text:
    [L. A. No. 16779.
    In Bank.
    June 22, 1939.]
    ERWIN P. WERNER, Petitioner, v. THE STATE BAR OF CALIFORNIA, Respondent.

      Erwin P. Werner, in pro. per., for Petitioner.
    Philbrick McCoy for Respondent.
   CURTIS, J.

By a notice to show cause and a subsequent supplemental notice, each issued by local administrative committee No. á for the county of Los Angeles, petitioner herein, Erwin P. Werner, an attorney at law, was directed to appear before said committee to show cause why he should not be disciplined for alleged professional misconduct upon five separate and distinct charges set forth in said notices. Pour of these charges were based upon the alleged misconduct of petitioner in soliciting professional employment through the instrumentality of one Nathan Balkin, an unlicensed person, in violation of rule 2 of the Rules of Professional Conduct. The fifth charge involved the conduct of petitioner in the settlement of a claim for personal injuries in favor of one Manuel Martin. This charge was dismissed by the Board of Bar Governors after the committee had found that there was no legal evidence to sustain the same. The action of the board in dismissing said charge is not called into question by this proceeding, so no further reference will be made to it.

The remaining four charges arose out of the alleged misconduct of the petitioner in soliciting employment as an attorney through the efforts of said Nathan Balkin in four personal injury matters, referred to in the record as the “Stirdivant-Lash Matter”, the “0’Shaunnessy Matter”, the “Lieb Matter” and the “Luciano Matter”. These four charges were consolidated and all heard together by the committee. At the conclusion of the hearing the committee made and filed its findings of fact and conclusions in favor of petitioner. The committee found in each of said matters that Nathan Balkin did solicit each of said injured parties to employ petitioner as an attorney for the purpose of recovering damages for the personal injuries sustained respectively by each of said persons. It further found in the Stirdivant-Lash Matter that, “At said time the said Balkin solicited the said Anna Stirdivant to employ Erwin P. Werner as her attorney for said purpose and on the following day, at or about the hour of 9 o’clock in the morning, as a result of a phone call by Benjamin Stirdivant at the solicitation of said Balkin said Edwin P. Werner called upon the said Anna Stirdivant, who was theretofore unknown to him, and discussed with her employment as her attorney in connection with said accident; that he did not solicit said employment as attorney. It is not true that at or about the time of said solicitation of employment on behalf of Erwin P. Werner by said Balkin that Erwin P. Werner agreed to compensate the said Balkin for his services in the event he was successful in securing the employment of said Erwin P. Werner, and it is not true that on or about December 26, 1934, said Erwin P. Werner had been fully advised by said Balkin of the contents of the police record of the accident which had resulted in the injuries to the said Anna Stirdivant; that said Anna Stirdivant declined to employ Erwin P. Werner as her attorney.”

In each of the three other matters the committee found that, “At the time herein mentioned said Erwin P. Werner knew the said Nathan Balkin but did not know that he was soliciting professional employment for him in eases involving personal injuries.” The conclusion of the committee based upon said findings was, “That respondent has not been guilty of a violation of his oath and duties as an attorney and counselor at law within the meaning of subdivision 2 of Section 287 of the Code of Civil Procedure. ’ ’ By reason of the foregoing findings and conclusion, the committee recommended that the charge against petitioner be dismissed, the committee stating that, “While this case, in the opinion of the committee, presented some very suspicious circumstances in support of the charges made, we do not feel that there is sufficient legal evidence upon which to sustain the charges.”

The administrative committee forwarded to the board of governors of The State Bar its report of said proceeding together with its findings of fact, conclusions, and recommendation. Upon receipt of said report and accompanying documents, the board of governors, upon the record before the committee, and without taking any further testimony, made its findings of fact and conclusions with respect to these four charges, and recommended that petitioner be suspended from the practice of law for the period of six months. It was to review this recommendation of the board of governors that this proceeding was instituted.

The findings of the hoard of governors differed from those of the committee in one respect only. While the committee inferentially in the Stirdivant-Lash matter, and expressly in the three other matters, found that petitioner did not know that Nathan Balkin was soliciting professional employment for him in eases involving personal injuries, the board of governors found to the contrary, that is, that petitioner knew that Nathan Balkin “was soliciting professional employment for him in cases involving personal injuries”.

Practically the sole contention of petitioner is that the evidence is insufficient to support the findings of the board of governors that petitioner knew that Nathan Balkin was soliciting employment for petitioner in cases involving personal injuries.

We shall now proceed to a discussion of the evidence produced before the local administrative committee in support of these four charges.

The Stirdivant-Lash Matter.

Anna Stirdivant and her daughter, Mabel E. Lash, were injured in an automobile accident on the night of December 24, 1934. A couple of days later one Nathan Balkin called upon each of these parties at the residence of Mrs. Stirdivant and solicited them to employ the petitioner as their attorney for the purpose of instituting actions to recover damages for their injuries sustained in said automobile accident. Balkin was not an attorney, but purported to represent petitioner. He told Mrs. Stirdivant and Mrs. Lash, and Benjamin Stirdivant, the son of Mrs. Stirdivant, that he had information that they were injured in an automobile accident and that he would like to have them take Mr. Werner as their attorney. He had with him what purported to be a record of said accident from the police department of the city. He informed them that Mr. Werner had been city attorney of Los Angeles. He urged Mrs. Stirdivant to write a letter to petitioner asking petitioner to call upon her in reference to her case and telling him that a friend of hers had recommended petitioner. At the same time, Balkin requested Benjamin Stirdivant to go with him to a drug store and phone petitioner. At the instance of Balkin, the letter was written by Mrs. Stirdivant and mailed that afternoon by her son, Benjamin. The latter also accompanied Balkin to a nearby drug store and after Balkin had dialed a certain number, which he said was petitioner’s telephone number, Benjamin Stirdivant took the telephone receiver at Balkin’s direction and asked that petitioner come out to his mother’s house, giving the name and address of his mother. Balkin then left in his machine, and the next day-petitioner called at the Stirdivant home and interviewed both Mrs. Stirdivant and her daughter, Mrs. Lash. The latter declined to have anything to do with petitioner, but her mother went to petitioner’s office the next day for the purpose of further consultation regarding the latter’s employment. Petitioner in the meantime had prepared an agreement in writing setting forth the terms of his employment as Mrs. Stirdivant’s attorney in case he should be employed in the proposed action. This agreement also fixed petitioner’s compensation should Mrs. Stirdivant decide to employ him. Mrs. Stirdivant declined to sign the papers at the time, and said she wanted to take them home to have her husband read them. She left with the “papers” and that was the last petitioner saw of her. She did not employ him. Balkin was produced at the hearing before the local administrative committee and made a most unsatisfactory witness. His replies were usually, “I don’t remember” or, “I refuse to answer on the ground that my answer might incriminate or degrade me.” He did deny that petitioner had ever paid him anything to solicit professional employment in eases involving personal injury. Petitioner also denied that he had ever employed Balkin to solicit either Mrs. Stirdivant or Mrs. Lash, or any other person to employ him in personal injury actions. He said that he called at the Stirdivant home in response either to the telephone call or to a letter from Mrs. Stirdivant, and that he had no knowledge or information that Balkin had inspired either the telephone call or the letter.

