Case Name: ROBINSON v. BIDWELL et al.
Court: Supreme Court of California
Jurisdiction: California
Decision Date: 1863
Citations: 22 Cal. 379
Docket Number: 
Parties: ROBINSON v. BIDWELL et al.
Judges: 
Reporter: California Reports
Volume: 22
Pages: 379–395

Head Matter:
ROBINSON v. BIDWELL et al.
The Act of April 25th, 1863, providing for a subscription by the City and County of Sacramento to the capital stock of the Central Pacific Railroad Company, upon a vote by the electors of the county in favor of the proposition, is in its main features constitutional, and authorizes the making of the subscription and issuance of bonds as therein directed. "
The tenth section, exempting the city and county from liability for the debts of the company, if it be unconstitutional (a point not decided) is not so essentially connected with the scope and object of the act as to invalidate its other provisions.
Where a provision of a statute is of such a nature and has such a connection with the other parts as to be essential to the law, its unconstitutionality vitiates the whole enactment. But if an independent provision, not in its nature and connections essential to the law, be unconstitutional, it may be treated as a nullity, leaving the rest of the enactment to stand as valid.
Even where an invalid provision in a statute 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.
Where a law is passed providing that certain acts shall be done upon the contingency of a vote of the electors of a district, the vote upon such proposition is not an act of legislation, but simply an event, upon the happening of which the law is to take effect.
In determining the constitutionality of an act which was to take effect, upon a vote of the people in its favor, it is not material to imfhire whether an unconstitutional provision therein was so important, in the view of the voters, that, if its invalidity had been known to them, they would not have sanctioned the law.
The proposed Central Pacific Railroad, leading from the City and County of Sacramento to the eastern portion of the State, is so far a public improvement, and sufficiently for the apparent interest of the city and county, that a law authorizing the municipality to become a stockholder in the railroad corporation is not unconstitutional as imposing a tax upon a local community for an improvement in which it has no peculiar interest.
Per Crockbb, J.—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. The fact that such claim is founded upon a constitutional provision, can make no difference.
A party may waive a constitutional as well as a statutory provision made for his benefit.
How far the Legislature may, under the thirty-second and thirty-sixth sections of Art. 4 of the Constitution, regulate the'individual liability of stockholders in a corporation, discussed and held open for future decisions.
Appeal from the Sixth Judicial District.
AprE 25th, 1863, the Legislature passed an act, entitled “An Act to authorize the City and County of Sacramento to subscribe to the Capital Stock of the Central Pacific Railroad Company of California, and providing for the payment of the same, and other matters relating thereto.” The first section provides for a special election, at which shaU be submitted to the voters of the county a proposition for the county to take three hundred shares of stock. Sec. 2 prescribes the form of the baEot, and declares that if a majority vote for the proposition, the Board of Supervisors of the county shaU subscribe and pay for the stock as thereinafter directed. Sec. 3 directs the mode of subscribing. Sec. 4 provides for the preparation of county bonds, and Sec. 5 for them issuance in instaHments. Secs. 6-9 provide for the levy of a county tax, and creation of a fund to meet the interest and redeem the bonds. The tenth section is given in the opinion of the Court; and the eleventh and last section makes the act a public act, and in force from its passage.
The election was held as provided by the act, resulting in a majority for the proposition.
The plaintiff alleges in his complaint, that he is a resident and tax payer of Sacramento County; that the defendants compose the Board of Supervisors of the county, and are about to subscribe for the stock and issue the bonds as provided in the act: that the Railroad Company is already largely indebted, and for this and future indebtedness the county will become liable; that the act is unconstitutional and therefore void, and prays that defendants be perpetually enjoined from making the subscription or issuing the bonds.
An order was made that defendants show cause why an injunction should not issue, and in connection with this a temporary restraining order. The motion was heard on the complaint, the answer filed by the defendants and affidavits, and an order made refusing the injunction and dissolving the restraining order. The appeal is taken by plaintiff from this order.
Tod Hobinson J. Gr. Hyer, for Appellant.
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 reads as folloAvs: “ 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) Avill be a stockholder of a corporation Avithin the meaning of this section, and thereby become liable for its (his) proportion of all the debts and liabilities 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 the question 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 cam 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 mil 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 the exemption, 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 them contract, and is to change wholly and entirely the agreement to which they consented.
Geo. JR. Moore, for Respondent.
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 indi vidually 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 limitation clause, 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 them 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.)

Opinion:
Norton, J. delivered the opinion of the Court—Cope, C. J. concurring, and Crocker, J. concurring specially.
This action is brought to restrain the Board of Supervisors of the City and County of Sacramento from subscribing for three thousand shares of the capital stock of the Central Pacific Railroad Company of California, and from issuing any bonds of said county in payment of any subscription for such stock.
The Act of the Legislature, by authority of which the Board of Supervisors propose to subscribe for the stock and issue the bonds, was passed April 25th, 1863, and is entitled "An Act to authorize the City and County of Sacramento to subscribe to the Capital Stock of the Central Pacific Railroad Company of California, and providing for the payment of the same, and other matters relating thereto." (Statutes of 1863, 447.) The tenth section of the act contains this provision: "The said subscription of stock shall be made upon and the same shall be subject to the express condition that the said City and County of Sacramento shall not be hable or bound for the debts or liabilities of said company beyond or exceeding the amount of stock thus subscribed or held by said city and county; and all contracts made by said company for the construction or equipment of said railroad after such subscription shall have been made, shah be subject to said condition, whether expressed therein or not; and in case the said company shall fail or refuse to make such stipulation in all them said contracts, then the said Board of Supervisors shall have power to declare the said subscription void and of no effect, and may recover from said company any previous payments that may have been made thereon at the time of such failure or refusal."
