The Holy See vs. Hon. Eriberto U. Rosario.
G.R. No. 101949, December 1, 1994.
Petitioners sold to Ramon Licup 3 lots namely 5-A, 5-B and 5-D with the agreement that the sellers clear the said lots of squatters who were then occupying the same. In view of the refusal of the squatters to vacate the lots sold to private respondent (Starbright Sales Enterprises).
Starbright demanded the petitioners to fulfill their undertaking and clear the property of squatters; however the petitioner proposed that if Starbright would undertake the eviction of the squatters, the purchase price of the lots should be reduced or if not, that the earnest money be returned. Petitioner and the PRC, without notice to private respondent, sold the lots to Tropicana.
Starbright filed a complaint for annulment of the sale of the three parcels of land, and specific performance and damages against the petitioner. It states that it is willing and able to comply with the terms of the contract to sell and has actually made plans to develop the lots into a townhouse project, but in view of the sellers’ breach, it lost profits of not less than P30,000,000.00.
Petitioners moved to dismiss the complaint based on sovereign immunity from suit.
RTC denied the motion to dismiss on the ground that petitioner “shed off [its] sovereign immunity by entering into the business contract.
Whether the doctrine of non-suability is not applicable to the petitioner since it entered into a commercial transaction for the sale of a parcel of land located in the Philippines.
NO. In the absence of legislation defining what activities and transactions shall be considered “commercial” and as constituting acts jure gestionis, the Court has to come out with own guidelines, tentatively they may be.
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.
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.
Lot 5-A was acquired by petitioner as a donation from the Archdiocese of Manila. The donation was made not for commercial purpose, but for the use of petitioner to construct thereon the official place of residence of the Papal Nuncio. The right of a foreign sovereign to acquire property, real or personal, in a receiving state, necessary for the creation and maintenance of its diplomatic mission, is recognized in the 1961 Vienna Convention on Diplomatic Relations (Arts. 20-22). This treaty was concurred in by the Philippine Senate and entered into force in the Philippines on November 15, 1965.
The decision to transfer the property and the subsequent disposal thereof are likewise clothed with a governmental character. Petitioner did not sell Lot 5-A for profit or gain. It merely wanted to dispose off the same because the squatters living thereon made it almost impossible for petitioner to use it for the purpose of the donation. The fact that squatters have occupied and are still occupying the lot, and that they stubbornly refuse to leave the premises, has been admitted by private respondent in its complaint
As expressed in Section 2 of Article II of the 1987 Constitution, we have adopted the generally accepted principles of International Law. Even without this affirmation, such principles of International Law are deemed incorporated as part of the law of the land as a condition and consequence of our admission in the society of nations.
There are two conflicting concepts of sovereign immunity, each widely held and firmly established.
- The classical or absolute theory, a sovereign cannot, without its consent, be made a respondent in the courts of another sovereign
- 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
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.
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 ; (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 ).
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 ); 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 ). 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.
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