HOW TO CHOOSE YOUR LAW IN AN INTERNATIONAL DISPUTE – Six Steps to Determine Default Choice of Law Without Contractual Guidance

If you’re in Miami, chances are you are not from Miami. The city is a hub of international finance and foreign investment, with significant securities and real estate holdings. Most residents arrive from elsewhere to partake in the abundance of opportunity and increased financial security. Yet, while money, securities, shares, holdings, and real estate continue to accumulate through Miami, contracts determining their every right and obligation do not perfectly follow. This leads to disputes between owners and interested parties, lawsuits, and ultimately a question of which country’s law applies.

Do you apply the law from the country of the investor? Which investor?

Do you apply the law of the country where the shares are held? The title documents?

Do you apply the law of the country of where the assets are located? Which assets?

These choice-of-law questions abound.

Bernhard Law FirmThis article provides a primer on initial considerations in choice of law where there is no contractual provision predetermining the controlling law. This article uses the example of a Brazilian estate administration recouping Florida real estate owned by a Netherlands company. If you have questions about choice of law or international disputes, please contact Bernhard Law Firm at www.bernhardlawfirm.com, abernhard@bernhardlawfirm.com, or +1-786-871-3349. Bernhard Law Firm handles trials and appeals in business and financial disputes.

A.     Six Steps to Determine Choice of Law and Likely Outcome of Your Dispute

First, determine which countries are involved. This includes the forum country of the erupting disputes (e.g. U.S.A., in a Florida court, as real estate or property at issue is in Florida), the country of the claimants (e.g. Brazil for Brazilian claimants to property in Florida), and the country of any interested parties or companies (e.g. The Netherlands or Aruba, involving a Dutch holding company with shares in a Florida holding company).

Second, determine the predominant nature of the dispute, based on how the dispute emerged. If somebody pass away and foreign heirs are claiming property in Florida, you may qualify this as an inheritance or estate dispute. If a foreign couple has divorced and one of the spouses is withholding assets or children in Florida, you may qualify this as a divorce or family law dispute. If a foreign company is dissolving and all investments and assets must be recouped, you may qualify this as a business, contractual, or goods dispute, depending on the asset to be recouped. If a foreign company has shipped out a product that is in Florida and subject to litigation, you may qualify this as a goods dispute. And so on.

Third, determine the domestic law of each interested country as to its default rules on choice of law for an international dispute. Most countries generally have a base charter, document, constitution, or code discussing how that country will generally address an international dispute, including choice of law based on the predominant nature of the dispute. Specific treaties with other interested countries to your dispute may vary each country’s default standard for choice of law. The Florida court should take judicial notice of the applicable foreign law. § 90.202(4), Fla. Stat. (2017).

Fourth, determine the treaties to which all involved countries are signatories. In 250 years, the U.S. has become party to over one hundred treaties. It should be helpful to start at the most recent treaties, The Hague Conventions, and post-WWII agreements for the most modern status of international arrangements, and then work back. Treaties should be reviewed for each involved country, focusing on each treaty’s treatment of the predominant nature of the dispute. The UN Convention on the Law of the Sea, rather than the Convention on Cybercrime Goods, better covers a crate of oranges stuck on a barge at sea.

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Fifth, analyze each interested country’s local opinions and legal interpretations as to choice of law and deferral to other countries’ application of law, specifically searching as to the relationship between the countries involved, the predominant nature of the dispute, and the treaties at issue. This should include an analysis of U.S. law on the subject. A legal opinion on your particular dispute may be obtained from a local law firm in each country, discussing the interested countries, the predominant nature of the dispute, the local law and applicable international treaties, and the firm’s certified opinion as to how the dispute would be determined under that country’s legal system. A Florida court can use legal opinions on the issues and foreign law, even though the legal opinions may be in dispute. See Guelman v. de Guelman, 453 So. 2d 1159, 1160 (Fla. 3d DCA 1984) (“A trial court will be sustained in its interpretation of the law of a foreign country if its interpretation is consistent with that given by an expert on the law of such foreign jurisdiction, even though such expert opinion may be in dispute.”). However, the adjudicating court must also take an active stance in researching and analyzing the foreign law independently. See Cohen v. Shushan, 212 So. 3d 1113, 1118–19 (Fla. 2d DCA 2017) (“Trial and appellate courts are urged to research and analyze foreign law independently.”); Transportes Aereos Nacionales, S.A. v. De Brenes, 625 So. 2d 4, 6 n.2 (Fla. 3d DCA 1993) (appearing to limit the ability of the Court to rely entirely on a legal opinion as to foreign law).

