HOLLYWOOD TURF CLUB v. DAUGHERTY (1950)

From a judgment in favor of respondent in an action to compel appellant (Commissioner of Corporations for the State of California) to issue a permit authorizing respondent (Hollywood Turf Club) to declare a stock dividend in shares having a par value of $100.00 each, the Commissioner of Corporations appeals.

Respondent was incorporated in 1935 with an authorized capital of 5000 shares of common stock without par value, and 5000 shares of preferred stock of $100.00 par value. Its articles of incorporation were amended in 1936 to authorize 12,500 shares of common stock with a par value of $100.00 each. In 1937 its articles of incorporation were again amended to permit an increase of capital stock to 22,500 shares of the par value of $100.00, and in 1938 by further amendment there was authorized the issuance of 30,000 shares of the par value of $100.00 per share. In 1947 the articles of incorporation were amended increasing the total number of shares authorized to 60,000 with a par value of $100.00 per share. In 1947 the Legislature amended section 5 of the Corporation Securities Act by adding thereto the following: ‘The commissioner shall have authority to prescribe by rules and regulations adopted after reasonable notice and a public hearing, the rights, preferences, privileges, restictions, and par value of securities proposed to be sold for the purpose of raising funds with which to finance racing enterprises authorized by law; provided that, any par value so prescribed shall not exceed one thousand dollars ($1,000) per share.’ St.1947, p. 2561.

Effective as of October 10, 1947, appellant adopted the following emergency regulation as section 666 of Title 10, California Administrative Code: ‘The rights, preferences, privileges, restrictions and par value of securities proposed to be sold for the purpose of arising funds with which to finance a horse racing enterprise shall be as follows:

‘(a) The securities shall be of only one class, without distinction.

‘(b) The securities shall have a par value of at least $1,000.

‘(c) Fractional shares shall not be issued except under specific authorization of the Corporation Commissioner based on a showing of unusual circumstances justifying the issuance of fractional shares.

‘This rule shall apply to the original and any subsequent financing of a horse racing establishment, whether by the sale of securities for cash, the issuance of securities in the capitalization of surplus or by the issuance of securities in any other manner.’

Thereafter effective as of December 26, 1947, appellant adopted as a new section 666 of Title 10 of the California Administrative Code the following:

‘The rights, preferences, privileges, restrictions and par value of securities proposed to be sold for the purpose of raising funds with which to finance a horse racing enterprise shall be as follows:

‘(a) The securities shall be of only one class, without distinction.

‘(b) The securities shall have a par value of at least $1,000.

‘(c) Fractional shares shall not be issued except under specific authorization of the Corporation Commissioner based on a showing of unusual circumstances justifying the issuance of fractional shares. In exceptional circumstances the issuance of script may be authorized in the discretion of the Commissioner to equalize share dividends.

‘This rule shall apply to the original and any subsequent financing of a horse racing establishment, whether by the sale of securities for cash, the issuance of securities in the capitalization of surplus or by the issuance of securities in any other manner.’

On December 9, 1947, the board of directors of respondent passed this resolution:

‘* * * Resolved, * * * (1) That a dividend of 29,997 shares of the capital stock of this corporation, of the par value of $100.00 per share, be, and the same is hereby declared on the basis of one share, or fractional part of one share of capital stock for each share, or fractional part of each share of the 29,997 shares of the capital stock of the corporation now issued and outstanding, of the aggregate par value of $2,999,700.00, said dividend to be payable, on the basis aforesaid, in shares of stock only, to shareholders of record of this corporation on March 10, 1948, such stock to be issued on March 24, 1948, or as soon thereafter as this corporation shall have received the Permit of the Division of Corporations, Department of Investment, of the State of California, authorizing it so to do; * * *.’

