Circuit Court of Appeals, Third Circuit. MAXWELL v. ENTERPRISE WALL PAPER MFG. CO. et al. age | 1 P No. 8156.

Argued Oct. 23, 1942. Decided Nov. 4, 1942. Appeal from the District Court of the United States for the Eastern District of Pennsylvania; George A. Welsh, Judge. Action by Walter C. Maxwell against Enterprise Wall Paper Manufacturing Company and others for an accounting and other relief. From an order, 47 F.Supp. 999, appointing receivers, the defendants Julius Isaacs, Philip Isaacs and Enterprise Wall Paper Manufacturing Company appeal. Reversed and remanded with directions.

hearing within the meaning of Sec. 129 when it is issued upon the complaint, affidavit, and argument of counsel for the plaintiff, without notice to his opponents? The authorities are sharply divided upon this question. Some maintain that the statute contemplates a hearing wherein both sides are present to plead, argue and present evidence upon the relief sought.FN2 The first and fifth circuits have held that less than this may constitute a hearing for the purposes of appellate jurisdiction. FN3 The manifest purpose of the statute is to enable a litigant to seek prompt review in an appellate court from an order or decree which in most instances is effective upon its rendition and is drastic and far reaching in effect. With this as its basis, it is unlikely that Congress meant to exclude hearings where the order is granted by a court after reading the papers and listening to the arguments of the complainant. Although onesided, we think that such proceedings are nevertheless a hearing within the meaning of Sec. 129 for the purposes of appellate jurisdiction FN1. 28 U.S.C.A. 227.

Janz N. Serrano that the acts which the defendants are alleged to have done would not, if proved, entitle plaintiff to relief. What form of equitable relief a plaintiff is to be given by a federal court for infringement of his rights, we have held to be a matter to be determined by federal law, not state decisions. Black & Yates, Inc., v. Mahogany Ass'n, Inc., 3 Cir., 1942, 129 F.2d 227, certiorari denied 1942, 63 S.Ct. 76, 87 L.Ed.- . In this case, however, we do not think that there is any difference between the principles determining the appointment of receivers as enunciated by Pennsylvania courtsFN4 and *403 those found in the federal decisions cited below. FN4. There is a comprehensive discussion of the law of receivers by the Supreme Court of Pennsylvania in McDougall v. Huntingdon & Broad Top R. & C. Co., 1928, 294 Pa. 108, 143 A. 574. Although, mismanagement, fraud, or misappropriation by the directors and officers of a corporation are recognized as grounds for the appointment of a receiver, the Court also states other controlling factors which are to be considered. Thus it states that * * * the conditions that call it into action should be such as would, if persisted in, ordinarily be fatal to corporate life. * * * The court, before any appointment is made, will act with the utmost caution. Receivers will not be appointed unless the chancellor is convinced the right is free from doubt, * * * the loss irreparable, with no adequate legal remedy, and the relief sought is necessary. Page 117 of 294 Pa.,page 577 of 143 A. * * * As to the limitation on the exercise of the power in cases where there is any other adequate remedy, * * * the rule, while stated in general terms and never directly denied, is often disregarded, and this tendency is growing in some jurisdictions: * * *. Page 119 of 294 Pa.,page 578 of 143 A. Prior to this, the Court noted that the courts have been liberal in appointing receivers to protect the interests of minority shareholders and that although this is desirable, * * * there is danger of going too far. Page 119 of 294 Pa., page 578 of 143 A.While the Court did not discuss ex parte appointments of receivers, it seems unlikely that the Pennsylvania rule in this respect is any different from that prevailing in the overwhelming majority of jurisdictions. As evidence of this see Pennsylvania Rules of Equity Practice, Rule 41 (Whenever the exigency of a case requires it, a temporary receiver may be appointed, without notice to the parties interested, * * *. The appointment shall continue until a hearing can be had, which shall be fixed at as early a date as possible, * * *. See f.n. 3, supra, as to the terms of the order in the case at bar.) and Hagerman v. Street Ry. Co., 1906, 10 Northam.Law Rep.,Pa., 243 (requiring, for an ex parte appointment of a receiver, a showing of the gravest emergency and of peril immediately threatening the security and safety of property * * *).

Before BIGGS, MARIS, and GOODRICH, Circuit Judges. GOODRICH, Circuit Judge.

FN2. Dreutzer v. Frankfort Land Co., 6 Cir., 1895, 65 F. 642, 646; Root v. Mills, 7 Cir., 1909, 168 F. 688, 690; Pacific Northwest Packing Co. v. Allen, 9 Cir., 1901, 109 F. 515, 516.

This is an appeal from an order appointing receivers for the Enterprise Wall Paper Mfg. Co. Plaintiff is a minority shareholder of the company. The complaint was filed on September 10, 1942. Application for the appointment of a receiver accompanied it and receivers were appointed by the District Court on the same day without notice to any of the defendants. While the defendants' argument in this Court has raised a number of issues, we think the controlling question is whether the facts alleged in the verified complaint and supporting affidavit justified the exercise of discretion by the trial court in the appointment of the receivers. Defendants have filed no answer or other pleading which, by introducing questions of fact, has lost them their right to raise the question of the sufficiency of the plaintiff's complaint and affidavit to support the appointment. *402 [1] [2] [3] A preliminary point which we must consider, although not raised by either party, is whether the Court may entertain this appeal. Appellate jurisdiction in such cases is governed by Sec. 129 of the Judicial Code,FN1 which provides that Where, upon a hearing in a district court, * * * an interlocutory order or decree is made appointing a receiver, * * * an appeal may be taken from such interlocutory order or decree to the circuit court of appeals;. Is an interlocutory order appointing a receiver one made upon a

FN3. Haight & Freese Co. v. Weiss, 1 Cir., 1907, 156 F. 328, 334, certiorari denied, 1907, 207 U.S. 594, 28 S.Ct. 260, 52 L.Ed. 356; Joseph Dry Goods Co. v. Hecht, 5 Cir., 1903, 120 F. 760. Two later cases in the Fifth Circuit have modified this case, by deciding that whether an ex parte hearing is a hearing under Sec. 129 depends upon the term of the receiver appointed, the sweeping effect of the order, and whether a hearing for the opponent within a reasonably short time is provided. In the absence of such ameliorating conditions the court has held the order appealable under Sec. 129. Marion Mortgage Co. v. Edmunds, 5 Cir., 1933, 64 F.2d 248; Williams Holding Co. v. Pennell, 5 Cir., 1936, 86 F.2d 230. It seems doubtful to us that the order resulting from the purported hearing should determine whether it was a hearing under Sec. 129 in the first instance. Be that as it may, the order issued in the case at bar is, in its terms, a general one appointing a receiver for the defendant company without limitation as to time, and not providing for any hearing.

[4] [5] A second preliminary point, also not raised by the parties, is whether state or federal law governs their rights herein. The corporate defendant is a Pennsylvania corporation and the rights and duties of the shareholders among themselves and the corporation are measured by Pennsylvania law. Restatement, Conflict of Laws (1934) Sec. 199, comment a; see also Secs. 192-202. There is no suggestion

[6] [7] We start with the undisputed premise that the granting or refusal of the appointment of a receiver is, in the first instance, a matter of discretion for the lower court and that we are not to substitute our discretion for that of the trial

judge.FN5 Equally undisputed, however, is the limitation that discretion is governed by legal principles applicable to the situation and if we deem them to have been departed from, it is our duty to correct the error. Likewise, it has been judicially noted almost innumerable times that the appointment of a receiver is an extraordinary, a drastic and, in the words of the Pennsylvania Court,FN6 an heroic remedy. It is not to be P age | 2 resorted to if milder measures will give the plaintiff, whether creditor or shareholder, adequate protection for his rights.FN7 FN5. Milwaukee & Minnesota R. Co. v. Soutter, 1864, 154 U.S. 540, 14 S.Ct. 1158, 17 L.Ed. 604; Fosdick v. Schall, 1878, 99 U.S. 235, 253, 25 L.Ed. 339; Kingsport Press, Inc., v. Brief English Systems, Inc., 2 Cir., 1931, 54 F.2d 497, certiorari denied, Owen v. Kingsport Press, 1932, 286 U.S. 545, 52 S.Ct. 497, 76 L.Ed. 1282.

FN8. A. G. Col Co. v. Superior Court in and for Santa Clara County, 1925, 196 Cal. 604, 238 P. 926, 930; Simpson v. Adkins, 1941, 311 IllApp. 543, 37 N.E.2d 355, 358; Kent Avenue Grocery Co. v. George Hitz & Co., 1918, 187 Ind. 606, 120 N.E. 659, 660; State Founders, Inc., v. Oliver, 1933, 165 Md. 360, 169 A. 59, 67; State ex rel. Claude v. District Court for Fourth Judicial Dist., 1939, 204 Minn. 415, 283 N.W. 738, 740; State ex rel. Thornton-Thomas Mercantile Co. v. Second Judicial District Court of Silver Bow County, 1897, 20 Mont. 284, 50 P. 852, 854; State ex rel. Schoenfelder v. Owen, 1941, 347 Mo. 1131, 152 S.W.2d 60, 65; Gossett v. First-Trust Joint Stock Land Bank of Chicago, Tex. Civ. App. 1940, 138 S.W.2d 904, 906.As to Pennsylvania, see f.n. 4, supra.

Janz N. Serrano Corporation. 5. The sale to certain corporations wholly owned by the individual defendants of merchandise at prices greatly reduced and below the normal market. 6. The unlawful diversion by the defendants, Philip Isaacs and Julius Isaacs, of money belonging to the Enterprise Corporation. 7. A loan by defendants, Philip Isaacs and Julius Isaacs, to the Enterprise Corporation of money which, in fact, belonged to the corporation by the representation that it was individual property and the repayment thereof by the Enterprise Corporation to the individual lenders. 8. The destruction of records and accounts by Philip Isaacs and Julius Isaacs with a fraudulent intent of hindering and defeating an accounting. 9. Allegations showing the necessity of an accounting. Plaintiff contends that grounds 2, 4, 5 and 8 allege continuing acts by the defendants. We do not get this from the allegations found in the complaint. With regard to point 8, if the records are in fact destroyed they are gone and neither a receiver nor anyone else can get them back. The allegations of wrongful diversion of corporate funds are alleged to have occurred in 1936, 1937, and 1938. The date of the improper loan (point 7) is not specified. These allegations, while they state past misconduct, do not bring the case within the imperious necessity rule enunciated above. [11] We think that the plaintiff's complaint states a satisfactory reason why the action was brought in the name of an individual minority shareholder without an endeavor to get corporate action against individual defendants. We also think that it states facts which, if they are proved, call for an accounting. It also states facts which may call for ancillary protection by way of injunction, impounding of records or otherwise, if there appears danger that books or documents of the corporation are in danger of being mutilated or destroyed. Further protective measures may be availed of if the necessity arises. We do not find in the allegations, however, any such grounds of immediate emergency that call for the appointment of a receiver, characterized in the decisions as one of last resort,FN10 to the exclusion of other remedies. There is nothing to make it appear that the business is not being competently run; attention has already been called to the fact that it appears to be in a *405 sound and prosperous condition. There are charges which, if substantiated, indicate that minority shareholders have not been receiving their share of the benefits of the enterprise. And if this appears to be the case, they are, of course, entitled to court help to secure them. But the help required falls far short in our judgment of the drastic remedy of receivership, certainly at this state of the litigation. We conclude, therefore, that the appointment of the receivers in this case was beyond the discretion to be exercised by the trial judge. The order is, therefore, reversed and the case remanded to the District Court with directions to vacate the order appointing the receivers, and to retain the case for further proceedings not inconsistent with this opinion.

FN6. McDougall v. Huntingdon & Broad Top R. & C. Co., supra, 294 Pa.at page 117, 143 A.at page 577.

FN7. Collins v. Williamson, 6 Cir., 1915, 229 F. 59, 67; Smith v. Chase & Baker Piano Mfg. Co., D.C.E.D. Mich. 1912, 197 F. 466, 472; Lowe v. Pioneer Threshing Co., C.C.D. Minn. 1895, 70 F. 646; United Electric Securities Co. v. Louisiana Electric Light Co., C.C.E.D. La. 1895, 68 F. 673.

[8] [9] The caution which should surround the appointment of a receiver is heightened when such appointment is sought peremptorily in a proceeding in which the opposition has neither notice nor opportunity to be heard. In the case of actual emergency it may be done. Tennessee Pub. Co. v. Carpenter, 6 Cir., 1938, 100 F.2d 728, 732. It is to be exercised sparingly and with great caution, and only under extreme and exceptional circumstances. Central West Public Service Company v. Craig, 8 Cir., 1934, 70 F.2d 427, 429, 430. The courts speak of it as proper only in a case of imperious necessity, when the right of the complainant, on the showing made by him, is undoubted, and when such relief and protection can be given in no other way. Cabaniss v. Reco Min. Co., 5 Cir., 1902, 116 F. 318, 324; Joseph Dry Goods Co. v. Hecht, 5 Cir., 1903, 120 F. 760; Mann v. Gaddie, 5 Cir., 1907, 158 F. 42. Similar language is found in Kolb Coal Co. v. Sauter, 7 Cir., 1924, 295 F. 690. Language to this general effect is found in the decisions of many courts, both state and federal.FN8 The phraseology may vary, but the enunciation of the general point of view is clear *404 enough. Our immediate question is whether that point of view which may accurately be described as a controlling principle of law was observed in the instant case.

[10] The plaintiff is a minority shareholder of the Enterprise Wall Paper Mfg. Co. He complains of mismanagement of the corporation by one of the individual defendants in ways to be noted presently. He does not allege that because of this mismanagement or otherwise the corporation is insolvent or is in danger of becoming so. Indeed, by the report of accountants, subsequently brought into the record by stipulation between the parties, it appears that far from being in danger of insolvency, the principal corporate defendant is a successful business enterprise and in a very sound financial position. This is not alone a conclusive ground for negativing a receivership for a receiver may, in an appropriate case, be appointed for a solvent concern.FN9 But certainly it is an item to be considered in determining the appropriateness of a receivership appointment. Major operations are seldom indicated for healthy patients. FN9. Annotations: 1926, 43 A.L.R. 242; 1929, 61 A.L.R. 1212; 1934, 91 A.L.R. 665.

The plaintiff in argument to this Court has summarized what he believes are the allegations in his complaint which entitle him to the relief granted. They are as follows: 1. Complete domination of the corporation by the defendant, Philip Isaacs, as a result of majority stock ownership and by the method in which he conducted its affairs. 2. The employment by the defendant, Philip Isaacs, of relatives at exorbitant salaries and the payment of salaries to other relatives who performed no services. 3. The use of fictitious expense accounts for non-existent employees in order that the defendants, Philip Isaacs and Julius Isaacs, might fraudulently appropriate the amount of such accounts. 4. the exploration of the New England field of business at the expense of the Enterprise Corporation for three years through the establishment there of a branch and, it having proved successful, the incorporation of a new company in which the individual defendants own practically all of the stock with the resultant profits to them and loss to the Enterprise

Janz N. Serrano FN10. A.L.R. annotations cited in the previous footnote.

C.A.3 1942. MAXWELL v. ENTERPRISE WALL PAPER MFG. CO. 131 F.2d 400 P age | 3 END OF DOCUMENT

Fuentes v. Shevin, 407 U.S. 67 (1972) Fuentes v. Shevin No. 70-5039 P age | 4 Argued November 9, 1971 Decided June 12, 1972* 407 U.S. 67 APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF FLORIDA Syllabus Appellants, most of whom were purchasers of household goods under conditional sales contracts, challenge the constitutionality of prejudgment replevin provisions of Florida law (in No. 70-5039) and Pennsylvania law (in No. 70-5138). These provisions permit a private party, without a hearing or prior notice to the other party, to obtain a prejudgment writ of replevin through a summary process of ex parte application to a court clerk, upon the posting of a bond for double the value of the property to be seized. The sheriff is then required to execute the writ by seizing the property. Under the Florida statute, the officer seizing the property must keep it for three days. During that period, the defendant may reclaim possession by posting his own security bond for double the property's value, in default of which the property is transferred to the applicant for the writ, pending a final judgment in the underlying repossession action. In Pennsylvania, the applicant need not initiate a repossession action or allege (as Florida requires) legal entitlement to the property, it being sufficient that he file an "affidavit of the value of the property"; and to secure a post-seizure hearing, the party losing the property through replevin must himself initiate a suit to recover the property. He may also post his own counterbond within three days of the seizure to regain possession. Included in the printed form sales contracts that appellants signed were provisions for the sellers' repossession of the merchandise on the buyers' default. Three-judge District Courts in both cases upheld the constitutionality of the challenged replevin provisions. Held: 1. The Florida and Pennsylvania replevin provisions are invalid under the Fourteenth Amendment since they work a

deprivation of property without due process of law by denying the right to a Page 407 U. S. 68 prior opportunity to be heard before chattels are taken from the possessor. Pp. 407 U. S. 80-93. (a) Procedural due process in the context of these cases requires an opportunity for a hearing before the State authorizes its agents to seize property in the possession of a person upon the application of another, and the minimal deterrent effect of the bond requirement against unfounded applications for a writ constitutes no substitute for a preseizure hearing. Pp. 407 U. S. 80-84. (b) From the standpoint of the application of the Due Process Clause, it is immaterial that the deprivation may be temporary and nonfinal during the three-day post-seizure period. Pp. 407 U. S. 84-86. (c) The possessory interest of appellants, who had made substantial installment payments, was sufficient for them to invoke procedural due process safeguards notwithstanding their lack of full title to the replevied goods. Pp. 407 U. S. 86-87. (d) The District Courts erred in rejecting appellants' constitutional claim on the ground that the household goods seized were not items of "necessity," and therefore did not require due process protection, as the Fourteenth Amendment imposes no such limitation. Pp. 407 U. S. 88-90. (e) The broadly drawn provisions here involved serve no such important a state interest as might justify summary seizure. Pp. 407 U. S. 90-93. 2. The contract provisions for repossession by the seller on the buyer's default did not amount to a waiver of the appellants' procedural due process rights, those provisions neither dispensing with a prior hearing nor indicating the procedure by which repossession was to be achieved. D. H. Overmyer Co. v. Frick Co., 405 U. S. 174, distinguished. Pp. 407 U. S. 94-96. No. 70-5039, 317 F.Supp. 954, and No. 70-5138, 326 F.Supp. 127, vacated and remanded. STEWART, J., delivered the opinion of the Court, in which DOUGLAS, BRENNAN, and MARSHALL, JJ., joined. WHITE, J., filed a dissenting opinion, in which BURGER, C.J., and BLACKMUN, J., joined, post, p. 407 U. S. 97. POWELL and

Janz N. Serrano REHNQUIST, JJ., took no part in the consideration or decision of the cases. Page 407 U. S. 69 MR. JUSTICE STEWART delivered the opinion of the Court. We here review the decisions of two three-judge federal District Courts that upheld the constitutionality of Florida and Pennsylvania laws authorizing the summary seizure of goods or chattels in a person's possession under a writ of replevin. Both statutes provide for the issuance of writs ordering state agents to seize a person's possessions, simply upon the ex parte application of any other person who claims a right to them and posts a Page 407 U. S. 70 security bond. Neither statute provides for notice to be given to the possessor of the property, and neither statute gives the possessor an opportunity to challenge the seizure at any kind of prior hearing. The question is whether these statutory procedures violate the Fourteenth Amendment's guarantee that no State shall deprive any person of property without due process of law. I The appellant in No. 5039, Margarita Fuentes, is a resident of Florida. She purchased a gas stove and service policy from the Firestone Tire and Rubber Co. (Firestone) under a conditional sales contract calling for monthly payments over a period of time. A few months later, she purchased a stereophonic phonograph from the same company under the same sort of contract. The total cost of the stove and stereo was about $500, plus an additional financing charge of over $100. Under the contracts, Firestone retained title to the merchandise, but Mrs. Fuentes was entitled to possession unless and until she should default on her installment payments. For more than a year, Mrs. Fuentes made her installment payments. But then, with only about $200 remaining to be paid, a dispute developed between her and Firestone over the servicing of the stove. Firestone instituted an action in a small claims court for repossession of both the stove and the stereo, claiming that Mrs. Fuentes had refused to make her remaining payments. Simultaneously with the filing of that action and before Mrs. Fuentes had even received a summons to answer its complaint, Firestone obtained a writ of replevin ordering a sheriff to seize the disputed goods at once. In conformance with Florida procedure, [Footnote 1] Firestone

Page 407 U. S. 71 had only to fill in the blanks on the appropriate form documents and submit them to the clerk of the small claims court. The clerk signed and stamped the documents and issued a writ of replevin. Later the same day, a local deputy sheriff P an agent of Firestone went to Mrs. Fuentes' home and and age | 5 seized the stove and stereo. Shortly thereafter, Mrs. Fuentes instituted the present action in a federal district court, challenging the constitutionality of the Florida prejudgment replevin procedures under the Due Process Clause of the Fourteenth Amendment. [Footnote 2] She sought declaratory and injunctive relief against continued enforcement of the procedural provisions of the state statutes that authorize prejudgment replevin. [Footnote 3] The appellants in No. 5138 filed a very similar action in a federal district court in Pennsylvania, challenging the constitutionality of that State's prejudgment replevin process. Like Mrs. Fuentes, they had had possessions seized under writs of replevin. Three of the appellants had purchased personal property -- a bed, a table, and other household goods -- under installment sales contracts like the one signed by Mrs. Fuentes, and the sellers of the property had obtained and executed summary writs of replevin, claiming that the appellants had fallen behind in their installment payments. Page 407 U. S. 72 The experience of the fourth appellant, Rosa Washington, had been more bizarre. She had been divorced from a local deputy sheriff, and was engaged in a dispute with him over the custody of their son. Her former husband, being familiar with the routine forms used in the replevin process, had obtained a writ that ordered the seizure of the boy's clothes, furniture, and toys. [Footnote 4] In both No. 5039 and No. 5138, three-judge District Courts were convened to consider the appellants' challenges to the constitutional validity of the Florida and Pennsylvania statutes. The courts in both cases upheld the constitutionality of the statutes. Fuentes v. Faircloth, 317 F.Supp. 954 (SD Fla); Epps v. Cortese, 326 F.Supp. 127 (ED Pa.). [Footnote 5] We noted probable jurisdiction of both appeals. 401 U.S. 906; 402 U.S. 994.. Page 407 U. S. 73 II

Under the Florida statute challenged here, [Footnote 6] "[a]ny person whose goods or chattels are wrongfully detained by any other person . . . may have a writ of replevin to recover them. . . ." Fla.Stat.Ann. 78.01 (Supp. 1972-1973). There is no requirement that the applicant make a convincing showing before the seizure Page 407 U. S. 74 that the goods are, in fact, "wrongfully detained." Rather, Florida law automatically relies on the bare assertion of the party seeking the writ that he is entitled to one and allows a court clerk to issue the writ summarily. It requires only that the applicant file a complaint, initiating a court action for repossession and reciting in conclusory fashion that he is "lawfully entitled to the possession" of the property, and that he file a security bond "in at least double the value of the property to be replevied conditioned that plaintiff will prosecute his action to effect and without delay and that, if defendant recovers judgment against him in the action, he will return the property, if return thereof is adjudged, and will pay defendant all sums of money recovered against plaintiff by defendant in the action." Fla.Stat.Ann. 78.07 (Supp. 1972-1973). Page 407 U. S. 75 On the sole basis of the complaint and bond, a writ is issued "command[ing] the officer to whom it may be directed to replevy the goods and chattels in possession of defendant . . . and to summon the defendant to answer the complaint." Fla.Stat.Ann. 78.08 (Supp. 1972-1973). If the goods are "in any dwelling house or other building or enclosure," the officer is required to demand their delivery; but, if they are not delivered, "he shall cause such house, building or enclosure to be broken open and shall make replevin according to the writ. . . ." Fla.Stat.Ann. 78.10 (Supp. 1972-1973). Thus, at the same moment that the defendant receives the complaint seeking repossession of property through court action, the property is seized from him. He is provided no prior notice and allowed no opportunity whatever to challenge the issuance of the writ. After the property has been seized, he will eventually have an opportunity for a hearing, as the defendant in the trial of the court action for repossession, which the plaintiff is required to pursue. And he is also not wholly without recourse in the meantime. For, under the Florida statute, the officer who seizes the property must keep it for

Janz N. Serrano three days, and, during that period, the defendant may reclaim possession of the property by posting his own security bond in double its value. But if he does not post such a bond, the property is transferred to the party who sought the writ, pending a final judgment in the underlying action for repossession. Fla.Stat.Ann. 78.13 (Supp. 1972-1973). The Pennsylvania law [Footnote 7] differs, though not in its essential nature, from that of Florida. As in Florida, Page 407 U. S. 76 a private party may obtain a prejudgment writ of replevin through a summary process of ex parte application to a prothonotary. As in Florida, the party seeking Page 407 U. S. 77 the writ may simply post with his application a bond in double the value of the property to be seized. Pa.Rule Civ.Proc. 1073(a). There is no opportunity for a prior hearing, and no prior notice to the other party. On this basis, a sheriff is required to execute the writ by seizing the specified property. Unlike the Florida statute, however, the Pennsylvania law does not require that there ever be opportunity for a hearing on the merits of the conflicting claims to possession of the replevied property. The party seeking the writ is not obliged to initiate a court action for repossession. [Footnote 8] Indeed, Page 407 U. S. 78 he need not even formally allege that he is lawfully entitled to the property. The most that is required is that he file an "affidavit of the value of the property to be replevied." Pa.Rule Civ.Proc. 1073(a). If the party who loses property through replevin seizure is to get even a post-seizure hearing, he must initiate a lawsuit himself. [Footnote 9] He may also, as under Florida law, post his own counterbond within three days after the seizure to regain possession. Pa.Rule Civ.Proc. 1076. III Although these prejudgment replevin statutes are descended from the common law replevin action of six centuries ago, they bear very little resemblance to it. Replevin at common law was an action for the return of specific goods wrongfully taken or "distrained." Typically, it was used after a landlord (the "distrainor") had seized possessions from a tenant (the "distrainee") to satisfy a debt allegedly owed. If the tenant then instituted a replevin action and posted security, the landlord could be ordered to return the property at

Page 407 U. S. 79 once, pending a final judgment in the underlying action. [Footnote 10] However, this prejudgment replevin of goods at common law did not follow from an entirely ex parte process of pleading by the distrainee. For P "[t]he distrainor could always stop the action of replevin by claiming to be the owner of the goods; and as this claim was often made merely to delay the proceedings, the writ de propriatate probanda was devised early in the fourteenth century, which enabled the sheriff to determine summarily the question of ownership. If the question of ownership was determined against the distrainor, the goods were delivered back to the distrainee [pending final judgment]." 3 W. Holdsworth, History of English Law 284 (1927). Prejudgment replevin statutes like those of Florida and Pennsylvania are derived from this ancient possessory action in that they authorize the seizure of property before a final judgment. But the similarity ends there. As in the present cases, such statutes are most commonly used by creditors to seize goods allegedly wrongfully detained -- not wrongfully taken -- by debtors. At common law, if a creditor wished to invoke state power to recover goods wrongfully detained, he had to proceed through the action of debt or detinue. [Footnote 11] These actions, however, did not provide for a return of property before final judgment. [Footnote 12] And, more importantly, on the occasions when the common law did allow prejudgment seizure by state power, it provided some kind Page 407 U. S. 80 of notice and opportunity to be heard to the party then in possession of the property, and a state official made at least a summary determination of the relative rights of the disputing parties before stepping into the dispute and taking goods from one of them. IV For more than a century, the central meaning of procedural due process has been clear: "Parties whose rights are to be affected are entitled to be heard; and in order that they may enjoy that right, they must first be notified." 68 U. S. 233. See Windsor v. McVeigh, 93 U. S. 274; Hovey v. Elliott, 167 U. S. 409; Grannis v. Ordean, 234 U. S. 385. It is equally fundamental that the right to notice and an opportunity to be heard "must be granted at a meaningful time and in a meaningful manner." Armstrong v. Manzo,@ 380 U. S. 545, 380 U. S. 552.

age | 6

The primary question in the present cases is whether these state statutes are constitutionally defective in failing to provide for hearings "at a meaningful time." The Florida replevin process guarantees an opportunity for a hearing after the seizure of goods, and the Pennsylvania process allows a postseizure hearing if the aggrieved party shoulders the burden of initiating one. But neither the Florida nor the Pennsylvania statute provides for notice or an opportunity to be heard before the seizure. The issue is whether procedural due process in the context of these cases requires an opportunity for a hearing before the State authorizes its agents to seize property in the possession of a person upon the application of another. The constitutional right to be heard is a basic aspect of the duty of government to follow a fair process of decisionmaking when it acts to deprive a person of his possessions. The purpose of this requirement is not Page 407 U. S. 81 only to ensure abstract fair play to the individual. Its purpose, more particularly, is to protect his use and possession of property from arbitrary encroachment -- to minimize substantively unfair or mistaken deprivations of property, a danger that is especially great when the State seizes goods simply upon the application of and for the benefit of a private party. So viewed, the prohibition against the deprivation of property without due process of law reflects the high value, embedded in our constitutional and political history, that we place on a person's right to enjoy what is his, free of governmental interference. See Lynch v. Household Finance Corp., 405 U. S. 538, 405 U. S. 552. The requirement of notice and an opportunity to be heard raises no impenetrable barrier to the taking of a person's possessions. But the fair process of decisionmaking that it guarantees works, by itself, to protect against arbitrary deprivation of property. For when a person has an opportunity to speak up in his own defense, and when the State must listen to what he has to say, substantively unfair and simply mistaken deprivations of property interests can be prevented. It has long been recognized that "fairness can rarely be obtained by secret, one-sided determination of facts decisive of rights. . . . [And n]o better instrument has been devised for arriving at truth than to give a person in jeopardy of serious loss notice of the case against him and opportunity to meet it." Joint Ant-Fascist Refugee Committee v. McGrath, 341 U. S. 123, 341 U. S. 170-172 (Frankfurter, J., concurring).

Janz N. Serrano If the right to notice and a hearing is to serve its full purpose, then, it is clear that it must be granted at a time when the deprivation can still be prevented. At a later hearing, an individual's possessions can be returned to him if they were unfairly or mistakenly taken in the first place. Damages may even be Page 407 U. S. 82 awarded to him for the wrongful deprivation. But no later hearing and no damage award can undo the fact that the arbitrary taking that was subject to the right of procedural due process has already occurred. "This Court has not . . . embraced the general proposition that a wrong may be done if it can be undone." Stanley v. Illinois, 405 U. S. 645, 405 U. S. 647. This is no new principle of constitutional law. The right to a prior hearing has long been recognized by this Court under the Fourteenth and Fifth Amendments. Although the Court has held that due process tolerates variances in the form of a hearing "appropriate to the nature of the case," Mullane v. Central Hanover Tr. Co., 339 U. S. 306, 339 U. S. 313, and "depending upon the importance of the interests involved and the nature of the subsequent proceedings [if any]," Boddie v. Connecticut, 401 U. S. 371, 401 U. S. 378, the Court has traditionally insisted that, whatever its form, opportunity for that hearing must be provided before the deprivation at issue takes effect. E.g., Bell v. Burson, 402 U. S. 535, 402 U. S. 542; Wisconsin v. Constantineau, 400 U. S. 433, 400 U. S. 437; Goldberg v. Kelly, 397 U. S. 254; Armstrong v. Manzo, 380 U.S. at 380 U. S. 551; Mullane v. Central Hanover Tr. Co., supra, at 339 U. S. 313; Opp Cotton Mills v. Administrator, 312 U. S. 126, 312 U. S. 152-153; United States v. Illinois Central R. Co., 291 U. S. 457, 291 U. S. 463; Londoner v. City & County of Denver, 210 U. S. 373, 210 U. S. 385-386. See In re Ruffalo, 390 U. S. 544, 390 U. S. 550-551. "That the hearing required by due process is subject to waiver, and is not fixed in form does not affect its root requirement that an individual be given an opportunity for a hearing before he is deprived of any significant property interest, except for extraordinary situations where some valid governmental interest is at stake that justifies postponing the hearing until after the event." Boddie v. Connecticut, supra, at 401 U. S. 379-379 (emphasis in original). Page 407 U. S. 83 The Florida and Pennsylvania prejudgment replevin statutes fly in the face of this principle. To be sure, the requirements that a party seeking a writ must first post a bond, allege

conclusorily that he is entitled to specific goods, and open himself to possible liability in damages if he is wrong, serve to deter wholly unfounded applications for a writ. But those requirements are hardly a substitute for a prior hearing, for they test no more than the strength of the applicant's own belief in his rights. [Footnote 13] Since his private gain is at stake, the danger is all too great that his confidence in his cause P age | 7 will be misplaced. Lawyers and judges are familiar with the phenomenon of a party mistakenly but firmly convinced that his view of the facts and law will prevail, and therefore quite willing to risk the costs of litigation. Because of the understandable, self-interested fallibility of litigants, a court does not decide a dispute until it has had an opportunity to hear both sides -- and does not generally take even tentative action until it has itself examined the support for the plaintiff's position. The Florida and Pennsylvania statutes do not even require the official issuing a writ of replevin to do that much. The minimal deterrent effect of a bond requirement is, in a practical sense, no substitute for an informed evaluation by a neutral official. More specifically, as a matter of constitutional principle, it is no replacement for the right to a prior hearing that is the only truly effective safeguard against arbitrary deprivation of property. While the existence of these other, less Page 407 U. S. 84 effective, safeguards may be among the considerations that affect the form of hearing demanded by due process, they are far from enough by themselves to obviate the right to a prior hearing of some kind. V The right to a prior hearing, of course, attaches only to the deprivation of an interest encompassed within the Fourteenth Amendment's protection. In the present cases, the Florida and Pennsylvania statutes were applied to replevy chattels in the appellants' possession. The replevin was not cast as a final judgment; most, if not all, of the appellants lacked full title to the chattels; and their claim even to continued possession was a matter in dispute. Moreover, the chattels at stake were nothing more than an assortment of household goods. Nonetheless, it is clear that the appellants were deprived of possessory interests in those chattels that were within the protection of the Fourteenth Amendment. A A deprivation of a person's possessions under a prejudgment writ of replevin, at least in theory, may be only temporary. The Florida and Pennsylvania statutes do not require a person to wait until a post-seizure hearing and final judgment to recover

what has been replevied. Within three days after the seizure, the statutes allow him to recover the goods if he, in return, surrenders other property -- a payment necessary to secure a bond in double the value of the goods seized from him. [Footnote 14] But it is now Page 407 U. S. 85 well settled that a temporary, nonfinal deprivation of property is nonetheless a "deprivation" in the terms of the Fourteenth Amendment. Sniadach v. Family Finance Corp., 395 U. S. 337; Bell v. Burson, 402 U. S. 535. Both Sniadach and Bell involved takings of property pending a final judgment in an underlying dispute. In both cases, the challenged statutes included recovery provisions, allowing the defendants to post security to quickly regain the property taken from them. [Footnote 15] Yet the Court firmly held that these were deprivations of property that had to be preceded by a fair hearing. The present cases are no different. When officials of Florida or Pennsylvania seize one piece of property from a person's possession and then agree to return it if he surrenders another, they deprive him of property whether or not he has the funds, the knowledge, and the time needed to take advantage of the recovery provision. Page 407 U. S. 86 The Fourteenth Amendment draws no bright lines around three-day, 10-day or 5-day deprivations of property. Any significant taking of property by the State is within the purview of the Due Process Clause. While the length and consequent severity of a deprivation may be another factor to weigh in determining the appropriate form of hearing, it is not decisive of the basic right to a prior hearing of some kind. B The appellants who signed conditional sales contracts lacked full legal title to the replevied goods. The Fourteenth Amendment's protection of "property," however, has never been interpreted to safeguard only the rights of undisputed ownership. Rather, it has been read broadly to extend protection to "any significant property interest," Boddie v. Connecticut, 401 U.S. at 401 U. S. 379, including statutory entitlements. See Bell v. Burson, 402 U.S. at 402 U. S. 539; Goldberg v. Kelly, 397 U.S. at 397 U. S. 262. The appellants were deprived of such an interest in the replevied goods -- the interest in continued possession and use of the goods. See Sniadach v. Family Finance Corp., 395 U.S. at 395 U. S. 342 (Harlan, J., concurring). They had acquired this

Janz N. Serrano interest under the conditional sales contracts that entitled them to possession and use of the chattels before transfer of title. In exchange for immediate possession, the appellants had agreed to pay a major financing charge beyond the basic price of the merchandise. Moreover, by the time the goods were summarily repossessed, they had made substantial installment payments. Clearly, their possessory interest in the goods, dearly bought and protected by contract, [Footnote 16] Page 407 U. S. 87 was sufficient to invoke the protection of the Due Process Clause. Their ultimate right to continued possession was, of course, in dispute. If it were shown at a hearing that the appellants had defaulted on their contractual obligations, it might well be that the sellers of the goods would be entitled to repossession. But even assuming that the appellants had fallen behind in their installment payments, and that they had no other valid defenses, [Footnote 17] that is immaterial here. The right to be heard does not depend upon an advance showing that one will surely prevail at the hearing. "To one who protests against the taking of his property without due process of law, it is no answer to say that, in his particular case, due process of law would have led to the same result because he had no adequate defense upon the merits." Coe v. Armour Fertilizer Works, 237 U. S. 413, 237 U. S. 424. It is enough to invoke the procedural safeguards of the Fourteenth Amendment that a significant property interest is at stake, whatever the ultimate outcome of a hearing on the contractual right to continued possession and use of the goods. [Footnote 18] Page 407 U. S. 88 C Nevertheless, the District Courts rejected the appellants' constitutional claim on the ground that the goods seized from them -- a stove, a stereo, a table, a bed, and so forth -- were not deserving of due process protection, since they were not absolute necessities of life. The courts based this holding on a very narrow reading of Sniadach v. Family Finance Corp., supra, and Goldberg v. Kelly, supra, in which this Court held that the Constitution requires a hearing before prejudgment wage garnishment and before the termination of certain welfare benefits. They reasoned that Sniadach and Goldberg, as a matter of constitutional principle, established no more than that a prior hearing is required with respect to the deprivation

of such basically "necessary" items as wages and welfare benefits. This reading of Sniadach and Goldberg reflects the premise that those cases marked a radical departure from established principles of procedural due process. They did not. Both P decisions were in the mainstream of past cases, having little or age | 8 nothing to do with the absolute "necessities" of life, but establishing that due process requires an opportunity for a hearing before a deprivation of property takes effect. [Footnote 19] E.g., Opp Cotton Mills v. Administrator, 312 U.S. at 312 U. S. 152-153; United States v. Illinois Central R. Co., 291 U.S. at 291 U. S. 463; Southern R. Co. v. Virginia, 290 U. S. 190; Londoner v. City & County of Denver, 210 U. S. 373; Central of Georgia v. Wright, 207 U. S. 127; Security Trust Page 407 U. S. 89 Co. v. Lexington, 203 U. S. 323; Hibben v. Smith, 191 U. S. 310; Glidden v. Harrington, 189 U. S. 255. In none of those cases did the Court hold that this most basic due process requirement is limited to the protection of only a few types of property interests. While Sniadach and Goldberg emphasized the special importance of wages and welfare benefits, they did not convert that emphasis into a new and more limited constitutional doctrine. [Footnote 20] Nor did they carve out a rule of "necessity" for the sort of nonfinal deprivations of property that they involved. That was made clear in Bell v. Burson, 402 U. S. 535, holding that there must be an opportunity for a fair hearing before mere suspension of a driver's license. A driver's license clearly does not rise to the level of "necessity" exemplified by wages and welfare benefits. Rather, as the Court accurately stated, it is an "important interest," id. at 402 U. S. 539, entitled to the protection of procedural due process of law. The household goods, for which the appellants contracted and paid substantial sums, are deserving of similar protection. While a driver's license, for example, "may become [indirectly] essential in the pursuit of a livelihood," ibid., a stove or a bed may be equally essential to provide a minimally decent environment for human beings in their day-to-day lives. It is, after all, such consumer goods that people work and earn a livelihood in order to acquire. No doubt, there may be many gradations in the "importance" or "necessity" of various consumer goods. Stoves could be compared to television sets, or beds Page 407 U. S. 90

could be compared to tables. But if the root principle of procedural due process is to be applied with objectivity, it cannot rest on such distinctions. The Fourteenth Amendment speaks of "property" generally. And, under our free enterprise system, an individual's choices in the marketplace are respected, however unwise they may seem to someone else. It is not the business of a court adjudicating due process rights to make its own critical evaluation of those choices and protect only the ones that, by its own lights, are "necessary." [Footnote 21] VI There are "extraordinary situations" that justify postponing notice and opportunity for a hearing. Boddie v. Connecticut, 401 U.S. at 401 U. S. 379. These situations, however, must be truly unusual. [Footnote 22] Only in a few limited situations Page 407 U. S. 91 has this Court allowed outright seizure [Footnote 23] without opportunity for a prior hearing. First, in each case, the seizure has been directly necessary to secure an important governmental or general public interest. Second, there has been a special need for very prompt action. Third, the State has kept strict control over its monopoly of legitimate force: the person initiating the seizure has been a government official responsible for determining, under the standards of a narrowly drawn statute, that it was necessary and justified in the particular instance. Thus, the Court has allowed summary seizure of property Page 407 U. S. 92 to collect the internal revenue of the United States, [Footnote 24] to meet the needs of a national war effort, [Footnote 25] to protect against the economic disaster of a bank failure, [Footnote 26] and to protect the public from misbranded drugs [Footnote 27] and contaminated food. [Footnote 28] The Florida and Pennsylvania prejudgment replevin statutes serve no such important governmental or general public interest. They allow summary seizure of a person's possessions when no more than private gain is directly at stake. [Footnote 29] The replevin of chattels, as in the Page 407 U. S. 93 present cases, may satisfy a debt or settle a score. But state intervention in a private dispute hardly compares to state action furthering a war effort or protecting the public health.