Sixth, compare each country’s interpretations and codes for similarities and differences, to get a general idea of controlling policies, where systems align so that choice of law generally will not affect the dispute’s outcome, and where the systems contrast so that choice of law becomes dispositive to your dispute. The contrast in the systems, and your choice of law on these contrasting points, will likely govern the outcome of your dispute.

B.     Exploring an Example in a Brazilian Estate Dispute on Florida Real Estate Owned Through a Netherlands Holding Company

Below is an example of choice-of-law analysis for a Brazilian estate administration as to Florida real estate assets held by a Netherlands company whose shares were advanced to an heir in Brazil. This example puts the above six steps into action, and shows how they facilitate a ready determination of the choice of law and dispute outcome. For brevity, a full analysis of each country’s law is not provided and this example skews to show that Brazil law controls the Brazilian estate’s advanced asset recoupment from Florida through the Netherlands.

1.     Step one: Which countries are involved?

In this example, the involved countries are the U.S. (Florida), Brazil (claimants), and the Netherlands (interested holding company).

2.     Step two: What is the predominant nature of the dispute?

In this example, a Brazilian estate seeks to recoup Florida real estate. A Netherlands holding company is owner on the Florida deed. However, all owners of the Netherlands company’s shares, including the estate/decedent, are Brazilians. Thus, this dispute should be qualified as an inheritance/estate matter or a family law matter. Depending on contrasts in applicable domestic law, other parties may seek to qualify this as a corporate, contractual, or goods (the actual shares or certificates of shares) dispute.

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3.     Step three: What is the domestic law of each country on choice of law for this type of dispute?

In this example qualifying this as an estate administration dispute, in Florida the law of the decedent’s domicile governs administration of his estate, recognition of marriage, and determination of estate rights and interests thereunder. Nahar v. Nahar, 656 So. 2d 225, 229 (Fla. 3d DCA 1995) (holding that Aruba was domicile of decedent, and thus Aruba law must apply to estate administration issue); Compagnoni v. Compagnoni, 591 So. 2d 1080,1081–82 (Fla. 3d DCA 1991) (holding Florida court was required to recognize party’s common-law marriage from out-of-state when distributing marital assets in Florida proceeding); See also Anderson v. Anderson, 577 So. 2d 658, 660 (Fla. 1st DCA 1991) (holding common-law marriage under foreign law must be recognized in Florida); Johnson v. Lincoln Square Props., Inc., 571 So. 2d 541, 543 (Fla. 2d DCA 1990) (holding wife could bring consortium claim based on out-of-state common-law marriage even though Florida no longer allowed common-law marriage); Guelman v. de Guelman, 453 So. 2d 1159, 1160 (Fla. 3d DCA 1984) (“A trial court will be sustained in its interpretation of the law of a foreign country if its interpretation is consistent with that given by an expert on the law of such foreign jurisdiction, even though such expert opinion may be in dispute.”); Biederman v. Cheatham, 161 So. 2d 538, 541 (Fla. 2d DCA 1964) (holding as between different states or nations, domicile determines controlling law for estate administration).

In Brazil, Brazil Civil Code Article 1.785, estate administration and succession determination must open in the place of the last domicile of the decedent. Brazil Civil Code Article 1.659 and 1.662 provide a presumption that any shares in foreign companies are community property and subject to Brazil estate administration and re-determination). Brazil Decree-Law No. 4.657 of September 4, 1942 (Introduction to the Civil Code) (1942) provides that Brazil law applies as to property located in Brazil, and to make inventory and distribution of assets located in Brazil. Decree-Law No. 4.657 of September 4, 1942 (Introduction to the Civil Code) (1942)). The default system in Brazil is intestate. Decree-Law No. 10.406 of January 10, 2002 (Civil Code) (2002), Book V, Title I, Article 1.790.

