Mr. Chief Justice TAFT delivered the opinion of the Court.
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. . . .
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 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, s 3, 39 Stat. 546 (Comp. St. s 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 collector of internal revenue is authorized to require the keeping of daily records of sales, and makes regulations prescribing the manner in which the proper books, invoices and other papers should be kept and entries made therein by the persons subject to the sales tax. R. 1164, Act No. 2339, §§ 5, 6; Administrative Code, § 1424(j).
Chinese merchants are said to have been in the Philippines even
before the arrival of the Spaniards in 1520. The Chinese written
language is an ancient language, with a literature and with characters
quite different from those used in European languages. There are many different
native dialects in the Philippines. Forty-three is said to be the number;
but there are less than a dozen of these which may be regarded as important-the
Tagalog, the Visayan, with two distinct main dialects, the Ilocano, the
Bical, the Pampangan, the Ibanag, the Pangasananian, and the Moro.
Perhaps from 7 to 10 per cent. of the Filipinos speak Spanish. A
great many (how large the percentage one cannot tell) of the younger people
in the Islands speak English. It is a polygot situation, and presents
many difficulties in government. Comparatively few of the Chinese speak
English or Spanish, or the native dialects, with any facility at all, and
less are able to write or to read either. But with capacity and persistence
in trade, by signs and by a patois, they communicate with the Filipinos
and others with whom they do business, making their calculations with the
abacus, an instrument for mechanical calculation, and keeping their books
in Chinese characters in ink, applied by a brush to strong paper, securely
bound. They have a scientific system of double entry bookkeeping.
The evidence of the president of the largest company in the Philippine Islands, an American who has been 21 years in business in the Philippines, as to the business activities of the Chinese, was accepted by the court below as reliable. He says that the Chinese system of distribution covers the Philippine Islands through the medium of middlemen in the principal centers, and then by the small Chinese storekeepers, throughout the Islands, extending even to the remotest barrios or small settlements. The Chinese are the principal distributing factors in the Philippines of imported goods, and the principal gatherers of goods for exportation in the same remote places. He said that if they were driven out of business there would be no other system of distribution available throughout the Islands, for the reason that there are not Filipino merchants sufficiently numerous, with resources and experience, to provide a substitute.
The Chinese consul general testified that not more than eight Chinese merchants in the Islands can read or write proficiently in any other language than Chinese, and that the great majority of them could not comply with the act. The merchants' establishments are made up of young Chinese persons, who come from China, begin at the beginning, and are promoted from time to time to become the head of the business. The books are always kept in the Chinese language, and each Chinese establishment is completely separated from the native mode of living.
Apparently there has always been some complaint in respect to the avoidance of taxes by the Chinese, because of the difficulty of determining what their sales tax should be. There has always been a sales tax in the Philippines. It is a method of taxation to which the people are used. Dr. Pardo de Tavera, the Philippine librarian and historian, testified in this case that efforts to enforce such a law as this in the Spanish times against the Chinese failed and became a dead letter. Governor General Harrison made a general recommendation looking to a law requiring the Chinese to keep books in other than Chinese language, so that their business might be investigated, saying that, until it was done, taxes would be evaded. Since the passage of the law in 1921, as already said, its enforcement has been postponed. Governor General Wood has sought to have the law repealed or changed in such a way that exceptions might be made to it, or that the books of the Chinese should be kept on stamped paper with the pages registered, for the purpose of making it difficult for the Chinese taxpayer to change the records of his business. Protests from the Chinese government, from members of the insular committee of the House of Representatives, from Chambers of Commerce in the United States and elsewhere, were brought to the attention of the Philippine Legislature, and the repeal or modification of the law came up for discussion, but all proposed changes were defeated. The great weight of the evidence sustains the view that the enforcement by criminal punishment of an inhibition against the keeping of any Chinese books of account by Chinese merchants in the Islands would seriously embarrass all of them and would drive out of business a great number.
Nor is there any doubt that the act as a fiscal measure was chiefly directed against the Chinese merchants. The discussion over its repeal in the Philippine Legislature leaves no doubt on this point. So far as the other merchants in the Islands are concerned, its results would be negligible and would operate without especial burden on other classes of foreign residents. The Supreme Court in its opinion in this case refers to the act as popularly known as the Chinese Bookkeeping Act.
Evidence was introduced on behalf of the defendants to show the difficulty of securing competent Chinese bookkeepers who could act as inspectors of Chinese books for the tax collecting authorities, and while the failure of the government to employ a sufficient number was charged to the fact that sufficient salaries were not paid to secure them, it is undoubtedly true that a lack of proper and reliable Chinese accountants presents a real difficulty in the examination of Chinese merchants' books.
