Title: City of Mesa v. Salt River Project Agr. Imp. & P. Dist.
Citation: 101 Ariz. 74, 416 P.2d 187
Docket Number: 8200
State: Arizona
Issuer: Arizona Supreme Court
Date: July 1, 1966

101 Ariz. 74 (1966) 416 P.2d 187 CITY OF MESA, a municipal corporation, Appellant, v. SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER DISTRICT, an agricultural improvement district, Appellee. No. 8200. Supreme Court of Arizona. In Banc. July 1, 1966. Rehearing Denied September 20, 1966. J. LaMar Shelley, Mesa, for appellant. Jennings, Strouss, Salmon &amp; Trask, Irving A. Jennings, Phoenix, for appellee. Ramsey Clark, Asst. Atty. Gen., Charles A. Muecke, U.S. Atty., Arthur E. Ross, Asst. U.S. Atty., Phoenix, Roger P. Marquis, Atty., Dept. of Justice, Washington D.C., amici curiae United States of America. McFARLAND, Justice. The City of Mesa, a municipal corporation, the appellant hereinafter designated the plaintiff brought an action in eminent domain to condemn a portion of the electrical plant and system of the Salt River Project Agricultural Improvement and *75 Power District, an agricultural improvement district hereinafter designated the defendant located at the Bayless Shopping Center on East Main Street in Mesa, Arizona. Defendant filed a motion to dismiss the action on the ground that the United States of America is an indispensable party to the action, and therefore the court lacks jurisdiction. The United States of America filed an amicus curiae brief claiming the United States government was an indispensable party to the suit in that the property sought to be condemned is an integral part of an important vital federal reclamation project. The lower court entered the following judgment October 15, 1963: From this judgment plaintiff appealed. In City of Mesa v. Salt River Project Agricultural Improvement and Power District, 92 Ariz. 91, 373 P.2d 722, plaintiff brought an action against defendant for a declaratory judgment to determine the respective rights of the parties to serve electrical energy in certain areas within its corporate limits, including the Bayless Shopping Center. It is the contention of plaintiff that in this decision this court gave plaintiff the right to condemn the property involved in this action. This court has had occasion to set forth the history of the Salt River Valley Project and the Salt River Valley Project Agricultural Improvement and Power District in other cases[1], the latest being Uhlmann v. Wren, 97 Ariz. 366, 401 P.2d 113. A large portion of the Salt River Valley was irrigated and cultivated in prehistoric times, but had been largely abandoned when white settlers began to arrive about 1867. Adjacent to what is now the Salt River Project were found the Mohave, Apache, Pima, and Maricopa Indians. While their reservations covered many thousands of acres, the irrigated lands consisted of only 4,713 acres, which lay along and close to the Salt and Verde Rivers. When the white settlers came, they found it desirable and necessary to form canal companies. They soon found, however, that the flow of the river varied, and that during the years of drought the supply of water at low-river stages was inadequate for the land they had placed in cultivation. Maintenance of the brush and rock diversion dams became a problem, for such dams were often washed out at the beginning of the flood. It was soon determined that a permanent dam, or dams, and a canal system were needed. Private capital was not available, so, in order to accomplish their objectives, when the Reclamation Act of June 17, 1902, 32 Statute 388, known as the Reclamation Act, now codified as 43 U.S.C.A. § 371 et seq., became effective, application was made for a federal reclamation project under the Act.[2] The Salt River Valley Water Users Association was incorporated under the laws of Arizona February 9, 1903, and a written agreement for the construction of the Project was entered into on June 25, 1904, between the Association and the United States of America. Title to Project property, under the authority of the Reclamation Act was retained in the United States government. The agreement was signed by the Secretary of the Interior on behalf of the United States, and by the Association president *76 and secretary on behalf of the Association. This agreement resulted in the construction of what is now known as the Theodore Roosevelt Dam, and the Project soon expanded to include the construction of the canal system and the power facilities. By 1907 the United States had purchased the various canals and acquired the distribution system in the Valley. In 1910 a contract was entered into between the Association and the United States for the construction of certain additional canals and electric power plants, the immediate cost to be borne by the Association. During the entire period prior to 1917 the Project was under the operation and control of the United States Reclamation Service. Although the Roosevelt Dam had not been