Melancon v. Superior Court In and For Los Angeles County

• Decision Date: 16 April 1954
• Citation: 268 P.2d 1050,42 Cal.2d 698
• Parties: . L. A. 22883. Supreme Court of California, In Bank
• Court: California Supreme Court

Page 1050

268 P.2d 1050

42 Cal.2d 698

MELANCON v. SUPERIOR COURT IN AND FOR LOS ANGELES COUNTY.

L. A. 22883.

Supreme Court of California, In Bank.

April 16, 1954.

Guy E. Ward, Beverly Hills, and David B. Heyler, Jr., Beverly Hills, for petitioner.

Kenneth N. Chantry and David Mellinkoff, Beverly Hills, amici curiae on behalf of petitioner.

Harold W. Kennedy, County Counsel, and William E. Lamoreaux, Deputy County Counsel, Los Angeles, for respondent.

O'Melveny & Myers, William W. Alsup, Philip F. Westbrook, Jr., Wright, Wright, Green & Wright, Loyd Wright, Charles A. Loring, Loeb & Loeb, Herman F. Selvin, Allen E. Susman and Jhon L. Cole, Los Angeles, for real parties in interest.

SCHAUER, Justice.

Petitioner seeks mandate to compel the superior court to enforce his claimed right to take the depositions of certain of the individual defendants, and officers of corporate defendants, in connection with a derivative stockholders' suit filed by petitioner, a stockholder in and as plaintiff on behalf of, defendant corporation Walt Disney Productions. The other defendants named are another corporation and seven individuals. Petitioner ¹ also asks for a writ of prohibition restraining the lower court from proceeding with a hearing (pending when the petition was filed but concluded before the alternative writs issued) on defendants' motions to require petitioner to furnish security, under the provisions of section 834 of the Corporations Code, for the reasonable expenses, including attorney's fees, which defendants may incur in defending the derivative stockholders' suit. The alternative writs issued, but for reasons hereinafter stated we have concluded that the peremptory writs should be denied and the alternative writs discharged.

Prior to our consideration of the petition for the writs the lower court heard the motions for security, granted them as to all except one defendant, and on September 4, 1953, made and signed written findings and conclusions and an order that plaintiff furnish a total of $65,500 as security within 30 days after service upon plaintiff of written notice of the signing of the order, that plaintiff serve written notice on defendants' counsel of the deposit of the security within 10 days 'after plaintiff has complied with this order,' and that further prosecution of the action by plaintiff 'is hereby stayed, and said defendants need not file any pleadings herein' until 30 days after plaintiff shall have served the notice of his compliance with the order for security, with a further stay until 20 days after plaintiff's sureties have justified in case defendants except to such sureties. Thereafter on September 10, we ordered issuance of the alternative writs; at that time we had not been informed of the hearing held and order made by the lower court. The writs issued commanding respondent court to show cause why the depositions should not be ordered and prohibiting 'any further proceedings with reference to a hearing on said Motions to require security, except as directed hereby, until the further order of this Court thereon.' Thereafter, on September 16, petitioner filed a supplemental petition for the two writs, alleging the hearing in the lower court on the security motions and the written order of September 4 granting them, and asking that such order be set aside and petitioner 'be permitted to take the depositions of all party defendants,' or, alternatively, that that court be restrained from dismissing the action if plaintiff fails to furnish the security ordered.

From the petition (as supplemented) for the writs and the return and answer thereto it appears that since 1947 plaintiff has been a shareholder of Walt Disney Productions, ² a corporation. He filed his derivative action against that corporation, certain of its alleged officers and directors, and Walt Disney, Incorporated, ³ a corporation. He asked that certain contracts between Disney Productions and defendant Walter E. Disney, and between Disney Productions and Disney, Inc., be declared invalid; that Walter E. Disney and Disney, Inc., account for all moneys received by virtue of such contracts; that Walter E. Disney account for sums paid him by Disney Productions as compensation for services rendered since 1940; and that Disney Productions and its officers and directors be enjoined from making further payments under the contracts attacked by plaintiff.

