Court Opinion

ID: 3840900
Source: CourtListenerOpinion
Date Created: 2016-07-06 08:10:07.549868+00
Date Added: 2024-06-11T07:40:33.278074
License: Public Domain

This is a suit, brought under the declaratory judgment act, to determine whether the plaintiffs are subject to an income tax on profits earned in the performance of a contract with the federal government for construction work on the Bonneville dam project.
This federal project extends from the banks of the Columbia river in Washington to the banks of the river on the Oregon side near Bonneville. It also includes an extensive tract on the mainland in this state necessary to maintain and operate the locks and power house. It is conceded that the construction work of the plaintiffs was performed on the project within the territorial boundaries of Oregon, some of which was on the bed of the Columbia river.
On original hearing it was held — Justices BEAN and KELLY dissenting — that the federal government had exclusive jurisdiction over the territory within the dam *Page 489 
project area and that, by reason thereof, the State Tax Commission had no authority to impose the tax. The importance of the questions involved has prompted this court to again give careful consideration to the case.
At the very threshold of the case the court should not be unmindful of the well-established rule that the sovereignty of a state — which includes the power to tax — is not presumed to have been relinquished or surrendered. It is only when such intention is clearly expressed that a court should so declare: Ryan v.State, 188 Wn. 115 (61 P.2d 1276), citing numerous authorities. Also see 1 Cooley on Taxation, (4th Ed.) p. 159, § 60. If the contention of the appellants be sustained, the state is completely ousted from all jurisdiction over the area and, as stated by the Washington supreme court in the Ryan case:
"* * * the residents of the project would be without school facilities, police protection, and the right to vote, the workmen would be deprived of the benefit of industrial insurance, and the rules for sanitation would be suspended; for, if the state be wholly without jurisdiction, then it must follow that the state may not extend its privileges to the residents of the project nor expend its money in their behalf."
It is well established that, under and by virtue of Article I, § 8, of the constitution of the United States, the federal government has the power to acquire exclusive jurisdiction over territory within a state, if the land is purchased with the consent of the state for a constitutional purpose: SurplusTrading Co. v. Cook, 281 U.S. 647 (50 S.Ct. 455, 74 L.Ed. 1091);Ft. Leavenworth R. Co. v. Lowe, 114 U.S. 525 (5 S.Ct. 995,29 L.Ed. 264). *Page 490 
Article I, § 8, of the federal constitution provides:
"Powers of congress — The congress shall have power —
"To regulate commerce with foreign nations, and among the several states and with the Indian tribes;
                                *      *      *      *      *
"To exercise exclusive legislation in all cases whatsoever, over such district (not exceeding ten miles square) as may, by cession of particular states, and the acceptance of congress, become the seat of the government of the United States, and to exercise like authority over all places purchased by the consent of the legislature of the state in which the same shall be, for the erection of forts, magazines, arsenals, dockyards, and otherneedful buildings; * * *." (Italics ours.)
The three essential elements of the plaintiffs' case are: (1) Title to the land within the dam area project must be acquired by the United States government; (2) The consent of the state of Oregon must be obtained; (3) The land must be acquired for a constitutional purpose.
It is conceded that the federal government has acquired, by purchase or condemnation, title to the land within the dam area project, with the exception of title to the bed of the river. The State Tax Commission urges that the state has never been divested of title to the bed of this navigable river. Appellants contend that, with reference to lands underlying navigable waters of the state, the state merely holds the same in trust for the benefit of the public and that it was not necessary for the federal government to purchase land underlying the navigable waters of the Columbia river in order to have exclusive jurisdiction.
It is well established that, upon admission to the Union, this state became vested with title to lands under the navigable waters, subject, however, at all times to *Page 491 
the rights of navigation and fishery: Cook v. Dabney, 70 Or. 529,  139 P. 721. It is equally well-settled that, under the constitution, congress has the right to regulate commerce and navigation and that the exercise of such right is exclusive of state authority: Stockton v. Baltimore  N.Y.R. Co., 32 F. 9;Winston Bros. Co. v. State Tax Commission (Or.), 62 P.2d 7, citing Gould on Waters (1883 Ed.) § 34.
