Moore v. Grillis

This case is concerned with the statutes of this State dealing with the right of others than "Certified Public Accountants" to prepare, and accept compensation for preparing, tax returns. A constitutional question is involved. The case originated in a justice of the peace court.

Appellants are not Certified Public Accountants. However, as we understand the record, they contracted with appellee to prepare his 1946 income tax returns, and they fully performed their agreement. For their services, appellee promised to pay them the sum of $275, and he did pay them $140 of this amount. For the unpaid balance of $135, upon refusal or failure of appellee to pay it, appellants brought this action in the court of a justice of the peace, and recovered judgment there for the same. Appellee thereupon appealed to the county court.

In the county court, appellee filed the following plea:

"Now comes the defendant, by its attorney, and for plea in its behalf in the above numbered cause, says;

"The services that plaintiffs contracted to render were those that can be lawfully rendered only by accountants who have qualified as provided by Chapter 12 Title 32 of Mississippi Code of 1942; Sections 8905 through 8912.

"Plaintiffs have not so qualified and not having qualified are specifically enjoined not to make, utter, issue, or certify balance sheet, statement of assets or liabilities or any statement of income or loss; or prepare or make any tax return. Said contract was therefore in violation of the laws of the State and therefore against public policy. All of this defendant is ready to verify.

"Wherefore, the defendant prays that this suit be dismissed at the cost of plaintiffs."

To this plea, appellants demurred on the basis of the claimed unconstitutionality of the statutes, cited in the aforesaid plea of appellees, assigning the following reasons:

"1. The Statute set up in the plea is not a valid exercise of the police power of the State;

"2. The statute pleaded violates the constitutional provisions prohibiting the granting of exclusive privileges and immunities;

"3. The statute pleaded violates the constitutional right of citizens to liberty and the pursuit of happiness;

"4. The statute pleaded unconstitutionally restricts the right of private contract."

The county court overruled this demurrer, and in due course followed a judgment there for appellees, — and the appellants here then appealed from the judgment of the county court to the circuit court, and the county court was affirmed in that court, whence appellants, on proper certificate of a constitutional issue, appealed to this Court.

By Chapter 211, Laws of 1920, the Legislature passed an act now embraced in Sections 8905-8911, inclusive, of the 1942 Code. Section 8906 established a Board of Public Accountancy, consisting of three members, and by Section 8907 prescribed its powers and duties, and provided for examinations of applicants to engage in public accountancy as Certified Public Accountants, and the issuance of a certificate to successful applicants. Section 8905 authorized: "Any citizen of the United States, residing or having a place for the regular transaction of business in the state of Mississippi being over the age of twenty-one years, of good moral character, and who shall have received from the state board of public accountancy a certificate of his qualifications to practice as a public accountant as hereinafter provided, shall be styled or known as a certified public accountant, and it shall be unlawful for any other person or persons to assume such title or use any letters, abbreviations or words to indicate that such a one using same is a certified public accountant."

By Section 8911, it was made a criminal offense for any person to represent himself to the public as having received a certificate as provided in this Chapter, Chapter 12, Title 32, Code 1942; or to assume to practice as a Certified Public Accountant; or to use the abbreviation, C.P.A., or any similar words or word, letters or letter, to indicate that the person using the same is a Certified Public Accountant, without having received the requisite original or renewal certificate.

It will be seen from the foregoing resume of the pertinent sections of this legislation that the Act of 1920 established a special class of accountants as Certified Public Accountants, and provided for the regulation of that class, but provided no regulations for accountants, public or otherwise, not in that class. The benefit thereby extended to those qualifying under it, is that they obtain a certificate as to their competency and fitness, which serves further as an authoritative recommendation of their efficiency and qualifications.