It is insisted by the plaintiff that this provision of Sec. 10, exempting the City and County of Sacramento from liability for the debts and liabilities of the company beyond the amount of the stock subscribed, is void, because repugnant to Sec. 36 of Art. 4 of -the Constitution, which provides that " each stockholder of a corporar tion or joint stock association shall be individually and personally liable for his proportion of all its debts and liabilities;" and that this provision being void it must result that the whole act is void. This result is claimed to follow for two reasons: 1st, because although an Act of the Legislature may in some cases be valid in part, although another part may be void, yet this is not the case when the part that is void enters so entirely into the scope and design of the law that without it the law cannot be maintained, and such it is claimed is the relation which the provision in question bears to the whole act; and 2d, because the voters of Sacramento have only given their assent to the subscription for the stock upon the condition contained in Sec. 10, and that if that is inoperative them assent becomes inoperative.
It is not necessary to decide what will be the effect of this provision of Sec. 10, in case the City and County of Sacramento should ever be called upon as a stockholder to pay any debt or liability of the railroad company, because if it should be conceded that this provision would be ineffectual to protect the city and county from liability, this fact cannot have the effect to invalidate the other provisions of the act.
In the case of the People v. Hill (7 Cal. 103), the Court say: " that if some of the provisions of the bill are unconstitutional this 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." This remark is in consonance with numerous decisions made in other States. (Town of Fishkill v. Fishkill & Beekman P. R. Co., 22 Barb. 634; Campbell v. Union Bank, 6 How. Miss. 625; Clark v. Ellis, 2 Blackf. 8; Baltimore v. State, 15 Md. 376; Santo v. State, 2 Clarke, Iowa, 262; McCulloch v. State, 11 Ind. 424.) But if the void provisions are so connected with the others, that without them the substantial object of the act cannot be accomplished, then the whole act is void. (Warren v. The Mayor and Aldermen of Charlestown, 2 Gray, 84; State v. Com. of Perry County, 5 Ohio N. S. 497.)
It is obvious that there can be no rule applicable to all cases by which it can be determined whether any particular provision is essential to effect the scope and design of the whole law. In the present case it is insisted that the provision exempting the city and county from liability for the debts of the company is so important an element in the law, that if it had been understood that it could not have effect, the voters of the county would not have sanctioned the law. Whether they would or not is, however, purely a matter of conjecture; and besides, it is immaterial, because them vote was not the act of legislation. It is precisely because this' vote is not tself the enactment of the law which relieves the act from the objection that the Legislature cannot delegate its powers directly to the voters. (Hobart v. The Supervisors of Butte County, 17 Cal. 23.) The result of this vote is only the contingency upon which the Legislature have expressed their will that the law shall take effect. The event has occurred, and the law, so far as it was dependent upon this event, takes effect, because the Legislature has enacted that it should take effect on the happening of that event. The result of the vote is a fact, the effect of, which cannot be varied by any speculations as to what it might have been.
But the exact question upon which the objection weighs is, whether the. provision of Sec. 10 is so vitally connected with the other provisions of the act that the Court is authorized to say that the Legislature would not have enacted the law if they had understood that this provision could not have effect. We have had frequent occasion to cite the principle that Courts are not authorized to annul an Act of the Legislature unless its violation of the Constitution is clear and beyond a doubt. This principle is applicable to this ease. Unless the Court can see clearly that this section is so connected with the scope and purpose of the act that without it the Legislature would not have passed the law, we are not authorized to declare the whole act void. The scope and object of the law as expressed in the title, and as appears from the body of the act, are to authorize the City and County of Sacramento to subscribe for stock of the railroad company and to provide for the payment of the same. It is certain that this object can be accomplished, although the provision in question should form no part of the law. It is an independent provision declaring what shall be the effect of the subscription as to the liability of the subscriber. Indeed, the subscription may be made upon the condition specified, and as between the subscriber and the company, and also as between the subscriber and any creditor in whose contract this condition is embodied, it would, we think, be operative. The only portion which can be claimed to be clearly void is that which provides that contracts not containing the condition shall nevertheless be subject to it. If the company shall make any such contracts the Board of Supervisors are empowered to declare the subscription void, and to recover any payments that may have been made. The Legislature seem to have contemplated that this portion of the provision might not be operative to protect the subscriber, and have therefore afforded another remedy, to a certain extent, which would have been useless if there was no doubt of the efficacy of this portion of the provision.
Upon a consideration of all these circumstances, we do not consider ourselves authorized to say that the Legislature would not have enacted the law if they had supposed that this portion of Sec. 10 would be inoperative of itself to protect the subscriber from liar bility, and we must hold that the law in question is not obnoxious to any constitutional objection, except that portion of the tenth section which provides that contracts not containing the condition mentioned in that section shall be subject to it, and that the invalidity of that portion does not affect the vahdify of the residue of the act.
The judgment is therefore affirmed.
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, aE claim upon the personal Eabihty 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 weE 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. 267; Chater v. San Francisco S. R. Company, 19 Id. 246), which, however, is only correct in a quahfied 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 Umiting the personal res ponsibility 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 Carr. & Payne, 200; Collyer on Partnership, Secs. 1091, 98, 387, 488; Story on Partnership, Sec. 129; Dow v. Sayward, 12 N. H. 275; Ensign v. Ward, 1 John. Cases, 171); and such notice may be inferred from circumstances, such as a publication in a newspaper taken by the creditor. (Livingston v. Roosevelt, 4 John. 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 them 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 Horton as intending to decide that point, and it may therefore properly be considered open to future adjudication.