In Re Sidebotham , 12 Cal. 2d 434 ( 1938 )

LANGDON, J.

Petitioner, after conviction and sentence for violation of certain provisions of the Real Estate Act, secured a writ of habeas corpus from the District Court of Appeal, and after a favorable decision in said court, was ordered discharged. Respondent sheriff then sought a hearing in this court. The sole issue before us is the constitutionality of the regulation of subdivisions under the terms of said act. (Deering’s Gen. Laws, 1937, Act 112, sec. 20 et seq.)

Section 20a of the act provides that prior to the time when subdivided lands are offered for sale or lease, the owner, his agent or subdivider shall notify the real estate commissioner in writing of his intention to sell, and in such notice shall give the name and address of the owner and the subdivider; description and area of the land; true statement of the condition of the title, particularly including all encumbrances; the terms or conditions on which it is intended to dispose of the land; and copies of contracts intended to be used. The commissioner may require “such additional information concerning the project as he may deem necessary”, and may prepare a questionnaire to be answered. Section 20b authorizes the commissioner at the expense of the owner, his agent or subdivider, to investigate any subdivision offered for sale or lease and make public his findings. Section 20e provides that the commissioner may issue an order prohibiting the sale or lease of the property if his examination shows that the sale or lease “would constitute misrepresentation to or deceit or fraud of the purchasers of lots or parcels in such subdivision”. This examination is followed by a public report (sec. 20e), and before any prohibitory order, a hearing must be held (see. 20f). After the project has been submitted to the real estate division, no material changes may be made without first notifying the division (sec. 20g). If the land is subject to a lien or encumbrance, provision must be made enabling the vendor to deliver title to each parcel sold free of such lien or encumbrance, upon completion of performance by the purchaser. (Sec. 20h.) For the purpose of the act, “subdivision” is defined as “land or lands divided or proposed to be divided for the purpose of sale or lease, whether immediate or future, into five or more lots or parcels”. (See. 20j.) Violation of these sections is made punishable by imprisonment in the county jail for not exceeding two years, or a fine not exceeding $2,000, and by suspension or revocation of a real estate broker's license. (Sec. 20l.)

Petitioner pleaded guilty to a charge of subdividing and offering for lease and sale certain land in Solano County without first notifying the commissioner, in violation of the terms of section 20a, supra. Sentence of imprisonment in the county jail for one year was pronounced, and habeas corpus was then sought on the ground that the law is invalid. It is contended that these sections are unconstitutional in that they place unreasonable burdens on the exercise of property rights, and that they are vague and uncertain. In our opinion these contentions are not sound.

The assertion that this is not valid police power legislation because it benefits only a special class, the purchasers and lessees of subdivided real estate, and not the whole public, is without substance. The police power may be, and usually is, exercised for the purpose of protecting particular classes of the public in need of such protection, and it is rare indeed that a single law includes everyone in the scope of its regulations. The object of the present law, prevention of fraud and sharp practices in a type of real estate transaction peculiarly open to such abuses, is obviously legitimate; and the method, involving investigation and disclosure of certain essential facts, and a protection for the innocent purchaser against loss of his land by foreclosure of the underlying mortgage, is perfectly reasonable.’ A safeguard against arbitrary action is provided in the requirement of a public report of the commissioner’s investigation and a public hearing on any contemplated prohibitory order. The decisions sustaining regulatory legislation to prevent fraud are numerous, and they fully support the law herein attacked. Particularly in point are People v. Craven, 219 Cal. 522 [27 Pac. (2d) 906], upholding the provisions of the Corporate Securities Act requiring an individual to secure a permit for the issuance of “certificates of interest”; and Wholesale Tobacco Dealers Bureau v. National Candy & Tobacco Co., 11 Cal. (2d) 634 [82 Pac. (2d) 3, 118 A. L. R. 486], upholding the California Unfair Practices Act. (See, also, Hall v. Geiger-Jones Co., 242 U. S. 539 [37 Sup. Ct. 217, 61 L. Ed. 480, Ann. Cas. 1917C, 643, L. R. A. 1917F, 514], on corporate securities acts; Riley v. Chambers, 181 Cal. 589 [185 Pac. 855, 8 A. L. R. 418], upholding the California Real Estate Brokers’ License Act.; Gregory v. Hecke, 73 Cal. App. 268 [238 Pac. 787], sustaining the statute preventing adulteration, false labeling or fraud in sale of germicides used for plant pests; Pacific Coast Box & Basket Co. v. White, 296 U. S. 176 [56 Sup. Ct. 159, 80 L. Ed. 138, 101 A. L. R. 853], upholding law regulating size and shape of berry containers; and many other authorities reviewed in the above decisions.)

Petitioner relies on People v. Pace, 73 Cal. App. 548 [238 Pac. 1089], wherein it was held that a provision of the Corporate Securities Act regulating the sale by an individual of securities personally owned, and not issued or underwritten by him, was an unconstitutional restriction on his right to dispose of property. We need not here consider the extent to which the Pace case has been limited by the opinion in People v. Craven, supra (see 22 Cal. L. Rev. 341), except to point out that the present legislation falls within the principles laid down in the Craven case. There the subject-matter was securities, individually owned, but issued by the defendant, and this latter fact furnished the basis for valid regulation. Here, the owner or subdivider, initiating the project, is in somewhat the same position. But a more conclusive answer to the Pace case is that the present statute requires no permit for the sale, but merely the giving of certain information to prevent fraud and oppression against lot purchasers, and this requirement, as we have already stated, is a reasonable one.

Petitioner contends that section 20j, defining “subdivision”, is arbitrary and indefinite, and also attacks the act for failure to define “misrepresentation” or “fraud”. We find no uncertainty in these terms. The legislature must necessarily choose some point at which the sale of parcels from a large tract gives rise to the possible evils which require regulation, and we cannot say that the determination of five lots is improper. And the terms “fraud” and “misrepresentation” are commonly understood and fully defined judicially.

It is also suggested that unfair or discriminatory action is permitted by the delegation of powers to the commissioner, but since nothing of the sort was alleged to have been done in the instant case, there is no such issue before us now.

The writ is denied, and petitioner is remanded to custody.

Curtis, J., Shenk, J., Seawell, J., and Waste, C. J., concurred.