Angeles & Salt Lake R. R. Co. v. City of Los Angeles (Cal.), 179 Pac. 390, which, as to the power of the municipality to assess a leasehold estate in such property for the purpose of levying a tax thereon, involved the same questions. The latter case, however, had been before the court on a former appeal prosecuted by the plaintiff from a judgment in favor of the city upon sustaining its demurrer to the complaint, with the result that the judgment was reversed. (See San Pedro etc. R. R. Co. v. City of Los Angeles, 167 Cal. 425, [52 L. R. A. (N. S.) 991, 139 Pac. 1071].) Upon going down of the remittitur the city was permitted to file an answer, and upon trial a judgment was entered in favor of the plaintiff, from which the city appealed. The hearing of the two cases thus considered together resulted in an affirmance of L. A. No. 4504, based solely upon the ground that the former decision thereof, as reported in 167 Cal. 425, [52 L. R. A. (N. S.) 991, 139 Pac. 1071], constituted the law of the case. As to the case now under consideration, however, the court took a different view of the question involved and reversed the judgment rendered against the city. Thereafter the petition of the city of Los Angeles, as appellant in L. A. No. 4504, for a rehearing was denied, thus finally disposing of the subject of litigation involved therein. A like petition for a rehearing was presented by the plaintiff in L. A. No. 4600, being the case now under consideration, which was granted upon the sole ground that the court had failed to consider the question as to the assessment made of certain alleged improvements upon the leasehold. By an order made granting said rehearing, the court restricted further argument to the question alone of the validity of the assessment of the alleged improvements. (See Minutes, Sept. 11, 1918, 56 Cal. Dec., No. 2969.)

[1] The question to which the court on the former consideration of the case addressed itself and to which the chief argument of counsel was directed was whether the laws of this state authorize the taxation of leasehold interests in the tidelands of the state. Upon this point, holding that municipalities have such power, we adopt the opinion of Mr. Justice Sloss, filed at the former hearing of the appeal, which is as follows:

"That a leasehold interest is property is a proposition not open to dispute. "The thing of which there may be owners in is called property.' (Civ. Code, sec. 654.) Interests in real property are called 'estates.' (Civ. Code, sec. 701.) They

are classified by section 761 of the same code as (1) estates of inheritance, (2) estates for life, (3) estates for years, (4) estates at will. The interest of the plaintiff under the lease from the state is an estate for years. There may be ownership of such estate. It is, therefore, property.

"Is it property for the purposes of taxation? Our constitution declares (art. XIII, sec. 1): 'All property in the state except as otherwise in this constitution provided, not exempt under the laws of the United States, shall be taxed in proportion to its value, to be ascertained as provided by law. . . . The section exempts property belonging to the state, and certain other kinds of property, not including interests like the one here involved. [2] With respect to all property not so exempted, the provision of the constitution that it shall be taxed in proportion to its value, to be ascertained as provided by law, is direct and mandatory. (Const., art. I, sec. 22.) The provision for the taxation of all property not exempt is repeated in section 3607 of the Political Code.

[3] "The constitutional provision is not self-executing. It imposes upon the legislature the duty of providing a mode whereby to ascertain the value of the property to be taxed. (McHenry v. Downer, 116 Cal. 20, 24, [45 L. R. A. 737, 47 Pac. 779.] See De Witt v. Hays, 2 Cal. 463, 468, [56 Am. Dec. 352].) [4] If, then, the legislature had not provided any mode for the assessment of leasehold estates, it might well be said, as was said in the former opinion, that such an estate is not 'property for the purposes of taxation' under our fiscal laws. But there does not appear to be any such deficiency in our revenue laws. Section 3617 of the Political Code declares that the term 'property' includes 'all matters and things, real, personal, and mixed, capable of private ownership,' and that the term 'real estate' includes 'the possession of, claim to, ownership of, or right to the possession of land.' A leasehold estate carries a right to the possession of the land lease. (Civ. Code, sec. 819.) It is, therefore, real property within the above definition. Other sections of the Political Code provide for the listing of real property, the description and valuation. thereof, and contain a complete scheme for the assessment of the property, and the levy and collection of the taxes. This scheme is as readily adaptable to an estate for years as to a freehold estate.

[5] "It is true that the code makes no specific provision for separate assessments of leasehold and reversion to the lessee and the owner of the fee, respectively. The usual procedure in this state, as elsewhere, has been to assess the entire value of the land to the owner of the reversion. Such assessment covers the value of the leasehold as well as of the reversionary interest, the sum of the two being comprised in the value of a complete ownership of the land. (Graciosa Oil Co. v. Santa Barbara, 155 Cal. 140, [20 L. R. A. (N. S.) 211, 99 Pac. 483].) The state thus receives the tax upon every interest in the land, and the requirement of the constitution and of section 3607 of the Political Code is satisfied. Where, however, the state owns the reversion, its reversionary interest, like all property owned by it, is exempt from taxation. In such a case it cannot be said that the private property right of the lessee is taxed through the medium of the taxation of the interest of the owner. Still less can it properly be said that because the interest of the state is not taxable, the private owner of a leasehold interest should be exempt from paying taxes upon the property that is owned by him.