Janz N. Serrano Nor do the broadly drawn Florida and Pennsylvania statutes limit the summary seizure of goods to special situations demanding prompt action. There may be cases in which a creditor could make a showing of immediate danger that a debtor will destroy or conceal disputed goods. But the statutes before us are not "narrowly drawn to meet any such unusual condition." Sniadach v. Family Finance Corp., supra, at 395 U. S. 339. And no such unusual situation is presented by the facts of these cases. The statutes, moreover, abdicate effective state control over state power. Private parties, serving their own private advantage, may unilaterally invoke state power to replevy goods from another. No state official participates in the decision to seek a writ; no state official reviews the basis for the claim to repossession; and no state official evaluates the need for immediate seizure. There is not even a requirement that the plaintiff provide any information to the court on these matters. The State acts largely in the dark. [Footnote 30] Page 407 U. S. 94 VII Finally, we must consider the contention that the appellants who signed conditional sales contracts thereby waived their basic procedural due process rights. The contract signed by Mrs. Fuentes provided that, "in the event of default of any payment or payments, Seller at its option may take back the merchandise. . . ." The contracts signed by the Pennsylvania appellants similarly provided that the seller "may retake" or "repossess" the merchandise in the event of a "default in any payment." These terms were parts of printed form contracts, appearing in relatively small type and unaccompanied by any explanations clarifying their meaning. In D. H. Overmyer Co. v. Frick Co., 405 U. S. 174, the Court recently outlined the considerations relevant to determination of a contractual waiver of due process rights. Applying the standards governing waiver of constitutional rights in a criminal proceeding [Footnote 31] -- although not holding that such standards must necessarily apply -- the Court held that, on the particular facts of that case, the contractual waiver of due process Page 407 U. S. 95 rights was "voluntarily, intelligently, and knowingly" made. Id. at 405 U. S. 187. The contract in Overmyer was negotiated between two corporations; the waiver provision was specifically bargained for, and drafted by their lawyers in the process of these negotiations. As the Court noted, it was "not a case of unequal bargaining power or overreaching. The

Overmyer-Frick agreement, from the start, was not a contract of adhesion." Id. at 405 U. S. 186. Both parties were "aware of the significance" of the waiver provision. Ibid. The facts of the present cases are a far cry from those of Overmyer. There was no bargaining over contractual terms P between the parties who, in any event, were far from equal in age | 9 bargaining power. The purported waiver provision was a printed part of a form sales contract and a necessary condition of the sale. The appellees made no showing whatever that the appellants were actually aware or made aware of the significance of the fine print now relied upon as a waiver of constitutional rights. The Court in Overmyer observed that, "where the contract is one of adhesion, where there is great disparity in bargaining power, and where the debtor receives nothing for the [waiver] provision, other legal consequences may ensue." Id. at 405 U. S. 188. Yet, as in Overmyer, there is no need in the present cases to canvass those consequences fully. For a waiver of constitutional rights in any context must, at the very least, be clear. We need not concern ourselves with the involuntariness or unintelligence of a waiver when the contractual language relied upon does not, on its face, even amount to a waiver. The conditional sales contracts here simply provided that, upon a default, the seller "may take back," "may retake" or "may repossess" merchandise. The contracts Page 407 U. S. 96 included nothing about the waiver of a prior hearing. They did not indicate how or through what process -- a final judgment, self-help, prejudgment replevin with a prior hearing, or prejudgment replevin without a prior hearing -- the seller could take back the goods. Rather, the purported waiver provisions here are no more than a statement of the seller's right to repossession upon occurrence of certain events. The appellees do not suggest that these provisions waived the appellants' right to a full post-seizure hearing to determine whether those events had, in fact, occurred and to consider any other available defenses. By the same token, the language of the purported waiver provisions did not waive the appellants' constitutional right to a pre-seizure hearing of some kind. VIII

We hold that the Florida and Pennsylvania prejudgment replevin provisions work a deprivation of property without due process of law insofar as they deny the right to a prior opportunity to be heard before chattels are taken from their possessor. [Footnote 32] Our holding, however, is a narrow one. We do not question the power of a State to seize goods before a final judgment in order to protect the security interests of creditors so long as those creditors have tested their claim to the goods through the process of a fair prior hearing. The nature and form of such prior hearings, moreover, are legitimately open to many potential variations, and are a Page 407 U. S. 97 subject, at this point, for legislation -- not adjudication. [Footnote 33] Since the essential reason for the requirement of a prior hearing is to prevent unfair and mistaken deprivations of property, however, it is axiomatic that the hearing must provide a real test. "[D]ue process is afforded only by the kinds of 'notice' and 'hearing' that are aimed at establishing the validity, or at least the probable validity, of the underlying claim against the alleged debtor before he can be deprived of his property. . . ." Sniadach v. Family Finance Corp., supra, at 395 U. S. 343 (Harlan, J., concurring). See Bell v. Burson, supra, at 402 U. S. 540; Goldberg v. Kelly, supra, at 397 U. S. 267. For the foregoing reasons, the judgments of the District Courts are vacated, and these cases are remanded for further proceedings consistent with this opinion. It is so ordered. MR. JUSTICE POWELL and MR. JUSTICE REHNQUIST did not participate in the consideration or decision of these cases. * Together with No. 70-5138, Parham et al. v. Cortese et al., on appeal from the United States District Court for the Eastern District of Pennsylvania. MR. JUSTICE WHITE, with whom THE CHIEF JUSTICE and MR. JUSTICE BLACKMUN join, dissenting. Because the Court's opinion and judgment improvidently, in my view, call into question important aspects of the statutes of almost all the States governing secured transactions and the procedure for repossessing personal property, I must dissent for the reasons that follow.

Janz N. Serrano First: It is my view that, when the federal actions were filed in these cases and the respective District Page 407 U. S. 98 Courts proceeded to judgment, there were state court proceedings in progress. It seems apparent to me that the judgments should be vacated and the District Courts instructed to reconsider these cases in the light of the principles announced in Younger v. Harris, 401 U. S. 37 (1971); Samuels v. Mackell, 401 U. S. 66; Boyle v. Landry, 401 U. S. 77; and Perez v. Ledesma, 401 U. S. 82. In No. 70-5039, the Florida statutes provide for the commencement of an action of replevin, with bond, by serving a writ summoning the defendant to answer the complaint. Thereupon, the sheriff may seize the property, subject to repossession by defendant within three days upon filing of a counterbond, failing which the property is delivered to plaintiff to await final judgment in the replevin action. Fla.Stat.Ann. 78.01 et seq. (Supp. 1972-1973). This procedure was attacked in a complaint filed by appellant Fuentes in the federal court, alleging that an affidavit in replevin had been filed by Firestone Tire & Rubber Co. in the Small Claims Court of Dade County; that a writ of replevin had been issued pursuant thereto and duly served, together with the affidavit and complaint; and that a trial date had been set in the Small Claims Court. Firestone's answer admitted that the replevin action was pending in the Small Claims Court and asserted that Mrs. Fuentes, plaintiff in the federal court and appellant here, had not denied her default or alleged that she had the right to possession of the property. Clearly, state court proceedings were pending, no bad faith or harassment was alleged, and no irreparable injury appeared that could not have been averted by raising constitutional objections in the pending state court proceeding. In this posture, it would appear that the case should be reconsidered under Younger v. Harris and companion cases, which were announced after the District Court's judgment. Page 407 U. S. 99 In No. 70-5138, Pennsylvania Rule of Civil Procedure 1073 expressly provides that an "[a]ction of replevin with bond shall be commenced by filing with the prothonotary a praecipe for a writ of replevin with bond. . . ." When the writ issues and is served, the defendant has three days to file a counterbond, and, should he care to have a hearing, he may file his own praecipe, in which event the plaintiff must proceed further in the action by filing and serving his complaint. In the cases before us, actions in replevin were commenced in accordance with the rules, and appellee Sears, Roebuck & Co. urged in the District Court that plaintiffs had

"adequate remedies at law which they could pursue in the state court proceedings which are still pending in accordance with the statutes and rules of Pennsylvania." App. 60. Under Younger v. Harris and companion cases, the District Court's judgment should be vacated and the case P reconsidered. Second: it goes without saying that, in the typical installment sale of personal property, both seller and buyer have interests in the property until the purchase price is fully paid, the seller early in the transaction often having more at stake than the buyer. Nor is it disputed that the buyer's right to possession is conditioned upon his making the stipulated payments, and that, upon default, the seller is entitled to possession. Finally, there is no question in these cases that, if default is disputed by the buyer he has the opportunity for a full hearing, and that, if he prevails, he may have the property or its full value as damages. The narrow issue, as the Court notes, is whether it comports with due process to permit the seller, pending final judgment, to take possession of the property through a writ of replevin served by the sheriff without affording the buyer opportunity to insist that the seller establish at a hearing that there is reasonable Page 407 U. S. 100 basis for his claim of default. The interests of the buyer and seller are obviously antagonistic during this interim period: the buyer wants the use of the property pending final judgment; the seller's interest is to prevent further use and deterioration of his security. By the Florida and Pennsylvania laws, the property is, to all intents and purposes, placed in custody and immobilized during this time. The buyer loses use of the property temporarily, but is protected against loss; the seller is protected against deterioration of the property, but must undertake by bond to make the buyer whole in the event the latter prevails. In considering whether this resolution of conflicting interests is unconstitutional, much depends on one's perceptions of the practical considerations involved. The Court holds it constitutionally essential to afford opportunity for a probable cause hearing prior to repossession. Its stated purpose is "to prevent unfair and mistaken deprivations of property." But in these typical situations, the buyer-debtor has either defaulted or he has not. If there is a default, it would seem not only "fair," but essential, that the creditor be allowed to repossess; and I cannot say that the likelihood of a mistaken claim of default is sufficiently real or recurring to justify a broad constitutional requirement that a creditor do more than the typical state law

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requires and permits him to do. Sellers are normally in the business of selling and collecting the price for their merchandise. I could be quite wrong, but it would not seem in the creditor's interest for a default occasioning repossession to occur; as a practical matter, it would much better serve his interests if the transaction goes forward and is completed as planned. Dollar-and-cents considerations weigh heavily against false claims of default, as well as against precipitate action that would allow no opportunity for mistakes to surface and be Page 407 U. S. 101 corrected. 407 U. S. The Court relies on prior cases, particularly Goldberg v. Kelly, 397 U. S. 254 (1970); Bell v. Burson, 402 U. S. 535 (1971); and Stanley v. Illinois, 405 U. S. 645 (1972). But these cases provide no automatic test for determining whether and when due process of law requires adversary proceedings. Indeed, "[t]he very nature of due process negates any concept of inflexible procedures universally applicable to every imaginable situation. . . ." "[W]hat procedures due process may require under any given set of circumstances must begin Page 407 U. S. 102 with a determination of the precise nature of the government function involved as well as of the private interest that has been affected by governmental action." Cafeteria Workers v. McElroy, 367 U. S. 886, 367 U. S. 895 (1961). See also Stanley v. Illinois, supra, at 405 U. S. 650; Goldberg v. Kelly, supra, at 397 U. S. 263. Viewing the issue before us in this light, I would not construe the Due Process Clause to require the creditors to do more than they have done in these cases to secure possession pending final hearing. Certainly, I would not ignore, as the Court does, the creditor's interest in preventing further use and deterioration of the property in which he has substantial interest. Surely, under the Court's own definition, the creditor has a "property" interest as deserving of protection as that of the debtor. At least the debtor, who is very likely uninterested in a speedy resolution that could terminate his use of the property, should be required to make those payments, into court or otherwise, upon which his right to possession is conditioned. Cf. Lindsey v. Normet, 405 U. S. 56 (1972). Third: the Court's rhetoric is seductive, but, in end analysis, the result it reaches will have little impact, and represents no more than ideological tinkering with state law. It would appear that

Janz N. Serrano creditors could withstand attack under today's opinion simply by making clear in the controlling credit instruments that they may retake possession without a hearing, or, for that matter, without resort to Judicial process at all. Alternatively, they need only give a few days' notice of a hearing, take possession if hearing is waived or if there is default; and, if hearing is necessary, merely establish probable cause for asserting that default has occurred. It is very doubtful in my mind that such a hearing would, in fact, result in protections for the debtor substantially different from those the present laws provide. Page 407 U. S. 103 On the contrary, the availability of credit may well be diminished or, in any event, the expense of securing it increased. None of this seems worth the candle to me. The procedure that the Court strikes down is not some barbaric hangover from bygone days. The respective rights of the parties in secured transactions have undergone the most intensive analysis in recent years. The Uniform Commercial Code, which now so pervasively governs the subject matter with which it deals, provides in Art. 9, 9-503, that: "Unless otherwise agreed, a secured party has on default the right to take possession of the collateral. In taking possession a secured party may proceed without judicial process if this can be done without breach of the peace or may proceed by action. . . ." Recent studies have suggested no changes in Art. 9 in this respect. See Permanent Editorial Board for the Uniform Commercial Code, Review Committee for Article 9 of the Uniform Commercial Code, Final Report, 9-503 (April 25, 1971). I am content to rest on the judgment of those who have wrestled with these problems so long and often and upon the judgment of the legislatures that have considered and so recently adopted provisions that contemplate precisely what has happened in these cases. * Appellants Paul and Ellen Parham admitted in their complaints that they were delinquent in their payments. They stipulated to this effect, as well as to receipt of notices of delinquency prior to institution of the replevin action, and the District Court so found. Appellant Epps alleged in his complaint that he was not in default. The defendant, Government Employees Exchange Corp., answered that Epps was in default in the amount of $311.25 as of August 9, 1970, that the entire sum due had been demanded in accordance with the relevant documents, and that Epps had failed and refused to pay that sum. The District

Janz N. Serrano Court did not resolve this factual dispute. It did find that Epps earned in excess of $10,000 per year, and that the agreements Epps and Parham entered into complied with the provisions of Pennsylvania's Uniform Commercial Code and its Services and Installment Sales Act. P for appellant Rosa Washington, the District Court, based on As age | 11 the allegations of her complaint, entered a temporary restraining order requiring that the property seized from her be returned forthwith. At a subsequent hearing, the order was dissolved, the court finding "that the representations upon which the temporary restraining order of September 18, 1970, issued were incorrect, both as to allegations contained in the complaint and representations made by counsel." (App. 29.) It was stipulated between appellant Fuentes and defendants in the District Court that Mrs. Fuentes was in default at the time the replevin action was filed and that notices to this effect were sent to her over several months prior to institution of the suit. (App. 25-26.)

United States District Court, E.D. Louisiana. In re SHELL OIL REFINERY. Robert ADAMS, Sr. v. SHELL OIL COMPANY. Civ. A. Nos. 88-1935, 88-2719. Sept. 26, 1990. Class action was filed against oil company following explosion at oil refinery. Plaintiffs moved for reconsideration of denial of discovery with regard to defendant's experts. The District Court, Mentz, J., held that: (1) plaintiffs' attempt to obtain discovery from experts expected to be called at trial was premature; (2) nontestifying in-house experts were retained or specially employed by defendant in preparation for trial; and (3) plaintiffs failed to show exceptional circumstances permitting discovery of results of tests conducted by nontestifying in-house experts, retained or specially employed by defendant in preparation for trial. Plaintiffs' motion for reconsideration denied.

materials tagged by the PLC, as well as additional materials Shell wanted preserved. Later, Shell conducted at its research facility metallurgical and chemical tests FN1 on material removed from the explosion site. R.E. Nordstrom and Paul A. Nelson are two Shell employees who were present during the testing. The PLC's experts observed certain of these tests. FN1. Other types of tests may have been conducted, but the court has no knowledge of the nature of other tests, if any.

Janz N. Serrano Experts Expected to be Called at Trial

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From the beginning of this case, both the PLC and Shell retained experts and actively investigated the cause of the explosion. Three months post-explosion, the court ordered: Any expert who has visited the NORCO plant and will be an expert witness at trial shall submit a preliminary report to the court on Friday, September 23, 1988. Shell submitted five reports: two from its in-house employees, R.E. Nordstrom and Paul A. Nelson; one from Failure Analysis Associates; one from Arthur D. Little, Inc.; and one from Hercules, Inc. The PLC submitted three expert reports: one from C H & A Engineering Group; one from Metallurgical & Materials Technologies, Inc.; and one from Perez Architects. The parties did not exchange the preliminary expert reports until later, in April, 1989. During course of this litigation, the PLC filed several motions seeking expert discovery, particularly the identity of Shell's experts and the results of the tests conducted by Shell on the CCU material. In each instance, the court ruled against allowing the discovery, unless Shell intended to use the expert or test result at trial. See Minute Entry entered October 18, 1988 (Interrogatories 8, 9) Rec.Doc. # 274; Minute Entry entered November 4, 1988, Rec.Doc. # 309; Minute Entry entered January 31, 1989, p. 2, Rec.Doc. # 441; Minute Entry entered August 22, 1989, Rec.Doc. # 807. Before the court is the PLC's Motion for Reconsideration of the Court's August 21, *440 1989 Ruling. Specifically, the PLC seeks the results of tests conducted by Shell on material from the CCU and leave of court to depose the authors of the preliminary expert reports.FN2 Shell states that it has not yet decided which test results and experts it intends to use at trial. Shell also states that it does not intend to call Nordstrom and Nelson at trial or to use either of their preliminary expert reports. FN2. The PLC also sought the identity of the authors of the preliminary expert reports submitted on behalf of Shell by Arthur D. Little, Inc. and Hercules, Inc. After the PLC filed its motion, Shell volunteered the names of these authors, so this particular request is moot.

[1] Although Fed.R.Civ.P. 26(b)(4)(A) allows for interrogatory discovery of experts expected to be called at trial, the court has discretion in this complex class action to control the sequence of discovery. See Fed.R.Civ.P. 26(b)(1). The Case Management Order (CMO), adopted by the court on August 13, 1990, governs the time frame for discovery of experts. See Rec.Doc. # 1140, 1149. Under the CMO, the parties need not disclose the identity of experts expected to be called at trial until March 1, 1991. The exchange of expert reports is May 1, 1991 and expert depositions start on June 15, 1991. At this time, Shell has no obligation to decide which experts it will call at trial or disclose information about any experts expected to be called at trial. As stated in the Advisory Committee Notes to Rule 26: The procedure established in subsection (b)(4)(A) holds the risk [that one side will benefit unduly from the other side's better preparation] to a minimum. Discovery is limited to trial witnesses, and may be obtained only at a time when the parties know who their expert will be. A party must as a practical matter prepare his own case in advance of that time, for he can hardly hope to build his case out of his opponent's expertise. (Emphasis added). Those who will testify at trial often cannot be identified until the later stages of litigation. See United States v. 215.7 Acres of Land, 719 F.Supp. 273, 278 (D.Del.1989) (tacit approval of the government's posture of indecision about what experts would be called at trial). Therefore, the court finds that the PLC's attempt to obtain discovery from experts expected to be called at trial is premature.FN3 FN3. The court made the same ruling on Shell's motion to discover similar information from the PLC. See Minute Entry entered September 6, 1990, Rec.Doc. # 1188.

ORDER AND REASONS MENTZ, District Judge.

The court addresses here the plaintiffs' request for discovery of the defendant's experts. The defense experts include some who are expected to testify at trial and some who are not expected to testify at trial. The court finds that while discovery of experts expected to testify at trial is premature, the plaintiffs are not entitled to any discovery of experts not expected to testify at trial.

Experts Not Expected to be Called at Trial

Facts On May 5, 1988, the catalytic cracking unit (CCU) at the Shell Oil Refinery, Norco, Louisiana, exploded. The first of several suits ultimately certified as a class action was filed that day. The day after the explosion, the parties entered an agreement giving the Plaintiff's Legal Committee (PLC) and its experts access to the CCU to inspect, measure, and photograph. See Transcript attached to Rec.Doc. # 4a; Consent Agreement, Rec.Doc. # 6; and Consent Agreement, Rec.Doc. # 7. Following their agreement, Shell Oil Company (Shell) preserved all

[2] [3] Under Fed.R.Civ.P. 26(b)(4)(B), the facts known and opinions held by non-testifying experts who are retained or specially employed in anticipation of litigation or preparation for trial are subject to discovery only in exceptional circumstances. This Rule recognizes that with nontestifying experts, there is no need to obtain discovery for effective cross-examination. See Hoover v. United States Dep't of the Interior, 611 F.2d 1132, 1142 (5th Cir.1980) (The primary purpose of [Rule 26(b)(4)(A)'s required disclosures about experts expected to be called at trial] is to permit the opposing party to prepare an effective cross-examination.) The Rule is also designed to prevent a party from building his case on the

Janz N. Serrano diligent preparation of his adversary. See Pielemeier, Discovery of Non-Testifying In-House Experts Under Federal Rules of Civil Procedure, 58 Ind.L.J. 597, 607-08 (1984). [4] Shell has stated its intention not to call at trial its in-house experts, Nordstrom and Nelson. No one disputes that P age | 13 Nordstrom and Nelson are experts. Even though Shell submitted the reports of Nordstrom and Nelson as preliminary reports of experts it expected to call at trial, Shell's later decision not to call them at trial is permissible. Prior to the court imposed deadline for exchange of witness lists, a party is free to make strategic decisions changing an anticipated witness to a non-witness. See Eliasen v. Hamilton, 111 F.R.D. 396, 401 (N.D.Ill.1986); Mantolete v. Bolger, 96 F.R.D. 179, 182 n. 2 (D.Ariz.1982). Thus, Nordstrom and Nelson*441 are properly designated as non-testifying experts. [5] The PLC maintains that Nordstrom and Nelson should be treated as ordinary witnesses under Fed.R.Civ.P. 26(b)(1) because they are in-house experts who would have performed the tests in question as part of their regular duties regardless of litigation. Alternatively, the PLC maintains that if Nordstrom and Nelson are non-testifying experts retained or specially employed in anticipation of litigation, then under Fed.R.Civ.P. 26(b)(4)(B) their facts and opinions are discoverable because of exceptional circumstances requiring great expense to duplicate the tests performed by Shell. Nordstrom is the Manager of Heat Transfer and Pressure Equipment for Shell. His duties consist of technical input on operations and on design and construction of new facilities. Nelson is a Research Manager whose duties consist of managing 11 research engineers and nine technicians for Shell. Their affidavits show that during the week following the explosion, Shell's legal department and outside counsel requested them to help the investigation team defend the lawsuits filed against Shell. Also, in September, 1988, James Blasek, outside counsel for Shell, requested Nordstrom and Nelson to prepare preliminary reports of their investigation and study of the explosion. Nordstrom and Nelson sent their preliminary reports to only Blasek. Although Nordstrom and Nelson have not been assigned to work exclusively on this litigation, they remain available to assist outside counsel on an as needed basis. The affidavits show that there can be no serious dispute that Nordstrom and Nelson's investigation and study of the explosion was in anticipation of litigation. Whether they were retained or specially employed within the meaning of Fed.R.Civ.P. 26(b)(4)(B) is a closer question. The courts and other legal authority are not in agreement on the question of whether an in-house expert can be retained or specially employed. Compare, e.g., Marine Petroleum Co. v. Champlin Petroleum Co., 641 F.2d 984 (D.C.Cir.1979); In re Sinking of Barge Ranger I, 92 F.R.D. 486, 489 n. 5 (S.D.Tex.1981); Seiffer v. Topsy's Int'l, Inc., 69 F.R.D. 69 (D.C.Kansas 1975); Comment, The In-House Expert Witness: Discovery Under the Federal Rules of Civil Procedure, 33 S.D.L.Rev. 283 (1988); Pielemeier, Discovery of Non-Testifying In-House Experts, 58 Ind.L.J. 597; and Graham, Discovery of Experts Under Rule 26(b)(4) of the Federal Rules of Civil Procedure: Part One, An Analytical Study, 1976 U.Ill.L.F. 895, concluding that in-house experts can be retained or specially employed, with Dallas v. Marion Power Shovel Co., Inc., 126 F.R.D. 539 (S.D.Ill.1989); Kansas-Nebraska Natural Gas v. Marathon Oil Co., 109 F.R.D. 12 (D.Neb.1983); and Virginia Elec. Power Co. v. Sun Shipbuilding & Dry Dock Co., 68 F.R.D. 397, 407 (E.D.Va.1975), concluding that in-house experts should be treated as ordinary witnesses under Rule 26(b)(1). [6] The court finds that the persuasive authority favors application of Rule 26(b)(4)(B) to non-testifying inhouse experts. To rule otherwise would encourage economic waste by requiring an employer to hire independent experts to obtain the protection of Rule 26(b)(4). Protection of an inhouse expert's opinion's supports improved public safety and other social benefits of self-analysis. That the work of an inhouse expert is used not only to defend a lawsuit but also to improve a company's operations or product design does not remove him from the parameters of Rule 26(b)(4)(B). See Hermsdorfer v. American Motors Corp., 96 F.R.D. 13, 15 (W.D.N.Y.1982). [7] Not all in-house experts fall within the parameters of the retained or specially employed language of Rule 26(b)(4)(B). The Advisory Committee Notes exclude from the scope of Rule 26(b)(4)(B) an expert who is simply a general employee of the party not specially employed on the case. Those in-house experts who are not retained or specially employed should be treated as ordinary witnesses under Rule 26(b)(1), and if their work was in anticipation*442 of litigation or preparation of trial, then discovery must be analyzed under the work product doctrine, Rule 26(b)(3). Neither the Rule nor the Notes explain when a general employee may become retained or specially employed. Some courts have found that the terms retained or specially employed mean something more than simply the assignment of a current employee to a particular problem raised by current litigation. See Kansas-Nebraska Natural Gas Co., Inc., 109 F.R.D. at 16. To the contrary, other authority suggests that a regular employee may become specially employed when he is designated and assigned by a party to apply his expertise to a particular matter in anticipation of litigation or for trial. See Pielemeier, Discovery of Non-Testifying In-House Experts, 58 Ind.L.J. at 605 (citing Graham, Discovery of Experts Under Rule 26(b)(4), 1976 U.Ill.L.F. note 3, at 942.) [8] [9] Whether an in-house expert is retained or specially employed must be decided case-by-case. In this case, the court finds that Nordstrom and Nelson were retained or specially employed by Shell in preparation for trial. Shell's attorneys engaged Nordstrom and Nelson to perform specific tasks to help them defend the lawsuit. At the direction of Shell's legal department and outside counsel, Nordstrom and Nelson investigated and studied the cause of the explosion, and prepared preliminary reports. Copies of the reports were sent only to Shell's outside counsel. Although Nordstrom and Nelson might have studied the cause of the explosion regardless of litigation, their usual duties do not include litigation assistance. That Nordstrom and Nelson were not paid additional compensation or assigned exclusively to the litigation is not conclusive. An in-house expert may be specially employed without additional compensation or an exclusive assignment. [10] [11] Having found that Nordstrom and Nelson are experts retained or specially employed in preparation for trial, the court must determine whether exceptional circumstances exist to permit discovery. A party seeking to show exceptional circumstances under Rule 26(b)(4)(B) carries a heavy burden. See Hoover v. United States Dep't of the Interior, 611 F.2d 1132, 1142 n. 13 (5th Cir.1980). The exceptional circumstances requirement has been interpreted by the courts to mean an inability to obtain equivalent information from other sources. See Marine Petroleum, 641 F.2d at 994; Candebat v. Zimmer, Inc., 1990 WL 43922, No. 89-659 (E.D.La. April 6, 1990); Sabido v. ANR Freight System, Inc., 1988 WL 58408, No. 87-5662 (E.D.La. May 31, 1988); United States v. Hooker Chemicals & Plastics Corp., 112 F.R.D. 333, 338 (W.D.N.Y.1986); Grindell v. American Motors Corp., 108 F.R.D. 94, 95 (W.D.N.Y.1985); Mantolete v. Bolger, 96 F.R.D. at 181; Puerto Rico Aqueduct and Sewer Authority v. Clow Corp., 108 F.R.D. 304, 310 (D.P.R.1985). The plaintiffs offered the affidavit of Thomas Shelton, President of Metallurgical and Materials Technology, Inc., to show that this case meets the exceptional circumstances requirement. Mr. Shelton was present at certain of the tests conducted by Shell and estimates that the total cost to duplicate the investigation and testing performed by Shell would be in the range of $230,000 to $315,000. The plaintiffs cited Pearl Brewing Co. v. Jos. Schlitz Brewing Co., 415 F.Supp. 1122 (S.D.Tex.1976), to show that expense can satisfy the exceptional circumstances requirement. In that antitrust case, the plaintiff's experts, who were not expected to be called at trial, created a complicated computer program for a beer marketing distribution model. The plaintiff's expert to be called at trial relied on this model in reaching his conclusions. The court found that the defendant's expert would be unable to understand the model without explanations of the undefined

Janz N. Serrano short-hand codes used in the computer program. For defendant's expert to attempt to unravel the short-hand codes alone would be unduly time consuming and expensive. The court granted discovery of the code explanations only. The court noted that the defendant was not trying to find support for his case out of the plaintiff's efforts, but only expediting analysis of the plaintiff's trial expert's conclusions. In other P age | 14 words, the defendant *443 was not going to rely on the plaintiff's distribution model to support its defense, but needed to know the codes in order for its expert to analyze the plaintiff's trial expert's conclusions. In contrast, the plaintiffs in the case at bar do not seek Shell's test results to understand how Shell's experts will substantiate their conclusions at trial. The plaintiffs want Shell's test results to avoid the expense of conducting their own tests. To allow discovery of Shell's test results under these circumstances would defeat the Rule's intended purposes of protecting trial strategy and preventing one party from having a free ride at the expense of the other party. The plaintiffs can obtain the substantial equivalent by having their own experts conduct tests. As a result of the parties' consent agreements, the PLC had access to the CCU for a total of fifteen days beginning on May 7 through June 3, 1988.FN4 See Transcript attached to Rec.Doc. # 4a; Consent Agreement, Rec.Doc. # 6; and Consent Agreement, Rec.Doc. # 7. The plaintiffs also have access to the materials tested by Shell. See Minute Entry entered January 31, 1989, page 2, Rec.Doc. # 441. Aside from having to pay for their own testing, the plaintiffs will suffer no loss. During the period set aside for expert discovery, the parties can discover the basis for each other's expert's conclusions, including information received from non-testifying experts. For these reasons, the plaintiffs have failed to show exceptional circumstances. FN4. The PLC had access to the CCU on the following days: Saturday, May 7; Monday, May 9; Friday, May 13; Wednesday, May 18; Thursday, May 19; Friday, May 20; Monday, May 23; Tuesday, May 24; Wednesday, May 25; Thursday, May 26; Friday, May 27; Tuesday, May 31; Wednesday, June 1; Thursday, June 2; and Friday, June 3, 1988. END OF DOCUMENT

Accordingly, IT IS ORDERED that the Plaintiffs' Legal Committee's Motion for Reconsideration of the August 21, 1989 Ruling in the District Court Re: Request for Production of Documents First Wave: Number 11 is DENIED. E.D.La.,1990. In re Shell Oil Refinery 132 F.R.D. 437

Hickman v. Taylor, 329 U.S. 495 (1947) Hickman v. Taylor No. 47 P age | 15 Argued November 13, 1946 Decided January 13, 1947 329 U.S. 495 CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE THIRD CIRCUIT Syllabus Under the Federal Rules of Civil Procedure, plaintiff in a suit in a federal district court against certain tug owners to recover for the death of a seaman in the sinking of the tug filed numerous interrogatories directed to the defendants, including one inquiring whether any statements of members of the crew were taken in connection with the accident and requesting that exact copies of all such written statements be attached and that the defendant "set forth in detail the exact provisions of any such oral statements or reports." There was no showing of necessity or other justification for these requests. A public hearing had been held before the United States Steamboat Inspectors at which the survivors of the accident had been examined and their testimony recorded and made available to all interested parties. Defendants answered all other interrogatories, stating objective facts and giving the names and addresses of witnesses, but declined to summarize or set forth the statements taken from witnesses, on the ground that they were "privileged matter obtained in preparation for litigation." After a hearing on objections to the interrogatories, the District Court held that the requested matters were not privileged and decreed that they be produced and that memoranda of defendants' counsel containing statements of fact by witnesses either be produced or submitted to the court for determination of those portions which should be revealed to plaintiff. Defendants and their counsel refused, and were adjudged guilty of contempt. Held: 1. In these circumstances, Rules 26, 33 and 34 of the Federal Rules of Civil Procedure do not require the production as of right of oral and written statements of witnesses secured by an adverse party's counsel in the course of preparation for

possible litigation after a claim has arisen. Pp. 329 U. S. 509514. 2. Since plaintiff addressed simple interrogatories to adverse parties, did not direct them to such parties or their counsel by way of deposition under Rule 26, and it does not appear that he filed a Page 329 U. S. 496 motion under Rule 34 for a court order directing the production of the documents in question, he was proceeding primarily under Rule 33, relating to interrogatories to parties. P. 329 U. S. 504. 3. Rules 33 and 34 are limited to parties, thereby excluding their counsel or agents. P. 329 U. S. 504. 4. Rule 33 did not permit the plaintiff to obtain, as adjuncts to interrogatories addressed to defendants, memoranda and statements prepared by their counsel after a claim had arisen. P. 329 U. S. 504. 5. The District Court erred in holding defendants in contempt for failure to produce that which was in the possession of their counsel, and in holding their counsel in contempt for failure to produce that which he could not be compelled to produce under either Rule 33 or Rule 34. P. 329 U. S. 505. 6. Memoranda, statements, and mental impressions prepared or obtained from interviews with witnesses by counsel in preparing for litigation after a claim has arisen are not within the attorney-client privilege, and are not protected from discovery on that basis. P. 329 U. S. 508. 7. The general policy against invading the privacy of an attorney's course of preparation is so essential to an orderly working of our system of legal procedure that a burden rests on the one who would invade that privacy to establish adequate reasons to justify production through a subpoena or court order. P. 329 U. S. 512. 8. Rule 30(b) gives the trial judge the requisite discretion to make a judgment as to whether discovery should be allowed as to written statements secured from witnesses; but, in this case, there was no ground for the exercise of that discretion in favor of plaintiff. P. 329 U. S. 512. 9. Under the circumstances of this case, no showing of necessity could be made which would justify requiring the production of oral statements made by witnesses to

Janz N. Serrano defendants' counsel, whether presently in the form of his mental impressions or in the form of memoranda. P. 329 U. S. 512. 153 F.2d 212 affirmed. A District Court adjudged respondents guilty of contempt for failure to produce, in response to interrogatories, copies of certain written statements and memoranda prepared by counsel in connection with pending litigation. 4 F.R.D. 479. The Circuit Court of Appeals reversed. 153 F.2d 212. This Court granted certiorari. 328 U.S. 876. Affirmed, p. 329 U. S. 514. Page 329 U. S. 497 MR. JUSTICE MURPHY delivered the opinion of the Court. This case presents an important problem under the Federal Rules of Civil Procedure as to the extent to which a party may inquire into oral and written statements of witnesses, or other information, secured by an adverse party's counsel in the course of preparation for possible litigation after a claim has arisen. Examination into a person's files and records, including those resulting from the professional activities of an attorney, must be judged with care. It is not without reason that various safeguards have been established to preclude unwarranted excursions into the privacy of a man's work. At the same time, public policy supports reasonable and necessary inquiries. Properly to balance these competing interests is a delicate and difficult task. Page 329 U. S. 498 On February 7, 1943, the tug "J. M. Taylor" sank while engaged in helping to tow a car float of the Baltimore & Ohio Railroad across the Delaware River at Philadelphia. The accident was apparently unusual in nature, the cause of it still being unknown. Five of the nine crew members were drowned. Three days later, the tug owners and the underwriters employed a law firm, of which respondent Fortenbaugh is a member, to defend them against potential suits by representatives of the deceased crew members and to sue the railroad for damages to the tug. A public hearing was held on March 4, 1943, before the United States Steamboat Inspectors at which the four survivors were examined. This testimony was recorded and made available to all interested parties. Shortly thereafter, Fortenbaugh privately interviewed the survivors and took statements from them with an eye toward the anticipated litigation; the survivors signed these statements on March 29. Fortenbaugh also interviewed other persons believed to have some information relating to

the accident, and in some cases he made memoranda of what they told him. At the time when Fortenbaugh secured the statements of the survivors, representatives of two of the deceased crew members had been in communication with him. Ultimately claims were presented by representatives of all five of the deceased; four of the claims, however, were settled without litigation. The fifth claimant, petitioner herein, brought P age | 16 suit in a federal court under the Jones Act on November 26, 1943, naming as defendants the two tug owners, individually and as partners, and the railroad. One year later, petitioner filed 39 interrogatories directed to the tug owners. The 38th interrogatory read: "State whether any statements of the members of the crews of the Tugs 'J. M. Taylor' and 'Philadelphia' or of any other vessel were taken in connection with the towing of the car float and the sinking of the Tug 'John M. Taylor.' Page 329 U. S. 499 Attach hereto exact copies of all such statements if in writing, and if oral, set forth in detail the exact provisions of any such oral statements or reports." Supplemental interrogatories asked whether any oral or written statements, records, reports, or other memoranda had been made concerning any matter relative to the towing operation, the sinking of the tug, the salvaging and repair of the tug, and the death of the deceased. If the answer was in the affirmative, the tug owners were then requested to set forth the nature of all such records, reports, statements, or other memoranda. The tug owners, through Fortenbaugh, answered all of the interrogatories except No. 38 and the supplemental ones just described. While admitting that statements of the survivors had been taken, they declined to summarize or set forth the contents. They did so on the ground that such requests called "for privileged matter obtained in preparation for litigation," and constituted "an attempt to obtain indirectly counsel's private files." It was claimed that answering these requests "would involve practically turning over not only the complete files, but also the telephone records and, almost, the thoughts, of counsel." In connection with the hearing on these objections, Fortenbaugh made a written statement and gave an informal oral deposition explaining the circumstances under which he had taken the statements. But he was not expressly asked in the deposition to produce the statements. The District Court for the Eastern District of Pennsylvania, sitting en banc, held that the requested matters were not privileged. 4 F.R.D. 479.

