THE CASE OF HASEGAWA V. KITAMURA - 28 PJP 21

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    This is the case of Hasegawa v. Kitamura (2007).[1]

    In the case of Hasegawa v. Kitamura, Nippon, a Japanese company, hired Kitamura, a Japanese national residing in the Philippines, as a project manager for a construction project in the Philippines. When Nippon terminated Kitamura's contract, he sued the company in the Philippines for breach of contract. Nippon argued that the case should be heard in Japan due to the fact that the contract was perfected in Japan between Japanese nationals in the Japanese language. However, the lower court and the appellate court disagreed, ruling that, since the contract was performed in the Philippines, Philippine law should apply.

    Nippon further argued that the lex loci rules should be used to defeat the jurisdiction of Philippine courts. In other words, it was opined that Philippine courts should be considered ousted from jurisdiction as a result of the existence of a foreign element in the case.

    Up in the Supreme Court, the question was 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. Hasegawa, representing Nippon, asked the Court to declare that the Regional Trial Court (“RTC”) of Lipa City did not have jurisdiction over the case because the contract was formed and executed in Japan between Japanese citizens.

    The Court clarified that jurisdiction and the process of choice of applicable law (better known as “choice of law”) are separate issues. While petitioners initially argued that Japanese law should apply, they later shifted their arguments to attack and question the court’s jurisdiction. In short, petitioners left behind their earlier theory that Philippines courts had jurisdiction but Japanese law should be made to apply.

    Philippine courts have the authority to hear and decide a case based on the nature of the claim (specific performance and damages, breach of contract, recovery of sum of money, injunction, etc.) in accordance with Philippine law on jurisdiction. Therefore, petitioners’ arguments about the applicable foreign law should not affect the court’s power to hear and decide the case, which is conferred by law and determined by the allegations in the complaint.

    Moreover, the Court explained that lex loci celebrationis relates to the “law of the place of the ceremony”[2] or the law of the place where a contract is made. On the other hand, the doctrine of lex contractus or lex loci contractus means the law of the place where a contract is executed or to be performed, which controls the nature, construction, and validity of the contract and may pertain to the law voluntarily agreed upon by the parties or the law intended by them either expressly (lex loci voluntatis) or implicitly (lex loci intentioinis).[3] Note that none of these principles speak about or deal anything with the power of courts to hear and decide a case. Rather, they refer to choice of law, a stage in the resolution of a conflicts case, which involves the process of opting between municipal law and foreign law.

    The Court further elucidated that, under the state of the most significant relationship (“SMSR”) 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, where it was negotiated, where it was to be performed, and the domicile, place of business, or place of incorporation of the parties. Again, the SMSR rule has nothing to with the jurisdiction of the forum.

    The SMSR rule considers several contacts (connecting factors or points of contact) and evaluates them according to their relative importance with respect to a particular issue to be resolved. For example, in one case,[4] the contacts taken into account were the following: (a) the place where the injury occurred; (b) the place where the conduct causing the injury occurred; (c) the domicile, residence, nationality, place of incorporation and place of business of the parties; and (d) the place where the relationship, if any, between the parties is centered.

    At the end, the Supreme Court rejected Hasegawa’s prayer for declaration of lack of jurisdiction. The Court emphasized that the resolution of a conflicts case normally involves three major steps or phases: (a) determination of jurisdiction; (b) choice of law; and, (c) recognition and enforcement of a foreign judgment. It is in the second stage – choice of law – where the lex loci principles and the SMSR rule become relevant. In other words, if the forum has subject matter jurisdiction over the case, the applicability of a foreign law properly pleaded and proved cannot destroy such power granted to it by law.

    I am aware that the Supreme Court in the case of Hasegawa v. Kitamura said that the three major phases mentioned above correspond to the following questions: (a) in what place can and should the litigation be initiated; (b) which law should be applied; and, (b) in what place can the resulting judgment be enforced. In the next succeeding paragraph following this discussion, the Court said that “jurisdiction considers whether it is fair to cause a defendant to travel to this state.” However, without proper context, this quotation from the Supreme Court could lead to more confusion.

    To put this in proper perspective, students must remember that jurisdiction has nothing to do with convenience. If the law says that the RTC has jurisdiction, it retains that power to hear and decide the case regardless of the existence of a foreign element. However, when the doctrine of forum non conveniens is invoked, the court may refuse impositions on its jurisdiction in order to give way to a more convenient court. Hence, the question on fairness in causing the defendant to travel to the Philippines to face litigation is not the main concern of jurisdiction over the subject matter. It only becomes relevant when the defendant pleads forum non conveniens.

    The doctrine of forum non conveniens is discussed at length in a separate part of this book.

    [1] 563 Phil. 572 [ G.R. No. 149177. November 23, 2007 ] KAZUHIRO HASEGAWA AND NIPPON ENGINEERING CONSULTANTS CO., LTD., PETITIONERS, VS. MINORU KITAMURA, RESPONDENT.

    [2] Garcia v. Recio, 418 Phil. 723, 729 (2001).

    [3] Philippine Export and Foreign Loan Guarantee Corporation v. V.P. Eusebio Construction, Inc., G.R. No. 140047, July 13, 2004.

    [4] Saudi Arabian Airlines v. Court of Appeals, 358 Phil. 105, 127 (1998).