
    Méndez v. The Administration of Porto Rico et al.
    Appeal from the District Court of San Juan.
    No. 8.
    Decided April 25, 1904.
    Action — Legal Capacity op Parties. — The legal capacity of one party having been recognized by another, it is not lawful for the latter to recede from his acts and subsequently question said legal capacity.
    Internal Bevenue — Administration op Excise Taxes. — Articles made subject to taxation upon which taxes have been paid at the time of their introduction into a town for immediate consumption cannot be subject to a new tax, and it is the duty of every administration of excise taxes, upon the cessation thereof, to pay over to its successor the amount of the sums collected and surcharges upon the taxed articles which it leaves in existence in publie establishments of sale.
    Id. — Change op Tariff. — The circumstance that a change has been made in the tariff is not sufficient to justify the collection of the difference between the amount paid upon the taxed articles, according to the tariff in force at the time they were introduced, and that payable under the new tariff, since an article cannot be taxed more than once even when it has undergone an indus¡-trial transformation.
    
      Id. — Collection of Sums Due. — The sums due on articles of consumption not intended for authorized transit or places of deposit are liable to collection upon their arrival in the town proper, and therefore said articles are legally considered as having been “consumed” for all purposes relating to the tax, and are exempt from the payment of the difference in the burdens imposed by the old and the new tariff.
    STATEMENT OF THE CASE.
    This is a suit pending before us on appeal, instituted by Antonio Méndez, as president of the “Retailers Association” of this city, who is represented- in this Supreme Court by Attorney Jacinto Texidor y Alcalá del Olmo, against the General Administration, represented by Assistant Attorney General Emilio del Toro, and as intervenor, the municipality of San Juan, which has not appeared in this court, seeking the reversal of a judgment rendered by the District Court of San Juan on the sixteenth day of May of last year, which contains the following findings of fact:
    “On the twenty-seventh day of November, 1899, the president of the municipal council informed the representative of the ‘Retailers Association’ of this city that the Governor-General had returned, with his approval, the tariff of excise taxes adopted in that year by the municipal council and municipal board, and therefore, that a practical investigation should be proceeded with for the purpose of determining the amount of stock of taxed articles in the hands of retailers, with a view of liquidating the sums paid by them as the difference between the tax theretofore collected in provincial money and • thereafter, in gold, the ‘Retailers Association’ having presented a petition to the municipal council praying that the stocks of goods upon which the former excise taxes had been paid should be exempted from the payment of the new tax. It appears from a "certificate of the secretary of the ‘Retailers Association,’ dated June 10, 1900, that at a general meeting held on February 28, 1900, Mr. Antonio Méndez, a merchant of this city, was re-elected president of said association. The municipal council deeming that the appeal had been taken, declared that there was no necessity for deciding the matter, and reserved to the party the right of appeal. Said appeal having been taken, the alcalde ordered the records of the case to be forwarded to the Secretary of the Treasury, in compliance with article 184 of the Municipal Law, whereupon the said Secretary, on November 6, 1900, dismissed the appeal and declared that the resolution appealed from, and each and every part thereof, was final.
    “Counsel for the ‘Retailers Association’ took a contentious-administrative appeal from this latter decision, accompanied by a copy of the same; and the record of the administrative proceedings having been called for and submitted for inspection, the claimant instituted proceedings for the annulment of said resolution, and to obtain a declaration, if warranted by the circumstances, that the classes of property affected by the excise tariff upon liquors and cigarettes, prior to the passage of the law now in force, should not be compelled to pay the difference in excess of' the amount imposed by the latter, and that, therefore, the municipality should forthwith refund to the claimants the sum of three thousand eight hundred and ninety-three pesos and eighty-two centavos which they deposited in the municipal treasury to cover said difference.
    “Their petition is based on the following facts: The proceedings of the session of November 27, 1899, in which the president of the council requested sworn statements of the stock on hand of the retailers; that the ‘Retailers Association’ addressed the petition in question to the municipal council, and that the appeal was held to have been duly taken; the decision of the municipal council above referred to; the petition for the suspension of the resolution, which was denied; that the appeal was allowed to be taken to the Treasurer, who, after consulting the Attorney General, the latter holding that the retailers were right, denied their claims and approved the action of the municipal council; whereupon the claimants, being dissatisfied with such action, made the deposit hereinbefore referred to for the purpose of prosecuting this appeal. Articles 87, 145 and 180 to 184 of the Municipal Law, and the Royal Orders of December 31, 1876, March 24, 1877, and June 15, 1878, were cited as grounds of law.