The United States supreme court in Illinois Central Railroadv. Illinois, 146 U.S. 387 (36 L.Ed. 1018, 13 S.Ct. 110), in speaking of the nature of a state's title to land underlying navigable waters, said:
"The trust devolving upon the State for the public, and which can only be discharged by the management and control of property in which the public has an interest, cannot be relinquished by a transfer of the property. The control of the State for the purposes of the trust can never be lost, except as to such parcels as are used in promoting the interests of the public therein, or can be disposed of without any substantial impairment of the public interest in the lands and waters remaining. It is only by observing the distinction between a grant of such parcels for the improvement of the public interest, or which when occupied do not substantially impair the public interest in the lands and waters remaining, and a grant of the whole property in which the public is interested, that the language of the adjudged cases can be reconciled. General language sometimes found inopinions of the courts, expressive of absolute ownership andcontrol by the State of lands under navigable waters,irrespective of any trust as to their use and disposition, mustbe read and construed with reference to the special facts of theparticular cases. A grant of all the lands under the navigable waters of a State has never been adjudged to be within the legislative power; and any attempted grant of the kind would be held, if not absolutely void on its face, as subject to revocation. The State can no more abdicate its trust over property in which the whole people are *Page 492 
interested, like navigable waters and soils under them, so as to leave them entirely under the use and control of private parties, except in the instance of parcels mentioned for the improvement of the navigation and use of the waters, or when parcels can be disposed of without impairment of the public interest in what remains, than it can abdicate its police powers in the administration of government and the preservation of the peace." (Italics ours).
As stated in Lewis Blue Point Oyster Co. v. Briggs,229 U.S. 82 (57 L.Ed. 1083, 33 S.Ct. 679, Ann. Cas. 1915 A, 232):
"If the public right of navigation is the dominant right and if, as must be the case, the title of the owner of the bed of navigable waters holds subject absolutely to the public right of navigation, this dominant right must include the right to use the bed of the water for every purpose which is in aid of navigation. This right to control, improve and regulate the navigation of such waters is one of the greatest of the powers delegated to the United States by the power to regulate commerce. Whatever power the several States had before the Union was formed, over the navigable waters within their several jurisdictions, has been delegated to the Congress, in which, therefore, is centered all of the governmental power over the subject, restricted only by such limitations as are found in other clauses of the Constitution."
Also see United States v. Chandler-Dunbar Co., 229 U.S. 53
(57 L.Ed. 1063, 33 S.Ct. 667), wherein the nature of the state's title to land underlying navigable waters is considered.
In Stockton v. Baltimore  N.Y.R. Co., supra, Mr. Justice Bradley, speaking for the court on the question of the title or ownership of a state in lands under navigable waters, said:
"The power to regulate commerce is the basis of the power to regulate navigation, and navigable waters *Page 493 
and streams, and these are so completely subject to the control of congress, as subsidiary to commerce, that it has become usual to call the entire navigable waters of the country the navigable waters of the United States. It matters little whether theUnited States has or has not the theoretical ownership anddominion in the waters, or the land under them; it has, what ismore, the regulation and control of them for the purposes ofcommerce. So wide and extensive is the operation of this power that no state can place any obstruction in or upon any navigable waters against the will of congress, and congress may summarily remove such obstructions at its pleasure. And all this power is derived from the power `to regulate commerce.'" (Italics ours.)
Since the federal government had the right under the constitution to erect the dam across the Columbia river, without the consent of the state, it was not dependent upon the state for conveyance of title to the bed of the stream. Indeed, the technical title which the state held was subject to the paramount right of the federal government over commerce and navigation.
The land bordering on the river was acquired, with consent of the state, for the purpose of erecting a dam in aid of navigation and the development of hydroelectric power. When the federal government exercised control of the land in aid of navigation or commerce, the state was ipso facto ousted from all control thereover. Whatever title the state had in the bed of the river, as trustee, would not in itself preclude the federal government from exercising exclusive jurisdiction if the dam were erected for the primary purpose of aiding navigation.
