the kind of legislation that ought to be enacted to accomplish these results has not yet been finally determined upon. This article doubtless is the one in regard to which the bank is more solicitous than it is in regard to any other. "Article 16 authorizes the bank to be a party to actions instituted to prosecute parties forging or falsifying the bank's paper money. It would seem apparent that the question of whether a private individual or corporation can be a party to a criminal prosecution would be determined by the general law of the country, which may be altered from time to time, as it pertains to criminal remedies and not to any chartered or vested rights of the institution.

"Article 17 requires the approval of the minister for the colonies as to the establishment of branches of the bank and as to their location. This article would not seem to be effective without further legislation.

"Article 18 is one of considerable importance. It reads as follows: 'Foreigners may become stockholders in the bank and participate in all exchange and banking transactions in the same form as the nationals, but they can not hold any position in the management or administration of the bank unless they become naturalized and ask to be residents of the country. All accounts belonging to foreigners in the hands of the bank shall be exempted from all attachment, confiscation, and reprisal in case of war declared against their respective countries.

"The term foreigners,' as introduced into the charter, probably meant all persons who were not subjects of the Crown of Spain, and such persons were excluded from holding any position in the management of the bank unless they became naturalized. Under such construction all Americans would be foreigners. It would be impossible for them to become naturalized within the meaning of that term-that is, become citizens of Spain by virtue of any law now existing. The anomalous condition would therefore exist of there being a bank in an American country, under American sovereignty, from the management of which all Americans were excluded. It is not clear that Filipinos could take part in the management of the bank. They are no longer Spanish subjects, nor can they be naturalized by any law yet enacted. This whole article is anomalous and needs careful revision.

"Article 20 makes it the duty of the bank to loan to the treasury of the archipelago, without interest, $500,000 when its capital is not over $1,500,000, and one-third of its capital when it exceeds that amount, for periods not exceeding six months of each year; and also compels the bank to loan further sums, at rates of interest to be agreed upon-practically 14 per cent less than the current discount to the public-with the proviso that such interest shall not exceed 5 per cent per annum. This privilege has never been exercised by the insular government, nor did the article apparently contemplate the loan to a different sovereignty than that of Spain. It is not clear that this article, without further legislation, is effective.

"Article 23, fixing the capital at $1,500,000, in shares of $200 each, apparently provides for an increase of capital to the amount of $3,000,000 when authorized by the stockholders in general meeting. Inasmuch as article 15 is claimed to authorize the issuance of paper to the amount of three times the paid-up capital, article 23 becomes important. It is quite manifest that the bank ought not to be allowed, at its own discretion, to increase its capital when such increase carries with it an increase in the amount of paper money set afloat, and when the government might deem such increased amount of paper money to be highly dangerous.

"Article 26 provides for the retention of 1,600 shares, which shall be nontransferable, until the corporation holding them shall seek to dispose of them and His Majesty's Government shall so order; and also, in order that the shares may become subject to an attachment, an order from competent authority must be issued. It is probable that these shares belong to some religious corporation. If so, it would not be in accordance with the theory of our government that the property should be inalienable, nor would it be a proper thing to be obliged to resort to the authorities of the Spanish Government to alienate them, nor should they be exempt from attachments any more than any other private property. This article needs revision.

"Article 30 provides that, after payment of expenses, a reserve fund of 10 per cent shall be set aside for the direccion,' and 5 per cent for the junta de gobierno,' the remaining 85 per cent being divided among the stockholders pro rata. This article is not specially objectionable, if the stockholders desire to have it enforced, except in so far as the constitution of the junta de gobierno ' and of the direccion' are perhaps objectionable, as hereinafter stated.

Under title 4 the following provision appears, probably as article 33, though not numbered in my copy: The high management and superior régime of the bank shall be vested in the protector, the governor-general, who may temporarily delegate a person of his trust to act in his behalf as such protector and in such part as he may deem proper, provided such deputy is a member of the council of administration or is vested with a like authority.'

"This article seems to make the governor-general the protector of the bank. He was a Spanish officer, appointed by the Crown of Spain. Such was the intent and meaning of the charter when granted. Whether the chief executive of the islands under American sovereignty could exercise such powers it is unnecessary now to determine, although the matter ought to be definitely settled, both as to whether he can exercise those powers and as to whether he ought to. Further legislation by the Commission would perhaps be required to intrust the civil governor with those powers. It is not known that the power has ever been exercised by the civil governor either to act as protector or to appoint a deputy to perform such portions of his functions as he might deem proper.