[The Philippine court upheld the law by concluding] that what the Legislature meant to do was to require the keeping of such account books in English, Spanish, or the Filipino dialects as would be reasonably adapted to the needs of the taxing officers in preventing and detecting evasion of taxes, and that this might be determined from the statutes and regulations then in force. What the court really does is to change the law from one which by its plain terms forbids the Chinese merchants to keep their account books in any language except English, Spanish, or the Filipino dialects, and thus forbids them to keep account books in the Chinese, into a law requiring them to keep certain undefined books in the permitted languages. This is to change a penal prohibitive law to a mandatory law of great indefiniteness, to conform to what the court assumes was, or ought to have been, the purpose of the Legislature, and which in the change would avoid a conflict with constitutional restriction.
It would seem to us, from the history of the legislation and the efforts for its repeal or amendment, that the Philippine Legislature knew the meaning of the words it used, and intended that the act as passed should be prohibitory, and should forbid the Chinese merchants from keeping the account books of their business in Chinese. . . .
We cannot give any other meaning to the Bookkeeping Act than that which its plain language imports, making it a crime for any one in the Philippine Islands engaged in business to keep his account books in Chinese. This brings us to the question whether the law thus construed to mean what it says is invalid.
The Philippine Bill of Rights, already referred to, provides that:
'No law shall be enacted in said Islands which shall deprive any person of life, liberty, or property without due process of law, or deny to any person therein the equal protection of the laws.'
. . .
In view of the history of the Islands and of the conditions there prevailing, we think the law to be invalid, because it deprives Chinese persons situated as they are, with their extensive and important business long established, of their liberty and property without due process of law, and denies them the equal protection of the laws.
Of course the Philippine government may make every reasonable requirement of its taxpayers to keep proper records of their business transactions in English or Spanish or Filipino dialect by which an adequate measure of what is due from them in meeting the cost of government can be had. How detailed those records should be we need not now discuss, for it is not before us. But we are clearly of opinion that it is not within the police power of the Philippine Legislature, because it would be oppressive and arbitrary, to prohibit all Chinese merchants from maintaining a set of books in the Chinese language, and in the Chinese characters, and thus prevent them from keeping advised of the status of their business and directing its conduct. As the petitioner, Yu Cong Eng, well said in his examination, the Chinese books of those merchants who know only Chinese and do not know English and Spanish (and they constitute a very large majority of all of them in the Islands,) are their eyes in respect of their business. Without them such merchants would be a prey to all kinds of fraud and without possibility of adopting any safe policy. It would greatly and disastrously curtail their liberty of action, and be oppressive and damaging in the preservation of their property. We agree with the Philippine Supreme Court in thinking that the statute construed as we think it must be construed is invalid.
In Lawton v. Steele, 152 U. S. 133, 137, 14 S. Ct. 499, 501 (38 L. Ed. 385), the court said:
'To justify the state in thus interposing its authority in behalf of the public, it must appear, first, that the interests of the public generally, as distinguished from those of a particular class, requires such interference; and, second, that the means are reasonably necessary for the accomplishment of the purpose, and not unduly oppressive upon individuals. The Legislature may not, under the guise of protecting the public interests, arbitrarily interfere with private business, or impose unusual and unnecessary restrictions upon lawful occupations. In other words, its determination as to what is a proper exercise of its police powers is not final or conclusive, but is subject to the supervision of the courts.'
In Holden v. Hardy, 169 U. S. 366, 398, 18 S. Ct. 383, 390 (42 L. Ed. 780), the court said:
'The question in each case is whether the legislature has adopted the statute in exercise of a reasonable discretion, or whether its action be a mere excuse for an unjust discrimination, or the oppression or spoliation of a particular class.' . . .
The same principle is laid down in Pierce v. Society of Sisters, 268 U. S. 510, 45 S. Ct. 571, 69 L. Ed. 1070, 39 A. L. R. 468, in 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 in Adams v. Tanner, 244 U. S. 590, 37 S. Ct. 662, 61 L. Ed. 1336, L. R. A. 1917F, 1163, Ann. Cas. 1917D, 973, in which this court has held legislative attempts arbitrary and oppressively to interfere with the liberty of the individual in the pursuit of lawful occupations to involve a lack of due process.
In Adams v. Tanner, supra, an act to restrict the maintenance of employment agencies by forbidding the collection of fees from those seeking work, to avoid the extortion to which such workers were often subjected, was held unconstitutional. . . .
In Truax v. Raich, supra, the people of the state of Arizona adopted an act, entitled 'An act to protect the citizens of the United States in their employment against noncitizens of the United States,' and provided that an employer of more than five workers at any one time in that state should not employ less than 80 per cent. qualified electors or native-born citizens, and that any employer who did so should be subject upon conviction to the payment of a fine and imprisonment. It was held that such a law denied aliens an opportunity of earning a livelihood and deprived them of their liberty without due process of law, and denied them the equal protection of the laws. As against the Chinese merchants of the Philippines, we think the present law which deprives them of something indispensable to the carrying on of their business, and is obviously intended chiefly to affect them as distinguished from the rest of the community, is a denial to them of the equal protection of the laws.
We hold the law in question to be invalid.