Puerto Rico v. Russell & Co.

Me. Justice Douglas,

dissenting:

There was no provision whatsoever in the grant of these water rights exempting them from any form of taxation. Hence if no contract had been made and the irrigation system had been constructed and respondent’s lands had been serviced in precisely the same way as *620was done here, I should think that there would be no doubt but that the assessment would be valid. The Supreme Court of Puerto Rico relied for the validity of the assessment on such cases as Knowles v. New Sweden Irrigation District, 16 Ida. 217, 235, 101 P. 81, 87, and Bleakley v. Priest Rapids Irrigation Dist., 168 Wash. 267, 11 P. 2d 597. Those cases hold that, under certain circumstances, the owner of a water right may be brought into an irrigation district and forced to pay an assessment. As stated in the Knowles case (p. 241):

“Under our irrigation law as it existed at the time of the organization of this district and the assessments referred to were made, if the land of the plaintiff was properly included in said irrigation district, it was subject to assessment for. benefits, provided it received any, whether the owner of said land owned a water right in connection therewith or not; for a person in an irrigation district may receive certain benefits regardless of whether the owner has a water right in connection therewith or not.”

The reasons which permit the owner of a water right to be brought into an irrigation district are equally cogent here. For, the impact of this assessment is not more rigorous than the assessment attendant on membership in an irrigation district. In fact, it is less, since respondent is being assessed only for a prorata share of the cost of maintenance and operation of the system, not its construction.

It was clear and undisputed that respondent obtained substantial benefits from the irrigation system. (1) The quantity of water received by respondent from the system is 19% larger than what previously had been available from the earlier limited flow of the river. (2) The storage reservoir impounds flood waters which would be largely lost to respondent. The dam not only increases the amount of water available but makes possible regu*621lar and more continuous deliveries of the water. (3) The irrigation system has tapped new sources of water which feed the reservoir. No separation of that additional supply of water from the old supply is possible. As a result, respondent obtains additional advantages, especially in dry years. (4) By reason of the construction and operation of the irrigation system, the water is available at several different distribution points through canals rather than at the river bed alone.

In that posture of the case, we would be faced with a determination by the legislature of Puerto Rico that respondent’s lands were benefited and that respondent should pay an assessment. It has long been held that such a “determination is conclusive upon the owners and the courts.” Spencer v. Merchant, 125 U. S. 345, 356. And see Davidson v. New Orleans, 96 U. S. 97; Walston v. Nevin, 128 U. S. 578. As stated in Fallbrook Irrigation District v. Bradley, 164 U. S. 112, 176, 177, “the fact of the amount of benefits is not susceptible of that accurate determination which appertains to a demonstration in geometry”; the choice of methods employed “is one of those matters of detail in arriving at the proper and fair amount and proportion of the tax that is to be levied on the land with regard to the benefits it has received, which is open to the discretion of the state legislature, and with which this court ought to have nothing to do.” And see French v. Barber Asphalt Paving Co., 181 U. S. 324; Milheim v. Moffat Tunnel Improvement Dist., 262 U. S. 710, 721; Roberts v. Richland Irrigation Dist., 289 U. S. 71; Chesebro v. Los Angeles County Flood Control Dist., 306 U. S. 459.

The existence of the contracts does not call for a different result. The statute in question provided that owners of water rights, such as respondent, “shall be entitled to receive from the irrigation system an amount of *622water which is the reasonable equivalent in value of the said water right or concession.” The Commissioner of the Interior was authorized “to enter into agreements with such owner or owners as to the amount of water and the time, place and conditions of delivery thereof, which shall be delivered to the lands to which the said water rights or concessions are appurtenant as the fair equivalent in value thereof.” Act No. 128, § 13, August 8, 1913, L. 1914, pp. 54-84. The contracts, as well as the statute, speak of “delivery” of the water. But the Supreme Court of Puerto Rico interpreted the contracts as meaning that respondent “agreed to receive [italics supplied] from the irrigation system a certain quantity of water in exchange” for its water rights. I do not think that that construction is unwarranted.

