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AMERICAN RAILROAD COMPANY OF PORTO RICO-ASSIGN
MENT TO-EXEMPTION FROM TAXATION.
The Legislative Assembly of Porto Rico did not exceed its powers in
granting to the "Compañia de los Ferrocarriles de Puerto Rico," in an act passed February 4, 1902, an exemption from taxation upon its railroad lines and property, theretofore built and acquired by it, as well as the railroad lines and property thereafter to be built and ac
quired by it. The exemption applies only to those lines and property which were the
possession of that company, and was not assignable. Consequently it does not apply to railroad lines or property built or acquired by subsequent purchasers, lessees, or operators. The exemption does not extend to the "American Railroad Company of
Porto Rico, Central Aguirre, operator,” to which company the ('ompañia de los Ferrocarriles leased all its property, notwithstanding the fact that the executive council on July 22, 1902, by an ordinance, authorized the latter company to assign to the American Railroad Company the right to construct, maintain, and operate the railroad line from Ponce to Guayama, the building of which had been authorized by ordinance of the executive council on October 28, 1901, and notwithstanding the ordinance of assignment was afterward approved by the
President. Immunity from taxation must be construed most strongly against the
grantee and will not be held assignable in order to pass to a purchaser on a sale, under mortgage, or otherwise, without express authorization.
DEPARTMENT OF JUSTICE,
December 1, 1910. Sir: I have carefully examined an opinion rendered by the Attorney General of Porto Rico (Mr. Brown) to the Treasurer of that Territory, respecting the legality of an assessment for taxation purposes of the "American Railroad Company of Porto Rico, Central Aguirre, operator,” which you have transmitted to me with the request that I express my views with respect to the conclusions reached. These conclusions may be summarized in two propositions:
First. That the Legislative Assembly of Porto Rico exceeded its powers in granting to the “Compañia de los Ferrocarriles de Puerto Rico," afterwards assigned to “American Railroad Company of Porto Rico, Central Aguirre, operator,” an exemption from taxation upon its railroad lines and property "heretofore built and acquired by it as well as the railroad lines and property hereafter to be built and acquired by it."
Second. That even if the Legislative Assembly of Porto Rico had power to grant said exemption, the exemption applies only to those lines and property which were in the possession of the company named in the act of the legislative assembly; that such exemption was not assignable, and therefore does not apply to railroad lines or property built or acquired by subsequent purchasers, lessees, or operators.
I have given very careful consideration to the exceedingly able argument by which the Attorney General of Porto Rico supports these propositions, but I am unable to concur with his conclusion upon the first proposition, although I agree with that embodied in the second.
First. With respect to the first proposition:
It appears from the papers submitted that on October 28, 1901, the Executive Council of Porto Rico granted a franchise to the Compañia de los Ferrocarriles de Puerto Rico, its successors and assigns, authorizing it to extend its railway lines to and between certain points in the island of Porto Rico, with a qualified right to sell and transfer the same. On July 22, 1902, the executive council by ordinance duly consented to the assignment to Henry de Ford, his heirs, etc., and to a proposed corporation to be designated as “American Railroad of Porto Rico, Central Aguirre, operator," of the right io construct, maintain, and operate the railroad line from Ponce to Guayama authorized by the above-mentioned ordinance of October 28, 1901. By act of the Legislative Assembly passed February 4, 1902, it was enacted that
“The Compañia de los Ferrocarriles de Puerto Rico, its successors and assigns, are hereby exempted from all insular, municipal, or local taxation of every name and nature for a period of twenty-five (25) years from the date of the acceptance by it of a certain ordinance passed by the Executive Council of Porto Rico on the twenty-sixth day of October, nineteen hundred and one, granting to it the right to extend its railroad lines to and between certain points in the island of Porto Rico
The Attorney-General of Porto Rico is of the opinion that the legislative assembly was without authority to
grant this exemption, because of the provisions of the act of Congress passed July 30, 1886, chapter 818 (24 Stat. 170). This act is entitled, "An act to prohibit the passage of local or special laws in the Territories of the United States, to limit territorial indebtedness, and for other purposes."
Section 1 enacts:
“That the legislatures of the Territories of the United States now or hereafter to be organized shall not pass local or special laws in any of the following enumerated cases, that is to say:
Then follows the enumeration of a number of such cases, including the following:
“Granting to any corporation, association, or individual the right to lay down railroad tracks, or amending existing charters for such purpose.
