County of Santa Clara v. Southern Pac. R. Co.

18 F. 385, 9 Sawy. 165

• Court: United States Circuit Court
• Decided: September 17, 1883
• Status: Published

Opinions

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 he 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.

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. Both 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 “up-nheld 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 administation 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, i 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, he considered as withdrawn from the taxing power of the state. As well observed by Chief Justice Chase, with reference to the exemption from 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 ease from which this citation is made, exemption from taxation was claimed only for the property — the road and rolling stock — of the company. Here the exemption claimed is of the franchises of the corporations — their right to o?ist 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 tho 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 tho 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 tho 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 tho 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 tlieir 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 tho assessing officers to comply with requirements of the laws of the slate, 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 rolling stock, without any designation of the value of each distinct part; and to the including in the roadway of property not properly appertaining to it, such as fences on itt sides belonging to adjoining proprietors, and, so far as the roadway o the Central Pacific Company is concerned, to the including in the es tímate of its length the four miles of the bay between the road in th county of San Francisco and the wharf in Alameda county. The value of the fences is included in the valuation of the roadway o' each company. The distance across the bay of San Francisco it added to the length of the road assessed to the Central Pacific Company,' and is assessed as of equal value per mile with the rest of the road. It is also contended that the land composing the roadway, and the rails laid thereon, should have been separately assessed; the latter as improvements under the constitution of the state, which requires “land and improvements thereon” to be separately assessed. An objection is also taken to those cases in which the people of the state are plaintiffs, that the statute under which they were brought was repealed in 1880, and that after that period actions for unpaid taxes could be brought only in the name of the county. We do not, however, deem it important to pass upon these and other objections to the assessment, arising from an alleged disregard of the laws of the state. We shall confine ourselves to the defenses made to the assessment and tax from the alleged conflict of the provisions under which they were levied, with (the requirements of the fourteenth amendment to the constitution of the United States, which declares that no state shall “deprive any person of life, liberty, or property without due process of law, nor deny to any person within its jurisdiction the equal protection of the laws.” The railroad companies contend that both inhibitions of this amendment were'violated in the assessment and taxation of their property.

The constitution of California provides for taxes on property, on incomes, and on polls. The taxation on property, with which alone we are concerned in this case, is to be in proportion to its value. There is no provision for levying a specific tax upon any article or kind of property. It declares that all property, not exempt under the laws of the United States, shall, with some exceptions, be taxed according to its value, to be ascertained as prescribed by law; and that the word “property” shall “include moneys, credits, bonds, stocks, dues, franchises, and all other matters and things, real, personal, and mixed, capable of private ownership.”

It also declares that “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.” And that, “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.” It also provides that “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. ”

By the constitution, not only is the ad valorem rule established for the taxation of property, but provision is also made for its assessment. The franchise, roadway, road-bed, rails, and rolling stock of railroads operated in more than one county, are to be assessed by a special board, termed the “State Board of Equalization.” All other property is to be assessed in the county in which it is situated. The supervisors of each county are constituted a board of equalization of such taxable property, and must act upon prescribed rules of notice to its owners. The state board is authorized to act, not only as assessor of the franchise, roadway, road-bed, rails, and rolling stock of railroads mentioned, but as a board of equalization of the taxable property in the several counties, so that equality may bo secured between the tax-payers of different localities. Its action in this latter character must also be upon prescribed rules of notice. But though the officers by whom the assessment of these properties is to be made be different, the properties are subject to the same rule of taxation; that is, they are to be taxed in proportion to their value. In fixing, however, the liabilities of parties to pay the tax assessed and levied upon properties subject to a mortgage, and in estimating the value of such properties as the foundation for the tax, a discrimination is made between the property held by railroad and quasi public corporations, and that held by natural persons and other corporations. A mortgage, as seen by the provisions of the constitution quoted above, is deemed and treated; for the purposes of assessment and taxation, as an interest in the property affected. At common law a mortgage of property is a conveyance of the title, subject to a condition that if the debt secured be paid as stipulated, the conveyance is to become inoperative. Until the debt secured is paid, the title is in the mortgagee. By the constitution, a mortgage, for the purposes of assessment and taxation, operates in like manner to transfer the mortgagor’s interest to the extent represented by the amount secured. If such amount be half the value of the property, the taxable interest of the mortgagee is an undivided half interest in the property. If the amount equal or exceed the whole value of the property, the taxable interest of the mortgagee embraces the entire property. The value of the security can never exceed the value of the property mortgaged; it may be less, and is so if the amount secured be less than such value.

Now, under the constitution, when, by the execution of a mortgage, a taxable interest in the property held by natural persons, or by corporations other than railroad or quasi public, is transferred by the owner to another party, or the whole taxable interest is vested in him, the holder alone of such interest is taxed for it. It is assessed against him as the owner of it, and against him alone could it be justly assessed; But when, by a mortgage on the property of a railroad or quasi public corporation, a taxable interest in such property is transferred by the corporation to another, or the whole interest is vested in him, the holder of such interest is exempted from taxation . for it, and the corporation is assessed and taxed for it notwithstanding the transfer. No account is taken of the transfer of the taxable interest in the estimate of the value of the property. It is still assessed and taxed to the original holder.

The discrimination thus made will more clearly appear by an illustration of the practical operation of the provisions. If, for example, A., owning property worth $20,000, should execute a mortgage thereof to the Nevada Bank, in San Francisco, to secure $10,000, the bank would hold a taxable interest in that property to the amount of an undivided half. Its liability for taxation would be precisely as though an absolute conveyance of an undivided half interest had been made to it. And the constitution, as seen above, requires that each owner shall pay the tax on his separate interest, and if he pay the tax chargeable on the interest of the other he shall be allowed for it, either by an addition to the mortgage debt, or a discharge of a portion of that debt according as he is the one or the other party to the seQurity. No one would pretend that the mortgagor should pay without such allowance the tax chargeable to the bank, nor that the bank should pay the tax chargeable to the mortgagor, except upon like condition. It would be difficult to state any principle which would justify the exaction from one of a tax leviable on the interest of the other. No power in any state has ever been asserted going to that extent, except the power to confiscate. The exaction would not be the taking of property by due process of law, even upon the theories as to what constitutes such process asserted in this case. It would be sheer spoliation by arbitrary power.

If, however, a railroad corporation should execute its mortgage to the Nevada Bank to secure a loan equal to half or the whole of the value of its property, and thus transfer to the bank a portion or the whole of its taxable interest in the property, that which is thus condemned as sheer spoliation would be enforced, if effect be given to the constitution as it is written. The taxable interest in that case held by the bank would not be assessed nor taxed to the bank. • If the mortgage should be for half of the value of the property, the railroad company would still have to pay the tax on the interest transferred, and would not be allowed any credit on the mortgage for the amount paid. If the mortgage should be equal to or exceed the whole value of’the property, the railroad company, which would not in such a case hold any taxable interest in the property, — ¿no more than if it had been previously transferred by an absolute conveyance, — would still be required to pay the tax upon it, and without any credit for' the payment. On wiiat principle, or by what species of reasoning, a tax upon property can be upheld and enforced against a party, be the party a natural or an artificial person, when the taxable interest in it had, at the time of the levy of the tax, been transferred to another. I am at a loss to understand. This position of the case was suggested to counsel on more than one occasion during the argument, but no answer was made to it. To every other position an answer was attempted, but to this one, none; and, as we think, for the best of reasons, because none was possible, unless, indeed, it be held that the constitution does not meara what in express language it declares, that a mortgage “shall, for the purposes of assessment and taxation, be-deenuid and treated as an interest in the property affected thereby.”

