SIDEBOTHAM v. << (1938)

This petitioner for a writ of habeas corpus pleaded guilty to a charge of subdividing and offering for lease and sale certain land in Solano county without first notifying the state real estate commissioner, contrary to the provisions of section 20a of the Real Estate Act. Stats.1919, p. 1252, as amended by Stats.1935, pp. 366, 372. No demurrer to the information was filed, and no motion in arrest of judgment was presented. The petitioner was sentenced to imprisonment in the county jail of Solano county for the period of one year.

The petitioner contends that the information fails to state facts sufficient to constitute a public offense, and that section 20a et seq. of the Real Estate Act are unconstitutional.

Sections 20a to and including 20l were added to, and amended the Real Estate Act in 1935. Stats.1935, pp. 366, 1475. Section 20a reads:

“Prior to the time when subdivided lands shall be offered for sale or lease, the owner, his agent or subdivider shall notify the Real Estate Commissioner in writing of his intention to sell such offering. Such notice of intention shall contain the following information: the name and address of the owner; name and address of subdivider; legal description and area of land; a true statement of the condition of the title to the land, particularly including all encumbrances thereon, the terms and conditions on which it is intended to dispose of such land, together with copies of any contracts intended to be used and such other information as the owner, his agent, or subdivider, may desire to present.

“After receiving such a statement the Real Estate Commissioner may require such additional information concerning the project as he may deem necessary, and for which purpose he shall be empowered to prepare a questionnaire for the owner, his agent or subdivider, to answer.”

Section 20j defines the word “subdivision,” as it is used in section 20a, to mean a division of the land for the purpose of sale or leasing thereof, into five or more lots or parcels.

Sections 20b to 20f, inclusive, provide that the real estate commissioner, in his discretion, may conduct an investigation of the proposed subdivision of land at the exclusive expense of the owner. The commissioner may also require a questionnaire of specified information to be signed by the owner and filed, accompanied with an initial fee of $50. If the land is to be subdivided for purposes other than those of residence or business property, the owner may be required to pay, for the examination referred to, an estimated fee, in addition to the initial $50 fee for filing the questionnaire, of not to exceed $10 per day for the time consumed in the examination. The commissioner is authorized to hold a hearing incident to that proceeding, and to adopt rules and regulations with relation thereto, to determine whether the proposed subdivision of land will result in misrepresentation, deceit, or fraud to the purchasers thereof. After completing the examination, it becomes mandatory on the commissioner to make a public report thereof, and, if it is determined that the plan for subdivision will result in misrepresentation, deceit, or fraud to the purchasers, the commissioner may prohibit the proposed sales or leasings of the parcels of subdivided property.

A violation of any of these provisions of the Real Estate Act is punishable by imprisonment in the county jail for a period of not to exceed two years, or by a fine not exceeding $2,000.

We are impelled to hold that sections 20a to 20l, inclusive, of the Real Estate Act, with relation to the subdivision by an owner of land for the purpose of the sale or leasing thereof in five or more separate parcels, are in conflict with the Fourteenth Amendment of the Federal Constitution, and with article 1, section 1, of the Constitution of California, for the reason that they impose onerous and unreasonable burdens on the owners of real property, precluding them from enjoying the constitutional guaranty of owning and controlling such private property. These sections constitute arbitrary restrictions upon the owner's free use and right to dispose of his own real property. They do not constitute a valid exercise of the police power of the state, and they are therefore unconstitutional and void. People v. Pace, 73 Cal.App. 548, 238 P. 1089.

We are unable to see how the restricted use, control and right of an owner to sell or lease his real property enforced by these amended sections of the Real Estate Act can possibly be justified under the police powers of the state. They are evidently not enacted for the general welfare of the public, but rather for the benefit of proposed purchasers or lessees of the property. Police power may be exercised only for public health, safety, or general welfare as distinguished from the mere benefit to be derived by individuals or classes of persons. In Binford v. Boyd, 178 Cal. 458, 461, 174 P. 56, 58, it is said in that regard: “The exercise of the police power is available only for the purpose of promoting the general welfare, the interests of the public as distinguished from those of individuals or persons. It cannot be used to promote private gain or advantage, except so far as the same may also promote the public interest and welfare, and it is the latter, and not the former, effect which forms the basis of the power and warrants its exercise. The Constitution declares that all men are by nature free and independent and have certain inalienable rights among which are those of acquiring, possessing, and protecting property, and pursuing and obtaining safety and happiness. Art. 1, § 1. These rights are invaded if the individual ‘is not at liberty to contract with others respecting the use to which he may subject his property, or the manner in which he may enjoy it.”’

