Bailey v. Fosca Oil Co.

• Decision Date: 03 June 1963
• Citation: 31 Cal.Rptr. 380,216 Cal.App.2d 813
• Court: California Court of Appeals Court of Appeals
• Parties: John B. BAILEY and Bailey & Co., a co-partnership, Plaintiffs and Appellants, v. FOSCA OIL CO., Ltd., a foreign corporation, etc., et al., Defendants and Respondents. Civ. 199.

Page 380

31 Cal.Rptr. 380

216 Cal.App.2d 813

John B. BAILEY and Bailey & Co., a co-partnership, Plaintiffs and Appellants, v. FOSCA OIL CO., Ltd., a foreign corporation, etc., et al., Defendants and Respondents.

Civ. 199.

District Court of Appeal, Fifth District, California.

June 3, 1963.

Hearing Denied July 31, 1963.

Burke & LaRue and Annette LaRue, Lawrence W. Young and Robert L. Young, Fresno, for plaintiffs and appellants.

Rowell, Lamberson & Thomas and Edwin H. Hiber, Fresno, for defendants and respondents.

STONE, Acting Presiding Justice.

This is an appeal from an order in a stockholders' derivative action staying proceedings as to the first and second causes of action until ten days after determination of a motion pursuant to Corporations Code section 834(c) to require plaintiffs to furnish security as to the third cause of action.

The issues presented by this appeal should never arise again since they represent ramifications emanating from an appeal from an order that has since been held to be nonappealable. The original appeal, Bailey v. Fosca Oil Co., 180 Cal.App.2d 289, 4 Cal.Rptr. 474 (hearing denied by Supreme Court), was from an order denying defendants' motion to require plaintiffs to furnish security in a stockholders' derivative action (Corp.Code § 834). Following that decision, such orders were held to be nonappealable by the case of Efron v. Kalmanovitz, 185 Cal.App.2d 149, 157, 8 Cal.Rptr. 107 (hearing denied by Supreme Court.)

The first Bailey v. Fosca opinion, having been decided prior to Efron, became the law of this case, and the effect of that opinion was to disjoin the first and second causes of action from the third cause of action. This result was pointed out in Bailey v. Fosca Oil Co., 211 A.C.A. 375, 27 Cal.Rptr. 454 (hearing denied by Supreme Court), a motion to dismiss this appeal. We there held that the prior Bailey case by affirming the order of the trial court denying defendants' motion as to the first and second causes of action and by remanding the third cause of action to the trial court with instructions to reconsider that cause of action only, removed the first and second causes of action from the operation of section 834 of the Corporations Code.

Plaintiffs first contend that the opinion in Efron v. Kalmanovitz, supra, renders the opinion in Bailey v. Fosca, supra, 180 Cal.App.2d 289, 4 Cal.Rptr. 474, a nullity, since that appeal was taken from a nonappealable order. Plaintiffs who make this contention were respondents in the first Bailey case and did not there challenge the jurisdiction of the court nor the appealability of the order. The reason was, perhaps, that no statute nor constitutional provision specified an order denying motion for security under Corporations Code section 834 as a nonappealable order, nor was there at that time any case law so holding. It was not until some time later when the Efron case was decided that the nonappealability of such an order became established by decisional law.

We do not agree with plaintiffs that the subsequent holding in the Efron case retroactively nullified the first Bailey opinion in which the appellate court considered the merits of the trial court's order pursuant to Corporations Code section 834.

In discussing the legal principles governing the so-called 'law of the case' as established by a prior appeal, the Supreme Court said in Gore v. Bingaman, 20 Cal.2d 118, at pages 120-121, 124 P.2d 17, at page 19:

'The issue sought to be raised upon this appeal, however, is no longer open for determination in this case. Although it may have been decided erroneously, the question whether the present action is legal in nature and properly appealable directly to the district court of appeal is one which was determined by that court upon the prior appeal. As the court said in Clary v. Hoagland, 6 Cal. 685, 688: 'The first point decided by any Court, although it may not be in terms, is, that the Court has jurisdiction, otherwise it would not proceed to determine the rights of the parties.' See, also, Scrimsher v. Reliance Rock Co., 1 Cal.App.2d 382, 393, 36 P.2d 688. Where a question of law once determined is sought to be relitigated upon a second appeal to the same appellate court it is clearly established that the first determination is the law of the case and will not be re-examined in the absence of unusual circumstances leading to injustice or unfairness even though the issue sought to be raised involves the jurisdiction of the court on the prior appeal. [Citations.] This is so, even though it is contended that absence of jurisdiction renders the decision on the prior appeal a nullity and ineffective as a determination of any question.' (Emphasis added.)

(See also Carpenter v. Pacific Mut. Life Ins. Co., 13 Cal.2d 306, 314, 89 P.2d 637; Orwitz v. Board of Dental Examiners, 55 Cal.App.2d 888, 889, 132 P.2d 272.)

Plaintiffs argue that if it be conceded that the first Bailey opinion is the law of the case, by the same reasoning this court's opinion in the second Bailey case likewise is the law of the case. As plaintiffs point out, we there determined that the trial court's order staying proceedings as to the first an second causes of action was not made pursuant to Corporations Code section 834. We were impelled to so hold because the first Bailey case removed the first and second causes of action from the operation of section 834 of the Corporations Code.

The gist of plaintiffs' argument is that absent the authority conferred by Corporations Code section 834, the trial court was powerless to stay proceedings as to the first and second causes of action. It must be conceded that there would be merit to plaintiffs' argument if the trial court's sole jurisdiction or authority to grant such an order derived from the provisions of Corporations Code section 834. Defendants, however, asserted bifurcated grounds for their motion by alleging:

'The said Motion of the said defendants for each of said Orders so noticed as aforesaid will be made and based upon the...