Under the provisions of the constitution cited, the property of the several railroad companies, defendants in these cases, was assessed and taxed, and in such assessment and taxation all the injurious discriminations mentioned were applied against the companies, as will appear by a statement of the proceedings. In considering them it will tend to clearness and brevity if we confine what we have to say principally to the case of Santa Clara county against the Southern Pacific Railroad Company. The circumstances distinguishing the other cases from it do not affect the questions involved.

The Southern Pacific Railroad Company operates a railroad through several counties. The entire length of the road is somewhat over 711 miles, of which 59 miles and throe-tenths of a mile are in the county of Santa Clara. The principal place of business of the company is in the city of San Francisco. Its stockholders are citizens of the United States, some of whom reside in California, and some in other states. On the first of April, 1875, it was indebted to divers persons in large sums of money advanced for the construction and equipment of its road; and to secure this indebtedness, and to complete the construction and equipment, it executed and delivered to certain parties, D. 0. Mills and Lloyd Tevis, of the city and county of San Francisco, a mortgage upon its road, franchises, rolling stock, and appurtenances, and upon a largo number of tracts of land, situated in different counties, aggregating over 11,000,000 acres, which were the property of the company. The indebtedness amounted to the sum of $32,520,000, and consisted of various bonds of the company. A portion of these bonds, amounting to about $1,632,000, has been paid; and so has the accruing interest on all of them. The balance of the bonds, amounting to about $30,898,000, remains a subsisting indebtedness. This mortgage was soon afterwards placed on record in the office of the recorder of deeds in the several counties of the state in which the property is situated.

The state board of equalization assessed the franchise, roadway, roadbed, rails, and rolling stock of that portion of the road which is designated as its main branch, being 160 84-100 miles in length, at $2,412,600, making $15,000 a mile, and apportioned to tbe county of Santa Clara $889,500. ■ Upon this amount thus assessed and apportioned the taxes were levied for which the action of that county is brought. Another portion of the road, designated as the southern division, was assessed in a similar manner, and the amount apportioned to the different counties through which the road passed. In making the assessment of the different portions no deduction was allowed for the mortgage thereon. No account was taken of the mortgage; it'was not treated as an interest in the property, nor as affecting in any way the liability of the mortgagor for the tax. If a natural person had'executed the, mortgage, it being for an amount exceeding the value of the property, the whole taxable interest would have been treated as in the mortgagees, and they alone would have been assessed and taxed; they alone would have been held amenable to a personal action for the taxes. ,If the mortgagor had paid the taxes to prevent a sale of the property,¹ the amount paid would have been credited on the mortgage. It can hardly require further illustration to show the' discrimination against, railroad companies in the matter of taxation, where property is subject to a mortgage. Not only is the company taxed in such a case for interests it does not possess, but it is not allowed any credit by those who do possess the interests for the amount exacted.

. The same discrimination will appear against railroad companies in the taxation of their property, if we treat mortgages thereon, not as interests in the property which the constitution declares they shall be deemed and treated to be, but as mere liens or incumbrances-thereon. The basis of all ad valorem taxation is necessarily the assessment of the- property; that is, .the estimate of its value. Whatever affects the value necessarily increases or diminishes the tax proportionately. If, therefore, any element which is taken into consideration in the valuation of the property of one party, be omitted in the valuation of the property of another, a discrimination'is made against the one, and in favor of the other, which destroys the uniformity so essential to all just and equal taxation. Such an element -exists where, in the assessment of property subject to a mortgage, the value of the mortgage is deducted if the property be owned by a natural person, and is not deducted if owned by a railroad corporation. And the constitution of the state declares' that, in the ascertainment of values as the basis of taxation, such deduction shall be allowed in the one case and denied in the other.

Instances of every-day occurrence will show the effect of this discrimination in a clear light. A natural person and a railroad company own together a parcel of property in equal proportions, subject to a mortgage. In estimating the value of the undivided half belonging to the natural person, half of the amount of the mortgage is deducted. In estimating the value of the undivided half belonging to the railroad company, no part of the mortgage is deducted. The discrimination is made against the company, for no other reason than its ownership. Take another instance : A natural person and a railroad company own tracts of land adjoining each other, of the same quantity, and of equal fertility and richness, both being subject to a mortgage. In the estimate of the value of the property belonging to the natural person the amount of the mortgage is deducted; in the estimate of the value of the property belonging to the railroad company the mortgage is not deducted. Of course, the valuation of the latter, and consequent tax, is proportionately increased, and this discrimination is made solely because of the ownership of the property. Should these two owners exchange their lands, the valuation made would change with the ownership. Should the railroad company sell its tract to an individual, the assessing officers would at once be bound to return a different.valuation of the property as a basis for taxation. Every one sees that the valuation has not in fact changed with the ownership, and therefore that the discrimination is made solely because a rule is adopted in the assessment of the property of one party different from that applied in the assessment of the property of the other, purely on account of its ownership. A corresponding difference in the tax which the different owners must pay follows the assessment. Thus, if two adjoining tracts are subject to a mortgage, each for half its value, the natural person owning one of them pays a tax on the other half, while the corporation must pay a tax on the whole of its tract; that is, double the tax of the individual. Thus, if each tract be worth $100,000, subject to a mortgage of $50,000, and the rate of taxation be 2 per cent., the tax of the individual will be $1,000; the tax of the corporation will he $2,000. If, then, these owners should exchange their lands, the property which this year is thus taxed at $1,000 will next year he taxed at double the amount, and the other tract this year taxed at $2,000 will next year bo taxed at one-half that sum. The property which Is now half exempt will then bo subject to taxation to its full value, and that which is now taxable at its full value will then be half exempt; and all this change in valuation without any change in the character or use of the property, but solely on account of the change in its ownership.

The principle which sanctions the elimination of one element in assessing the value of property held by one party, and takes it into consideration in assessing the value of property held by another party, would sanction the assessment of the property of one at less than its value,— at a half or a quarter of it, — and the property of another at more than its value, — at double or treble of it, — according to the will or caprice of the state. To-day railroad companies are under its ban, and the discrimination is against their property. To-morrow it may he that other institutions will incur its displeasure. If the property of railroad companies may be thus sought out and subjected to discriminating taxation, so, at the will of the state, by a change of its constitution, may the q>roperty of churches, of universities, of asylums, of savings banks, of insurance companies, of rolling and flouring mill companies, of mining companies, indeed, of any corporate companies existing in the state. The principle which justifies such a discrimination in assessment and taxation, where one of the owners is a railroad corporation and the other a natural person, would also sustain it where both owners are natural persons. A mere change in the state constitution would effect this if the federal constitution does not forbid it. Any difference between the owners, whether of age, color, race, or sex, which the state might designate, would be a sufficient reason for the discrimination. It would be a singular comment upon the weakness and character of our republican institutions if the valuation and consequent taxation of property could vary according as.the owner is white, or black, or yellow, or old, or young, or male, or female. A classification of values for taxation upon any such ground would be abhorrent to.all notions of equality of right among men. Strangely, indeed, would the law sound in case it read that in the assessment and taxation of property a deduction should be made for mortgages thereon if the property be owned by white men or by old men, and not deducted if owned by black men or by young men; deducted if owned by landsmen, not deducted if owned by sailors; deducted if owned by married men, not deducted if owned by bachelors; deducted if owned by men doing business alone, not deducted .if owned by men doing business in partnerships or other associations; deducted if owned by trading corporations, not deducted if owned.by churches or universities; and so on, making a discrimination whenever there was any difference in the character or pursuit or condition of the owner. To levy taxes upon a valuation of property thus made is of the very essence of tyranny, and has never been done except by bad governments in' evil times, exercising arbitrary and des■potic power.

