnson
Gibbs" is the owner of the land described therein; that said Eva Johnson Gibbs died intestate
on November 28, 1929, living surviving her her husband, the appellee, and two sons, Allison J.
Gibbs , now age 25 and Finley J. Gibbs, now aged 22, as her sole heirs of law.
Article XI of Chapter 40 of the Administrative Code entitled "Tax on inheritances, legacies and
other acquisitions mortis causa" provides in section 1536 that "Every transmission by virtue of
inheritance ... of real property ... shall be subject to the following tax." It results that the
question for determination in this case is as follows: Was Eva Johnson Gibbs at the time of her
death the owner of a descendible interest in the Philippine lands above-mentioned?
The appellee contends that the law of California should determine the nature and extent of
the title, if any, that vested in Eva Johnson Gibbs under the three certificates of title Nos.
20880, 28336 and 28331 above referred to, citing article 9 of the Civil Code. But that, even if
the nature and extent of her title under said certificates be governed by the law of the
Philippine Islands, the laws of California govern the succession to such title, citing the second
paragraph of article 10 of the Civil Code.
Article 9 of the Civil Code is as follows:
The laws relating to family rights and duties, or to the status, condition, and legal capacity of
persons, are binding upon Spaniards even though they reside in a foreign country." It is
argued that the conjugal right of the California wife in community real estate in the Philippine
Islands is a personal right and must, therefore, be settled by the law governing her personal
status, that is, the law of California. But our attention has not been called to any law of
California that incapacitates a married woman from acquiring or holding land in a foreign
jurisdiction in accordance with the lex rei sitae. There is not the slightest doubt that a
California married woman can acquire title to land in a common law jurisdiction like the State
of Illinois or the District of Columbia, subject to the common-law estate by the courtesy which
would vest in her husband. Nor is there any doubt that if a California husband acquired land
in such a jurisdiction his wife would be vested with the common law right of dower, the
prerequisite conditions obtaining. Article 9 of the Civil Code treats of purely personal relations
and status and capacity for juristic acts, the rules relating to property, both personal and real,
being governed by article 10 of the Civil Code. Furthermore, article 9, by its very terms, is
applicable only to "Spaniards" (now, by construction, to citizens of the Philippine Islands).
The Organic Act of the Philippine Islands (Act of Congress, August 29, 1916, known as the
"Jones Law") as regards the determination of private rights, grants practical autonomy to the
Government of the Philippine Islands. This Government, therefore, may apply the principles
and rules of private international law (conflicts of laws) on the same footing as an organized
territory or state of the United States. We should, therefore, resort to the law of California,
the nationality and domicile of Mrs. Gibbs, to ascertain the norm which would be applied
here as law were there any question as to her status.
But the appellant's chief argument and the sole basis of the lower court's decision rests upon
the second paragraph of article 10 of the Civil Code which is as follows:
Nevertheless, legal and testamentary successions, in respect to the order of succession as well
as to the amount of the successional rights and the intrinsic validity of their provisions, shall
be regulated by the national law of the person whose succession is in question, whatever may
be the nature of the property or the country in which it may be situated.
In construing the above language we are met at the outset with some difficulty by the
expression "the national law of the person whose succession is in question", by reason of the
rather anomalous political status of the Philippine Islands. (Cf. Manresa, vol. 1, Codigo Civil,
pp. 103, 104.) We encountered no difficulty in applying article 10 in the case of a citizen of
Turkey. (Miciano vs. Brimo, 50 Phil., 867.) Having regard to the practical autonomy of the
Philippine Islands, as above stated, we have concluded that if article 10 is applicable and the
estate in question is that of a deceased American citizen, the succession shall be regulated in
accordance with the norms of the State of his domicile in the United States. (Cf. Babcock
Templeton vs. Rider Babcock, 52 Phil., 130, 137; In re Estate of Johnson, 39 Phil., 156, 166.)
The trial court found that under the law of California, upon the death of the wife, the entire
community property without administration belongs to the surviving husband; that he is the
absolute owner of all the community property from the moment of the death of his wife, not
by virtue of succession or by virtue of her death, but by virtue of the fact that when the death
of the wife precedes that of the husband he acquires the community property, not as an heir
or as the beneficiary of his deceased wife, but because she never had more than an inchoate
interest or expentancy which is extinguished upon her death. Quoting the case of Estate of
Klumpke (167 Cal., 415, 419), the court said: "The decisions under this section (1401 Civil Code
of California) are uniform to the effect that the husband does not take the community
property upon the death of the wife by succession, but that he holds it all from the moment
of her death as though required by himself. ... It never belonged to the estate of the deceased
wife."
The argument of the appellee apparently leads to this dilemma: If he takes nothing by
succession from his deceased wife, how can the second paragraph of article 10 be invoked?
Can the appellee be heard to say that there is a legal succession under the law of the
Philippine Islands and no legal succession under the law of California? It seems clear that the
second paragraph of article 10 applies only when a legal or testamentary succession has taken
place in the Philippines and in accordance with the law of the Philippine Islands; and the
foreign law is consulted only in regard to the order of succession or the extent of the
successional rights; in other words, the second paragraph of article 10 can be invoked only
when the deceased was vested with a descendible interest in property within the jurisdiction
of the Philippine Islands.
In the case of Clarke vs. Clarke (178 U. S., 186, 191; 44 Law ed., 1028, 1031), the court said:
It is principle firmly established that to the law of the state in which the land is situated we
must look for the rules which govern its descent, alienation, and transfer, and for the effect
and construction of wills and other conveyances. (United States vs. Crosby, 7 Cranch, 115; 3 L.
ed., 287; Clark vs. Graham, 6 Wheat., 577; 5 L. ed., 334; McGoon vs. Scales, 9 Wall., 23; 19 L.
ed., 545; Brine vs. Hartford F. Ins. Co., 96 U. S., 627; 24 L. ed., 858.)" (See also Estate of Lloyd,
175 Cal., 704, 705.) This fundamental principle is stated in the first paragraph of article 10 of
our Civil Code as follows: "Personal property is subject to the laws of the nation of the owner
thereof; real property to the laws of the country in which it is situated.
It is stated in 5 Cal. Jur., 478:
In accord with the rule that real property is subject to the lex rei sitae, the respective rights of
husband and wife in such property, in the absence of an antenuptial contract, are determined
by the law of the place where the property is situated, irrespective of the domicile of the
parties or to the place where the marriage was celebrated. (See also Saul vs. His Creditors, 5
Martin [N. S.], 569; 16 Am. Dec., 212 [La.]; Heidenheimer vs. Loring, 26 S. W., 99 [Texas].)
Under this broad principle, the nature and extent of the title which vested in Mrs. Gibbs at
the time of the acquisition of the community lands here in question must be determined in
accordance with the lex rei sitae.
It is admitted that the Philippine lands here in question were acquired as community property
of the conjugal partnership of the appellee and his wife. Under the law of the Philippine
Islands, she was vested of a title equal to that of her husband. Article 1407 of the Civil Code
provides:
All the property of the spouses shall be deemed partnership property in the absence of proof
that it belongs exclusively to the husband or to the wife. Article 1395 provides:
"The conjugal partnership shall be governed by the rules of law applicable to the contract of
partnership in all matters in which such rules do not conflict with the express provisions of
this chapter." Article 1414 provides that "the husband may dispose by will of his half only of
the property of the conjugal partnership." Article 1426 provides that upon dissolution of the
conjugal partnership and after inventory and liquidation, "the net remainder of the
partnership property shall be divided share and share alike between the husband and wife, or
their respective heirs." Under the provisions of the Civil Code and the jurisprudence prevailing
here, the wife, upon the acquisition of any conjugal property, becomes immediately vested
with an interest and title therein equal to that of her husband, subject to the power of
management and disposition which the law vests in the husband. Immediately upon her
death, if there are no obligations of the decedent, as is true in the present case, her share in
the conjugal property is transmitted to her heirs by succession. (Articles 657, 659, 661, Civil
Code; cf. also Coronel vs. Ona, 33 Phil., 456, 469.)
It results that the wife of the appellee was, by the law of the Philippine Islands, vested of a
descendible interest, equal to that of her husband, in the Philippine lands covered by
certificates of title Nos. 20880, 28336 and 28331, from the date of their acquisition to the date
of her death. That appellee himself believed that his wife was vested of such a title and
interest in manifest from the second of said certificates, No. 28336, dated May 14, 1927,
introduced by him in evidence, in which it is certified that "the spouses Allison D. Gibbs and
Eva Johnson Gibbs are the owners in fee simple of the conjugal lands therein described."
The descendible interest of Eva Johnson Gibbs in the lands aforesaid was transmitted to her
heirs by virtue of inheritance and this transmission plainly falls within the language of section
1536 of Article XI of Chapter 40 of the Administrative Code which levies a tax on inheritances.
(Cf. Re Estate of Majot, 199 N. Y., 29; 92 N. E., 402; 29 L. R. A. [N. S.], 780.) It is unnecessary in
this proceeding to determine the "order of succession" or the "extent of the successional
rights" (article 10, Civil Code, supra) which would be regulated by section 1386 of the Civil
Code of California which was in effect at the time of the death of Mrs. Gibbs.
The record does not show what the proper amount of the inheritance tax in this case would
be nor that the appellee (petitioner below) in any way challenged the power of the
Government to levy an inheritance tax or the validity of the statute under which the register
of deeds refused to issue a certificate of transfer reciting that the appellee is the exclusive
owner of the Philippine lands included in the three certificates of title here involved.
The judgment of the court below of March 10, 1931, is reversed with directions to dismiss the
petition, without special pronouncement as to the costs.
GRANT v. McAULIFFE.
MANCHESTER v. McAULIFFE.
JENSEN v. McAULIFFE.*
Civ. 8153–8155.
Decided: April 13, 1953
Goldstein, Barceloux & Goldstein, Chico, for appellants. Honey & Mayall, Stockton, for
respondent.
On December 17, 1949, appellant Jensen was driving west on U. S. Highway 66 and appellants
Grant and Manchester were riding with him. W. W. Pullen was driving his automobile east on
the same highway. At a point approximately 15 miles east of Flagstaff, Arizona, the Jensen
and Pullen cars collided, due to the alleged negligence of Pullen.
Jensen's automobile was badly damaged and Jensen, Grant and Manchester suffered personal
injuries. Pullen died on January 5, 1950, and Frank H. McAuliffe was appointed administrator
of his estate by the Superior Court in Plumas County, California, which county was and had
been the residence of Pullen, Jensen, Grant and Manchester. On December 14, 1950, Jensen,
Grant and Manchester each filed an action for damages against the estate of Pullen, having
previously presented their claims against Pullen to the administrator who rejected each of the
claims.
In response to plaintiffs' complaints defendant filed a general demurrer and notice of motion
to abate. After hearing the motion the court made an order abating the action in each case.
Plaintiff in each case appealed from the said order and the three appeals have been
consolidated as each is based upon the same grounds.

Appellants make a vigorous and able attack on the orders abating the actions. They contend
that the trial court erred in that its conclusions were contrary to the following contentions:
‘1. The question of survivability is a procedural matter and should be governed by the law of
the forum.
‘2. Regardless of the nature of the doctrine of survivability in other states, it is definitely a
purely procedural matter in the State of Arizona, and therefore has no application to
California actions.
‘3. Assuming the law of Arizona on the question of survival to be substantive, it will not be
enforced in California where the Arizona rule is directly contrary to the public policy of the
State of California.’
We shall first discuss the principal contention of appellants which is that survivability is a
procedural or remedial matter and not a substantive right and therefore should be governed
by the law of the forum.
It is the general rule, as stated by appellants, that matters of procedure are governed by the
law of the forum. The rule is stated in 11 Am.Jur., sec. 14, p. 314 (cited by appellants), as
follows:
‘* * * The broad, uncontroverted rule is that the lex loci will govern as to all matters going to
the basis of the right of action itself, while the lex fori controls all that is connected merely
with the remedy. The Courts will assume that a case is to be governed by the laws of the
forum unless it is expressly shown that a different law applies, and in case of doubt as to
whether the lex loci or the lex fori should govern, the court will naturally prefer the laws of its
own state or country.’
Also see Frederick Sage & Co. v. Alexander & Oviatt Corp., 138 Cal.App. 476, 32 P.2d 655.
Respondent does not dispute this general rule but contends that in the instant case it has
been shown that a different law does apply. Respondent argues that the fundamental and
general rule in the field of tort law is as stated in 11 Am.Jur., sec. 182, p. 490, as follows:
‘Where an action is brought in one jurisdiction for a tort committed in another, the general
rule is that all matters relating to the right of action are governed by the lex loci delicti. That
law determines whether a person has sustained a legal injury. The actionable quality or
nature of acts causing death or bodily injuries as tortious is therefore to be determined by
reference to the lex loci, rather than the lex fori. The law of the place of the wrong may defeat
recovery because of the failure of the injured person to fulfil certain statutory conditions.
Such law governs in the forum.
‘It is obvious under the foregoing rules that in order to maintain an action of tort founded
upon an injury to person or property, and not upon a breach of contract, the act which is the
cause of the injury and the foundation of the action must therefore be at least actionable by
the law of the place in which it is done. Correspondingly, if no legally maintainable action is
created by the place of the wrong, none exists elsewhere. The prosecution of transitory
actions in a state or country other than that in which the cause of action arises is based on
comity, so that, where under the lex loci no right of action exists, no action can be entertained
by the courts of the forum, although a statute of the forum gives such a right of action. * * *’
In the case of Loranger v. Nadeau, 215 Cal. 362, at page 366, 10 P.2d 63, 65, 84 A.L.R. 1264, a
case having to do with the application of the rule of lex loci delicti in a tort action, our
Supreme Court said:
‘It is the settled law in the United States that an action in tort is governed by the law of the
jurisdiction where the tort was committed, and, as it is a transitory action, it may be
maintained in any jurisdiction where the defendant may be found. It is the general rule in tort
actions that the court will, if it has jurisdiction of the necessary parties and can do substantial
justice between them in accordance with its own forms of procedure, enforce the foreign law
if it is not contrary to the public policy of the forum, to abstract justice, or pure morals, or
injurious to the welfare of the people of the state of the forum. 12 Cor.Jur., p. 453. In Loucks
v. Standard Oil Co., 224 N.Y. 99, 120 N.E. 198, 202, it was said: ‘The courts are not free to
refuse to enfroce a foreign right at the pleasure of the judges, to suit the individual notion of
expediency or fairness. They do not close their doors, unless help would violate some
fundamental principle of justice, some prevalent conception of good morals, some deep-
rooted tradition of the common weal.’ In Reynolds v. Day, 79 Wash. 499, 140 P. 681, 683,
L.R.A.1916A, 432, it was said: ‘Under the rule of comity, rights which have accrued by the law
of another state or nation are treated as valid everywhere. When the action is transitory and
the jurisdiction of the parties can be obtained by service of process, the foreign law, if not
contrary to the public policy of the state where the action is brought, nor contrary to abstract
justice or pure morals nor calculated to injure the state or its citizens, will be recognized and
enforced. This rule applies alike to actions ex contractu and actions ex delicto. In all such
cases, the right to recover is governed by the lex loci and not by the lex fori.’'
