Chapter XIII

Choice of Law in Property

A. The Controlling Law
In most cases, the first task of a court in conflicts case involving property is to resolve whether it
is a movable or an immovable. y an! large, upon this !etermination will !epen! the controlling
legal system.
Immovable property is regulate! by the le" situs.
In contrast, rights over movable properties are not necessarily governe! by the le" situs.
The transfer of movable properties may be controlle! by the le" !omicilii, the le" situs
#Philippines$, the le" loci actus or the proper law of transfer.
%. Le" !omicilii
The ol! law on movables was mobilia sequuntur personam& which meant that the rights
over movables were governe! by the law of the owner's !omicile. ecause by their nature,
these ob(ects coul! be move! from place to place, it was !ifficult to anticipate where they may
be situate! at a given time. )or purposes of simplicity an! convenience they were ascribe! the
!omicile of the owner.
*"cept for purposes of Ta"ation + le" situs applies.
,. Le" situs.
Another applicable law is the le" situs. The conventional wis!om for the le" situs is the e"ercise
of power- the state where the property is situate! having the sole power to !eci!e the vali!ity
an! effects of the transfer of property. .n the other han!, the policy/oriente! rationale for
applying the le" situs is also one of its obvious a!vantages.
0. Le" loci actus
The alternatives to le" !omicilii an! le" situs are le" loci actus or the law of the place where
the transaction was completed an! the proper law of the forum. The proper law refers to the
law of the state which has the most real connection with the transfer.
Article 1%1 of the Civil Co!e
Article 414 of the Civil Code provides that all things which are or may be the object of appropriation are considered
either real property or personal property.
Business is likewise not enumerated as personal property under the Civil Code. Just like interest in business
however it may be appropriated. !ollowing the ruling in "trochecker v. #amire$ business should also be classified
as personal property. "ince it is not included in the e%clusive enumeration of real properties under Article 41& it is
therefore personal property.
Article %2 of the Civil Co!e states that real property an! personal property are 3sub(ect to the
law of the country where it is situate!.&
The conflict/of/law rule on property has thus been simplifie!.
The only time a Philippine court has to settle a problem of classifying property is when it is
locate! in a foreign country which has a law that !istinguishes between real an! personal
property.
The rationale for the le" situs or le" rei sitae rule now universally recogni4e! is that being
physically a part of the country, it shoul! be sub(ect to the laws thereof. 5eference to the le"
situs is apropos even when a mo!ern approach to choice/of/law is use! because the situs is the
place most closely an! significantly relate! to the issue in 6uestion. The le" situs rule covers all
transactions involving sale, mortgage, barer, e"change, lease assignment, or any form of
alienation. It also governs such issues as the effects of co/ownership, 6uieting of the title,
ta"ation, registration an! the rules in prescription.
*"plaining the reason for a!opting the le" situs for movables, the Chairman of the 7pecial
Committee of the 8ew Civil Co!e sai!9 3now that there has been great increase in the amount
an! variety of personal property not connecte! with the person of the owner it was !eeme!
a!visable by Congress of the Philippines to a!opt the !octrine le" sitae also to movabes. It has
been hel! that personal property may be separate! from its owner, who may be ta"e! on its
account at the place where the property is locate!, although he is not a !omiciliary, citi4en or
resi!ent of the state which impose! the ta".
. CAPACIT: T. T5A87)*5 .5 AC;<I5* P5.P*5T:
The capacity of the person to transfer or ac6uire real property is governe! by the law of
the place where the property is locate!.
Llantino vs Co Liong Chong
=ere >olina a Chinese national ac6uire! )ilipino citi4enship, thus she has a right to the
sale of the resi!ential lan!.
Cheesman vs Interme!iate appellate Court
Thomas is an American citi4en an! therefore !is6ualifie!, un!er the Constitution, to
ac6uire an! own real properties.
C. *"trinsic an! Intrinsic vali!ity of Conveyances
The formalities of a contract to convey property are likewise governe! by the le" situs.
Any transfer of property which re6uires registration of title can not be accepte! by the
registry of property unless the formal re6uirements of the le" situs are complie! with.
