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Petitioner Nippon is a Japanese consultancy firm providing technical and management support in the infrastructure projects of foreign governments. It entered into an Independent Contractor Agreement (ICA) with respondent Kitamura, a Japanese national permanently residing in the Philippines. The ICA was entered into and perfected in Tokyo, Japan and written wholly in the Japanese language.
The agreement provided that Kitamura extend services for a year. Nippon assigned Kitamura as project manager of the Southern Tagalog Access Road Project in the Philippines. Respondent was named project manager of the Bongabon-Baler Road Improvement Project when the Southern Tagalog Project was near completion.
Later, Hasegawa, Nippon's general manager for its International Division, informed respondent that the company had no more intention of automatically renewing his ICA. Respondent demanded that he be assigned to the Bongabon project.
Nippon insisted that respondent’s contract was for a fixed term that had already expired. Respondent initiated a civil case for specific performance and damages with the RTC of Lipa.
Petitioners, contending that the ICA had been perfected in Japan and executed by and between Japanese nationals, moved to dismiss the complaint for lack of jurisdiction. They asserted that the claim for improper pre-termination of respondent's ICA could only be heard and ventilated in the proper courts of Japan following the principles of lex loci celebrationis and lex contractus.
The RTC denied the motion to dismiss invoking the ruling of the SC in Insular Government v. Frank that matters connected with the performance of contracts are regulated by the law prevailing at the place of performance.
MR was denied. The CA dismissed the petition for lack of statement of material dates and for insufficient verification and certification against forum shopping.
A second petition was filed with the CA. The CA ruled that the principle of lex loci celebrationis was not applicable to the case, because nowhere in the pleadings was the validity of the written agreement put in issue. The CA thus declared that the trial court was correct in applying instead the principle of lex loci solutionis.MR was denied by the CA.
Whether the subject matter jurisdiction of Philippine courts in civil cases for specific performance and damages involving contracts executed outside the country by foreign nationals may be assailed on the principles of lex loci celebrationis, lex contractus, the "state of the most significant relationship rule," or forum non conveniens.
No. The subject matter jurisdiction of the Philippine courts in civil cases for specific performance and damages involving contracts executed outside the country by foreign nationals may not be assailed on the principles of lex loci celebrationis, lex contractus, the "state of the most significant relationship rule," or forum non conveniens.
The Court found the invocation of these grounds unsound.
Since these three principles in conflict of laws make reference to the law applicable to a dispute, they are rules proper for the second phase of judicial resolution of conflicts problems- the choice of law. They determine which state's law is to be applied in resolving the substantive issues of a conflicts problem. Necessarily, as the only issue in this case is that of jurisdiction, choice-of-law rules are not only inapplicable but also not yet called for.
Thus the SC elucidated on the three consecutive phases involved in the judicial resolution of conflicts problems: jurisdiction, choice of law, and recognition and enforcement of judgments.
Jurisdiction considers whether it is fair to cause a defendant to travel to this state; choice of law asks the further question whether the application of a substantive law which will determine the merits of the case is fair to both parties. The power to exercise jurisdiction does not automatically give a state constitutional authority to apply forum law. While jurisdiction and the choice of the lex fori will often coincide, the "minimum contacts" for one do not always provide the necessary "significant contacts" for the other. The question of whether the law of a state can be applied to a transaction is different from the question of whether the courts of that state have jurisdiction to enter a judgment.
In this case the SC said, only the first phase is at issue—subject matter jurisdiction. Jurisdiction over the subject matter in a judicial proceeding is conferred by law. It is further determined by the allegations of the complaint irrespective of whether the plaintiff is entitled to all or some of the claims asserted therein. To succeed in its motion for the dismissal of an action for lack of jurisdiction over the subject matter of the claim, the movant must show that the court or tribunal cannot act on the matter submitted to it because no law grants it the power to adjudicate the claims.
Lex loci celebrationis relates to the "law of the place of the ceremony" or the law of the place where a contract is made. The doctrine of lex contractus or lex loci contractus means the "law of the place where a contract is executed or to be performed." It controls the nature, construction, and validity of the contract and it may pertain to the law voluntarily agreed upon by the parties or the law intended by them either expressly or implicitly. Under the "state of the most significant relationship rule," to ascertain what state law to apply to a dispute, the court should determine which state has the most substantial connection to the occurrence and the parties. In a case involving a contract, the court should consider where the contract was made, was negotiated, was to be performed, and the domicile, place of business, or place of incorporation of the parties. This rule takes into account several contacts and evaluates them according to their relative importance with respect to the particular issue to be resolved.
Further, petitioners' premature invocation of choice-of-law rules is exposed by the fact that they have not yet pointed out any conflict between the laws of Japan and ours. Before determining which law should apply, first there should exist a conflict of laws situation requiring the application of the conflict of laws rules. Also, when the law of a foreign country is invoked to provide the proper rules for the solution of a case, the existence of such law must be pleaded and proved.
It should be noted the SC said that when a conflicts case, one involving a foreign element, is brought before a court or administrative agency, there are three alternatives open to the latter in disposing of it: (1) dismiss the case, either because of lack of jurisdiction or refusal to assume jurisdiction over the case; (2) assume jurisdiction over the case and apply the internal law of the forum; or (3) assume jurisdiction over the case and take into account or apply the law of some other State or States. The court’s power to hear cases and controversies is derived from the Constitution and the laws. While it may choose to recognize laws of foreign nations, the court is not limited by foreign sovereign law short of treaties or other formal agreements, even in matters regarding rights provided by foreign sovereigns.
Neither can forum non conveniens, be used to deprive the trial court of its jurisdiction. First, it is not a proper basis for a motion to dismiss because Section 1, Rule 16 of the Rules of Court does not include it as a ground. Second, whether a suit should be entertained or dismissed on the basis of the said doctrine depends largely upon the facts of the particular case and is addressed to the sound discretion of the trial court. In this case, the RTC decided to assume jurisdiction. Third, the propriety of dismissing a case based on this principle requires a factual determination; hence, this conflicts principle is more properly considered a matter of defense.
Hence, the SC ruled that since the RTC is vested by law with the power to entertain and hear the civil case filed by respondent and the grounds raised by petitioners to assail that jurisdiction are inappropriate, the trial and appellate courts correctly denied the petitioners’ motion to dismiss.