MILLER v. UNION BANK & TRUST CO. OF LOS ANGELES et al.*
This is an appeal from a judgment entered pursuant to an order sustaining defendants' general demurrer to the plaintiff's complaint without leave to amend. It is alleged in the complaint that on the 5th day of January, 1926, the defendant bank, a California corporation, issued a certain declaration of trust known as the “Whittier Triangle Syndicate” involving a tract of real estate in Los Angeles county as the trust res; that the declaration of trust was issued for the purpose of selling assignments of beneficial interests to the public; that on May 14, 1929, the bank issued and sold to the plaintiff 60/200 interests in the net proceeds arising out of said trust; that at no time did the bank have a permit from the commissioner of corporations to issue or sell the said securities; and that they were therefore void.
It is asserted both by the plaintiff and the defendants that the question involved may be stated as follows: “Was the Corporate Securities Act, St. 1917, p. 673, as amended in 1923 [Stats. of 1923, p. 87] and as it read until 1929, constitutional in requiring state banks to secure a permit before issuing securities and in exempting national banks from the necessity of obtaining a permit before issuing securities?” The demurrer was sustained on the theory that the Corporate Securities Act in the respect stated was unconstitutional and that therefore it was not necessary for the bank to have obtained a permit to issue the securities; but the demurrer should have been sustained as well if for any reason it was unnecessary for the bank to obtain such permit.
The defendants, assuming that the provisions of the Corporate Securities Act as then in effect required state banks to obtain a permit to issue securities while at the same time exempting national banks from this requirement, contended in the trial court and contend here that the provision requiring state banks to obtain a permit before issuing securities was unconstitutional for the reason that the act permitted national banks to do business in the state on more favorable terms than state banks; that said favoritism is contrary to section 15 of article 12 of the Constitution of California, which reads as follows: “No corporation organized outside the limits of this state shall be allowed to transact business within this state on more favorable conditions than are prescribed by law to similar corporations organized under the laws of this state.” That this fundamental safeguard of the Constitution was attempted to be subverted by placing a burden on domestic corporations to which foreign corporations were not subjected, the latter thus being given negatively a privilege denied the former [Young v. Three For One Oil Royalties, 1 Cal.(2d) 639, 36 P.(2d) 1065]; and finally that this unauthorized discrimination in favor of national banks extended to state banks the exemption granted to national banks.
The respondents' contention as above stated is very persuasive. Nevertheless, we should not overlook one of the fundamental rules of statutory construction which is that unconstitutional effect should not be given to a statute if another construction is reasonably discoverable from its language. We have reached the conclusion that the Corporate Securities Act as it existed during the years from 1923 to 1929 may be reasonably construed, and therefore should be so construed, as not to require either national banks or state banks to obtain permits from the commissioner of corporations before issuing securities. Our reasons for this conclusion are fully set forth in the case of Fox-Woodson Lumber Co. v. Bank of America (Cal.App.) 51 P.(2d) 1149, the opinion in which was filed on this date. For brevity's sake we do not again set them forth herein.
Under our construction of the law it was not necessary for the bank to have obtained a permit in order to issue the securities and the securities were not void with respect to the only ground set up by plaintiff as his cause of action, and therefore the plaintiff's complaint failed to state a cause of action.
CRAIL, Presiding Justice.
We concur: WOOD, J.; McCOMB, Justice pro tem.