The Central Pacific Railroad Company, being required by the laws
of California to make returns of its property to the Board of
Equalization for purposes of taxation, made a verified statement in
which, among other things, it was said: "The value of the franchise
and entire roadway, roadbed, and rails within this state is
$12,273,785." The Board of Equalization determined that the actual
value of the franchises, roadway, roadbed, rails, and rolling stock
of the company within the state at that time was $18,000,000. The
company not having paid the taxes assessed on this valuation, this
action was brought by the state to recover them.
Held:
(1) That the presumption was that the franchise included by the
company in its return was a franchise which was not exempt under
the laws of the United States, and that the Board had acted upon
property within its jurisdiction.
(2) That if the Board of Equalization had included what it had
no authority to assess, the company might seek the remedies given
under the law to correct the assessment so far as such property was
concerned, or recover back the tax thereon, or, if those remedies
were not held exclusive, might defend against the attempt to
enforce it.
(3) Where the property mentioned in the description could be
assessed, and the assessment followed the return, the company ought
to be
Page 162 U. S. 92
held estopped from saying that the description was ambiguous,
and this notwithstanding the fact that the statement was made on
printed blanks, prepared by the Board.
The decision of the supreme court of the state that the findings
of the trial court on the question of whether the franchises taxed
covered franchises derived from the United States was conclusive,
and is binding on this Court.
The fact that a court, after giving its decision upon an issue,
gives its opinion upon the manner in which it would have decided
the issue under other circumstances does not constitute an error to
be reviewed in this Court.
The Central Pacific company is a corporation of California,
recognized as such by the acts of Congress granting it aid and
conferring upon it federal franchises, and it was not the object of
those acts to sever its allegiance to the state or transfer the
powers and privileges derived from it, nor did those consequences
result from the acceptance of the grant by the corporation.
The property of a corporation of the United States may be taxed
by a state, but not through its franchise.
Although a corporation may be an agent of the United States, a
state may tax its property, subject to the limitation pointed out
in
Railroad Co. v.
Peniston, 18 Wall. 6.
It is immaterial in this case whether the railroad company
operates its road under the franchise derived from the United
States or under that derived from the state.
When it is considered that the Central Pacific company returned
its franchise for assessment, declined to resort to the remedy
afforded by the state laws for the correction of the assessment as
made if dissatisfied therewith, or to pay its tax and bring suit to
recover back the whole or any part of the tax which it claimed to
be illegal, its position is not one entitled to favorable
consideration; but, without regard to that, the Court holds, for
reasons given, that the state courts rightly decided that the
company had no valid defense to the causes of action proceeded
on.
This was an action brought in the name of the the State of
California against the Central Pacific Railroad Company in the
Superior Court of the City and County of San Francisco under
section 3670 of the Political Code of that state to recover a
certain sum of money alleged to be due the state and various other
sums of money alleged to be due eighteen counties of the state for
taxes for the fiscal year 1887 upon the assessment of the state
Board of Equalization, judgment being demanded for the several sums
of state and county taxes delinquent and unpaid as stated in the
complaint, with
Page 162 U. S. 93
five percent therein added for delinquency and nonpayment, and
interest from the time of such delinquency, and also for costs of
suit and attorneys' fees, as allowed by law.
The provisions of the state constitution on the subject of
revenue are found in article XIII, and sections 1, 4, and 10 of
that article and sections 3664-3671 of the Political Code of
California are given in the margin.
*
Page 162 U. S. 94
The complaint contained 19 counts on nineteen alleged causes of
action, and each count averred that the defendant was at all times
therein mentioned a corporation organized
Page 162 U. S. 95
and existing under the laws of the State of California and
engaged in operating a railroad in more than one county of that
state, and that, on August 13, 1887, the State Board of
Page 162 U. S. 96
equalization, for the purposes of state and county taxation for
the fiscal year ending June 30, 1888, assessed to defendant, then
the owner and operator thereof in more than one county
Page 162 U. S. 97
in said state, the franchise, roadway, roadbed, rails, and
rolling stock of defendant's railroad, then situated and being
within said state at the sum of eighteen million dollars.
Page 162 U. S. 98
The first count then averred that within ten days after the
third Monday in August, 1887, the State Board of Equalization
apportioned the total assessment of the franchise, roadway,
Page 162 U. S. 99
roadbed, rails, and rolling stock of defendant to the counties
in the state in which the railway was located, in proportion to the
number of miles of railway laid in such
Page 162 U. S. 100
counties, and the amounts of the total assessments so
apportioned by the Board to those counties, and the number of miles
of defendant's railway laid in said counties, were specifically set
forth.
Page 162 U. S. 101
The count then proceeded as follows:
"V. That within ten days after the third Monday in August, 1887,
said State Board of Equalization did transmit to each of the county
auditors of said counties a statement showing the length of the
main track of defendant's railway within the counties of said
auditors, respectively, with a description of the whole of
defendant's railway track within the counties of said auditors,
respectively, including the right of way sufficient for
identification, the assessed value per mile of the same, as fixed
by said
pro rata distribution per mile of the said
assessed value of the whole franchise, roadway, roadbed, rails, and
rolling stock of defendant's railway in said state, and the amount
apportioned to the counties of said auditors, respectively. . .
."
"VI. That thereafter, and prior to the first Monday in October,
1887, the county auditor of each of said counties did enter said
statement so transmitted to him upon the assessment roll of his
county, and did enter upon said assessment roll of his county the
said amount of said assessment apportioned by said State Board of
Equalization to this county in the column of the assessment roll of
his county which showed the total value of all property of his
county for taxation. . . ."
"VII. That thereafter, and on the first Monday of October, 1887,
the Board of Supervisors of each of said counties did levy the
state tax of said State of California according to the rate
theretofore fixed for such state tax for the fiscal year ending
June 30, 1888, by said State Board of Equalization, upon the
taxable property in its county, including the property of defendant
assessed and apportioned to its county as aforesaid, and the taxes
so levied in all of said counties for the purposes of state
taxation upon said property of defendant assessed and apportioned
to said counties as aforesaid was the sum of $109,440."
"VIII. That upon the 17th day of September, 1887, said State
Board of Equalization did fix the rate of state taxation for the
fiscal year ending June 30, 1888 at the rate of $0.608 on each one
hundred dollars. "
Page 162 U. S. 102
"IX. That defendant has never at any time paid said state tax,
amounting to said sum of $109,440, nor any part thereof; that said
state tax became and was delinquent on the last Monday in December,
1887 at six o'clock p.m., and upon and at the time of, and by
reason of, such deliquency, five percent of said state tax, to-wit,
the sum of $5,472, was, by the Comptroller of said state, added to
said state tax, and no part of said $5,472 so added for delinquency
has ever been paid by defendant."
"X. That prior to the third Monday of October, 1887, the said
State Board of Equalization did prepare, and transmit to the
Comptroller of said state, a Duplicate Record of Assessment of
Railways, and a Duplicate Record of Apportionment of Railway
Assessments, for the fiscal year ending June 30, 1888, both
certified by the chairman and clerk of said State Board of
Equalization, and which said duplicate records included the said
assessment of defendant's said property, and the said apportionment
of the assessment of defendant's property to the said
counties."
"Before the fourth Monday of October, 1887, said Comptroller did
compute at the rates of taxation fixed and levied as aforesaid, and
enter in separate money columns in the said Duplicate Record of
Apportionment of Railway Assessments, the respective sums, in
dollars and cents, to be paid by the defendant as the state tax
upon the total amount of said assessment, and as the county tax
upon the apportionment of said assessment to each county, and city
and county, of the property assessed to defendant named in said
duplicate record; that within ten days after the fourth Monday in
October, 1887, said Comptroller did publish for two weeks in one
daily newspaper of general circulation published at the state
capital of said state, and in two daily newspapers of general
circulation published in the City and County of San Francisco in
said state, a notice that he had received from said State Board of
Equalization said Duplicate Record of Assessments of Railways and
said Duplicate Record of Apportionment of Railway Assessments, and
that the said taxes were then due and payable, and would become
come delinquent on the last Monday in December,
Page 162 U. S. 103
1887 at 6 o'clock p.m., and that unless paid to the state
treasurer at the capitol prior thereto, five percent would be added
to the amount thereof."
"That a reasonable compensation for legal services by Langhorne
and Miller, attorneys for plaintiff, in the institution and
prosecution of this cause of action, is a sum equal to ten percent
of the tax in this cause of action alleged to be delinquent."
Then followed eighteen counts for the county taxes in the
several counties, all averring in detail compliance with the law in
relation thereto.
Defendant demurred to the complaint. The demurrer was overruled,
and defendant answered, setting up various defenses, one of which
was that the franchise assessed to defendant by the State Board of
Equalization was derived by defendant from the government of the
United States, through certain acts of Congress, and that the same
were used by defendant as one of the instrumentalities of the
federal government, and hence was not taxable by the state; that
the assessment of this franchise was so blended with the whole
assessment as not to be separable therefrom, and that the whole
assessment was therefore void.
The plaintiff put in evidence the Duplicate Record of
Assessments of Railways by the state Board of Equalization for
1887, and the Duplicate Record of Apportionment of Railway
Assessments for 1887, filed in the office of the Comptroller of the
State of California on the 11th of October, 1887. These were
admitted subject to defendant's objection. The Duplicate Record of
the Assessments of Railways stated that
"the State Board of Equalization being in session on this the
thirteenth day of August, 1887, all the members being present, and
having under consideration the assessment of the franchise,
roadway, roadbed, rails, and rolling stock of the Central Pacific
Railroad Company within the state for the year 1887, and it
appearing to this Board that said company on the first Monday in
March in the year 1887 at 12 o'clock meridian of that day, owned,
and still owns, 719.50 miles of railroad within this state, which
at said time and day
Page 162 U. S. 104
in March was, and still is, operated in more than one county,
being the entire railway of said company within this state, and
which, with the right of way for the same, is described as follows:
[Here follows description of line of roadway, roadbed, rails, and
right of way.] And it appearing that the actual value of the
franchise, roadway, roadbed, rails, and rolling stock of said
company within this state at the said date and time in March was,
and still is, the sum of eighteen million dollars, therefore it is
hereby ordered that the said franchise, roadway, roadbed, rails,
and rolling stock, for the year 1887, be, and the same are hereby,
assessed to the said Central Pacific Railroad Company at the sum of
eighteen million dollars."
The Duplicate Record of Apportionment of Railway Assessments,
under date of August 22, 1887, stated:
"The State Board of Equalization met this day. All the members
present. The Board this day apportioned the total assessment of the
franchise, roadway, roadbed, rails, and rolling stock of each
railroad assessed by it on the 13th day of August, 1887, for the
year 1887, to the counties and the City and County of San Francisco
in proportion to the number of miles of railway laid in each
county, and in the City and County of San Francisco, which
apportionment is set out in the following table. The apportionment
is based upon the proportion the number of miles in each county of
a railway bears to the total number of miles of such railway laid
in the state."
The annexed table gave the name of the corporation to which each
railway was assessed, and the name of each railway assessed, in
this instance as the "Central Pacific Railroad Company," the names
of the counties and city and county to which the assessment was
apportioned, the total number of miles of road in the state, the
number of miles in each county and city and county, the value per
mile, the total assessment of the franchise, roadway, roadbed,
rails, and rolling stock of each railway assessed, the amount
apportioned to each county and city and county for purposes of
county and city and county taxation, rate of taxation for each
county and city and county levied by the Board of Supervisors,
amount of
Page 162 U. S. 105
state taxes at the state rate, and amount due of county and city
and county taxes upon the assessment as apportioned.
It was admitted that the apportionment was made as the Political
Code required it to be made, and that the mileage for each county
was correctly stated.
Plaintiff then proved, under objection, that the taxes sued for
had not been paid, or any portion thereof. Evidence was also
introduced in regard to the value of services of counsel.
Defendant called as a witness C. M. Coglan, clerk of the Board
of equalization, and identified the original minutes of the
proceedings of the Board relating to the assessment of the property
of the Central Pacific Railroad Company for the year 1888 under
date of August 17, 1888. It appeared therefrom that the Attorney
General recommended to the Board that the franchises of the Central
Pacific and Southern Pacific Companies, derived from the state, be
assessed, and that the valuation thereof be stated separately in
the record of assessments; that the Board assess the moles,
bridges, and culverts of each road separately, and, in respect of
certain railroad companies, declare that the steamers used in
operating those roads were not assessed. Whereupon the Board
proceeded to make such assessment, and ordered that the franchise
of the Central Pacific Railroad Company, derived from the State of
California, be assessed at $1,250,000, and that the franchise of
the Southern Pacific Railroad Company, derived from the State of
California, be assessed at $1,000,000; that the moles, culverts,
bridges, and wharves upon which the tracks of the Central Pacific
are laid be assessed at $1,000,000; that the moles, culverts,
bridges, and wharves upon which the tracks of the Southern Pacific
are laid be assessed at $400,000. The original record of the
assessment of the Central Pacific Railroad Company made by the
Board for the year 1888 was offered in evidence, and was to the
effect that the Board assessed the franchise derived from the State
of California, the roadway, roadbed, and rolling stock of said
company within said state at the total sum of $15,000,000.
On the cross-examination of Mr. Coglan, plaintiff offered, and
the court admitted in evidence, under defendant's objection,
Page 162 U. S. 106
the verified statements furnished by defendant to the State
Board of Equalization during the years 1887 and 1888, which were
marked "Plaintiff's Exhibits 4 and 6." Exhibit 4 was the return
made by the Central Pacific Railroad Company for 1888, which read
thus:
"The Central Pacific Railroad Company answers the questions
propounded by the Board as follows, and makes the following
statement in relation to its property subject to taxation in the
State of California, owned by it for the year ending on the first
Monday in March, 1888, and of all property used in operating its
railway during such year:"
"The length of railway owned and operated as a system, in and
out of the state, is 1,344.14 miles."
"Length of track, sidings, and double track reduced to single
track is _____; out of the state, 597 miles; in the state, 747.14
miles."
The value of the franchise derived
from the state within this state . . . . . . . . . $ 25.00
The value of the entire roadway, roadbed,
rolling stock, and rails within this state is. . .
9,376,607.00
-------------
$9,376,632 00
This was followed by a list of the mileage of the road in
California in each of the counties through which it ran, and
schedules of the rolling stock, the earnings and expenses of the
road, as a system, in and out of the state, of the operating
expenses, and of the earnings and expenses within the state. The
return was duly sworn to.
Exhibit six was the return of the company for the year 1887.
This opened with the same statement as the other, and after giving
the length of the railway owned and operated as a system and the
length of track, single and double, out of and in the state,
continued: "The value of the franchise and entire roadway, roadbed,
and rails within this state is $12,273,785.00." The usual lists and
schedules were attached.
Defendant then called as a witness one Morehouse, a member of
the State Board of Equalization, whose evidence tended
Page 162 U. S. 107
to show that the assessment for 1887 was intended by him to, and
did, include defendant's federal franchise, but that he could not
say that the value of the federal franchise operated on the minds
of the other members of the Board in making up the items of the
valuation. Defendant offered to prove by Morehouse that at every
session from 1883, and prior to 1888, the Board, in making its
assessment of the valuation of the property of the Central Pacific
Railroad Company, included in its total estimate the value of the
federal franchise held by that company by virtue of the acts of
Congress referred to, and that the valuation of the federal
franchise was blended into the general assessment of that company
in such a manner as to be indistinguishable from it and not capable
of separation. This was objected to as incompetent, irrelevant, and
immaterial, the objection sustained by the court, and exception
saved.
E. W. Maslin, secretary of the State Board of Equalization from
April, 1880, to March, 1891, who was present at the Board meetings
and kept the record of its proceedings, was called as a witness by
defendant, and testified that from his acquaintance with the
history of the assessment of the road since 1880, his relation to
it with respect of the franchise and personal property, his
conversation with many members through those years, the knowledge
he had of how two members arrived at their conclusions, and the
knowledge that he thought he had as to how three members arrived at
their conclusions, he thought he could state what elements of value
were considered by the Board in making their estimate for the total
values for 1887. Thereupon defendant asked witness the following
questions:
"Q. From the various sources of knowledge which you have
enumerated, please state to the court what elements were taken into
consideration by the State Board of Equalization in making the
assessment of this company for the year 1887."
"Q. Did you here any conversation between the members of the
State Board of Equalization during the meeting when the assessment
of this company was made for the year 1887, with reference to the
elements that they proposed to and did include in the assessment?
"
Page 162 U. S. 108
"Q. At the time that the assessment of 1887 was made by the
State Board of Equalization upon the property of the Central
Pacific Railroad Company, what was said and done at the meeting of
the State Board of Equalization on that day in your presence?"
