Court Opinion

ID: 5451240
Source: CourtListenerOpinion
Date Created: 2022-01-08 18:42:36.51526+00
Date Added: 2024-06-11T08:32:23.853293
License: Public Domain

SCHAUER, J., Dissenting.
The majority direct issuance of the peremptory writ of prohibition “to restrain respondent court from enforcing its order requiring petitioners to post security” under the provisions of section 834 of the Corporations Code, which deals with stockholders’ derivative actions, and to further restrain that court from entering judgment in an involuntary dissolution proceeding until petitioners have been accorded an opportunity to establish their status as shareholders in the subject corporation and to exercise certain claimed rights as intervenors. In my view petitioners have not shown that respondent court exceeded or is about to exceed its jurisdiction; neither have they shown that if the trial court erred in the exercise of jurisdiction, they do not have an adequate remedy by appeal. Accordingly, the order to show cause heretofore issued should be discharged and the writ should be denied.
In the petition for prohibition petitioners allege that in September, 1957, an action for involuntary dissolution of Benedict Heights, Inc., a California corporation, was filed in respondent superior court by Fairfield, Rosner and Benjamin (the real parties in interest in this prohibition proceeding). Petitioners learned of such action in March, 1959, and with permission of court filed therein a complaint in intervention, alleging, among other things, that petitioners are stockholders of the corporation; that they “bring this intervention proceeding in behalf of themselves and on behalf of all other shareholders of Benedict Heights, Inc., who desire to join in said proceedings ’ ’; that Fairfield is in dominion and control of the corporation and of its records and assets and has refused to cause petitioners’ shares of stock to be registered on the corporate books; that “Fairfield has, while acting as agent ... of said Corporation, collected monies due to the Corporation, and made disbursements without any authorization from the Board of Directors and threatens to continue to do so: that . . . Fairfield negotiated the sale of . . . real estate . . . formerly owned by said Corporation: that this realty at the time of sale constituted the sole asset, other than stock sub*506scriptions, of said corporation; that said parcel was sold for the sum of $10,000.00 . . . That there has been no accounting to the stockholders or the last Board of Directors of the Corporation for any transactions . . . Fairfield has carried out, since . . . 1952 . . .; [that] the assets of said Corporation are in danger of being lost or dissipated.”1 Relief sought by petitioners through their complaint in intervention included the following demands: (1) an order compelling registration of their stock on the corporation's books; (2) a preliminary injunction restraining Fairfield from paying out any of the corporation’s assets until trial of the dissolution action; (3) that the default of Benedict Heights, Inc., be vacated and that “plaintiffs in intervention be permitted to file an answer on behalf of Benedict Heights, Inc., to the plaintiff’s Complaint”; (4) that the court determine the value of the corporation’s assets and require Fairfield to post a bond pendente lite in the amount of such value.
From the averments of the complaint in intervention herein-above (and in footnote 1) quoted or summarized, and from the nature of the relief sought, it is clear that, although some of the claims asserted appear to relate to stockholders’ personal rights, at least a substantial part of the cause stated and the relief sought is on behalf of the corporation and, hence, competent only in a derivative action. (See Hogan v. Ingold (1952), 38 Cal.2d 802, 809 [243 P.2d 1, 32 A.L.R.2d 834].)
It is thus manifest that the trial court was acting within its power and authority, i.e., jurisdiction, when in the exercise of its discretion it required the posting of security under section 834 of the Corporations Code, and prohibition is consequently not available to petitioners to compel the court to desist from enforcing its order to that effect.
