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Timestamp: 2019-04-25 00:59:39+00:00

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CALIFORNIA v. CENTRAL PAC. R. CO.
[127 U.S. 1, 12] Mr. J. M. Wilson for plaintiffs in error.
[127 U.S. 1, 26] Geo. A. Johnson, Atty. Gen., Saml, Shellabarger, and J. M. Wilson, for the State of California.
Creed Haymond, H. S. Brown, Geo. F. Edmunds, and Wm. M. Evarts, for the railroads.
These cases are substantially similar to those of Santa Clara Co. v. Railroad Co., and the other cases decided at the same time, and reported in 118 U.S. 394 , 6 Sup. Ct. Rep. 1132. It will be unnecessary, therefore, to set out any provisions of the constitution and laws of the United States and of California which are involved in the present cae in common with those referred to . The actions were brought by the state of California in the superior court for the county of San Francisco, and were removed into the circuit court of [127 U.S. 1, 27] the United States, where a jury was waived in each case, and the causes were tried by the court, whose findings of fact and conclusions of law are contained in the respective records. One of the cases (No. 660 on the docket) was brought against the Central Pacific Railroad Company for the recovery of the state and county taxes due upon the assessment of the company's property made by the state board of equalization for the year 1883; said assessment being $18,000,000, and the taxes amounting to $276, 865.10, 60 per cent. of which was tendered and paid without prejudice to either party after the suit was brought. Another case (No. 1,157) is an action against the same company for the taxes of 1884, due upon a like assessment of $24,000,000. A third, (No. 664,) against the same company, is for the taxes of 1884, upon an assessment of $22,000,000. No. 661 is a similar action against the Southern Pacific Railroad Company for the taxes of 1883. No. 662 is a similar action against the Northern Railway Company for the taxes of 1883, No. 663 is a similar action against the California Pacific Railroad Company for the taxes of 1883. Tender and payment of 60 per cent. of the taxes were made in all the cases except 1, 157, in which the amount tendered and paid was 50 per cent. Similar defenses were set up in these cases as in the cases reported in 118 U. S., supra. It was claimed, as in those cases, that in making the assessments no deduction was made for the mortgages on the companies' property, while such deduction was made on the property of other citizens, by assessing to the mortgagees the amount of the mortgages as an interest in real estate; thus discriminating against the company, and denying to it the equal protection of the laws, contrary to the fourteenth amendment of the constitution. It was also alleged, in defense, that the board of equalization included in the assessments a valuation of rights, franchises, and property which they had no authority to assess; as, for example, franchises granted to the companies by the United States, and ferry-boats, fences, and other property subject to be assessed by the local county boards, and not by the state board; and that the assessments were for aggregate amounts, not showing on their face what part of the valuation [127 U.S. 1, 28] represented the property illegally included therein,-thus rendering the entire assessment in each case void. It was on this latter ground that the judgments for the defendants in the former cases were affirmed. If these defenses, or either of them, are supported by the facts, it is unnecessary for us to decide the question raised under the fourteenth amendment of the constitution. The questions arising under that amendment are so numerous and embarrassing, and require such careful scrutiny and consideration, that great caution is required in meeting and disposing of them. By proceeding step by step, and only deciding what it is necessary to decide, light will gradually open upon the whole subject, and lead the way to a satisfactory solution of the problems that belong to it. We prefer not to anticipate these problems when they are not necessarily involved.
The last section shows explicitly that, in regard to a railroad, the state board has power to assess only five things,-the franchise, roadway, road-bed, rails, and rolling stock. The county boards are authorized to assess all the rest of the property. If the state board includes in its assessment any more of the railroad property than it is authorized to do, the assessment will be pro tanto illegal and void. If the unlawful part can be separated from that which is lawful, the former may be declared void, and the latter may stand; but if the different parts, lawful and unlawful, are blended together in one indivisible assessment, it makes the entire assessment illegal. This is so well settled that it needs no citation of authorities further than to refer to the opinion of this court in the former cases. 118 U.S. 394 , 6 Sup. Ct. Rep. 1132. In the present assessments, all parts of the property are blended together, and are inseparable. If it be true, therefore, that property not authorized to be included in the assessments is included therein, the assessments must be declared void.
Here, it will be perceived that the legislature undertakes to define what things are and what are not comprised within the five categories of railroad property assessable by the state board, and declares that they include, not only the entire railway within the state, the right of way, bridges, and culverts, but also the '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.' This is clearly an enlargement of the terms of the constitution. Steamers, at least, are not, and have been held by the supreme court of California not to be, embraced in the five categories.
