Efron v. Kalmanovitz

• Decision Date: 05 October 1960
• Citation: 8 Cal.Rptr. 107,185 Cal.App.2d 149
• Court: California Court of Appeals Court of Appeals
• Parties: Jacob G. EFRON, Ray N. Taber, Sam S. Rubino and Sylvia Morrison, stockholders of Maier Brewing Company, a corporation, for themselves and other stockholders of said corporation, similarly situated, Plaintiffs and Respondents, v. Paul KALMANOVITZ, S & P Company, a corporation, Maier Brewing Company, a corporation, Chris A. Wasem, Robert J. Wallerstein, George Alef, Doe 1, Doe 11, and Doe 111, Defendants. Maier Brewing Company, a corporation, Chris A. Wasem, Robert J. Wallerstein, and George Alef, Paul Kalmanovitz and S & P Company, a corporation, Appellants. Civ. 24243.

Page 107

8 Cal.Rptr. 107

185 Cal.App.2d 149

Jacob G. EFRON, Ray N. Taber, Sam S. Rubino and Sylvia Morrison, stockholders of Maier Brewing Company, a corporation, for themselves and other stockholders of said corporation, similarly situated, Plaintiffs and Respondents, v. Paul KALMANOVITZ, S & P Company, a corporation, Maier Brewing Company, a corporation, Chris A. Wasem, Robert J. Wallerstein, George Alef, Doe 1, Doe 11, and Doe 111, Defendants.

Maier Brewing Company, a corporation, Chris A. Wasem, Robert J. Wallerstein, and George Alef, Paul Kalmanovitz and S & P Company, a corporation, Appellants.

Civ. 24243.

District Court of Appeal, Second District, Division 2, California.

Oct. 5, 1960.

Rehearing Denied Nov. 1, 1960.

Hearing Denied Nov. 30, 1960.

G. Vernon Brumbaugh, Los Angeles, for appellants, Maier Brewing Co., Chris A. Wasem, Robert J. Wallerstein, George Alef.

W. Alan Thody, Los Angeles, for appellants, Paul Kalmanovitz, S & P Co.

Sydney J. Dunitz, Beverly Hills, Horowitz & Howard, Los Angeles, for respondents.

RICHARDS, Justice pro tem.

Appeals from an order denying the motions of several defendants that the plaintiffs furnish security in a stockholders' derivative suit; from an order denying defendants' motions to reconsider and vacate the order denying the motions for security and from an order denying defendants' motions for a new trial of the motions for security.

Plaintiffs, as stockholders of Maier Brewing Company, filed a stockholders' derivative suit against Maier Brewing Company; its board of directors; Paul Kalmanovitz, its majority stockholder, and S & P Company, a corporation wholly owned by Paul Kalmanovitz, to vacate a contract whereby Maier Brewing Company sold all of its assets, except cash and accounts receivable, to S & P Company; to enjoin the transfer of the Maier Brewing Company's assets to S & P Company or any assignee thereof; to establish a constructive trust of any Maier Brewing Company assets transferred to any defendant and for an accounting, costs of suit and attorneys fees.

The defendants, in three groups, moved that plaintiffs be required, under Corporations Code, § 834, to furnish security upon the ground specified in said section 834(b)(1), that there is no reasonable probability that the prosecution of the action would benefit the corporation or its security holders. Thirteen separate declarations of fact by defendants, their attorneys and others, were filed in support of the motions. Hearings were conducted for eight days by the trial court and evidence, oral and documentary, introduced at such hearings. On March 30, 1959, the court, by minute order, denied each motion. Thereafter, the court made its written 'Findings of Fact, Conclusions of Law and Order Denying Motions under Corporations Code section 834', finding that it is not true that there is no probability that the action will benefit the corporation or its security holders; concluding therefrom that the motions for security should be denied and ordering that each of such motions be denied. Motions to reconsider and vacate the aforesaid order and for a new trial and for relief under Code Civ.Proc. § 473, were made and denied.

The appealability of the order denying defendants' motions for security under Corporations Code, § 834, was not raised by any of the parties to the appeal, but was suggested by this court when the matter first came on for hearing, which hearing was continued in order to permit counsel, at the court's request, to prepare and file additional briefs on the question of appealability. Such briefs were prepared and filed and before the court when the matter again came on for hearing and was submitted.

It is of course fundamental that an appellate court has no appellate jurisdiction to entertain and pass upon an appeal from a non-appealable order. Rossi v. Caire, 189 Cal. 507, 508, 209 P. 374; Sherman v. Standard Mines Co., 166 Cal. 524, 525, 137 P. 249; Estate of Vai, 168 Cal.App.2d 147, 149, 335 P.2d 501; Golden v. Stansbury, Inc., 155 Cal.App.2d 480, 483, 318 P.2d 134; Collins v. City and County of San Francisco, 112 Cal.App.2d 719, 722, 247 P.2d 362. If it be determined that the appeal is from a non-appealable order and the reviewing court is without appellate jurisdiction, that court has no recourse other than to dismiss the appeal on its own motion. Olmstead v. West, 177 Cal.App.2d 652, 2 Cal.Rptr. 443; Golden v. Stansbury, Inc., supra, 155 Cal.App.2d at pages 482-483, 318 P.2d at page 135; Estate of Murphy, 50 Cal.App.2d 440, 442, 123 P.2d 129.

