petitioner by general laws, subject to alteration, amendment or repeal, come within the definition of the term "property'?

Under the new constitution it is impossible to grant a franchise, in the property sense of that term, to either natural or artificial persons, for it declares (art. 1, § 21); "No special privileges or immunities shall be granted which may not be altered, revoked or repealed by the legislature. Nor shall any class of citizens be granted privileges or immunities which upon the same terms shall not be granted to all citizens." And, again (art. 4, § 25): "The legislature shall not pass local or special laws in any of the following enumerated cases, that is to say: Granting to any corporation, association or individual any exclusive right, privilege or immunity in all cases where a general law may be made. applicable."

is

It is evident, therefore, that the day of "franchises" as property over. The whole tendency of the civilized government, is to do away with special or exclusive privileges, and wherever a right is extended by the government to make it common to all. Equality of right, equality of privilege, and equality of burden, are now the crowning franchises of all persons, natural and artificial, in this state. The great difficulty in construing a word like "franchise," which has figured extensively in the evolution of government, is that the attributes of a by-gone age are likely to be given to it notwithstanding the modifications that may have taken place in its character, and scope.

As already stated the power of society over the individual is absolute. It is called the power of government, or the police power. Every privilege which the individual, either specially or as a member of a class or in common with all other individuals enjoys, may be regarded in one sense as a grant from the government.

The despot who rules with the consent or by the sufferance of society has absolute power over the vocation of life. He can grant to a certain individual the right to pursue a special trade exclusively, or he can throw open such trade or occupation to all. When such a grant is made to an individual, his heirs and assigns, it may be regarded as his property, and when such a grant is made to all individuals it is no less a franchise; it is a freedom, a liberty, but not "property." If we look back to the times of Elizabeth, James I and Charles I, we will find many examples of special grants which partook of the nature of property. Hallam, in his Constitutional History of England, vol. 1, ch. v, speaking of the reign of Elizabeth, says: "The crown either possessed or assumed the prerogative of regulating almost all matters of commerce at its discretion."

"Patents to deal exclusively in particular articles, generally of foreign growth, but reaching in some instances to such important necessaries of life as salt, leather and coal, had been lavishly granted to the courtiers, with little direct advantage to the revenue. They sold them to companies of merchants, who, of course, enhanced the price to the utmost ability of the purchaser."

"In 1601 parliament made a bolder and more successful attack on the administration than this reign had witnessed. The grievance of

monopolies had goné on continually increasing; scarce any article. was exempt from these oppressive patents. When the list of them was read over in the house a member exclaimed: 'Is not bread among the number?' The house seemed amazed. 'Nay,' said he, if no remedy is found for these, bread will be there before the next parlia

ment.

It was in those times that the East India Company was organized under letters patent from the crown, and vested with the exclusive right to trade in India. Monopolies were granted by letters patent, conferring the exclusive right to deal in necessaries of life, such as coal, iron, soap, salt, leather, tobacco, beer, hops, linen, etc. (Bright's English Hist., vol. 11, p. 629.) Rights of ferry, rights of wharfage, rights of fishing, rights of chase and of toll-roads, etc., were also granted. All these grants, as a rule, were made by letters patent, running to an individual, his heirs or assigns, and exclusive in their nature. They were protected by the courts as property, and it was held by the courts that no grant could be made by the sovereign which would interfere with or impair the exercise of the previous grant. They were therefore termed incorporeal hereditaments, and, Kent, in speaking of such franchises, says (Kent's Com., vol. 3, page 458): "Another class of incorporeal hereditaments are franchises, being certain privileges conferred by grant from government, and vested in individuals. In England they are very numerous and are understood to be royal privileges in the hands of a subject. They contain an implied covenant on the part of the government not to invade the rights vested. The government can not resume them at pleasure or do any act to impair the grant without a breach of An estate in such a franchise and an estate in law rest upon the same principle, being equally grants of a right or privilege for an adequate consideration. If the creation of a franchise be not declared to be exclusive, yet it is necessarily implied in the grant, as in the case of the grant of the ferry, bridge, or turnpike, or railroad, that the government will not, either directly or indirectly, interfere with it, so as to destroy or materially impair its value. Every such interference, whether it be by the creation of a rival franchise or otherwise, would be in violation or in fraud of the grant."

contract.

