[ G.R. No. 5876. September 01, 1911 ] 20 Phil. 30
[ G.R. No. 5876. September 01, 1911 ]
THE GOVERNMENT OF THE PHILIPPINE ISLANDS, PLAINTIFF AND APPELLEE, VS. THE STANDARD OIL COMPANY OF NEW YORK, DEFENDANT AND APPELLANT. D E C I S I O N
ARELLANO, C.J.:
The Government of the Philippine Islands demands of The Standard Oil Company of New York the payment of P38,433.76, together with the interest thereon due from October 28, 1901, and the costs and expenses occasioned by this suit, by reason of the customs duties payable by the defendant company, the cause of the indebtedness being that contained in the following facts as set forth in the complaint:
On or about the 27th of July, 1901, the defendant company imported into the Philippine Islands 30,000 cases of refined petroleum which contained approximately 300,000 gallons. (Fact VI,) That same day, July 27, 1901, the defendant company presented to the Bureau of Customs of this city an affidavit setting forth that the said 30,000 cases of refined petroleum had been sold by the former to the commissary department of the United States Army in Manila, and that the said company retained no interest therein. (Fact VII.)
Through this affidavit and application for free entry made by the chief of the commissary department of the United States Army in Manila, the customs authorities of Manila issued a permit for the introduction into the Islands of the 30,000 cases of refined petroleum which were taken from the ship, then in the port of Manila, to the bonded warehouse of the defendant company where they were to remain in bond until they should be withdrawn and delivered to the commissary department of the United States Army in Manila, under the free entry privilege. (Facts VIII and IX.)
From August 7 to October 28, 1901, the defendant company removed from its warehouse the 30,000 cases there deposited, which it did with, the authorization of the customs authorities of the port of Manila, upon the express representation of the duly authorized agents of the defendant that the withdrawal of the said cases was for their delivery to the commissary department of the United States Army and for the exclusive use of the said Army, in conformity with the terms of the privilege of free entry granted thereto. (Facts X and XI.)
But, of the 30,000 cases, only 10,679 were actually delivered to the commissary department of the United States Army, and the remaining 19,321 cases, which contamed 193,210 gallons of refined petroleum, equivalent to 608,321.685 kilograms, were, free of customs duties, sold to private parties; the Government of the Philippine Islands, as alleged by the plaintiff, being, by these deceitful and fraudulent means, defrauded of the tax or duty which the defendant company should have paid upon the said cases. (Facts XII and XIII.)
As prescribed by section 30 of the Provisional Customs Tariff, then in force in the Philippine Islands, the duty chargeable was 6.318 pesos Mexican currency for each 100 kilograms; so that, for the 608,321.685 kilograms, the defendant company was indebted in the sum of 38,433.76 pesos Mexican currency which, at the exchange of one dollar for each 2 pesos in Mexican currency, make exactly 38,433.76 pesos in Philippine currency. (Facts IV, V, and XIV.)
To this complaint the defendant company interposed a demurrer upon the ground that sufficient facts were not alleged therein to constitute a cause of action, for the reason that, during the period of time when it is alleged in the complaint that the defendant company had imported petroleum into the Philippine Islands without paying the customs duties due thereon, there was no law whatever in existence that authorized the collection of duty on petroleum imported into the Philippine Islands from the United States.
Such demurrer was overruled, to which ruling an exception was taken by the defendant and, having been allowed a delay of five days within which to answer the complaint, the company waived such right and insisted upon the demurrer. The following stipulation was then agreed to by the plaintiff and the defendant:
“It is hereby stipulated by both parties, through their attorneys, that as, in harmony with section 101 of the Code of Civil Procedure the defendant’s demurrer was overruled and it refused to answer the complaint, they submit the case to the decision of the court upon the allegations of the complaint which, for the purposes of the demurrer and pursuant to section 91 of the aforesaid code, have been admitted by the defendant; and that the latter shall stand by its demurrer and the exception taken by it before the court: for which reason there is no need of taking any testimony.” (B. of E., p. 10,)
As a consequence, the Court of First Instance of the city of Manila rendered judgment and sentenced the defendant company to the payment of the amount demanded in the complaint with interest thereon at 6 per cent per annum from October 28, 1901, and to pay the costs.
