People v. Superior Court for Los Angeles County

• Decision Date: 01 February 1967
• Citation: 248 Cal.App.2d 276,56 Cal.Rptr. 393
• Court: California Court of Appeals Court of Appeals
• Parties: The PEOPLE of the State of California, Petitioner, v. The SUPERIOR COURT of the State of California FOR the COUNTY OF LOS ANGELES, Respondent; Joe WITZERMAN et al., Real Parties in Interest. Civ. 31163.

Page 393

56 Cal.Rptr. 393

248 Cal.App.2d 276

The PEOPLE of the State of California, Petitioner, v. The SUPERIOR COURT of the State of California FOR the COUNTY OF LOS ANGELES, Respondent Joe WITZERMAN et al., Real Parties in Interest.

Civ. 31163.

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

Feb. 1, 1967.

Thomas C. Lynch, Atty. Gen., and H. Warren Siegel, Deputy Atty. Gen., for petitioner.

No appearance for respondent.

Ball, Hunt & Hart and Frank C. Aldrich, Long Beach, for real parties in interest.

McCOY, Associate Justice pro tem. ^*

In July 1966 the People of the State of California filed an action in the respondent court against Joe Witzerman and others, under section 26101, Corporations Code, seeking to enjoin them from selling certain livestock care and management agreements and from making false and misleading statements in connection with such sales, unless and until they obtained a securities permit under section 25500 of the Corporations Code. The action also seeks recovery of civil penalties under sections 17500 and 17536, Business and Professions Code. The question before us is whether a protective order made by the trial court in certain discovery proceedings initiated by the People is in excess of that court's jurisdiction and an abuse of its discretion.

Before the filing of the action the Commissioner of Corporations issued certain cease and refrain orders ordering the real parties in interest not to sell or offer for sale, negotiate for the sale of, or deal in this state with respect to any security as defined in section 25008 of the Corporations Code, and more particularly 'any certificate of interest in cattle or livestock' and 'any livestock management contracts' without a permit to sell such securities, and, as to some of the real parties in interest, without a certificate to act in this state as security brokers or agents. Shortly after the filing of the complaint against the real parties in interest, here referred to as the defendants, the People obtained a preliminary injunction ordering defendants to desist from offering or negotiating for the sale of, selling or receiving any consideration for the transfer of, hypothecating, or dealing in this state in any livestock care and management agreements similar to those set forth in the complaint, until they had secured the necessary permits and licenses to do so. Defendants were also enjoined from making any statement or distributing any literature which states or implies, among other things, that the livestock management agreement 'or defendants' method of doing business, has been approved by, or exempted from the Corporate Securities Law by the Commissioner of Corporations.'

In August 1966 the People served several interrogatories on defendants. In answer to interrogatory 3 some of the defendants submitted a list of the livestock owners who have entered into livestock care and management agreements with Saddle Butte Ranch of Long Beach, the date of such agreements, the description of the livestock covered thereby, the persons negotiating them, the amounts paid by the owners under the agreements, and their account numbers. However, they did not give the People the addresses of these persons. In answer to interrogatory 11 defendants stated that 'It is impossible to recall any specific conversation relating to any specific person, although some if not all of these defendants did at one time or another exhibit the material and follow the procedures set forth in their answers to Interrogatory No. 10. It is also impossible to recall any specific date, information or material forming the factual basis for any specific conversations, although extensive farm journals, magazines, university reports and other published material was (f) requently referred to and used.' Interrogatory 10 and the answer thereto relate to representations made by defendants to persons to whom they had sold cattle or livestock management contracts.