O’Shaunnessy Matter.

On or about February 13, 1935, Helen O’Shaunnessy was injured in an automobile accident in the city of Los Angeles. On the next day, Nathan Balkin called upon her and solicited her to employ petitioner to represent her in an action to recover damages for injuries sustained as a result of said accident. He presented her with the professional card of petitioner and proceeded with her in much the same manner as he had with Mrs. Stirdivant. He had no success on the first visit and returned a few days later. On this occasion the name of a former member of the Board of Bar Governors was mentioned by a brother of Miss 0 ’Shaunnessy, whereupon Balkin became greatly excited and frightened and left the house at once. Petitioner never called on Mrs. 0 ’Shaunnessy or had any communication with her, and the matter ended with the exit of Balkin from the 0 ’Shaunnessy home. Petitioner made the same denials respecting the activities of Balkin in this matter as he had made in the Stirdivant-Lash matter. He further denied that he ever gave Balkin any of his (petitioner’s) cards.

The Lieb Matter.

George Lieb was injured in an automobile accident on March 8, 1935, in the city of Los Angeles. On the next day Nathan Balkin called on Tom Lieb, the son of George Lieb, presented petitioner’s professional card, and solicited Tom Lieb to employ petitioner on behalf of his father for the purpose of recovering damages for injuries sustained in said automobile accident, and as in the preceding matters, extolled petitioner’s ability as a lawyer, and urged him to telephone petitioner and state that a friend had told him to call up petitioner. Nothing seems to have resulted from the efforts of Balkin, as petitioner was never approached by any member of the Lieb family, nor did he take any action on Lieb’s behalf in the prosecution of any action brought by Lieb, if in fact the latter ever brought any action. Petitioner testified that he never asked Balkin to solicit any case from Lieb, or from any other person, and that he never gave Balkin any of his professional cards.

The Luciano Matter.

William Luciano was injured in an automobile accident on or about August 13, 1935. On the next day, Nathan Balkin called at the Luciano home, and there met the mother and two sisters of William Luciano. He solicited them to have William Luciano employ petitioner as his attorney in an action to recover damages sustained by reason of his injuries. He presented them with petitioner’s card and followed much the same tactics employed by him in soliciting employment for petitioner by Mrs. Stirdivant and the others mentioned above. Balkin on being informed by the sisters that they would not move in the matter until they had consulted their brother, left the Luciano home and was not seen by any of the inmates until a few days later. About two days after Balkin’s visit, one of the sisters of William Luciano called up petitioner on the phone and stated that she wanted to make an appointment with him, and also that she wanted to “see the little stout man with glasses who gave me your phone number to call you”. Petitioner replied, “I don’t know who you are talking about. I haven’t anybody working for me.” This ended the conversation. Two days later, Balkin called again and had a conversation with Annabelle Luciano, one of William Luciano’s sisters, who relates their interview as follows: He said, Did you call up Mr. Werner?’ and I said, ‘Yes,’ and he said, ‘Do you know, he is very mad. I almost lost my job.’ and I said, ‘I am sorry but I wanted you to come back again so my brother could speak with you about the case. He didn’t have an attorney at that time and we thought we should get your attorney you spoke about.’ And so he said, ‘Of course, he would not know me,’ He said, ‘You must not do that,’ and he got sore at me and he said, ‘Don’t do it any more.’ and I said I would not do it any more. ‘You don’t want me to lose my job?’ and I said, ‘Of course not.’ Thereupon Balkin left the house. ’ ’ Petitioner denied that he ever had any conversation with Balkin about the Luciano case, or that he ever told Balkin that he “was mad” about anything connected with the case. He made no denial of having the telephone conversation with Annabelle Luciano.

Balkin pleaded guilty to a complaint filed in the municipal court of the city of Los Angeles charging him with soliciting professional employment in the four matters heretofore set forth, but the name of the attorney in whose behalf he was charged with soliciting employment was not alleged in the complaint filed against him. He admitted that he was engaged in that business for a number of years in 'Chicago, where it was not in violation of the law, before coming to this state, and he further stated that he knew no other business and had engaged in it since coming to this state. He had some legal business with an attorney who had his office in the same suite of rooms in which petitioner had his office. The evidence does not show that he had any legal business with petitioner. The evidence is in some conflict as to the frequency he was seen in the common reception rooms of such suite of offices. There is evidence that he was seen in Mr. Werner’s office on a few occasions, but not often. Petitioner admitted that he knew Balkin and saw him at times in the reception room of his office and on a very few times in Ms own office. On one of such occasions Balkin was selling neckties.

In reviewing the evidence, findings and conclusions of the Board of Bar Governors, it is the duty of this court to reexamine the entire proceedings before said board as they are required to be kept, and transmitted to this court. (In re Shattuck, 208 Cal. 6 [279 Pac. 998].) “This court is not bound by the findings or recommendations made by the local administrative committee, nor their adoption by the Board of Bar Governors, and will examine the record anew to ascertain whether or not any charge has been proven against petitioner which merits disbarment.” (In re Stafford, 208 Cal. 738 [284 Pac. 670].) “The only order or orders which are provided for therein (The State Bar Act) and which have or were intended to have the effect of working the disbarment, suspension or discipline of any person who might be subjected to the powers and processes with which the Board of Bar Governors are vested are the final orders which are to be made by this court under the provisions of said act.” (In re Shattuck, 208 Cal. 6, 12 [279 Pac. 998, 1000].)

It follows from the foregoing and prior decisions of this court as well as from the provisions of the State Bar Act that it is the duty of this court to pass upon the evidence, weigh its effect, and finally determine whether it is sufficient to sustain the charges against the accused attorney.

The evidence shows without any question that the witness, Balkin, did solicit on the various occasions set forth in the four charges against petitioner the employment of petitioner as attorney for the purpose of instituting actions to recover damages for the several injuries sustained respectively by the injured persons. The only question in serious dispute is whether Balkin in soliciting said employment did so with the knowledge and consent of petitioner. As to petitioner’s knowledge of Balkin’s activity in petitioner’s behalf, the local administrative committee found in favor of petitioner, while the Board of Bar Governors upon the same and identical evidence found against petitioner.

It is apparent that there is no direct evidence that Balkin in soliciting employment for the petitioner was acting for petitioner with either his knowledge or consent. The evidence that petitioner knew of Balkin’s activity in his behalf is entirely circumstantial. In the Lieb matter there is not even any circumstantial evidence which tended to show that petitioner knew that Balkin was soliciting employment for him. A reading of the evidence shows simply that Balkin called upon relatives of the injured party and asked them to employ petitioner and gave to them petitioner’s card. None of these parties ever saw petitioner or had any conversation with him over the telephone or otherwise. The only place in the evidence respecting the charge where petitioner’s name appears is in the conversation between Balkin and the injured party’s relatives which was had not in the presence of the petitioner, and there is absolutely no evidence showing that petitioner in any way authorized the use of his name by Balkin, or had any knowledge that Balkin was making use of petitioner’s name in the solicitation of his employment by the relatives of the injured person.