Following along that cited code, under Article 10, succession and inheritance must be governed by the law where the decedent was domiciled, regardless of the nature and state of the property. Id. at Art. 10 (“A sucessão por morte ou por ausência obedece à lei do país em que domiciliado o defunto ou o desaparecido, qualquer que seja a natureza e a situação dos bens” which means “Succession by death or absence shall be governed by the law of the country in which the deceased or disappeared person domiciled, whatever the nature and state of the property may be.”). Similarly, under Article 7, the law of the person’s domicile country controls family rights. Id. at Art. 7. Under Article 7, § 1, if a domestic partnership is in or from Brazil, then Brazilian law applies to spousal rights. Under Article 7, §§ 4 and 5, if domestic partners are domiciled in Brazil, then Brazilian law governs their property regime, including enforcement of community property. Under Article 10, if a decedent was domiciled in Brazil, then Brazilian law controls his estate succession and inheritance after death. Under Article 5, in the application of the any law, the court must attend to the Brazilian social purposes to which it is directed and to the demands of the Brazilian common good. Id. at Art. 5.

Further, Brazilian law must govern the succession and inheritance of foreign assets for the benefit of the Brazilian spouse and children, whenever the competing law is not more favorable to them and the purposes stated under Brazil law. Id. at Art. 10. Under Article 17, the laws, acts, and judgments of another country, as well as any will declarations, are not effective when they offend national sovereignty, public order, and morality. Id. at Art. 17.

Accordingly, Brazil law should apply to effect a Brazilian estate inventory and its statutory purpose to recoup and account for inheritance advances, with a legal presumption that these must be re-divided with competing heirs and spouse. Brazil Civil Code Art. 538 and 544; Brazil Decree-Law No. 4.657 of September 4, 1942 (Introduction to the Civil Code) (1942) Art. 7 at §§ 1, 4, and 5, and Art. 10; Brazil Decree-Law No. 10.406 of January 10, 2002 (Civil Code) (2002) at Art. 1.785, 1.788, 1.790, 1.793, 1.797, 1.826, 1.827, 1.829, 1.847, 1.992, 1.995, 2.002, 2.003, 2.004, 2.015, 2.017, and 2.020.

4.     Step Four: What are the treaties to which involved countries are signatories?

The Netherlands is party to nearly every international convention requiring that the domicile country’s law control all family, marriage, succession, and estate administration rules and rights. The Netherlands is party to the Convention on Celebration and Recognition of the Validity of Marriages (March 14, 1978), wherein it agreed that the formal requirements for marriages is governed by the law of the country of celebration—i.e. here, Brazil. Convention at Article 2; see also Article 3 (agreeing to follow the originating country’s choice-of-law rules on marriage issues).

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The Netherlands is party to the Convention of 14 March 1978 on the Law Applicable to Matrimonial Property Regimes, wherein the parties agreed that a couple’s matrimonial property regime will be governed by the law of the country in which the couple establish their first habitual residence or that country with which their partnership is most closely connected—i.e. here, Brazil. Convention Article 4.

The Netherlands is party to the Convention on the Law Applicable to Succession to the Estates of Deceased Persons, The Hague, 1 August 1989 (The Hague Succession Law Convention; not in force, however applied in the Netherlands in accordance with the WCErf), wherein it agreed that succession is governed by the law of the country in which the deceased at the time of death was habitually resident—i.e. here, Brazil. Article 3.

The Netherlands is party to the Convention on the Conflicts of Laws Relating to the Form of Testamentary Dispositions (Oct. 5, 1961), wherein it agreed to uphold the law of the decedent’s domicile and nationality, as to testamentary dispositions—i.e. here, Brazil. Convention Article 1. The Netherlands is party to the Convention on the Recognition of Decisions Relating to the Validity of Marriages (Sept. 8, 1967), wherein it agreed to recognize any decision relating to the validity or nullity of a matrimonial bond. See Convention at Article 1

In this example, total contravention and disregard of these agreements is not plausible. Given controlling conventions and international treaties on recognition of domicile state’s determinations on marriage and domestic partnership, the Netherlands should confirm Brazilian application and interpretations.