This is a clear affirmation of the allegation of the answer. Section 3665 of the Political Code, as amended March 9, 1883, requires the state board of equalization to include in their assessment of railroad property 'all steamers which are engaged in transporting passengers, freights, and passenger and freight cars across waters which divide the road.' It is a matter of public notoriety, as much so as the existence of the railroad itself, or that of the Sierra Nevada, or any other geographical feature on the route, that the railroad companies in the cases referred to have steam ferry-boats engaged in the transportation of passengers and freight across the bay of San Francisco and the straits of Carquinez; and that, without such means of transportation, those waters could not be crossed.
The question whether steamers and ferry-boats should be included in the property assessed by the state board of equalization, or in that assessed by the county board, was distinctly raised in the case of San Francisco v. Railroad Co., 63 Cal. 469, and decided in favor of the county board. That was an action brought by the city and county of San Francisco against the company to recover taxes imposed upon it by virtue of an assessment made by the county board upon the same ferry-boats now assessed by the state board. The company resisted the tax on the ground that these boats were assessable by the state board, and not by the county board. The supreme court of California decided against the company. Its finding of facts was as follows, namely: 'That the defendant is a corporation existing under the law of the United States, and of this state, ... owner of a line of railroad known as the 'Central Pacific Railroad,' extending from a point in the city of San Francisco. ... to Ogden, in the territory of Utah; that the length of said road in the city and county of San Francisco is four miles from a [127 U.S. 1, 34] point within said city to the eastern shore of the southern arm of the bay of San Francisco; that from said point on the eastern shore ... to a point on the western so re of said bay, where the railway of defendant again commences, is about twelve miles; that across said bay no line of railroad has been constructed, and freight and passengers carried upon said road are taken across said bay upon steam ferry-boats; ... that upon the decks of said vessels are laid railroad tracks,' etc. After giving judgment for the plaintiff upon these facts, the court says: 'The sole question presented for decision herein is whether the steamers Thoroughfare and Transit, mentioned in the above findings, are to be assessed by the assessor of the city and county of San Francisco or by the state board of equalization. The property to be assessed by the board is defined in the 10th section of article 13 of the constitution of 1879. It is the franchise, roadway, road-bed, rails, and rolling stock of all railroads operated in more than one county of the state. All property other than the above mentioned is to be assessed by the local assessors. Are the steamers above named embraced within the category of property named in the section above referred to? The relation of such steamers to the Central Pacific Railroad Company is set forth in the findings.' The court then proceeds to show that the ferry-boats cannot be included in either of the five categories mentioned in the constitution, namely, in either the franchise, roadway, road-bed, rails, or rolling stock; and concludes as follows: 'We are of opinion that the assessment of the steamers above mentioned pertained to the local assessor, and was properly made by the assessor of the city and county of San Francisco.' This decision was made in June, 1883, and is a construction of the constitution of California. It follows that the act of March, 9, 1883, as reproduced in section 3665 of the Political Code, departs from the constitutional provision; and that the assessments, in following the act, are also unconstitutional and void.
In No. 1,157, one of the cases against the Central Pacific Railroad Company, being for the taxes of the year 1884, the court finds that the state board of equalization, in making [127 U.S. 1, 35] the assessment, did knowingly and designedly include in the valuation of the roadway the value of fences erected upon the line between said roadway and the land of coterminous proprietors. This brings that case precisely within the decision made in the former cases reported in 118 U. S.
Another defense set up by the Central Pacific Railroad Company in the three cases against it, namely, Nos. 660, 664, and 1,157, and by the Southern Pacific Railroad Company in No. 661, is that the state board of equalization included in their assessments in said cases the value of the franchises conferred upon said companies by the United States, which, it is contended, is repugnant to the constitution and laws of the United States, and therefore void. Thus, in No. 660, the Central Pacific Railroad Company, in its answer, after reciting the various acts of Congress conferring franchises and privileges and imposing duties upon the company, avers that it is a federal corporation, and holds its corporate powers and franchises under the government of the United States, and that the said government has never given to the state of California the right to lay any tax upon the franchise, existence, or operations of the company. Similar averments are made in the other cases, 664, 1,157, and 661. The court finds, in each of these cases, 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. The first question, then, is whether the defendants in these cases held any franchises granted to them by the government of the United States. Of this there can hardly be a doubt.
The Central Pacific Railroad Company was constituted by the consolidation of two state corporations of California, but derived many of its franchises and privileges from the government of the United States. The findings of the court below on this subject are as fl lows, to-wit: 'That on the 28th day of June, 1861, a corporation was formed and organized under the laws of the state of California, under the corporate name of the Central Pacific Railroad Company of California. Said corporation was formed [127 U.S. 1, 36] for the purpose of constructing, owning, and operating a line of railroad and telegraph, commencing at the city of Sacramento, in said state, and running thence through the counties of Sacramento, Placer, Sierra, and Nevada to the eastern boundary of said state, in the expectation that its proposed railroad would, when constructed, constitute part of a line of railroad extending from the Missouri river to the Pacific ocean, which line it was then supposed was about to be constructed under the legislative supervision and authority of the government of the United States, and which line of railroad was afterwards so constructed. That on or about the 1st day of July, 1862, the government of the United States undertook to construct, or to cause to be constructed, a line of railroad from the Missouri river to the Pacific ocean, and to that end congress passed an act entitled 'An act to aid in the construction of a railroad from the Missouri river to the Pacific ocean, and to secure to the government the use of the same for postal, military, and other purposes.' See 12 U. S. St. 489. That to facilitate the construction of said road the government of the United States, by said act of congress, conferred upon the said Central Pacific Railroad Company of California the same powers, and clothed it with the same privileges and immunities, which it conferred upon and clothed the said Union Pacific Railroad Company, except that the said Central Pacific Railroad Company of California was to commence the construction of said railroad at the Pacific ocean, and build east until it met the said Union Pacific Railroad, building west. That on or about the 2d day of July, 1864, congress passed an act entitled 'An act to amend an act entitled 'An act to aid in the construction of a railroad and telegraph line from the Missouri river to the Pacific ocean, and to secure to the government of the United States the use for the same for postal, military, and other purposes,' approved July 1, 1862.' See 13 U. S. St. at Large, 356. That said Central Pacific Railroad Company of California filed in the department of the interior its acceptance of the [127 U.S. 1, 37] terms and conditions of said act of congress of July 1, 1862, within the time therein designated. That on or about the 31st day of October, 1864, said Central Pacific Railroad Company of California sold and assigned all its rights under the aforesaid acts to a corporation then existing under the laws of the state of California, and known as the Western Pacific Railroad Company, so far as said rights related to the construction of said railroad and telegraph between the cities of San Jos e and Sacramento, in said state of California. Said assignment was ratified and confirmed by the United States by an act of Congress passed on the 3d day of March, 1865, entitled 'An act to amend an act entitled 'An act to aid in the construction of a railroad and telegraph line from the Missouri river to the Pacific ocean, and to secure to the government the use of the same for postal, military, and other purposes,' approved July 1, 1862, and to amend an act amendatory thereof, approved July 2, 1864.' See 13 U. S. St. at Large, 504. That the said line of railroad from the Pacific ocean to Ogden, in Utah territory, was completed and put in operation in 1869, and has been in operation from that time until the present, and still is in operation, and the whole of the railroad mentioned in the said acts of congress has long since been completed, and is now, in accordance with the spirit and intent of said acts of congress, operated as one continuous line from the Missouri river to the Pacific ocean, and is so operated and maintained for the uses and purposes mentioned in said acts. That in August, 1870, acting under the sai acts of congress, said Central Pacific Railroad Company of California and the said Western Railroad Company formed themselves into one corporation under the name of the Central Pacific Railroad Company. Said company is the defendant herein, and has, from the completion of said railroad as aforesaid until the present time, owned (except in the respect hereinafter stated) and operated said railroad under and by virtue of said acts of congress, and for the uses and purposes therein mentioned.' [127 U.S. 1, 38] If we turn to the acts of congress referred to by the court, we shall find that franchises of the most important character were conferred on this company. Originally, the Central Pacific Railroad Company of California had only power to construct a railroad from Sacramento to the eastern boundary of the state. Congress, by the act of 1862, authorized the company (in the words of the act) '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 are contained in this act for the construction of said railroad and telegraph line first mentioned, [the Union Pacific,] and to meet and connect with the first-mentioned railroad and telegraph line on the eastern boundary of California.' Section 9. In the following section it was enacted that, after the completion of its road to the eastern boundary of California, the Central Pacific might unite upon equal terms with the Union Pacific Railroad Company in constructing so much of said railroad and telegraph line, and branch railroads and telegraph lines, through the territories, from the state of California to the Missouri river, as should then remain to be constructed, on the same terms and conditions as provided in relation to the Union Pacific Railroad Company. Thus, without referring to the other franchises and privileges conferred upon this company, the fundamental franchise was given by the acts 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. 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. The present company has it by transfer from and consolidation of the original companies, by which its existence and capacities were constituted. Such consolidation was authorized by the sixteenth section of the act of congress of July 1, 1862, and the sixteenth section of the act of July 2, 1864, taken in connection with the second section of [127 U.S. 1, 39] the act of March 3, 1865, referred to in the findings of the court. The lastnamed act ratified the transfer by the Central Pacific to the Western Pacific of a portion of its road extending from San Jos e to Sacramento, and conferred upon the latter company all the privileges and benefits of the several acts of congress relating thereto, and subject to all the conditions thereof. If, therefore, the Central Pacific Railroad Company is not a federal corporation, its most important franchises, including that of constructing a railroad from the Pacific ocean to Ogden City, were conferred upon it by Congress.
