Mr. Hill to Mr. Wilson.

No. 338.]

Sir: Mr. Buck’s Nos. 364, 394, 398, 417, 450, 526, and 528, dated, respectively, October 4, 1899, and January 12, February 5, April 7, July 6, December 14, and December 28, 1900, concerning land tenure in the former foreign settlements, were duly received.

[Page 346]

The Department telegraphed to Mr. Buck on the 28th ultimo as follows:a

This was followed on January 31 by my telegram reading as follows:a

Complaint is made by American holders of perpetual leases in foreign settlements that their right, title, and estate in said leases are in effect impaired by reason of Japanese laws requiring—

  • First. The registration of the transfer of land titles in perpetual leases as “superficies.”
  • Second. Separate registration, in distinct offices and records, of the transfer of lands and of the buildings thereon, and imposing a charge in the nature of a tax for the registration of the latter of 2½ per cent of their value.

It is claimed that both requirements are in contravention of the guaranty of the treaty of November 22, 1894, between the United States and Japan.

The attitude of the Japanese Government in relation to these questions is set forth in an extract from the note of the Japanese minister to the British minister, contained in Mr. Buck’s letter to Consul-General Gowey, inclosed in his No. 398, of February 5, 1900, to the Department, which is in substance that “the right of perpetual lease, i. e., the right of superficies created for foreigners, is considered a kind of special superficies, and it is clear that it is not the right of superficies according to the civil code;” that even “after the right of perpetual lease has been registered in accordance with the imperial ordinance (No. 329) the title deed has the same validity as before; but that said ordinance was amended by imperial ordinance No. 458, in which the words ‘perpetual lease’ were specially inserted in brackets after the word ‘superficies,’ in order to make it more clear that the so-called right of superficies is the right of perpetual lease. As to the form or mode of confirmation, it is also stated that it is provided in the ordinance that the transfer of a perpetual lease can not be set up against a third party unless the transfer is indorsed upon the title deed; and that such indorsement hitherto made shall have the same effect as an indorsement made in accordance with the above ordinance; that the validity of the title deeds has thus been confirmed.”

Forms of title deeds are given in the inclosure in Mr. Buck’s No. 417, one described as in “Foreign settlement, Bluff,” and the other in “Foreign settlement of Yokohama.” They are alike in all essential respects, the former running as follows:

“The Kanagawa Ken Rei leases to Mrs. V. T. Lindsley, an American citizen, her heirs, executors, administrators, and assigns, the lot of land described, as long as she or her heirs, executors, administrators, or assigns shall pay or cause to be paid to the Japanese Government the ground rent named, payable in advance on June 1 in each and every year to the Japanese Government; that said lot or any parcel thereof shall be transferable to no person other than a subject or a citizen of a power having a treaty with Japan.

“That no parcel of such lot, or building thereon, shall be sold or leased to any Japanese subject, unless authorized by both Japanese and consular authorities, legalizing each transfer or lease.

“That the grantee, her heirs, executors, administrators, and assigns [Page 347]shall conform to the regulations made and to be made by the Japanese local authorities and consuls in conjunction.

“That nonperformance of said conditions renders the title deed null and void; the lot shall revert to the Japanese Government, and the buildings thereon shall become their property.”

The above lease contains no stipulation for any exemption from further charge, and if any existed it was solely in virtue of the law of the extraterritorial jurisdiction, which has been abolished.

This view is confirmed by the form of a receipt, stated in Mr. Lindsley’s brief given at the time of the original purchase, that the sum paid “is in full of purchase money of lot.”

An inclosure in said dispatch states that the land regulations of Yokohama provide that the proprietorship of the soil being in the Japanese Government no tax will be levied on renters of the foreign quarter for the purposes of streets, roads, jetties, sewers, and drains; that foreign holders are authorized to levy taxes for lighting, street cleaning, and police purposes; that the interest in a lot shall always be held to reside in the owner of record (which is stated in the inclosure to be at the consulate); that no title shall pass unless the deed is lodged for record within three days from the date of the conveyance, but no lot can be transferred within one year after date of title deed.

It is to be observed that the taxes thus leviable are in the nature of taxes for municipal purposes.

It is also observed that the registration of a transfer within three days from the date thereof is essential to the validity of the conveyance.

In the treaty between the United States and Japan, of November 22, 1894, it is provided, in Article II, that citizens or subjects of each of the high contracting parties in any part of the territories of the other “may there own or hire and occupy houses, manufactories, warehouses, shops, and premises which may be necessary for them, and lease land for residential and commercial purposes, conforming themselves to the laws, police and customs regulations of the country like native citizens or subjects.”

