Pampanga Sugar Mills, the plaintiff below, was the owner and operator of a sugar mill in the Philippine Islands. The business of the corporation consisted of milling sugar cane grown on lands owned and operated by others. The cane was delivered to the corporation by its owners under milling contracts which provided that the corporation should receive, as compensation for milling, one-half of the resulting centrifugal sugar, the other half going to the owners of the cane. The half received by the corporation was sold from time to time in the ordinary course of trade. Upon sales so made in 1920, 1921 and 1922 a tax was assessed as on merchants' sales under section 1459 and section 1460 of Act No. 2711 of the Philippine Legislature, known as the Administrative Code of 1917. Trinidad, the defendant below, was the then collector of internal revenue of the Islands. The tax, which was 1 per cent. on the sales value of the sugar so produced and sold by the corporation, amounted to 60,911.42 pesos.
The corporation claimed that its operations were not within the purview of the statute, paid the tax under protest, and then brought this suit in the court of first instance at Manila to recover the amount. The question presented was one solely of statutory construction. Is the corporation a merchant within the meaning of the law? The pertinent provisions of the statute are these:
'Sec. 1459. Percentage tax on merchants' sales.-All merchants not herein specifically exempted shall pay a tax of one per centum on the gross value in money of the commodities, goods, wares, and merchandise sold, bartered, exchanged, or consigned abroad by them, such tax to be based on the actual selling price or value of the things in question at the time they are disposed of or consigned, whether consisting of raw material or of manufactured or partially manufactured products, and whether of domestic or foreign origin. The tax upon things consigned abroad shall be refunded upon satisfactory proof of the return thereof to the Philippine Islands unsold. * *
"Merchant,' as here used, means a person engaged in the sale, barter, or exchange of personal property of whatever character. Except as specially provided, the term includes manufacturers who sell articles of their own production and commission merchants having establishments of their own for the keeping and disposal of goods of which sales or exchanges are effected, but does not include merchandise brokers.
'Sec. 1460. Sales not subject to merchants' tax.-In computing the tax above imposed transactions in the following commodities shall be excluded:
'(a) Things subject to a specific tax,
'(b) Agricultural products when sold by the producer or owner of the land where grown, or by any other person other than the merchant or commission merchant, whether in their original state or not.'
The trial court denied relief. Its judgment was affirmed by the Supreme Court of the Islands under the following circumstances. The case was argued three times and was before the court for three years. Throughout the period one judge was disqualified and the remaining eight were equally divided. Under section 138 of the Philippine Administrative Code of 1917 the concurrence of five judges is necessary for the pronouncement of a judgment where there is no vacancy in the court; and the amount in controversy exceeds 10,000 pesos. Thus, in this case, the equal division of the appellate court did not operate as an affirmance of the judgment below. Finally, one of the four, who had been consistently of the opinion that the corporation was not subject to the tax, changed his vote and voted with the four who thought the tax had been collected legally. He wrote, at the time of doing so, an opinion in which he stated that he still adhered to his original belief and that he changed his vote solely in order to break the deadlock, and thereby enable the corporation to apply to this Court for a review. A writ of certiorari was granted. 278 U.S. 590, 46 S.C.t. 28, 73 L. Ed. -. As the amount in controversy exceeds $25,000, there is jurisdiction under section 7 of the Act of February 13, 1925, 43 Stat. 936, 940, 28 USCA § 349. We are of opinion that the judgment should be affirmed.