See, also, Restatement of the Law, Conflict of Laws, sec. 390, pp. 478–479; 15 C.J.S., Conflict of
Laws, § 12, p. 896.
It is a well-settled rule at common law that causes of action founded on tort abated with the
death of the tort-feasor. This common-law rule has long been recognized and accepted in
California, as stated in the case of Clark v. Goodwin, 170 Cal. 527, at page 529, 150 P. 357, at
page 358, L.R.A.1916A, 1142, as follows:
‘The only question on this appeal is whether the cause of action so given survives the death of
the person who wrongfully or negligently causes the death on account of which damages are
claimed. Admittedly it does not survive the death of the wrongdoer if the well-settled
common-law rule relative to abatement of a cause of action for damages for injuries to
person on the death of the wrongdoer has not been changed by statute in this state. Our
statutes provide that: ‘The common law of England, so far as it is not repugnant to or
inconsistent with the Constitution of the United States, or the constitution or laws of this
state, is the rule of decision in all the courts of this state.’ Pol.Code, § 4468. Nothing was more
firmly settled at common law than the rule that such a cause of action, except under certain
circumstances which do not exist here, does not survive the death of either the person to or
by whom the wrong was done.'

In the absence of specific statutory enactment the common-law rule as to abatement of
causes of action founded on tort still prevails. However, in a majority of jurisdictions,
including California, legislation has been enacted expressly modifying the common-law rule.
Since the enactment of Probate Code, section 574 in 1931, as amended in 1949, and the
addition of section 956 to the Civil Code in 1949, a cause of action does not abate in California
upon the death of a tort-feasor.
The common-law rule as to survival of tort actions prevails in Arizona, but section 21–534 of
the Arizona Code provides:
‘An action to recover damages for injuries to the person, or death caused by the wrongful act,
default or neglect of another, shall not abate by reason of the death of the defendant, and his
personal representative may be substituted as defendant; if such action be against a receiver,
assignee or trustee, and such receiver, assignee or trustee shall die, resign or be removed
from office, his successor in office may be substituted as defendant. The action shall
thereupon proceed to judgment as if the defendant had remained alive, or the original
receiver, assignee or trustee had continued in office.’
This statute is the only statute enacted by the State of Arizona regarding death situations and
in effect is a revival statute, providing only for the substitution of a personal representative of
a deceased litigant who has died after a proceeding or action has been commenced. This
Arizona statute has been expressly so construed in the case of McLellan v. Automobile
Insurance Company of Hartford, Conn., 9 Cir., 80 F.2d 344, wherein the plaintiffs argued that
the above-cited section of the Arizona Code was a survival statute. At page 350 of 80 F.2d, the
court stated:
‘It is clear that in a case where the wrongdoer dies, section 3774 [21–534, Arizona Code] is
designed to revive an ‘action’; i. e., a ‘proceeding’, which has theretofore been instituted to
recover damages for death by wrongful act, even though the cause of action itself, if the
proceeding had not been instituted before the death of the wrongdoer, would not have
survived his death.'
This decision relied on the interpretation given the California revival statute, Code of Civil
Procedure, section 385, in the case of Clark v. Goodwin, 170 Cal. 527, 150 P. 357.
The common-law rule as to the abatement of actions is still in effect in the State of Arizona
and has been expressly held to be so in the case of McClure v. Johnson, 50 Ariz. 76, 69 P.2d
573, at page 576, where the court in passing on the decision rendered in the McLellan case
(above cited) stated:
‘We are of the opinion that the decision of that court was correct on the point referred to,
and that under the law of Arizona when a tort-feasor dies before the commencement of an
action, the cause of action does not survive his death, and a plea in abatement should be
sustained if the fact appears on the face of the complaint, or a verdict should be directed in
favor of defendant if it is first shown by the evidence.’
Turning to the contention of plaintiffs that survivability is a procedural or remedial right and
not a substantive right, and therefore that it should be governed by the lex fori, we believe
that our Supreme Court has determined this question adversely to plaintiffs' contention in the
recent case of Cort v. Steen, 36 Cal.2d 437, at page 440, 224 P.2d 723, at page 725, where the
court stated:
‘Prior to 1949 there was no provision under the law of this state for the survival of actions to
recover for personal injuries. If the statutory provisions for survival affect only the remedy or
procedure, the conclusion would follow that in the absence of an express provision the
enactment applies as well where a party died prior to its effective date. San Bernardino
County v. Industrial Acc. Comm., 217 Cal. 618, 628 et seq., 20 P.2d 673. That case also
indicates when retrospective application express or implied will be invalid as an impairment
of vested rights.’
Again quoting from the same case, at pages 441, 442 of 36 Cal.2d, at page 725 of 224 P.2d:
‘* * * In spite of the vagueness of its origin, the uncertainty of its meaning, and the criticism
to which it has been subjected, the maxim actio personalis moritur cum persona has become
firmly imbedded in the law. [Citations.] Courts have treated the phrase as referring not
merely to the remedy, but to the right or cause of action itself. Thus ‘abatement’ as used in
determining the effect of the non-survivability doctrine, did not have the same meaning as
abatement of actions which could be revived for or against personal representatives. Under
the doctrine the abatement of the action by the death of the injured person through the tort-
feasor's act or otherwise, or by the death of the tort-feasor, was deemed to abate the wrong
as well. For in legal concept death was considered not to be an injury. [Citations.] Recovery
was solely punitive, and the deceased's representatives had not received or committed the
wrong in their personal capacities. [Citation.] Since death ‘discharged’, ‘terminated’ [citation],
or ‘dissolved’ the cause [citations], a survival statute was deemed to create a right or cause of
action, rather than to continue an existing right, or to revive or extend a remedy theretofore
accrued for the redress of an existing wrong.' [Citations.]
In 1 Am.Jur., sec. 157, page 103, it is stated:
‘The general rule is that the survival of a cause of action is governd by the law of the state
where the cause arose. Some courts apply this rule even though there is no similar statute in
the state of the forum, but other courts have limited their decisions to cases in which there is
a similar statute in the forum. This is regarded as a matter pertaining to the substantive right,
rather than to the remedy. This principle finds application in causes of action for personal
injuries. The survival of such a cause is governed by the law of the place where the injury
occurred and the cause of action arose.
‘Many of the courts limit this doctrine to cases in which no action has been brought until after
the death of the injured person or of the wrongdoer. The fact that the action is brought in the
state of the domicile of the wrongdoer and that by the law of that state the cause of action
survives his death is not effective to make the cause of action survive where such action is
brought after his death.’ Ormsby v. Chase, 290 U.S. 387, 54 S.Ct. 211, 78 L.Ed. 378.
We believe that the basic weakness of the argument of plaintiffs upon this point is that they
have failed to properly evaluate the distinction between the survival and revival of actions.
Plaintiffs have cited a number of cases in support of their contention that survivability is
procedural but an examination of these cases, with the exception of one or two extreme
minority views, discloses that they all deal with revival statutes, and that the court in each
instance applied its own law regardless of the law of locus delicti, in accordance with the
general rule hereinbefore stated. ‘Survival’ has to do with the accrual of a cause of action and
its abatement at the death of one of the parties. ‘Revival’ has to do with a cause of action
pending at the death of one of the parties. The distinction between ‘survival’ and ‘revival’ is
clearly pointed out in exhaustive annotations in 87 A.L.R. 852 and 92 A.L.R. 1502. Survival of
actions is by the overwhelming weight of authority held to be a matter of ‘substantive law’
and the lex loci delicti applies, while ‘revival’ is considered a matter of ‘procedure or remedy’
and the lex fori applies.
Since in the instant cases the actions were not instituted before the death of the tort-feasor,
and the State of Arizona has no survival statute, but applies the common-law rule that an
action for personal injuries against a tort-feasor abates at his death, McClure v. Johnson, 69
P.2d 573; McLellan v. Automobile Ins. Co., 80 F.2d 344, supra, we must, in view of the
authorities cited, hold that upon the death of the tort-feasor, before the filing of the actions,
the plaintiffs' right of action abated.
The final contention of plaintiffs is that ‘assuming the law of the state of Arizona on the
question of survival to be substantive, it will not be enforced in California where the rule is
directly contrary to the public policy of the State of California.’ The authorities cited by
plaintiffs on this point all appear to involve situations where the locus delicti has a ‘survival’
statute but the forum does not. In such cases relief has been denied in the forum because to
grant it would contravene strong public policy therein. However, no case has been cited
where a cause of action for tort could be enforced in the forum where such cause of action
could not be enforced in the courts of the state where the wrong was committed and the
cause of action arose. The rule is well expressed in Restatement of the Law, Conflict of Laws,
section 390, as follows:
‘Comment:
‘(a) A claim does not survive the death of a party to it unless it is made by a statute to survive.
No recovery can be had for damages after the death of the injured party or of the tort-feasor
unless such be the law of the place of wrong. By the early common law no claim for a tort
survived. By a very early English statute, claims for breach of a contractual obligation
survived. The category of claims surviving the death of the person injured has been enlarged
by modern legislation to include many tort claims, but there are still states by the law of
which a claim for damages for certain personal injuries dies with the injured person. By
modern legislation most claims survive against the representative of a deceased wrongdoer.
‘(b) If a claim for damages for injury survives the death of the injured person or the
wrongdoer, as the case may be, by the law of the place of wrong, recovery may be had upon it
by or against the representative of the decedent, provided that law of the state of forum
permits the representative of the decedent to sue or be sued on such a claim. Without such
power created by the law of the state of suit, no recovery can be had.’
We are unable to agree with plaintiffs' contention that the public policy of the State of
California as expressed in its statutory enactments modifying the common-law rule as to the
abatement of causes of action for torts, requires a holding that the plaintiffs in the instant
actions may press their actions in the courts of California. Admittedly the causes of action
arose in Arizona where the torts were committed, and the laws of Arizona are controlling. No
actions having been commenced prior to the death of the tort-feasor, the right of action of
the plaintiffs ceased in accordance with the rules established by the courts of Arizona.
Therefore, when plaintiffs filed their actions in California no causes of action existed, and to
permit a recovery in California for a tort committed in Arizona when the cause of action
abated in Arizona, would be contrary to the general rule hereinbefore quoted, as expressed in
11 Am.Jur., sec. 182, page 491, as follows:
‘It is obvious under the foregoing rules that in order to maintain an action of tort founded
upon an injury to person or property, and not upon a breach of contract, the act which is the
cause of the injury and the foundation of the action must therefore be at least actionable by
the law of the place in which it is done. Correspondingly, if no legally maintainable action is
created by the place of the wrong, none exists elsewhere. The prosecution of transitory
actions in a state or country other than that in which the cause of action arises is based on
comity, so that, where under the lex loci no right of action exists, no action can be entertained
by the courts of the forum, although a statute of the forum gives such a right of action. * * *’
In view of the foregoing we conclude that the learned trial judge correctly determined that
the causes of action of plaintiffs abated and that the orders abating the actions should be and
the same are hereby affirmed.
SCHOTTKY, Justice.
Marie et al.
v.
Garrison
83 N.Y. 14 (N.Y. 1880)
ANDREWS, J.
Special demurrers, as known to the former practice, have no place in our present system of
pleading. The Code authorizes a demurrer for specific causes and no pleading is demurrable
unless it is subject to one or more of the objections specified in the section defining the
grounds of demurrer. A demurrer to a complaint for insufficiency can only be sustained when
it appears that, admitting all the facts alleged, it presents no cause of action whatever. It is
not sufficient that the facts are imperfectly or informally averred, or that the pleading lacks
definiteness and precision, or that the material facts are only argumentatively averred. The
complaint on demurrer is deemed to allege what can be implied from the allegations therein,
by reasonable and fair intendment, and facts impliedly averred are traversable in the same
manner as though directly averred. (1 Chitty's Pl. 713; Haight v. Holley, 3 Wend. 258; Prindle
v. Caruthers, 15 N.Y. 425.) The remedy for indefiniteness is not by demurrer, but by motion.
(Code, § 546; Seeley v. Engell, 13 N.Y. 542.) "Indefiniteness," says Chitty, "is in general only
matter of form." (1 Chitty's Pl. 717.) The rule by which, under the Code, the sufficiency of a
complaint is to be determined is stated by DENIO, J., in Zabriskie v. Smith ( 13 N.Y. 330.) He
says: "It is sufficient that the requisite allegations can be fairly gathered from all the
averments in the complaint, though the statement of them may be argumentative, and the
complaint deficient in technical language."
In the light of these rules we proceed to examine the question whether the complaint in this
case sets forth a cause of action. It is undoubtedly essential, to sustain the complaint, that it
should appear therein that a valid contract was entered into by Garrison, from the breach of
which a right of action has accrued to the plaintiffs and Denny. It is insisted, on the part of
Garrison, that the promise upon which the action is based is, so far as the complaint shows, a
mere nudum pactum, no valid consideration therefor being averred. The oral agreement of
June, 1876, upon which the action is brought, is alleged to have been made in consideration
of the surrender by the plaintiffs and Denny to the defendant, Garrison, of the letter of
March 29, 1876, and of their consenting to a modification of the terms of the agreement
contained therein, and no other consideration is averred or can be gathered from the terms of
the substituted agreement. If the contract surrendered was itself a nude pact, its surrender
formed no valid or legal consideration for the substituted promise. If, on the other hand, it
was binding and valid, it needs no citation of authorities to show that its surrender was in law
a good consideration for the new agreement.