On February 20, 1948, respondent filed with appellant an application for a permit to issue as a stock dividend 29,997 shares of its common stock having a par value of $100.00 per share. Appellant held a hearing on such application pursuant to the provisions of chapter 5, part 1, division 3, title 2 of the Government Code. This application was denied for the reason that the proposed issue of stock did not conform to the provisions of section 666, title 10 of the Administrative Code in that permission was sought to issue securities of a par value of less than $1000 per share.

Respondent filed the present petition for a writ of mandate and review of the order of appellant on November 9, 1948.

Questions

First: Was the petition filed by respondent in the superior court beyond the period of limitatios permitted by section 15 of the Corporate Securities Act?

This question must be answered in the negative. Section 15 of the Corporate Securities Act reads as follows:

‘Every order, decision, license or other official act of the commissioner shall be subject to review in accordance with law.

‘Except for review of proceedings conducted in accordance with Chapter 5 of Part 1 of Division 3 of Title 2 of the Government Code, a written petition praying that the order, decision, permit or evidence of other official act be issued, modified or set aside in whole or in part may be filed in the superior court of the State of California, within 60 days after the issue of such order, decision, permit or evidence of other official act of the commissioner or after completion of application to the commissioner and failure or refusal of the commissioner to act upon said application.’ St.1945, p. 1679.

The hearing in the instant case before appellant as commissioner of corporations was conducted in accordance with the provisions of Chapter 5 of Part 1 of Division 3 of Title 2 of the Government Code. Therefore the hearing in the superior court to review appellant's denial of respondent's application fell within the exception mentioned in section 15 of the Corporate Securities Act, supra, and was not subject to the 60 day limitation set forth therein. Since the statute is free from ambiguity there is no room for construction by the court. (People v. Pacific Guano Co., 55 Cal.App.2d 845, 848, 132 P.2d 254.)

The review here in question was held in accordance with section 11523 of the Government Code, which provides:

‘Judicial review may be had by filing a petition for a writ of mandate in accordance with the provisions of the Code of Civil Procedure. Except as otherwise provided in this section any such petition shall be filed within 30 days after the last day on which reconsideration can be ordered. The right to petition shall not be affected by the failure to seek reconsideration before the agency. The complete record of the proceedings, or such parts thereof as are designated by the petitioner, shall be prepared by the agency and shall be delivered to petitioner, within 30 days after a request therefor by him, upon the payment of the expense of preparation and certification thereof. The complete record includes the pleadings, all notices and orders issued by the agency, any proposed decision by a hearing officer, the final decision, a transcript of all proceedings, the exhibits admitted or rejected, the written evidence and any other papers in the case. Where petitioner, within 10 days after the last day on which reconsideration can be ordered, requests the agency to prepare all or any part of the record the time within which a petition may be filed shall be extended until five days after its delivery to him. The agency may file with the court the original of any document in the record in lieu of a copy thereof.’ (Italics added.)

The reconsideration mentioned in the foregoing section is that referred to in Government Code section 11521, specifying that power to order a reconsideration shall expire 30 days after the delivery or mailing of a decision to respondent. Respondent proceeded as outlined in the emphasized portion of section 11523, Government Code, supra, by requesting appellant within 10 days after the last day for consideration to prepare a record. This record was delivered to respondent November 4, 1948, and within 5 days thereafter, to wit, on November 9, 1948, respondent filed an application for a writ of mandate and review of appellant's order in the superior court.

Second: Is section 5 of the Corporate Securities Act, set forth supra, unconstitutional as being special legislation and illegally discriminatory?

This question must be answered in the affirmative. This statute involves a special legislative classification. It may be conceded that racing enterprises and particularly horse racing enterprises may be the subject of valid legislative classifications. However, the classification here attempted does not have to do with the regulation of horse racing or betting, but is an attempt to regulate a feld of corporate financing. (See Krause v. Durbrow, 127 Cal. 681, 685, 60 P. 438.) The Corporate Securities Act has been a general law regarding the special subject of issuance of securities, but applicable equally to all issuers thereof. The commissioner has full authority under the act to exercise his authority as to each individual application presented to him. There is a degree of speculation in the issuance of all securities, and to hold that the Legislature could by special statute establish different criteria as to corporations engaged in different businesses would result in complete confusion and conflict in the system of protection for investors. If the Legislature could restrict the issuance of horse racing shares as it has attempted to do here it would open the door for similar legislation as to any other commercial enterprise, depending upon the risk involved in the business, and would conflict with the provisions of the Fourteenth Amendment to the Constitution of the United States, and Article 1, Section 11 of the Constitution of California.

