Statement of the Case.

Court of the United States for what is now the Northern District of California. In each, judgment was rendered for

"2. To prescribe rules and regulations, not in conflict with the constitution and laws of the State, to govern supervisors when equalizing, and assessors when assessing.

"3. To make out, prepare, and enforce the use of forms in relation to the assessment of property.

"4. To hold regular meetings at the state capitol on the second Monday in each month, and such special meetings as the chairman may direct.

5. To annually assess the franchise, roadway, road-bed, rails, and rolling-stock of all railroads operated in more than one county in this State, at their actual value, on the first Monday in March, at 12 o'clock M., and to apportion such assessment to the counties, and cities and counties, in which such railroads are located in proportion to the number of miles of railway laid in such counties, and cities and counties, in the manner provided for in section 3664 of said code.

6. To equalize the assessment of each mortgage, deed of trust, contract, or other obligation by which a debt is secured, and which affects property situate in two or more counties, and to apportion the assessment thereof to each of said counties.

7. To transmit to the assessor of each county, or city and county, its apportionment of the assessments made by said Board upon the franchises. roadways, road-beds, rails, and rolling-stock of railroads; and also its apportionment of the assessments made by such Board upon mortgages. deeds of trust, contracts, and other obligations by which debts are secured, in the manner provided for in § 3664 of said code.

8. To meet at the state capitol on the third Monday in August, and remain in session from day to day (Sundays excepted) until the third Monday in September.

"9. At such meeting to equalize the valuation of the taxable property of the several counties in this State for the purpose of taxation; and to that end, under such rules of notice to the clerk of the Board of Supervisors of the county affected thereby as it may prescribe, to increase or lower the entire assessment roll, or any assessment contained therein, so as to equalize the assessment of the property contained in said roll, and make the assessment conform to the true value in money of the property assessed, and to fix the rate of state taxation, and to do the things provided in § 3693 of said code.

10. To visit as a Board, or by the individual members thereof, whenever deemed necessary, the several counties of the State, for the purpose of inspecting the property and learning the value thereof.

11. To call before it or any member thereof, on such visit, any officers of the county, and to require them to produce any public records in their custody.

12. To issue subpoenas for the attendance of witnesses or the production

Argument for Plaintiffs in Error.

the defendant, to review which the plaintiff below, in each case sued out a writ of error.

Mr. J. M. Wilson for plaintiffs in error. Mr. Samuel Shellabarger was with him on the brief. Mr. G. A. Johnson, Attorney General of California, filed a brief for same.

The principal questions presented by these records are the following:

First. Inasmuch as the constitution of California provides that in assessing property held by individuals for taxation the amount of encumbrances by mortgage is declared to be an interest in the property, and shall be assessed against the mortgage, and the value in excess of the mortgage shall be assessed against the owner; and inasmuch, as in cases of such corporations as the defendant, operating a railroad in more than one county of the State, no such division is provided for

of books before the Board, or any member thereof, which subpœnas must be signed by a member of the Board, and may be served by any person. "14. To appoint a clerk, prescribe and enforce his duties. The clerk shall hold his office during the pleasure of the Board.

"15. To report to the governor, annually, a statement showing: "First. The acreage of each county in the State that is assessed.

"Second. The amount assessed per acre.

"Third. The aggregate value of all town and city lots.

"Fourth. The aggregate value of all real estate in the State.

66

Fifth. The kinds of personal property in each county, and the value of each kind.

44

Sixth. The aggregate value of all personal property in the State.

Seventh. Any information relative to the assessment of property and the collection of revenue.

Eighth. Such further suggestions as it shall deem proper.

"16. To keep a record of all its proceedings. [In effect April 3, 1880.] "Section 3693. When, after a general investigation by the Board, the property is found to be assessed above or below its full cash value, the Board may, without notice, so determine, and must add to or deduct from the valuation:

"1. The real estate.

"2. Improvements upon such real estate.

"3. The personal property, except money, such per centum respectively as is sufficient to raise or reduce to its full cash value." [In effect April 3, 1880.]

Argument for Plaintiffs in Error.

or permitted; - is this a denial to that company of the equal protection of the laws as contemplated by the Fourteenth Article of Amendment to the Constitution of the United States?

Second. Inasmuch as neither the constitution of the State of California, nor any law of that State, (as is claimed by the defendant,) provides for any special notice to be given to the defendant, of such assessment, and makes no specific provision for a hearing before the Board of Equalization, but only such notice and right to be heard as might be implied from the existence of the laws making it the duty of the property owners to make returns, and the officers to assess and apportion; - does this amount to a taking of the defendant's property, in the shape of taxes, without "due process of law," as contemplated by the Fourteenth Article of Amendment to the Constitution of the United States?