Does, then, the complaint show, either directly or by fair inference, a valid consideration for
the conditional promise of the defendant, Garrison, contained in the letter? No consideration
appears in the letter itself. It shows in general terms the situation of the Pacific Railroad
Company and the relation of the parties to it; that Garrison was the owner of a majority in
amount of the third mortgage bonds of the road, and that the parties to whom the letter was
addressed were stockholders therein, and that a foreclosure action to foreclose the third
mortgage was pending at the suit of one Ketcham. The letter contains, in substance, a
promise by Garrison that if he should purchase the road on the foreclosure, he would, upon
the plaintiffs organizing a successor company within six months after the purchase and
making the payments and complying with the other conditions specified, convey the road to
them. He does not bind himself to purchase; but in the event that he does purchase his
undertaking to convey the road on the terms stated is absolute. In substance, Garrison agreed
in case he purchased the road to give the plaintiffs the option to take it upon the terms
proposed at any time within six months after such purchase.
The complaint in its introductory averments sets forth that the plaintiffs and Denny "owned
and held either in their own right, or in trust for others with full power of disposition," thirty-
six thousand shares of the capital stock of the Pacific railroad of Missouri, of the aggregate
par value of $3,600,000; that the defendant held $2,200,000 of the $4,000,000 issue of third
mortgage bonds, which it is alleged were of doubtful validity, and were claimed by the
stockholders to have been fraudulently and collusively issued by the directors of the
company, and without the consent of the stockholders, as required by the laws of Missouri;
that the defendant was solicitous to have the bonds adjudicated to be valid, and that a
collusive foreclosure suit, in the interest of Garrison and others, was commenced by Ketcham
in November, 1875, to foreclose the third mortgage, and was pending, in which suit the
defendant had in April, 1876, been admitted as co-complainant, and had become the principal
party in prosecuting the same; that certain stockholders had intervened in the suit, and filed
an answer and cross-bill, alleging collusion and fraud on the part of the directors of the road
in the issue of the bonds; that some of the plaintiffs had filed a petition in the foreclosure suit
to be made parties, and to be allowed to defend the same in their own behalf, and in behalf
of other stockholders; that the value of the equity of redemption in the road was $8,000,000.
Following these introductory averments of the complaint, are paragraphs five and six, upon
which the plaintiffs rely as containing an averment of a consideration for the defendant's
promise contained in the letter, as follows:
"5th. That on or about the 29th day of March, 1876, with the view of compromising said
conflicting claims, and establishing the validity of said debt of $4,000,000 in the hands of said
Garrison (the defendant Garrison) and others of his associate bondholders, and to prevent the
plaintiffs from defending said foreclosure suit, and in consideration of the relinquishment by
the plaintiffs of all further opposition to said foreclosure suit, the said Garrison, the
defendant, entered into an agreement with plaintiffs, evidenced in part by a letter written by
him to some of the plaintiffs and the defendant Denny, a copy of which is hereto attached,
marked `A,' and the same is made a part of this complaint.
"6th. The plaintiffs aver that they and the defendant, Denny, performed and fulfilled all the
preliminary obligations in the said agreement contained and agreed to be performed on their
part and behalf, and in consequence thereof said defendant, Garrison, was enabled to
procure a judgment and decree of foreclosure on or about June 6, 1876, and a sale of said
premises on or about the 6th day of September, 1876, which sale was confirmed by the court
in the month of October, 1876, viz.: October 6, which confirmation was modified October 23,
1876."
It is not averred that the plaintiffs and Denny agreed to relinquish their opposition to the
foreclosure in consideration of the agreement of Garrison, contained in the letter. But the
averments contained in the paragraphs quoted do fairly import that in consequence of their
relinquishment of such opposition the defendant, Garrison, was enabled to procure a
judgment of foreclosure and sale, and it is averred in a subsequent part of the complaint that
without their "co-operation and consent a decree of foreclosure and sale would not then have
been made, or made at all until after a trial by the court, the result of which trial was in
doubt." It is not essential to the existence of a consideration for the defendant Garrison's
agreement, that mutuality of obligation should have existed between the parties when his
agreement was made. The necessary consideration would arise if the plaintiffs and Denny, in
compliance with the proposition in his letter, and in consideration of his promise therein, did
in fact discontinue their opposition to the foreclosure, although they did not at the time bind
themselves to do so. When a defendant has actually received the consideration of an
agreement by a voluntary performance of an act by the other party, upon his proposition or
suggestion, such performance constitutes a consideration which will uphold the defendant's
promise. ( Sands v. Crooke, 46 N.Y. 564; Morton v. Burn, 7 Ad. El. 25; Storm v. U.S., 94 U.S.
83.) The fair intendment from the allegations of the complaint is that Garrison undertook to
do the things promised in his letter, in case the plaintiffs would relinquish the opposition to
the foreclosure, and that they did subsequently relinquish their opposition, thereby enabling
him to secure judgment of foreclosure. In this view we think the complaint sufficiently
averred a consideration for his original promise, and that the surrender of the option to
purchase the road, in case it should be bid off by Garrison, was a good consideration for the
substituted oral agreement.
By the substituted agreement, Garrison agreed to bid off the road on the foreclosure sale, and
organize a successor company, upon a basis stated in the complaint, and "deliver to said
plaintiffs and said Denny, in return for the amount of the stock of the Pacific railroad so as
aforesaid held by them, thirty-six thousand full paid shares of the par value of one hundred
dollars each," in the new organization.
It is claimed that this agreement was illegal on two grounds: first, that it was a collusive
arrangement between the parties to establish a fraudulent and invalid debt, and procure a
sale of the property of the company thereon to the prejudice of the other stockholders and
creditors; and second, that the agreement was calculated to prevent competitive bidding
between the parties on the foreclosure sale, contrary to the general principles and policy of
the law.
We think that neither of these points is well taken. The complaint does not allege that the
third mortgage bonds were in fact fraudulent. It alleges that they were of doubtful validity,
and then proceeds to specify various particulars in respect to which it was claimed that they
were invalid, as before stated. It is not alleged that Garrison was a party to the fraud, if any
existed in the issue of the bonds, or that the company did not receive their full value, or that
they were not given to secure a valid debt, nor does it appear that the mortgage debt could
not have been enforced in equity against the property of the company. The allegations of the
complaint do not justify the inference that the parties were colluding to enforce a fictitious
debt against the company, and it is difficult to see what interest the plaintiffs could have had
to have united in such a conspiracy.
In respect to the second ground of alleged illegality it is to be observed, that the magnitude of
the property involved in the foreclosure would naturally prevent an individual (unless
possessed of great wealth) from bidding on the sale. The plaintiffs, who together owned a
large number of shares, had a right to enter into any arrangement for the protection of their
interests not prohibited by law. This was not the case of a combination between persons
having no prior interest in the property to suppress bidding at a judicial sale for speculative
purposes. The arrangement made was, so far as appears, a reasonable and honest attempt on
the part of the plaintiffs, to save their property from being sacrificed on the foreclosure. The
other stockholders and bondholders were at liberty to bid on the sale. The mere fact that an
arrangement, fairly entered into, with honest motives, for the preservation of existing rights
and property, may incidentally restrict competition at a public or judicial sale, does not, we
think, render the arrangement illegal. The question of intent, at all events, is one for the jury,
upon the whole facts as they shall appear on the trial. ( Marsh v. Russell, 66 N.Y. 288; Phippen
v. Stickney, 3 Metc. 384; Wicker v. Hoppock, 6 Wall. 94.)
The complaint shows that the road on the foreclosure sale was purchased for the defendant,
Garrison, in the name of a third party, and that he subsequently organized a new company.
The complaint then alleges, "that although often requested so to do, the said Garrison has
refused and does refuse to fulfill his said contract with the plaintiffs, and to issue or cause to
be issued and be delivered to the plaintiffs thirty-six thousand shares of stock in said (new)
company, in exchange for the stock of the Pacific railroad, so as aforesaid held by the
plaintiffs." It is claimed that the complaint is defective, for the reason that it shows no offer,
readiness, or even ability to surrender the thirty-six thousand shares of old stock in exchange
for the new shares. This objection is unanswerable, unless a tender of the old shares is
implied in the averment of the refusal of Garrison to issue the new shares in exchange for the
stock of the old company held by the plaintiffs. Bearing in mind that what is implied in an
averment is on demurrer to be taken as if the thing implied is directly averred, and that an
argumentative pleading is not for that reason demurrable, we conclude, although not without
some hesitation, that an averment of a refusal to exchange does import that the other party
offered to do that without which no exchange could be effected, viz.: that he tendered the
property or thing which was the consideration of that which he was to receive and which he
called on the other party to deliver.
It is made a separate ground of demurrer that there is a misjoinder of parties plaintiffs. This is
one of the grounds of demurrer under the new Code (§ 448). This objection is predicated in
part upon the general rule that parties whose interests are divided, distinct and several,
cannot unite as plaintiffs, and it is asserted that the interests of the plaintiffs under the
contract sued upon were several and distinct within the rule stated. We concur in the view of
the defendant's counsel that the rational construction of the pleader's allegation in the
introductory clause of the complaint, that the plaintiffs and Denny "owned and held, either in
their own right or in trust for others," the thirty-six thousand shares, etc., is that they held
shares distributively and severally aggregating that number, one or more holding their shares
individually, and one or more holding shares in trust, or that one or more, or each, held
shares both individually and in trust. But we think it does not follow from the individual or
several ownership by the plaintiffs of the shares in the old company, that their interest in the
contract with Garrison was several and not joint, or that Garrison's contract was with the
plaintiffs severally and distributively.
There seems to be no difficulty, in the nature of things, in the plaintiffs as owners of distinct
and several shares of stock in the same company uniting and combining their shares in one
aggregate for the purpose of sale as an entire property to one person, and taking from him a
promise to pay them jointly a gross sum, equal to their aggregate interests, leaving them, as
between themselves, to arrange the distribution of the fund which shall be derived from the
sale. The circumstances of this case show that such an arrangement may be of great practical
convenience, and we know of no peremptory rule of law which forbids it. The promise of
Garrison was, in form, a promise to the plaintiffs jointly. He entered into no undertaking to
transfer to each plaintiff shares corresponding with the shares held by him in the old
company. His promise was on receiving from the plaintiffs, as an aggregation of individuals,
thirty-six thousand shares, to give them in exchange thirty-six thousand other shares. The
shares to be transferred by them to Garrison, and by Garrison to the plaintiffs, were to be
transferred in solido. The legal interest of the plaintiffs in the contract was joint, although
their interest in the shares to be transferred by Garrison or in the damages which may be
recovered may be unequal and separable. The construction of the contract is, we think,
precisely the same as if the plaintiffs had been joint owners of the shares when the contract
was made. (See Emery v. Hitchcock, 12 Wend. 156; Loomis v. Brown, 16 Barb. 331; 1 Pars. on
Cont. 19, and cases in note.)
It is also claimed that there is a misjoinder of causes of action in behalf of trustees, with
causes of action in favor of individuals, and also that the complaint is defective in not setting
forth the trust under which the trust shares were held. But the averment in the complaint
that the shares were held by the plaintiffs either in their own right or in trust, is an averment
simply of legal title of the plaintiffs to the shares mentioned. The action is not an action by
trustees to enforce a trust, or upon a contract made by the plaintiffs in a representative
character. The contract is with the plaintiffs as individuals, and we are of opinion that an
action may be maintained thereon by them in their own names, without setting out the trust
or referring to their character as trustees. At least it cannot appear on demurrer that the
plaintiffs are not entitled to maintain the action in their individual capacity. (See Merritt v.
Seaman, 6 N.Y. 168; Mellen v. Hamilton F. Ins. Co., 17 id. 615; 1 Chitty's Pl. 3.)
Our conclusion is that the demurrer was properly overruled at the Special Term. It must be
admitted that the complaint is indefinite and argumentative, and that material facts are
obscurely averred, but we think that it is not defective in substance within the rules by which
the sufficiency of pleadings on demurrer is tested.
The judgment of the General Term should be reversed and the judgment of the Special Term
affirmed, with leave to the defendant to answer on payment of costs.
All concur, except FINCH, J., taking no part.
Judgment accordingly.
Haumschild vs Continental casualty
CURRIE, J.
This appeal presents a conflict-of-laws problem with respect to interspousal liability for tort
growing out of an automobile accident. Which law controls, that of the state of the forum, the
state of the place of wrong, or the state of domicile? Wisconsin is both the state of the forum
and of the domicile while California is the state where the alleged wrong was committed.
Under Wisconsin law a wife may sue her husband in tort. Under California law she cannot.
Peters v. Peters (1909), 156 Cal. 32, 103 Pac. 219; Cubbison v. Cubbison (1946), 73 Cal.App.2d
437, 166 Pac. (2d) 387; and Paulus v. Bauder (1951), 106 Cal.App.2d 589, 235 Pac. (2d) 422.
This court was first faced with this question in Buckeye v. Buckeye (1931), 203 Wis. 248, 234
N. W. 342. In that case Wisconsin was the state of the forum and domicile, while Illinois was
the state of the place of wrong. It was there held that the law governing the creation and
extent of tort liability is that of the place where the tort was committed, citing Goodrich,
Conflict of Laws (1st ed.), p. 188, sec. 92. From this premise it was further held that
interspousal immunity from tort liability necessarily is governed
[7 Wis.2d 132]
by the law of the place of injury. This principle of conflict of laws has been consistently
applied in all subsequent interspousal actions in automobile accident cases1 except the
recent case of Bodenhagen v. Farmers Mut. Ins. Co. (1958), 5 Wis.2d 306, 92 N.W.2d 759, 95
N.W.2d 822, hereinafter discussed.
