Opinion
Rehearing Denied Oct. 25, 1928.
Hearing Granted by Supreme Court Nov. 22, 1928.
Appeal from Superior Court, City and County of San Francisco; Walter Perry Johnson, Judge.
Action by the Welsbach Company against the State and others to recover taxes. Judgment of dismissal, and plaintiff appeals. Affirmed. COUNSEL
A. A. Sanderson, of San Francisco, for appellant.
U.S. Webb, Atty. Gen., and Frank L. Guerena, Deputy Atty. Gen., for respondents.
Gaylord & Smith, of San Francisco, amici curiæ .
David Livingston, of San Francisco, amici curiæ in behalf of appellant.
OPINION
KNIGHT, Acting P. J.
During the years 1926 and 1927 appellant, a foreign corporation organized and existing under the laws of New Jersey, paid license taxes to the state of California, under protest, which were imposed and collected pursuant to the provisions of section 3 of the Corporate License Act of California, enacted in the year 1915, and the several subsequent acts amendatory and supplementary thereto. Deering’s General Laws 1923, Act 1743, p. 548. Subsequently, in March, 1927, the Supreme Court of this state, in conformity with certain decisions of the Supreme Court of the United States construing similar acts of other states, declared those portions of the California Corporate License Act under the authority of which said taxes had been imposed and collected to be unconstitutional, it being held that the same were violative of the commerce clause of and the Fourteenth Amendment to the Constitution of the United States. Perkins Manufacturing Co. v. Jordan, 200 Cal. 667, 254 P. 551. Thereupon appellant brought this action against the state of California, its secretary of state, and state treasurer to recover the taxes so paid, amounting to $1,100. The complaint contained three counts. In two of them appellant set forth the particular circumstances under which said taxes were paid; and the third was a common count in assumpsit for money had and received. Respondents interposed a demurrer to the complaint and to each cause of action set forth therein upon the grounds that the same did not state facts sufficient to constitute a cause of action and that the court had no jurisdiction of the parties or the subject of the action. The demurrer was sustained with leave to amend, but appellant declined to amend and judgment of dismissal was entered, from which judgment this appeal has been taken.
The basic legal principle that a state, being deemed in law a sovereign, cannot be sued without its consent, has been modified in this state by the Constitution wherein it provides that suits may be brought against the state in such manner and in such courts as may be directed by law (section 6, art. 20, Const. of Cal.); and pursuant to the authority thus granted the Legislature of this state in 1893 enacted a statute providing in part as follows:
"All persons who have, or shall hereafter have, claims on contract or for negligence against the state not allowed by the State Board of Examiners, are hereby authorized, on the terms and conditions herein contained, to bring suit thereon against the state in any of the courts of this state of competent jurisdiction, and prosecute the same to final judgment." Stats. 1893, p. 57. (Italics ours.)
The substance of appellant’s contention here is that the demand it is suing upon constitutes a claim on contract within the meaning of said statute, and therefore is one upon which recovery may be had thereunder. In a previous case involving the construction of said statute it was held that when an action is brought against the state thereunder "the allegations of the complaint should aver such facts as show distinctly an authorized contract." Melvin v. State, 121 Cal. 16, 53 P. 416. (Italics ours.) Nowhere in the complaint in the present action is it alleged nor does appellant claim that the state ever entered into any contractual relationship with reference to a refund of said taxes; nor is it contended that there is any legislative act imposing upon the state an obligation to surrender money collected under a statute subsequently declared unconstitutional; but appellant argues that the term "claims on contract"as employed in the act of 1893 should be construed to include any equitable demand enforceable as an implied contract, and that since the action herein is one to recover taxes paid to the state under protest pursuant to the provisions of void statute, it is in effect an action based upon an implied contract, and therefore may be maintained against the state on a common count in assumpsit for money had and received.
The right of a foreign corporation to recover from the state corporate taxes involuntarily paid pursuant to the Corporate License Act preceding the act of 1915, and which was also declared unconstitutional, was the question considered in the case of McClellan v. State of California, 35 Cal.App. 605, 170 P. 662; and it was there held that without the consent of the state to bring such an action it could not be maintained, the court saying:
"There is not now, nor has there ever been, any statute of this state authorizing any one to institute against the state, or any of its officers, an action for the recovery of any fee or sum of money of the character here involved."
But, continuing, the court said:
"The only statute permitting the institution of such suits is the act of February 28, 1893 (Stats. 1893, p. 57). This statute authorizes actions against the state by ‘all persons who have, or shall hereafter have, claims on contract or for negligence against the state not allowed by the state board of examiners.’ This action is admittedly neither an action on contract nor because of negligence, but counsel for appellant claims his right of action has foundation irrespective of any permissive act," etc.
