Ryan v. State

• Decision Date: 28 October 1936
• Docket Number: 26060.
• Citation: 188 Wash. 115,61 P.2d 1276
• Court: Washington Supreme Court
• Parties: RYAN v. STATE. SAME v. STATE TAX COMMISSION.

61 P.2d 1276

188 Wash. 115

RYAN v. STATE.

SAME v. STATE TAX COMMISSION.

No. 26060.

Supreme Court of Washington, En Banc.

October 28, 1936

Appeal from Superior Court, Thurston County; John M. Wilson, Judge.

Two actions by David H. Ryan against the State of Washington and against the State Tax Commission. From judgments dismissing both actions, plaintiff appeals.

Affirmed.

Luby &amp Pearson and Brown & Weller, all of Spokane, for appellant.

E. W Schwellenbach, of Ephrata, amicus curiae.

G. W Hamilton and E. P. Donnelly, both of Olympia, for respondents.

STEINERT Justice.

Plaintiff brought these two actions seeking (1) the refund of an amount exacted from, and paid by, him as an occupation tax, and (2) an injunction to prevent the imposition against him of a subsequent tax of the same kind. Trial Before the court, without a jury, resulted in a dismissal of both actions. Plaintiff has appealed.

The taxes imposed by the state in the first case were based upon the total amount of sales of merchandise made by appellant and also upon the total amount of gross income received by him in the performance of a federal government contract, all such sales and operations having been made and conducted within the area comprised in what is known as the Columbia Basin Project. The tax sought to be enjoined in the second case was based upon the total amount of gross income received by appellant in the performance of a second, and subsequent, federal government contract operating within the same area. The principal question in the first case, and the only question in the second, is whether the state of Washington had any jurisdiction within the territory of the project, sufficient to permit the state to impose and collect an occupation tax for services rendered therein by appellant to the federal government.

A brief history of the Columbia Basin Project will be of aid to a clearer understanding of the problem involved.

For a number of years, the people of this state have been actively interested in the development of the Columbia river and its tributaries. Between 1918 and 1932, many surveys and reports were made by engineers employed either by the state or else by the bureau of reclamation or the War Department of the United States. These surveys and reports had relation to navigation, the development of hydroelectric power, and the reclamation of arid lands by irrigation. The state and its people were directly and particularly interested in, and concerned with, the features of power and reclamation. In 1932, the chief of engineers of the United States Army, after an exhaustive investigation, recommended a comprehensive plan for the improvement and development of the Columbia river for the purposes of navigation, flood control, power and irrigation. The plan contemplated the ultimate construction of ten dams in the Columbia river, the first of which, together with a power plant, was to be erected at the head of Grand Coulee.

In 1933, the state Legislature created the Columbia Basin Commission, consisting of five members, and authorized them to enter into contracts and to employ any and all means necessary to secure the immediate development of the Columbia Basin Project by means of the proposed Grand Coulee dam and the orderly development of the power, water, and soil resources incident thereto. Chapter 81, Laws 1933, p. 376.

During this period of preparatory activities, the Grand Coulee Dam and power plant had an indeterminate status, owing to the uncertainty as to whether the project would be a state or a federal project. It seems that originally it was contemplated that the Columbia Basin Commission should at least carry on the necessary preliminary engineering. For that purpose, the Columbia Basin Commission obtained from the State Emergency Relief Commission an allocation of $377,000 of emergency relief funds. This had the effect of tying in the project with the matter of emergency relief work, which was seriously engaging the attention of this, and of other states, at that time.

On June 30, 1933, the Columbia Basin Commission, in pursuance of its plan, entered into a contract with the United States, represented by the Bureau of Reclamation, Department of the Interior, wherein the United States agreed to make the topographic surveys and explorative work and to prepare the designs and specifications for construction work on the dam, for which the Columbia Basin Commission agreed to pay an initial sum of $50,000 at the time of the execution of the contract and the balance of the allocation of $377,000 as the work progressed. It appears that, during the period with which we are here concerned, the greater part of the $377,000 was paid as agreed.

It soon became apparent, however, that the work of construction itself would be of such magnitude and the expense so great that its completion would require the intervention of no less an agency than the federal government, with the unlimited financial resources at its command. Consequently, steps were taken to have the Grand Coulee Dam and power plant included in the federal public works program. After considerable effort, this was accomplished, and an allocation of $63,000,000 for the dam and power plant was made by the federal bureau commonly known as NIRA.

On November 1, 1933, the United States, represented by the Secretary of the Interior, and pursuant to the reclamation laws and the National Industrial Recovery Act (48 Stat. 195), and the state of Washington, acting through the Columbia Basin Commission, entered into a contract relating to the construction of the dam, power plant, and power transmission lines at the Grand Coulee site, under the comprehensive plan above mentioned.

Some of the provisions of that contract are of particular interest in this controversy. The contract began with a series of ten recitals. No. 1 referred to the fact that the allotment of $63,000,000, appropriated by NIRA, had been made available for the construction of the dam and power plant. No. 9 recited that the increased amount of firm power made possible at the lower dams by reason of the storage behind the Grand Coulee Dam was an important factor in making the lower dams self-liquidating. No. 10 referred to the fact that the Columbia Basin Commission had been created by the state Legislature for the purpose of co-operating with the federal government in securing the construction of the project and of the Grand Coulee Dam.

The contract then set forth the articles of agreement by number. The first, which is numbered article 11, provided for the expenditure by the United States of $63,000,000, or so much thereof as was found necessary, in the construction of a dam and power plant at Grand Coulee site. Article 12 provided that the United States should retain title to the dam and power plant until the cost of the project had been fully repaid into the treasury of the United States. Article 13 reads as follows: '13. Commission to Act in Advisory Capacity. The Commission will act as an advisory board representing the state in an advisory capacity in conferences with officers of the United States concerning the various important questions which may arise from time to time in connection with the construction and use of the said dam, power plant and transmission lines.' (Italics ours.) Then followed a number of provisions giving the state an option, for a period of 8 1/2 years after the date of the contract, to purchase the perpetual right to the entire output of the dam and power plant, upon the conditions set forth in detail therein. Article 24 reads as follows: '24. Rules and Regulations by Secretary. The Secretary shall have the right to adopt and promulgate rules and regulations for the administration of the said project and the right to determine and decide all questions arising in connection with or growing out of the construction or operation and maintenance of said proposed dam, power plants and transmission lines and which are not expressly determined by law or the terms of this contract, and his decisions on such questions shall be conclusive.' (Italics ours.)

At this point, appellant's first connection with the project appears. On November 29, 1933, appellant, a resident of San Diego, Cal., entered into a contract with the United States for the excavation of overburden at Columbia river dam site, Columbia Basin Project, 'Washington,' for the sum of $534,500. The specifications, attached to and made a part of the contract, provided, among other things, that the appellant should obtain all required licenses and permits, should give preference, after ex-service men, to citizens who were residents of the county and state in which the work was to be performed, should furnish compensation insurance in compliance with the laws of the state wherein the work was to be done, and should comply with all applicable provisions of federal, state, and municipal safety laws and building and construction codes.

Appellant entered upon the execution of the work under the contract about January 1, 1934, and completed it in the summer of the same year. During the entire performance of the work, appellant maintained his office and living quarters within the territory of the project as hereinafter designated.

After the completion of that contract, appellant, on July 18, 1934 entered into a second contract with the United States, which was for the construction of a railroad at Grand Coulee Dam, Columbia Basin Project, 'Washington,' for the sum of $235,570. The railroad was to be 34.5 track miles in length, extending from the Northern Pacific Railway tracks at Odair, Wash., to the dam site. The specifications in this contract contained the same provisions as those to which we have specifically...