Washington County v. State Tax Commission

133 P.2d 564, 103 Utah 73, 1943 Utah LEXIS 88

• Court: Utah Supreme Court
• Decided: January 28, 1943
• Docket: No. 6426.
• Status: Published

Opinions

WOLFE, Chief Justice.

Original proceeding in this court on a petition for a writ of prohibition to prevent the Tax Commission from applying the formula set out in Section 80-2-7, R. S. U. 1933, in ascertaining the amount of money to be refunded to pumpers of irrigation water. The petition alleges that Section 80-2-7 is unconstitutional and that the Tax Commission is, therefore, without jurisdiction or authority to apply the formula set out therein. The defendants demurred generally and answered that they were proceeding according to the provisions of Sections 80-2-6, 7, and 8, R. S. U. 1938, which sections were constitutional and that the petitioners had misconceived their remedy in petitioning for a writ of prohibition. We first consider the defendants’ contention that the petitioners have misconceived their remedy.

In order to ascertain whether the Commission is proceeding without authority, it is necessary to determine the constitutional question, for the Commission has the authority to apply the formula prescribed by Section 80-2-7 only if that section is constitutional. In this situation, if there is no other adequate remedy in the ordinary course of the law, the writ may be used to test the constitutionality of the statute in question. In Levy v. Superior Court, 105 Cal. 600, 38 P. 965, 29 L. R. A. 811, the court entertained the writ to test the validity of a statute which gave the court the authority to proceed in a particular manner to examine under oath a person alleged by the executor or administrator to be concealing property of the estate. We entertained the writ in a similar situation in Mayers v. Bronson, 100 Utah 279, 114 P. 2d 213, 136 A. L. R. 698, when the cause had ripened to the point where the person asked to disclose would have had to do so and thus forego a claimed immunity or resist and run the peril of being wrong with consequent fine or imprisonment. See, also, Adolph Coors Co. v. Liquor Control Commission, 99 Utah 246, 105 P. 2d 181; McInerney v. City of Denver, 17 Colo. 302, 29 P. 516; Bell v. First Judicial District Court, 28 Nev. 280, 81 P. 875, 1 L. R. A., N. S., 843, 113 Am. St. Rep. 854, 6 Ann. Cas. 986.

In this case, the authority of the Commission to proceed pursuant to Section 80-2-7 depends upon the constitutionality of that section. This type of case must be distinguished from those cases where the lower tribunal has general jur isdiction over the subject matter in controversy but while proceeding within its jurisdictional limits is called upon to decide the constitutionality of a statute drawn into controversy. In the latter type of cases the fact that the lower tribunal committed error in holding the statute in question constitutional does not unhorse it of jurisdiction, but it has the authority to proceed to final judgment. Atwood v. Cox, 88 Utah 437, 55 P. 2d 377; State ex rel. Robinson v. Durand, 36 Utah 93, 104 P. 760; State ex rel. Heinze v. District Court, 32 Mont. 394, 80 P. 673.

Even in the former type of case where the very constitution or existence of a court or its authority to proceed in a particular manner depends upon the validity of a statute, the writ will not issue unless it is also shown that the petitioner has no other adequate remedy. Section 104-69-1 and 2, R. S. U. 1933; Mayers v. Bronson, supra. Therefore, in order to determine whether the writ was properly issued in this case we must ascertain whether or not there is another adequate remedy. If there is, the alternative writ should not have been issued for the writ of prohibition is the most extraordinary of all writs. Van Cott v. Turner, 88 Utah 535, 56 P. 2d 16; Campbell v. Durand, 39 Utah 118, 115 P. 986.

The defendants suggest that the petitioners have an adequate remedy under the declaratory judgment statutes, or by injunction. Section 104-64-1 and 2, R. S. U. 1933, do expressly authorize district courts to determine the validity of statutes which affect the rights, status, or other legal relations of the person bringing the action. While such proceeding might be adequate to test the validity of the statutes in question here, the Tax Commission could proceed pursuant to Section 80-2-7 while the declaratory action was pending. Thus, the petitioners might be injured even though they prevailed in the declaratory judgment proceeding. The envisaged ramifications of other suggested remedies are such that their adequacy is somewhat doubtful. Ordinarily sound public policy would re quire a petitioner, seeking to halt a state agency like the Tax Commission, to make an affirmative showing that he had no other adequate remedy. However, the alternative writ has issued. Any harm resulting therefrom has already been done. Since it has been delayed, the Tax Commission is quite as anxious for a decision on the questions herein involved as are the petitioners. The case involves the conflicting interests of several groups who have intervened and gone to the expense of filing briefs on the points raised. Other persons and corporations similarly situated throughout the State are interested in the outcome of the action, and the case, therefore, has a public interest phase. None of the parties will be prejudiced if we do so proceed and no good purpose can now be served by compelling the petitioners to seek other possible remedies. We, therefore, proceed to the merits.

