author: CURTIS, J.

text:
    [S. F. No. 14799.
    In Bank.
    July 11, 1934.]
    H. P. STOLTENBERG, Respondent, v. JOE HARVESTON et al., Appellants.

      M. M. Getz and George D. Collins, Jr., for Appellants.
    Dunn, White & Aiken and Hamilton Wright for Respondent.
   CURTIS, J.

Action for unlawful detainer by the landlord against tenants holding over after default in the payment of rent. ' The defense to the action was that the landlord orally reduced the rent from $675 per month to $300. This latter sum was paid monthly by the lessees from the date of the lease to and including April 1, 1932. As the rent was payable in advance, the payment on April 1, 1932, covered the whole month of April. On May 7th following, the landlord served notice on the tenants that the rent of "said premises for the month of May, 1932, amounting to $675, due May 1, 1932, under the terms of the lease had not been paid, and that the tenants were required to pay the same within three days after service of notice or deliver up possession of the premises. A trial was had, and judgment was rendered for the plaintiff for possession of the premises. Defendants have appealed on the judgment-roll.

The principal points made on appeal are: (1) That the written lease fixing the monthly rental at $675 was altered and modified by an oral agreement to accept $300 per month as rent of said premises and the actual acceptance of said sum, and (2) no cause of action was stated in the complaint as the allegations of the complaint show that the notice to pay rent or surrender possession of the premises was prematurely given.

Taking these points up in the order of their statement, it is apparent that the first question presented is whether the written lease to pay a monthly rent of $675 per month may be modified by an oral agreement to accept the sum of $300 per month. By section 1698 of the Civil Code it is provided that, “A contract in writing may be altered by a contract in writing, or by an executed oral agreement, and not otherwise.” In so far as the payments of rent made under the oral agreement of the parties are concerned, there can be no question that as to those payments actually made and accepted as rent- in full for the period covered by them, the oral agreement reducing the rent was executed and no claim for the recovery of rent during the period covered by said payments can be maintained. (Julian v. Gold, 214 Cal. 74 [3 Pac. (2d) 1009].) As to the monthly payments of rent due under said lease and not actually paid by the lessees, a different rule governs. As to such payments the oral agreement to accept amounts less than those called for in the written lease had not been executed. In the ease of Klein Norton Co. v. Cohen, 107 Cal. App. 325, 330 [290 Pac. 613], it was held that, “an agreement, in order to be executed, must be fully performed on both sides”. It is further stated in this opinion that, “This principle is strictly enforced when an attempt is made to set up a modification of a written contract by an oral one under section 1698 of the Civil Code.” In this present action the agreement to accept $300 as rent for the month of May, 1932, was in fact not performed by both parties to said agreement. The court found that the tenants tendered the sum of $300 to the landlord in payment of the May rent, but it was refused by the latter. Until the amount had been accepted by the landlord as rent for the month for which it was tendered, it could not be said that this oral agreement to lower the rent had been performed by the landlord, and until it was so performed by him he was not bound by its terms. This point was definitely decided by this court in the case of Sinnige v. Oswald, 170 Cal. 55, 57 [148 Pac. 203], where it was held that “Concessions of the kind that were shown by the defendants, when supported by a consideration, are valid to the extent that a lower rent has been tendered and accepted, as satisfaction in full of the instalments thus paid. They are not sufficient to establish a change in the written contract so as to affect the amount of future instalments of rent where no such change of terms has been made in writing. ’ ’ While it was held by this court in our opinion in Julian v. Gold, supra, that the reference in the above statement that a consideration was necessary to support such an oral agreement was purely obiter, no exception was taken to any other point decided in that case. It is in line with other decisions in this state on the same subject (Estate of McDougal, 146 Cal. 196, 199 [79 Pac. 875]; Dodge v. Chapman, 42 Cal. App. 612, 614 [183 Pac. 966]; James Eva Estate v. The Mecca Co., 40 Cal. App. 515, 519 [181 Pac. 415]), and we think correctly enunciates the law governing such cases.

The second point relied upon by appellants arises out of the following state of facts: The written lease of said premises provides for the payment of the rent monthly in advance on the first day of each month. It further provides that, “No default shall be declared by reason of any provision herein for failure to pay rent upon the day herein specified until five (5) days have elapsed after the same may have become due and payable, and permission is hereby granted the lessees to pay the same at any time within the five (5) days after the same may have become due and payable hereunder.” No rent having been paid by the defendants herein on May 1, 1932, the day when a monthly payment of rent became “due and payable”, or at any time thereafter, the plaintiff on May 7th following, served written notice upon the defendants that said rent had not been paid, and required the defendants to pay said rent within three days after the service of said notice, or deliver up possession of the said premises within said three days. Defendants’ claim that the notice of default was given prematurely rests upon the fact that May 1, 1932, was Sunday and therefore a holiday, and they, therefore, contend that as the rent was due and payable on May 1st, they had under section 13 of the Code of Civil Procedure all of the next day in which to make said payment, and therefore the five-day period mentioned in the lease did not begin to run until this next day, which would be May 2d, and it would not end until May 7th, and that defendants had the whole of said last-mentioned day in which to make said payment. The notice, therefore, which was served on May 7th while defendants were not in default, they contend, was served one day too soon. The fundamental error of defendants is in their assumption that they were required under the lease to pay the rent on May 1st. While the lease provides in effect that the rent shall become due and payable on the first day of each month of said term, it is further provided, as we have seen under the clause of the lease above quoted, that the lessees may pay the rent at any time within five days after it becomes due and payable, which undoubtedly means within five days after the first of the month. We understand defendants concede this to be the meaning of this provision of the lease. This being so, the lessees (the defendants) were not required to pay the rent or to perform any other act whatever on May 1st, a holiday. Therefore, the provisions of section 13 of the Code of Civil Procedure providing that any act of a. secular nature appointed by law or contract to be performed on a holiday may be performed on the following day has no application for the reason that under the facts in this case no such act was appointed to be performed on a holiday. The first day the defendants were under any legal obligation to pay the May rent was May 6th, five days after the nominal day of payment. May 6th was not Sunday, or a holiday for any other purpose. May 6th was also the last day fixed by the lease for the payment of said rent for that month. Not having been paid on that day, the defendants, for failure to pay the same, were in default under the terms of the lease. The notice of such default given by the landlord on the day following was not premature, but in all respects conformed to the terms of the lease and the law applicable thereto. The complaint setting forth these facts therefore stated a good cause of action against the said defendants.

Other points were made by the defendants in their briefs filed herein, but they are so unsubstantial that a discussion of them would serve no useful purpose.

Judgment is affirmed.

Preston, J., Langdon, J., Shenk, J., Thompson, J., and Waste, C. J., concurred.

Rehearing denied.


source: Caselaw Access Project

author: WASTE, C. J.

license: Public Domain

text:
    [L. A. No. 14609.
    In Bank.
    July 11, 1934.]
    C. C. JULIAN, Plaintiff, v. W. A. SCHWARTZ, Defendant and Appellant; L. V. REDFIELD et al., Petitioners and Appellants; BARNHART-MORROW, CONSOLIDATED, et al., Respondents.
    Olson & Olson and J. W. Falkner for Petitioners and Appellants.
    Hanna & Morton and Simpson & Simpson for Defendant and Appellant.

      Everett W. Mattoon, County Counsel, S. V. 0. Prichard, Deputy County Counsel, and Hunsalcer, Moote & Longcroft for Respondents.
   WASTE, C. J.

This action was brought to have the ownership of, and certain conflicting rights and interests in, certain oil wells and the proceeds of production therefrom judicially determined. At the commencement of the action, and pursuant to stipulation, receivers were appointed to take charge of and operate the wells and conserve the net proceeds. From time to time the receivers resigned and trustees were appointed, also pursuant to a stipulation, to operate the wells and impound the funds received. A “nominal” receiver was appointed to carry on litigation affecting funds due the prior receivership from persons purchasing oil from the wells. This “nominal” receivership is still in effect and is not affected by the proposed order here sought to be restrained. At the conclusion of the trial the court determined the rights and interests of the several parties in and to the several wells and leases involved. Petitioners, being dissatisfied with the judgment as entered, prosecuted an appeal to this court, which appeal is now pending. Subsequent to the taking of the appeal the respondents in this proceeding moved the trial court for an order requiring the trustees to render an accounting and to disburse the impounded funds to the several parties determined to be the owners of interests in the wells and leases, and to deliver possession of the wells to the party from whose possession they had been taken when the action was commenced and who was adjudged by the trial court to be entitled thereto. After hearing upon the motions the trial court announced its intention to grant the same, whereupon the petitioners commenced this proceeding for a writ of supersedeas to stay the proposed “enforcement” of the judgment pending disposition of the appeal on the merits. An order to show cause why a writ of supersedeas should not be granted was issued, with a temporary stay, and the matter is now before us for determination.

Examination of the authorities indicates that an appeal from the judgment does not serve to divest the trial court of jurisdiction to deal with an ancillary receiver (the equivalent of which we have before us in the present case) and the funds or property held by him. (Baughman v. Superior Court, 72 Cal. 572 [14 Pac. 207]; Havemeyer v. Superior Court, 84 Cal. 327, 382, 383 [24 Pac. 121, 18 Am. St. Rep. 192, 10 L. R. A. 627]; Broder v. Conklin, 121 Cal. 289 [53 Pac. 797].) The rule is generally stated in 2 California Jurisprudence, 479, section 226, as follows: “Upon an appeal from a judgment the functions of an ancillary receiver are not necessarily suspended during the appeal; neither .is the power of the court to remove or suspend him superseded by the appeal.”'