The principle enunciated in the Buckeye Case and followed in subsequent Wisconsin cases,
that the law of the place of wrong controls as to whether one spouse is immune from suit in
tort by the other, is the prevailing view in the majority of jurisdictions in this country. Anno.
22 A. L. R. (2d) 1248, 1251-1253, entitled, "Conflict of laws as to right of action between
husband and wife or parent and child." It is also the rule adopted in Restatement, Conflict of
Laws, p. 457, sec. 378, and p. 470, sec. 384 (2). However, criticism of the rule of the Buckeye
Case, by legal writers, some of them recognized authorities in the field of conflict of laws, and
recent decisions by the courts of California, New Jersey, and Pennsylvania, have caused us to
re-examine the question afresh.
In 1942, Prof. Walter Wheeler Cook of the Northwestern University Law School faculty
published his book entitled, "The Logical and Legal Bases of the Conflict of Laws." It was his
conclusion that the law of the domicile, and not the place of wrong, should be applied in
determining whether
[7 Wis.2d 133]
a wife had capacity to sue her husband in tort. Pages 248 to 250 and 345 to 346 of text. Also,
in 1942, Max Rheinstein in an article in 41 Michigan Law Review, 83, 97, advocated that the
law of domicile should be applied in conflict-of-laws situations to determine whether there is
an immunity for tort grounded on family relationship. Ernst Rabel, in his "The Conflict of
Laws: A Comparative Study" (1945), pp. 322, 323, pointed out that in the civil-law countries of
western Europe prohibitions, which exclude lawsuits in tort between husband and wife, are
considered part of family law and, therefore, the law of the domicile governs and not the law
of the place of wrong.
The most-comprehensive treatment of the problem that we have discovered is the excellent
30-page article in 15 University of Pittsburgh Law Review, 397, entitled, "Interspousal Liability
for Automobile Accidents in the Conflict of Laws: Law and Reason versus the Restatement,"
by Alan W. Ford, published in 1954. The article contains a careful analysis of the American
cases on the subject commencing with our own Buckeye Case. The author's conclusion is
stated as follows (p. 423):
"The lex fori and the lex loci delicti rules have already been criticized as inadequate. Between
them, these two rules encompass all of the American cases. To find a more-desirable
alternative we must, therefore, go beyond those cases. The foreign experience, briefly
discussed above, is a useful starting point. As that experience suggests, there is some logic in
separating questions of status and tort, in determining the incidents of the marital
relationship by the family law, and the problems of tort by the law of torts. If a conflicts
problem is involved, there is no reason why both questions should be determined by the law
of torts. Instead, the two questions should remain separate, and problems of status or
capacity could be referred, by an appropriate conflicts rule, to the law of the place of the
domicile."
[7 Wis.2d 134]
Ford, in his article, cited four cases of interspousal immunity in which American courts have
refused to apply the law of the place of wrong to an automobile accident situation but instead
applied their own law of the forum: Poling v. Poling (1935), 116 W.Va. 187, 179 S. E. 604;
Mertz v. Mertz (1936), 271 N.Y. 466, 3 N.E.2d 597, 108 A. L. R. 1120; Kircher v. Kircher (1939),
288 Mich. 669, 286 N. W. 120; and Kyle v. Kyle (1941), 210 Minn. 204, 297 N. W. 744. In all
four cases one spouse sued the other in the state of domicile where there existed the
immunity from suit in tort in a situation where the accident had occurred in a state which had
abolished the immunity. The decisions were based on the ground that the public policy of the
forum state forbade one spouse suing the other in tort.2 The holdings in these four cases are
highly significant because they are inconsistent in result with the theory that the injured
spouse possessed a vested right in the cause of action which had accrued in the state where
the alleged negligence occurred. Furthermore, these cases are authority for the principle that
public policy may be a controlling factor to be considered by the court of the forum state in
determining which law it will apply in resolving a conflict-of-laws problem. This factor of
public policy is also acknowledged in Restatement, Conflict of Laws, pp. 9, 10, sec. 5,
comment b.
The first case to break the ice and flatly hold that the law of domicile should be applied in
determining whether there existed an immunity from suit for tort based upon family
relationship is Emery v. Emery (1955), 45 Cal.2d 421,
[7 Wis.2d 135]
289 Pac. (2d) 218. In that case two unemancipated minor sisters sued their unemancipated
minor brother and their father to recover for injuries sustained in an automobile accident that
occurred in the state of Idaho, the complaint alleging wilful misconduct in order to come
within the provisions of the Idaho "guest" statute. All parties were domiciled in California.
The opinion by Mr. Justice TRAYNOR recognized that the California court, in passing on the
question of whether an unemancipated minor child may sue the parent or an unemancipated
brother, had a choice to apply the law of the place of wrong, of the forum, or of the domicile.
It was held that the immunity issue was not a question of tort but one of capacity to sue and
be sued, and rejected the law of the place of injury as "both fortuitous and irrelevant." In
deciding whether to apply the law of the forum, or the law of the domicile, the opinion stated
this conclusion (45 Cal.2d 428, 289 Pac. (2d) 222):
"Although tort actions between members of the same family will ordinarily be brought in the
state of the family domicile, the courts of another state will in some cases be a more
convenient forum, and thus the question arises whether the choice-of-law rule should be
expressed in terms of the law of the forum or that of the domicile. We think that disabilities
to sue and immunities from suit because of a family relationship are more properly
determined by reference to the law of the state of the family domicile. That state has the
primary responsibility for establishing and regulating the incidents of the family relationship
and it is the only state in which the parties can, by participation in the legislative processes,
effect a change in those incidents. Moreover, it is undesirable that the rights, duties,
disabilities, and immunities conferred or imposed by the family relationship should constantly
change as members of the family cross state boundaries during temporary absences from
their home."
Since the decision in Emery v. Emery, supra, two other courts have held that, when a court is
confronted with a
[7 Wis.2d 136]
conflict-of-laws problem in order to resolve an issue of whether there is an immunity from
suit for tort based upon a family relationship, the law to be applied is that of the domicile
state. Koplik v. C. P. Trucking Corp. (1958), 27 N.J. 1, 141 Atl. (2d) 34; and Pittman v. Deiter
(1957), 10 Pa. D. & C. 2d 360. The conclusion reached by the New Jersey supreme court in the
Koplik Case, after first having rejected the law of the place of injury as applicable to the
immunity question, is stated succinctly as follows (27 N.J. 11, 141 Atl. (2d) 40):
"As a final word on the subject, we hold the view that even where an actual conflict-of-laws
problem is directly presented, it is sensible and logical to have disabilities to sue and
immunities from suit arising from the family relationship determined by reference to the law
of the state of the family domicile when the suit is brought in that state. Otherwise, the lex
loci will be permitted to interfere seriously with a status and a policy which the state of
residence is primarily interested in maintaining." (Citing Emery v. Emery, supra, and Ford's
article in 15 University of Pittsburgh Law Review.)
Among recent law-review articles and notes approving the holding of one or more of the
afore-cited three cases, which have held that immunity from suit based on family relationship
is a matter of family law rather than tort law and should be governed by the law of the
domicile, are: 31 Temple Law Quarterly, 117, 4 Wayne Law Review, 79, and 33 Indiana Law
Journal, 297. All were published in 1958.
The two reasons most often advanced for the common-law rule, that one spouse may not sue
the other, are the ancient concept that husband and wife constitute in law but one person,
and that to permit such suits will be to foment family discord and strife. The Married
Women's Acts of the various states have effectively destroyed the "one person"
[7 Wis.2d 137]
concept thereby leaving as the other remaining reason for the immunity the objective of
preventing family discord. This is also the justification usually advanced for denying an
unemancipated child the capacity to sue a parent, brother, or sister.3 Clearly this policy
reason for denying the capacity to sue more properly lies within the sphere of family law,
where domicile usually controls the law to be applied, than it does tort law, where the place
of injury generally determines the substantive law which will govern. In making a choice
between the law of the domicile and the law of the forum, in those situations where the
action is not brought in the state of the domicile, the afore-quoted persuasive arguments
advanced by the California and New Jersey courts in Emery v. Emery, supra, and Koplik v. C. P.
Trucking Corp., supra, in favor of applying the law of domicile to decide any issue of incapacity
to sue based upon family relationship, seem unanswerable.
We are convinced that, from both the standpoint of public policy and logic, the proper
solution of the conflict-of-laws problem, in cases similar to the instant action, is to hold that
the law of the domicile is the one that ought to be applied in determining any issue of
incapacity to sue based upon family relationship.
However, in order to adopt such a conflict-of-laws rule it will be necessary to overrule at least
six prior decisions of this court, and to partially overrule two others. If it ever is proper for a
court to depart from stare decisis, we scarcely can perceive of a more-justifiable situation in
which to do so. In the first place, the rule being discarded is one lying
[7 Wis.2d 138]
in the field of conflict of laws as applied to torts so that there can hardly have been any action
taken by the parties in reliance upon it. Secondly, strong reasons of public policy exist for
supplanting such rule by a better one which does not unnecessarily discriminate against the
citizens of our own state.
The most-compelling argument against taking such step is that it departs from the rule of the
Restatement, and disturbs the sought-after ideal of establishing some uniformity in the
conflict-of-laws field. However, as well appears from the cases hereinbefore cited, there is a
clearly discernible trend away from the rule of the Restatement in so far as it requires that
the law of the place of wrong is to be applied in determining questions of incapacity to sue
based on family status. Furthermore, it must be recognized that, in the field of the conflict of
laws, absolutes should not be made the goal at the sacrifice of progress in furtherance of
sound public policy. The American Law Institute is now engaged in redrafting a revised
Restatement of Conflict of Laws. In such work of revision the question of whether the law of
the domicile, rather than the law of the place of wrong, should be applied, in resolving an
issue of interfamily immunity from suit in tort, will undoubtedly receive consideration.
After most careful deliberation, it is our considered judgment that this court should adopt the
rule that, whenever the courts of this state are confronted with a conflict-of-laws problem as
to which law governs the capacity of one spouse to sue the other in tort, the law to be applied
is that of the state of domicile. We, therefore, expressly overrule the cases of Buckeye v.
Buckeye, supra; Forbes v. Forbes (1938), 226 Wis. 477, 277 N. W. 112; Bourestom v.
Bourestom (1939), 231 Wis. 666, 285 N. W. 426; Garlin v. Garlin (1951), 260 Wis. 187, 50
N.W.2d 373;
[7 Wis.2d 139]
Scholle v. Home Mut. Casualty Co. (1956), 273 Wis. 387, 78 N.W.2d 902; and Hansen v.
Hansen (1956), 274 Wis. 262, 80 N.W.2d 230. We do not overrule the result in the cases of
Nelson v. American Employers' Ins. Co. (1951), 258 Wis. 252, 45 N.W.2d 681, and 22 A. L. R.
(2d) 1244, and Jaeger v. Jaeger (1952), 262 Wis. 14, 53 N.W.2d 740, but we disapprove of the
holding therein that the law of place of injury controlled the issue of interspousal immunity.
It is interesting to note that, if the rule now adopted had been applied in the first six cited
overruled automobile accident cases, the result in four of such cases would have been to hold
that there was no interspousal immunity from suit, because the parties were domiciled in
Wisconsin. Only in Forbes v. Forbes, supra, and Bourestom v. Bourestom, supra, would
immunity from suit have been found to exist if the law of the domicile, as interpreted by this
court, had been applied to such issue.
The Forbes Case is the only one of the eight where the place of wrong was Wisconsin. The
parties were nonresidents domiciled in Illinois. For the reasons hereinbefore set forth, it is
apparent that Illinois rather than Wisconsin was the state most concerned with the policy
considerations of whether the plaintiff wife had capacity to sue her husband. Furthermore,
the plaintiff in the Forbes Case would not have fared worse in Wisconsin than she would have
in the state of domicile.
The Bourestom Case involved "forum shopping" which ought to be discouraged rather than
tolerated. There Oklahoma was the state of injury, Minnesota the state of domicile, and
Wisconsin the state of forum. The adoption of the new rule would not in theory close the
doors of our courts to a nonresident spouse in such a situation instituting suit in Wisconsin.
However, the defendant spouse might have
[7 Wis.2d 140]
a good defense in bar if he pleaded, and proved, the true state of domicile, and took the
proper steps to bring before the trial court the law of such state granting the immunity.
Perhaps a word of caution should be sounded to the effect that the instant decision should
not be interpreted as a rejection by this court of the general rule that ordinarily the
substantive rights of parties to an action in tort are to be determined in the light of the law of
the place of wrong. This decision merely holds that incapacity to sue because of marital status
presents a question of family law rather than tort law.
Earlier in this opinion we made a brief reference to our recent decision in Bodenhagen v.
Farmers Mut. Ins. Co. In that case a wife domiciled in Wisconsin instituted suit against the
insurer of her husband's automobile to recover for injuries sustained in an automobile
accident occurring in Illinois as a result of the alleged negligence of the husband. We first
looked to Illinois law to determine whether a cause of action existed in favor of the plaintiff
wife. The Illinois law was interpreted by us as holding that its interspousal immunity against
suit in tort barred only the remedy and not the cause of action, and, therefore, Wisconsin, as
the forum state, would not apply such law. A motion for rehearing was filed subsequent to
our original decision and the brief filed in support thereof caused this court to grant a
rehearing. The reason for so doing was that we entertained grave doubt as to whether we
had reached the right conclusion in holding that under Illinois law the interspousal immunity
to suit in tort was procedural and not substantive. Because of the result reached in the instant
appeal we now find it unnecessary to pass on such last-mentioned point. In an opinion this
day handed down in such rehearing in the Bodenhagen Case we have affirmed the original
result, but have grounded the same upon the principle
[7 Wis.2d 141]
herein adopted, i.e., that the law of domicile controls the issue of interspousal immunity.
The concurring opinion by Mr. Justice FAIRCHILD protests that we should not adopt the
conflict-of-laws rule, that interspousal immunity to suit in tort should be determined by the
law of the domicile, because this was not urged in the briefs or arguments of counsel.
