These are appeals in two cases which, as they involve the same main legal proposition, will be disposed of together. They are actions to recover taxes paid to the tax-collector of San Joaquin County by plaintiff under protest — one to recover such taxes paid in the year 1898, the other for taxes paid in the year 1899, upon the assessment of a franchise hereinafter to be mentioned. Plaintiff is a corporation organized under the laws of this state for many purposes, among others to manufacture, use, transmit, purchase, and sell gas for illuminating, heating, and other purposes; to produce, generate, transmit, use, purchase, and sell electricity; to produce, conduct, use, purchase, and sell steam and steam power; and generally, to engage in the business of producing, transmitting, and selling light, heat, and power. The place where the principal business of the corporation is to be transacted is set forth in its articles of incorporation as required by section 290 of the Civil Code, and is declared to be the city and county of San Francisco. At the time when the assessments in question on this appeal were made the plaintiff corporation was actually engaged in the business of supplying the inhabitants of the city of Stockton with gas and electric light, using the streets of the city for that purpose, its pipes and conduits being laid therein for the distribution of gas, and its poles strung with wires *Page 315 erected thereon for the transmission of electricity. These assessments, made by the assessor of San Joaquin County, were of what was denominated the "franchise" of the appellant exercised in the city of Stockton, and which is described in the findings in each case as "the right and privilege of using the public streets and thoroughfares of said city of Stockton for laying down pipes and conduits therein and connections therewith, and for erecting poles therein and of running electric wires over, across, and about the same, and of making connections therewith so far as was necessary for supplying said city of Stockton and its inhabitants with gaslight and electric light, and in connection therewith to collect rates and charges for said light furnished said city and its inhabitants." In addition to the assessment upon its franchise as so described, the plaintiff was assessed each year in question upon other property in the city of Stockton, including its pipes, poles, and wires in use in, under, and upon the streets thereof. It paid all the other taxes levied without protest, but as to the taxes levied upon said franchise, paid them each year under protest, and these actions are brought to recover back the amounts so paid. Judgments were entered in favor of defendant, and from them plaintiff appeals.
It is provided by section 19 of article XI of the constitution that "in any city where there are no public works owned and controlled by the municipality for supplying the same with water or artificial light, any individual or any company duly incorporated for such purposes under and by authority of the laws of the state . . . shall have the privilege of using the public streets and thoroughfares thereof and of laying down pipes and conduits therein and connections therewith so far as may be necessary for introducing into and supplying such city and its inhabitants either with gaslight or other illuminating light, or with fresh water for domestic and all other purposes . . . upon the condition that the municipal government shall have the right to regulate the charges thereof." Section 3628 of the Political Code provides that "the franchise, roadway, roadbed, rails and rolling-stock of all railroads operated in more than one county in this state shall be assessed by the state board of equalization as hereinafter provided for. Other franchises, if granted by the authorities of a county, city, or city and county, must be assessed in the county, city, or *Page 316 city and county within which they were granted; if granted by any other other authority, they must be assessed in the county in which the corporations, firms or persons owning or holding them have their principal place of business." No question is raised but that a franchise is property under the terms of the constitution and the revenue laws of the state, and that it is taxable as such. The sole question relative thereto is, Was the franchise assessed against the plaintiff properly assessable in the county of San Joaquin?