To each of these questions plaintiff interposed objections,
which were sustained by the court, and defendant excepted.
Defendant then made the following offer:
"Now, in view of the ruling of the court on this subject, we now
offer to prove by this witness that from the time of the
organization of the State Board of Equalization, in 1880, down to
and including the year 1887, that Board had every year considered
the value of the federal franchise (that is, the franchise derived
from the United States by the acts of Congress of the government of
the United States) belonging to and owned by the Central Pacific
Railroad Company as an element of value in assessing the total
value of the property of that railroad company, and that in 1888,
in consequence of the decision of the Supreme Court of the United
States upon the subject, the State Board of Equalization for the
first time ceased to consider this federal franchise as an element
of value, and hence reduced their valuation by the sum of three
million dollars on the Central Pacific Railroad Company's
property."
This offer was disallowed by the court, and defendant
excepted.
Plaintiff, in rebuttal, called C. E. Wilcoxen and J. P. Dunn,
who were members of the Board and participated in making the
assessment of 1887, and they testified that the federal franchise
was not included in the assessment for that year. On the
cross-examination of Mr. Wilcoxen, an effort was made to introduce
testimony that he had given before a committee of the General
Assembly of California in 1889, which the court excluded except so
far as it related to the year 1887.
The statement on motion for new trial then continued:
"In its written opinion, upon which the findings were based, the
court, after determining as a fact, from a preponderance of the
evidence before it, that the federal franchise of defendant was not
assessed or included in the assessment of
Page 162 U. S. 109
the property of defendant by the State Board of Equalization for
the year 1887, uses the following language:"
"But if the parol evidence offered did not weigh in plaintiff's
favor, and if, by a preponderance of such evidence, defendants
could have shown that the state intended to and did include a
federal franchise in the assessment, I think the court would have
to disregard it as incompetent. The effect of such parol evidence
would be to contradict the record, which cannot be done."
"The best and only evidence of the acts and intentions of
deliberative bodies must be drawn from the record of its
intentions. . . . From both standpoints of fact and of law, the
findings must be that a federal franchise was not included in these
assessments."
On February 3, the superior court made and filed its written
findings of fact and conclusions of law. The finding of fact
included the following:
"XXX. That on the 13th day of August, 1887, the State Board of
Equalization of the State of California did, for the purposes of
taxation for the fiscal year 1887, assess as a unit, and not
separately, the franchise, roadway, roadbed, rails, and rolling
stock of defendant's railroad, then being and situate within the
state at the sum and value mentioned in the amended complaint, and
did then and there enter said assessment upon its minutes, and in
its record of assessments; that such assessment is the one upon
which the several taxes mentioned in the complaint herein are
based, and no other assessment than the one aforesaid was ever made
by said Board of equalization or other assessor of said property of
the defendant for said fiscal year; that said State Board of
Equalization did at the time and in the manner alleged in the
amended complaint, apportion said assessment and transmit such
assessment and the apportionment to the county and city and county
auditors, and said assessment and the apportionment thereof were
entered upon the assessment rolls of said counties and said cities
and counties as alleged in said amended complaint, as hereinbefore
found."
"XXXI. That the said Board of equalization, in making
Page 162 U. S. 110
said assessment, did assess the franchise, roadway, roadbed,
rails, and rolling stock of defendant's railroad at their full cash
value, without deducting therefrom the value of the mortgage or any
part thereof or the value of said bonds issued under said acts of
Congress, given and existing thereon as aforesaid, to secure the
indebtedness of said company to the holders of said bonds, and in
making said assessment said Board did not deem nor treat said
mortgage or bonds as an interest in said property, but it assessed
the whole value of said property as assessed to defendant in the
same manner it would have done had there been no mortgage thereon.
At the time said assessment and apportionment were made as
aforesaid by said State Board of Equalization, the assessment books
or rolls for the said fiscal year had been completed and were in
existence, and the assessment and valuation of defendant's property
for the purposes of taxation for said fiscal year had been
ascertained and fixed as provided by law, and said Board, in making
said valuation and apportionment, did exercise all necessary powers
relative to the equalization of values for the purposes of
taxation."
"XXXIII. Said State Board of Equalization, in making said
assessment of defendant's roadway, did not include in the valuation
of said roadway the value of any fences erected upon the land of
coterminous proprietors, and did not value said roadway at a
greater value than the value of other property similarly situated
and greater than its actual cash value, and did not blend in said
assessment the value of any fences. That said Board, in making its
said assessment and valuation therefor, did not adopt a system of
valuation which operated unequally or which was intended to or
which did in any manner violate the rule prescribed in section 10
of article 13 of the state constitution, and said Board, in making
its said assessment and valuation therefor, did not value the
rolling stock of defendant at sixty (60) or any other percent above
its actual value, and did not value nor assess defendant's
franchise in excess of its actual value."
"XXXIV. That in making said assessment and valuation therefor,
said State Board of Equalization did not include the
Page 162 U. S. 111
value of or assess any steamboats or boats, nor blend the value
or assessment of any steamboats or boats with the value of, or
assessment of, defendant's roadway, rails, roadbed, and rolling
stock."
"XXXV. That in making its assessment and valuation therefor of
defendant's franchise, said State Board of Equalization did not
include, assess, or value any franchise or corporate power held or
exercised by defendant under the acts of Congress hereinbefore
mentioned, or under any act of Congress whatever. And said Board,
in making said assessment and valuation therefor upon defendant's
franchise, roadbed, roadway, rails, and rolling stock for purposes
of taxation for the fiscal year 1887, did not include in its said
assessment and valuation therefor any federal franchise then
possessed by defendant, nor any franchise or thing whatsoever which
said Board could not legally include in such assessment or
valuation. That the franchise, roadway, roadbed, rails, and rolling
stock of defendant's railroad were valued and assessed by said
State Board of Equalization, for purposes of taxation for the
fiscal year 1887, at their actual value, and in proportion to their
values, respectively."
The conclusions of law were that plaintiff was entitled to
recover the sums claimed, with five percent penalty, interest, and
counsel fees, the amounts being stated, and costs.
Judgment was rendered in plaintiff's favor accordingly.
On the 19th of June, following, the statement on motion for new
trial was approved and filed as part of the record, including an
assignment and specification of errors. The defendant's motion for
a new trial was overruled, and defendant appealed to the supreme
court of the state from the judgment, and from the order denying
the motion for new trial. January 6, 1895, the supreme court
rendered judgment directing the court below to modify its judgment
by striking therefrom the amount allowed for interest prior to the
entry thereof, and also certain counsel fees, and that as so
modified the judgment and order denying a new trial should stand
affirmed. The opinion is reported in
People v. Central Pacific
Railroad, 105 Cal. 576.
Page 162 U. S. 112
MR. CHIEF JUSTICE FULLER, after stating the facts in the
foregoing language, delivered the opinion of the Court.
The assessment of the State Board of Equalization is not
attacked on the ground of fraud, but it is contended that the value
of the federal franchise or franchises possessed by plaintiff in
error was included therein, and that, as the assessment embraced
all the property assessed as a unit, it was thereby wholly
invalidated.
Santa Clara Co. v. Southern Pacific Railroad,
118 U. S. 394;
California v. Central Pacific Railroad, 127 U. S.
1.
By section 1 of article XIII of the Constitution of California,
it is provided that
"all property of the state, not exempt under the laws of the
United States, shall be taxed in proportion to its value, to be
ascertained as provided by law. The word 'property' as used in this
article and section is hereby declared to include moneys, credits,
bonds, stocks, dues, franchises, and all other matters and things
real, personal, or mixed, and capable of private ownership,"
and, by section 10, that
"the franchise, roadway, roadbed, rails, and rolling stock of
all railroads operated in more than one county in this state shall
be assessed by the State Board of Equalization at their actual
value,"
and the Political Code provided that this must be, and the mode
in which it should be, done.
Railway corporations were required to furnish the Board of
equalization, before it acted, and as of the first Monday of March
in each year, a statement, signed and sworn to by one of their
officers, showing in detail the whole number of miles of railway in
the state and, when the line was partly out of the state, the whole
number of miles within and without owned or operated by each
corporation and the value thereof; the value of the roadway,
roadbed, and rails of the whole, and
Page 162 U. S. 113
the value of the same within the state; the width of the right
of way; the rolling stock and value; the gross earnings of the
entire road, and of the road within the state; the net income; the
capital stock authorized and paid in; the number of shares
authorized and issued, etc.
This verified statement for 1887 was made by plaintiff in error
in due time, and purported to be a
"statement in relation to its property subject to taxation in
the State of California owned by it for the year ending on the
first Monday in March, 1887, and of all property used in operating
its railway during such year."
And it was therein set forth, among other things, "[t]he value
of the franchise and entire roadway, roadbed, and rails within this
state is $12,273,785.00." The Board of equalization determined
"that the actual value of the franchise, roadway, roadbed,
rails, and rolling stock of said company within this state at the
said date and time in March, was, and still is, the sum of eighteen
million dollars,"
and thereupon assessed "the said franchise, roadway, roadbed,
rails, and rolling stock for the year 1887" at that sum.
By section 3670 of the Political Code, the Duplicate Record of
Assessment of Railways, and the Duplicate Record of Apportionment
of Railway Assessments, or copies thereof, were made
prima
facie evidence of the assessment, and that the forms of law in
relation to the assessment and levy of such taxes had been complied
with, and these were put in evidence.
Under this state of facts, the presumption was that the
franchise thus included by plaintiff in error in its return, and by
the Board in its assessment, was a franchise which was not exempt
under the laws of the United States, and that the Board had acted
upon property within its jurisdiction, rather than upon property
which it had no power to include in the assessment. Indeed, as the
supreme court points out, when plaintiff in error included the
franchise in its statement, if there were two franchises, one of
which could be assessed and the other could not, plaintiff in error
ought not to be permitted to say that the one which was not capable
of assessment was intended by it to be, or was, included therein.
People v. Central Pacific Railroad, 105 Cal. 592. And
the
Page 162 U. S. 114
court cited
San Francisco v. Flood, 64 Cal. 504;
Lake County v. Sulphur Bank Quicksilver Mining Co. 68 Cal.
14, and
Dear v. Varnum, 80 Cal. 86 -- which rule that a
party who furnishes a list of property for taxation is estopped
from questioning the sufficiency of the description so furnished,
in an action to collect the taxes. Undoubtedly, if the Board of
equalization had included what it had no authority to assess, the
company might seek the remedies given under the law to correct the
assessment, so far as such property was concerned, or recover back
the tax thereon, or, if those remedies were not held exclusive,
might defend against the attempt to enforce it. But where the
property mentioned in the description could be assessed, and the
assessment followed the return, as it did here, the company ought
at least to be held estopped from saying that the description was
ambiguous.
It is said that plaintiff in error should not be bound by this
statement, because it was on printed blanks prepared by the Board;
but when plaintiff in error filled out and swore to the statement
of its property "as being subject to taxation," and the blank form
called on plaintiff in error to give a statement of the value of
its franchise within the state for the purpose of assessment and
taxation, if it had intended to claim that its state and federal
franchises were so merged as to render the former not subject to
taxation, or that it had no franchise subject to taxation, it was
its duty to so indicate in making the return. Nothing in the law,
and nothing in the blank form, could have compelled it to make a
statement contrary to the facts.
Plaintiff in error attempted to rebut the case made by
introducing evidence which it claimed tended to show that the
franchise assessed covered franchises derived from the United
States as well as from the state, but the findings of fact of the
trial court were to the contrary, and, there being a conflict of
evidence on the point, the supreme court treated the findings as
conclusive, in accordance with the well settled rule on the subject
in that jurisdiction. In
Reay v. Butler, 95 Cal. 206, 214,
it was said:
"It has been held here, in
Page 162 U. S. 115
more than a hundred cases, commencing with
Payne v.
Jacobs, 21 Cal. 39, in the first published book of Reports of
this court, and ending with
Dobinson v. McDonald, 92 Cal.
33, in the last volume of said Reports, that the finding of a jury
or court as to a fact decided upon the weight of evidence will not
be reviewed by this Court."
That rule is equally binding on us.
Republican River Bridge
Co. v. Kansas Pacific Railway, 92 U. S.
315;
Dower v. Richards, 151 U.
S. 658.
It was argued in the Supreme Court of California, as it has been
here, that because the trial judge, after having determined as a
fact, from the preponderance of the evidence before him, that the
federal franchise was not assessed, stated that he thought that if
the parol evidence offered had not weighted in plaintiff's favor,
and that if by a preponderance of such evidence defendants could
have shown that the Board intended to and did include a federal
franchise in the assessment, the court would have to disregard it
as incompetent because the effect would be to contradict the
record, therefore the evidence had been disregarded by the court in
making its decision, and that the rule in respect of the
conclusiveness of a determination of facts on a conflict of
evidence did not apply. We entirely concur with the disposition of
this suggestion by the supreme court, which said:
"It clearly appears, however, that the court did not disregard
the evidence, but that, after determining as a fact, from the
preponderance of evidence before it, that the federal franchise had
not been assessed, it stated that if the preponderance of evidence
had been otherwise, it would have held as a matter of law that the
assessment must be tested by its own language. The fact that a
court, after giving its decision upon an issue, gives its opinion
upon the manner in which it would have decided the issue under
other circumstances does not constitute an error to be reviewed in
this Court."
Counsel for plaintiff in error also urge that inasmuch as it
appeared in the proceedings to assess for 1888 that the Board
placed "the franchise of the Central Pacific Company derived from
the State of California" at $1,250,000 and then assessed
Page 162 U. S. 116
"the franchise derived from the State of California, the
roadway, roadbed, and rolling stock of said company within said
state at the total sum of $15,000,000," it should be inferred, from
the difference in the language used in the assessment of 1887 and
the difference in the total amount, that the franchise then
assessed included the federal franchise. But it also appeared that
the return of the company for 1888, in respect of this matter, was
as follows:
The value of the franchise derived from the
state within this state . . . . . . . . . . . . . $ 25.00
The value of the entire roadway, roadbed,
rolling stock, and rails within this state is . .
9,376,607.00
-------------
$9,376,632 00
And we think that neither the difference in valuation nor the
difference in the mode of statement had a material bearing on the
assessment of 1887. The proceedings in 1888 showed greater care on
the part of the company in making the return, and on the part of
the Board in making the assessment, and possibly, if plaintiff in
error had been equally careful in relation to the assessment in
1887, it might have resulted that the valuation would have been
less, although it does not follow that the reduction in 1888 might
not be attributed to a change of financial conditions.
After all, these are considerations which were presented to the
trial judge in connection with all the evidence, and they have been
disposed of adversely to the company.
Exceptions were saved to the action of the trial court in
respect of the exclusion of certain evidence, but we are unable to
find in these rulings, or in the decision of the supreme court
thereon, the denial of any title, right, privilege, or immunity
specially set up or claimed under the Constitution or laws of the
United States.
The rulings passed on by the supreme court, and which we must
assume were all that were called to its attention, relate to the
cross-examination of the witness Wilcoxen as to statements
previously made by him, which the superior court confined to the
assessment for 1887, in respect of which he had
Page 162 U. S. 117
been examined in chief. The supreme court held that, under the
circumstances disclosed by the record, the superior court did not
err in this particular.
And also to the exclusion of the evidence of Maslin as to the
conversations of members of the Board, in making the assessment, in
relation thereto. The supreme court held as to this that
"the intention of the Board or of any of its members, or the
signification to be given to the term 'franchise' as used in the
assessment, could not be shown in this manner, and the evidence
could not be used for impeaching purposes unless the members of the
Board had been previously questioned thereon."
The correctness of these rulings commends itself to us, but it
is enough to say that it is impossible to predicate error raising a
federal question as to these or any of the rulings on evidence
referred to by counsel.
Clearly no such error was committed in the rejection of the
general offers of proof, if we should treat them as open to
consideration notwithstanding the apparent abandonment of the
exceptions in that regard in the supreme court. The issue was upon
the assessment for the year 1887. The decision in
California v.
Pacific Railroad Company, 127 U. S. 1, as
announced April 30, 1888, but the last of the judgments of the
circuit court therein considered and affirmed was rendered July 15,
1886. And the action of the Board in years prior to 1887, as sought
to be shown, was not necessarily relevant or material. Offers of
proof must be offers of relevant proof, specific, not so broad as
to embrace irrelevant and immaterial matter, and made in good
faith. The exercise of the discretion of the trial court in
rejecting these offers cannot properly be reviewed by us.
The errors assigned as to the nondeduction of outstanding
mortgages from the valuation of the property are expressly waived,
though it is assigned for error in the brief that the court erred
in not holding that, as the state franchise was subject to the lien
of a mortgage to the United States, the assessment was invalid,
because in effect taxing the interest of the United States in that
franchise created by the mortgage.