Likewise to sustain the present statute would improperly set horse racing corporations apart from all others as to the issuance of their securities and discriminate against the investor of limited capital in favor of the wealthy one. The right to invest in securities should not by legislative action be restricted to persons of means. In other words comparative wealth is not a proper basis for legislative classification.

This view is well expressed by the Supreme Court of the United States in, Gulf, Colorado & Santa Fe Railway Company v. Ellis, 165 U.S. 150, 155, 17 S.Ct. 255, 257, 41 L.Ed. 666, where the court says: ‘The state may not say that all white men shall be subjected to the payment of the attorney's fees of parties successfully suing them, and all black men not. It may not say that all men beyond a certain age shall be alone thus subjected, or all men possessed of a certain wealth. These are distinctions which do not furnish any proper basis for the attempted classification. That must always rest upon some difference which bears a reasonable and just relation to the act in respect to which the classification is proposed, and can never be made arbitrarily, and without any such basis.’

If the Legislature could authorize appellant to fix a par value up to $1000.00, it might also authorize him to fix a par value far in excess thereof, to wit, a million dollars per share, and thus for all practical purposes prevent the sale of securities by legal corporations engaged in the business of horse racing.

In view of our conclusion it is unnecessary to discuss whether or not the issuance of the stock dividend was ‘for the purpose of raising funds with which to finance racing.’

Third: Did the trial court err in finding that respondent did not have a plain, speedy or adequate remedy at law since, pursuant to the provisions of section 11440 of the Government Code, respondent could have sought declaratory relief?

This question must be answered in the negative. Assuming that the provisions of section 11440 were available to respondent such relief was an equitable remedy and not a legal remedy. (Adams v. Cook, 15 Cal.2d 352, 362, 101 P.2d 484. Cf. Dare v. Board of Medical Examiners, 21 Cal.2d 790, 795, 136 P.2d 304.) Nor does the fact that respondent might have accomplished a similar financial result by transferring its surplus to its capital account deprive respondent of the remedy it sought in the present action. It sought not alone to accomplish the transfer but the right to issue a stock dividend. A remedy is not adequate which does not afford the applicant the very relief which he seeks, and which is equally convenient, beneficial and effective. (Dufton v. Daniels, 190 Cal. 577, 581, 582, 213 P. 949.)

Fourth: Did the trial court err in holding that appellant exceeded his jurisdiction by his rule, section 666, Title 10 of the California Administrative Code, requiring that stock dividend shares of a racing corporation should be not less than $1,000 par value?

This question must be answered in the negative. An administrative officer's power to prescribe rules and regulations is not the power to make law but merely to adopt regulations to carry out the will of the Legislature as expressed in the language of the statute. (First Industrial Loan Co. of California v. Daugherty, 26 Cal.2d 545, 550, 159 P.2d 921. See also Manhattan General Equipment Co. v. Comm. etc., 297 U.S. 129, 56 S.Ct. 397, 80 L.Ed. 528.) Because the Legislature failed to enact a statute which appellant felt should have been enacted, he could not by rule supply such alleged defect. Therefore, since we have seen that the legislative enactment was unconstitutional, it is self-evident that appellant's rule was invalid.

Fifth: Was it error for the trial court to make the following findings of fact?

(a) ‘VI It is not true that the issue of the stock dividend applied for by petitioner herein would doubly or to any other extent or at all aggravate the holding of investments in horse racing enterprises of less than $1,000 per person.’