Such was the nature of franchises in England, and also in this country at the time Chancellor Kent wrote. In the celebrated case of Dartmouth College v. Woodward, 4 Wheaton 519, it was decided that the charter granted by the British Crown to Dartmouth College was a contract, and that an act of the legislature of New Hampshire altering the charter was an act impairing the obligation of a contract, and was unconstitutional and void. Justice Washington said (page 657): "To this grant or this franchise the parties are the king, and the person for whose benefit it is created or trustees for them. The assent of both is necessary. The subjects of the grant are not only privileges and immunities, but property. Certain obligations are created, binding both on the grantor and grantee. On the part of the former, it amounts to an extinguishment of the king's pre

*

rogative to bestow the same identical franchise on another corporate body, because it would prejudice his prior grant. It implies, therefore, a contract not to reassert the right to grant the franchise to another, or to impair it."

Justice Story says (p. 700): "In respect to corporate franchises they are, properly speaking, legal estates vested in the corporation itself as soon as it is in esse. They are not mere naked powers granted to the corporation, but powers coupled with an interest."

Mr. Webster, in his memorable argument in that case said: "Hume gives the reason: It is that such franchises were regarded in a most emphatic sense as private property. If it could be made to appear that the trustees and the president and professors held their offices and franchises during the pleasure of the legislature and that the property holden belonged to the state, then indeed the legislature have done no more than they had a right to do. But this is not so. The charter is a charter of privileges and immunities, and these are holden by the trustees expressly against the state forever."

The decision of this case attracted great attention. Its effect was feared; it placed the creature beyond the power of the creator, and as a result of it the various states adopted constitutional amendments, providing for the formation of corporations under general laws, which should be subject to alteration, amendment or repeal. The courts themselves in a measure shrank back from the doctrine of that case, and in a subsequent case, argued in the supreme court of the United States, entitled Charles River Bridge v. Warren Bridge et al. (11 Peters 420), they modified the doctrine which had previously existed as to the exclusiveness of franchises, and declared "that a franchise conferred by the government was not exclusive unless so expressed in the grant. This remained the settled doctrine of the American courts since that decision.

It will be observed, therefore, that the tendency of the people, acting through constitutional conventions and representative legislatures and of the courts, has been to modify the doctrine of the Dartmouth College case, and to make powers conferred by the government upon persons, natural or artificial, mere privileges enjoyed, not property owned. This tendency has reached its highest development in our state, where the legislature is not permitted to grant any special privilege to any person, natural or artificial, and where all privileges conferred by the sovereign power are made of common right and general enjoyment.

The only case which has been called to our attention in which a tax has been imposed upon the franchise of a corporation as property, separate and apart from the property in connection with which it is exercised is the case of Exchange Bank of Columbus v. Hines, 3 Ohio St. 7, in which the court declared the tax invalid, in the following language:

Does a corporate franchise, in sober truth and reality, possess the essential qualities of property? It is said that the corporate franchise of a bank, conferring a peculiar legal capacity, and the high function

of making and circulating paper money, is valuable-indeed, a thing of great value. But value is not the distinguishing attribute of property. The right of suffrage is esteemed valuable; a public office, with its emoluments, is valuable; a license to keep a tavern, as formerly granted in this state, or a license to carry on any special business which is prohibited without a special grant of authority from the government, may be valuable, and a right to either of these things may be asserted and maintained in a court of justice, yet neither of them possesses the essential qualities which constitute property. Our right to the free use and enjoyment of things which are in common, such as air, light, water, etc., is valuable; and our right to the free use of the public highways, and to many of the privileges and advantages derived from the government may be valuable, and may be maintained by legal process. Yet none of these things come within the denomination of property. Those things which constitute the subject-matter of private property are such as the owner may exercise exclusive dominion over, in the use, enjoyment and disposal of them, without any control or diminution save only by the laws of the land. (1 Wend. Blackstone, 138.) It is a fundamental principle that property considered as an exclusive right to things contains not only a right to use those things, but a right to dispose of them, either by exchanging them for other things, or by giving them away to any other person, without any valuable consideration in return, or even of throwing them away, which is usually called relinquishing them." (Rutherford's Institutes 20; Puffendorff, c. 9, b. 7.)

