Cook v. W. S. Ray Manufacturing Co.

The defendant in this action is a California corporation having its principal place of business in the city and county of San Francisco. The action was commenced in the county of Santa Clara to recover damages for breach of warranty of the quality and fitness of certain galvanized sheet iron which it was alleged was sold and delivered by the defendant to the plaintiff in said county of Santa Clara. The defendant demurred to the complaint and at the same time filed its demand, affidavits, and motion for an order changing the place of trial to said city and county of San Francisco, "where said defendant resides and has its principal place of business." This is an appeal from the order denying that motion, and involves a consideration of our constitutional and code provisions relating to the place of trial of those civil actions, in which our domestic corporations are defendants. By section 395 of the Code of Civil Procedure it is provided that all actions (with certain exceptions, among which the present does not fall) must be tried in the county in which the defendants or some of them reside. It has been frequently held in this state that a corporation resides at its principal place of business, and if the rights of the parties depended upon the statute alone the order denying the motion of defendant could not be upheld. But by section 16 of article XII of the constitution it is provided that:

"Sec. 16. A corporation or association may be sued in the county where the contract is made or is to be performed, or where the obligation or liability arises, or the breach occurs; or in the county where the principal place of business of such corporation is situated, subject to the power of the court to change the place of trial as in other cases."

And this has been held to mean, not merely that an action against a corporation may, at the option of the plaintiff, be commenced in one of the designated counties other than the one in which the defendant has its principal place of business, but that it may be prosecuted to final judgment where commenced unless the defendant can allege and show some sufficient ground for a change of the place of trial distinct from the fact that the residence of the corporation is in another county.(Terezevant v. Strong Co., 102 Cal. 49, [36 P. 395]; Miller Lux v. Kern County Land Co., 134 Cal. 589, [66 P. 856].) So far as the construction of the constitution and statutes of California is concerned the doctrine of these cases has never been questioned, except possibly in Grocers' Union v. Kern CountyLand Co., 150 Cal. 466, [89 P. 120], but it is here contended that the constitutional provision above quoted, as construed by this court, excludes our domestic corporations from the benefit of a statutory right conferred upon all natural persons resident of the state, and is for that reason violative of the fourteenth amendment of the constitution of the United States, and whether this is so or not is the sole question to be decided.

It is true that the appellant urges the objection that the complaint does not show that the breach of contract alleged therein occurred in Santa Clara County, but we have no doubt that it does.

It is also contended by the respondent that the punctuation of section 16 of article XII of the constitution, requires a construction which would allow a corporation to move for a change of the place of trial only when the action has been commenced in the county of its principal place of business. We do not consider this the proper construction of the section, and do not see how such construction would affect the disposition of the present appeal. If the main feature of said section as construed in the cases above cited is violative of the fourteenth amendment of the federal constitution no construction of its final clause could save it, and if it is not violative of the fourteenth amendment, the construction contended for is of no consequence in this case. Aside from these minor questions, thus briefly considered, all that we have to decide in this case is, as above stated, whether section 16 of article XII of the constitution of California, as heretofore construed, is, in its application to transitory actions, such as this, violative of a right secured to our domestic corporations by the fourteenth amendment to the federal constitution. To sustain its contention on this point the appellant relies principally upon the decision of this court in the case of Grocers' Union v. Kern County Land Co., 150 Cal. 466, [89 P. 120]. That case does clearly overrule our unanimous decision in Miller Lux v. Kern County Land Company, as the case was presented on the first appeal. (134 Cal. 586, [66 P. 856].) It is perhaps not in conflict with the point actually decided on the second appeal of the Miller Lux case — though the correctness of the first decision was there assumed. In neither of those cases, however, was the point suggested or considered, upon which the decision in the Grocers' Union case turned, and upon which the appellant here claims a reversal of the order denying its motion for a change of the place of trial. In that case for the first time we were asked to consider the bearing of our code provisions as to venue upon section 16 of article XII of our constitution, as affected by the fourteenth amendment, and it was there decided, in effect, that our legislature by section 392 of the Code of Civil Procedure has declared it to be the permanent policy of the state that certain actions based on claims of interest in, or damages to, real property must be tried in the county where the land is situate, that the right conferred upon landowners by this provision is a substantial and valuable privilege, that there is no imaginable reason why corporations owning lands within the state should be denied a right common to all other landowners, and therefore that the effect of such denial is to deprive them of the equal protection of the laws, contrary to the inhibition of the fourteenth amendment. It is here contended that by section 395 of the Code of Civil Procedure it is declared to be the permanent policy of the state that in a large class of actions, including the present case, the trial must be in the county where the defendant or some of the defendants reside, that the privilege is a valuable one, and that there is no reason for excluding our domestic corporations from its advantages. If there is a flaw in this reasoning it consists in ignoring the essential difference between real and quasi real actions, and those personal actions covered by the terms of section 16 of article XII of the constitution — the class of actions which the debates in the constitutional convention prove that the members had in mind when considering and adopting said section. It was notorious at that time that nearly all of the California corporations had designated San Francisco as their principal place of business, and that while they had offices in San Francisco where their books and accounts were kept, their stocks transferred and their directors' meetings held, they were operating mines and factories, and making contracts to be performed in distant parts of the state, that the nature of their business must necessarily involve them in frequent litigation arising out of torts and breaches of contract, that if all such cases must be tried in San Francisco the business of the local courts would be congested, that there would be unreasonable and unnecessary delay in bringing contested cases to trial, and the complaining parties often subjected to ruinous expense in prosecuting their claims. These considerations, none of which affect the class of cases provided for in section 392 of the Code of Civil Procedure, were deemed by the framers of our constitution sufficiently important to justify the discrimination which they made between corporations and natural persons as to the venue of personal actions, and so it seems to us, at least so far as it affects actions for breaches of contracts, damages for personal injuries, and the like. And here lies the distinction between this case and Grocers' Union v.Kern County Land Co. In that case it was found that there was no conceivable reason for any discrimination between corporations and natural persons as to the privilege of being sued only in the county where the land affected was situate. Here it appears that there were at the time our constitution was adopted weighty considerations justifying the discrimination as to actions arising out of breach of contract. The same conditions which prevailed at that time still continue, though modified to some extent by the fact that other places outside of San Francisco are now the principal places of business of many large corporations formed since the adoption of the constitution, which, however, may be held to have accepted as one of the conditions of their corporate existence the particular provision of our constitution here in question. If the views above stated are correct this case is governed by the principle affirmed in Cincinnati St. RailwayCo. v. Snell, 193 U.S. 30, [24 Sup. Ct. 319, 48 L. Ed. 604] — the principle, that is to say, that the fourteenth amendment safeguards only fundamental rights, and not the mere form which the state may deem proper for their enforcement. That was a case involving a discrimination made by a statute of the state of Ohio between corporations and natural persons as to the venue of personal actions, and the statute was upheld by the supreme court of the United States without any dissenting opinion.

The order of the superior court is affirmed.

Angellotti, J., Shaw, J., Sloss, J., Lorigan, J., Henshaw, J., and Melvin, J., concurred.

Case Details

Case Name: Cook v. W. S. Ray Manufacturing Co.

Court Name: California Supreme Court

Date Published: Apr 10, 1911

Citation: 115 P. 318

Docket Number: S.F. No. 5151.

Court Abbreviation: Cal.