Court Opinion

ID: 3300811
Source: CourtListenerOpinion
Date Created: 2016-07-05 17:17:08.197083+00
Date Added: 2024-06-11T14:54:46.458245
License: Public Domain

I dissent. Nothing that has been said shakes my conviction that "liability" is used as importing a fixed contractual obligation in the nature of a debt (noscitur a sociis), and not an indefinite, inchoate right which may never ripen into a legal demand. This was the decision of Johnson v. Bank of Lake,
decided in 1899, after review by this court in bank. For sixteen years this has been the construction of our constitution and our statute upon the subject. Contracts, rights of stockholders, and rights of those dealing with corporations have arisen and attached under this construction. All succeeding legislatures have acquiesced in it. Why it should be subverted and the question thrown into confusion at this late date, or what purposes are served thereby, except to enable stockholders to escape liability, I am unable to perceive. It is said that one contracting with a corporation is entitled to know upon what stockholders liability is cast, and that this is accomplished by giving the word this infinitely broad meaning and holding that the liability is created at the time the contract is entered into, regardless of the time of performance. In fact, we know this amounts to little or nothing. But, let us see further: An attorney engages to conduct litigation upon behalf of a corporation; a contractor agrees to pump out a mine; each to receive *Page 512 
a compensation contingent upon success. The litigation is brought to a successful end after more than three years of strife in the courts; the contractor succeeds in pumping out the mine after many disappointments and delays, and both the lawyer and the contractor find themselves denied any recourse against the stockholders. The stockholders' liability has ceased. It was created at the time of the contract, but it could not be enforced during the period of the execution of the contract; the stockholders at the time the contract was entered into have escaped liability, and the more recent stockholders have incurred none. Certainty in the law is at times of more importance than a correct declaration of the law, and particularly is this so in commercial matters, because commercial activities adjust themselves in accordance with any declaration of the law. They ask for positive law rather than good law. To all these interests stability and fixity is of the utmost importance, and for sixteen years they have been told by this court that the law was as declared in Johnson v. Bank ofLake.
Singularly enough, too, the prevailing opinion does not discredit the opinion of this court in McBean v. Fresno,112 Cal. 159, [53 Am. St. Rep. 191, 31 L. R. A. 794, 44 P. 358]. It must be that McBean v. Fresno has been so repeatedly approved and followed as to render it immune from the attack so successfully made upon the case of Johnson v. Bank of Lake. Yet the language of the provision of the constitution interpreted and expounded in the McBean case was much broader than the provisions here under review. In the McBean case, article XI, section 18, of the constitution forbade cities from incurring "indebtedness or liability in any manner or for any purpose
exceeding in any year the income and revenue." Yet under this extremely broad language it was declared that a liability which could not become a debt within a given year was not a liability contemplated by the constitution. Nor is the reasoning of the prevailing opinion which supports the construction declared in the McBean case persuasive, for it could justly be said that it is quite as important and was quite as much in contemplation of the constitution that one city council should not be able to mortgage the revenues of succeeding councils, and so check the development of a city, as to say that the sole design of the law was to prevent a particular council from incurring *Page 513 
debts in excess of the revenue of the year. Again,Yule v. Bishop, 133 Cal. 574, [62 P. 68, 65 P. 1094], declares upon the existence of a liability as arising at the time it becomes fixed, precisely as does Johnson v. Bank ofLake. Yet Yule v. Bishop is affirmed in the prevailing opinion. Logically, however, if the definition of liability given in the prevailing opinion is to obtain, the liability of the stockholders of the corporation arose when the corporation accepted the indorsement of the surety. The liability in the present case did not become fixed until the goods were delivered. In Yule v. Bishop it did not become fixed until the surety was obliged to and did pay. This court in bank held in the Yule case that, within the contemplation of the law, liability arose not when the contract was entered into, but when the surety in fact did pay.
The resultant benefit to stockholders of corporations, enabling them to escape liability, may justify this reversal of the law, but if it finds no justification in this there can be no other.