(b) ‘VII Petitioner has shown a need and justification for the granting of an exception to the Commissioner of Corporations' rule appearing in Section 666, Title 10, California Administrative Code.’

(c) ‘VIII The issuance of the proposed stock dividend by petitioner would be fair, just and equitable provided that certain precautions are taken so that the stock dividend reaches only those who are now legally entitled to it.’

(d) ‘XII None of the affirmative allegations of respondent's return and answer is true, except such as is likewise found in petitioner's petition and complaint.’

This question must be answered in the negative.

(a) The evidence failed to disclose that the stock dividend would double or otherwise aggravate the condition of share holdings below $1,000 per person.

(b) This finding was properly sustained by the evidence which showed that there was no scheme, conspiracy or plan to trade improperly in shares of respondent's stock, and that even though on two previous occasions stock dividends similar in nature had been permitted by appellant and declared by respondent such shares had not been improperly traded.

(c) The evidence disclosed that the issuance of the stock dividend by a permit properly restricting the same would cause such stock dividend to reach the hands of those legally entitled thereto.

(d) Appellant contends that this finding was too broad and that certain undisputed issues of fact were found to be untrue. Conceding this to be a fact, there was no prejudicial error in the finding. Hence pursuant to the mandate of Article 6, section 4 1/212 of the Constitution of the State of California such error must be disregarded. (Bell v. Scudder, 78 Cal.App.2d 448, 457 et seq., 177 P.2d 796.)

The judgment is affirmed.

I dissent. On either of two grounds the judgment should be reversed.

1. Section 5 of the Corporate Securities Act is Constitutional

Entirely devoid of support is the argument advanced by petitioner and adopted by the majority opinion that section 5 of the Corporate Securities Act, as amended (Stats.1947, ch. 1122, p. 2561), is in violation of the Constitution as being special legislation and illegally discriminatory, and that in consequence thereof the rule of the Commissioner of Corporations is void which requires that securities to be issued by petitioner and other corporations for the purpose of raising funds with which to finance horse racing enterprises shall have a par value of at least $1,000.

The Legislature has specially classified the business of horse racing, has made special regulations relating thereto and has authorized the Commissioner of Corporations to adopt and enforce, with reference to the issuance of the securities of corporations engaged in such business, a regulation not made or authorized in connection with those whose business are of a different nature and are not subject to control under the police power. It is within the constitutional power of the Legislature so to do because their business is one which the State has inherent power to regulate or even to prohibit entirely either by statute or by constitutional amendment.

Petitioner must be deemed to have entered into such business in contemplation of the State's power in that regard and of the included power to establish and enforce such regulations as are not unreasonable for the protection of the public interest. By reason of the fact that petitioner's securities, unlike those of an ordinary business corporation, may be rendered worthless by a statute prohibiting horse racing adopted at any session of the Legislature or by a vote of the people at any election, or by the action of the Horse Racing Board in revoking or refusing to renew its license to operate, such securities may be treated specially by statute without violating the constitutional prohibition of special and discriminatory legislation.

The majority opinion treats petitioner as a normal business corporation, when in fact it is not, and has placed its securities on the same basis as those of corporations that are not subject to regulation under the police power. It is true that the Corporate Securities Act is a general law relating to the subject of the issuance of securities. It is and must be applicable alike to all corporations of the same class and character and to their securities. But a corporation such as petitioner, whose business is wholly unlike all others in that it is subject to control and regulation under the police power, may be separately classified and regulated in a manner not possible or necessary in the case of the ordinary corporation.

The general rule is that persons are free to contract in such manner and upon such subjects as they desire, but freedom of contract, like liberty, is not an absolute. Both may be regulated by just and impartial laws. Freedom of contract is subject to various restraints and limitations as to purpose and to divers conditions of time, place and circumstance. Persons may not enter into contracts as they choose, even for lawful purposes. The law and society say what contracts may be oral, what shall be in writing, for what length of time they may continue in force and how they may be enforced. The liberty of contract may be circumscribed by statute in the exercise of the police power for the protection of the general welfare of the citizens of the state as well as for the preservation of their health, morals and safety.