It cannot at the present day be doubted that congress, under the power to regulate commerce among the several states, as well as to provide for postal accommodations and military exigencies, had authority to pass these laws. The power to construct, or to authorize individuals or corporations to construct, national highways and bridges from state to state, is essential to the complete control and regulation of interstate commerce. Without authority in congress to establish and maintain such highways and bridges, it would be without authority to regulate one of the most important adjuncts of commerce. This power in o rmer times was exerted to a very limited extent; the Cumberland or National road being the most notable instance. Its exertion was but little called for, as commerce was then mostly conducted by water, and many of our statesmen entertained doubts as to the existence of the power to establish ways of communication by land. But since, in consequence of the expansion of the country, the multiplication of its products, and the invention of railroads and locomotion by steam, land transportation has so vastly increased, a sounder consideration of the subject has prevailed, and led to the conclusion that congress has plenary power over the whole subject. Of course, the authority of congress over the territories of the United States, and its power to grant franchises exercisable therein, are, and ever have been, undoubted. But the wider power was very freely exercised, and much to the general satisfaction, in the creation of the vast system of railroads connecting the east with the [127 U.S. 1, 40] Pacific, traversing states as well as territories, and employing the agency of state as well as federal corporations. See Railroad Removal Cases, 115 U.S. 1 , 14-18, 5 Sup. Ct. Rep. 1113.
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 with 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 branch of the king's prerogative, subsisting in the hands of a subject.' 2 Comm. 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 is the same as to say that the right of eminent domain can only be exercised by virtue [127 U.S. 1, 41] 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, 4 Wheat. 316, '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 lawo f 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 sovereignity. It is unnecessary to cite cases on this subject The principles laid down by this court in McCulloch v. Maryland, Osborn v. Bank, 9 Wheat. 817, and Brown v. Maryland, 12 Wheat. 436, and in 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. 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. Id. 25, 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 [127 U.S. 1, 42] any valuation of the franchise at all, the tax may be arbitarily laid. It is not an idle objection, therefore, made by the company against the tax imposed in the present cases.
An examination of the acts referred to in these findings shows that congress authorized the Southern Pacific Railroad Company to connect with the Atlantic Pacific Railroad at such point, near the boundary line of the state of California, as it should deem most suitable for a railroad line to San Francisco; and, to aid in the construction of such a railroad line, congress declared that the company should have similar grants of land, and should be required to construct its road on the like regulations, as to time and manner, with the Atlantic & Pacific. Like powers were also given to the Southern Pacific Railroad Company to construct a line of railroad from Tehachapa pass, by way of Los Angeles, to the Texas Pacific road at the Colorado river, (Fort Yuma.) The Southern Pacific Company was not authorized by its original charter to extend its railroad to the Colorado river, as we already know by other cases brought before us, and as appears by the act of the state legislature passed April 4, 1870, which assumed to authorize the company to change the line of its railroad so as to reach the eastern boundary line of the state; thus duplicating the power given to it by the act of congress. See the state act quoted in 118 U.S. 399 , 6 Sup. Ct. Rep. 13 4. This state legislation was probably procured to remove all doubts with regard to the company's power to construct such roads. It is apparent, however, that the franchise to do so was fully conferred by [127 U.S. 1, 45] congress, and that franchise was accepted, and the roads have been constructed in conformity thereto. It conclusively appears, therefore, that the Southern Pacific Railroad Company did receive from the United States government, and still enjoys, important franchises connected with its railroads.
It follows that, in each one of the now before us, the assessment made by the state board of equalization comprised the value of franchises or property which the board was prohibited by the constitution of the state from including therein; and that these values are so blended with the other items of which the assessment is composed that they cannot be separated therefrom. The assessments are therefore void. This renders it unnecessary to express any opinion on the application of the fourteenth amendment, as the result would not be different whatever view we might take on that subject. The judgments in all the cases are affirmed.

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