The court then decreed that the tug owners and Fortenbaugh, as counsel and agent for the tug owners forthwith "answer Plaintiff's 38th interrogatory and supplemental interrogatories; produce all written statements of witnesses obtained by Mr. Fortenbaugh, as counsel and agent for Defendants; Page 329 U. S. 500 state in substance any fact concerning this case which Defendants learned through oral statements made by witnesses to Mr. Fortenbaugh, whether or not included in his private memoranda, and produce Mr. Fortenbaugh's memoranda containing statements of fact by witnesses or to submit these memoranda to the Court for determination of those portions which should be revealed to Plaintiff." Upon their refusal, the court adjudged them in contempt and ordered them imprisoned until they complied. The Third Circuit Court of Appeals, also sitting en banc, reversed the judgment of the District Court. 153 F.2d 212. It held that the information here sought was part of the "work product of the lawyer," and hence privileged from discovery under the Federal Rules of Civil Procedure. The importance of the problem, which has engendered a great divergence of views among district courts, [Footnote 1] led us to grant certiorari. 328 U.S. 876. The pretrial deposition-discovery mechanism established by Rules 26 to 37 is one of the most significant innovations of the Federal Rules of Civil Procedure. Under the prior federal practice, the pretrial functions of notice-giving, issueformulation, and fact-revelation were performed primarily and inadequately by the pleadings. [Footnote 2] Inquiry into the issues and the facts before trial was Page 329 U. S. 501 narrowly confined, and was often cumbersome in method. [Footnote 3] The new rules, however, restrict the pleadings to the task of general notice-giving, and invest the depositiondiscovery process with a vital role in the preparation for trial. The various instruments of discovery now serve (1) as a device, along with the pretrial hearing under Rule 16, to narrow and clarify the basic issues between the parties, and (2) as a device for ascertaining the facts, or information as to the existence or whereabouts of facts, relative to those issues. Thus, civil trials in the federal courts no longer need be carried on in the dark. The way is now clear, consistent with recognized privileges, for the parties to obtain the fullest

Janz N. Serrano possible knowledge of the issues and facts before trial. [Footnote 4] There is an initial question as to which of the depositiondiscovery rules is involved in this case. Petitioner, in filing his interrogatories, thought that he was proceeding under Rule 33. That rule provides that a party may serve upon any adverse party written interrogatories to be answered by the party served. [Footnote 5] The District Court proceeded Page 329 U. S. 502 on the same assumption in its opinion, although its order to produce and its contempt order stated that both Rules 33 and 34 were involved. Rule 34 establishes a procedure whereby, upon motion of any party showing good cause therefor and upon notice to all other parties, the court may order any party to produce and permit the inspection and copying or photographing of any designated documents, etc., not privileged, which constitute or contain evidence material to any matter involved in the action and which are in his possession, custody, or control. [Footnote 6] The Circuit Court of Appeals, however, felt that Rule 26 was the crucial one. Petitioner, it said, was proceeding by interrogatories, and, in connection with those interrogatories, wanted copies of memoranda and statements secured from witnesses. While the court believed that Rule 33 was involved at least as to the defending tug owners, it stated that this rule could not be used as the basis for condemning Fortenbaugh's failure to disclose or produce Page 329 U. S. 503 the memoranda and statements, since the rule applies only to interrogatories addressed to adverse parties, not to their agents or counsel. And Rule 34 was said to be inapplicable since petitioner was not trying to see an original document and to copy or photograph it, within the scope of that rule. The court then concluded that Rule 26 must be the one really involved. That provides that the testimony of any person, whether a party or not, may be taken by any party by deposition upon oral examination or written interrogatories for the purpose of discovery or for use as evidence, and that the deponent may be examined regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action, whether relating to the claim or defense of the examining party or of any other party, including the existence, description, nature, custody, condition and location of any books, documents or other tangible things. [Footnote 7] Page 329 U. S. 504

The matter is not without difficulty in light of the events that transpired below. We believe, however, that petitioner was proceeding primarily under Rule 33. He addressed simple interrogatories solely to the individual tug owners, the adverse parties, as contemplated by that rule. He did not, and could not under Rule 33, address such interrogatories to their counsel, Fortenbaugh. Nor did he direct these interrogatories either to P age | 17 the tug owners or to Fortenbaugh by way of deposition; Rule 26 thus could not come into operation. And it does not appear from the record that petitioner filed a motion under Rule 34 for a court order directing the production of the documents in question. Indeed, such an order could not have been entered as to Fortenbaugh, since Rule 34, like Rule 33, is limited to parties to the proceeding, thereby excluding their counsel or agents. Thus, to the extent that petitioner was seeking the production of the memoranda and statements gathered by Fortenbaugh in the course of his activities as counsel, petitioner misconceived his remedy. Rule 33 did not permit him to obtain such memoranda and statements as adjuncts to the interrogatories addressed to the individual tug owners. A party clearly cannot refuse to answer interrogatories on the ground that the information sought is solely within the knowledge of his attorney. But that is not this case. Here, production was sought of documents prepared by a party's attorney after the claim has arisen. Rule 33 does not make provision for such production, even when sought in connection with permissible interrogatories. Moreover, since petitioner was also foreclosed from securing them through an order under Rule 34, his only recourse was to take Fortenbaugh's deposition under Rule 26 and to attempt to force Fortenbaugh to produce the materials by use of a subpoena duces tecum in accordance with Rule 45. Holtzoff, "Instruments of Discovery under the Federal Rules of Civil Procedure," 41 Page 329 U. S. 505 Mich.L.Rev. 205, 220. But, despite petitioner's faulty choice of action, the District Court entered an order, apparently under Rule 34, commanding the tug owners and Fortenbaugh, as their agent and counsel, to produce the materials in question. Their refusal led to the anomalous result of holding the tug owners in contempt for failure to produce that which was in the possession of their counsel, and of holding Fortenbaugh in contempt for failure to produce that which he could not be compelled to produce under either Rule 33 or Rule 34. But, under the circumstances, we deem it unnecessary and unwise to rest our decision upon this procedural irregularity, an irregularity which is not strongly urged upon us and which was disregarded in the two courts below. It matters little at this later stage whether Fortenbaugh fails to answer interrogatories filed under Rule 26 or under Rule 33 or whether he refuses to produce the memoranda and statements

pursuant to a subpoena under Rule 45 or a court order under Rule 34. The deposition-discovery rules create integrated procedural devices. And the basic question at stake is whether any of those devices may be used to inquire into materials collected by an adverse party's counsel in the course of preparation for possible litigation. The fact that the petitioner may have used the wrong method does not destroy the main thrust of his attempt. Nor does it relieve us of the responsibility of dealing with the problem raised by that attempt. It would be inconsistent with the liberal atmosphere surrounding these rules to insist that petitioner now go through the empty formality of pursuing the right procedural device only to reestablish precisely the same basic problem now confronting us. We do not mean to say, however, that there may not be situations in which the failure to proceed in accordance with a specific rule would be important or decisive. But, in the present circumstances, for the purposes of this decision, the procedural Page 329 U. S. 506 irregularity is not material. Having noted the proper procedure, we may accordingly turn our attention to the substance of the underlying problem. In urging that he has a right to inquire into the materials secured and prepared by Fortenbaugh, petitioner emphasizes that the deposition-discovery portions of the Federal Rules of Civil Procedure are designed to enable the parties to discover the true facts, and to compel their disclosure wherever they may be found. It is said that inquiry may be made under these rules, epitomized by Rule 26, as to any relevant matter which is not privileged, and, since the discovery provisions are to be applied as broadly and liberally as possible, the privilege limitation must be restricted to its narrowest bounds. On the premise that the attorney-client privilege is the one involved in this case, petitioner argues that it must be strictly confined to confidential communications made by a client to his attorney. And, since the materials here in issue were secured by Fortenbaugh from third persons, rather than from his clients, the tug owners, the conclusion is reached that these materials are proper subjects for discovery under Rule 26. As additional support for this result, petitioner claims that to prohibit discovery under these circumstances would give a corporate defendant a tremendous advantage in a suit by an individual plaintiff. Thus, in a suit by an injured employee against a railroad or in a suit by an insured person against an insurance company, the corporate defendant could pull a dark veil of secrecy over all the pertinent facts it can collect after the claim arises merely on the assertion that such facts were gathered by its large staff of attorneys and claim agents. At the same time, the individual plaintiff, who often has direct knowledge of the matter in issue and has no counsel until some

Janz N. Serrano time after his claim arises, could be compelled to disclose all the intimate details of his case. By endowing with Page 329 U. S. 507 immunity from disclosure all that a lawyer discovers in the course of his duties, it is said, the rights of individual litigants in such cases are drained of vitality, and the lawsuit becomes more of a battle of deception than a search for truth. But framing the problem in terms of assisting individual plaintiffs in their suits against corporate defendants is unsatisfactory. Discovery concededly may work to the disadvantage as well as to the advantage of individual plaintiffs. Discovery, in other words, is not a one-way proposition. It is available in all types of cases at the behest of any party, individual or corporate, plaintiff or defendant. The problem thus far transcends the situation confronting this petitioner. And we must view that problem in light of the limitless situations where the particular kind of discovery sought by petitioner might be used. We agree, of course, that the deposition-discovery rules are to be accorded a broad and liberal treatment. No longer can the time-honored cry of "fishing expedition" serve to preclude a party from inquiring into the facts underlying his opponent's case. [Footnote 8] Mutual knowledge of all the relevant facts gathered by both parties is essential to proper litigation. To that end, either party may compel the other to disgorge whatever facts he has in his possession. The depositiondiscovery procedure simply advances the stage at which the disclosure can be compelled from the time of trial to the period preceding it, thus reducing the possibility of surprise. But discovery, like all matters of procedure, has ultimate and necessary boundaries. As indicated by Rules 30(b) and (d) and 31(d), limitations inevitably arise when it can be shown Page 329 U. S. 508 that the examination is being conducted in bad faith or in such a manner as to annoy, embarrass, or oppress the person subject to the inquiry. And, as Rule 26(b) provides, further limitations come into existence when the inquiry touches upon the irrelevant or encroaches upon the recognized domains of privilege. We also agree that the memoranda, statements, and mental impressions in issue in this case fall outside the scope of the attorney-client privilege, and hence are not protected from discovery on that basis. It is unnecessary here to delineate the content and scope of that privilege as recognized in the federal courts. For present purposes, it suffices to note that the protective cloak of this privilege does not extend to

age | 18

information which an attorney secures from a witness while acting for his client in anticipation of litigation. Nor does this privilege concern the memoranda, briefs, communications, and other writings prepared by counsel for his own use in prosecuting his client's case, and it is equally unrelated to writings which reflect an attorney's mental impressions, conclusions, opinions, or legal theories. P But the impropriety of invoking that privilege does not provide an answer to the problem before us. Petitioner has made more than an ordinary request for relevant, nonprivileged facts in the possession of his adversaries or their counsel. He has sought discovery as of right of oral and written statements of witnesses whose identity is well known and whose availability to petitioner appears unimpaired. He has sought production of these matters after making the most searching inquiries of his opponents as to the circumstances surrounding the fatal accident, which inquiries were sworn to have been answered to the best of their information and belief. Interrogatories were directed toward all the events prior to, during, and subsequent to the sinking of the tug. Full and honest answers to such broad inquiries would necessarily have included all Page 329 U. S. 509 pertinent information gleaned by Fortenbaugh through his interviews with the witnesses. Petitioner makes no suggestion, and we cannot assume, that the tug owners or Fortenbaugh were incomplete or dishonest in the framing of their answers. In addition, petitioner was free to examine the public testimony of the witnesses taken before the United States Steamboat Inspectors. We are thus dealing with an attempt to secure the production of written statements and mental impressions contained in the files and the mind of the attorney Fortenbaugh without any showing of necessity or any indication or claim that denial of such production would unduly prejudice the preparation of petitioner's case or cause him any hardship or injustice. For aught that appears, the essence of what petitioner seeks either has been revealed to him already through the interrogatories or is readily available to him direct from the witnesses for the asking. The District Court, after hearing objections to petitioner's request, commanded Fortenbaugh to produce all written statements of witnesses and to state in substance any facts learned through oral statements of witnesses to him. Fortenbaugh was to submit any memoranda he had made of the oral statements, so that the court might determine what portions should be revealed to petitioner. All of this was ordered without any showing by petitioner, or any requirement that he make a proper showing, of the necessity for the production of any of this material or any demonstration that denial of production would cause hardship or injustice. The court simply ordered production on the theory that the

facts sought were material and were not privileged as constituting attorney-client communications. In our opinion, neither Rule 26 nor any other rule dealing with discovery contemplates production under such circumstances. That is not because the subject matter is privileged or irrelevant, as those concepts are used in these Page 329 U. S. 510 rules. [Footnote 9] Here is simply an attempt, without purported necessity or justification, to secure written statements, private memoranda, and personal recollections prepared or formed by an adverse party's counsel in the course of his legal duties. As such, it falls outside the arena of discovery and contravenes the public policy underlying the orderly prosecution and defense of legal claims. Not even the most liberal of discovery theories can justify unwarranted inquiries into the files and the mental impressions of an attorney. Historically, a lawyer is an officer of the court, and is bound to work for the advancement of justice while faithfully protecting the rightful interests of his clients. In performing his various duties, however, it is essential that a lawyer work with a certain degree of privacy, free from unnecessary intrusion by opposing parties and their counsel. Page 329 U. S. 511 Proper preparation of a client's case demands that he assemble information, sift what he considers to be the relevant from the irrelevant facts, prepare his legal theories, and plan his strategy without undue and needless interference. That is the historical and the necessary way in which lawyers act within the framework of our system of jurisprudence to promote justice and to protect their clients' interests. This work is reflected, of course, in interviews, statements, memoranda, correspondence, briefs, mental impressions, personal beliefs, and countless other tangible and intangible ways -- aptly though roughly termed by the Circuit Court of Appeals in this case as the "work product of the lawyer." Were such materials open to opposing counsel on mere demand, much of what is now put down in writing would remain unwritten. An attorney's thoughts, heretofore inviolate, would not be his own. Inefficiency, unfairness, and sharp practices would inevitably develop in the giving of legal advice and in the preparation of cases for trial. The effect on the legal profession would be demoralizing. And the interests of the clients and the cause of justice would be poorly served. We do not mean to say that all written materials obtained or prepared by an adversary's counsel with an eye toward

Janz N. Serrano litigation are necessarily free from discovery in all cases. Where relevant and nonprivileged facts remain hidden in an attorney's file, and where production of those facts is essential to the preparation of one's case, discovery may properly be had. Such written statements and documents might, under certain circumstances, be admissible in evidence, or give clues as to the existence or location of relevant facts. Or they might be useful for purposes of impeachment or corroboration. And production might be justified where the witnesses are no longer available or can be reached only with difficulty. Were production of written statements and documents to be precluded under Page 329 U. S. 512 such circumstances, the liberal ideals of the depositiondiscovery portions of the Federal Rules of Civil Procedure would be stripped of much of their meaning. But the general policy against invading the privacy of an attorney's course of preparation is so well recognized and so essential to an orderly working of our system of legal procedure that a burden rests on the one who would invade that privacy to establish adequate reasons to justify production through a subpoena or court order. That burden, we believe, is necessarily implicit in the rules as now constituted. [Footnote 10] Rule 30(b), as presently written, gives the trial judge the requisite discretion to make a judgment as to whether discovery should be allowed as to written statements secured from witnesses. But, in the instant case, there was no room for that discretion to operate in favor of the petitioner. No attempt was made to establish any reason why Fortenbaugh should be forced to produce the written statements. There was only a naked, general demand for these materials as of right, and a finding by the District Court that no recognizable privilege was involved. That was insufficient to justify discovery under these circumstances, and the court should have sustained the refusal of the tug owners and Fortenbaugh to produce. But, as to oral statements made by witnesses to Fortenbaugh, whether presently in the form of his mental impressions or memoranda, we do not believe that any showing of necessity can be made under the circumstances of this case so as to justify production. Under ordinary conditions, forcing an attorney to repeat or write out all that witnesses have told him and to deliver the account Page 329 U. S. 513 to his adversary gives rise to grave dangers of inaccuracy and untrustworthiness. No legitimate purpose is served by such production. The practice forces the attorney to testify as to what he remembers or what he saw fit to write down

regarding witnesses' remarks. Such testimony could not qualify as evidence, and to use it for impeachment or corroborative purposes would make the attorney much less an officer of the court and much more an ordinary witness. The standards of the profession would thereby suffer. P Denial of production of this nature does not mean that any age | 19 material, nonprivileged facts can be hidden from the petitioner in this case. He need not be unduly hindered in the preparation of his case, in the discovery of facts, or in his anticipation of his opponents' position. Searching interrogatories directed to Fortenbaugh and the tug owners, production of written documents and statements upon a proper showing, and direct interviews with the witnesses themselves all serve to reveal the facts in Fortenbaugh's possession to the fullest possible extent consistent with public policy. Petitioner's counsel frankly admits that he wants the oral statements only to help prepare himself to examine witnesses and to make sure that he has overlooked nothing. That is insufficient under the circumstances to permit him an exception to the policy underlying the privacy of Fortenbaugh's professional activities. If there should be a rare situation justifying production of these matters, petitioner's case is not of that type. We fully appreciate the widespread controversy among the members of the legal profession over the problem raised by this case. [Footnote 11] It is a problem that rests on what Page 329 U. S. 514 has been one of the most hazy frontiers of the discovery process. But, until some rule or statute definitely prescribes otherwise, we are not justified in permitting discovery in a situation of this nature as a matter of unqualified right. When Rule 26 and the other discovery rules were adopted, this Court and the members of the bar in general certainly did not believe or contemplate that all the files and mental processes of lawyers were thereby opened to the free scrutiny of their adversaries. And we refuse to interpret the rules at this time so as to reach so harsh and unwarranted a result. We therefore affirm the judgment of the Circuit Court of Appeals. Affirmed. MR. JUSTICE JACKSON, concurring. The narrow question in this case concerns only one of thirtynine interrogatories which defendants and their counsel refused to answer. As there was persistence in refusal after the court ordered them to answer it, counsel and clients were

committed to jail by the district court until they should purge themselves of contempt. The interrogatory asked whether statements were taken from the crews of the tugs involved in the accident, or of any other vessel, and demanded, "Attach hereto exact copies of all such statements if in writing, and if oral, set forth in detail the exact provisions of any such oral statements or reports." The question is simply whether such a demand is authorized by the rules relating to various aspects of "discovery." The primary effect of the practice advocated here would be on the legal profession itself. But it too often is overlooked Page 329 U. S. 515 that the lawyer and the law office are indispensable parts of our administration of justice. Law-abiding people can go nowhere else to learn the ever changing and constantly multiplying rules by which they must behave and to obtain redress for their wrongs. The welfare and tone of the legal profession is therefore of prime consequence to society, which would feel the consequences of such a practice as petitioner urges secondarily, but certainly. "Discovery" is one of the working tools of the legal profession. It traces back to the equity bill of discovery in English Chancery practice, and seems to have had a forerunner in Continental practice. See Ragland, Discovery Before Trial (1932) 13-16. Since 1848, when the draftsmen of New York's Code of Procedure recognized the importance of a better system of discovery, the impetus to extend and expand discovery, as well as the opposition to it, has come from within the Bar itself. It happens in this case that it is the plaintiff's attorney who demands such unprecedented latitude of discovery and, strangely enough, amicus briefs in his support have been filed by several labor unions representing plaintiffs as a class. It is the history of the movement for broader discovery, however, that, in actual experience, the chief opposition to its extension has come from lawyers who specialize in representing plaintiffs, because defendants have made liberal use of it to force plaintiffs to disclose their cases in advance. See Report of the Commission on the Administration of Justice in New York State (1934) 330, 331; Ragland, Discovery Before Trial (1932) 35, 36. Discovery is a two-edged sword, and we cannot decide this problem on any doctrine of extending help to one class of litigants.

Janz N. Serrano It seems clear, and long has been recognized, that discovery should provide a party access to anything that is evidence in his case. Cf. Report of Commission on the Administration of Justice in New York State (1934) 41, 42. Page 329 U. S. 516 It seems equally clear that discovery should not nullify the privilege of confidential communication between attorney and client. But those principles give us no real assistance here, because what is being sought is neither evidence nor is it a privileged communication between attorney and client. To consider first the most extreme aspect of the requirement in litigation here, we find it calls upon counsel, if he has had any conversations with any of the crews of the vessels in question or of any other, to "set forth in detail the exact provision of any such oral statements or reports." Thus, the demand is not for the production of a transcript in existence, but calls for the creation of a written statement not in being. But the statement by counsel of what a witness told him is not evidence when written plaintiff could not introduce it to prove his case. What, then, is the purpose sought to be served by demanding this of adverse counsel? Counsel for the petitioner candidly said on argument that he wanted this information to help prepare himself to examine witnesses, to make sure he overlooked nothing. He bases his claim to it in his brief on the view that the Rules were to do away with the old situation where a law suit developed into "a battle of wits between counsel." But a common law trial is and always should be an adversary proceeding. Discovery was hardly intended to enable a learned profession to perform its functions either without wits or on wits borrowed from the adversary. The real purpose and the probable effect of the practice ordered by the district court would be to put trials on a level even lower than a "battle of wits." I can conceive of no practice more demoralizing to the Bar than to require a lawyer to write out and deliver to his adversary an account of what witnesses have told him. Even if his recollection were perfect, the statement would be his language Page 329 U. S. 517 permeated with his inferences. Everyone who has tried it knows that it is almost impossible so fairly to record the expressions and emphasis of a witness that, when he testifies in the environment of the court and under the influence of the leading question, there will not be departures in some respects. Whenever the testimony of the witness would differ from the "exact" statement the lawyer had delivered, the

Janz N. Serrano lawyer's statement would be whipped out to impeach the witness. Counsel producing his adversary's "inexact" statement could lose nothing by saying, "Here is a contradiction, gentlemen of the jury. I do not know whether it is my adversary or his witness who is not telling the truth, but one is not." Of course, if this practice were adopted, that scene would be P repeated over and over again. The lawyer who delivers such age | 20 statements often would find himself branded a deceiver afraid to take the stand to support his own version of the witness' conversation with him, or else he will have to go on the stand to defend his own credibility -- perhaps against that of his chief witness, or possibly even his client. Every lawyer dislikes to take the witness stand, and will do so only for grave reasons. This is partly because it is not his role; he is almost invariably a poor witness. But he steps out of professional character to do it. He regrets it; the profession discourages it. But the practice advocated here is one which would force him to be a witness not as to what he has seen or done, but as to other witnesses' stories, and not because he wants to do so, but in self-defense. And what is the lawyer to do who has interviewed one whom he believes to be a biased, lying, or hostile witness to get his unfavorable statements and know what to meet? He must record and deliver such statements even though he would not vouch for the credibility of the witness by calling him. Perhaps the other side would not want to Page 329 U. S. 518 call him either, but the attorney is open to the charge of suppressing evidence at the trial if he fails to call such a hostile witness even though he never regarded him as reliable or truthful. Having been supplied the names of the witnesses, petitioner's lawyer gives no reason why he cannot interview them himself. If an employee-witness refuses to tell his story, he, too, may be examined under the Rules. He may be compelled on discovery as fully as on the trial to disclose his version of the facts. But that is his own disclosure -- it can be used to impeach him if he contradicts it, and such a deposition is not useful to promote an unseemly disagreement between the witness and the counsel in the case. It is true that the literal language of the Rules would admit of an interpretation that would sustain the district court's order. So the literal language of the Act of Congress which makes "any writing or record . . . made as a memorandum or record of any . . . occurrence, or event" admissible as evidence would have allowed the railroad company to put its engineer's accident statements in evidence. Cf. Palmer v. Hoffman, 318 U. S. 109, 318 U. S. 111. But all such procedural measures have a background of custom and practice which was assumed by those who wrote and should be by those who apply them. We reviewed the background of the Act and the consequences on the trial of negligence cases of allowing railroads and others to put in their statements and thus to shield the crew from crossexamination. We said, "Such a major change which opens wide the door to avoidance of cross-examination should not be left to implication." 318 U.S. at 318 U. S. 114. We pointed out that there, as here, the "several hundred years of history behind the Act . . . indicate the nature of the reforms which it was designed to effect." Page 329 U. S. 519 318 U.S. at 318 U. S. 115. We refused to apply it beyond that point. We should follow the same course of reasoning here. Certainly nothing in the tradition or practice of discovery up to the time of these Rules would have suggested that they would authorize such a practice as here proposed. The question remains as to signed statements or those written by witnesses. Such statements are not evidence for the defendant. Palmer v. Hoffman, 318 U. S. 109. Nor should I think they ordinarily could be evidence for the plaintiff. But such a statement might be useful for impeachment of the witness who signed it, if he is called, and if he departs from the statement. There might be circumstances, too, where impossibility or difficulty of access to the witness or his refusal to respond to requests for information or other facts would show that the interests of justice require that such statements be made available. Production of such statements are governed by Rule 34 and on "Showing good cause therefor" the court may order their inspection, copying or photographing. No such application has here been made; the demand is made on the basis of right, not on showing of cause. I agree to the affirmance of the judgment of the Circuit Court of Appeals which reversed the district court. MR. JUSTICE FRANKFURTER joins in this opinion.

Janz N. Serrano COCA COLA CO. v. DIXI-COLA LABORATORIES, Inc. Suit by the Coca Cola Company against Dixi-Cola Laboratories, Inc., to enjoin the infringement of a trade-mark and for alleged unfair competition. On plaintiff's objection to interrogatories served by defendant. P Order in accordance with opinion. question of practice therefore very naturally arises as to whether the large number of interrogatories in this case is reasonably consistent with the spirit and intent of the new federal rules of civil procedure (F.R.C.P.). [1] [2] [3] One important object of the new rules was to require simplicity and brevity in the pleadings, but with the most ample provision for facilities of discovery of facts before trial, so that surprise at the trial and possible miscarriage of justice thereby could be avoided. Prior to the adoption of the new rules federal procedure at law was largely lacking in legal machinery for the discovery of facts prior to the trial; and federal equity procedure provided in this respect only interrogatories under rule 58, and in connection with a bill of discovery. 28 U.S.C.A.following section 723. But the practice in many of the states had been liberalized and modernized in this respect, and it was one of the purposes of the F.R.C.P. to adopt the best of the modern English and state practices for discovery. To this end the F.R.C.P. now provides in rules 26 to 37, both inclusive, every facility by way of (a) depositions before and pending trial; (b) interrogatories to parties; (c) discovery and production of documents and things for inspection, copying or photographing; (d) physical and mental examination of *278 persons, and (e) admission of facts and genuineness of documents. We are here concerned primarily with the procedure for development of facts prior to trial by the use of interrogatories provided for by rule 33. This practice has long been known in admiralty and was provided for by federal equity rule 58. It was, however, comparatively inefficient and cumbersome as a method of obtaining full discovery prior to trial. Influenced no doubt by the spirit of equity decisions in the earlier English practice, the scope of matters allowed to be inquired about by interrogatories had become much restricted by judicial decisions. Thus by many decisions only matters exclusively or peculiarly within the knowledge or control of the adverse party could be made the subject of interrogatories; and in other cases discovery was limited to material or ultimate facts, and not permitted as to merely evidentiary facts; and names and addresses of witnesses were generally excluded. In formulating the new rule 33, it was apparently the purpose of the Advisory Committee to the Supreme Court (as explanation of the new rules at the Cleveland, Washington and New York Institutes) to omit all such restrictions on the scope of interrogatories, and to broaden the subject matter upon which the adverse parties could be interrogated to any facts which are relevant to the case, except as to questions which may be privileged. See Moore's Federal Practice, Vol. II, Ch. 33; Nichols v. Sanborn Co., D.C., 24 F.Supp. 908, 910; Babcock & Wilcox Co. v. North Carolina Pulp Co., D.C., 25 F.Supp. 596; Lanova Corp. v. National Supply Co., D.C. Pa., 29 F.Supp. 119; Landry v. O'Hara Vessels, Inc., D.C. Mass., 29 F.Supp. 423. [4] [5] Despite the wide latitute of subject matter now permissibly embraced within the scope of interrogatories under rule 33, there are necessarily some implied and inherent limitations affecting proper practice regarding them. By the rule the interrogatories are required to be separately and fully answered in writing under oath and signed by the person making them within fifteen days after service; and objections thereto may be presented to the court within ten days. And by rule 37, on refusal to answer interrogatories without substantial justification the court shall require the refusing party or deponent and the party or attorney advising the refusal or either of them to pay to the examining party the amount of the reasonable expenses incurred in obtaining the order, including reasonable attorney's fees. If the motion is denied and if the court finds that the motion was made without substantial justification, the court shall require the examining party or the attorney advising the motion or both of them to pay to the refusing party or witness the amount of the reasonable expenses incurred in opposing the motion, including reasonable attorney's fees. As the answer must be in writing under oath, and made within fifteen days, unless the time is expressly extended by court order, the necessary inference would seem to be that the party interrogated need only answer matters of fact within his knowledge, and this would seem to exclude the propriety of interrogatories which merely seek to elicit opinions, or which require research and compilation of data and information not readily known to the party interrogated; and of course only matters that are relevant to the particular case can properly be the subject of interrogatories. [6] It should also importantly be borne in mind that extensive examination of the adverse party by interrogatories is cumbersome and likely to prove inefficient, as compared with the now available method of taking his deposition. There is, therefore, now no further necessity under the F.R.C.P. to resort to interrogatories where an extended examination is desired. Cf. Pressed Steel Car Co. v. Union Pac. R. Co., D.C.N.Y., 241 F. 964, 967; Zolla v. Grand Rapids, etc., Corp., D.C.N.Y., 46 F.2d 319, 320. See also 42 Yale Law Journal, 875, 876, where Prof. Sunderland in discussing the subject has this to say: In actual effectiveness interrogatories are far inferior to the oral examination. Their defects are quite obvious. In the first place, they give the party to whom they are addressed more time to study their effect, which furnishes a better opportunity to frame protective answers which conceal or evade. In the next place, as a means of forcing a specific, detailed and thorough disclosure from a reluctant party, there is a tendency for the interrogatories to grow in number, complexity and variety of form, so as to call for as many aspects of the proof as possible, with the result that they often become difficult to administer. Cases have been reported where more than two thousand interrogatories were

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CHESNUT, District Judge.