A short statement of the historical background of this case might be helpful in an understanding of the problems raised. Before the amendment of 1930, Section 3, Article XIII of the Constitution of Utah provided that:

“Ditches, canals, reservoirs, pipes and flumes owned and used by individuals or corporations for irrigating lands owned by such individuals or corporations, or the individual members thereof, shall not be separately taxed as long as they shall be owned and used exclusively for such purpose.”

This provision was probably adopted in pursuance of a general public policy designed to encourage the cultivation and irrigation of arid lands. By 1930 the feasibility of pumping underground water to the surface for irrigation by use of electrical power had been demonstrated. At that date' amendments to §§ 2 and 3 of Article XIII were adopted by the Utah electorate to remedy the obvious inequity of tax exemption accorded to gravity or surface water users as against persons who used electrical power to pump irrigation water. The Constitution was amended to provide, Art. XIII, § 2, that:

“Water rights, ditches, canals, reservoirs, power plants, pumping plants, transmission lines, pipes and flumes owned and used by individuals or corporations, for irrigating lands within the State owned by such individuals or corporations, or the individual members thereof, shall not be separately taxed as long as they shall be owned and used exclusively for such purposes. Power plants, power transmission lines and other property used for generating and delivering electrical power, a portion of which is used for furnishing power for pumping water for irrigation purposes on lands in the State of Utah, may be exempted from taxation to the extent that such property is used for such purposes. These exemptions shall accrue to the benefit of the users of water so pumped under such regulations as the Legislature may prescribe.”

Under this provision the Legislature was to work out the details. The only guide imposed by the Constitution was that the Legislature evolve a formula which would be reasonably calculated to measure the extent to which the property of the electrical distributor was used to supply pumping power.

In 1931 the Legislature enacted the present “pump refund” statutes, Section 80-2-6, 80-2-7, and 80-2-8, R. S. U. 1933, which provide:

80-2-6 “Power plants, power transmission lines and other property, used for generating and delivering electrical power, a portion of which is used for pumping water for the irrigation of lands in this state, are exempted from taxation to the extent' that such property is used for such purposes. Such exemption shall accrue to the benefit of the users of the water so pumped.”

“80-2-7 “The state tax commission shall ascertain the total amount of electric power in kilowatt hours distributed by each distributor thereof for all purposes within this state, and the total amount of electric power in kilowatt hours distributed and used for pumping water exclusively for the irrigation of lands within this state by each such distributor; and from the total property assessment on all properties assessed within this state so used for generating and distributing electrical power by each such distributor the state tax commission shall make an exemption of the percentage thereof which the total amount of electric power in kilowatt hours so distributed by each such distributor and used exclusively for pumping water for irrigation purposes bears to the total amount of electric power -distributed by such distributor for all purposes within this state.”

80-2-8 “The total amount of tax saved to each distributor by such exemption shall be prorated and paid by such distributor to the users of its power for pumping water for irrigation purposes, ratably according to the amount' of power so used for such purposes by each such user.”

The plaintiff contends that the Constitutional provision only authorizes the Legislature to exempt from taxation that property of an electrical distributor which is used in whole or in part to furnish electrical energy to pump irrigation water, and that, therefore, Section 80-2-7 wrongly prescribes a formula which exempts property of an electrical distributor without regards to whether or not it is so used.

The Tax Commission interprets Section 80-2-7 as permitting the application of the formula to all the property of the defendant power company which is operated as a unit. The respective positions of the parties can best be illustrated by assuming a hypothetical case. If we assume the total electrical energy generated and distributed by the Washington-Iron County system for all purposes to be 100,000 kilowatt hours, and the total energy used for pumping purposes' to be 2,000 kilowatt hours, then 2,000/100,000 or 1/50 of the total electrical energy is used for pumping. Under the Tax Commission’s interpretation, 1/50 of the total property in the Washington-Iron County system would be exempt from taxation. If we assume the total valuation of that system for tax purposes to be $800,000, l/50th, or $6,000, would be exempt.

