National Bondholders Corporation v. McClintic

• Decision Date: 10 November 1938
• Docket Number: No. 4406.,4406.
• Citation: 99 F.2d 595
• Parties: NATIONAL BONDHOLDERS CORPORATION et al. v. McCLINTIC, Judge.
• Court: U.S. Court of Appeals — Fourth Circuit

99 F.2d 595 (1938)

NATIONAL BONDHOLDERS CORPORATION et al. v. McCLINTIC, Judge.

No. 4406.

Circuit Court of Appeals, Fourth Circuit.

November 10, 1938.

Sidney C. Weinstein, of New York City, and Reuben Oppenheimer, of Baltimore, Md. (Ralph Wolf, of New York City, Thomas B. Jackson and Herman Bennett, both of Charleston, W. Va., Hays, Wolf, Kaufman & Schwabacher, of New York City, Brown, Jackson & Knight, of Charleston, W. Va., and Emory, Beeuwkes, Skeen & Oppenheimer, of Baltimore, Md., on the brief), for petitioners.

Robert S. Spilman, of Charleston, W. Va. (Hawthorne D. Battle, and Price, Smith & Spilman, all of Charleston, W. Va., on the brief), for respondent.

Before NORTHCOTT and SOPER, Circuit Judges, and CHESNUT, District Judge.

CHESNUT, District Judge.

In this case the petitioners pray for a writ of mandamus to the Honorable George W. McClintic, United States District Judge for the Southern District of West Virginia, to vacate his order of October 11, 1938, staying the taking of the depositions of certain witnesses, notice for which had been given under rule 26 of the new Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c. The order was passed in consolidated cases pending in the District Court of the United States for the Southern District of West Virginia entitled National Bondholders Corporation and Union Series Eye Corporation, Plaintiffs, v. Charleston National Bank, Trustee. Upon the filing of the petition this court passed a show cause order, in reply to which the respondent has made a full return, and we have heard argument by counsel for the respective parties. From the papers submitted we learn the nature and history of the case in which the order was passed.

On December 29, 1936, the plaintiffs filed suit in equity against the Charleston National Bank as substituted Trustee under a trust indenture dated May 1, 1926, from the Union Mortgage Investment Company covering collateral to secure bonds to be issued by the Mortgage Company and guaranteed by the National Surety Company. The collateral consisted largely of first mortgage notes on real estate deposited with the trustee, and bonds having a total value of $1,564,000 were issued under the indenture which it is said places affirmative duties on the trustee to maintain the value of the collateral.

The plaintiffs in the case (National Bondholders Corporation and Union Series Eye Corporation) are corporations formed in pursuance of a general plan of reorganization promulgated by the New York Superintendent of Insurance for the liquidation of collateral securing bonds guaranteed by the National Surety Company. This reorganization plan was adopted by the United States District Court for Delaware in proceedings under Section 77B of the Bankruptcy Act, 11 U.S.C.A. § 207, for the reorganization of the Union Mortgage Investment Company. The plaintiffs are liquidating agencies for the benefit of holders of bonds issued by the Mortgage Company and the benefit of the former National Surety Company, which had guaranteed these bonds.

In their bill of complaint the plaintiffs alleged that the Charleston National Bank as substituted trustee had failed to take steps necessary for the protection of the collateral; that it permitted defaults in payments due on collateral mortgage notes; that it permitted poor collateral notes to be substituted for good ones; that it permitted collateral to be used to pay off one series of bonds to the prejudice of other bondholders; and that it committed other improper acts in administering the trust. After several extensions of time which had been granted the defendant answered on May 17, 1937 denying misconduct in administering the trust and setting up numerous defenses.

