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market value of the shares. If this be true, ascertaining the value of the franchise of a it must follow, as we have already shown, corporation is by deducting from the aggrethat section 3608 of the Political Code, pro gate market value of its shares the value of hibiting any assessment of shares of stock, its tangible property, and taking the differis unconstitutional. That a system of taxa ence as the value of the franchise. See San tion may be adopted by a state under which José Gas Co. v. January, 57 Cal. 614; Spring all those elements may be included as prop Valley Water Works v. Schottler, 62 Cal. 69, erty of the corporation in the assessment 117; Spring Valley Water Works v. Barber, against the corporation was, as we have seen, 99 Cal. 36, 38, 33 Pac. 735, 21 L. R. A. 416; held by the United States Supreme Court in Bank of California v. San Francisco, 142 Cal. several cases. (See cases cited, supra, and 276, 287, 75 Pac. 832, 64 L. R. A. 918, 100 Am. recognized both in the Davenport Case, and in St. Rep. 130. It was said by Chief Justice the majority and minority opinions in the Beatty in his concurring opinion in Stockton Dodge Case.) This conclusion necessarily Gas and C. Co. v. San Joaquin Co. (Cal. Sup.) follows the undisputed doctrine that a state 83 Pac. 59, that the method of ascertaining may assess and tax at their full cash value the value of a corporate franchise by taking shares of stock in corporations. That our the difference between the market value of statutes, as construed by this court, positive
the shares and the value of the tangible ly command the assessment of all such ele property as the basis of assessment has been ments in such a manner as to make the ag sanctioned in several cases, and nowhere disgregate value of the corporate property meas approved. It appears too clear for question ure up in amount to the aggregate market that such difference between the market value value of the shares, appears very clear to us. of the shares of stock and the value of the Those statutes expressly require that all prop
tangible property is necessarily the aggregate erty belonging to corporations shall be as cash value of such intangible property as sessed and taxed at its "full cash value," under our system must be held to belong to defined to be the amount at which the prop the corporation, call it franchise, good will, erty will be taken in payment of a just debt or dividend or profit-earning power, or what due from a solvent debtor, and this positive you please. Whatever it is, our laws posiinjunction is as applicable to the intangible tively require it to be assessed by the assessproperty of a corporation, such as its cor ing officers to the corporation at its full cash porate franchise, which admittedly must be value, precisely as all other property is reassessed and taxed, as it is to the tangible quired to be assessed at its full cash value. property, such as real estate. As was said The aggregate value of the shares evidenced by Mr. Justice Brewer, in the dissenting by the certificates of stock, must be the agopinion in the Dodge Case: “But it is said gregate cash value of the property of the there is no specific command to include in the corporation held by it in trust for its stockproperty of a state corporation the good will, holders. This being so, the method already dividend-earning power, and the like, and that approved by the decisions of this court as a they are necessarily included in the selling “proper method” is not only a “proper methvalue of the stock of any corporation. It is od." It is the only method by which the true, these items are not in terms mentioned, cash value of the intangible property rebut neither are desks and furniture. The quired to be assessed can be ascertained, and language is general, so general that it in is, therefore, the method necessarily enjoined cludes everything, not excepting good will, by our laws upon the assessing officers. dividend-earning power and the like, for they Whether or not in the case of a banking corare 'capable of private ownership.' They be poration which possesses no other franchise long to the corporation. There is no good than its corporate franchise, the whole of its will in a share of stock over and above the intangible property may be considered "frangood will which belongs to the corporation, chise" and be assessed eo nomine, as seems and, if the corporation sells and conveys all to be clearly intimated by the cases we have that it possesses 'capable of private owner cited, is not absolutely necessary to a detership' it sells and conveys its good will, and mination of the question under discussion. there is nothing left of good will or anything This was also true of the case of Bank of else belonging to the stockholders. This is California v. San Francisco, supra, where the so plain that he who runs may read." The decision of such question was expressly withstatutes expressly requiring the assessment of held. 142 Cal. 289, 75 Pac, 832, 64 L. R. A. all the property, both tangible and intangible, 918, 100 Am. St. Rep. 130.