    “That the Department of Justice made answer praying that the want of legal capacity of the plaintiff be first taken into consideration, and in case said objection should be overruled, that the complaint be dismissed, with costs against the plaintiff, alleging the following facts: That the municipal council of this city ordered payment of said taxes for the fiscal year 1899-1900, to be in force from and after the first day of December of said year, when the tariff was published after the approval thereof by the Governor; that the municipal council ordered an investigation to be made for the purpose of determining the stocks of goods subject to the tax, adding the substance of the first finding of fact; and requesting a sworn statement of said stock of goods; that the petition requesting that the articles in question be declared exempt from payment having been presented, and said claim having been denied, the ‘Retailers Association’ requested the suspension of the resolution, which request was denied and the appeal allowed to the Treasurer, who dismissed the same ;■ and the complainant, being dissatisfied with said decision, took a contentious-administrative appeal, counsel having appeared on behalf of Antonio Méndez in his capacity as president of the ‘Retailers Association.’ The following legal grounds were relied upon: The want of legal capacity in Méndez in that it has not been shown that he is -the president of the ‘Retailers Association;’ that municipalities, when empowered to do so, frame their budgets annually, having power to require payment of the differences resulting from excise taxes; and that the retailers do not suffer any damage.
    “The case having been opened for the submission of evidence, there appears in that of plaintiff a certificate of the secretary of the municipal council of September 25, 1899, relative to the excise tax by kilograms on cigarettes; a certificate of November 27, 1899, reporting that the excise tariff having been approved by the Governor, an investigation should be proceeded with for the purpose of ascertaining the existence of stocks and of liquidating the amounts to be paid by reason of the difference in the tax; and'a third certificate, referring to that of December 28, .1899, which ordered the appointment of a commission to study the claims of the retailers, without the rights of the appellants in the appeal taken being prejudiced by the delay; and a fourth certificate, embodying the resolution of May 28, 1899, ordering the collection with all due dispatch of the unpaid sums due on the articles affected.
    “A day and hour having been set for the hearing, the parties submitted arguments in support of their respective rights.”
    In view of the findings of fact above set forth, and the legal grounds considered by said court as applicable to the case, judgment was rendered overruling the dilatory exception of want of legal capacity in the plaintiff and dismissing the complaint, and the Administration was released from the demánd, without special imposition of costs.
    'The judge of the San Juan court, José Tous Soto, delivered a dissenting opinion to the effect that the resolution of the municipal council of San Juan of December 28,1899, which resolution was affirmed by the Treasurer of Porto Eico on the 6th of November of the following year, should be annulled, and that said municipal council should be adjudged to reimburse the “Betailers Association” in the sum of $3,893.82, the amount of the difference in the tariff ordered to be collected and deposited by the plaintiffs to abide the result of the appeal taken, without special imposition of costs, based upon the following conclusions of law:
    “With regard to the dilatory exception as to the ‘want of legal capacity in Antonio Méndez as president of the “Retailers Association, ’ ’ he having failed to duly show that he was such president, ’ a certificate of the secretary of said association appears in the record of administrative proceedings attached to this cause, showing that Méndez is acting in such capacity; and although it has not been shown that the legal entity known as the ‘Retailers Provision Association of San Juan, ’ possesses legal capacity, owing to the fact that it was organized under chapter 2 of title II of book I of the Civil Code of 1899, the capacity of said association has not been put in issue, but only that of Méndez as the representative thereof. On the other hand, not only the municipal council, by accepting from the association the deposit of the sum of $3,893.82 as the difference in tariffs, and accepting Antonio Méndez (folio 1) as the representative thereof, and by allowing the appeal taken in the name of said association, but also the Treasurer of Porto Rico, in deciding said appeal and mentioning Méndez in official communications as the representative of the ‘Retailers Association’ (folio 10), have recognized the capacity of said association and that of Antonio Méndez as the legal representative of the same, which it is sought to question by means of the exception interposed; and therefore said exception cannot prevail according to the constant decisions of the Supreme Court of Spain holding that no person can go against his own acts.
    “The provisional regulations for the imposition, administration and collection of excise taxes of June 21, 1899, provide, in article 127, paragraph 1, that ‘ every administration of excise taxes, upon the cessation thereof, is obliged to deliver to the adminstration which succeeds it, such sums as it may have received as charges and surcharges upon the different classes of property affected which it leaves in public establishments for sale, in pursuance of which the proper appraisement will be made’; and the finals paragraph of said article provides ‘that during the period in which the appraisements referred to in this article are made, and until the termination thereof, the retiring administration may intervene in the offices of the inspectors of weights and measures, in order to prevent the different classes of property introduced during said period from being included herein.’ It is clearly to be inferred from these provisions that the taxed articles which have paid the tax upon their introduction into a town for immediate consumption (as all articles introduced are except in cases of transit, deposits or raw material) cannot be again subjected to tax, even upon the entry of a new administration, and even though said articles have not been consumed; and in order that the new administration may not suffer damage in consequence of the existence in the market of articles which naturally diminish the introduction of other similar articles, credit should be given it by the retiring administration.