To hold otherwise would be in direct conflict with WinstonBros Co. v. State Tax Commission, supra, a unanimous decision of this court (CAMPBELL, C.J., not participating) rendered on the same day that this case *Page 494 
was decided on original hearing. The Winston Bros. Co. case involved the right of the state to collect an income tax on profits earned in the performance of a contract with the federal government for the reconstruction and repair of the south jetty at the mouth of the Columbia river. The jetty extends "on to certain tidelands and from thence over lands underlying navigable waters, and is some six or seven miles in length". The court properly held that the government had exclusive jurisdiction and exempted the plaintiff contractor from payment of the tax. True, this court held that the title to the land underlying the navigable waters passed by virtue of § 60-1302, Oregon Code 1930, but upon further consideration it is believed that such section of the statute was not applicable and added nothing to the right of the government to obtain exclusive jurisdiction over the project. What was said in reference thereto was not necessary to a decision of the case. In the Winston case the state had expressly granted to the United States all its right, title, and interest "in and to the land in front of Fort Stevens, and Point Adams * * * and subject to overflow, between high and low tide" (over which the jetty extended). (Special Laws of Oregon, 1864, p. 72.) In 1913, the state also granted exclusive jurisdiction to the federal government over the land within the military reservation (Ch. 33, Laws of Oregon for 1913, now § 60-1305, Oregon Code 1930). The real basis of the decision in the Winston case was that this state had consented to the acquisition of land by the federal government for the sole constitutional purpose of building a jetty to aid commerce and navigation. Hence, the federal government had exclusive jurisdiction and the state had no authority to impose the tax. *Page 495 
The vital question in the instant case does not so much concern the title of the federal government to the land within the dam area project, but is rather whether such land was acquired by the federal government with the consent of the state for a constitutional purpose. If it was not so acquired, of course, exclusive jurisdiction does not rest in the federal government. The United States government may acquire land within a state by various methods, but to obtain exclusive jurisdiction over the same it must acquire ownership thereof, with the consent of the state, for a purpose within the contemplation of Article I, § 8, of the federal constitution.
The state, by a general statute enacted in 1909, codified as § 60-1303, Oregon Code 1930, thus gave its consent to the acquisition of land by the United States government:
"Consent is hereby given to the United States to purchase or otherwise acquire any lands within the state of Oregon for the purpose of erecting thereon any needful public buildings, under authority of any act of congress; and the United States may enter upon and occupy any such lands which may be purchased or otherwise acquired, and shall have the right of exclusive jurisdiction over the same; provided, that all process, civil or criminal, issuing under authority of the laws of the state of Oregon, may be executed by the proper officers thereof upon any person or persons amenable to the same within the limits of the land so acquired, in like manner and to the same effect as if this act had not been passed." [Italics ours.]
In the enactment of the above statute, the legislature undoubtedly had in mind the need of cooperating with the federal government in the acquisition of land within a state for a constitutional purpose as designated in Article I, § 8, of the federal constitution. *Page 496 
The erection of the dam in the instant case manifestly does not come within the descriptive terms of "forts, magazines, arsenals, dockyards" mentioned in the above constitutional provision. If the construction work comes under such constitutional provision, it must be within the term "other needful buildings".
As stated in Ryan v. State, 188 Wn. 115 (61 P.2d 1276):
"If the case were one of first impression, the rule of ejusdem generis would, in our opinion, exclude such work from the classification of `needful buildings' because the particular work was in no way connected with, or related to, forts, magazines, arsenals, or dockyards."
However, the courts have given a broad interpretation to the term "needful buildings". It has been applied in the following cases, as cited in the Ryan case:
"A navy yard (Western Union Tel. Co. v. Chiles, 214 U.S. 274,29 S.Ct. 613, 53 L.Ed. 994); a military hospital (Arlington Hotel Co. v. Fant, 278 U.S. 439, 49 S.Ct. 227, 73 L.Ed. 447); a military reservation (United States v. Unzeuta, 281 U.S. 138,50 S.Ct. 284, 74 L.Ed. 761); an army training and mobilization station (Surplus Trading Co. v. Cook, 281 U.S. 647, 50 S.Ct. 455,74 L.Ed. 1091); a customs house (Sharon v. Hill (C.C.), 24 F. 726); locks and dams (United States v. Tucker (D.C.), 122 F. 518); a post office (United States v. Andem (D.C.), 158 F. 996); a penitentiary (Steele v. Halligan (D.C.), 229 F. 1011); an Indian training school (United States v. Wurtzbarger (D.C.), 276 F. 753); a military cemetery (Wills v. State, 3 Heisk. (50 Tenn.) 141); a soldiers' home (Sinks v. Reese, 19 Ohio St. 306, 2 Am.Rep. 397); a courthouse (State v. Mack, 23 Nev. 359, 47 P. 763, 62 Am. St. Rep. 811.)"