We have concluded that an order denying a motion for security under Corp.Code, § 834, in a stockholders' derivative suit is not an appealable order, and that the defendants' appeals from such order must be dismissed.

Before discussing our reasons for the foregoing conclusion, we will direct our attention to the defendants' appeals from the order denying their motions to reconsider and to vacate the order denying their motions for security. It is established that an appeal may not be taken from a nonappealable order by the device of moving to reconsider and vacate the order and then appealing from a ruling denying the motion. Litvinuk of Litvinuk, 27 Cal.2d 38, 43-44, 162 P.2d 8; Title Insurance & Trust Co. v. California etc. Co., 159 Cal. 484, 487, 114 P. 838; Edlund v. Los Altos Builders, 106 Cal.App.2d 350, 354, 235 P.2d 28. As to defendants' appeals from the order denying their motions for a new trial of their motions for security, it is equally well-established that proceedings for a new trial do not lie to secure the re-examination of a decision on a motion which is not made in connection with the trial of the cause (Gray v. Cotton, 174 Cal. 256, 258, 162 P. 1019; Mann v. Superior Court, 53 Cal.App.2d 272, 285, 127 P.2d 970) as distinguished from a motion for a new trial to review issues of fact or law occurring at a trial (Carney v. Simmonds, 49 Cal.2d 84, 315 P.2d 305). Defendants' motions for security obviously were not a trial of the cause as contemplated by Code of Civ.Proc. § 657, and, therefore, their motions for a new trial did not properly lie, in which case the proper procedure is to affirm the order denying the motions for new trial and not to dismiss the appeals therefrom. Quist v. Sandman, 154 Cal. 748, 753, 99 P. 204.

We turn now to the controlling problem of the appealability of an order denying a motion for security in a stockholders' derivative suit. Corp.Code, § 834 provides, in relevant part, as follows: '(a) No action may be instituted or maintained in the right of any domestic or foreign corporation by the holder or holders of shares, * * * of such corporation unless both of the following conditions exist: (1) The plaintiff alleges in the complaint that he was a registered shareholder * * * at the time of the transaction * * * of which he complains * * *. (b) In any such action, at any time within thirty days after service of summons upon the corporation or any defendant, the corporation or such defendant may move the court for an order, upon notice and hearing, requiring the plaintiff to furnish security as hereinafter provided. Such motion may be based upon one or more of the following grounds: (1) That there is no reasonable probability ¹ that the prosecution of the cause of action alleged in the complaint against the moving party will benefit the corporation or its security holders; (2) That the moving party, if other than the corporation, did not participate in the transaction complained of in any capacity. * * * At the hearing upon such motion, the court shall consider such evidence written or oral, by witnesses or affidavit, as may be material: * * *. If the court determines, after hearing the evidence adduced by the parties at the hearing, that the moving party has established a probability in support of any of the grounds upon which the motion is based, the court shall fix the nature and amount of security to be furnished by the plaintiff * * *. A determination by the court that security either shall or shall not be furnished * * *, shall not be deemed a determination of any one or more issues in the action or the merits thereof. * * * If the court, upon any such motion, makes a determination that security shall be furnished by the plaintiff as to any one or more defendants, the action shall be dismissed as to such defendant or defendants, unless the security required by the court shall have been furnished within such reasonable time as may be fixed by the court.'

We start with the basic rule that 'no appeal can be taken except from an appealable order or judgment, as defined in the statutes and developed by the case law'. Lavine v. Jessup, 48 Cal.2d 611, 613, 311 P.2d 8, 9. An order denying a motion under Corp.Code, § 834, is not one of the several orders specified as appealable by Code of Civ.Proc. § 963, subsection 2. Our inquiry is thus narrowed down to the question of whether such order may be considered a 'final judgment' within subsection 1 of said section 963, as 'developed by the case law'. Lavine v. Jessup, supra.

It has been said of subsection 1 of said section 963, authorizing an appeal from 'a final judgment' that '[t]his provision states the final judgment rule, or rule of one final judgment, a fundamental principal of appellate practice in the United States. The theory is that piecemeal disposition and multiple appeals in a single action would be oppressive and costly, and that a review of intermediate rulings should await the final disposition of the case.' 3 Witkin, California Procedure, p. 2151. The rule is thus stated decisionally: 'Under California procedure there is ordinarily only one final judgment in an action.' Sjoberg v. Hastorf, 33 Cal.2d 116, 118, 199 P.2d 668, 669 and cases cited.

However, as stated in 3 Witkin, supra, p. 2152, 'A necessary exception to the one final judgment rule is recognized where there is a final determination of some collateral matter...