However, an order such as is proposed to be here made discharging the receiver or trustee and directing him to pay over the money or property acquired and held by him is appealable as a special order after final judgment. (Sec. 963, Code Civ. Proc.; Broder v. Conklin, supra; Hidden v. Jordan, 1 Cal. Unrep. 216; 22 Cal. Jur. 550, sec. 142.) This being so, the present application for a writ of supersedeas is premature. If and when the order here sought to be restrained is made, the petitioners may, if they be so advised, prosecute an appeal therefrom. Upon such appeal it will be proper for petitioners to apply for a supersedeas which this court may issue in the inherent exercise of its appellate jurisdiction, in the event it be determined that such a writ is both proper and essential to maintain the status quo pending disposition of the appeal from the judgment.'

The order to show cause is therefore discharged and the petition for a writ of supersedeas denied without prejudice.

Shenk, J., Langdon, J., Preston, J., and Curtis, J., concurred.


author: THOMPSON, J.

text:
    [S. F. No. 14863.
    In Bank.
    July 16, 1934.]
    ARTHUR J. SMITH et al., Appellants, v. SOUTHERN PACIFIC RAILROAD COMPANY (a Corporation), Respondent.
    Owen D. Richardson and Donald B. Richardson for Appellants.
    Louis Oneal, Arthur G. Shoup and Frank Thunen for Respondent.
   THOMPSON, J.

The plaintiffs have appealed from a judgment quieting the title of the Southern Pacific Railroad Company to a strip of land less than an acre in area along its right of way in Santa Clara County.

The plaintiffs claim as joint tenants through a deed from one C. N. Anderson executed in 1923, and show a paper title by mesne conveyance from one C. H. Phillips, who was stipulated to be the record owner of the San Martin rancho, of which the strip of land was a part, at the time of its first conveyance as a separate parcel.

The respondent railroad company set up as a defense that the action was barred by sections 318 and 319 of the Code of Civil Procedure, and, by way of cross-complaint, asserted ownership and asked to have its title quieted. The ease was tried without a jury and the court found that “the defendant and cross-complainant Southern Pacific Railroad Company is and for many years has been the owner, in possession and entitled to the exclusive possession by itself, and its lessees, of that certain standard gauge steam railroad and the right of way therefor referred to in the complaint and being commonly known as the Coast Line Railroad of Southern Pacific Railroad Company; that said railroad is now and at all times mentioned in the complaint has been in constant operation as a standard gauge steam railroad in the regular business of interstate and intrastate passenger and freight transportation; that the land described in the complaint is and at all times therein mentioned has been a part of the right of way for said railroad, protected by right of way boundary fence constructed many years ago by said defendant and cross-complainant and by it continuously maintained, separating the said railroad right of way from the state highway, formerly known as Monterey road, through said county of Santa Clara, California; that the said right of way and the said fence have been so maintained and used by said defendant and cross-complainant continuously for a period of over forty (40) years, and that said defendant and cross-complainant has paid all taxes levied and assessed thereon during said period”, and rendered judgment quieting its title thereto.

Appellants contend that the respondent’s occupation was occasional and insufficient to support the claim of adverse possession; that there was no substantial inclosure, nor any usual cultivation or improvement; that the evidence did not support the findings, and, finally, that the presumption of ownership is with the paper title and that clear evidence is necessary to overcome it.

We are of the opinion that the record supports the findings and judgment of the trial court. The respondent’s railroad has been in its present location since 1868. It was stipulated that the -Southern Pacific Railroad Company is the owner of the railroad and the Southern Pacific Company is the lessee. A map introduced in evidence shows a fenced right of way on both sides of the track for the entire portion of the track portrayed on the map, a distance of about two miles. This fence inclosed the property claimed by the plaintiffs. Employees of the respondent, including the assistant engineer, the foreman of bridges and building on the coast division, the superintendent of bridges and building, the roadmaster and the section foreman, testified that from the year 1878 to the time of the trial the fence had been maintained in approximately the same position and had been kept in repair; that every year the grass and weeds had been cut and burned off and that until 1928, when the plaintiffs built their temporary fence around the other three sides of the strip of land in question, they had known of no claim to the property other than that of the railroad company. The section foreman and the roadmaster testified that the fence was torn down immediately and the wire and pickets, of which the fence had been built, were placed on plaintiffs’ property. John Klinger, called by plaintiffs, testified that he had lived near the strip of land in question since 1902, and' had known the same since that time; that in 1903 he leased land along the respondent’s right of way, which included the land here in dispute. In 1903 he plowed the strip claimed by plaintiffs, and one Linden (the then holder of the paper title) told him it was his land. Klinger did not plant this strip again until 1912, when he paid one Dethlefsen, who had taken title from Linden, $3 a year for the privilege of using it, and thereafter he planted this strip for six or seven years, when Dethlefsen told him he had sold the land, and Klinger did not touch the strip again.

The plaintiffs produced the following evidence of user from 1919 (which was probably the last year Klinger took hay from the strip, according to his testimony): From 1919 to 1923 the plaintiffs saw one Mulch, an employee of plaintiffs’ immediate grantor, cut hay from the strip; from the fall of 1923 to 1925 the plaintiffs planted the strip and cut the hay thereon; in 1926 they gave the volunteer crop thereon to one Roll, and in 1928 they had Roll put the fence up. Witness Broughelli, who owned property near plaintiffs’, testified that in 1923 Anderson leased the land to him and that he plowed the strip and sowed and harvested oats thereon, but he also testified that he thought it was railroad property, although he contradicted this last statement on his redirect examination.

With regard to the payment of taxes, it is conceded that, unless taxes on this strip were included in the assessment and taxation of the operative property of the railroad under “rights of way in Santa Clara County” no taxes were assessed on it as a separate piece until 1927, in which year it was assessed separately at plaintiffs’ request. Plaintiffs have paid the taxes since the separate assessment. The respondent introduced records of its tax on operative property as including rights of way in Santa Clara County for the years 1923 to 1927, inclusive.

It has been held that user and improvement of land as a roadbed and right of way “in the manner usual by railroads” and the payment of taxes assessed upon the land as a part of the roadbed and right of way will, even in the absence of a substantial inclosure, satisfy the requirements of adverse possession. (Daniels v. Gualala Mill Co., 77 Cal. 300 [19 Pac. 519].) The user of the respondent has met this test.

The evidence supports the finding of the trial court that this user was continuous for over forty years. To interrupt the adverse user the re-entry of the legal title holder must be open, notorious and under claim of right and must equal in dignity and character that required to initiate an adverse possession. (Armstrong v. Payne, 188 Cal. 585, 597 [206 Pac. 638].) In the case at bar the respondent had openly fenced the land and assumed possession and control over it as a part of its right of way, and had executed a lease therefor which, as early as 1903, came to the attention of the plaintiffs’ predecessor in interest. There is no Indication in the record that the title of the respondent was disputed at the time, and from 1912 for a period of six or seven years the respondent’s lessee, under the same lease, - but having in the meantime leased from the record owner also, cut hay from the strip in question. Thereafter the hay was cut, and in some years the land was plowed and sown by various persons, who entered by a temporary gate in the right of way fence. It is testified by plaintiff Smith himself that- this fence was always nailed up again every year, and it is also in evidence that some of those who used this land were questioned as to their right to do so by the section foreman, who understood such use to be permissive and arranged “by the office” of the respondent. It is only in the building of the fence in 1928, long after the prescriptive period had run, that we find an act of the paper title holder which in any way challenges the right of the respondent- to control the use of this strip of land.

The judgment is affirmed.

Preston, J., Shenk, J., Curtis, J., Langdon, J., and Waste, C. J., concurred.


author: PRESTON, J.

text:
    [S. F. No. 14808.
    In Bank.
    July 16, 1934.]
    ANTHONY REGOLI, Appellant, v. C. R. FANCHER et al., Respondents.

      Thomas T. Califro and Frank E. McGuire for Appellant.
    John S. DeLancey and Stanley J. Smith for Respondents.
   PRESTON, J.

This record presents reciprocal actions to quiet title to a residence lot in Oakland. Issues were joined on both complaint and cross-complaint. Defendant C. R. Fancher having died prior to trial, his widow Dorothy IT. Faneher, as administratrix of his estate, was substituted in his place as defendant and cross-complainant. Plaintiff was denied relief and said administratrix had judgment quieting her title against plaintiff. Defendants D. H. and Kate Duncanson were declared bona fide encumbrancers of said property under the title of said defendant.

Both parties deraigned title from common grantors Stanley N. Foreman and wife. Plaintiff’s claim rests upon the following documents and proceedings, to wit:

A deed executed and delivered by said grantors to Rosie Guaragna, wife of Luigi Guaragna, dated August 12, 1925, and a deed of trust by said grantee conveying the legal title to Nonesiatina Lucchesi and Pietro Lucchesi, as trustees, to secure a note for the sum of $8,500, payable to Angelo Lucchesi; also proceedings regular on their face foreclosing said deed of trust and the sale thereunder and the purchase thereat of said property by plaintiff and the receipt by him of a trustees’ deed in regular form purporting to convey said property to him. Plaintiff, in his complaint, set forth the foregoing facts in detail and joined a second count therein tendering the general issue to quiet title.