Respondents assert that the decision in that case is determinative of this action, but appellant contends that notwithstanding the action there was similar in its nature to the one here, the language of the decision shows that the case was tried and decided on a theory foreign to the issue of the application of the provisions of the statute in 1893, and that therefore the decision in that case is not conclusive of the present action.
Aside, however, from the question as to whether the decision in that case is determinative of the present action, we are of the opinion that the nature of the demand here sued upon does not come within the purview of the statute of 1893, because obviously there is no contractual relationship involved in the transactions pleaded in the complaint, which we believe must exist before the remedy granted by the statute may be invoked. It may be stated generally in this connection that the law of contracts makes a clear distinction between "genuine" or "true" contracts, or "contracts implied in fact" as they are sometimes called, that is, engagements which are conceived in and founded upon the intention and will of the parties to be bound thereby, and so-called "quasi" or "constructive" contracts, or "contracts implied in law," as they are sometimes referred to, which, as will appear from the authorities hereinafter cited, are in no sense contracts and have none of the fundamental elements thereof, but, on the contrary, are mere fictions of law depending for their legal existence, not upon the assent of the party sought to be bound, but alone upon equitable principles out of which the law fashions an obligation and imposes the same upon a party irrespective of the fact that he has not assented to it and in most cases has expressly dissented therefrom. Admittedly, appellant’s demand belongs to the latter class, and, therefore, being entirely destitute of any contractual element, cannot be said to constitute such a "claim on contract," as was contemplated by the Legislature in the enactment of said statute.
The distinction above mentioned is clearly pointed out by Professor Keener in his work on Quasi Contracts, wherein he states that the treatment of quasi contracts in the same class with express contracts and contracts implied in fact "is not only unscientific, and therefore theoretically wrong, but is also destructive of clear thinking, and therefore vicious in practice." Continuing, he says:
"It needs no argument to establish the proposition that it is not scientific to treat as one and the same thing, an obligation that exists in every case because of the assent of the defendant, and an obligation that not only does not depend in any case upon his assent, but in many cases exists notwithstanding his dissent. And yet with this wide difference between simple contracts and quasi contracts, the latter are generally treated today as a species of simple contract. *** A true contract *** exists as an obligation, because the contracting party has willed, in circumstances to which the law attaches the sanction of an obligation, that he shall be bound. Had he not so willed, he would not be under a contractual obligation. This statement is as true of a contract implied in fact as of an express contract. Indeed the division of simple contracts into ‘express contracts’ and ‘contracts implied in fact’ does not involve a consideration of the principles of contracts at all. In the case of a contract implied in fact, as much as in the case of an express contract, the plaintiff must prove that the defendant either made or accepted an offer which resulted in a promise on the defendant’s part, and that the promise was not only in fact made, but that a sufficient consideration was given therefor. If the defendant gave in words a promise containing all the terms of the contract which the plaintiff claims that he made, for a consideration expressly requested in words by him, in exchange therefor, then the contract is an express contract. *** The terms, ‘express contracts’ and ‘contracts implied in fact,’ are used, then, to indicate not a distinction in the principles of contract, but a difference in the character of the evidence by which a simple contract is proved. The source of the obligation in each case is the intention of the parties. The term ‘contract implied in law’ is used, however, to denote, not the nature of the evidence by which the claim of the plaintiff is to be established, but the source of the obligation itself. It is a term used to cover a class of obligations where the law, though the defendant did not intend to assume an obligation, imposes an obligation upon him, notwithstanding the absence of intention on his part, and in many cases in spite of his actual dissent."
The learned author then quotes from Maine on "Ancient Law," wherein it is said that:
It is an error to identify quasi contracts with implied contracts, "for implied contracts are true contracts which quasi contracts are not. In implied contracts, acts and circumstances are the symbols of the same ingredients which are symbolized, in express contracts, by words; and whether a man employs one set of symbols or the other must be a matter of indifference so far as concerns the theory of agreement. But a quasi contract is not a contract at all. The commonest sample of this class is the relation subsisting between two persons, one of whom has paid money to the other through mistake. The law, consulting the interests of morality, imposes an obligation on the receiver to refund; but the very nature of the transaction indicates that it is not a contract, inasmuch as the convention, the most essential ingredient of contract is wanting." Keener on Quasi Contracts, pp. 3 to 5.
