CALIFORNIA v. SAN PABLO c. RAILROAD

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Docket Number

No. 257.

Attorney(S)

Mr. William H.H. Hart, Attorney General for the State of California, after stating the fact of the offer and deposit of money as aforesaid, said: I respectfully submit that this offer should not prevent the hearing of this cause and a decision of the constitutional question involved. There are other cases depending upon the determination of this. It will be seen in the record, that there was a stipulation in this case, and three others, that the decision that might be made in this court in the case of The People of the State of California v. The Central Pacific Railroad Co., should be treated as a decision in all of the cases, provided the decision should be upon points involved therein, and if not so made, then the judgment of the Circuit Court in any of these cases should be set aside and findings of fact therein made. That case having been decided against the State because the assessment included steamboats and federal franchise, (see 127 U.S. 1,) and the question made in the present case under the Fourteenth Amendment not having been passed upon, counsel of the parties signed a stipulation to have the judgment set aside in this case, and to submit the same to the Circuit Court upon the facts stated in the stipulation, and it was accordingly thus submitted and decided by the Circuit Court, the design of the stipulation thus submitting the case being to obtain a decision which would also dispose of the remaining two cases embraced in the stipulation first made, that stipulation having been made to carry out the design of the first, that is, to obtain a decision that will dispose of all these cases. Therefore, nothing short of a payment of what is claimed in those two cases, as well as in this, should be regarded as dispensing with a decision of the constitutional question raised in this case, and which is the same in the three cases. It is of the utmost importance to the people of the State of California, that it be determined whether an assessment of the property of railroad corporations in the manner required by the constitution of California is valid, so it may be known, when these assessments are made, whether they can be included in the sources of revenue that can be relied upon in the administration of the government of that State, or whether such corporations are at liberty to decline to pay taxes, and to pay only what sums and when they may choose, merely as voluntary contributions to the public funds of California. The court declined to hear further argument. Mr. George A. Johnson, a former Attorney General of the State of California, and Mr. Samuel Shellabarger and Mr. Jeremiah M. Wilson also submitted briefs for the plaintiff in error. Mr. George F. Edmunds, Mr. Harvey S. Brown and Mr. Creed Haymond submitted briefs on the merits for the defendant in error. Mr. Harvey S. Brown also submitted a brief on a motion to dismiss the writ of error.

Judges

Horace Gray

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Smart Summary

Factual and Procedural Background

This case originated from an action brought on March 10, 1886, by the State of California against the San Pablo and Tulare Railroad Company to recover taxes assessed under sections 4 and 10 of article 13 of the California constitution. The taxes were assessed on the defendant’s railroad franchise, roadway, roadbed, rails, and rolling stock across several counties. The defendant challenged the constitutionality of the assessment provisions, arguing they violated the Fourteenth Amendment by discriminating against railroad and quasi-public corporations, particularly by failing to allow deductions for mortgages on such property.

After initial proceedings, the parties entered into stipulations to consolidate the issues with related cases, agreeing to treat the Supreme Court’s decision in The People of the State of California v. The Central Pacific Railroad Co. as controlling if it addressed the points involved. The Supreme Court did not decide the constitutional question on that occasion, leading to the setting aside of the original judgment and submission of the case to the Circuit Court on agreed facts. The Circuit Court ultimately ruled in favor of the defendant, concluding that the assessment method was unconstitutional as applied.

Subsequently, the defendant offered and deposited with a bank the full amount of taxes, penalties, interest, and costs claimed by the State, pursuant to a California statute that treats such deposit as extinguishing the obligation. The State declined to accept the payment, and the writ of error was brought to challenge the Circuit Court’s judgment.

Legal Issues Presented

Whether the provision of section 4 of article 13 of the California constitution, which assesses railroad and quasi-public corporations without allowing deductions for mortgages, violates the Fourteenth Amendment by discriminating against such corporations.
Whether a writ of error must be dismissed when the defendant offers and deposits the full amount claimed, including penalties, interest, and costs, in a bank to the plaintiff’s credit, in accordance with state law.