Defendants offered no oral testimony but rested their entire case upon certain court proceedings and a certain deed. The court proceedings were of those found in the Matter of James Guaragna, Bankrupt, No. 14786, in the Southern Division of the United States District Court for the Northern District of California, Second Division. Said bankrupt is the son of the above-named Rosie and Luigi Guaragna. The deed relied upon by defendants is a quitclaim deed dated December 13, 1926, covering said property, naming J. Costello, the trustee of said bankrupt, as grantee, and the following persons as grantors: Luigi Guaragna and RoSie Guaragna, his wife, Angelo Lucchesi, Nonesiatina Lucchesi and his wife, Pietro Lucchesi, a single person, James Guaragna and his wife. The validity of the sale under said bankruptcy proceedings and the validity of said deed will be considered in the order named.

On December 21, 1925, an involuntary petition in bankruptcy was filed against the said James Guaragna and on January 6, 1926, he was duly adjudicated a bankrupt. On said December 21st, at the time of the institution of the proceedings, the said J. Costello was appointed a receiver of the bankrupt estate and on January 26, 1926, he was named trustee in bankruptcy of said estate. The pertinent documentary evidence introduced was the following:

An order to show cause and restraining order, dated February 10, 1926, made by the referee in bankruptcy, directing said Luigi Guaragna, Rosie Guaragna, Albert Russello,Angelo Lucchesi, Nonesiatina Lucchesi, Pietro Lucchesi and James Guaragna, to show cause on the sixteenth day of February, 1926, why they should not turn over the possession of the real property here in suit to the trustee in bankruptcy; also why said Rosie and Luigi Guaragna should not be directed forthwith to convey the equitable title to said property to said trustee and why Angelo Lucchesi and the trustees in said deed of trust, Nonesiatina and Pietro Lucchesi, should not forthwith make a reconveyance of the legal title thereto and why an order quieting title of the trustee to said property should not be made against them and why certain other relief, not here material, should not be granted.

This was followed by a judgment and decree taken by default which purported to direct the said Rosie and Luigi Guaragna to convey said real property to said trustee in bankruptcy and surrender possession thereof to him. It further purported to direct said Angelo Lucchesi and Nonesiatina and Pietro Lucchesi to convey the legal title to said property, free of the encumbrance of said deed of trust and gave further extraordinary and extensive equitable relief, such as appointing a commissioner, E. C. Street, and directing him to execute said conveyances in case said parties failed for the period of ten days to themselves so do.

Another document is entitled a commissioner’s deed, purporting to be a deed executed by said commissioner appointed under said decree, conveying said real property to said trustee in bankruptcy and making a reconveyance of the property held by said trustee, as directed in said decree.

Another document is an order confirming the sale of said real property, dated December 9, 1926, the sale having been made on August 19, 1926, to Charles R. Fancher. This last-mentioned order recited that said Angelo Lucchesi and all the other above-named parties appeared through their attorney Joseph P. Lacey and objected to the confirmation of said sale and that said objections were overruled.

Still another document is a trustee’s deed, dated December 9, 1926, purporting to convey said real property, pursuant to said sale, to said Charles R. Fancher, the purchaser.

It will be noted that there is an entire absence in the record not only of the petition supporting said order to show cause above referred to, but also of proof that a copy of either the order to show cause or the petition was served upon any of the said parties, particularly Angelo Lucchesi. It is true that the decree recites service upon and the presence of these parties both by counsel and in person but the uneontradieted evidence of several witnesses showed clearly that no such service was made nor was Angelo Lucchesi present, either in person or by counsel, to answer said order to show cause. In fact, the proof established that a subpoena to appear at 2 o’clock on the fifteenth day of January, 1926, to be examined in relation to said bankruptcy was the only paper served upon Angelo Lucchesi or any other of the parties mentioned in said decree. We are pointed to no authority which sustains a default decree against a person in the position of Angelo Lucchesi. It is true the attack here is collateral, but this decree would seem clearly to be in no different status than a decree of a sister state or foreign country. In such cases it is always competent to impeach the judgment or decree by showing that in fact the process upon which it is based was never served. (Estate of Pusey, 177 Cal. 367 [170 Pac. 846]; Estate of Pusey, 180 Cal. 368 [181 Pac. 648]; Delanoy v. Delanoy, 216 Cal. 27, 34 [13 Pac. (2d) 719, 86 A. L. R. 1321].) We know of no law that clothes the orders or decrees of a referee in bankruptcy with any presumption of jurisdiction over strangers to the proceeding.

We are also of the view that upon the recitals of the decree itself the referee never acquired jurisdiction to enter it, even though the parties voluntarily appeared in said proceeding and merely objected to the jurisdiction of the referee to proceed. The propriety of a court in bankruptcy making a decree, in a summary proceeding, binding on third persons, to turn over to the trustee of a bankrupt estate property held by them is a question that has received extended treatment by the federal courts and the gist of the rulings thereon seems to be that to authorize such a proceeding, possession of the property, either actual or constructive, must be in the bankruptcy court. For illustration, such as where it was in the physical possession of the debtor at the time of the filing of the petition in bankruptcy but not delivered to the trustee, or where delivered to the trustee, it had been taken from him by a third person or where the property is in the hands of the bankrupt’s agent or bailee. A yet further element must be present, to wit: The claim of the third party must not be bona fide but merely colorable. (Taubel-Scott-Kitzmiller Co. v. Fox, 264 U. S. 426 [44 Sup. Ct. 396, 68 L. Ed. 770] ; also, In re Bastanchury Corporation, 62 Fed. (2d) 537, 542.)

It is true that here the decree and the order to show cause do recite that the real estate involved was in the possession of said parties as agents of the bankrupt; still the further facts shown are that the property was in the possession of two of said parties under a deed thereto from persons other than the bankrupt, which deed antedated the proceeding in bankruptcy; also that there existed thereon a deed of trust in favor of another of the third parties, which likewise antedated the bankruptcy proceeding; also that the parties appeared at the time mentioned in the order to show cause and asserted orally their claims to said property and questioned the jurisdiction of the court to proceed and demanded that a plenary action be initiated rather than a summary proceeding.

We are referred to no case which sustains a summary proceeding under such circumstances. We here see equitable powers of the most far-reaching character employed to secure specific performance, cancellation of instruments, appointment of a commissioner and quieting title, followed by a further provision which empowered the marshal to take possession of the property from the said parties and deliver it to the trustee. We think no authority can be found to support such action under the circumstances. A claim may be fraudulent and still be adverse and substantial. (Johnston v. Spencer, 195 Fed. 215; Mueller v. Nugent, 184 U. S. 1 [22 Sup. Ct. 269, 46 L. Ed. 405].) Indeed, the federal District Court itself would not have jurisdiction of a plenary suit for this relief except under certain contingencies applicable to all civil actions. (Bardes v. Hawarden Bank, 178 U. S. 524 [20 Sup. Ct. 1000, 44 L. Ed. 1175].) We think that the facts of this case make applicable the doctrine of Louisville Trust Co. v. Comingor, 184 U. S. 18, 25 [22 Sup. Ct. 293, 46 L. Ed. 413], where it was held that only by plenary action could the trustee in bankruptcy secure property from an assignee where the assignment antedated the bankruptcy proceeding. It was there further held that an informal protest to the jurisdiction was a sufficient appearance. See, also, Crews et al. v. Folds, 160 Ga. 22 [127 S. E. 281, 6 A. B. R. 127], where the Georgia Supreme Court made a holding in complete accord with the views we have here expressed.

In fact, in a recent case, Wight v. Street, 63 Fed. (2d) 80, 81, which involved a decree presumably of this same referee, appointing this same commissioner to make a transfer of real property, in substantially the same kind of a situation, we find that the Circuit Court of Appeals of the Ninth Circuit held a plenary action was required and closed its opinion with the following language: "Our conclusion is that the bankruptcy court was without jurisdiction of the merits in a summary proceeding. As said by the court in Shea v. Lewis, (C. C. A. 8) 206 Fed. 877, 884: ‘We adhere to the wholesome rule “which assures a trial of the merits of” such claims “in a plenary suit at law or in equity under the rules of pleading, of practice, and of evidence, that wisdom and experience have found most conducive to the discovery of the truth and the administration of justice”. In re Rathman, (C. C. A.) 183 Fed. 913, 929 [106 C. C. A. 253, 269].’ This rule is especially applicable where, as here, the order directs the conveyance of the title to real property by a stranger to the bankruptcy proceeding.”