In the Luciano matter the evidence against petitioner is slightly, if any, stronger against petitioner than that in support of the Lieb charge. After Balkin had called upon the relatives of Luciano, given them petitioner’s card, and asked them to communicate with petitioner, a sister of William Luciano some two days later called petitioner on the telephone, and after stating to him that she wanted to make an appointment with him, said she wanted to see “a little stout man”, evidently describing Balkin. Petitioner replied, “I don’t know who you are talking about.” Miss Luciano then said, “He gave me your phone number to call you.” To this remark respondent replied, “I haven’t anybody working for me.” Miss Luciano replied, “Okay, thanks”, and put down the telephone. There was surely nothing in this incident which would tend to connect petitioner with the activities of Balkin. The latter a few days later called at the Luciano home and asked Miss Luciano if she had called up Mr. Werner, and she replied that she had. In the absence of any evidence connecting petitioner with the acts of Balkin what transpired at this second visit, and whatever conversation was had between Balkin and Miss Luciano was not legal evidence against petitioner.

In the 0 'Shaunnessy matter, the evidence against petitioner lacks any evidentiary support whatever. It shows that Balkin called upon Miss O ’Shaunnessy, and as on the other occasions he solicited her to employ petitioner, giving her petitioner’s card and asking her to write or telephone petitioner. She did neither. Balkin called at a later date, but as hereinbefore stated, he became frightened at the mention of a certain attorney’s name and left hurriedly and never returned. There is not a scintilla of evidence in the entire record which even tended to show that petitioner knew of either of these visits of Balkin to the 0 ’Shaunnessy home, or that he had any connection with or knowledge of Baltin’s efforts to secure his employment by Miss 0 ’Shaunnessy.

In the Stirdivant-Lash matter, petitioner did, upon receiving a telephone message from Benjamin Stirdivant, call upon Mrs. Stirdivant and Mrs. Lash and confer with Mrs. Stirdivant respecting his employment as her attorney to recover damages sustained by her in the automobile accident. He further mot her at his office by appointment, and he presented to her a proposed contract which he had drafted defining the terms of his employment and fixing his compensation. Mrs. Stirdivant did not sign the contract, but took it with her, and petitioner never heard from her in regard to her case again. It is true that the telephone message sent to petitioner by Benjamin Stirdivant was prompted by Balkin, but there was nothing in the message that indicated to petitioner that Balkin had inspired it. Nor is there any evidence to indicate that petitioner had any knowledge that Balkin had visited the Stirdivant home.

Balkin was called as a witness upon this charge as in the other three. As stated before he proved a most unsatisfactory witness. He did, however, deny that petitioner had ever employed him to solicit business for him or had ever paid him for any work of that character. Petitioner himself took the witness stand and denied that he had ever employed Balkin to solicit business for him and denied that he had any knowledge that Balkin was engaged in soliciting business for him. Taking the evidence against petitioner upon this as well as the other charges, we are not impressed with its evidentiary value. While the proof is clear that Balkin was soliciting business for petitioner, it may well be asked why was he doing so if he was “to get nothing” out of the business after it was received? We must admit that this evidence raises a strong suspicion that Balkin was acting for petitioner and with the knowledge of the latter. If we were to concede that this evidence justified an inference at least in the Stirdivant matter that respondent had knowledge of Baltin’s activities, this inferen.ce would be sufficient to sustain the truth of the charge against petitioner involving the Stirdivant matter. However, this inference is contrary to the testimony of petitioner that he had no such knowledge. If petitioner’s testimony is true, then we would be justified in holding that he was not guilty of the charges, or of any of them, preferred against him. To pass upon the weight to be given the testimony of any witness when only the written record is before a reviewing body is always a most difficult undertaking. In this connection we think it proper to refer to the findings of the local administrative committee, not that its findings are binding upon us but simply to aid the court in determining the weight of the evidence upon which we are called to act. This committee was composed of three reputable and experienced members of the Los Angeles Bar. The members of that committee gave a great deal of time and unusual care in hearing the charges against petitioner. A record of more than nine hundred pages of testimony is before us as having been introduced at the hearing. The rulings of the committee upon the admission of evidence and upon other questions raised at the hearing are quite numerous. They all appear to be fair and just. No complaint is made by either party as to any ruling or other action taken by the committee except as to its final action. This committee personally contacted the witnesses at the hearing. They observed their conduct and demeanor while testifying, and the character of their testimony, and no doubt took into consideration the interest of the petitioner in the result of said hearing. As they found in favor of the petitioner, they evidently believed he was telling the truth when he disclaimed any connection with Balkin’s activities. The members of the committee were in far better position-to pass upon the truthfulness of petitioner’s testimony than were either the members of the Board of Bar Governors, or are the members of this court. In Mauer v. State Bar, 219 Cal. 271, 276 [26 Pac. (2d) 14], this court stated its views in that respect as follows: “However, bearing in mind that the local administrative committee, number eight, which heard the witnesses and was in a better position to judge the certainty of the offense than we are, or the Board of Governors before whom he failed to appear, recommended suspension of eighteen months, and that the second administrative committee, in like favorable position, recommended a reprimand only, it would seem that suspension for a period of three years should convince petitioner and any other person with similar inclinations that such transactions will not be tolerated in the profession,” In Egan v. State Bar, 10 Cal. (2d) 458, 462 [75 Pac. (2d) 67], we find a similar expression in the following language, ‘‘ The recommendation of the local committee, which was in closer touch with the personal attributes of petitioner and the background of the case on the hearing than are we on the record, has caused us to hesitate to award the extreme penalty provided by law. ’ ’

The finding, therefore, of the local administrative committee as to the truth of the charges against the petitioner having been founded upon this personal contact with petitioner and the other witnesses in the case, is entitled to our respectful consideration, and causes us to hesitate from a mere reading of the printed record before us to arrive at a conclusion contrary to that of the committee. Accordingly it is our conclusion that none of the four charges against petitioner as alleged in the original and supplemental notices to show cause, and hereinbefore discussed in detail, is sustained by the evidence. It is therefore ordered that this proceeding against petitioner be and the same is hereby dismissed.

Edmonds, J., Shenk, J., Langdon, J., Houser, J., and Seawell, J., concurred.


source: Caselaw Access Project

author: EDMONDS, J.

license: Public Domain

text:
    [S. F. No. 16252.
    In Bank.
    June 22, 1939.]
    W. H. NESBITT, City Clerk, etc., Petitioner, v. EMIL BOLZ, Councilman, etc., et al., Respondents.

      Burke, Hickson, Burke & Marshall for Petitioner.
    James C. Bone for Respondents.
   EDMONDS, J.

By this proceeding in mandamus petitioner, who is the City Clerk of the City of Arcadia and also a taxpayer and qualified elector thereof, seeks to compel respondents, councilmen of that city, to appoint new members to fill vacancies existing on the city council. A demurrer filed by respondents admits the following facts which appear from the allegations of the petition.

Arcadia is a city of the sixth class organized under the Municipal Corporations Act. (Stats. 1883, p. 93.) As such it has a city council regularly composed of five members. (Mun. Corp. Act, supra, sec. 851.) In May, 1939, by an election held under the Municipal Elective Officers Recall Law (Stats. 1931, p. 563, as amended), two members of the council were recalled. A majority of the electors who voted at the recall election also voted that if the recall should prevail, the city council should fill the vacancy or vacancies created. (Mun. Elec. Off. Recall Law, supra, sec. 15.) Before the three remaining councilmen could act upon the matter of filling the vacancies, one of them resigned, and respondents, the two others have since refused to meet and appoint new councilmen upon the ground that they do not constitute a quorum of the city council and are without authority to transact any business.

