Gallardo v. Porto Rico Ry., Light & Power Co., 2058.

• Citation: 18 F.2d 918
• Decision Date: 11 April 1927
• Docket Number: No. 2058.,2058.
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)
• Parties: GALLARDO, Treasurer, et al. v. PORTO RICO RY., LIGHT & POWER CO.

18 F.2d 918 (1927)

GALLARDO, Treasurer, et al. v. PORTO RICO RY., LIGHT & POWER CO.

No. 2058.

Circuit Court of Appeals, First Circuit.

April 11, 1927.

COPYRIGHT MATERIAL OMITTED

William C. Rigby, of Washington, D. C. (Russell H. Brennan, of Washington, D. C., and George C. Butte and J. A. Lopez Acosta, both of San Juan, Porto Rico, on the brief), for appellants.

Carroll G. Walter, of New York City (Edward J. Patterson, of New York City, and J. Henri Brown, of San Juan, Porto Rico, on the brief), for appellee.

Before BINGHAM, JOHNSON, and ANDERSON, Circuit Judges.

ANDERSON, Circuit Judge.

The court below enjoined the appellants, the treasurer and the commissioner of the interior of Porto Rico, from enforcing the Water Power Act of July 28, 1925 (Acts Porto Rico 1925, No. 60). The act took effect on October 26, 1925, and the bill was filed on the next day. Sections 1, 2, 3, and 4 are as follows:

"Section 1. For the purpose of providing funds to begin and continue the development of such water power of the island as may be made use of economically and to advantage, according to the hydrographic survey being made by direction of the Legislature of Porto Rico with funds appropriated for the purpose in the budget for the biennium 1923-1925, a special tax of one-tenth of one per cent. of the assessed valuation of all taxable real property not exempt from taxation in the island of Porto Rico, except Vieques and Culebra, is hereby levied, and the same shall be collected annually in addition to all other taxes levied under other laws in force, during the fiscal years 1925-26, 1926-27 and 1927-28.

"Sec. 2. The proceeds of said special tax shall be covered into a fund to be known as the `Special Fund for the Development and Use of the Water Power of the Island of Porto Rico,' which shall be placed at the disposal of the commissioner of the interior for the survey, preparation of plans and construction of all such works as may be necessary for the development of hydraulic power and its subsequent utilization, wherever possible, for agricultural or industrial purposes and municipal use of available waters, said works to include the construction of reservoirs, tunnels, channels and conduits and the laying of piping, the construction of hydroelectric plants and their auxiliaries, transmission and distribution lines, transformer substations, and in general, all such works and accessory equipment and all such incidental expenses as may be required for the complete termination of each project of development that may be undertaken: Provided, that in the survey and construction of works to be done under the provision of this act, preference shall be given to such works as are to be carried out on the largest rivers that will develop the greatest electric power.

"Sec. 3. Such receipts as may be derived from the sale of electric power produced by such electric plants as may be built hereunder, together with receipts from the sale of available water shall first be devoted to the payment of annual maintenance and operation expenses of the system or systems constructed, and the remainder shall be distributed as follows: One-third shall be covered into the special fund created hereunder in order to restore and increase the same with the object of providing funds to continue extending the systems constructed in accordance with this act, and of carrying out such new projects as may answer the purposes hereof; and the remaining two-thirds shall be covered into the regular funds of the insular treasury: Provided, that during the first period of operation of the works constructed, and until receipts from such operation cover annual expenses of operation and maintenance, such deficit as there may be in said expenses shall be met out of the special fund hereby created: Provided, further, that when development of all such water power of the island as may be economically utilized for the purposes herein stated is completed, and when the commissioner of the interior so certifies to the treasurer of Porto Rico, said receipts shall be devoted primarily to cover annual expenses of maintenance and operation; and of the balance, fifteen (15) per cent. shall be covered into a reserve fund to be devoted to improvements and renewals, and the remaining eighty-five (85) per cent. shall be covered into regular funds of the insular treasury.

"Sec. 4. The commissioner of the interior is hereby authorized, empowered and directed to attend to all matters connected with the administration of such works and services as may be constructed and established hereunder; to appoint such personnel and establish such organization as he may deem necessary, and subject to the provisions of the Public Service Law, he shall make and award, in the name of the people of Porto Rico, all such contracts as may be necessary for the sale of electric power and water. The auditor of Porto Rico, upon consultation with the commissioner of the interior, shall establish such system of accounting as may be required adequately to control and keep a statistical record of all receipts and expenditures incurred in connection with the construction, maintenance and operation of the works whose construction and operation are hereby authorized."

Section 5 provides that the designated engineer shall have the right to enter upon lands for making surveys, the owner to be compensated for any damage done, and that the commissioner of the interior may institute eminent domain proceedings to obtain the requisite lands and rights for the works "declared to be works of public utility." The commissioner is also given by this section power to obtain such rights by negotiation, which provides, further, "that whereas the enactment of this bill by the Legislature determines a new policy in the utilization of public waters by the people of Porto Rico, it shall be the duty of the Public Service Commission to see that said policy is not impaired by grants of franchises."

Section 6 reads:

"For the purpose of providing funds uninterruptedly to continue surveys already commenced, and to further the preliminary work permitting due development of the work to be undertaken under this act, the treasurer of Porto Rico is hereby authorized to make such advances out of any funds in the treasury, not to exceed thirty thousand (30,000) dollars, as the commissioner of the interior may request, the amount of advances so made to be reimbursed out of the proceeds of the aforesaid tax, when collected."

The appellee sues in two capacities: (1) As a taxpayer; (2) as the owner of franchises and other property which it claims would be irreparably damaged by the government's project. Answers were filed; the plaintiff's president and general manager testified; and the court below, in a long opinion, held the act void on four grounds, dealt with below, and issued an injunction in broad and inclusive form. The evidence shows that the plaintiff furnishes electric current in 28 municipalities; that its investment in property devoted to the lighting and power business was, as of December 31, 1924, over $4,500,000; that its last tax paid was based on an assessed valuation of $3,435,207; that during the last year it earned 9 2/3 per cent. on its investment; that it had pending applications for franchises to develop water power on certain streams, in order to obtain additional power needed for its rapidly developing business; that power developed by steam would cost at least one-third more than from a hydroelectric plant; that there were 8 to 10 rivers in Porto Rico available for hydroelectric development; that competition from the government might reduce the plaintiff's net earnings $100,000 a year. None of the plaintiff's franchises are, in terms, exclusive; all are "subject to amendment, alteration or repeal" under the Act of April 12, 1900 (31 Stat. 77). Cf. section 37 of the Organic Act (39 Stat. 951 Comp. St. § 3803oo).

Parenthetically, we observe that the evidence leaves it doubtful whether the government project will work competitively or co-operatively with plaintiff's. On this record it is quite conceivable that the contemplated government development will only supplement and perhaps help the plaintiff's existing plants and lines. On the other hand, we cannot, on this record, hold that the result may not be harmful competition.

The assignments of error challenge the jurisdiction of the court as well as the substantive grounds of the decision.

The objections to the jurisdiction cannot be sustained. The fundamental question is, whether the act of the Legislature of Porto Rico is in conflict with the Organic Act. Camunas v. P. R. Ry., Lt. & Pr. Co. (C. C. A.) 272 F. 924. Porto Rico Tax Cases (C. C. A.) 16 F. (2d) 545.

There is nothing in the contention of a lack of jurisdictional amount. Plaintiff's tax for only one of the three years involved exceeds $3,000. It is unnecessary to consider whether the case falls, as to the amount involved, under the rule laid down in Berryman v. Whitman College, 222 U. S. 334, 32 S. Ct. 147, 56 L. Ed. 225.

Nor is the suit premature. It must be assumed (the answers admit) that the treasurer and commissioner intend to do their full apparent duty under the act. Davis v. Berry (D. C.) 216 F. 413, 415. The plaintiff attacks the whole undertaking as invalid; if this contention be sound, it is clear that the threatened injury was imminent, and a suit to test the power was most appropriate and timely. Risty v. Chicago, etc., R. R., 270 U. S. 378, 388, 46 S. Ct. 236, 70 L. Ed. 641. It is of great practical importance to Porto Rico, as well as to the plaintiff, to have an early and final decision as to the validity of this important legislation. First Nat. Bank v. Albright, 208 U. S. 548, 28 S. Ct. 349, 52 L. Ed. 614, is not in point.

Clearly there is no plain, adequate, and complete remedy at law, even if the legislation of 1923 and 1924 (Act No. 68 of 1923 and Act No. 9 of 1924) be held...