The law, as passed in 1920, did not require that accountants, public or private, pass such examination and obtain a certificate before practicing the profession of accountancy. It provided merely the privilege as a voluntary one for those interested. Neither did it purport to prevent or punish the practicing of accountancy without a certificate from the board, but forbade the holding of oneself out to the public as possessing the certificate which the board was authorized to issue under the provisions of the act; and barred practicing as a Certified Public Accountant, and the using of the abbreviation C.P.A., or similar words or letters of designation, in order to deceive the public into believing that the person so acting was a Certified Public Accountant under the law, but who had not first successfully passed the requisite examination by the State Board of Accountancy, and certified by it. So far as the provisions of Chapter 211, Laws 1920, Sections 8905-8911, Code 1942, are concerned, see State v. De Verges, 153 La. 349, 95 So. 805, 27 A.L.R. 1526.

The Supreme Court of Oklahoma, in 1924, called attention to the fact that every state in the Union had a law regulating accountancy, similar to the law of that state. The Oklahoma statute was in all pertinent and material aspects the same as the law of this State, supra. However, the Oklahoma Supreme Court very cogently observed that at that time, ". . . no other state had attempted to prohibit the practice of the profession by those not certified." State ex rel. Short, Attorney General, et al. v. Riedell, 109 Okla. 35, 233 P. 684, 686, 42 A.L.R. 765.

In the 1930 Code of this State appeared, for the first time, Section 5918, now Section 8912, Code of 1942. In this amendment to the Chapter on Public Accountancy, the Legislature of Mississippi did attempt to prohibit the "practice of the profession (of accountancy) by those not certified." It is there enacted "That it shall be unlawful for any person, except acertified public accountant, who has complied with the requirements of this chapter, or an attorney in the practice of law in this state, or their employees, to charge or receive, directly or indirectly, a fee or special compensation for . . .making any tax return. If any person who at the time of making the charge or receiving such fee or compensation has not, by virtue of the provisions of this chapter, authority to practice as an attorney or certified public accountant hereunder, or any employee of such attorney or certified public accountant, shall charge or receive, directly or indirectly, a fee or special compensations, — . . . (c) for making or preparing any taxreturn; — shall be guilty of a misdemeanor, and upon conviction therefor be punished by a fine of not less than fifty dollars or not more than five hundred dollars, or by imprisonment in the county jail for not less than ten days or for not more than six months, or by both such fine and imprisonment in the discretion of the court." (Italics supplied.) The statute further makes provision under the so-called "Grandfather Clause" for the practice, as Certified Public Accountants, of those having a regularly established business as a public accountant on or before February 28, 1931, upon filing notice, and so forth.

In its ultimate and final analysis, this statute brands as criminal the "making or preparing [of] any tax return" except by lawyers and Certified Public Accountants or their employees,for compensation.

It is to be observed that the effect of Section 8912 is that Certified Public Accountants are put in a privileged class, which permits them to charge for services in preparing "any tax return." On the other hand, those not Certified Public Accountants are placed in an under-privileged class, without the right to charge for services in preparing "any tax return", on the penalty of becoming criminal and subject to heavy penalties. The Act does not, therefore, apply equally to all public accountants, or those engaged in making and preparing tax returns. Laws regulating the nursing profession have been upheld, where the right to use the initials "R.N.", standing for "Registered Nurse", was established, — yet practical nurses were not prohibited. Regulation of the teaching profession has always been recognized as within the constitutional power of the Legislature. However, will anyone contend that a statute providing that only teachers who have been awarded a Phi Beta Kappa Key could teach in the schools of this State and receive compensation, and that all others could constitutionally be prohibited from receiving compensation, with a criminal penalty, if they so taught? We have members of the bar with degrees of LL. B., and those without, and both subject to regulation under the State Police Power. Can it be successfully argued that a constitutional law can be passed which would limit the right to charge a fee for services to that class of lawyers who have LL. B. Degrees, and make it a criminal offense for those without such degree to accept compensation for similar services? Such discriminations surely could not escape condemnation as being arbitrarily discriminatory, and without a reasonable relation to the public health, safety, convenience, general prosperity, or public morals. Certainly section 8912 benefits Certified Public Accountants, but is detrimental to those not certified.