They “shall enjoy, respectively, the same treatment in matters of commerce and navigation as native citizens or subjects, or citizens or subjects of the most favored nation, without having to pay taxes, imposts, or duties of whatever nature or whatever denomination levied in the name or for the profit of the Government, public functionaries, private individuals, corporations, or establishments of any kind, other or greater than those paid by native citizens or subjects or citizens or subjects of the most favored nation.

Article XVIII stipulates that “existing leases in perpetuity upon which property is now held in the said settlements shall be confirmed, and no conditions whatsoever other than those contained in such existing leases shall be imposed in respect of such property.” * * *

“All lands which may previously have been granted by the Japanese Government free of rent for the public purposes of the said settlements shall, subject to the right of eminent domain, be permanently reserved free of all taxes and charges for the public purposes for which they were originally set apart.”

Imperial ordinance No. 329, of July 7, 1899, provides: “If a right in an immovable which might be set up against third persons has been duly acquired by an alien or a foreign juridical person before the time fixed in the imperial ordinance No. 251 of the thirty-second year of [Page 348]Meiji, but has not been registered before the said time, it can not be set up against third persons unless it is registered within one year from said time.”

This ordinance was amended by imperial ordinance No. 458, December 27, 1899, as follows: “When a superficies (perpetual lease) created in a foreign settlement is transferred, such transfer can not be set up against third persons unless it is entered in the title deed by the chihoco of the place where such land is situated. If a right other than that mentioned under paragraph 1 which might be set up against third persons has been duly acquired by an alien or a foreign juridical person before the time fixed in the imperial ordinance No. 251 of the thirty-second year of Meiji, but has not been registered before the said time, it can not be set up against third persons unless it is registered up to the 31st of December, 1900.”

It is clear that under the terms of the above lease and treaty the Japanese Government can not alter, impair, or diminish the title and estate in the perpetual lease. And the attitude of the Japanese Government mentioned in Mr. Buck’s said letter to Consul-General Gowey, as well as the amendatory ordinance No. 458, evince that understanding and construction of the treaty by the Japanese Government.

If it be true, as contended, that the superficies is a different and inferior estate to that of the perpetual lease, the registration laws applicable to the former could not apply to the latter. Whether the amendatory ordinance cures the defect of the registration laws depends on its validity and authoritative construction by the Japanese Government.

But the Department concurs in the construction given by the Japanese minister, that a perpetual lease may, without, however, altering the title or estate, be styled by a certain analogy a special kind of superficies not defined or provided for by the code, and for this reason and under the express terms of the last paragraph of Article 1 of the amendatory ordinance the failure to register the transfer of perpetual lease within the period therein prescribed could not affect the rights of the transferee by precluding him from setting up said transfer against third persons.

The objection of the leaseholders, when analyzed, lies not to a mere law requiring registration of perpetual leases, nor to the mere ideal severance of the estate into lands and buildings for the purposes of registration, but to the effect of the required form of registration on the title to the land.

Mere acts or omissions of ministerial officers, unauthorized by law, in omitting essential or adding superfluous words in the recording of the instrument, or by recording the transfers in an improper book, or under an improper description of title, should be subject to redress by the courts in an action of mandamus or for damages. If not, such acts and omissions would appear to be an abuse of power justifying refusal to offer the transfers for registration and the bringing of a test case for an authoritative decision of the question.

In the United States the courts lean against that construction of a grant by a State which implies exemption from the ordinary powers and burdens of taxation as belong in the nature of a renunciation of sovereignty. Such exemption must be clearly and expressly given, and is in general strictly construed.

This view is reenforced by the consideration that, as is stated, no [Page 349]buildings were on the lands at the time of the original grants, in consideration of which the ground rents were payable; and by the further consideration that improvements are ordinarily assessed for taxation in the United States on account of the increased value of the land.

It does not, therefore, seem clear that under the terms of the said lease and treaty, alien holders of the perpetual leases can object to a law merely requiring their assignees to register and have recorded separately lands and houses; nor to the 2½ per cent tax on houses erected since the coming into operation of the treaties, nor even to such tax on houses before erected.

Article II of the treaty puts them in respect of taxes on a footing of equality with the subjects of Japan or with the citizens or subjects of the most-favored nation; unless it can be successfully maintained that the treaty stipulation for the confirmation of the leases, without other conditions than those contained therein, implies ex vi termini exoneration of land and buildings from all taxes or charges other than the annual payment of the ground rent.

The treaty provides for the confirmation of leases in perpetuity without conditions other than those contained in leases then existing.

The only condition of the kind named is the payment of the ground rent. It does not prohibit the segregation of the leasehold estates into lands and houses for the mere purpose of registration, so long as the title and estate is not diminished or impaired; and unless the original lease stipulates expressly or by implication a perpetual exemption from registration and taxation other than ground rent, the treaty between the United States and Japan does not seem to forbid it. The Department, however, appreciating the force of the arguments adduced in support of such exemption in virtue of the treaty, reserves its decision for further consideration of this point.