    “Although in the case at bar it is not sought to apply the new tariff as a whole to the articles which are previously subjected to taxation, the attempt to collect the difference between the amount paid upon said articles according to the tariff in force when they were introduced, and the amount which they should pay according to the new tariff, is practically equivalent to collecting the tax twice on the same article, thereby contravening the spirit of said article and the fundamental principles upon the subject of excise taxes declaring ‘that an article cannot be taxed more than once, even in case it experiences industrial transformations,’ a principle which is complied with by the provisions excepting from the tax the articles in transit subject to a tax and the taxed raw material ivhen they are also the products of manufacture; and that ‘the duties are collectible upon the arrival in the town proper of all articles of consumption not intended for authorized transit or a place of deposit.’ Said articles are, therefore, legally considered thereafter as ‘consumed’ for all purposes connected with the tax. (Art. 12 and chap. 19 and 24 of said Regulations.)
    “The contention that the new excise tariff was framed to go into effect on July 1, 1899, and not Having been approved until November of tbe same year, the effects thereof should operate retrospectively as of the former date, at least as regards articles subject to the tax introduced after the commencement of the fiscal year, and not consumed at the time of the approval of the tariff, is untenable; for apart from the fact that after the introduction of said articles and the payment of the tax for their consumption they are legally considered to have been consumed, and therefore said consumption cannot be made the basis of further taxation, it is not possible to give a retroactive effect to a municipal ordinance or resolution, as this cannot be done even with measures emanating from the legislative power, by reason of the principle laid down in the Constitution of the United States and article 4 (it should say article 3) of the Civil Code.
    “On the other hand, even recognizing in theory the justice of applying the new tariff to the articles in existence at the time of its approval, introduced subsequently to July 1, 1899, it is practically impossible to determine whether all the articles made subject to the tax in November of 1899 were introduced after said date, and, consequently, the application of the new tariff to all such articles would always prove inexpedient and unjust.
    “Neither is the argument admissible that no damage has been sustained by the merchants in paying the new and higher tariff instead of that in force at the time of the introduction of the articles subject to the tax, for the reason that the prices thereof experienced a rise proportional to the new charge as soon as the municipal council approved the new tariff; since the economic phenomenon created by the effects of the tax represented by said rise in price has nothing to do with the rights of the claimants against whom the administrative action has been directed, under article 116 of the regulations in question, in collecting from them an improper tax, and this fact creates the appropriate legal action in favor of the aggrieved parties to obtain reparation for the injury, independently of the compensation resulting to the aggrieved parties by reason of an economic phenomenon produced by the laws regulating supply and demand.
    “The action of the municipality in returning to merchants who had previously introduced articles, the difference between the tariff in force at the-time of the introduction of the affected articles and the lower tariff subsequently established, which was done in compliance with the ‘statement of conditions’ regulating the tax, cannot be utilized as the basis of an argument a contrario sensu in favor of said corporation in tbe ease at bar; for apart from tbe fact that said corporation did nothing more tban to comply with its ‘statement,’ said pretended right of reciprocity would serve to make plausible acts which are in manifest violation of the rights of the complainants, permitting the imunicipality, without the consent of the former, to make compensation for the difference in tariffs which at another time is returned to other dealers with the difference in tariffs which is collected from the retailers in the case at bar. And it cannot be argued that the said ‘statement’ authorizes the municipality to collect the difference in tariffs in its favor, since said statement cannot establish rights in favor of the municipality in contravention of the fundamental principles governing excise taxes.”
    From the judgment rendered the plaintiff took an appeal, ■which was allowed, and the record having been sent up to this court after a citation of the parties, in which only the Assistant Attorney General and the applicant appeared, the appeal was conducted according to the proper procedure and a day was set for the hearing, at which counsel for the appellant and the Fiscal of this Supreme Court presented arguments in support of their respective contentions.
    