The defendant appealed to this court, by bill of exceptions, and, after a hearing on the appeal, it is found that the appellant sets up the following assignments of error:
The overruling of the demurrer; The judgment rendered against the defendant; The holding that the Act of Congress of June 30, 1906, was retroactive in effect and thus brought into force the ineffective military order which was invalid at the time of its issuance; and That this method of construing the said Act is contrary to the Amendments V and XIV of the Constitution of the United States.
Entering into details with reference to these assignments of error, the appellant puts the first proposition in the following terms:
Did there exist in the Philippines any law or regulation whatever legally in force and effect, under the provisions of which the payment of tariff or customs duties on the merchandise concerned, imported into this country from the United States on July 27, 1901, could be exacted? And then answers the same in the negative, grounded on four decisions of the Supreme Court of the United States: Dooley vs. U. S. (182 U. S., 222); De Lima vs. Bidwell (182 U. S., 1); Fourteen Diamond Rings vs. U. S. (183 U. S., 176); and Warner, Barnes & Company vs. U, S. (197 U. S., 419).
That there was such a law in force in the Philippines on the date mentioned, is a fact that can not be denied, nor is it denied by the appellant, who, on page 8 of his brief, says that “subsequent to November 10, 1898, the payment of tariff duties at the custom house at Manila was required pursuant to the order issued by President McKinley that served as a rule of action until November 15, 1901, when the Act of the Philippine Commission went into effect.” What is denied and co
With respect to this point under consideration, the legislative history of this period, August 13, 1898 to November 15, 1901, pertinent to the facts of the complaint, is the following: A customs service had been established in the Philippines by the Spanish Government. Upon the occupation of Manila by the American army on the 13th of August, 1898, the military government that was established found such service in operation and continued it, keeping the Manila custom-house open. On July 12, 1898, President McKinley, in his capacity of Commander-in-Chief of the Army, issued a military order in which he provided a schedule of tariff duties which were to be imposed and collected in all the posts and places occupied and held by troops of the United States. This military order was not, however, immediately applied to the custom-house at Manila, which continued to levy and collect duties in accordance with the Spanish tariff until November 10, 1898; but from this date it began to enter into full and absolute force and effect and continued to govern until November 15, 1901, when the tariff established by Act No. 230 of the Philippine Commission, became operative.
So that, from the time of the establishment of the military government of occupation, there was continuously, without any intermission, a tariff law under which customs duties were levied and collected in the Manila custom-house until the Philippine Commission, to which all the legislative, executive and judicial powers in the Islands were transferred, enacted on September 17, 1901, Act No. 230, made effective on November 15 of the same year—an Act which continued in force until Congress passed the Act of March 8, 1902, as to the entire force and effect of which, as well as to that of the previous Act of the Philippine Commission, not a word need be said, inasmuch as they are both entirely outside of the facts of the complaint.
The military order of July 12, 1898, under which the privilege of free entry was granted and the removal free of duty of the 30,000 cases of petroleum in question was effected, is the one that the appellant says “was still born,” that is to say, that it never had nor could have any legal existence, and rests its assertion on the four decisions, above cited, of the Supreme Court of the United States.
It should be remembered that the exchange and ratification of the Treaty of Paris took place on April 11, 1899.
The cases of De Lima vs. Bidwell, and Dooley vs. U. S. were for exportation from Porto Rico to the United States and for importation from the United States into Porto Rico, respectively, subsequent to April 11, 1899. The duties were paid under protest; and suit being brought to obtain their refund, the Supreme Court of the United States decided that it was proper to return them, on the sole ground that the appellant company, on page 9 of its brief, argues in these terms: “because the powers of the President, as Commander-in-Chief of the Army and Navy, to impose customs duties in Porto Rico, ceased with the ratification of the Treaty of Paris, whereby Porto Rico was ceded to the United States,” and “ceased to be a foreign country,” as stated in the second of the said decisions, or in other terms, according to the first of them, “because Porto Rico had ceased to be a foreign country within the meaning of the customs laws, so that the Dingley Tariff, which treats of importations from foreign countries, could no longer be applicable in the matter of importations from Porto Rico.”
