Robinson v. Bidwell

Full title: ROBINSON[1] v. BIDWELL et al.

Court: Supreme Court of California

Date published: Jul 1, 1863

22 Cal. 379 (Cal. 1863)

Opinion

[Syllabus Material] [Syllabus Material] [Syllabus Material] [Syllabus Material] [Syllabus Material] [Syllabus Material] [Syllabus Material] [Syllabus Material] [Syllabus Material] [Syllabus Material] Rehearing 22 Cal. 379 at 390.

Appeal from the Sixth Judicial District.

COUNSEL:

I. The tenth section of the act in question is unconstitutional, being in direct conflict with the thirty-sixth section of the fourth article of the Constitution which readsas follows: " Each stockholder of a corporation or joint-stock association shall be individually and personally liable for his proportion of all its debts and liabilities."

It cannot be questioned that the City and County of Sacramento (when this subscription shall have been made) will be a stockholder of a corporation within the meaning of this section, and thereby become liable for its (his) proportion of all the debts and liabilites of said company.

It may be contended that its (his) proportion of said debts, etc., is not clearly declared in the Constitution, although we think differently, yet the point is immaterial, because said proportion is clearly fixed by law. See sec. 32 of Act concerning Corporations, Wood's Dig. 119, and amendment thereto by Act dated and approved April 27th, 1863.

But independent of this view of the case, we think it clear that said exemption clause is void, because while the Constitution declares that each stockholder shall be liable for his proportion of the debts and liabilities, this clause declares that this particular stockholder shall not be so liable. The confliction is certain and evident, and one or the other must be void. And thequestion for determination is simply whether the Constitution or the statute is the greater; whether a law passed by the Legislature which in its essential particulars directly conflicts with the Constitution of the State can be upheld by the Courts.

It is contended, that the proportion of the debts of the corporation, for which each stockholder is liable, is only the amount of his subscription. In answer, we have only to say, that if the framers of the Constitution had intended to provide that when his subscription was paid up he should no longer be liable for corporate debts or liabilities, they would have said so in so many words. The language used in the Constitution is to be construed by the rules that govern the interpretation of other instruments, or such as are used in interpreting the ordinary sayings of men. There is not a set of rules by which its provisions may be explained to mean that the stockholder shall not be liable, when it says as plainly and positively as it is possible to express it in English language, that he shall be liable. (See Debates in Constitutional Convention, 136.)

Again, the act makes special provisions in favor of a particular corporation. Sec. 31 of Art. 4 of the Constitution provides, " Corporations may be formed under general laws, but shall not be created by special act, except for municipal purposes." By the act here in question a special privilege and benefit is conferred upon a particular corporation, and thus, by its terms, conflicts with the above-quoted provision of the Constitution.

II. By the vote, the people only expressed their willingness to the making of the subscription under the provisions of the act, and under the limitations therein contained.

The unconstitutionality of the tenth section, therefore, destroys the force and virtue of the entire act. In the case of The People v. Hill , 7 Cal. 103, it is held, that the unconstitutionality of certain sections of a law will not vitiate the whole act, unless they enter so entirely into the scope and design of the law that it would be impossible to maintain it, without such obnoxious provisions. We submit that the case at bar comes within the rule here established, and that the tenth section does enter so entirely into the scope and design of the law that it would be impossible to maintain it without this section. This section, containing theexemption, is a vital and essential portion of the contract made between the City and County of Sacramento and the Central Pacific Railroad Company. It constitutes the principal feature of the agreement; and believing in the force and effect of this exemption, the people of the city and county were induced to yield their consent. To declare the section void, and yet maintain the act, is to destroy the only guaranty the people possess, and still hold them to their contract, and is to change wholly and entirely the agreement to which they consented.

Tod Robinson & J. G. Hyer, for Appellant.

Geo. R. Moore, for Respondent.

¹

I. The law is full and perfect without the tenth section, and to strike this part out the balance would stand without objection.

" A part of a statute may be in conflict with some constitutional provision, and therefore void, while the balance of the law would be valid and binding." People v. Hill , 7 Cal. 103.

This act is identical with the Yuba County law, which has been passed upon and held to be constitutional by this Court. Pattison v. Supervisors Yuba Co. , 13 Cal. 180; see also Hobart v. Supervisors Butte Co. , 17 Id. 29; Grant v. Courter, 24 Barb. 232; City of Aurora v. West , 9 Ind. 74, and cases cited in 13 Cal. 188.

II. The tenth section of the act is constitutional. Sec. 36 of Art. 4 of the Constitution provides, that " Each stockholder of a corporation, or joint stock company, shall be individually and personally liable for his proportion of all its debts and liabilities." Now what is " his proportion of its debts and liabilities." Will not his proportion of its debts bear the same relation to the whole debt as his stock does to the whole stock. The words personally and individually liable mean nothing more than that for his proportion of the debts, his individual and personal property, as contradistinguished from his corporate property, shall be liable--that is, after the corporate property has been exhausted.

