I am unable to concur in the result reached by the majority, and specially dissent from so much of the opinion as seems to approve of the doctrine that legislation affecting municipal corporations is not subject to constitutional limitations. I am prepared to admit that the test of proper classification for purposes of taxation is the same under the equality clause of the Fourteenth Amendment and the taxation clause of our State Constitution, but I do not subscribe to the proposition that the limitation imposed by the latter permits the adoption of any scheme of taxation which does not offend the former as it may be construed by the Federal Supreme Court. In other words, a holding by that Court that a municipal corporation *Page 357 has no standing to invoke the protection of the Fourteenth Amendment against unequal taxation would not control the question arising under the State Constitution. It may be that Court has gone so far in the Trenton and the Newark cases, cited in the majority opinion, as to hold that the Fourteenth Amendment affords a municipal corporation no protection against legislation affecting its property held in a private or proprietary capacity. If so, the Court has departed from its former holdings and ignored the distinction, recognized by it for more than a century, between the rights of a municipal corporation respecting property held in a purely governmental capacity and that held in a private or proprietary capacity. In the circumstances, it is of special importance that the distinction between the protection afforded by the two provisions should be preserved. Municipal corporations like the plaintiff are either entitled to the same protection respecting their property held in a private capacity as the Constitution guarantees to individuals, or they have no protection from legislative encroachments. If they may be subjected to taxation that does not meet the requirements of the Constitution they must equally be denied the benefit of all constitutional limitations. There is no exception in favor of tax legislation.
It is the well-established rule in most of the jurisdictions where the question has arisen that the property rights of municipal corporations (referring to property acquired in their private or proprietary capacity) are protected by the same constitutional guaranties which shield the property of individuals from legislative aggression. Many of the leading cases are collected in 19 R.C.L. 760. See, also, City of Boston v. Treasurer Receiver General, 237 Mass. 403, 130 N.E. 390, 394; Springfield Gas Elcc. Co. v. Sprigfield, 292 Ill. 236, 126 N.E. 739, 18 A.L.R. 929. It is the settled doctrine of our own cases. Those most in point are Town of Poultney v. Town of Wells, 1 Aikens 180, 186; Montpelier v. East Montpelier, 27 Vt. 704; same case, 29 Vt. 12, 67 A.D. 748; Atkins v. Town of Randolph,31 Vt. 226, 237; Plimpton v. Somerset, 33 Vt. 283; Sargent v. Clark,83 Vt. 523, 77 A. 337. The doctrine is recognized in Stiles v.Newport, 76 Vt. 154, 56 A. 662. It is not claimed that the plaintiff's electric plant is held in a governmental capacity, and it clearly is property held in its private or proprietary capacity. On the authority of these cases the plaintiff *Page 358 would be entitled to the same protection against unconstitutional tax legislation as a private corporation or an individual. The effect of the opinion of the majority is to overrule these cases, though they are not referred to, and to commit the court to a doctrine which Judge Cooley has characterized as "dangerous in government and unsound in constitutional law." Cooley on Taxation, 481. The majority have gone out of their way to accomplish this result, for in the end they uphold the constitutionality of the statute.
As I view it the only open question in the case is one of classification. I recognize the rule that statutes are not to be declared unconstitutional unless their invalidity appears beyond any reasonable doubt; but the classification on which this statute is based appears so clearly arbitrary that I am unable to entertain any doubt of its invalidity. There is no disagreement respecting the test of proper classification. It is well stated by Rowell, J., in State v. Hoyt, 71 Vt. 59, 42 A. 973. The difficulty inheres in its application. It will be admitted that the rule requiring proportionate taxation may be as effectually abrogated by arbitrary exemptions from taxation as by arbitrary imposition of unequal taxation. Besides it is constantly to be borne in mind that the right of classification is allowed in order to avoid or correct inequalities, never to create them. The effect of the questioned statute is to make two classes of municipal electric light plants for taxation purposes distinguished merely by location, whether within or without the town where the municipality owning the plant is situated.