We next pass to consideration of the quitclaim deed executed after sale of the property and, in the same connection, the waiver of the right to seek a review of the order confirming the sale to said Charles R. Rancher. The answer to the cross-complaint herein, respecting said deed, pleads: “That the alleged deed alleged to have been executed by Luigi Guaragna (et al.) ... to J. Costello, as trustee (etc.) ... in the answer of the defendants herein, was at the time it was made, ever since has been and now is void and of no effect, and in this connection alleges: that on or about the 13th day of December, 1926, and prior to the alleged making of said deed, said J. Costello . . . and others acting as his agent and on his behalf, did menace and threaten to criminally prosecute said Angelo Lucchesi, Nonziatina Lucchesi, Pietro Lucchesi, Rosie Guaragna, and Luigi Guaragna with arrest under criminal warrant, and did menace and threaten to criminally prosecute said alleged makers of said deed, for an alleged violation of the National Bankruptcy Laws, and did menace and threaten said Angelo Lucchesi, Nonziatina Lucchesi and Pietro Lucchesi with the loss of all their properties unlawfully, if (they) . . . Rosie Guaragna and Luigi Guaragna, did not sign said alleged deed . . . and thereby putting said makers of said alleged deed in fear of the loss of their liberties and properties, and thereby, and solely by reason thereof, were induced to and did sign said alleged deed. That said signing, or execution, of said alleged deed was without any consideration whatsoever. . . . That by reason of the aforesaid acts, conduct, menace, threats and duress, and lack of consideration said alleged deed is of no effect and void.”

Execution of the above-mentioned waiver was part of the transaction respecting said deed. The court below made no finding at all on this issue of coercion and duress. We think the plaintiff was entitled to a finding on this defense to the cross-complaint. The evidence shows without substantial contradiction that these documents were both executed by parties under the fear of criminal prosecutions, amid tears and turbulence. The further fact is that soon after execution of said deed, the parties whose rights are here involved were in fact indicted, prosecuted and acquitted of the charges which were the basis of the action of the referee in making the above-considered decree. It is true that $1,000 was paid for said deed by the trustee but the receipt for same was executed by Luigi Guaragua alone and not by the material party here, Angelo Lucchesi, who testified that he received no part thereof.

The claim that respondents did not apply the coercion that forced the deed is immaterial to this inquiry because the deed was secured subsequent to the purchase by Charles R. Rancher and subsequent also to the deed by the trustee to him. He was therefore not in the position of a bona fide purchaser relying upon this deed. Moreover, he had actual knowledge of the adverse claims of said parties at the time of his purchase and, still further, a purchaser is bound at his peril to know whether or not on the face of the record the court is proceeding within its jurisdiction in making a sale to him.

It follows from the foregoing that, upon the record as it now stands, the judgment must be reversed, and it is so ordered.

Shenk, J., Langdon, J., Curtis, J., and Waste,- C. J., concurred.


author: THE COURT.

text:
    [S. F. No. 15121.
    In Bank.
    July 16, 1934.]
    AUGUST BENDIX, Appellant, v. JESSE M. SABIN, Respondent; HENRIETTA G. SABIN et al., Defendants.

      R. E. Hewitt for Appellant.
    R. A. Rogers for Respondent.
   THE COURT.

Motion to dismiss appeal.

The trial court rendered judgment against the plaintiff. After motion for new trial made and denied, plaintiff gave notice of, hut has not perfected, an appeal.

From the order of the trial court terminating proceedings for the preparation of a record on appeal, it appears that the time allowed by law has long since passed.

The appeal is dismissed.


text:
    [L. A. No. 13207.
    In Bank.
    July 16, 1934.]
    RAY L. RILEY, as Controller, etc., Appellant, v. ALBERT C. ROBBINS et al., Respondents.

      David Tannenbaum and W. H. H. Gentry for Appellant.
    Dempsey and Mackay and Howard W. Reynolds for Respondents.
   THE COURT.

These proceedings were commenced by the petition of Ray L. Riley, State Controller, for determination of the inheritance tax due on property left by Hortense L. Robbins, who died intestate on or about August 12, 1929. The court appointed an inheritance tax appraiser, who reported that the personal property left by the decedent was, at the time of her death, of the total market value of $436,310.19; that allowable deductions amounted to $9,952.41 ; that “the clear market value subject to tax” was $434,-319.71; that the property passed share and share alike to the respondents (surviving husband and adult son and daughter) and that each share was subject to an inheritance tax of $5,784.13, the total tax being $17,353.39. The respondents objected to the report and appraisement on the ground that expenses of the decedent’s funeral and last illness were not allowed as deductions from the market value of the taxable property. Hearing was had, the respondents’ objections were sustained and judgment was entered allowing the deductions of $11,595.15, the stipulated amount of funeral and last illness expenses, from the figure shown by the appraiser as the clear market value subject to tax, thus reducing the tax to $16,540.71, the share of each respondent becoming $5,513.57. From this judgment allowing the deduction the petitioner has appealed. It was stipulated that the expenses of the funeral and last illness were paid by the decedent’s husband and that he was financially well able to pay them.

The appellant contends that, inasmuch as the husband is obligated to pay these expenses without being entitled to be reimbursed from the estate of the wife (which is conceded by the respondents), these items were improperly allowed as deductions.

Prior to amendment on August 14, 1929, section 2 of the Inheritance Tax Act (Stats. 1921, p. 1500, as amended in 1925 and 1927 [Codes and Gen. Laws, Deering’s Consol. Supp. 1925-1927, p. 2027]) provided:

Section 2. “A tax shall he and is hereby imposed upon the transfer of any property, real, personal or mixed, or of any interest therein or income therefrom, in trust or otherwise, to persons, institutions or corporations not hereinafter exempted, to be paid to the treasurer of the proper county, as hereinafter directed for the use of the state, said taxes to be upon the market value of such property at the rates hereinafter prescribed and only upon the excess over the exemptions hereinafter granted, in the following cases:

“ (1) When the transfer is by will or by the intestate or homestead laws of this state. . . .
“(10) Deductions from appraised value. In determining the market value of the property transferred, the following deductions and no others shall be made from the appraised value thereof:
“ (b) Expenses of funeral and last illness.”

It is the theory of appellant that subdivision (10) is a limitation on the actual expenses or charges on the estate which may be allowed in computing the tax and not an arbitrary establishment of deductions which shall be allowed regardless of whether the property transferred has been lessened thereby. We are asked to construe subdivision (10) and paragraph (b) thereof in the light of the act as a whole, and its allegedly manifest intent to tax the net beneficial interest passing to the transferee, and to hold that subdivision (10) of section 2 means, when it says “the following deductions and no others shall be made”, that the enumerated deductions shall be made only when they are an actual charge on the estate of the decedent and allowable as such in probate and administration proceedings.

We cannot so disregard the plain mandate of the statute. The direction to make the dedhction is clear and unambiguous on its face, nor does any conflict or uncertainty arise when read in the light of the other deductions allowed, as appellant has contended. The most that can be said is that apparently the legislature was prompted by other and different considerations when including this deduction in its enumeration. Where the meaning of the statute is plain there is no room or justification for judicial interpretation, and the only function of the court is the application of the enactment to the facts at bar. (Sandelin v. Collins, ante, p. 147 [33 Pac. (2d) 1009].) We are satisfied that to give effect to the construction urged by the appellant would be an invasion of the province of the legislature.

The judgment appealed from is affirmed.

Rehearing denied.

Tyler, J., pro tem., dissented.


text:
    [Sac. No. 4880.
    In Bank.
    July 16, 1934.]
    ALEX E. WILSON, Respondent, v. JACK JOHNSON et al., Defendants; JACK JOHNSON et al., Appellants.
    Frank J. Fontes for Appellants.
    Sterling Carr, Louis Glieksberg and Ephriam Adams for Respondent.
   PRESTON, J.

It is the plain duty of appellants to comply with the requirements of section 943 of the Code of Civil Procedure in order to effect a stay of proceedings on the judgment in the court below, from which they have appealed.

The judgment directs the assignment to plaintiff and respondent of certain shares of corporate stock standing on the books of the company in the respective names of the appellants. They, too, have the beneficial ownership of said certificates and the right of possession, subject only to the escrow in which they are held to await compliance with certain restrictions imposed by the commissioner of corporations. The judgment directs an assignment and delivery subject to the escrow restrictions.

The case of Baar v. Smith, 201 Cal. 87 [255 Pac. 827], relied upon by appellants, is not applicable, as the holding there was predicated upon both the absence of title and possession and beneficial ownership, which the court' held sufficient to make applicable section 949 of the Code of Civil Procedure instead of the previous section noted above.

The application is denied.

Shenk, J., Curtis, J., Langdon, J., and Waste, C. J., concurred.


text:
    [S. F. No. 14992.
    In Bank.
    July 17, 1934.]
    FRED FARRIS, Appellant, v. PACIFIC STATES AUXILIARY CORPORATION (a Corporation) et al., Respondents.

      Leon French and Fred W. Lake for Appellant.
    John L. Mace for Respondents.
   THE COURT.

Motion to dismiss appeal or affirm judgment. On the hearing we denied the motion to dismiss appeal and submitted for decision the motion to affirm the judgment.

