Southern Pacific Co. v. Levee District No. 1 of Sutter Country

The differences between the plaintiff and the parties defendant were submitted to the superior court for decision under an agreed statement of facts, as contemplated by section 1138 of the Code of Civil Procedure. The judgment of the superior court was against plaintiff, and this appeal followed.

The stipulated facts essential to this consideration are the following: By the constitutional amendment and the legislative enactments passed in subordination thereto, public service corporations, of which plaintiff is one, pay to the state a percentage of their gross revenues, fixed by law, as a “ com-mutated or substituted tax for other taxes which were or might have been levied.” (Pacific Gas & Electric Co. v. Roberts, 168 Cal. 420 , [ 143 Pac. 700 ].) This tax for the year beginning July 1, 1911, was four per cent of the gross re* eeipts arising from the operations of plaintiff within the state of California during the calendar year of 1910. It was due and payable on the first Monday of July (Const., art. XIII, sec. 14, subd. f) and was by appellant paid in full.

Prior to the change in the method of taxing public utilities (Const., art. XIII, sec. 14), and continuously thereafter, up to and including the time of the submission of this controversy to the superior court, the defendant levee district had an outstanding bonded indebtedness of four hundred thousand dollars, saving that sixty thousand dollars of this bonded indebtedness had been paid.

Before seeking to enforce the collection of this tax against plaintiff the levee district made formal demand upon the controller to pay over to it out of the tax so collected from plaintiff the amount of the district tax against plaintiff’s property. Upon the controller’s refusal so to do demand was made upon the plaintiff for the payment of this district tax, with threats of the enforcement of the penalty provided by law for its failure to pay. Under this compulsion plaintiff paid this district tax, accompanying the payment by written objection and protest.

Appellant’s contention is that it is entitled to a recovery of the amount of the tax thus paid to the district, and it stands indifferent as to whether that recovery should be had from the district directly or from the controller. The district insists that appellant is entitled to no recovery, but if it should be held that it is entitled to a recovery that recovery should be had against the controller. The controller joins with the district in disputing appellant’s right to any recovery, but further urges that no recovery can be had against the state because the tax which appellant paid to the state was paid voluntarily and without protest. The other defendants are sued merely in their representative capacities—some as directors of the district, and of the others O ’Banion is the treasurer of Sutter County and thus the custodian of the dis. trict’s funds, and Ohleyer is the assessor of the levee district.

These defendants are impleaded not alone as proper parties defendant for the recovery of the moneys, but because appellant also seeks injunctive relief against the district and its officers, which injunctive relief is that the district and its officers be prohibited from further levying a similar tax against appellant’s operative properties within the district. With this statement of facts clearly in mind, we may proceed to a consideration of the legal questions presented by the controversy. Upon this consideration the following quotations from the constitution have a controlling bearing. “Taxes levied, assessed, and collected as hereinafter provided upon

“All property enumerated in subdivisions a, b, and d of this section [being all of the properties of these corporations excepting their shares of stock] shall be subject- to taxation, in the manner provided by law to pay the principal and interest of any bonded- indebtedness created and outstanding by any city, city and county, county, town, township, or district, before the adoption of this section. The taxes so paid for principal and interest on such bonded indebtedness shall be deducted from the total amount paid in taxes for state purposes.” (Const., art. XIII, sec. 14, subd. e.)

“All the provisions of this section shall be self-executing, and the legislature shall pass all laws necessary to carry this section into effect. . . . The legislature shall provide for reimbursement from the general funds of any county to districts therein where loss is occasioned in such districts by the withdrawal from local taxation of property taxed for state purposes only.” (Const., art. XIII, see. 14, subd. f.)

