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" Whether by international law or usage the United States Government on taking possession of the Philippines, will be bound by the terms of the Company's concession both as to exclusive rights and subsidies.” This, it appears, was submitted to the most eminent counsel available and answered by them in this wise: “ The United States Government is bound to carry out the obligations of the concession, or to give an adequate compensation; if it means to follow the usage”; but beyond this opinion of English counsel no steps seem to have been taken.
A claim made for recognition of a concession to a British Company for a Cuban cable on the ground that the obligations contracted by Spain under those concessions “ become binding on the United States Government on their taking possession of the Islands" was negatived by the Attorney-General on the ground that our Government was not the successor of Spain, “ but merely an intervening power arranging the succession.” “ It did not make the contract of concession,"adds the Attorney-General, “it is not the beneficiary receiving the benefits said to accrue to the Island from the cables, nor is it the Island, nor the locality to which the obligations are said to be locally attached; neither does it appropriate to itself the revenue of the the Island."
A claim made on behalf of another British corporation, the Manila Railway Company, Limited, for payment by the United States of a subvention guaranteed by the Spanish Gov. ernment, met with a like fate. It passed through the ordeal of the War Department and its law officer and thence to the Attorney-General and was rejected on the ground that the obligation which the Manila Railway Company was seeking to ensorce was a “general debt" and a “personal contract ” of the Spanish Government.
“ The contract was made by Spain and partly for her own benefit,” says the Attorney-General ; “it was the indivisible personal contract of Spain and of the concessionaire. All the promises of any contract entered into by the former Government of a province, wrested from it by a victory in war, do not transfer themselves to the new government in defiance of the natural proposition that a man cannot be bound by a stranger's promises. There is an obvious difference between a mere debt for the payment of a loan and an executory contract containing many stipulations to be performed on one side or the other.
“ The concessions here in question are executory contracts not concerning the public domain owned by Spain, but containing many personal obligations of Spain and of other parties. They were, and this appears upon their face, concerning instruments with which the Monarchy was to govern more easily and conveniently the subject colonies for the general benefit of Spain as well as their own. The difference between them and what we conceive of as a franchise seems to me to be an obvious one."
The Attorney-General concludes that there is no “ rule of law to the effect that contracts made by the old sovereignty for local and imperial objects shall be obligatory as such upon the new sovereignty,” but that “as the provinces of the Philippines have received and will retain the chief benefit from the railroad, the revenues out of which that part of the benefit was to be paid for are now in the hands of their new government, the creditor was induced, very properly, to look to those revenues for that purpose, and, moreover, the railroad was a most necessary piece of property.
It would seem to follow that although the contract, as such, has departed with Spain, there is a general equitable obligation upon the provinces to make some fair arrangement with the company, etc."
An application made for the confirmation of a conces. sion for use of water power in Porto Rico was met with the answer that the right of the applicant
had not been completed by the action or assent of the Crown authorities of Spain; that his right is not vested but inchoate and cannot be made vested by the completion of those requisites prescribed by Spanish law."
The Attorney-General assented, however, to the proposition that
“if at the time the Treaty of Paris took effect the applicant had a complete and vested right to the use of the waters of the River Plata, that right would be respected by the United States."
A like disposition was made upon a concession for the construction of a tramway in Porto Rico, which was left incomplete by the failure to make public bids before the sovereignty of Spain passed away.
On the other hand, in reference to certain cable concessions in Cuba, the exclusive rights conserred upon the companies was recognized, the War Department holding that under the terms of the concession
construed by the Spanish authorities, the Cuba Submarine Telegraph Company has the right to object to the use of the Government overland telegraph lines in Cuba for the transmission of messages received by the
French cable at Santiago and destined for the central station at Havana, Cienfuegos or Batabano, and also to object to the transmission over Government Telegraph Lines of messages originating in any of said places and destined for points outside of Hayti over the French cable.”
The continuing validity of the exclusive privilege claimed by the Company in Cuba was passed upon by the Attorney-General upon proceedings taken by a rival company to land a cable in Cuba, a proceeding which was endeavored to be sustained by emphasizing the fact that an obnoxious monopoly was otherwise encouraged. Upon this the Attorney-General said :
“ The mere fact that the Western Union Telegraph Company is enjoying under a grant of exclusive right what amounts to a monopoly is no reason of itself why it should be deprived of its concession. It is easy to say that monopolies are odious, but there are concessions which amount to monopolies which are lawful and cannot be disturbed except by a violation of public faith.
