Kaiser Land & Fruit Co. v. Curry

Mandamus prayed to be directed against Charles F. Curry, secretary of state of the state of California.

This is an original proceeding in mandate. The petition shows the following to be the material facts: Plaintiff is; a domestic corporation formed for .purposes of profit, whose certificate of incorporation was issued August 12, 1899. By its articles of incorporation, its number of directors is fixed at five. On or about October 15, 1908, a majority of the stockholders thereof duly met and executed and acknowledged a certificate, decreasing the number of directors from five to-three, which, on October 22, 1908, was filed in the office of the county clerk of Santa Barbara County, the county in which ■was located the principal place of business of the corporation. A certified copy of this certificate was presented to the secretary of state for filing, on October 29, 1908, together with the fees allowed by law for filing, and the corporation demanded that such officer file the same, and issue a certificate of decrease of the number of directors. (Civ. Code, sec. 290.) The

So far as it may be considered material, the act is as follows:—■

“Section 1. No corporation heretofore or hereafter incorporated under the laws of this state, or of any other state, shall do or attempt to do business by virtue of its charter or certificate of incorporation, in this state, without a state license therefor. •

“Section 2. It shall be the duty of every corporation incorporated under the laws of this state, and of every foreign corporation now doing business, or which shall hereafter engage in business in this state, to procure annually from the secretary of state a license authorizing the transaction of such business in this state, and shall pay therefor a license-tax as follows”: (Then follows a statement of the amounts of tax proportioned to the amount of the authorized capital stock of the corporation, the tax running from ten dollars where the authorized capital stock does not exceed ten thousand dollars, to two hundred and fifty dollars where it exceeds five million dollars.)

“Said license-tax or fee shall be due and payable on the first day of July of each and every year to the secretary of state, who shall pay the same into the state treasury. If not paid on or before the hour of four o’clock p. m. of the first day of September next thereafter, the same shall become delinquent and there shall be added thereto, as a penalty for such delinquency, the sum of ten dollars.

“The license-tax or fee hereby provided authorizes the corporation to transact its business during the year or for any fractional part of each year in which such license-tax or fee is paid. ‘Tear,’ within the meaning of this act, means from and including the first day of July to and including the thirtieth day of June next thereafter.

“Section 3. The secretary of state shall, on or before the fifteenth day of September in each year, report to the governor of the state a list of all corporations which have become delinquent, as provided in section two of this act, and the governor shall forthwith issue his proclamation, declaring under this act that the charter of such delinquent domestic corporation will be forfeited and the right of such foreign corporation to do business in this state will be forfeited unless payment of such license-tax, together with the penalty for such delinquency, as hereinbefore provided, be made to the secretary of state on or before the hour of four o’clock p. m. of the thirtieth day of November next following.

“Section 4. Said proclamation shall be filed immediately in the office of the secretary of state, and said secretary of state shall immediately cause a copy of said proclamation to be published in one issue of each of two daily newspapers to be selected by the governor.

“Section 5. At the hour of four o’clock p. m. of the thirtieth day of November each year the charters of all delinquent domestic corporations which have failed to pay the said license-tax, together with said penalty for such delinquency, shall be forfeited to the state of California, and the right of all delinquent foreign corporations to do business in this state which have failed to pay said license-tax, together with the penalty for such delinquency, shall be likewise forfeited. . . .

“Section 7. All educational, religious, scientific and charitable corporations, and all corporations which are not organized for pecuniary profit, are exempt from the provisions of this act.

“Section 8. On or before the thirty-first day of December of each year the secretary of .state shall make a list of all domestic corporations whose charters have been so forfeited and of all foreign corporations whose right to do business in this statq has been so forfeited, and shall transmit a certified copy thereof to each county clerk in this state, who shall file the same in his office.

“Section 9. It shall be unlawful for any corporation, delinquent under this act, either domestic or foreign, which has not paid the license-tax or fee, together with the penalty for such delinquency, as in this act prescribed, to exercise the powers of such corporation, or to transact any business in this state, - after the thirtieth day of November next following the delinquency. ...”

Section 10 makes the directors or managers in office of a corporation whose charter is so forfeited, the trustees of the corporation and stockholders or members, to settle up the affairs of the corporation.

Section 10b is as follows: “At the time of filing a certified copy of articles of incorporation of any corporation when filed on or between the first day of July and the following first day of December in any year, there shall be paid, in addition to all other fees required by law to be paid to secretary of state, the sum of twenty dollars, which shall be received and license receipt issued in full of the license-tax payable under this act, for the then current year.”

Certain questions as to the proper construction of this act are involved by this application.