In the case of the Fourteen Diamond Rings (183 U. S., 176) the Supreme Court referred entirely to the case of De Lima vs. Bidwell (182 U. S., 1), and said:
“No reason is perceived for any different ruling as to the Philippines. By the third article of the treaty Spain ceded to the United States the archipelago known as the Philippine Islands,’ * * *. The treaty was ratified * * *. The Philippines thereby ceased, in the language of the treaty ’to be Spanish.’ Ceasing to be Spanish, it ceased to be a foreign country.”
And in the case of Wainer, Barnes & Co. vs. IL S. (197 U. S., 419), what that high tribunal said, as transcribed by the appellant company itself, is the following:
“It will be observed that the President’s order relied upon was an order issued during the war with Spain, nine months before the treaty of peace was concluded. It was a measure taken with reference to that war alone, and not with reference to the insurrection of the native inhabitants of the Philippines, which did not arise until much later * * *. The natural view would be that the order expired by its own terms when the war with Spain was at an end. The order directs that upon the occupation of any forts and places in the Philippine Islands by the forces of the United States’ the duties shall be levied and collected ‘as a military contribution.’ * * * It was a regulation for and during an existing war, referred to as definitely as if it had been named.”
In none of these decisions is the military order of July 12, 1898, considered as “stillborn/’ for it is not denied that it was effective up to the exchange or ratification of the treaty of peace of April 11, 1899, and only subsequent to this date is it considered that it became inoperative because the object for which it was created no longer existed. This is all that may be said.
Continuing the history of the last case, it must be kept in mind that if the Philippine Commission went on applying the customs tariff established by the President in that military order, it was because, on June 8, 1901, the Secretary of War had cabled to the Philippine Commission the following:
“The most obvious distinction between the status of Porto Rico and the Philippines, after the cession, indicated in the opinions of the court, is in the fact that Porto Rico was, at the time of cession, in full peaceable possession, while a state of war has continued in the Philippines. As the question of the President’s power to impose duties in the Philippine Islands under the existing conditions of military occupation has not been decided by the court, the President has determined to continue to impose duties as heretofore.” (See Lincoln vs. U. S., 202 U. S., 484, 497.)
As may be seen, the matter treated in the paragraph above quoted is referred to by the words transcribed from the preceding decision (Warner Barnes & Co. vs. U. S., 197 U. S., 419, 429) “the fact [it is furthermore stated in the said decision] that there was an insurrection of natives not recognized as belligerents in another part of the Islands, or even just outside the walls of the city of Manila, did not give the President power to impose duties on imports from a country no longer foreign.” (Id.)
The Government of the United States asked for an annulment of this decision and a rehearing and invoked the ratification of the acts of the President, contained in the Act of Congress of July 1,1902, called the “Philippine Bill;” but in a decision of May 28, 1906, that high tribunal re-affirmed its decision and held that the ratification of the executive acts under the President’s order of July 12, 1898, contained in the Act of July 1, 1902, was confined to actions taken in accordance with its provisions; but that the exaction of duties on goods from the United States, after April 11, 1899, was not in accordance with those provisions and was not ratified by the said Act. (Lincoln vs. U. S., and Warner, Barnes & Co. vs. U. S., supra. )
Warner, Barnes & Co, succeeded in recovering the customs duties paid under protest on goods imported into the Islands from the United States. And if nothing further had been done in this matter, the present litigation would have had no reason for existence. The same ground upon which that commercial firm obtained the reimbursement of what it had unduly paid, could effectively be advanced by the present appellant as a bar against its being compelled to pay what would have been also unduly demanded.
But something further was done: there was subsequently an Act of Congress and a new decision by the same Supreme Court bearing on a case exactly identical with that of Warner, Barnes & Co., which Act and decision make it appear that what is demanded of the appellant company is in no wise improper.
