The Manila Railroad Company vs. The Insular Collector of Customs

Locomotive brake equipment manufactured in England and imported as equipment for a railroad under its charter, Act No. 1510, is properly admitted free of duty under section 10 of that Act, not under section 12 of the Tariff Act of 1909, because section 12 is limited to articles grown, produced, or manufactured in the United States or its possessions; the Collector of Customs erred in cancelling the section 10 entry and admitting the equipment under section 12.

The Manila Railroad Company operated railroad lines under a charter, Act No. 1510, section 10 of which provided for the free admission of materials necessary for the construction and equipment of its railroad lines. The Insular Collector of Customs administered customs duties under the Philippine Tariff Law of 1909, section 12 of which allowed free entry for articles that were the growth, product, or manufacture of the United States or its possessions. The dispute concerned the interaction between the railroad's charter-based free-entry privilege and the later tariff law.

On or about October 17, 1913, the Manila Railroad Company imported ten locomotive engines to be used upon its railroad. Some parts of the engines had been manufactured in England; some were sent to the United States and there attached to the locomotives; and some were sent directly to Manila to be attached in the Philippine Islands. The locomotives and parts were admitted free of duty: the locomotives, except the England-manufactured parts, under section 12 of the Philippine Tariff Law of 1909, and the England-manufactured parts under section 10 of Act No. 1510.

Later, the Collector of Customs cancelled the free entry of the England-manufactured parts and admitted them free of duty under section 12 of the Philippine Tariff Law of 1909 instead of section 10 of Act No. 1510. The Manila Railroad Company protested the cancellation, but the Collector overruled the protest on December 23, 1913. The railroad then appealed to the Court of First Instance.

The trial court described the case as a protest against the Collector's cancellation of railroad construction entry No. 524 and reliquidation of entries Nos. 4992 and 9108 to include the value of certain brake material covered by entry No. 524. The court found that the Manila Railroad Company had contracted in the United States with the American Locomotive Company for ten locomotives for its southern lines, to be built according to plans and specifications. Those specifications called for vacuum brake equipment generally used and manufactured in England, so the complete brake equipment for the ten locomotives was purchased in England. The complete parts for four locomotives were imported directly from England and passed free under section 10 of Act No. 1510.

The brake equipment for the remaining six locomotives was first shipped from England to the United States, where duty was imposed upon it, and then reshipped directly to the Philippine Islands, accompanying the locomotives. Nothing was done to the brake equipment while in the United States except that perhaps one or more were fitted to the engines for trial. The ten locomotives, less the brake equipment, were entered free of duty. The six brake equipments were entered under railroad free entry No. 524, Exhibit E, but the Acting Insular Deputy Collector of Customs later cancelled that entry. After the cancellation, the importation was liquidated under section 12 of the Tariff Act of 1909, and the railroad protested, claiming that it should be allowed free entry under section 10 of Act No. 1510.

• Repeal of Act No. 1510: The Insular Collector of Customs urged that the provisions of Act No. 1510 for free entry of railroad materials were repealed by the Tariff Act of 1909.
• No Violation of Charter Rights: The Collector maintained that because the articles in question were allowed free entry under section 12 of the Tariff Act, the railroad company's rights under section 10 of its charter were in no wise violated.

• Free Entry under Section 10: The Manila Railroad Company protested the Collector's cancellation and reliquidation, claiming that the importation should be allowed free entry under section 10 of Act No. 1510.

• Proper Free-Entry Provision: Whether the Collector of Customs erred in cancelling the free entry under section 10 of Act No. 1510 and reliquidating the England-manufactured locomotive brake equipment under section 12 of the Philippine Tariff Law of 1909.
• Repeal and Charter Rights: Whether the free-entry provisions of Act No. 1510 were repealed or impaired by the Tariff Act of 1909, and whether the Collector could compel entry under section 12 over the railroad company's protest.

• Proper Free-Entry Provision: Yes, error. The brake equipment was manufactured in England and therefore could not be admitted under section 12 of the Tariff Law of 1909, which covers articles that are the growth, product, or manufacture of the United States or its possessions. It was properly admitted under section 10 of Act No. 1510.
• Repeal and Charter Rights: No. The Court of First Instance held that Act No. 1510 is in the nature of a contract between the Government and the railroad company, and that rights acquired under it were not impaired by the subsequent Tariff Act; section 27 of the Tariff Act expressly preserved acts done and rights accruing or accrued. The Supreme Court affirmed that judgment.

