Beverly Hills Federal Sav. & Loan Ass'n v. Superior Court for Los Angeles County

• Court: California Court of Appeals
• Writing for the Court: HUFSTEDLER; KAUS, P.J., and McCOY
• Citation: Beverly Hills Federal Sav. & Loan Ass'n v. Superior Court for Los Angeles County, 66 Cal.Rptr. 183, 259 Cal.App.2d 306 (Cal. App. 1968)
• Decision Date: 21 February 1968
• Parties: BEVERLY HILLS FEDERAL SAVINGS AND LOAN ASSOCIATION, Gibralter Savings and Loan Association, Glendale Federal Savings and Loan Association, and Western Federal Savings and Loan Association, Petitioners, v. SUPERIOR COURT of the State of California FOR the COUNTY OF LOS ANGELES, Respondent; Preston MARTIN, Savings and Loan Commissioner of the State of California, and Equitable Savings and Loan Association, Real Parties in Interest. Civ. 32060.

Page 183

66 Cal.Rptr. 183

259 Cal.App.2d 306

BEVERLY HILLS FEDERAL SAVINGS AND LOAN ASSOCIATION, Gibralter Savings and Loan Association, Glendale Federal Savings and Loan Association, and Western Federal Savings and Loan Association, Petitioners, v. SUPERIOR COURT of the State of California FOR the COUNTY OF LOS ANGELES, Respondent Preston MARTIN, Savings and Loan Commissioner of the State of California, and Equitable Savings and Loan Association, Real Parties in Interest.

Civ. 32060.

Court of Appeal, Second District, Division 5, California.

Feb. 21, 1968.

Rehearing Denied March 20, 1968.

Hearing Denied April 17, 1968.

Richards, Watson & Hemmerling, Richard Richards, Joseph F. Brodley, Munger, Tolles, Hills & Rickerhauser, Roderick M. Hills, and James N. Adler, Los Angeles, for petitioners.

No appearance for respondent.

Thomas C. Lynch, Atty. Gen., and Arthur C. De Goede, Deputy Atty. Gen., for Preston Martin, as Savings and Loan Commissioner of State of California.

Loeb & Loeb and Howard I. Friedman, Los Angeles, for real party in interest Equitable Savings and Loan Ass'n.

HUFSTEDLER, Associate Justice.

Petitioners seek a peremptory writ of mandamus from this court ordering the respondent superior court to set aside its order denying discovery and to issue an order compelling the real parties in interest to answer questions which petitioners have propounded by way of interrogatories and oral deposition.

Petitioners seek this discovery in connection with their action in the respondent superior court in which they seek judicial review, pursuant to section 5258 of the Financial Code, of a decision by the savings and loan commissioner ('commissioner') granting the application of Equitable Savings and Loan Association ('Equitable') to operate a branch office in Beverly Hills.

Equitable filed its application for a branch license in Beverly Hills on August 8, 1966. Notices required by section 6004 of the Financial Code were sent to other associations in the state, including petitioners. A hearing was held in connection with Equitable's application on August 30, 31 and September 1, 2, 1966, as required by section 6005 of the Financial Code. Petitioners were parties to and participated fully in this hearing.

The commissioner's decision to award Equitable a license to operate a Beverly Hills branch was rendered December 1, 1966. The license was issued to Equitable the same day.

The discovery which petitioners seek to compel relates to three alleged issues set forth in their petition for relief filed in the court below: (1) The commissioner based his decision on secret ex parte communications with Equitable; (2) Equitable deliberately misrepresented to and concealed from the commissioner information regarding its financial condition and other material facts; and (3) the commissioner had abandoned his usual rules, regulations and instructions without notice.

Petitioners are entitled to make reasonable use of discovery devices in the proceedings below, limited only by the requirement that their inquiries be relevant to the subject matter of their cause of action. (Greyhound Corp. v. Superior Court (1961) 56 Cal.2d 355, 372, 15 Cal.Rptr. 90, 364 P.2d 266; West Pico Furniture Co. v. Superior Court (1961) 56 Cal.2d 407, 416, 15 Cal.Rptr. 119, 364 P.2d 295.) The discovery statutes vest wide discretion in the trial court in granting, denying or limiting discovery. The trial court's rulings will not be disturbed on appeal, absent a showing that its discretion was abused. (Greyhound Corp. v. Superior Court, supra, 56 Cal.2d at p. 380, 15 Cal.Rptr. 90, 364 P.2d 266.)

Scope of Judicial Review in Administrative Mandamus

The subject matter of nonapplicant petitioners' administrative mandamus petition, to which the discovery must be relevant, is judicial review of proceedings before the commissioner in a branch license application case. The subject matter is coextensive with the scope of such permissible judicial review.

The scope of review available in an action for administrative mandamus is determined by the nature of the interest which a petitioner seeks to vindicate. This proposition becomes clear from a review of the history of administrative mandamus in California as it developed on a case-by-case basis.