(Hn 1) We have the right to make use of knowledge of the popular and general customs of the people of this State, and public conditions therein. It is well known that there are few populous cities in Mississippi, and in such centers Certified Public Accountants do, as a matter of business expediency, generally have their offices, in order to cater to a potential clientele of suitable proportions to earn them a satisfactory competence. On the other hand, there are scores and scores of small communities without any Certified Public Accountants, and whose inhabitants have neither the time, the financial ability, nor the need to leave their homes and places of business to travel to the offices of Certified Public Accountants, more or less distant from them, or to bring such accountants to their small village or town, as the case may be. It is, of course, further well known that thousands of people in the State of Mississippi must compulsorily make and fill various forms of "tax returns", both to the State and Federal Governments, and need assistance in so doing. If they do not file these returns, they become liable to National and State penalties. It is not optional with them. What then? We all know the answer. Accountants, bookkeepers, insurance agents, notaries public, and others including local attorneys, must be called upon to aid in preparing their "tax returns." And they, except for Section 8912, could legally charge and receive compensation for such valuable services.

The lawyers and Certified Public Accountants can so charge, but not the others. If the others do charge and receive compensation, they become criminals by so doing. Yet, there are not enough Certified Public Accountants in this State to render these services to multiplied thousands of our people. (Hn 2) Can it, therefore, be fairly contended that Section 8912 has a reasonable relation to the promotion of the public convenience, the general prosperity, the public health, the public morals, or the public safety? It must have, in order to come within the police power of the State, and survive under the constitution. On the other hand, is it not potential as a detriment to, and impairment of, the general welfare of our citizens, favoring only the class of accountants who are Certified Public Accountants, in whom it tends to establish a monopoly, except for attorneys, if the statute be sustained as constitutional?

The effect on the uncertified accountant is definite and certain. He is prohibited from receiving compensation for his services, and those dependent upon him are deprived of the fruits of his practical or professional skill or knowledge. This could conceivably go, in the case of uncertified public accountants, to the extent of forcing such accountants to be compelled to change their occupations, sacrificing years of training, experience, and investment in their business establishment, — and all because they are not Certified Public Accountants. This presents the incongruous and paradoxical situation that the Act of 1920 does not require one to become a Certified Public Accountant, but only prohibits the representation that he is such; while the amendment of 1930 subjects him to criminal prosecution for charging for services, because he is not a Certified Public Accountant. By this observation, we are not to be considered as hazarding the opinion that change in the statute in conformity therewith would overcome the constitutional infirmity.

(Hn 3) We recognize that it is not for the courts to decide whether a law is needed and advisable in the general government of the people. That is solely a matter for the wisdom of the Legislature. But, it is our duty to construed the law and apply it to the case presented, and determine whether the Constitution of this State authorizes the legislation. That is what we must do in the instant case. As we have declared, if a statute purporting to protect public health, morals or safety, has no real relation to those objects, or is a palpable invasion of rights secured by fundamental law, courts must so adjudge and thereby give effect to the Constitution. Town of McCool v. Blaine, 194 Miss. 221,11 So. 2d 801. In this connection, it is necessary to bear in mind a State Constitution does not grant specific legislative powers, but limits them. Farrar v. State, 191 Miss. 1, 2 So. 2d 146.