Until the adoption of the fourteenth amendment there was no restraint to be found in the constitution of the United States against the exercise of such power by the states. In many particulars the states were previously limited; their sovereignty was a restricted one. They could not declare war, nor make treaties of peace. They could not enter into compacts with each other. They could not pass a bill ■of attainder, nor an ex post facto law, nor a law impairing the obligation of contracts. They could not interfere with the exercise of the powers, nor obstruct the laws of the federal government. But in many other particulars the power of the states was supreme, subject to no control by the constitution.of the United States. The original amendments were only limitations upon the federal government, and did not affect the states. Among the powers still held by the states was the power of taxation. When not interfering with any power or purpose or agent of the federal government, there was no limitation upon.its.exercise. .Except as restrained by their own constitutions-, tlie states might impose taxes upon any property within their jurisdiction; and, as said in the Delaware Tax Case, 18 Wall. 231, the manner in which its value was assessed, and the rate of taxation, however arbitrary or capricious, wore mere matters of legislative discretion; and it was not for the court to suggest, in any case, that a more equitable mode of assessment or rate of taxation might be adopted than the one prescribed by the legislature of the state.

The first section of the fourteenth amendment places a limit upon all the powers of the state, including, among others, that of taxation. After stating that all persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the state in which they reside, it declares that “no state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States, nor shall any state deprive any person (dropping the designation ‘citizen’) of life, liberty, or property, without due process of law, nor deny to any person within its jurisdiction the equal protection of the laws.” The amendment was adopted soon after the close of the civil war, and undoubtedly had its origin in a purpose to secure the newly-made citizens in the full enjoyment of their freedom. But it is n no respect limited in its operation to them. It is universal in its application, extending its protective force over all men, of every race and color, within the jurisdiction of the states throughout the broad domain of the republic. A constitutional provision is not to be restricted in its application because designed originally to prevent an existing wrong. Buch a restricted interpretation was urged in the Dartmouth College Case, to prevent the application of the provision prohibiting legislation by states impairing the obligation of contracts to tlio charter of the college, it being contended that the charter was not such a contract as the'prohibition contemplated. Chief Justice Marshall, however, after observing that it was more than possible that the preservation of rights of that description was not particularly in view of the framers of the constitution when that clause was introduced, said:

“It is not enough to say that this particular case was not in the mind of the convention when the article was framed, nor of the American people when it was adopted. It is necessary to go further and to say that, had this particular case been suggested, the languago would have been so varied as to exclude it, or it would have been made a special exception. The case being within the words of the rule, must he within its operation likewise, unless there be something in the literal construction so obviously absurd or mischievous, or repugnant to the general spirit of the instrument, as to justify those who expound the constitution in making it an exception.” 4 Wheat. 611.

All history shows that a particular grievance suffered by an individual or a class, from a defective or oppressive law, or the absence of any law, touching the matter, is often the occasion and cause for enactments, constitutional or legislative, general in their character, designed to cover eases not merely of the same, but all cases of a similar, nature. The wrongs which were supposed to be inflicted upon or threatened to citizens of the enfranchised race, by special legislation directed against them, moved the framers of the amendment to place in the fundamental law of the nation provisions not merely for the security of those citizens, but to insure to all men, at all times, and at all places, due process of law, and the equal protection of the laws^ Oppression of the person and spoliation of property by any state were thus forbidden, and equality before the law was secured to all. In the argument of the San Mateo Case in the supreme court, Mr. Edmunds, who was a member of the senate when the amendment was discussed and adopted by that body, speaking of its broad and catholic spirit, said: “There is no word in it that did not undergo the completest scrutiny. There is no word in it that was not scanned, and intended to mean the full and beneficial thing that it seems to mean. There was no discussion omitted; there was no conceivable posture of affairs to the people who had it in hand” which was not considered. And the purpose of this long and anxious consideration was that protection against injustice and oppression should be made forever secure — to use his language — “secure, not according to the passion of 'Vermont, or of Ehode Island, or of California, depending upon their local tribunals for its efficient exercise, but secure as the right of a Roman was secure, in every province and in every place, and secure by the judicial power, the legislative power, and the executive power of the whole body of the states and the whole body of the people.”

With the adoption of the amendment the power of the states to oppress any one under any pretense or in any form was forever ended; and henceforth all persons within their jurisdiction could claim equal protection under the laws. And by equal protection is meant equal security to every one in his private rights — in his right to life, to liberty, to property, and to the pursuit of happiness. It implies not only that the means which the laws afford for such security shall be equally accessible to him, but that no one shall be subject to any greater burdens or charges than such as are imposed upon all others under like circumstances. This protection attends every one everywhere, whatever be his position in society or his association with others, either for profit, improvement, or pleasure. It does not leave him because of any social or official position which he may hold, nor because he may belong to a political body, or to a religious society, or be a member of a commercial, manufacturing, or transportation company. It is the shield which the arm of our blessed government holds at all times over every one, man, woman, and child, in all its broad domain, wherever they may go and in whatever relations they may be placed. No state — such is the sovereign command of the whole people of the United States — no state shall touch the life, the liberty, or the property of any person, however humble his lot or exalted his station, without due process of law ; and no state, even with due process of law, shall deny to any one within its jurisdiction the equal protection of the laws.

Unequal taxation, so far as it can be prevented, is, therefore, with other unequal burdens, prohibited by the amendment. There undoubtedly are, and always will be, more or less inequalities hi the operation of all general legislation arising from the different conditions of persons from their means, business, or position in life, against which no foresight can guard. But this is a very different thing, both in purpose and effect, from a carefully devised scheme to produce such inequality; or a scheme, if not so devised, necessarily producing that result. Absolute equality may not be attainable, but gross and designed departures from it will necessarily bring the legislation authorizing it within the prohibition. The amendment is aimed agains.t the perpetration of injustice, and the exercise of arbitrary power to that end. The position that unequal taxation is not within the scope of its prohibitory clause would give to it a singular meaning. It is a .matter of history that unequal and discriminating taxation, leveled against special classes, has been the fruitful means of oppressions, and the cause of more commotions and disturbance in society, of insurrections and revolutions, than any other cause in the world. It would, indeed, as counsel in the San Mateo Case ironically observed, be a charming spectacle to present to the civilized world, if the amendment were to read, as contended it does in law: “Nor shall any state deprive any person of his property without due process of law, except it be in, the form of taxation; nor deny to any person within its jurisdiction the equal protection of the law's, except it be by taxation.” No such limitation can be thus in-grafted by implication upon the broad and comprehensive language used. The pow'er of oppression by taxation without due process of law is not thus permitted; nor the pow'er by taxation to deprive any person of the equal protection of the laws.

