Minister Dawson to the Secretary of State.

No. 253.]

Sir: Continuing the subject of my No. 250, of May 21, the sugar production tax, I have the honor herewith to inclose you a copy and translation of the supreme court decision adverse to Mr. William L. Bass.

I have also obtained and carefully read the argument of Mr. Bass’s attorneys and have endeavored, with the aid of conversations with persons learned in Dominican law and practice, to reach an exact understanding of the contentions on both sides and the opinion of the court.

It appears that the defendant’s attorneys allowed the various defaults to be taken with a view of gaining time and that they did not prejudice the ultimate trial of the cause on the merits. This is usual in hard-fought cases and in accordance with the practice of the best Dominican lawyers. One default seems to be allowed before each court as a matter of form, and the cause may thereafter be reopened for trial on the merits as a matter of course without prejudice to the defaulted party.

The essential part of the decision is that the contract of December 18, 1903, by which the minister of finance agreed in the name of the provisional government to exempt sugar from taxation for twenty years, was invalid and unenforcible because it attempted to limit the action of subsequent legislative bodies. The supreme court holds that future legislative action is not a proper matter for contract with private individuals, and that a provisional government’s power in this respect is not greater than that of a constitutional government.

Mr. Bass’s alternative prayer was for damages equal to the amount he would have to pay if the contract were enforced. This prayer was denied as was his principal prayer that the tax law subsequently passed be declared invalid. The reasoning of the court on this question of damages is not explicit, but it seems it was held that the contract being void ab initio as against public policy no action for damages on account of its violation would lie.

If the department desires copies of the voluminous arguments of the counsel on both sides I will procure and send them. [Page 617]I inclose herewith copies of requests made by the resident manager for Mr. Bass that I intervene to prevent the execution of the judgment of the supreme court and of my reply to him.

I have, etc.,

T. C. Dawson.

[Inclosure 1.—Decision.—Translation.]

Fermin Rodriguez Gonzales, secretary of the supreme court of justice, certify that in the records under his charge there exists a decision, word for word as follows:

In the name of the Republic—In the city of Santo Domingo on May 14, 1906, sixty-third year of independence and forty-third of the restoration—the supreme court of justice duly convened in the room where it holds its hearings, composed of the Magistrates Rafael J. Castillo, president; Leovigilde Cuello, and Martin Rodriguez Mueces, members; Manuel de J. Gonzalez Marrero, fiscal member; assisted by the undersigned secretary, has given the following decision and judgment in its civil jurisdiction:

In the matter of exception taken by Mr. William L. Bass, proprietor of the estate “Consuelo,” situated in San Pedro de Macoris, who has as his duly constituted attorneys among those practicing before the courts of the Republic, Moises Garcia Mella and Jacinto B. Peynado, said exception having been taken to the judgment of default rendered by this supreme tribunal on the 5th of February of this year against the State.

The roll having been read by the Alguacil de Estrados, and the argument of the attorneys of the opposition having been heard, which terminates as follows:

“Therefore, and in virtue of articles first, second, 1134, 1135, 1156, 1157, 1158, 1161, 1184, 1234, 1352, 2044, and 2052 of the Civil Code; 25, 36, 91, 102, and 103 of the constitution; and 157 and 130 of the Code of Civil Procedure: Be pleased, first, to listen to Mr. William L. Bass, who opposes the execution of the decision rendered against him by this supreme court on February 5, 1906, and which has been notified to him on the 17th of said month and year. Be pleased, second, to discharge him from all judgments pronounced against him, both in the decision given by your authority and in the decision given by the court of first resort of San Pedro de Macoris, on the 26th of May and 6th of November, 1905, respectively; to reverse all these judicial decisions; and holding to the contrary to declare that the principal action of the Dominican State against Mr. William L. Bass for the collection of the disputed tax is ill founded and unenforcible because the State wants right and interest in the bringing of such action; Be pleased, third, likewise, in deciding upon the adverse considerations advanced by Mr. William L. Bass in the lower court, to declare one of two things, either that the Dominican Government is required to hold Mr. William L. Bass during twenty years exempt from paying all public taxes upon the sugars he may produce on and export from the estate ‘Consuelo,’ situated in San Pedro de Macoris, and this not only in consequence of the rights acquired by virtue of laws prior to the decree of April 30, 1904, but also as an execution of the contractual transaction of December 18, 1903; or that, rescinding said contractual instrument (sanction of article 1184 of the Civil Code) you declare that the Dominican State, being a debtor unfaithful to the execution of what was agreed upon, ought to pay Mr. William L. Bass, not only because it has failed to fulfill the guarantee of exemption decreed on August 12, 1902, and December 18, 1903, but also because it has not carried out the aforesaid contractual transaction, an indemnity equal to the sums of money which have successively been required of Mr. William L. Bass on account of the disputed tax or any other public taxes which may directly or indirectly fall upon his sugar enterprise; and, fourth, that you condemn the Dominican State to the payment of all the costs.”