“ Concessions of this kind, which carry with them exclusive rights for a period of years, constitute property of which the concessionary can no more be deprived arbitrarily and without lawful reason than it can be deprived of its personal tangible assets. If, therefore, the Western Union Telegraph Company has an exclusive grant applicable to Cuba for cable rights, which grant has not expired, it would be violative of all principles of justice to destroy its exclusive right by granting competing privileges to another company. It is the function of the Government to prevent as far as possible all infringement of the vested rights of others; vested rights which are property ought not to be taken from any one, except by due process of law. Executive action applied to subjects like this is not due process of law.”1
Perhaps the most important and the most delicate case presented for consideration relates to certain banks, both in Porto Rico and the Philippines, organized under Spanish law, after fulfillment of all the conditions required by the general statutes of the country, and to which banks were given exclusive privileges for a long term of years. These privileges conferred the exclusive right to issue bank notes in the various localities where the banks were situated, and prescribed the relation of such issue to its paid-up capital, etc., upon terms which might be considered to-day as of great liberality, though scarcely any one will be found to dispute that at the time of the formation of the banks the
1 XXII Op. Atty. Gen'l, 516, 518.
investment of the requisite capital was not any more than fairly rewarded by the benefits to be derived from the terms granted.
In endeavoring to shape the financial regulations for these new territories, Congress met with these financial establishments asserting their respective rights and privileges, and the question at once arose as to how far these rights or privileges were entitled to respect at the hands of the new sovereignty that dominated the institutions since the cession under the Treaty of Paris.
In a projected Act for the regulation of the currency in the Philippines, which never became a law, an attempt was made to deal with the problem in such a spirit as would give some recognition to the existing banking institutions and yet not materially interfere with the new scheme which Congress was attempting to devise; one section of this proposed law conceded to the bank the right to issue notes equal to the entire paid up capital of the bank without any deposit of United States bonds to secure circulation, no notes issued earlier than 1884 to be counted as part of such circulation. While this was a concession greatly in advance of the requirements exacted of national banks, it fell far short of the privileges conceded by the terms of the bank's incorporation under Spanish law and ignored its claim to an exclusive right to issue circulating notes and its claims in reference to exemption from taxation.
An interesting correspondence had preceded this attempted legislation, between some members of the Philippine Commission and the Directors of the bank.
Commissioner Ide writes to the Directors (September 24, 1901), that the subject of legislation upon the banking system of the Philippine Islands is likely to be soon taken up and that it is desirable that the regulations should, as nearly as possible, be uniform.
“ There is no desire,” says the Commissioner, “to infringe upon the privileges of your institution so far as they are compatible with the commercial interests in the government of this Island. It is probable, however, that the Congress of the United States will refuse to consider the privilege of note issue pertaining to your establishment to be exclusive."
Starting with this denial of the value of any rights conferred by the Spanish charter, the Commissioner suggests a method of compromise which “would not affect the earnings or financial condition" of the bank. To this the Bank Directors replied that under Spanish law the bank had since 1878 possessed the exclusive right of issuing notes for circulation in the Philippines and that the plan outlined by the Commissioner did violence to this and other rights of the bank, and proceeded to quote to the Commissioner the Darmouth College case and the long line of cases that have followed it; but, while insisting upon the legality of the rights which it claims, the bank made a counter proposition to which the Commissioner replies that it would be well for the Directors to refer to the decision of the Veazie Bank v. Fenno, wherein, says the Commissioner, “it was held that it was entirely competent for Congress to impose any such tax as it saw fit, upon the issue of circulating notes by State banks, even though such a tax should be prohibitive by reason of its amount.”
To this the Directors return an answer expressing their regret that the effort to arrive at a compromise of what they considered their legal rights “should have apparently served to suggest the propriety of destroying the exercise of such rights by repression or prohibitory taxation.”
It will readily be seen that the controversy as to the rights secured by International Law or by the terms of the Treaty of Paris, is of very great interest as applied to the banking privileges of institutions existing under the jurisdiction of Spain, in the territory over which the United Staies has now acquired complete sovereignty.
Property rights are certainly protected by the terms of the Treaty and franchises in general have long since been recognized as property rights. In this connection the War Department, through its law officer, discussing franchises for tramways in Porto Rico, sanctions the definition of Angell & Ames and of Judge Thompson; to wit, a franchise is a special privilege conferred by governments on individ. uals and which does not belong to the citizens of the country generally by common right. Franchises spring from contracts between the sovereign power and private citizens, made upon a valuable consideration for purposes
'(1869) 8 Wall. 533.