Act of State Doctrine

The doctrine was first stated in the case of Underhill vs Hernandez

Definition: Every sovereign state is bound to respect the independence of every other sovereign
state, and the courts of one country will not sit in judgment on the acts of the government of
another, done within its own territory.

Underhill vs Hernandez

Hernandez was in command of a revolutionary army in Venezuela when an engagement took

place with the government forces which resulted in the defeat of the latter, and the occupation of
Bolivar by the former. Underhill was living in Bolivar, where he had constructed a waterworks
system for the city under a contract with the government, and carried on a machinery repair
business. He applied for a passport to leave the city, which was refused by Hernandez with a
view to coerce him to operate his waterworks and his repair works for the benefit of the
community and the revolutionary forces. Subsequently a passport was given him. The
revolutionary government under which Hernandez was acting was recognized by the United
States as the legitimate government of Venezuela. Subsequently Underhill sued Hernandez in
.the Circuit Court for the Second Circuit to recover damages caused by the refusal to grant the
passport, for alleged confinement of him to his own house, and for alleged assaults and affronts
by Hernandez' soldiers. Judgment being rendered for defendant, the case was taken to the
circuit court of appeals, where the judgment was affirmed, the court holding "that the acts of the
defendant were the acts of Venezuela, and as such are not properly the subject of adjudication
in the courts of another government. Every sovereign state is bound to respect the
independence of every other sovereign state, and the courts of one country will not sit in
judgment on the acts of the government of another, done within its own territory.

French vs Banco Nacional De Cuba

There was a decision no. 346 issued by the currency stabilization fund which prevented
Americans and other foreign investors from receiving any other currency except Cuban peso.
The plaintiff, Hazel French, was the assignee, of Alexander Ritter who invested $350,000 in a
Cuban farm. Since there was a refusal to pay in American Dollars, he filed a case for breach of
contract before the US court. The Court held by applying the act of state doctrine because it
was issued by the CURRENCY STABILIZATION FUND, which is an official instrumentality of
the Cuban government.

Philippine National Bank vs US District Court for the district of Hawaii

In this case, the act of state doctrine was also held to be applicable to JUDGMENTS of the
courts of one country. The US district court had cited the PNB for contempt of court for
transferring funds to the Republic of the Philippines pursuant to a prior judgment of the
Philippine Supreme Court. This case is related in the earlier case of CREDIT SUISSE v. US
District Court. The Swiss assets of the Marcos estate had been frozen by the Swiss government at
the request of the Republic of the Philippines, which was seeking to recover them. The class
plaintiffs obtained an injunction from the US court of Hawaii requiring the Swiss banks to hold
the assets for the benefit of the class plaintiffs. However, the US circuit Court of Appeals issued
a writ of mandamus and held that the injunction violated the act of state doctrine, which
precludes American courts from declaring invalid a foreign sovereigns official act, that is, the
freeze order of the Swiss government.

Jurisdiction Over the Res

Definition: It refers to the courts jurisdiction over the thing or property which is the subject
matter of the action.

This type of jurisdiction is necessary in actions IN REM and QUASI IN REM

Summons must still be served to the defendant not for the purpose of acquiring
jurisdiction but to satisfy due process requirements.

El Banco Espanol vs Vicente Palanca

Engracio Palanca mortgaged several parcels of land to El banco espanol. Thereafter, he returned
to China where he died. The bank moved to foreclose such properties after publication in a
newspaper in the City of Manila. Sale by public auction was held and the bank emerged as
highest bidder.7 years after confirmation, Vicente Palanca, administrator, moved to set aside the
order because the court did no acquire jurisdiction over the defendant. The Court held that ,since
it involves an action to foreclose a mortgage, such action is quasi in rem wherein jurisdiction
over the person is not necessary.

Dizon vs Perkins

Eugene Perkins filed an action against Benguet Mining company for dividends of his shares of
stock. Payment was withheld because of conflicting claims between Eugene, Idonah and
Engelhard. The complaint was permitted to be amended to implead the Idonah and Engelhard.
Thereafter, Summons by publication were served upon the two. It was ruled that the court
acquired jurisdiction over the non-resident defendants by virtue of such publication, since the
action involved herein is an action quasi in rem.
Travellers Health association vs Virginia

The state corporation commission ordered an association located in Nebraska, and engaged in
mail order health insurance business, to cease and desist from further sales of certificates of
insurance until the association complies by furnishing information as to its financial condition.
Notice was served thru registered mail. Thereafter, they moved to quash such service contending
that service thru registered mail did not meet the due process requirements. The court ruled in
favor of the appellant that notice via registered mail did not satisfy due process requirements
because the commission order attempts to destroy or impair their right to make contracts in
Nebraska.