At the present state of the above case, a question of practice has arisen with regard to interrogatories by the defendant to the plaintiff after the pleadings have been completed. One question presented is whether the court has discretion to limit the interrogatories by one party to the other to a reasonable number. Another question is whether interrogatories can properly be maintained when they seek answers only with regard to details of evidence. Still another question is whether answers should be compelled to interrogatories which call for research work and compilation of data or statistics, which really constitute matters of evidence in support of affirmative defenses. The issues made by the pleadings in this case are neither unusual nor complex. The plaintiff is the holder of the well known trade mark Coca Cola. See Coca-Cola Co. v. Koke Company of America et al., 254 U.S. 143, 41 S.Ct. 113, 65 L.Ed. 189. The suit is brought to enjoin infringement of this mark by the defendant in the use, among other names, of Dixie-Cola; and also for alleged unfair competition. The answer of the defendant among other defenses alleges fraud on the part of the plaintiff in the registration of its trade mark many years ago, and oppressive litigation by it over a long period of years to maintain the mark and discourage competition, in the sale of somewhat similar beverages. In aid of its defense the defendant has now served upon the plaintiff under rule 33 of the new rules of federal civil procedure, 28 U.S.C.A. following section 723c, 112 interrogatories to be answered by the plaintiff corporation or by its officers or representatives, many of which are subdivided, so that the total number of questions asked is 255, extending over 40 large typewritten pages. The plaintiff has answered all but about 40 of these, and has filed objections to the remainder. The questions and the answers thereto and the objections to others form a book extending over 82 typewritten pages. Counsel for both parties have been heard on the objections in oral argument for about three hours, and the examination of the pleadings and interrogatories and the objections and consideration of the numerous different points raised has occupied a much greater length of time. The

Janz N. Serrano employed. *279 To meet this sort of abuse, the questions must either be authorized by court order or there must be an arbitrary limit to their number, both of which methods of dealing with the matter are unsatisfactory. In view of these limitations upon the effectiveness of written interrogatories, it is evident that they are not well P age | 22 adapted for the purpose of a general examination. It is only when the facts sought are few, formal and isolated, that this method can be satisfactorily employed. So long as the discovery is restricted to the case of the examiner, and he is not permitted to inquire into the case of his adversary, the facts sought by discovery will usually be few, formal and isolated, and written interrogatories will perhaps serve reasonably well. For a small task a feeble instrument may suffice. But if discovery is to involve a thorough inquiry into the vital and highly controversial phases of the case, resort must be had to an oral examination. It is apparent that the two aspects of the problem of discovery, namely its scope and its methods, are intimately connected. One depends to a considerable degree upon the other, and both should be dealt with together. [7] [8] Experience in some recent cases in this court where interrogatories have been extensively used, strongly confirms the views expressed by Prof. Sunderland. Where the facts to be elicited are relatively few and important, whether ultimate facts or evidentiary facts, the legal machinery of interrogatories is a very useful, expeditious and inexpensive method; but where they are very numerous, as in this case, they tend to become unduly burdensome, oppressive and vexatious to the adverse party and difficult for the court to administer. So long as the interrogatories to be passed on by the court are comparatively few in number and relate to important or dominant facts or aspects of the case, it is not difficult for the trial judge to rule upon them intelligently; but when, as in this case, the number of questions is 255, and some 40 are objected to, the situation is quite different. At this preliminary stage of the case it is difficult for the trial judge to determine the relevancy of comparatively minor and subordinate evidentiary facts. Furthermore the procedure tends to be unnecessarily wasteful of judicial time. The judicial ruling upon the interrogatories themselves is not necessarily conclusive or even important in most cases as determinative of the issues in the case. The purpose of the interrogating party is to develop information or force admissions; but if the answers are not satisfactory or useful, the time spent in considering them and the objections thereto is generally wasted, because the answers do not become evidence in the case unless voluntarily introduced by the interrogator as admissions against interest on the part of the party interrogated. [9] These considerations tend to the view that the number of interrogatories should be relatively few and related to the important facts of the case, rather than very numerous and concerned with relatively minor evidentiary details. It is not proposed to lay down any general rigid or inflexible rule with regard to what number of interrogatories is proper because cases must necessarily very in their range of relevant facts. But in general it may be observed that it will be only the exceptional case where more than fifteen or twenty interrogatories can conveniently and efficiently be submitted. Where a more comprehensive examination of the adverse party is desired it should ordinarily be done by taking his deposition. If insistence is made upon answers to such a large number of interrogatories that they become unreasonably oppressive or vexatious, it would seem appropriate to impose costs in accordance with rule 37. [10] I proceed now to rule upon the several interrogatories objected to. In view of the large number involved it would be tedious and unduly protract the opinion to discuss them each separately. Where the objections are sustained the ground therefor is either because, so far as I can see at this stage of the case, the questions are irrelevant or unnecessarily burdensome upon the plaintiff in requiring investigation or research or compilation of data or statistics, which more properly is the province of counsel for the defendant, or for other reasons indicated in the objections specifically made by the plaintiff. In this connection it is noted that the plaintiff has presented its objections in the convenient form of a book in which the interrogatories are separately numbered and the answers are given in connection therewith, when answered, and in the case of those not answered the objections thereto are presented in red ink. The rulings on *280 the severally numbered questions where the objections are sustained or overruled, are as follows:
No. of Interrogatory 5(f) 14 46 46(a) 50(b) 51(d) 51(e) [FN*]54(f) * 55(d) * 55(f) * 56(a) 57(f) * 57(g) * 58(d) * 59(d) * 60(d) 61(a) 61(b) 61(c) 61(d) 61(e) 62(a) Objection 62(b) 62(c) 62(d) 63(a) 63(b) 64(a) 65(a) 66 66(a) 66(b) 67 68(c) 70 76(a) 77 78 82(a) to (k) 83 88 96 Overruled Sustained Sustained Sustained Sustained Sustained Sustained Sustained Sustained Sustained Sustained Sustained Sustained Sustained Sustained Sustained Sustained Sustained Sustained Sustained

[11] *With reference to interrogatories Nos. 54(f); 55(d); 55(f); 56(a); 57(g); 58(d); 59(d), and 60(d), a particular word should be said. In paragraph 25, and some following paragraphs of the complaint, allegations are made by the plaintiff with respect to acts of unfair competition. Thus paragraph 25 reads: On information and belief, the defendants named in paragraph 17 hereof, induced and encouraged bottlers to whom their bottling concentrate is sold to use on and in connection with the sale of bottled beverages manufactured by said bottlers, names which are confusingly similar to plaintiff's registered trade mark 'Coca Cola and which are colorable imitations and infringements thereof. Interrogatory 54(f) reads as follows: State the identity and address of all persons having knowledge of facts relevant to the allegations of said paragraph 25 of the complaint. Similar interrogatories are propounded with regard to several subsequent paragraphs of the complaint. The form of this interrogatory seems objectionable, but if in substance it is meant to require only the name of bottlers, customers of the defendants, who are induced and encouraged to commit the alleged unfair competition, then to that extent the objections to this and the similar questions just enumerated are overruled. [12] [13] Interrogatory No. 55(f) reads as follows:

Sustained Sustained Sustained Sustained Sustained Sustained Sustained See infra See infra See infra See infra Overruled See infra See infra See infra See infra Overruled Overruled Overruled Sustained Sustained Overruled

State the names and addresses of the witnesses upon whose testimony the plaintiff will reply in proof of the allegations of paragraph 28 of plaintiff's bill of complaint.

Janz N. Serrano The form of this question is also objectionable. The plaintiff is not bound to limit itself in the introduction of testimony to certain named witnesses; that is to say, a bill of particulars of who the witnesses will be should not be required. If, however, by this question the defendant seeks merely information as to the names of bottlers or customers of the P defendant known to the plaintiff in connection with the age | 23 charge of unfair competition contained in paragraph 28 of the bill, then to that extent the objection is overruled.

District Court, N.D. Georgia, Newnan Division. SAXTON v. W. S. ASKEW CO. age | 24 P No. 52 Civil Action. March 7, 1941. Suit by Caldwell Saxton against the W.S. Askew Company to recover, on behalf of himself and others similarly situated, unpaid wages and unpaid overtime compensation under the Fair Labor Standards Act, wherein some 41 employees of the defendant filed their petition for intervention, adopting the allegations of the original petition, and wherein the plaintiff and interveners filed a motion for the production of records and documents for inspection. Decree in accordance with opinion.

Thereafter some forty-one employees of the defendant filed their petition for intervention adopting the allegations of the original petition. Plaintiffs and intervenors, all of whom will be denominated as plaintiffs, have moved for the production of records and documents, for inspection, etc. under Rule 34, 28 U.S.C.A.following section 723c, specifying the records made and kept by defendant under Section 11(c) of the Fair Labor Standards Act from October 24, 1938, to July 3, 1940; the time slips, etc., from which these records were made; and all records kept by defendant to show its employees, their names, addresses, persons worked and number of hours worked, the weekly wages paid to each; and the sales and shipping records of defendant and other records *325 showing the names and addresses of persons to whom sales or shipments were made, etc. Defendant contends that the motion should be denied for the reasons: (a) That the pay roll records, so far as pertaining to the employees not parties to the suit, are immaterial; (b) that so far as such records relate to the plaintiffs the facts are well known to the plaintiffs; and (c) according to the allegations of the petition each party has definite information and knowledge as to the number of hours each worked and the rate of pay received; and (d) that the motion contains no statement of facts showing why the order prayed for should be granted; and (e) it does not show that the records contain any material evidence; nor (f) is there any showing that the records are required for any adequate reason; and (g) there is no reason shown why the information sought could not be secured by taking depositions or by notice to produce. It is, admitted that the shipping records are material and defendant admits readiness to furnish plaintiffs such portions of these records as the Court deems pertinent. [1] These various matters will be dealt with in the order stated above. The amendment offered by the plaintiffs is, under the former judgment of this court, subject to the objections urged, and so far as the same attempts to maintain the action as a true class one on behalf of all employees it will be stricken. [2] Under the circumstances of this case, no useful purpose would be served by the appointment of a master, and the motion therefor is accordingly denied. [3] [4] The motion of plaintiffs that they be allowed to inspect and copy the specified records of the defendant is not as full and complete as it should be to meet all strict requirements of proper procedure. The motion is not verified, as would be indicated by the official forms of the Rules of Civil Procedure, Number 24, but in view of the nature of the issues involved, which would render subsequent verification certain, I am unwilling to base denial of the motion on this ground. In interpreting and enforcing the provisions of the

Janz N. Serrano Rules of Civil Procedure, the District Courts are given wide discretion and latitude to the end that the desired results of speedy and efficient administration of justice may be secured. Prior to the adoption of the rules and the beginning of what is hoped will be a simplification of Civil Procedure, the motion of the plaintiffs would have appeared novel and the argument of defendant that is was merely an effort to obtain its evidence would have had great weight. However, once the proposition be accepted that the rules relating to discovery and the production of documents was enacted for the purpose of providing a short, speedy and inexpensive determination of law suits, the argument of the defendant that it is not fair to make it produce its evidence before trial loses much force. This argument overlooks the fact that the tendency of the rules and modern procedure is to do away with every possible feature of trial by surprise, and substitute a trial by facts, whatever they may be, if indeed it be found after the use of the means of discovery provided that a trial is necessary or would result in establishment of rights for the plaintiff. It may be observed that the documents sought to be inspected are not those which the defendant has secured as its evidence after the institution of the suit. In actual practice, there will be rare instance where the objection to the motion for production and inspection of documents can be defended by showing that the information could become available by depositions or subpoena duces tecum, for especially in the latter case it is tantamount to the argument that the party is entitled to retain his evidence until the actual trial, with all the advantages of secrecy and surprise which might ensue as a matter of course. This is thought to be contrary to all modern day principles of judicial procedure. [5] Under the pleadings, the nature of the case, and the facts produced in the oral argument, the motion for production and inspection is deemed sufficient. It is alleged by the plaintiffs that the matter of hours worked and pay received is peculiarly within the knowledge of the defendant, who knows or should know and have records of the exact number of hours worked and compensation paid. If defendant is subject to the terms of the act, it should have such records and is required by law to keep them, and under these circumstances the materiality and relevancy of the contents of such records is apparent, and a statement that they are material is not a conclusion of the plaintiffs. Indeed,*326 it is difficult to understand the difference between the materiality of these records and of the shipping records, which the defendant concedes to be material. Adopting the language of C. F. Simonin's Sons, Inc., v. American Can Company, D.C., 30 F.Supp. 901, 902, and Fishman v. Marcouse, D.C., 32 F.Supp. 460, 461, 462, 463: In the instant case I am convinced there is 'reasonable ground to believe that a cause of action exists' and the plaintiff should be

RUSSELL, District Judge.

This suit was originally instituted by Caldwell Saxton against the defendant seeking to recover on behalf of himself and others similarly situated unpaid wages and unpaid overtime compensation under the provisions of the Fair Labor Standards Act, 29 U.S.C.A. 201 et seq. Upon objections made and upon consideration of the motion made for a more definite statement, the petitioner was held to be not authorized to maintain the suit on behalf of other employees. D.C., 35 F.Supp. 519. Plaintiff thereafter prayed leave of the Court to amend his petition setting forth substantially similar allegations to those contained in the original petition, and amplifying the allegations as to the similar situation of some eighty-one other employees, stating that he had been duly authorized to maintain the action, and praying the appointment of a master, and that he be permitted to recover for himself and the other eighty-one employees such amount as may be found due. This amendment was allowed subject to objection. Defendant objects to the allowance of this amendment and moves to strike it upon the ground that it is concluded by the former judgment of the court, and it can only proceed as an action in which other employees are permitted to intervene; that the statement he had been authorized and empowered to bring the action is a conclusion; and that there is no reason for the appointment of a master shown by the petition.

Janz N. Serrano afforded the privilege of examining the defendant's books and records. [6] Nevertheless, the motion of the plaintiffs is too broad. They have no right or concern with the records of the defendant concerning all its employees, but only as to such P age | 25 records as affect them. It would not be the inclination of this court, no matter how technical or formal the motion, to permit a fishing expedition into the records of the defendant. Under Rule 34, the court should in permitting inspection and making of copies prescribe such terms and conditions as are just. To prevent a fishing expedition, the method adopted by Judge Bard in Fishman v. Marcouse, D.C., 32 F.Supp. 460, supra (72 Bull. 23, Dept. of Justice), following the procedure of Judge Kirkpatrick, would seem to meet the requirements of justice. Asking for too much will not defeat the entire motion of the plaintiffs, but the grant will be restricted to those pay roll records pertaining solely to the plaintiffs in the suit. Counsel for the plaintiffs may present an order appointing a master to supervise and to conduct plaintiffs' inspection and copying of the pay roll records, time slips and pay roll records, and other records from which the foregoing records were made, showing the persons worked and number of hours worked each day, and the weekly wage paid to each of the plaintiffs between the 24th day of October, 1938, and July 3, 1940, but the master shall be required to withhold from plaintiffs' examination and inspection all matters and information contained in such documents which do not relate to the plaintiffs in this action. Counsel for both parties will be given an opportunity to agree upon a disinterested master and report same by March 15th, with evidence of consent, in the absence of which the Court will name a person to conduct the examination. As to the shipping records, defendant will furnish to the plaintiffs a record of sales and shipments by defendant between October 24, 1938, and July 3, 1940, showing the consignees, their addresses, and the kind of lumber product shipped, unless it be stipulated between the parties that all shipments were of products produced in the plant of the defendant during the period of time specified. From the response to the motion, it is apparent that no difficulty will be experienced by the parties in reaching an agreement as to a date and time necessary for this inspection, but to forestall any delay, in the absence of agreement, the defendant will exhibit such records to plaintiffs' counsel at its office during business hours on March 12, 1941. END OF DOCUMENT

D.C.GA 1941. SAXTON v. W. S. ASKEW CO. 38 F.Supp. 323

District Court, E.D. New York. MACKERER v. NEW YORK CENT. R. CO. age | 26 P No. 817. Oct. 4, 1940. Action by Kate R. Mackerer, as administratrix of the goods, chattels, and credits of Joseph Oscar Mackerer, deceased, against the New York Central Railroad Company to recover damages for the death of Joseph Oscar Mackerer, deceased, who was killed as a result of the turning over of a steam crane which he was operating while in the defendant's employ. The plaintiff seeks the production of all papers and records showing repairs made to the steam crane subsequent to the accident, the request being made in interrogatory 4. Defendant required to comply with interrogatory 4.

Hawthorne, 144 U.S. 202, 12 S.Ct. 591, 36 L.Ed. 405, considered this question and held such evidence inadmissible as incompetent and lacking in probative force. [2] The point here in issue has been discussed by Hon. Alexander Holtzoff, Special Assistant to the Attorney General, in one of his able commentaries on the Federal Rules of Civil Procedure. He has said with reference to the scope of an examination, The examining party is not restricted to securing testimony that would be admissible in evidence at the trial. He may go further and obtain information that may be useful in securing such evidence. See Holtzoff, New Federal Procedure and the Courts, 75. [3] Thus, both under Rule 26(b), and Rule 34, covering inspection, it is not necessary to establish admissibility of the testimony or document. It is sufficient that the inquiry be made as to matters generally bearing on the issue and relevant thereto or that there is reasonable probability that the document in question contains material evidence. This court had occasion to consider this question in Beler v. Savarona Ship Corporation, 26 F.Supp. 599. In this case plaintiff, the widow of the intestate, was, undoubtedly, not present at *410 the time of the accident and is therefore dependent upon information received from others. She is entitled to all the aid that the court can give her to prove the alleged negligent acts of the defendant. [4] If a narrow construction were placed upon Rule 26(b), the court would rule that the papers and documents sought should not be produced. The purpose of the Federal Rules of Civil Procedure, however, is to cut through the maze of technicalities which have heretofore existed, and to enable the court to do a greater measure of moral justice under the law. In another able and well-considered article by Mr. Holtzoff appearing in the American Bar Association Journal, January 1940 issue, page 45, entitled, Twelve Months Under The New Rules of Civil Procedure, Mr. Holtzoff has succinctly stated the purposes of the new Rules, as follows: The purpose of the new procedure has been to throw into discard the technicalities that acted as a brake on the progress of a lawsuit; to abolish what has been so aptly termed as the sporting theory of justice; to provide efficient machinery for the ascertainment of truth; and to expedite a determination of each controversy on the merits.' It cannot be decided as a matter of law in advance of the trial that the subject of plaintiff's inquiries is wholly irrelevant or immaterial. It is possible as contended by plaintiff that the repairs which were made after the accident disclose certain defects in the crane which by their very nature will appear to have been in existence before the accident. Furthermore, it is

Janz N. Serrano conceivable that such documents might be used to rebut defendant's evidence. See Choctaw, Oklahoma, & Gulf Railroad Company v. McDade, 191 U.S. 64, 24 S.Ct. 24, 48 L.Ed. 96. It is possible that such evidence might be admissible for other reasons. No injury can come to the defendant by producing the documents showing the repairs and on the contrary great harm may be done the plaintiff. All that is being decided here is that the documents should be produced for plaintiff's attorney's examination, copying, etc., as set forth in interrogatory 4. This court is not deciding that the documents would be admissible upon the trial. That question, of necessity, must be determined by the trial court. 4. Defendant will be required to comply with interrogatory Settle order on notice.

MOSCOWITZ, District Judge.

E.D.N.Y., 1940 MACKERER v. NEW YORK CENT. R. CO. 1 F.R.D. 408 END OF DOCUMENT

This action was brought to recover damages for the death of plaintiff's intestate who was killed as a result of the turning over of a steam crane which he was operating while in the defendant's employ. The plaintiff seeks the production of all papers and records showing repairs made to the steam crane subsequent to the accident. This request is made in interrogatory 4, which reads as follows: Directing the defendant to produce and permitting plaintiff's attorney to examine, copy and photograph all inspection reports, repair sheets, shop records, photographs, and any and all other papers showing the mechanical condition of, and showing repairs made to said steam crane following the accident involving said steam crane which occurred on August 9, 1939. Rule 26(b), Rules of Civil Procedure, 28 U.S.C.A. following section 723c, permits an examination regarding any matter not privileged which is relevant to the subject matter. Rule 34 permits dicovery of material documents. The question therefore arises whether a discovery may cover material which would be inadmissible in evidence. [1] Certainly, plaintiff cannot, as a part of her case, establish repairs made subsequent to the accident. The reason for that rule is that, if such evidence were admissible, a defendant in an accident case would hesitate, and in some instances refuse, to make any repairs for fear that evidence of such repairs would affect the defendant's rights before a jury. The Supreme Court in Columbia & Puget Sound R. Co. v.

UPJOHN COMPANY et al., Petitioners v. UNITED STATES et al. No. 79-886.| Argued Nov. 5, 1980. | Decided Jan. 13, 1981. P Corporation and in-house general counsel appealed from order of the United States District Court for the Western District of Michigan, Noel P. Fox, Chief Judge, enforcing an Internal Revenue summons for documents. The Court of Appeals, Sixth Circuit, 600 F.2d 1223, affirmed in part, reversed in part and remanded. Certiorari was granted, and the Supreme Court, Justice Rehnquist, held that: (1) District Court's test, of availability of attorney-client privilege, was objectionable as it restricted availability of privilege to those corporate officers who played substantial role in deciding and directing corporation's legal response; (2) where communications at issue were made by corporate employees to counsel for corporation acting as such, at direction of corporate superiors in order to secure legal advice from counsel, and employees were aware that they were being questioned so that corporation could obtain advice, such communications were protected; and (3) where notes and memoranda sought by government were work products based on oral statements of witnesses, they were, if they revealed communications, protected by privilege, and to extent they did not reveal communications, they revealed attorney's mental processes in evaluating the communications and disclosure would not be required simply on showing of substantial need and inability to obtain equivalent without undue hardship. Judgment of Court of Appeals reversed, and case remanded. Chief Justice Burger filed an opinion concurring in part and concurring in the judgment. **679 Syllabus FN*

age | 27

General Counsel. The General Counsel and outside counsel also interviewed the recipients of the questionnaire and other company officers and employees. Subsequently, based on a report voluntarily submitted by petitioner disclosing the questionable payments, the Internal Revenue Service (IRS) began an investigation to determine the tax consequences of such payments and issued a summons pursuant to 26 U.S.C. 7602 demanding production of, inter alia, the questionnaires and the memoranda and notes of the interviews. Petitioner refused to produce the documents on the grounds that they were protected from disclosure by the attorney-client privilege and constituted the work product of attorneys prepared in anticipation of litigation. The United States then filed a petition in Federal District Court seeking enforcement of the summons. That court adopted the Magistrate's recommendation that the summons should be enforced, the Magistrate having concluded, inter alia, that the attorney-client privilege had been waived and that the Government had made a sufficient showing of necessity to overcome the protection of the workproduct doctrine. The Court of Appeals rejected the Magistrate's finding of a waiver of the attorney-client privilege, but held that under the so-called control group test the privilege did not apply [t]o the extent that the communications were made by officers and agents not responsible for directing [petitioner's] actions in response to legal advice ... for the simple reason that the communications were not the client's. The court also held that the workproduct doctrine did not apply to IRS summonses. Held: 1. The communications by petitioner's employees to counsel are covered by the attorney-client privilege insofar as the responses to the *384 questionnaires and any notes reflecting responses to interview questions are concerned. Pp. 682-686. (a) The control group test overlooks the fact that such privilege exists to protect not only the giving of professional advice to **680 those who can act on it but also the giving of information to the lawyer to enable him to give sound and informed advice. While in the case of the individual client the provider of information and the person who acts on the lawyer's advice are one and the same, in the corporate context it will frequently be employees beyond the control group (as defined by the Court of Appeals) who will possess the information needed by the corporation's lawyers. Middle-leveland indeed lower-level-employees can, by actions within the scope of their employment, embroil the corporation in serious legal difficulties, and it is only natural that these employees would have the relevant information needed by corporate counsel if he is adequately to advise the client with respect to such actual or potential difficulties. Pp. 683-684. (b) The control group test thus frustrates the very purpose of the attorney-client privilege by discouraging the

Janz N. Serrano communication of relevant information by employees of the client corporation to attorneys seeking to render legal advice to the client. The attorney's advice will also frequently be more significant to noncontrol employees than to those who officially sanction the advice, and the control group test makes it more difficult to convey full and frank legal advice to the employees who will put into effect the client corporation's policy. P. 684. (c) The narrow scope given the attorney-client privilege by the Court of Appeals not only makes it difficult for corporate attorneys to formulate sound advice when their client is faced with a specific legal problem but also threatens to limit the valuable efforts of corporate counsel to ensure their client's compliance with the law. P. 684. (d) Here, the communications at issue were made by petitioner's employees to counsel for petitioner acting as such, at the direction of corporate superiors in order to secure legal advice from counsel. Information not available from upperechelon management was needed to supply a basis for legal advice concerning compliance with securities and tax laws, foreign laws, currency regulations, duties to shareholders, and potential litigation in each of these areas. The communications concerned matters within the scope of the employees' corporate duties, and the employees themselves were sufficiently aware that they were being questioned in order that the corporation could obtain legal advice. P. 685. 2. The work-product doctrine applies to IRS summonses. Pp. 686-689. (a) The obligation imposed by a tax summons remains subject to the traditional privileges and limitations, and nothing in the language *385 or legislative history of the IRS summons provisions suggests an intent on the part of Congress to preclude application of the work-product doctrine. P. 687. (b) The Magistrate applied the wrong standard when he concluded that the Government had made a sufficient showing of necessity to overcome the protections of the work-product doctrine. The notes and memoranda sought by the Government constitute work product based on oral statements. If they reveal communications, they are protected by the attorneyclient privilege. To the extent they do not reveal communications they reveal attorneys' mental processes in evaluating the communications. As Federal Rule of Civil Procedure 26, which accords special protection from disclosure to work product revealing an attorney's mental processes, and Hickman v. Taylor, 329 U.S. 495, 67 S.Ct. 385, 91 L.Ed. 451, make clear, such work product cannot be disclosed simply on a showing of substantial need or inability to obtain the equivalent without undue hardship. P. 688. 600 F.2d 1223, 6 Cir., reversed and remanded.

FN* The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Lumber Co., 200 U.S. 321, 337, 26 S.Ct. 282, 288, 50 L.Ed. 499. *383 When the General Counsel for petitioner pharmaceutical manufacturing corporation (hereafter petitioner) was informed that one of its foreign subsidiaries had made questionable payments to foreign government officials in order to secure government business, an internal investigation of such payments was initiated. As part of this investigation, petitioner's attorneys sent a questionnaire to all foreign managers seeking detailed information concerning such payments, and the responses were returned to the

*386 **681 Justice REHNQUIST delivered the opinion of the Court.

requested information. Responses were to be sent directly to Thomas. Thomas and outside counsel also interviewed the recipients of the questionnaire and some 33 other Upjohn officers or employees as part of the investigation. On March 26, 1976, the company voluntarily submitted a preliminary report to the Securities and Exchange Commission on Form 8-K disclosing certain questionable payments.FN1 A copy of the report was simultaneously submitted to the Internal Revenue Service, which immediately began an investigation to determine the tax consequences of the payments. Special agents conducting the investigation were given lists by Upjohn of all those interviewed and all who had responded to the questionnaire. On November 23, 1976, the Service issued a summons pursuant to 26 U.S.C. 7602 demanding production of: FN1. On July 28, 1976, the company filed an amendment to this report disclosing further payments.

P We granted certiorari in this case to address important age | 28 questions concerning the scope of the attorney-client privilege in the corporate context and the applicability of the workproduct doctrine in proceedings to enforce tax summonses. 445 U.S. 925, 100 S.Ct. 1310, 63 L.Ed.2d 758. With respect to the privilege question the parties and various amici have described our task as one of choosing between two tests which have gained adherents in the courts of appeals. We are acutely aware, however, that we sit to decide concrete cases and not abstract propositions of law. We decline to lay down a broad rule or series of rules to govern all conceivable future questions in this area, even were we able to do so. We can and do, however, conclude that the attorney-client privilege protects the communications involved in this case from compelled disclosure and that the work-product doctrine does apply in tax summons enforcement proceedings. I Petitioner Upjohn Co. manufactures and sells pharmaceuticals here and abroad. In January 1976 independent accountants conducting an audit of one of Upjohn's foreign subsidiaries discovered that the subsidiary made payments to or for the benefit of foreign government officials in order to secure government business. The accountants, so informed petitioner, Mr. Gerard Thomas, Upjohn's Vice President, Secretary, and General Counsel. Thomas is a member of the Michigan and New York Bars, and has been Upjohn's General Counsel for 20 years. He consulted with outside counsel and R. T. Parfet, Jr., Upjohn's Chairman of the Board. It was decided that the company would conduct an internal investigation of what were termed questionable payments. As part of this investigation the attorneys prepared a letter containing a questionnaire which was sent to All Foreign General and Area Managers over the Chairman's signature. The letter *387 began by noting recent disclosures that several American companies made possibly illegal payments to foreign government officials and emphasized that the management needed full information concerning any such payments made by Upjohn. The letter indicated that the Chairman had asked Thomas, identified as the company's General Counsel, to conduct an investigation for the purpose of determining the nature and magnitude of any payments made by the Upjohn Company or any of its subsidiaries to any employee or official of a foreign government. The questionnaire sought detailed information concerning such payments. Managers were instructed to treat the investigation as highly confidential and not to discuss it with anyone other than Upjohn employees who might be helpful in providing the

Janz N. Serrano officials such as the Chairman and President, the Court of Appeals remanded to the District Court so that a determination of who was *389 within the control group could be made. In a concluding footnote the court stated that the work-product doctrine is not applicable to administrative summonses issued under 26 U.S.C. 7602. Id., at 1228, n. 13. II [1] [2] Federal Rule of Evidence 501 provides that the privilege of a witness ... shall be governed by the principles of the common law as they may be interpreted by the courts of the United States in light of reason and experience. The attorney-client privilege is the oldest of the privileges for confidential communications known to the common law. 8 J. Wigmore, Evidence 2290 (McNaughton rev. 1961). Its purpose is to encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and administration of justice. The privilege recognizes that sound legal advice or advocacy serves public ends and that such advice or advocacy depends upon the lawyer's being fully informed by the client. As we stated last Term in Trammel v. United States, 445 U.S. 40, 51, 100 S.Ct. 906, 913, 63 L.Ed.2d 186 (1980): The lawyerclient privilege rests on the need for the advocate and counselor to know all that relates to the client's reasons for seeking representation if the professional mission is to be carried out. And in Fisher v. United States, 425 U.S. 391, 403, 96 S.Ct. 1569, 1577, 48 L.Ed.2d 39 (1976), we recognized the purpose of the privilege to be to encourage clients to make full disclosure to their attorneys. This rationale for the privilege has long been recognized by the Court, see Hunt v. Blackburn, 128 U.S. 464, 470, 9 S.Ct. 125, 127, 32 L.Ed. 488 (1888) (privilege is founded upon the necessity, in the interest and administration of justice, of the aid of persons having knowledge of the law and skilled in its practice, which assistance can only be safely and readily availed of when free from the consequences or the apprehension of disclosure). Admittedly complications in the application of the privilege arise when the client is a corporation, which in theory is an artificial creature of the *390 **683 law, and not an individual; but this Court has assumed that the privilege applies when the client is a corporation. United States v. Louisville & Nashville R. Co., 236 U.S. 318, 336, 35 S.Ct. 363, 369, 59 L.Ed. 598 (1915), and the Government does not contest the general proposition. [3] The Court of Appeals, however, considered the application of the privilege in the corporate context to present a different problem, since the client was an inanimate entity and only the senior management, guiding and integrating the several operations, ... can be said to possess an identity analogous to the corporation as a whole. 600 F.2d at 1226. The first case to articulate the so-called control group test adopted by the court below, Philadelphia v. Westinghouse Electric Corp., 210 F.Supp. 483, 485 (ED Pa.), petition for mandamus and prohibition denied sub nom. General Electric

All files relative to the investigation conducted under the supervision of Gerard Thomas to identify payments to employees of foreign governments and any **682 political *388 contributions made by the Upjohn Company or any of its affiliates since January 1, 1971 and to determine whether any funds of the Upjohn Company had been improperly accounted for on the corporate books during the same period. The records should include but not be limited to written questionnaires sent to managers of the Upjohn Company's foreign affiliates, and memorandums or notes of the interviews conducted in the United States and abroad with officers and employees of the Upjohn Company and its subsidiaries. App. 17a-18a. The company declined to produce the documents specified in the second paragraph on the grounds that they were protected from disclosure by the attorney-client privilege and constituted the work product of attorneys prepared in anticipation of litigation. On August 31, 1977, the United States filed a petition seeking enforcement of the summons under 26 U.S.C. 7402(b) and 7604(a) in the United States District Court for the Western District of Michigan. That court adopted the recommendation of a Magistrate who concluded that the summons should be enforced. Petitioners appealed to the Court of Appeals for the Sixth Circuit which rejected the Magistrate's finding of a waiver of the attorney-client privilege, 600 F.2d 1223, 1227, n. 12, but agreed that the privilege did not apply [t]o the extent that the communications were made by officers and agents not responsible for directing Upjohn's actions in response to legal advice ... for the simple reason that the communications were not the client's. Id., at 1225. The court reasoned that accepting petitioners' claim for a broader application of the privilege would encourage upper-echelon management to ignore unpleasant facts and create too broad a zone of silence. Noting that Upjohn's counsel had interviewed

Co. v. Kirkpatrick, 312 F.2d 742 (CA3 1962), cert. denied, 372 U.S. 943, 83 S.Ct. 937, 9 L.Ed.2d 969 (1963), reflected a similar conceptual approach: Keeping in mind that the question is, Is it the corporation which is seeking the lawyer's advice when the asserted privileged communication is made?, the most satisfactory P age | 29 solution, I think, is that if the employee making the communication, of whatever rank he may be, is in a position to control or even to take a substantial part in a decision about any action which the corporation may take upon the advice of the attorney, ... then, in effect, he is (or personifies) the corporation when he makes his disclosure to the lawyer and the privilege would apply. (Emphasis supplied.) Such a view, we think, overlooks the fact that the privilege exists to protect not only the giving of professional advice to those who can act on it but also the giving of information to the lawyer to enable him to give sound and informed advice. See Trammel, supra, at 51, 100 S.Ct., at 913; Fisher, supra, at 403, 96 S.Ct., at 1577. The first step in the resolution of any legal problem is ascertaining the factual background and sifting through the facts *391 with an eye to the legally relevant. See ABA Code of Professional Responsibility, Ethical Consideration 4-1: A lawyer should be fully informed of all the facts of the matter he is handling in order for his client to obtain the full advantage of our legal system. It is for the lawyer in the exercise of his independent professional judgment to separate the relevant and important from the irrelevant and unimportant. The observance of the ethical obligation of a lawyer to hold inviolate the confidences and secrets of his client not only facilitates the full development of facts essential to proper representation of the client but also encourages laymen to seek early legal assistance. See also Hickman v. Taylor, 329 U.S. 495, 511, 67 S.Ct. 385, 393394, 91 L.Ed. 451 (1947). In the case of the individual client the provider of information and the person who acts on the lawyer's advice are one and the same. In the corporate context, however, it will frequently be employees beyond the control group as defined by the court below-officers and agents ... responsible for directing [the company's] actions in response to legal advicewho will possess the information needed by the corporation's lawyers. Middle-level-and indeed lower-level-employees can, by actions within the scope of their employment, embroil the corporation in serious legal difficulties, and it is only natural that these employees would have the relevant information needed by corporate counsel if he is adequately to advise the client with respect to such actual or potential difficulties. This fact was noted in Diversified Industries, Inc. v. Meredith, 572 F.2d 596 (CA8 1978) (en banc):

In a corporation, it may be necessary to glean information relevant to a legal problem from middle management or nonmanagement personnel as well as from top executives. The attorney dealing with a complex legal problem is thus faced with a Hobson's choice. If he **684 interviews employees not having the very highest authority,*392 their communications to him will not be privileged. If, on the other hand, he interviews only those employees with the very highest authority, he may find it extremely difficult, if not impossible, to determine what happened. Id., at 608-609 (quoting Weinschel Corporate Employee Interviews and the AttorneyClient Privilege, 12 B.C.Ind. & Com. L.Rev. 873, 876 (1971)). [4] The control group test adopted by the court below thus frustrates the very purpose of the privilege by discouraging the communication of relevant information by employees of the client to attorneys seeking to render legal advice to the client corporation. The attorney's advice will also frequently be more significant to noncontrol group members than to those who officially sanction the advice, and the control group test makes it more difficult to convey full and frank legal advice to the employees who will put into effect the client corporation's policy. See, e. g., Duplan Corp. v. Deering Milliken, Inc., 397 F.Supp. 1146, 1164 (DSC 1974) (After the lawyer forms his or her opinion, it is of no immediate benefit to the Chairman of the Board or the President. It must be given to the corporate personnel who will apply it). The narrow scope given the attorney-client privilege by the court below not only makes it difficult for corporate attorneys to formulate sound advice when their client is faced with a specific legal problem but also threatens to limit the valuable efforts of corporate counsel to ensure their client's compliance with the law. In light of the vast and complicated array of regulatory legislation confronting the modern corporation, corporations, unlike most individuals, constantly go to lawyers to find out how to obey the law, Burnham, The Attorney-Client Privilege in the Corporate Arena, 24 Bus.Law. 901, 913 (1969), particularly since compliance with the law in this area is hardly an instinctive matter, see, e. g., United States v. United States Gypsum Co., 438 U.S. 422, 440-441, 98 S.Ct. 2864, 2875-2876, 57 L.Ed.2d 854 (1978) (the behavior proscribed by the [Sherman] Act is *393 often difficult to distinguish from the gray zone of socially acceptable and economically justifiable business conduct).FN2 The test adopted by the court below is difficult to apply in practice, though no abstractly formulated and unvarying test will necessarily enable courts to decide questions such as this with mathematical precision. But if the purpose of the attorneyclient privilege is to be served, the attorney and client must be able to predict with some degree of certainty whether particular discussions will be protected. An uncertain privilege, or one which purports to be certain but results in widely varying applications by the courts, is little better than no

Janz N. Serrano privilege at all. The very terms of the test adopted by the court below suggest the unpredictability of its application. The test restricts the availability of the privilege to those officers who play a substantial role in deciding and directing a corporation's legal response. Disparate decisions in cases applying this test illustrate its unpredictability. Compare, e. g., Hogan v. Zletz, 43 F.R.D. 308, 315-316 (ND Okl.1967), aff'd in part sub nom. Natta v. Hogan, 392 F.2d 686 (CA10 1968) (control group includes managers and assistant managers of patent division and research and development department), with Congoleum Industries, Inc. v. GAF Corp., 49 F.R.D. 82, 83-85 (ED Pa.1969), aff'd, 478 F.2d 1398 (CA3 1973) (control group includes only division and corporate **685 vice presidents, and not two directors of research and vice president for production and research). FN2. The Government argues that the risk of civil or criminal liability suffices to ensure that corporations will seek legal advice in the absence of the protection of the privilege. This response ignores the fact that the depth and quality of any investigations, to ensure compliance with the law would suffer, even were they undertaken. The response also proves too much, since it applies to all communications covered by the privilege: an individual trying to comply with the law or faced with a legal problem also has strong incentive to disclose information to his lawyer, yet the common law has recognized the value of the privilege in further facilitating communications.

*394 [5] The communications at issue were made by Upjohn employees FN3 to counsel for Upjohn acting as such, at the direction of corporate superiors in order to secure legal advice from counsel. As the Magistrate found, Mr. Thomas consulted with the Chairman of the Board and outside counsel and thereafter conducted a factual investigation to determine the nature and extent of the questionable payments and to be in a position to give legal advice to the company with respect to the payments. (Emphasis supplied.) 78-1 USTC 9277, pp. 83,598, 83,599. Information, not available from upper-echelon management, was needed to supply a basis for legal advice concerning compliance with securities and tax laws, foreign laws, currency regulations, duties to shareholders, and potential litigation in each of these areas. FN4 The communications concerned matters within the scope of the employees' corporate duties, and the employees themselves were sufficiently aware that they were being questioned in order that the corporation could obtain legal advice. The questionnaire identified Thomas as the company's General Counsel and referred in its opening sentence to the possible illegality of payments such as the ones on which information was sought. App. 40a. A statement of policy accompanying the questionnaire clearly indicated the legal implications of the investigation. The policy statement was issued in order that there be no uncertainty in the future as to the policy with

respect to the practices which are the subject of this investigation. *395 It began Upjohn will comply with all laws and regulations, and stated that commissions or payments will not be used as a subterfuge for bribes or illegal payments and that all payments must be proper and legal. Any future agreements with foreign distributors or agents were to be approved by a company attorney and any questions P age | 30 concerning the policy were to be referred to the company's General Counsel. Id., at 165a-166a. This statement was issued to Upjohn employees worldwide, so that even those interviewees not receiving a questionnaire were aware of the legal implications of the interviews. Pursuant to explicit instructions from the Chairman of the Board, the communications were considered highly confidential when made, id., at 39a, 43a, and have been kept confidential by the company. FN5 Consistent with the underlying purposes of the attorney-client privilege, these communications must be protected against compelled disclosure. FN3. Seven of the eighty-six employees interviewed by counsel had terminated their employment with Upjohn at the time of the interview. App. 33a-38a. Petitioners argue that the privilege should nonetheless apply to communications by these former employees concerning activities during their period of employment. Neither the District Court nor the Court of Appeals had occasion to address this issue, and we decline to decide it without the benefit of treatment below.