Arguments of the Parties

State of California's Arguments

The State argued that the offer and deposit of money by the defendant should not prevent the hearing and decision of the constitutional question involved.
The State emphasized the importance of resolving whether the method of assessing railroad property under the California constitution is valid, as it affects the reliability of tax revenue and the ability of corporations to pay taxes.
The State noted stipulations made to consolidate decisions across multiple cases to avoid duplicative litigation and to obtain a uniform ruling on the constitutional issues.

Defendant's Arguments

The defendant contended that the assessment provisions discriminated against railroad and quasi-public corporations by not permitting deductions for mortgages, unlike assessments on property owned by natural persons or other corporations.
The defendant relied on the agreed facts showing that the full value of the property was assessed without deducting mortgage values, despite the existence of substantial secured debts.
By depositing the full amount of taxes, penalties, interest, and costs in a bank to the State’s credit, the defendant argued that its obligation was extinguished under California law, thus rendering the writ of error moot.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Lord v. Veazie, 8 How. 251, 255	Dismissal of writ of error when the cause of action is extinguished by payment or deposit of the amount claimed.	Used as precedent to support dismissal of the writ of error because the defendant deposited the full amount claimed, extinguishing the obligation.
Cleveland v. Chamberlain, 1 Black, 419	Similar principle regarding dismissal of writs of error under analogous circumstances.	Reinforced the court’s position that mootness due to payment or deposit requires dismissal.
Wood Paper Co. v. Heft, 8 Wall. 333	Dismissal of writ of error when the underlying obligation ceases to exist.	Applied to confirm that the court cannot decide moot questions.
San Mateo County v. Southern Pacific Railroad, 116 U.S. 138	Similar dismissal principles in tax-related disputes.	Supported the court’s refusal to hear the case after full payment was tendered and deposited.
Little v. Bowers, 134 U.S. 547	Principle that courts do not decide abstract or moot questions.	Used to emphasize the court’s limitation to actual controversies.
Singer Manuf. Co. v. Wright, 141 U.S. 696	Reinforces the dismissal of writs of error when no live controversy remains.	Applied to affirm dismissal due to extinguishment of the obligation.
Elgin v. Marshall, 106 U.S. 578	Supports the principle that courts must decide actual controversies and not moot cases.	Referenced as consistent authority for dismissal on mootness grounds.

Court's Reasoning and Analysis

The court based its decision primarily on the fact, openly admitted by the State’s Attorney General, that the defendant had offered and deposited with a bank the full amount of taxes, penalties, interest, attorney’s fees, and costs claimed, in accordance with a California statute that treats such deposit as equivalent to payment and receipt. This extinguished the defendant’s obligation and rendered the cause of action moot.

The court emphasized its constitutional role to decide actual controversies affecting rights of persons or property. It cannot issue advisory opinions on abstract or moot questions, even if parties stipulate otherwise. The court noted that no stipulation can enlarge its power to decide moot questions.

In applying these principles, the court found that since the State had effectively received all it could recover, the writ of error presented no live controversy and therefore had to be dismissed. The court drew on established precedents where writs of error were dismissed under similar circumstances to reinforce its conclusion.

Holding and Implications

Writ of error dismissed.

The direct effect of this decision is that the State of California’s appeal was dismissed because the obligation underlying the suit was extinguished by the defendant’s deposit of the full amount claimed. The court did not reach the constitutional question regarding the validity of the tax assessment provisions under the Fourteenth Amendment. No new precedent was established as the dismissal followed well-settled principles limiting judicial power to actual controversies.

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CALIFORNIA v. SAN PABLO AND TULARE RAILROAD COMPANY.

If, pending a writ of error to reverse a judgment for the defendant in an action by a State to recover sums of money for taxes, the defendant offers to the plaintiff, and deposits in a bank to its credit, the amount of those sums, with penalties, interest and costs, which by a statute of the State have the same effect as actual payment and receipt of the money, the writ of error must be dismissed.