We are satisfied that the act must be construed as imposing the duty on all domestic corporations (excepting educational, religious, scientific, and charitable corporations, and all corporations which are not organized for pecuniary profit) to pay the so-called “tax,” regardless of whether they actually transact or attempt to transact business in the state. Section 2, the section prescribing this duty, is plain and explicit in this regard. “It shall be the duty of every corporation incorporated under the laws of this state, and of every foreign corporation now doing business, or which shall hereafter engage in business in this state, to procure annually from the secretary of state a license authorizing the transaction of such business in this state, and shall pay therefor a license-tax as follows:”

The next question to be considered in regard to the construction of the act is whether under its provisions, a failure on the part of a domestic corporation to comply with its provisions by paying the charge imposed thereby for any year by four o’clock p. M. of the thirtieth day of November of that year, ipso facto works a forfeiture of its charter. The contention of plaintiff on this point is that the act merely states the conditions under which the charter is liable to forfeiture, and that the forfeiture before becoming effective must be established by the decree of a court of competent jurisdiction in some proceeding brought for that purpose. It is, of course, admitted that the only question in this connection is one of legislative intent. All the cases agree upon the proposition that although a forfeiture at common law does not operate to divest the title of the owner until by a proper judgment in a suit instituted for that purpose the rights of the state have been determined, a statute prescribing a forfeiture may be self-executing. Upon this point the language of the act is so clear and unmistakable in meaning, that we should be obliged to hold that it was intended that such failure should ipso facto work a forfeiture even if the result thereof should be, as claimed, that the act so providing must be held unconstitutional on the ground that it violates the due process of law clauses of the federal and state constitutions. We concede the claim that the act should be construed against such ipso facto forfeiture if the language used is fairly susceptible of such interpretation, but we are satisfied that it is not so susceptible. As we have seen, the act, after imposing the specific charge, provides that it shall be paid between July first and four o’clock p. m. of September first of the year for which it is due, that at the last mentioned time a penalty of ten dollars for delinquency shall accrue (sec. 2), that the secretary of state shall, on or before September fifteenth in each year report to the governor a list of all delinquent corporations, whereupon the governor shall issue his proclamation declaring “that the charters of

This brings us to a consideration of the question of the nature of the charge imposed by this act on the corporations affected by its provisions. It is earnestly claimed that, although denominated a “license-tax,” it is a tax on “property” within the meaning of that word as used in section 1 of article XIII of our-constitution. That section providing that “all property in the state, not exempt under the laws of the United States, shall be taxed in proportion to its value, to be ascertained as provided by law,” it is claimed that, as this act taxes the property of the various corporations without regard to its value, it is void. In view of what we have already said, it is clear that the charge imposed by this act is a charge for

“Although the statute designates an imposition of this kind as a license fee or franchise tax it plainly is not a tax upon corporate franchises. In fact, strictly speaking, it is not a

tax at all, nor has it the elements of one. It is in reality an arbitrary imposition laid upon the corporation without regard to the value of its property or its franchises and without regard to whether it exercises the latter or not solely as a condition of its continued existence. The state in creating a corporation has the right to impose upon its creature such conditions as the legislature within constitutional limits may deem proper; and the acceptance by the corporation of the franchises, powers and privileges conferred upon it binds it to the performance of those conditions so long as it continues to remain in possession of those franchises, powers, and privileges, and the conditions themselves remain unrevoked by the legislature, and this is so without regard to the solvency or insolvency of the corporation, the value or want of value of its franchises or whether or not it is exercising them either by its officers and directors or through a receiver. The sole test in determining its liability to comply with those conditions so long as they remain unrevoked is the existence or nonexistence of the corporation.” (In re United States Car Co., 60 N. J. Eq. 516 , [ 43 Atl. 673 ].)

This quotation aptly states the real nature of the charge imposed by the act under consideration, and the grounds upon which the imposition is justified. It is substantially the purchase price which the state has seen fit to charge for the continuance of the privilege of being and acting as a corporation. Although this privilege had already been granted to plaintiff and all other existing corporations, it had been granted subject to the power reserved by the state, to be exercised by general laws, of revocation, or the imposition of new charges therefor or new conditions upon which it might be enjoyed. The charge is in no sense a tax upon the thing granted, as is the tax imposed under section 1 of article XIII. It is a mere license fee charged for the privilege, and is not a tax upon property at all, and the requirements of section 1 of article XIII of the constitution do not apply thereto. (See, in addition to authorities already cited, Jersey City etc. Co. v. United etc. Co., 46 Fed. 264 ; State v. Pacific etc. Co., 99 Pac. (Or.) 427; Chehalis Boom Co. v. Chehalis Co., 24 Wash. 135 , [ 63 Pac. 1123 ]; American Smelting etc. Co. v. People, 34 Colo. 240 , [ 82 Pac. 531 ]; Marsden Co. v. Assessors, 61 N. J. Law, 461 , [ 39 Atl. 638 ]; People v. Knight, 174 N. Y. 478 , [ 67 N. E.

