84 P. 285 | Cal. Ct. App. | 1906
This is an action to recover taxes paid under protest. The complaint contains a concise statement of the following facts: 1. That on September 1, 1871, the plaintiff was incorporated under an act entitled "An act to authorize the incorporation of canal companies," approved May 14, 1862. 2. That ever since said date it has been and now is a corporation organized and doing business under the laws of this state, and has had its principal place of business in the city and county of San Francisco. 3. That it was incorporated "for the purposes of the construction of canals for the transportation of passengers and freight, and for the purpose of irrigation and water power, and for the conveyance of water for mining and manufacturing purposes." 4. That it has never owned, possessed or held any franchise granted by the authorities of Merced county, or any municipal corporation or body within the limits of said county. 5. That on the first Monday in March, 1903, the only franchise or franchises it owned, held, or possessed were those obtained by virtue of its incorporation, and the exercise of powers conferred by its charter, and the law under which it was incorporated. 6. That on said first Monday in March, 1903, it "was the owner of certain canals in the county of Merced, used for the conveying and distribution of water, and constructed and operated by said plaintiff in pursuance of the provisions of the act of the legislature above mentioned, and for the purposes for which said company was incorporated as aforesaid. 7. That the property of plaintiff, including the canals above mentioned, was assessed by the assessor of Merced county for the fiscal year 1903-04, and said assessment contained the following item: "Franchise on above-described canals, $15,000." 8. That in due time the tax collector of Merced county demanded the payment of $367.50 as taxes levied upon the property designated on the assessment-roll as "Franchise on above-described canals," and said sum was paid under protest duly and regularly made and filed at the time such tax was paid. The court sustained a general demurrer to the complaint, and judgment was thereupon entered in favor of the defendant. *595
The question presented by this appeal is whether or not the plaintiff owned a franchise connected with its canals and corporate business, which was assessable in Merced county. The question is as complex as its proper solution is important. It involves the consideration of principles upon which taxation is based, and invites a careful study of corporate organization and powers, as distinguished from corporate ownership of property, tangible and intangible. It will, doubtless, be conceded that all property, corporeal and incorporeal, whether owned by natural or artificial persons, should bear its just and proper proportion of the burdens of government. This concession necessarily involves the admission that corporations, in common with natural persons, should be willing, and, if unwilling, should be compelled, to pay taxes upon all property owned by them, according to the situs and value of such property. Under the constitution of this state franchises must be classed as property subject to taxation. (Const., art. XIII, secs. 1-10; Spring Valley W. W. v.Schottler,
This distinction between the power to own, and ownership, is very important when we come to consider the difference between *597
the creative franchise, vesting the power to acquire, and other franchises which it may subsequently acquire by purchase or acceptance. It points the difference between the general, creative franchise to be, and the special franchises which, when accepted or purchased, vest privileges or franchises resting in special grant from governmental sources. Above all things it eliminates the heresy that all special franchises, enjoyed and exercised by a corporation, whether acquired by acceptance or purchase, are merged in the general franchise which creates the corporation, and endows it with enumerated powers. The mere fact that a corporation is organized for the specific purpose of acquiring, and is given power to acquire public uses or franchises, does not carry with it the idea that such franchises, when acquired, be they many or few, are merged in, and must be assessed as part and parcel of the general corporate franchise. This idea would absolutely destroy the equality, enjoyed by natural and artificial persons alike, in matters of taxation. If a natural person should purchase a dozen franchises to supply water or light to the inhabitants of as many different cities, none would question the proposition that each franchise so held could be assessed in each particular city, according to its value and kind. And if such person purchased a single franchise of either character, nobody would have the hardihood to contend that his purchase was merged in his identity as an individual, or in his right to acquire that particular kind of property. If this be true of franchises acquired by purchase, it certainly cannot be said that franchises acquired by acceptance are governed by a different rule, for it must be admitted that all franchises originally vest by acceptance of a special grant. If, then, a natural person may be compelled to pay taxes on each separate franchise held and exercised, there is no principle of law, logic or justice, sustaining the view that immunity from such taxation is enjoyed by corporations, because, forsooth, it requires another and very different franchise to give them life and power. The unfairness and injustice of such a rule is apparent when the status of corporations owning such franchises is contrasted with the status of banking or other purely private corporations. All corporations enjoy corporate franchises, but only a comparative few can or do acquire special privileges denominated franchises, *598
and as an incident thereto enjoy the right or franchise to take private property as public agents. All corporate franchises, under our system, may be taxed, and it would be extremely unjust, if corporations owning and enjoying additional and valuable franchises could not be assessed therefor aside from any assessment levied upon the corporate franchise, held and assessed in common with all other corporations debarred from owning or exercising such privileges. It would be strange, indeed, if these particular creatures of the law could find in their creation the source of immunity not enjoyed by citizens who, in the aggregate, constitute the source from which all laws proceed. The distinction between the corporate or creative franchise, and other special franchises which the corporate entity may acquire and exercise, has long been recognized by our courts. (San Francisco v. Spring Valley W. W.,
In the case at bar, the appellant is a corporation, and its franchise to exist and act as such is, unquestionably, assessable *599
only in the city and county of San Francisco. It only remains, therefore, to determine whether it owns and exercises any other franchise, connected with, or incident to, its canals and water system which is assessable in Merced county. The powers conferred by the act under which appellant was incorporated are comprehensive and important. These powers it has, admittedly, exercised and is still exercising. It was thereby clothed with power to acquire property, appropriate and distribute water, construct canals, and to establish, collect and receive rates, water rents and tolls. As an incident to the public uses and franchises it might exercise and acquire, by acceptance or otherwise, it was given the right of eminent domain as a public agent in charge of public uses and franchises. When its corporate organization was completed, before it had acquired any property or done any corporate act, it held only the single corporate franchise to exist with enumerated powers. Any other franchise which was offered in the grant of powers, and which by proper manifestation of acceptance or exercise of power it might acquire, was inchoate (Stockton etc. Co. v. County of SanJoaquin,
The doctrine that the right to collect rates for water distributed or furnished is a franchise independent of the creative or corporate franchise is by no means new or strange. This rule and other analogous rules find support in many well-considered cases. (Spring Valley W. W. v. Schottler,
It follows from the application of the principles above discussed that the appellant owns and is exercising a franchise growing out of, and incident to the operation of, its canals which may be assessed and taxed as separate and distinct from its corporate franchise. And it seems clear to us that recent decisions of the supreme court are determinative of all questions touching the situs of such franchise for purposes of taxation. (Stockton etc. Co. v. San Joaquin Co.,
The judgment is affirmed.
Chipman, P. J., and Buckles, J., concurred. *602