The Holy See vs Rosario

Facts:
Petitioner is the Holy See who exercises sovereignty over the Vatican City in Rome, Italy, and is
represented in the Philippines by the Papal Nuncio. Private respondent, Starbright Sales
Enterprises, Inc., is a domestic corporation engaged in the real estate business.

This petition arose from a controversy over a parcel of land consisting of 6,000 square meters
(Lot 5-A, Transfer Certificate of Title No. 390440) located in the Municipality of Parañaque,
Metro Manila and registered in the name of petitioner. The three lots were sold to Ramon Licup,
through Msgr. Domingo A. Cirilos, Jr., acting as agent to the sellers. Later, Licup assigned his
rights to the sale to private respondent.

In view of the refusal of the squatters to vacate the lots sold to private respondent, a dispute
arose as to who of the parties has the responsibility of evicting and clearing the land of
squatters. On January 23, 1990, private respondent filed a complaint with the Regional Trial
Court, Branch 61, Makati, Metro Manila for annulment of the sale of the three parcels of land,
and specific performance and damages against petitioner, represented by the Papal Nuncio,
and three other defendants: namely, Msgr. Domingo A. Cirilos, Jr., the PRC and Tropicana.

On June 8, 1990, petitioner and Msgr. Cirilos separately moved to dismiss the complaint —
petitioner for lack of jurisdiction based on sovereign immunity from suit, and Msgr. Cirilos for
being an improper party. An opposition to the motion was filed by private respondent.

On June 20, 1991, the trial court issued an order denying, among others, petitioner's motion to
dismiss after finding that petitioner "shed off [its] sovereign immunity by entering into the
business contract in question.

On December 9, 1991, a Motion for Intervention was filed before us by the Department of
Foreign Affairs, claiming that it has a legal interest in the outcome of the case as regards the
diplomatic immunity of petitioner, and that it "adopts by reference, the allegations contained in
the petition of the Holy See insofar as they refer to arguments relative to its claim of sovereign
immunity from suit"

Issues:
1. Whether or not personality or legal interest of the Department of Foreign Affairs to
intervene in the case in behalf of the Holy See.
2. Whether or not petitioner has sovereign immunity from suit.

Ruling:
1. In Public International Law, when a state or international agency wishes to plead sovereign or
diplomatic immunity in a foreign court, it requests the Foreign Office of the state where it is sued
to convey to the court that said defendant is entitled to immunity. In the Philippines, the practice
is for the foreign government or the international organization to first secure an executive
endorsement of its claim of sovereign or diplomatic immunity. But how the Philippine Foreign
Office conveys its endorsement to the courts varies. In International Catholic Migration
Commission v. Calleja, 190 SCRA 130 (1990), the Secretary of Foreign Affairs just sent a letter
directly to the Secretary of Labor and Employment, informing the latter that the respondent-
employer could not be sued because it enjoyed diplomatic immunity. In World Health
Organization v. Aquino, 48 SCRA 242 (1972), the Secretary of Foreign Affairs sent the trial
court a telegram to that effect. In Baer v. Tizon, 57 SCRA 1 (1974), the U.S. Embassy asked the
Secretary of Foreign Affairs to request the Solicitor General to make, in behalf of the
Commander of the United States Naval Base at Olongapo City, Zambales, a "suggestion" to
respondent Judge.

In the case at bench, the Department of Foreign Affairs, through the Office of Legal Affairs
moved with this Court to be allowed to intervene on the side of petitioner. The Court allowed the
said Department to file its memorandum in support of petitioner's claim of sovereign immunity.

2. 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.

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.

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.
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 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.

Besides, the privilege of sovereign immunity in this case was sufficiently established by the
Memorandum and Certification of the Department of Foreign Affairs. As the department tasked
with the conduct of the Philippines' foreign relations (Administrative Code of 1987, Book IV, Title
I, Sec. 3), the Department of Foreign Affairs has formally intervened in this case and officially
certified that the Embassy of the Holy See is a duly accredited diplomatic mission to the
Republic of the Philippines exempt from local jurisdiction and entitled to all the rights, privileges
and immunities of a diplomatic mission or embassy in this country (Rollo, pp. 156-157). The
determination of the executive arm of government that a state or instrumentality is entitled to
sovereign or diplomatic immunity is a political question that is conclusive upon the courts
(International Catholic Migration Commission v. Calleja, 190 SCRA 130 [1990]). Where the plea
of immunity is recognized 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 (World Health Organization v. Aquino, 48 SCRA 242 [1972]). As in
International Catholic Migration Commission and in World Health Organization, we abide by the
certification of the Department of Foreign Affairs.