However, appellant's brief did cite and summarize Emery v. Emery, supra, and on the oral
argument appellant's counsel also cited Koplik v. C. P. Trucking Corp., supra, in which two
cases such rule was adopted by the California and New Jersey courts. While the appellant's
counsel did not request that we overrule Buckeye v. Buckeye, supra, and the subsequent
Wisconsin cases dealing with this particular conflict-of-laws problem, he did specifically seek
to have this court apply California's conflict-of-laws principle, that the law of the domicile is
determinative of interspousal capacity to sue, to this particular case. However, to do so would
violate the well-recognized principle of conflict of laws that, where the substantive law of
another state is applied, there necessarily must be excluded such foreign state's law of
conflict of laws. Restatement, Conflict of Laws, p. 11, sec. 7 (b); 11 Am. Jur., Conflict of Laws,
p. 296, sec. 3; 15 C. J. S., Conflict of Laws, p. 872, sec. 7; Griswold, Renvoi Revisited, 51
Harvard Law Review, 1165, 1170, 1173;4 and note in 18 George Washington Law Review, 559.
The reason why the authorities on conflict of laws almost universally reject the renvoi
doctrine (permitting a court
[7 Wis.2d 142]
of the forum state to apply the conflict-of-laws principle of a foreign state) is that it is likely to
result in the court pursuing a course equivalent to a never-ending circle. For example, in the
instant case, if the Buckeye v. Buckeye line of Wisconsin cases is to be followed, the
Wisconsin court first looks to the law of California to see whether a wife can sue her husband
in tort. California substantive law holds that she cannot. However, California has adopted a
conflict-of-laws principle that holds that the law of the domicile determines such question.
Applying such principle the court is referred back to Wisconsin law because Wisconsin is the
state of domicile. Again the court applies Wisconsin law and, under the prior holdings of the
Buckeye v. Buckeye line of authorities, would have to again refer to California law because
such line of cases does not recognize that the law of domicile has anything to do with
interspousal immunity, but holds that the law of the state of injury controls.
Wisconsin certainly should not adopt the much-criticized renvoi principle in order not to
overrule the Buckeye v. Buckeye line of cases, and still permit the plaintiff to recover. Such a
result we believe would contribute far more to produce chaos in the field of conflict of laws
than to overrule the Buckeye v. Buckeye line of cases and adopt a principle the soundness of
which has been commended by so many reputable authorities.
By the Court.—Judgment reversed, and cause remanded for further proceedings not
inconsistent with this opinion.
FAIRCHILD, J. (concurring).
I concur in the reversal of the judgment, but do not find it necessary to reexamine settled
Wisconsin law in order to do so. A fundamental change in the law of Wisconsin such as the
one announced by the majority in this case, which will importantly affect many people,
should be made, if at all, in
[7 Wis.2d 143]
a case where the question is necessarily presented. Both parties assumed that their case
would be decided under the principle which is being overturned by the majority, and
accordingly, we have not had the benefit of brief or argument upon the validity of the
principle.
1. Solution of this case without overruling previous decisions. Plaintiff wife alleges a personal
injury tort cause of action arising in California against defendant husband. Defendant
husband pleads that she has no cause of action because she was his wife. It has been the rule
in Wisconsin that the existence or nonexistence of immunity because of family relationship is
substantive and not merely procedural, and is to be determined by the law of the locus state.
The law of California is that the existence or nonexistence of immunity is a substantive
matter, but that it is an element of the law of status, not of tort. The tort law of California is
no more concerned with immunity than is Wisconsin's. Thus it makes no difference under the
facts of this case whether we look directly to the law of Wisconsin to determine that
immunity is not available as a defense or look to the law of Wisconsin only because California,
having no general tort principle as to immunity, classifies immunity as a matter of status.
2. Policy questions requiring full consideration. Under the principle announced by the
majority that the existence or nonexistence of immunity is a matter of status, our courts must
henceforth recognize immunity as a defense where the alleged tort occurred in Wisconsin,
but the parties are married and are domiciled in an immunity state. This would mean that
such an act is or is not a remedial wrong depending upon the state where the parties happen
to be domiciled.
The determination of domicile is not always easy, yet the courts will henceforth be required
to determine it in many cases where it has henceforth been considered immaterial.
[7 Wis.2d 144]
A good many married couples who may have domicile in other states are in Wisconsin for
extended periods. Some, for example, are students at colleges and universities, some
stationed here for military duty, some temporarily assigned here by employers, and some
vacationing. Under the rule abandoned by the majority, a tortious act done in Wisconsin by a
nonresident and injuring his spouse gave rise to the same civil liability as if done by a
permanent resident.
The problem involved apparently has its principal impact because of injuries sustained in
automobile accidents where members of a family travel together across state lines. Under the
new rule Wisconsin courts will not countenance the defense of immunity for a Wisconsin
husband when sued by his wife for an injury occurring in an immunity state. I concede there is
some merit to the logic relied upon and that there may be some practical benefit to Wisconsin
people. It is to be remembered, however, that under the law of many states a wife will have
no cause of action for simple negligence of her husband because she will be a gratuitous
guest. The fact that she and her husband are domiciled in Wisconsin and that they are on a
family trip which began in Wisconsin will not exempt her from that principle of tort law. Thus
the purely practical benefit to Wisconsin people which might appear at first blush to arise
from the new rule will be limited.
If we deem it necessary and proper at this stage to reject a well-settled rule of law, should we
limit ourselves to all the implications of the rule that the availability of the defense of
immunity is to be governed by the law of domicile ? If we have a free choice of what the law
is to be henceforth might not the public policy of Wisconsin be better served by some other
alternative ? One possible alternative is that the availability of the defense of family immunity
will be determined by the law of the forum. Actually this is
[7 Wis.2d 145]
the result reached in a good many of the decisions, although different reasons are given.
Admittedly, the proposition that family immunity is substantive and destroys or prevents the
existence of a cause of action can be supported by neater logic than a proposition that it is
only a denial of a remedy in the courts of a particular state, but these arguments are
metaphysical and might well be re-examined if greater justice would be accomplished as a
practical matter by a change in thinking.
Another possible alternative would be that the forum state when faced with the question of
immunity choose the law of whichever state (locus or domicile) conforms more closely to its
own. The party adversely affected by such a rule can be said to have subjected himself to the
law of the domicile state by choosing to live in it or to the law of the locus state by choosing
to travel in it. Our legislature has set up a similar rule for a choice of law with respect to the
mode of execution of a will outside of Wisconsin. Sec. 238.07, Stats.
In summary, I would dispose of the present case upon the theory that California law governs
the existence of the alleged cause of action and that in California the immunity question
cannot be decided by resort to the law of torts but rather the law of status. I would leave to a
later case the consideration of whether the Wisconsin rule of choice of law as to the defense
of family immunity should remain as heretofore or, if it is to be changed, which rule will be
best.
I am authorized to state that Mr. Justice BROWN concurs in this opinion.
G.R. No. L-23678 June 6, 1967
TESTATE ESTATE OF AMOS G. BELLIS, deceased.
PEOPLE'S BANK and TRUST COMPANY, executor.
MARIA CRISTINA BELLIS and MIRIAM PALMA BELLIS, oppositors-appellants,
vs.
EDWARD A. BELLIS, ET AL., heirs-appellees.
Vicente R. Macasaet and Jose D. Villena for oppositors appellants.
Paredes, Poblador, Cruz and Nazareno for heirs-appellees E. A. Bellis, et al.
Quijano and Arroyo for heirs-appellees W. S. Bellis, et al.
J. R. Balonkita for appellee People's Bank & Trust Company.
Ozaeta, Gibbs and Ozaeta for appellee A. B. Allsman.
BENGZON, J.P., J.:
This is a direct appeal to Us, upon a question purely of law, from an order of the Court of First
Instance of Manila dated April 30, 1964, approving the project of partition filed by the
executor in Civil Case No. 37089 therein.1äwphï1.ñët
The facts of the case are as follows:
Amos G. Bellis, born in Texas, was "a citizen of the State of Texas and of the United States."
By his first wife, Mary E. Mallen, whom he divorced, he had five legitimate children: Edward
A. Bellis, George Bellis (who pre-deceased him in infancy), Henry A. Bellis, Alexander Bellis
and Anna Bellis Allsman; by his second wife, Violet Kennedy, who survived him, he had three
legitimate children: Edwin G. Bellis, Walter S. Bellis and Dorothy Bellis; and finally, he had
three illegitimate children: Amos Bellis, Jr., Maria Cristina Bellis and Miriam Palma Bellis.
On August 5, 1952, Amos G. Bellis executed a will in the Philippines, in which he directed that
after all taxes, obligations, and expenses of administration are paid for, his distributable
estate should be divided, in trust, in the following order and manner: (a) $240,000.00 to his
first wife, Mary E. Mallen; (b) P120,000.00 to his three illegitimate children, Amos Bellis, Jr.,
Maria Cristina Bellis, Miriam Palma Bellis, or P40,000.00 each and (c) after the foregoing two
items have been satisfied, the remainder shall go to his seven surviving children by his first
and second wives, namely: Edward A. Bellis, Henry A. Bellis, Alexander Bellis and Anna Bellis
Allsman, Edwin G. Bellis, Walter S. Bellis, and Dorothy E. Bellis, in equal shares.1äwphï1.ñët
Subsequently, or on July 8, 1958, Amos G. Bellis died a resident of San Antonio, Texas, U.S.A.
His will was admitted to probate in the Court of First Instance of Manila on September 15,
1958.
The People's Bank and Trust Company, as executor of the will, paid all the bequests therein
including the amount of $240,000.00 in the form of shares of stock to Mary E. Mallen and to
the three (3) illegitimate children, Amos Bellis, Jr., Maria Cristina Bellis and Miriam Palma
Bellis, various amounts totalling P40,000.00 each in satisfaction of their respective legacies, or
a total of P120,000.00, which it released from time to time according as the lower court
approved and allowed the various motions or petitions filed by the latter three requesting
partial advances on account of their respective legacies.
On January 8, 1964, preparatory to closing its administration, the executor submitted and
filed its "Executor's Final Account, Report of Administration and Project of Partition" wherein
it reported, inter alia, the satisfaction of the legacy of Mary E. Mallen by the delivery to her of
shares of stock amounting to $240,000.00, and the legacies of Amos Bellis, Jr., Maria Cristina
Bellis and Miriam Palma Bellis in the amount of P40,000.00 each or a total of P120,000.00. In
the project of partition, the executor — pursuant to the "Twelfth" clause of the testator's Last
Will and Testament — divided the residuary estate into seven equal portions for the benefit
of the testator's seven legitimate children by his first and second marriages.
On January 17, 1964, Maria Cristina Bellis and Miriam Palma Bellis filed their respective
oppositions to the project of partition on the ground that they were deprived of their
legitimes as illegitimate children and, therefore, compulsory heirs of the deceased.
Amos Bellis, Jr. interposed no opposition despite notice to him, proof of service of which is
evidenced by the registry receipt submitted on April 27, 1964 by the executor.1
After the parties filed their respective memoranda and other pertinent pleadings, the lower
court, on April 30, 1964, issued an order overruling the oppositions and approving the
executor's final account, report and administration and project of partition. Relying upon Art.
16 of the Civil Code, it applied the national law of the decedent, which in this case is Texas
law, which did not provide for legitimes.
Their respective motions for reconsideration having been denied by the lower court on June
11, 1964, oppositors-appellants appealed to this Court to raise the issue of which law must
apply — Texas law or Philippine law.
In this regard, the parties do not submit the case on, nor even discuss, the doctrine of renvoi,
applied by this Court in Aznar v. Christensen Garcia, L-16749, January 31, 1963. Said doctrine
is usually pertinent where the decedent is a national of one country, and a domicile of
another. In the present case, it is not disputed that the decedent was both a national of Texas
and a domicile thereof at the time of his death.2 So that even assuming Texas has a conflict of
law rule providing that the domiciliary system (law of the domicile) should govern, the same
would not result in a reference back (renvoi) to Philippine law, but would still refer to Texas
law. Nonetheless, if Texas has a conflicts rule adopting the situs theory (lex rei sitae) calling
for the application of the law of the place where the properties are situated, renvoi would
arise, since the properties here involved are found in the Philippines. In the absence,
however, of proof as to the conflict of law rule of Texas, it should not be presumed different
from ours.3 Appellants' position is therefore not rested on the doctrine of renvoi. As stated,
they never invoked nor even mentioned it in their arguments. Rather, they argue that their
case falls under the circumstances mentioned in the third paragraph of Article 17 in relation
to Article 16 of the Civil Code.
Article 16, par. 2, and Art. 1039 of the Civil Code, render applicable the national law of the
decedent, in intestate or testamentary successions, with regard to four items: (a) the order of
succession; (b) the amount of successional rights; (e) the intrinsic validity of the provisions of
the will; and (d) the capacity to succeed. They provide that —
ART. 16. Real property as well as personal property is subject to the law of the country where
it is situated.
However, intestate and testamentary successions, both with respect to the order of
succession and to the amount of successional rights and to the intrinsic validity of
testamentary provisions, shall be regulated by the national law of the person whose
succession is under consideration, whatever may he the nature of the property and regardless
of the country wherein said property may be found.
ART. 1039. Capacity to succeed is governed by the law of the nation of the decedent.
Appellants would however counter that Art. 17, paragraph three, of the Civil Code, stating
that —
Prohibitive laws concerning persons, their acts or property, and those which have for their
object public order, public policy and good customs shall not be rendered ineffective by laws
or judgments promulgated, or by determinations or conventions agreed upon in a foreign
country.
prevails as the exception to Art. 16, par. 2 of the Civil Code afore-quoted. This is not correct.
Precisely, Congress deleted the phrase, "notwithstanding the provisions of this and the next
preceding article" when they incorporated Art. 11 of the old Civil Code as Art. 17 of the new
Civil Code, while reproducing without substantial change the second paragraph of Art. 10 of
the old Civil Code as Art. 16 in the new. It must have been their purpose to make the second
paragraph of Art. 16 a specific provision in itself which must be applied in testate and
intestate succession. As further indication of this legislative intent, Congress added a new
provision, under Art. 1039, which decrees that capacity to succeed is to be governed by the
national law of the decedent.
