Case Summary (G.R. No. 15574)
Petition and Procedural Posture
Petitioner filed for mandamus to compel the Collector to issue a Philippine registry certificate. The Attorney‑General, representing the Collector, demurred on the ground that the petition failed to state a cause of action. The material facts were admitted for decision. The central legal challenge was to the constitutionality of Act No. 2761 (Philippine Legislature, Feb. 23, 1918) insofar as it conditions registry in the coastwise trade on citizenship composition of corporate ownership.
Material Facts
Smith, Bell & Co. is organized under Philippine law but has a majority of alien (British) stockholders. The Bato, owned by the corporation, is over fifteen gross tons and was brought to Cebu for coastwise commerce. The Collector refused registration because not all of the corporation’s stockholders were citizens of either the United States or the Philippine Islands. Act No. 2761 had amended Administrative Code provisions governing Philippine registry and related requirements.
Applicable Legal and Constitutional Framework
Primary federal delegations and constraints: (a) Act of Congress of April 29, 1908 (delegating to the Philippine government the authority to adopt regulations governing transportation between Philippine ports until Congress authorized U.S. registry for Philippine‑owned vessels); (b) the Jones Law (Act of Congress of August 29, 1916), especially section 3 (due process/equal protection guarantee), sections 6–8 and 10 (continuation of laws and grant of general legislative power to the Philippine Legislature subject to the Act), and section 31 (continuation of nonconflicting laws). Local law: Administrative Code provisions as amended by Act No. 2761 (sections 1172, 1176, 1202).
Text and Effect of Act No. 2761
Act No. 2761 amended Administrative Code section 1172 to define “domestic ownership” for purposes of Philippine registry by excluding vessels owned by entities with alien stockholders except where ownership is vested in (a) citizens or native inhabitants of the Philippines, (b) citizens of the United States residing in the Philippines, or (c) corporations composed wholly of citizens of the Philippines, of the United States, or both and created under U.S., state, or Philippine law, subject to residency of a duly authorized officer, managing agent, or master in the Philippines. Sections 1176 and 1202 were amended to empower the Collector to investigate legitimacy/domestic ownership before issuing or retaining a registry and to limit the number of non‑citizen officers/engineers on Philippine vessels, respectively.
Legal Issue Presented
Whether Act No. 2761 is a valid exercise of Philippine legislative power, i.e., whether the Philippine Legislature may lawfully deny Philippine coastwise registry to corporations that have alien stockholders, without violating the due process and equal protection guarantees of the applicable organic law.
The Court’s Conclusion on Legislative Authority
The Court found abundant delegation and authority for such local regulation: the 1908 Act expressly authorized the Philippine government to regulate intra‑Insular transport pending congressional action; the Jones Law granted general legislative power to the Philippine Legislature (subject to its provisions). The principle that Acts of the United States operate in the Philippines only to the extent expressly extended likewise supported insular legislative autonomy in this domain. Accordingly, the Legislature possessed the competency to enact Act No. 2761.
Due Process and Equal Protection Analysis
The Court treated the first paragraph of the Philippine Bill of Rights (as embodied in the Jones Law) as functionally equivalent to the Fourteenth Amendment’s due process and equal protection guarantees, applying the same principles: the term “person” includes aliens and corporations, and classifications affecting corporations must rest on reasonable grounds and not be arbitrary. The petitioner argued Act No. 2761 denied equal protection and deprived useful property rights without due process by depriving the corporation of the practical benefits of ownership. The Court acknowledged precedents invalidating arbitrary discrimination against aliens but emphasized recognized exceptions permitting differential treatment when justified by legitimate public interests.
Recognized Exceptions and Application to Act No. 2761
The Court identified established exceptions permitting discriminatory legislation as compatible with due process/equal protection: valid exercises of police power to protect health, morals, order, industry and resources; regulation of the public domain and common property to reserve use to citizens; and limitation of employment on public works to citizens. Applying those principles to the Philippine context, the Court accepted that regulation of coastwise navigation in an archipelagic territory of over three thousand islands implicates security, commerce, and the public domain. Steamship li
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Procedural Posture
- Smith, Bell & Co. (Ltd.) petitions the Court for a writ of mandamus to compel Joaquin Natividad, Collector of Customs of the port of Cebu, to issue a certificate of Philippine registry for the motor vessel Bato.
- The Attorney-General, acting as counsel for respondent, demurs to the petition on the general ground that it does not state facts sufficient to constitute a cause of action; the facts alleged in the petition are treated as admitted for purposes of decision.
- The core legal question presented is whether Act No. 2761 of the Philippine Legislature is valid — specifically whether the Government of the Philippine Islands, through its Legislature, can deny registry of vessels in the coastwise trade to corporations having alien stockholders.
- The petition for mandamus is denied by the Court; costs are awarded against the petitioner.
Facts
- Petitioner: Smith, Bell & Co. (Ltd.), a corporation organized and existing under the laws of the Philippine Islands.
- Ownership and stock: A majority of the corporation’s stockholders are British subjects.
- Vessel: The motor vessel Bato, built in the Philippine Islands in 1916, with gross tonnage in excess of fifteen tons, is owned by petitioner.
- Intended use: The Bato was brought to Cebu in the year of the case for the purpose of transporting the petitioner’s merchandise between ports in the Philippine Islands.
- Application for registry: An application was made at Cebu, the home port of the vessel, to the Collector of Customs for a certificate of Philippine registry.
- Collector’s refusal: The Collector refused to issue the certificate on the ground that not all stockholders of Smith, Bell & Co., Ltd., were citizens either of the United States or of the Philippine Islands.
- Result: The present litigation ensued seeking mandamus to compel issuance of the certificate.
Statutory and Textual Authorities Relied Upon (as set out in the record)
- Act of Congress, April 29, 1908 (repealing Shipping Act of April 30, 1906, but reenacting portion of section 3): quoted section 1:
- "That until Congress shall have authorized the registry as vessels of the United States of vessels owned in the Philippine Islands, the Government of the Philippine Islands is hereby authorized to adopt, from time to time, and enforce regulations governing the transportation of merchandise and passengers between ports or places in the Philippine Archipelago."
- (Cited: 35 Stat. at L., 70; Section 3912, U. S. Comp. Stat. [1916]; 7 Pub. Laws, 364.)
- Jones Law (Act of Congress of August 29, 1916), quoted provisions:
- Sec. 3 (first paragraph, first sentence): "That no law shall be enacted in said Islands which shall deprive any person of life, liberty, or property without due process of law, or deny to any person therein the equal protection of the laws."
- Sec. 6: "That the laws now in force in the Philippines shall continue in force and effect, except as altered, amended, or modified herein, until altered, amended, or repealed by the legislative authority herein provided or by Act of Congress of the United States."
- Sec. 7: grants the legislative authority power to amend, alter, modify, or repeal laws continued in force; includes specific extension to laws relating to revenue and taxation.
- Sec. 8: grants general legislative power to the Philippine Legislature, "except as otherwise herein provided."
- Sec. 10: places limitations and provisos concerning tariff acts and certain acts affecting immigration or currency requiring Presidential approval within specified periods.
- Sec. 31: "That all laws or parts of laws applicable to the Philippines not in conflict with any of the provisions of this Act are hereby continued in force and effect." (39 Stat. at L., 546.)
- Act No. 2761 (Philippine Legislature, enacted February 23, 1918), amendments to the Administrative Code:
- Amendment to section 1172 (as enacted in section 1 of Act No. 2761), italics preserved in source:
- "Sec. 1172. Certificate of Philippine register. Upon registration of a vessel of domestic ownership, and of more than fifteen tons gross, a certificate of Philippine register shall be issued for it. If the vessel is of domestic ownership and of fifteen tons gross or less, the taking of the certificate of Philippine register shall be optional with the owner.
- "'Domestic ownership,' as used in this section, means ownership vested in some one or more of the following classes of persons: (a) Citizens or native inhabitants of the Philippine Islands; (b) citizens of the United States residing in the Philippine Islands; (c) any corporation or company composed wholly of citizens of the Philippine Islands or of the United States or of both, created under the laws of the United States, or of any State thereof, or of the Philippine Islands, provided some duly authorized officer thereof, or the managing agent or master of the vessel resides in the Philippine Islands.
- "Any vessel of more than fifteen gross tons which on February eighth, nineteen hundred and eighteen, had a certificate of Philippine register under existing law, shall likewise be deemed a vessel of domestic ownership so long as there shall not be any change in the ownership thereof nor any transfer of stock of the companies or corporations owning such vessel to persons not included under the last preceding paragraph."
- Amendment to section 1176 (section 2 of Act No. 2761):
- "Sec. 1176. Investigation into character of vessel. No application for a certificate of Philippine register shall be approved until the collector of customs is satisfied from an inspection of the vessel that it is engaged or destined to be engaged in legitimate trade and that it is of domestic ownership as such ownership is defined in section eleven hundred and seventy-two of this Code.
- "The collector of customs may at any time inspect a vessel or examine its owner, master, crew, or passengers in order to ascertain whether the vessel is engaged in legitimate trade and is entitled to have or retain the certificate of Philippine register."
- Amendment to section 1202 (section 3 of Act No. 2761):
- "Sec. 1202. Limiting number of foreign officers and engineers on board vessels. No Philippine vessel operating in the coastwise trade or on the high seas shall be permitted to have on board more than one master or one mate an
- Amendment to section 1172 (as enacted in section 1 of Act No. 2761), italics preserved in source: