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course the individual inhabitants had elected to pursue. Hence the provisions of Article IX of the treaty:

In case they remain in the territory they may preserve their allegiance to the Crown of Spain by making, before a court of record, within a year from the date of the exchange of ratifications of this treaty, a declaration of their decision to preserve such allegiance; in default of which declaration they shall be held to have renounced it and to have adopted the nationality of the territory in which they may reside.

This provision of the treaty simply declares the ordinary rule that allegiance is presumed from the fact of residence in the country and participation in the protection and other benefits of organized government. In regard to this rule Halleck says:

The transfer of territory establishes its inhabitants in such a position toward the new sovereignty that they may elect to become, or not to become, its subjects. Their obligations to the former government are canceled, and they may or may not become the subjects of the new government, according to their own choice. If they remain in the territory after this transfer, they are deemed to have elected to become its subjects, and thus have consented to the transfer of their allegiance to the new sovereignty. If they leave, sine animo revertendi, they are deemed to have elected to continue aliens to the new sovereignty. The status of the inhabitants of the conquered and transferred territory is thus determined by their own acts. This rule is the most just, reasonable, and convenient which could be adopted. It is reasonable on the part of the conqueror, who is entitled to know who become his subjects and who prefer to continue aliens; it is very convenient for those who wish to become the subjects of the new state, and is not unjust toward those who determine not to become its subjects. According to this rule, domicile, as understood and defined in public law, determines the question of transfer of allegiance, or rather, is the rule of evidence by which that question is to be decided. (Halleck's Int. Law, vol. 2, sec. 7, p. 475, 3d ed.)

“ Allegiance," as heretofore used in this report, means the absolute and permanent obligation such as the citizen owes to his government until relieved therefrom by his own act or that of the government. But an alien, domiciled in any country, owes a temporary allegiance to the government of that country, continuing during such residence. (Carlisle v. United States, 16 Wall., 147, 154.)

Local or actual allegiance is that which is due from an alien while resident in a country in return for the protection afforded by the government. (Kent's Com., vol. 2, p. 42.)

The inhabitants of the territories ceded or relinquished by Spain in the treaty of Paris, so long as they remain in said territories, are required to yield such temporary allegiance without regard to their citizenship.

The foregoing report being submitted to the Acting Secretary of War was by him transmitted to the State Department with the following communication:

JUNE 24, 1901. Sir: I have the honor to acknowledge receipt of communication from the Hon. David J. Hill, Acting Secretary of State, dated June 12, 1901, inclosing copy of a dispatch from the United States minister to Spain, forwarding a copy of the royal decree concerning change of citizenship under the treaty of Paris (1898).

In said letter the Acting Secretary of State says: “Some of the articles of this decree do not appear to be in harmony with the stipulations of the treaty, but the apparent conflict is probably intended to be saved by the provisions of Article V.",

The doubt suggested by the foregoing caused the matter to be referred to the law officer of the Division of Insular Affairs, War Department, for examination and report. A copy of that officer's report is herewith transmitted. I am inclined to agree with the view taken therein. I should be pleased to have an expression of your views on the matter, as it will be necessary to advise the military governments what course they are to pursue with reference to the matters dealt with in said decree. Very respectfully,

WM. CARY SANGER,

Acting Secretary of War. The SECRETARY OF STATE.

The State Department concurred in the views expressed in the report, and thereupon the War Department advised the government of the Philippines and the government of Cuba as follows:

July 16, 1901. SIR: I have the honor to transmit copy of the royal decree of Spain, dated May 11, 1901, which said decree declares the terms and conditions under which Spain is willing to accept a renewal of allegiance to it by certain individual inhabitants of the territories acquired by the United States as a result of the Spanish-American war, and to reinstate such individuals in Spanish citizenship.

Epon examination this Department was of opinion that said decree did not infringe upon the rights of the United States in the matters dealt with, nor violate the provisions of the treaty of peace. This view was communicated to the State Department with request for the opinion of that Department, and in response thereto the Acting Secretary of State says:

"The Department thinks there is nothing in the Spanish decree to which this Government can properly object.” (State Department's letter of July 3, 1901.)