Soon after the adoption of the amendment, congress recognized by its legislation the application of the prohibition to unequal taxation. The original civil rights act, previously passed, made persons of the emancipated race citizens, and declared that all citizens of the United States, of every race or color, should have the same rights in every state and territory to make and enforce contracts; to sue, be parties, and give evidence; to inherit, purchase, lease, sell, own, and convey real and personal property; and to the benefit of all laws and proceedings for the security of persons and property, — as was enjoyed by white citizens, and should be subject to like punishments, pains, and penalties, and to none other. After the adoption of the amendment the act was re-enacted, and to the clause that all persons should enjoy the same rights as white citizens, and be subject to like punishments, pains, and penalties, it added: and subject scly to like “taxes, licenses, and exactions of every land, and to no other.si The congress which re-enactod the civil rights act with this addition was largely composed of those who had voted for the amendment; and it is well known that oppressions by unequal taxation were the subject of consideration before the committee of the two houses under whose direction- the amendment was proposed. But were this otherwise,- and were the wrong of such unequal taxation not prominently iñ the minds of the framers, it being within the language, it must be held to be within the operation of the prohibition. As truly and eloquently said by Mr.- Conkling in the argument of the San Mateo Case :

“If it be true that new needs have come; if it be true that wrongs have arisen, or shall arise, which the framers in their forebodings never saw,— wtongs: which shall be righted by the words they established, — then all the more will those words be sanctified and consecrated to humanity and progress.”

The fact to which counsel allude, that certain property is often exempted from taxation by the states, does not at all militate against this view of the operation of the fourteenth amendment in forbidding the imposition of unequal burdens. Undoubtedly, since the adoption of that amendment, the power of exemption is much more restricted than formerly; but that it may be extended to property used for objects of a public nature is not questioned,- — that is, where the property is used for the promotion of the public well-being and not for any private end." Thus property used for public instruction, for schools, colleges, and universities, which are open to all applicants on similar conditions, may properly be exempted. The public benefit is the equivalent to the state for the tax which would otherwise be exa'cted; If buildings, used as churches for public worship, are also sometimes exempted, it must be because, apart from religious considerations, churches are regarded as institutions established to inculcate principles of sound morality, leading citizens to a more ready obedience to the laws. Whatever the exemption, it can only be sustained for the public service or benefit received. The equality of protection which the fourteenth amendment declares that no state shall deny to any one, is not thus invaded. That amendment requires that exactions upon property for the public shall be levied according to some common ratio to its value, so that each owner may contribute only his just proportion to the general fund. When such exaction is ’ made without reference to a common ratio, it is not a t^x, whatever else it may be termed; it is rather a forced contribution, amounting, in fact, to simple confiscation. As justly said by the supreme court of Kentucky, in the celebrated case of Lexington v. McQuillan’s Heirs, whenever the property of a citizen is taken from him by the sovereign will and appropriated without his consent to the benefit of the public, the exaction should not be considered as a tax unless similar¹ contributions be exacted -by the same public will from such members of the same community as own the same kind of property; and- although there may be a discrimination in the subjects of taxation, still-'persons of the same class and property of the same kind must generally be subjected alike to the same common burden. 9 Dana, (Ky.) 513.

The cases of People v. Weaver, 100 U. S. 539, and of Evansville Bank v. Britton, 105 U. S. 322, will illustrate the character of the discrimination of which the defendants complain. By an act of congress passed in 1864, and re-enacted in the Revised Statutes, the shares in national banks are allowed to be included in the valuation of the personal property of the owner in the assessment of taxes imposed by authority of the state in which the banks are located, subject to two restrictions: that the taxation shall not be at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of the state, and that the shares owned by nonresidents of the state shall be taxed at the place where the bank is located. Bev. St. § 5219. In People v. Weaver, 100 U. S. 539, the meaning of these restrictions upon the state was considered by the supreme court, and it was held:

(1) That the restriction against discrimination has reference to the entire process of assessment, and includes tlie valuation of the shares, as well as the rate of percentage charged thereon; (2) that a statute of .New York, which established a mode of assessment by which such shares were valued higher in proportion to their real value than other moneyed capital, was in conflict with the restriction, although no greater percentage was levied on such valuation than on other moneyed capital; and (3) that a statute which permitted a party to deduct his just debts from the valuation of his personal property, except so much as consisted of those shares, taxed them at a greater rate than other moneyed capital, and was, therefore, void as to them.

Tlie discrimination there condemned, by which an increased value was given to the shares of the national banks beyond what was given to other moneyed capital, is a discrimination similar to that made by the elimination of mortgages in estimating the Value of railroad property in the cases before us. In Evansville Bank v. Britton the doctrine of this case is approved, and it was held that tlie taxation of shares in the national banks, under a statute of Indiana, without permitting the owner to deduct from their assessed value the amount of his bona fide indebtedness, as he was permitted to do in tlie case of other investments of moneyed capital, was a discrimination forbidden by the act of congress.

That the proceeding by which the taxes claimed in these several actions were levied against the railroad companies on taxable interests with which they had parted was not due process of law, seems to me so obviously true as to require no further illustration. Any additional argument would rather tend to obscure a truth which should be evident upon its simple statement; and if we assume that the mortgage in each case was a mere lien or incumbrance on the property affected, and not an interest in it, as the constitution declares it is, then also is it clear that its elimination as an element in the valuation of the property of the defendants for taxation, while it was considered in the valuation of the property of natural - persons, was a discrimination against the former, and led to unequal taxation against them. In neither view, therefore, was the assessment valid, and the taxation levied upon it cannot be sustained.

To justify these discriminating provisions, and maintain the action in face of them, the plaintiffs have taken positions involving doctrines which sound strangely to those who have always supposed that the constitutional guaranties extend to all persons, whatever their relations, and protect from spoliation all property, by whomsoever held. These positions are substantially as follows: That persons cease to be within the protection of the fourteenth amendment, and as such entitled to the equal protection of the laws, when they become members of a corporation; that property, when held by persons associated together in a corporation, is subject to any disposition which the state may, at. its will, see fit to make; that, in any view, the property upon which the taxes claimed were levied was classified by its use, taken out of its general character as real and personal property, and thus lawfully subjected to special taxation; and that the power of the state cannot be questioned by the Southern Pacific Railroad Company by reason of the covenant in its mortgage. These positions are not advanced by counsel in this language, nor with the baldness here given; but they mean exactly what is here stated, or they mean nothing, as will clearly appear when we analyze the language in which they are presented.

Private corporations — and under this head, with the exception of sole corporations, with which we are not now dealing, all corporations other than those which are public are included — private corporations consist of an association of individuals united for some lawful purpose, and permitted to use a common name in their business and have succession of membership without dissolution. As said by Chief Justice Marshall: “The great object of an incorporation is to bestow the character and properties of individuality on a collective and changing body of men.” Providence Bank v. Billings, 4 Pet. 514, 562. In this state they are formed under general laws. By complying with certain prescribed forms any five persons may thus associate themselves. In that sense corporations are creatures of the state; they could not exist independently of the law, and the law may, of course, prescribe any conditions, not prohibited by the constitution of the United States, upon which they may be formed and continued. But°the member's do not, because of such association, lose their rights to protection, and equality of protection. They continue, notwithstanding, to possess the same right to life and liberty as before, and also to their property, except as they may have stipulated otherwise. As members of the association — of the artificial body, the intangible thing, called by a name given by themselves — their interests, it is true, are undivided, and constitute only a right during the continuance of the corporation to participate in its dividends, and, on its dissoiution, to a proportionate share of its assets; but it is property, nevertheless, and the courts will protect it, as they will any other property, from injury or spoliation.

