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of public benefit as well as of individual advantage. Why, then, should not the franchises lawfully conferred upon banks under Spanish authority be respected by the new sovereignty under whose jurisdiction they have passed ?

Even if such franchises were questionable property rights under our law, it has been repeatedly held that their attributes as property should be tested under the Spanish law from which they were derived.


“We have often held," said the Supreme Court in United States v. Hanson, “ that the authorities of Spain were authorized to grant the public domain, in accordance with their own ideas of the merits and considerations presented by the grantee; and that our powers extended only to the inquiry, whether in fact the grant had been made; and its legal effect when made, in cases where the law by implication introduced a condition, or it was peculiar in its provision.” “The same evidence that was accorded to the return of the surveyor-general by the Spanish Governor, before the cession, is due to it by the courts of this country.”

“ It was the desire of the United States in carrying out the purposes of the Treaty of Guadalupe Hidalgo,” says the Supreme Court, in U. S. v. Anguisola, 2 “to act as a great nation, not seeking, in extending their authority over the ceded country, to enforce forfeitures, but to afford protection and security to all just rights which could have been claimed from the government they superseded.

This same rule of consulting the laws of the country from which the rights flow, as a criterion of their value is again upheld in Townsend v. Greeley, 3 and in United States v. Turner4, where the Court says:

Undoubtedly the validity and effect of both of these instruments depend altogether upon the laws, ordinances, and usages of the Spanish Government, prevailing in the province of Louisiana at the time they were made; and it is the duty of the court to expound them accordingly.”

And as late as 171 U. S. 220, in the case of Ely's Administrators v. U. S., the Court says, at page 234 :

“ This grant was one which at the time of the cession in 1853 was recognized by the Government of Mexico as valid, and, therefore, one which it was the duty of this Government to respect and enforce."

Under our own jurisprudence such franchises have been (1842) 16 Pet. 196, 198, 200. 2(1863) 1 Wall. 352. 3(1866) 5 Wall. 326. *(1850) 11 How. 663,

repeatedly recognized as property. We have seen above a quotation from the Attorney-General acknowledging the the existence of that character of property, and on a more recent occasion the Attorney-General, having to pass upon the protection due to a patent issued in the Philippine Islands, lays down this rule, that, although “ the patent is for something we should not call a patentable inven. tion and should not issue a patent to protect, yet, under the treaty, the United States must respect it, and that the objection that a monopoly is thereby created is not sufficient to justify any different interpretation of the treaty.” (XXII, 617.)

What other objections can be made to the claim for protection put forth by these banks?

The Attorney-General has suggested that a personal contract attaching to a particular personality is not entitled to protection from the superseding government, because the benefit of such contract cannot pass to another, any more than its burdens. But it is evident that many such contracts may enure to the benefit of a superseding government; mail contracts, contracts for the furnishing of supplies, for maintaining toll bridges, keeping open channels of navigable streams, all of which might well call for the investment of large capital, only properly remunerated by long and exclusive privilege, are a few examples of contracts that may enure to the benefit of a succeeding government and should be among the burdens which that government takes when it compels the cession of territory.

“ If the United States were not content to receive the territory, charged with titles thus created,” says the Supreme Court, they ought to have made, and they would have made, such exceptions as they deemed necessary.")

It may be admitted that some governmental contracts are of a character which would not pass to the new government; for instance, if the subject of the contract were such that it applied exclusively to the form of government which had been superseded, i.e., to contribute to the Civil List of the Queen; or, if it were entirely disconnected with the ceded territory, such as a tax or contribution of any character for the maintenance of highways or bridges in the

U. S. v. Clarke (1834), 8 Pet. 436.



peninsula and not touching the Philippines. But where, as in the instances mentioned above, the contract or franchise is of such a character that it is not necessarily confined to the personal benefit of the granting sovereign, it cannot fall under the ban of a personal contract, dying with the party making it.

This idea of a personal contract which does not pass to the succeeding government may be tested by the converse of the proposition: Would the right of the Spanish Government to enforce the obligation assumed by the grantee of such a contract pass to the United States Government ?

For instance, in the case of a franchise to maintain a toll bridge, would not the United States Government have the same right the Spanish Government had to compel its maintenance or to compel the continuance of a service under a mail contract, or a contract to keep open the channel of a navigable river ?