In a later treatise on the subject of quasi contracts, Professor Woodward asserts that the persistent refusal to observe the essential dissimilarity of the two obligations "has resulted in confusion and error, and in many cases has wrought serious injustice"; and, continuing, he says:
"It cannot be too strongly emphasized, therefore, that quasi contracts are in no sense genuine contracts. The contractor’s obligation is one that he has voluntarily assumed. He is bound because he has made a promise or undertaking that the law will enforce. And the only difference between an express contract and a contract implied in fact is that in the former the promise or undertaking is verbal, while in the latter it is an implication of the promisor’s conduct. But quasi contractual obligations are imposed without reference to the obligor’s assent. He is bound, not because he has promised to make restitution-it may be that he has explicitly refused to promise-but because he has received a benefit the retention of which would be inequitable." Woodward on Law of Quasi Contracts, sec. 4.
One of the earlier cases supporting the text above quoted is Hertzog v. Hertzog, 29 Pa. 465, cited in County of San Luis Obispo v. Gage, 139 Cal. 398, 73 P. 174, which will be hereinafter more particularly referred to. There the Supreme Court of Pennsylvania, speaking through Mr. Justice Lowrie, said:
"There is some looseness of thought in supposing that reason and justice ever dictate any contracts between parties, or impose such upon them. All true contracts grow out of the intentions of the parties to transactions, and are dictated only by their mutual and accordant wills. When this intention is expressed, we call the contract an express one. When it is not expressed, it may be inferred, implied, or presumed, from circumstances as really existing, and then the contract, thus ascertained, is called an implied one."
And then, after referring to that class of obligations created by law, not by act of the parties, the decision continues:
"The latter class are merely constructive contracts, while the former are truly implied ones. In one case the contract is mere fiction, a form imposed in order to adapt the case to a given remedy; in the other it is a fact legitimately inferred. In one, the intention is disregarded; in the other, it is ascertained and enforced. In one, the duty defines the contract; in the other, the contract defines the duty."
The distinction is also noted in People ex rel. Dusenbury v. Speir, 77 N.Y. 144, wherein the court says:
"There is a class of cases where the law prescribes the rights and liabilities of persons who have not in reality entered into any contract at all with one another, but between whom circumstances have arisen which make it just that one should have a right, and the other should be subject to a liability similar to the rights and liabilities in certain cases of express contract. Thus, if one man has obtained money from another, through the medium of oppression, imposition, extortion, or deceit, or by the commission of a trespass, such money may be recovered back, for the law implies a promise from the wrongdoer to restore it to the rightful owner, although it is obvious that this is the very opposite of his intention. Implied or constructive contracts of this nature are similar to the constructive trusts of courts of equity, and in fact are not contracts at all."
Bearing in mind, therefore, the well-established principle of jurisprudence heretofore referred to that a state may not be sued without its consent, it becomes evident, we think, that when the Legislature in 1893, by statute, relaxed said principle by consenting that the state be sued upon "claims on contract," it contemplated giving its consent to be sued only on that class of contracts to which the state had consented to become a party, and, so far as this phase of the statute is concerned, intended to restrict the remedy granted therein to claims arising out of genuine or true contracts; in other words, to conventions which the state had voluntarily entered into with the intention of being bound thereby.
It is of course conceded that, as applying to individuals, the doctrine of the enforcement of quasi or constructive contracts has received recognition in this state, as in others; but we are of the opinion that until the Legislature by statute expressly declares that as against a sovereign a recovery may be had on that class of demand, the character of action here instituted cannot be maintained. The state of Indiana has such a statute. It reads as follows: "That any person or persons having or claiming to have a money demand against the state of Indiana, arising at law or in equity, out of contract express or implied, *** may bring suit against the state therefor. ***" Burns’ Ann. St. 1908, § 1485. And consequently in the case of State v. New York Mutual Life Ins. Co. (175 Ind. 59) 93 N.E. 213, 42 L. R. A. (N. S.) 256, it was held that the terms of that act included quasi contracts or contracts implied in law of the kind here sued upon. But a comparison of the terms of the Indiana statute with those of our own clearly demonstrates that if the Legislature of this state had intended to extend the operation of its statute to cover not only such contracts as the state itself might make, but also those which the courts, by fiction of law, might make for it, the language of our statute, like that of the statute in Indiana, would surely have been made broad enough to indicate such intention; and the fact that a statute of limited meaning was adopted may be taken, we think, as a clear manifestation of a purpose to exclude from its operation the class of demands here sued upon.
