Opinion
Rehearing Denied Dec. 5, 1930
Hearing Granted by Supreme Court Dec. 29, 1930.
Separate applications by J. Earl Jardine, by F.S. Baer and others, by W.R. Bacon and others, and by Robert E. Burns and others, for writs of prohibition prayed to be directed to the Superior Court of Los Angeles County.
Writs denied in part, and in part granted. COUNSEL
Loeb, Walker & Loeb and O’Melveny, Tuller & Myers, all of Los Angeles, for petitioners Jardine, Baer, Bacon, and others.
Bauer, Wright & Macdonald and Lyon, Fleming & Robbins, all of Los Angeles, Sloss & Ackerman, of San Francisco, and Hickcox & Thomson, of Los Angeles, for petitioners Burns and others.
Hewitt, McCormick & Crump and Joseph L. Lewinson, all of Los Angeles, for respondents.
OPINION
SCHMIDT, Justice pro tem.
One Arthur M. Loeb and others, as stockholders of Sunset Pacific Corporation, filed in the superior court of Los Angeles county an action, which will hereafter be referred to as the action, against one Jacob Berman, sometimes known as Jack Bennet, and many other defendants, including "Los Angeles Stock Exchange, a nonprofit and unincorporated association," which will hereafter be referred to as the exchange, which action was brought on behalf of Sunset Pacific Corporation as the assignee of the Julian Petroleum Corporation.
Except for a few members and ex-members of the Los Angeles Stock Exchange, who were joined as defendants to enforce against them a liability alleged to arise out of their individual participation in the acts forming the cause of action, not any of the members of the exchange were named as defendants either in the complaint or in the summons in said action. Following the commencement of the action, copies of summons and complaint were served upon the exchange and upon members and ex-members of the exchange. Thereupon the exchange, as such, and each of its members and ex-members upon whom service of summons had been had, including those who had been specifically named in the complaint, appeared specially in the respondent court for the sole purpose of moving that court for an order quashing such service. The hearing on said motions to quash were had in the respondent court upon affidavits and upon the constitution and by-laws of the exchange. Each of said motions were denied, whereupon petitions for writs of prohibition were filed in this court. To each of these petitions respondent court has filed a general demurrer in addition to filing an answer to the petition. By stipulation the four cases are consolidated in this court.
Whether liability of any character exists in favor of the plaintiffs in the action or any of them against the exchange or against any of the defendants actually named in the complaint and summons, or what the rights and duties between the members of the exchange and the exchange itself are, and, by reason thereof, whether there is any individual liability against the members, and like questions, must necessarily be matters of fact, and as such are to be determined by the trial court upon trial on the merits. We cannot in advance anticipate what facts will be found nor what judgment will be rendered.
The real question to be determined is: Did the respondent court obtain jurisdiction over the exchange as well as jurisdiction over the respective individuals? If so, then each petition should be dismissed, and, if not, then the writs should issue.
I. The motion to quash on behalf of the exchange was made upon the following ground and separately upon each of them: Said purported service was and is null and void, and of no force or effect; respondent court had no jurisdiction over the person of said defendant; that said exchange is not now and never has been an association engaged in the transaction of business under a common name or any name whatever within the meaning of section 388 of the Code of Civil Procedure; said exchange is not now and never has been an association composed of two or more individuals transacting business under a common name within the meaning of said section 388; that said section 388 is in violation of and obnoxious to section 1 of article 1 of the Constitution of the state of California, and of section 21 of article 1 of the Constitution of the state of California, and of section 1 of the Fourteenth Amendment to the Constitution of the United States.
Substantially the same grounds were set forth by the respective individuals in their respective motions to quash.
For the purpose of the motion to quash, if the affidavits show a conflict in evidentiary facts, then this court cannot disturb the finding of the lower court upon such contested facts. The determination of such contested facts by the respondent court is not subject to collateral attack by writ of prohibition. Lumas Film Corp. v. Superior Court, 89 Cal.App. 384, 264 P. 792.
The section 388 involved reads as follows: "When two or more persons, associated in any business, transact such business under a common name, whether it comprises the names of such persons or not, the associates may be sued by such common name, the summons in such cases being served on one or more of the associates; and the judgment in the action shall bind the joint property of all the associates, and the individual property of the party or parties served with process, in the same manner as if all had been named defendants and had been sued upon their joint liability."
In paragraph XXI of the complaint it is alleged: "Defendant Los Angeles Stock Exchange is now, and at all times as to it herein mentioned was, a voluntary and unincorporated association of sixty or more individuals, who were and are associated together in business and who transact and transacted such business under a common name." By the motion to quash, supported by affidavits, the exchange virtually asked the respondent court to determine that this allegation of fact so contained in the complaint was not true. A fact alleged in a complaint requiring a finding thereon in order to support a judgment cannot be made an issue upon a motion to quash service of summons. Such motion goes only to the jurisdictional fact of service; that is, whether the court has acquired jurisdiction of the person, and not to the merits of the case. Felton Water Company v. Superior Court, 82 Cal.App. 382, 256 P. 255. To ask a court to determine in advance such issue of fact merely because the particular case, as is claimed in this instance, is apt to be a protracted one and expensive to defend, is not sufficient reason for this court to interfere with a writ of prohibition. If same were to be permitted in this case, why not try any issue of fact upon a like motion to quash?