On June 30, 1906, Congress passed the following Act:
“That the tariff duties both import and export imposed by the authorities of the United States or of the provisional military government thereof in the Philippine Islands prior to March eighth, nineteen hundred and two, at all ports and places in said Islands upon all goods, wares, and merchandise imported into said Islands from the United States, or from foreign countries, or exported from said islands, are hereby legalized and ratified, and the collection of all such duties prior to March eighth, nineteen hundred and two, is hereby legalized and ratified and confirmed as fully to all intents and purposes as if the same had by prior Act of Congress been specifically authorized and directed.” (34 Stat. at L. 636.)
The case which gave rise to the new decision of the Supreme Court was that of United States vs. Heinszen & Co. (206 U. S., 370), wherein demand was made for a like return of customs duties paid during the same period of time as those claimed by Warner, Barnes & Co., and when those demanded in this suit are understood to have been assessable.
Under this new phase of the matter, there was said what appears to be the last word in the same, with respect to the duties that were already levied and collected—that the order of the President of July 12, 1898, was not a law that had legal existence, in an absolute sense, inasmuch as the President had no power to create a law of this nature, such power being an exclusive one of the legislative branch, and that Congress neither issued such order nor authorized the President to do so.
And the Supreme Court said that it must be acknowledged that when the goods were introduced into the Philippine Islands there existed a customs tariff by virtue whereof duties were imposed in the name of the United States (that of the President’s order) ; and although the duties fixed in this tariff were illegally exacted at that time, that is, after the exchange of the treaty of peace, such illegality was not the result of an inherent want of power in the United States to have authorized their imposition, but simply arose from the failure to delegate to the public official the authority essential to give immediate validity to his acts in enforcing the payment of the said duties; and since what is done by the agent without express power from the beginning on the part of the principal, may subsequently by the latter be confirmed by his ratifying his agent’s action, hence Congress, by its said Act of June 30, 1906, confirmed, ratified, and gave such duties, levied and collected, legal subsistence in giving legal existence to the customs tariff, as though it had been passed by Congress itself, and the fallacy—the court adds—“becomes yet more obvious when it is observed that the contention can not even be formulated without misstating the nature of the Act of Congress; in other words, without treating that act as retrospective legislation enacting a tariff, when on its very face, the act is but an exercise of the conceded power dependent upon the law of agency to ratify an act done on behalf of the United States which the United States could have originally authorized.” (U. S. vs. Heinszen & Co., 206 U. S., 370.)
The foregoing is a complete statement of all the essential points of fact and of law which are strictly legal precedents with respect to the question now under discussion, to wit:
Should the appellant company pay the customs duties demanded of it at the present time?
The company maintains that it should not.
Because the President’s order, together with the tariff of July 12, 1898, under which such duties are demanded, is null and void and of no value and effect. Because the Act of Congress of June 30, 1906, did not confirm nor resuscitate that order, and was confined to approving and ratifying acts already consummated under the authority thereof, that is, to legalizing the collection of the duties imposed in that tariff and already received; but it did not authorize duties to be collected on goods that had been imported or exported without the payment of any tax. Because it could not have been the intention of Congress to direct the levy of duties on goods imported under free entry in previous years, or during the period in question, as would be the case if the confirmation had a wider scope than that before indicated. Because, as in the case of an agent who, lacking the power to sell, purchase, and mortgage, substitutes another in his agency with such power to sell, purchase, and mortgage, if his substitute sells, purchases, and mortgages, and the principal, on being informed of what was thus illegally done by the substitute, chooses to ratify it, such ratification would not authorize the substitute again to sell, purchase, or mortgage; so, likewise, in the case of the President, the agent of the United States, who, lacking power to impose customs duties, delegated such power to his agents of the Government of these Islands, and subsequently the Congress of the United States chose to ratify the collections made by such agents of the Government of these Islands: this does not authorize such agents again to make similar collections. Because in the case of United States vs. Heinszen & Co. (206 U. S., 370) the conclusion arrived at from the decision of the Supreme Court appears to be that its sole basis is the power to confirm, since it completely repudiates the argument that the law established a tariff for the imposition and collection of duties on goods which, escaping the illegal exactions, could enter the country without the payment of duties, and holds that the right to confirm sprung immediately from, and as a result of, the payment of the money, that is, from the performance of the operation in behalf of the principal, the United States. (Brief, pp. 22 and 23.) Because there are two rules of construction: One is that every law must be understood and construed as future in its operation, unless its language be incompatible with such a conclusion; and the other, that the laws on taxation must be strictly interpreted against the Government, and in favor of the citizens or subjects, for no charges should be imposed, nor may their imposition be presumed, in excess of what the law expressly and clearly requires: hence, if the sense of the words employed in the Act of June 30, 1906, may be satisfied by restricting its scope to the duties already levied and collected, its effects must be limited to this point and not be allowed to embrace other cases. (Brief, p. 34.)