Page 162 U. S. 118
As to this, no such question was raised or passed on in the
state court, and moreover, the objection is without merit, on
principle and authority, on grounds hereafter stated.
We are thus brought to the consideration of the real question in
the case, presented in various aspects, and argued with much
ability by counsel for plaintiff in error -- namely, that the
company's franchises are one and inseparable, constituting and
indivisible unit which cannot be subjected to taxation by the State
of California, because that would be necessarily to subject the
federal franchise to taxation.
The argument is that the franchise of railroads authorized by
the state constitution and the provisions of the Political Code to
be assessed is nothing but the right to operate the railroad and
charge and take tolls thereon; that the right of the Central
Pacific Railroad Company to construct, maintain, and operate its
railroad in California was conferred upon that company by, and
derived by it from, the United States, and that the right is a
single right, though granted also by the state.
The company is a corporation of California, made up of two
California corporations consolidated by articles of association
entered into under the laws of California, and recognized as a
California corporation by the acts of Congress through which it
obtained federal assistance and federal franchises subsequently to
its incorporation, in 1861, Act of July 1, 1862, c, 120, 12 Stat.
489; at of July 2, 1864, c. 216, 13 Stat. 356; Act of March 3,
1865, c. 88, 13 Stat. 504; Act of May 7, 1878, c. 96, 20 Stat. 56,
and never otherwise regarded in the legislation of the state.
Indeed, by the Act of April 4, 1864, St.Cal. 1863-64, c. 417,
passed to "enable the said company more fully and completely to
comply with and perform the provisions and conditions of said act
of Congress" of July 1, 1862, California authorized the company to
construct, maintain, and operate the road and telegraph in the
territory lying east of the state, with the usual incidental
rights, privileges, and powers, also vesting in the company the
rights, franchises, and powers granted by Congress, with the
express reservation that the company should be
"subject to all the
Page 162 U. S. 119
laws of this state concerning railroad and telegraph lines,
except that messages and property of the United States, of this
state, and of the said company, shall have priority of
transportation and transmission over said line of railroad and
telegraph."
Sinking-Fund Cases, 99 U. S. 754.
Severance of the allegiance of the corporation to the state that
created it, and deprivation or transfer of the powers and
privileges conferred by the state, were not the object of the grant
by the United States, nor the consequence of the acceptance of that
grant by the corporation as thereto authorized by the state.
Pennsylvania Railroad v. St. Louis, Alton &c.
Railroad, 118 U. S. 290,
118 U. S. 296.
But it was not contended at the bar that the company ever became a
corporation of the United States, or that it is other than a state
corporation.
Even in respect of railway corporations created by act of
Congress, the claim of an exemption of their property from state
taxation has been repeatedly denied. This was so ruled in
Railroad Company v.
Peniston, 18 Wall. 5,
85 U. S. 30,
85 U. S. 36, and
Mr. Justice Strong said:
"It cannot be that a state tax which remotely affects the
efficient exercise of a federal power is for that reason alone
inhibited by the Constitution. To hold that would be to deny to the
states all power to tax persons or property. Every tax levied by a
state withdraws from the reach of federal taxation a portion of the
property from which it is taken, and to that extent diminishes the
subjects upon which federal taxes may be laid. The states are, and
they must ever be, coexistent with the national government. Neither
may destroy the other. Hence the federal Constitution must receive
a practical construction. Its limitations and its implied
prohibitions must not be extended so far as to destroy the
necessary powers of the states, or prevent their efficient
exercise. . . ."
"It is therefore manifest that exemption of federal agencies
from state taxation is dependent not upon the nature of the agents
or upon the mode of their construction, or upon the fact that they
are agents, but upon the effect of the tax --
Page 162 U. S. 120
that is, upon the question whether the tax does in truth deprive
them of power to serve the government as they were intended to
serve it, or does hinder the efficient exercise of their power. A
tax upon their property has no such necessary effect. It leaves
them free to discharge the duties they have undertaken to perform.
A tax upon their operations is a direct obstruction to the exercise
of federal powers."
"In this case, the tax is laid upon the property of the railroad
company precisely as was the tax complained of in
Thompson v. Railway
Co., 9 Wall. 579. It is not imposed upon the
franchises, or the right of the company to exist and perform the
functions for which it was brought into being. Nor is it laid upon
any act which the company has been authorized to do. It is not the
transmission of dispatches nor the transportation of United States
mails or troops or munitions of war that is taxed, but it is
exclusively the real and personal property of this agent, taxed in
common with all other property of the State of a similar character.
It is impossible to maintain that this is an interference with the
exercise of any power belonging to the general government, and, if
it is not, it is prohibited by no constitutional implication."
In
Thompson v. Pacific
Railroad, 9 Wall. 579, the Union Pacific Railway
Company, Eastern Division, a corporation created by the legislature
of Kansas, received government aid in bonds and land, and, thus
aided, constructed its road to become one link in the
transcontinental line known as the "Union Pacific System," in
accordance with the same acts of Congress relating to plaintiff in
error, and conferring the same functions and privileges. The State
of Kansas having subsequently taxed the roadbed, rolling stock, and
certain personal property of the corporation, its stockholders
sought to enjoin the collection of the tax on the ground that the
property was mortgaged to the United States, and that it was bound
under the congressional grant to perform certain duties, and
ultimately pay five percent of its net earnings to the United
States, and that state taxation would retard and burden it in the
discharge of its obligations to the general government. But the
contention was overruled, and Mr. Chief Justice Chase said:
Page 162 U. S. 121
"But we are not aware of any case in which the real estate or
other property of a corporation not organized under an act of
Congress has been held to be exempt, in the absence of express
legislation to that effect, to just contribution, in common with
other property, to the general expenditure for the common benefit,
because of the employment of the corporation in the service of the
government."
"It is true that some of the reasoning in the case of
McCulloch v. Maryland seems
to favor the broader doctrine. But the decision itself is limited
to the case of the bank, as a corporation created by a law of the
United States and responsible, in the use of its franchises, to the
government of the United States."
"And even in respect to corporations organized under the
legislation of Congress, we have already held at this term that the
implied limitation upon state taxation, derived from the express
permission to tax shares in the national banking associations, is
to be so construed as not to embarrass the imposition or collection
of state taxes to the extent of the permission fairly and liberally
interpreted.
National Bank v.
Commonwealth, 8 Wall. 353."
"We do not think ourselves warranted, therefore, in extending
the exemption established by the case of
McCulloch v.
Maryland beyond its terms. We cannot apply it to the case of a
corporation deriving its existence from state law, exercising its
franchise under state law, and holding its property within state
jurisdiction and under state protection."
". . . No one questions that the power to tax all property,
business, and persons, within their respective limits, is original
in the states, and has never been surrendered. It cannot be so
used, indeed, as to defeat or hinder the operations of the national
government; but it will be safe to conclude, in general, in
reference to persons and state corporations employed in government
service, that when Congress has not interposed to protect their
property from state taxation, such taxation is not obnoxious to
that objection.
Lane Co. v. Oregon, 7
Wall. 77;
National Bank v. Kentucky, 9
Wall. 353. We perceive no limits to the principle of exemption
Page 162 U. S. 122
which the complainants seek to establish. It would remove from
the reach of state taxation all the property of every agent of the
government. . . ."
"The nature of the claims to exemption which would be set up is
well illustrated by that which is advanced in behalf of the
complainants in the case before us. The very ground of claim is in
the bounties of the general government. The allegation is that the
government has advanced large sums to aid in the construction of
the road; has contented itself with the security of a second
mortgage; has made large grants of land upon no condition of
benefit to itself, except that the company will perform certain
services for full compensation, independently of those grants, and
will admit the government to a very limited and wholly contingent
interest in remote net income. And because of these advances and
these grants and this fully compensated employment, it is claimed
that this state corporation, owing its being to state law and
indebted for these benefits to the consent and active interposition
of the state legislature, has a constitutional right to hold its
property exempt from state taxation, and this without any
legislation on the part of Congress which indicates that such
exemption is deemed essential to the full performance of its
obligations to the government."
In his dissenting opinion in
Railroad
Co. v. Peniston, 18 Wall. 48, Mr. Justice Bradley
distinguishes
Thompson v. Pacific Railroad from that case
thus:
"That was a state corporation, deriving its origin from state
laws and subject to state regulations and responsibilities. It
would be subversive of all our ideas of the necessary independence
of the national and state governments, acting in their respective
spheres, for the general government to take the management,
control, and regulation of state corporations out of the hands of
the state to which they owe their existence, without its consent,
or to attempt to exonerate them from the performance of any duties
or the payment of any taxes or contributions to which their
position as creatures of state legislation renders them
liable."
Both these cases were referred to with approval by Mr.
Page 162 U. S. 123
Justice Miller in
Western Union Telegraph Co. v.
Massachusetts, 125 U. S. 530, and
by MR. JUSTICE BREWER in
Reagan v. Mercantile Trust Co.,
154 U. S. 413,
154 U. S. 416.
In the latter case, it was contended that, as the Texas and Pacific
Railway was a corporation organized under the laws of the United
States, it was not subject to the control of the state even as to
rates of transportation wholly within the state. The argument was
that the company received all its franchises from Congress, that
among those franchises was the right to charge and collect tolls,
and that the state had not the power, therefore, in any manner to
limit or qualify such franchise. But that position was not
sustained, and MR. JUSTICE BREWER, delivering the opinion, said
"that, conceding to Congress the power to remove the corporation
in all its operations from the control of the state, there is in
the act creating the company nothing which indicates an intent on
the part of Congress to so remove it, and there is nothing in the
enforcement by the State of reasonable rates for transportation
wholly within the state which will disable the corporation from
discharging all the duties and exercising all the powers conferred
by Congress."
Although the Central Pacific Company is not a federal
corporation, it is nevertheless true that important franchises were
conferred upon the company by Congress, including that of
constructing a railroad from the Pacific Ocean to Ogden, in the
Territory of Utah. But as remarked in
California v. Central
Pacific Railroad, 127 U. S. 1,
127 U. S.
38-40,
"this important grant, though in part collateral to, was
independent of, that made to the company by the State of
California, and has ever since been possessed and enjoyed."
That case came up from the Circuit Court of the United States
for the Northern District of California, and the circuit court
found that the assessment made by the State Board of Equalization
"included the full value of all franchises and corporate powers
held and exercised by the defendant," and, as it could not be
denied that that embraced franchises conferred by the United
States, it was held that the assessment was invalid, but it was not
held nor intimated that if the Board of equalization
Page 162 U. S. 124
had only included the state franchise, the same result would
have followed.
Mr. Justice Bradley, delivering the opinion of the Court,
said:
"Assuming, then, that the Central Pacific Railroad Company has
received the important franchises referred to by grant of the
United States, the question arises whether they are legitimate
subjects of taxation by the state. They were granted to the company
for national purposes, and to subserve national ends. It seems very
clear that the State of California can neither take them away nor
destroy nor abridge them nor cripple them by onerous burdens. Can
it tax them? It may undoubtedly tax outside visible property of the
company situated within the state. That is a different thing."
"But may it tax franchises which are the grant of the United
States? In our judgment, it cannot. What is a 'franchise'? Under
the English law, Blackstone defines it as 'a royal privilege or
grant of the King's prerogative, subsisting in the hands of the
subject.' 2 Bl.Com. 37. Generalized, and divested of the special
form which it assumes under a monarchical government based on
feudal traditions, a franchise is a right, privilege, or power of
public concern which ought not to be exercised by private
individuals at their mere will and pleasure, but should be reserved
for public control and administration, either by the government
directly or by public agents acting under such conditions and
regulations as the government may impose in the public interest and
for the public security. Such rights and powers must exist under
every form of society. They are always educed by the laws and
customs of the community. Under our system, their existence and
disposal are under the control of the legislative department of the
government, and they cannot be assumed or exercised without
legislative authority. No private person can establish a public
highway, or a public ferry, or railroad, or charge tolls for the
use of the same without authority from the legislature, direct or
derived. These are franchises. No private person can take another's
property, even for a public use, without such authority, which
Page 162 U. S. 125
is the same as to say that the right of eminent domain can only
be exercised by virtue of a legislative grant. This is a franchise.
No persons can make themselves a body corporate and politic without
legislative authority. Corporate capacity is a franchise. The list
might be continued indefinitely."
Mr. Justice Bradley then referred to
McCulloch v. Maryland;
Osborn v. Bank, and
Brown v. Maryland, to the
proposition that a power given to a person or corporation by the
United States cannot be subjected to taxation by a state, and
added
"that these views are not in conflict with the decisions of this
Court in
Thomson v. Pacific Railroad,
9 Wall. 579, and
Railroad Co. v. Peniston, 18
Wall. 5. As explained in the opinion of the Court in the latter
case, the tax there was upon the property of the company, and not
upon its franchises or operations. 18 Wall.
85 U. S.
35-37."
Thus it was reaffirmed that the property of a corporation of the
United States might be taxed, though its franchises -- as, for
instance, its corporate capacity -- and its power to transact its
appropriate business and charge therefor could not be. It may be
regarded as firmly settled that although corporations may be agents
of the United States, their property is not the property of the
United States, but the property of the agents, and that a state may
tax the property of the agents, subject to the limitations pointed
out in
Railroad Co. v. Peniston; Van Brocklin v.
Tennessee, 117 U. S. 151,
117 U. S.
177.
Of course, if Congress should think it necessary for the
protection of the United States to declare such property exempted,
that would present a different question. Congress did not see fit
to do so here, and unless we are prepared to overrule a long line
of well considered decisions, the case comes within the rule
therein laid down. Although in
Thomson's Case it was
tangible property that was taxed, that can make no difference in
principle, and the reasoning of the opinion applies.
Under the laws of California, plaintiff in error obtained from
the state the right and privilege of corporate capacity; to
construct, maintain, and operate; to charge and collect fares
Page 162 U. S. 126
and freights; to exercise the power of eminent domain; to
acquire and maintain right of way; to enter upon lands or waters of
any person to survey route; to construct road across, along, or
upon any stream, water course, roadstead, bay, navigable stream,
street, avenue, highway, or across any railway, canal, ditch, or
flume; to cross, intersect, join, or unite its railroad with any
other railroad at any point on its route; to acquire right of way,
roadbed, and material for construction; to take material from the
lands of the state, etc. Stat.Cal. 1861, c. 532, 607; 2 Deering's
Annotated Codes and Stat.Cal. 114.
It is not to be denied that such rights and privileges have
value, and constitute taxable property.
The general rule, as stated by Mr. Justice Miller in
State
Railroad Tax cases, 92 U. S. 575,
92 U. S.
603,
"that the franchise, capital stock, business, and profits of all
corporations are liable to taxation in the place where they do
business, and by the state which creates them, admits of no dispute
at this day."
And the Constitution of California expressly declares that the
word "property," as used in section 1 of article 13, providing that
"all property in the state, not exempt under the laws of the United
States, shall be taxed in proportion to its value," includes
franchises, as well as all other matters and things capable of
private ownership.
The question here is not a question of the value of the state
franchise, but whether that franchise existed, for if in 1887
plaintiff in error possessed any subsisting rights or privileges,
otherwise called franchises, derived from the state, then they were
taxable, and the extent of their value was to be determined by the
Board of equalization.
So far as the ability of the company to discharge its duties and
obligations to the general government is concerned, it is difficult
to see that taxation of the state franchise would tend to impair
that ability any more than taxation of the roadway, roadbed, rails,
and rolling stock. If the necessary effect of a tax on such
tangible property is not to unconstitutionally hinder the efficient
exercise of the power to serve the government, neither can it be so
in respect of the state franchise.
Page 162 U. S. 127
Indeed, the taxation by the State of the franchise granted by it
does not, and could not, prevent plaintiff in error from acting
under its federal franchise.
This was an action to recover judgment against the company under
the statute, and the franchise was only an element in arriving at
the valuation in making the assessment; but if the power to tax the
state franchise involved the power to dispose of it at delinquent
tax sale or on execution, such sale would be subject to the
superior and independent rights of the United States, and the fact
that this would affect the value is of no consequence. If the state
franchise should be voluntarily surrendered by the company to the
state or forfeited by the state, yet the United States, through the
federal franchise, could still operate the road in California. And
on the other hand, should plaintiff in error in any manner be
deprived of its federal franchise, it would not thereby be
prevented from operating in California under its state franchise.