5.     Step Five: What are each interested country’s local opinions and legal interpretations?

Again, a Florida court can use legal opinions on the issues and foreign law, even though the legal opinions may be in dispute. See Guelman v. de Guelman, 453 So. 2d 1159, 1160 (Fla. 3d DCA 1984) (“A trial court will be sustained in its interpretation of the law of a foreign country if its interpretation is consistent with that given by an expert on the law of such foreign jurisdiction, even though such expert opinion may be in dispute.”). However, the adjudicating court must also take an active stance in researching and analyzing the foreign law independently. See Cohen v. Shushan, 212 So. 3d 1113, 1118–19 (Fla. 2d DCA 2017) (“Trial and appellate courts are urged to research and analyze foreign law independently.”); Transportes Aereos Nacionales, S.A. v. De Brenes, 625 So. 2d 4, 6 n.2 (Fla. 3d DCA 1993) (appearing to limit the ability of the Court to rely entirely on a legal opinion as to foreign law).

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Brazil Supreme Court – By Rob Sinclair – Supreme Court, CC BY-SA 2.0, https://commons.wikimedia.org/w/index.php?curid=8462847

Legal opinions note that either consciously or unconsciously, legal scholars have often erroneously resorted to concepts embedded in Anglo-American legal usage in drawing conclusions from documents faithful to the meaning of succession in Brazil’s inheritance system, distorting the meaning of succession in Brazilian inheritance. Linda Lewin, Natural and Spurious Children in Brazilian Inheritance Law from Colony to Empire: A Methodological Essay, The Americas, Vol. 48, No. 3, January 1992, at 358. Where American law has assumed the centrality of a will, Brazilian law has taken intestacy as the normal course of events. Id. American legal scholars generally misunderstand that surviving spouses are not just heirs, but rather the holder of one-half of the couple’s community property. Id. at *359. A surviving spouse’s ownership of community property gives her a prior and independent legal claim. Id. at *360. Any Florida court should endeavor to apply Brazilian legal concepts, black letter law, and policies to this dispute, and endeavor to distinguish and separate American law and concepts where they do not comply with Brazil law and policy.

6.     Step Six: How do the laws compare?

In Brazil, Brazil Civil Code Article 1.788 and 1.790, if a person dies intestate (without a will), then the estate property must be shared amongst the surviving spouse (or domestic partner) and children. Under Article 1.790, the companion (i.e. spouse or domestic partner) is entitled to participation in succession and inheritance for all property acquired during the union. Under Article 1.790 and 1.829, the surviving domestic partner by default is entitled to the entire inheritance, but may be subject to competing claims from children (hers or otherwise), who may be able to claim up to 50%. Under Article 1.797, the administration of the estate should be done first and foremost by the domestic partner/companion/spouse of the decedent.

Under Brazil Civil Code Article 1.847, the calculation of the assets of the estate must include the value of all property subject to the “Collation.” Brazil Civil Code Book V, Title IV, Chapter IV, holds the rules for Collation—the process of resubmitting individual inter vivos advancements back into the estate for fair re-division amongst all heirs equally. Under Article 2.002, competing heirs must confer the value of the inter vivos transfers that they received from the decedent before death (i.e. advancements), under penalty of evasion, for the purpose of equalizing the shares amongst heirs. Under Article 2.003, the purpose of this Collation is to match the proportion established in the Code, in proper proportion between the surviving spouse and competing child heirs. Upon resubmission of the inter vivos advancements, the property shall be split in kind, unless unavailable, and then the value must be shared.

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Under Brazil Civil Code Article 2.004, if the inter vivos transfer did not contain or state a certain value at that time, and there is no estimate of value made at the time of transfer, then their value should be calculated as of the time of estate division. Under Brazil Civil Code Article 1.793, the heirs may then openly confirm their succession and inheritance by assignment in a public deed.

Under Brazil Civil Code Article 1.826, the possessor of any assets or inter vivos advancement transfer is obligated to return and resubmit the assets/transfers to the estate for inventory and collection, and the responsibility is on the possessor to disclose and submit the asset, who must do so in good faith. Under Article 1.827, only transfers made to bona fide third-party purchasers, for good value and in good faith, are excluded. Under Article 1.992, the heir who withholds inheritance property and fails to disclose them to the inventory and Collation process, loses the right to that property. Under Article 1.995, if the concealing heir no longer has the property, he must pay the value of the property plus any damages and losses.