But, in the first place, it is not correct to affirm that the President’s order was originally null and void. Its force and validity from November 10, 1898 to April 11, 1899 is beyond question. If, since this last date, it was unduly applied and, as a result thereof, there were illegal collections of the duties levied from then to November 15, 1901, when the Act of the Philippine Commission went into effect, and even also, it may be granted, until March 8, 1902, when the Act of Congress began to be operative, it was not, as the Supreme Court of the United States has already held, for an original want of power in the United States in whose name such duties were exacted, but was merely through an overreaching of power on the part of the agent—a defect which, if it really vitiated those collections, certainly was adoptable and was adopted by the general law of agency which authorizes the constituent or principal to ratify and make as of his own the act of the delegate or agent as if he himself, instead of the latter, had performed it, “as if such collection,” the words of the Act, “had been specifically authorized and directed,” by a prior Act of Congress.
In the second place: The intention and will of the legislator being so clear, so explicit, to approve, confirm, and ratify as by an act of his own prior to April 11, 1899, and even also to July 12, 1898 (the date of the order of the President), the acts of the latter and of the officials of the Government of these Islands, with respect to “the collection of all the said duties prior to March 8, 1902,” and also with regard to “the import and export duties levied by the authorities of the United States or of the provisional military government of the same in the Philippine Islands prior to March 8, 1902” two subjects that are the purpose of the said Act, it being an axiom of law, that the ratification is equivalent to a mandate (ratihabitio aequiparatur mandato), the conclusion can not be avoided that, by the legislator’s will, the tariff duties demandable during the period mentioned in the complaint, are so, not by a null and void order of the President, but by an Act of Congress. Such, and no other, is for the courts the status, of the established law in this matter, be whatever it may, in abstract law, the legality of the legislative act concerned, for there is no question pending before us with respect to its constitutionality, “We do not treat of the question in this brief,” says the appellant, “as we do not consider it necessary to do so.” (Brief, p. 15.)
In the third place: If, as the said Act provides, “the tariff duties both import and export imposed by the authorities of the United States or of the provisional military government thereof in the Philippine Islands prior to March 8, 1902, * * * upon all goods, wares, and merchandise imported into said Islands from the United States * * * are hereby legalized and ratified * * *;” if the refined petroleum concerned in the complaint, was one of the articles imported into these Islands from the United States prior to March 8, 1902; if the import duty imposed upon it by section 30 of the tariff established by authority of the United States (the President), was 6.318 pesos Mexican currency for each 100 kilograms; if the total amount of this duty, aggregating, according to the facts set forth, the sum specified in the complaint, has been owing since October 28, 1901; if the action for its collection has arisen, and has not prescribed in accordance with section 206 of Act No. 355, by reason of the fraud committed and which has justly given ground for the levying of duty then why should the customs officials and the prosecuting officers of the Government remain inactive and not comply with their duty to exact, collect or demand the payment of such duties? And how can the courts, in view of an explicit law, appraised duties, an importation effected and an action arisen and not prescribed, fail to grant what is asked in a complaint based on such grounds?