[T]he protection of the privilege extends only to communications and not to facts. A fact is one thing and a communication concerning that fact is an entirely different**686 *396 thing. The client cannot be compelled to answer the question, What did you say or write to the attorney? but may not refuse to disclose any relevant fact within his knowledge merely because he incorporated a statement of such fact into his communication to his attorney. Philadelphia v. Westinghouse Electric Corp., 205 F.Supp. 830, 831 ( q2.7). See also Diversified Industries, 572 F.2d., at 611; State ex rel. Dudek v. Circuit Court, 34 Wis.2d 559, 580, 150 N.W.2d 387, 399 (1967) (the courts have noted that a party cannot conceal a fact merely by revealing it to his lawyer). Here the Government was free to question the employees who communicated with Thomas and outside counsel. Upjohn has provided the IRS with a list of such employees, and the IRS has already interviewed some 25 of them. While it would probably be more convenient for the Government to secure the results of petitioner's internal investigation by simply subpoenaing the questionnaires and notes taken by petitioner's attorneys, such considerations of convenience do not overcome the policies served by the attorney-client privilege. As Justice Jackson noted in his concurring opinion in Hickman v. Taylor, 329 U.S., at 516, 67 S.Ct., at 396: Discovery was hardly intended to enable a learned profession to perform its functions ... on wits borrowed from the adversary. [7] Needless to say, we decide only the case before us, and do not undertake to draft a set of rules which should govern challenges to investigatory subpoenas. Any such approach would violate the spirit of Federal Rule of Evidence 501. See S.Rep. No. 93-1277, p. 13 (1974) ( the recognition of a privilege based on a confidential relationship ... should be determined on a case-by-case basis); Trammel, 445 U.S., at 47, 100 S.Ct., at 910-911; United States v. Gillock, 445 U.S. 360, 367, 100 S.Ct. 1185, 1190, 63 L.Ed.2d 454 (1980). While such a case-by-case basis may to some slight extent undermine desirable certainty in the boundaries of the attorney-clientt *397 privilege, it obeys the spirit of the Rules. At the same time we conclude that the narrow control group test sanctioned by the Court of Appeals, in this case cannot, consistent with the principles of the common law as ... interpreted ... in the light of reason and experience, Fed. Rule Evid. 501, govern the development of the law in this area. III Our decision that the communications by Upjohn employees to counsel are covered by the attorney-client privilege disposes of the case so far as the responses to the questionnaires and any notes reflecting responses to interview questions are concerned. The summons reaches further,

Janz N. Serrano however, and Thomas has testified that his notes and memoranda of interviews go beyond recording responses to his questions. App. 27a-28a, 91a-93a. To the extent that the material subject to the summons is not protected by the attorney-client privilege as disclosing communications between an employee and counsel, we must reach the ruling by the Court of Appeals that the work-product doctrine does not apply to summonses issued under 26 U.S.C. 7602.FN6 FN6. The following discussion will also be relevant to counsel's notes and memoranda of interviews with the seven former employees should it be determined that the attorney-client privilege does not apply to them. See n. 3, supra. [8] [9] [10] The Government concedes, wisely, that the Court of Appeals erred and that the workproduct doctrine does apply to IRS summonses. Brief for Respondents 16, 48. This doctrine was announced by the Court over 30 years ago in Hickman v. Taylor, 329 U.S. 495, 67 S.Ct. 385, 91 L.Ed. 451 (1947). In that case the Court rejected an attempt, without purported necessity or justification, to secure written statements, private memoranda and personal recollections prepared or formed by an adverse party's counsel in the course of his legal duties. Id., at 510, 67 S.Ct., at 393. The Court noted that it is essential that a lawyer work with *398 a certain degree of privacy**687 and reasoned that if discovery of the material sought were permitted

FN4. See id., at 26a-27a, 103a, 123a-124a. See also In re Grand Jury Investigation, 599 F.2d 1224, 1229 (CA3 1979); In re Grand Jury Subpoena, 599 F.2d 504, 511 (CA2 1979).

FN5. See Magistrate's opinion, 78-1 USTC 9277, p. 83,599: The responses to the questionnaires and the notes of the interviews have been treated as confidential material and have not been disclosed to anyone except Mr. Thomas and outside counsel.

much of what is now put down in writing would remain unwritten. An attorney's thoughts, heretofore inviolate, would not be his own. Inefficiency, unfairness and sharp practices would inevitably develop in the giving of legal advice and in the preparation of cases for trial. The effect on the legal profession would be demoralizing. And the interests of the clients and the cause of justice would be poorly served. Id., at 511, 67 S.Ct., at 393-394. The strong public policy underlying the work-product doctrine was reaffirmed recently in United States v. Nobles, 422 U.S. 225, 236-240, 95 S.Ct. 2160, 2169-2171, 45 L.Ed.2d 141 (1975), and has been substantially incorporated in Federal Rule of Civil Procedure 26(b)(3).FN7 FN7. This provides, in pertinent part: [A] party may obtain discovery of documents and tangible things otherwise discoverable under subdivision (b)(1) of this rule and prepared in anticipation of litigation or for trial by or for another party or by or for that other party's representative (including his attorney, consultant, surety, indemnitor, insurer, or agent) only upon a showing that the party seeking discovery has substantial need of the materials in the preparation of his case and that he is unable without

[6] The Court of Appeals declined to extend the attorney-client privilege beyond the limits of the control group test for fear that doing so would entail severe burdens on discovery and create a broad zone of silence over corporate affairs. Application of the attorney-client privilege to communications such as those involved here, however, puts the adversary in no worse position than if the communications had never taken place. The privilege only protects disclosure of communications; it does not protect disclosure of the underlying facts by those who communicated with the attorney:

Janz N. Serrano undue hardship to obtain the substantial equivalent of the materials by other means. In ordering discovery of such materials when the required showing has been made, the court shall protect against disclosure of the mental impressions, conclusions, opinions, or legal theories of an attorney or other representative of a party concerning the litigation. As we stated last Term, the obligation imposed by a tax P age | 31 summons remains subject to the traditional privileges and limitations. United States v. Euge, 444 U.S. 707, 714, 100 S.Ct. 874, 879-880, 63 L.Ed.2d 741 (1980). Nothing in the language of the IRS summons provisions or their legislative history suggests an intent on the part of Congress to preclude application of the work-product doctrine. Rule 26(b)(3) codifies the work-product doctrine, and the Federal Rules of Civil Procedure are made applicable *399 to summons enforcement proceedings by Rule 81(a)(3). See Donaldson v. United States, 400 U.S. 517, 528, 91 S.Ct. 534, 541, 27 L.Ed.2d 580 (1971). While conceding the applicability of the workproduct doctrine, the Government asserts that it has made a sufficient showing of necessity to overcome its protections. The Magistrate apparently so found, 78-1 USTC 9277, p. 83,605. The Government relies on the following language in Hickman: We do not mean to say that all written materials obtained or prepared by an adversary's counsel with an eye toward litigation are necessarily free from discovery in all cases. Where relevant and nonprivileged facts remain hidden in an attorney's file and where production of those facts is essential to the preparation of one's case, discovery may properly be had.... And production might be justified where the witnesses are no longer available or can be reached only with difficulty. 329 U.S., at 511, 67 S.Ct., at 394. The Government stresses that interviewees are scattered across the globe and that Upjohn has forbidden its employees to answer questions it considers irrelevant. The above-quoted language from Hickman, however, did not apply to oral statements made by witnesses ... whether presently in the form of [the attorney's] mental impressions or memoranda. Id., at 512, 67 S.Ct., at 394. As to such material the Court did not believe that any showing of necessity can be made under the circumstances of this case so as to justify production.... If there should be a rare situation justifying production of these matters petitioner's case is not of that type. Id., at 512-513, 67 S.Ct., at 394-395. See also Nobles, supra, 422 U.S., at 252-253, 95 S.Ct., at 2177 (WHITE, J., concurring). Forcing an attorney to disclose notes and memoranda of witnesses' oral statements is particularly disfavored because it tends to reveal the attorney's mental processes, 329 U. S., at 513, 67 S.Ct., at 394-395 (what he saw fit to write down regarding witnesses' remarks); id, at 516-517, 67 S.Ct., at 396 **688 (the statement would be his [the *400 attorney's] language, permeated with his inferences) (Jackson, J., concurring).FN8 FN8. Thomas described his notes of the interviews as containing what I considered to be the important questions, the substance of the responses to them, my beliefs as to the importance of these, my beliefs as to how they related to the inquiry, my thoughts as to how they related to other questions. In some instances they might even suggest other questions that I would have to ask or things that I needed to find elsewhere. 78-1 USTC 9277, p. 83,599. We do not decide the issue at this time. It is clear that the Magistrate applied the wrong standard when he concluded that the Government had made a sufficient showing of necessity to overcome the protections of the work-product doctrine. The Magistrate applied the substantial need and without undue hardship standard articulated in the first part of Rule 26(b)(3). The notes and memoranda sought by the Government here, however, are work product based on oral statements. If they reveal communications, they are, in this case, protected by the attorney-client privilege. To the extent they do not reveal communications, they reveal the attorneys' mental processes in evaluating the communications. As Rule 26 and Hickman make clear, such work product cannot be disclosed simply on a showing of substantial need and inability to obtain the equivalent without undue hardship. While we are not prepared at this juncture to say that such material is always protected by the work-product rule, we *402 **689 think a far stronger showing of necessity and unavailability by other means than was made by the Government or applied by the Magistrate in this case would be necessary to compel disclosure. Since the Court of Appeals thought that the work-product protection was never applicable in an enforcement proceeding such as this, and since the Magistrate whose recommendations the District Court adopted applied too lenient a standard of protection, we think the best procedure with respect to this aspect of the case would be to reverse the judgment of the Court of Appeals for the Sixth Circuit and remand the case to it for such further proceedings in connection with the work-product claim as are consistent with this opinion. Accordingly, the judgment of the Court of Appeals is reversed, and the case remanded for further proceedings. It is so ordered. Chief Justice BURGER, concurring in part and concurring in the judgment.

Rule 26 accords special protection to work product revealing the attorney's mental processes. The Rule permits disclosure of documents and tangible things constituting attorney work product upon a showing of substantial need and inability to obtain the equivalent without undue hardship. This was the standard applied by the Magistrate, 78-1 USTC 9277, p. 83,604. Rule 26 goes on, however, to state that [i]n ordering discovery of such materials when the required showing has been made, the court shall protect against disclosure of the mental impressions, conclusions, opinions or legal theories of an attorney or other representative of a party concerning the litigation. Although this language does not specifically refer to memoranda based on oral statements of witnesses, the Hickman court stressed the danger that compelled disclosure of such memoranda would reveal the attorney's mental processes. It is clear that this is the sort of material the draftsmen of the Rule had in mind as deserving special protection. See Notes of Advisory Committee on 1970 Amendment to Rules, 28 U.S.C.App., p. 442 (The subdivision ... goes on to protect against disclosure the mental impressions, conclusions, opinions, or legal theories ... of an attorney or other representative of a party. The Hickman opinion drew special attention to the need for protecting an attorney against discovery of memoranda prepared from recollection of oral interviews. The courts have steadfastly safeguarded against disclosure of lawyers' mental impressions and legal theories ...). *401 Based on the foregoing, some courts have concluded that no showing of necessity can overcome protection of work product which is based on oral statements from witnesses. See, e. g., In re Grand Jury Proceedings, 473 F.2d 840, 848 (CA8 1973) (personal recollections, notes, and memoranda pertaining to conversation with witnesses); In re Grand Jury Investigation, 412 F.Supp. 943, 949 (ED Pa.1976) (notes of conversation with witness are so much a product of the lawyer's thinking and so little probative of the witness's actual words that they are absolutely protected from disclosure). Those courts declining to adopt an absolute rule have nonetheless recognized that such material is entitled to special protection. See, e. g., In re Grand Jury Investigation, 599 F.2d 1224, 1231 (CA3 1979) (special considerations ... must shape any ruling on the discoverability of interview memoranda ...; such documents will be discoverable only in a rare situation ); Cf. In re Grand Jury Subpoena, 599 F.2d 504, 511-512 (CA2 1979).

I join in Parts I and III of the opinion of the Court and in the judgment. As to Part II, I agree fully with the Court's rejection of the so-called control group test, its reasons for doing so, and its ultimate holding that the communications at issue are privileged. As the Court states, however, if the purpose of the attorney-client privilege is to be served, the attorney and client must be able to predict with some degree of certainty whether particular discussions will be protected. Ante, at 684. For this very reason, I believe that we should articulate a standard that will govern similar cases and afford guidance to corporations, counsel advising them, and federal courts.

Janz N. Serrano The Court properly relies on a variety of factors in concluding that the communications now before us are privileged. See ante, at 685. Because of the great importance of the issue, in my view the Court should make clear now that, as a *403 general rule, a communication is privileged at least when, as here, an employee or former employee speaks at the direction of the management with an attorney regarding P age | 32 conduct or proposed conduct within the scope of employment. The attorney must be one authorized by the management to inquire into the subject and must be seeking information to assist counsel in performing any of the following functions: (a) evaluating whether the employee's conduct has bound or would bind the corporation; (b) assessing the legal consequences, if any, of that conduct; or (c) formulating appropriate legal responses to actions that have been or may be taken by others with regard to that conduct. See, e. g., Diversified Industries, Inc. v. Meredith, 572 F.2d 596, 609 (CA8 1978) (en banc); Harper & Row Publishers, Inc. v. Decker, 423 F.2d 487, 491-492 (CA7 1970), aff'd by an equally divided Court, 400 U.S. 348, 91 S.Ct. 479, 27 L.Ed.2d 433 (1971); Duplan Corp v. Deering Milliken, Inc., 397 F.Supp. 1146, 11631165 (DSC 1974). Other communications between employees and corporate counsel may indeed be privileged-as the petitioners and several amici have suggested in their proposed formulations FN*-but the need for certainty does not compel us now to prescribe all the details of the privilege in this case. FN* See Brief for Petitioners 21-23, and n. 25; Brief for American Bar Association as Amicus Curiae 5-6, and n. 2; Brief for American College of Trial Lawyers and 33 Law Firms as Amici Curiae 9-10, and n. 5. Nevertheless, to say we should not reach all facets of the privilege does not mean that we should neglect our duty to provide guidance in a case that squarely presents the question in a traditional adversary context. Indeed, because Federal Rule of Evidence 501 provides that the law of privileges shall be governed by the principles of the common law as they may be interpreted by the courts of the United States in the light of reason and experience, this Court has a special duty to clarify aspects of the law of privileges properly *404 before us. Simply asserting that this failure may to some slight extent undermine desirable certainty, ante, at 686, neither minimizes the consequences**690 of continuing uncertainty and confusion nor harmonizes the inherent dissonance of acknowledging that uncertainty while declining to clarify it within the frame of issues presented.

United States District Court, D. Massachusetts. Brian KOZLOWSKI, PPA and Cynthia Karaffa, Plaintiffs, v. SEARS, ROEBUCK AND COMPANY and Russell Mills, Inc., Defendants. P SEARS, ROEBUCK AND COMPANY, Third-Party Plaintiff, age | 33 v. RUSSELL MILLS, INC., Third-Party Defendant. Civ. A. No. 75-1370-J. Dec. 6, 1976. As Amended Dec. 8, 1976. A products liability action, based on claims of negligence, breach of warranty and strict liability in tort, was brought against the manufacturer and marketer of pajamas by a minor who was severely burned when his pajamas were caused to ignite. On a motion by defendant marketer to remove a judgment by default entered against it, 71 F.R.D. 594, the District Court, Julian, Senior District Judge, held that information concerning accidents similar to the one alleged in the complaint was clearly relevant and a proper subject for pretrial discovery, notwithstanding defendant marketer's attempt to absolve itself of the responsibility of producing such evidence by alleging the herculean effort that would be necessary to locate the documents in its files; and that a defendant may not excuse itself from compliance with discovery rules by utilizing a system of recordkeeping which conceals rather than discloses relevant records, or makes it unduly difficult to identify or locate them, thus rendering the production of the documents an excessively burdensome and costly expedition. Motion denied.

sounding in negligence, breach of warranty, and strict liability in tort. On July 17, 1975, the plaintiff filed a Request to Produce pursuant to Rule 34, Federal Rules of Civil Procedure, seeking, among other items, [FN1] a record of all complaints and communications concerning personal injuries or death allegedly caused by the burning of children's nightwear which had been manufactured or marketed by the defendant, Sears, Roebuck & Co. On August 8, 1975, the defendant filed a motion to quash. The plaintiff opposed the defendant's motion to quash and filed a motion to compel discovery pursuant to Rule 37, Federal Rules of Civil Procedure. On January 22, 1976, United States Magistrate Princi filed a Memorandum and Order, after a hearing on the motions, overruling the defendant's objections and ordering production*75 within thirty days of all thirty-one items.[FN2] Because the material was not forthcoming, the plaintiff filed, on April 16, 1976, a motion for entry of judgment by default against the defendant, pursuant to Rule 37, Federal Rules of Civil Procedure. On July 14, 1976, this Court, finding that the defendant's failure to comply with a previous discovery order was willful and deliberate, entered a judgment by default against the defendant on the issue of liability, but conditioned its removal upon the defendant's full compliance with the Court's discovery order on or before September 15, 1976. On September 14, 1976, the defendant filed the instant motion to remove the judgment by default. The Court held a hearing on the motion on October 20, 1976, and took it under advisement. On the basis of that hearing, the Court finds that the defendant has failed substantially to comply fully with the Court's July 14 Order, and thus has not fulfilled the condition for removal of the default judgment. FN1. The plaintiff's Request for Production sets forth six items (sample pajama fabrics) requested for testing and twenty-five items requested for inspection and copying. Following this Court's entry of judgment by default against the defendant, on July 14, 1976, Sears, Roebuck & Co. furnished certain documents for inspection in four separate installments: July 27, 1976, August 18, 1976, August 23, 1976, and September 14, 1976. The defendant maintains that it has produced all requested documents which have been available since the commencement of this case; the plaintiff contends that the items produced were only a part of the documents available to the defendant. It is clear, for example, that the defendant has not produced the requested records of similar complaints.

Janz N. Serrano The Court now denies defendant's motion for reasons hereinafter stated. [1] In order to ascertain which law governs the discoverability of prior similar accidents, we must look at the Massachusetts choice of law rules. Klaxon v. Stentor Electric Mfg. Co., Inc., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Massachusetts adheres to the traditional rule that in tort cases all substantive aspects of the cause of action are governed by the law of the place where the injury occurred. Pevoski v. Pevoski, Mass., 358 N.E.2d 1416. In re Air Crash Disaster at Boston, Mass. July 31, 1973, 399 F.Supp. 1106, 1115 (D.C.Mass.1975); Doody v. John Sexton & Co., 411 F.2d 1119, 1121 (1 Cir. 1969); Burke v. Lappin, 299 N.E.2d 729 (Mass.App.1973). It is apparent that the alleged facts that give rise to the plaintiff's claims, whether such claims be based on negligence, breach of warranty, or strict liability, occurred in Michigan, where the plaintiff minor sustained his burns. The Michigan Supreme Court has held, in a product liability case, that evidence of a prior accident involving the same product (trailer ramp) under similar circumstances is admissible as tending to establish that the trailer ramp was in fact defectively manufactured. Berry v. Fruehauf Trailer Co., 371 Mich. 428, 124 N.W.2d 290, 291 (1963). [2] [3] In the instant case, information concerning accidents similar to the one alleged in the complaint is clearly relevant to the issues of whether the pajamas allegedly marketed by the defendant were an unreasonably dangerous product and whether the defendant knew, or in the exercise of due care should have known, of that danger. Furthermore, even though the records of similar suits might be inadmissible in evidence (Narring v. Sears, Roebuck & Co., 59 Mich.App. 717, 229 N.W.2d 901 (1975) (circumstances of prior accident were too dissimilar to accident alleged in complaint)), the records might contain facts which would lead to the discovery of admissible evidence. See Rule 26(b)(1), Fed.R.Civ.P., Melori Shoe Corp. v. Pierce & Stevens, Inc., 14 F.R.D. 346 (D.C.Mass.1953). Accordingly, most courts have held that the existence and nature of other complaints in product liability cases is a proper subject for pretrial discovery. See 20 A.L.R.3d 1430, Frumer & Friedman, Products Liability, s 47.01, but see Proctor & Gamble Distributing Co. v. Vasseur, 275 S.W.2d 941 (Ky.1955). Nevertheless, information of similar complaints has not been produced by the defendant. The defendant has contended throughout this litigation and reiterated at the October 20 hearing that because of its longstanding practice of indexing claims alphabetically by name of claimant, rather than by type of product, there is no practical way for anyone to determine whether there have been any complaints similar to *76 those alleged in the complaint at bar, other than (by) going through

COURT'S RULING ON DEFENDANT'S MOTION TO REMOVE DEFAULT JUDGMENT JULIAN, Senior District Judge.

A brief statement of the prior events in this case suffices to explain the present posture of the defendant's motion to remove the default judgment. Plaintiff, a minor, was severely burned on November 11, 1970, in Royal Oak, Michigan, when a pair of pajamas allegedly manufactured and marketed by defendant was cause to ignite (Plaintiff's Complaint, Count # 6). Plaintiff commenced this product liability action on April 9, 1975, asserting claims

FN2. The Magistrate's order modified the plaintiff's request to produce as to twenty-five of the items by imposing a time limit on the materials requested of five years prior and three years subsequent to November 11, 1970.

all of the . . . claims . . . in the Sears Index . . . which is the equivalent of an impossible task. (Defendant's Supplementary Memorandum in Support of its Motion to Remove the Default.) No evidence has been produced tending to establish the truth of this representation. P [4] [5] Under Rule 34, Fed.R.Civ.P., the party from whom discovery is sought has the burden of showing some sufficient reason why discovery should not be allowed, once it has been determined that the items sought are properly within the scope of Rule 26(b), Fed.R.Civ.P. See 8 Wright & Miller, Federal Practice & Procedure : Civil s 2214, p. 644 (1970). Merely because compliance with a Request for Production would be costly or time-consuming is not ordinarily sufficient reason to grant a protective order where the requested material is relevant and necessary to the discovery of evidence. Luey v. Sterling Drug, Inc., 240 F.Supp. 632, 634-5 (W.D.Mich.1965). [6] In the instant case, the requested documents are clearly within the scope of Rule 26(b), Fed.R.Civ.P., the plaintiff has a demonstrable need for the documents, the defendant undisputedly has possession of them, and the plaintiff has no other access to them. Thus, the defendant has a duty pursuant to Rule 34, Fed.R.Civ.P., to produce its records of similar suits. The defendant seeks to absolve itself of this responsibility by alleging the herculean effort which would be necessary to locate the documents. The defendant may not excuse itself from compliance with Rule 34, Fed.R.Civ.P., by utilizing a system of record-keeping which conceals rather than discloses relevant records, or makes it unduly difficult to identify or locate them, thus rendering the production of the documents an excessively burdensome and costly expedition. To allow a defendant whose business generates massive records to frustrate discovery by creating an inadequate filing system, and then claiming undue burden, would defeat the purposes of the discovery rules. See Hickman v. Taylor, 329 U.S. 495, 500, 67 S.Ct. 385, 91 L.Ed. 451 (1947); Holtzoff, Instruments of Discovery Under Federal Rules of Civil Procedure, 41 Mich.L.Rev. 205, 224 (1942). Apart from the defendant's failure to locate records of similar complaints in its own files, it appears that the defendant has never inquired of Russell Mills, Inc. (the manufacturer of children's nightwear) whether that corporation has any accessible information regarding the requested documents. It is undisputed that the defendant, Sears, Roebuck & Co., does have an indemnification agreement with its manufacturer, Russell Mills, Inc. Sears, Roebuck & Co. is a defendant in another, unrelated product liability case pending in this District, Wales, Administratrix, et al. v. Sears, Roebuck & Co., et al., Civil Action No. 73-564-S., District of Massachusetts. In that case, the defendant was in fact able to

procure records of similar claims from its manufacturer/indemnitor. [7] It is well established that a private corporation cannot avoid producing documents by an allegation of impossibility if it can obtain the requested information from the sources under its control. (In re Ruppert,309 F.2d 97 (6 Cir. 1962) (attorney); Bingle v. Liggett Drug Co., 11 F.R.D. 593, 594 (D.C.Mass.1951) (insurer); George Hantscho Co. v. MiehleGoss-Dexter, Inc., 33 F.R.D. 332 (S.D.N.Y.1963) (corporate subsidiary).) The defendant's apparent failure in this case to pose any inquiry to Russell Mills, Inc., when a similar query proved fruitful in another case, undermines the defendant's assertion that it has produced all documents available to it. [8] Finally, the defendant makes a confusing offer to finance the transportation to Chicago, Illinois (where the records are kept), by the plaintiff's attorney so that he may either attempt to locate the desired documents among the defendant's massive files, or else verify for himself the impossibility of such a task. The defendant has in essence told the plaintiff that, if he wishes, he may hunt through all its documents and find the information for himself. This *77 amounts to nothing more than a gigantic do it yourself kit. See Harlem River Consumers Cooperative, Inc. v. Associated Grocers of Harlem, Inc., 64 F.R.D. 459 (S.D.N.Y.1974), quoting Life Music, Inc. v. Broadcast Music, Inc., 41 F.R.D. 16 (S.D.N.Y.1966). This Court will not shift the financial burden of discovery onto the discovering party, in this case an indigent plaintiff, where the costliness of the discovery procedure involved is entirely a product of the defendant's self-serving indexing scheme over which the plaintiff has no control. [9] While a judgment by default is the most severe in the spectrum of sanctions, National Hockey League v. Metropolitan Hockey Club, Inc. (per curiam), 427 U.S. 639, 96 S.Ct. 2778, 49 L.Ed.2d 747 (1976), provided in Rule 37, Fed.R.Civ.P., it is appropriate where one party has acted in willful and deliberate disregard of reasonable and necessary court orders and the efficient administration of justice. Trans World Airlines v. Hughes, 332 F.2d 602, 614 (2 Cir. 1964). The defendant's failure to produce records of similar complaints is due basically to an indexing system of its own devising, so maintained as to obstruct full discovery. Compare this situation with that prevailing in Societe Internationale v. Rogers, 357 U.S. 197, 78 S.Ct. 1087, 2 L.Ed.2d 1255 (1958) (reversing the dismissal of a complaint under Rule 37(b), Fed.R.Civ.P.), where the record clearly demonstrated that the petitioner had made extensive efforts at compliance with a court order for the production of certain records which were in the possession of Swiss banks and which could not have been produced without subjecting the petitioner to criminal penalties in Switzerland. Id., at 211, 78 S.Ct. 1087.

age | 34

Janz N. Serrano This Court's finding, contained in its July 14 Order, that the defendant willfully failed to comply with the discovery rules, still stands. The record of this case to date discloses either a total lack of diligence on the part of defense counsel, or extended indifference to its case on the part of defendant. Sivelle v. Maloof, 373 F.2d 520, 521 (1 Cir. 1967). The Court finds and rules that the defendant has failed to show full compliance with the July 14 Order, and its motion to vacate the default judgment is therefore denied.

ROY A. SHARFF et al., v. THE SUPERIOR COURT OF THE CITY AND COUNTY OF SAN FRANCISCO; BELFAST BEVERAGES, INC. (a Corporation), Real Party in Interest. S. F. No. 19214. Supreme Court of California Apr. 28, 1955. HEADNOTES

condition on her right to have case proceed to trial, and writ of mandate will issue to allow case to go to trial without requiring plaintiff to comply with such condition.

age | 35

SUMMARY

Janz N. Serrano enjoins or to compel the admission of a party to the use and enjoyment of a right to which he is entitled and from which he is unlawfully precluded. (Code Civ. Proc., 1085, 1086.) (2) The order in the present case is not appealable, and plaintiff does not have any plain, speedy and adequate remedy in the ordinary course of law. The writ is, therefore, available to test whether the court by its order has imposed an unlawful condition upon plaintiff's right to proceed to trial. (3) It has been held that the court may order a plaintiff in a personal injury action to undergo a physical examination by the defendant's doctor. ( Johnston v. Southern Pac. Co., 150 Cal. 535 [89 P. 348, 11 Ann.Cas. 841].) The doctor should, of course, be free to ask such questions as may be necessary to enable him to formulate an intelligent opinion regarding the nature and extent of the plaintiff's injuries, but he should not be allowed to make inquiries into matters not reasonably related to the legitimate scope of the examination. (See Wood v. Flagg (1907), 121 App.Div. 636 [106 N.Y.S. 308]; Wunsch v. Weber (1894), 29 N.Y.S. 1100.) (4) Whenever a doctor selected by the defendant conducts a physical examination of the plaintiff, there is a possibility that improper questions may be asked, and a lay person should not be expected to evaluate the propriety of every question at his peril. The plaintiff, therefore, should be permitted to have the assistance and protection of an attorney during the examination. (See Williams v. Chattanooga Iron Works (1915), 5 Tenn. C.C.A. 10, 20-21, aff'd. 131 Tenn. 683 [176 S.W. 1031, Ann.Cas. 1916B 101].) It is argued that an attorney, by making groundless objections, may hinder an examination, thereby depriving the defendant of the benefit of an informed medical opinion. The plaintiff, however, should not be left unprotected on the assumption *511 that an attorney will unduly interfere with the examination. Should such interference occur, appropriate steps may be taken by the court to provide the doctor with a reasonable opportunity to complete his investigation of the nature and extent of any injuries the plaintiff may have sustained. (5) We are of the view that the respondent court, in staying all proceedings until plaintiff should comply with the order directing her to submit to an oral and physical examination without the presence of her attorney, imposed an unwarranted condition on her right to have the case proceed to trial. Let a writ of mandate issue directing respondent court to allow the case to be tried without requiring plaintiff to submit to a medical examination in the absence of her attorney.

(1) Mandamus 6--Acts and Duties Enforceable. Mandamus will issue, where there is no plain, speedy and adequate remedy in ordinary course of law, to compel performance of act which law specifically enjoins or to compel admission of party to use and enjoyment of right to which he is entitled and from which he is unlawfully precluded. (Code Civ. Proc., 1085, 1086.) See Cal.Jur., Mandamus, 6 et seq.; Am.Jur., Mandamus, 54 et seq. (2) Mandamus 15(5)--Existence of Other Remedy. Since an order staying all proceedings in personal injury action until plaintiff complies with order to submit to oral and physical examination in absence of her attorney is not appealable, and she does not have any plain, speedy and adequate remedy in ordinary course of law, writ of mandamus is available to test whether court by its order has imposed unlawful condition on plaintiff's right to proceed to trial. (3) Inspection 3, 4--Physical Examination. Court may order plaintiff in personal injury action to undergo physical examination by defendant's doctor, and doctor should be free to ask such questions as may be necessary to enable him to formulate intelligent opinion regarding nature and extent of plaintiff's injuries, but he should not be allowed to make inquiries into matters not reasonably related to legitimate scope of examination. See Cal.Jur., Inspection and Physical Examination, 4; Am.Jur., Discovery and Inspection, 5 et seq. (4) Inspection 3, 4--Physical Examination. Whenever doctor selected by defendant conducts physical examination of plaintiff, there is possibility that improper questions may be asked, and plaintiff should be permitted to have assistance and protection of attorney during examination. (5) Inspection 6--Physical Examination--Enforcing Order for Examination. Superior court, in staying all proceedings in personal injury action until plaintiff should comply with order directing her to submit to oral and physical examination by defendants' doctor without presence of her attorney, imposes unwarranted

PROCEEDING in mandamus to compel the Superior Court of the City and County of San Francisco to allow case to go to trial without requiring plaintiff to submit to an examination without presence of her attorney. H. A. van der Zee, Judge. Writ granted. COUNSEL Roy A. Sharff, in pro. per., and Ivan C. Sperbeck for Petitioners. Thomas W. Loris as Amicus Curiae on behalf of Petitioners. Bronson, Bronson & McKinnon and John F. Ward for Respondent and Real Party in Interest. Bledsoe, Smith & Cathcart, Peart, Baraty & Hassard, George A. Smith and Alan L. Bonnington as Amici Curiae on behalf of Respondent and Real Party in Interest. GIBSON, C. J.

After a personal injury action was set for trial, the defendants made a motion for an order requiring the plaintiff to submit to an examination by defendants' doctor in the absence of her attorney. Plaintiff consented to the examination but requested that she be permitted to have her attorney present. The respondent court made an order directing that she submit to an oral and physical examination concerning [her] alleged injuries, which said examination shall be performed in the absence of said plaintiff's attorney ... and that further proceedings by plaintiff in the above entitled *510 action be stayed until said plaintiff ... submits to said examination. This proceeding was brought to compel respondent court to allow the case to go to trial without requiring plaintiff to submit to an examination under the conditions specified in the order. Two attorneys, who represented plaintiff in the personal injury action, joined with her in requesting relief, but they have no standing on their own behalf to challenge the validity of the order, and the proceeding is dismissed as to them. (1) Mandamus will issue, where there is not a plain, speedy and adequate remedy in the ordinary course of law, to compel performance of an act which the law specifically

Shenk, J., Edmonds, J., Carter, J., Traynor, J., Schauer, J., and Spence, J., concurred.

Supreme Court of California, In Bank. Katherine VINSON, Petitioner, v. The SUPERIOR COURT of Alameda County, Respondent; P PERALTA COMMUNITY COLLEGE DISTRICT et al., Real age | 36 Parties in Interest. S.F. 24932. Aug. 27, 1987. Worker brought action against job interviewer and employer college district alleging sexual harassment and intentional infliction of severe emotional distress. Defendants moved for order compelling worker to undergo medical and psychological examination, and worker opposed motion as violation of her right to privacy, and alternatively, requested protective order shielding her from any probing into her sexual history or practices and asking that her attorney be allowed to attend. The Alameda Superior Court, Myron A. Martin, J., granted motion without imposing any of the requested limitations. Worker petitioned for writ of prohibition and/or mandate. The Court of Appeal denied the petition. The Supreme Court, Mosk, J., held that: (1) worker had placed her mental state in controversy, for purposes of civil rule permitting mental examination of party in any action in which mental condition is in controversy; (2) defendants had shown good cause entitling them to compel mental examination of worker; (3) worker had not waived her right to sexual privacy and defendants had not shown good cause justifying inquiry into worker's zone of sexual privacy; and (4) worker's interests could be adequately protected without having her attorney present at mental examination, and she was thus not entitled to have counsel present at examination. Judgment of Court of Appeal reversed with directions to issue writ.

Plaintiff is a 59-year-old widow who in 1979 applied for a job in Oakland with a federally funded program, administered at the time by defendant Peralta Community College District, under the direction of codefendant Grant. Plaintiff alleges that Grant, during an interview with her in a private cubicle, commented on how attractive she appeared for a woman of her age. He assertedly made some salacious observations regarding her anatomy and expressed his desires with regard thereto. He allegedly concluded the interview by intimating that acquiring the position was subject to a condition precedent: her acquiescence to his sexual yearnings. Plaintiff claims she declined his advances as unconscionable and left greatly distraught. Unknown to Grant, plaintiff was later hired by defendant college district as a certification technician. She asserts that once he discovered she was working for the program, he had her transferred to the payroll unit, a position for which he apparently***296 knew she had no training. Soon thereafter he terminated her employment. Plaintiff filed suit on several causes of action, among them sexual harassment, wrongful discharge, and intentional infliction of emotional distress. Defendants' actions are said to have caused her to suffer continuing emotional distress, loss of sleep, anxiety, mental anguish, humiliation, reduced selfesteem, and other consequences. *838 Defendants moved for an order compelling her to undergo a medical and a psychological**408 examination.FN1 The examinations were meant to test the true extent of her injuries and to measure her ability to function in the workplace. Plaintiff opposed the motion as a violation of her right to privacy. In the alternative, if the court were to permit the examination she requested a protective order shielding her from any probing into her sexual history or practices, and asked that her attorney be allowed to attend in order to assure compliance with the order. The court granted the motion without imposing any of these limitations. Plaintiff petitioned the Court of Appeal for a writ of prohibition and/or mandate to direct the trial court to forbid the examination or to issue appropriate protective orders. The Court of Appeal denied the petition. FN1. We use the terms psychiatric, psychological and mental examination interchangeably for the purposes of this issue.

Janz N. Serrano 186, fn. 4, 23 Cal.Rptr. 375, 373 P.2d 439; Pacific Tel. & Tel. Co. v. Superior Court (1970) 2 Cal.3d 161, 169, 84 Cal.Rptr. 718, 465 P.2d 854.) As we shall see, intervening legislative enactments have partially resolved some of the issues raised by this petition. Nonetheless, important questions remain regarding the right of a defendant in a case alleging sexual harassment and emotional distress to conduct discovery and a plaintiff's countervailing right to privacy.

I. The Appropriateness of a Mental Examination

[2] Plaintiff first contends the psychiatric examination should not be permitted because it infringes on her right to privacy. Before we can entertain this constitutional question, we must determine the statutory scope of the discovery laws.FN2 FN2. Part 4, title 3, chapter 3, article 3, of the Code of Civil Procedure ( 2016-2036.5), the applicable legislation on depositions and discovery at the time this action began, has been repealed. (Stats.1986, ch. 1334, 1.) The repeal was operative July 1, 1987, on which date a new article 3 (entitled the Civil Discovery Act of 1986) came into effect. The act provides, however, that the use of a discovery method initiated before July 1, 1987, will be governed by the law regulating that method at the time it was initiated. (Stats. 1987, ch. 86, 20.) We must therefore apply the superseded discovery procedures to this case. But as we shall show by appropriate references to the new act, many of its relevant provisions are substantially similar.

MOSK, Justice.