• Proper Free-Entry Provision: Section 10 of Act No. 1510 provides for admission into the Philippine Islands, by the plaintiff, of supplies and equipment for its railroad during a certain period. It was not denied that the material was brought in as equipment for the railroad and was manufactured in England. Section 12 of the Philippine Tariff Law of 1909 provides for free entry of all articles, except rice, that are the growth, product, or manufacture of the United States or its possessions, to which the customs in force in the United States is applied and upon which no drawback has been allowed. Because the brake equipment was admittedly manufactured in England, it could not have been admitted under section 12. The Collector properly admitted it under section 10, and committed an error when he cancelled that entry and admitted the articles under section 12. The Supreme Court therefore affirmed the Court of First Instance.
• Repeal and Charter Rights: The Collector urged that Act No. 1510's free-entry provisions were repealed by the Tariff Act of 1909. The Court of First Instance rejected this because section 27 of the Tariff Act expressly provides that it shall not affect "any act done or any right accruing or accrued." Act No. 1510 being in the nature of a contract between the Government and the railroad company, the rights acquired under it were not impaired by the subsequent Tariff Act. The Collector also maintained that because the articles were allowed free entry under section 12, the railroad's rights under section 10 were not violated. This was rejected: the railroad had a perfect right to stand upon its charter and demand that the entry of materials for construction and equipment be allowed thereunder, and the Collector had no authority, over the railroad's protest, to compel entry under another law. The certificate on the invoices that the articles were of United States growth, product, or manufacture and that no drawback had been claimed was immaterial. The record showed no waiver of the railroad's rights and nothing that stopped it from asserting them in a court of general jurisdiction. The Supreme Court affirmed the Court of First Instance's judgment.

• Charter as Contract and Non-Impairment of Charter Rights — Act No. 1510, the railway company's charter, is in the nature of a contract between the Government and the railroad company. Rights acquired under it, including the right to free entry of materials necessary for construction and equipment, are not impaired by a subsequent tariff law where that law expressly provides that it shall not affect any act done or any right accruing or accrued. The Court of First Instance applied this principle and the Supreme Court affirmed, holding that the railroad's section 10 rights survived the Tariff Act of 1909.
• Proper Statutory Basis for Free Entry — Section 12 of the Philippine Tariff Law of 1909 grants free entry only to articles, except rice, that are the growth, product, or manufacture of the United States or its possessions, to which United States customs is applied and upon which no drawback has been allowed. Articles manufactured in England cannot be admitted under that section. The Court applied this by holding that the England-manufactured brake equipment was properly admitted under section 10 of Act No. 1510, not under section 12.
• Collector's Lack of Authority to Compel Entry Under Another Law — Where an importer has a charter-based right to free entry under a specific statute and protests the Collector's action, the Collector has no authority to compel entry under a different law. The Court applied this by ruling that the Collector erred in cancelling the section 10 entry and admitting the equipment under section 12 over the railroad's protest.

• "We do not think it can be successfully disputed that as Act No. 1510 is in the nature of a contract between the Government and the railroad company the rights acquired under it by the latter were not impaired by the subsequent Tariff Act." — In the Court of First Instance decision quoted and affirmed by the Supreme Court, this passage states the charter-as-contract rationale for rejecting the Collector's claim that the later Tariff Act repealed or impaired the railroad's free-entry rights.
• "The railroad company had a perfect right to stand upon its charter and to demand that the entry of materials for construction and equipment should be allowed thereunder; the Collector of Customs had no authority, over the railroad company's protest, to compel the entry under another law." — This passage defines the limits of the Collector's authority and explains why the cancellation of the section 10 entry was improper.
• "Clearly, therefore, the material in question could not have been admitted under section 12 of the Philippine Tariff Law of 1909. The Collector of Customs properly admitted said material, which had been admittedly manufactured in England, under section 10 of Act No. 1510. He committed an error when he cancelled said entry and admitted said articles under section 12 of Tariff Act of 1909." — This is the Supreme Court's own ratio decidendi, holding that the England-manufactured brake equipment fell outside section 12 and was properly admitted under section 10.

• Section 10, Act No. 1510 — The charter of the railway company provides for the admission free of duty of all materials necessary for the construction and equipment of the railroad lines covered by the charter. It was applied as the proper basis for the free entry of the England-manufactured brake equipment, which was imported as equipment for the railroad.
• Section 12, Philippine Tariff Law of 1909 — Provides for free entry of all articles, except rice, that are the growth, product, or manufacture of the United States or its possessions, to which the customs in force in the United States is applied and upon which no drawback has been allowed. It was held inapplicable to the brake equipment because the equipment was manufactured in England.
• Section 27, Tariff Act of 1909 — Expressly provides that the Act shall not affect "any act done or any right accruing or accrued." It was relied upon to hold that the railroad's rights under Act No. 1510 were not impaired or repealed by the subsequent Tariff Act.

• Arellano, C.J.
• Torres, J.
• Carson, J.
• Araullo, J. Johnson, J., authored the opinion.