It is petitioner’s theory that under section 15 of the Municipal Elective Officers Recall Law, supra, respondents have the power and are under the duty to fill the vacancies on the city council created by the recall election. That section provides: “If the recall should prevail in any ease, and a majority of those voting on the question of filling the vacancy or vacancies, as the case may be, favor a special election for that purpose, the same shall be called forthwith, . . . Otherwise the council shall forthwith fill the vacancy or vacancies by appointment.’’ A further provision is: “In the event of a majority of the City Council being recalled at one and the same election, said members shall retain their offices until their successors are elected and qualify.” (Sec. 16.)

From these provisions it seems clear that when a majority of the council members are recalled, those whom the voters have retired to private life must, nevertheless, continue in office for the purpose of electing their successors. But when fewer than a majority are recalled, as the facts of the present case show, then the only logical conclusion which can be reached is that the legislature intended the council, as composed of either three or four members, to elect persons to fill the vacancies in its membership.

This construction is in harmony with the Municipal Corporations Act, supra, which provides: “At any meeting of the city council a majority of said council shall constitute a quorum for the transaction of business ...” (Sec. 859.) Although for certain functions, such as the enactment of ordinances, the concurrence of at least three members is required (sec. 861), there is no question but that a council of three members is directed and required to elect the successors of two recalled councilmen and that two of them constitute a quorum for that purpose.

This conclusion is not at variance with the so-called “City Slip” cases such as San Francisco v. Hazen, 5 Cal. 169; McCracken v. San Francisco, 16 Cal. 591, and Pimental v. San Francisco, 21 Cal. 351. These cases involved the interpretation of a charter provision which required the concurrence of “a majority of all the members elected” to the board of aider-men and a board of assistant aldermen for the passage of an ordinance. The ordinance in question had been passed by the board of aldermen, but the board of assistant aldermen, consisting regularly of eight members, voted four in the affirmative and three in the negative, there being one vacancy at the time. It was held that inasmuch as the four assistant aider-men who had voted in the affirmative did not constitute “a majority of all the members elected”, the ordinances had not been legally passed.

However, a distinction is recognized where, as in this case, the legislative provision does not explicitly require the concurrence of a majority of the members elected. In Board of Commrs., etc., v. Wachovia Loan & Trust Co., 143 N. C. 110 [55 S. E. 442], the court considered a charter provision which required “a three-fourths vote of the entire board” in order to pass an ordinance borrowing money. One member of the board had resigned, leaving six, and of these only five voted for the passage of such an ordinance. The court held that the charter provision meant three-fourths of the existing membership of the entire board, saying: “Wherever the special provision in such charter contains the word ‘entire’ board elected or similar terms, it is invariably held that all the members elected must be taken into account. (Dillon on Mun. Corp., sec. 281.) We are unable to find any judicial decision which places the same construction upon the words ‘ entire board’ when the word ‘elected’ does not follow.” (See, also, People v. Wright, 30 Colo. 439 [71 Pac. 365] ; State v. Willis, 47 Mont. 548 [133 Pac. 962].)

As it is the respondents’ duty to meet for the purpose of electing two persons to fill the vacancies created in the city council by the recall election, let the peremptory writ of mandate issue.

It is so ordered.

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


author: THE COURT.

text:
    [Crim. No. 4158.
    In Bank.
    June 22, 1939.]
    THE PEOPLE, Appellant, v. NOEL DAVENPORT, Respondent.

      U. S. Webb, Attorney-General, Earl Warren, Attorney-General, Walter L. Bowers, Deputy Attorney-General, Bur on Fitts, District Attorney (Los Angeles County), and A. H. Van Cott, Deputy District Attorney, for Appellant.
    Edwin M. Daugherty, Commissioner of Corporations, and Fred A. Weller, Chief Assistant Commissioner of Corporations, as Amici Curiae, on Behalf of Appellant.
    Morris Lavine for Respondent.
   THE COURT.

This is an appeal by the People from a judgment sustaining a demurrer to eighteen counts of an amended indictment, in each of which defendant was charged with a violation of the Corporate Securities Act.

By the indictment defendant was accused of issuing and selling securities in the form of a series of agreements, the first of which was dated October 23, 1933', and the last, April 10, 1934. Except for names, dates and amounts, the various counts were practically identical and only one need be described here. In the first count it was charged that “The said Noel Davenport, on or about the 23rd day of October, 1933, at and in the County of Los Angeles, State of California, did wilfully, unlawfully, feloniously and knowingly authorize, direct and aid in the issuance and sale of, and did issue, execute and sell, and assist in causing to be issued, executed and sold to Ella J. Bloom for value, a security of his own issue, to-wit, an evidence of indebtedness, note and investment contract, said security not being one issued, given or acquired in a bona fide way in the ordinary course of legitimate business, trade or commerce, and said security being one issued for sale to the public by the said Noel Davenport, the said Noel Davenport not having first applied for and secured a permit from the Commissioner of Corporations of the State of California so to do; the said security being in words and figures as follows, to-wit: ...” There follows a copy of an "agreement” signed by the respondent as first party and by Ella J. Bloom as second party. That agreement contained the following:

"DECLARATION OF FIRST PARTY. That he now is and for some considerable time heretofore has been engaged in the business of buying and selling gold and silver bullion, maintaining a principal place for the transaction of said business at Nogales, Arizona, in the conduct of which he has contracted to purchase the gold and silver production from a number of mining properties now in actual operation in the Altar Mining District of Mexico.
"That to avail himself of the increased production of said bullion additional capital is required to finance his operations, which will be used only in the business of merchandising gold and silver bullion and for no other purpose whatsoever.
"That his present and past experience leads him to believe that the continuance of this business will be profitable and his experience has been that a profit of not less than fifty (50%) per cent can be realized upon shipments of bullion as they are made from time to time.
"That he is thoroughly conversant with the character of business in which he is now engaged and conducts said business on his own individual responsibility, and that he believes that he is established in a way that he can continue to operate successfully in the future.
"DECLARATION OF SECOND PARTY. That he has read the above and foregoing statement and that First Party has made no representations other than therein contained to induce him to execute this agreement and that he does so freely and voluntarily, on his own initiative and responsibility without any promise, agreement, representation, or inducement except as herein contained, and with no hope of profit or reward other than the payment of the purchase price herein stipulated.
"That said sale is made without any restriction or limitation with the understanding that First Party may use and dispose of said securities as the absolute owner thereof and that his agreement to pay therefor as herein provided is the sole and only consideration therefor, and that the only obligation of First Party is the debt evidenced hereby.
"That he has made no representation as to the value of said securities and that the selling price therefor is fixed and determined without reference to the present market value and that any difference between the selling price as fixed hereby and the market value shall not be a defense available to First Party either on the ground of usury or otherwise.
“BY REASON WHEREOF, the said Parties do hereby agree as follows: . . . ” Thereafter, the agreement contained provisions by which the first party agreed to buy, and the second party agreed to sell to him, for $795.47, certain building and loan certificates, for which the first party agreed to pay in twenty-five equal monthly instalments, with interest on deferred payments at seven per cent per annum, pajmble quarterly, and the first party acknowledged receipt of the certificates, the said certificates bearing “the proper endorsement thereon transferring title to First Party”. The agreement also provided that the payments thereon would be made at a certain bank; that as collateral security the first party would insure his life, naming the bank as beneficiary and providing that in the event of his death the proceeds would be applied upon an; amount due to the second party; that if four consecutive instalments were not paid the whole amount might be declared due; and that “This instrument is non-negotiable and shall not be assigned by either party without the written consent of the other”.