The right and privilege, or franchise, of being a corporation is of
value to its members, and is considered as property separate and
distinct from the property which the corporation may acquire; but
apart from that, if the state franchise to be assessed were
confined to the right to operate the road and take tolls, such a
franchise was originally granted by the state to this company, and
as such was taxable property. If the subsequent acts of Congress
had the effect of creating a federal franchise to operate the road,
that merely rendered the state right subordinate to the federal
right, and did not destroy the state right, nor merge it into the
federal right, and no authority is cited to sustain any such
proposition. No act of Congress in terms attempted to bring about
this result, and no such result can be deduced therefrom by
necessary implication. Whether plaintiff in error now operates its
road under the franchise derived from the United States or from the
state is immaterial, as the supreme court well said. The right to
operate the road is valuable whether it is being exercised or not,
and the question, we repeat, relates to the existence of the
franchise, and not to the extent of its value.
When we consider that plaintiff in error returned its
franchise
Page 162 U. S. 128
for assessment, declined to resort to the remedy afforded by the
state laws for the correction of the assessment as made, if
dissatisfied therewith, or to pay its tax and bring suit to recover
back the whole or any part of the tax which it claimed to be
illegal, we think its position is not one entitled to the favorable
consideration of the court; but without regard to that we hold, for
the reasons given that the state courts rightly decided that the
company had no valid defense to the causes of action proceeded
on.
Judgment affirmed.
MR. JUSTICE WHITE concurred in the result.
MR. JUSTICE FIELD, dissenting.
I am unable to concur with may associates in their opinion or
judgment in the present case.
The case comes before us on writ of error to the Supreme Court
of California, affirming the judgment of the Superior Court of the
City and County of San Francisco, and an order of that court
denying a new trial in an action brought by the people of the state
against the Central Pacific Railroad Company to recover moneys
alleged to be due by it to the state for taxes for the fiscal year
of 1887, upon assessments made by the State Board of Equalization.
The supreme court of the state affirmed the judgment of the
superior court against that company in disregard, in my opinion, of
the long established doctrine of this Court that the powers of the
general government and the instrumentalities of the state called
into exercise in enforcement of those powers cannot be impaired or
their efficiency lessened by taxation or any other action on the
part of the state. This doctrine has been constantly asserted by
this Court when called upon to express its opinion thereon, its
judgment being pronounced by the most illustrious Chief Justice in
its history with the unanimous concurrence of his associates. It
has become a recognized principle, made familiar in the courts of
the country by the decision of this Court in
McCulloch
v. Maryland, 4 Wheat. 316, and
Osborn v.
Bank, 9 Wheat. 738. The disregard
Page 162 U. S. 129
of this doctrine in the present case recalls the aphorism of
Coleridge, applied with equal force, but not more applicable, to
moral principles. "Truths," he says,
"of all others the most awful and interesting, are too often
considered as so true that they lose all the power of truth, and
lie bedridden in the dormitory of the soul side by side with the
most despised and exploded errors."
It would seem that the truth of the constitutional doctrine has
lost some of its force by the very fact that it has heretofore been
considered so true as never to be questioned.
By the Act of Congress of July 1, 1862, c. 120, 12 Stat. 489,
the Union Pacific Railroad Company was organized by Congress and
authorized and empowered to lay out, construct, furnish, and
maintain a continuous railroad and telegraph, with the
appurtenances, from a point on the 100th meridian of longitude west
from Greenwich, between the south margin of the valley of the
Republican River and the north margin of the valley of the Platte
River, in the Territory of Nebraska, to the western boundary of
Nevada territory, and was vested with all the powers, privileges,
and immunities necessary to carry into effect the purposes of the
act. In aid of the great work thus inaugurated, railway
corporations by the states through which the overland railroad
projected was to pass were called into existence. If rights,
powers, privileges, and immunities were conferred by state
authority upon these state corporations, they constituted a portion
of their franchises, subordinate to those conferred by the general
government, and comprised with those of that government an
essential part of the means for the efficiency and usefulness of
the auxiliary corporations.
The powers, privileges, and immunities conferred upon the state
corporations by the United States were necessarily paramount to
those derived from the state. When the powers, privileges, and
immunities of such state corporations were derived solely from the
authority of the state, they were generally designated, when spoken
of collectively, as the state franchise or franchises of the
corporation, and when the rights, powers, privileges, and
immunities were supposed to be
Page 162 U. S. 130
derived solely from the United States, they were generally
designated, when spoken of collectively, as the federal franchise
or franchises of the corporation. When no indication of the source
of the franchise or franchises was specified, the rights, powers,
privileges, and immunities involved in that term held by the
defendant were usually designated as the franchise or franchises of
the company specifically, without other description, and the term
included the powers, privileges, and immunities conferred by both
federal and state authority. The term embraced all those powers,
duties, and immunities which were conferred, or supposed to be
conferred, upon the railroad company for its operation from either
source or from both sources.
By section 9 of the general act of 1862, mentioned above, the
Central Pacific Railroad Company was authorized to construct a
railroad and telegraph line from the Pacific Coast at or near San
Francisco, or the navigable waters of the Sacramento River, to the
eastern boundary of California, upon the same terms and conditions
in all respects as were contained in the act for the construction
of the overland railroad and telegraph line, and to meet and
connect with the railroad and telegraph line on the eastern
boundary of California. Each of the companies was required to file
its acceptance of the conditions of the act in the Department of
the Interior within six months after its passage.
By the tenth section of the general act, the Central Pacific
Railroad Company, after completing its road across the State of
California, was authorized to continue the construction of the
railroad and telegraph through the territories of the United States
to the Missouri River, including the branch roads specified in the
act, upon the routes indicated, on the terms and conditions
provided in the act in relation to the Union Pacific Railroad
Company, until the roads should meet and connect and the whole line
of the railroad and branches and telegraph should be completed.
By section 16 of the act mentioned, power was given to the
Central Pacific to consolidate with the other companies named
therein.
Page 162 U. S. 131
By section 17, it was provided that in case the company or
companies failed to comply with the terms and conditions of the
act, Congress might pass an act to insure the speedy completion of
the road and branches or put the same in repair and use and direct
the income of the railroad and telegraph line to be thereafter
devoted to the use of the United States, and further that if the
roads mentioned were not completed so as to form a continuous line
from the Missouri River to the navigable waters of the Sacramento
River, by July 1, 1876, the whole of the railroads mentioned and to
be constructed under the provisions of the act, together with all
their property of every kind and character, should be forfeited to
and taken possession of by the United States.
The eighteenth section provided that when the net earnings of
the entire road should reach a certain percentage upon its cost,
Congress might reduce the rates of fare thereon, if unreasonable in
amount, and might fix and establish the same by law, and it
declared that the better to accomplish the object of the act --
namely to promote the public interest and welfare by the
construction of the railroad and telegraph line and to keep the
same in working order, and to secure to the government at all
times, but particularly in time of war, the use and benefits of the
same for postal, military, and other purposes, Congress might at
any time, having due regard for the rights of the companies named,
add to, alter, amend, or repeal the act, and the companies were
required to make annual reports as to the matters mentioned to the
Secretary of the Treasury.
By the Act of Congress of July 2, 1864, amendatory of the Act of
July 1, 1862, additional powers, rights, privileges, immunities,
and property were granted to the companies engaged in the great
national work proposed by Congress in the former act in order to
secure the completion of that work, which at that time was of
imminent necessity.
By section 16 of this last act it was provided that, should the
Central Pacific Railroad Company complete its line to the eastern
boundary of the State of California before the line of
Page 162 U. S. 132
the Union Pacific Railroad shall have been extended westward so
as to meet the line of the first-named company, that company might
extend its line eastward 150 miles on the established route, so as
to meet and connect with the line of the Union Pacific Railroad,
complying in all respects with the provisions and restrictions of
the act as to the Union Pacific Railroad, and when it was
completed, should enjoy all the rights, privileges, and benefits
conferred by the act on the latter company.
It is found by the Court that the Central Pacific Railroad
Company accepted the provisions of the acts of 1862 and 1864, and
that, on or about October 21, 1864, that company assigned to the
Western Pacific Railroad Company, a corporation created and then
existing under the law of California, all its rights under the acts
of Congress, so far as they related to the construction of the
railroad and telegraph line between the cities of San Jose and
Sacramento, in California, and that this assignment was ratified
and confirmed by Congress in the Act of March 3, 1865, to amend the
constituting acts of 1862 and 1864.
The Act of March 3, 1865, provided that section 10 of the Act of
July 2, 1864, should be so modified and amended as to allow the
Central Pacific Railroad Company, and the Western Pacific Railroad
Company of California, the Union Pacific Railroad Company, and the
eastern division of the Union Pacific Railroad Company, and all
other companies provided for in the Act of July 2, 1864, to issue
their six percentum thirty-year bonds, interest payable in any
lawful money of the United States, upon their separate roads. And
the companies were thereby authorized to issue, respectively, their
bonds to the extent of one hundred miles in advance of a continuous
completed line of construction, and the assignment, made by the
Central Pacific Railroad Company of California, to the Western
Pacific Railroad Company of the state, of the right to construct
all that portion of the railroad and telegraph from the City of San
Jose to the City of Sacramento, was thereby ratified and confirmed
to the Western Pacific Railroad Company,
Page 162 U. S. 133
with all the privileges and benefits of the several acts of
Congress relating thereto, subject to the conditions thereof.
The Central Pacific Railroad Company was empowered by the State
of California to construct within its limits various lines of
railroad, and to equip them with the appurtenances essential to
give to their operations efficiency and usefulness. It is conceded
that until April 4, 1864, the Central Pacific Railroad Company and
other railroad corporations of the state exercised and enjoyed what
are termed the franchises of its corporations -- that is, the
rights, powers, privileges, and immunities conferred upon them by
state authority -- and also various powers, duties, privileges, and
immunities conferred upon them by the general government, and which
are termed their federal franchises. But on that date, the 4th of
April, 1864, the Legislature of California abrogated the state
franchises of those corporations and substituted by adoption in
their place the federal franchises, which have remained in force
ever since.
The provisions of the Act of Congress of July 1, 1862, and of
July 2, 1864, state with entire distinctness the rights, powers,
duties, privileges, and immunities of the principal railroad --
that of the Union Pacific -- and of the auxiliary roads connecting
therewith. The most essential features are the following:
I. The Act of July 1, 1862, authorized the Union Pacific
Railroad Company to construct its road, vesting it with all powers
necessary for that purpose, and requiring it to transport mails,
troops, and munitions of war. This was a plain exercise of the
express power "to establish post roads," and of the implied power
to construct military roads.
II. The same act authorized the Central Pacific Railroad Company
to construct its road on the same terms and conditions as those of
the Union Pacific.
III. The third section of the Act of July 2, 1864, provided in
the usual form for the exercise by both companies of the federal
right to acquire the right of way for the construction of these
post and military roads.
IV. The Central Pacific Company was thus made the agent of the
government in its exercise of the constitutional
Page 162 U. S. 134
power to establish post roads and military roads. No state law
could have obstructed or impeded the federal government in the
exercise of this power, or in any degree whatever have limited or
facilitated the Central Pacific Company in the enjoyment of the
federal franchise thus conferred.
V. If the consent of the state was necessary to the
establishment of this road by the United States, it will be found
in the statute of California enacted in 1852, which, independent of
its preamble, reads as follows:
"SEC. 1. The right of way through this state is hereby granted
to the United States for the purpose of constructing a railroad
from the Atlantic to the Pacific Ocean."
Statutes of California of 1852, p. 150, ๏ฟฝ 1.
If the consent of the state was necessary to the complete
substitution of the federal franchise for any then existing state
franchise for the construction of the road, it will be found in the
act of the Legislature of the State of California of April 4, 1864,
which, after a comprehensive grant to the company of all necessary
privileges and powers, including the state's right of eminent
domain, made, as the act recites, "to enable said company more
fully and completely to comply with and conform to the provisions
and condition of said act of Congress," concludes with the
following language:
"Hereby confirming to and vesting in said company all the
rights, privileges, franchises, power and authority conferred upon,
granted to or vested in said company by said act of Congress;
hereby repealing all laws and parts of laws inconsistent or in
conflict with the provisions of this act or the rights and
privileges herein granted."
Statutes of California, 1863-64, c. 417, ๏ฟฝ 1., p. 471. In the
opinion of the majority of the court, delivered by the Chief
Justice, it is said that the general rule, expressed by Mr. Justice
Miller in
Railroad Tax cases, 92 U. S.
575,
"that the franchises, capital stock, business, and profits of
all corporations are liable to taxation in the place where they do
business and by the state which creates them"
admits of no dispute at this day. And then the opinion adds that
the question here is not a question of the value of the state
franchises, but
Page 162 U. S. 135
whether those franchises existed, for if, in 1887, the plaintiff
in error (the Central Pacific Railroad Company) possessed any
subsisting rights or privileges, otherwise called franchises,
derived from the state, then they were taxable, and the extent of
their value was to be determined by the Board of equalization. A
complete answer to the ground of the opinion is found in the Act of
the Legislature of California of April 4, 1864, passed twenty-three
years before 1887, to which I have above referred, which abrogated
the state franchises previously existing and substituted in their
place the federal franchises
The federal franchises for the construction of the Central
Pacific Railroad from the Pacific Coast to the eastern boundary
line of California as a part of the continuous military and post
road to the Missouri River established by Congress could have had
no rival in a state franchise for the construction of the same
road; but in order that this might never be questioned, the
Legislature of the State of California obliterated its own
franchises when it ratified and confirmed the franchises given by
the federal government to the Central Pacific Railroad Company.
How, then, can the state, twenty-three years later, tax alleged
state franchises, claimed by its authorities to underlie the
federal franchises? Suppose the alleged state franchises should be
sold for a delinquent tax thereon under the authority of the state,
and an attempt should be made to place the purchaser in possession;
a federal judge would, of course, be applied to for an injunction,
which would undoubtedly be granted, and the shadow of the shade of
the state franchises would appear no more.
But notwithstanding this express abrogation of the state
franchises, meaning by that the powers, duties, rights, privileges,
and immunities of the state corporations conferred by the
Legislature of the State of California and the substitution in
place thereof of the franchises conferred by the general
government, the State of California has, since the abrogation of
the state franchises and the substitution of the federal
franchises, in various ways subjected that railroad and its
franchises, whether derived from state or federal authority, which
were
Page 162 U. S. 136
essential to the successful working of the road brought into
existence by the federal government to heavy burdens in the way of
taxation, and thus imposed an additional obstacle to the efficiency
of the Central Pacific Railroad in the execution of the general
operations of the overland railroad.
The question presented is whether the burden thus imposed upon
the franchises, roadbed, rails, and rolling stock of railroads,
whether or not operated in more than one county, can be lawfully
assessed upon them when they constitute the grant of the general
government, or an essential part of or are appurtenant to the
franchises of the state corporation which is used as an
instrumentality of the overland road. The State Board of
Equalization has assessed the franchises of the state as a distinct
element in the estimate of the valuation of the railroad, carrying
its estimate to an enormous sum in many instances, as, in the
present case, to the sum of $18,000,000, and at the same time it
has assessed the federal franchises -- that is, those derived from
the general government -- as a distinct and separate element in the
estimate of the valuation of the railroad, and has blended the two
franchises in determining the valuation of the railroad for the
purpose of taxation.
It seems to me as an extravagant, if not an absurd, position in
the face of the specific legislation by the state abrogating its
franchises of the Central Pacific Railroad Company and substituting
the federal franchises in their place, to contend that the state
franchises still exist and can be enforced and be made the subject
of estimate in the valuation of the railroad for taxation. The
federal franchises, standing alone, cannot be impeded or hampered
in any way by state legislation. This would follow had not the
state expressed itself in the emphatic way it has done:
"Confirming to and vesting in said company all the rights,
privileges, franchises, powers and authority conferred by the grant
to or vested in said company by said act of Congress, hereby
repealing all laws and parts of laws inconsistent or in conflict
with the provisions of this act, or the rights and privileges
herein granted."
The state franchises thus abrogated and discarded cannot be
again
Page 162 U. S. 137
restored to life by mere words, however often repeated and with
whatever asseveration made. The dishonored franchises are gone
forever.
Independently of this view, the two franchises -- the so-called
state franchise and the so-called federal franchise -- if both
exist at the same time, are to be treated as necessarily so blended
together that they cannot be separated and given a distinct
valuation in the total estimate. And even when separated, were that
possible, the inevitable blending follows the moment the value of
the railroad becomes a matter of serious consideration for the
purpose of fixing the amount of the assessment. I construe the
state and federal franchises as being simply the right conferred
upon them to complete and operate the road. And whatever part the
state or federal franchises may have played in accomplishing this
result, the separate effect of either cannot be distinguished from
the other, and apply to each and every mile of the road. The two
franchises have interlaced each other at every step of their
exercise. It follows that the separate estimation of the taxation
of the so-called state franchises when they existed, which, as
appears, was only for a limited period, was impossible; and, for
many reasons, which we will state, it was never intended that such
state franchises should be assessed and taxed as a separate entity
in the estimate of the value of the railroad.