Under Article 2.017, Brazil law requires that the highest possible equality be given to the heirs in the process of sharing, when accounting for the value, nature, and quality of the property. Under Article 2.020, the heirs in possession of estate property, the surviving spouse, and the administrator are entitled to reimbursement of all expenses they have incurred in maintaining the estate property up to division.

Under Brazil law, any assets at any time held by a decedent are presumed community spousal property, including any shares or quotas in foreign companies, enterprises, or corporations. Brazil Civil Code Article 1.659. Likewise, income is part of the Brazilian community spousal property, as is anything obtained from that income, including real estate, furniture, rights, or pecuniary assets—this would include ownership shares in foreign companies, whether or not capitalized by Brazilian income.

Under Brazil Decree-Law No. 3.000 of March 26, 1999 (Civil Code), Book I, Title I1.968, Subtitle I, Chapter I, Article 2, individuals domiciled or resident in Brazil, holders of economic or legal availability of income or earnings of any nature, including income and capital gains, must treat that as taxable Brazil property, regardless of nationality, sex, age, status in civil law, or profession. Brazil taxable property includes any perceived income from any assets owned by them. Under Article 3, even the income and benefits of any nature perceived in Brazil by residents or those domiciled abroad are treated as taxable Brazil property. Under Article 38, property is considered property in Brazil and subject to taxation if owned by a Brazilian, regardless of the name of the income, titles or rights, the location, legal status or nationality of the source, the origin of the goods producing the income and manner of receiving the income or earnings, or the taxpayer’s benefit in any form and for any purpose.

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Brazil Court of Justice – By A. Júnior – Flickr, CC BY 2.0, https://commons.wikimedia.org/w/index.php?curid=25625667

Thus, under Brazil Decree-Law No. 3.000, Article 12, Subsection 4, income from shares in foreign companies must still be reported and treated as a Brazilian property by the estate of a deceased, with offsets in Brazilian taxation for any taxes paid or withheld at the source of the income (i.e. in the foreign country). Under Article 19, any income from any investments and capital gains received abroad by those Brazilians abroad is still treated as Brazilian property subject to Brazilian taxation. Under Article 26, any income, dividends, or gains to owners of foreign companies is treated as Brazilian property subject to taxation. Under Article 28, those properties are considered owned and held by the natural person in his Brazil habitual residence, the place where he has his permanent dwelling. Under Article 16, to avoid treatment of your income as Brazilian, you must move permanently abroad and present of a final declaration of exit from the country

Under Article 33, bank accounts, financial investments, stocks, commodities, futures, similar stock exchange property are all considered owned in Brazil, to be registered and taxed in Brazil. Under Article 37, gross income includes all proceeds of capital, labor, or both, proceeds of any kind, and any accruals not corresponding to declared income.

Under Article 55, income received from securities that touch the heir and estate, income received in the form of assets or rights, income received from foreign organizations, income from interests, profits, “income received abroad, whether or not transferred to Brazil, as a result of developed activity or capital located abroad” (subsection VII), the redemption value of securities, and the interests and any other income of beneficiary parties, interest and any interests produced by capital invested, even if it results from income that is not taxable or exempt, profits and dividends actually paid to shareholders or individual company holders, is all considered property owned in Brazil and subject to Brazilian taxation.

In the Netherlands, Dutch Civil Code Book 4, Article 4:13(2), the spouse acquires all assets of the decedent’s estate. Under Dutch Civil Code Article 4:13(3), a decedent’s children only acquire a financial debt-claim against the spouse, which value corresponds to the value of the child’s share in the estate, and which only becomes due and demandable if the spouse goes bankrupt or dies. Under Article 4:67, the estate must account for and offset any inter vivos transfers made to the disadvantage of an heir and any inter vivos transfers made to a descendant heir. Under Article 4:34, 4:70, and 4:71, the value of such inter vivos transfers must be deducted from the heir’s intestate share. Under Article 4:34, 4:79, and 4:89, inter vivos transfers may be abated and the shares in inheritance equalized. Under Article 4:90, the recipient heir must compensate the non-recipient heir for the value of the abated inter vivos transfer.

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Under Dutch Civil Code Article 4:16(4), the spouse and children are entitled to full examination of all records, documents, and data to assess their claims and rights, and each must give up all such information. Under Dutch Civil Code Article 4:15(2), even if the spouse and heirs reached an initial agreement as to the value of the estate, but there has been a mistake about the value that disadvantages a party, or it has otherwise been calculated incorrectly, the estate must be re-valued and re-divided to correct this disadvantage. Thus, application of Dutch law may benefit a competing spouse over other heirs in Brazil.