And the argument of the attorney for Bass, Moises Garcia Mella, amplifying the defense and terminating by ratifying its conclusions, having been heard;

And the arguments of the solicitor general and of Dr. José Lamarche having been heard which terminates as follows:

“For all the reasons set forth, and those which will be added by the attorney for the State, Dr. José Lamarche, and for others which you will deign [Page 618]to supply in your high judicial learning, and in virtue of the dispositions of articles 6, 1111, 1112, 1115, 1117, 1131, 1133, 1128, and 2045 of the Civil Code; 130 of the Code of Civil Procedure; and the decrees of March 14, 1903, and April 30, 1904, the Dominican State at the instance of the treasury administrator of San Pedro de Macoris, concludes respectfully praying that, first, you dismiss the exception taken by Mr. William L. Bass as unfounded and frivolous; second, that you confirm in all its parts your judgment of default rendered on February 5, 1906; and, third, that you condemn Mr. William L. Bass to the costs of this action.”

And the attorney, Dr. José Lamarche, having been heard in the reading of his argument emplying the defense which terminates by ratifying the former conclusions;

And the records being examined:

It appears that on March 14, 1903, the provisional government presided over by Gen. Horacio Vasquez gave a decree establishing a tax of 10 cents gold upon each hundred pounds of sugar produced in the Republic; that on December 18, 1903, the minister of finance, representing the provisional government, party of the first part, and the managers of the different sugar estates, parties of the second part, entered into an agreement to which they gave the name of contract, by which the Government undertook to free sugars from all taxes or duties during twenty years, and the managers of the estates, in the names of their respective owners, agreed to pay each one the sum of $1,500 gold in settlement of the tax in so far as it corresponded to the production of 1902; that on the same date (December 18, 1903) the provisional government gave a decree by which the sugar which might be produced in the country for the term of twenty years was freed from all taxes; that on April 30, 1904, the provisional government issued a decree concerning export duties by which the decree of March 14, 1903, establishing the tax of 10 cents on each hundred pounds of sugar was declared to be in force; that on May 4, 1905, the treasury administrator of San Pedro de Macoris summoned Mr. William L. Bass before the court of first resort of said judicial district to hear himself condemned to pay into the treasury office the sum to which his proportion of the tax of 10 cents gold on each hundred pounds of sugar might amount, said sugar being produced by his estate “Consuelo” from the day upon which he ceased to pay at according to the last settlement, and to the payment of the costs; that on May 26, 1905, the court of first resort gave a judgment in default in said cause because said defendant had not appeared, accepted the considerations advanced by the plaintiff, and consequently condemned Mr. William L. Bass to pay into the treasury office the aforesaid sum, and further condemned him to payment of the costs; that on June 23, 1905, Mr. William L. Bass filed an exception against the said default judgment pronounced against him on May 26 of the same year; that in the session held for the purpose on October 6 the discussion of the cause took place, and the judge gave judgment by which he dismissed the exception of Mr. Bass, and his demand for damages and losses, confirmed in all respects the previous judgment, and condemned the defendant to pay the costs, and said defendant not accepting this judgment appealed therefrom in due time and form; that the period fixed by the law having run the hearing for the discussion of the cause before the supreme court was fixed for the 24th of January, 1906, and the appellant not having appeared the public law department, representing the state, prayed for a default and that its considerations be judicially ratified because well founded and resting on legal proofs; that on February 5, 1906, this supreme court rendered judgment affirming the judgment appealed from and to whose conclusions Mr. William L. Bass had entered formal exception; that the requisites of the law having been complied with the hearing of the cause took place again in the session of March 16.