In the case of
California v. Pacific Railroad,
127 U. S. 34,
this Court decided that, as the assessments of the State Board of
Equalization against the Central Pacific Railroad Company of 1883
and 1884, and the assessment against the Southern Pacific Railroad
Company of 1883, included the franchises conferred by the United
States upon those corporations, respectively, the assessments were
void as repugnant to the Constitution and laws of the United States
and the power of Congress to regulate commerce among the several
states. 127 U.S.
127 U. S.
41-43.
It appears by the record that the complaint in this action
contains nineteen counts upon the same number of alleged causes of
action. The first count is for state taxes. The other counts are
for county taxes.
Page 162 U. S. 138
In
People v. Central Pacific Railroad, 83 Cal. 393,
399, it was held by the supreme court of the state that section
3670 of its Political Code, prescribing a special form of
complaint, was in conflict with its constitution, and that a
complaint in an action to recover taxes levied upon a railroad
could not join causes of action in favor of the several counties
through which the road runs. But that is not material in the
present action.
Each of the eighteen counts alleges that the defendant is a
corporation organized and existing under the laws of California,
engaged in operating a railroad in more than one county of the
state. The state sets forth its claims for a recovery and asks for
judgment in its favor for the several assessments stated against
the franchises, or some portion thereof, which constitute a grant
of the general government, or appurtenances to the grant of the
state corporation, rendering it efficient and useful as an
instrumentality of the overland road, the great work undertaken by
the general government. The complaint alleges in its several counts
that in August, 1887, which, as stated above, was twenty-three
years after the state franchises to the defendant had been
abrogated and annulled, the State Board of Equalization, for the
purpose of state and county taxation for the fiscal year ending
June 30, 1888, assessed to the defendant, then the owner and
operator thereof in more than one county in the state, the
franchise, roadway, roadbed, rails, and rolling stock of the
defendant's railway then within the state at the sum of
$18,000,000, and that, within ten days after the third Monday in
August of that year, the Board apportioned the total assessment of
the franchise, roadway, roadbed, rails, and rolling stock of the
defendant to the counties in the state in which defendant's railway
was located in proportion to the number of miles of defendant's
railway laid in such counties and the amounts of the total
assessment thus apportioned by the Board to the counties,
respectively, and the number of miles of defendant's railway laid
in the counties, respectively.
The complaint concludes with a demand for judgment
Page 162 U. S. 139
against the defendant for the several sums of state and county
tax alleged to be delinquent and unpaid as stated therein,
aggregating the sum of $295,740.71, with five percent thereon for
delinquency and nonpayment, with interest at the rate of two
percent on the amount from the last of December, 1887; also for the
costs of suit and for attorney's fees.
To the complaint a demurrer, general and special, was interposed
by the defendant. The superior court overruled the demurrer, with
leave to the defendant to answer the complaint.
The answer of the defendant puts in issue most of the material
allegations of the complaint, and sets up various special and
affirmative defenses. One of those defenses is that the "franchise"
assessed to the defendant by the State Board of Equalization was
derived from the government of the United States through certain
acts of Congress (commonly known as the "Pacific Railroad Acts");
that the same is held and used by the defendant as one of the means
and instrumentalities of the federal government, and was therefore
not taxable by the state; that the assessment of this franchise was
so blended with the whole assessment as not to be separable
therefrom, and that the whole assessment was therefore void.
On the trial of the issues presented by the pleadings, the
complainant was allowed by the court, against the objection of the
defendant, to introduce in evidence the Duplicate Record of
Assessment of Railways by the State Board of Equalization for 1887,
filed in the office of the Comptroller of the State of California,
October 11, 1887. The court overruled the objections of the
defendant and admitted the paper in evidence, and an exception was
taken to the ruling of the court. The Duplicate Record of
Assessment of Railways by the state Board of Equalization for 1887,
which was dated August 13, 1887, simply states that the defendant
owns a certain railway in the state, operated in more than one
county, being the entire railway of the company in the state, and
then follows this paragraph, without any evidence in support of its
averment:
"And, it appearing that the actual value of the franchises,
Page 162 U. S. 140
roadway, roadbed, rails, and rolling stock of said company
within the state at the said date and time, was and still is the
sum of eighteen million dollars, therefore it is hereby ordered
that the said franchise, roadway, roadbed, rails, and rolling
stock, for the year 1887 be, and the same are hereby, assessed to
the said Central Pacific Railroad Company at the sum of eighteen
million dollars."
The evidence mentioned in the Duplicate Record of Assessment of
Railways was the only proof offered by the plaintiff in support of
any of its causes of action, and that evidence, it is plain, was
not entitled to any weight in the determination of the case, not
being supported by any other evidence.
On the part of the defendant, evidence was offered to show that
the State Board of Equalization knowingly included the value of the
"federal franchise" in the assessment in question, as it had done
in the assessment which was afterwards before this Court, and
declared void, in
California v. Pacific Railroad Company
and in other assessments.
The findings of the superior court, as to the allegations of the
complaint, were that they were true, except as to counsel fees, as
to which it was found that a reasonable compensation for the
services of two of the counsel employed was 7 1/2 percent on the
amount recovered, and 2 1/2 percent for the third counsel.
As to the affirmative allegations of the answer, the court,
among other things, found:
"That on the 13th day of August, 1887, the State Board of
Equalization of the State of California did, for the purposes of
taxation for the fiscal year 1887, assess, as a unit, and not
separately, the franchise, roadway, roadbed, rails, and rolling
stock of defendant's railroad, then being and situate within the
state at the sum and value mentioned in the amended complaint, and
did then and there enter such assessment upon its minutes and in
its record of assessments; that such assessment is the one upon
which the several taxes mentioned in the complaint herein are
based, and no other assessment than the one aforesaid was ever made
by the Board of equalization or other assessor of the property of
defendant for the fiscal year;
Page 162 U. S. 141
that the Board did at the time and in the manner alleged in the
amended complaint, apportion the assessment, and transmit it and
the apportionment to the county and city and county auditors, and
the assessment and the apportionment thereof were entered upon the
assessment rolls of the counties and the cities and counties as
alleged in the amended complaint, as hereinbefore found."
"That the Board of equalization, in making the assessment, did
assess the franchise, roadway, roadbed, rails, and rolling stock of
defendant's railroad at their full cash value, without deducting
therefrom the value of the mortgage or any part thereof, or the
value of the bonds, issued under the acts of Congress, given and
existing thereon, as aforesaid, to secure the indebtedness of the
company to the holders of the bonds, and, in making such
assessment, the Board did not deem nor treat the mortgage or bonds
as an interest in the property, but it assessed the whole value of
the property as assessed to defendant in the same manner it would
have done had there been no mortgage thereon."
The conclusions of law from the findings were that plaintiff was
entitled to recover judgment for the several principal sums of
state and county taxes, found in the record of assessments of
railways to be delinquent and unpaid; also, interest upon the
principal sums from the 27th day of December, 1887 at the rate of
seven percent per annum, up to the date of judgment; also, to
recover five percent penalty upon the principal sums; also, fees
for legal services rendered herein by two of the counsel, a sum
equal to seven and one-half percent on the amount recovered, and by
the third counsel a sum equal to two and one-half percent of that
amount.
Judgment was entered upon the findings in favor of the plaintiff
for the sums mentioned, and a motion for a new trial was
overruled.
The majority of the supreme court of the state, in their
opinion, sustained the contentions of the state upon the questions
presented, with the exception of the questions in respect to
interest on the amount of taxes and the fees of one of the counsel,
and affirmed the judgment entered.
Page 162 U. S. 142
Mr. Justice Mcfarland dissented from the opinion of the court.
This dissenting opinion expresses so fully and clearly and
satisfactorily the views which I entertain that they are set forth
in full:
"In my opinion," says Justice Mcfarland,
"the assessment in question [that of 1887] is void under the
decisions of the Supreme Court of the United States in the case of
California v. Central Pacific Railroad Company and Southern
Pacific Railroad Company, 127 U. S. 1, because it includes a
federal franchise, and thus attempts to tax one of the means or
instrumentalities employed by the United States government for
carrying into effect its sovereign powers. That this cannot be done
by a state has been the established law ever since the decision of
the supreme court in
McCulloch v. Maryland, 4
Wheat. 316, in 1819. The principle was fully recognized and
declared by this Court in
San Benito County v. Southern Pacific
Railroad, 77 Cal. 518, and in
San Francisco v. Western
Union Telegraph Co., 96 Cal. 140."
"The only difference between the case in 127 U.S. and the case
at bar is that, in the former, the trial court found that the State
Board of Equalization included in the assessment the value of 'all
franchises and corporate powers held and exercised by the
defendant,' while in the case at bar, the court below found that
the said Board, in making the assessment for the year 1887, 'did
not include in its said assessment any federal franchise.' But the
assessment in both instances was exactly the same, namely, 'the
franchise' of the railroad. In the former case, it does not appear
that the trial court received any evidence on the question as to
what 'the franchise' included, and it is probable that the finding
was based upon the language of the assessment alone. In the case at
bar, the court did receive evidence as to what the Board intended
by the words 'the franchise,' and it appears in the record that the
court, after having concluded that, 'from a preponderance of
evidence before it, the federal franchise of defendant was not
assessed or included in the assessment,' proceeded to say that"
"if, by a preponderance of such evidence, defendants could have
shown that the state
Page 162 U. S. 143
intended to and did include the federal franchise in the
assessment, I think the court would have to disregard it as
incompetent. The effect of such parol evidence would be to
contradict the record, which cannot be done."
"Now if it was competent to introduce testimony to show the
intent of the members of the Board when they made the assessment,
then the court clearly erred in ruling out certain evidence offered
on that point by appellant. . . ."
"On the other hand, if the record of the Board should alone be
considered, then it simply appears that 'the franchise' was
assessed, and I cannot possibly see how that phrase can be
construed to mean anything else than the whole franchise belonging
to it. It means just what the lower court has found it to mean, as
above quoted, in the case in 127 U.S. The words 'the franchise'
clearly, in my judgment, include the right of the appellant to do
business, and the whole of that right. The right is a unit and
inseparable. The court below found [see finding 30] that the Board
'did assess as a unit, and not separately, the franchise, roadway,'
etc. And I cannot conceive how a court can first, separate it, or,
second, if it could, how it could determine which part to throw
away. Moreover, the main foundation of the doctrine of
McCulloch v. Maryland is that the power to tax includes
the power to destroy, and thus a state might, under the guise of
taxation, destroy or materially cripple an instrumentality of the
federal government. And is it not manifest that, in the case at
bar, that principle protects the instrumentality here involved from
injury or destruction under the pretense that only that part of the
unity which comes from the state is taxed? Are not the effects and
consequences the same?"
"In my opinion, therefore,' adds the dissenting justice,
'without discussing the other questions involved, the judgment
should be reversed."
To review and reverse the judgment of the supreme court
affirming the judgment of the superior court for the City and
County of San Francisco, a writ of error to the supreme court of
the state was sued out of this Court, and several assignments
Page 162 U. S. 144
of error were filed for its consideration. My attention will be
confined to those deemed the most important.
1st. The supreme court should have reversed the judgment of the
Superior Court for the City and County of San Francisco, on the
ground that, upon the finding of facts in the record, the value of
the "franchise" of the Central Pacific Railroad, derived from the
United States called federal franchise, was included in the
assessment of the franchise, roadway, roadbed, rails, and rolling
stock of the railroad, made by the State Board of Equalization for
the year 1887, and was inseparable therefrom, and that the whole of
the assessment was therefore illegal and void under the
Constitution and laws of the United States.
2d. The supreme court should have reversed the judgment of the
superior court, because that court found that the State Board of
Equalization on August 3, 1887, did, for the purpose of taxation
for the fiscal year, 1887, assess as a unit, and not separately,
the franchise, roadway, roadbed, and rolling stock of the Central
Pacific Railroad, then being within the State of California.
3d. The supreme court should have reversed the judgment of the
superior court upon the ground that the property of the Central
Pacific Railroad Company, including the franchise, and every part
of the franchise, of the railroad, was and is subject to the lien
of the mortgage of the United States to secure the indebtedness of
that company to it, and the United States had and have an interest
and ownership therein to the extent of the lien, and therefore the
franchise of the railroad could not and cannot be taxed or assessed
for taxation by the State of California, under the Constitution and
laws of the United States.
4th. The supreme court should have reversed the judgment of the
superior court on the ground that that court admitted in evidence
the portion of the Duplicate Record of Assessment of Railways by
the state Board of Equalization for the Year 1887, relating to the
assessment of the property of the plaintiff in error for that year
without proof of its correctness.
The facts which are the basis of the several assignments of
Page 162 U. S. 145
error are contained in the legislation or authorized statements
of Congress or of the states mentioned, or in the findings of the
court. Their legality and validity are thereby fully
established.
By the legislation of Congress to which I have referred, as well
as by the legislation of the State of California, it is plain that
the Central Pacific Railroad Company was made one of the means of
accomplishing the great work of Congress, and whenever, by any act
of the state authorities of California, the franchise of the
Central Pacific Railroad Company was included in the assessment of
the franchise, roadway, roadbed, rails, and rolling stock of that
company, there was necessarily included the franchise thus derived
from the legislation of Congress. Indeed, treating the franchise of
the railroad as meaning its power to construct the work
contemplated and to conduct its operations, it is difficult to see
how in any respect its franchise could be treated other than as one
entire whole. Its power to construct the road authorized by the
government, and to carry on its operations, could not be under the
control of the state authorities so as to interfere in any respect
with the full exercise of the powers, privileges, and immunities
granted by Congress.
And it was specially found by the court below, in its thirtieth
finding of fact, that the State Board of Equalization, on August
13, 1887, for the purpose of taxation for the fiscal year 1887,
assessed as a unit, and not separately, the franchise, roadway,
roadbed, rails, and rolling stock. It was therefore unlawful that
its taxation by the state should in any respect impede, retard, or
delay the exercise of the powers conferred by Congress upon the
Central Pacific Railroad Company or defeat its action. Nor could
any part of the powers, privileges, and immunities conferred upon
the railroad be separated from the rest so as to be treated as an
independent part thereof, and any part considered as the special
grant of the state, and superior to or in any way impairing the
control thereof by the United States pursuant to their
legislation.
It also appears from the legislation of Congress that the
Secretary of the Treasury was authorized to issue and did
Page 162 U. S. 146
issue to the Central Pacific Railroad Company bonds of the
United States, in designated amounts per mile, to aid in the
construction of its road, which bonds and interest were to be
repaid by the company at their maturity, and that, to secure such
repayment, the United States were to hold a lien upon all the
property of the railroad company to the extent of the bonds thus
issued. Any taxation of the property or franchises of the Central
Pacific Railroad Company without the consent of Congress was hence
an impairment of such lien of the United States, and therefore
invalid.
The Superior Court of the City and County of San Francisco erred
in receiving in evidence the portion of the Duplicate Record of the
Assessment of Railways by the State Board of Equalization for the
Year 1887, relating to the assessment of the property of the
plaintiff in error, for the obvious reason that such duplicate in
no way established the legality and validity of the assessment.
This Court, in the case of
California v. Pacific Railroad
Companies, 127 U. S. 1,
adjudged that the State of California had no power, without the
consent of Congress, to tax the franchises derived by the Central
Pacific Railroad Company from the government of the United States,
or any franchise conferred on it by that government, or any part of
any franchise granted to that company by the United States. The
opinion of the Court was delivered by Mr. Justice Bradley.
"Assuming," he said,
"that the Central Pacific Railroad Company has received the
important franchises referred to by grant of the United States, the
question arises whether they are legitimate subjects of taxation by
the state. They were granted to the company for national purposes
and to subserve national ends. It seems very clear that the State
of California can neither take them away, nor destroy nor abridge
them, nor cripple them by onerous burdens. Can it tax them? It may,
undoubtedly, tax outside visible property of the company situated
within the state. That is a different thing."
"But may it tax franchises which are the grant of the United
States? In our judgment, it cannot. What is a franchise?
Generalized, and divested of the special form
Page 162 U. S. 147
which it assumes under a monarchical government based on feudal
traditions, a franchise is a right, privilege, or power of public
concern which ought not to be exercised by private individuals at
their mere will and pleasure, but should be reserved for public
control and administration, either by the government directly or by
public agents, acting under such conditions and regulations as the
government may impose in the public interest and for the public
security. Such rights and powers must exist under every form of
society. Under our system, their existence and disposal are under
the control of the legislative department of the government, and
they cannot be assumed or exercised without legislative authority.
