Lower Colorado River Authority v. Chemical Bank. & Trust Company, Trustee et al., 144 Tex. 326

Mr. Justice Brewster delivered the opinion of the Court. On July 18, 1945, this court rendered an opinion reversing, in part, the judgments of the courts below. The majority of the court as now constituted are convinced that that action was erroneous. Accordingly, the original opinion is withdrawn and the following is substituted therefor.

This is a suit by Lower Colorado River Authority, herein designated as LCRA, against Chemical Bank & Trust Company, herein called Trustee, The American National Bank of Austin, herein referred to as Co-Trustee, and the Attorney General of , Texas, seeking a declaratory judgment to determine the validity of Art. 7150, Sec. 4a, Vernon’s Annotated Civil Statutes (Acts 48th Leg., Reg.

Ses., Chap. 316, p. 472), and “the rights, status and other legal relations of the parties” under portions of a trust indenture executed between LCRA and Trustee and Co-Trustee to secure $21,635,000 in revenue bonds issued and sold by LCRA. The trial court’s judgment, unsatisfactory, in part, to LCRA as well as to Trustee and Co-Trustee, was affirmed by the Court of Civil Appeals. 185 S. W. (2d) 461. Consequently, LCRA, Trustee, and Co-Trustee are petitioners here. The sole question presented in the application of LCRA is the validity of Sec. 4a, Art. 7150, supra.

Art. 7150 lists property which is exempt from taxation.

Section 4 deals with public property. Then comes

section 4a listing as exempt “all property real or personal belonging exclusively to Districts and Authorities created directly by Acts of the Legislature pursuant to

Article XVI,

Section 59 of the Constitution, as agencies of the State of Texas, and all property real or personal belonging exclusively to Districts and Authorities created or incorporated under laws enacted pursuant to

Section 59,

Article XVI of the Constitution.” That exemption is then limited, however, by the following proviso, which is the particular portion of the statute under attack: “Provided that if any such District or Authority has heretofore acquired or does hereafter acquire property which at the time of such acquisition is or was then subject to taxation, and is at the time of its acquisition being used for generating, transmitting, and distributing electric energy or power, such District or Authority shall at the times prescribed by law for the payment of ad valorem taxes make a payment in lieu of taxes to the State of Texas and to the county, city, and such taxing districts within which such property is situated; such payment in lieu of- taxes to be in the amount which would be realized by levying an ad valorem tax at the current rate for the then current tax year based on the assessed value of such property for the last current year before being acquired by such District or Authority; * * Although called payments “in lieu of taxes,” the payments are mandatory and must be made when ad valorem taxes are due; they equal what the ad valorem tax would yield by levy at the current rate; they are based on the assessed values fixed for the last year before the property was acquired by the district or authority; and they are secured by a lien on the property.

Clearly, therefore, they are taxes, and we so hold; hence the question is whether the property of LCRA is exempt from taxation as public property under Art. XI,

section 9, of the Constitution of this state, which reads: “The property of counties, cities and towns, owned and held only for public purposes, such as public buildings and the sites therefor, fire engines and the furniture thereof, and all property used, or intended for extinguishing fires, public grounds and all other property devoted exclusively to the use and benefit of the public shall be exempt from forced sale and from taxation * (Italics ours.) That provision has been construed by this court in such cases as Galveston Wharf Co. v.

City of Galveston, 63 Texas, 14, and Corporation of San Felipe de Austin v. State, 111 Texas, 108, 229 S. W. 845. In the Galveston Wharf Co. case, supra, it was held that wharf property owned by the City of Galveston and open to use by all persons and vessels was public property, notwithstanding the fact that compensation was charged for its use, when the money so received, after payment of expenses, was expended for the benefit of the people of the city. In Corporation of San Felipe de Austin v.

State, supra, it was decided that land granted by the Mexican Government to the town of San Felipe de Austin for use by its inhabitants as timber and grazing land was not subject to taxation because it was devoted exclusively to a public use. Sec. 59, Art. XVI, was adopted in 1917 as an amendment to ' the Texas Constitution.

