ACCOUNTING CORPORATION OF AMERICA v. STATE BOARD OF ACCOUNTANCY OF CALIFORNIA

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District Court of Appeal, First District, Division 2, California.

ACCOUNTING CORPORATION OF AMERICA v. STATE BOARD OF ACCOUNTANCY OF CALIFORNIA et al.

Civ. 13738.

Decided: January 13, 1949

Sullivan, Roche, Johnson & Farraher, of San Francisco (Wilkinson, Hall, Witwer & Moran, of Chicago, Ill., of counsel), for appellant. Fred N. Howser, Atty. Gen. and J. Albert Hutchinson, Dep. Atty. Gen., for respondents.

Plaintiff sued for an injunction and for declaratory relief to prevent enforcement of certain provisions of the Business and Professions Code relating to the practice of public accountancy. A demurrer to the complaint was sustained without leave to amend. The appeal presents the single question of the validity of the code sections under which the respondents are preventing appellant from continuing its business.

Plaintiff was duly incorporated under California law on July 1, 1945, and was engaged in the practice of public accountancy on September 15, 1945, when the statute under attack became effective. Section 5060 required a license of all persons engaged in the practice. Section 5062 exempted from the operation of the statute all corporations which had been engaged in the practice for three years prior to the effective date of the statute. Section 5082 lists four groups of individuals who are permitted to register within six months after the effective date of the Act and thereby become licensed public accountants. No provisions have been made enabling any corporation to register unless it has been in business in this state for more than three years prior to the effective date of the Act. Appellant's attack upon the judgment goes directly to these provisions of the Act which it claims are discriminatory and unconstitutional.

We refer first to the provisions of the State Constitution. Article I, Sec. 11: “All laws of a general nature shall have a uniform operation.”

Article I, Sec. 21: “No special privileges or immunities shall ever be granted which may not be altered, revoked, or repealed by the Legislature; nor shall any citizen, or class of citizens, be granted privileges or immunities which, upon the same terms, shall not be granted to all citizens.”

Article IV, Sec. 25: “The Legislature shall not pass local or special laws in any of the following enumerated cases, that is to say: *

“Nineteenth—Granting to any corporation, association, or individual any special or exclusive right, privilege, or immunity.”

Uniformity of operation inhibits the granting of any exclusive right or privilege to any individual or corporation unless the classification is based upon a “natural intrinsic or constitutional distinction.” Mordecai v. Board of Supervisors, 183 Cal. 434, 438, 192 P. 40, 41. Statutes which have made an arbitrary classification based solely on the time the person or corporation has been in business have been uniformly held to be unconstitutional. Del Mar Canning Co. v. Payne, 29 Cal.2d 380, 382, 383, 175 P.2d 231; In re Wacholder, 1 Cal.App.2d 254, 260, 36 P.2d 705; In re Fassett, 21 Cal.App.2d 557, 560, 561, 69 P.2d 865; Soares v. City of Santa Maria, 38 Cal.App.2d 215, 218, 100 P.2d 1108.

Here the statute grants special and exclusive privileges to an arbitrary class of corporations and, to a lesser extent, to four specified groups of individuals. All California corporations which have been in business for more than three years are given the exclusive right to continue. All others are denied the privilege for all time. There is no reason for the discrimination. A corporation organized in this state is preferred though its three years of operation may have been entirely in another state. A foreign corporation may have been in business in this state for more than three years but it is denied the privileges of the statute. These discriminations are clearly arbitrary and capricious under the rule of Del Mar Canning Co. v. Payne, supra.

The judgment is reversed with directions to overrule the demurrer.

I concur. I think some notice should be given however to cases cited by respondent such as Dent v. West Virginia, 129 U.S. 114, 9 S.Ct. 231, 32 L.Ed. 623 and In re Weisberg, 215 Cal. 624, 12 P.2d 446. The statute before us differs radically from the type of statute considered in the cited cases. In those cases the licensing statutes required a license for all persons engaging in a designated business or profession. Generally a successful examination was made a prerequisite for the issuance of such license but as an exception persons engaged in the business or profession for a stated period were entitled to be licensed without examination. The rationale of those decisions is that in the legislative discretion a fixed period of experience in the business or profession may be determined to establish the qualifications of the person to receive a license without examination. But in those cases no person already engaged in the business or profession was absolutely excluded from the opportunity to qualify to engage in it thereafter. Therein lies the clear distinction from the provisions of this statute which gives to all corporations engaged in the business for three or more years the absolute right to continue in such business in perpetuity and unconditionally denies the same right to all other corporations engaged in the business at the time the statute was enacted. In my judgment this provision is clearly arbitrary.

The further argument that if the attacked proviso is held unconstitutional it would result in depriving all corporations of the right to practice accountancy is not sound. The legislature clearly intended to exempt from the operation of the act certain corporations. To hold that all corporations are prohibited from practicing accountancy in the face of the legislative intent to permit some to do so would be judicial legislation. Marsh v. Hanley Supervisors, et al., 111 Cal. 368, 372, 43 P. 975. We cannot enlarge the act to cover a class not intended by the legislature to be covered by striking out the proviso as unconstitutional. 11 Am.Jur. 855. The severability provision in the act is not an inexorable command (Danskin v. San Diego Unified School Dist., 28 Cal.2d 536, 555, 171 P.2d 885) and in spite of its inclusion in the statute we cannot say that the legislature intended to prohibit all corporations from practicing accountancy in the face of its express enactment that some corporations should be allowed to do so. State v. Levitan, 190 Wis. 646, 210 N.W. 111, 119, 48 A.L.R. 434; State v. Inland Empire Refineries, 3 Wash.2d 651, 101 P.2d 975, 981; Williams v. Standard Oil Co., 278 U.S. 235, 49 S.Ct. 115, 73 L.Ed. 287, 60 A.L.R. 596.

NOURSE, Presiding Justice.

GOODELL, J., concurs.