If this is the proper interpretation of the Constitution, then there is no conflict between the thirty-sixth section of the Constitution and the tenth section of the act. Besides, the Legislature had the perfect right to impose this limitation, and to require that such restriction should be embraced in every contract made by the company; and all persons dealing with the company, with a knowledge of the limitationclause, would be bound by it, and the stockholders would not be liable for contribution outside or beyond their subscriptions. This view is fully sustained by the case reported in 19 Eng. Law and Eq. 627.

III. It is contended by the plaintiff that if the tenth section is not valid and no limitation is imposed, then the people voted on the proposition under a misapprehension of their liability, and that consequently they are not bound by their vote. As every one is deemed to know the law, the people could not legally withdraw their assent to the proposition, if they would, on the ground of ignorance. They voted upon the question, not as controlled by the tenth section (if that should be held invalid,) but as the whole law will stand when construed and settled by our Courts.

The vote of the people did not change the law in the least. It gave it no more force or vitality, and made it no more binding, than when it left the hands of the Legislature. A statute may take effect at once, or at some future time, or upon the happening of some event. In this case, the contingency was the consent of the people. The law existed before, but was not to be enforced until this event transpired-- until the people consented to accept its benefits and advantages. Hobart v. Supervisors of Butte Co. , 17 Cal. 29.

JUDGES: Norton, J. delivered the opinion of the Court. Cope, C. J. concurring, and Crocker, J. concurring specially.

OPINION

NORTON, Judge

[EDITOR'S NOTE: The page numbers of this document may appear to be out of sequence; however, this pagination accurately reflects the pagination of the original published documents.]

On petition for rehearing, Norton, J. delivered the following opinion. the other Justices concurring:

A petition for a rehearing has been filed in this case by counsel, who, it is understood, also represent parties interested in the operation of other laws similar to the one considered in this case, of which several were enacted by the last Legislature. The importance of the question, as well as the fact that several other laws involving the same question may be presented for consideration, has induced us to deliberate carefully upon the arguments presented in the petition for rehearing, but we have found no reason for changing our former opinion or for ordering the case to be reargued. Indeed, upon the principal question no authorities have been cited nor any principles of law suggested other than those cases which were cited by us and those principles of law which were presented by us in our former opinion. The purpose of the petition has been to press upon us with great earnestness the authority and weight of those cases and those principles of law. Probably no other case can be found in which language so favorable for the plaintiff is employed, as that of the case cited from 2 Gray, 84, and none in which a decision favorable to the plaintiff was made in which the facts approach so near to this case as in the case cited from 5 Ohio, N. S., 497. The case in 2 Gray, however, does not furnish us any aid in searching for a criterion by which to determine when a void portion of a law is so connected with the other portions as to render the whole void, because in that case the vice was not in any particular provision, but in the purpose and effect of the whole law. The Court say: " Before proceeding to consider the objections separately, we are all of opinion that if this act be unconstitutional at all, it is not in any separate and independent enactments, but in the entire scope and purpose of the act." Hence, what the Court says as to parts being conditions, considerations, or compensations for each other, had no application to the case before the Court, and receives no illustration from the facts of the case. In the case from 5 Ohio, the Court do not consider what effect the void provision would have had upon the residue of the law if it had rested solely upon the action of the Legislature, because by the Constitution of that State the question of the removal of a county seat, which was the case before the Court, is required to be left to the choice of the electors. By the law under consideration in that case the electors were not left free to vote upon the question of removal, but a provision was added calculated to compel them, by pecuniary considerations, to vote differently from what they otherwise might. The whole law, therefore, by which the question was submitted to the electors was held to be void. In the case before us, although the people were called upon to vote upon the question of subscribing for the stock, it was not by virtue of any constitutional requirement that the question must be submitted to them. It was not necessary to the validity of the law that it should have been submitted to a vote of the people, as it was in the Ohio case. In the Ohio case, the people, by the Constitution of that State, were authorized to say by their vote whether the county seat should be removed. In our case, the people are not authorized by a direct vote to determine whether the county shall have the right to subscribe for stock. The Legislature have seen fit to say that the law shall take effect or not, according to the result of a vote, simply considered as an event. As was shown in our former opinion, by reference to the case of Hobart v. The Supervisors of Butte County , 17 Cal. 23, if the law was to take effect in consequence of the vote, considered as an expression of the will of the voters as to whether it was a proper law, the submission of the question to their vote would have been void, as amounting to an enactment of a law by the direct vote of the people, which cannot be done under our Constitution. In the State of Rhode Island and in the State of Iowa and, we think, in other States, it has been decided that a provision in the statute submitting it to the people to say by their vote whether the law shall take effect is absolutely void, as being an attempt to delegate to the people directly the power of enacting laws which can only constitutionally be exercised by the Legislature. These decisions will perhaps commend themselves to many minds as resting upon clearer grounds of reason than those decisions which allow a law to take effect or not according to the result of such a vote, considered merely as an event, but at the same time deny that any legislative effect can constitutionally be given to such a vote. Yet in those States, while the provision of the statute submitting the law to a vote of the people was held to be wholly void, the statutes themselves were held to be valid laws, notwithstanding this invalid provision. (State v. Copeland, 3 R. I., 33; Santo v. State, 2 Clarke, Iowa 262.) In this State as in the States of Rhode Island and Iowa the validity of a law containing a provision submitting it to a vote of the people cannot be determined by inquiring into any supposed inducements that may have influenced the vote of the people, but must be determined by a consideration of the connection and relative operation of the valid and invalid provisions. But if the vote of the people could be considered as the act of legislation, the result would be the same. We must in that case apply the same considerations to determine the validity of a law passed by a direct vote of the people that are applicable to determine the validity of a law passed by the Legislature.