Mr. Buck’s No. 417 states that the regulations of the several settlements vary in terms, as do also the conditions in the forms of the perpetual lease; that the land regulations for the port of Yokohama provided that foreign holders might levy taxes upon their lands and buildings for police, lighting, and street cleaning, but now, with loss of extraterritorial jurisdiction, they do not have this power, and the question stated by Mr. Buck is relevant, whether the Japanese authorities may not now have the right to tax, at least for these municipal purposes.

Article I of ordinance 458 inhibits the transfer of a superficies (perpetual lease) from being set up against third persons unless the transfer has been registered; but as above shown, under the construction by the Japanese minister of the amendatory ordinance, and under the terms of the first paragraph of Article I, and under the express terms of the last paragraph of Article I, there is no period limited for the registration of the transfer.

The wisdom of the policy of registration laws is too well settled to admit of question. In the United States they are found in most, if not all, of the States. While no explanation has been made to the Department (except Mr. Buck’s report that there is no law compelling a transferee to register) of the effect as stated in Article I of ordinance 458 of the failure to register transfers, it is presumed that the article is intended to accomplish substantially the same object in this regard as is contemplated by registration laws in the United States. The [Page 350]ordinance does not profess to invalidate unrecorded transfers, but to prevent their being set up against third persons.

But the case of the leaseholders seems to be clearer and stronger under the French treaty. Article 21 of the treaty between France and Japan provides that “leases in perpetuity in virtue of which foreigners actually possess property in settlements shall be confirmed, and properties of this nature shall be subject to no impost taxes, charges, contributions, or conditions whatsoever other than those expressly stipulated in the lease in question.” This stipulation expressly exempts the said properties from all taxes or charges other than the single one of the payment of the ground rents or compliance with any other conditions expressly stipulated in the leases; and if the word “properties” includes buildings on the lands as fixtures, they are equally exempt. The question is, therefore, one of construction of the juridical meaning of the word “properties” as used in the text.

Messrs. Lindsley and McIvor, in their briefs, contend “that for the word ‘proprietés’ in the French text, the word ‘fudo-san’ is used in the Japanese text, and that the words ‘terrains’ and ‘jisho’ are correspondingly used, evincing a discriminating legal use of the terms, the former word meaning in the Japanese civil code ‘real estate or immovables,’ in the sense of article 86 of the civil code, ‘land and things fixed to it are immovables;’ while the words ‘terrains’ and ‘jisho’ mean vacant lands.” If their interpretation is correct, the word “properties” would include land and fixtures.

It is not stated whether, during the pre code era, the word “fudo-san” was in use and expressed the same legal conception as that attributed to it by the code; but if so, the exemption stipulated in the lease would seem clearly to apply also to the buildings, even if the treaty provisions be interpreted in the sense of the words of the Japanese text and laws.

But it may well be contended that the treaty should be construed according to the laws and usages of the country of the holders’ origin; that is to say, according to the law of the extraterritorial jurisdiction in force and there applicable at the time the treaty was formed; that the treaty should be construed according to the laws, usages, and customs in force at the time when and at the place where it was to be carried into execution, under which land and its fixtures constituted a juridical entity; and that it could not be justly interpreted in the light of Japanese laws not then and there in force, the provisions of which, in derogation of existing rights, were not in the contemplation of both high contracting parties. The rights then vested and existing in all their extent could not be presumedly intended to be impaired, and certainly could not be impaired without express treaty provision authorizing it; and especially could it not be done by any doubtful construction.

American holders would therefore be entitled to the same exemptions as the French holders, in virtue of the favored-nation clause of the treaty between the United States and Japan.

It is impracticable for the Department at present to attempt to give a final construction of the rights of the foreign holders of the leases owing to its unfamiliarity with the laws, usages, and legal terminology of Japan, and to its want of information as to the arguments urged in extenso by the Japanese Government in support of its contention. But it is hoped that a mutually friendly discussion of the questions [Page 351]involved may lead to their final and satisfactory elucidation and settlement. The apparently favorable disposition of the Japanese Government is evinced by the statement in Mr. Buck’s No. 526 of December 14, 1900, that a bill will doubtless be passed by the Diet for the registration of perpetual leases as such and for the registration of buildings constructed prior to the coming into operation of the new treaties without payment of the 2½ per cent tax. In the meantime you will lend your assistance to the American holders of leases in respect of the freedom of fixtures from other charges than those imposed on the lands to which they are attached, and you will seek, if necessary, a clearer act of confirmation of these titles than appears to have been made.

I am, etc.,

David J. Hill,
Acting Secretary.
  1. Printed ante.
  2. Printed ante.