*507It is of course true that section 834 “is not designed and does not operate to deprive a shareholder of any vested property right. By its very words the section relates solely to actions which may be 1 instituted or maintained in the right of any domestic or foreign corporation by the holder ... of shares ... of such corporation.’ (Italics added.) Since the statute is directed only at actions instituted or maintained ‘in the right’ of the corporation it has no application to actions or suits seeking directly to enforce personal rights of shareholders. Stockholders, if they have a personal cause of action, are still free to sue the corporation, the majority stockholders, or the directors of the corporation, and to recover for any cause they can establish.” (Hogan v. Ingold (1952), supra, 38 Cal.2d 802, 809.) If petitioners’ complaint in intervention stated a cause only for their individual and personal claims as stockholders, section 834 would have no application and the order of the court would apparently be erroneous and, we may assume, “beyond its jurisdiction” as that term is used in relation to granting prohibition. (Abelleira v. District Court of Appeal (1941), 17 Cal.2d 280, 287 [3, 4, 5, 6] et seq. [109 P.2d 942, 132 A.L.R. 715] ; City of Los Angeles v. Superior Court (1959), 51 Cal.2d 423, 429-430 [2] [333 P.2d 745] [“To permit the issuance of prohibition it is not necessary that there be a lack of jurisdiction over the subject matter or parties in the fundamental sense but only that there be a want or excess of the power of the court as defined by statute or by rules developed and followed under the doctrine of stare decisis. (Tidewater Assoc. Oil Co. v. Superior Court, 43 Cal.2d 815, 821 [279 P.2d 35] ; Abelleira v. District Court of Appeal, 17 Cal.2d 280, 287 et seq. [109 P.2d 942, 132 A.L.R. 715])”] ; Lawson v. Superior Court (1957), 155 Cal.App.2d 755, 760 [6] [318 P.2d 812] [“Where a court has no jurisdiction to act except in a particular manner, it may be restrained by prohibition from acting in a different, unauthorized manner or may be compelled by mandate to act in a particular manner”] ; see also Rescue Army v. Municipal Court (1946), 28 Cal.2d 460, 462-464 [la, 2a, 3] [171 P.2d 8].) But in addition to the matters which appear to relate to stockholders’ personal rights, the complaint here, as already shown, alleges facts and seeks relief which are competent only in a derivative action.
Moreover, in a prohibition proceeding all presumptions are in favor of the propriety of the lower court’s action, and the burden is on the petitioners to establish any claimed excess of jurisdiction. (See Franklin v. Superior Court (1950), 98 *508Cal.App.2d 292, 294 [2] [220 P.2d 8] ; 40 Cal.Jur.2d 158, § 13; id. 262-265, §§ 85, 86, and cases there cited.) Here, since we do not have a complete record of the proceedings in the trial court, it is our duty to presume that the order requiring the posting of security was intended to be and would be applied only to the derivative aspects of petitioners’ complaint in intervention, and not to their personal rights as alleged stockholders. There is no showing that petitioners have ever been ordered to post security in an action or on a cause of action pleading only stockholders’ personal rights. It is of course true that in the absence of a complete record petitioners’ assertions as to the legal effect of the pleadings and proceedings in the dissolution action can not properly be accepted in derogation of the lower court’s jurisdiction.
Additionally, even if we assume, contrary to the rule in prohibition cases, that the lower court erred in some detail of its order, no case for issuance of the writ is made out. It is elementary that prohibition will not issue where there is a plain, speedy, and adequate remedy by appeal. (Code Civ. Proc., §1103; Bowles v. Superior Court (1955), 44 Cal.2d 574, 581-582 [1] [283 P.2d 704]; Brock v. Superior Court (1947), 29 Cal.2d 629, 637 [3] [177 P.2d 273, 170 A.L.R. 521]; 40 Cal.Jur.2d 134-139, and cases there cited.) The majority concede that petitioners have a remedy by appeal, and even petitioners themselves do not suggest that such remedy is not adequate, but merely content themselves with asserting that inasmuch as no judgment of dismissal has (as of the time of their application) been entered “there is nothing from which to appeal.” As declared in Melancon v. Superior Court (1954), 42 Cal.2d 698, 704 [2] [268 P.2d 1050] (wherein petitioner sought both mandate and prohibition), “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,” (italics added) where petitioners’ complaints go only to error and not to the jurisdiction of the court. (See also C. S. Smith Metropolitan Market Co. v. Superior Court (1940), 16 Cal.2d 226, 228 [1] [105 P.2d 587].) Moreover, as the majority concede, petitioners are not without a remedy despite their assertion that inasmuch as no judgment of dismissal has been entered “there is nothing from which to appeal. ’' If petitioners properly request and the court refuses to enter an order or judgment from which they can appeal, then mandamus lies to compel *509entry of judgment to put petitioners in a position to test on appeal the propriety (including the scope) of the order requiring them to post security. (See Berri v. Superior Court (1955), 43 Cal.2d 856, 860-861 [11] [279 P.2d 8]; 32 Cal.Jur.2d 207-214, and cases there cited.)
