Santa Clara County v. Southern Pacific Railroad Co

118 U.S. 394 (1886), argued 26–29 Jan. 1886, decided 10 May 1886 by vote of 9 to 0; Harlan for the Court. This was one of the legion of cases involving railroads and government agencies (at every level) that inundated the courts in the late nineteenth century. The State of California and certain affected counties sought to collect taxes that they claimed were owed by both the Southern Pacific and Central Pacific railroads. Argument focused almost entirely on whether the taxes were barred by the Due Process Clause of the Fourteenth Amendment.

The U.S. Supreme Court did not address the constitutional issues posed by counsel. Instead, it based its ruling on a narrower issue: whether the fences on the railroads' property should have been assessed by either county or state taxing authorities. Justice John Marshall Harlan held that such fences could not be taxed as property subject to taxation under California statute; the Court's ruling upheld that of the California court.

Despite the Court's narrow holding, the case was not without constitutional consequence. In an unusual preface, entered before argument, Chief Justice Morrison R. Waite observed that the Court would not consider the question “whether the provision in the Fourteenth Amendment to the Constitution which forbade a state to deny to any person within its jurisdiction the equal protection of the Constitution, applied to these corporations. We are all of the opinion that it does” (p. 396). It followed that corporations enjoyed the same rights under the Fourteenth Amendment as did natural persons.

See also Due Process, Substantive; Private Corporation Charters.

— Augustus M. Burns III

• 118 U.S. 394 (1886)
• Vote: 9–0
• For the Court: Harlan

The state of California tried to collect taxes owed by the Southern Pacific and Central Pacific railroads. Advocates for the railroad companies claimed that the due process clause of the 14th Amendment made the state tax levy against them unconstitutional. The 14th Amendment says that no state shall “deprive any person of life, liberty, or property without due process of law.” The railroad company advocates argued that the state tax levy was an unconstitutional denial of their rights to property.

The Issue

Was a corporation protected against state interference with its rights in the same way that a person was protected? If not, the California taxes on the railroads should be enforced. If so, the taxes could be declared invalid.

Opinion of the Court

The Supreme Court did not directly address the 14th Amendment issue in its opinion. Indeed, Chief Justice Morrison Waite announced, even before the Court heard oral arguments, that the Court would not deal with the question of “whether the provision in the Fourteenth Amendment to the Constitution which forbade a state to deny to any person within its jurisdiction the equal protection of the Constitution, applied to these corporations. We are all of the opinion that it does.”

Having established that the Court would apply the 14th Amendment protection of constitutional rights to corporations in the same way as it did to individuals, the Court focused on the narrow issue of whether the state of California could tax fences on the railroad companies' property. The Court decided against the state of California, ruling that the state tax law was a violation of the 14th Amendment due process rights of the corporation, defined by the Court as a person.

Significance

Corporations were established in constitutional law as “persons” within the meaning of the 14th Amendment. By using the due process guarantees of the 14th Amendment, corporation lawyers were able to protect businesses from many kinds of state government regulations put forward in behalf of the public good. This view of corporations as persons protected by the 14th Amendment was not fully overturned until the 1930s. In West Coast Hotel Co. v. Parrish (1937), for example, the Court upheld a state law regulating wages of women workers of a private business. The Court refused to protect the rights of the business as a person under the 14th Amendment.

See also West Coast Hotel Co. v. Parrish

An 1886 Supreme Court decision, Santa Clara County v. Southern Pacific Railroad Company, 118 U.S. 394, 6 S. Ct. 1132, 30 L. Ed. 118, is often cited for the principle that the term person as used in the Equal Protection Clause of the Fourteenth Amendment applies to corporations as well as to natural persons.

The Southern Pacific Railroad Company refused to pay a tax assessed by the California Board of Equalization upon its franchise, roadways, roadbeds, fences, and rolling stock. The county brought an action in state court against the railroad to recover the delinquent taxes. The railroad had the action removed to the federal district court. The court agreed with the defendant that the assessment of the tax was void because the board had no jurisdiction to act. It also ruled that the defendant had been denied equal protection of the law because the assessment of the property was made at full monetary value without the discount that was given to individual property owners for outstanding mortgages on their property. The county filed a writ of error to the federal court, and the U.S. Supreme Court heard the case.

The Court agreed with the railroad that the state board had no jurisdiction to assess the tax. The assessment of taxes by the board on fences belonging to the railroad was deemed void because the board was authorized by the state constitution to assess only "the franchise, roadway roadbed, rails, and rolling stock." The Court rejected the argument that the fences constituted part of the roadway for purposes of taxation. The constitution required a separate assessment for "land, and improvements thereon" and a state statute expressly included the term fence within the categories of improvements. The state board acting through the county sought to have the plaintiff liable for a single sum, incorporating taxes assessed upon various types of property, including property that the board had no power to assess. The Court declared that since part of the assessment was illegal, it could not support an action for the county to recover the entire tax; therefore, it affirmed the judgment for the defendants.

The Court did not explicitly discuss the Fourteenth Amendment in its opinion, basing its decision on the invalidity of the assessment. In its statement of the facts of the case, it did, however, set out the Fourteenth Amendment claims of the railroad. The California constitution denied "railroads and other quasi public corporations" equal protection of laws as guaranteed by the Fourteenth Amendment to the Constitution because the board did not reduce the value of property for assessment purposes by the amount of any outstanding mortgage debts on it, as it did for property owned by natural persons or other corporations. Although the Supreme Court did not specifically rule on the constitutionality of the treatment of the railroad by the state, the case of County of Santa Clara v. Southern Pacific Railroad Company is cited to support the principle that both corporations and natural persons are entitled to equal protection of laws pursuant to the Fourteenth Amendment to the Constitution.

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