92 Review Notes IN CONFLICT OF Laws

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PROBLEM: A and B, both Taiwanese, enter
into a contract of employment in Taipei under
which A, the employer, agrees to pay B, the em-
annual compensation, 20%
ployee, as the latter's
of the annual produce of a certain parcel of land
in Barangay Lioac, Naguilian, La Union. The law
of what state shall govern the extrinsic and in-
trinsic validity of the contract?
ANSWER: With respect to extrinsic valid-
be governed by the lex loci
ity, the contract shall
celebrationis, or Taiwanese law. With respect to
intrinsic validity, what is controlling is the
or lex contractus.
proper law of the contract,
The lex situs should not be applied to both the extrin-
sic and intrinsic validity of the contract because the con-
tract does not affect the title to the property. The property
is merely incidental to the contract of employment.

3. In contracts where property is given as security

for a principal contract (usually of loan), the principal
contract is governed by its proper law; but the accessory
contract of mortgage is governed by the lex situs, subject
to the following rules:

(a) If the principal contract is valid under

its proper law (lex loci voluntatis or lex loci inten-
tionis), it does not automatically follow that the
accessory contract of mortgage is also valid,
be-
cause its validity will still be tested by the lex si-
tus. (The mortgage, whether real estate or chat-
tel, has to be registered where the property is.
situated.)
If the accessory contract is not valid under
the lex situs, the validity of the principal contract
 LECTURE No, 7 93

of loan is unaffected, except that the loan would

become an unsecured obligation.
(b) However, if the principal contract is
not valid as determined by its proper law, the
accessory contract of mortgage would have to be
invalidated also, even if, independently tested
by the lex situs, it might be valid. This is because
by its very nature, an accessory contract cannot
stand without a principal obligation whose per-
formance or fulfillment it is meant to secure.
(Goodrich; see also Articles 2085, 2125 and 2140,
Civil Code; and Section 3, Act No. 1508)
These exceptions apply with like force to
rule
personal property. Inasmuch as the same
applies to both real and personal property, the
same exceptions should also apply to both.
"A mortgage is an accessory contract, its
consideration is the consideration of the princi-
and
pal contract, from which it receives its life,
without which it cannot exist as an independent
contract." (China Banking Corp. v. Lichauco, 46
Phil. 460 [1924])

Kinds of personal property

Generally, there are two kinds of personal property:

tangible and intangible.
Tangibles are sometimes called choses in possession,
and intangibles, choses in action. Examples of choses in
action are shares of stock, franchises and copyrights. In the
case of Involuntary Insolvency of Stochecker v. Ramirez,
44 Phil. 933, the Supreme Court held that a half interest in
a drug business is personal property, capable of being the
subject of a chattel mortgage (citing Sec. 2,
Act No. 1508).
94 Review Notes IN CONFLICT OF Laws
-
A. Choses in possession, OF tangible personal prope,
sitae. The rule of mobili,
ties, are subject to th e rule of lex rei
sequuntur personam, under
which the property follows the
owner wherever he goes, 1s obsolete with respect to tangi-
bles.
which are
However, choses in possession usually
and in transit, are governed
moving, such as vessels goods
by special rules.
1. Ships-If on the high seas, the law of the flag or
but if it is docked at a for-
registry is controlling,
of such port is regarded as the
eign port, the law
temporary lex situs. (Wolff)
the law of
2 Goods in transitu-are governed by
of the
destination with respect to the liability
common car rier. Article 1753
of the Civil Code

provides:
"Art. 1753. The law of the country to
shall
which the goods are to be transported
of the common carrier
govern the liability
for their loss, destruction and deteriora-
tion." (Civil Code)

NOTE: Other matters, such as the validity

of the contract or bill of lading, are not governed
but by the lex contrac-
by the law of destination,
tus, or proper law of the contract.
The validity of
the seizure of goods in transitu is governed by
the law of the place where they were seized (lo-
cus regit actum). It is the act of seizure that is di-
of
rectly in issue. The disposition or alienation
the goods in transitu is generally governed by
the proper law of the contract (Jex contractus).
 Lecture No. 7 95

B. Choses in action or incorporeal movables. The

law of the contract (lex contractus) usually governs,
proper
subject to special laws, such as laws on intellectual prop-
and copyrights.
erty like patents
The thing to remember is that the rule of lex rei sitae
applies to
real as well as tangible personal property
.