The foundation statute is section 1094.5, subdivision (c) of the Code of Civil Procedure, which provides: 'Where it is claimed that the findings are not supported by the evidence, in cases in which the court is authorized by law to exercise its independent judgment on the evidence, abuse of discretion is established if the court determines that the findings are not supported by the weight of the evidence; and in all other cases abuse of discretion is established if the court determines that the findings are not supported by substantial evidence in the light of the whole record.'

The statute does not supply and definition of the 'cases in which the court is authorized by law to exercise its independent judgment,' and does not purport to define either 'weight of the evidence' or 'substantial evidence in the light of the whole record.' The meaning of these terms must be ascertained from the cases from which section 1094.5 was developed and from the later decisions applying the section.

Prior to 1936, the scope of judicial review of administrative decisions was relatively well settled: It was the 'substantial evidence rule' invoked by filing a writ of certiorari to review the administrative decision. But the California Supreme Court's decision in 1936 in Standard Oil Co. v. State Board of Equalization, 6 Cal.2d 557, 59 P.2d 119, changed all that. The use of certiorari was abolished and the scope of review was drastically altered. The court reasoned that certiorari would lie only to review judicial acts, that administrative agencies could not constitutionally exercise judicial powers, and therefore certiorari could not be used to review administrative decisions. The court thus created a procedural vacuum. Litigants next attempted prohibition, but the court slammed the door on prohibition as firmly as it had upon certiorari. (Whitten v. California State Board of Optometry (1937) 8 Cal.2d 444, 65 P.2d 1296, 115 A.L.R. 1.) The condition was partially rectified by the court in Drummey v. State Board of Funeral Directors (1939) 13 Cal.2d 75, 87 P.2d 848, when the court decided that mandamus would lie to review administrative decisions. But the court in the Drummey case disabused everyone of the notion that 'administrative mandamus' was 'certiorari' under an assumed name, because the court expressly rejected the 'substantial evidence rule' which was an integral part of the certiorari remedy. Lingering hope that the door had been opened a crack by the court's decision in McDonough v. Goodcell (1939) 13 Cal.2d 741, 91 P.2d 1035, 123 A.L.R. 1205, holding that the substantial evidence rule was untouched in a case involving denial of an application for a license, appeared dashed by the court's decision three years later in Laisne v. State Board of Optometry (1942) 19 Cal.2d 831, 123 P.2d 457. The Laisne case held that not only was the trial court to exercise its independent judgment on the facts, but it should conduct a 'trial de novo,' in the sense of a complete retrial of the facts upon which the administrative decision was based. Within a year, the court disavowed the trial de novo concept advanced in the Laisne case and substituted a more qualified form of review in its decision in Dare v. Board of Medical Examiners (1943) 21 Cal.2d 790, 136 P.2d 304, a license revocation case.

The difficulty in harmonizing Standard Oil, Drummey, McDonough, Laisne and Dare led the California Judicial Council in 1944 to obtain legislation to clarify the law. The result of their efforts was the enactment of section 1094.5 of the Code of Civil Procedure, which is in substance a codification of the principles expressed by the court in the Dare case.

Because it is a codification of the Dare case, bringing with it the gloss of its history, section 1094.5 leaves unresolved where the line should be drawn between 'independent judgment' cases and 'substantial evidence' cases. ¹ It is incumbent upon this court to attempt to apply the distinctions which the Supreme Court in its opinions appears to have drawn between kinds of administrative decisions reviewable and the scope of review applicable to each. Only thus can we properly determine the legitimate bounds for discovery in the present proceeding.

Under the Dare case and its progeny, the general rule appears to be that the decisions of all statewide agencies exercising quasi-judicial power are subject to 'limited trial de novo' by the superior court. There are, however, two 'exceptions' to this rule: (1) Administrative agencies exercising quasi-judicial power pursuant to authority derived from the Constitution are immunized from the holding of the Standard Oil case; ² and (2) administrative decisions of statewide agencies which are not judicial in character or which, if judicial in character, do not affect a vested right or interest, are likewise immune from the Standard Oil case. The rationale is that in neither circumstance is the constitutional inhibition discovered in the Standard Oil case present. Since the commissioner herein does not derive his power from the Constitution, we are here concerned only with the second 'exception.'

The 'exception' was first carved out by the court in McDonough v. Goodcell, supra, 13 Cal.2d 741, 91 P.2d 1035, 123 A.L.R. 1205. ³ In that case the petitioners applied for mandamus to compel the respondent insurance commissioner to issue to petitioners a permit to conduct a bail bond business. The effect of the denial of a permit was to foreclose petitioners from carrying on a business in which they had been for many years engaged. The court held that the denial of an application for a permit by a statewide agency did not involve an exercise of...