“Granting to any corporation, association, or individual any special or exclusive privilege, immunity, or franchise whatever.
"In all other cases where a general law can be made applicable, no special law shall be enacted in any of the Territories of the United States by the Territorial legislatures thereof."
This statute, the Attorney-General of Porto Rico argues, is made applicable to Porto Rico by force of the provisions of section 14 of its organic act, known as the “Foraker Act," approved April 12, 1900 (31 Stat. 77), viz:
“That the statutory laws of the United States not locally inapplicable, except as herein before or hereinafter otherwise provided, shall have the same force and effect in Porto Rico as in the United States, except the internal-revenue laws, which, in view of the provisions of section three, shall not have force and effect in Porto Rico.'
One of such statutory laws of the United States, in his opinion, is the act of July 30, 1886, restricting the powers of the legislatures of the Territories of the United States; which act he maintains was not locally inapplicable to Porto Rico, but embodied a sound governmental policy, and which therefore qualified and restricted the powers granted to the legislative bodies of Porto Rico by the “Foraker Act."
Passing the question whether or not a statute restricting the powers of the legislatures of "the Territories of the United States now or hereafter to be organized” is embraced within the general description “of the statutory laws of the United States not locally inapplicable,” which are to “have the same force and effect in Porto Rico as in the United States"--a proposition which, in my opinion, is
. exceedingly doubtful—the provisions of the "Foraker Act” are in themselves, it appears to me, clearly inconsistent with any such limitation.
The “Foraker Act” contains in itself a complete scheme for the civil government of the Territory of Porto Rico. By section 8 it enacts:
“That the laws and ordinances of Porto Rico now in force shall continue in full force and effect, except as altered, amended, or modified hereinafter, or as altered or modified by military orders and decrees in force when this act shall take effect, and so far as the same are not inconsistent or in conflict with the statutory laws of the United States not locally inapplicable, or the provisions hereof, until altered, amended, or repealed by the legislative authority hereinafter provided for Porto Rico or by act of Congress of the United States
Other sections of the act pertinent to the present inquiry are the following:
"SEC. 27. That all local legislative powers hereby granted shall be vested in a legislative assembly which shall consist of two houses; one the executive council, as herein before constituted, and the other a house of delegates, to consist of thirty-five members elected biennially by the qualified voters as hereinafter provided; and the two houses thus constituted shall be designated “The legislative assembly of Porto Rico.'
“Sec. 32. That the legislative authority herein provided shall extend to all matters of a legislative character not locally inapplicable, including power to create, consolidate, and reorganize the municipalities, so far as may be necessary, and to provide and repeal laws and ordinances therefor; and also the power to alter, amend, modify, and repeal any and all laws and ordinances of every character now in force in Porto Rico, or any municipality or district thereof, not inconsistent with the provisions hereof: Provided, however, That all grants of franchises, rights, and privileges or concessions of a public or quasi-public nature shall be made by the executive council, with the approval of the governor, and all franchises granted in Porto Rico shall be reported to Congress, which hereby reserves the power to annul or modify the same.
“SEC. 15. That the legislative authority hereinafter provided shall have power by due enactment to amend, alter, modify, or repeal any law or ordinance, civil or criminal, continued in force by this act, as it may from time to time
The grant of legislative power contained in these sections is, it appears to me, entirely inconsistent with the theory that the restrictions contained in the act of 1886 were imposed upon the legislature of Porto Rico. The provisions, for example, contained in section 32, empowering the legislative assembly power to create, consolidate, and reorganize the municipalities, so far as may be necessary, and to provide and repeal laws and ordinances therefor," is quite inconsistent with the provisions in the act of 1886 prohibiting territorial legislatures from passing local or special laws "incorporating cities, towns, or villages, or changing the charter of any town, city, or village;" and the power to grant "franchises, rights, and privileges or concessions of a public or quasi-public nature” vested in the executive council with the approval of the governor, by section 32, is inconsistent with the restriction in section 1 of the act of July 30, 1886, prohibiting the passage of local or special laws granting to any corporation, association, or individual, the right to lay down railroad tracks or amending existing charters for such purpose.
It is obvious that Congress adopted with respect to Porto Rico a different means of protecting the public from the improvident grant of franchises from that of restricting its exercise of power by the limitations of the act of 1886, by requiring all franchise rights, privileges, or concessions