Moreover, whenever the statute of 1893 has been brought before the Supreme Court for interpretation in relation to transactions different from the one now under consideration, the language employed by the court in dealing with the subject fairly indicates, we believe, that the construction we have placed upon the statute is the proper one. For instance, in the case of County of San Luis Obispo v. Gage, supra, which was an action instituted by the county against the state to recover money paid by the county for the maintenance of orphans, half orphans, and abandoned children pursuant to the terms of a statute enacted in 1880 (Stats. 1880, p. 13), the decision in favor of the county was placed upon the ground that the state, by virtue of the terms of said act, had "in effect promised to each county in the state that if it should thereafter maintain and support persons of a class mentioned in the act, the state would appropriate and pay to such county the sums of money therein stated. This," the Supreme Court said, "was the equivalent of an offer upon condition, and upon the performance of the condition by any county the offer became a promise, and binding as such upon the state"; and therefore it was held that the liability sued upon was contractual, the court saying, "Contracts may be made or evidenced by a statute, and by conduct ensuing thereupon, as well as by other means or evidence," and that money accruing under such contracts was recoverable in actions in assumpsit unless some other remedy was expressly provided. It will be observed, therefore, that the case was decided upon the theory of a genuine contract having been entered into by the state, that is, one having its source in the consent of the state, expressed through the medium of a statute, to be bound thereby. But in so deciding the court was careful to differentiate genuine contracts from so-called quasi contracts or contracts implied in law such as we have here, for with respect to the latter the court said:
"It is not necessary to decide, and we do not wish to be understood to hold, that the act of 1893 is to be construed to mean that an action may be maintained against the state in every case where an action of assumpsit would lie at common law. There were many cases where assumpsit was allowed, although there was in fact no contract made, nor any dealings whatever between the parties, the law implying a contract out of necessity, and because without such fictitious creation none of the legal forms of action would apply and the party would be remediless. There is a clear distinction between such a case and one where the making of a contract or agreement is implied, as a matter of evidence. Hertzog v. Hertzog, 29 Pa. 465. There might be strong reasons in favor of the proposition that the Legislature, in referring to ‘claims on contract,’ meant real contracts, not fictitious ones. Melvin v. State, 121 Cal. 23 (53 P. 416)."
Again, in the case of Melvin v. State, supra, wherein the court declined to apply the provisions of the statute of 1893 to a case of negligence, it was said with reference to their applicability to cases of contracts:
"*** The allegations of the complaint should aver such facts as show distinctly an authorized contract." (All italics ours.)
The only inference which can be reasonably drawn from the word "authorized" as there used is that the court meant such contracts as had their inception in the will of the state to be bound thereby.
The case of Chapman v. State, 104 Cal. 690, 38 P. 457, 43 Am. St. Rep. 158, upon which appellant seems to rely to sustain its position, is not in conflict with the two foregoing cases, nor is it out of harmony with the interpretation we have given the statute. There the state, through its board of harbor commissioners, acting under the express authority of statute, engaged in the business of a wharfinger, and as such entered into a contract of bailment with plaintiff’s assignor. The personal property which was the subject of the contract of bailment was destroyed as the result of the alleged negligence on the part of the state’s agents, and an action was brought against the state to recover the value of the property. It was held, first, that under the law of bailments a wharfinger was bound by his contract to return or deliver the goods, and that for a negligent loss of the same he was liable for a breach of contract, enforceable at common law by an action in assumpsit and under our practice by the owner or the consignee in an action upon the contract for damages sustained by reason of such negligence; secondly, that since the state had voluntarily engaged in the business of a wharfinger under the authority of law and as such had entered into a contract of bailment "it was bound thereby to the same extent as a private person engaged in conducting the business of a wharfinger would be under a similar contract." It will be seen, therefore, that in that case the liability thus fastened upon the state arose out of a genuine or true contract voluntarily entered into by the state for the bailment of the private personal property, and that such liability was in no manner identified with the class of obligation here involved. And in the case of County of Alameda v. Chambers, 35 Cal.App. 537, 170 P. 432, the court, in giving its interpretation of the effect of the decisions in Chapman v. State, supra, and Melvin v. State, supra, said, with reference to the point at issue here, that the principle that the state is bound by the same rules as an individual in measuring its liability on a contract "necessarily presupposes a valid contract with the state."
The recent cases of Great Northern Ry. Co. v. State of Washington (Wash.) 267 P. 506, and Badger v. Crockett (Utah) 259 P. 921, cited to us by amicus curiæ in support of appellant’s theory herein, do not touch the point at issue here. Both involved only the constitutionality of the corporate license acts of those states, and the question of the right to sue the state for a return of the taxes was not raised in either case, presumably for the reason that the plain terms of the remedial acts of those states, which are far broader and much more comprehensive than those of our statute of 1893, placed that question beyond doubt.
Under the ruling in Hartford Fire Ins. Co. v. Jordan, 168 Cal. 270, 142 P. 839, the cause of action attempted to be stated against the secretary of state and state treasurer will not lie. As to them, also, therefore, the demurrer was properly sustained.
The judgment is affirmed.
We concur: CASHIN, J.; PARKER, Justice pro tem.