Yu Cong Eng v. Trinidad

• Decision Date: 07 June 1926
• Docket Number: No. 623,623
• Citation: 70 L.Ed. 1059,271 U.S. 500,46 S.Ct. 619
• Parties: YU CONG ENG et al. v. TRINIDAD, Collector of Internal Revenue, et al
• Court: U.S. Supreme Court

271 U.S. 500

46 S.Ct. 619

70 L.Ed. 1059

YU CONG ENG et al.

v TRINIDAD, Collector of Internal Revenue, et al.

No. 623.

Argued April 12, 13, 1926.

Decided June 7, 1926.

Mr. Frederic R. Coudert, of New York City, for petitioners.

[Argument of Counsel from pages 501-502 intentionally omitted] Mr. Paul Shipman Andrews, of Syracuse, N. Y., for respondents.

[Argument of Counsel from pages 503-505 intentionally omitted] Mr. Chief Justice TAFT delivered the opinion of the Court.¹

This case comes here on a writ of certiorari to review a decision of the Supreme Court of the Philippine Islands denying an original petition for prohibition against the enforcement by criminal prosecution of Act No. 2972 of the Philippine Legislature, known as the Chinese Bookkeeping Act, on the ground of its invalidity. The petitioner, Yu Cong Eng, was charged by information in the court of first instance of Manila, with its violation. He was arrested, his books were seized, and the trial was about to proceed, when he and the other petitioner, Co Liam, on their own behalf, and on behalf of all the other Chinese merchants in the Philippines, filed the petition against the fiscal, or prosecuting attorney of Manila, and the collector of internal revenue engaged in the prosecution, and against the judge presiding.

By the Code of Civil Procedure of the Philippine Islands, § 516, the Philippine Supreme Court is granted concurrent jurisdiction in prohibition with courts of first instance over inferior tribunals or persons, and original jurisdiction over courts of first instance, when such courts are exercising functions without or in excess of their jurisdiction. It has been held by that court that the question of the validity of a criminal statute must usually be raised by a defendant in the trial court and be carried regularly in review to the Supreme Court. Cadwallader-Gibson Lumber Company v. Del Rosario, 26 Philippine Reports, 192. But in this case, where a new act seriously affected numerous persons and extensive property rights, and was likely to cause a multiplicity of actions, the Supreme Court exercised its discretion to bring the issue of the act's validity promptly before it and decide it in the interest of the orderly administration of justice. The court relied by analogy upon the cases of Ex parte Young, 209 U. S. 123, 28 S. Ct. 441, 52 L. Ed. 714, 13 L. R. A. (N. S.) 932, 14 Ann. Cas. 764, Truax v. Raich, 239 U. S. 33, 36 S. Ct. 7, 60 L. Ed. 131, L. R. A. 1916D, 545, Ann. Cas. 1917B, 283, and Wilson v. New, 243 U. S. 332, 37 S. Ct. 298, 61 L. Ed. 755, L. R. A. 1917E, 938, Ann. Cas. 1918A, 1024. Although objection to the jurisdiction was raised by demurrer to the petition, this is now disclaimed on behalf of the respondents, and both parties ask a decision on the merits. In view of broad powers in prohibition granted to that court under the Island Code, we acquiesce in the desire of the parties.

Act No. 2972, the validity of which is attacked, was passed by the Philippine Legislature, and approved February 21, 1921. It reads as follows:

'No. 2972. An act to provide in what languages account books shall be kept, and to establish penalties for its violation.

'Be it enacted by the Senate and House of Representatives of the Philippines in Legislature assembled and by the authority of the same:

'Section 1. It shall be unlawful for any person, company, or partnership or corporation engaged in commerce, industry or any other activity for the purpose of profit in the Philippine Islands, in accordance with existing law, to keep its account books in any language other than English, Spanish or any local dialect.

'Sec. 2. Any person violating the provisions of this act shall, upon conviction, be punished by a fine of not more than ten thousand pesos, or by imprisonment for not more than two years, or both.

'Sec. 3. This act shall take effect on November 1st, nineteen hundred and twenty-one.'

This was amended as to its date by a subsequent act and it did not take effect until January 1, 1923. Various efforts were made to repeal the act or amend it, but they were defeated.