By what criterion can the Court decide that any particular provision is so essential that if it be invalid the whole law must be held invalid? In the case from 2 Gray, the Court say, " if the invalid provision is so connected with the others as to warrant a belief that the Legislature intended them as a whole, and that if it could not be carried into effect the Legislature would not pass the residue independently," the whole is void. This criterion we applied in our former opinion, and concluded that tried by this test the law in question was valid in all its parts, except the obnoxious provision of the tenth section. But we have seen above that this criterion finds no illustration in the facts of the case in which it was announced, and upon scrutiny it will be found, we think, that this general language really furnishes no practical criterion. In one sense, the Legislature must always intend all the provisions of an act " as a whole." The various sections and provisions are always enacted together as one law, when these sections and provisions relate to the same subject. And by what process can a Court determine whether the Legislature would or would not have passed one portion if another portion could not have effect? If we were allowed to say that the legal presumption in all cases is that the Legislature would not have passed the law at all unless all its parts could have effect, we would have a simple criterion, and a comparatively easy task. But, on the contrary, it is fully settled that although a part is void, the residue may be sustained.

The rule has a nearer approach to a practical criterion as it is given in the case of the Exchange Bank of Columbus v. Hines, 3 Ohio N. S. 1, in which the Court say: " Where the provision of a statute is of such a nature, and has such a connection with the other parts of the statute as to be essential to the law, its unconstitutionality vitiates the whole enactment. But if an independent provision, not in its nature and connection essential to the other parts of the statute, be unconstitutional, it may be treated as a nullity, leaving the rest of the enactment to stand as valid." In the case of Clark v. Ellis, 2 Blackf. 8, the rule is given in these words: " A part of an Act of Assembly unconstitutional does not affect a constitutional part of the same act relating to the same subject. That part which is unconstitutional is considered as if stricken out of the act, and if enough remains to be intelligibly acted upon, it is considered as the law of the land." Tried by the test furnished in those cases, there is no difficulty in deciding that the law under consideration is not wholly void. The provisions of sec. 10 cannot be said with any reason to be essential to the main purpose and object of the law, and if that section were stricken out, the remaining sections would constitute a complete law. The purpose of that section is only to add a certain incident and effect to the act of becoming a stockholder, but it is not of the essence of becoming a stockholder. This incident may fail, and yet the substance of the transaction remain. In all cases where a question of this kind arises, the provision which is found to be invalid has a connection with and qualifies or affects the other provisions. The Legislature does not insert provisions which are merely nugatory. Yet that it has such a bearing upon and qualification of the other provisions is not alone sufficient to constitute it so essential to the law that, if it cannot take effect, the whole must fail. Even where the invalid provision is in the nature of a condition to the main purpose of the law, its invalidity will not necessarily invalidate the whole law, if the remaining provisions are sufficient to effect that main purpose. Thus in the case of the Mobile and Ohio Railroad Company v. The State , 29 Ala. 573, a law is presented providing for a loan of money by the State to certain corporations. In order to obtain a loan, the corporations are required to consent that, if they made default in payment, their charters should be forfeited, and that the General Assembly might declare them forfeited, and that any forfeiture so declared should be complete and effectual for all purposes, without any judicial proceedings for such purpose. The portion of this conditional provision which required a consent that the General Assembly might declare the charters forfeited without legal proceedings, was held to be invalid, as attempting to confer judicial powers upon the Legislature. Nevertheless, the residue of the law was sustained, yet all the objections might have been urged in that case that are in this. It might plausibly be said that the Legislature of Alabama never would have passed the law to loan the money of the State if they had supposed that effect could not be given to the provisions for a prompt and effectual coercion of payment.