The currently accepted doctrine is that when a private right appears to be in conflict with the public interest the former must yield to the latter. Neither the Fifth nor the Fourteenth Amendment to the Constitution of the United States precludes the Legislature from prescribing reasonable rules and regulations for the making of contracts for certain purposes.

‘The power of government extends to the denial of liberty of contract to the extent of forbidding or regulating every contract which is reasonably calculated to injuriously affect the public interests.’ Atlantic Coast Line R. Co. v. Riverside Mills, 219 U.S. 186, 202, 31 S.Ct. 164, 169, 55 L.Ed. 167, 181, 31 L.R.A.,N.S., 7. The guarantee of liberty does not withdraw from legislative supervision the making of contracts nor does it deny to government the power to provide restrictive safeguards. Chicago B. & Q. R. Co. v. McGuire, 219 U.S. 549, 567, 31 S.Ct. 259, 55 L.Ed. 328, 338. In the protection of the public welfare statutes have been sustained which limited the hours of labor by persons employed on public work although not applicable to work performed under private contract (Atkin v. State of Kansas, 191 U.S. 207, 24 S.Ct. 124, 48 L.Ed. 148; Ellis v. United States, 206 U.S. 246, 27 S.Ct. 600, 51 L.Ed. 1047, 11 Ann.Cas. 589), and which prohibited insurance companies from denying that insured property was worth the amount for which it was insured (Orient Ins. Co. v. Daggs, 172 U.S. 557, 19 S.Ct. 281, 43 L.Ed. 552). For other examples of statutes interfering with the right of making contracts see 219 U.S. at page 568, 31 S.Ct. at page 262. Those cases and many more that may be found in subsequent reports had to do with what may be termed ordinary business contracts, not those which are strictly within the police power such as that which is the subject of this proceeding.

It is within the right of the government to restrain some individuals from all contracts as well as all individuals from some contracts, said the court in Frisbie v. United States, 157 U.S. 160, 165, 15 S.Ct. 586, 39 L.Ed. 657, 659, wherein the court rejected the plea that the statute was unconstitutional because it limited the fee of an agent in prosecuting a pension claim, since under the power of the Congress to give or to withhold pensions it may prescribe the conditions under which applications therefor may be presented. Applying the same principle in the case now before the court, since it is within the power of the state to permit or to prohibit horse racing it may prescribe the conditions under which such enterprises may be maintained, including the method by which they may be financed. The power of the Legislature to provide for the regulation of horse races (Const., Art. IV, sec. 25a) is not limited to the making of rules for the running of races and wagering thereon. The public is no less in need of security in the investment of money in the financing of a racing plant than in the running of races, and the power of the Legislature is not so circumscribed that it cannot provide protection in the former as well as in the latter. The Legislature determines the public policy of the state and the courts are without power to substitute another merely because they disagree with the legislative decision.

The fact, which is undisputed, that the running of horse races and wagering upon them may, in the interest of the public welfare, be regulated or even forbidden by law is a complete confutation of the unsupported theory advanced in the majority opinion that the Legislature and the people are powerless to regulate the sale of securities which make possible the operation of such enterprises. When a corporation finds it necessary to sell its securities to the public in order to initiate or to continue a venture into horse racing the police power enters its affairs and remains throughout its operations. The individual member of the public is entitled to the protection of the police power in his investment in such securities to the same extent as in an ‘investment’ in a pari mutuel wager.

In this case the Commissioner of Corporations has not arbitrarily established a rule without legislative authority nor has legislative power been delegated to him. The Legislature has fixed the primary standard for the commissioner's action and has empowered him to adopt rules and regulations, after notice and public hearing, and by such rules and regulations to prescribe the par value of securities proposed to be issued for the purpose of raising funds for the financing of racing enterprises authorized by law, the par value of shares not to exceed $1,000. (Corp. Sec. Act, sec. 5 as am. by Stats.1947, ch. 1122, p. 2561.) Pursuant to such authority the commissioner adopted a rule that such securities should have a par value of at least $1,000. The primary standard was fixed by the Legislature. The commissioner, in the exercise of the power lawfully delegated to him, adopted the rule which is applicable to all persons and corporations engaged in a like business.