Construing the act as we do, and in view of what we have already said, we see no force in the claim that it is void as being in conflict with the due process of law provisions of the federal and state constitutions, by reason of the fact that the failure of a domestic corporation to pay the charge imposed ipso facto works a forfeiture of its charter without any opportunity to the corporation to be heard. Practically, we have here simply the case of the grant by the state of a privilege upon condition subsequent, the privilege of being and acting as a corporation, which is to continue only upon the condition that the corporation shall annually pay to the state a certain specific amount therefor, on or before the thirtieth day of November at four o’clock p. m., it being provided that upon failure to pay at such time, the privilege shall ipso facto cease, provided, of course, that the acts required to be performed by the secretary of state and the governor shall have been performed in the manner required. This is not the taking of property without the due process of law, or, indeed, the taking of property at all within the meaning of the constitutional provisions, notwithstanding that the continuance of the privilege might be very valuable. By virtue of the terms of the statutes relating to the grant of the privilege and its continuance, the privilege ceases to exist upon the failure of the corporation to make the payment specified as a condition of its continuance. As said in Los Angeles Ry. Co. v. Los Angeles Co., 152 Cal. 242 , [ 125 Am. St. Rep. 54 , 92 Pac. 490 ], where a breach of condition works a forfeiture of the thing granted, “there is no office for a judgment to perform, except perhaps to supply conclusive evidence of the fact” which itself works the forfeiture. (See, also, Arcata v. Arcata etc. Co., 92 Cal. 639 , 645, [ 28 Pac. 676 ].) It is obvious that there is no analogy between such a

• It should be unnecessary to say that it is only when the breach of condition prescribed by the act in fact occurs that there is any forfeiture, and that there can be no forfeiture as to any corporation exempted from the provisions of the act. Nothing is conclusively adjudicated or adjudicated at all against any corporation by any tribunal or officer. If a corporation exempted from the provisions of the act under the section exempting “all educational, religious, scientific and charitable corporations, and all corporations which are not organized for pecuniary profit” is nevertheless reported to the governor by the secretary of state as delinquent, and included in the proclamation of the governor provided for in section 3, there is no forfeiture as to such a corporation, and wherever its right to be and continue as a corporation is legally assailed that

The act is not in violation of section 1 of article III of the constitution, providing that no person charged with the exercise of powers properly belonging to one of the three departments of the state, the legislative, executive, and judicial, shall exercise any functions appertaining to either of the others, except as in the constitution provided. The point in this connection is that the secretary of state, an executive officer, is given the judicial power to determine whether any corporation which has failed to pay the charge, is within or without the exception mentioned in section 7 of the act. He is given no such power, within the meaning of the constitutional provision. He is simply called upon to report to the governor, with a view to the making of the proper proclamation of the latter officer, a list of the corporations which, according to the records of his office, have not paid the charge imposed upon them by the act. This proclamation, it will be remembered, is practically a notice to delinquent corporations, advising them that unless the charge together with the penalty for delinquency is paid at the time designated by the statute, their charters will be forfeited. While the secretary of state must exercise his judgment in determining which of the corporations whose articles are on file come within the description given in section 7, purely for the purpose of determining which shall be included in the list he is required to make, he does this as a mere incident to the exercise of a purely ministerial function, and is not making a determination that is

We are unable to see any force in the objection made by amici curiae that the act is in conflict with section 11 of article I of the constitution, in that it does not operate uniformly upon all the corporations to which it is applicable, in that it imposes different penalties upon domestic and foreign corporations for non-payment of the charge. The California corporation forfeits its charter, while the foreign corporation forfeits only the right to do business in the state. As to each, the state takes away all that it has given, and all that it can take away. The operation of a law is none the less uniform because it operates differently upon different classes, provided there be a reasonable basis for the classification and for a different treatment of the various classes. There is such a reasonable basis here. The difference in the power of the state as regards domestic and foreign corporations furnishes a rational and proper basis for providing these different penalties in cases of delinquency by the two classes of corporations.

The act is not in conflict with section 15 of article XII of the state constitution, which provides that “no corporation organized outside the limits of this state shall be allowed to transact business within this state on more favorable conditions than are prescribed by law to similar corporations organized under the laws of this state.” The conditions prescribed upon which corporations are allowed to transact business within this state are absolutely the same as to both classes, domestic and foreign. Each is required to pay the same amount, and the time for payment is the same as to each.

We do not think that the case falls within the rule enunciated in Ex parte Young, 209 U. S. 123 , [ 28 Sup. Ct. 441 ], to the effect that where the validity of a statute depends upon the existence of a fact which can be determined by a court only after investigation of a very complicated and technical character, a provision in the statute which imposes such severe penalties by way of fine and imprisonment for disobedience of its provisions, as to intimidate the parties affected thereby

In our judgment, the act is not void for failure of the title to sufficiently express its subject (Const., art. IV, sec. 24). As is said in Ex parte Liddell, 93 Cal. 633 , [ 29 Pac. 251 ]: “The object of the provision is to prevent legislative abuse—to prevent the passage of acts bearing deceitful and misleading titles. It is intended to protect the members of the legislature as well as the public against fraud; to guard against the passage of bills the titles of which give no intimation to the members of the legislature or to the public of the matters contained therein. .. . To prevent deception by the inclusion of matters incongruous with the subject specified in the title. If the title contains a reasonable intimation of the matters under

What we have said substantially covers all of the points that have been made against the validity of the act.

The demurrer to the petition is sustained and the proceeding dismissed.

Sloss, J., Shaw, J., Lorigan, J., and Melvin, J., concurred.