And the supreme court after having deliberated,

Considering that de facto governments are not invested with full sovereignty which always resides in the people; that their extraordinary power only results from the accumulation of legislative and executive functions; that therefore they can change laws, suspend them, and repeal them in their legislative capacity, but can not validly infringe those laws whose existence they have respected, and ought to adjust their acts to them because such laws are legitimate or obligatory for the nation; considering that an agreement founded upon an illicit consideration can produce no effect whatever (article 1131 of the Civil Code); that the consideration is illicit when prohibited by law or contrary to public interest (article 1133 of the Civil Code); that only things which are commercial can [Page 619]be the subject of contracts (article 1128 of the Civil Code), and that the laws which concern the public interest can not be repealed by private contracts (article 6);

Considering that to be valid contractual transactions must unite within themselves the general conditions requisite to the validity of contracts, and further those which are especially required for them by the Civil Code; that to be able to contract it is necessary to have power to dispose of the subject-matter of the transportation (article 2045 of the Civil Code);

Considering that the contractual transactions celebrated the 18th day of December between the minister of finance, representing the Government, party of the first part, and the managers of the sugar estates of Macoris, parties of the second part, can have no validity in law on account of its consideration being illicit, seeing that by it was stipulated the remission of the sums owed up to that date by the sugar producers on account of the tax of 10 cents gold on each hundred pounds they produced, which was created on the 14th of March, 1908, by the decree of the provisional government, which they were not willing to comply with, and further because there was stipulated the removal of all taxes from sugar for a period of twenty years, all this in consideration of the sum of $10,500 which the estates had paid one for all to the Government; that the first stipulation is illicit, seeing that it gave sanction to the resistance of the estate proprietors to the payment of a tax legally established, and made the subject of contract things which are not commercial, being the public revenues, and the power of legislation to create, modify, or suppress taxes in conformity with the requirements and necessities of the nation;

Considering that laws which suppress a tax for a definite or indefinite time are of a public nature like those which create them and may in any case be modified, revoked, or repealed, without giving the right to those whose interests may be harmed to interpose in opposition as a vested right and privilege of exemption which they have been enjoying and hoped to continue enjoying, and that in such a case it can not be truly said that the law has a retroactive effect because it only touches the future;

Considering that in the present case the decree of December 18, 1903, was virtually repealed by that of April 30, 1904, which reestablished the tax of 10 cents gold upon each hundred pounds of sugar produced in the country; that no court can ignore the obligatory character of this decree while it continues in force—that is to say, until the first of August, the date upon which it will cease to be effective by virtue of the decree of the National Congress of date April 21 of the current year;

Considering that although it is true that the National Treasury has always enjoyed the privilege of undertaking the collection of taxes without the necessity of going before the courts, it is not prohibited from preferring the course of the ordinary courts because such a method is entirely favorable to the person being collected from;

Considering that every party who fails ought to be condemned in costs:

Therefore, and in view of articles 1, 6, 1128, 1131, 1133, and 2045 of the Civil Code, and 130 of the Code of Civil Procedure, of the decrees of March 14, 1903, and April 30, 1904,

The supreme court, administering justice in the name of the Republic, but authority of law, and in virtue of the cited articles, holds that it ought to dismiss and does dismiss the exception taken by Mr. William L. Bass to the judgment rendered by this supreme court on February 5, of the current year, and consequently confirms in all its parts said decision and condemns the defendant to all the costs of the present cause, and by this same decision definitely judging the matter order is thus given and thus signed.