The fear expressed in the majority opinion that the approval of the statute now under consideration will open the door to the establishment of different criteria as to corporations engaged in different businesses is groundless, since only those that are subject to the police power may be made responsive to special rules that the Legislature, in the exercise of that power, deems necessary to the protection of the public. Commercial corporations will not be affected nor will they be endangered by the declaration that the statute here involved is valid and enforceable.

The paucity of authority for the position taken by petitioner and adopted by the majority of this court is manifested by the fact that the only case cited in petitioner's brief or in the majority opinion with reference to unconstitutional discriminatory legislation is Gulf, C. & S. F. Ry. Co. v. Ellis, 165 U.S. 150, 17 S.Ct. 255, 41 L.Ed. 666, which expresses the trite statement that the law may not say that a white man shall be subject to a certain rule and a black man not. The question was with reference to the payment of attorneys' fees by railroad companies to successful litigants in cases of a designated character. The police power was not involved. The statute imposed a penalty upon railroad corporations for failure to pay certain debts. Compelling payment of debts is not a police regulation. The court so stated (165 U.S. page 158, 17 S.Ct. page 258) and on that basis declared the law unconstitutional. Manifestly neither that case nor the white-man-black-man illustration bears any analogy to the subject of this action. The authorities hereinbefore cited, as well as countless others to be found in the federal and state reports, sustain, as proper exercise of police power, legislation that is applicable to a certain class of persons when such class is so distinguishable from all others as to warrant special regulations. Illustrative are Atchison, T. & S. F. R. Co. v. Matthews, 174 U.S. 96, 19 S.Ct. 609, 43 L.Ed. 909, and Missouri, K. & T. R. Co. v. Cade, 233 U.S. 642, 34 S.Ct. 678, 58 L.Ed. 1135, in which statutes, although special and discriminatory because they provide for attorneys' fees to successful plaintiffs in cases of a certain character and not to successful defendants nor to plaintiffs in other cases, were sustained as proper exercise of the police power and were held not to violate the unequal protection and due process clauses. In the Matthews and Cade cases the court distinguished Gulf, C. & S. F. Ry. Co. v. Ellis, supra, in that the statute discussed in the latter case was not an exercise of police power.

The argument advanced by petitioner and adopted by the majority that because the statute sets apart horse racing corporations from all others with reference to their securities it discriminates against an investor with a small amount of capital in favor of one with unlimited funds is a comparison of no more force than that in Gulf, C. & S. F. Ry. Co. v. Ellis, supra, and is expressly rejected by our Supreme Court as will hereinafter appear. It is true that a person who possesses less than $1,000 would be unable to purchase a share. Likewise were the par value to be fixed at $100 one with only $10 would be deprived of investing it.

Neither the affluent nor the impecunious prospective investor, whose privilege of purchasing petitioner's securities is affected, is before the court with an objection to the statute. Nevertheless, in view of the fact that the majority opinion rests in part on an alleged discrimination between investors according to their financial status, it should be noted that the courts have not been impressed by such a comparison. The statute which provides for the suspension of a driver's license in case of nonpayment of a judgment for damages resulting from an automobile accident was once held to be discriminatory, unreasonable and in violation of the due process clause because it was based on a person's ability to pay. In re Lindley, 1930, 108 Cal.App. 258, 291 P. 638. Before the period of gestation of the Lindley case had expired the Supreme Court overruled it and declared the statute did not violate any constitutional inhibition. Watson v. Division of Motor Vehicles, 1931, 212 Cal. 279, 298 P. 481. Similar statutes have been sustained in Rosenblum v. Griffin, 89 N.H. 314, 197 A. 701, 705, 115 A.L.R. 1367, where the court said that ‘Equality of right implies no equality of ability or means,’ and in Nulter v. State Road Comm., 119 W.Va. 312, 193 S.E. 549, 194 S.E. 270.

