Government of the Philippine Islands vs. Hongkong and Shanghai Banking Corp.

A statutory provision levying assessments on banking institutions to fund the Bureau of Banking is constitutional if it is germane to the general subject of reorganizing government bureaus expressed in the Act's title, provided it does not apply to U.S. government agencies absent congressional authorization.

The Government of the Philippine Islands brought an action against several banking institutions doing business in the country to determine their liability under Section 11 of Act No. 4007. Section 11 mandated that the total annual expenses of the Bureau of Banking be reimbursed by an assessment levied upon all banking institutions subject to inspection by the Bank Commissioner. The Bureau of Banking was already in existence as one of the bureaus of the Insular Government under Act No. 3519.

The Government of the Philippine Islands filed a complaint against the Hongkong & Shanghai Banking Corporation and eight other banking institutions to recover sums representing assessments levied under Section 11 of Act No. 4007. This section provided that the total annual expenses of the Bureau of Banking would be reimbursed to the Government by an assessment levied upon all banking institutions subject to inspection by the Bank Commissioner, with the proportion assessed against each institution based on its average total assets relative to the average total assets of all such institutions.

All the defendant banks demurred to the complaint. They argued that the complaint did not state a cause of action because Section 11 of Act No. 4007 was unconstitutional, asserting that the subject matter of the section was not embraced in the title of the Act, in violation of the Jones Law. The title of Act No. 4007 was "An Act to reorganize the departments, bureaus and offices of the Insular Government, and for other purposes." The National City Bank of New York additionally argued that there was a misjoinder of parties and that Section 11 did not impose a tax upon national banking associations, which it belonged to.

The lower court sustained the demurrers and dismissed the complaint solely on the ground that Section 11 was unconstitutional. The Government appealed this dismissal to the Supreme Court.

• Constitutionality of Section 11: Appellees contended that the subject matter contained in Section 11 was not embraced in the title of Act No. 4007, violating the Jones Law's requirement that a bill's subject be expressed in its title.
• Exemption of National City Bank: The National City Bank of New York alleged that there was a misjoinder of parties defendant and that Section 11 of Act No. 4007 did not impose any tax upon national banking associations, to which class it belonged.

• Constitutionality of Section 11: Whether Section 11 of Act No. 4007, which levies assessments on banking institutions to fund the Bureau of Banking, is unconstitutional for violating the Jones Law's requirement that the subject of a bill be expressed in its title.
• Applicability to National City Bank: Whether Section 11 of Act No. 4007 applies to the National City Bank of New York, an agency of the United States.

• Constitutionality of Section 11: Yes. Section 11 is constitutional because its contents are germane to and connected with the organization and maintenance of the Bureau of Banking, which is embraced in the Act's title to reorganize government departments and bureaus.
• Applicability to National City Bank: No. The National City Bank of New York, as an agency of the United States, was not subject to taxation by the Philippine Government except as permitted by an Act of Congress, and the form of taxation imposed under Section 11 was not so permitted.

• Constitutionality of Section 11: The constitutional provision requiring a bill to embrace only one subject expressed in its title is intended to prevent "omnibus bills" and surreptitious legislation. However, such provisions should not be so narrowly construed as to cripple proper legislation. It is sufficient if the title is comprehensive enough to reasonably include the general object the statute seeks to effect; mere details need not be set forth. The title of Act No. 4007 is "An Act to reorganize the departments, bureaus and offices of the Insular Government, and for other purposes." At the time of the Act's passage, the Bureau of Banking already existed as one of the bureaus of the Insular Government. Therefore, the bureau is embraced in the title. Furthermore, the contents of Section 11, which provide for the reimbursement of the Bureau's expenses through assessments on banks, are germane to and connected with the organization and maintenance of that bureau. The banking business is affected with public interest, justifying regulation and control under the police power, including the provision for enforcement by a bureau supported by moderate assessments.
• Applicability to National City Bank: The National City Bank of New York is an agency of the United States. As such, it is not subject to taxation by the Philippine Government unless permitted by an Act of Congress. The specific form of taxation imposed under Section 11 of Act No. 4007 was not permitted by any act of Congress, rendering the section inapplicable to this appellee.