The whole ultimate effect of Section 8912 is to prohibit uncertified accountants, or preparers of tax returns, from earning a living threat, or, at least from receiving compensation therefor. Counsel for appellees contends that is a mere regulation. Regulation, it seems to us, is one thing, but prohibition of doing a thing, thereby eliminating the practice to be regulated, is another thing entirely. It is a common right of the people, to enjoy "Life, Liberty and the pursuit of Happiness," and the right of the citizens of this State to employ whom they choose to make their tax returns, even though one so employed be not a Certified Public Accountant, or attorney, is within those prerogatives of the people. The tax returns must be correctly prepared because they will be checked, and erors therein required to be corrected by the tax officials, State or Federal, to whom the returns must be submitted. This would be true, whether the service of preparing the tax return were rendered by a Certified Public Accountant, attorney, uncertified public accountant, or other persons. Certification of the accountant in making the return would possess no special sanctity there. "Cu jusvis hominis est errare" — any man may make a mistake. Cicero, Philippicae. No. xii, sec. 2. And, Fabius Maximus long ago pointed out that it is beyond man's powers to avoid all mistakes. Plutarch's Lives, Fabious, Ch. 13, Sec. 1. If such errors persistently occurred and recurred on the part of any person preparing such returns, with much frequency, this inefficiency would soon eliminate him from public demand in preparing tax returns, without the intervention of any state board. (Hn 4) "Liberty" within constitutional provisions against depriving any person thereof except by due process of law includes "liberty of contract," which, in turn, means freedom from arbitrary or unreasonable restraint. Constitution 1890, Section 14; U.S.C.A. Constitutional Amendment 14; Saucier v. Life Casualty Ins. Co. of Tennessee, 189 Miss. 693, 198 So. 625.

Said the Supreme Court of Oklahoma further, in State ex rel. Short v. Riedell, supra [109 Okla. 35, 233 P. 690]: "When it is declared by law that private business concerns, in the employment of an accountant or auditor when deemed by them to be of advantage or to their interest must, in the interest of the general welfare, employ one certified by the state, it is for the reason that such private business so affects the general welfare as to the best interest of the public that their right of contract be limited in the employment of an accountant. It is, in effect, a regulation of private business concerns desiring an audit. An application of the same principle with the same results would justify legislation requiring private business concerns to submit to an audit, or to require them to have an audit made at stated times or under certain conditions. It would be the application of the same principle with the same results differing only in degree. There are certain corporations known as public service corporations which, in the interest of the general welfare, the federal and state governments have deemed it necessary to regulate by requiring them to submit to audits and make reports; but they have never gone so far as to say whom they shall or whom they shall not employ in matters of private concern. They have been left free to exercise their own judgment in selecting their employees, and no restrictions have been placed upon the right of any one to accept such employment. Heretofore private enterprises, including those classed as public service corporations, have been permitted to contract in matters affecting their private concern without any serious thought that such business, however small or extensive, sufficiently affected the public welfare as to justify depriving them of that right. American constitutional governments rest upon the right of private property. By ``private Property' is meant the right of absolute control of property. It includes the right of contract in matters concerning that property. It is true that the right of private property and the right of private contract must yield when the public peace, health, safety, or general welfare renders it necessary; but no court has ever held, so far as we know, that reputable business enterprises, innocent in their nature, so affect the public welfare by success or failure as to justify their regulation to the extent of limiting them in their right to contract in matters purely of private concern."

The Supreme Court of the United States said: "A state cannot, ``under the guise of protecting the public, arbitrarily interfere with private business or prohibit lawful occupations or impose unreasonable and unnecessary restrictions upon them.'" Liggett Company v. Baldridge, 278 U.S. 105, 49 S. Ct. 57, 59, 73 L. Ed. 204.

As stated above, the statute of Oklahoma was very much like ours, including our Section 8912, Code 1942, and the Supreme Court of that State held the statute void, as violative of the Constitution. The Court there said: "Our conclusion therefore, is that the act, in so far as it prohibits uncertified accountants from holding themselves out as professional or expert accountants or auditors for compensation or engaging in the practice of that profession, is in conflict with the spirit and express provision of the Constitution and void, in this, that it abridges the right of private property and infringes upon the right of contract in matters purely of private concern bearing no perceptible relation to the general or public welfare, and thereby tends to create a monopoly in the profession of accountancy for the benefit of certified accountants, and denies to uncertified accountants the equal protection of the laws and the enjoyment of the gains of their own industry. The defendants are not engaged in the exercise of a franchise, but a constitutionally guaranteed right."