Private respondent is not left without any legal remedy for the redress of its grievances. Under
both Public International Law and Transnational Law, a person who feels aggrieved by the acts
of a foreign sovereign can ask his own government to espouse his cause through diplomatic
channels.

Notes:
In 1929, Italy and the Holy See entered into the Lateran Treaty, where Italy recognized the
exclusive dominion and sovereign jurisdiction of the Holy See over the Vatican City. It also
recognized the right of the Holy See to receive foreign diplomats, to send its own diplomats to
foreign countries, and to enter into treaties according to International Law. The Lateran Treaty
established the statehood of the Vatican City "for the purpose of assuring to the Holy See
absolute and visible independence and of guaranteeing to it indisputable sovereignty also in the
field of international relations". In a community of national states, the Vatican City represents an
entity organized not for political but for ecclesiastical purposes and international objects. Despite
its size and object, the Vatican City has an independent government of its own, with the Pope,
who is also head of the Roman Catholic Church, as the Holy See or Head of State, in conformity
with its traditions, and the demands of its mission in the world. Indeed, the world-wide interests
and activities of the Vatican City are such as to make it in a sense an "international state"
Inasmuch as the Pope prefers to conduct foreign relations and enter into transactions as the
Holy See and not in the name of the Vatican City, one can conclude that in the Pope's own
view, it is the Holy See that is the international person.

The Republic of the Philippines has accorded the Holy See the status of a foreign sovereign.
The Holy See, through its Ambassador, the Papal Nuncio, has had diplomatic representations
with the Philippine government since 1957 (Rollo, p. 87). This appears to be the universal
practice in international relations.
The Sapphire Case
Facts:
The case was one of collision between the American ship Sapphire and the French transport
Euryale, which took place in the harbor of San Francisco on the morning of December 22, 1867,
by which the Euryale was considerably damaged. A libel was filed in the district court two days
afterwards in the name of the Emperor Napoleon III, then Emperor of the French, as owner of
the Euryale, against the Sapphire. The claimants filed an answer alleging, among other things,
that the damage was occasioned by the fault of the Euryale.

Issues:
1. The right of the Emperor of France to have brought suit in our courts.
2. Whether, if rightly brought, the suit had not become abated by the deposition of the
Emperor Napoleon III.

Ruling:
1. The first question raised is as to the right of the French Emperor to sue in our courts. On this
point, not the slightest difficulty exists. A foreign sovereign, as well as any other foreign person,
who has a demand of a civil nature against any person here may prosecute it in our courts. To
deny him this privilege would manifest a want of comity and friendly feeling.

2. We think it has not. The reigning sovereign represents the national sovereignty, and that
sovereignty is continuous and perpetual, residing in the proper successors of the sovereign for
the time being. Napoleon was the owner of the Euryale, not as an individual but as sovereign of
France. This is substantially averred in the libel. On his deposition the sovereignty does not
change, but merely the person or persons in whom it resides. The foreign state is the true and
real owner of its public vessels of war. The reigning Emperor or national assembly or other
actual person or party in power is but the agent and representative of the national sovereignty.
A change in such representative works no change in the national sovereignty or its rights. The
next successor recognized by our government is competent to carry on a suit already
commenced and receive the fruits of it. A deed to or treaty with a sovereign as such enures to
his successors in the government of the country. If a substitution of names is necessary or
proper, it is a formal matter, and can be made by the court under its general power to preserve
due symmetry in its forms of proceeding. No allegation has been made that any change in the
real and substantial ownership of the Euryale has occurred by the recent devolution of the
sovereign power. The vessel has always belonged and still belongs to the French nation.
People vs Perfecto
Facts:
About August 20, 1920, the Secretary of the Philippine Senate, Fernando M. Guerrero,
discovered that certain documents which constituted the records of testimony given by
witnesses in the investigation of oil companies, had disappeared from his office. Shortly
thereafter, the Philippine Senate, having been called into special session by the Governor-
General, the Secretary for the Senate informed that body of the loss of the documents and of
the steps taken by him to discover the guilty party. The day following the convening of the
Senate, September 7, 1920, the newspaper La Nacion, edited by Mr. Gregorio Perfecto,
published an article.