The judgment appealed from was upon a directed verdict at the close of the entire evidence in the case. The grounds set forth in the motion of respondent Pacific States Auxiliary Corporation to affirm the judgment are that the appeal is frivolous and that the questions presented are so unsubstantial as not to need further argument. No argument was therefore presented in said respondent’s points and authorities accompanying its motion to affirm judgment to refute the contention appearing in appellant’s brief. The action is for the possession of an apartment house and its furnishings. The appellant, who was the plaintiff in the action, contends in his brief on appeal that at the trial he made out a prima facie case in his favor. He refers to certain evidence in the reporter’s transcript which tends to support this contention. If he is correct in this contention, then the motion for a directed verdict was erroneous as the issue under such circumstances became one of fact to be decided by the jury. Possibly there is evidence in the record which will explain the evidence relied upon by the appellant and demonstrate its lack of probative value. The record with its exhibits consists of something over three hundred pages of typewritten matter. We hardly feel that it is the duty of this court to spend its time in an exhaustive examination of this record in order to ascertain whether or not it contains the necessary evidence to justify the trial court’s order granting the respondent’s motion for a directed verdict. This burden, we think, should be assumed by the respondent.

The motion, therefore, to affirm the judgment is denied, and the respondent is given thirty days from the date of this order in which to file its brief in reply to that of the appellant.


author: SHENK, J.

text:
    [S. F. No. 15057.
    In Bank.
    July 17, 1934.]
    In the Matter of the Estate of C. LIND, Deceased. G. R. SOULE et al., Appellants, v. JOHN J. TAAFFE et al., Executors, etc., Respondents.
    William Sea, Jr., for Appellants.
    No appearance for Eespondents.
   SHENK, J.

On February 7, 1933, Charles Lind died testate in the city and county of San Francisco. On September 2d of the same year the executors of his will filed their first and final account and petition for distribution, including a bequest of $4,333.34 in cash to William Lyons, a legatee under the will. Judgment creditors of Lyons filed their objections to the petition for distribution based on the following facts: In an action in the Superior Court in and for the City and County of San Francisco, A. B. Walcott in 1918 obtained a judgment against said legatee Lyons. The appellants are the owners of said judgment by assignment. On July 22, 1933, on order of court, an execution was issued on said judgment and a copy thereof, with the sheriff’s notice attached, was on August 7th filed by the' sheriff in the office of the county clerk in the matter of said probate proceedings. On the same day a copy of said execution with sheriff’s notice was served on one of said executors. When the matter of the settlement of the account and petition for distribution came on for hearing, on September 14th, counsel for the judgment creditors presented an objection to the petition on the ground that said levy of execution on the interest of William Lyons in said estate was not mentioned in the petition, as provided in section 561 of the Code of Civil Procedure. Notwithstanding the objection the court settled the account and ordered distribution in accordance with the prayer of the petition. The objectors then moved the court, on notice, to amend the decree of distribution by inserting therein an order directing sufficient of said cash legacy to William Lyons to be delivered to the sheriff to satisfy the amount due on said judgment. The motion was denied. The owners of said judgment, Soule and Best, have prosecuted an appeal from the decree of distribution and from the order denying their motion to amend the decree.

The pertinent part of section 561 of the Code of Civil Procedure provides: “The interest of a defendant in personal property belonging to the estate of a decedent, whether as heir, legatee, or devisee, may be attached by serving the personal representative of the decedent with a copy of the writ and a notice that said interest is attached. . . . A copy of said writ of attachment and of said notice shall also be filed in the office of the clerk of the court in which said estate is being administered and the personal representative shall report such attachment to the court when any petition for distribution is filed, and in the decree made upon such petition distribution shall be ordered to such heir, legatee or devisee, but delivery of such property shall be ordered to the officer making the levy subject to the claim of such heir, legatee or devisee, or any person claiming under him. The property shall not be delivered to the officer making the levy until the decree distributing such interest has become final.”

Section 688 of the Code of Civil Procedure contains the provision that money and other property, real or personal, or any interest therein, of a judgment debtor are liable to execution, and that debts and credits and all other property, both real and personal, or any interest therein “may be levied upon or relieved from levy in like manner as like property may be attached or relieved from attachment”.

No reason has been pointed out, and we perceive none, why the writ of execution may not be employed in the same manner and with the same effectiveness as the writ of attachment as provided in section 561. The writ of execution involved herein was issued and was served and filed as provided in said section for the service and filing of the writ of attachment, and should be given like effect. It was thereupon the duty of personal representatives of the decedent to report said execution when the petition for distribution was filed. Failing in that respect the judgment creditor properly called the attention of the court, on motion, to the omission, and the decree of distribution should have been made to provide for distribution to the legatee of the amount of the legacy, when the decree should become final, but that the delivery of the money be made to the officer making the levy, subject to the claim of the legatee or any person claiming under him.

The decree and order are reversed.

Curtis, J., Langdon, J., Preston, J., and Waste, C. J., concurred.


text:
    [S. F. No. 15106.
    In Bank.
    July 17, 1934.]
    T. V. MAXWELL et al., Petitioners, v. THE SUPERIOR COURT OF SAN MATEO COUNTY et al., Respondents.
    Kirkbride, Wilson & Brooks for Petitioners.
    Carl W. Anderson, Gilbert D. Ferrell and Fred W. Comba for Respondents.
   SHENK, J.

Petition for writ of mandate. The matter is presented on the petition, the answer thereto and a demurrer to the answer.

Charle Hammer and Frida Hammer, his wife, brought an action in the respondent superior court against the petitioners herein to rescind certain agreements for the sale of real property. The plaintiffs in the action were the purchasers under said agreements and the petitioners herein were the defendant sellers. The defendants in the action filed a cross-complaint seeking reformation and specific performance of the agreements.

On July 14, 1933, the respondent court made and entered its order termed an interlocutory decree, wherein it adjudged the defendants entitled to reformation and specific performance of the agreements. The order directed that within ten days after service of notice of entry of the interlocutory decree, the defendants deposit with the clerk of the court a grant deed to the property involved conveying to the plaintiffs a merchantable title; that the plaintiffs should have ten days after service of notice of deposit of the deed to deposit the amount of the purchase price or to file and serve a written notice of their objections to the title. The interlocutory decree provided that the court should pass upon the objections and if it should determine that the plaintiffs would receive a merchantable title they should have ten days within which to deposit the purchase money with the clerk. If it should be determined that the title was defective, the defendants were to have 120 days within which to obtain a court decision that the title was clear and merchantable, the plaintiffs thereupon to have ten days within which to deposit the purchase price. It was provided further that upon the deposit of the purchase money a final judgment of specific performance should be entered declaring that the property had been conveyed and the purchase money paid; but that upon failure to deposit the purchase money the defendants should have judgment against the plaintiffs for the amount thereof, $6,500, with interest from January 15, 1932.

Within due time the defendants in said action, the petitioners herein," deposited with the clerk of the court their grant deed. The plaintiffs filed and served their objections to the title. A hearing on said objections was had and on October 3, 1933, the respondent court made its order that the deed was insufficient to convey a merchantable title. On November 21, 1933, the defendants filed an additional instrument and on that date noticed a second hearing for November 27, 1933, on the question of their compliance with the direction of the interlocutory decree to deposit a deed conveying a merchantable title. The judge of the respondent court was unable to hear said matter on the day noticed and set the hearing for December 4, 1933. On December 2, 1933, the defendants perfected an appeal from the order of October 3, 1933.

On December 4, 1933, the respondent court determined that the grant deed and other instruments deposited with the clerk conveyed a merchantable and clear title. Notice of the entry of said order was served upon the plaintiffs, but the plaintiffs failed to deposit with the clerk the purchase money as provided in the interlocutory decree.

On January 2, 1934, the defendants noticed a motion to be heard on January 8, 1934, for final judgment in their favor, in accordance with the order of December 4, 1933, and the interlocutory decree of July 14, 1933. At the hearing on said motion the plaintiffs interposed an objection to the hearing and determination of the matter on the ground that, as an appeal was then pending from the order of October 3, 1933, the court had no jurisdiction to enter the order of December 4, 1933, and no jurisdiction to enter a final judgment in the action. The hearing on the objection was continued to January 15th.

On January 13th the petitioners obtained an order of dismissal of their appeal from the order of October 3, 1933. On January 15, 1934, when the petitioners’ motion for final judgment in their favor was argued and submitted, the respondent court declined to act upon the motion until advised that it had jurisdiction. The petitioners thereupon brought the present proceeding to have determined the question of respondent’s jurisdiction to entertain and render its decision on the petitioners’ motion for final judgment.

The question presented depends for its proper answer on whether the order of December 4, 1933, that the title conveyed by the grant deed was merchantable, was a valid order. Whether it was a valid order depends on whether on that date, while the appeal taken by the petitioners from the order of October 3, 1933, was pending, the respondent court had jurisdiction to entertain and decide the motion of the petitioners for the order of December 4th.

