
    Guillermety et al v. Treasurer of Porto Rico.
    Appeal from the District Court of San Juan.
    No 3.
    Decided February 10, 1903.
    Revenues. — Laws sueb as the regulations and schedules for the assessment and collection of Insular industrial taxes, existing prior to the American occupation and expressly adopted by General Order continue in force until repealed by legislative provision and must govern iii cases to which they are applicable. ■
    Taxation. — Local and Federal. — Federal custom house regulations have no reference or application to local commercial and industrial taxes and prior to the Insular Revenue Law of 1901, the law existing at the time of American occupation and adopted by Military authority continued in force unaffected by Congressional legislation.
    STATEMENT OF THE CASE.
    A “ litigative-administrative ” action having been instituted in the District Court of San Juan by Fidel Guillermety, Egozcue & Go., Cerecedo Hermanos & Co., Fernández Gaurán & Co., Isidoro A. Sánchez, Joaquin Outfitting & Co., Sobrinos de Izquierdo, Planas Rojo <fe Co., Juan Pizá, Bolivar Arruza <fe Co., Manuel Román, A. Mayol & Co., A. Vicente efe Co., Luiña Hermanos efe Co., José Peña efe; Co., José María Blanco, José María Suárez, Sobrinos de Armas, Palacios efe Co., Gregorio Rodríguez, A. Margarida efe Co., Alejandro Bozzo, Américo Salas, Castrillón y Ochoa, Pedro Giusti, Mendez efe Co., and Angel Suárez, as plaintiffs, against the Treasurer of Porto Rico, as defendant, an appeal was taken to this Supreme Court from the judgment rendered in the case by the District Court, which literally reads as follows:
    “la fclie City of San Juan, Porto Rico, this sixth day of'June, 1902. In the matter of the “litigative-administrative” case pending before this Court between the following parties, to-wit: Fidel Guillermety, Egozcue & Co. and other merchants of San Juan, plaintiffs, represented by Herminio Díaz Navarro, Esq., and the Honorable Treasurer of Porto Rico, defendant, represented by the Fiscal, from the resolutions of the Treasurer with reference to the collection of taxes imposed upon goods imported by the former. On July 14, 1900, the Treasurer of Porto Rico addressed three communications- to the Collector of Internal Revenue of San Juan, stating that as a result o.f an investigation of the records of the Custom House, made by an agent of the Treasury, it had been ascertained that of the merchants whose names appeared in the list accompanying each communication, those of the first had imported goods through the Custom House, and while figuring in one of them as shipping agents, had at the same time carried on a banking business, without having been duly registered under Schedule 2, No. 16 A, 1st., of the Regulation for said fiscal year ; these merchants were, according to said list, Sobrinos de Izquierdo and Rubert Hermanos, there resulting against the former a difference in Schedule of three hundred and twenty-one dollars and thirty cents, and against the latter, two hundred dollars and three cents. Those referred to in the second communication had had done business as importers in 1889-90, without being duly registered under Schedule 2, No. 16, A., 3rd of the Regulation for said fiscal year¡ and on the corresponding list appeared the appellants Angel Suárez, Ramirez de Solá, Méndez y Co., Pedro Giusti, J. J. Pohl, Fernández Juncos & Co.> Rucabado & Pórtela, José • Soliveras, Américo Salas, Alejandro Bozzo, R. Margarida, Gregorio Rodriguez, Sobrinos de Armas, Sobrinos de Portilla, Pieras & Co., Ramón Almazán, José María Suárez, Francisco Marxuach, with a difference against them of from sixty to one hundred and nineteen dollars; the third communication referred to those who during said fiscal year had imported goods worth more than twelve thousand dollars, without being duly registered under Schedule 2, No. 16, A, 2 of tlie Regulation, the other appellants appearing upon the list thereto attached with differences against them ranging from one hundred and sixteen dollars and two hundred and thirty-six dollars. The Colector of Internal Revenue requested the aforesaid merchants to satisfy within three days the amounts resulting against them from the liquidation made upon the quota assessed, while it appears that Sobrino de Armas and Planas, Rojo & Co., were summoned to pay the difference. All those papers, together with those' relating to the preceding finding of fact were forwarded to the Court by the Administration as a result of the claim set up in the writing interposing the administrative appeal from the resolution of the Treasurer ordering them to appear at the Treasury to pay the differences or total amounts of imposts due. Some of these had paid under protest and produced receipts in which they reserved their rights against the demand made upon them, while from the certificate issued by the Collector it appears that the said difference had not been paid nor receipt therefor presented by the appellants J. M. Bayona, Herrero, Ortega & Co., Caldas & Co., F. Font Hermano, Meltz & Gandía, Cuétara, Ros & Co., Francisco Alonso & Co., Francisco Marxuach, José