The vali!ity an! effect of conveyance of property are treate! as a 6uestion of property
rather than contract.
)urthermore, the le" situs law applies to the essential vali!ity of the transfer unless the
le" intentionis is clearly establishe!. The le" situs also governs the effects of the
conveyance of properties.
?. *"ception to Le" 7itus 5ule
There are at least 0 e"ceptions to the application of le" situs rule, namely9
)irst *"ception @here the transaction !oes not affect transfer of title to or ownership of
the lan!. In this case the proper law of the transfer is the le" intentionis or le" voluntatis
is the governing law.
Lil(e!ahl vs Alassgow
7econ! *"ception9 In contracts where real property is offere! by way of security for the
performance of an obligation such as loan, the principal contract is the loan while the
mortgage of the lan! is only an accessory. The mortgage of the lan! is only an
accessory. The mortgage of the lan! is governe! by the rule of le" situs but the loan
contract is governe! by the rules on or!inary contracts.
Thir! *"ception9 Testate or intestate succession an! capacity to succee! are governe!
by the national law of the !ece!ent #Article %2, par.,, Civil Co!e$.
*. 7IT<7 .) C*5TAI8 P5.P*5TI*7
%. 7itus of personal property for Ta" purposes
The ma"im mobilia se6untuur personam has been viewe! as a mere 3fiction of law&
having its origins in consi!erations of general convenience an! public policy within its
(uris!iction. It yiel! to establishe! facts of legal ownership, actual presence, an!
control elsewhere, an! cannot be applie! if it woul! result in inescapable an! patent
in(ustice.
Asiatic Petroleum vs Co ;uico
2B Phil. 100 #%BBC$
5uling9 It is evi!ent then, that the !efen!ant/appellee in this case although the was
outsi!e of the Philippines at the time this action was institute! against him,
possesse! property foun! an! locate! here an! that such property, was within the
reach or our Courts
,. 7itus of >oney
In Leon vs >anufacturers Life Insurance Co., the court hel! that the fun!s in
6uestion were outsi!e the (uris!iction of the probate court of >anila. =aving been
en!orse! in an annuity in Cana!a was the situs of the money. The party whose
appearance the appellant sought was only a branch or agency of the company which
hel! the fun!s in its possession, the agency's intervention being limite! to !elivering
to the annuitant the checks ma!e out an! issue! from the office. The court
conclu!e! that there was no showing or allegation that the fun!s have been
transferre! to the >anila branch.
0. 7itus of ?ebts
There are two kin!s of movable property9
Choses in possession which embraces all types of tangible physical ob(ects an!
choses in action which refers to intangible ob(ects.
Chose in action can be further classifie! into rights which are mere rights of actions
such as a !ebt arising from a loan an! rights which are represente! by a !ocument
that is both capable of !elivery an! susceptible to negotiation as a separate legal
entity.
Case9
=arris v alk
This conclusion was premise! on , hol!ings9
%.$ That a !ebt though intangible, is sub(ect to sei4ure like tangible property an!
,.$ That the !ebt is 3locate!& where the !ebtor is because it is where he can be sue! an!
the !ebt collecte!.
1. 7itus of Corporate 7hare of 7tocks
Corporation Co!e
7ection 20
Case
CI5 vs Anglo California 8ational ank
7ection ,1 of the 8ational Internal 5evenue Co!e levies income ta"es on foreign
corporations only on income !erive! from sources within the Philippines an! with
respect to capital gains on the sale of personal properties 7ection 0D #e$ of the same
Ta" Co!e !eems the place of sale as also that place or source of the capital gain.
In this case, it is a!mitte! that the negotiation, perfection an! consummation of the
contract of sale were all !one in California, <.7.A. It follows that the title to the
shares of stock passe! from the ven!or the ven!ee at sai! place, from which time
the inci!ents of ownership were veste! on the buyer.
). Patents, Tra!emarks, Tra!e 8ame, an! Copyright
Cases
. CAPACIT: T. T5A87)*5 .5 AC;<I5* P5.P*5T:
The capacity of the person to transfer or ac6uire real property is governe! by the law of
the place where the property is locate!.