The Philippine Senate, in its session of September 9, 1920, adopted a resolution authorizing its
committee on elections and privileges to report as to the action which should be taken with
reference to the article published in La Nacion. On September 15, 1920, the Senate adopted a
resolution authorizing the President of the Senate to indorse to the Attorney-General, for his
study and corresponding action, all the papers referring to the case of the newspaper La Nacion
and its editor, Mr. Gregorio Perfecto. As a result, an information was filed in the municipal court
of the City of Manila by an assistant city fiscal, in which the editorial in question was set out and
in which it was alleged that the same constituted a violation of article 256 of the Penal Code.
The defendant Gregorio Perfecto was found guilty in the municipal court and again in the Court
of First Instance of Manila.

Issue:
Whether or not article 256 of the Penal Code, under which the information was presented, is in
force

Ruling:
It is a general principle of the public law that on acquisition of territory the previous political
relations of the ceded region are totally abrogated. "Political" is here used to denominate the
laws regulating the relations sustained by the inhabitants to the sovereign.

As a matter of course, all laws, ordinances and regulations in conflict with the political character,
institutions and Constitution of the new government are at once displaced. Thus, upon a cession
of political jurisdiction and legislative power — and the latter is involved in the former — to the
United States, the laws of the country in support of an established religion or abridging the
freedom of the press, or authorizing cruel and unusual punishments, and he like, would at once
cease to be of obligatory force without any declaration to that effect." To quote again from the
United States Supreme Court: "It cannot be admitted that the King of Spain could, by treaty or
otherwise, impart to the United States any of his royal prerogatives; and much less can it be
admitted that they have capacity to receive or power to exercise them. Every nation acquiring
territory, by treaty or otherwise, must hold it subject to the Constitution and laws of its own
government, and not according to those of the government ceding it.
On American occupation of the Philippines, by instructions of the President to the Military
Commander dated May 28, 1898, and by proclamation of the latter, the municipal laws of the
conquered territory affecting private rights of person and property and providing for the
punishment of crime were nominally continued in force in so far as they were compatible with
the new order of things. But President McKinley, in his instructions to General Merritt, was
careful to say: "The first effect of the military occupation of the enemy's territory is the severance
of the former political relation of the inhabitants and the establishment of a new political power."
From that day to this, the ordinarily it has been taken for granted that the provisions under
consideration were still effective.

According to our view, article 256 of the Spanish Penal Code was enacted by the Government
of Spain to protect Spanish officials who were the representatives of the King. With the change
of sovereignty, a new government, and a new theory of government, as set up in the
Philippines. It was in no sense a continuation of the old, although merely for convenience
certain of the existing institutions and laws were continued. The demands which the new
government made, and makes, on the individual citizen are likewise different. No longer is there
a Minister of the Crown or a person in authority of such exalted position that the citizen must
speak of him only with bated breath. "In the eye of our Constitution and laws, every man is a
sovereign, a ruler and a freeman, and has equal rights with every other man. We have no rank
or station, except that of respectability and intelligence as opposed to indecency and ignorance,
and the door to this rank stands open to every man to freely enter and abide therein, if he is
qualified, and whether he is qualified or not depends upon the life and character and
attainments and conduct of each person for himself. Every man may lawfully do what he will, so
long as it is not malum in se or malum prohibitum or does not infringe upon the qually sacred
rights of others."

Article 256 of the Penal Code is contrary to the genius and fundamental principles of the
American character and system of government. The gulf which separates this article from the
spirit which inspires all penal legislation of American origin, is as wide as that which separates a
monarchy from a democratic Republic like that of the United States. This article was crowded
out by implication as soon as the United States established its authority in the Philippine
Islands. Penalties out of all proportion to the gravity of the offense, grounded in a distorted
monarchical conception of the nature of political authority, as opposed to the American
conception of the protection of the interests of the public, have been obliterated by the present
system of government in the Islands. To summarize, the result is, that all the members of the
court are of the opinion, although for different reasons, that the judgment should be reversed
and the defendant and appellant acquitted, with costs de officio.