Whatever affects the property of the corporation — that is, of all the members united by the common name — necessarily affects their interests. If all the members of the corporation die or withdraw from the association, the corporation is dead; it lives and can live only through its members. When they disappear the corporation disappears. Whatever confiscates or imposes burdens on its property, confiscates or imposes burdens on their property, otherwise nobody would bo injured by the proceeding. Whatever advances the prosperity or wealth of the corporation, advances proportionately the prosperity and business of the corporators, otherwise no one would be benefited. It is impossible to conceive of a corporation suffering an injury or reaping a benefit except through its members. The legal entity, the metaphysical being, that is called a corporation, cannot feel either. So, therefore, whenever a provision of the constitution or of a law guaranties to persons protection in their property, or affords to them the means for its protection, or prohibits injurious legislation affecting it, the benefits of the provision or law are extended to corporations; not to the name under which different persons are united, but to the individuals composing the union. The courts will always look through the name to see and protect those whom the name represents. Thus, inasmuch as the constitution extended the judicial power of the United States to controversies between citizens of a state and aliens and between citizens of different states, because its framers apprehended that state tribunals in such controversies might bo swayed by local feelings, prejudices, or attachments, Chief Justice Marshall, speaking for the whole supreme court, held that corporations were within the provision. “Aliens, or citizens of different states,” said that great judge, “are not loss susceptible of these apprehensions, nor can they be supposed to be less the objects of constitutional provision, because they are allowed to sue by a corporate name. That name, indeed, cannot be an alien or a citizen, but the persons whom it represents may be the one or the other, and the controversy is in fact and in law between these persons suing in their corporate character, by their corporate name, for a corporate right, and the individual against whom the suit may be instituted. Substantially and essentially the parties in such a case, where the members of the corporation are aliens, or citizens of a different state from the opposite party, come within the spirit and terms of the jurisdiction conferred by the constitution on the national tribunals. Such fias been the universal understanding on the subject.” Bank of U. S. v. Deveaux, 5 Cranch, 61, 87.

Similar was the construction given by that court to a clause in the treaty of peace of 1783 between the United States and Groat Britain. The sixth article provided that there should be “no future confiscation made, nor any prosecutions commenced, against any person or persons for or by reason of the part which he or they may have taken in the present war, and that no person shall on that account suffer any future loss or damage, either in his person, liberty, or property.” The state of Vermont undertook to confiscate the property of an English corporation and give it away. The corporation claimed the benefit of the article and recovered the property, against the objection that the treaty applied only to natural persons, and could not embrace corporations, because they were not persons who could have taken part in the war, or be considered British subjects. Much stronger is that case than the one now before us; but the supreme court looked with undimmed vision through the legal entity, the artificial creation of the state, and saw the living human beings whom it represented, and protected them under their corporate name. Society for the Propagation of the Gospel in Foreign Parts v. Town of New Haven, 8 Wheat. 464.

The fifth amendment to the constitution declares that no person shall “be deprived of life, liberty, or property without due process of law.” This is a limitation upon the federal government similar to that which exists in the constitution of several of the states against their own legislative bodies; and the term “person” thus used has always been held, either by tacit assent or express adjudication, whenever the question has arisen, to extend, so far as property is Concerned, to corporations, because to protect them from spoliation is to protect the corporators also.

Now, the fourteenth amendment extends in this respect the same prohibition to the states that the fifth amendment did to the federal government: “Nor shall any state deprive any person of life¹, liberty, or property without due process of law;” and it adds to the inhibition, “nor deny to any person within its jurisdiction the equal protection of the laws.” By every canon of construction known to the jurisprudence of the country, the same meaning must be given to the term “person” in the latter provision as in the former. Surely these great constitutional provisions, which have been, not inaptly, termed a new Magna Charta, cannot be made to read as counsel contend, “nor shall any state deprive any person of life, liberty, or property without due process of law, unless he he associated with others in a corporation, nor deny to any person within its jurisdiction the equal protection of the laws, unless he he a member of a corporation.” How petty and narrow would provisions thus limited appear in the fundamental law of a great people !

The constitutional guaranties of due process of law, and of equality before the law, would be dwarfed into comparative insignificance, and almost emasculated of their protective force, if restricted in their meaning and operation, 'as contended by counsel. A large proportion of our people are members of some corporation, — religious, educational, scientific, trading, manufacturing, 'or commercial, — and the amount of property held by thorn embraces the greater part of tbe wealth of the country. According to the report of the commissioner of railroads, made to the secretary of the interior, for the year ending June 30, 1882, the railroad companies operated that year 104,813 miles of railway, and transported 350,000,000 tons of freight, of the estimated value of §12,000,000,000. The value of these roads alone was §2,600,000,000, and they employed that year 1,200,000 persons in operating the roads, besides 400,000 in construction, — a total of 1,600,000 persons, — about one thirty-third part of our population, estimated at 53,000,00o.¹

The value of the property of manufacturing companies is over §1,000,000,000; of national banks, over $700,000,000; of insurance companies, over $600,000,000; of mining companies, over $300, 000,000; and of telograph companies and shipping companies, each over $100,000,000. Indeed, the aggregate wealth of all the trading, commercial, manufacturing, mining, shipping, transportation, and other companies engaged in business, or formed for religious, educational, or scientific purposes, amounts to billions upon billions of dollars ; and yet all this vast property which keeps our industries flourishing, and furnishes employment, comforts, and luxuries to all classes, and thus promotes civilization and progress, is lifted, according to the argument of counsel, out of the protection of the constitutional guaranties, by reason of the incorporation of the companies; that is, because the persons composing them — amounting in the aggregate to nearly half the entire population of the country — have united themselves in that form under the law for the convenience of business. If the property for that reason is exempted from the protection of one constitutional guaranty, it must he from all such guaranties. If, because of it, the property can be subjected to unequal and arbitrary impositions, it may for tbo same reason be taken from its owners without due process of law, and taken by the state for public use without just compensation. If the position be sound, it follows that corporations hold all their property, and the right to its use and enjoyment, at the will of the state; that it may be invaded, seized, and the companies despoiled at tlm state’s pleasure. It need hardly he said that there v/ould bo little security In the possession of property lield by such a tenure, and of course little incentive to its acquisition and improvement. ■ -

But in truth the state possesses no such arbitrary power over the property of corporations. When allowed to acquire and own property, they must be treated as owners, with all the rights incident to ownership. They have a constitutional right to be so treated. Whatever power the state may possess in granting or in amending their charters, it cannot withdraw their property from the guaranties of the federal constitution. As was said in the San Mateo Case: “It cannot impose tbe condition that they shall not resort to the courts of law for the redress of injuries or the protection of their property; that they shall make no complaint if their goods are plundered and their premises invaded; that they shall ask no indemnity if their lands be seized for public use or be taken without due process of law; or that they shall submit without objection to unequal and oppressive burdens arbitrarily imposed upon them; that, in other words, over them and their property the state may exercise unlimited and irresponsible power. Whatever the state may do, even with the creations of its own will, it must do in subordination to the inhibitions of the-federal constitution.”