"Under article 35 the powers of the protector are defined: First. To appoint the directors, the secretary, and one of the syndics, to be selected by him from the ternary (consisting of three persons) lists, as proposed by the stockholders in general meeting.'

"Under this provision the stockholders select three persons for directors and from them the protector appoints those who are to act.

"Second. To appoint of his choice the other syndic, omitting the requisite of a ternary.'

"This paragraph apparently authorizes the protector to appoint one syndic irrespective of the wishes of the stockholders.

"Third. To determine the issues of stock.'

"It will be seen that this authority is large and great. It would also seem to be apparent that there could be no increase above the $1,500,000 stock now issued without the consent of the protector. It would seem, therefore, that until the civil governor assumes the duties of protector, by legislation of the Commission or otherwise, no authority could grant the right to increase the stock of the bank above its present issue.

"Fourth. To approve the rates of interest fixed by the bank on discounts and

loans.'

"This provision probably gives the protector power to veto rates of interest fixed, and perhaps to establish other rates.

"Fifth. To suspend or detach from their respective positions all directors or members of the Junta de Gobierno should there be sufficient cause to justify such suspension.'

This power is a very important one.

"Sixth. To resolve gubernatively all differences and doubts which may arise on matters relating to the interior management or the observance of the present statutes and regulations of the bank.

***Seventh. To order the revision of the statutes or the regulations of the bank when he may think so proper, or at the request of the stockholders in general meeting.'

"This power is one of very great importance.

"Eighth. To exercise all the powers which the law confers upon him as a representative of His Majesty's Government over all public institutions which are protected and franchised.'

"It will be seen, therefore, that the bank was intended by its charter to be in a sense a government institution, and that the theory of its charter contemplated that it should be under the immediate control and largely the absolute protection of the protector or governor-general. None of these powers have ever been exercised by the civil governor, and it is not clear that it should be the policy of the government to assume such large responsibilities for the conduct and management of a bank. It is probable that it might be more in line with American theory and institutions that such legislation should be enacted as would make the bank a self-governing institution, but subject to suitable laws for expansion and regulation, such as may be deemed necessary for safeguarding the stockholders, depositors, and note holders.

"Under article 36 the deputy protector is intrusted with large powers, such as calling meetings of stockholders, calling meetings of the Junta de Gobierno, presiding over general meetings; and, fourth, To order the suspension of all reso

lutions passed by the stockholders in general meeting or by the Gobierno at the request of any of the syndics when they conflict with the statutes and regulations.'

"Fifth. To supervise and manage all the departments of the bank and to submit for approval to the protector any changes and additions they may wish to make or remarks to offer in the interests of the institution.

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66

Sixth. To assist in person in the count of “ cash" and the preparation of the balance sheet, which must be done every month, and certifying in the proper book over his signature to the correctness thereof.

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'Seventh. To answer all extraordinary reports required by the protector upon the bank's affairs after examining into the books, documents, and papers of the institution.'

"Inasmuch as there has not been since the complete establishment of American sovereignty in the islands any exercise of the powers of protector by the civil governor, or any appointment of a deputy protector, nor appointment of syndics by the protector, it is not apparent how the bank's affairs have been lawfully conducted, and it is not seen how, under the terms of the charter, the bank could have gone on legally in the conduct of its business. It would seem that its procedure must be subject to very grave doubts as to its legality and that steps ought to be taken to put the bank into such a situation that there can be no question as to the legality of the acts of its officers. The situation of bank officers who are conducting the business illegally and not in accordance with the provisions of the charter might prove to be a very unhappy one. These provisions seem greatly to need revision.

"Article 41 makes it the duty of the general stockholders' meeting of the bank, among other things: Third. To submit to the protector, through the hands of the bank's direction, ternary lists (containing three names) to fill the positions of directors, secretary, and one of the syndics.'

"This course could not have been followed since American occupancy, there being no protector or deputy protector acting.

"Article 45 likewise provides for the appointment of a second syndic by the protector, and article 46 provides that that syndic shall remain in office four years.

"Article 48 provides that the councilors and syndies shall be entitled to a fee for attendance at all sessions, and states that the fee is already provided for in article 29. Article 29 makes no provision in regard to this matter and relates to an entirely different subject. It is possible that there is a mistake in the translation.

