Court Opinion

ID: 5435180
Source: CourtListenerOpinion
Date Created: 2022-01-08 17:52:34.721924+00
Date Added: 2024-06-11T08:31:47.695449
License: Public Domain

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 *385Company 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 *386bears 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 *387objection 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 *388seem 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*389ponsibility 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 *390subject 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.