The following was written as the opinion of the court, to which the majority has failed to agree: This is a suit for an injunction brought by appellants against appellees to restrain them from levying a tax upon the lands within the Elephant Butte irrigation district for operation and maintenance of the irrigation and drainage system of that project. On June 30, 1927, the board of directors of said district made and formulated a budget of the estimated amount required for operation and maintenance of such system for the year 1928, in which is inserted an item of $205,000 for that purpose. In including this item the board failed to take into account cash on hand and other resources more than sufficient, it is alleged, to pay the entire cost of operation and maintenance for the year 1928. This was plainly an endeavor on the part of the board to accumulate a fund *Page 491 not required for operation and maintenance, but to be kept in reserve. The theory of the members of the board was that it was desirable to secure an extension of time from 20 to 40 years for the repayment to the United States of the construction cost of the Elephant Butte dam and reservoir, and that it was possible, in that event, that the Secretary of the Interior might demand a repayment of the operation and maintenance expense during the same year in which they accrued, instead of the succeeding year as had theretofore been the established practice. The contract between the district and the government makes no specific provision as to the time when the operation and maintenance costs are to become due and payable, but section 6 of the Reclamation Extension Act (Act of August 13, 1914, 38 Stat. 686 [43 USCA §§ 493-497]), referred to in the contract, provides that such charges shall become due and payable on the date fixed by the Secretary of the Interior. It is argued, therefore, by appellees that the Secretary of the Interior might fix the date for payment in the same year in which the service was to be performed by the United States, or might fix a later date in his discretion, and that, therefore, the board had a right, and it was its duty, to anticipate such contingency and to accumulate a surplus for that purpose. The fact remains, however, that the Secretary of the Interior had not, on June 30, 1927, when the estimate and budget was made up, fixed a date for payment earlier or different from what had been the practice theretofore, or any date at all. It may have been, and probably was, wise and in accordance with good business principles for the board, if they had the power, to thus anticipate possibilities so as to avoid all danger of penalties for failure to pay the United States the operation and maintenance charges when demanded. On the other hand, the interests of the farmers and water users were to be compelled to pay as little as possible each year out of their incomes from the farms.
But be that as it may, no matter what the powers of the Secretary of the Interior are, and no matter what the terms of the contract of the district with the United States are, the question is whether, under the statutes of the state, the board had power to make and promulgate this *Page 492 estimate and budget and thus subject the lands in the district to this taxation. At the time of this estimate and budget the Secretary of the Interior had made no demand on the district for the 1928 operation and maintenance charge. All that was before the board from that source was what is termed "public notice" from the Secretary of the Interior, dated March 25, 1927, in which it was stated:
"Notice is hereby given that the estimated cost of operating and maintaining that portion of the project, irrigation, and drainage system which is utilized for the benefit of New Mexico lands for the irrigation season of 1927, including all proper overhead and other general charges, is $195,000, which amount, or such part as is the actual cost for the calendar year 1927, the district shall pay to the United States in two equal payments, due March 1, and September 1, 1928."
A three months' period of grace is also allowed upon each one-half of such payment. It thus appears that, so far as the Secretary of the Interior was concerned, he was dealing with the 1927 payment only, and he was not concerned in any way with the 1928 payment. The 1928 payment, then, was not a need or a necessity of the board for which they might resort to taxation of the lands of the district. While the district by the contract is liable for operation and maintenance charges of the government, these charges are not due until demanded by the Secretary of the Interior; in fact, we find it difficult to understand how the Secretary of the Interior could reasonably demand these charges in advance or even during the current year when the service is rendered, knowing, as he must, the laws of the state and the means and ability of the district to raise money to taxation, and the time required to collect the same. It is upon such knowledge, no doubt, that he has pursued his present policy of estimating these costs and charges early in the year and demanding the payment thereof in the following year, thus enabling the district to provide money by means of taxation. In this connection, it is to be remembered, that our legislation was formulated largely under the supervison of the Reclamation Service and in such form as to suit it, and for that reason alone there would seem to arise a moral obligation upon the part of the Secretary of the Interior to administer the laws of Congress and the contract so as to comply *Page 493 with the spirit of our laws, rather than to arbitrarily fix dates for payments at times when, under these laws, the district would be unable to perform and make the payments. Section 3 of chapter 39, Laws 1921, seems to us to be the controlling provision applicable to the powers of the board. It is as follows:
"The board of directors, on a date to be fixed by a standing order of the board, which shall not be later than July 1, of each year, shall estimate and determine the amount of funds required to meet the obligations and needs of the district for the ensuing year, together with such additional amount as may be necessary to meet any deficiency in the payment of expenses or obligations previously incurred by the district and remaining unpaid, for such of the following purposes as may be required by the activities of the district, to wit: * * *
"Item two. Any payment to become due under any contract with the United States, to secure which bonds have not been deposited with the United States, whether for the cost of irrigation or drainage system or for the operation and maintenance thereof, or both. * * *
"Item three. The portion of the expenses of operation and maintenance of the irrigation and drainage systems to be collected by tax assessment and levy, including funds required to meet obligations as provided in section 5 hereof. This portion shall not be less than one-fourth, nor more than two-thirds of the estimate for such operation and maintenance costs for the ensuing year, and shall be determined by the board of directors of said district from year to year, and the said portion of said operation and maintenance expenses so collected by tax assessment and levy, shall be collected from all lands of the district, whether irrigated or not except such lands as may be exempted from taxation by the terms of this act, and the same, when collected, shall be applied to the cost of operating and maintaining of the irrigation and drainage systems. The remainder of said estimated amount shall be paid by the parties actually using said systems and water for irrigation or other purposes, in accordance with the terms of their contract for water."