"An illuminating discussion of the question is found in Trimble v. Seattle, 231 U. S. 683, [58 L. Ed. 435, 34 Sup. Ct. Rep. 218], a case which was not called to the attention of the department on the former appeal. The supreme court of Washington had upheld an assessment on certain leaseholds of tide-lands owned by the state. The assessment of the leaseholds was authorized by statutes enacted after the execution of the leases by the state. A writ of error was granted to review the judgment of the state court. The plaintiff in error contended that the leases imported an obligation that the lessor should pay all taxes and assessments, and that the federal constitution prohibited the impairment of this contract by a subsequent law. The supreme court of the United States held that no such obligation was included in the lease, saying:

"In ordinary cases the whole property is taxed and which party shall bear the burden is not a matter of public concern. But when the state makes the lease, the supposed obligation would be an obligation not to tax-a restriction of public import not lightly to be imposed (citing cases). It is urged that to deny the state's obligation discriminates unconstitutionally against this class of lessees, since all others are free from the burden. But that is not true. Whether landlord or tenant

shall pay a tax is a matter of private arrangement, and the practice one way or the other has no bearing on the matter. The argument from inequality really works the other way. If these leaseholds are not taxable, they are a favored class of property; for ordinarily leaseholds are taxed even if they are lumped and included in the value of the fee. When an interest in land, whether freehold or for years, is severed from the public domain and put into private hands, the natural implication is that it goes there with the ordinary incidents of private property and therefore is subject to being taxed.'

"In Graciosa Oil Co. v. Santa Barbara, 155 Cal. 140, [20 L. R. A. (N. S.) 211, 99 Pac. 483], a separate assessment of a leasehold interest to the lessee was upheld. The case was discussed at some length in the opinion on the former appeal in the first of the cases before us, and it was pointed out that the lease in the Graciosa case carried with it a right to take a part of the substance of the land itself. There is, no doubt, a distinction between the grant of such right and an 'ordinary lease for usufructuary purposes,' and it may be conceded that the decision in the Graciosa case is not a controlling authority in favor of the appellant's contention here. On the other hand, that decision does not, as suggested by the former opinion dealing with the rights of the parties to the present appeals, support the respondent's position that its leasehold interest is not taxable. What was said in Graciosa Oil Co. v. Santa Bar bara regarding the mode of taxing property leased by one private individual to another had no reference to a case like this, where the lessor is a governmental agency whose property is exempt from taxation. The opinion fully recognizes that, in the usual case, the assessment to the owner of the fee includes the value of both the reversion and the leasehold interest, and that, under such conditions, both interests are assessed, and the mandate of the constitution is followed.

[6] "The principle that a possessory right in public land is private property, and that it may be assessed for purposes of taxation to the person in possession, although in point of law he may have no right as against the state or government owning the land, has long been settled in this state. (People v. Shearer, 30 Cal. 646, 655; People v. Frisbie, 31 Cal. 146; People v. Cohen, 31 Cal. 210.) The first two of these cases are referred to in the decision of the first appeal in San Pedro etc. R. Co. v. Los Angeles, 167 Cal. 425, [52 L. R. A. (N. S.) 991,

139 Pac. 1071], and they are sought to be distinguished upon the ground that the possession of the claimant was one designed to ripen into an ownership of the fee, under the land laws of the United States. But a careful examination will show that this ground of distinction is not tenable. In the Shearer case (30 Cal. 646), the court pointed out that the occupant had not made the payment which was necessary to vest in him any legal or equitable right as against the government. He was, however, in possession, and his right as possessor was held to be property subject to taxation. The court said: "The possession itself of the public lands and the improvements thereon, whether by naked trespassers or those who claim in addition a right of pre-emption, as to everybody except the United States, have always in California, and in most, if not all, of the new states, been regarded as valuable property interests. The transfers of such possession and improvements have always been held to constitute a valuable. consideration for a promise. The possessors often derive and enjoy large revenues from them. Contracts for such possession, and rights growing out of them, are constantly recognized, protected, and enforced by the courts, and, in this state, a very large share of the litigation in the courts maintained. by means arising from taxation grows out of this very class of rights. . . . Such possession of the public lands, and the improvements put upon them, are, therefore, recognized and protected as a valuable species of property in the possessor.' It was further said that these possessions 'exist wholly independent of pre-emption laws, without any pre-emption right or intention to claim such right, and always anterior to the existence of those rights. . . . And this property is property in the citizen or inhabitant having possession, and not in the United States. This property, so recognized and protected, in our judgment is clearly not exempt from taxation.' (Page 659.) And, accordingly, it was held that such possessory rights should be assessed and that 'the value of the possessory right should be put down and not the value of the land itself,' as the basis of the assessment for taxation. A mandate was issued to the assessor to compel him to do so.

"This conclusion was reached regardless of whether the person in possession was intending to claim as pre-emptioner or homesteader, or whether his possession could ever have ripened into a fee. Nor was the decision in People v. Frisbie, 31 Cal.