The determinative question presented by the appeal is whether the transactions had between the respondent and others named in the various counts of the indictment in fact amount to sales of “securities” within the meaning of the Corporate Securities Act.

The appellant contends that the transactions here involved were “investment” contracts or “evidences of indebtedness” within the meaning of the Corporate Securities Act. On the other hand, the respondent contends that each agreement pleaded is merely one for the purchase and sale of personal property, and not a “security” as defined in the act.

Although it is obviously true that the usual contract for the purchase and sale of property in the ordinary course of business is not within the purview of the Corporate Securities Act, nevertheless the mere fact that a transaction is clothed in the language and form of such a purchase and sale contract is not in itself a conclusive badge of its innocence. In proper circumstances “courts have looked through form to substance and found that in fact the transaction contem plated the conduct of a business enterprise by others than the purchasers, in the profits or proceeds of which the purchasers were to share”. (Emphasis added.) (Domestic & Foreign Pet. Co., Ltd., v. Long, 4 Cal. (2d) 547 [51 Pac. (2d) 73].) It may be conceded that, in some circumstances, judicial tribunals have concluded that a contract, or even a deed, regular upon its face, has been found to constitute a “security” as that word was intended to be used in relation to the act, and within the scope and purpose of the legislation.

In the instant case, the defendant was charged in each count of the indictment with having sold a “security”, which amounted to, or was in the nature of, an " ‘ evidence of indebtedness”, a “note”, or an “investment” contract. The provisions of section 2 (a), subdivision 7, of the act (Stats. 1933, p. 2308) which were in effect at the time of the transactions here involved, and upon which the indictment was based, provided that a “security” was to include “any stock, bond, note, treasury stock, debenture, evidence of indebtedness, certificate of interest or participation, certificate of interest in a profit-sharing agreement, . . . investment contract, or beneficial interest in title to property, profits or earnings, . . . ” (Emphasis added.) But under section 2 (b), subdivisions 10 and 11 thereof, the following exceptions were made: “bills of exchange, trade acceptances, promissory notes and other commercial paper issued, given or acquired in a bona fide way in the ordinary course of legitimate business, trade or commerce. Promissory notes, whether secured or unsecured, where the notes are not offered to the public, . , . ” (Emphasis added.)

In construing the provisions of section 2(a), subdivision 7, which provide that “The wmrd ‘security’ shall include . . . any note, . . . evidence of indebtedness, . . . investment contract ... ”, etc.,—in the light of the rules relating to the construction of statutes, which provide that words of general import may be given a contracted meaning dependent upon the connection in which they are employed, and considering the general purpose or scheme entertained by the legislature in passing the statute, and the rule that words will not be given their literal meaning when to do so would evidently carry the operation of the enactment far beyond the legislative intent and thereby make its provisions apply to transactions never contemplated by the legislative body (Lewis v. Creasey Corp., 198 Ky. 409 [248 S. W. 1046]),— it is clear that the legislature intended by the use of the words or phrases of general import in said section, such as “note” and “evidence of indebtedness”, that each such expression should possess the same general characteristics as the word “security”, within the meaning of which the legislature provided that they were to be included. Furthermore, since, for example, the legislature specifically excepted from the operation of the act “promissory notes”, falling within the provisions of section 2 (b), subdivisions 10 and 11, hereinbefore referred to, it plainly was not the legislative intent that “every” note or evidence of indebtedness, regardless of its nature and of the circumstances surrounding its execution, should be considered as included within the meaning and purpose of the act.

However, the appellant earnestly contends that the “agreement” here in question at least amounted to an “investment” contract. But it has been judicially declared (People v. Davenport, 21 Cal. App. (2d) 292 [69 Pac. (2d) 861] ; Lewis v. Creasey Corp., 198 Ky. 409 [248 S. W. 1046]), that in the generic sense of the word every contract is an “investment” contract,—from which declaration it should follow that, when viewed in the light of the surrounding circumstances, the question whether the contract in the instant case is included within the purview of the act would seem necessarily to depend upon the construction which appellate courts of this and other jurisdictions, respectively, have placed upon the several Corporate Securities Acts of the various states, including the construction which those tribunals have placed upon the pertinent terms therein employed, such as “security”, “investment” contract, and the like.

In 37 Corpus Juris, at page 275, it is said: “The term ‘securities’ as used in these [Blue Sky] laws, means written assurances for the return or payment of money, evidences of indebtedness, except where special definitions are given by the statutes. Thus under some statutes, it includes any certificate or instrument issued and sold or offered to the public, evidencing a right to participate in the profits or earnings or the distributions of the assets of a business carried on for profit, or the shares or other interests or right into which the property of companies or rights of members thereof are divided, and all certificates and other instruments issued by them or under their authority evidencing or representing such shares, interests, or rights. It means the investment of funds in a designated portion of the assets and capital of a concern, with a view of receiving a profit through the efforts of others than the investor; and in this sense includes what are termed ‘security’ or ‘investment’ contracts or ‘speculative securities’. But it does not extend to ordinary commercial contracts, nor does it include interest income from the lending of money, or the profits which one might make by his own efforts as the result of any ordinary commercial contract.” (Emphasis added.)

In the case entitled Creasey Corp. v. Ena Bros. Co., 177 Wis. 49 [187 N. W. 666], wherein the Wisconsin act, analogous to the one involved here was under discussion, the court pointed out that the act read as follows: “ ‘ “Security” or “securities” means and includes any bonds, stocks, notes or other obligations or evidences of indebtedness or of title which constitutes evidences of, or is secured by, title to, interest in or lien upon any or all of the property or profits of such company. ’ ” It was there contended that a contract of membership in an association, which gave the member the right to purchase goods from the association at a small stipulated percentage above cost, hut which gave no other interest to the member in the association, was an obligation for the sale of which a permit was required under the Blue Sky Law, and that the contract in question was included within the term “or other obligations” mentioned in the statute. In negativing this contention the court directed attention to the fact that “The member acquired no rights either in the capital or profits of the company”, and said that “It may be argued that in one sense every contract is a security, because it guarantees to the parties thereto something of value. But, as before stated, the Blue Sky Law . . . was enacted for the purpose of protecting against the sale of worthless money obligations, and not against entering into other contracts where service is to be rendered, as here, or other obligations are incurred that do not partake of the sale of securities, or of a sharing in either the capital or profits of a company.” (Emphasis added.)

And in the ease entitled In re Waldstein, 160 Misc. 763 [291 N. Y. Supp. 697], in defining the term “security” the court said, “The term ‘security’ has no exactly defined legal definition. G-enerically, the word has reference to written instruments, usually for the payment of money or evidences of a debt, and being more than a mere promise of the debtor of a general liability on his part, but having as collateral to it a pledge of property or some additional obligation. . . . Those instruments, however, secured or unsecured, which are used for the purpose of financing enterprises and promoting a distribution of rights in or obligations of such enterprises, and which are designed as a means of investment, are termed securities.”