Soliveras, F. Fernández Juncos & Co., Ramirez de Sola, The Pan-American Express Co., Pieras & Co. Notice having been served upon the party, a “litigative-administra-tive ” action was brought, it being set up in the complaint that during the ' Spanish regime certain shedules of taxes on Commerce and Industry were in force, dues being imposed upon importers according to classifications based upon the importance of their importations, as shown by the licenses issued for the purpose; that upon the proclamation of American sovereignty, said licenses were continued in force by virtue of General Orders Nos. 1 and 11; but when General Henry succeeded General Brooke he repealed said Orders in so far as these licenses or patentes were concerned, and declared importation free to all; this decision, though not published, was communicated to the Collector of Customs at San Juan who was also Treasurer of Porto Rico, who notified all his subordinates in the Island, and informed thém that merchandise presented for entry should be detained only the time necessary to comply with the Custom-House ordinances, without requiring the exhibition of the importers’ license; that said decision was posted to the public on the doors of the Custom-House, and published in the papers, and merchants made importations without any formality other than the production of a bill of lading made out to their consignment or endorsed to them, and paying only such taxes as appertained to the class of industry or commerce under which they were register'd and the duties on the goods imported, without any further requirements, from the Custom-House; that Custom-Houses in the United States are Federal Institutions, and in this Island they had been, from October 18, 1898, April 1, 1900, dependencies of the War Deparment, and are now dependencies of the Treasury Department, at Washington, but they have never been under the control of either the Secretary or Treasurer of Porto Rico; that by an order of the present Treasurer, reestablishing the importation licences or patentes, and repealing General Henry’s order, several merchants, among them the appellants, were notified on July 16, 1900, to cover at the office of the Collector of Internal Revenues, within three days, the difference resulting between the tax assigned them for their respective licences in the budget of 1899-1900, and the tax due by them -as importers; that the case was summitted to the Collector of Customs at this city who replied to the President of the Chamber of Commerce that' the tax imposed, by the Spanish Government in proportion to the amount of goods imported, had been abolished at the time of the American occupation, and the only formality required for the withdrawal of merchandise from the Custom House, is the exhibition of a manifest, together with a proper bill of lading and satisfactory invoices, and the payment of the duties on said merchandise; that with this letter the Chamber of Commerce applied to the Treasurer, and called his attention to the fact that the resolution in question was contrary to the law in force, and asked that it be revoked, to which he would not accede, nor would- the Governor act in the matter, stating that it was a case to be decided by the Courts; that appellants had paid under protest for the purpose of testing their case in a court for the trial of claims against the Administration, stating for that purpose their names, surnames and the respective amounts. As legal propositions they maintained that the laws had continued in force except where inconsistent with the change brought about in Porto Rico, according to General Orders No 1, Series of 1898, while General Orders No. 11, same Series, provided that the laws governing the importation of merchandise be continued; that General Henry had repealed said orders by Special Order addressed to the Collector of Internal Revenues, at San Juan, who communicated the same to his subordinates, declaring importations free to all and abolishing licenses or patentes. They cited Section 8 of the Proclamation of the President of the Republic, dated January 20, 1899, which was the legal status when the Foraker Act was published; that the same could have been modified by the Treasurer under Section 8 of said Act. Reference is made to article 1 section 8 of the Organic Act. It is alleged that the repeal by the Treasurer of General Henry’s Order cannot be given a retroactive effect; that this court has jurisdiction of the suit; that the resolution contested comes under articles 1 and 2 of the Royal decree of November 23, 1888, and 1 and 3 of the Regulation governing administrative cases, which is final. They pray that said resolution be revoked and General Henry’s Special Order abolishing importation licenses or patentes be declared in force until otherwise provided by the Legislative Assembly of Porto Rico, and that the amounts paid on account of difference of schedules be returned. The Fiscal answered the complaint and alleged the'following facts: That the Treasurer had ordered an investigation to be made for the purpose of ascertaining whether importers were covering into