Declaring that the control, storing, preservation and distribution of flood waters and the waters of Texas rivers and the development of hydro-electric power are public rights and duties, it authorizes the legislature to divide the state into a proper number of conservation and reclamation districts to accomplish those purposes, “which districts shall be governmental agencies and bodies politic and corporate with such powers of government and with the authority to exercise such rights, privileges and functions concerning- the subject matter of this amendment as may be conferred by law.” Pursuant to that amendment the Legislature in 1934, by Acts 43rd Leg., 4th C.

S.,ch. 7, p. 19, created LCRA, stating that it “shall be and is hereby declared to be a governmental agency and body politic and corporate, with the powers of government” and that its creation “is hereby determined to be es- " sential to the accomplishment of the purposes of

Section 59 of

Article 16 of the Constitution of the State of Texas, including (to the extent hereinafter authorized) the control, storing, preservation and distribution of the waters of the Colorado River and its tributaries for irrigation, power and other useful purposes, the reclamation and irrigation of arid, semi-arid and other lands needing irrigation, and the conservation and development of the forests, water and hydro-electric power of the State of Texas.” It authorizes LCRA to fix and collect reasonable rates for water, power, electric energy and other services sufficient to pay expenses of operation and maintenance as well as interest and matured principal on payments agreed to be made as to such bonds and to fulfill the terms of any agreements made with its bondholders.

The Act exempts all property of LCRA from forced sale. It guarantees free use by the public of LCRA lands for recreation, hunting and fishing, except where such use would interfere with LCRA’s business, grants free public passage to and from all its lakes and provides that the public shall not be charged for the right to hunt, fish, boat or swim in its lakes.

Finally, the Act declares that the Legislature’s intention is that rates made and collected by LCRA “shall not be in excess of what may be necessary to fulfill the obligations imposed upon it by this Act;” and it is conceded that no individual will or can ever enjoy any dividends or other income from LCRA’s operation. The vital public purpose served by districts organized under Art. XVI, Sec. 59, supra, is admirably stated in Bexar-Medina-Atascosa Counties Water Improvement Dist. v. State (Civ. App.), 21 S. W. (2d) 747 (er. ref.), and Brazos R. Con. & Rec. Dist. v. McCraw, 126 Texas, 506, 91 S. W. (2d) 665.

In the former case it is said that any doubt as to the taxability of their properties should be resolved in favor of reclamation and preservation of the state’s waters rather than taxation. It thus appears from the provisions of our Constitution and legislative enactments thereunder, as they have been construed by our courts, that LCRA is a governmental agency serving a public purpose in controlling and storing the flood waters of the Colorado River and that all benefits derived from its efforts are public benefits.

Hence, its property is public property devoted exclusively to public use and is exempt from taxation under Art. XI, Sec. 9, of the Constitution; and the proviso contained in Sec. 4a, Art. 7150, supra, requiring payments “in lieu of taxes,” is void because contrary to the Constitution. That the property in question is revenue-producing because used to generate electricity to be sold to the public does not mean that it is not held only for public purposes nor that it is any the less devoted exclusively to the use and benefit of the public. That precise question was foreclosed in Galveston Wharf Co. v.

City of Galveston, supra, in an opinion by Justice Stayton. There, as here, the right of user was open to everybody but no one could actually use the wharf without paying for the privilege, yet this court, through Justice Stayton, said that that fact “does not withdraw from it its public character”; that “it is property held only for purposes essentil'ly public, and may be said to be devoted exclusively to the use and benefit of the public.” On that declaration we are content to rest. Nor can the force of Art.

XI, Sec. 9, of the Constitution of this state, be destroyed in this case by any application of the doctrine of ejusdem generis. It is contended that under that doctrine the fact that the words “all other property devoted exclusively to the use and benefit of the public” follow the language “public buildings and the sites therefor, fire engines and the furniture thereof, and all property used, or intended for ex-tinuishing fires, public grounds” limits the application of the exemption to public buildings and grounds and anything used to fight fires.

We do not believe the framers of the Constitution ever intended that the exemption should be so narrowly applied, otherwise the purpose of the exemption would be largely defeated. To apply the doctrine of ejusdem generis in its strict sense would mean that government in Texas could engage in the senseless process of taxing itself, the net result of which would be put to take its own money out of one pocket for the purpose of putting it into another — less the cost of assessing and collecting the tax. Obviously that procedure could never accomplish anything but an idle expenditure of public funds.

See State of New Mexico v. Locke, 29 N. M. 148, 219 Pac., 790, 30 A. L. R. 407. To illustrate, parking meters are now maintained in nearly every city of any importance to assist in providing funds with which the cities may purchase and operate fire fighting machinery, own public grounds, erect public buildings and otherwise perform their functions. To the extent of the revenues they yield, the meters relieve the cities of the necessity of raising those funds by general direct taxation.

Therefore, to tax them would mean that what is taken by taxation, plus the cost incident to the process, would have to be made up in some other form of taxation.

Again, road machinery owned and used exclusively by a county in constructing and maintaining public roads, trucks owned by the state and used exclusively by it in transporting food and other essential supplies to its eleemosynary institutions and literally hundreds of other items of personal property owned by the public and used exclusively for public purposes would be liable to taxation at the will of the legislature, merely because they cannot be classified as public buildings, public grounds or instrumentalities for extinguishing fires.

It is apparent, therefore, that Justice Stayton wrote with his habitual deliberation and accuracy when he rejected the narrow ejusdem generis doctrine contended for in this case, in these words: “The enumeration of certain things in the

section of the Constitution quoted (Art. 11, Sec. 9), as exempt from taxation, was not intended to operate as a' declaration that things not enumerated were subject; but simply to indicate the character of things, and the uses to which they must be appropriated, in order to be entitled to the exemption.” (Italics ours.) Galveston Wharf Co. v. City of Galveston, supra. Years later Chief Justice Phillips added his rejection of it when he said in Corporation of San Felipe de Austin v. State, supra, “The test is not whether the property is used for governmental purposes. That is not the language of the Constitution.

This court has never adopted that narrow limitation and the weight of authority is opposed to it. Much public property of municipalities exempt from taxation has, and can have, no governmental use. The test is whether it is devoted exclusively to a public use.” (Italics ours.) Then, citing Galveston Wharf Co. v. City of Galveston, supra, with approval, he added that it would be difficult to find anything “governmental” in the public use of a wharf. Nor are we under any obligation, under the facts of this case, to harmonize Art. XI, Sec. 9, supra, with Art.

VIII, Sec. 2, of the Constitution of Texas, which declares that the legislature “may, by general laws, exempt from taxation public property used for public purposes.” That duty likewise was performed for us a long time ago by Chief Justice Stayton when he said, in Daugherty v. Thompson, 71 Texas, 192, 9 S. W., 99, “As before said,

section 2,

article 8, of the Constitution, gave to the Legislature power to exempt property held in private ownership but used for purposes which give to it a public character. (Italics ours.)

Section 9 of

article XI, however, exempts from taxation ‘property of counties, cities and towns owned and held only for public purposes, such as public buildings and sites therefor, fire engines and the furniture thereof and all property used or intended for extinguishing fires, public grounds, and all other property devoted exclusively to the use and benefit of the public.’ What the Constitution exempts from taxation the Legislature has no power to require to be taxed.

Thus this court early and unequivocally denied the doctrine that the Legislature has the power to tax all public property except courthouse, jails, fire fighting apparatus, school buildings, playgrounds, libraries, public parks, and the like. It announced in unmistakable language that the Legislature is without power to tax any property publicly owned and held only for public purposes and devoted exclusively to the use and benefit of the public.

Yet the Constitution has never been amended either to modify or overrule those clear declarations; nor, in so far as we are advised, has any attempt ever been made so to amend it. So it is not for us now to question them. We hold, therefore, that Sec. 4a, of Art. 7150, R. S., supra, is void. -We have concluded that the Court of Civil Appeals reached the correct conclusion on all other questions presented and that no good purpose would be served by writing further on them.

Accordingly, the judgment heretofore rendered in this cause is set aside and the judgment of the Court of Civil Appeals affirming that of the trial court is affirmed. Opinion delivered October 31, 1945. Rehearing overruled November 28, 1945.