"Under article 50 the authority of the syndics is defined. Their powers are important, and among others is the following: Fourth. To prevent thereupon the issuance of bank paper to a greater amount than that authorized by these statutes.'

"It would seem that without the lawful appointment of a syndic by the protector there could be no further issue of bank paper.

"Article 55 requires the Junta de Gobierno to submit, through the direction of the bank, a list of qualified persons from which the protector may appoint parties to fill the vacancies temporarily occurring. This article would seem not to be of efficiency unless there were a protector duly authorized by law to act.

"Title X, under the head of General Rules, reads: Unless by virtue of a judicial order, the bank is not permitted to give out any statement of the deposit of current account of any given person.'

"Perhaps this rule is not objectionable, but the law upon this subject should be general and applicable to all banks in the interest of justice.

"In view of the foregoing extracts from the charter of the bank a serious question likewise arises as to whether, under all the circumstances, the bank has any legal status under American sovereignty, and as to whether its provisions are not so interwoven with the Spanish sovereignty that there is no method of lawfully executing the provisions of the charter under a different sovereignty unless new legislaton shall intervene. Under the American definition, a charter constitutes a contract between the state and the corporation chartered. Many of the provisions of the charter of the Spanish-Filipino Bank are in the nature of contracts of such a character that a stranger to those contracts can not be made a party to them without a revision of the charter itself. For instance, the provision that the bank shall loan one-third of its capital six months of the year to the government without interest, and other portions of its capital to the government at a low rate of interest, was a compact to make

those loans to a known government with which it was dealing, not with a third party who was a stranger to the whole contract. Suppose the insurrectionary Filipino government had succeeded in establishing itself. The principles of the international law which the bank invokes would have preserved its charter rights under the new government, but it would be a somewhat strained construction of law that would, under the charter, require the bank to make the loans referred to to the insurrectionary Filipino government when that government might have been totally insolvent. It never contracted to make such advances to the American Government, to the Filipino government, or to any other government except the Spanish Government. But those provisions for loans are the considerations in part which the bank, as one contracting party, made to the Spanish Government, the other contracting party, for its privilege of existence, for its alleged monopoly in the issuance of paper money, and for the special protection which the government threw around it through the Protector and Syndic. Through every portion of the charter runs the current of an intimate contract made with the Crown of Spain, whereby duties and rights appertain to each, which are mutually interdependent. It is a serious question as to whether, under these circumstances, the duties and obligations which the Spanish Crown had assumed could be divested from it and transferred to the American Government. The law officers of the United States have uniformly refused to recognize the obligation of the United States or of the insular government to pay to the Manila Railway Company (Limited) a bonus in the form of a guaranty of earnings which the Government of Spain had made to that railroad company in its charter, upon the ground that the contract was with the Government of Spain, and that neither by principles of international law nor by the treaty of Paris did the United States assume any of the obligations incurred by the Crown of Spain.

"A full discussion of this subject may be found in Magoon's Reports, page 177. So far as the Spanish Government was bound by the terms of the franchise in question, its obligations to the bank apparently remained unimpaired by the treaty of cession, the United States having paid to Spain $20,000,000, largely in view of the assumption of any debts or obligations of the Spanish Government in relation to the ceded territory. This appears from the protocols of the treaty. Probably a correct view of the law on this subject is stated in Hall on International Law, pages 101 and 102, in discussing the correspondence between the United States and England with reference to the authority exercised by England over the Mosquito Shore, and to a treaty between Great Britain and Mexico, wherein the distinguished author says:

"Mr. Buchanan's general statement was accurate, but the very fact that Mexico succeeded to all the territorial rights of Spain, and consequently to full sovereignty within the territory of the republic, shows that it could not be burdened by limitations on sovereignty to which Spain had chosen to consent. It possessed all the rights appertaining to an independent state, disencumbered from personal contracts entered into by the state from which it had severed itself.'

"Upon the principle here stated, the obligations which the Spanish Government had assumed to the Spanish-Filipino Bank were personal obligations which remained binding upon the two contracting parties, and which the Government of the United States never assumed by the treaty of cession. It would also seem that all the rights of full sovereignty were secured by the United States by the treaty of cession without being burdened with limitations on that sovereignty to which Spain has chosen to consent, except so far as the treaty protects vested property rights. So far as those property rights rested in contracts with the Crown of Spain, and where there were mutual contracts to he fulfilled, and where the Government of the United States had strenuously refused in the negotiations to assume any of the obligations of Spain, the situation is entirely different from that which exists where the Government of Spain had granted privileges and rights to parties who now, under the new sovereignty, seek protection of such vested rights.