The doctrine of unlimited power of the state over corporations, their franchises and property, simply because they are created by the state, so frequently and positively affirmed by counsel, has no foundation whatever in the law of the country. By the decision of the supreme court of the United States in the Dartmouth College Case, it was settled, after great consideration, that the charter of a corporation, under which its franchise — its capacity to do business and hold property — is conferred^ is a contract between the corporators and the state, and therefore within the protection of the federal constitution prohibiting legislation impairing the obligation of contracts. So far from the state having unlimited control over the franchises and property of corporations, because of its paternity to them, it has under that decision only such as it possesses over the contracts and property of individuals. It cannot, from that fact alone, alter, lessen, or revoke their franchises, although they be a free gift. It cannot, from that fact alone, interfere with or impose any burdens upon their property, except as it can interfere with and impose burdens upon the property of individuals.

Such is the doctrine not only of the Dartmouth College Case, but of an unbroken line of decisions of the supreme court of the United States, and of the supreme courts of the several states since that case. To avoid that limitation upon their power, most of the states, in charters since granted, have reserved a right to repeal, amend, or alter them, or have inserted in their constitutions clauses reserving a right to their legislatures to repeal, alter, or amend the charters, or to repeal, alter, or amend general laws under which corporations are permitted to be formed. This reservation, in whatever form expressed, applies only to the contract of incorporation, without which it would be beyond revocation or change by the state. It removes any impediment which would otherwise exist to legislation affecting that contract. It leaves the corporation in the same position it would have occupied had the supreme court held in the Dartmouth College Case that charters are not contracts, and that laws repealing or modifying them do not impair the obligation of contracts. It accomplishes nothing more; therefore, the legislation authorized by it must relate to the contract embodied in the charter, amending, altering, or abrogating its provisions. Legislation touching any other subject is not affected by it — neither .authorized nor forbidden. Its whole scope and purpose is to enable the state to pass laws with respect to the charter, — the contract of incorporation, — which would otherwise be in conflict with the prohibition of the federal constitution. Legislation dealing with the corporation in any other particular must, therefore, depend for its validity upon the same conditions which determine the validity of like legislation affecting natural persons.

The state may, of course, accompany its grant with such conditions as it may deem proper for the management of the affairs of the corporation which do not impinge upon any provision of the federal constitution; and by the reservation clause it will retain control over the grant, and may withdraw it or modify it at pleasure. It is on this ground that the state has asserted a right to regulate the charges —the fares and freights — of corporations. But it is a novel doctrine that it can on that ground also control their property, appropriate it, burden it, and despoil them of it,- as it may choose, unrestrained by any constitutional inhibitions. That doctrine has no standing as yet in the law of this country. The property acquired by corporations is held independently of any reserved power in their charters. By force of the reservation the state may alter, amend, or revoke what it grants; nothing more. It does not grant the tangible and visible property of the companies, their roads, their roadways, road-beds, rails, or rolling stock. These are their creation or acquisition. Over them it can exercise only such power as may be exercised through its control of the franchises of the companies, and such as may be exercised over the property of natural persons engaged in similar business.

As justly said by the supreme court of Michigan, speaking by Mr. Justice Cooley:

“It cannot be necessary at this day to enter upon a discussion in denial of the right of the government to take from either individuals or corporations any property which they may rightfully have acquired. In the most arbitrary times such an act was recognized as pure tyranny, and it has been forbidden in England ever since Magna Charla, and in this country always. It is immaterial in what way the property was lawfully acquired, — whether by labor in the ordinary vocations of life, by gift or descent, or by making profitable use of a franchise granted by the state; it is enough that it has become private property, and it is then protected by the law of the land.” Detroit v. Detroit & Howell Plank-road Co. 43 Mich. 146-7; [S. C. 5 N. W. Rep. 275.]

But it is urged that, even with an admission of these positions, property may be divided into classes and subjected to different rates; that such classification maybe made from inherent differences in the nature of different parcels of property, and also from the different uses to which the same property may be applied; and it is sought to place the tax levied in these cases under one of these heads. As already mentioned, the constitution of the state provides with respect to property that it shall be taxed in proportion to its value; it provides for no specific fax upon any article. The classification of property, either from its distinctive character or its peculiar use, must be made within the rule prescribing taxation according to value. Real and personal property, differing essentially in their nature, may undoubtedly be subjected to different rates; real property may be taxed at one rate, personal property at another. But in both cases the tax must bear a definite proportion to the value of the property. So, also, if use be the ground of classification, for which a. different rate of 'taxation is prescribed, the rate must still bear a definite proportion to the value. Now, there is no difference in the rate of taxation prescribed by the law of the state for the property of railroad corporations and that prescribed for the property of individuals. There is only one rate prescribed for all property. There is, therefore, as said in the San Mateo Suit, no case presented for the application of the doctrine of classification, either from the peculiar character of railroad property or its use.

The ground of complaint is not that any different rate of taxation is adopted, — for there is none, — but that a different rule is followed in ascertaining the value of the property of railroad corporations, as ■a basis for taxation, from that followed in ascertaining the value of property held by natural persons. In estimating the value in one case, certain elements are considered, by which the value as a basis for taxation is lessened; in estimating the value in another ease, those elements are omitted, by which the valuation is proportionately increased. .All property of railroad corporations, whether used in connection with the operation of their roads or entirely distinct from any such use, is estimated without regard to any mortgages thereon, while the property of natural persons is valued with a deduction of such mortgages.

, Of the property of the railroad company, — the Southern Pacific,— several million acres .of farming lands are included in the same mortgage which covers the roadway, roadrbed, rails, and rolling stock of the company. No distinction is made in the assessment of the value of any of this property because of the use of it. The whole is assessed in the same manner without regard to the mortgage thereon ; and the taxes on the whole of it thus assessed, with the exception of the taxes on the road-bed, roadway, rails, and rolling stock, have been paid by the companies or parties to whom, since the levy, certain parcels have been sold. The discrimination between the railroad companies and individual proprietors, in the estimate of the value of their property, is made because of its ownership, and not from any specific differences in the character of the property, or in the specific uses to which it is applied.

The farming lands held by the company are not different in character from adjoining farming lands held by natural persons, yet they are assessed, under the system established by the constitution of the state, upon different principles. The road-bed, roadway, rails, .and rolling stock oi the railroad companies are not different in their nature or use from the road-bed, roadway, rails, and rolling stock owned in many cases by natural persons, yet they are subject to a different rule of assessment. It is not classifying property to make a distinction of that character in estimating its value as a basis for taxation. It is making the amount of taxation depend, not upon the nature of the property or its use, but upon its ownership. And if this can be done, there is no protection against unequal and oppressive taxation. As justly observed by Mr. Edmunds in the San Mateo Case :

“If you once concede the point that you may classify different rates upon the vaiues of things, or may put up your values on different principles, as values by deduction or otherwise, — -which is the same thing stated in another way, — then there is no check upon the exercise of arbitrary power. The mob or commune that can get possession of the state legislature for one term may despoil every one of the citizens whom it chooses to despoil, and the liberty and the security of the constitution of the United States, secured through painful exertion and great consideration, crystallized in unmistakable language, — historic, indeed, and benefloient as it is historic, securing national intrinsic rights everywhere and to everybody. — -will turn out to be an utter sham and delusion ”

If, to the position of counsel that property may be classified simply because owned by a corporation, and thus differently assessed, we add the further position that the owner of the property assessed has no constitutional right to have notice of the assessment, or to be heard respecting it, though it he double or treble the value of the property, — though the property be assessed at thousands, when worth only hundreds, — we have a system established with a power of oppression under which no free man should ever be contented to live.