In the case entitled Lewis v. Creasey Corp., 198 Ky. 409 [248 S. W. 1046], the corporation operated wholesale grocery houses in the different states of the Union. It sold “service contracts” to retail dealers, for which it charged $300 and upon payment of such sum obligated itself to the purchaser of the contract to furnish him with groceries for his store for the period of twenty years at a five per cent increase of the original costs to the Creasey Corporation. The latter contended that the'contract did not fall within the provisions of the act (The Kentucky Blue Sky Law) there involved. The act provided that every person who sold “any contract, stock, bonds or other securities issued by him” was required to obtain a permit for such sale. In construing that language, the court adverted to the fact that in other sections of the act following the one under review, the transactions covered by the statute were referred to as “securities” or as “other securities”, and said, “ ... it is made perfectly plain to our minds from a consideration of the whole statute that the character of transactions that the Legislature had in mind, and to which it made its terms applicable, are what is ordinarily understood by the terms ‘security contract’ or ‘securities’, and that it never contemplated lodging the power or jurisdiction in the hands of the administrator of the statute to supervise or in any wdse regulate all, or any, ordinary commercial contracts between members of society. No such universal guardianship was ever intended (if indeed such a sweeping regulation would be constitutional), howsoever much it might be beneficial in some instances. ...” The court there proceeded to say, “Other authorities give a similar definition to the term, and it necessarily means the investment of funds in a designated portion of the assets or capital of a concern, with the view that the latter by using, and operating with, the investment will earn a profit for the investor. . . , but its definition does not include interest income from the lending of money, or the profits which one might make by his own efforts as the result of any ordinary commercial contract which he might enter into. . . . We, therefore, conclude as the eases referred to hold, that the primary purpose of Blue Sky Laws is to protect investors from investments in securities whereby a profit is promised and expected without any active efforts on the part of the investor, and which scheme contemplates that the company or individual who receives the investment will employ it himself or itself in such a manner as to reap a profit to the holder of the sold security; and that it was not intended to apply to contracts containing mutual obligations, such as are daily entered into in commercial life, and from which a profit can only be reaped by the iises which the investor alone makes of them. In one sense of the word every contract is an investment by the parties thereto. . . . Surely, it cannot be said that the Legislature intended to vest the Banking Commissioner with supervision of all sorts of contracts, though involving the idea of investment, as we have seen, and with power to withdraw the right to make contracts if, perchance, he concluded that one or the other party had been defrauded or that the particular class of contracts possessed the potentialities for the commission of fraud. ” (Emphasis added.)

In the case entitled Domestic & Foreign Pet. Co., Ltd., v. Long, 4 Cal. (2d) 547 [51 Pac. (2d) 73], the same general principles enunciated in the foregoing cases were expressed by this court. Therein lessees under an oil and gas lease made assignments of percentages of oil and other substances to be produced during the lease; but it was not therein contemplated that the lessees and the assignees of such percentages of oil would be tenants in common in the rights conferred by the lease, nor that the assignees would be permitted to drill for or to produce oil, nor that they would have any voice in the operations. In holding that such assignments were “securities” within the meaning of the act, this court said: “Instruments such as those in . . . the instant case are not issued to persons who expect to reap a profit from their own services and efforts exerted in the management and operation of oil-bearing property, but to those in the category of investors, who, for a consideration paid, stipulate for a right to share in the profits or proceeds of a business enterprise or venture to be conducted by others. ... In decisions in this state and in other jurisdictions where it has been contended that a transaction under attack did not come within the Corporate Securities Act because it constituted only a sale of specific real or personal property or an interest therein, the courts have looked through form to substance and found that in fact the transaction contemplated the conduct of a business enterprise by others than the purchasers, in the profits or proceeds of which the purchasers were to share.” The court went on to say that “such interests are generally declared to be investment contracts, which are included in the definition of ‘security’ in the Blue Sky Law of this and other states, ...” (Emphasis added.)

The foregoing authorities serve to point the distinction between those transactions contemplated by the act, and the contract involved in the instant case, where the only (asserted) “profit” contemplated by the alleged purchaser of the “security” was seven per cent interest on deferred payments of the purchase price. All he had a right to expect by the transaction was the payment of the agreed purchase price at the times stipulated, plus the interest therein provided for. And as shown by the authorities herein cited, the expectation of the mere payment of interest does not transform the transaction into an “investment” contract within the meaning of the act. (Lewis v. Creasey Corp., 198 Ky. 409 [248 S. W. 1046]; State v. Whiteaker, 118 Or. 656 [247 Pac. 1077] ; 37 C. J. 275.) Nor was the seller of the certificate (the alleged purchaser of the “security”) given any interest in any portion of the business. Under the terms of the contract he had a right to be paid whether the business prospered or not, and, in the event of respondent’s death, was even protected in the matter of payment by life insurance. Under those circumstances, the use which the respondent may have intended to make of the certificates, or their monetary value, would seem to be immaterial.

It follows from the foregoing discussion that, “looking through form to substance”, the instant transactions were not oí that character which the legislature intended should fall within the inhibitions of the act.

The judgment is affirmed.

Rehearing denied. Curtis, J., and Shenk, J., voted for a rehearing.


text:
    [L. A. No. 16535.
    In Bank.
    June 22, 1939.]
    In the Matter of the Estate of VIOLA L. ALLSHOUSE, Deceased. SARAH DAVIS et al., Appellants, v. HARRY A. ALLSHOUSE, Jr., Respondent.

      Eckman & Lindstrom, Ralph G. Lindstrom, Arthur W. Eclcman and R. L. Moore for Appellants.
    Voltaire Perkins, H. B. Jack Manard, Anderson & Anderson, Meserve, Mumper & Hughes and Roy L. Herndon for Respondent.
   THE COURT.

In this proceeding for determination of heirship, the appellants, three brothers, a sister and a nephew, of Viola L. Allshouse, deceased, are her heirs. They have appealed from a decree which adjudges that respondent, the son by prior marriage of the predeceased husband of decedent, is also an heir, and is entitled by virtue of section 229 of the Probate Code to succeed to substantially all of decedent’s estate.

The appeal presents solely a question of law as most of the major facts are covered by stipulation of the parties. The legal problem is to correctly classify the properties in the estate in order to determine what portion or portions thereof are subject to the provisions of section 229, supra. That statute, so far as here pertinent, provides: “If the decedent leaves no issue, and the estate or any portion thereof was separate property of a previously deceased spouse, and came to the decedent from such spouse by gift, descent, devise or bequest, such property goes in equal shares to the children of the deceased spouse. ...” The precise point to be decided is what, if any, portion of the property found by the trial court to have come to decedent from her husband by gift, devise, and bequest, was “separate property” of the previously deceased spouse, within the meaning of the statute.

The decedent, Viola L. Allshouse, and Harry A. Allshouse, Sr., were married in the year 1919. Both were then domiciled in the State of Missouri, and that domicile was retained during the entire period of the marriage. Mr. Allshouse died on March 1, 1931, and about two weeks thereafter the widow established a domicile in California. She spent her remaining years in this state, passing away on April 1, 1936, intestate and without issue.