The Tennessee Supreme Court said in a similar case before it and we quote from its opinion:

"Complainant is invoking individual rights as a citizen to engage in a private business or vocation, without unreasonable or arbitary restraint. In New State Ice Company v. Liebmann, 285 U.S. 262, 52 S. Ct. 371, 374, 76 L. Ed. 747, decided by the Supreme Court of the United States March 21, 1932, that court recognized the principle invoked by complainant:

"Plainly, a regulation which has the effect of denying or unreasonably curtailing the common right to engage in a lawful private business, such as that under review, cannot be upheld consistent with the Fourteenth Amendment. Under that amendment, nothing is more clearly settled than that it is beyond the power of a state, ``under the guise of protecting the public, arbitrarily (to) interfere with private business or prohibit lawful occupations or impose unreasonable and unnecessary restrictions upon them.' Jay Burns Baking Co. v. Bryan,264 U.S. 504, 513, 44 S. Ct. 412, 412, 68 L. Ed. 813, 826, 32 A.L.R. 661, and authorities cited; Louis K. Liggett Co. v. Baldridge,278 U.S. 105, 113, 49 S. Ct. 57, 73 L. Ed. 204, 208."

It was held that the Tennessee statute requiring certificate and license by board of accountancy as conditions precedent to practice of public accounting was void as imposing an arbitrary restriction on right of private contract. Campbell v. McIntyre et al., 165 Tenn. 47, 52 S.W.2d 162, 163.

In a case involving practically the same principle of constitutional law, the Illinois Supreme Court has held there was no reasonable basis for discrimination between two stated classes of accountants, whereby one would become favored over the other. It was also held that the right to follow any of the common occupations of life is an inalienable right. It is one of the blessings of liberty. The Court recognized the well-established principle of constitutional jurisprudence, that the right to liberty, property and the pursuit of happiness is subject to the reasonable exercise of the police power of the state, but said: "The end to be secured by the exercise of the police power is the furtherance of the public health, comfort, safety, or welfare, and, unless an act restricting the ordinary occupations of the citizens can be shown to fall within the police power such act is void, as violating the right of the citizen to liberty and the pursuit of happiness." Continuing, the Illinois Court declared: "We do not say that it is beyond the power of the General Assembly to enact a statute requiring that no one shall use the term ``certified public accountant' or the term ``public accountant' without having met the requirements of such an act. Such a provision may well be within the power of the Legislature on the ground that it is to the public interest that no one shall use a term indicating that he has been examined and certified as an accountant when such is not the fact." The part of the Illinois Statute discriminating in favor of such certified accountants against others not certified, in the practice of accountancy, was declared unconstitutional. Frazer v. Shelton,320 Ill. 253, 150 N.E. 696, 701, 43 A.L.R. 1086.

Against these decisions, appellee cites a case from Wisconsin, Wangerin et al. v. Wisconsin State Board of Accountancy et al.,223 Wis. 179, 270 N.W. 57. There is sufficient difference between the legislation dealt with by the Wisconsin Court and our Mississippi Statute, Section 8912, Code 1942, to prevent our applying the reasoning of the Wisconsin Court to our statute, even if we agreed with it.

Appellant also cites Heller v. Abess, 134 Fla. 610,184 So. 122, 124, wherein Heller, who was neither a Certified Public Accountant, nor a public accountant, under the Florida Laws, was enjoined from using any title which indicated or mislead people into believing he was a public accountant, statutorily so entitled. The Florida Court said: "The statute is not, as contended, an arbitrary, unreasonable and oppressive exercise of the sovereign legislative power in forbidding the use by others of the business or professional title given under the statute only to those who duly qualify and pay a license tax to engage in the business, occupation or profession of public accountant as regulated by the statute; such provisions being reasonable and appropriate to prevent imposition upon the public and to serve the general welfare." There is nothing in the Florida case presenting any difficulty in our conclusion here. We see nothing in the other citations by appellee which would justify any change of our views.