After filing the derivative action, plaintiff gave notices and had served subpoenas duces tecum for the taking of depositions of certain of the defendants and corporate officers; upon their refusals either to be sworn or to answer various questions they were directed to appear for court rulings thereon. Meanwhile all defendants filed motions to require plaintiff to furnish security for expenses, including attorney's fees, under section 834 of the Corporations Code. Also, the court stayed further proceedings on the depositions until after the hearing and order on the motions for security. This petition (as supplemented) for mandamus and prohibition followed. As above noted, we acted on the petition without having been informed that the lower court had theretofore heard and granted the motions for security ⁴ and had stayed further prosecution of the action until the security was furnished. ⁵

In support of the order requiring such security the court found, among other things (in the language of section 834), 'That there is no reasonable probability that the prosecution of the cause of action alleged * * * will benefit the corporation or its security holders.'

Petitioner in support of his contention that this case is a proper one for the issuance of the jurisdictional writ of prohibition, attacks, on grounds for the most part substantially the same as those recently discussed in Beyerbach v. Juno Oil Co., (1954), 42 Cal.2d 11, 265 P.2d 1, the constitutionality of the security provisions here involved. It is now established in this state that where there is no other adequate remedy, such as by appeal, 'The constitutionality of a statute or ordinance may be tested by prohibition on the ground that invalidity of the legislation goes to the jurisdiction of the court to proceed to try the case.' (Rescue Army v. Municipal Court (1946), 28 Cal.2d 460, 462-467, 171 P.2d 8; see also Code of Civ. Proc. §§ 1102, 1103; Hunter v. Justice's Court (1950), 36 Cal.2d 315, 323, 223 P.2d 465.) By our opinion in the Beyerbach case petitioner's attacks on the statute have been answered adversely to him in most respects.

His remaining contentions concern the depositions he sought to take. He urges that by refusing to compel completion of the depositions the trial court deprived him of the means of effectively obtaining evidence to oppose the motions for security, particularly with respect to whether there is a 'reasonable probability that the prosecution of the cause of action alleged * * * will benefit the corporation or its security holders' (Corp.Code, § 834), and that he was thereby denied equal protection of the law. In this respect, petitioner relies upon section 2021 of the Code of Civil Procedure ⁶ and upon cases in which mandamus has issued to compel the lower court to enforce the right to take depositions or to perpetuate testimony. (See McClatchy Newspapers v. Superior Court (1945), 26 Cal.2d 386, 159 P.2d 944; Brown v. Superior Court (1949), 34 Cal.2d 559, 212 P.2d 878; Superior Ins. Co. v. Superior Court (1951), 37 Cal.2d 749, 235 P.2d 833.)

In none of the cited cases, however, had the hearing or trial in connection with which the testimony or deposition was sought been held and the order or judgment of the trial court been rendered prior to the issuance of an alternative writ or writs by the appellate court. By contrast, in the matter new before us, as already noted, the hearing on the motions for security had been held, over a period of three days, and the order for the furnishing of the security by plaintiff had been made prior to the consideration by this court of the petition for the writs. Under such circumstances it appears that the remedy by appeal from the judgment of dismissal which presumably will follow if the ordered security is not furnished is not only an adequate, but is clearly a more appropriate remedy than the writs here sought.

In the first place, the rule is that prohibition ordinarily issues only to prevent future judicial acts rather than to undo acts already performed. (See State Bd. of Equalization v. Superior Ct. (1937), 9 Cal.2d 252, 254, 70 P.2d 482; 21 Cal.Jur. 581-582, and cases there cited.) Although exceptions to this rule have been made and the writ has been allowed where that act in question is a continuing one and the circumstances are so aggravated as to justify immediate relief, such as where a receiver has been appointed, an injunction has issued, or property has been seized under a void order (see Evans v. Superior Court (1939), 14 Cal.2d 563, 580-581, 96 P.2d 107, and cases there cited), and 'where, because of delay, there would be consequential damages' (Golden State Glass Corp. v. Superior Court (1939), 13 Cal.2d 384, 389, 90 P.2d 75), no such aggravated circumstances or consequential damages would appear to flow from the order requiring the furnishing of security by plaintiff in the derivative stockholders' action, or from the entry of an appealable judgment of dismissal which would follow plaintiff's failure to comply with the security order. As recently reaffirmed in Jollie v. Superior Court (1951), 38 Cal.2d 52, 56, 237 P.2d 641, the expense of an appeal is insufficient to justify issuance of the writ of prohibition.

In the second place, petitioner in his third supplemental petition for the writs, complains of rulings by the court on evidence offered by him as plaintiff at the three-day hearing on the security motions, complains that one of the defendants subpoenaed by plaintiff as a witness was excused from testifying at...