Santa Clara County v. Southern Pacific Railroad

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.

Santa Clara County v. Southern Pacific Railroad
Supreme Court of the United States
Argued January 26–29, 1886 Decided May 10, 1886
Full case name	Santa Clara County v. Southern Pacific Railroad Company
Citations	118 U.S. 394 (more)
Holding
The railroad corporations are persons with the intent of the Fourteenth Amendment to the U.S. Constitution.
Court membership
Chief Justice Morrison Waite Associate Justices Samuel F. Miller · Stephen J. Field Joseph P. Bradley · John M. Harlan William B. Woods · T. Stanley Matthews Horace Gray · Samuel Blatchford
Case opinions
Majority	Harlan, joined by Unanimous court
Laws applied
14 Stat. 292, §§ 1, 2, 3, 11, 18 (an Act of 1866 giving special privileges to the Atlantic and Pacific Railway Corporation)

Santa Clara County v. Southern Pacific Railroad Company, 118 U.S. 394 (1886) was a United States Supreme Court case dealing with taxation of railroad properties. The case is most notable for the obiter dictum statement that corporations are entitled to protection under the Fourteenth Amendment.^[1][2]

For its opinion, the Court consolidated three separate cases:

• Santa Clara County v. Southern Pacific Railroad Company
• California v. Central Pacific Railroad Company
• California v. Southern Pacific Railroad Company

Contents 1 History and legal dispute 2 A passing remark 3 Decision 4 Significance 5 See also 6 References 7 External links

History and legal dispute

At the California Constitutional Convention of 1878-79, the state legislature drew up a new constitution that denied railroads "the right to deduct the amount of their debts [i.e., mortgages] from the taxable value of their property, a right which was given to individuals." ^[3] Southern Pacific Railroad Company refused to pay taxes under these new changes. The taxpaying railroads challenged this law, based on a conflicting federal statute of 1866 which gave them privileges inconsistent with state taxation (14 Stat. 292, §§ 1, 2, 3, 11, 18).

San Mateo County, along with neighboring counties, filed suit against the railroads to recoup the massive losses in tax revenue stemming from Southern Pacific's refusal to pay. After hearing arguments in San Mateo County v. Southern Pacific Railroad Company, the California Supreme Court sided with the county. Using the Jurisdiction and Removal Act of 1875, a law created so black litigants could bypass hostile southern state courts if they were denied justice, Southern Pacific was able to appeal all the way to the U.S. Supreme Court.^[4]

A passing remark

Bancroft Davis, the Court Reporter and former president of Newburgh and New York Railway

The decisions reached by the Supreme Court are promulgated to the legal community by way of books called United States Reports. Preceding every case entry is a headnote, a short summary in which a court reporter summarizes the opinion as well as outlining the main facts and arguments. For example, in U.S. v. Detroit Timber and Lumber (1905), headnotes are defined as "not the work of the Court, but are simply the work of the Reporter, giving his understanding of the decision, prepared for the convenience of the profession."^[5]

The court reporter, J.C. Bancroft Davis, wrote the following as part of the headnote for the case:

"The court does not wish to hear argument on the question whether the provision in the Fourteenth Amendment to the Constitution, which forbids a State to deny to any person within its jurisdiction the equal protection of the laws, applies to these corporations. We are all of the opinion that it does."^[6]

In other words, corporations enjoyed the same rights under the Fourteenth Amendment as did natural persons.^[7] However, this issue is absent from the court's opinion itself.

Before publication in United States Reports, Davis wrote a letter to Chief Justice Morrison Waite, dated May 26, 1886, to make sure his headnote was correct:

Dear Chief Justice, I have a memorandum in the California Cases Santa Clara County v. Southern Pacific &c As follows. In opening the Court stated that it did not wish to hear argument on the question whether the Fourteenth Amendment applies to such corporations as are parties in these suits. All the Judges were of the opinion that it does.^[8]

Waite replied:

I think your mem. in the California Railroad Tax cases expresses with sufficient accuracy what was said before the argument began. I leave it with you to determine whether anything need be said about it in the report inasmuch as we avoided meeting the constitutional question in the decision.^[9]

C. Peter Magrath, who discovered the exchange while researching Morrison C. Waite: The Triumph of Character, writes "In other words, to the Reporter fell the decision which enshrined the declaration in the United States Reports...had Davis left it out, Santa Clara County v. Southern Pac[ific] R[ailroad] Co. would have been lost to history among thousands of uninteresting tax cases."^[10]

Author Jack Beatty wrote about the lingering questions as to how the reporter's note reflected a quotation that was absent from the opinion itself.

Why did the chief justice issue his dictum? Why did he leave it up to Davis to include it in the headnotes? After Waite told him that the Court 'avoided' the issue of corporate personhood, why did Davis include it? Why, indeed, did he begin his headnote with it? The opinion made plain that the Court did not decide the corporate personality issue and the subsidiary equal protection issue.^[11]

Decision

The court's actual decision was uncontroversial. A unanimous decision issued by Justice ruled on the matter of fences -- in that the state of California illegally included the fences running beside the tracks in its assessment of the total value of the railroad's property. As a result, the county could not collect taxes from Southern Pacific that it was not allowed to collect in the first place.^[12]

The Supreme Court never reached the equal protection claims. Nonetheless, this case is sometimes incorrectly cited as holding that corporations, as juristic persons, are protected by the Fourteenth Amendment.^[13]

Significance

As such, it did not technically - in the view of most legal historians - have any legal precedential value.^[14] However, the Supreme Court is not required by Constitution or even precedent to limit its rulings to written statements.

Justice William O. Douglas wrote in 1949, "the Santa Clara case becomes one of the most momentous of all our decisions.. Corporations were now armed with constitutional prerogatives."

Justice Hugo Black wrote "in 1886, this Court in the case of Santa Clara County v. Southern Pacific Railroad, decided for the first time that the word 'person' in the amendment did in some instances include corporations...The history of the amendment proves that the people were told that its purpose was to protect weak and helpless human beings and were not told that it was intended to remove corporations in any fashion from the control of state governments...The language of the amendment itself does not support the theory that it was passed for the benefit of corporations."

See also

• Corporate Personhood Debate
• Juristic person
• Equal protection
• List of United States Supreme Court cases, volume 118

References

1. ^ http://www.answers.com/topic/santa-clara-county-v-southern-pacific-railroad
2. ^ http://www.sccsuperiorcourt.org/aboutus_court_history.htm
3. ^ Carl Brent Swisher, "Motivation and Political Technique" in The California Constitutional Convention, 1878-1879 (New York: Da Capo, 1969), p. 78
4. ^ R. Hal Williams, The Democratic Party and California Politics, 1880-1896 (Stanford: Stanford University Press, 1973), pp. 34-36
5. ^ http://supreme.justia.com/us/200/321/
6. ^ 118 U.S. 394 (1886) - According to the official court Syllabus in the United States Reports
7. ^ Westlaw, http://www.answers.com/topic/santa-clara-county-v-southern-pacific-railroad
8. ^ Jack Beatty, Age of Betrayal: The Triumph of Money in America, 1865-1900 p.172
9. ^ Ibid.
10. ^ C. Peter McGrath, Morrison R. Waite: The Triumph of Character (New York: Macmillan, 1963), p.117
11. ^ Beatty, Age of Betrayal, p. 173
12. ^ 118 US Reports 412-17
13. ^ When Is a Corporation Like a Freed Slave?
14. ^ Thomas Van Flein. "Headnotes and the Course of History." The Alaska Bar Rag. May/June, 2003 (27 AK Bar Rag 2)

External links

• Text of Santa Clara County v. Southern Pacific Railroad, 118 U.S. 394 (1886) is available from:  · Enfacto · Justia

• Barry Yeoman, When Is a Corporation Like a Freed Slave?, Mother Jones
• "Unequal Protection: The Rise of Corporate Dominance and the Theft of Human Rights" by Thom Hartmann
• "Supreme Court Correspondence Uncovered" De-fact-o.com
• "Why do corporations have the same rights as you?" HowStuffWorks.com

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