The State and Federal Governments, in a measure, have recognized the lack of a sufficient number of persons capable of aiding citizens in the preparation of Income Tax Reports, by sending out agents, from the State Tax Commission and the Bureau of Internal Revenue, respectively, to the county sites, in order to help in such tasks. But, for various reasons, among them being sickness, previous engagements, press of business, absence from home, and the limited number of such assistants and their limited time of availability, this service cannot supply the deficiency. It is well known that not enough members of the legal profession are willing to assist with small Income Tax Returns, which form the major portion of all such documents, to supply adequate aid to the public. So, recourse must still be had to others for assistance.

As stated, supra, Section 8912 is an infringement on the right of accountants not certified, and others engaged in preparing Income Tax Returns, to pursue their occupation gainfully; tends to establish a monopoly in Attorneys and Certified Public Accountants; and restricts the liberty of the people in respect to contract. Our Court, as far back as 1908, had something to say about this in dealing with privilege taxes on two differentiated classes of employment in the plumbing trade. This particular licensing law was held unconstitutional. There, we declared that: "Liberty, in its broad sense, must consist in the right to follow any of the ordinary callings of life without being trammeled." We quoted with approval from State v. Smith, 42 Wash. 237, 84 P. 851, 5 L.R.A., N.S., 674, 114 Am. St. Rep. 114, 7 Am. Cas. 577, where the Supreme Court of the State of Washington said: "The right to follow any of the common occupations of life is an inalienable right. It was formulated as such under the phrase ``pursuit of happiness' in the Declaration of Independence. It commenced with the fundamental proposition that all men are created equal; that they are endowed by their Creator with inalienable rights; that among these are life, liberty, and pursuit of happiness. This right is a large ingredient in the civil liberty of the citizen." In our opinion, we further characterized the condemned law by declaring it "not only unjust to the laborer, but it is equally wrong to the public." Wilby v. State, 93 Miss. 767, 47 So. 465, 466, 23 L.R.A., N.S., 677. We think the views above quoted apply with equal force here.

To summarize our views, we reiterate that Chapter 211, Laws 1920, Sections 8905-8911, Code 1942, constitutionally establish the class, Certified Public Accountants, and provide for their regulation. However, Section 8912 does not attempt to provide any code of rules for practice by other accountants, but destroys their right to charge compensation for their services in preparing Income Tax Returns, — which is destruction, not regulation.

Statutes may be constitutional and in operation with respect to some persons and state of facts, and unconstitutional as to others. 11 Am. Jur., Const. Law, Secs. 163, 164; Russell Inv. Corporation v. Russell, 182 Miss. 385, 178 So. 815, 182 So. 102; Lee v. Smith, 189 Miss. 636, 198 So. 296.

We hold, therefore, that so much of Chapter 12, Title 32, embracing Sections 8905 to 8911, inclusive, from Chapter 211, Laws 1920, is a valid exercise of the police power under the Constitution of 1890, and hence within the constitutional power of the Legislature to enact. (Hn 5) We declare to be violative of the Constitution, the 1930 amendment, or Section 8912, insofar as it affects the making and preparation of tax returns, as not being a reasonable exercise of the police power of the state; and that it is arbitrarily discriminatory; not in promotion of the public welfare; and without reasonable relation to the advancement of the public convenience, the general prosperity, the public health, the public morals, or the public safety, and is therefore in violation of the Constitution.

Since the case before us involves only the making and preparation of tax returns, we limit expression of decision in this case to that particular phase of Section 8912.

The judgment of the circuit court is therefore reversed and the cause remanded.

Reversed and remanded.