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Where the tax collection case as presented to the trial court was one in which the government seeks judgment for an entire tax arising upon an assessment of different kinds of property as a unit -- such assessment including property not legally assessable by the state board of equalization under Cal. Const. art. XIII (1879), and the part of the tax assessed against the latter property not being separable from the other part, upon such an issue, the law is for the taxpayer; an assessment of that kind is invalid and will not support an action for the recovery of the entire tax so levied.
By an act of Congress, the Atlantic and Pacific Railroad Company was created, with the power to construct and maintain, by certain designated routes, a continuous railroad and telegraph line. A right of way over the public domain was given to the company, and a liberal grant of the public lands was made to it. The same act authorized the Southern Pacific Railroad Company to connect with the Atlantic and Pacific Railroad at such a point. The act declared that it should have similar grants of land, subject to all the conditions and limitations provided, and shall be required to construct its road on like regulations, as to time and manner, with the railroad company. Subsequently, Congress incorporated the Texas Pacific Railroad Company and to aid in its construction, it was also given the right of way over the public domain and made it a liberal grant of public lands. Under the authority of this legislation, the Southern Pacific Railroad Company constructed a line of railroad from San Francisco, connecting with the Texas and Pacific Railroad in Texas; and with other railroads, it is operated as one continuous line from Texas to San Francisco. In December 1877, said Southern Pacific Railroad Company, and other railroad corporations existing under the laws of California, were legally consolidated, and a new corporation thereby formed, under the name of the Southern Pacific Railroad Company, herein defendant. In 1870, the Central Pacific Railroad Company of California and the Western Pacific Railroad Company formed themselves into one corporation under the name of the Central Pacific Railroad Company, likewise, herein defendant. Pursuant to Cal. Const. art. XIII (1879) and Cal. Pol. Code § 3664 (1881), which provided for taxation of railroad property, the state board of equalization made assessments against defendants' railroad taxpayers' property, including the value of said railroad, roadway, road-bed, rails, rolling-stock, and franchises, as well as the value of fences erected upon the lines between the roadways and adjoining properties. The assessments were forwarded to plaintiffs county and state namely Santa Clara County and State of California, and when these taxes were left unpaid, plaintiffs filed an action to collect on the state tax assessments. Defendant taxpayers raised numerous defenses, including claims that the taxes violated equal protection. Judgment was entered for the defendant.
Did the court err in ruling in favor of the defendants in plaintiffs’ action to collect state tax assessments?
The court affirmed the judgment of the lower court and held that the assessments were void since these assessments improperly included property, namely the fences, that were outside the jurisdiction of the equalization board under § 3664. The court explained that under the constitution and laws of California, Cal. Pol. Code § 3617 and Cal. Const. art. XIII, which were relative to taxation, fences erected upon the line between the roadway of a railroad and the land of coterminous proprietors were not part of the roadway, to be included by the State Board in its valuation of the property of the corporation, but, fences were improvements assessable separately and were within the jurisdiction of local authorities of the proper county. An assessment of a tax was invalid, and will not support an action for the recovery of the tax if being laid upon different kinds of property as a unit, it included property not legally assessable, and if the part of the tax assessed upon the latter property cannot be separated from the other part of it. In this case, since the court could not ascertain from the record which part of the assessment was attributable to fences, the court concluded that the entire assessment was void.