• One Subject, One Title Rule — The constitutional requirement that a bill shall embrace only one subject, which shall be expressed in its title, is intended to prevent "log rolling" legislation, surprise, or fraud in the legislature, and to apprise the people of the subject of legislation. The provision should receive a reasonable, not technical, construction. It is sufficient if the title is comprehensive enough reasonably to include the general object the statute seeks to effect without expressing every end and means. A provision is valid if it is germane to the general subject expressed in the title. In this case, the assessment on banks to fund the Bureau of Banking was held germane to the reorganization of government bureaus.
• Taxation of Foreign Government Agencies — An agency of the United States is not subject to taxation by the Philippine Government except as permitted by an Act of Congress. Since the form of taxation under Section 11 was not permitted by any act of Congress, the National City Bank of New York was exempt.

• "Constitutional provisions relating to the subject matter and titles of statutes should not be so narrowly construed as to cripple or impede proper legislation." — This passage articulates the standard of review for the one subject, one title rule, emphasizing a reasonable construction that upholds legislation rather than invalidating it over mere details.
• "It is sufficient if the title be comprehensive enough reasonably to include the general object which a statute seeks to effect, without expressing each and every end and means necessary or convenient for the accomplishing of that object. Mere details need not be set forth." — This defines the scope of the title requirement, clarifying that a title need not be an index of the act, provided the body is germane to the general object.
• "The National City Bank of New York, one of the herein appellees, being an agency of the United States, was not subject to taxation by the Philippine Government except as permitted by Act of Congress." — This establishes the rule regarding the tax exemption of U.S. government agencies in the Philippines, limiting local taxing power absent congressional authorization.

• Detroit vs. Detroit Citizens' Street R. Co., 184 U. S. 368 — Cited for the principle that constitutional provisions on titles should be given a reasonable construction and that a title need not refer to every end and means necessary for the general object.
• Noble State Bank vs. Haskell, 219 U. S. 104 — Cited to support the proposition that the banking business is affected with public interest, justifying regulation and control under the police power.
• Oxford vs. Love, 250 U. S. 603 — Followed for the principle that the legislature may establish reasonable regulations for banking institutions and provide for their enforcement by a bureau supported by moderate assessments.
• Posadas vs. National City Bank, 296 U. S. 497 — Applied to determine that the form of taxation imposed under Section 11 was not permitted by any act of Congress, thus exempting the National City Bank.

• Section 11, Act No. 4007 — The provision levying an assessment on banking institutions to reimburse the annual expenses of the Bureau of Banking. The Court held this constitutional as germane to the Act's reorganization title, but inapplicable to the National City Bank.
• Paragraph 17, Section 3, Jones Law — The organic act provision requiring that no bill enacted into law shall embrace more than one subject, which shall be expressed in the title. The Court construed this reasonably to uphold Section 11.

Avancena, C. J., Villa-Real, and Imperial, JJ., concurred.

• Laurel, J. — Concurred with the majority on the power of the Legislature to impose a tax on banks and the rejection of the contention that the levy violated Section 29 of the Jones Law, but dissented on the title issue. Laurel argued that Section 11, dealing with taxation/assessment, was not germane to the reorganization of departments and bureaus. He emphasized that "to reorganize is not to tax," and that the phrase "and for other purposes" in the title was meaningless surplusage that could not justify the inclusion of a tax provision. He traced the legislative history showing Section 11 was inserted only during the conference committee, violating the constitutional intent to prevent surreptitious legislation.
• Concepcion, J. — Dissented, arguing that the subject matter of Section 11 was absolutely foreign to the reorganization of government departments and bureaus. Concepcion maintained that Section 11 amended the assessment provisions of the Administrative Code without previous notice in the title, rendering it null and void for violating the Jones Law's one subject, one title rule. Diaz, J., concurred in Laurel's dissent.