Third. Is the property in question exempt from taxation because of its relations to the government of the United States ?

Fourth. Is this tax void because the franchise was blended with the roadway, road-bed, etc., in making the assessment?

In the beginning of this discussion we desire to call the attention of the court to the fact that the assessment in question is upon the franchise, road-bed, roadway, rails, and rollingstock of the defendant exclusively; that it does not embrace the value of the fences along the road, nor does it embrace any steamers used in connection with the business of said road, nor does it embrace any of the outlying lands granted to the company by the United States in aid of the construction of the road, and which are covered by the land-grant mortgage mentioned in the answer and findings of fact. The question, therefore, as to whether or not the method that may have been pursued by the State in assessing these outlying lands was a valid method, or whether the constitution and laws of the State of California in relation to and affecting the taxation of such lands are valid, is not involved in this record. And we have, therefore, to consider, in the discussion of this case, simply the question whether or not what has been done

Argument for Plaintiffs in Error.

under, or provided for, by the constitution and laws of California in respect to the assessment and taxation of the roadbed, roadway, rails, and rolling stock of corporations such as the defendant, is a violation of the provisions of the Fourteenth Amendment to the Constitution in the particulars referred to in the propositions herein before stated. And it is to these that we invite the attention of the court.

When the constitution of the State was adopted, in 1879, this railroad company existed with its road completed, and with mortgages upon it quite equal to, if not in excess of, the assessable value of the property. And we venture to assume that the court will take judicial notice of so notorious a fact as that there were thousands of miles of railroad in that State, heavily mortgaged, many of the bonds of which were held outside of said State, and that could not be reached for taxation by assessments against the holders.

This property aggregated in value many millions of dollars -in this particular case alone, judging by the assessments, amounting to more than $20,000,000.

The aggregate of the assessments in the cases now before the court amounts to more than $50,000,000.

That this enormous amount of property should bear its fair proportion of the expenses of government will not be denied.

The Right to tax and the Right to classify Property for Taxation.

Unless it can be maintained that the Fourteenth Article of Amendment has destroyed it, the State, in the exercise of its sovereign power, has the right not only to tax according to its discretion, but also to classify property for assessment and taxation.

What the State may do in that behalf has been stated by this court in The Railroad Company v. Peniston, 18 Wall. 5. See also, to the same effect, Williams v. Supervisors of Albany, 122 U. S. 154, 163, 164.

In the light of these opinions, the sovereign and absolute power of a State to impose taxes, and to determine the extent, the subjects upon, and the mode in which it shall be

Argument for Plaintiffs in Error.

exercised, cannot be disputed. If the right to classify ever could have been the subject of reasonable disputation, it has been set at rest by the decision of this court in the Kentucky Railroad Tax Cases, 115 U. S. 321, in which this very question was presented and disposed of. See also State Railroad Tax Cases, 92 U. S. 575, at page 611.

It being, then, settled that the State may divide property into classes for the purposes of taxation — may make farming lands, city and town lots one class, and railroads, their franchises, roadway, etc., another class-it necessarily follows that if the State of California has made such a division or classification, she has not exceeded her sovereign authority by so doing. And it equally follows from this that the State must be the judge, and the sole judge, as to what classification shall be made within the limit of the power to classify. It can only become subject to legal criticism when what is done, or provided for, operates unequally upon different persons belonging to the same class. Missouri v. Lewis, 101 U. S. 22.

Now what has the State done? Its constitution and its laws in this respect cover "property." They provide for assessing in one class property not owned by railroads operating in more than one county, in the doing of which mortgages are to be deemed an interest in the property, and so assessed, and the value in excess of the mortgage is to be deemed an interest in the same property, and so assessed; and in another class "property" owned by railroad companies operating in more than one county, as to which no such division is to be made. It is a distinct classification of "property," and not a classification of persons.

The railroad property is not taxed beyond its value, but, in taxing, it is not divided as property between the mortgagor (the company) and the mortgagee (the bondholder), and each taxed separately for his interest. Or, to state it yet differently, the mortgage in this case is not declared to be an interest in the railroad property, and the assessment is against the owner as to the entire value. Is this an unlawful discrimination?

The answer to this question, we submit, is found in the principles of law which control the powers and rights of sovereign