In Florida, under Florida law, an “advancement” is an inter vivos transfer made by a parent to his child, that would otherwise have represented part of donor’s estate that the child would inherit on his parent’s death. West v. Coogler, 427 So. 2d 813, 814 (Fla. 5th DCA 1983) (holding that conveyance of 40-acre tract by mother to her son constituted an advancement, subject to recoupment at estate administration). The transfer is subject to recoupment and redivision by the estate upon death of the donor. Id.

This doctrine of recoupment of inheritance advancements rests on ancient equitable doctrine, well established in American and Florida law. Id. The doctrine of advancements recoupment was the subject of statutory enactments in England (22 & 23 Car. II 1682–1683) that are part of Florida’s common law. Id. The doctrine is based on the assumed desire of a parent/spouse to equalize his estate among his heirs, not only as to property owned at death but as to all property that went from him to his children inter vivos, so that one heir will not be preferred to another in the final settlement of his estate. Id.

Under Florida law, a voluntary conveyance of land or property by a parent to a child was presumed an advancement, and the burden of proof was on the party claiming that it is not. Sewell v. Everett, 57 Fla. 529, 532 (Fla. 1909) (“the legal presumption . . . is that this was an advancement to her, chargeable against her ultimate inheritance in his estate.”); see also West v. Coogler at 814 n.4 (confirming the presumption of advancement); Medary v. Dalman, 69 So. 2d 888, 889 (Fla. 1954) (confirming the prima facie presumption of transfer as an advancement); Smith v. Smith, 143 Fla. 159, 161 (Fla. 1940) (“where the property is conveyed to the wife, the transfer being ‘regarded prima facie as an advancement’”); Redding v. Bank of Greenville, 92 Fla. 327, 333 (Fla. 1926) (“the doctrine of ‘advancement’ is based on the assumed desire of the donor to equalize the distribution of his estate”).

Under Florida law, these inter vivos transfers (advancements) should be recouped and grouped, hotchpot, with the entire estate corpus and charged against the interest of the advanced heir. West v. Coogler at 815 (holding pre-death conveyance of 40 acres constituted an advancement to be grouped, hotchpot, with corpus and charged in kind as 40 acres against interest of that heir); Towles v. Roundtree, 10 Fla. 299, 301 (Fla. 1863) (“The law expressly says, when ‘a child shall receive any real or personal estate, by way of advancement, such advancement shall be brought into hotch-pot.’”); Taylor v. Everett, 60 Fla. 362, 363 (Fla. 1910) (holding that any advancement of real or personal property must be brought into hotchpot with the whole estate, for equal division).

Under Florida law, the statute of limitations has no application to advancements made by a father to his child, so as to prevent the same from being brought into hotchpot. Lindsay v. Platt, 9 Fla. 150, 154 (Fla. 1860) (“neither the statute of limitations nor the statute of frauds has anything to do with this question [of advancements on inheritance].”).

Under the modern Florida Probate Rule 5.380(a), a beneficiary may file a petition for compulsory payment to enforce equalization in case of advancements. This corresponds to the original Florida Statutes § 734.07 for recoupment of inter vivos transfers as advancements:

737.07 Advancements.-When any person has received any advancements from an intestate in his lifetime and any of the next of kin, by petition, alleges that such advancement has been made, the same shall be determined by the county judge . . . such advancement as of the value at the time made, without interest, shall be taken into account in determining the distribution of the estate and charged against the person to whom such advancement was made or those claiming through him. No personal representative shall be held responsible for having made distribution before such a petition has been filed and citation served upon or notice given to him. The statute of limitations shall not apply to advancements. s. 734.07, Fla. Stat. (1973).