It is insisted by appellant that as to a corporation organized under the laws of this state, and authorized to supply gas and electricity to cities for illuminating purposes, its corporate franchise included as a necessary part thereof, and as indispensable to the enjoyment of that franchise, the privileges extended by the constitutional provision of using the public streets and thoroughfares of cities for laying down pipes and conduits and placing thereon electric poles and stringing wires across and over the same, and, as an incident to such privilege, the right to collect from the cities and the inhabitants thereof for gas and electricity distributed and sold therein; that the right to exercise these privileges, extended by the constitutional provision to all corporations created like the plaintiff for one of the purposes specified therein, constituted part of its formative charter; that its corporate franchise embraced and included these privileges as a grant to it of them by the sovereign authority, and that such franchise, considered as an entirety, was assessable only in the city and county of San Francisco, where its principal place of business, fixed by its articles of incorporation, was; and that the act of the assessor of San Joaquin County in assessing its franchise in that county was unauthorized and void. While we have directed attention to the contention of plaintiff, we have done so simply to state his position, and do not deem it necessary, in the view we take of the case, to particularly discuss it, though some reference may be made to it in a general way as we proceed. Nor do we feel called upon to determine other points, raised on the appeal by respondents, as to the proper construction to be placed on the phrase "principal place of business," as used in section 3628 of the Political Code, — whether it means the actual place of the transaction of franchise business or the office of the corporation where business *Page 317 of a strictly corporate nature is transacted, — nor to pass, as invited to do, upon the constitutionality of this section of the Political Code itself.
While all these propositions have been learnedly discussed by counsel, a consideration of them is unnecessary, because we are satisfied that the validity of the assessment of this franchise by the assessor of San Joaquin County must be sustained, under section 10 of article XIII of the constitution. That section provides that "all property . . . shall be assessed in the county, city, city and county, town, township, or district in which it is situated." As this constitutional provision declares that all property (save property of railroads operated in more than one county, which it provides shall be assessed by the state board of equalization) must be assessed in the locality where it is situated, it follows, as a franchise is property subject to taxation, that if the franchise which was assessed against plaintiff in the county of San Joaquin had a local situation in the city of Stockton, in that county, it was properly assessed there under the constitutional mandate, and could be assessed nowhere else. And if it be determined from a consideration of the authorities that a franchise or right exercised by the plaintiff in the streets of the city of Stockton is of a local character, it is an immaterial matter for consideration as the source from which the right or franchise sprung. It can be of no moment that the franchise is granted by the constitution — by the state in its sovereignty. It is not the source from which it was derived that shall determine the place where it shall be assessed and taxed, but the place where it is situated. For the purpose of taxation under the constitutional provision it is not the locus of the grantor that is to be considered, but the situs of the franchise. This provision of the constitution is but the recognition of one of the fundamental principles of taxation, that property situated in a city and county should be taxed there for the purpose of revenue; that the property which has had the protection and benefit of municipal government shall pay its share of the expenses required to insure these advantages, apportioned on the basis of the actual value of that property.(San Francisco etc. Ry. v. Scott, 142 Cal. 229, [75 P. 575].) It applies to all property. And where a franchise, or the right acquired by an exercise of it, is of a local character, *Page 318 it requires that it shall be assessed in the locality which is burdened with its exercise, and upon which is cast the duty of protecting the property embraced in such exercise. While the right is accorded by the constitution to the plaintiff in common with all kindred corporations and with individuals to use the streets of a city for the purpose of furnishing illuminants to it and its inhabitants, it cannot be said that any one individual or corporation possesses this right merely by virtue of the constitutional provision. The constitution extends a potential right to those enumerated in its provisions to avail themselves of the benefit of the franchise. But this general extension of the privilege does not invest individuals or corporations with the franchise in the streets of any particular city. It is only acquired when the constitutional grant is actually accepted; when the pipes and conduits for gas or the electric poles are laid in or erected on the streets of the city. It is then owned by any individual or corporation doing so, as an accepted franchise under the general constitutional grant, exercised in the particular city where these appliances are laid or erected. By the provisions of the constitution all persons and all corporations organized for the purpose of supplying these necessities are given the capacity to take the franchise extended thereunder, but they do not acquire it until they have accepted it by proceeding to its actual exercise.