"It is said that capability of alienation, or disposal, either by sale, devise, or abandonment, is an essential incident to property. (2 Kent's Com. 317.) "A corporate franchise, therefore, being a mere privilege, or grant of authority by the government, is not property of any description, and consequently not subject to taxation under the above provision of the constitution.”

The constitution not only provides that "all property shall be taxed in proportion to its value," but that such value is "to be ascertained as provided by law." The only rule laid down in the Political Code for the assessment of property is that contained in section 3637, to wit: "All taxable property must be assessed at its full cash value," which latter term is defined (§ 3617, subd. 5) as follows: "The terms value and cash value mean the amount at which the property would be taken in payment of a just debt due from a solvent debtor."

The rule applied was one which it was declared had the approval of the supreme court, in the case of San Jose Gas Co. v. January, viz., by ascertaining, first, the market value of the stock of the corporation; and secondly, the assessed value of the property thereof, and deducting the latter from the former, the difference was declared to be the value of the franchise.

The rule applied does not operate equally and uniformly upon all franchises, for in the case of a franchise enjoyed by an individual, there would be no stock from the aggregate market value of which could be deducted the value of the tangible property in order to

ascertain the value of the franchise, nor is it an equal or uniform rule in any sense, for it applies only to corporations, whereas the business of private individuals and firms should be subjected to the same mode of assessment. A mercantile firm may have a stock of goods on hand worth $100,000, and yet its business, the good will, so called, with the advantages which years of skillful and honorable attention to business united with fortunate circumstances may have given, may be worth five times as much as the stock, and yet the assessor assesses only the tangible property, and lets the good-will go free. The law provides that "private corporations may be formed for any purpose for which individuals may lawfully associate themselves." (C. C., § 286.) Such a mercantile firm could, if it chose, form itself into a mercantile corporation. With a stock of goods on hand never exceeding $100,000 it might earn, with a skill and ability of its members through the large custom acquired, a liberal rate of interest on $500,000, and the stock would sell in the market for that sum. In such cases, the assessor, pursuing the rule contended for here, would determine the value of the franchise to be $400,000; whereas, as a matter of fact, the right to be a corporation would be utterly valueless to a firm, and the difference between the market value of the stock and the value of the tangible property would simply be the good-will of the business; this would exist whether the concern was incorporated or not; and yet the difference is assessed only to corporations and not to individuals.

A more glaring instance of the absurdity of the rule applied is that of a newspaper whose value is almost entirely made up of skill, ability, enterprise and good-will. Take the case of the two leading newspapers of this city, the Chronicle and Call, owned by private proprietors. Each is valued at about $300,000, and probably yields its proprietors a liberal interest upon that amount. Probably the only property connected with either of these papers which the assessor would assess are the printing presses and fixtures, worth, say, $30,000; but if either paper should be incorporated into a joint-stock company, with a capital stock of $300,000, its stock would probably sell for that amount, as the value of the stock in the market is largely determined by the rate of interest paid as dividends upon it. The assessor then, in that case, would assess the franchise, that is, the privilege of conducting the same business in the name of an artificial being, at the difference between the value of the printing press and fixtures, and the market value of the stock, namely: $270,000. So the mere change in the conduct of the business of such a newspaper, from the hands of a natural person to those of an artificial person, would result in an assessment upon the latter ten times greater than upon the former, and yet this artificial person is a purely business corporation; it does not have the power of eminent domain, or exercise the royal prerogative of collecting tolls; the only franchise it possesses is the right to be a corporation.

THORNTON, J.

9-WIL. CASES.

Blackstone says, in relation to franchises: