When families are in conflict
When family members are at war with each other, a frequent threat is to see each other in court. But we do not want to become as litigious as Americans allegedly are.
Remember the infamous 1994 case where a lady spilled coffee on her lap and sued a popular fast food chain for creating such a hot beverage? Astoundingly, the jury awarded her millions of dollars, but the chain appealed and both parties finally settled out of court.
Sadly, cases of siblings disputing the estate settlements of deceased parents, spouses battling each other over custody of children, grown children taking the side of a parent or stepparent over another clog the dockets of courts worldwide, even in our country where family solidarity is supposedly taken more seriously than most.
Clients often ask if doing a family constitution is enough to deter members from confronting each other in court. While a constitution is an invaluable guide in managing family relationships, governance and disputes, it is not legally binding on its own.
Family constitutions are “more similar to a statement of intent,” says US law firm Mills and Reeve. “They are agreements entered into by family members which represent the consensus view of the relationship between the family and their affairs.”
Thus, constitutions can be bolstered by more formal documents such as shareholder agreements, which are legally binding.
Mills and Reeve gives a common distinction between the two documents: “Some family members who are not shareholders, for instance, beneficiaries of a family trust which owns shares in the business, might be a party to the constitution whilst there may be shareholders, such as external investors, who are not parties to the family constitution but will be parties to the shareholders’ agreement. The biggest difference is that a family constitution often deals with issues incapable of being the basis of a binding legal agreement.”
Other documents that family businesses can attach to their constitution to make their wishes binding in court include trust agreements, company charters and even wills.
Back to the legal arena—are there ways to resolve conflict without going to court? Certainly. In fact, our Philippine Family Code touts the “earnest effort rule,” where parties agree to exert their utmost to reach a satisfactory compromise among themselves or with a mediator. For instance, in the Filipino-Chinese community, family associations can recommend an elder esteemed by the community to help out.
A 2024 ruling by the Supreme Court centers on the crucial role of family mediation, which applies to parties in legal relationships, even common law or sexual relations. Raya Villacorta of Accralaw explains in BusinessWorld: “Among the cases where the rule shall apply are those involving child support and custody, guardianship, settlement of intestate estates and other civil cases … Parties undergo a 30-day family mediation … with a mediator functioning as an impartial third party … [and hopefully] a settlement is reached. If [not] … the case may [go to] Judicial Dispute Resolution..”
What if the parties do not agree to mediation? Then it is only fair that the case is dismissed. If one side does not appear (and does not have a reasonable justification for their absence), then it is but just that other party can present evidence ex parte, which the judge can use as basis for a decision.
“As pointed out by the Family Code Commission, there is nothing sadder and more tragic than litigation between members of the same family,” says Villacorta. “The family is supposed to be a refuge, a space for support, understanding and unconditional love. For these reasons, the state continues to adopt measures to protect its sanctity. With the promulgation of the rule on family mediation, members of the family are provided with an out-of-court process of resolving family disputes, decreasing the emotional costs brought by litigation.”
Queena N. Lee-Chua is with the board of directors of Ateneo’s Family Business Center. Get her book “All in the Family Business” at Lazada or Shopee, or the ebook at Amazon, Google Play, Apple iBooks. Contact the author at blessbook.chua@gmail.com.
