CONFLICT OF LAWS (2019) MIDTERM REVIEWER
JOSEPH RANDI TORREGOSA
CONFLICT OF LAWS
INTRODUCTION
STAGES IN THE RESOLUTION OF A COL PROBLEM
1. Determination of jurisdiction
2. Choice of law
3. Enforcement of judgment
DETERMINATION OF JURISDICTION
CHOICE OF LAW
Cases where public policy prevailed over foreign law
BANK OF AMERICA, NT and SA vs. AMERICAN
REALTY CORP & CA
(Collection suits sa HK and England + REM foreclosure sa
Philippines para more chances of winning pero pildi nuon)
Doctrine: 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.
FACTS: Petitioner Bank of America granted loans to 3
corporate borrowers (foreign affiliates of private respondent).
Due to default in payment of the loans, Bank of America and
the 3 corporate borrowers entered into restructuring
agreements. As additional security for the restructured loans,
private respondent American Realty Corporation (domestic
corporation), as third party mortgagor, executed 2 REMs.
The 3 corporate borrowers (foreign affiliates of private
respondent) defaulted in the payment of the restructured
loans. Bank of America filed civil actions before the foreign
courts for the collection of the principal loan. 2 cases were
filed before the High Court of Justice in England and 2 cases
were filed before the Supreme Court of Hong Kong High
Court. In these civil suits, the private respondent was not
impleaded as party-defendant.
Despite the pendency of civil suits before the foreign courts
for the collection of the principal loan, petitioner Bank of
America filed before the Office of the Provincial Sheriff of
Bulacan, Philippines an application for extrajudicial
foreclosure of REM. Eventually, the mortgaged properties
were sold at public auction in an extrajudicial foreclosure sale
to a third party.
Respondent filed before RTC – Pasig an action for damages
against the petitioner. Respondent alleged that petitioner
waived its remedy to foreclose the REMs by filing an action
for collection of the principal loan before foreign courts.
In its answer, petitioner alleged that: 1) respondent was not
a party defendant in the civil cases filed in HK and England;
2) There is no civil suit for sum of money filed in the
Philippines; and 3) Under the English Law, which is the
governing law or choice of law under the principal
agreements, the mortgagee does not lose its security interest
by filing civil actions for sums of money.
The RTC rendered a decision in favor of the respondent and
declared that the filing in foreign courts by the defendant of
collection suits against the principal debtors operated as
waiver of the security of the mortgages. Consequently, the
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respondent’s rights as owners were violated by the
foreclosure sale.
On appeal, the CA affirmed the RTC’s decision.
ISSUE: Whether or not the petitioner’s 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.
HELD: YES, the 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.
Philippine laws prohibit the creditor to avail two remedies:
collection of loan and foreclosure of mortgage. It may opt to
exercise only one of two remedies so as not to violate the
rule against splitting a cause of action. On the basis of
Philippine laws, the filing for collection abroad amounts to
waiver of petitioner to institute foreclosure proceedings.
On the question of the choice of law, Philippine law shall
apply notwithstanding the evidence presented by petitioner
to prove the English law on the matter. A foreign law must be
properly pleaded and proved as a fact. 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. This is the doctrine of processual
presumption.
Assuming arguendo that the English Law on the matter were
properly pleaded and proved, 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. 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.
Moreover, foreign law should not be applied when its
application would work undeniable injustice to the citizens or
residents of the forum. Clearly, English Law is not applicable
and the doctrine of processual presumption cannot be
applied.
Case Follow-up Questions (during oral recitations)
1. Who put up the collaterals? American Realty
Corporation (domestic corporation), a third party
mortgagor executed 2 REMs. Take note,
2. Where was the collection suit filed? Bank of
America filed civil actions before the foreign courts
for the collection of the principal loan. 2 cases were
filed before the High Court of Justice in England and
2 cases were filed before the SC of HK High Court.
In relation to the foreclosure suit, Bank of America
filed before the Office of the Provincial Sheriff od
Bulacan an application for extrajudicial foreclosure
of REM.
3. The issue of the case is regarding the remedies
of the creditor in order to collect his credit. How
would you classify this? Intrinsic validity of the
contract so you either apply lex voluntatis or lex
intentionis.
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CONFLICT OF LAWS (2019) MIDTERM REVIEWER
In the case, they applied lex voluntatis since the
parties had a choice of law clause which is to apply
the laws of England (English rules). Under English
law, the remedies of the creditor are cumulative.
The creditor can avail of foreclosure and collection
of credit simultaneously (unlike PH laws that adopt
alternative remedies).
So supposedly, under the case, it should have been
resolved under English laws that allow collection of
credit and foreclosure of mortgage at the same time
following lex voluntatis. However, PH court did not
allow this since it is contrary to public policy. So the
court decided the case using PH laws.
4. What about if it is public policy? More priority is
given to public policy rather than the application of
lex voluntatis
5. So whatever goes against our public policy, it
cannot prevail over our own laws? So we do not
recognize divorce even if valid abroad? Divorce
is not recognized in the PH, as a general rule since
it is against public policy. HOWEVER, we do
recognize divorce when it is obtained by an alien
whose nation recognizes it as valid. However, to
Filipino nationals, divorce cannot be recognized or
binding as to them.
There are also cases that when it is the alien spouse
who applies for divorce in a foreign country where it
is allowed capacitating him to remarry, provided
also that it is valid in his country where he is a
national, PH law recognizes the divorce insofar as
to allow the Filipino spouse to remarry considering
it would be unfair to let him/ her remain to be
married to someone whose national law deems him
already single.
Article 15, Civil Code
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
6. What is the demarcation when to use public
policy and unfairness? Apply the concept of
unfairness to the case of Bank of America? Isn’t
it unfair to the bank not to let him pursue the
foreclosure? It is unfair but not everything that is
unfair is against public policy. The application of
public policy may result to instances that becomes
unfair for others, but we still apply it.
7. Is fairness even a factor in determining COL
cases? No, it’s not supposed to be considered in
the determination of COL problems. We have public
policy.
8. Situation 1: Fil couple obtains a divorce decree
abroad is not valid. Situation 2: Divorce decree
obtained by alien spouses is valid. Why the
difference on the matter of public policy? The
point is this we recognize divorce decrees obtained
by aliens abroad because we follow our national law
principle (status, family rights and duties, condition,
legal capacity are governed by the national law of
the individual).
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ATTY. JOSEPH RANDI TORREGOSA
So that, if the 2 alien spouses obtain divorce abroad
and it’s valid there in their country, we should also
recognize it as valid in the PH (because we apply
our COL rule on status). In the same manner that 2
Filipinos obtain divorce abroad even if valid in
where it was obtained, that decree cannot be
recognized as valid in the PH because they are
governed by PH laws. Under PH laws, we do not
recognize divorce.
We arrive at this conclusion by applying our COL
rules. Apply this to the case of Bank of America.
That’s precisely the problem in this case because
lex voluntatis is embedded in our COL rules but
here, we are told that applying it will go against our
public policy. The ultimate question is how do we
know whether a COL problem should be dictated by
public policy even if a foreign law should have been
applicable? And since our public policy is in our
laws, is it right to say that a foreign law that
contradicts our internal law, internal law should
prevail since we should uphold public policy?
(caveat: wa kayo niya giclear if mao na jud ni ang
answers huhu)
Status, family rights and duties, etc—nationality
law will prevail
So the alien’s foreign law will still apply even if our
internal law tells us that it is against our public
policy.
Example: divorce by an alien is recognized in the
PH
Contracts—lex contractus (lex voluntatis or lex
intentionis)
Apply the foreign law daw but if the foreign law
contradicts ours, we apply ours (but not sure kay wa
niya giclarify)
Property—law of the situs of the property
Foreign law prevails as when the property is located
abroad even if it contradicts ours
9. 2 Filipinos married abroad and the marriage is
by proxy or without a marriage license. What if
it is valid there as such? That’s against our
public policy, would that be valid? Marriage is
governed by lex loci celebracionis and the
exceptions are those mentioned in Art 26,
Family Code. Where’s public policy now? That
marriage would have been void under our
jurisdiction for being contradictory to our public
policy. And yet, we recognize that marriage as
valid. WA SIYA NI ANSWER GUYS huhu
10. What law governs contracts? It depends:
PHILIPPINE CONFLICT RULES ON CONTRACTS
REMEMBER, it does not mean that just because the case is
filed in a Philippine court that PH laws apply.
EXTRINSIC VALIDITY
Relates to the form and solemnities of a contract (whether
written or oral, notarized or not, required to have witnesses
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CONFLICT OF LAWS (2019) MIDTERM REVIEWER ATTY. JOSEPH RANDI TORREGOSA