      Mr. Texidor, for appellant.
    
      Mr. del Toro, Fiscal, for respondent.
    The other respondent did not appear.
   Mr. Justice HebNÁNdez,

after stating the foregoing facts, delivered the opinion of the court.

The findings of fact of the judgment appealed from are in substance accepted.

The excise tariffs framed by the municipal council and municipal hoard of this city for the fiscal year 1899-1900 having been forwarded to the Governor, that official returned said tariffs with his approval toward the end of November of the said former year, and on the 27th of the same month the municipal council resolved to call upon the retailers for sworn statements of their stocks on hand, and to appoint the necessary commission to verify, if necessary, the' accuracy of said statements, the articles embraced therein to be appraised according to the new tariff. Against this resolution the “Retailers Association” presented a petition to the municipal council, praying it to decide that the articles in their establishments affected by the later excise tax which had paid the charge imposed by the former tariff should not be obliged to pay the new tax, and that it be considered, in the event such action should not be agreed to, that an appeal had been taken to the Civil Secretary. This petition was acted upon by the municipal council on the 28th of December, following, it having resolved to appoint a committee to make a careful study of the matter 'and make report thereon, provided that the delay consequent upon suph action should not prejudice the rights of the petitioner as to. the appeal taken in due time and form.

May 28, 1900, the municipal council, at the instance of the deputy of excise taxes, and without the committee appointed' having made Ithe report with which it was charged, ordered! steps to be taken with all due dispatch for the immediate collection of the sums due by the retailers for the difference in the excise taxes shown by the last tariff approved.

Attorney Herminio Díaz Navarro, as counsel for the “Retailers Association,” requested the suspension of the resolution of May 28,1900, on the ground that the proper course was to transmit the records to the superior authorities for the determination of the appeal taken in case the petition presented against the resolution of November 27, 1899, should be-rejected, which request was disposed of on the 3d of July of said year 1900 by the alcalde acting as president of the municipal council, holding that the petition should be denied, and by a subsequent decision of the 14th of said month the appeal taken was allowed. The case was decided on the 6th of November of tbe same year by tbe Treasurer of Porto Eico, who dismissed tbe appeal taken and declared tbe resolution appealed from final, and each and every part thereof, as tbe result whereof tbe suit was commenced in tbe District Court of San Juan to secure tbe nullification of tbe resolution of tbe municipal council of this city of May 28, 1900, and for a declaration, if meet in tbe premises, that tbe articles subject to tbe tariff of excise taxes prior to tbe one in force ought not to pay tbe difference in excess of that imposed upon the latter, and that tbe sum of $3,893.82, which bad been deposited in tbe municipal treasury to cover said difference, should be ordered by tbe municipal council to be -returned to tbe plaintiffs.

Tbe conclusions of law set forth in tbe dissenting opinion, with tbe exception of tbe last thereof, are likewise accepted.

Although article 20 of tbe statement of conditions pertaining to tbe award of tbe privilege of collecting excise taxes provides that in case of alteration in tbe rates established for tbe imposition of tbe tax, tbe amounts of tbe award must be altered in tbe same proportion, and article 71 of said statement prescribes that upon tbe surrender of tbe privilege by tbe contractor, or person charged with tbe collection of tbe tax, to the person obtaining tbe same in subsequent bidding, a new count shall be made of the stock on band in commercial bouses, and that tbe former shall pay over to tbe latter tbe amount of tbe charges received by him from said articles which have not been consumed at tbe time of the surrender of tbe privilege, it cannot be concluded from tbe text of tbe articles cited by tbe Administration in support of its position that tbe municipality has tbe right to collect a larger tax by reason of tbe increase made by tbe new tariffs, when, as in tbe present case, stocks of goods are involved which have already paid tbe proper charges.

A confirmation of tbe doctrine enunciated may be found in tbe Eoyal Order of March 24, 1887, prescribing that goods acquired by tbe owners of public establishments for tbe sale thereof should he considered as consumed for the purposes of the tax, provided that the charges thereon were paid upon their entrance into the town, and, therefore, that the stocks of goods remaining over in said establishments at the time of the change in the tariffs are exempt from the payment of the difference in the burdens imposed by the one or the other.

Overruling the dilatory exception of want of legal capacity in the plaintiff, we adjudge that we ought to revoke and do revoke the resolution of the municipal council of this city of November 27, 1899, and the related resolution of the 28th of May of the following year, as well as the decision of the Treasurer of Porto Bico of November 6,1900. We also declare that the stocks of goods on hand in the retailers’ establishments intended for sale on the date when the tariffs of excise taxes on drinks and cigarettes went into effect, after the approval thereof by Major-General Davis, are exempt from the payment of the difference in the tax prescribed by said tariffs with relation to former tariffs, and order the sum of $3,893.82, the amount of the difference in tariffs improperly collected, and the amount deposited by the appellant in the municipal treasury, to be returned by the municipal council of this city to the “Eetailers Association,” all without special imposition of costs. In so far as we concur in the judgment appealed from the same is affirmed and is in all other respects reversed. The record of the District Court of San Juan is ordered to be returned with the proper certificate.

Chief Justice Quiñones and Justices Figueras and Mac-Leary concurred.

Mr. Justice Sulzbacher did not sit at the hearing of this case.  