The plaintiff in a suit for sexual harassment and intentional infliction of severe emotional distress petitions for a writ of mandate and/or prohibition to direct respondent court to forbid her pending psychiatric examination, or in the alternative to protect her from any inquiry into her sexual history, habits, or practices. She also requests that her attorney be allowed to attend the examination if it is held. We conclude that the examination should be permitted but that a writ should issue to restrict its scope. We further conclude that her counsel should not be present.

[3] *839 Code of Civil Procedure section 2032, subdivision (a), FN3 permits the mental examination of a party in any action in which the mental condition of that party is in controversy. Plaintiff disputes that her mental condition is in controversy. She points to Cody v. Marriott Corp. (D.Mass. 1984) 103 F.R.D. 421, 422, a case interpreting rule 35(a) of the Federal Rules of Civil Procedure. Like the California rule that was patterned on it, rule 35 requires that physical or mental condition be in controversy before an examination is appropriate.FN4 Cody was an employment discrimination case in which the plaintiffs alleged mental and emotional distress. The court held that the claim of emotional distress ***297 did not ipso facto place the plaintiff's mental state in controversy. FN3. Unless otherwise noted, all further statutory references are to the Code of Civil Procedure, and this and all further references to sections 2016 to 2036 refer to the version of those sections operative until July 1, 1987.

[1] We use prerogative writs in discovery matters only to review questions that are of general importance to the trial courts and the profession, and when broad principles can be enunciated to guide the courts in future cases. ( Oceanside Union School Dist. v. Superior Court (1962) 58 Cal.2d 180, 185-

FN4. Because section 2032 was based on federal rule 35, judicial construction of the federal rule may be useful in construing section 2032. ( Reuter v. Superior Court (1979) 93 Cal.App.3d 332, 337, 155 Cal.Rptr. 525.)

wages lost following an unjust dismissal would not normally create a controversy regarding the plaintiff's mental state. To hold otherwise would mean that every person who brings such a suit implicitly asserts he or she is mentally unstable, obviously an untenable proposition. Determining that the mental or physical condition of a party is in controversy is but the first step in our analysis. In contrast to more pedestrian discovery procedures, a mental or physical examination requires the discovering party to obtain a court order. The court may grant the motion only for good cause shown. ( 2032, subd. (a).) FN5 FN5. After July 1, 1987, this requirement is contained in section 2032, subdivision (d).

Janz N. Serrano II. Privacy Limitations on the Scope of a Mental Examination If we find, as we do, that an examination may be ordered, plaintiff urges us to circumscribe its scope to exclude any probing into her sexual history, habits, or practices. Such probing, she asserts, would intrude impermissibly into her protected sphere of privacy. Furthermore, it would tend to contravene the state's strong interest in eradicating sexual harassment by means of private suits for damages. An examination into a plaintiff's past and present sexual practices would inhibit the bringing of meritorious sexual harassment actions by compelling the plaintiff-whose privacy has already been invaded by the harassment-to suffer another intrusion into her private life. [9] [10] A right to privacy was recognized in the seminal case of Griswold v. Connecticut (1965) 381 U.S. 479, 85 S.Ct. 1678, 14 L.Ed.2d 510. It protects both the marital relationship (ibid.) and the sexual lives of the unmarried ( Eisenstadt v. Baird (1972) 405 U.S. 438, 92 S.Ct. 1029, 31 L.Ed.2d 349). More significantly, California accords privacy the constitutional status of an inalienable right, on a par with defending life and possessing property. (Cal. Const., art. I, 1; White v. Davis (1975) 13 Cal.3d 757, 120 Cal.Rptr. 94, 533 P.2d 222.) California's privacy protection similarly embraces sexual relations. (See Fults v. Superior Court (1979) 88 Cal.App.3d 899, 152 Cal.Rptr. 210; Morales v. Superior Court (1979) 99 Cal.App.3d 283, 160 Cal.Rptr. 194.) Defendants acknowledge plaintiff's right to privacy in abstracto but maintain she has waived it for purposes of the present suit. In addition, they urge us to take heed of their right to a fair trial, which they claim depends on a meaningful examination of plaintiff. Defendants contend they would not have requested a mental examination if plaintiff had simply brought a sexual harassment suit; but because she claims emotional and mental damage, they should be entitled to present expert testimony on the extent of the injury. Preparing such testimony, they suggest, requires not simply a mental examination, but one without substantial restrictions on its scope. [11] We cannot agree that the mere initiation of a sexual harassment suit, even with the rather extreme mental and emotional damage plaintiff claims to have suffered, functions to waive all her privacy interests, exposing her persona to the unfettered mental probing of defendants' expert. Plaintiff is not compelled, as a condition to entering the courtroom, to discard entirely her *842 mantle of privacy. At the same time, plaintiff cannot be allowed to make her very serious allegations without affording defendants an opportunity to put their truth to the test.

P The reasoning of Cody rested in large part on age | 37 Schlagenhauf v. Holder (1964) 379 U.S. 104, 85 S.Ct. 234, 13 L.Ed.2d 152, in which the United States Supreme Court examined the in controversy requirement. In Schlagenhauf the plaintiffs were passengers injured when their bus collided with the rear of a truck. The defendant truck company, in answer to a cross-claim by the codefendant bus company, charged that the bus driver had been unfit to drive **409 and moved to have him undergo a mental and physical examination. The Supreme Court recognized that at times the pleadings may be sufficient to put mental or physical condition in controversy, as when a plaintiff in a negligence action alleges mental or physical injury. (Id. at p. 119, 85 S.Ct. at p. 243.) But it determined that the driver had not asserted his mental condition in support of or in a defense of a claim, nor did the general charge of negligence put his mental state in controversy. (Id. at pp. 119-122, 85 S.Ct. at pp. 243-245.) Schlagenhauf thus stands for the proposition that one party's unsubstantiated allegation cannot put the mental state of another in controversy. [4] It is another matter entirely, however, when a party places his own mental state in controversy by alleging mental and emotional distress. Unlike the bus driver in Schlagenhauf, who had a controversy thrust upon him, a party who chooses to allege that he has mental and emotional difficulties can hardly deny his mental state is in controversy. To the extent the decision in Cody, supra, 103 F.R.D. 421, is inconsistent with this conclusion, we decline to follow it. (See also Reuter v. Superior Court, supra, 93 Cal.App.3d at p. 340, 155 Cal.Rptr. 525.) [5] In the case at bar, plaintiff haled defendants into court and accused them of causing her various mental and emotional ailments. Defendants *840 deny her charges. As a result, the existence and extent of her mental injuries is indubitably in dispute. In addition, by asserting a causal link between her mental distress and defendants' conduct, plaintiff implicitly claims it was not caused by a preexisting mental condition, thereby raising the question of alternative sources for the distress. We thus conclude that her mental state is in controversy. [6] We emphasize that our conclusion is based solely on the allegations of emotional and mental damages in this case. A simple sexual harassment claim asking compensation for having to endure an oppressive work environment or for

[7] Section 2036 defines a showing of good cause as requiring that the party produce specific facts justifying discovery and that the inquiry be relevant to the subject matter of the action or reasonably calculated to lead to the discovery of admissible evidence.FN6 The requirement of a court order following a showing of good cause is doubtless designed to protect an examinee's privacy interest by preventing an examination from becoming an annoying fishing expedition. While a plaintiff may place his mental state in controversy ***298 by a general allegation of severe emotional distress, the opposing party may not require him to undergo psychiatric testing solely on the basis of speculation that something of interest may surface. ( Schlagenhauf v. Holder, supra, 379 U.S. at pp. 116-122, 85 S.Ct. at pp. 241-245.) FN6. This section has been repealed and has apparently not been replaced by equivalent language. There is no indication, however, that the Legislature intended repeal of former section 2036 to change the requirements for good cause in regard to mental examinations.

[8] Plaintiff in the case at bar asserts that she continues to suffer diminished self-esteem, reduced motivation, sleeplessness, loss of appetite, fear, lessened ability to help others, loss of social contacts, anxiety, mental anguish, loss of reputation, and severe emotional distress. In their motion **410 defendants pointed to these allegations. Because the truth of these claims is relevant to plaintiff's cause of action and justifying facts have been shown *841 with specificity, good cause as to these assertions has been demonstrated. Subject to limitations necessitated by plaintiff's right to privacy, defendants must be allowed to investigate the continued existence and severity of plaintiff's alleged damages.

Janz N. Serrano In Britt v. Superior Court (1978) 20 Cal.3d 844, 143 Cal.Rptr. 695, 574 P.2d 766, we faced a similar conflict between discovery procedures and the parties' constitutional rights. The plaintiffs were property owners near an airport operated by the local port district. They sued the district for diminution of property values, personal injuries, and emotional disturbance brought ***299 about by the airport's activities. P age | 38 The defendant sought to discover the plaintiffs' entire medical history, including all illnesses, injuries, and mental or emotional disturbances for which they had sought treatment at any time in their lives. Furthermore, it asked for information regarding their membership in various community organizations. Responding to the assertion that the plaintiffs had waived their right to privacy by bringing suit, we stated that while the filing of a lawsuit may implicitly bring about a partial waiver of one's constitutional right of associational privacy, the scope **411 of such waiver must be narrowly rather than expansively construed, so that plaintiffs will not be unduly deterred from instituting lawsuits by the fear of exposure of their private associational affiliations and activities. (Id. at p. 859, 143 Cal.Rptr. 695, 574 P.2d 766.) Therefore, we noted, an implicit waiver of a party's constitutional rights encompasses only discovery directly relevant to the plaintiff's claim and essential to the fair resolution of the lawsuit. (Id. at p. 859, 143 Cal.Rptr. 695, 574 P.2d 766; see also In re Lifschutz (1970) 2 Cal.3d 415, 431, 85 Cal.Rptr. 829, 467 P.2d 557.) [12] Plaintiff's present mental and emotional condition is directly relevant to her claim and essential to a fair resolution of her suit; she has waived her right to privacy in this respect by alleging continuing mental ailments. But she has not, merely by initiating this suit for sexual harassment and emotional distress, implicitly waived her right to privacy in respect to her sexual history and practices. Defendants fail to explain why probing into this area is directly relevant to her claim and essential to its fair resolution. Plaintiff does not contend the alleged acts were detrimental to her present sexuality. Her sexual history is even less relevant to her claim. We conclude that she has not waived her right to sexual privacy. [13] But even though plaintiff retains certain unwaived privacy rights, these rights are not necessarily absolute. On occasion her privacy interests may have to give way to her opponent's right to a fair trial. Thus courts must balance the right of civil litigants to discover relevant facts against the privacy interests of persons subject to discovery. (*843 Valley Bank of Nevada v. Superior Court (1975) 15 Cal.3d 652, 657, 125 Cal.Rptr. 553, 542 P.2d 977.) [14] Before proceeding, we note the Legislature recently enacted a measure designed to protect the privacy of plaintiffs in cases such as these. Section 2036.1 (operative until July 1, 1987; presently, substantially the same provision is contained in 2017, subdivision (d)), provides that in a civil suit alleging conduct that constitutes sexual harassment, sexual assault, or sexual battery, any party seeking discovery concerning the plaintiff's sexual conduct with individuals other than the alleged perpetrator must establish specific facts showing good cause for that discovery, and that the inquiry is relevant to the subject matter and reasonably calculated to lead to the discovery of admissible evidence.FN7 (See also Priest v. Rotary (N.D.Cal.1983) 98 F.R.D. 755.) We must determine whether the general balancing of interests embodied in this new legislation has obviated the need for us to engage in an individualized balancing of privacy with discovery in the case at bar. FN7. Although the motion to order an examination was made before this provision went into effect, we apply the section to the case at bar because procedural changes generally govern pending as well as future cases. ( Woodland Hills Residents Assn., Inc. v. City Council (1979) 23 Cal.3d 917, 930932, 154 Cal.Rptr. 503, 593 P.2d 200; Pacific Vegetable Oil Corp. v. C.S.T., Ltd. (1946) 29 Cal.2d 228, 232-233, 174 P.2d 441; Sour v. Superior Court (1934) 1 Cal.2d 542, 545, 36 P.2d 373.) **412 [15] Nowhere do defendants establish specific facts justifying inquiry into plaintiff's zone of sexual privacy or show how such discovery would be *844 relevant. Rather they make only the most sweeping assertions regarding the need for wide latitude in the examination. Because good cause has not been shown, discovery into this area of plaintiff's life must be denied. [16] [17] Section 2036.1, thus amply protects plaintiff's privacy interests. We anticipate that in the majority of sexual harassment suits, a separate weighing of privacy against discovery will not be necessary. It should normally suffice for the court, in ruling on whether good cause exists for probing into the intimate life of a victim of sexual harassment, sexual battery, or sexual assault, to evaluate the showing of good cause in light of the legislative purpose in enacting this section and the plaintiff's constitutional right to privacy.

III. Presence of Counsel In the event a limited psychiatric examination is proper, plaintiff urges us to authorize the attendance of her attorney. She fears that the examiner will stray beyond the permitted area of inquiry. Counsel would monitor the interview and shield her from inappropriate interrogation. And depicting the examination as an alien and frankly hostile environment, she asserts that she needs her lawyer to provide her with aid and comfort. Defendants, joined by amici California Psychiatric Association and Northern California Psychiatric Association, counter that a meaningful mental examination cannot be conducted with an attorney interposing objections. And if plaintiff's counsel is present, defense counsel would also seek to attend. Defendants maintain these adversaries would likely convert the examination into a chaotic deposition. We contemplated whether counsel must be allowed to attend the psychiatric examination of a client in Edwards v. Superior Court (1976) 16 Cal.3d 905, 130 Cal.Rptr. 14, 549 P.2d 846. The plaintiff in Edwards alleged that because of the defendant school district's failure to properly instruct and supervise users of school equipment, she sustained physical and emotional injuries. The trial court granted a motion compelling her to undergo a psychiatric examination alone. Holding that the plaintiff could not insist on the presence of her counsel, a majority of this court denied her petition for a peremptory writ. The plaintiff in Edwards raised many of the points urged upon us here. She asserted that her attorney should be present to protect her from improper inquiries. We were skeptical that

In enacting the measure, the Legislature took pains to declare that The discovery of sexual aspects of complainant's [ sic ] lives, as well as those of their past and current friends and acquaintances, has the clear potential to discourage complaints and to annoy and harass litigants.... without protection against it, individuals whose intimate lives are unjustifiably and offensively***300 intruded upon might face the Catch- 22 of invoking their remedy only at the risk of enduring further intrusions into the details of their personal lives in discovery.... [] ... Absent extraordinary circumstances, inquiry into those areas should not be permitted, either in discovery or at trial. (Stats. 1985, ch. 1328, 1.) FN8 FN8. Plaintiff suggests that section 2036.1 does not adequately protect her privacy interests because section 2032 already requires good cause for a mental examination, and nothing is added by again requiring good cause for inquiry into a plaintiff's sexual history and practices. But the above-quoted legislative declaration accompanying section 2036.1, i. e., that inquiry into sexuality should not be permitted absent extraordinary circumstances, suggests that a stronger showing of good cause must be made to justify inquiry into this topic than is needed for a general examination. Furthermore, section 2032 merely requires good cause for the examination as a whole; in emotional distress cases that will often be present. By contrast, a defendant in a sexual harassment case desiring to ask sex-related questions must show specific facts justifying that particular inquiry.

a lawyer, unschooled in the ways of the mental health profession, would be able to discern the psychiatric relevance of the questions. And the examiner should have the freedom to probe *845 deeply into the plaintiff's psyche without interference by a third party. (Id. at p. 911, 130 Cal.Rptr. 14, 549 P.2d 846.) The plaintiff further suggested counsel should be P present to lend her comfort and support in an inimical age | 39 setting. We responded that an examinee could view almost any examination***301 of this sort, even by her own expert, as somewhat hostile. Whatever comfort her attorney's handholding might afford was substantially outweighed by the distraction and potential disruption caused by the presence of a third person. (Ibid.) Finally, we concluded counsel's presence was not necessary to ensure accurate reporting. Verbatim transcription might inhibit the examinee, preventing an effective examination. Furthermore, other procedural devicespretrial discovery of the examiner's notes or crossexamination, for example-were available for the plaintiff's protection. (Id. at pp. 911-912, 130 Cal.Rptr. 14, 549 P.2d 846.) A number of federal courts have since pondered this question. The court in Zabkowicz v. West Bend Co. (E.D.Wis.1984) 585 F.Supp. 635, agreed that the plaintiff in **413 an action charging sexual harassment and extreme emotional distress was entitled to have her attorney or a recording device present to ensure that the defendant's expert did not overstep his bounds. But in another federal case, Lowe v. Philadelphia Newspapers (E.D.Pa.1983) 101 F.R.D. 296, the court ruled the plaintiff could not have counsel present at the psychiatric examination, although she could have a psychiatrist or other medical expert as an observer. In Lowe there were indications the defense had engaged in offensive tactics during discovery, which may explain the court's willingness to allow third parties into the examination. In contrast, in Brandenberg v. El Al Israel Airlines (S.D.N.Y.1978) 79 F.R.D. 543, there were no signs portending abuse, and the court denied the plaintiff's request for the presence of her counsel. These cases suggest that in the federal courts a mental examinee has no absolute right to the presence of an attorney; but when the circumstances warrant it, the courts may fashion some means of protecting an examinee from intrusive or offensive probing. [18] Despite the dissent in Edwards, 16 Cal.3d 905, 914, 130 Cal.Rptr. 14, 549 P.2d 846 (dis. opn. by Sullivan, J. and Mosk, J.), we conclude that a reconsideration of that decisionwhich is barely 10 years old-is not justified.FN9 We emphasize, *846 however, that Edwards should be viewed as standing for the proposition that the presence of an attorney is not required during a mental examination. In light of their broad discretion in discovery matters (see generally Greyhound Corp. v. Superior Court (1961) 56 Cal.2d 355, 15 Cal.Rptr. 90, 364 P.2d 266), trial courts retain the power to permit the presence of counsel or to take other prophylactic measures when needed.

FN9. Section 2032, subdivision (g) (operative July 1, 1987), now specifically provides for the attendance of an attorney at a physical examination. (See Sharff v. Superior Court (1955) 44 Cal.2d 508, 282 P.2d 896.) Subdivision (g)(2) states, however, that nothing in the discovery statutes shall be construed to alter, amend, or affect existing case law with respect to the presence of counsel or other persons during a mental examination by agreement or court order. Had the Legislature felt it desirable to have counsel present at psychiatric examinations, it would certainly have provided for this in its thorough revision of the section. Indeed, in the course of that revision the Legislature considered and rejected a provision that would have annulled our decision in Edwards by permitting counsel to attend a mental examination.

Janz N. Serrano ch. 1328, 1.) If we conclude on the basis of general considerations that a mental examination is appropriate and that it should occur without the presence of counsel, plaintiff urges us to adopt a special rule exempting those who bring harassment charges from either or both of these requirements. We believe that in these circumstances such a special rule is unwarranted. In the first place, we should be guided by the maxim that entia non sunt *847 65 847 multiplicanda praeter necessitatem: we should carve out exceptions from general rules only when the facts require it. The state admittedly has a strong interest in eradicating the evil of sexual harassment, and the threat of a mental examination could conceivably dampen a plaintiff's resolve to bring suit. But we have seen that those who allege harassment have substantial protection under existing procedural rules. In general it is unlikely that a simple sexual harassment suit will justify a mental examination. Such examinations may ordinarily be considered only in cases in which the alleged mental or emotional distress is said to be ongoing. When an examination is permitted, investigation by a psychiatrist into the private life of a plaintiff is severely constrained, and sanctions are available to guarantee those restrictions are respected. Finally, the mental examination in this case largely grows out of plaintiff's emotional distress claim. We do not believe the state has a greater interest in preventing emotional distress in sexual harassment victims than it has in preventing such distress in the victims of any other tort. The judgment of the Court of Appeal is reversed with directions to issue a peremptory writ of mandate compelling respondent court to limit the scope of the mental examination in accordance with the views expressed herein.

[19] Plaintiff makes no showing that the court abused its discretion in excluding her counsel from the examination. Her fears are wholly unfounded at this point; not a shred of evidence has been produced to show that defendants' expert will not respect her legitimate rights to privacy or might disobey any court-imposed restrictions. Plaintiff's apprehension appears to derive less from the reality of the proposed analysis than from the popular image of mental examinations. Plaintiff's interests can be adequately protected without having her attorney present. In the first place, section 2032 requires the court granting a physical or mental examination to specify its conditions and scope. We must assume, absent evidence to the contrary, that the examiner will proceed in an ethical manner, adhering to these constraints. And if plaintiff truly fears that the examiner will probe into impermissible areas, she may record the examination on audio tape. This is an unobtrusive measure that will permit evidence***302 of abuse to be presented to the court in any motion for sanctions.FN10 FN10. We note that the new discovery act explicitly provides both examiners and examinees the opportunity to perpetuate the interview on audio tape. ( 2032, subd. (g)(2) (operative July 1, 1987).)

LUCAS, C.J., and BROUSSARD, PANELLI, ARGUELLES, EAGLESON and KAUFMAN, JJ., concur.

[20] Plaintiff refers us to the history of psychiatric examinations for victims of sexual assault. Such examinations were widely viewed as inhibiting prosecutions for rape by implicitly placing the victim on trial, leading to a legislative prohibition of examinations to assess credibility. (Pen.Code, 1112; see also Note, Psychiatric Examinations of Sexual Assault Victims: A Reevaluation (1982) 15 U.C. Davis L.Rev. 973.) The victim of sexual harassment is analogous to the prosecutrix in a rape case, plaintiff asserts, and she points to legislative findings that discovery of sexual aspects of complainants' lives has the clear potential to discourage complaints. **414 (Stats.1985,

United States Court of Appeals, Second Circuit. CINE FORTY-SECOND STREET THEATRE CORP., PlaintiffAppellee, v. P ALLIED ARTISTS PICTURES CORP., American International age | 40 Pictures, Inc., Columbia Pictures Industries, Inc., Twentieth Century-Fox Film Corp., Warner Bros. Distributing Corp., Cinema Circuit Corp., Harry Brandt Booking Office, Inc., Judlo, Inc., Steftom, Inc. and the FortySecond Street Co., Defendants-Appellants. No. 1040, Docket 79-7121. Argued June 8, 1979. Decided June 28, 1979. In a suit for treble damages under antitrust laws and for injunction against alleged anticompetitive practices, the United States District Court for the Southern District of New York, Gerard L. Goettel, J., denied a magistrate's recommendation which would have precluded introduction of proof of damages as a sanction for failure to answer interrogatories satisfactorily, the court believing that it lacked the power, absent a finding of willfulness, to impose the extreme sanction recommended. An interlocutory appeal was certified on the district court's own motion. The Court of Appeals, Irving R. Kaufman, Chief Judge, held that a grossly negligent failure to obey an order compelling discovery may justify the severest disciplinary measures available under the rule providing for sanctions. Reversed. Oakes, J., filed a concurring opinion.

credible deterrent rather than a paper tiger, Rosenberg, New Philosophy of Sanctions, In Federal Discovery Rules Sourcebook 141 (W. Treadwell ed. 1972), the pretrial quagmire threatens to engulf the entire litigative process. [FN2] FN1. See United States v. Procter & Gamble Co., 356 U.S. 677, 682, 78 S.Ct. 983, 2 L.Ed.2d 1077 (1958); Hickman v. Taylor, 329 U.S. 495, 500-01, 67 S.Ct. 385, 91 L.Ed. 451 (1947); P. Connolly, E. Holleman & M. Kuhlman, Judicial Controls and the Civil Litigative Process: Discovery (1979).

Janz N. Serrano FN4. Allied Artists Pictures Corp., American International Pictures Industries, Inc., Columbia Pictures Industries, Inc., Twentieth Century-Fox Film Corp., and Warner Bros. Distributing Corp.

FN2. Erickson, The Pound Conference Recommendations: A Blueprint for the Justice System in the Twenty-First Century, 76 F.R.D. 277, 288 (1977); American Bar Association, Report of Pound Conference Follow-Up Task Force, 74 F.R.D. 159, 192 (1976).

On November 6, 1975, the eleven defendants served plaintiff with a set of consolidated interrogatories. Cine thereupon secured its adversaries' consent to defer discovery on the crucial issue of damages until it could retain an expert to review the rival exhibitors' box office receipts. Not until four months after the deadline upon which the parties had agreed, however, did Cine file its first set of answers to the remaining interrogatories. Moreover, even casual scrutiny reveals the patent inadequacy of these responses. Many were bare, ambiguous cross-references to general answers elsewhere in the responses. Highly specific questions concerning the design of Cine's theater were answered with architectural drawings that did not even purport to show the dimensions requested. Although Cine now complains bitterly that these interrogatories amounted to pure harassment, it never moved to strike them as irrelevant or as harassing. Rather, it filed supplemental answers, which were similarly deficient, and then failed to obey two subsequent orders from Magistrate Gershon compelling discovery. At a hearing in October of 1977, the magistrate found Cine's disobedience to have been willful, and assessed $500 in costs against it. Soon afterwards, she further warned plaintiff that any further noncompliance would result in dismissal. By the summer of 1977, as this conflict was coming to a head, Cine had still not retained the expert it claimed was necessary to respond to the damages interrogatories. Magistrate Gershon quite reasonably and leniently ordered Cine merely to produce a plan to answer, but this yielded no result. The magistrate then directed Cine to answer the damages interrogatories, admonishing*1065 its counsel that future nonfeasance would be viewed in light of past derelictions. Cine did file two sets of answers, one over two months late and both seriously deficient. The responses omitted, Inter alia, any information concerning significant time periods for which Cine claimed injury. Moreover, they failed to provide any indication as to the method of calculating a major portion of the alleged damages. Thereupon, at an unrecorded hearing held on September 7, 1978, Magistrate Gershon, once again held off the imposition of final sanctions in these already over-protracted discovery proceedings and ordered the defects cured, on pain of dismissal of the complaint. Cine stood mute, neither appealing from, objecting to, nor complying with the order. On September 20, the defendants moved before the magistrate for dismissal of the complaint, citing plaintiff's failure to obey the order requiring responses on damages.

A panel of this court has accepted certification of an interlocutory appeal pursuant to 28 U.S.C. s 1292(b) which raises the following question: where a party, fully able to comply with a magistrate's order compelling discovery fails to do so due to a total dereliction of professional responsibility, amounting to gross negligence, may the district court in its discretion order a preclusion of evidence tantamount to the dismissal of a claim under Fed.R.Civ.P. 37? We conclude that it may.

I Appellee Cine Forty-Second Street Theatre Corp. (Cine), has operated a movie theater in New York City's Times Square area since July 1974. It alleges that those owning neighboring theaters on West Forty-Second Street (the exhibitors) [FN3] attempted through abuse of City agency processes to prevent the opening of its theater. When this tactic was unsuccessful, Cine contends, the exhibitors entered into a conspiracy with certain motion picture distributors [FN4] to cut off its access to first-run, quality films. Bringing suit on August 1, 1975, Cine claimed $3,000,000 in treble damages under the antitrust laws, and sought an injunction against the defendants' alleged anticompetitive practices. FN3. These are Cinema Circuit Corp., Germar, Inc., Judlo, Inc., Steftom, Inc., and The Forty-Second Street Co. Another defendant in this category, Harry Brandt Booking Office, Inc., does not own any theaters, but was alleged to be the booking agent for some of the films and theaters in question.

Before KAUFMAN, Chief Judge, and OAKES and MESKILL, Circuit Judges. IRVING R. KAUFMAN, Chief Judge.

The Federal Rules of Civil Procedure carried the discovery principles of Equity into the nation's courts of law in the hope of expediting the litigation process and of transforming the sporting trial-by-surprise into a more reasoned search for truth.[FN1] On their face, the Rules deal harshly with the recusant deponent and the dilatory answeror. Courts have been reluctant, however, *1064 to impose the full range of sanctions available under Rule 37. Preclusion of testimony and dismissal are, to be sure, extreme sanctions, to be deployed only in rare situations. But unless Rule 37 is perceived as a

At a formal hearing on October 19, 1978, Cine's attorney argued that several months earlier he and defense counsel had reached an understanding, pursuant to which a deposition of Cine's principal officer, Clark, would replace the answers at issue. Cine has never introduced any written evidence or corroborative testimony demonstrating the existence of such an P understanding. In any case, the magistrate's subsequent age | 41 oral order compelling answers to the interrogatories would have superseded it. Accordingly, Magistrate Gershon found that Cine had no basis for assuming that the answers were not due on the dates set in her orders. After noting plaintiff's history of disobedience in the face of her own repeated warnings, the magistrate concluded that Cine's present non-compliance was willful. [FN5] (T)he plaintiff, she stated, has decided when it will be cooperative and when it will not be cooperative, and that it does not have any right to do. She thereupon recommended to the district court that Cine be precluded from introducing evidence with respect to damages. This sanction was, of course, tantamount to a dismissal of Cine's damage claim, but left standing its claim for injunctive relief. FN5. In light of our holding, it is not necessary for us to consider Cine's contention that a written order is, as a matter of law, a necessary prerequisite to a finding of willfulness under Rule 37. We note, En passant, however, that in Independent Investors Protective League v. Touche Ross & Co., 25 F.R.Serv.2d 222, 224, and Henry v. Sneiders, 490 F.2d 315, 318 (9th Cir.), Cert. denied, 419 U.S. 832, 95 S.Ct. 55, 42 L.Ed.2d 57 (1974), preclusion was upheld on the basis of orders announced in open court.

the magistrate. Instead, the court merely assessed costs in the amount of $1,000.[FN6] But, recognizing that he might have misperceive(d) the controlling law of this circuit, Judge Goettel certified this interlocutory appeal on his own motion under 28 U.S.C. s 1292(b). FN6. Defendants estimate that their actual costs in seeking to compel discovery total at least $50,000.

*1066 On reargument, Judge Goettel expressed some doubt regarding the correctness of his prior decision. In light of plaintiff's subsequent response to the damages interrogatories, however, the court adhered to its earlier view. [FN7] FN7. Responding to a contention raised for the first time on reargument, the court noted that in light of the extensive proceedings already conducted before the magistrate, an evidentiary hearing in the district court could serve no useful function. The judge did note that a hearing could explore other actions litigated by plaintiff's counsel in federal court; he was in fact already aware of other cases in which these same lawyers had ignored discovery orders. But he concluded that such an inquiry would raise problems of privilege that would outweigh any probative value such a hearing could have.

Janz N. Serrano U.S.App.D.C. 339, 566 F.2d 231 (1977). Rule 37 strictures are also specific deterrents and, like civil contempt, they seek to secure compliance with the particular order at hand. Robison v. Transamerica Ins. Co., 368 F.2d 37 (10th Cir. 1966). Finally, although the most drastic sanctions may not be imposed as mere penalties, Hammond Packing Co. v. Arkansas, 212 U.S. 322, 29 S.Ct. 370, 53 L.Ed. 530 (1909); See Hovey v. Elliott, 167 U.S. 409, 17 S.Ct. 841, 42 L.Ed. 215 (1897), courts are free to consider the general deterrent effect their orders may have on the instant case and on other litigation, provided that the party on whom they are imposed is, in some sense, at fault. National Hockey League v. Metropolitan Hockey Club, Inc., 427 U.S. 639, 96 S.Ct. 2778, 49 L.Ed.2d 747 (1976) (per curiam); Societe Internationale pour Participations Industrielles et Commerciales v. Rogers, 357 U.S. 197, 78 S.Ct. 1087, 2 L.Ed.2d 1255 (1958). Where the party makes good faith efforts to comply, and is thwarted by circumstances beyond his control for example, a foreign criminal statute prohibiting disclosure of the documents at issue an order dismissing the complaint would deprive the party of a property interest without due process of law. See Societe Internationale, supra, 357 U.S. at 212, 78 S.Ct. 1087. It would, after all, be unfair and irrational to prevent a party from being heard solely because of a nonculpable failure to meet the terms of a discovery order. Note, The Emerging Deterrence Orientation of the Imposition of Discovery Sanctions, 91 Harv.L.Rev. 1033, 1041-42 (1978). Indeed, such measures would be gratuitous, for if the party is unable to obey there can be no effective deterrence, general or specific. Accordingly, Rule 37 should not be construed to authorize dismissal of (a) complaint because of petitioner's noncompliance with a pretrial production order when it has been established that failure to comply has been due to inability, and not to willfulness, bad faith, or any fault of petitioner. Societe Internationale, supra, 357 U.S. at 212, 78 S.Ct. at 1096. The lower court did not determine whether willfulness caused plaintiff's failure to *1067 respond. It was possible, Judge Goettel apparently believed, that Cine's counsel simply did not understand the exact requirements of the magistrate's unwritten order compelling discovery. If so, Cine's failure to answer the damages interrogatories might not rise to the level of willfulness or bad faith for both of these conditions imply a deliberate disregard of the lawful orders of the court. See Bon Air Hotel, Inc. v. Time, Inc., 376 F.2d 118 (5th Cir. 1967), Cert. denied, 393 U.S. 859, 89 S.Ct. 131, 21 L.Ed.2d 127 (1968). The question, then, is whether gross negligence amounting to a total dereliction of professional responsibility, but not a conscious disregard of court orders, is properly embraced within the fault component of Societe Internationale's triple criterion. Fault, of course, is a broad and amorphous concept, and the Courts of Appeals have had considerable difficulty

II The question before us is whether a grossly negligent failure to obey an order compelling discovery may justify the severest disciplinary measures available under Fed.R.Civ.P. 37. This rule provides a spectrum of sanctions.[FN8] The mildest is an order to reimburse the opposing party for expenses caused by the failure to cooperate. More stringent are orders striking out portions of the pleadings, prohibiting the introduction of evidence on particular points and deeming disputed issues determined adversely to the position of the disobedient party. Harshest of all are orders of dismissal and default judgment. FN8. Rule 37 was amended in 1970 to permit the imposition of a broader range of sanctions. By deleting the word wilfully from subsection (d) of the Rule, the drafters intended that wilfullness (be) relevant only to the selection of sanctions, if any, to be imposed. Advisory Committee Note, Reprinted in 4A J. Moore, Moore's Federal Practice P 37.01(8), at 37-23 (2d ed. 1975); Flaks v. Koegel, 504 F.2d 702, 708 (2d Cir. 1974).

Judge Goettel, the district judge to whom Magistrate Gershon's order was submitted for approval, reacted to Cine's behavior as did Magistrate Gershon. He wrote, (i)f there were ever a case in which drastic sanctions were justified, this is it. But Judge Goettel could not fully accept the magistrate's finding of willfulness. (T)he actions of plaintiff's counsel, he concluded, were either wilful Or a total dereliction of professional responsibility. No other conclusion is possible. However, in the absence of a written direction, it is virtually impossible to establish that the attorney's action was in fact wilful, rather than grossly negligent. The district judge thus apparently believed it possible that Cine's counsel, confused as to the precise terms of Magistrate Gershon's oral orders, could have thought in good faith that the answers were not due. Action taken upon that baseless belief, however, was, at the very least, grossly negligent. The district court regretfully concluded that under Flaks v. Koegel, 504 F.2d 702 (2d Cir. 1974), it lacked the power, absent a finding of willfulness, to impose the extreme sanction recommended by

[1] These sanctions serve a threefold purpose. Preclusionary orders ensure that a party will not be able to profit from its own failure to comply. Dellums v. Powell, 184

Janz N. Serrano construing it in this context. Indeed, one court defined fault by the apparent oxymoron intentional negligence. Bon Air Hotel, Inc., supra, 376 F.2d at 120. Thus, commentators have opined that an element of willfulness or conscious disregard of the court's orders is a prerequisite to the harsher categories of Rule 37 sanctions. 4A J. Moore, Federal Practice P 37.03(2.-5) at P 37-70 (2d ed. 1976); Note, Supra, at 1033, 1043 & n.63; age | 42 Accord, Dellums, supra, 184 U.S.App.D.C. at 343, 566 F.2d at 235 (dictum). But the appellate cases commonly cited for this proposition hold only that dismissal is an abuse of discretion where failure to comply was not the result of the fault of any party. E. g. Flaks v. Koegel, 504 F.2d at 712; General Dynamics Corp. v. Selb Manufacturing Co., 481 F.2d 1204, 1211 (8th Cir. 1973), Cert. denied, 414 U.S. 1162, 94 S.Ct. 926, 39 L.Ed.2d 116 (1974); Dorsey v. Academy Moving & Storage, Inc., 423 F.2d 858, 860 (5th Cir. 1970). Unless we are to assume that the Court chose its words carelessly, we must accord the term fault a meaning of its own within the Societe Internationale triad. And plainly, if fault has any meaning not subsumed by willfulness and bad faith, it must at least cover gross negligence of the type present in this case. The holding in Edgar v. Slaughter, 548 F.2d 770, 773 (8th Cir. 1977), which contains the apparent suggestion that dismissal is appropriate only for actions taken deliberately or in bad faith, does not conflict with this conclusion. Counsel's action in that case at worst amounted to simple negligence and indeed may have been partially excusable, Id. at 773 n.4. Flagrant negligence of the type involved in the case at bar was simply not at issue. In the only case that actually presented the question now before us, Affanato v. Merrill Bros., 547 F.2d 138 (1st Cir. 1977), the First Circuit implicitly adopted the view we have expressed. There, the district court had entered a default judgment after what the appellate court characterized as a series of episodes of nonfeasance which amounted, in sum, to a near total dereliction of professional responsibility on the part of defendant's counsel. Id. at 141. The Court of Appeals affirmed, noting that counsel's failures went well beyond ordinary negligence but without finding willfulness or bad faith. Id. In the final analysis, however, this question cannot turn solely upon a definition of terms. We believe that our view advances the basic purposes of Rule 37, while respecting the demands of due process. The principal objective of the general deterrent policy of National Hockey Is strict adherence to the responsibilities counsel owe to the Court and to their opponents, 427 U.S. at 640, 96 S.Ct. at 2780. Negligent, no less than intentional, wrongs are fit subjects for general deterrence, See G. Calabresi, The Costs of Accidents, 133-173 (1970). And gross professional incompetence no less than deliberate tactical intransigence may be responsible for the interminable delays and costs that plague modern complex lawsuits.[FN9] An undertaking on the scale of the large contemporary suit brooks none of the *1068 dilation, posturing, and harassment once expected in litigation. See Herbert v. Lando, 441 U.S. 153, --, 99 S.Ct. 1635, 1649, 60 L.Ed.2d 115, 134, Id. -- U.S. at -- - --, 99 S.Ct. at 1650-1651, 60 L.Ed.2d at 135-136 (Powell, J., concurring). The parties, and particularly their lawyers, must rise to the freedom granted by the Rules and cooperate in good faith both in question and response. FN9. American Bar Association, Supra, note 3, at 191-92; Kaufman, The Philosophy of Effective Judicial Supervision Over Litigation, 29 F.R.D. 207, 213 (1962). [5] Plaintiff urges that because it has at last filed answers to the damage interrogatories, it should be permitted to prove its losses at trial. But it forgets that sanctions must be weighed in light of the full record in the case, National Hockey, supra, 427 U.S. at 642, 96 S.Ct. 2778. Furthermore, (i)f parties are allowed to flout their obligations, choosing to wait to make a response until a trial court has lost patience with them, the effect will be to embroil trial judges in day-to-day supervision of discovery, a result directly contrary to the overall scheme of the federal discovery rules, Dellums, supra, 184 U.S.App.D.C. at 343-44, 566 F.2d at 235-36. Moreover, as we have indicated, compulsion of performance in the particular case at hand is not the sole function of Rule 37 sanctions. Under the deterrence principle of National Hockey, plaintiff's hopelessly belated compliance should not be accorded great weight. Any other conclusion would encourage dilatory tactics, and compliance with discovery orders would come only when the backs of counsel and the litigants were against the wall. [6] In light of the fact that plaintiff, through its undeniable fault, has frozen this litigation in the discovery phase for nearly four years, we see no reason to burden the court below with extensive proceedings on remand. Judge Goettel's opinion makes it abundantly clear that but for his misinterpretation of the governing law in this circuit, he would have wholeheartedly adopted Magistrate Gershon's original recommendation. Accordingly, the judge's order declining to adopt the magistrate's recommendation that proof of damages be precluded is reversed.

[2] Considerations of fair play may dictate that courts eschew the harshest sanctions provided by Rule 37 where failure to comply is due to a mere oversight of counsel amounting to no more than simple negligence, Affanato, supra, 547 F.2d at 141; See SEC v. Research Automation Corp., 521 F.2d 585 (2d Cir. 1975) (dictum). But where gross professional negligence has been found that is, where counsel clearly should have understood his duty to the court the full range of sanctions may be marshalled. Indeed, in this day of burgeoning, costly and protracted litigation courts should not shrink from imposing harsh sanctions where, as in this case, they are clearly warranted. [3] [4] A litigant chooses counsel at his peril, Link v. Wabash Railroad Co., 370 U.S. 626, 82 S.Ct. 1386, 8 L.Ed.2d 734 (1962), and here, as in countless other contexts, counsel's disregard of his professional responsibilities can lead to extinction of his client's claim.[FN10] See, e.g., Anderson v. Air West, Inc., 542 F.2d 522 (9th Cir. 1976) (dismissal for failure to proceed with due diligence); RePass v. Vreeland, 357 F.2d 801 (3rd Cir. 1966) (negligent failure to file suit within statute of limitations); Universal Film Exchanges, Inc. v. Lust, 479 F.2d 573 (4th Cir. 1973) (party not relieved under Fed.R.Civ.P. 60(b) from summary judgment where counsel's failure to proffer defenses was grossly, rather than excusably, negligent). FN10. The acts and omissions of counsel are normally wholly attributable to the client. Link v. Wabash Railroad Co., 370 U.S. 626, 82 S.Ct. 1386, 8 L.Ed.2d 734 (1962). This case does not present the extraordinary circumstance of complete disappearance or mental illness of counsel that justified relief in Vindigni v. Meyer, 441 F.2d 376 (2d Cir. 1971) and United States v. Cirami, 563 F.2d 26 (2d Cir. 1977). Indeed, by Magistrate Gershon's finding and counsel's own admission, Clark, Cine's principal officer, was aware of every aspect of discovery and intimately involved with the progress of the case.

OAKES, Circuit Judge (concurring):

I concur in the result. It may be that the fault for the inexcusable delays in compliance with the discovery requests and orders *1069 lay with the client or with the complexity of the interrogatories and requests of opposing counsel. If the latter, remedy lay with an application under Fed.R.Civ.P. 26(c). If the former, then the magistrate's recommendation of preclusion strikes at the proper party. It would be with the greatest reluctance, however, that I would visit upon the client the sins of counsel, absent client's knowledge, condonation, compliance, or causation.

C.A.N.Y., 1979. Cine Forty-Second St. Theatre Corp. v. Allied Artists Pictures Corp. 602 F.2d 1062, 49 A.L.R. Fed. 820, 27 Fed.R.Serv.2d 828, 19792 Trade Cases P 62,778

Janz N. Serrano END OF DOCUMENT

age | 43

Janz N. Serrano District Court, D. Oregon. BURTON v. WEYERHAEUSER TIMBER CO. et al. age | 44 P Civil No. 326. Feb. 1, 1941. Action for personal injuries by James J. Burton against the Weyerhaeuser Timber Company and others. New trial ordered. Plaintiff received a disabling acid burn on his hand while handling an acid carboy that had been returned (according to the theory of plaintiff's case) by defendant Weyerhaeuser presumably empty. Plaintiff claimed that he was burned with muriatic acid which ran out of the carboy. Other acid carboys, presumably empty, which had contained sulphuric acid and had been returned by other users, were lying about, and defendants made a strong showing at the trial by plaintiff's admissions and by other testimony, chiefly of expert witnesses, that burns of the kind suffered by plaintiff could not have been from muriatic acid, but were sulphuric burns. Defendant Weyerhaeuser offered to demonstrate, and was allowed to make a demonstration, that muriatic acid in contract with flesh on the hand for the time claimed by plaintiff was not harmful. Nothing was said by defendant's counsel at pre-trial about this defense, nor that a demonstration would be made of the non-deleterious effect of muriatic acid. Some of the reasons why the intended defense and demonstration should have been disclosed are set forth in the order granting a new trial, copy of which is hereto appended. [5] The attorneys were expressly charged at the conclusion of the pre-trial hearing to prepare and submit a pretrial order not later than one week before the trial. In disregard of this direction the pre-trial order was not submitted until after the jury had been empaneled and sworn, and then only in response to a question from the bench about the order. I cannot escape the impression that there was some connection between the failure to observe the direction to prepare and to submit the pre-trial order well before the trial, and the surprise issues raised at the trial. I can sympathize with the desire of counsel, experienced in the older forms of practice, to withhold disclosure of such dramatic issues until the midst of trial, but it must be made clear that surprise, both as a weapon of attack and defense, is not to be tolerated under the new Federal procedure. In view of the known (and one of the primary) objectives of the New Rules of Civil Procedure, to eliminate surprise as a trial tactic, one can hardly imagine a greater breach of the spirit of the New Rules than to deny to an injured man the right to show by the doctor attending him the fullest circumstances of his case, but exactly that happened in this case upon the insistence of defendants' counsel that an exposition of the medical aspects of the case could not be made on rebuttal. Plaintiff's counsel would, of course, have called the attending physician in his case in chief had he been apprised that defendants intended by oral evidence and demonstration to dispute the kind of acid burn which plaintiff claimed to have suffered. Faithfully administered in spirit, as my senior colleague and I are endeavoring to administer them, the new rules outlaw the sporting theory of justice from Federal courts. Order Granting New Trial. On its own initiative and pursuant to Rule 59(d), Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c, the court orders a new trial herein on all issues on the following grounds and for the following reasons: [6] 1. Objection by defendants to testimony by Dr. Bettman, called as a witness by plaintiff, as to the nature of plaintiff's burns and his treatment, and the court's ruling limiting Dr. Bettman's testimony to the kind of acid burn in his opinion suffered by plaintiff, without being given the opportunity to give the reasons upon which such opinion was based, prevented plaintiff from having a fair trial. [7] 2. Demonstration by a witness for defendant Weyerhaeuser Timber Company that a small amount of muriatic acid placed on the witness's hand and allowed to remain for several minutes could be washed off without any damage resulting, was improperly and erroneously permitted by the court, because (a) Neither the court nor opposing counsel were apprised either at the pre-trial hearing, nor were they apprised at all in advance of the trial that such demonstration was contemplated, thus depriving plaintiff's counsel of the opportunity to meet the demonstration by evidence or demonstration contra, particularly depriving opposing counsel and the court of the opportunity to *574 check or have checked the muriatic acid used for the demonstration to determine whether it was the same in quality, strength, etc. as the muriatic acid which plaintiff contended caused plaintiff's burn. (b) The demonstration was not comparable in quantity of acid used to the quantity which plaintiff claimed was spilled on his glove and hand. Only a small amount of acid was placed on the hand of the demonstrator, whereas plaintiff testified that about a pint of acid was spilled on his glove and hand. The foregoing prevented plaintiff from having a fair trial. [8] 3. The factual defense that plaintiff was burned by sulphuric acid and not by muriatic acid should have been disclosed at the pre-trial hearing. Failure to disclose it was contrary to the spirit of the New Rules of Civil Procedure that surprise should be eliminated as a trial tactic, and contrary as well to the purpose and spirit of pre-trial procedure as established and conducted in this court. The failure to disclose that this was to be an important defense on the facts prevented plaintiff from having a fair trial, in that plaintiff's counsel was deprived of the opportunity to meet this defense.

McCOLLOCH, District Judge.

I desire to make these observations about pre-trial procedure as established and conducted in this court: [1] 1. Parties are expected to disclose all legal and fact issues which they intend to raise at trial, save only such issues as may involve privilege or impeaching matter. As to these two exceptions disclosure may be made to the judge conducting the pre-trial hearing without disclosure to opposing counsel, and a ruling will be made on the exception claimed. [2] The test to be applied on impeaching matter or any factual issue, which counsel feels should not be disclosed to his opponent in advance of trial, is the simple one-whether disclosure or non-disclosure will best promote the ends of justice. That is for the judge conducting the pre-trial hearing to determine. [3] 2. Pre-trial orders should be agreed on by counsel and presented to the court for signature and filing a reasonable time before trial. In the rare cases where counsel are unable to agree on the form of *573 the pre-trial order, the court should be advised well before the trial date, and pre-trial orders representing the views of both sides submitted. [4] 3. At least one of the attorneys on each side appearing at pre-trial should also participate in the trial. A new trial has been deemed necessary in this case largely because of disregard of the foregoing. Both sides were offenders.

United States Court of Appeals, Tenth Circuit. BERGER v. BRANNAN. age | 45 P No. 3729. Jan. 27, 1949. Rehearing Denied March 7, 1949. Appeal from the United States District Court for the District of Colorado; John Foster Symes, Judge. Action by Clinton P. Anderson, Secretary of Agriculture, against Ray S. Berger doing business as Berger Sales Company for treble damages under the Emergency Price Control Act for sales of rice at prices in excess of maximum prices established under applicable regulation. Charles Brannan, Secretary of Agriculture, suing on behalf of the United States was substituted as plaintiff. From an adverse judgment, defendant appeals. Affirmed. *242 Defendant filed a motion to dismiss and a motion for a bill of particulars. More than two months thereafter the motion to dismiss was withdrawn and the motion for a bill of particulars was denied. Almost two months thereafter, an answer was filed admitting sales, but denying the correctness of the statistical data set out in the exhibit. The answer specifically denied that the exhibit correctly set out the type of sales, the correct sale price, and that defendant had demanded or received any price not allowed, permitted or fixed by the pertinent price regulation. A pre-trial conference was held at which all the allegations of the complaint were admitted except the correctness of the compilation set out in Exhibit A. Defendant claimed that these items were wrong because plaintiff had failed to take into account proper classifications for purposes of establishing the rate of mark-up, freight, packaging, delivery charges and various zones in which sales were made. It is clear from the record that this additional data which defendant claimed had been omitted from Exhibit A was reflected by defendant's books. Thus, when the court inquired of defendant's attorney how the administrator was going to know what items should be added, defendant's attorney replied, How can I tell him except from the records that we have, your Honor, and he has had those over a year. When the Court stated, I know, but they are your records, so you ought to be able to furnish that information, counsel for defendant replied, I will be glad to give him back the record if he wants it. It's considerable colloquy, the court entered the following pretrial order: It will be the order of the Court that the defendant may take Exhibit A and make up its own copy of Exhibit A and add to it the items just enumerated, which it claims it was entitled to add to the ceiling price, and file the same in-thirty days or sixty days? Defendant objected to this order on the ground that it compelled him to prove plaintiff's case. Defendant did not complete his exhibit pursuant to the order of the court within sixty days. After the expiration of that time, plaintiff filed a motion for summary judgment. Attached thereto was the affidavit of John B. O'Malley to the effect that he had prepared the compilation set up in Exhibit A from defendant's books; that it contained a full, complete, correct and true itemization as reflected by the records and that all the items, charges and overcharges were accurately compiled in accordance with the applicable price regulations. Thereafter defendant appeared in court with its compilation and asked permission to file it out of time. This compilation admitted overcharges in the amount of $2,308. On a hearing, the court denied the defendant a right to file this compilation and entered summary judgment for plaintiff in the amount of the actual overcharges as reflected in Plaintiff's Exhibit A. Appellant does not challenge the order of the court

Janz N. Serrano denying him the right to file his compilation out of time. Two points are raised by this appeal. First, that the court erred in its order directing appellant to make up an exhibit showing the items he claimed appellee had omitted from his Exhibit A, and second, that the court erred in entering summary judgment. There was no dispute between the parties as to any elements which went to make up appellant's cost or as to the mark-up which he was entitled to take. Thus, appellee concedes that packaging the goods, making sales either at retail or wholesale, the kind of wholesaler to whom sales were made, and the zone within which the goods were delivered, all were elements of cost to be taken into account. It must also be conceded that these items, if any, were reflected by appellant's books. The only question then is, appellant having contended that appellee's Exhibit A was in error because it did not reflect all these items, could the court, in a pre-trial conference, enter an order requiring appellant to point out the items on its books which it claimed appellee had omitted from its exhibit? [1] [2] [3] It is true, as contended by appellant, that the pre-trial procedure, set up by Federal Rules of Civil Procedure, Rule 16, 28 U.S.C.A., may not be turned into a device by which a litigant can make use *243 of his opponent's preparation for trial and by which one may be compelled to reveal to his opponent the facts upon which his defense or cause of action is based; neither may a pre-trial conference take the place of a regular trial. On the other hand, it is more than a mere conference at which the court seeks to obtain an elimination of issues or withdrawals of groundless allegations or denials. The court has power to compel parties to agree as to all facts concerning which there can be no real issue. In McDonald v. Bowles, 9 Cir., 152 F.2d 741, 742, a similar situation was involved. There, as here, an exhibit, prepared from the books of one of the parties, was objected to by the other party. The court, in its pre-trial order, directed the objecting party to set out the objections so that they could be considered with the original exhibit. Upon refusal so to do, the court held that the jury was warranted in accepting, as true, the facts as shown in the original exhibit. In the opinion, the court said: The purpose of the pre-trial conference is to simplify the issues, amend the pleadings where necessary, and to avoid unnecessary proof of facts at the trial. The spirit of a pre-trial procedure is not only to call the parties together and ask them to stipulate as to all matters concerning which there can be no dispute, but to compel them to stipulate and agree as to all facts concerning which there can be no real issue. The court has a right to compel the parties to do this. This is the philosophy of the McDonald case.FN1 Unless the court has such power, a pre-trial conference is indeed innocuous and of little help. Without Rule 16, the court always has had the power to ask the parties to meet and request them

Before PHILLIPS, Chief Judge, and BRATTON and HUXMAN, Circuit Judges.

HUXMAN, Circuit Judge.

On June 24, 1947, Clinton P. Anderson, then Secretary of Agriculture, instituted this action in the United States District Court for the District of Colorado, against Ray S. Berger, doing business as Berger Sales Company, seeking treble damages under the Emergency Price Control Act of 1942, Sec. 205, 50 U.S.C.A.Appendix, 925, for sales of rice at prices in excess of the maximum prices established under the applicable regulation. In support of the allegations of the complaint, and as a part thereof, there was attached thereto an exhibit marked Exhibit A which listed eighty-one sales of rice. The exhibit set out the date of each sale, its invoice number, the sale price, the defendant's cost price, percent of each mark-up, the legal resale price, the ceiling price, and the overcharge. The proper Government officials had, prior thereto, obtained by subpoena duces tecum appellant's books, and the complaint alleged that Exhibit A was prepared from such books and that the recapitulation set out therein correctly reflected the condition of the books as to those matters and that all data therein was taken from such books.

Janz N. Serrano to try and get together on all such matters. The purpose of the pre-trial procedure is to compel them to do this. [4] Since the only issue between the parties was what material data was recorded on appellant's books and since appellee had alleged that his Exhibit A correctly reflected all P age | 46 pertinent data, the court was not required to stand by, permit appellant to rest on its general denial and await the outcome of a long expensive trial, to see whether such a denial was sustained. Since appellee conceded appellant's rights to credit for all such items, but claimed it had given such credit in the preparation of Exhibit A, the court had power under Rule 16 of require appellant to point out specifically what items on its books were omitted from appellee's Exhibit A. Appellant having failed to do this, there was no real issue of fact in dispute. Plaintiff's Exhibit, buttressed by the affidavit of the person who prepared it stating that it correctly reflected all pertinent items shown by appellant's books, stood unchallenged and the court properly sustained his motion for summary judgment under Rule 56. Affirmed. 337. FN1. Penn v. Automobile Ins. Co., D.C., 27 F.Supp.

C.A.10 1949. Berger v. Brannan, 172 F.2d 241 END OF DOCUMENT

United States Court of Appeals, Seventh Circuit. G. HEILEMAN BREWING CO., INC., Plaintiff-Appellee, v. JOSEPH OAT CORPORATION, Defendant-Appellant. No. 86-3118. Argued May 20, 1987. Rehearing En Banc Sept. 27, 1988. Decided March 27, 1989. In disputes over waste water treatment system for waste water treatment plant, the United States District Court for the Western District of Wisconsin, Barbara B. Crabb, Chief Judge, 107 F.R.D. 275, sanctioned corporate defendant for failing to send corporate representative to settlement conference as ordered and appeal was taken. The Court of Appeals, Manion, Circuit Judge, 848 F.2d 1415, reversed. On rehearing en banc, the Court of Appeals, Kanne, Circuit Judge, held that: (1) district court was entitled to order represented litigant to appear before it in person at pretrial conference for purpose of discussing posture and settlement of case, and (2) district court was entitled to impose sanctions upon corporation for failing to comply with such order. Affirmed. Posner, Circuit Judge, filed dissenting opinion. Coffey, Circuit Judge, filed dissenting opinion in which Easterbrook, Ripple, and Manion, Circuit Judges, joined. Easterbrook, Circuit Judge, filed dissenting opinion in which Posner, Coffey and Manion, Circuit Judges, joined. Ripple, Circuit Judge, filed dissenting opinion in which Coffey, Circuit Judge, joined. Manion, Circuit Judge, filed dissenting opinion in which Coffey, Easterbrook and Ripple, Circuit Judges, joined.

age | 47

May a federal district court order litigants-even those represented by counsel-to appear before it in person at a pretrial conference for the purpose of discussing the posture and settlement of the litigants' case? After reviewing the Federal Rules of Civil Procedure and federal district courts' inherent authority to manage and control the litigation before them, we answer this question in the affirmative and conclude that a district court may sanction a litigant for failing to comply with such an order.

Janz N. Serrano any unrepresented parties to appear before it for a conference or conferences before trial for such purposes as .... (5) facilitating the settlement of the case.

Fed.R.Civ.P. 16(a)(5). A. Authority to Order Attendance First, we must address Oat Corporation's contention that a federal district court lacks the authority to order litigants who are represented by counsel to appear at a pretrial conference. Our analysis requires us to review the Federal Rules of Civil Procedure and district courts' inherent authority to manage the progress of litigation. Rule 16 addresses the use of pretrial conferences to formulate and narrow issues for trial as well as to discuss means for dispensing with the need for costly and unnecessary litigation. As we stated in Link v. Wabash R.R., 291 F.2d 542, 547 (7th Cir.1961), aff'd, 370 U.S. 626, 82 S.Ct. 1386, 8 L.Ed.2d 734 (1962): Pre-trial procedure has become an integrated part of the judicial process on the *651 trial level. Courts must be free to use it and to control and enforce its operation. Otherwise, the orderly administration of justice will be removed from control of the trial court and placed in the hands of counsel. We do not believe such a course is within the contemplation of the law. The pretrial settlement of litigation has been advocated and used as a means to alleviate overcrowded dockets, and courts have practiced numerous and varied types of pretrial settlement techniques for many years. See, e.g., Manual for Complex Litigation 2d, 21.1-21.4 (1985); Federal Judicial Center, Settlement Strategies for Federal District Judges (1988); Federal Judicial Center, The Judge's Role in the Settlement of Civil Suits (1977) (presented at a seminar for newly-appointed judges); Federal Judicial Center, The Role of the Judge in the Settlement Process (1977). Since 1983, Rule 16 has expressly provided that settlement of a case is one of several subjects which should be pursued and discussed vigorously during pretrial conferences. FN2 FN2. Rule 16(c)(7) states: (c) Subjects to be Discussed at Pretrial Conferences. The participants at any conference under this rule may consider and take action with respect to .... (7) the possibility of settlement or the use of extrajudicial procedures to resolve the dispute;....

I. BACKGROUND A federal magistrate ordered Joseph Oat Corporation to send a corporate representative with authority to settle to a pretrial conference to discuss disputed factual and legal issues and the possibility of settlement. Although counsel for Oat Corporation appeared, accompanied by another attorney who was authorized to speak on behalf of the principals of the corporation, no principal or corporate representative personally attended the conference. The court determined that the failure of Oat Corporation to send a principal of the corporation to the pretrial conference violated its order. Consequently, the district court imposed a sanction of $5,860.01 upon Oat Corporation pursuant to Federal Rule of Civil Procedure 16(f). This amount represented the costs and attorneys' fees of the opposing parties attending the conference.

II. THE APPEAL Oat Corporation appeals, claiming that the district court did not have the authority to order litigants represented by counsel to appear at the pretrial settlement conference. Specifically, Oat Corporation contends that, by negative implication, the language of Rule 16(a)(5) prohibits a district court from directing represented litigants to attend pretrial conferences. FN1 That is, because Rule 16 expressly refers to attorneys for the parties and any unrepresented parties in introductory paragraph (a), a district court may not go beyond that language to devise procedures which direct the pretrial appearance of parties represented by counsel. Consequently, Oat Corporation concludes that the court lacked the authority to order the pretrial attendance of its corporate representatives and, even if the court possessed such authority, the court abused its discretion to exercise that power in this case. Finally, Oat Corporation argues that the court abused its discretion to enter sanctions. FN1. Rule 16(a)(5) provides: (a) Pretrial Conferences; Objectives. In any action, the court may in its discretion direct the attorneys for the parties and

Before BAUER, Chief Judge, CUMMINGS, WOOD, Jr., CUDAHY, POSNER, COFFEY, FLAUM, EASTERBROOK, RIPPLE, MANION and KANNE, Circuit Judges.

KANNE, Circuit Judge.

Fed.R.Civ.P. 16(c)(7). [1] The language of Rule 16 does not give any direction to the district court upon the issue of a court's authority to order litigants who are represented by counsel to appear for pretrial proceedings. Instead, Rule 16 merely refers to P the participation of trial advocates-attorneys of record and age | 48 pro se litigants. However, the Federal Rules of Civil Procedure do not completely describe and limit the power of the federal courts. HMG Property Investors, Inc. v. Parque Indus. Rio Canas, Inc., 847 F.2d 908, 915 (1st Cir.1988) (citations omitted). The concept that district courts exercise procedural authority outside the explicit language of the rules of civil procedure is not frequently documented, but valid nevertheless. Brockton Sav. Bank v. Pete, Marwick, Mitchell & Co., 771 F.2d 5, 11 (1st Cir.1985), cert. denied, 475 U.S. 1018, 106 S.Ct. 1204, 89 L.Ed.2d 317 (1986). The Supreme Court has acknowledged that the provisions of the Federal Rules of Civil Procedure are not intended to be the exclusive authority for actions to be taken by district courts. Link v. Wabash R.R., 370 U.S. 626, 82 S.Ct. 1386, 8 L.Ed.2d 734 (1962). In Link, the Supreme Court noted that a district court's ability to take action in a procedural context may be grounded in inherent power, governed not by rule or statute but by the control necessarily vested in courts to manage their own affairs so as to achieve the orderly and expeditious disposition of cases. 370 U.S. at 630-31, 82 S.Ct. at 1389 (footnotes omitted).FN3 This authority likewise forms the basis for continued development of procedural techniques designed to make the operation of the court more efficient, to preserve the integrity of the judicial process, and to control courts' dockets.FN4 Because the rules *652 form and shape certain aspects of a court's inherent powers, yet allow the continued exercise of that power where discretion should be available, the mere absence of language in the federal rules specifically authorizing or describing a particular judicial procedure should not, and does not, give rise to a negative implication of prohibition. See Link, 370 U.S. at 629-30, 82 S.Ct. at 1388; FN5 see also Fed.R.Civ.P. 83 (In all cases not provided for by rule, the district judges and magistrates may regulate their practice in any manner not inconsistent with these rules or those of the district in which they act.). FN3. The Supreme Court has long held that the inherent powers of federal courts are those which are necessary to the exercise of all others. Roadway Express, Inc. v. Piper, 447 U.S. 752, 764, 100 S.Ct. 2455, 2463, 65 L.Ed.2d 488 (1980) (quoting United States v. Hudson & Goodwin, 7 Cranch 32, 34, 11 U.S. 32, 3 L.Ed. 259 (1812)).

to punish for contempt, power to sanction persons who file frivolous pleadings, power to determine whether there is jurisdiction), cert. granted, 488 U.S. 1003, 109 S.Ct. 781, 102 L.Ed.2d 773; Strandell v. Jackson County, 838 F.2d 884, 886 (7th Cir.1988); Thompson v. Housing Auth. of Los Angeles, 782 F.2d 829, 831 (9th Cir.), cert. denied, 479 U.S. 829, 107 S.Ct. 112, 93 L.Ed.2d 60 (1986); Halaco Eng'g Co. v. Costle, 843 F.2d 376, 380 (9th Cir.1988) (court stating that the Supreme Court has recognized that a district court has inherent authority to impose sanctions for discovery abuses which may not be a technical violation of discovery rules). The practice of some district judges requiring represented parties to appear in person (or by corporate representative) has been part and parcel of such settlement conferences for many years. See In re LaMarre, 494 F.2d 753, 756 (6th Cir.1974) (court stating that it is well within the scope of a district court's authority to compel the appearance of a party's insurer at a pretrial conference and to enforce the order). FN5. In Link, plaintiff's counsel, who was aware of a pretrial conference, deliberately failed to attend the conference. The district court dismissed the suit even though the Federal Rules of Civil Procedure did not expressly provide for it. Our court recognized the district court's inherent authority to do so and found that it was not an abuse of discretion to dismiss the lawsuit. Courts may exercise their inherent powers and invoke dismissal as a sanction in situations involving disregard by parties of orders, rules, or settings. Link, 291 F.2d at 546 (citations omitted). The Supreme Court affirmed this rationale. Link, 370 U.S. at 627, 82 S.Ct. at 1387, 8 L.Ed.2d 734 (1962).

Janz N. Serrano are to be strictly construed. C. Wright & A. Miller, Federal Practice and Procedure: Civil 2d 1029 (1987). [The] spirit, intent, and purpose [of Rule 16] is ... broadly remedial, allowing courts to actively manage the preparation of cases for trial. In re Baker, 744 F.2d 1438, 1440 (10th Cir.1984) (en banc), cert. denied, 471 U.S. 1014, 105 S.Ct. 2016, 85 L.Ed.2d 299 (1985). Rule 16 is not designed as a device to restrict or limit the authority of the district judge in the conduct of pretrial conferences. As the Tenth Circuit Court of Appeals sitting en banc stated in Baker, the spirit and purpose of the amendments to Rule 16 always have been within the inherent power of the courts to manage their affairs as an independent constitutional branch of government. Id. at 1441 (citations omitted). [3] We agree with this interpretation of Rule 16. The wording of the rule and the accompanying commentary make plain that the entire thrust of the amendment to Rule 16 was to urge judges to make wider use of their powers and to manage actively their dockets from an early stage. We therefore conclude that our interpretation of Rule 16 to allow district courts to order represented parties to appear at pretrial settlement conferences merely represents another application of a district judge's inherent authority to preserve the efficiency, and more importantly the integrity, of the judicial process. To summarize, we simply hold that the action taken by the district court in this case constituted the proper use of inherent authority to aid in accomplishing the purpose*653 and intent of Rule 16. We reaffirm the notion that the inherent power of a district judge-derived from thevery nature and existence of his judicial office-is the broad field over which the Federal Rules of Civil Procedure are applied.FN6 Inherent authority remains the means by which district judges deal with circumstances not proscribed or specifically addressed by rule or statute, but which must be addressed to promote the just, speedy, and inexpensive determination of every action. FN6. The Federal Rules of Civil Procedure are not the only set of rules grounded in the district courts' inherent authority. Circumstances not explicitly authorized in the Federal Rules of Evidence such as in limine rulings are derived from the district court's inherent authority to manage the course of trials. See Luce v. United States, 469 U.S. 38, 41 n. 4, 105 S.Ct. 460, 463 n. 4, 83 L.Ed.2d 443 (1984) (citations omitted).

[2] Obviously, the district court, in devising means to control cases before it, may not exercise its inherent authority in a manner inconsistent with rule or statute. As we stated in Strandell v. Jackson County, 838 F.2d 884, 886 (7th Cir.1988), such power should be exercised in a manner that is in harmony with the Federal Rules of Civil Procedure. This means that where the rules directly mandate a specific procedure to the exclusion of others, inherent authority is proscribed. Landau & Cleary, Ltd. v. Hribar Trucking, Inc., 867 F.2d 996, 1002 (7th Cir.1989) (emphasis added). In this case, we are required to determine whether a court's power to order the pretrial appearance of litigants who are represented by counsel is inconsistent with, or in derogation of, Rule 16. We must remember that Rule 1 states, with unmistakable clarity, that the Federal Rules of Civil Procedure shall be construed to secure the just, speedy, and inexpensive determination of every action. This language explicitly indicates that the federal rules are to be liberally construed. Cf. Hickman v. Taylor, 329 U.S. 495, 507, 67 S.Ct. 385, 392, 91 L.Ed. 451 (1947). There is no place in the federal civil procedural system for the proposition that rules having the force of statute, though in derogation of the common law,

B. Exercise of Authority to Order Attendance Having determined that the district court possessed the power and authority to order the represented litigants to

FN4. See Newman-Green, Inc. v. Alfonzo-Larrain R., 854 F.2d 916, 921-22 (7th Cir.1988) (en banc) (court discussing examples of specific procedures, such as the power

appear at the pretrial settlement conference,FN7 we now must examine whether the court abused its discretion to issue such an order. FN7. The district court had authorized the magistrate to resolve all pretrial matters pursuant to 28 U.S.C. P 636(b)(1)(A).

faced with a decidely different issue-a situation we would not countenance. The Advisory Committee Notes to Rule 16 state that [a]lthough it is not the purpose of Rule 16(b)(7) to impose settlement negotiations on unwilling litigants, it is believed that providing a neutral forum for discussing [settlement] might foster it. Fed.R.Civ.P. 16 advisory committee's note, subdivision (c) (1983). These Notes clearly draw a distinction between being required to attend a settlement conference and being required to participate in settlement negotiations. Thus, under the scheme of pretrial settlement conferences, the corporate representative remains free, on behalf of the corporate entity, to propose terms of *654 settlement independently-but he may be required to state those terms in a pretrial conference before a judge or magistrate. [6] As an alternative position, Oat Corporation argues that the court abused its discretion to order corporate representatives of the litigants to attend the pretrial settlement conference. Oat Corporation determined that because its business was a going concern: It would be unreasonable for the magistrate to require the president of that corporation to leave his business [in Camden, New Jersey] to travel to Madison, Wisconsin, to participate in a settlement conference. The expense and burden on the part of Joseph Oat to comply with this order was clearly unreasonable. Consequently, Oat Corporation believes that the district court abused its authority. We recognize, as did the district court, that circumstances could arise in which requiring a corporate representative (or any litigant) to appear at a pretrial settlement conference would be so onerous, so clearly unproductive, or so expensive in relation to the size, value, and complexity of the case that it might be an abuse of discretion. Moreover, [b]ecause inherent powers are shielded from direct democratic controls, they must be exercised with restraint and discretion. Roadway Express, Inc. v. Piper, 447 U.S. 752, 764, 100 S.Ct. 2455, 2463, 65 L.Ed.2d 488 (1980) (citation omitted). However, the facts and circumstances of this case clearly support the court's actions to require the corporate representatives of the litigants to attend the pretrial conference personally. This litigation involved a claim for $4 million-a claim which turned upon the resolution of complex factual and legal issues.FN9 The litigants expected the trial to last from one to three months and all parties stood to incur substantial legal fees and trial expenses. This trial also would have preempted a large segment of judicial time-not an insignificant factor. Thus, because the stakes were high, we do not believe that the burden of requiring a corporate representative to attend a

Janz N. Serrano pretrial settlement conference was out of proportion to the benefits to be gained, not only by the litigants but also by the court. FN9. G. Heileman Brewing Company hired RME Associates, Inc., a consulting firm, to build a waste water treatment plant at Heileman's brewery in LaCrosse, Wisconsin. Subsequently, RME entered into a contract with Joseph Oat Corporation whereby Oat Corporation agreed to design, engineer, construct and test the system. Oat Corporation was the exclusive licensee in the United States for the system's developer, N.V. Centrale Suicker Maatschappij (CSM), a Dutch corporation. A contract dispute arose between Oat Corporation, Heileman, and RME involving the malfunctioning of the waste water treatment system. In December, 1982, Oat Corporation initiated federal diversity litigation against Heileman and RME in New Jersey. RME counterclaimed. The case was transferred to the court below. RME then joined CSM as a third-party defendant. On the same day, Heileman filed an action in Wisconsin state court against Oat Corporation and RME. RME cross-claimed against Oat Corporation and counter-claimed against Heileman.

age | 49

[4] [5] At the outset, it is important to note that a district court cannot coerce settlement. Kothe v. Smith, 771 F.2d 667, 669 (2d Cir.1985).FN8 In this case, considerable concern has been generated because the court ordered corporate representatives with authority to settle to attend the conference. In our view, authority to settle, when used in the context of this case, means that the corporate representative attending the pretrial conference was required to hold a position within the corporate entity allowing him to speak definitively and to commit the corporation to a particular position in the litigation. We do not view authority to settle as a requirement that corporate representatives must come to court willing to settle on someone else's terms, but only that they come to court in order to consider the possibility of settlement. FN8. Likewise, a court cannot compel parties to stipulate to facts. J.F. Edwards Constr. Co. v. Anderson Safeway Guard Rail Corp., 542 F.2d 1318 (7th Cir.1976) (per curiam). Nor can a court compel litigants to participate in a nonbinding summary jury trial. Strandell, 838 F.2d at 887. In the same vein, a court cannot force a party to engage in discovery. Identiseal Corp. v. Positive Identification Sys., Inc., 560 F.2d 298 (7th Cir.1977).

As Chief Judge Crabb set forth in her decision which we now review: There is no indication ... that the magistrate's order contemplated requiring Joseph Oat ... to agree to any particular form of settlement or even to agree to settlement at all. The only requirement imposed by the magistrate was that the representative [of Oat Corporation] be present with full authority to settle, should terms for settlement be proposed that were acceptable to [Oat Corporation]. G. Heileman Brewing Co., Inc. v. Joseph Oat Corporation, 107 F.R.D. 275, 276-77 (1985). If this case represented a situation where Oat Corporation had sent a corporate representative and was sanctioned because that person refused to make an offer to pay moneythat is, refused to submit to settlement coercion-we would be

In the early phase of trial preparation, Heileman and Oat Corporation agreed to withdraw all claims between them. In addition, Oat Corporation dismissed its complaint against RME. After these events, the lawsuit consisted of RME's claims against Oat Corporation and CSM. Additionally, the corporation did send an attorney, Mr. Fitzpatrick, from Philadelphia, Pennsylvania to Madison, Wisconsin to speak for the principals of the corporation. It is difficult to see how the expenses involved in sending Mr. Fitzpatrick from Philadelphia to Madison would have greatly exceeded the expenses involved in sending a corporate representative from Camden to Madison. Consequently, we do not think the expenses and distance to be traveled are unreasonable in this case. Furthermore, no objection to the magistrate's order was made prior to the date the pretrial conference resumed. Oat Corporation contacted the magistrate's office concerning the order's requirements and was advised of the requirements now at issue. However, Oat Corporation never objected to its terms, either when it was issued or when Oat Corporation sought clarification. Consequently, Oat Corporation was left with only one course of action: it had to comply fully with the letter and *655 intent of the order and argue about its reasonableness later.FN10 FN10. In Malone v. United States Postal Serv., 833 F.2d 128 (9th Cir.1987), cert. denied, 488 U.S. 819, 109 S.Ct. 59, 102 L.Ed.2d 37 (1988), the Ninth Circuit addressed the same

general issue we confront here. Malone appealed the imposition of the sanction of dismissal. Malone argued that the pretrial order was invalid and thus her noncompliance was justified. Id. at 133. Specifically, Malone claimed that the order of dismissal was erroneous since the court lacked the authority to require Malone to supply a list of questions and answers for all P potential witnesses. The Ninth Circuit Court of Appeals age | 50 disagreed with Malone's argument and held that counsel who believes a court order to be erroneous is not relieved of the duty to obey it. Malone's refusal to abide with the pretrial order was not justified. Id.; see also Maness v. Meyers, 419 U.S. 449, 458, 95 S.Ct. 584, 591, 42 L.Ed.2d 574 (1975).

somewhat ambiguous, any ambiguity was eliminated by the magistrate's remarks from the bench on December 14, the written order of December 18,FN11 and the direction obtained by counsel from the magistrate's clerk. FN11. On December 18, 1984, the oral order was reduced to writing. It stated: The progress of the conference was impaired by the fact that neither plaintiff Joseph Oat Corporation, or its carrier National Union, was represented, in addition to counsel, by a representative having full authority to settle the case.... It appearing that a substantial possibility exists that a number of the claims and issues in these cases may be susceptible of settlement, and that other related matters might be considered (including the avoidance of unnecessary proof, cumulative evidence, and redundant litigation; the possibility of adopting amendments to the pleadings, the restructuring of the parties; and the adoption of special procedures for managing this complex and protracted litigation) so as to secure the just and speedy determination of this litigation as the least expense to the parties, IT IS HEREBY ORDERED: .... 2. In addition to counsel, each party and the insurance carriers of plaintiff Oat and defendant RME, shall be represented at the conference in person by a representative having full authority to settle the case or to make decisions and grant authority to counsel with respect to all matters that may be reasonably anticipated to come before the conference; ....