In the argument of counsel, the distinction between taxes for licenses and franchises, and taxation upon values, seems to have been overlooked, and because no notice is required in the former case, and no opportunity given to be heard, therefore it is contended that the rule is not sound; that notice is necessary, and an opportunity of being heard in the latter case where an assessment is made upon property and values are found upon evidence; yet the distinction is plain and everywhere recognized. A license tax paid by an insurance company of another state, in order to exercise its corporate powers in this state, is the consideration given for a privilege which the company may or may not take; if taken, the fee must be paid. Of coarse, no notice there is necessary. If a person wishes a license to do business at a particular place, or of a particular kind, such as selling liquor, cigars, clothes, or keeping a restaurant or hotel in a city, he is only to pay what the law requires and go into the business. Notice in such cases would be of no service to him, and no hearing could change the result. And the state may exact the payment of a particular sum — such as it deems proper — as a condition of the grant of corporate powers, or for their continuance, and may reserve the right to alter this condition as it may choose; or rather, the state might have exercised such power and made such exaction had she not by her constitution declared that franchises should be assessed and taxed as property, according to their value. But for this provision no notice could be required of the amount demanded for the' privilege granted, nor opportunity of bemg heard respecting it; for notice or hearing could be of no service to the company. Here we are not considering the compensation to be paid for franchises or privileges of any kind, whether designated as taxes or license fees, but of taxation upon values. Where these are to be ascertained, and evidence is to be taken for that purpose, and a determination is to be made which is judicial in its character, there the owner must, in some form — in some tribunal — have an opportunity afforded him to be heard respecting the proceeding under which his property may be taken before such proceeding becomes final and the valuation is irrevocably fixed. And in such cases there can be no valid deprivation of his property without it.

The notice to which we refer need not be a personal citation; it is sufficient if it be given by a law designating the time and' place where parties may contest the justice of the valuation. As a general rule only a statutory notice is given. The state may designate the kind of notice and the manner in which it shall be given. All that we assert, or have asserted, is that there must be a notice of some kind which will call the attention of the parties to the subject, and inform them when and where they will be permitted to expose any alleged wrong in the valuation of which they may complain.

It was with reference to the class of cases where values are to be found upon evidence, that we said in the San Mateo Suit that notice and opportunity to be heard were essential to the validity of the assessment, and without which the proceeding by which the tax-payer’s property was taken from him would not be due process of law. We have heard nothing in the argument of the present cases or in the criticism of the authorities which in the slightest degree affects the accuracy of the statement. In Stuart v. Palmer, 74 N. Y. 191, the court of appeals of New York, in an elaborate opinion, speaking by Mr. Justice Earl, said:

“It is difficult to define with precision the exact meaning and scope of the phrase ‘due process of lawr.’ Any definition which could be given would probably fail to comprehend all the cases to which it would apply. It is probably better, as recently stated by Mr. Justice Miller, of the United States supreme court, ‘to leave the meaning to.be evolved by the gradual process of judicial inclusion and exclusion, as the cases presented for decision shall require, with the reasoning on which such decisions may be founded.’ Davidson v. New Orleans, 96 U. S. 104. It may, however, be stated generally that due process of law requires an orderly proceeding, adapted to the nature of the case, in which the citizen has an opportunity to be heard, and to defend, énforce, and protect his rights. A hearing, or an opportunity to be heard, is absolutely essential. We cannot conceive of due process of law without this.”

And again:

l'‘ It has always been the general rule in this country, in every system of assessment and taxation, to give the person to be assessed an opportunity to be heard at some stage of the proceedings. That due process of law requires this, has been quite uniformly recognized.”

Numerous other authorities might be cited to the same purport, and the language of Judge Cooley in his treatise on Taxation, which exhibits a thoughtful consideration of the subject, and a careful examination of the adjudged cases, expresses the established law. Speaking of tax cases he says:

“ We should say that notice of proceedings in such eases, and an opportunity for a hearing of some description, were matters of constitutional right. It has been customary to provide for them as a part of what is ‘due process of law ’ for these cases, and it is not to be assumed that constitutional provisions, carefully framed for the protection of property, were intended or could be construed to sanction'legislation under which officers might secretly assess one for any amount in their discretion, without giving him an opportunity to contest the justice of the assessment. It has often been very pointedly and emphatically declared that it is contrary to the first principles of justice that one should he condemned unheard; and it has also been justly observed of taxing officers that ‘it would be a dangerous precedent to hold that any absolute power resides in them to tax as they may choose, without giving any notice to the owner. It is a power liable to great abuse;’ and it might safely have been added, it is a powrer that, under such circumstances, would be certain to he abused. ‘ The general principles of law applicable to such tribunals oppose the exercise of any such power.’ ” Cooley, Tax’n, 266.

The suggestion of counsel that there is a difference in the law as to notice and opportunity of being heard, where an assessment is made for local purposes, and where it is made under a statute providing revenue for the state, is without foundation. Taxation for local improvements, or for city, county, or town purposes, involves the exercise of the same power which is exerted in taxation for state or general purposes. It is the sovereign powmr of the state in both cases which authorizes the tax, whether that power be exerted directly by an act of the legislature, or by a municipal body as an instrumentality of the state. “That these assessments,” says Cooley, speaking of such as are special, “are an exercise of the taxing power, has over and over again been affirmed, until the controversy may be regarded as closed.” And tbis statement is supported in a note to his treatise, by a reference to numerous adjudged cases, (page 430.)

The object both of taxation for general purposes and of assessments for local purposes is to raise money. In both cases property is valued and a certain proportion of tbe valuation taken for the designated purpose. Whether that purpose be general or local it in no respect changes the essential character of the proceeding. The-property from which the exaction is to be made is less extensive in the one case than in the other. But in both there must be evidence of its value, and a judicial determination respecting it. And the fact that in cases of local improvements there is sometimes a consideration also of the benefits to be received, takes nothing from the judicial character of the proceeding.

The clause of the constitution which forbids deprivation of property without due process of law, places liberty under the same guaranty, and no one can be deprived of either, — property or liberty, — under the name of taxation, any more than under any other name, by officers of the state, without some notice of their proceedings, -and a right to be heard respecting their determination before it is executed.

The covenant in the mortgage of the Southern Pacific Railroad Company cannot affect one way or the other the right of the plaintiff to recover against that company. The power of the state is not enlarged nor diminished by it. It is not made with the state and could not be enforced by it. So far as the power or action of the state is concerned, it cannot possibly have any influence. It is a matter which concerns only the parties. They can by arrangement vary it any day; they may enlarge it, qualify it, or release it, whenever they choose. It would be strange indeed if the state’s power of taxation depended in any way upon the stipulation of third parties, or the validity of a tax could be affected by it. The covenant reads as follows:

“And the said party of the first part hereby agrees and covenants to and with the said parties of the second part, and their successors in said trust, that it will pay all ordinary and extraordinary taxes, assessments, and other public burdens and charges which shall or maybe imposed upon the property herein described and hereby mortgaged, and every part thereof.”