While considering this constitutional grant of the right to use the streets of cities throughout the state by individuals or corporations for supplying either water or artificial light (when the city owns no public works for such purpose), it is well to remember the purpose which was sought to be attained under the provision. It was to prevent the abuses which the framers of the constitution believed were theretofore indulged in by municipal officers, who, by imposing onerous burdens and conditions upon persons desiring to compete with existing companies in such municipalities in supplying such necessities, precluded them from doing so, and hence created a monopoly in favor of existing corporations. By providing for unrestricted competition in the supplying of these necessities, it prevented such abuses. But while this was the purpose in view, and the facility was afforded to use the streets of a city for that purpose without the necessity of obtaining a *Page 319 franchise therefor from the municipal authorities, it was not intended thereby that in the exercise of such privilege whatever rights of a valuable property nature were acquired should not be subject to taxation in the locality where, through the exercise of the franchise, the corporation became invested with them. Now, is the franchise exercised by the plaintiff in the city of Stockton, or, more accurately speaking, the right or interest which plaintiff acquired in the streets of that city by virtue of its exercise, property of a local character, property — to use the term in the constitutional provision —"situated" in the city of Stockton? We think the authorities support the contention of respondent that it is; that the franchise extended by the constitutional provision to lay pipes and conduits, or erect poles and supply the inhabitants of a city with artificial light, is an incorporeal hereditament — is real estate in the nature of an easement pertaining to the streets of the city in which it is exercisable; that it is inseparably annexed to the soil out of which the profit arises, and has a local situation in the place, and that place only, where the right is actually exercised.
The principle that franchises of the character here involved are treated as incorporeal hereditaments finds ready support in the authorities. In Bowman v. Watham, Fed. Cas. No. 1,740, p. 1082, it is said: "And the only inquiry now is whether the ferry right reserved is of the same nature, in this respect, as a part of the land. In what does it differ? It is appurtenant to the soil, and constitutes no inconsiderable part of its value. As has been shown, it is susceptible of a different ownership from the soil. It is still a right growing out of the soil, and subjects it to the servitude in whosoever's hands it may come. Although an incorporeal hereditament in contemplation of law, it is property, real property. It passes by deed — is assets in the hands of heirs, and in all respects is subject to the laws which regulate real estate. . . . There would seem to be no doubt that the ferry franchise, with all that belongs to it, may be taken by descent or by conveyance the same as other interests which pertain to realty." In Dundy v. Chambers, 23 Ill. 312, it is also said: "Chancellor Kent, in his Commentaries (vol. 3, p. 458), in treating of franchises in roads and ferries, says: `An estate in such a franchise, and an estate in land, rest upon the same principle, *Page 320 being equally grants of a right or privilege for an adequate consideration.' And he calls such franchises incorporeal hereditaments. Hilliard, in his treatise on Real Property (vol. 1, p. 1), classes a ferry franchise amongst hereditaments." And in Gue v. Tidewater Canal Co., 24 How. (U.S.) 263, it is said: "The property seized by the marshal is of itself of scarcely any value, apart from the franchise of taking toll, with which it is connected in the hands of the company, and, if sold under thisfieri facias without the franchise, would bring scarcely anything; but would yet, as it is essential to the working of the canal, render the property of the company in the franchise, now so valuable and productive, utterly worthless. Now it is very clear that the franchise or right to take toll on boats going through the canal would not pass to the purchaser under this execution. The franchise, being an incorporeal hereditament, cannot, upon the settled principles of the common law, be seized under a fieri facias." In People v. O'Brien, 111 N.Y. 46, [18 N.E. 692, 7 Am. St. Rep. 684], the court said: "In speaking of the franchises of a corporation we shall assume that none are assignable except by the special authority of the legislature. We must also be understood as referring only to such franchises as are usually authorized to be transferred by statute, — viz., those requiring for their enjoyment the use of corporeal property, such as railroad, canal, telegraph, gas, water, bridge, and similar companies, and not to those which are in their nature purely incorporeal and inalienable, such as the right of corporate life, the exercise of banking, trading, and insurance powers, and similar privileges. The franchises last referred to, being personal in character and dependent upon the continued existence of the donor for their lawful exercise, necessarily expire with the extinction of corporate life, unless special provision is otherwise made. . . . In the former class it has been held that at common law real estate acquired for the use of a canal company could not be sold on execution against the corporation separate from its franchise, so as to destroy or impair the value of such franchise. . . . And by parity of reasoning it must follow that the tracks of a railroad company, and the franchise of maintaining and operating its road in a public street, are equally inseparable, in the absence of express legislative authority providing for their severance." In City of *Page 321 Chicago v. Baer, 41 Ill. 306, the court says: "Certain it is that this railway company has a franchise appurtenant to this street; that, through this franchise, it has a right of occupancy in a portion of the street, peculiar to itself, and, so far as may be necessary to run its cars, exclusive; that this right of occupancy is secured for a long term of years; that this franchise and this right of occupancy together constitute a property fixed and immovable in its character like realty, and recognized and protected by the law as fully as a fee simple in land."
