Holy See vs. Rosario

THE HOLY SEE, petitioner,
vs.
THE HON. ERIBERTO U. ROSARIO, JR., as Presiding Judge of the Regional Trial Court of Makati, Branch 61 and STARBRIGHT SALES ENTERPRISES, INC., respondents.

238 SCRA 524
December 1, 1994

FACTS:

Lot 5-A is registered under the name of the petitioner The Holy See. This lot is contiguous to lots 5-B and 5-D registered in the name of Philippine Realty Corporation (PRC). These three lots were sold through an agent Msgr. Domingo Cirilos Jr. to Ramon Licup. Licup assigned his rights to private respondent Starbright Sales Ent. Inc. (SSEI).

Due to refusal of the squatters to vacate the lots, a dispute arose as to who of the parties has the responsibility of eviction and clearing the land. SSEI insists that petitioner should clear the property of the squatters. Petitioner refused and proposed that either SSEI undertake the eviction or that the earnest money be returned. Msgr. Cirilos returned the P100,000.00 earnest money, and the property was sold to Tropicana Properties and Development Corporation (Tropicana).

SSEI filed suit for annulment of sale, specific performance and damages against Msgr. Cirilos, PRC, and Tropicana.

The petitioner and Msgr. Cirilos moved to dismiss for lack of jurisdiction based on sovereign immunity from suit. It was denied on the ground that petitioner ―shed off its sovereign immunity by entering into the business contract in question. A motion for reconsideration was also denied. Hence, this special civil action for certiorari.

ISSUE:

Did the Holy See properly invoke sovereign immunity for its non-suability?

HELD:

YES. In the case at bar, lot 5-A was acquired as a donation from the archdiocese of Manila for the site of its mission or the Apostolic Nuniciature in the Philippines. The subsequent disposal was made because the squatters living thereon made it impossible for petitioner to use it for the purpose of the donation. Petitioner did not sell lot 5-A for profit or gain.

There are two conflicting concepts of sovereign immunity, each widely held and firmly established. According to the classical or absolute theory, a sovereign cannot, without its consent, be made a respondent in the courts of another sovereign. According to the newer or restrictive theory, the immunity of the sovereign is recognized only with regard to public acts or acts jure imperii of a state, but not with regard to private acts or acts jure gestionis (United States of America v. Ruiz, 136 SCRA 487 [1987]; Coquia and Defensor-Santiago, Public International Law 194 [1984]).

The restrictive theory, which is intended to be a solution to the host of problems involving the issue of sovereign immunity, has created problems of its own. Legal treatises and the decisions in countries which follow the restrictive theory have difficulty in characterizing whether a contract of a sovereign state with a private party is an act jure gestionis or an act jure imperii.

The restrictive theory came about because of the entry of sovereign states into purely commercial activities remotely connected with the discharge of governmental functions. This is particularly true with respect to the Communist states, which took control of nationalized business activities and international trading.

This Court has considered the following transactions by a foreign state with private parties as acts jure imperii: (1) the lease by a foreign government of apartment buildings for use of its military officers (Syquia v. Lopez, 84 Phil. 312 [1949]; (2) the conduct of public bidding for the repair of a wharf at a United States Naval Station (United States of America v. Ruiz, supra.); and (3) the change of employment status of base employees (Sanders v. Veridiano, 162 SCRA 88 [1988]).

On the other hand, this Court has considered the following transactions by a foreign state with private parties as acts jure gestionis: (1) the hiring of a cook in the recreation center, consisting of three restaurants, a cafeteria, a bakery, a store, and a coffee and pastry shop at the John Hay Air Station in Baguio City, to cater to American servicemen and the general public (United States of America v. Rodrigo, 182 SCRA 644 [1990]); and (2) the bidding for the operation of barber shops in Clark Air Base in Angeles City (United States of America v. Guinto, 182 SCRA 644 [1990]). The operation of the restaurants and other facilities open to the general public is undoubtedly for profit as a commercial and not a governmental activity. By entering into the employment contract with the cook in the discharge of its proprietary function, the United States government impliedly divested itself of its sovereign immunity from suit.

In the absence of legislation defining what activities and transactions shall be considered “commercial” and as constituting acts jure gestionis, we have to come out with our own guidelines, tentative they may be.

Certainly, the mere entering into a contract by a foreign state with a private party cannot be the ultimate test. Such an act can only be the start of the inquiry. The logical question is whether the foreign state is engaged in the activity in the regular course of business. If the foreign state is not engaged regularly in a business or trade, the particular act or transaction must then be tested by its nature. If the act is in pursuit of a sovereign activity, or an incident thereof, then it is an act jure imperii, especially when it is not undertaken for gain or profit.

As held in United States of America v. Guinto, (supra): “There is no question that the United States of America, like any other state, will be deemed to have impliedly waived its non-suability if it has entered into a contract in its proprietary or private capacity. It is only when the contract involves its sovereign or governmental capacity that no such waiver may be implied.”

In the case at bench, if petitioner has bought and sold lands in the ordinary course of a real estate business, surely the said transaction can be categorized as an act jure gestionis. However, petitioner has denied that the acquisition and subsequent disposal of Lot 5-A were made for profit but claimed that it acquired said property for the site of its mission or the Apostolic Nunciature in the Philippines. Private respondent failed to dispute said claim.

Under Art.31 (A) of the 1961 Vienna Convention on Diplomatic Relations, a diplomatic envoy is granted immunity from the civil and administrative jurisdiction of the receiving state over any real action relating to private immovable property situated in the territory of the receiving state which the envoy holds on behalf of the sending state for the purposes of the mission. If this immunity is provided for a diplomatic envoy with all the more reason should immunity be recognized as regards the sovereign itself, which in this case is the Holy See.

Moreover, the Department of the Foreign Affairs has formally intervened and officially certified that the Embassy of the Holy See is a duly accredited diplomatic missionary to the Republic of the Philippines and as such is exempt from local jurisdiction and entitled to all the rights, privileges and immunities of a diplomatic mission or embassy in this court.

The determination of the executive arm of the government that a state or instrumentality is entitled to sovereign or diplomatic immunity is a political question that is conclusive upon the courts. Where the plea of immunity is reacquired and affirmed by the executive branch, it is the duty of the courts to accept this claim so as not to embarrass the executive arm of the government in conducting the country‘s foreign relations.

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