actually completed until 1911, the first distribution of water stored behind the same was made in 1910. On September 6, 1917, the Association made a supplemental contract with the United States (by the Secretary of the Interior), in which the United States turned over to the Association the care, operation, and maintenance of the Salt River Project. This included power plants, power houses, and transmission lines as well as all of the irrigation facilities. In 1937 the Association, by agreement, transferred subject to the rights of the United States of America to the District all of its properties, including all water and power rights, franchises and privileges. The agreement recited the various contracts and obligations thereunder between the Association and the United States government in regard to the construction, operation, and maintenance of the Salt River Project, in which the District assumed the obligations thereunder. This contract was approved by the Secretary of the Interior, subject to all of the provisions of the contracts between the United States and the Association in existence as of the date of its approval, and the Salt River Project Agricultural Improvement and Power District expressly stated approval was made without waiver, modification, or abridgment of any of the terms or provisions of the contracts in existence at the time. Approval further provided that any remedy available to the United States against the Association by virtue of any contracts mentioned would be enforceable against the District.[3] Both defendant and the United States, in their briefs, contend that the United States government is the owner of the project facilities sought to be condemned, and the United States of America is an indispensable party to this action. In the case of Carr v. United States, 98 U.S. 433, 25 L. Ed. 209, the court held: It has been held to be elemental that the United States government is an indispensable party in an action against property in which the United States has an interest. This principle of law was well set forth in the case of Public Utility District No. 1 of Pend Oreille County v. Inland Power &amp; Light Company, 64 Wash. 2d 122, 390 P.2d 690, and supporting authorities. We do not deem it necessary to add to the decisions cited therein. The property sought to be condemned was all of the electrical works, lines, plants, facilities, and electrical properties owned and operated by the Inland Power &amp; Light Company, which, being a non-profit membership corporation organized under the laws of the State of Washington, was financed in its operation by the Rural Electrification Administration, an agency of the United States Department of Agriculture. The questions presented in Inland Power &amp; Light Company, supra, are the same as in the instant case that is, did the court lack jurisdiction *77 for the reason that the United States government was an indispensable party to the action? The court held: It is plain that, as held in the Inland case, supra, mere submission of the appearance by the United States as an amicus curiae does not give the court jurisdiction. Nor is it contended that Congress has passed authorization for the United States to become a party to the action. In the instant case the question then is solely the interest of the United States government in the property sought to be condemned. Though this is an appeal from a summary judgment, all of the contracts were made a part of the record, and the determination of the issue turns upon the construction of these contracts and the provisions of the Reclamation Act and amendments thereto under which the Salt River Project was formed. *78 Section 10 of the contract dated June 25, 1904, between the United States and the Association, provides that: Prior to the contract dated September 6, 1917, all of the construction, operation and administration of the Project were conducted by the officers and employees of the United States government, under direction of the Secretary of the Interior. Under this contract the Association was designated by the United States as agent for the care, operation, and maintenance of Project facilities. There were some 242,000 acres of land included in the Salt River Project. Soon after the Association took over the operation of the Project it became apparent there was not sufficient water for the irrigation of all of it, and it would be necessary to pump to prevent the waterlogging of the land, and for irrigation purposes. As a matter of fact, in the case of Hurley v. Abbott et al. (in the District Court of the Third Judicial District of the Territory of Arizona in and for Maricopa County, March 1, 1910), which decided the respective water rights of the members of the Association, Judge Edward Kent recognized the existence of a number of pumping plants for the supply of water during times of scarcity. Adams v. Salt River Valley Water Users' Association, 53 Ariz. 374, 89 P.2d 1060. The pumping of