THIS was an action, brought March 10, 1886, by the State of California against the San Pablo and Tulare Railroad Company, a corporation of California, in the Superior Court of the city and county of San Francisco, (and thence removed by the defendant into the Circuit Court of the United States, upon the ground that it was a suit arising under the Constitution and laws of the United States,) to recover taxes assessed by the State Board of Equalization, under sections 4 and 10 of article 13 of the constitution of California, (which are copied in the margin,) as state and county taxes for the year July 1, 1885, to June 30, 1886, upon the defendant's franchise, roadway roadbed, rails and rolling stock in the counties of Alameda, Contra Costa and San Joaquin.

SEC. 4. 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. 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 in the county, city or district in which the property affected thereby is situate. 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: Provided, that if any such security or indebtedness shall Page 309 be paid by any such debtor or debtors, after assessment and before the tax levy, the amount of such levy may likewise be retained by such debtor or debtors, and shall be computed according to the tax levy for the preceding year.
SEC. 10. All property, except as hereinafter in this section provided, shall be assessed in the county, city, city and county, town, township or district in which it is situated, in the manner prescribed by law. The franchise, roadway, roadbed, rails and rolling stock of all railroads operated in more than one county in this State shall be assessed by the State Board of Equalization, at their actual value; and the same shall be apportioned to the counties, cities and counties, cities, towns, townships and districts in which such railroads are located, in proportion to the number of miles of railway laid in such counties, cities and counties, cities, towns, townships and districts.

The defendant, in its answer, filed March 19, 1886, and averring the facts necessary to present the question, set up the following defence: "The provision of section 4 of article 13 of the constitution of the State of California, providing for the assessment of the property of railroad and other quasi public corporations, is in contravention of the provisions of the Fourteenth Amendment of the Constitution of the United States, in that it discriminates against such corporations; in this, that whereas under said section 4 of said article 13 of the constitution of the State of California, if the property of natural persons, or corporations not quasi public, has a mortgage, lien or incumbrance thereon, they are not liable to assessment or taxation upon such property, but only upon the value of their interest in such property over and above the value of such mortgage, lien or incumbrance; whereas, in the case of the property of railroad and other quasi public corporations, no such allowance or deduction is made, had or allowed with respect to any mortgage, lien or incumbrance there may be upon such property; and also in this, that while section 10 of article 13 of the constitution of the State of California provides the same mode for the assessment of the franchise, roadway, roadbed, rails and rolling stock of all railroads operated in more than one county, whether such property be owned by railroad or other quasi public corporations or by private corporations or by natural persons, yet section 4 of article 13 of said constitution permits or allows indebtedness secured by mortgage, trust deed, or otherwise, to be deducted from the value of such property, only when it is owned by natural persons or corporations not quasi public, and denies such deduction when the property is owned by railroad or other quasi public corporations."

On July 14, 1886, the attorneys for the parties filed in this and three similar cases the following stipulation in writing:

"It is hereby stipulated that jury trials in the above entitled actions are hereby waived, and that said causes may be submitted to the court upon the testimony referred to in the stipulation this day made and filed in the case of The People of the State of California v. The Central Pacific Railroad Company, subject to the same terms and conditions. It is hereby further stipulated that special findings of facts in all of the above entitled actions are waived. It is hereby further stipulated and agreed that the said case of The People of the State of California v. The Central Pacific Railroad Company shall by the losing party be taken to the Supreme Court of the United States; and that the decision of said court in said case shall be applicable to and be treated by each party as the decision of said court in the above entitled actions; it being the intention and desire of the parties hereto to save the expense of separate writs of error; and that all the above entitled actions shall abide the final decision of said Supreme Court of the United States in the said case of The People of the State of California v. The Central Pacific Railroad Company, provided the said decision shall be made upon points involved therein; and if not so made, then the judgments in any of the above cases in which the point is not involved shall be set aside and findings of fact therein shall be made."