The inventory of her estate showed the following assets, of a total appraised value of $58,481.41: (1) cash, $467.18; (2) United Corporation, 7 shares of common stock, $50.75; (3) American International Corporation, 13 shares, $146.25; (4) Parke, Davis & Co., 1111 shares of capital stock, $49,300.63; (5) Federal Savings & Loan Society of Kansas City, Missouri, 10 shares, $1,000; (6) household and personal effects, $1,-516.60; (7) Los Angeles real property, $6,000.

Except for the first three items, of a total appraised value of $664.18, respondent was, by the decree entered herein, adjudged entitled to receive all of the above property, items 4-7, together with all the dividends, rents, issues, and profits therefrom acquired since April 1,, 1936.

Tracing the history of decedent’s acquisition of items 4-7, attention is first directed to item 4, the $49,300.63 worth of stock which comprises the bulk of the estate, 1111 shares of Parke, Davis & Company. Mr. Allshouse was for many years the manager of that concern. Between 1907 and 1925, he acquired 450 shares of its common stock—120 shares prior to his marriage in 1919 to decedent and the other 330 thereafter, but in part the 330 shares were paid for with funds possessed prior to the marriage. On June 18, 1928, this stock was “spread” five to one, so that the 450 shares became 2,250. On June 30th Mr. Allshouse prepared a will devising 500 shares to respondent, and directing that the remaining 1750 shares be held in trust for payment of income therefrom to decedent during her life and distribution to respondent at her death. However, on August 3, 1929, he transferred 1,000 of these shares to decedent by way of gift, with the result that only 1250 shares were in his estate at his death in March, 1931. Of the latter shares, 500 were distributed to respondent, 360 were sold to pay costs of administration, and 390 were held in the trust and distributed to respondent at its close. The 1,000 shares given to decedent were still held by her at her husband’s death, and thereafter she purchased 100 additional shares upon the open market and also received an 11 share stock dividend, thus increasing her ownership to 1111 shares. At the time of her own death she no longer had the original certificates evidencing her ownership, because of a wrongful conversion of the stock from her and later recovery, but she held certificates for the same amount and class of stock, which represent the 111,1 shares acquired in the manner above described.

Item number 5 represents 10 shares in Federal Savings and Loan Society of Kansas City, Missouri, valued at $.1,000, which, so the evidence shows, were acquired by Mr. Allshouse in 1925, and transferred by him to decedent in February, 1929. He had previously made a similar stock gift to respondent. Whether or not he purchased the stock with funds possessed prior to his marriage to decedent is not revealed.

The household and personal effects appraised at $1516.60, item number 6, were devised to decedent by Mr. Allshouse, and distributed to her in the proceedings had in Missouri for the probate of his will.

The last item, number 7, Los Angeles real property valued at $6,000, came to decedent in the following manner: Mr. Allshouse purchased a parcel of real property located in Jackson County, Missouri, in September, 1919, which was about three months after he married decedent. The evidence intimates that the purchase price was paid with funds possessed by him prior to the marriage, but this is not clearly established. Title was taken in the name of the spouses as tenants by the entirety. In May, 1929, this Missouri property was exchanged for California real estate taken in joint tenancy. In August, 1929, Mr. Allshouse delivered a quitclaim deed of his interest in the joint tenancy to decedent, thus placing full title and ownership of the land in her.

.It is practically conceded that all of these assets, items 4-7, had their origin in property which came to decedent from her husband by gift, devise, or bequest. While there is some suggestion that in 192'8 and 1929, Mr. Allshouse may have intended, by the preparation of his will and by transfers to both respondent and decedent, to effect an equal division of his property between the two in consideration of an agreement on the part of decedent not to contest the will, that such was the case is not proved by the evidence. On the contrary, the fact is stipulated that the transfer to decedent of the main item of value, the Parke Davis stock, was a gift; so far as is shown the other transfers too were made without consideration. That was the conclusion of the trial court, and its findings have sufficient support in the record.

The only question therefore is whether the trial court was correct in further concluding that this property so given, devised, and bequeathed to decedent by her husband was his “separate property” as that term is used in the California statute of succession. (Sec. 229, supra.)

Had the property been acquired in California, it would have fallen into the following three divisions: First, personal property owned by the husband prior to his marriage to decedent, or acquired thereafter with assets which he possessed prior to said marriage, or by gift, devise, descent, or bequest. This would have been the husband’s separate property (Civ. Code, sec. 163), and the portion of decedent’s estate traceable thereto would be distributable to respondent (sec. 229, supra.) Second: All other personal property accumulated by the husband during the period of the marriage. This would have been community property (Civ. Code, sec. 164), and the portion of decedent’s estate traceable thereto would also be distributable to respondent (Probate Code, sec. 228). Third: Real property held by the spouses in joint tenancy, with later quitclaim deed from husband to wife. Classification and distribution of this item would depend upon the facts which attended the creation of the joint tenancy.

The above classifications, however, are not here controlling because all of the property was in fact acquired by the spouses while domiciled in Missouri, which is not a community property state. That jurisdiction adheres to the common law. Property there accumulated during marriage, which would in California be community, is denominated the sole property of the husband, subject only to the wife’s right of dower. This is an ownership which differs in its incidents from either community property, or separate property distinguished from community, as those terms are employed in a community property jurisdiction, although it partakes more nearly of the nature of separate property than of community.

Respondent urges that in order to give effect to the California statutes of succession the Missouri holding of the husband in Missouri must be reclassified under a community property classification, and that it should be denominated separate property. Appellants, on the other hand, urge that the property classifications of the two jurisdictions are irreconcilable, and inasmuch as sections 228 and 229 of the Probate Code do not provide for succession to property originating in transfers to a wife by gift, devise, and bequest from property held by her husband in common law ownership sole, those statutes may not be relied upon by respondent in support of his asserted heirship. It is urged that the source of decedent’s estate should not be traced beyond the borders of this jurisdiction, but that the property should be distributed according to the classification which it acquired when decedent became a resident of California. That is to say, decedent was unmarried, a widow possessed of a separate estate, at the time she established her California domicile. All of the property which had originated in transfers to her from her husband had passed into her sole ownership. Separate property (other than that referred to in section 229) of a decedent who leaves neither issue, spouse, nor parent, passes pursuant to section 225 of the Probate Code to the decedent’s brothers, sisters, and descendants of deceased brothers and sisters by right of representation. Under this classification appellants would inherit, to the exclusion of respondent.

It is our view that the property classifications of the two jurisdictions are only partially irreconcilable, and that it is not erroneous, for purposes of succession, to trace the origin of an estate into a foreign jurisdiction and to there apply a California classification, provided the foreign ownership possessed substantially the incidents of the California property holding under which it is to be classified. But such a reclassification is clearly wrong if the effect of imposing the community property ownership upon the foreign or common law holding would be to vary or defeat rights incident to that holding in a case where the property itself never left the foreign jurisdiction, and its owner was never domiciled in the community property state. Furthermore, in considering which classifications are common to both jurisdictions, and which are irreconcilable, the title of the ownership should not be determinative, but the incidents thereof, the essential rights secured, and the persons in whom they vest. So far as is possible these rights should be protected in working out the solution of problems concerning the status of property touched by the laws of both jurisdictions. (McKay, Community Property, sec. 646, p. 438; 31 C. J., sec. 1080, p. 15.)