(Signed) R. J. Castillo, Martin Rodriguez Mueses, Leovigildo Cuello, Fermin Rodriguez Gonzalez, Secretary. Registered in Santo Domingo May 17, 1906, in Book Letter B, folio 220, No. 633, $2 gold being the fixed fee. (Signed) Rogelio A. Rodriguez, Director of Register. I have taken notice. (Signed) Jose G. Garcia, Municipal Treasurer. It is a faithful and exact copy. Consequently the Republic orders and requires any Alguacil legally requested thereto to put these presents in execution by the Fiscal Officers of the Courts of First Resort and by the General Solicitor to be caused to be executed, and by the authorities, civil as well as military, to whom shall be entrusted the public forces to lend their aid if it shall be legally required. In faith of which this copy has been signed and sealed by me in order that it may serve as an efficient authorization to the Fiscal Minister, on this the 17th day of May, 1906 (Signed) Fermin Rodriguez Gonzalez, Secretary. (There is a seal.)

[Page 620]

In the city of Santo Domingo, on the 18th day of May, 1906, at the request of the Dominican State, and solicitation and diligence of the Treasury Administrator of San Pedro de Macoris, his duly authorized attorneys being the Solicitor General of the Republic, and Dr. Don Jose Lamarche, I, Eduardo Guatreau, the undersigned, Alguacil de Estados, of the Supreme Court of Justice, expressly went to the office of Don Jacinto B. Peynado and Don Moises Garcia Mella, attorneys authorized by Mr. William L. Bass, situated in the 19th of March street, house No.—, and have notified them and left a copy, speaking with Jacinto B. Peynado, of the adverse decision pronounced by the Supreme Court of Justice on the 14th day of the said month and year as the date of this instrument. Of all which we have written out these presents, whose costs, including copies, paper and registry is $17.50 gold. I gave faith. (Signed) Eduardo Guatreau.

[Inclosure 2.]

Mr. Gustav Stiernstam to Minister Dawson.

Mr. Minister: As per “mandamiento de pago,” notified yesterday this estate has been condemned to pay to the Dominican Government within twenty-four hours the amount of, more or less, $24,000 on account of the 10-cent taxes.

As I am without means to satisfy this demand, I take liberty of bringing this fact to your knowledge.

I have, etc.,

Gustav Stiernstam,
Resident Manager of the Estate Consuelo.
[Inclosure 3.]

Mr. Gustav Stiernstam to Minister Dawson.

Mr. Minister: Referring to my letter dated May 24 last, I beg now to inform you that the Dominican Government has put an embargo on all the sugars on deposit in our store, including sugars not belonging to the estate. Since the embargo of these sugars would cause more litigations, I beg you to save us out of these new troubles.

I have, etc.,

Gustav Stiernstam,
Resident Manager of the Estate Consuelo.
[Inclosure 4.]

Minister Dawson to Mr. Gustav Stiernstam.

Sir: I am in receipt of your letters of May 24 and 30 in regard to the demand of the Dominican Government for the payment of the 10-cent sugar tax by the estate under your management.

As your are doubtless aware the embargo you mention was made under the decision rendered on May 14 by the supreme court against the Consuelo, and appears by the statement of the government authorities of whom I have inquired to be the regular and usual process.

They deny that they have seized sugars not produced by the Consuelo. It might be well for you to give me the particulars as to your contention in regard to this point—where the sugar was produced, to whom it belongs, how it came in your storehouse, etc. If it was sugar manufactured by you from cane grown by “colonos” under contracts by which the growers of the cane were to receive a certain proportion and the estate the remainder, I fear that the question as between you and the “colonos” can not be settled without litigation. [Page 621]The wording of the contracts between your estate and the “colonos” may be an element in its determination.

In the absence of instructions from the Department of State I am not authorized to protest against the enforcement of the decision of May 14, and the data in my possession as to the sugar embargoed which is not your property is not sufficient for me to venture to express an opinion.

I will send the Department of State copies of your letters as well as a copy of the decision, and I presume that Mr. Bass, who I understand is in the United States, will take steps to bring the matter before the Secretary of State.

Yours, truly,

T. C. Dawson.