It is therefore evident that whatever public policy or good customs may be involved in our
System of legitimes, Congress has not intended to extend the same to the succession of
foreign nationals. For it has specifically chosen to leave, inter alia, the amount of successional
rights, to the decedent's national law. Specific provisions must prevail over general ones.
Appellants would also point out that the decedent executed two wills — one to govern his
Texas estate and the other his Philippine estate — arguing from this that he intended
Philippine law to govern his Philippine estate. Assuming that such was the decedent's
intention in executing a separate Philippine will, it would not alter the law, for as this Court
ruled in Miciano v. Brimo, 50 Phil. 867, 870, a 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 regard to those matters that
Article 10 — now Article 16 — of the Civil Code states said national law should govern.
The parties admit that the decedent, Amos G. Bellis, was a citizen of the State of Texas,
U.S.A., and that under the laws of Texas, there are no forced heirs or legitimes. Accordingly,
since the intrinsic validity of the provision of the will and the amount of successional rights
are to be determined under Texas law, the Philippine law on legitimes cannot be applied to
the testacy of Amos G. Bellis.
Wherefore, the order of the probate court is hereby affirmed in toto, with costs against
appellants. So ordered.
Pfau v. Trent Aluminum Co.
Annotate this Case
55 N.J. 511 (1970)
263 A.2d 129
STEVEN PFAU ET AL., PLAINTIFFS-APPELLANTS, v. TRENT ALUMINUM COMPANY ET AL.,
DEFENDANTS-RESPONDENTS.
The Supreme Court of New Jersey.
Argued January 20, 1970.
Decided March 17, 1970.
*513 Mr. Jacob D. Fuchsberg, of the New York Bar, argued the cause for Plaintiffs-Appellants
(Messrs. Yesko and Marcus, attorneys; Mr. Elliot F. Topper, of the New York Bar, of counsel).
Mr. Richard D. Catenacci argued the cause for Defendants-Respondents (Messrs. Pindar,
McElroy, Connell, Foley & Geiser, attorneys; Mr. John A. Pindar of counsel; Mr. Richard D.
Catenacci on the brief).
The opinion of the court was delivered by PROCTOR, J.
This appeal presents a conflct of laws problem regarding a host's liability to his guest for
negligence arising out of an automobile accident. Plaintiff, a Connecticut domiciliary, was
injured in Iowa while a passenger in an automobile driven by a New Jersey domiciliary and
owned by a New Jersey corporation. Iowa has a guest statute which provides that a host-
driver is not liable to his passenger-guest for ordinary negligence.[1] The defendants pleaded,
inter alia, the Iowa guest statute as a defense. On plaintiff's motion, Judge Demos, in the Law
Division, struck *514 this defense, holding that the New Jersey law requiring a host to use at
least ordinary care for the safety of his guest was applicable. The Appellate Division ruled that
the Iowa guest statute applied to the case and accordingly reversed and reinstated the
defense. 106 N.J. Super. 324 (1969). Plaintiff petitioned this Court for certification. Since we
were not confronted with a final judgment, we granted defendants' motion to dismiss, but
allowed plaintiff 15 days to file a motion for leave to appeal an interlocutory order. Such a
motion was filed and granted.
The facts pertinent to this appeal are undisputed. Plaintiff, Steven Pfau, a domiciliary of
Connecticut, was a student at Parsons College in Iowa, and the defendant, Bruce Trent, a
domiciliary of New Jersey, was a student at the same college. The boys met for the first time
at Parsons.
Following the Easter vacation in 1966, the defendant, Bruce Trent, drove the automobile
involved in the accident back to Iowa for his use at college. The automobile was registered in
New Jersey in the name of the Trent Aluminum Company, a New Jersey corporation owned by
Bruce's father. Bruce was using the car with the owner-corporation's consent. The vehicle was
insured in New Jersey by a New Jersey carrier.
About a month after Bruce's return to college and several days before the accident, he agreed
to drive the plaintiff to Columbia, Missouri, for a weekend visit. They never reached their
destination. Shortly after leaving Parsons on April 22, 1966, and while still in Iowa, Bruce
failed to negotiate a curve and the car he was operating collided with an oncoming vehicle
driven by Joseph Davis. Mr. Davis and his wife and child, who were Iowa domiciliaries, were
injured in the accident. Their claims have now been settled by defendants' insurance carrier.
The sole question presented by this appeal is whether the Iowa guest statute is applicable to
this action.
In Mellk v. Sarahson, 49 N.J. 226 (1967) this Court abandoned the old lex loci delicti rule for
determining choice of law in tort cases, e.g., Harber v. Graham, 105 N.J.L. *515 213, 214-215
(E. & A. 1928), 61 A.L.R. 1232 and adopted the governmental interest analysis approach. We
did so because we believed that the lex loci delicti doctrine worked unjust results in many
cases and ignored the interests which jurisdictions other than that where the tort occurred
may have in the resolution of the particular issues involved. Id. at 229. In Mellk, the plaintiff
was injured while riding as a passenger in the defendant-driver's car when it struck a parked
vehicle in Ohio. Plaintiff and defendant were both New Jersey domiciliaries and their guest-
host relationship began in this state. When the accident happened, they were returning from
a brief visit to the home of a mutual friend in Wisconsin. Defendant's automobile was insured
and registered in New Jersey. In those circumstances we declined to apply the Ohio guest
statute. The purposes discerned in the Ohio statute by that state's own courts were the
prevention of collusive suits and the preclusion of suits by "ungrateful guests." Since both
plaintiff and defendant were New Jersey domiciliaries and since the car was insured in New
Jersey, we did not believe that Ohio had any interest in the application of its guest statute to
the case. Instead, we applied New Jersey's strong declared policy of requiring a host to
exercise at least ordinary care for the safety of his guest. Cohen v. Kaminetsky, 36 N.J. 276,
283 (1961).
Our decision in Mellk followed Babcock v. Jackson, 12 N.Y.2d 473, 240 N.Y.S.2d 743, 191
N.E.2d 279 (1963) in which the New York Court of Appeals rejected the traditional choice of
law rule which looked invariably to the place of the tort, and reached the same result as Mellk
on similar facts. There, two New York residents began an automobile trip from that state to
Ontario. The plaintiff, a guest in defendant's car, was injured when the defendant-driver
struck a stone wall in Ontario. Although the Ontario statute barred any recovery by a guest-
passenger against a host-driver, the court applied New York law which permitted the guest to
sue his host. Babcock achieved widespread acclaim from legal scholars, e.g., Cavers,
Cheatham, Currie, *516 Ehrenzweig, Leflar and Reese, "Comments on Babcock v. Jackson," 63
Colum. L. Rev. 1212 (1963), and New York has continued to apply the Babcock approach in
subsequent decisions. See Dym v. Gordon, 16 N.Y.2d 120, 262 N.Y.S.2d 463, 209 N.E.2d 792
(Ct. App. 1965); Macey v. Rozbicki, 18 N.Y.2d 289, 274 N.Y.S.2d 591, 221 N.E.2d 380 (Ct. App.
1966); Tooker v. Lopez, 24 N.Y 2d 569, 301 N.Y.S.2d 519, 249 N.E.2d 394 (Ct. App. 1969). These
post-Babcock decisions have indicated some of the difficulties which are inevitable when a
court applies a new approach to various factual patterns. We are faced with the same
problem in the present case, for defendants do not argue that New Jersey should return to lex
loci delicti; they disagree, however, with the plaintiff over what state's law modern conflicts
principles dictate should be applied.
In order to determine whether the Iowa guest statute should apply to this case, we must first
examine its purposes as articulated by the Iowa courts. See Mellk v. Sarahson, supra, 49 N.J.,
at 230. These purposes are: "to cut down litigation arising from the commendable unselfish
practice of sharing with others transportation in one's vehicle and protect the Good
Samaritan from claims based on negligence by those invited to ride as a courtesy,"
Rainsbarger v. Shepherd, 254 Iowa 486, 492, 118 N.W.2d 41, 44, 1 A.L.R.3d 1074 (1962); to
prevent ingratitude by guests, Knutson v. Lurie, 217 Iowa 192, 195, 251 N.W. 147, 149 (1933);
to prevent suits by hitchhikers, Id.; "to prevent collusion suits by friends and relatives
resulting in excessively high insurance rates," Hardwick v. Bublitz, 253 Iowa 49, 54, 111
N.W.2d 309, 312 (1961).
The above policies expressed by the Iowa courts would not appear to be relevant to the
present matter. This action will not increase litigation in the Iowa courts; no hitchhiker is
involved; no Iowa insurer will be subjected to a "collusive suit" since the insurer is a New
Jersey corporation; there is no "Good Samaritan" Iowa host-driver to be protected; and
finally, there is no Iowa guest displaying his "ingratitude" *517 by suing for ordinary
negligence. The desire of Iowa to prevent collusive suits and suits by ungrateful guests and to
cut down litigation would ordinarily apply to Iowa domiciliaries, defendants insuring motor
vehicles there, and persons suing in its courts. Melik v. Sarahson, supra, 49 N.J., at 231.
Defendants contend, however, that application of the Iowa guest statute is required because
the plaintiff and the individual defendant were residing in Iowa at the time of the accident,
because the host-guest relationship began and ended in Iowa, and because non-guest Iowa
domiciliaries were injured in the accident. These factors were treated as significant in the
post-Babcock decision of Dym v. Gordon, supra.
In Dym the plaintiff sued for injuries which she suffered in a collision between two
automobiles in Colorado. Both the plaintiff-guest and the defendant-host were New York
domiciliaries who were attending summer school at the University of Colorado when the
accident occurred. They had gone separately to Colorado. The defendant was driving the
plaintiff to a nearby golf course when the car they were riding in collided with another
vehicle. Defendant's car was registered and insured in New York and he had brought it to
Colorado for use at college. After returning to New York, the plaintiff brought suit to recover
for her injuries. Defendant pleaded the Colorado guest statute which required a showing of
intentional misconduct, intoxication, or "negligence consisting of a willful and wanton
disregard of the rights of others" in order for a guest to recover from his host.
In a four to three decision, the New York Court of Appeals held that the Colorado guest
statute was applicable. The majority reasoned that the statute was based on three policy
considerations, i.e., "the protection of Colorado drivers and their insurance carriers against
fraudulent claims, the prevention of suits by `ungrateful guests', and the priority of injured
parties in other cars in the assets of the negligent *518 defendant." 16 N.Y.2d at 124, 262
N.Y.S.2d at 466, 209 N.E.2d at 794. Since another vehicle was involved in the accident, the
majority believed that the policy of priority of claims was a significant factor. The majority
also noted that the parties had become temporary residents of Colorado, and that the host-
guest relationship began and ended in that state. This latter factor the seat of the relationship
was strongly emphasized.
In a dissent, Judge Fuld (now Chief Judge) contended that the case was not materially
distinguishable from Babcock, supra. He noted that the majority's conclusion that Colorado's
guest statute envisioned a third party priority policy found no support in any judicial or
legislative pronouncements in Colorado. 16 N.Y.2d at 132, 262 N.Y.S.2d at 473, 209 N.E.2d at
799.
In the later case of Macey v. Rozbicki, supra, the same court, in a six to one decision,
substantially narrowed Dym. In Macey, the defendants, husband and wife, were New York
domiciliaries who were vacationing at their summer home in Ontario. They invited the
plaintiff, who was the wife's sister and who was also a New York domiciliary, to spend a 10-
day vacation with them. During this visit the plaintiff was injured while riding as a passenger
when defendants' automobile collided with another vehicle owned and operated by a
Canadian. The plaintiff and wife defendant had intended to drive to church in nearby Niagara
Falls, Ontario, and then return to the defendants' summer home. Plaintiff sued in New York
and the defendants pleaded the Ontario guest act which immunizes an automobile owner and
driver from liability for personal injury to or death of his guest. The court held that New York
law permitting a guest to sue his host for ordinary negligence was applicable and rejected the
defense of the Ontario guest statute. That the trip in question was to begin and end in Canada
was said to be "not particularly significant," since the parties were living permanently in New
York and "undoubtedly" had made the plans for the plaintiff's visit in New York. 18 N.Y.2d at
*519 292, 274 N.Y.S.2d at 593, 221 N.E.2d at 381. The court distinguished Dym by saying that
in that case the principal situs of the relationship was in Colorado. No mention was made of
any priority of claims theory based on the Canadian car involved in the accident.
In a concurring opinion Judge Keating pointed out that Dym and Macey were
indistinguishable except for two facts: 1) in Dym, there was no prior arrangement for the
plaintiff and defendant to meet in Colorado; and 2) that the parties in Dym were going to
reside in Colorado for a longer period of time. He could not accept the majority's conclusion
that these factors were grounds for a valid distinction. He reasoned that where the parties
were New York domiciliaries and the automobile was insured under the laws of that state, the
"seat of the relationship was irrelevant." Accordingly, he thought that Dym should no longer
be followed. 18 N.Y.2d, at 296-298, 274 N.Y.S.2d, at 596-598, 221 N.E.2d, at 384-385.
Most recently, the New York Court of Appeals decided Tooker v. Lopez, supra, which explicitly
rejected the rationale and holding of Dym. 24 N.Y.2d, at 574-575, 301 N.Y.S.2d, at 523, 249
N.E.2d, at 394. See also the concurring opinion of Judge Burke who wrote for the majority in
Dym, 23 N.Y.2d, at 591, 301 N.Y.S.2d, at 538, 249 N.E.2d, at 407-408. In Tooker, Catharina
Tooker, a student at Michigan State University, was killed when the car in which she was a
passenger overturned after the driver had lost control of the vehicle while attempting to pass
another car. The driver, Marcia Lopez, was also killed and another passenger, Susan Silk, was
seriously injured. The two girls were classmates of Miss Tooker at the University. At the time
of the accident they were en route from the University to Detroit, Michigan, to spend a
weekend. Miss Tooker and Miss Lopez were both New York domiciliaries. The automobile
which Miss Lopez was driving belonged to her father who lived in New York, where the car
was registered and insured.
*520 The administrator of Miss Tooker's estate sued for wrongful death. The defendant
pleaded as a defense the Michigan guest statute which bars a guest's recovery from his host
for ordinary negligence.