or not or its procedure for execution). Lex loci celebracionis

apply Most Significant Relationship Rule

Lex loci celebracionis

Our COL rule for extrinsic validity.

Article 17, Civil Code

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.

INTRINSIC VALIDITY
Concerns itself with the substantive aspect of the contract
(validity of subject matter, terms and conditions, rights and
duties and liabilities of the parties and interpretations of the
terms and conditions of the contract). Lex contractus
governs.

Example: the availability of the creditors’ remedies (as in

the case of Bank of America).

Lex contractus
It is recognized in our jurisdiction that we follow lex
contractus, based on the general principles of contracts of
Liberality of contracts.

Article 1306, Civil Code

The contracting parties may establish such stipulations,
clauses, terms and conditions as they may deem
convenient, provided they are not contrary to law, morals,
good customs, public order, or public policy.

Two kinds of lex contractus

For purposes of Conflict of Laws rule on contracts insofar
as intrinsic validity is concerned, the following shall
govern:

1. Lex Loci Voluntatis

The law voluntarily agreed upon by the parties
through a ‘choice of law clause’.

Example: in the case of Bank of America, English

law was the law they voluntarily agreed on to be
governed by

Exceptions:

a. If the stipulation is contrary to law, morals, good
custom and public policy, etc.


b. If the law stipulated has no relation at all to the

contract.

2. Lex Loci Intentionis

If the contract is silent as to the applicable law to
govern, look at the manifestations or intention of the
parties. This is the law intended by the parties
although not expressly stated in the contract.

How to determine the intention of the parties:

Apply the Most Significant Relationship rule.
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