I wish further to emphasize that this is the first time, insofar as any ease called to my attention discloses, that the mere issuance of an order to show cause has been relied upon as a basis for ultimate issuance of the peremptory writ despite the admitted existence of an adequate remedy by appeal. It is to be remembered that in this case no alternative writ has been issued, as was done in City & County of San Francisco v. Superior Court (1959), ante, p. 236 [347 P.2d 294] ; City of Los Angeles v. Superior Court (1959), 51 Cal.2d 423, 429 [1] [333 P.2d 745]; Atkinson v. Superior Court (1957), 49 Cal.2d 338, 342 [2] [316 P.2d 960]; and Bowles v. Superior Court (1955), supra, 44 Cal.2d 574, 582 [2, 3], yet the majority cite the above listed four cases and in each ease note a page of the decision on which the only conceivably relevant proposition is a holding to the effect that when the District Court of Appeal or this court issues an alternative writ it ipso facto determines that there is no other adequate remedy. In the Atkinson case the majority cite page 342 (“Since no purpose but delay would be served at this time by reviewing the District Court’s decision that the remedy by appeal was inadequate, we accept it for the purposes of these proceedings.”). In the Bowles case the majority cite page 582 (“It was, of course, the duty of that court [the District Court of Appeal] before issuing an alternative writ to determine whether petitioners had another plain, speedy and adequate remedy in the ordinary course of law.”). In City & County of San Francisco v. Superior Court, page 243, ante, is cited by the majority (“The absence of another adequate remedy was determined by this court when we granted an alternative writ.”) In City of Los Angeles v. Superior Court the majority cite page 429 (“The absence of another adequate remedy was determined by this court when we granted an alternative writ.”) Appended to the citation of those cases in the majority opinion is footnote 1, reading as follows: “In these eases an alternative writ rather than an order to show cause has issued. An order to show cause, however, like an alternative writ, entails an expenditure of time and effort of court and counsel that would be wasted if another remedy -were subsequently found adequate and the merits of the dis*510pute, although fully presented, were not determined. ’ ’ Such citations of authority coupled with the footnote seem to make it clear that in this case the majority are holding, without specifically so stating, that when this court issued its mere order to show cause it likewise determined that petitioners had no adequate remedy other than the writ.
It is a fact disclosed by the records of this court that at its conference session on August 5, 1959, only four justices, one of whom is the author of this dissent, voted to issue the order to show cause. At that time the author of the dissent did not determine, and since then he has not determined, that another adequate remedy is lacking here. Nor did a majority of the court so determine. Yet the present majority dispose of the issue as to adequacy of remedy by declaring that “an appeal, however, would raise a question that has already been fully presented and considered at length in this proceeding, and no purpose but delay, to the prejudice of the parties and the courts, would be served by refusing to decide the jurisdictional question at this time. ’ ’ Such a statement is scant support for proceeding to issue the writ where appeal is admittedly not only available, but is both adequate and a more appropriate remedy; it is, indeed, the only remedy which can provide a record on which this court can properly determine whether the trial court even erred in the exercise of its jurisdiction. The duteous purpose of preserving the integrity of the law would be served by adhering to the fundamental rule that prohibition is not available where there is an adequate remedy by appeal; rendering the law uncertain by such departures as this only adds to the difficulties of practicing lawyers and the judges of other courts—and ultimately to the burdens of this court.
