Castner v. First National Bank of Anchorage

Decision Date24 March 1960
Docket NumberNo. 16232.,16232.
Citation278 F.2d 376
PartiesRachel CASTNER, Appellant, v. FIRST NATIONAL BANK OF ANCHORAGE, Arctic Cold Storage, Inc., and Union Bank of Anchorage, Appellees.
CourtU.S. Court of Appeals — Ninth Circuit

Edgar Paul Boyko, Los Angeles, Cal., for appellant.

Roger Cremo, Anchorage, Alaska, for appellees.

Before STEPHENS, POPE and KOELSCH, Circuit Judges.

KOELSCH, Circuit Judge.

Plaintiff appeals from a judgment by the District Court for the Territory (now State) of Alaska dismissing her Second Amended Complaint and from a post judgment order denying her leave to file a Third Amended Complaint.

Jurisdiction in the court below was based upon Title 53, Ch. 2, Alaska Compiled Laws Annotated (1949) and 48 U. S.C.A. §§ 101 and 103; jurisdiction of this court rests upon 28 U.S.C. §§ 1291 and 1294(2).1

The suit was commenced on December 11, 1956, by Rachel V. Castner to have set aside the sale of certain property of L. V. Castner, Inc., an Alaska corporation, upon summary foreclosure of a chattel mortgage executed by that corporation to the Union National Bank of Anchorage. The property was purchased at the sale by the mortgagee, on November 20, 1950, later turned over to the First National Bank of Anchorage, successor of the Union National Bank of Anchorage, and is presently in the possession of the Arctic Cold Storage Company.

The allegations in the complaint as well as in the second amended complaint reveal that plaintiff-appellant initiated an action for and on behalf of L. V. Castner, Inc., against the two banks and the cold storage company. The corporation was also joined as a nominal defendant since any recovery would presumptively belong to it. Price v. Gurney, 1944, 324 U.S. 100, 65 S.Ct. 513, 89 L. Ed. 776. References herein to "defendants" or "appellees" do not include L. V. Castner, Inc. In addition, two of the three directors (plaintiff being the third) of the corporation were joined as defendants, but made no appearance.

Appellant's allegations show that after the sale L. V. Castner, Inc. was adjudged a bankrupt on an involuntary petition and a trustee appointed, but that the trustee took no action to set aside the foreclosure sale prior to closing the bankruptcy estate. The gist of the claim asserted by appellant is that the chattel mortgage itself was void because it dispensed with the giving of notice on foreclosure sale contrary to law, that the sale was invalid because not conducted in accordance with statute, and that the property was sold to the mortgagee under a power of sale for an unconscionably low price in violation of the mortgagee's fiduciary obligation to the mortgagor. In addition to the primary relief, appellant also asks that a receiver be appointed to take charge of the property as well as for an accounting.

After the pleadings were settled the defendants moved for summary judgment on several grounds, among them:

"2. That the Second Amended Complaint herein is barred by the Statute of Limitations and plaintiff\'s laches.
* * * * * *
"4. That the plaintiff is barred from maintaining an action of the nature attempted to be alleged in her Second Amended Complaint for the reason that the corporation on whose behalf the action is alleged to have been brought would be barred from maintaining such an action under Territorial Law."

In support of the motion defendant-appellees presented affidavits showing that the name of L. V. Castner, Inc., had been stricken from the corporate rolls of Alaska, on January 2, 1953, for failure to pay annual corporate license taxes, and that the corporation had failed to file annual reports as required by the laws of Alaska.2 This motion was denied and the case was thereupon assigned to another judge and set for trial. Upon reviewing the record the second judge expressed some doubt as to the correctness of his predecessor's rulings, and instead of proceeding with the trial, reopened the matter on his own initiative and scheduled a further hearing several days hence on the motions.

Following this hearing the court entered judgment in favor of appellees and at the same time made extensive Findings of Fact and Conclusions of Law, though not obliged to do so. See Lindsey v. Leavy, 9 Cir., 1945, 149 F.2d 899. The facts found were substantially those urged by appellees in their motion for summary judgment.

Appellant makes a number of specifications of error, but only three of them require consideration here; those will be discussed seriatim.