Judge Keating, this time writing for the majority of the court, held that the New York standard
of ordinary care for a guest was applicable to the case and that Michigan's guest statute could
not be raised as a defense. The court held that in light of the policy considerations which
underlie the ostensibly conflicting laws of Michigan and New York, it was clear that the latter
had the only real interest in whether recovery should be granted. Judge Keating reasoned
that the application of Michigan law would defeat New York's legitimate interest without
serving any legitimate interest of Michigan. He identified New York's interest as its strong
policy of holding all drivers of motor vehicles financially responsible for their negligent acts
irrespective of the guest status of the victims. Michigan, on the other hand, had no interest in
whether a New York plaintiff is denied recovery against a New York defendant where the car
was insured in New York. He rejected as "plainly irrevelant" the fact that the deceased guest
and driver were residing in Michigan for an extended period of time. 24 N.Y.2d, at 577, 301
N.Y.S.2d, at 525, 249 N.E.2d 399. Although Judge Keating did not specifically treat the "seat of
the relationship" factor, i.e., that the trip was arranged for and began and ended in Michigan,
it is obvious that he considered this factor equally irrevelant. Judge Burke in his concurring
opinion, while marking the passing of Dym with regret, conceded that the "origin of the
relationship" could not be considered in an interest analysis approach. 24 N.Y.2d, at 590-591,
301 N.Y.S.2d, at 537-538, 249 N.E.2d, at 407-408.
Finally, Judge Keating abjured the third-party-fund theory enunciated in Dym, saying:
*521 If the purpose of the statute is to protect the rights of the injured "non-guest", as
opposed to the owner or his insurance carrier, we fail to perceive any rational basis for
predicating that protection on the degree of negligence which the guest is able to establish.
24 N.Y.2d at 575, 301 N.Y.S.2d at 524, 249 N.E.2d at 397.
In Mullane v. Stavola, 101 N.J. Super. 184 (Law Div. 1968), a pre-Tooker decision, Judge
Halpern, sitting in the Law Division in our state, reached the same result on similar facts.
There, plaintiffs-guests and defendant-host were all New Jersey domiciliaries in attendance at
St. Leo's College in Florida. The defendants' vehicle was registered and insured in New Jersey.
While returning to the campus from Dade City, Florida, the automobile operated by the
defendant, William Stavola, and owned by his mother, Mary Stavola, collided with a
telephone pole. Utilizing the same governmental-interest analysis approach taken later in
Tooker, the court refused to apply Florida's guest statute which barred guests' suits for the
ordinary negligence of their hosts. Judge Halpern reasoned that since all of the parties were
domiciled here and since the car was registered and insured here, New Jersey had the
"paramount governmental interest, or concern, in fixing the rights and liabilities between the
parties." Id., at 187-189. He explicitly rejected the result and rationale in Dym.
We are in accord with both Tooker and Mullane. While Iowa was the "seat of the
relationship" in the instant case, this "contact" does not relate to any interest or policy
behind Iowa's guest statute. Nor do we attach any importance to the temporary Iowa
residence of plaintiff and defendant. Both parties were still permanently domiciled in other
states which retained interests. Moreover, the insurer is a New Jersey corporation which
issued its policy at rates applicable to New Jersey. See Ehrenzweig, "Guest Statutes in the
Conflict of Laws Towards a Theory of Enterprise Liability Under `Foreseeable and Insurable
Laws,'" 69 Yale L.J. 595, 603 (1960). Iowa's interest in these temporary residents is limited to
enforcement of its *522 rules of the road at least where the litigation is not in that state.[2]
Finally, we are not persuaded by the third-party-fund theory. Iowa has never expressed such
a purpose behind its guest statute, and it is not appropriate for us to impute inarticulated
purposes to the legislature of another state. See Comment, "Conflict of Laws Two Case
Studies in Governmental-Interest Analysis," 65 Colum. L. Rev. 1448, 1459 (1965). The danger
of injured Iowa domiciliaries being deprived of available funds because of recovery by the
negligent driver's guest is merely speculative. If Iowa had identified the protection of these
third parties as a policy underlying its guest statute, we could still give effect to that policy by
giving priority to the third party's judgment lien against defendant's assets. See Baade,
"Counter-Revolution or Alliance For Progress? Reflections on Reading Cavers, The Choice-of-
Law Process," 46 Tex. L. Rev. 141, 168 (1967). We need not decide whether such a procedure
is the proper solution to this problem because the claims of the Iowa domiciliaries have been
settled.[3]
It is clear to us that Iowa has no interest in this suit. Recovery for negligence in this action will
not transgress any of the purposes behind Iowa's guest statute as enunciated by that state's
courts or legislature, and will not in the slightest impair traffic safety in Iowa. Nor do we
believe that the reasons urged by defendants for applying Iowa law *523 are valid. We are
convinced that if the plaintiff were a New Jersey domiciliary Iowa's guest statute would be
inapplicable.
In this case, however, we are faced with a more complex situation since plaintiff is a
domiciliary of Connecticut. Thus, we must consider the law of both New Jersey and
Connecticut. Connecticut long ago repealed its guest statute, Con. Public Acts, 1931, Chap.
270, 1937 Supp. § 351d repealing § 1628, and now permits guest-passengers to recover from
their host-drivers for ordinary negligence. See Massa v. Nastri, 125 Conn. 144, 3 A.2d 839, 120
A.L.R. 939 (1939); Laube v. Stevenson, 137 Conn. 469, 475-476, 78 A.2d 693, 697, 25 A.L.R.2d
592 (1951). There is no doubt that if this plaintiff-guest had been injured in a Connecticut
accident by a Connecticut host-driver, there would be no bar to recover for ordinary
negligence if suit were brought in that state. See Palombizio v. Murphy, 146 Conn. 352, 150
A.2d 825, 73 A.L.R.2d 1173 (1959); Costanzo v. Sturgill, 145 Conn. 92, 139 A.2d 51 (1958).
Turning to New Jersey's law, we are led to Cohen v. Kaminetsky, supra, where we held that
the strong policy of this state is to allow a guest-passenger to be compensated by his host-
driver in cases of ordinary negligence. Thus, the substantive laws of Connecticut and New
Jersey are in accord.
In Reich v. Purcell, 67 Cal. 2d 551, 63 Cal. Rptr. 31, 432 P.2d 727 (1967), commented on by
Cavers, Cheatham, D. Currie, Ehrenzweig, Gorman, Horowitz, Kay, Leflar, Rosenberg, Scoles,
Trautman, and Weintraub in 15 U.C.L.A.L. Rev. 551 (1968), the California Supreme Court was
faced with a situation similar in principle to the present case. There the court dealt with a
Missouri statute which limited damages for wrongful death. Lee and Jeffry Reich, father and
son, brought a wrongful death action for damages arising out of a head-on collision between
two automobiles in Missouri. One of the automobiles was owned and operated by the
defendant, a domiciliary of California, *524 who was on his way to a vacation in Illinois. The
other automobile was owned and operated by plaintiffs' decedent, Mrs. Reich. The Reichs
were domiciled in Ohio and Mrs. Reich and her two children were on their way to California
where the family was contemplating settling. Mrs. Reich and one child were killed in the
collision. Plaintiffs later became California domiciliaries. The estates of Mrs. Reich and the
deceased child were being administered in Ohio. Neither Ohio nor California limits recovery in
wrongful death actions. Missouri's statute limits damages in such cases to a maximum of
$25,000. It was stipulated that the damages for Mrs. Reich's death were substantially in
excess of that amount.
Writing for a unanimous court Chief Justice Traynor rejected defendant's contention that the
Missouri ceiling applied. The court held that Missouri had no substantial interest in extending
the benefits of its statute to travelers from states having no similar limitation. Having
resolved that Missouri law did not apply, Justice Traynor next examined the interests of
California and Ohio. He refused to give any weight to the plaintiffs' California domicile since
they had moved to California after the accident. Nor did he believe that defendant's California
domicile was significant since that state did not have any limitation on damages to protect its
defendants. Accordingly, he concluded that Ohio, the state of decedents' domicile at the time
of the accident, was the only interested state and that its law should apply to the case.
It may well be that in this case, however, New Jersey has an interest. We are not certain that
a defendant's domicile lacks an interest in seeing that its domiciliaries are held to the full
measure of damages or the standard of care which that state's law provide for. A state should
not only be concerned with the protection and self-interest of its citizens. See Tooker v.
Lopez, 24 N.Y.2d, at 577, 301 N.Y.S.2d, at 525-526, 249 N.E.2d, at 399. In Cohen v. *525
Kaminetsky, supra, we emphasized a host's duty to his guests. There we said: "We see no
reason why the host should be less vigilant for his own guest than he must be for the guest in
another car. The duty to exercise reasonable care is as appropriate in the one situation as in
the other." 36 N.J., at 283. It would not seem just to limit the imposition of this duty to
instances where a New Jersey host negligently injures a New Jersey guest in a state which has
a guest statute. See Mellk v. Sarahson, supra. Therefore, if Connecticut had a guest statute in
this case, we would be forced to choose between our state's policy of holding our hosts to a
duty of ordinary care and Connecticut's policy of denying a guest recovery for the ordinary
negligence of his host and we might have a true conflict. But since Connecticut has the same
policy of applying principles of ordinary negligence to the host-guest relationship as does New
Jersey, this case presents a false conflict and it is unnecessary for use to decide whether this
state has an interest sufficient to warrant application of its law. See Leflar, American Conflicts
Law at 328-29.
It would appear that Connecticut's substantive law allowing a guest to recover for his host's
ordinary negligence would give it a significant interest in having that law applied to this case.
Defendants argue, however, that if we apply Connecticut's substantive law, we should apply
its choice-of-law rule as well. In other words, they contend Connecticut's interest in its
domiciliaries is identified not only by its substantive law, but by its choice-of-law rule.
Connecticut adheres to lex loci delicti and according to its decisions would most likely apply
the substantive law of Iowa in this case. E.g., Landers v. Landers, 153 Conn. 303, 216 A.2d 183
(1966). Defendants contend that plaintiff should not be allowed to recover when he could not
do so in either Iowa where the accident occurred or in Connecticut where he is domiciled. We
cannot agree for two reasons. First, it is not definite that plaintiff would be unable to recover
in either *526 of those states.[4] More importantly, however, we see no reason for applying
Connecticut's choice-of-law rule. To do so would frustrate the very goals of governmental-
interest analysis. Connecticut's choice-of-law rule does not identify that state's interest in the
matter. Lex loci delicti was born in an effort to achieve simplicity and uniformity, and does not
relate to a state's interest in having its law applied to given issues in a tort case. See B. Currie,
"The Disinterested Third State," 28 Law & Contemp. Prob. 754, 784-85 (1963); Cavers, The
Choice-of-Law Process at 106; Ehrenzweig, Conflict of Laws at 235; Comment, "False
Conflicts," 55 Calif. L. Rev. 74, 84-85 (1967). It is significant that in Reich v. Purcell, supra, the
California Supreme Court applied the substantive law of Ohio to the Missouri accident. The
court did not apply Ohio's choice-of-law rule which was lex loci delicti, and would have called
for application of the Missouri limitation on damages. Lyons v. Lyons, 2 Ohio St.2d 243, 208
N.E.2d 533 (1965). Professor Kay in her comment on Reich v. Purcell was in agreement with
*527 the above authorities that only the foreign substantive law should be applied, and she
agreed with the court in Reich that Ohio's choice-of-law rule should be ignored. Kay,
"Comment on Reich v. Purcell," 15 U.C.L.A.L. Rev., supra at 589 n. 31 See also Haumschild v.
Continental Casualty Co., 7 Wis.2d 130, 95 N.W.2d 814 (1959).
We conclude that since Iowa has no interest in this litigation, and since the substantive laws
of Connecticut and New Jersey are the same, this case presents a false conflict and the
Connecticut plaintiff should have the right to maintain an action for ordinary negligence in
our courts. In this situation principles of comity, and perhaps the equal protection and
privileges and immunities clauses of the Constitution, dictate that we should afford the
Connecticut plaintiff the same protection a New Jersey plaintiff would be given. Cavers, The
Choice-of-Law Process, 144 n. 8, 299 n. 14 (1965).
For the reasons expressed the order of the Appellate Division is reversed and the order of the
trial court striking the separate defense of the Iowa guest statute is reinstated.
For reversal Chief Justice WEINTRAUB and Justices JACOBS, FRANCIS, PROCTOR, HALL,
SCHETTINO and HANEMAN 7.
For affirmance NONE.
PAULA T. LLORENTE, petitioner, vs. COURT OF APPEALS and ALICIA F. LLORENTE, respondents.
DECISION
PARDO, J.:
The Case
The case raises a conflict of laws issue.
What is before us is an appeal from the decision of the Court of Appeals[1] modifying that of
the Regional Trial Court, Camarines Sur, Branch 35, Iriga City[2] declaring respondent Alicia F.
Llorente (herinafter referred to as Alicia), as co-owners of whatever property she and the
deceased Lorenzo N. Llorente (hereinafter referred to as Lorenzo) may have acquired during
the twenty-five (25) years that they lived together as husband and wife.