I believe that the better view is that the purpose of the order to show cause issued after we granted a hearing was to give the parties further opportunity to brief and present their contentions on all issues and this court a like opportunity for further study of those contentions. The mere issuance of an order to show cause should not, in my opinion, be relied upon as a basis for issuing the writ in derogation of established procedural principles. Heretofore it has been apparently unquestioned law that “An order to show cause is a notice of motion and a citation to the party to appear at a stated time and place to show cause why a motion should not be granted. ’ ’ (Difani v. Riverside County Oil Co. (1927), 201 Cal. 210, 213-214 [1] [256 P. 210].) And as stated in McAuliffe v. *511Coughlin (1894), 105 Cal. 268, 270 [38 P. 730], “The order to show cause was simply a notice of the motion, and a citation of the defendant to appear at a stated time and place and show cause why plaintiff’s motion should not be granted. Such orders are frequently made, especially on applications for injunctions and writs of mandate. They are never prejjxidicial to the rights of the party cited.” (Italics added.) Again, in Green v. Gordon (1952), 39 Cal.2d 230, 232 [1, 2] [246 P.2d 38], this court followed the rule, stating “ [1] An order to show cause is in the nature of a citation to a party to appear at a stated time and place to show why the requested relief should not be granted. (See Difani v. Riverside County Oil Co., 201 Cal. 210, 213-214 [256 P. 210].) [2] Obviously, a showing on general demurrer that the petition does not state sufficient facts to justify relief is a complete answer to an order to show cause, and the court is then warranted in discharging the order and dismissing the proceeding.” In the interests of certainty, for the benefit of the profession, the status of the above cited cases which, although not mentioned by the majority, are apparently overruled sub silentio insofar as the holdings above quoted are concerned, should be unequivocally defined. It is manifest that such holdings are inconsistent with the present majority’s implied holding, hereinabove discussed, that the mere issuance of an order to show cause why a writ of prohibition should not issue constitutes a determination that there is no other adequate remedy available.
Certainly, as shown hereinabove, appeal is the more appropriate remedy in this case if we are to consider whether, as suggested by petitioners, the court below erred in failing to grant leave to amend. This remedy appears to be plainly adequate and is the only remedy which can present the entire record for review as to possible errors at law.
I do not believe it serves the interests of justice or wise court administration to permit resort to the extraordinary writs upon the mere plea that no judgment has as yet been entered and therefore “there is nothing from which to appeal.”
By the terms of the complaint in intervention which was before the trial court at the time it ordered the security posted, and a copy of which is included in the present record, petitioners seek relief which, as hereinabove shown, is indisputably in substantial part derivative in nature. We cannot on this petition for prohibition review for possible error a *512record which is not before us; neither, if we adhere to established law, can we hold that the court did not have jurisdiction to make the subject order.
I would discharge the order to show cause heretofore issued and deny the writ sought.
Spence, J., and McComb, J., concurred.
The petition of the real parties in interest for a rehearing was denied February 24, 1960. Peek, J. pro tern.,* participated therein in place of White, J., who deemed himself disqualified. Sehauer, J., Spence, J., and McComb, J., were of the opinion that the petition should be granted.

The complaint in intervention also alleged the following, among other things:
“Fairfield is the alter ego of said Corporation . . . [TJhat said Corporation is a dormant shell only, without substance, and that Fairfield is an interloper who has, without proper, or any, authority, obtained possession of all of the Corporate books, records and papers, and has secured, and now has, full control of and dominion over all of said Corporation’s assets, and has collected $16,500.00 of Corporate monies. . . . [TJhat . . . Fairfield has collected other sums.
“That . . . the corporate powers . . . are being illegally executed . . . and a wrongful diversion of corporate funds has occurred and will continue to occur. . . . That plaintiffs in intervention bring this . . . proceeding in behalf of themselves and on behalf of all other shareholders . . . who desire to join in said proceedings. . . . [TJhat . . . Fairfield, and perhaps [others] . . . are indebted to Benedict Heights, Inc., for their actions with respect to assets of the Corporation, and for dereliction of duty. . . .’’

Assigned by Chairman of Judicial Council.