918, 100 Am. St. Rep. 130. It is enough for to be at its full cash value, it is obvious the purposes of this discussion, that all of that there is but one method by which the such intangible property must be assessed cash value of the intangible property can be under some name as the property of the ascertained, a method ordinarily much more corporation. It is, however, apparent that, certain and accurate in its results than any while it is a simple matter enouh to fix the method that can be devised for the ascertain value of the whole, it would be impossible ment of the value of real estate and many to segregate and apportion the value of all articles of personal property. It is settled the elements entering into the making up this law in this state that a proper method for property, and nothing of benefit to any one
could be accomplished by any such attempted | ly essential to prevent embarrassment in the segregation. We are satisfied that under the matter of the execution of revenue laws by system of taxation in this state as construed the proper officers, and to be specially apby our decisions, all such intangible property | plicable in the matter of preliminary inmay be properly included in the assessment junctions where the question as to the legalof the corporate franchise of the corporation. ity of the tax has not been finally determin
Another question presented upon this ap ed. 'Under that rule, no act on the part of peal is as to the propriety of the remedy officers required by the law to be performed by injunction. We are satisfied that no in in the execution of the revenue measures will junction pendente lite restraining such acts be stayed by injunction, unless that act is upon the part of the tax collector as were of such a nature, and will have such an efspecified in the injunction, should have been fect, as to irreparably injure the property issued, and that the motion to dissolve this owner, or, as said in the case above cited injunction should have been granted. It is and quoted from, "where the property is well settled by the decisions in this state real estate, throw a cloud upon the title of that the equitable remedy by injunction will the complainant.” It is obvious that a gennot be granted to restrain proceedings of eral allegation that such an act will cast the officers on whom is devolved the duty of a cloud upon the title of the complainant, enforcing the tax laws, merely because the and will be to her great and irreparable intax sought to be enforced is illegal. To justi- | jury is insufficient to justify such relief, fy the exercise of such a remedy, it must where the laws of the state show clearly appear that the same is necessary to pro- that no such effect can be produced. tect the rights of the property owner and We have already stated the acts specificalthat he has no adequate remedy at law. In ly probibited by the temporary injunction the matter of granting such relief, therefore, here involved. It is very clear that, under a court of equity will go no further than is our law, none of these acts could have the necessary to protect the rights of the prop effect heretofore stated. It may be conceded erty owner, and will not to any greater ex that the execution of a deed of said property tent impede the officers of the state in the by the tax collector to the state of California, performance of their duties. This general which deed, by express provision of the Pomatter has several times been under consid litical Code, would purport to convey the eration by this court, notably in the cases of absolute title, and be primary evidence as Sav. and Loan Soc. v. Austin, 46 Cal. 415, 488, to certain matters affecting the regularity of and Houghton v. Austin, 47 Cal. 616, 650, 666. the proceedings and conclusive evidence as In the first of these cases, which was an ap
to other of said matters (sections 3786, 3787), peal from an order refusing to dissolve an would constitute a cloud upon the title, withinjunction, this court said: "If the tax were in the rule enunciated in a long line of conceded to be illegal, it does not necessarily cases (see Maskey v. Lackmann, 146 Cal. 777, follow that, for that reason alone, the plain 780, 81 Pac. 115), and that, therefore, the extiff would be entitled to an injunction. In ecution of such a deed, pending proceedings Dows v: City of Chicago, 11 Wall. (U. S.) to determine the validity of the assessment, 110, 20 L. Ed. 65, Mr. Justice Field, in de- | might, in a proper case, be enjoined. Such, livering the opinion of the court, says: "Any | however, was not one of the acts specifically delay in the proceedings of the officers, upon enjoined here, all of those acts being things whom the duty is devolved of collecting the required by the law to be done before any taxes, may derange the operations of gov deed can be executed. No such deed could ernment, and thereby cause serious detri be executed by the tax collector until the ment to the public. No court of equity will, expiration of five years from the date of sale therefore, allow its injunction to issue to re (Pol. Code, $$ 3781, 3785). We are satisfied strain their action, except