II. The individuals applying for writs fall into three groups: (a) Those sued in their individual capacity and so named in the complaint whether or not they were members of the exchange at the time of the alleged transactions; (b) those who were members of the exchange at the time of the transactions involved in the complaint who were not named as individual defendants either in the complaint or in the summons; and (c) those who were present members of the exchange, but not members at the time of the alleged transactions, and who were not named as defendants either in the complaint or in the summons.
As to those members who were made parties to the action by the allegations of the complaint, they are charged with the matters set forth in the complaint, and cannot as such defendants by a motion to quash have determined in advance of a trial on the merits any of the issues of fact, including that of their respective liabilities, if any.
The defendants in the other two groups are in a different situation. Although it is the peculiar province of the Legislature to determine procedure, it is nevertheless for the courts to determine whether the method prescribed by the Legislature actually brings a person before the court. There can be no doubt that by the amendment of 1907 to section 388 it was the intention of the Legislature to provide a method for the enforcement of a judgment had against an association where there was also individual liability of a member by reason of being such member of the association, to the end that the property of such member might be taken to satisfy such liability of such member. It is contended that, because section 416, Code of Civil Procedure, provides that, from the time of the service of summons and a copy of the complaint in a civil action, the court is deemed to have acquired jurisdiction of the parties and to have control over all the subsequent proceedings, by the service of a copy of summons and complaint against an association upon a supposed member that such member of the association thereby is made a party to the action and by such service acquires all the rights and duties given by section 430, Code of Civil Procedure, and other sections of the Code, to demur or answer as if he were actually named a defendant in the action. On the other hand, petitioners contend that such a procedure is violative of the constitutional provision prohibiting the taking of property without due process of law. In City of Los Angeles v. Oliver (Cal.App.) 283 P. 298, commencing at the bottom of page 308, we read:
"As applied to judicial proceedings, the phrase ‘due process of law’ imports an orderly proceeding adapted to the nature of the case in which a person is accorded an opportunity to be heard and to defend, enforce, and protect his rights. County of Santa Clara v. Southern Pacific Ry. Co. (C.C.) 18 F. 385. *** It means a process which, ‘following the forms of law, is appropriate to the case, and just to the parties to be affected. It must be pursued in the ordinary mode prescribed by the law; it must be adapted to the end to be attained; and wherever it is necessary for the protection of the parties, it must give them an opportunity to be heard respecting the justice of the judgment sought.’ Hagar v. Reclamation District, 111 U.S. 701, 4 S.Ct. 663, 667, 28 L.Ed. 569. It was undoubtedly the purpose of the framers of both constitutional guaranties to secure to every person a judicial trial according to the established rules of law, before he could be deprived of either life, liberty, or property. Cohen v. Wright, 22 Cal. 293, 318."
Section 407, Code of Civil Procedure, provides:
"The summons must be directed to the defendant, signed by the clerk, and issued under the seal of the court, and must contain:
"1. The names of the parties to the action, the court in which it is brought, and the county in which the complaint is filed;
"2. A direction that the defendant appear and answer the complaint within ten days, if the summons is served within the county in which the action is brought; within thirty days, if served elsewhere;
"3. A notice that, unless the defendant so appears and answers, the plaintiff will take judgment for any money or damages demanded in the complaint as arising upon contract, or will apply to the court for any other relief demanded in the complaint."
By the amendment of 1907 to section 388, under attack, a summons and complaint served upon individuals not named in the summons or complaint is not in harmony with subdivision 1 of section 407, Code of Civil Procedure, in that it does not name the parties to the action. Neither is it in harmony with subdivision 2 of said section, in that there is no direction whatsoever to the person so served to appear and answer, nor is he apprised what judgment, if any, is sought against him. The most that can be said is that he is informed that an action is pending against an association of which he may or may not in fact be a member at the time of the service of the summons. As was said in Coe v. Armour Fertilizer Works, 237 U.S. 421, 35 S.Ct. 625, 59 L.Ed. 1027, extra official or casual notice is not sufficient; the law must require notice to them and an opportunity to be heard.
It necessarily follows that the procedure thus provided by section 388 does not provide for any notice that is either real or reasonable.
After a careful examination of the authorities presented and in view of the matters herein expressed we find that, in so far as an association as an entity is concerned, section 388 is not in violation of section 1, article 1, or section 21 of article 1, of the Constitution of the state of California, or of section 1 of the Fourteenth Amendment of the Constitution of the United States. We are of a like opinion that the provisions of the section as applying to individuals named as defendants likewise is not unconstitutional. We are, however, equally satisfied that the provisions of section 388 in so far as a judgment may be rendered against a person not named in the summons or complaint, but merely by serving him with a copy of the summons and complaint, is unconstitutional.
In so far as the Los Angeles Stock Exchange and the respective individuals named in the complaint and summons are concerned, the writ is denied; and, in so far as the individuals not named in the complaint or summons are concerned, the writ is granted.
We concur: CRAIG, Acting P.J.; IRA F. THOMPSON, J.