No private person can establish a public highway, or a public
ferry, or railroad, or charge tolls for the use of the same,
without authority from the legislature, direct or derived. These
are franchises. No private person can take another's property, even
for a public use, without such authority, which is the same as to
say that the right of eminent domain can only be exercised by
virtue of a legislative grant. This is a franchise. No persons can
make themselves a body corporate and politic without legislative
authority. Corporate capacity is a franchise. The list might be
continued indefinitely."
"In view of this description of the nature of a franchise, how
can it be possible that a franchise granted by Congress can be
subject to taxation by a state without the consent of Congress?
Taxation is a burden, and may be laid so heavily as to destroy the
thing taxed, or render it valueless. As Chief Justice Marshall said
in
McCulloch v. Maryland, 'the power to tax involves the
power to destroy.' Recollecting the fundamental principle that the
Constitution, laws, and treaties of the United States are the
supreme law of the land, it seems to us almost absurd to contend
that a power given to a person or corporation by the United States
may be subjected to taxation by a state. The power conferred
emanates from, and is a portion of, the power of the government
that confers it. To tax it is not only derogatory to the dignity,
but subversive of the powers, of the government and repugnant to
its paramount sovereignty. It is unnecessary to cite cases on
this
Page 162 U. S. 148
subject. The principles laid down by this Court in
McCulloch v. Maryland, 4
Wheat. 316,
Osborn v. Bank, 9 Wheat.
738, and
Brown v. Maryland, 12 Wheat.
419, and numerous cases since which have followed in their lead,
abundantly sustain the views we have expressed. It may be added
that these views are not in conflict with the decisions of this
Court in
Thomson v. Pacific Railroad,
9 Wall. 579, and
Railroad Co. v. Peniston, 18
Wall. 5. As explained in the opinion of the Court in the latter
case, the tax there was upon the property of the company, and not
upon its franchises or operations. 18 Wall.
85 U. S.
35-37."
"The taxation of a corporate franchise merely as such, unless
pursuant to a stipulation in the original charter of the company,
is the exercise of an authority somewhat arbitrary in its
character. It has no limitation but the discretion of the taxing
power. The value of the franchise is not measured like that of
property, but may be ten thousand or ten hundred thousand dollars,
as the legislature may choose. Or, without any valuation of the
franchise at all, the tax may be arbitrarily laid. It is not an
idle objection therefore made by the company against the tax
imposed in the present case."
The important cases bearing upon the subject intervening between
the great
Bank Cases and
Thomson v. Pacific
Railroad and
Railroad Co. v. Peniston, were
Weston v. City of
Charleston, 2 Pet. 467;
Dobbins v.
Commissioners of Erie County, 16 Pet. 435;
Bank of Commerce v. New York
City, 2 Black 620;
The Banks
v. The Mayor, 7 Wall. 16, and
National Bank v.
Commonwealth, 9 Wall. 358, and in those cases the
doctrine was consistently maintained and enforced that a state
cannot lay a tax which bears upon a power of the national
government, or, in the judgment of the court, may hinder, impair,
or burden any "operation" of that government, or interfere with or
affect the efficiency of any "agency" of the national government in
performing the functions by which it is designed to serve the
United States.
In
Weston v. City of Charleston, this Court declared
the tax on the stock of the United States, involved, to be
unconstitutional because it "operated upon the power" to borrow
Page 162 U. S. 149
money on the credit of the United States, and was deemed by the
court to be "a burden, however inconsiderable," on "the operations
of government."
The Court, speaking by Chief Justice Marshall, in that case
again declared that the state cannot, by taxation or otherwise,
"retard, impede, burden, or in any manner control the operation
of the constitutional laws enacted by Congress to carry into
execution the powers vested in the general government."
The case of
Dobbins v. Commissioners, adjudged that a
state tax on an officer of the United States for his office or its
emoluments was void, mainly because of "its interference with the
constitutional means" employed by the government to execute its
powers.
The Court, speaking by Mr. Justice Wayne, said:
"Does not a tax by a state upon the office, diminishing the
recompense, conflict with the laws of the United States, which
secures it to the officer in its entirety? It certainly has such an
effect, and any law of a state imposing such a tax cannot be
constitutional, because it conflicts with a law of Congress made in
pursuance of the Constitution."
The principles declared in
Weston v. City of Charleston
governed the decisions of the Court in
Bank of Commerce v. New
York City and in
Banks v. Mayor, which adjudged that
the bonds and other securities of the United States are "as much
beyond the taxing power of the states as the operations themselves
in furtherance of which they were issued."
The court again declared in those cases that any interference by
the state governments tending to the interruption of, or in
derogation of, the full legitimate exercise of the powers granted
to the national government, was prohibited by the Constitution.
The theory of the majority of the court below was that the
franchise of this railroad can be segregated into two franchises, a
state franchise and a federal franchise. But the franchise of the
railroad, or the right in the company to operate its railroad, is a
single right, from how many sources soever
Page 162 U. S. 150
derived, and, being derived from the national government, that
right could not be assessed for taxation, agreeably to the
Constitution of the United States, whether or not the right had
been granted by the state also to the railroad company. The theory
of the separation of the franchise into two distinct rights for the
purpose of taxation by California is effectually disposed of by Mr.
Justice McFarland at the close of his opinion in these few
words:
"The court below found that the Board 'did assess as a unit, and
not separately, the franchise, roadway,' etc. I cannot conceive how
a court can, first, separate it, or, second, if it could, how it
could determine which part to throw away. Moreover, the main
foundation of the doctrine of
McCulloch v. Maryland is
that the power to tax includes the power to destroy, and thus a
state might, under the guise of taxation, destroy or materially
cripple an instrumentality of the federal government. And is it not
manifest that, in the case at bar, that principle protects the
instrumentality here involved from injury or destruction under the
pretense that only that part of the unity which comes from the
state is taxed? Are not the effects and consequences the same?"
The fact that each government has granted the right does not
create two rights. The two grants, taken together, confer nothing
more than each of them separately conferred. A tax on "the
franchise" of the Central Pacific Railroad, being nothing more nor
less than a tax on the right of the company to operate its road, is
a tax on its right to operate its railroad granted by the United
States, or on the franchise granted by that government.
How is that part of the franchise granted by the state to be
separated from that part granted by the general government? What
part of the life of this being is at the mercy of the state? Upon
what member of its body may the tax collector execute his judgment
of death?
If we should consider the right of the Central Pacific Railroad
Company to operate its road, derived from the state, as one thing,
and its same right derived from the United States
Page 162 U. S. 151
as another and distinct or different thing, what results will
follow? Plainly these:
If the state can tax the right so derived from itself, it can
levy a tax upon it as it pleases, and may sell the right assessed
in case of nonpayment of the tax. There can be no such thing as
taxable property which cannot be sold for the tax, and the title to
which cannot be transferred to the purchaser. By such a sale, the
property will pass from the delinquent to the purchaser. If a sale
could be made of this particular right, then the Central Pacific
would lose the right, and the purchaser would gain it.
It is obvious that the right to operate its railroad cannot, by
virtue of the state's taxing powers, be taken from the Central
Pacific Railroad Company or conferred upon any other corporation or
individual. Nothing, then, would pass by such a sale, and, as there
is nothing to sell or transfer, there can be nothing to assess.
If the position asserted by the defendant in error, the State of
California or the people of the state (considering both expressions
as meaning substantially the same contesting organization), that
the so-called state franchise of the Central Pacific Railroad can
be separated from the federal franchise of that company, and
separately valued, and subjected to taxation, be maintained,
destructive consequences would follow, as will be seen from a brief
consideration.
In
Northern Pacific Railroad v. Traill County,
115 U. S. 610,
the Court, in referring to a sale, for taxes, of lands belonging to
a railroad company, said:
"A valid sale for taxes, being the highest exercise of sovereign
power of the state, must carry the title to the property sold, and
if it does not do so, it is because the assessment is void. It
follows that if the assessment of these taxes (those previously
stated to have been levied upon the lands of the company) is valid
and the proceeding is well conducted, the sale confers a title
paramount to all others, and thereby destroys the lien of the
United States for the costs of surveying these lands. If, on the
other hand, the sale would not confer such a title, it is because
there exists no authority to make it."
There would seem to be no doubt,
Page 162 U. S. 152
therefore, that the state cannot be held to have had the power
to tax the so-called state franchise of the Pacific Railroad so
long as it was of any validity, and previously and subsequently to
its abrogation the state plainly possessed no such power, unless
the court is prepared to decide expressly as the effect of the
legislation that Congress intended that the state should be able to
divest the company of that franchise, and to transfer by a tax sale
the title of the franchise to the purchaser as against both the
company and the United States, and in that way to destroy the right
and interest of the government of the United States in the
franchise. There is clear and conclusive evidence in the Pacific
Railroad legislation that Congress intended that the so-called
state franchise, so long as it remained of any value, should not be
subject to state legislation, and that the right and interest of
the United States therein, while of any value, should not be
destroyed by the state in the exercise of its taxing power. For
example, section 5 of the Act of July 1, 1862, provides that the
issue and delivery of bonds to the company, referring to bonds the
issue and delivery of which were authorized by the act, shall
ipso facto constitute a first mortgage on the whole line
of the railroad and telegraph, together with the rolling stock,
fixtures, and property of every kind and description, and on the
refusal or failure of the company to redeem its bonds, or any part
of them, when required by the Secretary of the Treasury, in
accordance with the provisions of the act, then the road, with all
rights, functions, immunities, and appurtenances thereunto
belonging, also all lands granted to the company by the United
States, may be taken possession of by the Secretary of the Treasury
for the use and benefit of the United States. The only change made
in this provision in regard to the security of the United States
for the subsidy bonds is by section 10 of the act of 1864, which is
that
"the lien of the United States bonds shall be subordinate to
that of the bonds of any or either of said companies hereby
authorized to be issued on their respective roads, property, and
equipments, except as to the provisions of the sixth section of the
act, to which this act is an amendment, relating to the
transmission of dispatches,
Page 162 U. S. 153
and the transportation of mails, troops, munitions of war,
supplies, and public stores for the government of the United
States."
The subsidy bonds are therefore a mortgage upon any subsisting
state franchise of the railroad, which may be taken possession of
by the Secretary of the Treasury for the use and benefit of the
United States on the refusal or failure of the company to redeem
the bonds, or any part of them, when required by the Secretary of
the Treasury. Congress manifestly intended that the rights of the
United States under this mortgage, in respect to the state
franchise, if any such existed, should not be destroyed or
disturbed by the state in the exercise of its taxing power, or any
other power. If the so-called state franchise of the railroad is a
thing of value, as the assessment in these cases claims it to be,
in the estimation of the State Board of Equalization, it is a
valuable part of the security of the United States for the
redemption of the subsidy bonds, which the Secretary of the
Treasury has the right to take possession of in the contingency
mentioned in the act. The franchise, if it existed and possesses
any value, cannot, therefore, in my opinion, be taken from under
the mortgage and transferred to a purchaser at a tax sale by the
State of California.
Take, again, the provisions of the sinking fund Act of May 7,
1878, which appropriates and applies the earnings of the company in
the exercise of all the franchises of the company for the purposes
and in the manner named. In the face of that act, it cannot be
believed that Congress supposed that there was power reserved to
the state to control or affect its interest or right in the
franchise or franchises of the railroad, so long as it or they
possessed any value.
There can be no doubt that a tax to be levied on the so-called
state franchise, while it was in existence, was a tax upon an
instrumentality by which the government effects its objects, and a
tax upon the operations of that instrumentality, within the
doctrines of this Court in the great cases to which I have
referred.
The United States selected this corporation as an agency for
carrying out a national object, and the right of the
corporation
Page 162 U. S. 154
to operate its railroad, or, in other words, the franchise of
the railroad, whether conferred by state or national authority, or
by both the state and nation, is an instrumentality by which the
United States effects its objects.
As a tax on the franchise of the Central Pacific Railroad while
in existence was nothing more nor less than a tax on the right of
the company to operate its railroad, such a tax was a tax on its
right to operate its railroad derived from the government of the
United States, and therefore unconstitutional.
There are no operations of the corporation, as an agency of the
government, which are performed exclusively in the exercise of any
state franchise in connection with its railroad, assuming the
existence of any such franchise; but all its operations are in the
exercise of its entire franchise, and a tax purporting to be levied
on any state franchise is therefore a tax on the operations of the
corporation in the exercise of the federal franchise, and a tax
directly on the federal franchise itself.
In
National Bank v. Commonwealth, where the right of
the states to tax the shares of the national banks was reaffirmed,
it was expressly conceded that the agencies of the national
government are uncontrollable by state legislation so far as it may
interfere with or impair their efficiency in performing the service
or the functions for which they are employed or designed to
perform.
The Supreme Court of California, in the case of
San Benito
Co. v. Southern Pacific Railroad, 77 Cal. 518, accepted the
authority of the decision of this Court in
California v.
Pacific Railroad Companies, 127 U. S. 34, and
held that an ordinance of the Board of Supervisors of San Benito
County imposing a license tax upon corporations or individuals
engaged in the business of carrying persons or freight for hire on
railroad cars in the county was void so far as it assumed to affect
the Southern Pacific Railroad Company, as the tax was deemed to be
levied upon the use of the franchise granted to the company by the
United States or the operations of the railroad in the exercise of
that franchise.
Page 162 U. S. 155
It was determined that the franchise of that company and its use
were equally beyond the taxing power of the state or any of its
political subdivisions, agreeably to the decision of this Court in
California v. Pacific Railroad Companies, which the court
felt constrained to obey.
"The franchise" of a railroad, which is contemplated by the
state constitution, and authorized to be assessed for taxation by
the State Board of Equalization, is nothing but the right to
operate the railroad, including the incidental right to charge and
take tolls thereon, and the like.
The Constitution applies equally to all railroads, whether owned
by corporations or associations or individuals, and the assessment
provided for is wholly independent of the ownership or the
character of the ownership of the railroad property assessed.
The tax proposed by the Constitution is consequently and
necessarily a tax upon the operations of the railroad in the
exercise of the franchise or right to operate the property.
The right of the Central Pacific Railroad Company to construct,
maintain, and operate its railroad in the State of California was
conferred upon the company by, and derived by it from, the
government of the United States, and any assessment of the right of
the company to maintain and operate its railroad in that state for
state taxation is void under the Constitution and laws of the
United States whether or not the company received the same right
from the State of California.
The right of the company to operate its railroad in the state is
a single right and a single thing, whether the right was derived by
the company from one or more than one government, and it cannot be
subjected to taxation by the State of California.
In conclusion, it appears beyond all controversy that the state
imposed burdens, in the way of taxation, upon the exercise of
powers and privileges conferred by the Congress of the United
States upon the Central Pacific Railroad Company and other
companies of the state -- rights, powers, and privileges which were
granted in furtherance of the great object
Page 162 U. S. 156
of Congress in the creation and operation of the overland
railroad -- and also imposed burdens by taxation upon the mortgage
held by the United States as security for the subsidy bonds issued
to the company, and for such irregular and illegal action the
judgment of the supreme court of the state should be reversed.
I have shown that the franchises granted by the State of
California to the Central Pacific Railroad Company were abrogated
and annulled by express legislation of the state on the 4th of
April, 1864, and that the taxation was subsequently made against
the railroad company upon an assessment of the value of its
franchises thus discarded and thrown away, and after the federal
franchises -- that is, franchises derived by grant of the United
States -- had been substituted in their place, and confirmed by the
state, with a release of all inconsistent and conflicting
provisions with the rights and privileges thus granted.
I have also shown that the assessment of the property of the
defendant made in 1887 was twenty-three years after the law was
passed abrogating and annulling the franchises of the state upon
which the valuation for taxation was made.
I have also shown that the United States hold a lien,
constituting a first mortgage on the whole line of the railroad and
telegraph, together with the rolling stock, fixtures, and property
of every kind and description, as security for certain subsidy
bonds issued to the company, and on the refusal or failure of the
company to redeem such bonds or any part of them when required by
the Secretary of the Treasury in accordance with the provisions of
the act, then the road, with all rights, functions, immunities, and
appurtenances thereunto belonging, also all lands granted to the
company by the United States, might be taken possession of by the
Secretary of the Treasury for the use and benefit of the United
States.
If the taxation levied in the present case can be enforced
against the defendant in face of the facts thus stated, there will
be developed a new and unknown power of taxation possessed by the
state, in the existence of which I shall not willingly believe.
Page 162 U. S. 157
It seems to me clear as the sun at noonday that the taxation
imposed by the State of California upon the exercise of the powers,
rights, privileges, and immunities constituting the franchises of
the United States or of the state to the overland railroad company
or to any of its auxiliary companies, to aid in the construction of
the overland railroad and its connecting roads, is directly
inimical to the rights and interests of the United States, and that
the blending of the franchises of the United States and of the
state and the subjection of either to taxation and to sale, which
must follow if the taxation be valid, would necessarily lead to the
direct and speedy destruction of the different roads, and thus we
should see, in the same century in which this greatest enterprise
of our county was undertaken by its government and carried to
completion and successful operation, that enterprise utterly
destroyed, the completeness of the ruin being marked by the
contrast with its original construction and successful operation,
rendering its destruction the more significant and deplorable.