where it may be that, under our law, none of these acts so necessary to protect the rights of the citizen enjoined could in any way prejudice plainwhose property is taxed, and he has no ad tiff's rights, or throw a cloud upon her title. equate remedy by the ordinary processes of Under our present system, the only cloud law. It must appear that the enforcement upon the title of the taxpayer created prior of the tax would lead to a multiplicity of to the execution of such a dced to the state, suits, or produce irreparable injury, or where is such cloud as arises from the fact that the the property is real estate, throw a cloud up tax is a lien upon his property in favor of on the title of the complainant, before the the state, attaching as of the first Monday in aid of a court of equity can be invoked. March (the date of assessment), and continu. This, we think, is a correct statement of the ing until the taxes are paid or the property rule, as established by the weight of author sold for the payment of the tax. Pol. Code, ity.” This ruling was affirmed in Hough $$ 3716, 3717, 3718. The effect of this lien ton v. Austin, supra, and these cases bave is in no degree practically added to by anynever been overruled or modified in this re thing required to be done by the tax collector spect by any later decision. The rule ap- prior to the execution of the deed. To compears to be founded on well-settled equitable ply with the laws of the state looking to the principles and appears to us to be absolute enforcement of unpaid taxes, the tax collector
is required to make publication of the en- | chise” and taxing it as franchise. A frantire delinquent list within a certain period, chise is simply a special privilege granted together with a notice that at a stated time, by the state directly or through one of its the property upon which the lien of the state mandatories. When that privilege is the exists will, by operation of law, be sold to privilege of being a corporation, when the the state, and at the time stated, to declare franchise granted is simply the franchise to all such property, as to which the taxes have be a corporation, that franchise can have no not been paid, sold to the state, to make greater value than what it has cost the inan entry accordingly upon the delinquent corporators to obtain it and what it would list, and to make out and file of record a cost other incorporators to obtain the identicertificate of such sale (Pol. Code, 88 3761 to cal privilege. Since in this state these fran3778). The only practical effect of a compli-chises are open to all upon the same condiance with these provisions, in addition to tions, that cost is the mere expense of filing preserving the rights of the state in the mat papers and procuring clerks' certificates, say ter of such taxes as are ultimately found to $10, and it cannot be said that such a franbe valid, is to start running the period of chise or privilege can ever be worth more five years within which redemption can be than that amount while our laws remain uneffected and at the expiration of which a deed changed. A tremendous distinction is, of may be issued to the state. During this course, to be observed between this franchise period, the legal title to the property contin to be a corporation and some special franues in the taxpayer, subject to the lien in chise to do a particular thing, as the franfavor of the state created by the assessment
chise to use a particular city street for street and levy. Neither the certificate of sale railroad purposes. Such a franchise, and (see Clarke v. Mead, 102 Cal. 516, 36 Pac. others of like kind, often have enormous value, 862), nor any of these acts of the tax col and this value comes from the fact that once lector constitutes even prima facie evidence granted, no other person can obtain them. It as to the validity of assessment or levy, and is not open to citizens upon the same terms, the taxpayer has a full and complete pro but it is in its nature monopolistic. But I tection against the creation of any cloud upon advert to this merely in passing, for we are his title in the enjoining of the execution here dealing with the franchise to be a corof the deed. Under such circumstances, equi- poration. ty will not interpose to the extent of pre To illustrate the fallacy of assessing the venting the performance of those prelim- difference in value between the market value inary acts which cannot affect the rights of of stock and the value of the tangible propa taxpayer, the failure to perform which may erty as franchise let us instance a case. result in prejudice to the state in the en Three men as copartners are engaged in the forcement of its revenue laws.
business of selling dry goods. By the exerThe order denying the motion to dissolve cise of varied qualities which go to make a the injunction is reversed.
business success they have developed an enor
mous and profitable business. They are asWe concur: BEATTY, C. J.; SHAW, J.; sessed for the value of their tangible propSLOSS, J.; LORIGAN, J.
erty, the stock on their shelves and their sol
vent credits or book accounts. They decide I dissent: MCFARLAND, J.
