Suburban Water Systems v. Superior Court

McCOY, J. pro tem.

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This is a proceeding for a writ of mandate to require the Superior Court for Los Angeles County to hear and determine on the merits petitioners’ motions under section 834 of the Corporations Code in action number 839957 now pending in that court.

In June 1964 a complaint was filed in the respondent court entitled “Constance A. Gamier, Trustee, and Gamier Enterprises, Inc., a corporation, co-partners doing business under the name and style of San Jose Ranch Company, and Constance A. Gamier. Individually, on behalf of themselves and of all other shareholders of Suburban Water Systems, Inc., a corporation, Plaintiffs, vs. Suburban Water Systems, Inc., a corporation, Camille A. Gamier, Carr H. Deitz, Walker Han-non, Monroe Harris, Valinda Engineering Company, a corporation, La Puente Co-Operative Water Company, a corporation, and Does I through XXX, Inclusive, Defendants.” Admittedly, as the complaint is captioned, this is a shareholders’ derivative suit. Sometime after the filing of the complaint, the defendants Suburban Water Systems, Camille A. Gamier, and Carr H. Deitz noticed motions for orders requiring the plaintiffs to furnish security for the costs of the moving defendants as provided in section 834 of the Corporations Code. These motions were heard on April 17 and May 9, 1967, on which latter date they were ordered submitted on the filing of further declarations. The court did not rule on these motions until January 17, 1968, at which time all three motions were denied.

On February 21, 1968, the court granted the motion of Suburban Water Systems to reconsider its ruling of January 17 as to the three moving defendants, and upon reconsideration, made the following order: “Motions of the said defendants for security pursuant to Section 834, Corporations Code, are denied as a matter of law, because plaintiffs’ holdings amount to more than 5% of Suburban; Water Systems, InC. stock' and are therefore a substantia,! interest.” It is this order which is the subject of the proceeding before'us. ............

[958]

Petitioners contend that the respondent court refused to exercise its jurisdiction under section 834 of the Corporations Code, in that it failed to determine on the evidence before it whether the moving parties had established a probability in support of the grounds upon which their motions were made, as required by that section, and that, instead, the court denied the motions “as a matter of law,” basing its decision on an erroneous interpretation of section 834.