I am of opinion that the judgment of the Supreme Court of
California affirming the judgment of the Superior Court of the City
and County of San Francisco, and an order of that court denying a
new trial in an action brought by the people of the state against
the plaintiff corporation, should be reversed, and a new trial in
that action granted.
MR. JUSTICE HARLAN, dissenting.
On the trial of this case in the state court of original
jurisdiction, the Secretary of the State Board of Equalization,
from April, 1880, to March, 1891, was called as a witness by the
defendant. His examination showed that he was present at the
meetings of that Board, and kept the record of its proceedings. He
said that from his knowledge of what passed at such meetings, he
could state what elements of value were considered by the Board in
making their estimate for the total values for 1887. He was asked
the following questions separately:
"From the various sources of knowledge which you
Page 162 U. S. 158
have enumerated, please state to the court what elements were
taken into consideration by the State Board of Equalization in
making the assessment of this company for the year 1887? . . . Did
you hear any conversation between the members of the State Board of
Equalization during the meeting when the assessment of this company
was made for the year 1887, with reference to the elements that
they proposed to, and did, include in the assessment? . . . At the
time that the assessment of 1887 was made by the State Board of
Equalization upon the property of the Central Pacific Railroad
Company, what was said and done at the meeting of the State Board
of Equalization on that day, in your presence?"
The state objected to each question, as it was propounded, and
its objection was sustained, the defendant excepting.
The company then made the following offer:
"Now in view of the ruling of the court on this subject, we now
offer to prove by this witness that from the time of the
organization of the State Board of Equalization, in 1880, down to
and including the year 1887, that Board had every year considered
the value of the federal franchise -- that is, the franchise
derived from the United States by the acts of Congress of the
government of the United States, belonging to and owned by the
Central Pacific Railroad Company -- as an element of value in
assessing the total value of the property of that railroad company,
and that in 1888, in consequence of the decision of the Supreme
Court of the United States upon the subject, the State Board of
Equalization for the first time ceased to consider this federal
franchise as an element of value, and hence reduced their valuation
by the sum of three million dollars on the Central Pacific Railroad
Company's property."
This offer was disallowed, and the company duly excepted.
Notwithstanding this action of the court, the state was
permitted to prove by two members of the Board who participated in
the assessment of 1887 that the federal franchise was not included
in that assessment.
One of the findings of fact was in these words:
"That, in making its assessment and valuation therefor of
defendant's franchise, said State Board of Equalization did not
include,
Page 162 U. S. 159
assess, or value any franchise or corporate power held or
exercised by defendant under the acts of Congress hereinbefore
mentioned, or under any act of Congress whatever. And said Board,
in making said assessment and valuation therefor upon defendant's
franchise, roadbed, roadway, rails, and rolling stock, for purposes
of taxation for the fiscal year 1887, did not include in its said
assessment and valuation therefor any federal franchise then
possessed by defendant, nor any franchise or thing whatsoever which
said Board could not legally include in such assessment or
valuation. That the franchise, roadway, roadbed, rails, and rolling
stock of defendant's railroad were valued and assessed by said
State Board of Equalization for purposes of taxation for the fiscal
year 1887 at their actual value, and in proportion to their values
respectively."
A statement, on motion, was filed for a new trial and
approved by the court. In that statement will be found the
following:
"In its written opinion, upon which the findings were based, the
court, after determining as a fact, from a preponderance of the
evidence before it, that the federal franchise of defendant was not
assessed or included in the assessment of the property of defendant
by the State Board of Equalization for the year 1887, uses the
following language:"
"But if the parol evidence offered did not weigh in plaintiff's
favor, and if, by a preponderance of such evidence, defendants
could have shown that the state intended to, and did, include a
federal franchise in the assessment, I think the court would have
to disregard it as incompetent. The effect of such parol evidence
would be to contradict the record, which cannot be done. The best
and only evidence of the acts and intentions of deliberative bodies
must be drawn from the record of its intentions. . . . From both
standpoints of fact and of law, the findings must be that a federal
franchise was not included in these assessments."
It thus appears that the trial court permitted the state to
prove by oral testimony that the state Board did not include the
federal franchises in its assessment, but denied to the defendant
the privilege of showing, by the same kind of evidence, that such
franchises were, in fact included in the
Page 162 U. S. 160
assessment. This, in my judgment, was error, and directly
affected the proper determination of the federal question. The
recital in the records of the Board were not conclusive of the
question. If in fact the Board did include the federal franchise in
its assessment, the defendant should have been allowed to prove it
by the best evidence capable of being produced; otherwise it would
be without remedy against a false statement on the records of the
Board.
Independently of this error, the judgment of the court below
should be reversed upon the ground that the franchises of the
Central Pacific Railroad Company are not subject to be taxed at all
by the state, although some of its visible property may, according
to the principles announced in former decisions of this Court, be
taxable for state purposes.
In the
Sinking Fund Cases, 99 U.
S. 710,
99 U. S. 727,
this Court, speaking by Chief Justice Waite and referring to the
Central Pacific Railroad Company, said:
"By the act of 1862, Congress granted this corporation a right
to build a road from San Francisco, or the navigable waters of the
Sacramento River, to the eastern boundary of the state, and thence
through the territories of the United States until it met the road
of the Union Pacific Company. For this purpose, all the rights,
privileges, and franchises were given this company that were
granted to the Union Pacific Company except the franchise of being
a corporation and such others as were merely incident to the
organization of the company. The land grants and the subsidy bonds
to this company were the same in character and quantity as those to
the Union Pacific, and the same right of amendment was reserved.
Each of the companies was required to file in the Department of the
Interior its acceptance of the conditions imposed before it could
become entitled to the benefits conferred by the act. This was
promptly done by the Central Pacific Company, and in this way that
corporation voluntarily submitted itself to such legislative
control by Congress as was reserved under the power of amendment. .
. . But for the corporate powers and financial aid granted by
Congress, it is not probable that the road would have been built.
"
Page 162 U. S. 161
In
California v. Pacific Railroad Company, 127 U. S.
1,
127 U. S. 38,
this Court, referring to the Pacific Railroad acts, so far as they
related to the Central Pacific Railroad, said:
"Thus, without referring to the other franchises and privileges
conferred upon this company, the fundamental franchise was given by
the act of 1862 and the subsequent acts to construct a railroad
from the Pacific Ocean, across the State of California and the
federal territories, until it should meet the Union Pacific, which
it did meet at Ogden, in the Territory of Utah."
In the case of
United States v. Stanford, 161 U.
S. 412, we said:
"In
United States v. Union Pacific Railroad Company,
91 U. S.
92, this Court, speaking by Mr. Justice Davis, held that
the construction of a railroad connecting the Missouri River with
the Pacific Ocean was a national work, because such a road would be
a great national highway, under national control; that the scheme
for establishing that highway originated in national necessities,
the country being involved at the time in a civil war which
threatened the disruption of the Union and endangered the safety of
our possessions on the Pacific, and that the enterprise required
national assistance because private capital was inadequate for an
undertaking of such magnitude. It appears upon the face of the act
of 1862, as amended by the act of 1864, that Congress had in view
the promotion of the public interest and welfare by the
construction of a railroad and telegraph line that could be used by
the government at all times, but particularly in time of war, for
postal, military, and other purposes, and that, so far as the
government and the public were concerned, such road and telegraph
were to be operated as one continuous line. These ends were to be
attained through the agency of a corporation created by Congress
and of certain corporations organized under state laws, which
Congress selected as instruments to be employed in accomplishing
the public objects specified in its legislation."
Again, in the same case:
"Although the Central Pacific Railroad Company of California
became an artificial being under the laws of that state, its road
owes its existence to the national government, for all that was
accomplished in the
Page 162 U. S. 162
exercise of privileges granted by, and because of the aid
derived from, the United States. . . . The relations between the
California corporation and the state were of no concern to the
national government at the time the purpose was formed to establish
a great highway across the continent for governmental and public
use. Congress chose this existing artificial being [the Central
Pacific Railroad Company] as an instrumentality to accomplish
national ends, and the relations between the United States and that
corporation ought to be determined by the enactments which
established those relations."
The relations of this railroad company as well to the United
States and the state are shown by the Act of the Legislature of
California approved April 4, 1864, entitled "An act to aid in
carrying out the provisions of the Pacific railroad and telegraph
act of Congress and other matters relating thereto," Stat.Cal.
1863-64, 471. That statute referred to the Act of Congress of July
1, 1862, 12 Stat. 489, c. 120, and to enable the Central Pacific
Railroad Company, therein named, more fully and completely to
comply with and perform its provisions and conditions, provided
that that company are
"hereby authorized and empowered, and the right, power, and
privilege is hereby granted to, conferred upon, and vested in them,
to construct, maintain and operate the said railroad and telegraph
line not only in the State of California, but also in the said
territories lying east of and between said state and the Missouri
River, with such branches and extensions of said railroad and
telegraph line, or either of them, as said company may deem
necessary or proper, and also the right of way for said railroad
and telegraph line over any lands belonging to this state, and on,
over, and along any streets, roads, highways, rivers, streams,
water, and watercourses, but the same to be so constructed as not
to obstruct or destroy the passage or navigation of the same, and
also the right to condemn and appropriate to the use of said
company such private property, rights, privileges, and franchises
as may be proper, necessary, or convenient for the purposes of said
railroad and telegraph, the compensation therefor to be
Page 162 U. S. 163
ascertained and paid under and by special proceedings, as
prescribed in the act providing for the incorporation of railroad
companies, approved May twentieth, eighteen hundred and sixty-one,
and the acts supplementary and amendatory thereof, said company to
be subject to all the laws of this state concerning railroad and
telegraph lines except that messages and property of the United
States, of this state, and of the said company shall have priority
of transportation and transmission over said line of railroad and
telegraph, hereby confirming to and vesting in said company all the
rights, privileges, franchises, power, and authority conferred
upon, granted to, or vested in said company by said act of
Congress, hereby repealing all laws and parts of laws inconsistent
or in conflict with the provisions of this act or the rights and
privileges herein granted."
Looking at the question in the light most favorable to the
state, it may be said that the franchises which the railroad
company possess with reference to the construction and maintenance
of its road within California came jointly from the United States
and the state. If the rights, privileges, and franchises granted by
the United States to this company were not all that was needed for
the accomplishment of the objects had in view by the construction
of a National highway between the Missouri River and the Pacific
Ocean, the state enactment of 1864 carried into the charter of the
company, looking at the company simply as a state corporation, all
the powers and franchises granted by the United States.
If the assessment in question had been separately upon the
visible property of the company, as distinguished from its
franchises, the case would have presented a different aspect, and
we should then have been compelled to reexamine the question as to
the extent to which the property of the company, used in
accomplishing the objects designed by Congress, could be taxed by
the state. But, as the opinion of the Court shows, the present
assessment was upon the franchise, roadway, roadbed, rails, and
rolling stock of the company, without stating separately their
respective values. That which was invalid cannot be separated from
that which was valid. So
Page 162 U. S. 164
that the question is presented whether it is competent for the
state to sell for its taxes the franchise of the company. If it
cannot, the whole assessment is void.
Santa Clara County v.
Southern Pacific Railroad, 118 U. S. 394,
118 U. S.
415.
The Court says that the railroad company obtained from the state
the right and privilege of corporate capacity; to construct,
maintain, and operate its road; to charge and collect fares and
freights; to exercise the power of eminent domain; to acquire and
maintain right of way; to enter upon lands or waters of any person
to survey route; to construct road across, along, or upon any
stream, watercourse, roadstead, bay, navigable stream, street,
avenue, highway, or across any railway, canal, ditch, or flume; to
cross, intersect, join, or unite its railroad with any other
railroad at any point on its route; to acquire right of way,
roadbed, and material for construction; to take material from the
lands of the state, etc.
But did it not acquire those rights and privileges also from the
United States? Did not the United States grant "the fundamental
franchise" to construct and maintain a railroad from San Francisco
across the state, and through the territories, until it met the
Union Pacific Railroad? If that franchise be sold by the state for
its taxes, how are the national objects contemplated by Congress to
be accomplished? What becomes of the mortgage of the United States
upon the entire property of the company, roadbed, right of way,
rolling stock, stationhouses, etc., which mortgage was taken in
order to secure the payment of the bonds issued by the United
States under the acts of Congress? What becomes of the power of the
United States reserved in the acts of Congress for the general
government, in certain contingencies, to take possession of this
railroad? In
Northern Pacific Railroad v. Traill County,
115 U. S. 600,
where the question was as to the power of a state or territory to
tax certain lands that had been granted by Congress to aid in the
construction of the Northern Pacific Railroad Company, Mr. Justice
Miller, speaking for the Court, said:
"No sale of land for taxes, no taxes can be assessed on any
property but by virtue of the
Page 162 U. S. 165
sovereign authority in whose jurisdiction it is done. If not
assessed by direct act of the legislature itself, it must, to be
valid, be done under authority of a law enacted by such
legislature. A valid sale, therefore, for taxes, being the highest
exercise of sovereign power of the state, must carry the title to
the property sold, and, if it does not do this, it is because the
assessment is void. It follows that if the assessment of these
taxes is valid and the proceedings well conducted, the sale confers
a title paramount to all others, and thereby destroys the lien of
the United States for the costs of surveying these lands. If, on
the other hand, the sale would not confer such a title, it is
because there exists no authority to make it."
It may be said that the franchise which the state may sell is
that which was granted by it. But is the state franchise so
distinct and separate from the franchise granted by the United
States that it can be sold separately from the franchise granted by
the United States? It seems to me that the franchise to build,
operate, and maintain a railroad from San Francisco to a point of
junction with the Union Pacific Railroad is a unit, and that it is
utterly impracticable to separate and sell so much of that
franchise as originally came from the state, and leave intact that
which was derived from the United States. The state cannot lawfully
do anything to impair or cripple the franchise, rights, and
privileges derived from the United States. What was said in
Pacific Railroad Removal Cases, 115 U. S.
1,
115 U. S. 16, in
reference to the relations between the Union Pacific Railroad
Company and certain state corporations which consolidated with that
company is applicable here:
"The whole being, capacities, authority, and obligations of the
company thus consolidated are so based upon, permeated by, and
enveloped in the acts of Congress referred to that it is
impracticable, so far as the operations and transactions of the
company are concerned, to disentangle those qualities and
capacities which have their source and foundation in these acts
from those which are derived from state or territorial
authority."
This Court has often declared that the Central Pacific Railroad
Company was one of the instrumentalities that had been
Page 162 U. S. 166
selected and was being employed by the United States in
accomplishing important national objects, to which the United
States is competent under the Constitution. Upon the franchises,
and upon all the property of that corporation, rests a mortgage to
secure the government against liability for the bonds it issued to
that corporation. With the consent of the state, if such consent
was necessary, that corporation has received large grants of land
upon the condition that it would meet and perform all the
obligations imposed upon it by the acts of Congress. I cannot agree
that the franchise which the corporation has received from the
United States and the state can be assessed by the state for
taxation, along with its roadbed, right of way, etc., and then
sold. That is taxation of one of the instrumentalities of the
national government, which no state may do without the consent of
the Congress of the United States. Of course, this corporation
ought to contribute its due share to the support of the government
of each state within whose limits its property is situated and its
privileges exercised. But it is for Congress to prescribe the rule
of taxation to be applied, at least to the franchises of the
corporation, which, although created by the state, is as much a
federal agency as if it had been created a corporation by national
enactment. It has never heretofore been recognized that a state
could, without the assent of Congress, sell for its taxes the
franchises, rights, and privileges employed, under the authority of
the national government, to accomplish national objects,
particularly where such franchises, rights, and privileges are
under mortgage to secure the government against specified
liabilities.
For the reasons stated, I dissent from the opinion and judgment
of the Court.
*
"Section 1. All property in the state not exempt under the laws
of the United States shall be taxed in proportion to its value, to
be ascertained as provided by law. The word 'property,' as used in
this article and section, is hereby declared to include moneys,
credits, bonds, stocks, dues, franchises, and all other matters and
things, real, personal, and mixed, capable of private ownership,
provided that growing crops, property used exclusively for public
schools, and such as may belong to the United States, this state,
or to any county or municipal corporation within this state, shall
be exempt from taxation. The legislature may provide, except in the
case of credits secured by mortgage or trust deed, for a deduction
from credits of debts due to
bona fide residents of this
state."