That the respondent court had such jurisdiction becomes apparent when the question of the appealability of the order of October 3, 1933, is considered. That order was not a final judgment in the action nor was it a special order made after final judgment. The interlocutory decree of July 14, 1933, was not, under the facts presented, a final judgment. It declared the rights of the parties, but it also provided for further steps and proceedings to be taken for the purpose of clearing the title to the property to be conveyed, and it specifically provided for a retention of jurisdiction by the respondent court for that purpose, and that final judgment be made when the question of the merchantability of the title should be determined. Further, the interlocutory decree was not an order that the defendants were entitled to specific performance absolutely, but was an order that they were so entitled in the event that they could furnish a merchantable title and the question of the merchantability of the title was explicitly reserved for investigation and determination prior to the entry of a final judgment in the action. Nor could the nature of the final judgment be determined until it was first determined whether there had or had not been a compliance with the directions of the interlocutory decree by both parties. Such an order is interlocutory. (Doudell v. Shoo, 159 Cal. 448, 453 [114 Pac. 579]; Zappettini v. Buckles, 167 Cal. 27, 33 [138 Pac. 696] ; 2 Cal. Jur., pp. 139, 145.) The order of October 3, 1933, therefore, was not a special order made after final judgment. Nor was it the final judgment contemplated by the interlocutory decree. Inasmuch as by the interlocutory decree the defendants had 120 days from October 3, 1933, within which to perfect their title, the order of October 3, 1933, was but another intermediary or interlocutory order in the case and nonappealable. (Sec. 963, Code Civ. Proc.; 2 Cal. Jur., p. 149.) The purported appeal therefrom was ineffectual and did not divest the respondent court of jurisdiction to make the order of December 4, 1933, or to proceed to final judgment in the action pending before it. (Krotzer v. Clark, 178 Cal. 736 [174 Pac. 657]; 2 Cal. Jur., pp. 421, 422.)

The question has been considered with respect to all of the facts alleged in the petition and the answer, and a specific ruling on the demurrer to the answer is deemed unnecessary.

It is ordered that the peremptory writ issue as prayed.

Preston, J., Langdon, J., Curtis, J., Waste, C. J., and Thompson, J., concurred.


text:
    [S. F. No. 15135.
    In Bank.
    July 17, 1934.]
    EDWIN M. DAUGHERTY, as Commissioner of Corporations, etc., Petitioner, v. RAY L. RILEY, as Controller, etc., Respondent.

      Charles P. Johnson for Petitioner.
    U. S. Webb, Attorney-General, Robert W. Harrison, Chief Deputy Attorney-General, and W. R. Augustine, Deputy Attorney-General, for Respondent.
    O’Melveny, Tuller & Myers, John A. Powell, Paul Fussell and Walter K. Tuller, as Amici Curiae on Behalf of Petitioner.
   SHENK, J.

This is a proceeding in mandamus to compel the respondent, state controller, to audit and approve certain claims in favor of the division of corporations by resorting first to the corporation commission fund, then to the general fund in the state treasury, and for general relief. The return to the alternative writ is a general demurrer to the petition.

The budget enactment of 1933 (Stats. 1933, p. 814) provides : “Item 85: For the support of the division of corporations, department of investment, six hundred ninety-eight thousand, six hundred seventy-four and 16/100 dollars, payable from the corporation commission fund—$698,674.16.” The average monthly budget authorization for the division of corporations for the current biennial period is $30,347.15. The average monthly expenses of that division for the first eight months of the current biennial period have been $28,616.63. At the close of business on February 28, 1934, there remained in the corporation commission fund the sum of $11,160.20. The operating expenses of said department for that month were $25,476.74, of which amount $23,824.14 was pay-roll. On March 15, 1934, the date for the payment of salaries for the preceding calendar month in said department, pursuant to section 664a of the Political Code, there was on hand the sum of $15,647.12 and no more.

With the foregoing condition of the corporation commission fund in mind the director of finance, on March 13, 1934, issued his certificate of unavoidable necessity, purporting to act under section 5 of the 1933 budget enactment, which provides, so far as pertinent, as follows: "The officers of the various departments . . . are expressly forbidden to make any expenditure in excess of such appropriation, except the consent of the state department of finance be first obtained, and a certificate in writing, duly signed by the director of said department, of the unavoidable necessity of such expenditure; ...”

The certificate of the director of finance recited that an extreme emergency had arisen in the administration of the division of corporations, in that the receipts of the corporation commission fund were insufficient to cover the necessary and vital operative expenses of said division; that the expenditures of the division for the current biennial period have not exceeded the limitation fixed by item 85 of the Budget Act of 1933; that the actual appropriation for said division is the amount represented by current fees deposited in the corporation commission fund, and the excess of said expenses for February, 1934, over the amount in said fund at the end of that month constitutes an expenditure in excess of the appropriation for said division; that on February 28, 1934, only $11,160 in the corporation commission fund against said operating expense in the sum of $25,476.74 for the month of February, 1934, is chargeable; that the nonpayment of said excess in the amount of $14,316.54 would result in seriously curtailing and crippling the operations of said division to the detriment of the public welfare; and that all of said expenditures arose and are vital and necessary to the proper functioning of said division. Following these recitals the director of finance certified to the unavoidable necessity of the above-mentioned expenditures in excess of the appropriation for the division of corporations “all as provided in section 5 of Chapter 278 of the Statutes of 1933”.

Under date of March 20, 1934, the commissioner of corporations presented his claim and request to the respondent state controller for a transfer from the general fund or other appropriate fund of an amount in addition to the balance in the corporation commission fund sufficient to meet the pay-roll of the department for the month of February. The state controller refused to comply with the demand, stating that in his opinion the procedure proposed to be adopted was void and of no effect. The present proceeding was then commenced.

In order to determine whether the petitioner is entitled to any relief it is deemed necessary to consider the status of the corporation commission fund from the standpoint of its legislative history and administration and to review the events which have resulted in the present admittedly unfortunate and deplorable financial condition of the department. It is insisted and not disputed that unless some relief can be granted the functioning of the department will be seriously curtailed if not completely suspended.

The office of the commissioner of corporations was created by the Investment Companies Act of 1913. (Stats. 1913, p. 715.) This act was reframed and renamed the Corporation Securities Act in 1917. (Stats. 1917, p. 673.) The act was amended in some respects at succeeding sessions of the legislature, preserving, however, the material objects and purposes thereof, but imposing new and onerous duties and responsibilities and expenditures on the division of corporations. The laws now in force place upon the division the administration not only of the Corporate Securities Act but also of the Industrial Loan Act (Stats. 1917, p. 658); the Credit Unions Act (Stats. 1927, p. 51); the Personal Property Brokers Act (Stats. 1909, p. 969; Stats. 1933, p. 1496) ; the Bucket Shop Act (Stats. 1923, p. 449); the Community Land Chest Act (Stats. 1933, p. 1465), and the Supplement to the California Industrial Recovery Act (Stats. 1933, p. 2632).

It is unnecessary to set forth in this opinion the provisions of the foregoing acts by which succeeding legislatures have imposed new duties and responsibilities upon the division of corporations. A reading of the several acts is a demonstration of the fact. Proceeding in the first instance on the theory of a check by the department on improvident transactions in certain lines of business, the functioning of the department has become an essential part of the transaction of businesses involving large corporate enterprises. The Corporate Securities Act alone provides in mandatory terms that permits be obtained and licenses issued before certain extensive corporate enterprises may be initiated or carried on. Financing and refinancing depend upon the authority first obtained from this department. If the department does not function a paralysis in the business life of the state depending upon its authority to proceed is the inevitable result.

As an indication of the strangulation of this department to the point where it must cease to function properly, the following facts appear without question: From its inception the sole support of the department has been and now is the revenue from fees for permits and licenses required by law to be issued as a prerequisite to the initiation or the carrying on of business. In times of business activity and prosperity these fees have been more in the aggregate than sufficient currently to support the department. In times of depression this revenue is correspondingly diminished. Prior to 1930 and during financially active years, the department built up a substantial reserve amounting to $752,563.82. No suggestion is made that the fees as fixed by statute, the payment of which resulted in this reserve, were unduly large, taking into consideration, necessarily, the fluctuations in financial transactions in cycles of years. This comfortable reserve was subjected to two legislative appropriation enactments. In 1929, when the surplus in the treasury of the state amounted to upwards of $25,000,000, the legislature adopted an act entitled, “An Act making an appropriation for the construction and completion, equipment and furnishing of an addition to the state office building at San Francisco, California’’. (Stats. 1929, p. 1683.) The amount of this appropriation was $330,000, and was made “out of any money in the state treasury to the credit of the corporation commission fund’’. In the body of the act it was provided that this addition to the state building at San Francisco was “for the housing of the San Francisco offices of the commissioner of corporations”, and it was also provided that “the director of finance may rent, lease, or allow the use of any portion of said addition, not needed for the use of the San Francisco office of the commissioner of corporations, to any of the agencies of the state government; rentals derived therefrom to he deposited in the corporation commission fund”. These provisions of the act will be referred to later in this opinion.

In 1931 the legislature, despite the still existing large general fund surplus, passed an act approved February 3, 1931, and effective immediately, as follows: “Section 1. The sum of two hundred ten thousand dollars ($210,000), is hereby appropriated out of any money in the corporation commission fund in the state treasury, not otherwise appropriated, to meet a deficiency in the appropriation for the construction and completion, equipment and furnishing of an addition to the state office building at San Francisco, California. Sec. 2. Inasmuch as this act provides an appropriation for the usual current expenses of the state, it is hereby declared an emergency measure and shall, under the provisions of section 1 of article four of the Constitution, take effect immediately.” (Stats. 1931, p. 51.) Of this appropriation the sum of $186,609.21 has been expended.

In 1933 the legislature repealed the act of 1929 above referred to which appropriated the sum of $330,000 from the corporation commission fund for the construction of the addition to the San Francisco state office building, and which provided for rentals therein for the benefit of the division of corporations. (Stats. 1933, p. 738.) This repealing statute was passed after said appropriation had been exhausted and no reason for its passage appears except to relieve the director of finance from the obligation to rent the excess space in said addition to other state agencies for the benefit of the corporation commission fund.