From these authorities it would appear, then, that the franchise extended by the constitution is of such a character that it is indissolubly annexed to the street of a city in and upon which it is exercised, and that, while an incorporeal hereditament, it is, in contemplation of law, real property, an easement appurtenant to such streets. This being so, it necessarily, as real property, has a situs in the city where it is exercised, and, under the constitutional provision with reference to the assessment of property, must be assessed there. It will be observed from these authorities which we have cited that the right to use the streets, and the right to take tolls by reason of their use, are inseparable parts of the franchise. The latter is a right arising out of the soil, a right to take a profit out of the easement acquired in the streets of the city, and the easement and the right to take a profit therefrom can be valuable only when exercised together. That these rights conjointly constitute the franchise is also the view taken by this court in Spring Valley Water Co. v. Barber, 99 Cal. 38, [33 P. 735].
But, independent of the general principle announced in these authorities with reference to the nature of the right plaintiff acquired by exercise of the franchise in the streets of the municipality, it is clear from the decision in the Appeal of N.B.and N.R.R. Co., 32 Cal. 512, where the matter is fully considered and discussed, that the franchise exercised by plaintiff invested it with an easement therein, real property, the situs of which was necessarily local. And this is equally apparent when we examine the Civil Code. Section 801 thereof declares the servitudes which may attach to other lands, and which, when so attached, shall constitute easements, and, among others, are included, by subdivisions 4 and 6, *Page 322 respectively, "the right of way" and "the right of transacting business upon land." Under section 802 of the same code, "the right of way" is designated as among the land burdens which may be granted or held, although not attached to land. This right of way, an easement, is real property, and is distinctly and necessarily local in character, and situated in and upon land. It is clear, too, that the right to use the pipes, conduits, and poles for the transmission of illuminants to the city and its inhabitants is a right which is exercised and can be exercised only in connection with and at the situs of the right of way and location of the appliances. It is a right exercised by means of these appliances in connection with a right of way, so that a profit, which the company is authorized to take, may be made upon the sale of the illuminants which they serve to transmit. This right to so use them for this purpose is as local to the city of Stockton as are the gas-pipes and the electric poles under or upon its streets, and within the meaning of subdivision 6, above referred to, is a "right to transact business upon land," acquired in addition to the easement by virtue of the exercise of the constitutional franchise.
From all these considerations we are of the opinion that the plaintiff, in the exercise of its franchise, acquired rights of property in and over the streets of the city of Stockton of a character distinctively local to that city, and that, under section 10 of article XIII of the constitution, above quoted, they were properly assessed by the assessor of San Joaquin County in that county.
The appeal from the judgment in each of these cases is accompanied by a bill of exceptions. It is urged therein that the trial court erred in its rulings relative to the admission of evidence. Under the pleadings and the issues raised, we think the rulings were correct.
The judgments appealed from in both cases are affirmed.
Shaw, J., Angellotti, J., Van Dyke, J., and Cooper, J., concurred.