The mere fact of classification is not enough. To withstand the constitutional test the classification must be reasonable, not a mere arbitrary selection, and must rest upon some real and substantial difference existing between the classes, having a fair relation to the object sought to be accomplished by the legislation, so that all persons similarly situated shall be treated alike — in short, some just and substantial reason for the difference in treatment between the two classes. The RoysterGuano Co. v. Virginia, 253 U.S. 412, 64 L. ed. 989, 40 Sup. Ct. 560. Stated differently, but to the same effect, the test of a valid classification is a substantial distinction which differentiates in important particulars the persons to whom it applies from all other persons, having some just and reasonable relation to the purpose of the law. Springfield Gas Elec. Co. v. Springfield, supra. See, *Page 359 also, State v. Hazelton, 78 Vt. 467, 63 A. 305; State v. Hoyt,supra; State v. Shedroi, 75 Vt. 277, 54 A. 1081, 63 L.R.A. 179, 98 A.S.R. 825. The principle is everywhere recognized that there can be no valid discrimination between subjects which properly belong to the same class. Proper classification, then, can be based only upon real differences existing between the classes. Any attempted classification must fail which results in a distinction between members of the same class.
It was held in State v. Hoyt that classification based on a difference of residence was purely arbitrary. It seems clear that the basis of the classification in the case at bar is of the same quality. The test must be the same whether the owner of property is a municipal corporation or an individual. The effect of the classification is to exempt resident and tax nonresident owners of the same kind of property. The opinion discusses at some length the justice and reasonableness of the tax as between the plaintiff and defendant, but that is wholly beside the point. The test is not whether, as between the municipalities owning the property and the taxing districts where the property happens to be located, the exemption is just or unjust or the imposition of the tax reasonable or unreasonable. It is wholly a question of discrimination between municipalities owning the same kind of property. The question can be met only by showing that a substantial difference exists between the municipalities taxed and those exempted, making the distinction just and reasonable as between them. I have yet to discover any satisfactory explanation why two municipal electric plants in all respects alike, except that one is located within and the other without the boundaries of the town where the owner is situated, should not be treated alike where the true test of proper classification is applied. It is no answer to say that the town within which the particular village is located is specially benefited, for the test is not a difference in benefits of the taxing districts; and, besides, there is no such difference. The only difference in condition between the municipalities taxed and those exempted is the location of their property. All are engaged in precisely the same kind of enterprise and the property employed has no distinguishing characteristics except the accident of location with reference to town lines. All are engaged in a public service and are subject to supervision by the Public Service Commission. They would owe the public outside *Page 360 their corporate limits the same duty in all respects regardless of town lines. To my mind this is not the "real and substantial difference" upon which a valid classification rests, but is an arbitrary and fanciful distinction. This should be seen when we consider how the mere change of town lines might affect the taxability of municipal property, or the situation that would exist if two municipalities, the one resident and the other non-resident, owned electric plants located in the same town.
In the cases relied upon by the majority, as stated in their opinion, the constitutionality of the statutes there in question was not involved. Consequently they are not entitled to the force given them. No case is cited, and I venture to say that none can be found, that supports the validity of the attempted classification. A similar question arose in Essex County ParkCom. v. Town of West Orange, 77 N.J. Law, 575, 73 A. 511, and it was held that classification according to location of the property could not be sustained. It was pointed out that such a classification was not according to any feature inherent in the property itself, but with reference to the mere chance of location, a circumstance entirely disconnected with the characteristics of the property.
The statement that "for obvious reasons no other exemption area could be fixed, in this State, in view of the interrelation between villages and the town of which they are a part, in the matter of taxation" adds nothing to the argument. As municipal corporations they are entirely distinct. The fact that village grand lists are made up as they are certainly would not stand in the way of limiting the exemption to that part of the property owned by a village located within its territorial limits and taxing so much of it as is located within the town outside. If it were admitted that a sufficient basis could be discovered for such a classification, though no case is found where the question has been discussed and decided, the inclusion of the whole town in the exemption area presents an entirely different question. The fact that the town grand list is made the basis for ascertaining the village grand list in no way affects the relations of the two municipalities, and affords no satisfactory reason for the classification of property to be taxed or exempted from taxation. The Legislature would doubtless have authority to provide for the uniform taxation of municipal electric plants. Such a measure would answer every valid argument advanced in support of *Page 361 the questioned act. But, when it undertook a classification based solely upon the location of the property, its action was clearly discriminatory as between municipalities taxed and those exempted from taxation, and for that reason in contravention of the Constitution. I would affirm the judgment.