Court Opinion

ID: 3300014
Source: CourtListenerOpinion
Date Created: 2016-07-05 17:16:36.011129+00
Date Added: 2024-06-11T14:00:36.620308
License: Public Domain

I concur in the judgment, and generally in the reasoning and principles announced in the prevailing opinion. Something more, however, remains to be said upon the question, and no better time for its saying presents itself than is offered by the present case. Concededly it is of the highest importance to the commonwealth that the tax system should be uniform and just and that no one person or class of persons should be exempt from the payment of a tax the collection of which is enforced against others. Per contra, that no one person or class of persons should be compelled to pay a tax which is not enforced against others. The fault of our system in this regard — a fault of which the taxpayer may justly be heard to complain — is not in the assessment of intangible property represented by the difference between the market value of the stock and the value of the tangible property, but it is in calling this difference the value of the "franchise" and taxing it as franchise. A franchise is simply a special privilege granted by the state directly or through one of its mandatories. When that privilege is the privilege of being a corporation, when the franchise granted is simply the franchise to be a corporation, that franchise can have no greater value than what it has cost the incorporators to obtain it and what it would cost other incorporators to obtain the identical privilege. Since in this state these franchises are open to all upon the same conditions, that cost is the mere expense of filing papers and procuring clerks' certificates, say ten dollars, and it cannot be said that such a franchise or privilege can ever be worth more than that amount while our laws remain unchanged. A tremendous distinction is, of course, to be observed between this franchise to be a corporation and some special franchise to do a particular thing, as the franchise to use a particular city street for street railroad purposes. Such a franchise, and others of like kind, often have enormous value, and this value comes from the fact that once granted, no other person can obtain them. It is not open to citizens upon the same terms, but it is in its nature monopolistic. But I advert to this merely in passing, for we are here dealing with the franchise to be a corporation. To illustrate the fallacy of assessing the difference *Page 598 
in value between the market value of stock and the value of the tangible property as franchise let us instance a case. Three men as copartners are engaged in the business of selling dry goods. By the exercise of varied qualities which go to make business success they have developed an enormous and profitable business. They are assessed for the value of their tangible property, the stock on their shelves and their solvent credits or book accounts. They decide to incorporate, and without the slightest change in location, stock, book accounts, without the slightest change of any kind, they pay ten dollars to the state of California, obtain articles of incorporation and issue to themselves each one third of the shares. These shares have a value far in excess of the total value of the goods on the shelves and of the solvent credits. Upon an investment say of a million dollars their profits show a return of six per cent upon ten millions of dollars. Finding, therefore, the value of the solvent credits and goods on hand at one million dollars and the value of the stock at ten million dollars, the assessor assesses this corporation nine million dollars for its franchise, for which franchise but the day before it paid the state ten dollars, and as to which franchise — which is merely the privilege as a corporation to carry on the business of buying and selling dry goods — any three men in the state of California may secure the identical privilege for the same expenditure of money. The necessary result would be that while yesterday the privilege was assessed for a million dollars, to-day the corporation is assessed for ten millions of dollars, nine millions of which is the so-called value of the franchise. I am not disputing the existence of this nine millions of property. I do insist that it was not called into being, nor in any way created, through the privilege to be a corporation so granted by the state. This nine million dollars is, and logically can be, nothing other than the good-will of the business, which good-will is itself a species of property distinctly recognized by the laws of this state, property capable of private ownership, and, therefore, property which should be assessed. And not only should it be assessed, but I insist it should be assesesd not under the misleading and deceptive misnomer of franchise, but assessed for what it really is, good-will. (Civil Code, secs. 655, 992, 993.) Even if the legislature should declare that it should *Page 599 
be assessed as franchise, this declaration does not make it franchise. The legislative declaration that it should be assessed as "beauty" would not make it beauty. The simple proof of the matter is that of this nine million dollars assessed as franchise, $8,999,990 are in effect good-will, and the remaining ten dollars is the value of the franchise. Nor do I think that this matter should be lightly put aside with the statement that as the property after all is assessed it does not matter under what name it pays its taxes. Logical results can only be reached by correct reasoning, and correct reasoning and a true interpretation is essential to that great desideratum, the uniformity in operation of our revenue system. Therefore, I am here contending that the property which is assessed should be assessed under its true name, and that this should be declared by this court, not only because it is the logical and correct interpretation of the law, but because it is of great moment that the assessors themselves should be properly directed in their delicate tasks, and that the taxpayer in turn should know upon just what property of his the law is imposing its burden. My position, therefore, is not that corporations should not pay this tax. But they should not be expected to pay it under the blind and misleading guise of franchise. They should be called upon to pay taxes upon the property as it actually is — the good-will. No justice of this court, I think, disagrees with me upon the proposition that in fact it is the good-will which is being assessed under the guise of franchise, and no one will question but if the good-will of a corporation is thus subject to assessment in this state, the good-will of every other business, whether carried on by a partnership or an individual, should equally be subject to taxation.