18 F. 385 (D.Cal. 1883), Santa Clara County v. Southern Pac. R. Co.

Citation:18 F. 385
Party Name:COUNTY OF SANTA CLARA v. SOUTHERN PAC. R. CO. For Taxes of 1882. COUNTY OF SACRAMENTO v. CENTRAL PAC. R. CO. For Taxes of 1882. COUNTY OF SACRAMENTO v. CENTRAL PAC. R. CO. For Taxes of 1881. PEOPLE OF THE STATE OF CALIFORNIA v. NORTHERN R. CO. For Taxes of 1881. PEOPLE OF THE STATE OF CALIFORNIA v. CENTRAL PAC. R. CO. For Taxes of 1881. PEOPLE OF T
Case Date:September 17, 1883
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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Page 385

18 F. 385 (D.Cal. 1883)

COUNTY OF SANTA CLARA

v.

SOUTHERN PAC. R. CO. For Taxes of 1882.

COUNTY OF SACRAMENTO

v.

CENTRAL PAC. R. CO. For Taxes of 1882.

COUNTY OF SACRAMENTO

v.

CENTRAL PAC. R. CO. For Taxes of 1881.

PEOPLE OF THE STATE OF CALIFORNIA

v.

NORTHERN R. CO. For Taxes of 1881.

PEOPLE OF THE STATE OF CALIFORNIA

v.

CENTRAL PAC. R. CO. For Taxes of 1881.

PEOPLE OF THE STATE OF CALIFORNIA

v.

SOUTHERN PAC. R. CO. For Taxes of 1881.

United States Circuit Court, D. California.

September 17, 1883

Page 386

[Copyrighted Material Omitted]

Page 387

E. C. Marshall, Atty. Gen. of California, D. M. Delmas, D. S. Terry, A. L. Rhodes, W. T. Baggett, J. H. Campbell, Dist. Atty. of Santa Clara Co., J. T. Carey, Dist. Atty. of Sacramento Co., and J. M. Lesser, Dist. Atty. of Santa Cruz Co., for plaintiffs.

S. W. Sanderson, J. N. Pomeroy, T. I. Bergin, H. S. Brown, S. C. Denson, and P. W. Wiggington, for defendants.

FIELD, Justice.

These are actions for the recovery of unpaid state and county taxes levied upon certain property of the several defendants, either for the fiscal year of 1881 or of 1882, and alleged to be due to the plaintiffs, with an additional 5 per cent. as a penalty for their non-payment and interest. The defendants are corporations formed under the laws of California, and the taxes claimed were levied on the franchise, roadway, road-bed, rails, and rolling stock of each of them as a unit, without separation or distinction in the valuation of the different parts composing the whole. To two of the corporations, the Southern Pacific Railroad Company and the Central Pacific Railroad Company, privileges and powers, other than those acquired under the laws of the state, were conferred by grant of the general government; and for them obligations and burdens were assumed not contemplated nor possible under their original organization.

It is contended that congress has selected these corporations as the special agents and instruments of the nation for public purposes, and to that end has clothed them with faculties, powers, and privileges to enable them to construct and maintain their roads as postal and military roads of the government; that the state, by an act of its legislature, has assented to the acceptance of these faculties, powers, and privileges, and that the companies, in consideration thereof, have assumed obligations to the general government with the discharge of which the state cannot interfere; that the power to tax their franchises involves the power to destroy the companies and thus deprive the general government of the benefit of the roads, for the construction and maintenance of which its grants were made; that the existence and exercise of the power on the part of the state are therefore incompatible with the duties devolved upon and assumed by the companies to the United States. Hence it is claimed by counsel that the tax levied upon the franchises of the defendants is illegal and void; and they refer to numerous decisions of the supreme court, which hold, in general language, that an agency of the United States, an instrumentality by which the federal government discharges its obligations to the people of the country, cannot be taxed by any state or subordinate authority. Certainly no state can impede or embarrass the federal government in its operations, as might be done if it could impose a tax upon the necessary means adopted for their execution; nor can the federal government impede or embarrass the operations of the state governments, as it might do if it could impose a tax upon the necessary means adopted by them in the exercise of their powers.