The result of the foregoing appropriations and legislative manipulations has been to skeletonize the division of corporations financially, at the same time leaving the extensive duties and responsibilities of that department otherwise unaffected.

It is the contention of the petitioner that the appropriation acts of 1929 and 1931 are unconstitutional. It is first necessary to examine into the nature of the corporation commission fund from which the appropriations were made. From the time of its creation the division of corporations was intended to be and has been a self-supporting state agency. The functions it performs under the authority of the Corporate Securities Act are to regulate, and thus to modify, limit and restrain individual freedom of action. The statute under which it operates is sustainable from a constitutional standpoint only as a justifiable exercise of the police power. (Hall v. Geiger-Jones Co., 242 U. S. 539 [37 Sup. Ct. 217, 61 L. Ed. 480, Ann. Cas. 1917C, 643, L. R. A. 1917F, 514]; Caldwell v. Sioux Falls Stock Yards Co., 242 U. S. 559 [37 Sup. Ct. 224, 61 L. Ed. 493].) Its general purpose was to protect' the public not only against fraudulent or unlawful stock and investment schemes and enterprises, but also- to regulate and control the issuance of securities offered to the public for purchase. (Hayden Plan Co. v. Friedlander, 97 Cal. App. 12 [275 Pac. 253].) The Corporate Securities Act is within that classification of laws passed for the protection of the public and the funds derived therefrom are for the purpose of paying the cost of regulation and are not for general tax or revenue purposes. (Van Wyke v. Burrows, 98 Cal. App. 415 [277 Pac. 190] ; 6a Cal. Jur., p. 532.) Under section 20 of the act the fees charged and collected pursuant to the authority of the act are paid into the state treasury to the credit of the “corporation commission fund”; and under section 21 all moneys paid into that fund are paid by warrants drawn by or under the authority of the commissioner of corporations. Section 28 provides: “All moneys which shall be paid into the state treasury and credited to the ‘corporation commission fund’ are hereby appropriated to be used by the commissioner in carrying out this act.” Although section 28 was amended in 1931 to include the language just quoted, such inclusion was but a re-enactment and continuation of the same provision in identical terms incorporated in section 21, in 1917, and which has at all times since the latter date been in force as a continuing appropriation for the support and maintenance of the corporation commissioner’s department.

In support of the contention that the act of 1929 was unconstitutional, it is pointed out that the appropriation therein made was for a capital expenditure, namely, for the construction or enlargement of a state office building, and therefore, it is asserted, was not a proper appropriation from the special fund of the corporation commissioner, but that such an appropriation should have been made from the general fund or other tax fund or some fund not specifically raised and especially set apart for purposes of regulation. If this be not so it is claimed that the enactment of the law imposing the regulatory fees has been and is in fact a special law for the assessment and collection of taxes in violation of the tenth subdivision of section 25 of article IV of the Constitution, and likewise double taxation and contrary to section 1 of article XIII of the Constitution which requires that all property in the state shall be taxed in proportion to its value.

The legislature in 1929 undoubtedly realized the legal obstacles in the way of taking these special funds for a capital expenditure unless it should be made to appear that the expenditure of the appropriation was in reality for the benefit of the corporation commissioner’s department. It therefore provided in the appropriation measure that the fund was to be used “for the housing of the San Francisco offices of the commissioner of corporations’’, accompanied by the provision that the director of finance might rent any portion of the improvement to be constructed not needed by the commissioner’s department, such rentals to be deposited in the corporation commission fund. No claim is made by the petitioner herein that the legislature was without power to use this special fund for the purpose of housing his department nor that one branch of his department is not in fact housed in the completed structure, but it is asserted that the facts existing at the time of the appropriation and subsequent events have proved the housing and rental provisions to have been a mere gesture. This claim is fortified by the fact that the space required for the San Francisco office of the commissioner is relatively small as compared with the whole improvement constructed; that the corporation commission fund has received no benefit from the rentals collected by the department of finance for space occupied by other departments other than credits on rentals charged to the department of corporations for space in the Los- Angeles and Sacramento state office buildings and janitor service in the San Francisco office, and that in 1933 the authorization for the collection of rentals for the benefit of the department was repealed by the act effective August 21, 1933. With the suspension of collection of rentals for the benefit of the petitioner’s fund the records of the department of finance as of December 13, 1933, showed that the division of corporations was in debt to the general fund in the sum of $16,921.13 on account of charges made against it for rent and janitor service.

However, good faith on the part of the legislature in 1929 in making the appropriation from the corporation commission fund for the purpose of housing the department and the collection of rentals for its benefit for space in excess of the department’s requirements must be assumed. It must also be assumed that the appropriation was so made in recognition of the special fund character of the revenues coming into the corporation commission fund. There was therefore no fatal infirmity in the appropriation of 1929. It is subsequent acts of the legislature and administrative departments in failing to safeguard the investment of this special fund for the benefit of the department of the collection of proper rentals that have been called into question. If the corporation commission fund is a special fund in the nature of a trust fund, a question which will hereinafter be discussed, good faith would also require that provision be made for the collection of rentals for space occupied by other departments, the • same to be paid into the corporation commission fund. For present purposes we are content to hold that the Appropriation Act of 1929 was not unconstitutional. As to the subsequent management of the office space constructed thereby, enough has been said for present purposes.

The Appropriation Act of 1931 rests upon a different basis. This appropriation was an attempted direct withdrawal of $210,000 from the corporation commission fund to pay for the completion of the state office building at San Francisco, without restriction as to office space for housing the corporation commissioner’s department or the collection of rental for the benefit of that department. The act directed that the appropriation be made “out of any money in' the corporation commission fund not otherwise appropriated” and declared the act an urgency measure “for the usual current expense of the state”, and to take effect immediately.

The petitioner urges the same objections to the 1931 act as are lodged against the 1929 Appropriation Act, but with more convincing force, in connection with additional objections. The 1931 act has not the earmarks of an appropriation for the benefit of the division of corporations. It appears to be an appropriation for a capital expenditure chargeable only against the general fund or some other tax or general revenue fund. As has been seen the corporation commission fund is not such a fund. Its revenues are impositions for purposes of regulation only. When collected this revenue is permanently set apart under the continuing appropriation under section 28 of the Corporate Securities Act for the use of the department. In this respect the revenues are in the nature of a trust fund raised for a particular purpose in the exercise by the state of its police power. They are not state revenues in the sense that they may be used for any state purpose as long as the department is not in need of them, and the justification for their collection is to make the department self-supporting. (See Riley v. Forbes, 193 Cal. 740 [227 Pac. 768].) This fund is a special fund of the same nature as the railroad commission fund, created as a continuing appropriation under section 85 of the Public Utilities Act for the support of the railroad commission. (Stats. 1915, p. 169.) This continuing special appropriation fund was held not affected by the adoption of the budget amendment of the Constitution or the budget bill. (Railroad Com. v. Riley, 192 Cal. 55 [218 Pac. 415].) The same is true of the special fund created for the examination and certification of nurses (Jamme v. Riley, 192 Cal. 126 [218 Pac. 578]), the real estate commissioner’s fund (Keiser v. State Board of Control, 192 Cal. 129 [218 Pac. 1016]), the fish and game commission fund (Board of Fish & Game Com. v. Riley, 194 Cal. 37 [227 Pac. 774]). Other similar special funds are the board of medical examiner’s fund (Stats. 1913, p. 722); the state dentistry fund (Stats. 1915, p. 698); and the special funds in the state treasury of other self-supporting regulatory state agencies not necessary to mention. That these special funds are raised for regulatory purposes and are set apart for the exclusive use of the state departments and agencies for which they are imposed and collected cannot be doubted. That these funds may not be permanently diverted from their specific purposes and to such an extent as to render the department or agency unable to function is likewise clear. This is especially true in the present case where the legislature has established elaborate governmental machinery the effective operation of which is essential to the transaction of business depending on its proper functioning. It would appear to be self-evident that the legislature may not on the one hand set up a department to authorize, regulate and supervise business transactions large and small, imposing fees upon those affected for the purpose of carrying out the purposes of the law, and on the other hand permanently divert the funds thus raised and constituting the life blood of the department to a general fund or other general tax purpose. The same rule does not of course apply to funds raised under the power of taxation.

What has been said is not to deny power upon the part of the legislature to transfer a special fund reserve temporarily from one purpose to another under the authority of section 444 of the Political Code or other authority to like effect. But when these diversions are made the transfers are under the section deemed a loan from the special fund to be returned to that fund as soon as funds are available. This right of transfer established by said section 444 is specifically declared not to warrant the transfer of any money from any fund so as to interfere in any manner with the objects for which such fund was created.

There is statutory authority for impressing a trust or special fund character on the corporation commission fund. Section 453a of the Political Code provides in part as follows: “Whenever any statute provides for the payment of moneys into the state treasury which have been collected or received for specific purposes by any agency of the state, and no fund has been created in the state treasury to which said moneys are to be credited, then said moneys shall be credited to the ‘special deposit fund’ and the money shall be held subject to the right of the state agency to recover the same, on claims properly presented, for fulfilling the purposes for which said moneys were so collected or received.”