The Facts
The deceased Lorenzo N. Llorente was an enlisted serviceman of the United States Navy from
March 10, 1927 to September 30, 1957.[3]
On February 22, 1937, Lorenzo and petitioner Paula Llorente (hereinafter referred to as Paula)
were married before a parish priest, Roman Catholic Church, in Nabua, Camarines Sur.[4]
Before the outbreak of the Pacific War, Lorenzo departed for the United States and Paula
stayed in the conjugal home in barrio Antipolo, Nabua, Camarines Sur.[5]
On November 30, 1943, Lorenzo was admitted to United States citizenship and Certificate of
Naturalization No. 5579816 was issued in his favor by the United States District Court,
Southern District of New York.[6]
Upon the liberation of the Philippines by the American Forces in 1945, Lorenzo was granted
an accrued leave by the U. S. Navy, to visit his wife and he visited the Philippines.[7] He
discovered that his wife Paula was pregnant and was living in and having an adulterous
relationship with his brother, Ceferino Llorente.[8]
On December 4, 1945, Paula gave birth to a boy registered in the Office of the Registrar of
Nabua as Crisologo Llorente, with the certificate stating that the child was not legitimate and
the line for the fathers name was left blank.[9]
Lorenzo refused to forgive Paula and live with her. In fact, on February 2, 1946, the couple
drew a written agreement to the effect that (1) all the family allowances allotted by the
United States Navy as part of Lorenzos salary and all other obligations for Paulas daily
maintenance and support would be suspended; (2) they would dissolve their marital union in
accordance with judicial proceedings; (3) they would make a separate agreement regarding
their conjugal property acquired during their marital life; and (4) Lorenzo would not prosecute
Paula for her adulterous act since she voluntarily admitted her fault and agreed to separate
from Lorenzo peacefully. The agreement was signed by both Lorenzo and Paula and was
witnessed by Paulas father and stepmother. The agreement was notarized by Notary Public
Pedro Osabel.[10]
Lorenzo returned to the United States and on November 16, 1951 filed for divorce with the
Superior Court of the State of California in and for the County of San Diego. Paula was
represented by counsel, John Riley, and actively participated in the proceedings. On
November 27, 1951, the Superior Court of the State of California, for the County of San Diego
found all factual allegations to be true and issued an interlocutory judgment of divorce.[11]
On December 4, 1952, the divorce decree became final.[12]
In the meantime, Lorenzo returned to the Philippines.
On January 16, 1958, Lorenzo married Alicia F. Llorente in Manila.[13] Apparently, Alicia had
no knowledge of the first marriage even if they resided in the same town as Paula, who did
not oppose the marriage or cohabitation.[14]
From 1958 to 1985, Lorenzo and Alicia lived together as husband and wife.[15] Their twenty-
five (25) year union produced three children, Raul, Luz and Beverly, all surnamed Llorente.[16]
On March 13, 1981, Lorenzo executed a Last Will and Testament. The will was notarized by
Notary Public Salvador M. Occiano, duly signed by Lorenzo with attesting witnesses Francisco
Hugo, Francisco Neibres and Tito Trajano. In the will, Lorenzo bequeathed all his property to
Alicia and their three children, to wit:
(1) I give and bequeath to my wife ALICIA R. FORTUNO exclusively my residential house and
lot, located at San Francisco, Nabua, Camarines Sur, Philippines, including ALL the personal
properties and other movables or belongings that may be found or existing therein;
(2) I give and bequeath exclusively to my wife Alicia R. Fortuno and to my children, Raul F.
Llorente, Luz F. Llorente and Beverly F. Llorente, in equal shares, all my real properties
whatsoever and wheresoever located, specifically my real properties located at Barangay Aro-
Aldao, Nabua, Camarines Sur; Barangay Paloyon, Nabua, Camarines Sur; Barangay Baras, Sitio
Puga, Nabua, Camarines Sur; and Barangay Paloyon, Sitio Nalilidong, Nabua, Camarines Sur;
(3) I likewise give and bequeath exclusively unto my wife Alicia R. Fortuno and unto my
children, Raul F. Llorente, Luz F. Llorente and Beverly F. Llorente, in equal shares, my real
properties located in Quezon City Philippines, and covered by Transfer Certificate of Title No.
188652; and my lands in Antipolo, Rizal, Philippines, covered by Transfer Certificate of Title
Nos. 124196 and 165188, both of the Registry of Deeds of the province of Rizal, Philippines;
(4) That their respective shares in the above-mentioned properties, whether real or personal
properties, shall not be disposed of, ceded, sold and conveyed to any other persons, but could
only be sold, ceded, conveyed and disposed of by and among themselves;
(5) I designate my wife ALICIA R. FORTUNO to be the sole executor of this my Last Will and
Testament, and in her default or incapacity of the latter to act, any of my children in the order
of age, if of age;
(6) I hereby direct that the executor named herein or her lawful substitute should served (sic)
without bond;
(7) I hereby revoke any and all my other wills, codicils, or testamentary dispositions
heretofore executed, signed, or published, by me;
(8) It is my final wish and desire that if I die, no relatives of mine in any degree in the
Llorentes Side should ever bother and disturb in any manner whatsoever my wife Alicia R.
Fortunato and my children with respect to any real or personal properties I gave and
bequeathed respectively to each one of them by virtue of this Last Will and Testament.[17]
On December 14, 1983, Lorenzo filed with the Regional Trial Court, Iriga, Camarines Sur, a
petition for the probate and allowance of his last will and testament wherein Lorenzo moved
that Alicia be appointed Special Administratrix of his estate.[18]
On January 18, 1984, the trial court denied the motion for the reason that the testator
Lorenzo was still alive.[19]
On January 24, 1984, finding that the will was duly executed, the trial court admitted the will
to probate.[20]
On June 11, 1985, before the proceedings could be terminated, Lorenzo died.[21]
On September 4, 1985, Paula filed with the same court a petition[22] for letters of
administration over Lorenzos estate in her favor. Paula contended (1) that she was Lorenzos
surviving spouse, (2) that the various property were acquired during their marriage, (3) that
Lorenzos will disposed of all his property in favor of Alicia and her children, encroaching on
her legitime and 1/2 share in the conjugal property.[23]
On December 13, 1985, Alicia filed in the testate proceeding (Sp. Proc. No. IR-755), a petition
for the issuance of letters testamentary.[24]
On October 14, 1985, without terminating the testate proceedings, the trial court gave due
course to Paulas petition in Sp. Proc. No. IR-888.[25]
On November 6, 13 and 20, 1985, the order was published in the newspaper Bicol Star.[26]
On May 18, 1987, the Regional Trial Court issued a joint decision, thus:
Wherefore, considering that this court has so found that the divorce decree granted to the
late Lorenzo Llorente is void and inapplicable in the Philippines, therefore the marriage he
contracted with Alicia Fortunato on January 16, 1958 at Manila is likewise void. This being so
the petition of Alicia F. Llorente for the issuance of letters testamentary is denied. Likewise,
she is not entitled to receive any share from the estate even if the will especially said so her
relationship with Lorenzo having gained the status of paramour which is under Art. 739 (1).
On the other hand, the court finds the petition of Paula Titular Llorente, meritorious, and so
declares the intrinsic disposition of the will of Lorenzo Llorente dated March 13, 1981 as void
and declares her entitled as conjugal partner and entitled to one-half of their conjugal
properties, and as primary compulsory heir, Paula T. Llorente is also entitled to one-third of
the estate and then one-third should go to the illegitimate children, Raul, Luz and Beverly, all
surname (sic) Llorente, for them to partition in equal shares and also entitled to the remaining
free portion in equal shares.
Petitioner, Paula Llorente is appointed legal administrator of the estate of the deceased,
Lorenzo Llorente. As such let the corresponding letters of administration issue in her favor
upon her filing a bond in the amount (sic) of P100,000.00 conditioned for her to make a return
to the court within three (3) months a true and complete inventory of all goods, chattels,
rights, and credits, and estate which shall at any time come to her possession or to the
possession of any other person for her, and from the proceeds to pay and discharge all debts,
legacies and charges on the same, or such dividends thereon as shall be decreed or required
by this court; to render a true and just account of her administration to the court within one
(1) year, and at any other time when required by the court and to perform all orders of this
court by her to be performed.
On the other matters prayed for in respective petitions for want of evidence could not be
granted.
SO ORDERED.[27]
In time, Alicia filed with the trial court a motion for reconsideration of the aforequoted
decision.[28]
On September 14, 1987, the trial court denied Alicias motion for reconsideration but modified
its earlier decision, stating that Raul and Luz Llorente are not children legitimate or otherwise
of Lorenzo since they were not legally adopted by him.[29] Amending its decision of May 18,
1987, the trial court declared Beverly Llorente as the only illegitimate child of Lorenzo,
entitling her to one-third (1/3) of the estate and one-third (1/3) of the free portion of the
estate.[30]
On September 28, 1987, respondent appealed to the Court of Appeals.[31]
On July 31, 1995, the Court of Appeals promulgated its decision, affirming with modification
the decision of the trial court in this wise:
WHEREFORE, the decision appealed from is hereby AFFIRMED with the MODIFICATION that
Alicia is declared as co-owner of whatever properties she and the deceased may have
acquired during the twenty-five (25) years of cohabitation.
SO ORDERED.[32]
On August 25, 1995, petitioner filed with the Court of Appeals a motion for reconsideration of
the decision.[33]
On March 21, 1996, the Court of Appeals,[34] denied the motion for lack of merit.
Hence, this petition.[35]
The Issue
Stripping the petition of its legalese and sorting through the various arguments raised,[36] the
issue is simple. Who are entitled to inherit from the late Lorenzo N. Llorente?
We do not agree with the decision of the Court of Appeals. We remand the case to the trial
court for ruling on the intrinsic validity of the will of the deceased.
The Applicable Law
The fact that the late Lorenzo N. Llorente became an American citizen long before and at the
time of: (1) his divorce from Paula; (2) marriage to Alicia; (3) execution of his will; and (4)
death, is duly established, admitted and undisputed.
Thus, as a rule, issues arising from these incidents are necessarily governed by foreign law.
The Civil Code clearly provides:
Art. 15. Laws relating to family rights and duties, or to the status, condition and legal capacity
of persons are binding upon citizens of the Philippines, even though living abroad.
Art. 16. Real property as well as personal property is subject to the law of the country where
it is situated.
However, intestate and testamentary succession, both with respect to the order of succession
and to the amount of successional rights and to the intrinsic validity of testamentary
provisions, shall be regulated by the national law of the person whose succession is under
consideration, whatever may be the nature of the property and regardless of the country
wherein said property may be found. (emphasis ours)
True, foreign laws do not prove themselves in our jurisdiction and our courts are not
authorized to take judicial notice of them. Like any other fact, they must be alleged and
proved.[37]
While the substance of the foreign law was pleaded, the Court of Appeals did not admit the
foreign law. The Court of Appeals and the trial court called to the fore the renvoi doctrine,
where the case was referred back to the law of the decedents domicile, in this case, Philippine
law.
We note that while the trial court stated that the law of New York was not sufficiently
proven, in the same breath it made the categorical, albeit equally unproven statement that
American law follows the domiciliary theory hence, Philippine law applies when determining
the validity of Lorenzos will.[38]
First, there is no such thing as one American law. The "national law" indicated in Article 16 of
the Civil Code cannot possibly apply to general American law. There is no such law governing
the validity of testamentary provisions in the United States. Each State of the union has its
own law applicable to its citizens and in force only within the State. It can therefore refer to
no other than the law of the State of which the decedent was a resident.[39] Second, there is
no showing that the application of the renvoi doctrine is called for or required by New York
State law.
The trial court held that the will was intrinsically invalid since it contained dispositions in
favor of Alice, who in the trial courts opinion was a mere paramour. The trial court threw the
will out, leaving Alice, and her two children, Raul and Luz, with nothing.
The Court of Appeals also disregarded the will. It declared Alice entitled to one half (1/2) of
whatever property she and Lorenzo acquired during their cohabitation, applying Article 144 of
the Civil Code of the Philippines.
The hasty application of Philippine law and the complete disregard of the will, already
probated as duly executed in accordance with the formalities of Philippine law, is fatal,
especially in light of the factual and legal circumstances here obtaining.
Validity of the Foreign Divorce
In Van Dorn v. Romillo, Jr.[40] we held 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 policy and
morality. In the same case, the Court ruled that aliens may obtain divorces abroad, provided
they are valid according to their national law.
Citing this landmark case, the Court held in Quita v. Court of Appeals,[41] that once proven
that respondent was no longer a Filipino citizen when he obtained the divorce from
petitioner, the ruling in Van Dorn would become applicable and petitioner could very well
lose her right to inherit from him.
In Pilapil v. Ibay-Somera,[42] we recognized the divorce obtained by the respondent in his
country, the Federal Republic of Germany. There, we stated that divorce and its legal effects
may be recognized in the Philippines insofar as respondent is concerned in view of the
nationality principle in our civil law on the status of persons.
For failing to apply these doctrines, the decision of the Court of Appeals must be reversed.[43]
We hold that the divorce obtained by Lorenzo H. Llorente from his first wife Paula was valid
and recognized in this jurisdiction as a matter of comity. Now, the effects of this divorce (as to
the succession to the estate of the decedent) are matters best left to the determination of the
trial court.
Validity of the Will
The Civil Code provides:
Art. 17. The forms and solemnities of contracts, wills, and other public instruments shall be
governed by the laws of the country in which they are executed.
When the acts referred to are executed before the diplomatic or consular officials of the
Republic of the Philippines in a foreign country, the solemnities established by Philippine laws
shall be observed in their execution. (underscoring ours)
The clear intent of Lorenzo to bequeath his property to his second wife and children by her is
glaringly shown in the will he executed. We do not wish to frustrate his wishes, since he was a
foreigner, not covered by our laws on family rights and duties, status, condition and legal
capacity.[44]
Whether the will is intrinsically valid and who shall inherit from Lorenzo are issues best
proved by foreign law which must be pleaded and proved. Whether the will was executed in
accordance with the formalities required is answered by referring to Philippine law. In fact,
the will was duly probated.
As a guide however, the trial court should note that whatever public policy or good customs
may be involved in our system of legitimes, Congress did not intend to extend the same to the
succession of foreign nationals. Congress specifically left the amount of successional rights to
the decedent's national law.[45]
Having thus ruled, we find it unnecessary to pass upon the other issues raised.
The Fallo
WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals in CA-G. R. SP No.
17446 promulgated on July 31, 1995 is SET ASIDE.
In lieu thereof, the Court REVERSES the decision of the Regional Trial Court and RECOGNIZES
as VALID the decree of divorce granted in favor of the deceased Lorenzo N. Llorente by the
Superior Court of the State of California in and for the County of San Diego, made final on
December 4, 1952.
Further, the Court REMANDS the cases to the court of origin for determination of the intrinsic
validity of Lorenzo N. Llorentes will and determination of the parties successional rights
allowing proof of foreign law with instructions that the trial court shall proceed with all
deliberate dispatch to settle the estate of the deceased within the framework of the Rules of
Court.
No costs.
SO ORDERED.