On July 15, 1886, the Circuit Court gave judgment for the defendant in the present case.

In the case of California v. Central Pacific Railroad, referred to in that stipulation, this court did not decide the question now presented, but on April 30, 1888, reversed the judgment of the Circuit Court on other grounds. 127 U.S. 1, 45.

On March 6, 1889, the parties, by another stipulation in writing, agreed that the previous judgment of the Circuit Court in the present case be set aside, and the case submitted to the Circuit Court upon an agreed statement of facts, "on which findings shall be made and conclusions of law drawn by the court."

On September 6, 1889, the Circuit Court, pursuant to this stipulation, ordered its former judgment to be set aside, and made and filed findings of fact in accordance with the agreed statement.

By these findings of facts, it appeared that, before and at the time of the assessment of these taxes, the defendant owed a debt secured by mortgage of its railroad, its franchise and its rolling stock and appurtenances, to the amount of more than $3000 a mile; that the State Board of Equalization valued and assessed the defendant's franchise, roadway, road-bed, rails and rolling stock, not separately, but together, (and not including any other kind of property,) at their full value, without deducting the value of the mortgage or any part thereof, although knowing of its existence, and did not deem or treat the mortgage as an interest in the property, and assessed the whole value of the property to the defendant as if there had been no mortgage thereon, but made the assessment upon the same basis for valuation as all other property in the State was valued for the purpose of taxation; and that there were at that time divers railroads in the State, owned and operated by corporations other than railroad corporations, and by individuals and partnerships.

Upon the facts found, the Circuit Court concluded, as matter of law, that the defendant was entitled to judgment. Judgment was entered accordingly, and the State of California sued out this writ of error.

The Attorney General of the State admitted in his brief, and, when this case was called for argument, stated in open court, the following fact:

"In the year 1893, the defendant offered and tendered to the plaintiff a sum of money equal to the taxes, penalties, interest and attorney's fee, to recover which this action was brought, and costs of suit, which offer and tender have not been accepted; but the money has been deposited by the defendant in bank, in accordance with the provisions of section 1500 of the Civil Code of California, which reads as follows: `An obligation for the payment of money is extinguished by a due offer of payment, if the amount is immediately deposited in the name of the creditor, with some bank of deposit within this State of good repute, and notice thereof is given to the creditor.'"

MR. JUSTICE GRAY delivered the opinion of the court.

Upon the fact most properly and frankly admitted in open court by the Attorney General of the State of California, there can be no doubt that this writ of error must be dismissed, because the cause of action has ceased to exist. Any obligation of the defendant to pay to the State the sums sued for in this case, together with interest, penalties and costs, has been extinguished by the offer to pay all these sums, and the deposit of the money in a bank, which by a statute of the State have the same effect as actual payment and receipt of the money. And the State has obtained everything that it could recover in this case by a judgment of this court in its favor. The duty of this court, as of every judicial tribunal, is limited to determining rights of persons or of property, which are actually controverted in the particular case before it. When, in determining such rights, it becomes necessary to give an opinion upon a question of law, that opinion may have weight as a precedent for future decisions. But the court is not empowered to decide moot questions or abstract propositions, or to declare, for the government of future cases, principles or rules of law which cannot affect the result as to the thing in issue in the case before it. No stipulation of parties or counsel, whether in the case before the court or in any other case, can enlarge the power, or affect the duty, of the court in this regard.

The case at bar cannot be distinguished in principle from previous cases in which writs of error have been dismissed by this court under similar or analogous circumstances. Lord v. Veazie, 8 How. 251, 255; Cleveland v. Chamberlain, 1 Black, 419; Wood Paper Co. v. Heft, 8 Wall. 333; San Mateo County v. Southern Pacific Railroad, 116 U.S. 138; Little v. Bowers, 134 U.S. 547; Singer Manuf. Co. v. Wright, 141 U.S. 696. See also Elgin v. Marshall, 106 U.S. 578.

Writ of error dismissed.