to incorporate, and without the slightest
change in location, stock, book accounts, HENSHAW, J. I concur in the judgment, without the slightest change of any kind, they and generally in the reasoning and principles pay $10 to the state of California, obtain artiannounced in the prevailing opinion. Some cles of incorporation and issue to themselves thing more, however, remains to be said upon each one-third of the shares. These shares the question, and no better time for its saying have a value far in excess of the total value presents itself than is offered by the present of the goods on the shelves and of the solcase. Concededly it is of the highest import vent credits. Upon an investment say of ance to the commonwealth that the tax sys $1,000,000 their profits show a return of 6 tem should be uniform and just and that no
per cent. upon $10,000,000. Finding, thereone person or class of persons should be ex fore, the value of the solvent credits, and empt from the payment of a tax, the collec goods on hand at $1,000,000 and the value of tion of which is enforced against others. Per the stock at $10,000,000, the assessor assesses contra, that no one person or class of persons this corporation $9,000,000 for its franchise, should be compelled to pay a tax which is for which franchise but the day before it not enforced against others. The fault of
The fault of paid the state $10, and as to which franchise our system in this regarda fault of which -which is merely the privilege as a corporathe taxpayer may justly be heard to com tion to carry on the business of buying and plain-is not in the assessment of intangible selling dry goods—any 3 men in the state of property represented by the difference be California may secure the identical privilege tween the market value of the stock and the for the same expenditure of money. The value of the tangible property, but it is in necessary result would be that while yestercalling this difference the value of the "fran- | day the privilege was assessed for $1,000,000,
to-day the corporation is assessed for $10,- ! results can only be reached by correct reason000,000, $9,000,000 of which is the so-called ing and correct reasoning and a true interprevalue of the franchise. I am not disputing | tation is essential to that great desideratum, the existence of this $9,000,000 of property. the uniformity in operation of our revenue I do insist that it was not called into being, system. Therefore I am here contending that nor in any way created, through the privilege the property which is assessed should be asto be a corporation so granted by the state. sessed under its true name, and that this This $9,000,000 is, and logically can be, noth should be declared by this court, not only being other than the good will of the business, cause it is the logical and correct interpretawhich good will is itself a species of property tion of the law, but because it is of great distinctly recognized by the laws of this moment that the assessors themselves should state, property capable of private ownership, be properly directed in their delicate tasks, and, therefore, property which should be as and that the taxpayer in turn should know sessed. And not only should it be assessed, upon just what property of his the law is but I insist it should be assessed not under imposing its burden. My position, therefore, the misleading and deceptive misnomer of is not that corporations should not pay this franchise, but assessed, for what it really is, tax. But they should not be expected to pay good will. (Civ. Code, $$ (55, 992, 993.)
it under the blind and misleading guise of Even if the Legislature should declare that franchise. They should be called upon to it should be assessed as franchise, this dec pay taxes upon the property as it actually is laration does not make it franchise. The -the good will. legislative declaration that it should be as No Justice of this court, I think, disagrees sessed as "beauty" would not make it beauty. with me upon the proposition that in fact it The simple proof of the matter is that of this is the good will which is being assessed un$9,000,000 assessed as franchise, $8,999,990 der the guise of franchise, and no one will are in effect good will, and the remaining question but if the good will of a corpora$10, is the value of the franchise. Nor do I tion is thus subject to assessment in this think that this matter should be lightly put state, the good will of every other business, aside with the statement that as the prop
whether carried on by a partnership or an erty after all is assessed it does not matter individual, should equally be subject to taxaunder what name it pays its taxes. Logical tion.
(41 Wash. 172)
MILLER V. O'LEARY. (Supreme Court of Washington. Oct. 19, 1906.) 1. ADVERSE POSSESSION-EXTENT OF POSSESSION.
Where the lessor of a lot had no title to a strip thereof, the construction on the strip by the lessee of a sidewalk leading to å joss house was not an adverse possession of the entire strip under the 12 years' statute of limitations.
d. Yote.-For cases in point. see vol. 1, (ent. Dig. Adverse Possession, $ 537.) 2. SAJE--PAYMENT OF TAXES.
i'nder the 7 years' statute of limitation requiring payment of taxes under claim and color of title. payment of taxes on land outside of the taxpayer's boundaries, under an error as to the location of the boundaries, was insufficient.