this water required that the Association expand its electrical facilities. This court, in the case of Reichenberger v. Salt River Project Agricultural Improvement and Power District, 50 Ariz. 144, 70 P.2d 452, recognized the title in these facilities to be in the United States government, using the following language: In all of the contracts with the United States government, the government retained title to the property. The contract dated September 6, 1917, under which the Salt River Valley Water Users' Association took over the operation of the Project, did not vest title in the Association, but merely provided that: The contract also stated: In setting forth the payments under the contract, it was provided that such payments would be paid "all without interest." The contract further provided: Paragraph nine provided that the contract could be cancelled or terminated upon March 1st of any year by giving one year's written notice thereof to the Secretary of the Interior, and that the agreement might be terminated by the United States government by written notice from the Secretary of the Interior, in case the Association failed to carry out the provisions of the law relating thereto or if the Secretary of the Interior should reasonably believe that the payment to it for the construction costs was being impaired by the failure or neglect of the Association to care for or maintain the Project. The 1937 contract between the Salt River Valley Water Users' Association and the Salt River Project Agricultural Improvement and Power District specifically provided: This contract was approved by the Secretary of the Interior on the express condition: Plaintiff contends that the United States has no real interest in the subject matter of this condemnation. In its brief, it states: Plaintiff also states that since the construction cost has been paid, the only excuse for termination of the contract by the United States is if the Association fails to carry out the provisions of the law or of the agreement, but since the United States has been paid in full, plaintiff asks the question, "how can it longer claim any right to terminate?" These are questions largely answered by the decision of the United States Supreme Court in the case of Ivanhoe Irrigation District v. McCracken, 357 U.S. 275, 78 S. Ct. 1174, 2 L. Ed. 2d 1313, which specifically involved parts of two statutory enactments one being Section 5 of the Reclamation Act of 1902 providing generally that no right to the use of water shall be sold for lands in excess of 160 acres to a single owner and the other, Section 9 of the Reclamation Act of 1939 in regard to the repayment of the United States for funds expended on construction of reclamation works. The same question is raised in the instant case in regard to the interest of the United States in the Salt River Project after repayment. The U.S. Supreme Court, in the Ivanhoe case, supra, in speaking of the repayment provision, stated: As pointed out in Ivanhoe, supra, the irrigation features of federal irrigation projects are built without the payment of interest. This is true in the instant case; thus, in reality, the cost has never been and will never be fully repaid. The United States is interested in seeing that the District fulfills its obligation as set forth in paragraph 15 of the 1917 contract in regard to providing for water for the Salt River Indian allotments, in the enforcement of the 160-acre limitation per person, and the fulfillment of other provisions of the contracts. As stated in these cases, the Reclamation Act was passed for the benefit of the people to develop the arid lands of the West. The people trying to develop this great Salt River Valley of Arizona just as in the Central Valley in California found it necessary to call upon the United States government for help, and, as the United States Supreme Court said in the Ivanhoe case, supra, the power of the Federal Government to impose reasonable conditions upon the use of federal funds, federal property, and federal privileges is beyond challenge. The initial money for the construction of this project was put up by the Federal Government. Without this initial investment the expansion would not have been possible. The initial investment gave the Project the financial standing necessary to secure loans. For example, payment of bonds issued for construction of dams below Theodore Roosevelt Dam was made possible by the sale of electricity generated at such dams, because Theodore Roosevelt Dam stored water which could be let down for the generation of electricity. The sale of this additional electricity, however, depended on an expansion of the market. It is an integrated project, the success of one phase depending on the others. It was evidently for this reason that in the 1917 contract the Association was required to agree to the provision: "That it will make no substantial change in any of said works, without first having obtained the consent