(1) The contracts themselves make plain that, as respects certain intakes on the river, “the presence of water in the river bed ... in quantities sufficient to permit the taking at the said intakes of the amounts of water specified shall be deemed to be deliveries.” That provision alone demonstrates that the Supreme Court of Puerto Rico was justified in interpreting “delivery” in these contracts differently than might be warranted in case of contracts for the cartage of goods. “The word ‘deliver’ has perhaps as many different shades of meaning ascertained by judicial interpretation as any other term known to the law.” United States v. McCready, 11 F. 225, 234. The problems of operation of an irrigation system are unique in many respects. Manipulation of the gates at the dam determines the flow of water through the various channels. Puerto Rico’s undertaking in each instance was to “deliver” water at specified intakes provided by respondent. Those intakes were in the river or in designated reservoirs provided by respondent. It seems reasonable to conclude that Puerto Rico’s *623undertaking was to make the specified quantities of water available so that they would be received at those intakes. To enforce the present tax is not to renig on that undertaking. The fact that respondent was to bear “all extra expenses” in case water was delivered at intakes other than the designated ones seems to me hardly more than a provision that respondent was to bear the cost in case the irrigation system had to be partially relocated to meet its requirements. In any event, it does no more than raise a doubt as to the correct interpretation of the contract — a doubt which, as subsequently pointed out, should not be resolved against the power of Puerto Rico to impose this tax.

(2) It seems to me tolerably clear that such a construction of the contracts comports with the purpose of the arrangement. The contracts state that Puerto Rico, “in order to facilitate and make more certain the operation of the said dam and the irrigation system of which it is a part, desires to determine and agree upon an amount of water which, delivered regularly, may, under all attending circumstances, be considered to be fair equivalent in value for irrigation purposes of the amount of water which the Fortuna Estates would under ordinary circumstances take and use under the said water rights and concessions.” The amount of water actually obtained by respondent before the dam was erected apparently fell far below the amount to which it was entitled under their water rights. The contracts were designed to substitute for that latter theoretical figure one which would represent a “fair equivalent in value for irrigation purposes” of the amount of water which respondent would “under ordinary circumstances take and use” under its water rights. From Puerto Rico’s point of view, such a determination was important so that the demands on the dam could be reduced to known requirements and so that the erection of the dam would not *624result in a windfall to respondent. The latter certainly would transpire if the dam gave respondent an amount of water which it had not been able to obtain on its own without the irrigation system. Thus the specification in the contracts of the “fair equivalent” of the amount of water which respondent ordinarily would obtain under its water rights was nothing more than a determination of the then worth of the water rights in terms of acre feet of water. Under that view, the contracts did not raise the water rights to a higher constitutional dignity than they previously enjoyed.

(3) No express exemption from this form of taxation is to be found in the contracts. If that exemption exists, it is implied. But even though it be assumed arguendo that Puerto Rico’s representative had the authority constitutionally to bargain away its taxing power, the exemption should not be inferred. Chief Justice Marshall stated in Providence Bank v. Billings, 4 Pet. 514, 561, that a relinquishment of a power to tax “is never to be presumed”; “its abandonment ought not to be presumed, in a case in which the deliberate purpose of the state to abandon it does not appear.” If there are doubts, they must be resolved in favor of the government. Wells v. Savannah, 181 U. S. 531; Chicago Theological Seminary v. Illinois, 188 U. S. 662; Metropolitan Street Ry. Co. v. New York, 199 U. S. 1, 35-36. As stated in Wells v. Savannah, supra, pp. 539-540, a contract of exemption from taxation must “be clearly proved. It will not be inferred from facts which do not lead irresistibly and necessarily to the existence of the contract. The facts proved must show either a contract expressed in terms, or else it must be implied from facts which leave no room for doubt that such was the intention of the parties and that a valid consideration existed for the contract. If there be any doubt on these matters, the contract has not been proven and the exemption does not exist.”

*625That rule should be applied to this situation. It is clear that respondent is one of the beneficiaries of the irrigation system, even though the additional amount of water which the erection of the dam enabled it to obtain be disregarded. The meaning of the word “delivery” as used in the contracts is at best ambiguous. Hence, we should strictly adhere to the presumption against exemption from taxation. To resolve all ambiguities in the contracts in respondent’s favor and against Puerto Rico is to forsake a canon of construction which has long obtained.

In conclusion, Puerto Rico has not treated respondent the same as landowners who have no water rights. The latter have to pay for the construction of the irrigation system as well as for its maintenance and operation. Respondent, on the other hand, is merely required to contribute towards the cost of maintenance and operation of the system. On these facts, that favored treatment is sufficient respect for the integrity of respondent’s property rights. To free it from all burden is to give it a windfall. Only under the compulsion of plain and unambiguous language should we permit a beneficiary of such a project to escape his fair share of the costs. There is no such compulsion here. Hence we should refuse to let the contract clause of Puerto Rico’s organic law produce an inequitable, unfair, and harsh result.

Mr. Justice Black, Mr. Justice Murphy, and Mr. Justice Byrnes join in this dissent.