This test may be applied to the Filipino Bank, which under its charter is bound to make certain stipulated loans for the benefit of the Philippine treasury. Why would not the United States Government have the same right that the Spanish Government possessed to compel compliance with this provision and to forfeit the franchise in case of a viola. tion of or non-compliance with such requirement?

Again it has been suggested that an executory contract with reciprocal obligations does not attach to a superseding government, the obligations being personal.

If these obligations are in the nature of a governmental franchise, or privilege, or right which constitutes property, there seems to be no reason, because it is executory and continuing, that it should not be included under the general designation of “property rights,” which the Treaty stipulates shall not suffer any hindrance or diminution.

Another objection that has been suggested, is that the function of a bank is a governmental function, the agency for which expires with the government which created it.

But a governmental function may be made the subject of a property right. It has been made a governmental function to carry the mails; but a contract to do that for a given term of years is surely valuable property, and why should the agency adopted for its performance in due form of law by an expiring government be ignored by its assignee and successor ?

Again it has been urged that it is against the policy of our Government to authorize the issue of circulating notes by other than National Banks, and that laws, or franchises, or contracts of any kind in contravention with the policy of the acquiring government, perish with the extinction of the sovereignty of the ceding government. This rule has never been applied except in cases.where the rule or statute appealed to in support of the concession is repugnant to the fundamental policy of our Government, such as are inconsistent with the very theory of our political existence. But the rule can have no application to temporary methods of performing certain functions of administration; there is nothing contrary to any fundamental element of our Government in the issue of bank notes by other than National Banks. It is simply not in accord with our present policy ; but State Banks were for a long period the only sources of paper currency, and the United States Bank was recognized as the agency for the financial operations of the Government.

But, assuming for the moment that the terms of such a franchise are inconsistent with our present financial legislation, and difficult, if not impossible, to bring into unison with our regulations for a uniform and stable currency ; it is not a sufficient reason to absolve from the obligation of a contract that it is difficult and annoying to carry it out; the obligation is not the less entitled to respect. The right which is violated by ignoring it, is a property right, and there would seem to be but one avenue of liberation, to wit, the exercise of the right of eminent domain, the ap. praisal of the property right which it is desired to absorb or extinguish and a fair compensation for it.

A quotation from Mr. Webster's argument touching the franchise to the Charles River Bridge Company will enforce this view :



“ The legislature may grant franchises. This is done by its sovereign power. What may it do with those franchises? What power has it over them after they have been granted ? It may do just what it is limited to do, and nothing more. It is restrained by the same instrument which gave it existence, from doing more. The question is, what restrictions on this power are found in the constitution of Massachusetts ; and by a reference to it, the limitation of legislative powers will be found. The power may be exercised by taking property, on paying for it. In the constitution, it is expressly declared that property shall not be taken by the public, without its being paid for. It is incident to the sovereignty of every government, that it may take private property for public use; but the obligation to make compensation is concomitant with the right.

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The suggestion made by Mr. Commissioner Ide, that the power of taxation could be legally employed to destroy the unquestioned value of the franchise, is certainly an arbitrary method of evading the obligation to make compensation which, as Mr. Webster tells us, is concomitant with the right to take private property.

And it is but one instance of very many of the misapplications of that celebrated dictum, that the power to tax is the power to destroy. More than once this dictum has been taken to indicate that a proper use of taxation is destruction, whereas nothing can have been further from the broad and equitable mind from which the dictum proceeded. It was the epigrammatic announcement of an unquestioned truth, that the power vested in government to maintain itself by the imposition of taxes was in no wise restricted, even if the application of the tax wrought the destruction of property. If the maintenance of the Government was dependent upon a heavy tax, no tax could be so heavy as to be unjust. It is a far cry from the assertion of that simple truth to the claim now made that the power of taxation, instead of being a preservative, is in reality a proper instrument of destruction. This might well be the subject of more extended comment, to which I cordially invite some of your contributors.

That banking is not a necessary agency of government, and that it is a universal right which may be regulated, but cannot be ignored, has been long since established.

Singularly enough, this was illustrated by another incident to the transfer of the sovereignty of the Philippines. The Hong Kong and Shanghai Banking Corporation is a British bank, doing business at Manila. The Philippine Commission passed an act on November 28, 1900, requiring every bank in the Philippine Islands to accept deposits

? (1837) 11 Pet. 535.


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