The first proposition advanced by all of the respondents is that the tax levied by the levee district is not a tax at all. Of course respondents do not by this mean to be understood as saying that it is not a tax as distinguished from an assessment for benefits. For the contrary has been decided in the case of this defendant levee district as to the precise form of raising revenues which the legislature has authorized it to employ. (People v. Whyler, 41 Cal. 351 ; Williams v. Corcoran, 46 Cal. 553 ; Wilson v. Board, of Supervisors of Sutter Co., 47 Cal. 91 .) While to the same effect are the cases of Smith v. Farrelly, 52 Cal. 77 , and City Street Imp. Co. v. Regents, etc., 153 Cal. 776 , [ 18 L. R. A. (N. S.) 451 , 96 Pac. 801 ], What respondents really mean is that because this tax partakes in its nature of an assessment for benefits, and as

The next proposition, for which all of respondents contend, is that conceding this to be a tax, while the constitution has declared that the method which it has adopted for raising this revenue from these corporations for state purposes shall be in lieu of all other taxes and'licenses, state, county and municipal, and has thus in effect forbidden the levy of such taxes by the enumerated corporate subdivisions of the state, namely, counties and municipalities, it has not forbidden the imposition of such taxes upon the properties -of these corporations by districts which are in no true sense municipal corporations. It may at once be said, as has been frequently decided, that these district agencies and mandatories of the state are not municipal corporations. (People v. Reclamation Dist. No. 551, 117 Cal. 114 , [ 48 Pac. 1016 ]; Hensley v. Reclamation Dist. No. 556, 121 Cal. 96 , [ 53 Pac. 401 ]; People v. Levee Dist. No. 6, 131 Cal. 30 , [ 63 Pac. 676 ]; Reclamation Dist. No. 551 v. County of Sacramento, 134 Cal. 477 , [ 66 Pac. 668 ]; People v. Sacramento Drainage Dist., 155 Cal. 373 , [ 103 Pac. 207 ]; Reclamation Dist. v. Birks, 159 Cal. 237 , [ 113 Pac.

Of the purpose of the framers of this new taxation measure, and of the intent of the people in adopting it, there is fortunately not the slightest - doubt. The state had appointed a learned commission on revenue and taxation, whose labors extended over many years. In 1906 they promulgated their first report. In 1910 they put forth their second report. These reports were most widely distributed, at the state’s expense, with the avowed purpose of educating its people to a knowledge of the reasons why the change in the method of taxation of public service corporations, banks, insurance companies, etc., was deemed most desirable, and to an understanding of the benefits which would follow the adoption of the new method. Those reports themselves are official publications of the state. (Appendix to Journals of Senate and Assembly, 39th sess., 1911, vol. 1.) Some of the reasons for the change have been expressed by this court in Pacific Gas & Elec. Co. v. Roberts, 168 Cal. 420 , [ 143 Pac. 700 ]. Another and potent reason as set forth in the reports was the injustice of permitting local assessments for local ends upon •properties such as railway companies and banks acting under corporate franchises and to whose prosperity the whole state contributed. Illustrations were given showing the injustice of permitting a poor county, contributing little or nothing to the support of a railway, but through whose territory a railway chanced to run, to tax locally the properties of the railway, while an adjoining county, rich and prosperous, and contributing enormously to the maintenance and support of the road, could, because the railroad did not reach into the county, receive no dollar of revenue. The same argument was applied to banks, and the demand was for a “separation of sources of taxation,” and a constitutional provision au

It would appear to be beyond peradventure, therefore, that when the constitution declared that the state taxes “shall be in lieu of all other taxes, state, county and municipal” it used the words “state, county and municipal” as inclusive and descriptive, and not as designed to exempt districts from its operation and to authorize the levying of local taxes by such districts. (2 Lewis’ Sutherland on Statutory Construction, sec. 495; Church of the Holy Trinity v. United States, 143 U. S. 457 , [ 36 L. Ed. 226 , 12 Sup. Ct. Rep. 511 ].) And this conclusion is strongly confirmed when consideration is paid to this constitutional amendment as a whole rather than to this single, detached sentence from it. Subdivision (e) of section 14, as above quoted, in terms declares that the operative properties of such corporations as appellant shall be subject to taxation “to pay the principal and interest of any bonded indebtedness created and outstanding by any . . . district before the adoption of this section.” Here is an express authorization to levy a specific tax for a single specific purpose, and under the rules of construction too familiar to require the support of authorities, in view of the whole scope of the act it is too plain for argument that the express grant of power to levy a specific tax for a specific purpose embraces within it the implied denial of the right to levy any such tax for any other purpose. And finally, there is the provision above quoted (Const., art. XIII, sec. 14, subd.f)," for the reimbursement of districts for tax losses sustained by the withdrawal of such corporate properties from local taxation; a loss they could not sustain under respondents’ view. Therefore it is concluded that both on the report of the commissioners, and on the language of the constitutional amendment, the only form of local tax which may be levied and collected “by any city, city and county, county, town, township or dis