"SEC. 4. A mortgage, deed of trust, contract, or other
obligation by which a debt is secured shall, for the purposes of
assessment and taxation, be deemed and treated as an interest in
the property affected thereby. Except as to railroad and other
quasi-public corporations, in case of debts so secured,
the value of the property affected by such mortgage, deed of trust,
contract, or obligation, less the value of such security, shall be
assessed and taxed to the owner of the property, and the value of
such security shall be assessed and taxed to the owner thereof, in
the county, city, or district in which the property affected
thereby is situate. The taxes so levied shall be a lien upon the
property and security, and may be paid by either party to such
security; if paid by the owner of the security, the tax so levied
upon the property affected thereby shall become a part of the debt
so secured; if the owner of the property shall pay the tax so
levied on such security, it shall constitute a payment thereon, and
to the extent of such payment a full discharge thereof,
provided that if any such security or indebtedness shall
be paid by any such debtor or debtors after assessment and before
the tax levy, the amount of such levy may likewise be retained by
such debtor or debtors, and shall be computed according to the tax
levy for the preceding year."
"SEC. 10. All property, except as hereinafter in this section
provided, shall be assessed in the county, city, city and county,
town, township, or district in which it is situated in the manner
prescribed by law. The franchise, roadway, roadbed, rails, and
rolling stock of all railroads operated in more than one county in
this state shall be assessed by the State Board of Equalization at
their actual value, and the same shall be apportioned to the
counties, cities and counties, cities, towns, townships, and
districts in which such railroads are located in proportion to the
number of miles of railway laid in such counties, cities and
counties, cities, towns, townships, and districts."
"
Provisions of Political Code"
"SECTION 3664. The president, secretary, or managing agent, or
such other officer as the State Board of Equalization may designate
of any corporation, and each person, or association of persons,
owning or operating any railroad in more than one county in this
state, shall, on or before the first Monday in April of each year,
furnish the said Board a statement, signed and sworn to by one of
such officers or by the person or one of the persons forming such
association showing in detail for the year ending on the first
Monday in March in each year --"
"1. The whole number of miles of railway in the state, and where
the line is partly out of the state, the whole number of miles
without the state and the whole number within the state, owned or
operated by such corporation, person, or association."
"2. The value of the roadway, roadbed, and rails of whole
railway, and the value of the same within the state."
"3. The width of the right of way."
"4. The number of each kind of all rolling stock used by such
corporation, person, or association in operating the entire
railway, including the part without the state."
"5. Number, kind, and value of rolling stock owned and operated
in the state."
"6. Number, kind, and value of rolling stock used in the state,
but owned by the party making the returns."
"7. Number, kind, and value of rolling stock owned, but used out
of the state either upon divisions of road operated by the party
making the returns, or by and upon other railways."
"Also showing in detail for the year preceding the first of
January --"
"1. The gross earnings of the entire road."
"2. The gross earnings of the road in the state and where the
railway is let to other operators, how much was derived by the
lessor as rental."
"3. The cost of operating the entire (road), exclusive of
sinking fund, expenses of land department, and money paid to the
United States."
"4. Net income for such year and amount of dividend
declared."
"5. Capital stock authorized."
"6. Capital stock paid in."
"7. Funded debt."
"8. Number of shares authorized."
"9. Number of shares of stock issued."
"10. Any other facts the State Board of Equalization may
require."
"11. A description of the road, giving the point of entrance
into and the point of exit from each county, with a statement of
the number of miles in each county. When a description of the road
shall once have been given, no other annual description thereafter
is necessary unless the road shall have been changed. Whenever the
road or any portion of the road is advertised to be sold or is sold
for taxes, either state or county, no other description is
necessary than that given by, and the same is conclusive upon, the
corporation, person, or association giving the description. No
assessment is invalid on account of a misdescription of the railway
or the right of way for the same."
"If such statement is not furnished as above provided, the
assessment made by the State Board of Equalization upon the
property of the corporation, person, or association failing to
furnish the statement is conclusive and final."
"SEC. 3665. The State Board of Equalization must meet at the
state capitol on the first Monday in August and continue in open
session from day to day, Sundays excepted, until the third Monday
in August. At such meeting, the Board must assess the franchise,
roadway, roadbed, rails, and rolling stock of all railroads
operated in more than one county. Assessment must be made to the
corporation, person, or association of persons owning the same, and
must be made upon the entire railway within the state, and must
include the right of way, bridges, culverts, wharves, and moles
upon which the track is laid, and all steamers which are engaged in
transporting passengers, freights, and passenger and freight cars
across waters which divide the road. The depots, stations, shops,
and buildings erected upon the space covered by the right of way
are assessed by the assessors of the county wherein they are
situate. Within ten days after the third Monday of August, the
Board must apportion the total assessment of the franchise,
roadway, roadbed, rails, and rolling stock of each railway to the
counties, or cities and counties in which such railway is located,
in proportion to the number of miles of railway laid in such
counties, and cities and counties. The Board must also, within said
time, transmit by mail to the county auditor of each county, or
city and county, to which such apportionment shall have been made a
statem at showing the length of the main track of such railway
within the county, or city and county, with a description of the
whole of the said track within the county, or city and county,
including the right of way, by metes and bounds, or other
description sufficient for identification, the assessed value per
mile of the same as fixed by a
pro rata distribution per
mile of the assessed value of the whole franchise, roadway,
roadbed, rails, and rolling stock of such railway within the state,
and the amount apportioned to the county, or city and county. The
auditor must enter the statement on the assessment roll or book of
the county, or city and county, and where the county is divided
into assessorial townships or districts, then on the roll or book
of any township or district he may select, and enter the amount of
the assessment apportioned to the county, or city and county, in
the column of the assessment book or roll as aforesaid, which shows
the total value of all property for taxation, either of the county,
city and county, or such township or district. On the first Monday
in October, the Board of Supervisors must make and cause to be
entered in the proper record book an order stating and declaring
the length of main track of the railway assessed by the State Board
of Equalization within the county, the assessed value per mile of
such railway, the number of miles of track, and the assessed value
of such railway lying in each city, town, township, school and road
district, or lesser taxing district in the county, or city and
county, through which such railway runs, as fixed by the State
Board of Equalization, which shall constitute the assessment value
of said property for taxable purposes in such city, town, township,
school, road, or other district, and the clerk of the Board or
Supervisors must transmit a copy of each order or equalization to
the city council, or trustees, or other legislative body of
incorporated cities or towns, the trustees of each school district,
and the authorized authorities of other taxation districts through
which such railway runs. All such railway property shall be taxable
upon said assessment at the same rates, by the same officers, and
for the same purposes, as the property of individuals within such
city, town, township, school, road, and lesser taxation districts,
respectively, if the owner of a railway assessed by the State Board
of Equalization is dissatisfied with the assessment made by the
Board, such owner may at the meeting of the Board, under the
provision of ยง thirty-six hundred and ninety-two of the Political
Code, between the third Monday in August and the third Monday in
September, apply to the Board to have the same corrected in any
particular, and the Board may correct and increase or lower the
assessment made by it, so as to equalize the same with the
assessment of other property in the state. If the Board shall
increase or lower any assessment previously made by it, it must
make a statement to the county auditor of the county affected by
the change in the assessment, of the change made, and the auditor
must note such change upon the assessment book or roll of the
county as directed by the Board. [In effect March 9, 1883.]"
"SEC. 3666. The State Board of Equalization must prepare each
year a book to be called 'Record of Assessment of Railways,' in
which must be entered each assessment made by the Board, either in
writing or by both writing and printing. Each assessment so entered
must be signed by the chairman and clerk. The record of the
apportionment of the assessments made by the Board to the counties,
and cities and counties, must be made in a separate book, to be
called 'Record of Apportionment of Railway Assessments.' In such
last described book must be entered the names of the railways
assessed by the Board, the names of the corporation to which, or
the name of the person or association to whom, each railway was
assessed, the whole number of miles of the railway in the state,
the number of miles thereof in each county, or city and county, the
total assessment of the franchise, roadway, roadbed, rails, and
rolling stock for purposes of state taxation, and the amount of the
apportionment of such total assessment to each county, and city and
county, for county, and city and county taxation. Before the third
Monday of October of each year, the clerk of the State Board of
Equalization must prepare and transmit to the comptroller of the
state duplicates of the 'Record of Assessment of Railways,' and
'Record of Apportionment of Railway Assessments,' each certified by
the chairman and clerk of the Board, and to be known respectively
as 'Duplicate The Record of Assessment of Railways,' and 'Duplicate
Record of Apportionment of Railway Assessments.' In the last named
duplicate, two columns must be added, in one of which the
Comptroller must enter the state taxes due the state upon the whole
assessment by each corporation, person, or association, and in the
other the county, or city and county taxes, due upon the assessment
apportioned to each county, or city and county, by each
corporation, person, or association. The two duplicates constitute
the warrant for the Comptroller to collect the state and county,
and city and county, taxes levied upon such property assessed by
the Board, and the amount of the apportionment of the assessment to
each county, and city and county, respectively. [In effect March 9,
1883.]"
"SEC. 3667. When the Board of Supervisors of each county, and
city and county, to which the State Board of Equalization has
apportioned the assessment of railways shall have fixed the rate of
county, or city and county, taxation, the clerk of the Board of
Supervisors must forthwith, by mail, postage paid, transmit to the
Comptroller a statement of the rate of taxation levied by the Board
of Supervisors for county, or city and county, taxation. If the
clerk fails to transmit such statement, the Comptroller must obtain
the information as to such rate of taxation from other sources. On
or before the fourth Monday of October, the Comptroller must
compute and enter in separate money columns in the 'Duplicate
Record of Apportionment of Railway Assessments' the respective
sums, in dollars and cents, rejecting fractions of a cent, to be
paid by the corporation, person, or association liable therefor, as
the state tax upon the total amount of the assessment, and the
county, or city and county, tax upon the apportionment of the
assessment to each county, and city and county, or the property
assessed to such corporation, person, or association named in said
duplicate record. [In effect March 9, 1883.]"
"SEC. 3668. Within ten days after the fourth Monday in October,
the Comptroller must publish a notice for two weeks in one daily
newspaper of general circulation at the state capital, and in two
daily newspapers of general circulation published in the City of
San Francisco, specifying:"
"1. That he has received from the State Board of Equalization
the 'Duplicate Record of Assessments of Railways' and the
'Duplicate Record of Apportionment of Railway Assessments.'"
"2. That the taxes are now payable and will be delinquent on the
Last Monday in December next at six o'clock p.m., and that unless
paid to the state treasurer at the capitol prior thereto, five
percent will be added to the amount thereof. On the last Monday in
December of each year at six o'clock p.m., all of unpaid taxes are
delinquent, and thereafter there must be collected by the state
treasurer or other proper officer an addition of five percentum,
which sum when collected must be set aside by the treasurer, as a
fund with which to pay the contingent expenses of actions against
any delinquents, the said expenses to be audited by the Board of
examiners. When any taxes paid to the state treasurer by order of
the Comptroller, upon assessments made and apportioned by the State
Board of Equalization, the Comptroller must forthwith notify the
auditor and treasurer respectively of each county, and city and
county that such taxes have been paid, and of the amount thereof to
which each county and city and county in erested is entitled. The
state's portion of the taxes must be distributed by the treasurer
to each fund entitled thereto, and the portion belonging to the
counties, and cities and counties, must be placed in a fund, to be
called 'Railway Tax Fund,' to the credit of each county, and city
and county entitled thereto. When any taxes are placed in the
'Railway Tax Fund' to the credit of a county, or city and county,
the Comptroller at the next settlement with the Comptroller, by the
treasurer of such county, or city and county, must draw and deliver
to such treasurer, his warrant upon the state treasurer for the
amount in the fund to the credit of such county, or city and
county. [In effect March 9, 1883.]"
"SEC. 3669. Each corporation, person, or association assessed by
the State Board of Equalization must pay to the state treasurer,
upon the order of the Comptroller, as other moneys are required to
be paid into the Treasury, the state and county, and city and
county, taxes each year levied upon the property so assessed to it
or him by said Board. Any corporation, person, or association,
dissatisfied with the assessment made by the Board, upon the
payment of the taxes due upon the assessment complained of, and the
five percent added, if to be added, on or before the first Monday
in February, and the filing of notice with the Comptroller of an
intention to begin an action, may, not later than the first Monday
of February, bring an action against the state treasurer for the
recovery of the amount of taxes and percentage so paid to the
treasurer or any part thereof, and in the complaint may allege any
fact tending to show the illegality of the tax, or of the
assessment upon which the taxes are levied, in whole or in part. A
copy of the complaint and of the summons must be served upon the
treasurer within ten days after the complaint has been filed, and
the treasurer has thirty days within which to demur or answer. At
the time the treasurer demurs or answers, he may demand that the
action be tried in the Superior Court of the County of Sacramento.
The Attorney General must defend the action. The provisions of the
Code of Civil Procedure relating to pleadings, proofs, trials, and
appeals are applicable to the proceedings herein provided for. If
the final judgment be against the treasurer, upon presentation of a
certified copy of such judgment to the Comptroller, he shall draw
his warrant upon the state treasurer, who must pay to the plaintiff
the amount of the taxes so declared to have been illegally
collected, and the cost of such action, audited by the Board of
examiners, must be paid out of any money in the gereal fund of the
Treasury, which is hereby appropriated, and the Comptroller may
demand and reveive from the county, or city and county, interested
the proportion of such costs, or may deduct such proportion from
any money then or to become due to said county, or city and county.
Such action must be begun on or before the first Monday in February
of the year succeeding the year in which the taxes were levied, and
a failure to begin such action is deemed a waiver of the rights of
action. [In effect March 9, 1883.]"
"SEC. 3670. After the first Monday of February of each year, the
Comptroller must begin an action in the proper court, in the name
of the people of the State of California, to collect the delinquent
taxes upon the property assessed by the State Board of
Equalization; such suit must be for the taxes due the state, and
all the counties, and cities and counties, upon property assessed
by the Board of equalization, and appearing delinquent upon the
'Duplicate Record of Apportionment of Railway Assessments.'"
"The demands for state and county, and city and county taxes,
may be united in one action. In such action a complaint in the
following form is sufficient:"
"
[Title of Court]"
"
THE PEOPLE OF THE STATE OF CALIFORNIA"
"
vs."
"[Naming the Defendant]"
"Plaintiff avers that on the ___ day of _____, in the year
(naming the year) the State Board of Equalization assessed the
franchise, roadway, roadbed, rails, and rolling stock of the
defendant at the sum of (naming it) dollars. That the Board
apportioned the said assessment as follows: To the County of
(naming it) the sum of (naming it) dollars (and so on naming each
county.)"
"That the defendant is indebted to plaintiff for state and
county taxes for the year eighteen _____, in the following sums:
for state taxes, in the sum of (naming it) dollars; for county
taxes of the County of (naming it), in the sum of (naming it)
dollars, etc., with five percent added for nonpayment of taxes.
Plaintiff demands payment for said several sums and prays that an
attachment may issue in form as prescribed in section 540 of the
Code of Civil Procedure."
"(Signed by the Comptroller or his attorney.)"
"On the filing of such complaint, the clerk must issue the writ
of attachment prayed for, and such proceedings shall be had as
under writs of attachment issued in civil actions; no bond nor
affidavit previous to the issuing of the attachment is required. If
in such action the plaintiff recover judgment, there shall be
included in the judgment as counsel fees, and in case of judgment
of taxes after suit brought but before judgment, the defendant must
pay as counsel fees, such sum as the court may determine to be
reasonable and just. Payment of the taxes or the amount of the
judgment in the case must be made to the state treasurer. In such
actions, the Duplicate Record of Assessments of Railways and the
Duplicate Record of Apportionment of Railway Assessments, or a copy
of them, certified by the Comptroller, showing unpaid taxes against
any corporation, person, or association for property assessed by
the State Board of Equalization, is
prima facie evidence
of the assessment, the property assessed, the delinquency, the
amount of the taxes due and unpaid to the state and counties, or
cities and counties therein named, and that the corporation,
person, or association is indebted to the people of the State of
California in the amount of taxes, state and county, and city and
county, therein appearing unpaid, and that all the forms of law in
relation to the assessment and levy of such taxes have been
complied with. [In effect March 9, 1883.]"
"SEC. 3671. The assessment made by the county assessor, and that
of the State Board of Equalization, as apportioned by the Board of
Supervisors to each city, town, township, school, road, or other
district in their respective counties, or cities and counties,
shall be the only basis of taxation for the county, or any
subdivision thereof, except incorporated cities and towns, and may
also be taken as such basis in incorporated cities and towns when
the proper authorities may so elect. All taxes upon townships,
road, school, or other local districts shall be collected in the
same manner as county taxes. [In effect March 9, 1883.]"