"It is not the purpose of this indorsement to enter into a discussion of this question, and these suggestions are made only for the purpose of showing the great necessity for a change in the conditions now surrounding the SpanishFilipino Bank and for the purpose of calling to the attention of the Commission the serious question as to whether the bank, under the special circumstances, has any legal status that is capable of vindication in the courts.

"In the correspondence above referred to, which occurred near the close of the year 1901, the bank officials stated, in substance, that while they claimed

that their privilege of note issue was an exclusive one, yet they did not consider monopolies of that character to be desirable, nor did they expect that the American Government would submit to having its paper-money circulation in the islands limited in the manner provided by their charter, because it was not sufficiently elastic to meet the probable increase of the demands of commerce, and because such a privilege ought not to be controlled exclusively by one private institution; yet they insisted that the privilege was one that appertained to the bank by competent authority, and one that had been protected in the amplest manner by the treaty of Paris, whereby the Philippine Islands were ceded to the United States, and that the United States Government should abolish the exclusive rights which the bank claimed, either by an agreement with that bank or by expropriation of the exclusive privilege and paying just compensation therefor; and proposed to surrender the bank's exclusive privilege, receiving in compensation therefor an exemption from all taxation during the whole period covered by its charter, the exemption to apply to all of its circulation, and to its stock, deposits, and assets of every kind; this being upon the basis that the bank should continue to issue its paper currency only up to the amount of its paid-up capital, but that the right should not be exclusive.

"In my opinion there is a hardship imposed upon the bank by not being more certain as to what its legal status is. Its request, contained in the within letter, that there should be an authentic determination of its status is not entitled as a right to any reply or determination. The bank has been allowed to do business and none of its chartered rights, so far as lawfully exercised and in harmony with existing laws and protected by the obligations imposed by the treaty of Paris, have as yet been interfered with. It has no just cause for complaint by reason of any action of the government. The demand for such an extensive exemption from all taxation was deemed by the Commission to be Inordinate and unreasonable, and one that could not be entertained. It is for the interests of the bank and of the government that the status of so important an institution should be clearly known, and that it should not continue or attempt to continue doing business upon an unlawful basis. Some of the provisions of the charter above stated are of such a character that it is impossible for the bank to proceed without grave doubts as to the legality of its procedure; it needs legislation for its own protection and for the protection of its note holders, depositors, and stockholders. In my opinion the interests of the government and of the bank in this respect are alike, and the charter ought to be amended in such manner as to safeguard the public, the officers of the bank, and the rights of the government itself. Such amendments of the charter doubtless ought to be made with the concurrence of the stockholders of the bank, so that no legal questions as to the amendments might subsequently arise. The amendments ought to provide, on the one hand, for such changes as will secure the certain legality of the acts of the officers in the management of the bank, and sufficient protection to safeguard the interests of all, and for a restriction of the amount of paper currency which it might issue to the amount of its paid-up capital, with or without security, as may be determined, and provisions should also be made that all the paper money issued should constitute a prior charge upon all the assets of the bank. On the other hand, the exclusive privilege of the bank, if it has it, ought to be eliminated and done away with forever, so that at the proper time a comprehensive banking system may be established, such as will provide for the indispensable needs of commerce by authorizing a sufficient supply of paper currency." After consideration by the Commission, on motion, it was

Resolved, That a copy of the foregoing indorsement by the sercetary of finance and justice be transmitted to the Spanish-Filipino Bank, and that the said institution be requested to appoint a committee to confer with the secretary of finance and justice, and with such other members of the Commission, if any, as may be designated to act with him in regard to modifications of the charter of the bank, so that a scheme may be devised that shall be just to the government, to the bank, and to the public at large.

No reply to this communication has been received from the bank and no further recommendation is now made upon this subject.

It should, however, be remarked that by section 111 of Act No. 1189, entitled "An act to provide revenue for the support of the insular, provincial, and municipal governments by internal taxation," a tax of 1 per cent per month was imposed upon all circulating notes issued