In the fourth place: It is to beg the question to affirm that an attempt is now being made again to collect the duties on certain merchandise which already, several years ago, was entered free of duty because of the absolute lack of any law that may have validly imposed them. Neither was there a lack of such a law, nor did the goods in question enter absolutely free of duty, but their importation was merely allowed conditionally, upon the declaration that they fell under an exemption, in accordance with the free entry clause contained in the same law, the existence of which is now denied. Had not the privilege of exemption from duty granted by the law been utilized, the duties now demanded would have been collected in July, 1901, and the most that could have happened is that the appellant would have found itself in the same situation as that of Warner, Barnes & Co., and Heinszen & Co., sharing with both these firms the uncertain results that might be attained by assailing the order of July 12, 1898; but now the appellant’s situation is parallel to that of those two firms only in respect to the fact of the importation of merchandise during the much discussed period, and differs therefrom in that the two companies above cited paid under protest, being resolved to maintain a theory of law, while the appellant was thoroughly convinced of the validity of the tariff and chose to avail itself of a privilege of exemption therein provided for, which, according to an admitted fact of the complaint, it abused by the commission of fraud.
This court would willingly overlook the fact enunciated in the last sentence just above expressed, and accept the third proposition stated by the appellant in its brief; but our desire is strongly opposed by section 91 of the Code of Civil Procedure and the agreement of the parties themselves above transcribed, according to which agreement “the allegations of the complaint have been admitted by the defendant,” one of them, to wit, the 13th, being that:
“The said 19,321 cases of petroleum were withdrawn by the defendant company through deceit and fraud and with the definite purpose of defrauding the Government of the Philippine Islands of the customs duties owing to the same.” (B. of E., p. 5,)
In the fifth place: The appellant’s a pari argument is not, in this case, conclusive; it would be so, had an exact parity been established; for example, were it said that the constituent or principal had conferred power upon his agent in the United States, up to a certain period of time; that the agent had to confer the said power upon another in the Philippines for the purpose of the latter’s exercising the same until the time fixed; that at a time considerably beyond that fixed, the substitute in the Philippines continued to exercise such power, let us say, for instance by collecting the rentals from several of the principal’s tenants; that one of the latter alleged an exemption from payment, with very apparent proof that convinced the substitute who, therefore, desisted from requiring payment; that another tenant paid under protest and accordingly brought suit and obtained an acquittance from the payment, for the reason that it had been demanded of him without power, when the power had already lapsed; that thereupon the principal, having learned of this case, ratified the power and the acts of the substitute; that another of the tenants, upon whom a demand to pay was made in the same manner as upon the previous one, also alleged the lapse of the power and the illegality of the requirement of the substitute, but, as the principal had already declared his intention to ratify the acts and the power of the substitute, the tenant did not succeed in obtaining a release from the payment; that, upon the discovery by the substitute that the first of the said tenants had falsely made it appear that such tenant had a cause for exemption from payment, suit was brought against the latter. If such first tenant could be, through his fraud or without fraud whatever, in a better situation than the third one and should be released from the payment of the rental which was not collected from him for a false reason, then the argument would be, by parity, conclusive that neither may the appellant be required to make the payment which, in 1901, would have been demanded of it, had it not brought forward that free entry privilege which afterwards turned out to be a false reason for exemption.
Neither could this first tenant above referred to, nor can the appellant, in our opinion, say that they knew how to elude, in one way or another, at a given time, a payment which they deemed devoid of good grounds, as was stated with reference to the second tenant mentioned in the example, and that the judgment rendered with respect to the third tenant could not warrant that, at some subsequent time, action might again be taken in the matter of the payment previously eluded, on the grounds that the non-payment was an acquired right and the ratification made by the principal could not, without its being given a retroactive effect, have any bearing except on future acts and not on those already past.
The admission, free of duty, of the appellant’s petroleum, could not constitute an acquired right, since this exception was not absolute, but conditional; the exemption was not the result of a right of its own, but simply one granted as a favor to a third party and of which, as the Government averred and the appellant admitted, it made an improper use; therefore this exemption can not be considered, not even by the lapse of time, as a mode of extinguishing an obligation.
The obligation to pay, therefore, still exists.
By reason of the foregoing, the judgment appealed from is affirmed, and the costs are assessed against the appellant. So ordered.
Torres, Mapa, Johnson, and Carson, JJ., concur.