Then follows a provision that the mortgagees or. any bondholder may, in ease of default by the mortgagor, pay and discharge the taxes and any lien or incumbrance upon the property prior to the mortgage, and that for such payments the party making them shall be allowed interest and be secured by the mortgage.

The covenant is necessarily limited to such taxes as may be lawfully levied on the mortgaged property, such as the mortgagor is personally bound to the state to pay, and to such other liens as may arise from Ijis previous contract with respect to the property. The mortgagor could not be required to pay any other taxes or discharge any other liens; and should the mortgagees pay or discharge any other, they could neither hold the mortgage as security for the amount, nor the mortgagor liable. The covenant cannot be construed to extend to any taxes levied in disregard of the constitution or laws, nor to such liens as may arise from a tax on other than the mortgaged property, nor from any act of the mortgagees, nor any judgment against them. Should a judgment, for instance, against them become a lien upon all their interests in real property, and among others on that conferred by the mortgage, it would not be embraced by the covenant. That does not cover taxes levied or leviable on the-mortgage, nor on the bonds secured; they are not within its terms, and the state cannot enlarge its meaning.

At the time the mortgage was given there had been conflicting decisions of the supreme court of the state as to the liability of mortgages to taxation. It must be supposed that the parties were well acquainted with these rulings, and though the last decision then rendered was against their taxation, it was the subject of popular comment and discontent, and counsel inform us was one of the most potent causes which led to the calling of a convention to change the constitution. If the parties, therefore, had intended to enter into a covenant that should bind the mortgagor to pay any taxes which might thereafter be levied on the mortgage, it would have been the natural and easy way to say so. Not having said so, we cannot impute to the language used anything beyond its plain meaning; and that is, that the mortgagor would pay such taxes and discharge such liens on the property as should be legally chargeable to him, not such as the law⁷ might afterwards impose upon the mortgagees. In fact, the covenant creates no greater liability on the part of the mortgagor than would have existed without it; and it was inserted only out of abundant caution. Every mortgagor is bound to pay the taxes lawfully levied on the property mortgaged, and to discharge any liens created by his previous act; and if at any time the mortgagee is compelled to pay the taxes and discharge such liens, to preserve the security, he can collect the amount from the mortgagor.

Fo the question comes back to the original point in the case — were the taxes for which the present action was brought lawfully levied? if so, they can be enforced, whatever may be the private relations or stipulations between the parties to the security. If not lawfully levied; if the law or state constitution under which, they wore imposed is in conflict with the inhibitions of the federal constitution; if the taxes were laid upon interests with which the mortgagor had parted, — they cannot be enforced, whatever may be the pledges of the parties to each other. The argument of the plaintiff amounts to this: if the taxes had been lawfully levied on the mortgage, the mortgagor would have been obliged to pay them under its covenant; therefore it is not injured by the illegality of the levy, and, not being injured by it, should not be heard to complain of it, but be compelled to pay the taxes. The answer to this specious reasoning is obvious. If the taxes are not lawfully levied, there are none for the payment of which the covenant can be invoked even by the mortgagees. The plaintiff must show that there rests upon the mortgagor a legal obligation to the state to pay the taxes arising upon its constitution or laws; not from any stipulation the parties may have made with each other, with which the state has no-concern. The action is not to enforce a lien upon the property; it is for a personal demand, and a personal liability to the state must be shown. No other liability of any kind to any party can aid a recovery.

The covenant we have been considering is not contained in the mortgage on the lands of the Central Pacific Company, and for such lands in California, amounting to upwards of 650,000 acres, that company is assessed and taxed without any deduction of the mortgage from their value, just as the Southern Pacific Company is taxed for its lands. The amount due on the land mortgage is over five and a half million dollars.

I have thus gone over, so far as I deem it necessary or important, the several positions of counsel for- the plaintiffs, and in none of them do I find any sufficient answer to the objection of the defendants. This opinion might, therefore, close with a simple order directing judgment for the defendants. But owing to misapprehensions, that have largely prevailed in the community since the trial of the San Mateo Case, which involved similar questions as to the effect of a decision against the state upon' its right to subject railroad property to its just proportion of the public burdens, I will venture to make some suggestions as to the manner in which all such demands of the state may be enforced without infringing any principle of constitutional law. I am profoundly sensible of the irritation which a supposed desire to escape from the just burdens of government naturally creates. The more powerful, the more wealthy, the party, the more intense the feeling, and it finds expression in words of bitter complaint, not merely against the party, but sometimes, also, against any administration of justice which tolerates such supposed evasion. It is sometimes forgotten that the courts cannot supply the defects of the law, nor always correct the mistakes of public officers, nor the errors even of learned counsel. Certainly no member of this court would countenance the escape of anybody from his just obligations, but it cannot, with any seeming justice, declare that one party shall discharge an obligation which the law, properly administered, would impose upon another. Its duty is to administer the law as it finds it, not to make it, never forgetting that its administration must always be in subordination to those great principles for the protection of private rights which are embodied in our national constitution, and which are of priceless value to every one in the state.

The railroad companies in California are taxed yearly to an amount exceeding $600,000. Their property is heavily incumbered with mortgages, amounting to much more .than its actual value. Why should they not be allowed by law, if they pay this sum, a credit for it on their mortgages, as any natural person paying it would be allowed ? Why should this unjust discrimination be made against them? Why should they by law be denied a credit for this more than $600,000 a year? Is there any justice in this denial? There is no difficulty in assessing and‘taxing the mortgages, if the words “except as to railroad and other quasi public corporations,” be eliminated from the constitution as invalid. ’ The imaginary difficulty has arisen from the supposed necessity of taxing the debts which the bonds secured. A.s these are held in different parts of the country, some out of the state, it would be impossible, it is said, to reach them. But the answer is that the taxes should be placed upon the mortgages, which for purposes of assessment and taxation are to be treated as interests in the property mortgaged; as much so as if it had been unconditionally conveyed to the mortgagees. The records of the different counties show the mortgages. The assessors can return to the board of equalization the value of the property covered by the mortgages in their respective counties, under section 3678 of the Political Code. The board would then have the value of the property of the companies and the amount of the mortgages before them. The mortgage of the Southern Pacific Company being greater than the value of the entire mortgaged property, it would be assessed at such value. It could never, as a mortgage, be worth more than the property. If necessary or convenient, the assessment of the mortgage on the roadway, road-bed, rails, and rolling stock could be stated separately from the value of the mortgage on other property of the company, and apportioned to the different counties as at present. The value of the mortgage on' other property could also be apportioned as required by the Political Code. Why then should not this system be pursued? The state would thus collect all the taxes which it ought to collect. The tax, being a lien upon the property, could be enforced by a sale of the property, just as though it was levied on the property and not upon the mortgages. If the companies should then pay the tax, they could by the law claim credit for it on their mortgages, and it would be deducted in the payment ot the interest or principal of their bonds. Then justice would be done to the corporations as it is done to individuals. The same proceeding could be pursued with the first mortgage on the property of the Central Pacific Company. That also being greater than the value of the property, the state would be able to collect as large a revenue as by taxation on the property itself, and the company would have the benefit of the payment by a credit on its mortgage.

It follows from the views expressed that findings must be had for the defendants, and judgment in their favor entered thereon.

1 These figures are taken by the commissioner from the estimate of Henry V. Poor, a compiler of railroad statistics.

7 Pollard v. State, 65 Ala. 635; Nat. Bank v. Com. 9 Wall. 353.