The Commissioner of Corporation repeatedly makes orders requiring corporate shares to be sold for cash and not on installments or in exchange for property. Such an order deprives a person from acquiring securities unless he is possessed of sufficient cash to pay the full price. No objection is found to have been sustained on such ground.

The majority cite Krause v. Durbrow, 127 Cal. 681, 60 P. 438, in which a statute was declared void which contained provisions relating to the election of directors of a mining company which were different from those applicable to other corporations, on the ground that there was no natural or inherent distinction between a mining corporation and other corporations for profit. The right to engage in mining operations is a property right and like any other normal business is not subject to regulation under the police power. There is no property right in horse racing or in the operation of a horse racing enterprise. It is a limited privilege which the State may grant or withhold, and if granted it may be revoked. Having accepted the privilege from the State petitioner must abide by the conditions imposed as a condition for continuing to exercise it.

2. The petition for mandate and review was filed too late.

The proceeding to have the commissioner's order reviewed is barred by the provisions of either the Corporate Securities Act or the Administrative Procedure Act (Government Code, § 11500), whichever is applicable.

If the Corporate Securities Act is controlling, the petition to review the order of the Commissioner of Corporations denying the permit not having been filed within 60 days after the issuance of the order, the court was without jurisdiction to entertain the petition for mandate and review. (Corp. Sec. Act, sec. 15, 2 Deering's Gen.Laws, pp. 1418, 1429, Act No. 3814.) The order was made on July 19, 1948, and the petition for review was filed on November 9, 1948, 113 days having intervened.

If the provisions of the Administrative Procedure Act are applicable the petition for review was not filed within the time allowed thereby. The chronology of the proceedings is as follows, all dates being in 1948:

July 19. Commissioner's order denying permit signed and served on petitioner.

August 18. Last day on which reconsideration could be ordered. (Gov.Code, sec. 11521.)

August 27. Petitioner's request for preparation of transcript of administrative proceedings made to commissioner.

September 24. Commissioner notified petitioner's attorneys transcript had been prepared and was ready for delivery and its cost.

September 27. Above notification confirmed by letter.

November 3. Letter from petitioner's attorneys received by commissioner enclosing check to cover cost of record. (Letter is dated October 27.)

November 4. Transcript delivered to petitioner's attorneys.

November 9. Petitioner's petition and complaint to review commissioner's order served on commissioner and filed in superior court.

From July 19, the date the commissioner's order was served on petitioner, to November 9, when the petition for review was filed in the superior court, 113 days had elapsed. Under section 11523 of the Government Code judicial review under the Administrative Procedure Act may be had only if petition therefor is filed within 30 days after the last day on which reconsideration could be ordered (in this case August 18) ‘except as otherwise provided’ in that section. The exception is that if within 10 days after such last day for reconsideration the petitioner has requested the administrative agency to prepare the record, the time within which a petition for review may be filed is extended for five days after delivery of the record to the petitioner. (Gov.Code, sec. 11523.) That section also requires the agency to prepare and deliver the record to petitioner within 30 days after request therefor upon payment of the expense of its preparation and certification. Petitioner made timely request upon the commissioner for the preparation of the record. Within 30 days after such request was made the commissioner completed the transcript of the record and notified petitioner it was ready for delivery upon payment of its cost. Thus far each act leading toward a review of the proceeding was performed within the time prescribed by the statute.

Petitioner was notified orally on September 24 and in writing on September 27 that the transcript was ready for delivery. The five day period of extension of time for filing the petition for review must be construed to have commenced when petitioner was informed that the transcript had been completed. The record could have been delivered on September 24, or at the latest on September 27, but for petitioner's delay in paying for it. Payment was made by letter from its attorneys dated October 27 but not delivered to the commissioner until November 3. There is no explanation or justification of the delay in making payment of the cost of the transcript, nor is there an explanation of the lapse of seven days between the date of the letter and its delivery to the commissioner.