The petition, after setting out the prosecution in the court of first instance, and the text of the act, avers that the petitioner Yu Cong Eng is a chinese merchant engaged in the wholesale lumber business in Manila; that he neither reads, writes nor understands the English or Spanish language or any local dialect; that he keeps the books of account of his business in Chinese characters; that by reason of his ignorance of the English and Spanish languages and of all local dialects he is unable to keep his books in any other language than his own; that, even if he should employ a bookkeeper capable of keeping his books in the English or Spanish language, he would have no means of personally revising or ascertaining the contents or correctness of the books thus kept; that the employment of such a bookkeeper, unless he should be a linguist, would entail as a necessary consequence the employment of a translator or interpreter familiar with the Chinese language and the language or dialect in which such books might be kept, in order to enable the petitioner to ascertain by hearsay the contents thereof; that he would be completely at the mercy of such employees, who, if dishonest, might cheat and defraud him of the proceeds of his business, and involve him in criminal or civil liability in its conduct; that under the provisions of the act he is prohibited from even keeping a duplicate set of accounts in his own language, and would, in the event of the enforcement of the law, be compelled to remain in total ignorance of the status of his business; and that the enforcement of the act would drive the petitioner and many other Chinese merchants in the Philippines who do 60 per cent. of the business of the Islands and who are in like circumstance, out of business.

The petition avers that the other petitioner in this case, Co Liam, is a Chinese person and conducts a small general merchandise business in Manila, commonly known in the Philippines as a Chinese tienda; that he carries a stock of goods of about 10,000 pesos, or $5,000; that his sales taxes amount to from 40 to 60 pesos per quarter; that he neither reads, writes, nor understands the English or Spanish language or any local dialect; that he keeps books of account of his small business in Chinese, the only language known to him, without the assistance of a bookkeeper; that he has been losing money for some time in the operation of his business, but that even in prosperous times his profits could never be sufficient to justify the employment of a Filipino bookkeeper, and that without the opportunity to keep Chinese books, be would be kept completely ignorant of the changing condition of his business, were he compelled to keep his books in English, Spanish, or a local dialect; and that the enforcement of the act would drive him and all the small merchants or tienda keepers in the Islands who are Chinese out of business.

The petitioners aver that the act, if enforced, will deprive the petitioners, and the 12,000 Chinese merchants whom they represent, of their liberty and property without due process of law, and deny them the equal protection of the laws, in violation of the Philippine Autonomy Act of Congress of August 29, 1916, c. 416, § 3, 39 Stat. 546 (Comp. St. § 3810).

An amendment to the petition set up the rights of the petitioners under the treaty now in force between the United States and China, alleging that under it the petitioners are entitled to the same rights, privileges, and immunities as the citizens and subjects of Great Britain and Spain, and that the treaty has the force and effect of a law of Congress, which this law violates.

An answer was filed by the fiscal, which is a general denial of the averments of the petition as to the effect of the law. He avers that the law is valid and necessary, and is only the exercise of proper legislative power, because the government of the Philippine Islands depends upon the taxes and imposts which it may collect in order to carry out its functions, and the determination of whether the mercantile operations of the merchants are or are not subject to taxation, as well as the fixing of its amount, cannot and ought not to be left to the mercy of those who are to bear it; that due to the inability of the officials of the internal revenue to revise and check up properly the correctness of the books of account which the Chinese merchants keep in their own language, the public treasury loses every year very large sums.

Evidence was taken on the issues made. A majority of the Supreme Court held that, if the act were construed and enforced literally, it would probably be invalid, but by giving it an interpretation different from the usual meaning of the words employed it could stand. Two of the justices dissented, on the ground that the court had exceeded its powers and by legislation made it a different act.

There are two tax laws from which a substantial part of the revenue of the Islands is derived. There is a sales tax of 1 1/2 per cent. on the gross sales of businesses and occupations for which a quarterly return is required. Administrative Code, § 1453, et seq., Act 3065. There is also an income tax. The annual revenue accruing from the sales tax is roughly 10,000,000 pesos, and that from the income tax about 2,000,000 pesos.

Another statute is the so-called Code of Commerce, brought over from the Spanish Code, the thirty-third article of which provides that all merchants shall keep a book of inventories and balances, a day book, a ledger, a copy book of telegrams, letters, etc., and such other books as may be required by special laws. Under the provisions of that Code and the internal revenue law, the colector of internal revenue is authorized to require the keeping of daily records of sales, and makes regulations prescribing the manner in which the...