Of persuasive, though not of controlling, value to the consideration, is the contemporaneous act of the legislature, upon which is enjoined by the provisions of the constitution itself the duty “to pass all laws necessary to carry this section into effect.” We will not unnecessarily prolong this discussion by quoting from the legislative acts. It is enough to refer to them. By a reading of them it is made plainly to appear that the legislature itself dealt expressly with districts and construed the constitution to forbid local taxation by such districts saving in the one instance authorized by the constitution itself. (Stats. 1911, e. 335, p. 530; Stats, of Special Sess. of Legislature, 1911, c. 23, p. 114; Stats. Regular Sess. of Legislature of 1911, c. 602, p. 1134; Stats. 1913, c. 6, p. 3, e. 320, p. 615, c. 533, p. 916.)

The conclusion thus reached and expressed is that the defendant district has not the general power to tax appellant’s properties for its local purposes. The particular tax here under consideration, however, .was admittedly levied under the constitutional sanction. In other words, it was a tax to pay the outstanding bonded indebtedness of the district. We next come, therefore, to the correlated rights and duties of these disputants under the admitted facts, which admitted facts for convenience may again be epitomized: The railroad company did pay, as it was called upon to pay, into the state treasury on the first Monday of July, the full four per cent of its gross revenues. The district tax at that time had not been assessed and levied. It was quite proper for the district to assess and levy this tax, because it was clearly within the contemplation of the constitutional provision that it should receive the amount of that tax either from the state by deduction from the total amount paid in by the railroad company, or from the railroad, which in turn would be entitled to reduce its total four per centum by the amount of the local tax which it had thus paid. Owing to the varying dates when these assessments became fixed and the taxes payable it was the duty of the appellant to pay in the full four per cent to the state as it did. At the time it did this it could not know and so could not withhold the amount of the district tax. Nor yet could it protest against its payment of

Such should have been the course adopted by the controller after the amount of the district tax was legally fixed and payable and demand had been made upon him for the payment of the same, out of the “total amount paid in taxes for state purposes” by appellant. The controller’s refusal so to do Was the initial error. Upon his refusal the district turned to appellant and exacted from it a double payment

It has been agreed by the parties that if this court shall reach the conclusion that appellant is entitled to its recovery, it may order a direct recovery from the controller. We need not therefore pause to consider with more particularity the form of the judgment.

The application of appellant for injunctive relief, after what already has been said, calls for but brief consideration. It is clearly within the power of the district to levy this tax for the purpose of ascertaining the proportion of the bonded indebtedness and interest which the property of .appellant should bear and pay, and no injunction therefore should be granted to prevent the district from so doing. Upon the other hand, it is not to be anticipated that any difficulty will be experienced in the future in the matter of the payments to such districts where the conditions here present exist, namely, where the time for the payment of the state tax antedates the assessment and levy of the district tax. No force inheres in the controller’s objection that the legislature has not provided adequate machinery justifying him in paying to such districts the amounts of their taxes. The constitutional amendment itself declares that “all the provisions of this section shall be self-executing.” And if there be a lack of machinery in other respects, the controller will be amply protected, in the payment of these moneys, by proper vouchers showing the payment thereof, and by proper entries in his books disclosing the nature and amount of the disbursements.

It is ordered therefore that the judgment appealed from be and hereby is reversed, and in conformity with the agreement of the parties it is further ordered that the superior court enter its judgment of award in favor of the appellant and against the respondent controller for the amount sued for.

Lorigan, J., Lawlor, J., Melvin, J., Sloss, J., Shaw, J., and Angellotti, C. J., concurred.

other person except one of the parties, he must set forth in the affidavit the reasons why it is not made by one of the parties. When a corporation is a party, the verification may be made by any officer thereof. ...” The affidavit of verification is as follows: