Title
Government of the Philippine Islands vs. Hongkong and Shanghai Banking Corp.
Case
G.R. No. 44257
Decision Date
Nov 22, 1938
Philippine Government sued banks under Act No. 4007, Sec. 11, seeking reimbursement for Bureau of Banking expenses. Court ruled Sec. 11 constitutional but exempted National City Bank of New York as a U.S. agency.

Case Summary (G.R. No. 145402)

Key Dates and Applicable Law

The decision was rendered on November 22, 1938, under the framework of the Jones Law as the organic law governing the Philippines at the time. The primary legal issues relate to Section 11 of Act No. 4007 and its compliance with Section 3, paragraph 17 of the Jones Law, which requires every enacted bill to embrace only one subject expressed in its title.

Summary of the Legal Issue

The Government sought to enforce Section 11 of Act No. 4007, which imposed an annual reimbursement obligation on banking institutions subject to inspection by the Bank Commissioner, calculated based on the proportion their assets bear to the total assets of all banks. The appellee banks challenged the validity of this provision on constitutional grounds, specifically contending that Section 11 was ultra vires as it violated the one-subject rule by introducing taxation unrelated to the act’s stated purpose of reorganizing government bureaus. The National City Bank of New York also argued the provision did not apply to it as a national banking association exempt from such assessment.

Constitutionality of Section 11: Majority Opinion

The majority upheld the constitutionality of Section 11, reasoning as follows:

  • The title of Act No. 4007, "An Act to reorganize the departments, bureaus and offices of the Insular Government, and for other purposes," sufficiently encompassed the Bureau of Banking, which already existed before enactment.
  • The provision in Section 11 was found to be germane and connected to the organization and maintenance of the Bureau of Banking, since it concerned the fiscal support necessary for the bureau’s operation.
  • The one-subject rule embodied in the Jones Law was interpreted liberally, allowing a general and comprehensive title to cover reasonable means for accomplishing the legislative objective.
  • The power of the legislature to impose reasonable and general regulations on banks, including assessments to support regulatory bureaus, was recognized as within the police power of the government.
  • National banking associations such as the National City Bank of New York are exempt from this assessment unless authorized by Congress; thus, Section 11 does not apply to that bank.

Constitutional Policy on Titles and Legislative Subjects

The majority opinion cited precedent from the U.S. Supreme Court and other authorities indicating that:

  • The constitutional requirement that a law embrace only one subject, expressed in its title, is designed primarily to prevent “logrolling,” surprise, and surreptitious legislation.
  • The subject expressed in the title need not enumerate all details or subordinate matters but must avoid incongruous or unrelated provisions.
  • The phrase “and for other purposes” in a title has limited effect and cannot justify provisions unrelated to the main subject. However, the provision at issue was deemed sufficiently related to the bureau’s maintenance under the general subject of reorganization.

Dissenting Opinion of Justice Laurel

Justice Laurel agreed with the legislative power to tax banks generally but dissented on the interpretation of the one-subject and title rule. Key points include:

  • He viewed Section 11 as an unconstitutional enactment because it introduced a taxing or assessment provision that had no relation to the act’s primary purpose of government reorganization.
  • The title of the Act does not give an adequate or clear indication of the taxation provision contained in Section 11; the section’s subject is distinct and alien from reorganization.
  • The provision was inserted without notice into a reorganization bill, which violated legislative procedural safeguards and constitutional mandates.
  • Historical and prior legislative acts treated the organization and funding of bureaus separately; prior reorganization laws did not include taxing measures to support bureaus.
  • Citing precedents including Central Capiz vs. Ramirez, Agcaoili vs. Suguitan, and Government of the Philippine Islands vs. El Hogar Filipino, Justice Laurel emphasized the mandatory nature of the one-subject rule and invalidity of provisions not expressed in the title.
  • Reliance on the phrase “and for other purposes” cannot cloak material provisions unrelated to the act’s primary subject.
  • He warned that upholding such provisions in reorganization acts could lead to dangerous legislative practices, undermining constitutional safeguards against omnibus and surprise legislation.

Dissenting Opinion of Justice Concepcion

Justice Concepcion also dissented, concurring with the reasoning that:

  • The subject matter of Section 11 is absolutely foreign to the reorganization of government departments, dealing instead with the levying of assessments on banks.
  • The inclusion of Section 11 violated the Jones Law as the title failed to express its subject, rendering the section unconstitutional and invalid.
  • The phrase “and for other purposes” does not legitimize unrelated provisions.
  • The National City Bank of New York’s exemption was acknowledged, but the broader assessment imposed by Section 11 on other banks should not be upheld under the reorganization act.

Legislative Proceedings and Amendments

The dissenting justices examined the legislative history of Act No. 4007, noting that:

  • Section 11’s taxing provision was not originally part of House Bill No. 1934 and was not included in the Senate-approved version.
  • The section was inserted late during the bicameral conference committee pha

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