Petitioner maintains that since the petition for review was filed within five days after the transcript was actually delivered to its attorneys, notwithstanding the delay deliberately caused by petitioner, the requirements of the law have been fulfilled and appellant's plea of the statute of limitations must be rejected. Such contention is untenable. It is narrowly technical and is made without regard or consideration for the purposes of the statute and manifestly upon the theory that no one other than petitioner has an interest in the proceedings or in their termination.

To sustain petitioner's position would permit every person against whom a ruling is made by the commissioner to enact his own statute of limitations by the simple expedient of deferring payment of the cost of the transcript, thereby postponing the date of its delivery and correspondingly delaying the proceeding for review.

The policy of the statute as expressed in the limitation of time for petitioning for review is to ensure promptness in the judicial review of an administrative order and an early determination of its validity. The agency is entitled to know whether its order is final and whether or not it is to be enforced, and the applicant and all persons dependent upon or interested in the result of the proceedings are entitled to know whether to rely upon the administrative order as determinative of their rights, obligations and liabilities.

An applicant for relief under the statute cannot take advantage of his own failure to exercise diligence in paying the amount necessary to enable him to petition the court for review. It he may delay for 32 days he may delay for a longer period and there would be no limitation upon the time he may award to himself for initiating proceedings in court.

The argument that only petitioner and its stockholders could have been damaged by the delay and that the commissioner suffered no detriment or injury is no answer. In Myers v. Johnson, 89 Cal.App.2d 800, 201 P.2d 884, the plaintiff sought to recover taxes paid under protest. Obviously he was the only sufferer by a delay in the determination of the case since the defendant treasurer had the money and the plaintiff could not recover it save by a reversal of the judgment of the trial court. The plaintiff's appeal was dismissed for his failure to pay the cost of the reporter's transcript within the time prescribed by the rule on appeal. (Rule 4(c), 22 Cal.2d 3.) The reporter had advised him of the cost but he stood upon the letter of the rule and contended his time had not expired by reason of the failure of the clerk to notify him of what he already knew. The court, not moved by this contention, dismissed the appeal declaring that an applicant must exercise a reasonable amount of diligence to investigate any unwarranted delay by an officer of the court and take steps to see that legal duty is performed. A greater duty rested upon petitioner to proceed with expedition than upon the plaintiff in the Myers case since petitioner itself and not a public official caused the delay. In the instant case the commissioner was not at fault. He performed his duty promptly, prepared the record within the time prescribed by the statute and notified petitioner that it was ready for delivery upon payment of the cost. The delay rested solely on the latter in failing to pay the necessary fee.

To sustain petitioner's theory would be to amend by judicial legislation section 11523 of the Government Code to provide in effect that the time within which a petition for review may be filed is extended until five days after the applicant chooses to pay the cost of the transcript. I do not join in so assuming the prerogative of the Legislature.

The result would not be different should the commissioner, as suggested by petitioner, demand payment in advance for the transcript. In such case payment could be deferred indefinitely and the right to review would be preserved by the mere filing of a request for a transcript. Such a demand in this case would not have ensured prompt payment since petitioner could have delayed payment and thereby postponed preparation of the transcript. Demand by the commissioner for payment before the preparation of the record would not have caused petitioner, if its technical contention should be sustained, to have been any more expeditious in its payment or vigilant in the prosecution of its petition for review.

The issue under discussion was raised in the trial court by demurrer and was not waived, as suggested by petitioner, by the filing of appellant's answer at the same time. (Code Civ.Proc., sec. 472.)

The judgment should be reversed with directions to sustain the demurrer and to enter judgment in favor of defendant.

McCOMB, Justice.

MOORE, P. J., concurs.