The petitioners contend that before any formula can constitutionally be applied to the property comprising the Washington-Iron County system, the property in the system, such as the line to Zion’s Canyon, meters in private homes, etc., which property is not used directly to furnish power to pumpers, must be cut off from the remainder which is so used. If, for example, we assume that the property so cut off were valued at $50,000, the value of the remaining property in the system would be $250,000. Hence, in the petitioner’s formula the $250,000 item would take the place of the $300,000 item in the Tax Commission’s formula. If all other factors were to remain unchanged the formula would be: 100,000 k. h. are to 2,000 k. h. as $250,000 is to X (the amount to be exempted) or $5,000. However, it is pointed out that if the formula is to be applied to only part of the property in the unit, it should take into consideration only part of the total number of kilowatt hours generated and distributed by the unit, for the property cut off would take with it part of the total kilowatt hours. It is not clear from the pleadings and the facts just what total would be left if all the property not directly used to furnish power to pumpers were cut off before the formula were applied, but in all probability a different result would be reached than that reached under the Tax Commission’s interpretation.

The case raises but two questions: (1) Is the Tax Commission correctly applying the formula set out in Section 80-2-7, (2) If so, is said Section constitutional. These questions may be discussed together.

Before we hold any statute unconstitutional, every doubt as to its constitutionality should first be resolved in favor of its validity. Stillman v. Lynch, 56 Utah 540, 192 P. 272, 12 A. L. R. 552; State v. Packer Corporation, 77 Utah 500, 297 P. 1013. The Legislature enacted these statutes in 1931. Since that date the Tax Commission has proceeded under these statutes to apply the formula set out in Section 80-2-7 to all the property in the Washington-Iron County unit.

“It is a general rule that contemporaneous construction by the department of government specially delegated to carry out a provision of the Constitution raises a strong presumption that such construction, if uniform and long acquiesced in, rightly interprets the provision. * * * While such construction is not conclusive upon the courts, it is entitled to the most respectful consideration.” Wells Fargo & Co. v. Harrington, 54 Mont. 235, 169 P. 463, 466.

“The construction placed on * * * constitutional provisions by officers * * * at or near the time of the enactment, which has been long acquiesced in, is a just medium for their judicial interpretation.” Foote v. Town of Watonga, 37 Okl. 43, 130 P. 597, 598.

Admittedly the Legislature in prescribing a formula such as is set out in Section 80-2-7 cannot ignore the express words of the Constitution. If the formula contains elements which could not possibly be a guide or an aid or which have no relevancy to the end to be arrived at, it is pro tanto invalid. State ex rel Public Service Comm. v. Southern Pac. Co., 95 Utah 84, 79 P. 2d 25. The petitioners contend that this formula does contain such elements; that the sole basis for any exemption is limited by the Constitution to the use to which the property is put; and that this basis is completely ignored by this formula which is applied to all property of an electrical distributor, operated as a unit regardless of its use.

The construction of the petitioners in this regard would appear correct if Sections 80-2-7 and 8 were read without reference to Section 80-2-6.

“But a statute is passed as a whole not in parts or sections and is animated by one general purpose and intent. Consequently each part or section should be construed in connection with every other part or section so as to produce a harmonious whole.” Lewis’ Sutherland “Statutory Construction” Second Ed. Vol. II, p. 706.

See, also, State ex rel Public Service Comm. v. Southern Pac. Co., supra; Colorado Springs Livestock Co. v. Godding, 20 Colo. 71, 36 P. 884.

When so construed, Section 80-2-6, in the words of the Constitution describes the property to be exempted and the basis for the exemption is the use to which the property is put. But the use to which the property is put does not mean that there must be a separation of the whole property into different parts according to whether each one of those parts is directly engaged in creating or carrying electrical energy to pumpers. Neither the Constitution nor the statute provides that the portion used for pumping water for irrigation of lands may be (are) exempted from taxation. The words, “a portion of which is- used” are descriptive of the sort of plants, power transmission lines, and other property which, is to be the subject of exemption by the legislature. “Power plants, power transmission lines no portion of which is used for pumping water for irrigation purposes” is not even the subject of the Constitutional provision or the exemption. These words are descriptive of the sort of electrical public utilities which are the subject of legislation, and it is incorrect to construe them as if they were a portion segregated for exemption. The operative words of both the Constitution and the statutes are those reading “to the extent that such property is used for such purposes.” What is meant by “such property”? Not necessarily the portion directly used to create and transmit electrical energy to pumpers. “Such property” means power plants, power transmission lines and other property used for generating and delivering electrical power a 'portion of which is used for pumping purposes. In determining the extent to which “such property” is used for “such purposes”, that is, irrigation purposes, it is not necessary to presume that only that property which creates and transmits the comingled energy is used for “such purposes.” In another sense, all of it is used for “such purposes”- because it is a unitary system. In determining the extent to which all of the system is used for irrigation pumping purposes, we must keep in mind the purpose of these statutes.