Is the dam at Bonneville being constructed for a constitutional purpose? If it is not, exclusive jurisdiction in the federal government does not obtain even *Page 497 
though title to the land has been acquired. The principal objective of the government is undoubtedly the development of hydroelectric power. The fact that the dam aids navigation is merely incidental. Where the main objective is not a constitutional purpose — such as the development of hydroelectric power — the state has not surrendered its political sovereignty over the territory within the project, although the federal government has exclusive authority over the actual construction of the dam. The state, by its legislative enactment in 1909, only gave its consent to transfer exclusive jurisdiction in the event the land was acquired for a primary purpose within the contemplation of the constitution.
Ryan v. State, supra, a case involving the right of the state of Washington to exact an occupation tax from a contractor for services rendered to the federal government in the construction work on the Coulee dam project, is a recent expression of the supreme court of Washington. The decision of the case hinged upon whether the federal government had exclusive jurisdiction over the territory within the project. The objectives of the government in building and constructing the dam were (1) to promote navigation; (2) to develop hydroelectric power; and (3) to provide water for irrigation. The court held that the federal government had acquired title to the land within the Columbia Basin project but that the state had not surrendered its sovereignty and had the right to impose the tax. It was further held that a dam came within the terms of the constitutional provision, viz, "other needful buildings". It nevertheless said that:
"* * * irrigation, flood control, and power development (except in so far as the latter two are intended to promote navigation or else some war measure or the national defense) * * * are not functions *Page 498 
enjoined upon the federal government by the Constitution, nor are they delegated to the United States by the Constitution, nor is it necessary that they be committed, for their operation, to the exclusive jurisdiction of the United States government."
and that:
"Legislative power, with reference to such things, is reserved in the state."
The reason for the ultimate conclusion that the contractor was not exempt from the tax was thus stated by the court:
"We conclude, therefore, that the purposes of the project taken as a whole, do not fall exclusively within any of the enumerated classes mentioned above, so as to give the United States exclusive jurisdiction over the lands, but, rather in a class where several purposes are so intermingled as to call for the exercise of jurisdiction by both the federal government and the state, according as their respective interests and duties require."
It is significant that the court, in reaching its conclusion, attached no importance whatever to the question of title to the bed of the Columbia river. The basis of the Ryan decision is that the project included objectives power over which was reserved to the states and the mere fact that the dam also promoted navigation and commerce did not oust the state from jurisdiction so far as imposition of the tax was concerned.
In the light of that decision, it is apparent that a contractor doing work in the state of Washington on the Bonneville dam project would be obliged to pay a tax on services rendered under a contract with the federal government. It would be an anomalous situation, to say the least, if a contractor doing work on the same project in the state of Oregon were exempt from payment of the tax. *Page 499 
In the much-cited case of United States v. Tucker, 122 F. 518, the dam and locks were erected by the federal government on Green river for the sole and exclusive purpose of promoting navigation, the title to the land had been acquired by the government with the consent of the state of Kentucky. Hence, it was held that the United States had exclusive jurisdiction over the territory within the project. The distinction between that case and the one at bar — in which there has been a commingling of functions reserved to the state with one over which the federal government had exclusive authority — is obvious.
In view of the character of the project — the main object being to develop hydroelectric power, a right reserved to the states — it is not considered that the federal government ever intended to exercise complete and exclusive jurisdiction over the territory within the dam area. The power actually exercised over the project by the federal government does not so indicate: Bensonv. United States, 146 U.S. 325 (36 L.Ed. 991, 13 S.Ct. 60). Neither is it thought that the record in its entirety discloses clear intention of the state to relinquish its sovereignty. Unless it is clear that the federal government has acquired exclusive jurisdiction, the court should, indeed, be reluctant so to declare. To hold that the state has been completely ousted of jurisdiction means that a sort of "No-man's Land" has been established and that no law, civil or criminal, of the state would have any force or effect therein.
The decree of the lower court sustaining the right of the state to impose the tax is affirmed.