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The two governments have supreme authority within their respective spheres, and within them neither can interfere with the other. On this principle it was held by the supreme court that the state could not levy a tax upon the salary or emoluments of an officer of the United States; nor could the United States impose a tax upon the salary of a state judge. Dobbins v. Com'rs Erie Co. 16 Pet. 435; Collector v. Day, 11 Wall. 113. But officers were necessary agents, instrumentalities for exercising the powers of their respective governments, and to tax the salary of either was to impair the means by which he could exist and maintain his office. In both cases, as observed by Mr. Justice NELSON, the exemption from taxation was 'upheld by the great law of self-preservation, as any government, whose means employed in conducting its operations is subject to the control of another, can exist only at the mercy of that government.'

The correctness of this general principle is not controverted, and cannot be in the face of the numerous decisions of the supreme court, when applied to the means or instrumentalities created by the federal government, or existing under its laws, for the exercise of its powers, such as officers of its courts in the administration of justice, or fiscal agents in the collection, custody, or distribution of its funds. But we are unable to accede to the position that every agent or instrument which the United States may see fit to employ, is thereby exempted from the common burdens of the state in which it may be found or used, in the absence of specific congressional legislation declaring such exemption. The coach employed to carry the mail, or the ferry-boat to convey it across a navigable stream, would hardly, by reason of this employment alone as an instrumentality of the general government, be considered as withdrawn from the taxing power of the state. As well observed by Chief Justice CHASE, with reference to the exemption from the state taxation claimed by the Kansas Division of the Pacific Railroad Company for its property, no limits can be perceived to the principle of exemption which the companies thus seek to establish. 'Every corporation,' he added, 'engaged in the transportation of mails, or of government property of any description, by land or water, or in supplying materials for the use of the government, or in performing any service of whatever kind, might claim the benefit of the exemption. The amount of property now held by such corporations, and having relations more or less direct to the national government, and its service, is very great. And this amount is continually increasing; so that it may admit of question whether the whole income of the property, which will remain liable to state taxation, if the principle contended for is admitted and applied in its fullest extent, may not ultimately be found inadequate to the support of the state governments. ' Thomson v. Pacific R.R. 9 Wall. 579, 591.

It is true that, in the case from which this citation is made, exemption from taxation was claimed only for the property-- the road and rolling

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stock-- of the company. Here the exemption claimed is of the franchises of the corporations-- their right to exist and maintain their roads. But it is not perceived that this difference between the cases can affect the rule which was there laid down, that unless congress interposes and creates the exemption, the taxing power of the state is not restrained; for if the roads and rolling stock can be taxed, and if the taxes are not paid, can be sold, the ability of the companies to discharge their obligations as agents of the government would be as effectually destroyed as by the taxation and sale of their franchises. The possession of the roads and rolling stock is as essential as the possession of the franchises.

The objection presented by counsel is not free from difficulty. At one time I thought that it was tenable, and so expressed myself by joining in the dissent in Railroad Co. v. Peniston, reported in 18 Wall. 5; but, on further consideration, I have come to the conclusion that the rule laid down in Thomson's Case is the true and sound rule. The state, it is conceded, cannot use its taxing power so as to defeat or burden the operations of the general government. And when that government has itself created the instrumentality used, its exemption from state taxation necessarily follows. But we are of opinion, yielding to the decision cited, that when the instrumentality is the creation of the state,-- a corporation formed under its laws,-- and is employed or adopted by the general government for its convenience, although to enlarge its use and render it more available additional privileges and benefits are conferred by that government upon the corporation, it remains subject to the taxing power of the state, unless congress declares it to be exempt from such power. Congress can undoubtedly exempt any agencies it may employ for services to the general government from such taxation as will in its judgment impede or prevent their performance. Occasions may arise hereafter, especially in time of war, where the necessities of the federal government will require such exemption of the roads of the companies, and of their franchises and appurtenances, to be declared and enforced; the exemption to continue until the necessities calling for it shall cease. But as yet congress has not declared any such exemption either of their property or of their franchises, and we therefore think that none exists.

Of the other defenses interposed to the claim of the plaintiffs, some are founded upon an alleged neglect of the assessing officers to comply with requirements of the laws of the state, and some upon the alleged conflict of provisions of the state constitution, under which they acted, with requirements of the federal constitution. Of the former are objections to what is termed the lumping character of the assessment; that is, the blending of the different items composing the whole into one valuation, namely, the value of the franchise, roadway, road-bed, rails, and...

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