Amended: May 22, 1939. Respondent sued the Treasurer of Porto Rico in a local district court for recovery of 1927 income taxes paid under the laws of the Island. By construction of the local Porto Rican statutes permitting suits for refunds, the local district court found that no right had been granted to sue at law for taxes voluntarily paid. The bill of complaint was then dismissed for lack of jurisdiction, because it disclosed that the tax in question had been paid voluntarily and without protest. The Supreme Court of Porto Rico affirmed, but was reversed by the United States Circuit Court of Appeals.
As conceded by respondent, this suit cannot be maintained unless authorized by a Porto Rican law, because Porto Rico cannot be sued without its consent. It is also conceded that the Porto Rican legislature is not obligated to provide a judicial remedy for tax refunds. Respondent's contentions here are that the governing statutes of the Island do authorize the present suit 'either by express language or by necessary implication,' and that the Porto Rican courts erroneously construed the local statutes.
Section 75 of the controlling Income Tax Act of Porto Rico, approved August 6, 1925, authorizes the Treasurer 'to remit, refund, and pay back all taxes erroneously or illegally assessed or collected, * * * and all taxes that appear to be unjustly assessed or excessive in amount, or in any manner wrongfully collected,' and requires him to 'report to The Legislature of Porto Rico at the beginning of each regular session * * * all transactions under this section.'
The courts of Porto Rico construed Section 75 to mean that the Treasurer's refusal to refund taxes not paid under protest is final; that the local statutes grant the courts no jurisdiction to review this refusal; and that after the Treasurer's report to the legislature, a voluntary taxpayer's complaint must be addressed to the legislature. Disagreeing with this construction given the statute by the courts of Porto Rico, the Circuit Court of Appeals (one Judge dissenting) found that the 1925 Act plainly provided a resort to the courts, even in suits to recover taxes voluntarily paid without protest.
It is necessary that we examine some of the considerations which led to the Porto Rican courts' construction of Section 75 of the 1925 Act. For illustration, Section 66 of the Porto Rican Income Tax Law of 1919 imposed upon the Treasurer the duty of making tax refunds (as in Section 75 of the 1925 Act), but Section 66 contained an express provision for 'appeal to the courts' if a taxpayer's claim were denied by the Treasurer. The omission of this express provision from Section 75 and all other Sections of the 1925 Act was logically considered by the Porto Rican courts to be of significance in the construction of that Act. The right of appeal to the courts contained in Section 66 of the 1919 Law was first omitted from the 1921 Porto Rican Law, and this led the Supreme Court of Porto Rico to declare in the present case that 'since 1921, * * * the right to bring suits for the recovery of taxes other than those paid under protest has been abrogated.'
Furthermore, four different sections of the 1925 Act (57, 60, 62 and 76(a) constitute a statutory plan under which a taxpayer who pays under protest is granted the right to sue in the courts for refund. Such a taxpayer can sue at law under these sections only if he has been denied relief by both the Treasurer and the Board of Review and Equalization of the Island. But these sections nowhere expressly authorize appeal from the Treasurer to the Board by one who paid taxes without protest. And Section 76(b), which the Circuit Court of Appeals interpreted as authorizing suit by a taxpayer who paid without protest, expressly prohibits suit in court 'until a claim for refund or credit has been duly filed with * * * the Board of Review and Equalization on appeal, according to the provisions of law in that regard, and the regulations established in pursuance thereof.' (Italics supplied.) Since a voluntary taxpayer is given no express right of appeal from the Treasurer to the Board by the 'provisions of law in * * * regard' to such appeals, he is not expressly authorized to comply with the condition precedent to right of suit under Section 76(b). Rights denied by the statutes could not be granted by regulations.