thereto, to be expressed in writing, of the Secretary of the Interior. * * *" Plaintiff points to the further provision in the same paragraph which permits the District to construct additional works at its own cost without the necessity of procuring the assent of the Secretary of the Interior, provided that such additional works shall not in any wise impair or diminish the present efficiency or adequacy of the project for the purposes for which it has been designed, constructed and acquired, as supporting its contentions that the United States government did not thereby gain an interest in the property sought to be condemned in the instant case. This is not the interpretation as represented to Congress first in 1922 by Carl Hayden in securing the passage of the bill to permit the sale of surplus power on the Salt River Reclamation Project. Senator Hayden, then Congressman, in a report from the Committee on Irrigation of Arid Lands[4], stated: The same representation was made to the Senate in the report of the Committee on Irrigation and Reclamation by Senator Cameron.[5] This has also been the interpretation *83 of this court in the case of Reichenberger v. Salt River Project Agricultural Improvement and Power District, supra. This same interpretation was recognized in the recent case of Uhlmann v. Wren, supra, in which it was pointed out that our Legislature had also recognized the interest of the Federal Government in this project. Plaintiff states that the representation of the United States that the facilities are located on a general perpetual right-of-way easement granted in the landowners' contract for inclusion of their lands in the Project is not factual, in that it contradicts the wording of the easement attached on the Representation of Interest which was executed the 27th day of May, 1958. This easement was one granted in the contract of the landowners for inclusion of their lands in the Project. It is immaterial as to how the Project secured these easements, as was recognized in the case of City of Mesa v. Salt River Project Agricultural Improvement and Power District, supra, in which we stated: Under the interpretation which has been placed upon the contracts with the United States government by this court, property acquired by the District in the extension of the Project's electrical plant and distribution system is held in trust for the United States. The basis of the amendment to the Reclamation Act to permit the sale of power by the Project was, as stated by Carl Hayden, then Congressman, "* * * any new development or extension of our present power system automatically becomes the property of the United States Government; * * *." Senator Hayden pointed out at the time (1922) that this amendment was passed to permit the Project to finance this additional development. The Reichenberger case, supra, in speaking of additional electrical works of an extension character which were to be paid for by bonds of the Project, also stated "* * * the legal title thereto being held by the government, * * *" At no place in the contracts, or in the interpretation of the contracts is it recognized or provided that any part of the Project's electrical plant or distribution system would be held other than in trust for the Federal Government. This case only involves the jurisdiction of the state courts when the United States government has an interest in property sought to be condemned. We have recognized the right of the Project to bring suit and they have brought suit in many other instances. We do not pass upon what the United States government should do in regard to the title to these various projects, for as stated in the Ivanhoe case, supra, this is a matter to be determined by the Federal Government and not by this court. Plaintiff is not without remedy, but its remedy does not lie in this court. We find the United States of America has an interest in the property sought to be condemned, and is an indispensable party to the action. We therefore hold the lower court did not have jurisdiction over the action. Judgment affirmed. STRUCKMEYER, C.J., BERNSTEIN, V.C.J., and UDALL, J., concur. NOTE: Justice LORNA E. LOCKWOOD did not participate in the determination of this appeal. [1] City of Mesa v. Salt River Project Agricultural Improvement and Power District, 92 Ariz. 91, 373 P.2d 722; Reichenberger v. Salt River Project Agricultural Improvement and Power District, 50 Ariz. 144, 70 P.2d 452; The Salt River Valley Water Users' Association v. Spicer, 28 Ariz. 296, 236 P. 728; Orme v. Salt River Valley Water Users' Association, 25 Ariz. 324, 217 P. 935. [2] The Salt River Project was the first project organized under the Reclamation Act of 1902. [3] 1937 contract between the Salt River Valley Water Users Association and the Salt River Project Agricultural Improvement and Power District. [4] Report No. 1000, 67th Congress, 2d Session, House of Representatives. [5] Senate Report No. 826, 67th Congress, 2d Session.