We dispose of this case upon the assumption that a portion of sec. 10 is invalid, as claimed by the plaintiff, but do not decide that it is invalid, deeming it proper to leave that question to be definitely decided when, if ever, it shall be necessary to the decision of a case.

It is also suggested, in the petition for rehearing, that the Legislature cannot constitutionally impose a tax upon a local community, city, or county, (which will be the effect of this law,) in order to aid a work of internal improvement beneficial to the State at large, but not peculiar to or belonging to the particular locality, or specially intended to promote its local interests. This question has been much discussed in other States. In the case of Sharpless v. Mayor of Philadelphia, 21 Penn. 181, the Court conclude that if the road is merely a private affair, or if the city can have no interest in its construction, a law authorizing the city to become a stockholder would be void. But that a railroad, as in that case, leading from the interior of the State to the City of Philadelphia was not a private affair, but a public improvement, and that the Court could not say that the city had no interest in its construction. These considerations apply to the case before us. The road is a public improvement, forming a portion of a great line of communication between remote parts of the State, and indeed of the nation, and connecting with the City and County of Sacramento. We cannot undertake to say that the City and County of Sacramento are not interested in its construction.

Rehearing denied.

CONCUR

CROCKER

Crocker, J. I fully concur with my associates in the judgment rendered in this case and in all the points decided, with the exception of that portion of the opinion which seems to imply that that part of the tenth section which provides that contracts not containing the condition mentioned in that section shall nevertheless be subject to it, is obnoxious to the Constitution. That persons dealing with a corporation have the right to waive by special contract, or in any other proper mode, all claim upon the personal liability of the stockholders, or to limit or qualify the extent of that claim, I have no doubt. The fact that such claim is founded upon a constitutional provision can make no difference, for a party may waive a constitutional as well as a statutory provision made for his benefit. (Sedg. on Stat. and Con. Law, 111.)

Corporations under our laws have been spoken of as being little different from special or limited partnerships, or joint stock associations, at the common law (Mokelumne Hill Canal Company v. Woodbury , 14 Cal. 265; Chater v. San Francisco S. R. Company , 19 Cal. 219), which, however, is only correct in a qualified sense. Still, treating them in that character, I think it clear that a creditor of a joint stock association or partnership would be bound by an agreement made by him waiving or limiting the personal responsibility of the members. (Story on Partnership, sec. 164; Collyer on Partnership, secs. 1091, 386, 486.) And where there is a stipulation or provision in the articles of partnership, or association, or by-laws, regulating, qualifying, or limiting the extent of such personal responsibility, it has been held that a creditor dealing with such association or partnership, with full notice thereof, is bound thereby, on the ground of having assented thereto (Kerridge v. Hesse, 9 Car. & P. 200; Collyer on Partnership, secs. 1091, 98, 387, 488; Story on Partnership, sec. 129; Dow v. Sayward , 12 N.H. 271; Ensign v. Ward, 1 Johns. Cas. 171); and such notice may be inferred from circumstances, such as a publication in a newspaper taken by the creditor. (Livingston v. Roosevelt, 4 Johns. 251. Whether the same principle would apply to a regulation of liability by statute, of which all persons are presumed to take notice, it is unnecessary to decide.

The thirty-second section of Art. 4 of the Constitution provides that " Dues from corporations shall be secured by such individual liability of the corporators and other means, as may be prescribed by law." This clearly leaves the regulation of the liability of the stockholders of a corporation entirely to the Legislature, imposing no restriction whatever upon the power, but leaving them free to regulate the character and extent of such liability, according to their own discretion, and under it there can be no pretense that the Legislature has exceeded its powers in any of the provisions of this tenth section. The thirty-sixth section, however, provides that " Each stockholder of a corporation or joint stock association shall be individually and personally liable for his proportion of all its debts and liabilities." This seems to take from the Legislature all power over the subject, and if it is to be considered as controlling and virtually repealing sec. 32, it may be a question whether it does not invalidate many of the statutes which have been passed from time to time, regulating this question of personal liability. How these two sections are to be harmonized so that both may stand, or if they cannot be thus reconciled, which shall control the other, constitutes the great difficulty in the construction of the Constitution upon this subject. Great public interests, as well as private rights of great value, are involved in its determination. The subject is one of too much importance to be disposed of without a thorough investigation and a careful consideration. It is not necessary to determine it in the present case, nor do I consider the opinion of Justice Norton as intending to decide that point, and it may therefore properly be considered open to future adjudication.

People v. Nally, Ex parte Frazer, People v. Parks,