The first question is whether it was error requiring reversal for the second judge to review and set aside prior interlocutory orders made by another judge sitting in the same case.3 In this regard the rule, stated simply, is that "* * * the various judges who sit in the same court should not attempt to overrule the decisions of each other, especially upon questions involving rules of property or of practice * * *" Shreve v. Cheesman, 8 Cir., 1895, 69 F. 785, 791; see also, Plattner Implement Co. v. International Harvester Co., 8 Cir., 1904, 133 F. 376.

In some instances, courts have viewed the rule as inflexible and without exception; on that basis they have denied the existence of power to act under any circumstances. Commercial Union of America, Inc. v. Anglo-South American Bank, Ltd., 2 Cir., 1925, 10 F.2d 937; see also, Annotation 132 A.L.R. 14, 32.4 However, the view has also been expressed that the statement does not express a rule of law, but simply one of practice resting upon principles of comity and uniformity "* * * to preserve the orderly functioning of the judicial process." T.C.F. Film Corporation v. Gourley, 3 Cir., 1957, 240 F.2d 711, 714. Under this view exercise of the power becomes a matter of discretion limited by the framework of the rule from which it emanates. Where "cogent reasons" appear, as in Shreve v. Cheesman, supra, or "exceptional circumstances" exist, as in T.C.F. Film Corp. v. Gourley, supra, one judge may set aside or reverse a prior order made by a colleague. See United States v. Wheeler, 3 Cir., 1958, 256 F.2d 745.

This court has not considered the problem frequently. In Hardy v. North Butte Mining Co., 9 Cir., 1927, 22 F.2d 62, we reversed an order of a second judge discharging receivers appointed by a prior judge in a case where the appointment had been made in the exercise of judicial discretion. In Carnegie National Bank v. City of Wolf Point, 9 Cir., 1940, 110 F.2d 569, we held it was an abuse of discretion for a second judge to dismiss an action after it had been heard and submitted to another judge of the same court and no reason was shown why the second judge entered into the case. We cited Shreve v. Cheesman, supra, for the proposition that one judge should not overrule another "* * * except for the most cogent reasons."

This court is therefore aligned with those holding that the power of each judge of a multi-judge court is equal and coextensive; it permits one to overrule the order of another under proper circumstances, and where one judge has done so the question becomes one of the proper exercise of judicial discretion.

We turn now to the instant case. We are concerned here with a second judge to whom a case has been assigned after a motion to dismiss the complaint and a motion for summary judgment have been denied by a prior judge and the case is set for trial. He is charged with the responsibility of conducting the trial to its conclusion. Yet after examination of the record he is firmly convinced that an error of law has been committed in denying the motions. He is faced with a dilemma: shall he adhere to the rule of comity and defer to the "erroneous" ruling of the first judge, thereby allowing a useless trial to proceed, or shall he reverse the order of the prior judge and permit immediate appeal, where he in turn may be reversed because he abused his discretion in overruling his colleague?

Under such circumstances, we feel that there is no abuse of discretion in overruling the prior judge. The second judge must conscientiously carry out his judicial function in a case over which he is presiding. He is not doing this if he permits what he believes to be a prior erroneous ruling to control the case. He can settle the questions presently without compelling the parties to proceed with what may be a futile and expensive trial. We think that these are cogent reasons and exceptional circumstances which justify a departure from the rule of comity within the permissible limits of judicial discretion.

It may be objected that this is opening the doors for similar reversals and basing discretion on whether the second judge is ultimately adjudged correct or not.5 This is not true. For under our holding we are not concerned at this stage with whether the second judge is in fact correct, but whether he was justified in reviewing the prior judge's ruling at all. His substantive ruling may be, as a matter of law, erroneous, yet his right and power to do so is perfectly justified as a matter of discretion.

We conclude that the second judge did not abuse his discretion in reversing the orders of the first judge and now pass to a consideration of the judgment on the merits.

The second question raised is whether appellant may prosecute an action on behalf of L. V. Castner, Inc., in the light of the facts established in the hearing on the motion for summary judgment.

The Conclusions of Law entered on the findings are as follows:

"1. That the plaintiff as a former officer and shareholder in the bankrupt corporation, L. V. Castner, Inc., had no better right to prosecute a suit on behalf of the corporation than the corporation would have to maintain such suit.
"2. That after adjudication of bankruptcy all of the property of the insolvent corporation passed out of its control, the corporation charter was repealed, the officers and directors ceased to function and the corporation ceased to exist.
"3. The plaintiff cannot maintain this action on behalf of
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