Under the modern Florida Statutes §§ 733.802(1) and 733.806, the property advanced shall be valued at the time the heir came into possession or enjoyment of the property or at the time of the death of the decedent, whichever first occurs.” A Florida court should distinguish that this newer version deviates from Brazil law, in that Brazil law presumes automatic treatment of inter vivos transfers as inheritance advancements that must be recouped and divided in intestate estate administration

Under long-standing Florida law, where the recipient of an advancement declines to bring the same into hotchpot when legally required to do so, that person should be excluded from participation in the division of the rest of the estate property. Lindsley v. McIver, 57 Fla. 466, 468 (Fla. 1909) (aff’ing the exclusion of an heir given his failure to bring his advancement into hotchpot). “Hotchpot” is bringing into the estate of intestate an estimate of value of advancements made by intestate to his or her children, in order that the whole may be divided in accordance with the statute of descents. Lindsley v. McIver, 57 Fla. 466, 468 (Fla. 1909) (aff’ing the exclusion of an heir given his failure to bring his advancement into hotchpot); Livingston v. Crickenberger, 141 So. 2d 794, 796 (Fla. 1st DCA 1962) (distinguishing that land acquired from the intestate decedent before death is and advancement, while land acquired from the administratrix rather than decedent is not).

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Florida law thus recognizes a cause of action for tortious interference with an expectancy on inheritance where there is a disproportionate advancement made before death intestate. Schilling v. Herrera, 952 So. 2d 1231, 1235 (Fla. 3d DCA 2007) (holding complaint sufficient for claim of interference with expectancy of inheritance, which is not precluded by failure to exhaust probate remedies); Davison v. Feuerherd, 391 So. 2d 799, 801–02 (Fla. 2d DCA 1980) (holding plaintiff stated cause of action for tortious interference with inheritance on disproportionate advancements); Martin v. Martin, 687 So. 2d 903, 904 and 908 (Fla. 4th DCA 1997) (holding plaintiff stated cause of action for tortious interference with inheritance between second wife and sons, by alleging activity to reduce the amount of inheritance remaining at estate administration).

Florida law likewise recognizes tortious interference claims for the advancement or diversion of assets away from the estate before death of the decedent. Neumann v. Wordock, 873 So. 2d 502, 503–04 (Fla. 2d DCA 2004) (rev’g dismissal of inheritance interference claim where plaintiff alleged that property was diverted to competing heir before death, so that the estate lacked property at death). The Dead Man’s Statute does not apply to claims for tortious interference with inheritance. In re Estate of Hatten, 880 So. 2d 1271, 1275–76 (Fla. 3d DCA 2004) (allowing inheritance interference claim alleging that defendant concealed documents to reduce amount of shares to be divided).

Where error or misrepresentation induced heirs to forego contest of administration or inheritance distribution, those heirs can nevertheless challenge the disposition of property. Ebeling v. Voltz, 454 So. 2d 783, 785 (Fla. 4th DCA 1984) (holding children who failed to contest will could still bring action challenging disposition of property given improper inducement to forego will contest); see also Schilling v. Herrera, 952 So. 2d 1231, 1236–37 (Fla. 3d DCA 2007) (confirming the holding in Ebeling).

As can be seen, Florida law neatly coincides with Brazil law as to treatment of inter vivos transfers to heirs as advancements to be recouped and offset in estate administration. Like Brazil, Florida requires an heir to submit an advancement to hotchpot. Like Brazil, Florida law holds that failure to submit an advancement relinquishes any right to inheritance. Like Brazil, failure to resubmit advancements entitles the harmed surviving claimant to sue for the lost value or property. Like Brazil, if a relinquishment of rights to estate is obtained through error or misrepresentation, the relinquishing heir can challenge the disposition. Because Brazil law does not offend Florida law or policy, a Florida court should enforce it. Application of Netherlands law may strongly benefit the spouse, and thus depending on the circumstances and policies of a particular case, a Florida court may be circumspect to apply it.

In this example, the decedent’s domicile was in Brazil, and thus Brazil law should control this estate matter. One may look to documents issued or signed in Brazil for recognition of Brazilian law in the estate’s administration. Brazil law should apply to determine whether the U.S. and Netherlands ownership shares should be resubmitted to Brazil for inventory and distribution to competing heirs.