With these preliminary observations, we may proceed to determine the proper classification of the three above-mentioned divisions of property.

First. Personal property owned by the husband prior to his marriage to decedent, or acquired thereafter with assets which he possessed prior to said marriage, or by gift, devise, descent, or bequest. This was clearly separate or sole property-of the husband in the simplest sense of that term, and to so classify it does no violence to either Missouri or California property laws, or to essential rights of the parties. Although some of the incidents of this ownership in the common law jurisdiction may have differed from those which would have obtained in the community property state, the variance is not substantial so far as the right of succession is concerned. The ownership was in essence that of the very type of property which it is the intent and purpose of section 229 to return to the husband's family upon death of the wife intestate and without issue.

Respondent should therefore succeed to that portion of decedent’s estate which is traceable to property within this first classification. The present record does not afford a sufficient basis for fixing the extent of this proportion. The evidence indicates that the husband was possessed of considerable wealth when he married decedent, but his earnings at that time, and for several succeeding years, were also generous. As manager of Parke, Davis & Company he received a monthly salary of from $1100 to $1,200, and even after an illness forced him to retire, he received a life pension of $150 a month. It is impossible to estimate with any degree of precision what part of his transfers to decedent represented his pre-marital assets, including the rents, issues, and profits thereof, and what part represented accumulations resulting from his efforts during the period of the marriage. Upon a retrial of the cause proof may be directed to this issue.

The second division covers all other personal property acquired by the husband during the period of the marriage. This property, which would in California have been community, was held in Missouri by the husband in sole ownership, subject only to the wife’s dower right. Such ownership, as heretofore mentioned, differs in substantial aspects from that of either community or separate property as those terms are employed in a community property jurisdiction. It differs from community property in that it vests a greater right in the husband. It differs from the husband’s separate property in that it includes the wife’s right of dower, which although inchoate is exceedingly valuable. (Chrisman v. Linderman, 202 Mo. 605 [100 S. W. 1090, 119 Am. St. Rep. 822, 10 L. R. A. (N. S.) 1205].) It therefore cannot properly be reclassified as either by the new jurisdiction while its situs and the domicile of its owner remain in the old.

Had the husband brought the property to this state, or had he become domiciled here, the rule would be different, for it is well settled that foreign property, when subjected to the laws of a community property jurisdiction, may be reclassified thereunder. (Estate of Thornton, 1 Cal. (2d) 1 [33 Pac. (2d) 1, 92 A. L. R. 1343]; Estate of Warner, 167 Cal. 686 [140 Pac. 583]; Estate of Arms, 186 Cal. 554 [199 Pac. 1053] ; 31 C. J., sec. 1083, p. 16; Shea v. Commissioner of Internal Revenue, 81 Fed. (2d) 937.) But the fact that the present case concerns a situation where both owner and property were at all times in Missouri makes it clearly distinguishable from those cases which treat of changes of property classification created by a change of marital domicile, or change of situs of property, from a common law to a community property jurisdiction. It is only where such changes have occurred, and the husband has brought marital assets held by him in common law sole ownership into the community property jurisdiction, thus subjecting them to its laws and classifications, that they have been held subject to reclassification as his separate property. Such reclassification finds its justification in the fact that community property law has only the two classes of ownership, and although the conversion into separate property creates an interference with the wife’s dower right, it does not cause the disturbance of vested rights which would result from a conversion of the property into community.

But the facts of the present ease afford no basis for application of the rule. The husband stayed in Missouri and there made provision for his wife and for respondent in contemplation of the operation of the property laws of that jurisdiction. There was no change of marital domicile; no change of situs of the property. The assets were still in Missouri at the time of the husband’s death, and they there passed into the ownership of the widow. The widow’s act in later establishing a domicile in this state, subjecting her property to its laws, should not have the retroactive effect of a prior act of the husband which would have changed the nature of his own ownership. In short, to reclassify the husband’s Missouri holding would be for this state to reach beyond its borders and impose its substantially different classification upon both a former owner and a former ownership which obtained in a foreign jurisdiction. This may not be done.

Respondent, therefore, is not entitled by virtue of section 229, supra, to distribution of the division of property here under discussion. And as there is no California statute of succession which provides that the estate of a widow which originated in transfers to her of property held by her previously deceased husband in common law sole ownership shall revert to the husband’s line, an estate derived from such source and brought into California by the widow, who here died intestate and without issue, is her separate property, having for purposes of application of the laws of succession the same status as the separate property of one who has never married. It follows that the portion of decedent’s estate which comes within this classification is distributable under section 225 of the Probate Code.

Third and last is the matter of determining whether the California real estate was given, devised, or bequeathed to decedent by her husband from his “separate property”. The history of this real estate has been hereinbefore set forth. It was received by decedent and her husband as joint tenants (the husband later quitclaiming his interest to decedent) in exchange for Missouri real property, which they held as tenants by the entirety. The latter ownership bears substantial similarity to a California joint tenancy with right of survivorship. (United States v. Jacobs, 306 U. S. 363 [59 Sup. Ct. 551, 83 L. Ed. 763]; Otto F. Stifels, etc., v. Saxy, 273 Mo. 159 [201 S. W. 67, L. R A. 1918C, 1009] ; Ashbaugh v. Ashbaugh, 273 Mo. 353 [201 S. W. 72].) It thus appears that decedent’s joint tenancy interest was taken by way of purchase and not of donation. That is to say, in consideration of relinquishment of her Missouri interest as tenant by the entirety, she received an interest as joint tenant in the California property, and at the same time the husband did likewise. Decedent’s California joint tenancy interest was her separate property; the husband’s like interest was his separate estate, and when he conveyed it to decedent by quitclaim deed, it was a gift to her of his separate property. It follows that the ownership which was vested in decedent at the time of her death is, as to an undivided one-half interest, traceable to a gift from her predeceased spouse of his separate property, to which respondent is entitled to succeed. The other undivided one-half interest came to decedent from her own separate property, and is distributable under section 225, supra.

In making this pronouncement we are not unmindful of the fact that the Missouri estate by the entirety was purchased by the husband with funds which he possessed either prior or subsequent to his marriage to decedent, and that where a tenancy by the entirety is so created, the presumption under Missouri law is that the husband has made a gift to the wife of her joint interest in the whole. (Alexander v. Alexander, (Mo. App.) 44 S. W. (2d) 872.) However, it would in our opinion be erroneous, in tracing the California holding for purposes of succession, to look beyond its origin in the tenancy by the entirety in the common law jurisdiction in order to find the source of the latter tenancy. This is so because of the differing property laws and classifications of the two jurisdictions, and the care which should be exercised to avoid any unnecessary invasion of vested rights. Therefore even if it can be said that decedent’s interest m the Missouri real property in fact originated in a gift to her by the husband of his separate property, the creation of the tenancy by the entirety followed by transmutation into a California joint tenancy, must be held to have broken the chain of the gift so far as application of the statutes of succession of the community property jurisdiction is concerned.

The decree is reversed.

Edmonds, J., did not participate in the consideration of or decision in this cause.

Rehearing denied.