On receipt of defendants' answers to the interrogatories the People noticed a motion under section 2030, subdivision (a), Code of Civil Procedure, for an order requiring the answering defendants to provide a further answer to interrogatory 3 giving the addresses of all the persons to whom livestock management agreements had been sold. Although defendants did not oppose the granting of this motion they noticed a motion for a protective order under section 2019, subdivision (b), as authorized by section 2030, subdivision (b), 'to prohibit, limit or restrict additional answers to Interrogatory No. 3.' The people opposed this motion. On October 19 the court granted both motions and made the order here under review. The court thereby ordered the defendants to provide the addresses of the livestock owners set forth in their answer to interrogatory 3. In response to defendants' motion it ordered that the supplemental answers setting forth said addresses should be sealed, subject to further order of the court, and further that during the pendency of the action, or until otherwise ordered, the People, their agents, etc., 'shall be and are hereby enjoined and prohibited from, either directly or indirectly, making or causing to be made to the owners whose names are disclosed by said answers any statement or representation, which implies: 1. That a cease and desist order has been issued against said defendants to refrain them from violating corporate securities laws; 2. That said defendants are operating without a license; 3. That said defendants have not obtained a securities permit; 4. That said defendants have been ordered to stop doing business; 5. That said defendants may not or could not perform and carry out the cattle management contracts with their customers.'

The People now seek a writ of mandate requiring the trial court to set aside the injunctive provisions of the order. It contends primarily that the order is in excess of the trial court's jurisdiction under section 526, subdivision (4), Code of Civil Procedure, and section 3423, subdivision (4), Civil Code, and an abuse of the court's discretion, in that it enjoins the Commissioner of Corporations from exercising his powers under section 25314 of the Corporations Code for the public benefit, thus preventing him from adequately pursuing his duty under section 25316 of that code to protect security purchasers from fraud and deception in the sale of securities. It also contends that the effect of the order is to prevent the commissioner and the Attorney, General in their interviews with defendants' customers from mentioning the cease and desist orders and the preliminary injunction, all of which are public records open to public inspection, under penalty of contempt of the protective order.

Defendants oppose the granting of the petition on the ground that the order is 'clearly within the jurisdiction of the court under Sections 2030(b) and 2019(b)(1) C.C.P.,' that it is not contrary to the public interest, and that the order is necessary to protect defendants from harassment, annoyance, expense, embarrassment and oppression. No return to our alternative writ was filed by the respondent court.

The authority of a trial court to make protective orders is limited by section 2019, subdivision (b), Code of Civil Procedure. By section 2030, subdivision (b), that section is made 'applicable for the protection of the party from whom answers to interrogatories are sought * * *.' No such order can be made in any case unless there is a showing of good cause. Under these sections, so far as applicable here, the trial court, 'for good cause shown' may make an order that the answers to interrogatories may be sealed, subject to further order of the court, and 'may make any other order which justice requires to protect the party * * * from annoyance, embarrassment, or oppression.' (Code Civ.Proc. § 2019, subd. (b)(1).) In our opinion the making of the order here under review constituted an abuse of the discretion conferred on the court by these sections, in that petitioners failed to make a showing of good cause for the order, and further that the order exceeded the jurisdiction of the court.

There is no doubt that petitioner is entitled by proper interrogatories to discover 'the identity and location' of persons with whom defendants had entered into contracts of the type or similar to those involved in the action, as 'persons having knowledge of relevant facts' (Code Civ.Proc. § 2016, subd. (b)), in order to select those to be interviewed and deposed. (West Pico Furniture Co. of Los Angeles v. Superior Court, 56 Cal.2d 407, 416, 15 Cal.Rptr. 119, 364 P.2d 295.) No good cause was shown for the court's order that the answers to be filed disclosing the addresses of these persons should be sealed until further order of the court.

In an attempt to show good cause for the injunctive portion of the protective order, defendants filed a declaration alleging that three of them 'have received a number of telephone calls from their customers (and contract holders),' who have advised them that representatives of the Commissioner of Corporations 'have contacted them and told them, among other things, the following: 1. That a cease and desist order has been issued against these defendants to refrain from violating corporate securities laws. 2. That these defendants are operating without a license. 3. That these defendants have not obtained a securities permit. 4. That these defendants have been ordered to stop doing business. 5. That they have been asked to sign statements concerning representations made to them by these defendants. 6. Other statements that...