If the decedent held the legal ownership interests of the Netherlands company and/or Florida assets directly in Brazil, then Brazil law should apply. Stocks, certificates, shares, and other such property is held and owned wherever the owner is domiciled. Brazil Decree-Law No. 4.657 of September 4, 1942 (Introduction to the Civil Code) (1942) at Art. 10; Brazil Decree-Law No. 3.000 of March 26, 1999 (Civil Code), Book I, Title I1.968, Subtitle I, Chapter I, at Art. 2, 3, 12, 16, 19, 26, 28, 33, 37, 38, and 55; §§ 733.607 and 733.812, Fla. Stat. (2017); Cypen at 1208–09; Sanchez at 1264–65; Markowitz at 729; Allison at 737.

If the decedent personally contributed money from Brazil to capitalize the Netherlands company, Brazil law may apply. If the management and administration of the Netherlands company and its capital was entrusted to the Brazilian decedent solely and entirely, to be carried out by him personally out of Brazil, then Brazil law may apply. If the business of the Netherlands company itself appears to be specifically limited to activity outside of the Netherlands, then non-Netherlands law may apply. If an heir is holding the Netherlands company’s liquidation proceeds personally in Brazil, Brazilian laws should apply. See Brazil Civil Code Article 1.659); Brazil Decree-Law No. 4.657 of September 4, 1942 (Introduction to the Civil Code) (1942) at Art. 10; Brazil Decree-Law No. 3.000 of March 26, 1999 (Civil Code), Book I, Title I1.968, Subtitle I, Chapter I, at Art. 2, 3, 12, 16, 19, 26, 28, 33, 37, 38, and 55.

[KEEP READING BELOW PHOTO]

Federal_Courthouse_in_Miami
Miami Federal Courthouse – By The original uploader was Miami92 at English Wikipedia. – Transferred from en.wikipedia to Commons., Public Domain, https://commons.wikimedia.org/w/index.php?curid=3706442

This is the same in Florida law. Under Florida Statutes § 733.607, the estate administrator has a right and obligation to take possession and control of all of the decedent’s property, including advancements, stocks, bonds, and all such interests in company ownership, whether the companies are domestic or foreign. § 733.607, Fla. Stat. (2017); see also In re Estate of Barsanti v. Cypen, 773 So. 2d 1206, 1208–09 (Fla. 3d DCA 2000) (requiring the return of bearer stock certificates to Florida from The Netherlands); Sanchez v. Solomon, 508 So. 2d 1264, 1264–65 (Fla. 3d DCA 1987) (holding Florida bank accounts were estate property in administration of Venezuelan estate, subject to freezing and return to Venezuela); Markowitz v. Merson, 869 So. 2d 728, 729 (Fla. 4th DCA 2004) (holding beneficiary of decedent was required to return bearer bonds belonging to the estate that she removed after death, as it was an asset required for marshaling to the estate and possession by the estate administrator); Trueman Fertilizer Co. v. Allison, 81 So. 2d 734, 737 (Fla. 1955) (beneficial title to corporate assets is vested in stockholders in their place of domicile, and upon death vests in the estate administrator). Under Florida Statutes § 733.812, corporate distributions, assets, income, funds, and payments are considered assets that must be marshaled into the estate for sharing and proper disposition; if the distributee has liquidated them and no longer has them, then he must return their value, income thereon, and any gain received

Accordingly, a Brazilian estate should be able to recoup and equally divide company stocks and ownership shares, or their liquidated cash proceeds, along with all other such property owned and held in Brazil by Brazilians, with application of Brazilian law.

This article should serve as a primer on initial considerations in choice of law where there is no contractual provision predetermining the controlling law. If you have questions about choice of law or international disputes, please contact Bernhard Law Firm at www.bernhardlawfirm.com, abernhard@bernhardlawfirm.com, or +1-786-871-3349. Bernhard Law Firm handles trials and appeals in business and financial disputes.

Bernhard Law Firm

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One thought on “HOW TO CHOOSE YOUR LAW IN AN INTERNATIONAL DISPUTE – Six Steps to Determine Default Choice of Law Without Contractual Guidance

  1. […] Posted by Miami International Attorneys, P.L. ⋅ July 3, 2018 ⋅ Leave a comment Filed Under  bernhard law firm, bernhardlawfirm, choice of law, choose law, fraud lawyers florida, fraudlawyersflorida Check out this article on how to choose the law in an international dispute from Fraud Lawyers Florida, #bernhardlawfirm: https://fraudlawyersflorida.com/2018/07/03/how-to-choose-your-law-in-an-international-dispute-six-st… […]

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