While the exercise of the police power may result in great good for general public welfare, in its uncertain scope and unwarranted exercise there lurks grave danger to the public and to the rights of private citizens. The difficulty which exists in defining its proper limits and in prescribing its bounds affords a temptation to legislative bodies to encroach upon the private rights of citizens to their detriment by hastily enacted laws which may be none the less harmful and dangerous because they may be well intended. It is an established maxim that the police powers may not be used as a cloak to conceal the invasion of constitutional rights. It is the duty of courts to carefully scrutinize legislation enacted in the guise of the police power to keep it within bounds and to preserve the inalienable rights of individual citizens. Binford v. Boyd, supra; In re Farb, 178 Cal. 592, 174 P. 320, 3 A.L.R. 301; Ex parte Jentzsch, 112 Cal. 468, 44 P. 803, 32 L.R.A. 664; People v. Holder, 53 Cal.App. 45, 199 P. 832.

The case of People v. Pace, 73 Cal.App. 548, 238 P. 1089, 1092, is determinative of this proceeding. It was there held that that portion of the Corporate Securities Act which prohibited a person from controlling or disposing of his own securities representing an interest in personal property was unconstitutional and void. In that case a rehearing was denied. The principle announced to the effect that legislation in the guise of police power which invades the rights of an individual to own and control his own property is unconstitutional and void has been approved in several subsequent cases. There is no authority to the contrary. We are unable to distinguish the principle there announced from that which is involved in sections 20a et seq. of the Real Estate Act under consideration. Commenting on the cases relied upon in support of the Corporate Securities Act under consideration it is said in the Pace Case:

“The court had under consideration the question of the right of an individual to sell or dispose of his own securities under circumstances such as are involved here, and certainly we have been unable to find any decision wherein a definite declaration is made by the court upon the question here involved. * * *

“We are thus presented with the oftoccurring problem of determining how far legislative enactments shall be permitted to encroach upon the rights of the individual to acquire, possess, and dispose of his property. When the questions of health, morals, or safety are involved, the path for judicial action is clearly defined by a long course of decisions, but when the test is that of ‘general welfare,’ courts are confronted with many difficult and conflicting considerations, as well as a multitude of diverse judicial decisions. * * * There are well–defined limits as to the extent to which such legislation may go in depriving a natural person of his right to possess property. Nor will the argument of the greatest good to the greatest number, or even the unquestioned beneficial results that might flow from such legislation, avail as against the constitutional guaranty.

“The Corporate Securities Act belongs to that type of legislation sometimes referred to as the ‘paternal activity’ of government. It is an attempt to throw about the individual who is about to invest his money in certain kinds of property a protecting arm of governmental authority. In others words, by regulating and controlling those engaged in the business of selling certain types of personal property, and if need be prohibiting certain undesirable persons or concerns from engaging in that type of business, the law protects those from loss who, either through carelessness or ignorance, might otherwise become the victims of fraudulent design.

“Legislation of this character from the outset has been vigorously assailed, and until the decision in the case of Hall v. Geiger–Jones Co., 242 U.S. 539, 37 S.Ct. 217, 61 L.Ed. 480, L.R.A.1917F, 514, Ann. Cas.1917C, 643, [see, also Rose's U. S. Notes Supp.], judicial opinion was divided on the question of the constitutionality of such legislation. But nowhere in the authorities sustaining the regulation of the business of brokers do we find authority to sustain the contention made here, that the police power under the guise of general welfare may be invoked to interfere with the sale by an individual of his own property when the acquiring and possession of such property is not contrary to law. * * *

“The section of the act in question, if sustained, in connection with other provisions of the act, ‘does more than regulate the mode of ‘disposing of property.’ As we have heretofore pointed out, the corporation commissioner would have the power and it would be his duty to refuse a person a broker's permit if he had a ‘bad business reputation,’ and by such refusal the person would be prevented from disposing of his own individual property which he had lawfully acquired and lawfully possessed if such disposition were made in more than one transaction. * * *

“We know of no authority that would sustain the contention that in order to make more effective a worthy regulation, that an invasion of individual rights as guaranteed by the Constitution would be justified. If the regulation of the business of brokers engaged in the sale of securities cannot be enforced in a manner satisfactory to the corporation commissioner without giving him the power to reach out and invade individual rights, then the legislation in question must necessarily fail, in part at least, of the purpose which is sought in this enactment.

“In Ex parte Quarg, 149 Cal. 79, 84 P. 766, 5 L.R.A.(N.S.) 183, 117 Am.St.Rep. 115, 9 Ann.Cas. 747, Mr. Justice Shaw, in considering the constitutionality of Legislative enactment prohibiting the sale or offering for sale of theater tickets at a price in excess of that originally charged by the theater, makes this comment: ‘The constitutional guaranty securing to every person the right of “acquiring, possessing, and protecting property,” refers to the right to acquire and possess the absolute and unqualified title to every species of property recognized by law, with all the rights incidental thereto, and, in connection with the right of personal liberty, it includes the right to dispose of such property in such innocent manner as he pleases, and to sell it for such price as he can obtain in fair barter.’ * * *

“The act [Corporate Securities] in part provides for regulation, but also provides a power to refuse a permit, which would make absolute prohibition in the sale of one's securities. The only purpose of the act in requiring the filing of certain information in the form of a petition by a person desiring to sell securities is to lay the foundation for action by the corporation commissioner that may or may not, according to his finding, result in an absolute prohibition of the sale of his securities.