But the Appropriation Act of 1931 did not pur- . port to make the transfer as a loan, but it boldly took from the special fund the money necessary for the support and maintenance of the corporation commissioner’s department with no provision for its repayment either out of any moneys in the general fund to be thereafter available or by repayment in the way of rentals charged to other departments, or otherwise. It is suggested by the respondent that “what the legislature had the power to create, it had the power to destroy in whole or in part so long as it did not impair vested rights”. The argument seems to be that as the legislature created the corporation commission fund and provided for the regulatory fees to be paid into it for particular purposes, the legislature could also appropriate the money so raised to a foreign purpose because neither the petitionér nor the fee payers have a vested right in the sense that they may successfully insist that the fund be devoted to the purpose for which the money was paid into the state treasury. The conclusion does not necessarily follow from the premise. Assuming that the legislature has the power to pass laws the effect of which would be seriously to affect or practically to destroy the business and economic interests in the state, it must be said that laws having that effect, designed or not, must be within constitutional limitations. To hold that the legislature could provide fees for regulatory purposes under the police power and then devote the money so received to capital expenditures for a foreign purpose would be to declare that the legislature could thus raise money by a special tax in contravention of section 25 of article IV of the Constitution. This course of legislative conduct cannot be justified.

If it be urged that the Appropriation Act of 1931 should not be considered alone, but should be deemed but an additional appropriation for the same purpose indicated in the Appropriation Act of 1929, viz., the housing of the San Francisco offices of the division of corporations, and therefore valid, we are confronted with the further obstacle in the way of declaring the act of 1931 an effective appropriation. That act states that the appropriation therein provided for shall be out of the corporation commission fund “not otherwise appropriated”. As noted, all fees paid into the corporation commission fund are under section 28 of the Corporate Securities Act continually appropriated for the support and maintenance of the division of corporations. This provision was a valid' appropriation of that fund for the purpose for which it was to be used and was in effect when the act of 1931 was adopted. Said section 28 is a specific continuing appropriation and the claims of the petitioner for 'the support of his department are the first charges against the fund (Callaghan v. Boyse, 17 Ariz. 433 [153 Pac. 773]); and an appropriation out of a fund “not otherwise appropriated” must be postponed to appropriations previously made out of that fund, and are thus subordinated to the prior appropriation. (Klein v. Pipes, State Treasurer, 43 La. Ann. 362 [8 So. 927]; 59 Cor. Jur. 231.) Since the entire corporation commission fund had been appropriated prior to the act of 1931 there was nothing in that fund upon which the latter act could operate.

Other points made by the petitioner attacking the act of 1931 as an emergency measure need not be passed upon in view of the conclusions reached on other phases of the-controversy.

We therefore conclude: First, that the act of 1929 was valid when considered as an appropriation (a) for the purpose of construction of quarters adequate to house the San Francisco offices of the division of corporations and (b) as providing that the amount expended therefor in excess of that amount constituted a loan from the corporation commission fund to be repaid to that special fund if needed by the division of corporations, as soon as other state funds are available therefor, or as an investment in the improvement for the benefit of the special fund and to be protected by rentals or revenues otherwise provided. Second: That the act of 1931 was ineffectual as an appropriation measure either (a) because it was an outright diversion of a special or trust fund raised for regulatory purposes to a capital expenditure or general tax purpose with no provision for its return, or for safeguarding it as an investment on behalf of the special fund; or (b) because it was by the terms of the act itself postponed and subordinated to the prior and continuing appropriation for the benefit of the division of corporations. In either or any event the amount expended under the purported authority of the 1931 act, to wit, the sum of $186,609.21, is in law still in the corporation commission fund.

The next question pertains to the appropriate remedy to be accorded the petitioner. Section 5 of the 1933 budget enactment, under which the director of finance proceeded with an evident purpose to assist in saving the division of corporations as an effective part of the state government, does not seem to fit the situation for the reason that the petitioner has not exceeded and does not intend to exceed the allotment to his department by the 1933 budget enactment. Nor has he exceeded, nor does he intent to exceed the amount which is in law now in the corporation commission fund under the continuing appropriation, and hence no violation of section. 677a of the Political Code is contemplated. The petitioner is therefore entitled to an approval of his claim against his own department fund as supplemented to the extent to which it was depleted by the ineffectual Appropriation Act of 1931.

It is therefore ordered that the respondent retransfer from the general funds of the state to the corporation commission fund the sum of $186,609.21 and to audit and approve the demands of the petitioner for expenditures from' that fund as supplemented by the amount so retransferred, or in the event that the general funds of the state be not available for such retransfer at this time then to credit the corporation commission fund with the amount hereby ordered retransferred and to draw his warrants upon the general fund in the state treasury sufficient to pay such claims of the corporation commissioner presented for the conduct of his department as are in excess of the amount otherwise in the corporation commission fund.

. Let a peremptory writ issue accordingly.

Preston, J., Thompson, J., Curtis, J., and Waste, C. J., concurred.


text:
    [S. F. No. 14880.
    In Bank.
    July 18, 1934.]
    IRENE V. COHN, Respondent, v. LEVI COHN et al., Executors, etc., Appellants.
    Joseph A. Brown for Appellants.
    Daniel R. Shoemaker and Harry I. Stafford for Respondent.
   PRESTON, J.

Plaintiff brought this action to have a deed declared to be a mortgage, which deed, absolute in form, was made by her in the year 1917 to one Charles Cohn, now deceased, to secure an indebtedness of $5,000; also for an accounting of the rents, issues and profits of the property in question; and for judgment awarding her the excess, if any, of rents and profits over the amount of her said indebtedness and interest thereon.

Issue was joined by the answer of defendants, who are executors of the last will and testament of Charles Cohn, deceased. Thereafter the cause proceeded to a hearing, the court made its findings and, on October 20, 1927, rendered its interlocutory decree, adjudging said deed to be a mortgage, appointing a referee to take an accounting, and providing that if plaintiff’s indebtedness exceeded the amounts collected from the property, then plaintiff should have ninety days from final determination of said accounting to pay defendants the moneys found due them; that upon such payment the deed should be canceled and defendants should execute to plaintiff a reconveyance of the property. Said interlocutory judgment was affirmed upon appeal; reference is made to said decision for a fuller statement of the facts of this ease. (Cohn v. Cohn, 100 Cal. App. 746 [281 Pac. 504].)

Later the matter of the accounting was heard. The referee concluded that on April 3, 1931, the plaintiff was indebted to defendants in the sum of $2,109.90, and rendered his report to that effect, to which report defendants filed various objections and exceptions. The trial court, however, found the report and findings of fact of the referee to be correct and gave judgment confirming and approving them, further ordering that defendants execute a reconveyance of said real property to plaintiff, subject to a lien in said sum of $2,109.90. From this judgment defendants appealed.

Appellants devote considerable space to a review of the evidence taken upon the accounting in an endeavor to prove its insufficiency to support the findings of the referee, particularly with respect to the amount of rentals received from the property and the balance found to be due them. It is unnecessary, however, to here engage in a detailed discussion of this contention. The matters urged by appellants may be said at most to create a conflict in the evidence, which the court was justified in resolving in favor of respondent. The record contains ample proof to support the findings of the referee and the court.

The only other contention of appellants is that the court, in the form of its judgment, should have pursued the course outlined in the interlocutory decree and ordered respondent to pay said indebtedness within a specified period after final determination of the accounting as a condition precedent to reconveyance of the property to her, instead of merely decreeing that appellants reconvey the property subject to said lien. This contention is untenable. The form of the final decree was properly drawn in conformity with the procedure suggested by recent expressions of this court on the subject. (Ochoa v. McCush, 213 Cal. 426 [2 Pac. (2d) 357]; Alamitos Land Co. v. Shell Oil Co., 217 Cal. 213 [17 Pac. (2d) 998].)

The ease of Dougery v. Bettencourt, 214 Cal. 455 [6 Pac. (2d) 499], relied upon by appellants, is not in point. The proceeding there was of a different character and the form of judgment was controlled by section 2466% of the Political Code, providing that no sale, certificate or deed made for a valid delinquent assessment should be adjudged invalid without payment to the purchaser of the land of said delinquent assessment, penalties, interest and costs. The court said: “Obviously the giving of a lien on the property is not the payment contemplated by that statute.”

It is urged that in this decree there is neither a fixed period of duration of the lien nor a specification of the rate of interest or the means of foreclosure declared. But this would also be true were appellants enforcing the deed as a mortgage. However, it is within the province of this court to make the judgment more certain in these particulars.

Accordingly, the last paragraph of said judgment is stricken out and the following is inserted in lieu thereof: “It is ordered that plaintiff, within ninety days from and after the date that this judgment becomes final, pay to the defendants the 'sum of $2,109.90, together with lawful interest thereon from and after April 3, 1931, and, when so paid, defendants are directed to reconvey said property to plaintiff free and clear of all incumbrances made, done or suffered by them. But in ease plaintiff fails to make said payment within the time specified herein, then defendants may apply to the court below for the usual decree of foreclosure and sale applicable to such a cause.”

As so modified the judgment is affirmed.

Shenk, J., Curtis, J., Langdon, J., and Waste, C. J., concurred.