Llantino vs Co Liong Chong
%EE 7C5A FB, #%BBC$
Issue9 @hether or not >olina a Chinese national ha! the right to hol! by lease the
property involve! in the case because at the time of the e"ecution of the contract, he
was still a Chinese national.
5uling9
<n!er the circumstances, a lease to an alien for a reasonable perio! is vali!. 7o is an
option giving an alien the right to buy real property on con!ition that he is grante!
Philippine citi4enship. Aliens are not completely e"clu!e! by the Constitution form use of
lan!s for resi!ential purposes. 7ince their resi!ence in the Philippines is temporary, they
may be grante! temporary rights such as a lease contract which is not forbi!!en by the
Constitution. 7houl! they !esire to remain here forever an! share our fortune an!
misfortune, )ilipino citi4enship is not impossible to ac6uire.
Cheesman vs Interme!iate appellate Court
%B0 7C5A B0 #%BB%$
>oreover, sai! legal presumption that all property of the marriage belongs e"clusively to
the con(ugal partnership coul! not apply inasmuch as Thomas is an American citi4en
an! therefore !is6ualifie!, un!er the Constitution, to ac6uire an! own real properties.
)inally, the fun!amental law prohibits the sale to aliens of resi!ential lan!. 7ection %1,
Article XIG of the %BD0 Constitution or!ains that, 37ave in cases of here!itary
succession, no private lan! shall be transferre! or conveye! e"cept to in!ivi!uals,
corporations, or associations 6ualifie! to ac6uire or hol! lan!s of the public !omain&
C. *"trinsic an! Intrinsic vali!ity of Conveyances
?.*"ception to Le" 7itus 5ule
There are at least 0 e"ceptions to the application of le" situs rule, namely9
)irst *"ception @here the transaction !oes not affect transfer of title to or ownership of
the lan!. In this case the proper law of the transfer is the le" intentionis or le" voluntatis
is the governing law.
Lil(e!ahl vs Alassgow
)acts9
Lan! in Colora!o
@hich was issue! as a security for a !ebt payable in I.@A.
5uling9
It is elementary that contracts ma!e an! to be performe! in a particular state are ma!e
with reference to the law of the state, which the parties must be presume! to have ha! in
min! at the time of making the contract.
The parties may be presume! to have contracte! with reference to the law of Iowa,
where the contract was e"ecute! an! to be performe!, an! that they inten!e! to be
boun! in accor!ance therewith.
Applying the case of 3 Clement vs @illet& The 7C of >innesota, hel! that a provision in a
!ee! conveying lan! in the state of Iowa, but e"ecute! an! !elivere! in the 7tate of
>innesota, between parties resi!ing therein, whereby grantee agree! an! assume! to
pay an e"isting mortgage, was a personal contract governe! by the laws of >innesota.
* 7IT<7 .) C*5TAI8 P5.P*5TI*7
% 7itus of personal property for Ta" purposes
Asiatic Petroleum vs Co ;uico
2B Phil. 100 #%BBC$
Issue9 @hether or not the court !o not have (uris!iction over the person of Co ;uico,
a non/resi!ent who was summone! by publication an! !i! not appear.
5uling9 It is evi!ent then, that the !efen!ant/appellee in this case although the was
outsi!e of the Philippines at the time this action was institute! against him,
possesse! property foun! an! locate! here an! that such property, was within the
reach or our Courts. It is well to emphasi4e in this connection the general proposition
that all property within a 7tate is sub(ect to the (uris!iction of its courts, an! they have
the right to a!(u!icate title thereto, to enforce liens thereupon, an! to sub(ect it to the
payment of the !ebts of its owners, whether resi!ent or not.
0 7itus of ?ebts
=arris v alk
Attachment is the creature of the local lawH If there be a law of the 7tate provi!ing
for the attachment of the !ebt, then if the garnishee be foun! in that 7tate, an!
process be personally serve! upon him therein, we think the court thereby ac6uires
(uris!iction over him, an! can garnish the !ebt !ue from him to the !ebtor of the
plaintiff an! con!emn it, provi!e! the garnishee coul! himself be sue! by his cre!itor
in that 7tate.