the Insular Treasury the- imposts assigned to their respective industries according to the Regulation in force; that upon examination of Custom House papers it was found, as shown by the report made, that importers registered under the third class, Schedule 2, Class 16'A. 3rd, had been carrying on a shipping and banking business when for this they should have been registered as importers and bankers under Schedule 2, Class 16 A. 1st, while merchants registered as third class importers Schedule 2, Class 16 A. 3rd, had made importations during the year aggregating over twelve thousand dollars, and should have been classified under Schedule 2, Class 16 A. 2nd; that others who were registered under different classes of Schedule 1, and were therefore not permitted to make any importations, had imported goods during the year and should be classified under Schedule 2, Class 16 A, 3rd; that the Treasurer,' in view of these facts, and desiring that the ordinances relating to revenue should be complied with, ordered that the parties mentioned in the report be required to pay the resulting difference, and having been so notified they have filed this “litigative-administrative” suit basing their rights of action upon an Order of General Henry; that the law governing the matter is the Regulation for the administration and collection of in_ dustrial taxes of the Island, according to which no merchant classified under Schedule 1, should make any importations; those under Schedule 2, should confine their operations to the limits defined in each of the paragraphs of Class 16; that foreseeing the possibility of the limits assigned to each class being exceeded, they were placed under the obligation of paying the amount of the proper dues as soon as the excess was known, either by the declaration of the party concerned, or as the result of an administrative investigation, pursuant to note 1, of class 16, and to preclude any evasion of these provisions, note 2 of said class had been inserted; that the change of sovereignty having taken place on the 18th of October 1898, General Order Ho. 1 was issued, and this ordinance which continued in force the aforesaid Regulation not being sufficient, No. 11 was issued, as also another General Order on the 12th of the same month, without there having been any subsequent legal provision to repeal, amend or annul said Regulation; that it is not possible to infer from the contents of the letter addressed to the Chairman of the Chamber of Commerce, that the same constitutes a repealing General Order, inasmuch as it is only the expression of a private opinion; that the industrial tax, like the land tax, constitutes one of the sources of revenue of the Insular Treasury; that the Constitution of the United States, Section 10, does not affect the case in point, since it is not a question of imposing duties on importations, but of taxing the pursuit of certain industries; that the Insular “Custom House tariff iu no way affects the question, and if for the dispatch of merchandise no formality is required other than the exhibition of the bill of lading and invoice, there may be independent legal provisions imposing upon importers a tax for the privilege of engaging in certain industries; hence the resolutions of the Treasurer are valid, and the allegations of appellants ■cannot prevail; wherefore it is prayed that the case be dismissed and that the record of the administrative proceedings be returned to the Treasurer as demanded. The procedings for the taking of evidence having been had, it appears from that introduced by the appellants that the Collector of Customs of San Juan, had stated in his reply that among the records of the Custom House there was no special order from the Government, repealing previous orders relating to the collection of duties on merchandise imported; that there was on file a letter dated May 29, 1899, addressed to Major James A. Buchanan, at that time Collector and Treasurer of Porto Rico, which reads as follows: “I have the honor to enclose copy of the circular addressed by you to this office on May 29th, referring to importers licences which have no relation to the Department of Customs, and ordering Collectors not to detain merchandise -more than the time necessary to comply with the CustomHouse Regulations. General Davis desires that the circular as proposed by you and approved by him, be published as soon as practicable, for the information and guidance of all concerned. The Order dated June 1, 1899, is this: “To all Custom Plouse Collectors. It is no concern of the Custom House to ascertain whether firms or individuals violate the municipal ordinances. Therefore, when goods are declared at the Custom House for entry, Collectors shall not detain them longer than the time required to comply with -the Custom House Regulations. The question of importers’ licences is one that concerns the importer and the Municipality. The foregoing is the opinion of the Commander of the Department and should be complied with. Buchanan”. Please excuse me from expressing an opinion with regard to the communication of July 21, 1900, addressed by