From that time until November 16, 1937, orders were obtained by the plaintiffs for an extension of time in which to file a reply and file interrogatories and take depositions; and similar orders were passed extending the time during which the defendants might likewise file interrogatories and take depositions. On November 16, 1937 the plaintiffs filed their reply, obtained a further extension of ninety days for taking depositions, and filed interrogatories directed to several of the defendant's employes. These interrogatories consisted of 159 subdivided questions, 339 in all, asking information in great detail concerning administration of the trust. On December 17, 1937 the defendant made a motion that the interrogatories filed by the plaintiff on November 16, 1937 be struck out, assigning various grounds therefor, among others that the plaintiffs had had at all times free access to the defendant's books and records and could discover for themselves the facts sought by interrogatories, and that therefore answering the interrogatories would serve no useful purpose. The matter was set for hearing at a later date. On February 7, 1938 the plaintiffs were given a further six months' extension of time for taking depositions, with the understanding that the question of interrogatories would be decided in the meantime. The defendant also obtained further extensions of time for taking depositions and filing interrogatories. In June 1938 the plaintiffs served notice that the deposition of one Milford would be taken in Baltimore on June 30, 1938. On June 28, 1938 the court granted defendant's motion to set for hearing on July 19th the question of the propriety of the plaintiff's interrogatories and also granted the defendant's motion to delay the taking of all depositions until that should be decided.

On August 1, 1938 the court granted defendant's motion of December 17, 1937 to strike out plaintiffs' interrogatories and passed an order to that effect. On the same day the court also ordered that the case be referred to a special master for hearing and report; and further ordered that the plaintiffs should not have any extension of time beyond August 12, 1938 for taking depositions in advance of proceedings before the special master. It was agreed that hearings before the special master should begin in the fall, and the date of October 31, 1938, was subsequently set by the master.

On September 22, 1938, six days after the new rules of civil procedure had become effective, the plaintiffs served notice on the defendant that the depositions of certain witnesses would be taken under the new rule 26. The defendant immediately objected and moved that the testimony of the witnesses be not taken by deposition but should be given before the special master. The motion was argued by counsel for the respective parties, the plaintiffs contending that discovery by way of depositions before beginning proceedings before the master was important for their case; that rule 26 gave them the right to take depositions for discovery and that their prior efforts to take depositions had been defeated. On the other hand the defendant contended that the new rules did not apply to a pending case when to apply them would work an injustice; that the new rule 30(b), 28 U.S.C.A. following section 723c, vests the court with discretion in preventing the taking of depositions for good cause shown; that to permit them to be taken would require weeks of labor and unnecessarily harass the defendant because the matter could all be presented before the special master, and that the court had on August 1, 1938, refused plaintiffs' further request for extension of time for taking depositions. As a result of this hearing, Judge McClintic passed the order of October 11, 1938, staying the taking of depositions; and it is to vacate this order that the present petition for the writ of mandamus is prayed.

It will be noted from the above history that the order now sought to be vacated was passed in a case which had been pending for nearly two years before the new rules took effect; and that by virtue of the numerous interlocutory orders which had been passed the District Judge must have been thoroughly familiar with the issues and the proceedings in the case occurring before the particular order was passed. And it will be further noted that the order itself was of an interlocutory nature and not final; and also was passed only after hearing and consideration.

In our opinion the application for the writ of mandamus in this case must be denied. Mandamus is an appropriate writ to require that judicial action shall be taken where the district judge unwarrantably refuses to act, and it, or a writ of prohibition, is appropriate where jurisdiction has been exceeded; but it is not appropriate, where judicial action has been taken, to control or reverse that action, especially where the matter is interlocutory only and can be subsequently reviewed on appeal. It is not doubted that in a proper case this court has the power to issue a writ of mandamus in aid of its appellate jurisdiction. Delaware, L. & W. R. Co. v. Rellstab, District Judge, 3 Cir., 15 F.2d 137, reversed 276 U.S. 1, 48 S. Ct. 203, 72 L.Ed. 439; Ex parte United States, 287 U.S. 241, 248, 53 S.Ct. 129, 77 L.Ed. 283. And we do not doubt that we could properly issue the writ if a district judge arbitrarily refused to take action as required by the new rules of civil procedure. Los Angeles Brush Mfg. Corp. v. James, 272 U.S. 701, 706, 47 S.Ct. 286, 71 L.Ed. 481. But in the instant case the writ is asked for in effect to reverse an interlocutory order of the district judge. In Maryland v. Soper, 270 U.S. 9, 29, 46 S.Ct. 185, 189, 70 LEd. 449, ...