[Ed. Yote.--For cases in point, see vol. 1, Cent. Dig. Adverse Possession, § 512.]
Appeal from Superior Court, King County ; Gev. E. Morris, Judge.
Action by Mary M. Miller against J. O'Leary. From a judgment in favor of plaintiff, defendant appeals and plaintiff files ('ross-appeal. Affirmed.
Harold Preston and Fred H. Peterson, for appellant. Blaine, Tucker & Hyland and F. R. Conway, for respondent.
PER CURIAM. Mary M. Miller, plaintiff below, brought this action against James O'Leary, defendant, to recover the possession of a tract of land situate in the city of Seattle and described as the north 10 feet of lot 6 in block 30, of David S. Maynard's plat of the town of Seattle. From the record it is inade to appear that some time prior to 1853 Ilenry L. Yesler and David S. Maynard sererally settled upon and located under the Oregon donation act land claims in what is now the city of Seattle. The claims adjoined each other; the south line of Yesler's claim forming the north boundary of Maynard's. In 1853 Maynard filed the town plat above mentioned, evidently believing that the land
included therein lay wholly within his own · donation claim. But in this he was mistaken,
as it actually extended over into Yesler's claim a distance of 130 feet. Block 30 was so platted that the north 10 feet of lot 6 therein, the tract in dispute, lay within the Yesler claim. Maynard, although he never acquired title to this 10-foot strip, conveyed the same not long after he filed the plat to one James Tilton, and from him the land passed through regular mesne conveyances to the defendant, who acquired it in June 25, 1896; his immediate grantor being one Daniel O'Leary.. The plaintiff bas title from Yesler, having purchased the property from the executor of his estate. To maintain her action the plaintiff relied upon the conveyance from the executor of Yesler's estate to herself. The defendant concedes that Maynard had no title to the land when he conveyed to Tilton, and that none passed to him by virtue of the several conveyances from the
| grantees of Tilton; but he contends that he
has title by virtue of the general statute of limitations relating to adverse possession, and the special statute relating to the payment of taxes for seven consecutive years. The case was tried before the court sitting without a jury, and resulted in findings and a judgment in favor of the plaintiff for the recovery of the land. Both parties appeal, the plaintiff froin the refusal of the court to award her judgment for rents, and the de. fendant from the judgment as entered.
With reference to the claim of adverse possession, it appears that in 1889 Daniel O'Leary, who then held the paper title, leased the whole of lot 6 to a Chinaman called "Quong Chong" for a term of five years, granting him permission to erect certain buildings upon the lot. At the time the lease was executed O'Leary claimed the whole of the lot, and pointed out its boundaries to Quong as the property leased. The lessee graded the lot immediately after the execution of the lease, and before the beginning of the year 1890 erected a joss house on the northwest corner of the lot immediately south of the strip, at the same time building a walk on the north side of the house along the strip back for a distance of about 60 feet, which was used as an entrance way to the rear door of the joss house, and to certain other buildings that were afterwards erected on the lot. This walk seems to have been maintained by the defendant's tenants from that time until shortly before the active dispute between the plaintiff and defendant began, perhaps about the year 1901. With the exception of the payment of taxes to be mentioned later, these are, in substance, the only overt acts of adverse possession shown. Whether such acts, if they stood alone, would justify the court in saying that the legal title had been diverted from the plaintiff to the defendant. we think might reasonably be questioned; but other facts shown, it seems to us, scarcely leave the case in doubt. The most potent of these is the fact that no permanent structure in the way of a building was put upon the strip. Although the tenants of the defendant's grantor studded the remaining portion of the lot with a variety of buildings, even to the very margin of the disputed ground, yet scrupulous cave was observed not to extend them onto it. It hardly seems possible that had the defendant's grantor contended in good faith as early as 1889 that the disputed tract passed by the deed from Maynard, or that he otherwise had claim to it, he would not have covered it with buildings. One of the plaintiff's witnesses, moreover, testified that the Chinese lessee did start to erect the joss house ne ir the north line of the lot as platted, going so far as to level off the ground and commence the foundation, but shortly afterwards, at the solicitation of some one, moved it south until it was off the disputed strip.