Lt. Col. Davis, Acting Collector of Customs under the Department of the Treasury, to Mr. Carlos M. Soler, Chairman of the Chamber of Commerce of San Juan, and to which you refer in your letter”; those from the Collectors of Arecibo, Aguadilla and Mayagüez referring to the above mentioned circular to Collectors, and the letter from the Chairman of the Chamber of Commerce accompanying the one addressed to Collector Davis, in which an inquiry is made as to whether the procedure requiring importers’ licences has been annulled, suspended or modified, with the reply of the Collector stating that the only requisite to withdraw goods from the Custom House is the presentation by the consignee or agent of a manifest, together with a bill of lading-made out to him, the oral evidence being Mr. Buchanan’s testimony to the effect that it was true that he had sent to Custom House Collectors the Order entitled “To All Collectors”; that said Order was issued in accordance with the requiriments of the Custom Regulation, and that the Military Commander could not issue such orders, because that depended exclusively on the President of the United States; that the order in question remained in force throughout the period during which he was Collector and importations were-made without the need of any licence. Carlos M. Soler acknowledged the letter he had received from Collector Davis, in reply to his inquiry. A day was set for the hearing, at which both parties were represented by their respective counsel, the rules of procedure provided for by law having been complied with Judge Juan Morera Martínez, prepared the opinion of the Court. The laws existing prior to the American occupation, having been declared in force by General Orders Nos. 1, 11 and 12 of 1898, another General Order or legal provision would have been necessary to repeal the Regulation and Tariff for the administration and collection of the industrial tax of the Island, applied by the Treasurer to the question at issue. Internal Revenues should not be confused with the Customs duties and requirements for the importation of merchandise into the Island, this branch of the Administration appertaining to the Federal Government; for which reason it cannot be inferred from the communication addressed to Collectors, that the licenses and tariffs, and therefore, the taxes on Commerce and Industry, have been abolished, but that the possession of a licence is not necessary for the dispatch of goods whether said licence be held or not. This is to be inferred from the words: “It is no .concern of the Custom House to ascertain whether firms or individuals violate the municipal ordinance”, implying that the tax on Commerce and Industry may be imposed as Internal Revenues, independently of the Custom House, but that a municipal license and the payment of the corresponding tariff rate, are not necessary requisites for dispatch of goods at the Custom House. Inasmuch as there was not in existence any provision modifying, altering or canceling the Regulation for the administration and collection of the tax on industry and commerce, until the Act Providing Revenues for the People of Porto Rico, and for other purposes, was passed by the Legislative Assembly, tailing effect July 1, 1901; and the question not being one of Custom House duties, but of taxation for engaging in some branch of Commerce or Industry, the Treasurer could take action in the matter as he did, based on the provisions of the aforesaid Regulation, and his resolution not being contested on any other ground, should be sustained and the [complaint dismissed, with no costs against plaintiffs there having been no temerity on their part. We, therefore, declare that the complaint can not be sustained and that the resolution issued by the Treasurer, being based upon the Regulation in force for the collection of insular taxes, should prevail.”
    From the above judgment Counsel for the plaintiffs took an appeal to this Court, which appeal was allowed and the parties were cited, and the same was heard on the 6th and 9th of August 1902, both parties being represented.
    
      Mr. Herminio Diaz Navarro, first, and later Mr. Jacinto Texidor, for appellants.
    Fiscal Mr. Emilio del Toro, for respondent.
   Mr. Justice, James H. MacLeary,

after making the above statement of facts, rendered the following • opinion of the Court:

The findings of fact and the conclusions of law of the judgment appealed from, are acepted. Moreover, no error has been committed by the District Court of San Juan in the decision hereinbefore quoted in full. It was never the object of the Customs Regulations to interfere with the collection of insular revenues, nor could it have such an effect, even if that had been its purpose. The decisions of the Insular Treasury, as set forth in aforesaid judgment are in strict accordance with the laws in force at the time. We adjudge that we should affirm and do affirm, the judgment rendered by the District Court of San Juan, June 6, 1902, with costs against appellants.

Messrs. Chief Justice Quiñones, and Associate Justices Hernández, Figueras and Sulzbacher, concurring.  