I transmit copy of correspondence with State Department and the report of the law officer, Division of Insular Affairs, War Department. Very respectfully,

WM. Cary SANGER,

Acting Secretary of War. Hon. WILLIAM H. Taft,

Civil Governor of the Philippine Islands.

IN RE CLAIM OF THE MANILA RAILWAY COMPANY, LIMITED,

FOR PAYMENT BY THE UNITED STATES OF INTEREST ON THE CAPITAL INVESTED IN THE RAILWAY OWNED AND OPERATED BY SAID COMPANY, PURSUANT TO GUARANTY OF SAID INTEREST BY THE SPANISH GOVERNMENT. [Submitted December 21, 1899. Case No. 849, Division of Insular Affairs, War Department.] [Printed as War Department publication by order of the Secretary of War.]

SYNOPSIS. 1. The funds of the United States subject to the orders of the War Department are

not available for the payment of claims based upon obligations of the Government of Spain, even though it were conceded that the United States had assumed said obligations or otherwise become liable thereon.

* See opinion of Attorney-General Griggs, July 26, 1900. 13635-02- 12

2. The executive branch of this Government refuses to consider the funds arising

from the revenues derived from the islands, the sovereignty of which was ceded and relinquished by Spain in the late treaty of peace, as being the funds or property of the United States. Said revenues are collected by exercise of belligerent right for the purpose of defraying the expenses of naintaining peace and order in said islands by and through the provisional government instituted therein

pursuant to the requirements of the laws of war. 3. During the negotiations which resulted in the treaty of Paris (December 10, 1898)

the Spanish Commission proposed that the Government of the United States should "be holden to all the rights and obligations of the Spanish Government" created by the “railroad concession from Manila to Dagupan." Said proposal was rejected by the American Commission, with the declaration “that they would not accept any articles that required the United States to assume the so-called colonial debts of Spain;" but, in respect to the Philippines, the American Commission agreed that their Government should pay to Spain the sum of $20,000,000. Proceedings of the Commissions reviewed and opinion arrived at that said payment was in lieu of an assumption by the United States of the financial obligations of the Government of Spain created for the benefit of the

Philippines. 4. The position taken by the American Commission was approved by the President

and made known to Congress. That body approved said position by ratifying the treaty based upon said position. It is, therefore, to be supported by the coordinate branches of the Government. It can not be adjudged untenable either by this Department or the provisional government temporarily in charge

of the civil affairs of the islands. 5. The contract obligations of Spain created by the guaranty of interest on the capital

invested in the enterprise included in the concession now owned by the Manila Railway Company did not pass to and become binding upon the United States by operation of international law upon the cession of sovereignty by Spain and the

acceptance of sovereignty over said islands by the United States. 6. Liability for debt arising upon the personal obligation of the General Government,

unsecured by the mortgage of the territory ceded, does not pass with the sovereignty of territory unless stipulated for in the treaty of cession. Such liability is part of the national debt of the nation making the cession. The taking over of the whole or any part thereof is an act of grace by the succeeding sovereign. Its accomplishment requires an affirmative act on the part of such sovereign. The sole dependence of a claimant desiring such grace is that the equities of his cause will appeal to the conscience of the new sovereign. Under the distribution of powers made by our Constitution such acts of grace by the sovereignty

of the United States must be performed by Congress. 7. The guaranty of the Spanish Government evidenced by the provisions of the

concession to the Manila Railway Company is not a lien upon the island of

Luzon. 8. The revenues now being collected by the provisional government of the Philip

pine Islands are not burdened with a trust in favor of the Manila Railway Company to secure the performance of the contract obligations of the Government of Spain. Sir: In response to your request I have the honor to submit the following report in re claim of the Manila Railway Company, Limited, for payment by the United States of interest on the capital invested in the railway owned and operated by said company, pursuant to guarantee of said interest by the Spanish Government.

The facts out of which the claim arises are as follows: The Manila

Railway Company, Limited, a corporation organized under the laws of Great Britain, obtained a concession from the Spanish Government for a railroad from Manila to Dagupan, in the island of Luzon, a distance of about one hundred and thirty miles. By the terms of the concession the Spanish Government guaranteed a return of eight per centum per annum upon the capital invested in the railroad. The claimant represents that the amount originally so invested was $4,964,400, but that the amount was subsequently increased, with the concurrence of the Spanish authorities, to $5,353,700.89. The Spanish Government, up to the time of the Spanish-American war, fulfilled its obligations under this contract by paying quarterly installments of the subvention as they accrued, the amount varying with the earnings of the railway.

The Manila Railway Company now shows that by the late treaty of peace between the United States and Spain the sovereignty of the island of Luzon and the other islands of the Philippine Archipelago was ceded by Spain to the United States, and that said sovereignty was assumed by the United States. (30 Stats. at Large, 1754.)

The company contends that by said cession and assumption the United States became bound to respond to the obligations of the Spanish Government under said concession. The company therefore claims that the United States should pay to it the amounts due on the subvention which have accrued since the date of the treaty of peace. These amounts are as follows: For quarter ending March 31, 1899....

$30, 293.00 For quarter ending June 30, 1899 .....

..... 99, 781. 97 For quarter ending September 30, 1899......

106, 994.00

Total ........
.............

.. 237, 068.97 The claim is made against the United States Government and presented to the War Department for payment. As thus presented the matter may be summarily disposed of by announcing the incontestable fact that there are no funds subject to the orders of the War Department which are available for the payment of claims of this character against the United States. If it were admitted that the claim is just and right and the United States bound to pay it, if payment is sought out of funds belonging to the United States Government, such funds must be provided and made available by Congress. None of the funds of the United States available to this Department can be devoted to such purpose.

Probably the railway company seeks to have this Department order said claim paid out of the moneys accruing from the revenues of the Philippine Islands, collected by the provisional government now being maintained there by the United States pursuant to the military occupation of said archipelago. The United States Govern

ment refuses to consider the money derived from said revenues as funds of the National Government of the United States, and declines to receive it into its Treasury or allow the Treasury Department to assume liability or responsibility in regard thereto. It follows that a claim asserted against the United States as an obligation of the United States can not be paid out of said moneys. If the United States is under obligation to pay the amounts due on this subvention, payment should be made out of national funds of the United States. In order to make such payment out of said funds, it is necessary that Congress should provide for the payment by an appropriation therefor.

The importance of the questions involved and the relation which this Department sustains to the territories lately ceded and relinquished by Spain to the United States hardly permit of disposing of the matter in such indeterminate manner, and therefore the discussion is extended to the bases on which the contention of the claimant rests.

The guaranty under which this claim is made appears in the concession, as follows:

4. The Government will aid the construction of the line by guaranteeing the interest of 8 per cent per annum upon the capital which might be invested. (Doc. 10, 849.)

The concession was finally conferred upon the party from whom the Manila Railway Company derived it, by royal decree, from which the following is quoted:

His Majesty The King (to whom God grant long life), and in his name, the Queen Regent of the Kingdom, has deigned to approve * * * the concession for the railway from Manila to Dagupan of those islands, with the subsidy of 8 per centum annually, etc. (Doc. 11, 849.)

It will be seen that this is an obligation of the National Government of Spain and not of a provincial or municipal government. An autonomous government, other than the Crown of Spain, capable of granting this concession did not exist in the island of Luzon at the time the obligation was created. The undertaking was that of the sovereignty of Spain, not of a dependency.

Did the United States assume this liability of the Spanish Government?

It certainly did not assume such liability by the terms of the treaty of Paris. That instrument does not provide for nor suggest such substitution. It is silent upon that point. But while the treaty is silent in regard to said matter the proceedings of the commissions which formulated said treaty are not silent. By reference to the message from the President of the United States to the Fifty-fifth Congress, transmitting the treaty of peace with Spain (Sen. Doc., No. 62, part 1), it will be seen that the Spanish Commission tried to induce the American Commission to consent to the insertion in said treaty of words which would bind the United States for the payment of all,

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