If each land owner were required to generate and distribute his own electrical energy for pumping his own irrigation water, the whole of it would be exempt under Article XIII, Section 2 if devoted only to pumping. Likewise, if one or several irrigation companies were organized to generate and distribute electrical energy solely for the purpose of pumping water, such property would be fully exempted from taxation. What the legislature intended to do was to treat for taxation purposes such portion of the property of a power company as could be said to be devoted to furnishing power to pumpers as if, in effect, it belonged to the pumpers. Naturally, since the power system was used to generate and distribute electrical power for all purposes and none of it could be earmarked for pumpers as it came from the dynamos or went through the transmission lines and transformers, nor could the generating unit, nor even the distributing system be said to be used for a definite period to generate or distribute power exclusively for the pumpers, some formula which divided the assessed value of the property on a proportional basis in the ratio of power generated for pumping purposes to total power generated had to be devised.

The legislature, from an administrative standpoint, believed that it would be impracticable to lop off certain parts of the system over which it was claimed no mingled electrical energy flowed and those parts which it was claimed were unrelated to the production and distribution of the energy required for pumping from the system as a whole. Furthermore, a system which is tied together and treated and operated as a unit and from which a gross revenue is produced as a unit has it valuation for taxing purposes based in part on its unitary earnings. These earnings form one of the factors or bases for taxation evaluation purposes. State ex rel Public Service Comm. v. Southern Pac. Co., supra.

All consumers are not only looked upon as contributing to the total operating income, but the system is considered as a unit in producting the earnings. The less paying portions were bolstered by the greater yielding parts. In that sense every part of the system contributes to every dollar of earnings. In fact, were not this system operated as a unit, it may be that part of the lines which do furnish power to pumpers would not be maintained at all because when cut off from the unit they would not be profitable.

Reasoning from the earnings as a whole produced by the system as a whole, there was nothing wrong in theory in including in the valuation, which is ascertained by a unitary assessment and which is to form the base for the application of the proportional power multiplier, all parts of unitary system. And from an administrative standpoint, which in taxation matters does not require exactitude, it was certainly permissible.

While it is true, as petitioners contend, that the formula can not contain elements which have no possible relevancy to the end sought to be arrived at, it must also not be so restricted as to exclude the consideration of those elements which are generally recognized as relevant or required. The property, no matter which formula is applied, will still be operated as a unit. It will still have its gross earnings based on a unitary system, and it will be assessed for taxation as a unit. Furthermore, the refunds to the pumpers will be made according to the number of kilowatt hours of electricity each pumper used, and the total kilowatt hours produced and distributed by the unit will continue to be so mingled that it will be impossible to determine which unit of electrical energy went to the pumpers and which went for other purposes. The Constitution does not explicitly so require, and when we consider all of the above factors, it would appear unreasonable to construe the Constitutional provision and these statutes as requiring in this one instance that the Tax Commission break this unit down into its component parts before any formula could be applied. However, the holding of this case is based upon the fact that the properties involved are operated as and considered to be a single integrated unit. There may be situations in this State in which an integrated power system is made up from numerous smaller self-contained units, some of which latter units furnish power to pumpers. The problem, being largely an administrative one, must admit of some flexibility, and in such case if it is administratively desirable to take the assessment of such sub-integrated unit as the base for the formula herein laid down, we are not at this time prepared to say that it may not or should not be done. However, the question is not before us and the opinion should not be construed as deciding it.

The Tax Commission has interpreted this provision to permit the treatment of this property as a unit and has applied this interpretation for over 10 years. When so interpreted the statutes must be held to be constitutional, and we cannot hold that this formula as applied by the Tax Commission is not reasonably calculated to accomplish the objective of the Constitutional provision. The Thx Commission is proceeding properly and the alternative writ should be vacated. Such is the order.

McDONOUGH, J., and M. J. BRONSON, District Judge, concur. LARSON, J., dissents..