We cannot see how, under this statute, the board has power to raise money by taxation for any obligation not yet due or for any need not shown to exist. While the obligation to the government exists it is not yet due, and therefore not properly taken into account in fixing the budget. Counsel for the appellees seek to justify the action of the board under the general powers granted in section 2, c. 39, Laws 1921, and elsewhere in the statutes. But we regard such general powers and discretion restrained by the positive provisions of item 3 above quoted. While it is true this legislation should receive a liberal *Page 494 interpretation in favor of the powers of the board, it being really a business and administrative corporation, not hampered by some of the rules in regard to municipal corporations, still it is bound to observe the restrictions placed upon it by law and must not assume a power not possessed by it.
As to the amount of such proposed tax which should be enjoined, we are not in a position to say from the record. The most we can do is to declare the principle which is to govern the board. Of course, the balance due the government for 1927 must be paid out of the funds on hand. While ordinarily uncollected taxes, accounts receivable, or other items of that character are not to be considered a surplus on hand, in a case like this where the board itself has listed such items as available resources and assets, it seems that they may be considered as such in determining the amount, if any, for which a tax may be laid by the board.
In this connection it is to be noted that appellants object to two items in the budget, one of $5,000 for hydroelectric development, and one of $5,000 for defense of water supply. We consider the objection to these two items by appellants as well taken. At first we were inclined to doubt this, for the reason that under section 1 of chapter 20, Laws 1919, the board is expressly given authority to construct, operate, and control plants for the generation, distribution, sale, and lease of electric energy. As to the second item, we were inclined to hold that under the general powers of the board and its discretion and duty to look after the welfare of the district it might expend from these funds money to investigate and stop, if possible, the encroachments of the state of Colorado upon our water supply at the headwaters of the Rio Grande in Colorado. The board undoubtedly has power to engage in both enterprises, but in item 3 of section 3 of chapter 39, Laws 1921, the moneys raised by taxation under said section are specifically required to be applied "to the cost of operating and maintaining of the irrigation and drainage systems." The moneys, therefore, for the purpose mentioned, must be provided in some other way, and cannot be paid out of the operation and maintenance fund. *Page 495
It follows that the board should be enjoined from causing the lands of the district to be taxed in 1927 for operation and maintenance, except in such sum, if any, as might be required to pay the amount due the government for operation and maintenance in 1927.
2. A second estimate and budget was made by the board June 30, 1927, for the general fund. This estimate and budget was entirely within the powers of the board under item 4 of section 3, c. 39, Laws 1921. This general fund is for the general running expenses of the district, aside from operation and maintenance. The district court disallowed three items in this budget amounting to $4,900, from which action no appeal has been taken. The principal difference between the parties is in regard to two items of $8,207.37 and $10,000, respectively. Both of these sums were on hand in cash at the time the budget was made out. Appellants argue that the item of $10,000, which was set aside by the board in 1926 as a building fund, could not be set aside and held in reserve. We do not so understand the matter. By section 2 of chapter 39, Laws 1921, the board is expressly authorized to construct or purchase property necessary for the use of the district. A suitable building necessary or proper for the use of the board is clearly within the statute and it is certainly within the general powers of the board to determine just when the building shall be constructed or the property acquired.
In regard to the item of $8,207.37, it is to be said that it is a fund appropriated by the Legislature for two purposes, by chapter 57, Laws 1905, namely: To pay the expense of organizing the Elephant Butte Water Users' Association and the making of a contract with the United States to construct the Elephant Butte dam and reservoir; and to improve the Rio Grande in New Mexico and increase its surface flow. The first of these purposes has long since been accomplished and the balance of the funds must be devoted to the purpose for which they were appropriated and are not available for the general fund of the district. The objection of appellants, therefore, cannot be sustained. *Page 496
It follows from the foregoing that the judgment is erroneous and should be reversed, and the cause remanded, with directions to proceed in accordance herewith.
For the reasons stated, I am compelled to dissent from the opinion of the majority.
ON MOTION FOR REHEARING