“In these days when the urge is strong upon legislative bodies to extend the paternal arm of government into the realm of economic activities, it is particularly important that courts, in the exercise of the particular functions imposed upon them by the Constitution, shall scrutinize with care legislation which tends to encroach upon the constitutional guaranties, to the end that the right of the individual to liberty and possession of property shall become, not a mere theory, but shall be maintained as a practical reality. And while it is true that the increasing conflict between the rights of the individual and the general welfare of society presents ofttimes difficult and perplexing problems, nevertheless courts should not and will not permit the violation of those most fundamental rights that underlie our very existence as a nation. Dobbins v. Los Angeles, 195 U.S. 223, 25 S.Ct. 18, 49 L. Ed. 169, [see, also, Rose's U. S. Notes]; Pacific Palisades Ass'n v. City of Huntington Beach et al., 196 Cal. 211, 237 P. 538, 40 A.L.R. 782.

“Appellant further urges that the defendant in this case is denied the equal protection of the law by the section of the act under consideration, in this: That any owner of securities who is not the issuer or underwriter thereof, and who sells for his own account, may do so without hindrance or complying with any provision of the act, provided that he accomplishes the disposal of the securities in one sale or exchange; but when, for any reason, he desires to make a second or a third or a fourth sale, he is by the act deprived of the rights which are accorded to one who desires to make only one sale. As we have pointed out in the outset of this opinion, it is readily apparent that if the act in question is sustained a great many individuals who are the owners of securities which they themselves did not issue or underwrite, would be required to secure a broker's license, which involves the filing of a petition, the awaiting of the decision of the corporation commissioner as to whether or not a broker's license will be issued, the securing and filing of a bond, and perchance eventually the refusal of a broker's license; while other individuals who find it convenient or possible to accomplish the same purpose in making one sale would be relieved from such burdens. It is difficult to believe that the Legislature intended to impose burdens on certain individuals in this manner that would not apply to all persons of the same class, for certainly there is no basis in law for such a distinction. * * *

“Any Legislative enactment that is reasonably subject to the interpretation we have just pointed out manifestly is in conflict with the Fourteenth Amendment to the Constitution of the United States. In 12 Corpus Juris, page 1144, this proposition is thus stated: ‘The Amendment (the Fourteenth) was intended to secure equality of right, and it renders unconstitutional all laws which may properly be construed as applying to persons or property arbitrarily and with discrimination, unequally or unjustly.’ * * *

“We are of the opinion that the section of the Corporate Securities Act under consideration, so far as it attempts to require a natural person to secure a broker's permit as provided in said act before he may lawfully sell his own securities, where he is not the issuer or underwriter of the same, is unconstitutional and invalid for the reasons herein set forth.”

The foregoing conclusion is supported by the cases of Bracey v. Darst, D.C., 218 F. 482, and William R. Compton Co. v. Allen, D.C., 216 F. 537. The two cases last cited hold the provisions of “Blue Sky Laws” in West Virginia and Iowa, which purported to prevent owners of property from controlling or alienating the same, to be void. The constitutional inhibition referred to in the Pace Case applies with equal force to the present case affecting the right of a person to own and control his real property.

The fact that the petitioner pleaded guilty to the charge of violating the provisions of section 20a of the Real Estate Act, without either demurring to the information or moving to arrest the judgment, does not preclude him from challenging the constitutionality of the section on this petition for a writ of habeas corpus. This proceeding does not involve the mere defective allegations of a complaint which attempts to state a criminal charged based on a valid statute. Since the section upon which the information was based is unconstitutional and void, it may not furnish a foundation for any valid criminal charge. Even though the information charge the offense prohibited by section 20a of the Real Estate Act in perfect language, it constitutes no public offense prohibited by any valid statute of the state, or any crime known to the law. Conceding the commission of the acts charged in the pleading, they amounted to no violation of law. Since the section is unconstitutional and void, the court was without jurisdiction to try or sentence the petitioner. The judgment is void. The petitioner is therefore unlawfully restrained of his liberty, and he is entitled to be discharged. Ex parte Maier, 103 Cal. 476, 37 P. 402, 42 Am.St.Rep. 129; Ex parte Keeney, 84 Cal. 304, 24 P. 34; In re Garbarini, 129 Cal.App. 618, 19 P.2d 27; 32 A.L.R. 1054, note.

The writ is granted, and the petitioner is discharged.

Mr. Justice THOMPSON delivered the opinion of the court.

We concur: PULLEN, P. J.; PLUMMER, J.