Janz N. Serrano the Oat Corporation's liability insurance carrier, National Union Fire Insurance Company, was represented by an adjuster.

FN13. In pertinent part, the order stated: 5. A settlement conference, which shall include the Heileman Brewing Company, shall be held herein on December 14, 1984 at 2:00 p.m..... In addition to counsel, each party shall be represented at the conference by a representative having full authority to settle the case....

We thus conclude that the court did not abuse its authority and discretion to order a representative of the Oat Corporation to appear for the pretrial settlement conference on December 19.

C. Sanctions Finally, we must determine whether the court abused its discretion by sanctioning Oat Corporation for failing to comply with the order to appear at the pretrial settlement conference. Oat Corporation argues that the instructions directing the appearance of corporate representatives were unclear and ambiguous. Consequently, it concludes that the sanctions were improper. [7] Absent an abuse of discretion, we may not disturb a district court's imposition of sanctions for failure of a party to comply with a pretrial order. The issue on review is not whether we would have imposed these costs upon Oat Corporation, but whether the district court abused its discretion in doing so. National Hockey League v. Metropolitan Hockey Club, Inc., 427 U.S. 639, 642, 96 S.Ct. 2778, 2780, 49 L.Ed.2d 747 (1976) (citations omitted). [8] Oat Corporation contends that the presence of Mr. Fitzpatrick, as an attorney authorized to speak on behalf of the principals of Oat Corporation, satisfied the requirement that its corporate representative attend the December 19 settlement conference. Oat Corporation argues that nothing in either the November 19, 1984 order or the December 14, 1984 order would lead a reasonable person to conclude that a representative or principal from the Joseph Oat Corporation was required to attend the conference personally-in effect arguing that sanctions cannot be imposed because the order failed to require a particular person to attend the conference. We believe that Oat Corporation was well aware of what the court expected. While the November order may have been

(Order of Nov. 19, 1984). When the conference resumed on December 19, Mr. Possi was present acting in his capacity as Oat Corporation's attorney of record. Mr. Fitzpatrick, who was not an attorney of record in the case, asserted that he was directed to attend the conference and speak on behalf of Oat Corporation's principals. FN14 Mr. Fitzpatrick also stated that he interpreted the November order not as requiring the presence of a principal of Oat Corporation at the conference scheduled for December 14, but as requiring the presence of the insurance carriers with authority to discuss settlement. FN14. On December 19, the following dialogue took place between the magistrate and Mr. Fitzpatrick: THE COURT: I made it clear on December 14th, that for purposes of this conference ... that each party in addition to be represented by counsel would have present the party itself for purposes of authorizing or discussing settlement in this case, speaking specifically about the order which is dated December 18th but was entered I think clearly enough on the 14th. That in addition to counsel, each party ... shall be represented at the conference in person by a representative having full authority to settle the case or make decisions relevant to all matters reasonably anticipated to come before the conference....

(Order of Dec. 18, 1984) (emphasis supplied). On December 14, in the presence of Oat Corporation's attorney of record and all those in the courtroom, the magistrate announced that the pretrial conference had *656 been impaired because Oat Corporation FN12 had not complied with Paragraph 5(c) of the November order requiring it to send to the conference a corporate representative.FN13 The magistrate clearly stated that the order's purpose was to insure the presence of the parties personally at the conference. From that moment on, Oat Corporation had notice that it was ordered to send a corporate representative to the resumed conference. Moreover, prior to the December 19 conference, Oat Corporation's counsel contacted the magistrate's office to determine if the magistrate really intended for corporate representatives to be in Madison, Wisconsin, for the settlement conference. Counsel was assured that such was the case. FN12. Except for the Oat Corporation, all the parties complied, sending their counsel and corporate representatives to the pretrial conference (a principal of CSM was standing by a telephone in the Netherlands). The Oat Corporation was represented by his attorney of record, John Possi. In addition,

As a matter of fact, Mr. Possi called yesterday to find out from my secretary if that is what I really meant ... he was informed that it is what I really meant; and I would like to have your explanation as to why no one from Joseph Oat is here from [sic] that authority.

MR. FITZPATRICK: I am here as a representative of Joseph Oat which I understood your order to be. I have discussed this thing thoroughly with the principals of Joseph Oat. They directed me to come to the conference. They directed me that I could speak for them, with authority to speak for

them. Their direction was I should make no offer to settle the case. That is their position. That is the position they choose to take and they designated me as the representative to communicate that to the Court.

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(Transcript of Dec. 19, 1984). The distinction is clearly drawn between an attorney representing a corporation and a corporate representative. As we define in this opinion-consistent with the meaning given by the magistrate-a corporate representative is a person holding a position with the corporate entity. Although Mr. Fitzpatrick was representing the corporate principals and Mr. Possi the corporation, no corporate representative attended as required by the magistrate's order. We therefore conclude that the court properly sanctioned Oat Corporation pursuant to Rule 16(f) for failing to send a corporate representative to the settlement conference.

attorneys to convey to their clients adequate information bearing on the desirability and terms of settling a case in lieu of pressing forward to trial. The distrust is warranted in some cases, I am sure; but warranted or not, it is what lies behind the concern that the panel opinion had stripped the district courts of a valuable settlement tool-and this at a time of heavy, and growing, federal judicial caseloads. The concern may well be exaggerated, however. The panel opinion may have had little practical significance; it is the rare attorney who will invite a district judge's displeasure by defying a request to produce the client for a pretrial conference. The question of the district court's power to summon a represented party to a settlement conference is a difficult one. On the one hand, nothing in Rule 16 or in any other rule or statute confers such a power, and there are obvious dangers in too broad an interpretation of the federal courts' inherent power to regulate their procedure. One danger is that it encourages judicial high-handedness (power corrupts); several years ago one of the district judges in this circuit ordered Acting Secretary of Labor Brock to appear before him for settlement discussions on the very day Brock was scheduled to appear before the Senate for his confirmation hearing. The broader concern illustrated by the Brock episode is that in their zeal to settle cases judges may ignore the value of other people's time. One reason people hire lawyers is to economize on their own investment of time in resolving disputes. It is pertinent to note in this connection that Oat is a defendant in this case; it didn't want its executives' time occupied with this litigation. On the other hand, die Not bricht Eisen [necessity breaks iron]. Attorneys often are imperfect agents of their clients, and the workload of our district courts is so heavy that we should hesitate to deprive them of a potentially useful tool for effecting settlement, even if there is some difficulty in finding a legal basis for the tool. Although few attorneys will defy a district court's request to produce the client, those few cases may be the very ones where the client's presence would be most conducive to settlement. If I am right that Rule 16(a) empowers a district court to summon unrepresented parties to a pretrial conference only because their presence may be necessary to get ready for trial, we need not infer that the draftsmen meant to forbid the summoning of represented parties for purposes of exploring settlement. The draftsmen may have been unaware that district courts were asserting a power to command the presence of a represented party to explore settlement. We should hesitate to infer inadvertent prohibitions. The narrowly legal considerations bearing on the question whether district courts have the power asserted by the magistrate in this case are sufficiently equivocal to authorize-indeed compel-us to consider the practical consequences for settlement before deciding what the answer should be. Unfortunately we have *658 insufficient information

III. CONCLUSION We hold that Rule 16 does not limit, but rather is enhanced by, the inherent authority of federal courts to order litigants represented by counsel to attend pretrial conferences for the purpose of discussing settlement. Oat Corporation violated the district court's order requiring it to have a corporate representative attend the pretrial settlement*657 conference on December 19, 1984. Under these circumstances, the district court did not abuse its discretion by imposing sanctions for Oat Corporation's failure to comply with the pretrial order. The judgment of the district court is hereby AFFIRMED.

Janz N. Serrano about those consequences to be able to give a confident answer, but fortunately we need not answer the question in this case-so clear is it that the magistrate abused his discretion, which is to say, acted unreasonably, in demanding that Oat Corporation send an executive having full settlement authority to the pretrial conference. This demand, which is different from a demand that a party who has not closed the door to settlement send an executive to discuss possible terms, would be defensible only if litigants had a duty to bargain in good faith over settlement before resorting to trial, and neither Rule 16 nor any other rule, statute, or doctrine imposes such a duty on federal litigants. See Strandell v. Jackson County, 838 F.2d 884, 887 (7th Cir.1987); Kothe v. Smith, 771 F.2d 667, 669 (2d Cir.1985); Del Rio v. Northern Blower Co., 574 F.2d 23, 26 (1st Cir.1978); Perez v. Maine, 760 F.2d 11, 12 (1st Cir.1985); National Ass'n of Government Employees, Inc. v. National Federation of Federal Employees, 844 F.2d 216, 223 (5th Cir.1988); Advisory Committee Notes to 1983 Amendments to Fed.R.Civ.P. 16. There is no federal judicial power to coerce settlement. Oat had made clear that it was not prepared to settle the case on any terms that required it to pay money. That was its prerogative, which once exercised made the magistrate's continued insistence on Oat's sending an executive to Madison arbitrary, unreasonable, willful, and indeed petulant. This is apart from the fact that since no one officer of Oat may have had authority to settle the case, compliance with the demand might have required Oat to ship its entire board of directors to Madison. Ultimately Oat did make a money settlement, but there is no indication that it would have settled sooner if only it had complied with the magistrate's demand for the dispatch of an executive possessing full settlement authority. Sufficient unto the day is the evil thereof: We should reverse the district court without reaching the question whether there are any circumstances in which a district court may compel a party represented by counsel to attend a pretrial conference.

POSNER, Circuit Judge, dissenting.

Rule 16(a) of the Federal Rules of Civil Procedure authorizes a district court to direct the attorneys for the parties and any unrepresented parties to appear before it for a [pretrial] conference. The word I have italicized could be thought to carry the negative implication that no represented party may be directed to appear-that was the panel's conclusion-but I hesitate to so conclude in a case that can be decided on a narrower ground. The main purpose of the pretrial conference is to get ready for trial. For that purpose, only the attorneys need be present, unless a party is acting as his own attorney. The only possible reason for wanting a represented party to be present is to enable the judge or magistrate to explore settlement with the principals rather than with just their agents. Some district judges and magistrates distrust the willingness or ability of

COFFEY, Circuit Judge, with whom EASTERBROOK, RIPPLE and MANION, Circuit Judges, join, dissenting.

Because Rule 16 of the Federal Rules of Civil Procedure, amended by the Supreme Court and Congress as recently as 1983, specifically designates who may be ordered to appear at a pretrial conference, I disagree with the majority's determination that the action taken by the district court in this case constituted the proper use of inherent authority to aid in accomplishing the purpose and intent of Rule 16. Majority Opinion at 652. Rule 16 of the Federal Rules of Civil Procedure states in relevant part:

(a) Pretrial Conferences; Objectives. In any action, the court may in its discretion direct the attorneys for the parties and any unrepresented parties to appear before it for a conference or conferences before trial for such purposes as (1) expediting the disposition of the action; (2) establishing early and continuing control so that the case will not be protracted because of lack of management; (3) discouraging wasteful P age | 52 pretrial activity; (4) improving the quality of the trial through more thorough preparation; and (5) facilitating the settlement of the case. Unlike the majority, I am convinced that Rule 16 does not authorize a trial judge to require a represented party litigant to attend a pretrial conference together with his or her attorney because the rule mandates in clear and unambiguous terms that only an unrepresented party litigant and attorneys may be ordered to appear. Although I recognize that all courts, including those of federal jurisdiction, possess certain inherent authority, such as the contempt power and the power to determine whether the court has jurisdiction, this authority is limited. We recently warned that: Inherent authority is not a substitute for good reason.... Inherent authority*659 like its cousin in criminal law the supervisory power, is just another name for the power of courts to make common law when statutes and rules do not address a particular topic. Cf. United States v. Widgery, 778 F.2d 325, 328-29 (7th Cir.1985). Soo Line R. Co. v. Escanaba & Lake Superior R. Co., 840 F.2d 546, 551 (7th Cir.1988). The Supreme Court has placed clear limits on judicial reliance on inherent authority or, as it is labeled in the criminal law context, supervisory power: Even a sensible and efficient use of the supervisory power ... is invalid if it conflicts with constitutional or statutory provisions. A contrary result would confer on the judiciary discretionary power to disregard the considered limitations of the law it is charged with enforcing. Thomas v. Arn, 474 U.S. 140, 148, 106 S.Ct. 466, 471, 88 L.Ed.2d 435 (1985) (quoting United States v. Payner, 447 U.S. 727, 737, 100 S.Ct. 2439, 2447, 65 L.Ed.2d 468 (1980)). Thus, as the majority recognizes, the district court, in devising means to control cases before it, may not exercise its inherent authority in a manner inconsistent with rule or statute. Majority Opinion at 652. The Supreme Court very recently underscored the fact that district courts are not to attempt to utilize an alleged inherent authority in a manner that contravenes the balance between varying interests that has previously been struck in a federal procedural rule, such as Federal Rule of Civil Procedure

16. In Bank of Nova Scotia v. United States, 487 U.S. 250, 108 S.Ct. 2369, 2374, 101 L.Ed.2d 228 (1988), the Court held that a judge may not invoke inherent authority (labeled supervisory power by the Court) to dismiss an indictment based upon harmless error in a grand jury proceeding: We now hold that a federal court may not invoke supervisory power to circumvent the harmless error inquiry prescribed by Federal Rule of Criminal Procedure 52(a). The balance struck by the Rule between societal costs and the rights of the accused may not casually be overlooked because a court has elected to analyze the question under the supervisory power. United States v. Payner, 447 U.S. [727, 736, 100 S.Ct. 2439, 2447, 65 L.Ed.2d 468 (1980) ]. As the Supreme Court observed in an earlier decision rejecting the broad use of the supervisory power (inherent authority) to justify an individual court's determination that public policy required criminal defendants to be extended certain protections beyond those allowed in the Constitution, such reasoning ... amounts to a substitution of individual judgment for the controlling decisions of this Court. Were we to accept this use of the supervisory power, we would confer on the judiciary discretionary power to disregard the considered limitations of the law it is charged with enforcing. We hold that the supervisory power does not extend so far. United States v. Payner, 447 U.S. 727, 737, 100 S.Ct. 2439, 2447, 65 L.Ed.2d 468 (1980) (footnote omitted). Like the procedural rule involved in Bank of Nova Scotia, the Federal Rules of Civil Procedure, including Rule 16, are the product of a careful process of study and reflection designed to take due cognizance both of the need for expedition of cases and the protection of individual rights. Strandell v. Jackson County, 838 F.2d 884, 886 (7th Cir.1987) (quoting S.Rep. No. 1744, 85th Cong., 2d Sess., reprinted in 1958 U.S.Code Cong. & Admin.News 3023, 3026). Furthermore, in those areas of trial practice where the Supreme Court and the Congress, acting together, have addressed the appropriate balance between the needs for judicial efficiency and the rights of the individual litigant, innovation by the individual judicial officer must conform to that balance. Id. at 886-87. Prior to 1983, Rule 16 only provided district court judges with the discretion to require the attendance of attorneys for parties at such proceedings. As pointed out earlier in this opinion, the Supreme Court and Congress took a good hard look at Rule 16 in hopes of improving judicial efficiency*660 and only increased the power of district court judges to the extent of authorizing them to compel the attendance of unrepresented parties at pretrial conferences. However, it is very clear that the amendment explicitly stopped short of providing trial judges with the broad and

Janz N. Serrano sweeping authority to compel the presence of represented parties at pretrial conferences that the majority now seeks to achieve by judicial fiat. [T]he Supreme Court and Congress, acting together, ... addressed the appropriate balance between the needs for judicial efficiency and the rights of the individual litigant, FN1 when they chose to amend Rule 16 in a limited manner. The majority upsets this careful balance and acts contrary to the Supreme Court's mandate in the Bank of Nova Scotia case when it relies upon an alleged inherent authority to permit district court judges to exercise a power which the drafters of Rule 16 explicitly denied them. See United States R. Retirement Board v. Fritz, 449 U.S. 166, 179, 101 S.Ct. 453, 461, 66 L.Ed.2d 368 (1980) (The language of the statute is clear, and we have historically assumed that Congress intended what it enacted.) FN2 The obvious intent of the Supreme Court and Congress that only attorneys and unrepresented parties be required to participate in pretrial conferences is clearly supported by the specific references to attorneys and unrepresented parties throughout Rule 16. Rule 16(a), as noted previously, allows for the court to direct the attorneys for the parties and any unrepresented parties to appear before it. Rule 16(b), concerning scheduling, requires a judge to consult[ ] with the attorneys for the parties and any unrepresented parties. Rule 16(c), regarding subjects to be discussed at a pretrial conference, states that [a]t least one of the attorneys for each party participating in any conference before trial shall have authority to enter into stipulations and to make admissions regarding all matters that the participants may reasonably anticipate may be discussed. Similarly, Rule 16(d), concerning final pretrial conferences, provides that [t]he conference shall be attended by at least one of the attorneys who will conduct the trial for each of the parties and by any unrepresented parties. FN1. Strandell, 838 F.2d at 886-87. FN2. Justice Scalia pointed toward a similarly circumscribed construction of supervisory power when he recently noted: Even less do I see a basis for any court's supervisory powers to discipline the prosecutors of its jurisdiction, except insofar as concerns their performance before the court and their qualifications to be members of the court's bar. Bank of Nova Scotia, 108 S.Ct. at 2379 (Scalia, J., concurring) (quoting United States v. Hasting, 461 U.S. 499, 505, 103 S.Ct. 1974, 1978, 76 L.Ed.2d 96 (1983)). Likewise, there is no basis for a court's possession of broad inherent powers to force party litigants to participate in settlement discussions where the party litigants have not expressed a desire to participate. The majority's creation of this new inherent authority to compel attendance of litigants (represented parties) also contravenes the terms of at least one other rule regulating compulsory attendance at judicial proceedings. Federal Rule of Civil Procedure 45 does not authorize subpoenas to be issued for pretrial conferences and permits the invocation of the subpoena power only for hearings and trials. On the federal level neither the Supreme Court nor Congress has given the

courts the authority to direct litigants' attendance much less the power to subpoena them to pretrial conferences whose sole purpose is to discuss the upcoming trial, to frame and define the issues, and through custom to explore with the consent of the litigants' attorneys, in very limited situations, the discussion of settlement possibilities. Furthermore, the extension of the inherent authority doctrine to substitute for P age | 53 the subpoena power at pretrial conferences raises a due process question in that the court's rule authority to issue a subpoena is subject to a motion to quash, which is not available to challenge the alleged inherent authority. Assuming that the court would issue a contempt citation for failure to appear, I know of no avenue for an unwilling litigant to challenge the alleged inherent authority other than an attempt *661 to offer a defense to an unjustified contempt citation. The newly created inherent authority to require represented litigants to appear at a pretrial conference is based upon a legal foundation of quicksand. Exercise of this power has posed and will continue to pose a substantial invitation for judicial abuse. The purpose of a pretrial conference is to set the parameters of litigation, clarify the issues and organize its presentation with the aid of the respective attorneys, and now, unrepresented party litigants in the hope of improving judicial efficiency at trial. As Charles Richey, District Judge for the United States District Court for the District of Columbia, has noted, Rule 16 provides an important mechanism for narrowing the issues in a case, saving time and expense for the litigants and easing the burden on the courts by facilitating the handling of congested dockets. C. Richey, Modern Management Technique for Trial Courts to Improve the Quality of Justice: Requiring Direct Testimony to be Submitted in Written Form Prior to Trial, 72 Geo.L.J. 73, 78 (1983). As the majority admits, it is not the purpose of Rule 16(b)(7) to impose settlement negotiations on unwilling litigants. Majority Opinion at 653 (quoting Fed.R.Civ.P. 16 Advisory Committee's Note (c) (1983)). We emphasized this fact when we noted that there is nothing in the amended rule [16] or in the Advisory Committee Notes [that] suggests that the amendments were intended to make the rule coercive. Strandell, 838 F.2d at 888. In our judicial system all party litigants are entitled to their day in court to present their claims or defenses before an impartial judge or jury. Our trial judges must never fall prey to becoming part of a process that even subliminally suggests a pressure to forego the essential right of trial. An example of the possible abuse that can result from creation of an inherent authority to require the attendance of represented party litigants at a pretrial conference is found in a case in which a trial judge in this circuit sought to compel the attendance of a represented party, the Secretary of Labor, to discuss a settlement after the Department of Labor's attorney refused to agree to a settlement proposal suggested by the district court.FN3 The trial court judge in that case stated:

FN3. No. 85-1640, unpublished order at 2 (7th Cir. April 23, 1985). This order is not cited as precedent, but merely for its description of the involved factual situation. I think I want to set a hearing as soon as I get back in which I want the Secretary of Labor to be here, not even Mr. Lilly. I'm tired of horsing around with people who sit in the Solicitor's Office, spending the taxpayer's money, having these kinds of, to me, difficult to understand, to put it gently, positions, and say, We want to take the position that any breach, however infinitesimal, however irrelevant, however immaterial, however inadvertent, however innocent, is going to be of significance in a determination as to whether or not compensation can be paid under an indemnification agreement to ERISA trustees. I want the Secretary to tell me that that's the Department of Labor's position. I want the Secretary to tell me that he wants a hole in this decree so that the other court would have to decide whether or not what the Trustees and Senator Saxbe [Independent Special Counsel] and the Fund did-the staff recommendation and all-should be determined by a new and different judge who has never had anything to do with the case, has no background in it, has no knowledge of the facts, etcetera. No. 85-1640, unpublished order at 2-3 (7th Cir. April 23, 1985). The district court added that: I will tell you now that I am through with the Department of Labor's waltzing around, taking ridiculous positions, and saying that this is the Government. The Government is the Secretary of Labor, so far as I'm concerned. And I want to see him at 10:00 o'clock on the 23rd of April in this courtroom to tell me why the Secretary of Labor is taking these idiotic positions. *662 Creation of an inherent authority to require the presence of a party litigant at a pretrial conference presents a host of problems. Certainly, the court has the power to command the attendance of attorneys at the conference under the provisions of Rule 16 and as officers of the court. However, I am convinced that if the attorney does not wish to have the litigant personally appear before the court at the pretrial conference, he is not bound to do so, lest, among other problems, the litigant make an admission of some type which would be damaging to the case and which had not previously been elicited in discovery proceedings. I believe we are all aware of the fact that the appearance of fairness, impartiality and justice is all imperative, and based upon logic I fail to understand how a litigant sitting at a command appearance before a judge who injects himself into an adversarial role for either of the parties' positions during settlement negotiations can feel that he or she (the litigant) will have a fair trial before the judge if he or she fails to agree with the judge's reasoning or direction regarding a recommended settlement. We may express in grandiose terms all sorts of theory and postulation about being careful not to influence, intimidate and/or coerce a settlement, but under the pressure that our trial judges experience today from their ever-burgeoning caseloads, we

Janz N. Serrano would be foolhardy not to anticipate an undesirable and unnecessary psychological impact upon the litigant in circumstances of this nature. The difficulties associated with active judicial participation in settlement negotiations is expressly exacerbated when the trial is scheduled before the court rather than a jury of one's peers. The appearance of partiality and impropriety must be avoided at all lengths if our nation is to continue to show respect for its judicial judgments. Since litigants are neither trained in the law nor have the basic understanding of the nuances of legal proceedings that we as lawyers have gained through years of education, professional training and experience, they could well be confused and dismayed with judicial participation in settlement negotiations. My conclusion that judges lack the inherent authority to require the presence of a represented party litigant at a pretrial conference does not deprive trial judges of the ability to effectively handle their caseloads. Judges remain free to require the attendance of attorneys and unrepresented parties at pretrial conferences. However, if further measures are taken to coercively require the presence and active participation of a represented party at a pretrial conference, it is my considered belief that judges will be no longer worthy of the aura of impartiality for the guiding consideration is that the administration of justice should reasonably appear to be disinterested as well as be so in fact. Public Utilities Commission v. Pollack, 343 U.S. 451, 466-67, 72 S.Ct. 813, 82223, 96 L.Ed. 1068 (1952) (Frankfurter, J., in chambers).FN4 FN4. It should be noted that those who advocate expansive use of supervisory power or inherent authority in the criminal context rely upon the integrity of the judicial process as a justification for allowing courts to exercise this authority. See United States v. Payner, 447 U.S. 727, 745-46, 100 S.Ct. 2439, 2451-52, 65 L.Ed.2d 468 (1980) (Marshall, J., dissenting). In our case, creation of the appearance of impropriety with a judge actively injecting himself into the settlement procedure in the presence of the party litigants compromises, rather than furthers, the protect[ion of] the integrity of the court, the major purpose behind the exercise of the supervisory powers. 447 U.S. at 748, 100 S.Ct. at 2453. Rule 16 is an example of the Supreme Court and the Congress, acting together [to address] the appropriate balance between the needs for judicial efficiency and the rights of the individual litigant. Strandell, 838 F.2d at 886-87. If we are to maintain the appearance of fairness and impartiality that is so important to preservation of confidence and respect for our cherished judicial system, innovation by the individual judicial officer must conform to that balance. Id. at 887. The majority, in their attempt to permit judicial officers the right to exercise their personal judgment to require the attendance at pretrial conferences of entities other than those specifically enumerated in Rule 16, upsets the delicate balance the Supreme Court and *663 Congress struck between the needs for judicial efficiency and the rights of the individual litigant. But on the other hand, if we wish to grant federal trial judges

the power, let it be accomplished through the accepted channels of the Supreme Court and Congress of the United States. FN5 Because district court judges lack authority to require the attendance of represented litigants at a pretrial conference as of this date, I dissent.FN6 FN5. If such radical surgery is to be performed, we P age | 54 can expect that the national rule-making process outlined in the Rules Enabling Act will undertake it in quite an explicit fashion. Strandell, 838 F.2d at 888 (footnote omitted). FN6. Although I am convinced that the district court lacked the authority to require represented parties to attend the pretrial conference, if it did have such power I would conclude, for the reasons enumerated by Judge Posner, that the magistrate acted improperly in exercising this power to require that Oat Corporation send to the settlement conference an executive possessing full settlement authority. EASTERBROOK, Circuit Judge, with whom POSNER, COFFEY and MANION, Circuit Judges, join, dissenting.

Each side has a statutory right to choose its representatives. 29 U.S.C. 158(b)(1)(B). Many a firm sends its corporate counsel to the bargaining table when a merger is under discussion. See Ronald J. Gilson, Value Creation by Business Lawyers: Legal Skills and Asset Pricing, 94 Yale L.J. 239 (1984). Oat did the same thing to explore settlement of litigation. A lawyer is no less suited to this task than to negotiating the terms of collective bargaining or merger agreements. Firms prefer to send skilled negotiators to negotiating sessions (lawyers are especially useful when the value of a claim depends on the resolution of legal questions) while reserving the time of executives for business. Oat understandably wanted its management team to conduct its construction business. As for the third subject, whether the representative must have settlement authority: the magistrate's only reason for ordering a corporate representative to come was to facilitate settlement then and there. As I understand Magistrate Groh's opinion, and Judge Crabb's, the directive was to send a person with full settlement authority. Fitzpatrick was deemed inadequate*664 only because he was under instructions not to pay money. E.g.: While Mr. Fitzpatrick claimed authority to speak for Oat, he stated that he had no authority to make a [monetary] offer. Thus, no representative of Oat or National having authority to settle the case was present at the conference as the order directed (magistrate's opinion, emphasis added). On learning that Fitzpatrick did not command Oat's treasury, the magistrate ejected him from the conference and never listened to what he had to say on Oat's behalf, never learned whether Fitzpatrick might be receptive to others' proposals. (We know that Oat ultimately did settle the case for money, after it took part in and prevailed at a summary jury trial-participation and payment each demonstrating Oat's willingness to consider settlement.) The magistrate's approach implies that if the Chairman and CEO of Oat had arrived with instructions from the Board to settle the case without paying cash, and to negotiate and bring back for the Board's consideration any financial proposals, Oat still would have been in contempt. Both magistrate and judge demanded the presence not of a corporate representative in the sense of a full-time employee but of a representative with full authority to settle. Most corporations reserve power to agree (as opposed to power to discuss) to senior managers or to their boards of directors-the difference depending on the amounts involved. Heileman wanted $4 million, a sum within the province of the board rather than a single executive even for firms much larger than Oat. Fitzpatrick came with power to discuss and recommend; he could settle the case on terms other than cash; he lacked only power to sign a check. The magistrate's order therefore must have required either (a) changing the allocation of responsibility within the corporation, or (b) sending a quorum of Oat's Board.

Our case has three logically separate issues. First, whether a district court may demand the attendance of someone other than the party's counsel of record. Second, whether the court may insist that this additional person be an employee rather than an agent selected for the occasion. Third, whether the court may insist that the representative have full settlement authority-meaning the authority to agree to pay cash in settlement (maybe authority without cap, although that was not clear). Even if one resolves the first issue as the majority does, it does not follow that district courts have the second or third powers, or that their exercise here was prudent. The proposition that a magistrate may require a firm to send an employee rather than a representative is puzzling. Corporate employees are simply agents of the firm. Corporations choose their agents and decide what powers to give them. Which agents have which powers is a matter of internal corporate affairs. Joseph Oat Corp. sent to the conference not only its counsel of record but also John Fitzpatrick, who had authority to speak for Oat. Now Mr. Fitzpatrick is an attorney, which raised the magistrate's hackles, but why should this count against him? Because Fitzpatrick is a part-time rather than a full-time agent of the corporation? Why can't the corporation make its own decision about how much of the agent's time to hire? Is Oat being held in contempt because it is too small to have a cadre of legal employees-because its general counsel practices with a law firm rather than being in house? At all events, the use of outside attorneys as negotiators is common. Many a firm sends its labor lawyer to the bargaining table when a collective bargaining agreement is about to expire, there to dicker with the union (or with labor's lawyer).

Janz N. Serrano Magistrate Groh exercised a power unknown even in labor law, where there is a duty to bargain in good faith. 29 U.S.C. 158(d). Labor and management commonly negotiate through persons with the authority to discuss but not agree. The negotiators report back to management and the union, each of which reserves power to reject or approve the position of its agent. We know from Fed.R.Civ.P. 16-and especially from the Advisory Committee's comment to Rule 16(c) that the Rule's reference to authority is not intended to insist upon the ability to settle the litigation-that the parties cannot be compelled to negotiate in good faith. A defendant convinced it did no wrong may insist on total vindication. See Hess v. New Jersey Transit Rail Operations, Inc., 846 F.2d 114 (2d Cir.1988), and Kothe v. Smith, 771 F.2d 667 (2d Cir.1985), holding that a judge may not compel a party to make a settlement offer, let alone to accept one. Rule 68, which requires a party who turns down a settlement proposal to bear costs only if that party does worse at trial, implies the same thing. Yet if parties are not obliged to negotiate in good faith, on what ground can they be obliged to come with authority to settle on the spot-an authority agents need not carry even when the law requires negotiation? The order we affirm today compels persons who have committed no wrong, who pass every requirement of Rules 11 and 68, who want only the opportunity to receive a decision on the merits, to come to court with open checkbooks on pain of being held in contempt. Settling litigation is valuable, and courts should promote it. Is settlement of litigation more valuable than settlement of labor disputes, so that courts may do what the NLRB may not? The statutory framework-bona fide negotiations required in labor law but not in litigation-suggests the opposite. Does the desirability of settlement imply that rules of state law allocating authority within a corporation must yield? We have held in other cases that settlements must be negotiated within the framework of existing rules; the desire to get a case over and done with does not justify modifying generally applicable norms. E.g., Dunn v. Carey, 808 F.2d 555, 560 (7th Cir.1986) (consent decrees, and hence settlement, may be more attractive if parties may agree not to follow state law, but the value of settlement does not authorize*665 that); Kasper v. Board of Election Commissioners, 814 F.2d 332, 340-42 (7th Cir.1987) (same); In re Memorial Hospital of Iowa County, Inc., 862 F.2d 1299 (7th Cir.1988) (parties' desire to settle does not justify vacating a judicial opinion that may be valuable to other persons). See also, e.g., Tiedel v. Northwestern Michigan College, 865 F.2d 88 (6th Cir.1988) (a district court lacks the power to promote settlement by requiring a party who rejects a mediator's proposal to pay the prevailing side's attorneys' fees). The majority does not discuss these problems. Its approach implies, however, that trial courts may insist that representatives have greater authority than labor negotiators bring to the table. And to create this greater authority, Oat Corp. might have to rearrange its internal structure-perhaps

delegating to an agent a power state law reserves to the board of directors. Problems concerning the reallocation of authority are ubiquitous. For example, only the Assistant Attorney General for the Civil Division has authority to approve settlements of civil cases, and his authority reaches only to $750,000; above that the Deputy Attorney General must approve. 28 C.F.R. 0.160(a)(2), 0.161. An attorney for the P age | 55 government, like Fitzpatrick, lacks the authority to commit his client but may negotiate and recommend. Does it follow that, in every federal civil case, a magistrate may require the presence of the Assistant or Deputy Attorney General or insist that they redelegate their authority? If such a demand would be improper for the Department of Justice, is it more proper when made of Joseph Oat Corporation? These issues will not go away. The magistrate's order was to send a representative with the authority to bind Oat to pay money. What is the point of insisting on such authority if not to require the making of offers and the acceptance of reasonable counteroffers-that is, to require good faith negotiations and agreements on the spot? Fitzpatrick had the authority to report back to Oat on any suggestions; he had the authority to participate in negotiations. The only thing he lacked-the only reason Oat was held in contempt of court-was the ability to sign Oat Corp.'s check in the magistrate's presence. What the magistrate found unacceptable was that Fitzpatrick might say something like I'll relay that suggestion to the Board of Directors, which might say no. Oat's CEO could have done no more. We close our eyes to reality in pretending that Oat was required only to be present while others voluntarily discussed settlement.

deal with individual situations-as long as that authority is exercised in conformity with the policies embodied in the national rules. However, the Rules Enabling Act hardly contemplates the broad, amorphous, definition of the inherent power of a district judge, at 652, articulated by the majority. It is significant that, just months ago, in the Judicial Improvements and Access to Justice Act, Pub.L. No. 100-702, 102 Stat. 4642 (1988), Congress made clear its concern*666 with district courts' frustrating the careful process of evaluation and consensus set up by the Rules Enabling Act through the proliferation of local rules. 401-407, 102 Stat. 4648-52. Today's decision is indeed hard to reconcile with the underlying Congressional concern for uniformity of practice in the federal courts. Indeed, the majority encourages the individual district court to march to its own drummer. Before long, we shall no doubt see the rhetoric of its opinion used to justify far more questionable innovations than the strongarm settlement methodology of the magistrate at issue in this opinion.

Janz N. Serrano advisory committee note, we held in Strandell that a district court may not order an unwilling litigant to participate in a summary jury trial because Rule 16, which addresses the district courts' power to insist on pretrial settlement proceedings, did not authorize district courts to conduct mandatory summary jury trials. See id. at 186-88. Implicit in this holding is that no inherent power exists to conduct mandatory summary jury trials; Rule 16 shut the door on such proceedings. The issue here-whether a district court may order a represented party to appear at a settlement conference-is slightly different from the issue in Strandell. But the proper analysis is the same. Since Rule 16 specifically addresses the use of settlement conferences in the federal courts, we must determine whether Rule 16 limits a district court's power over who the court may order to appear at those conferences. As with any rule or statute, the proper starting point in interpreting Rule 16 is the rule's language. We should not be content to rely on general statements about liberal construction, and Rule 16's broadly remedial spirit. See majority opinion at 652-53. It is true that Rule 1 commands us to construe the federal rules to secure the just, speedy, and inexpensive determination of every action; but that command is not an excuse for us to ignore the words the drafters used to pursue that goal. As originally enacted, Rule 16 provided that district courts could direct the attorneys for the parties to appear for pretrial conferences. In 1983, Rule 16 was amended to provide, among other things, that the possibility of settlement is an appropriate subject to consider at pretrial conferences. Fed.R.Civ.P. 16(c)(7); see also Fed.R.Civ.P. 16(a)(5) ( facilitating settlement). But Rule 16(c) states only that the participants*667 at any conference under this rule may consider settlement (emphasis added); Rule 16(c) does not say who those participants may be. Rule 16(a), on the other hand, provides that a district court may direct the attorneys for the parties and any unrepresented parties to appear for a pretrial conference. Rule 16(a) thus defines who the participants at a pretrial conference are: attorneys and unrepresented parties. As Judge Coffey notes, dissenting opinion at 660, other parts of Rule 16 echo Rule 16(a)'s reference to attorneys and unrepresented parties. Rule 16(b) requires courts to enter scheduling orders after consulting with the attorneys for the parties and any unrepresented parties.... Rule 16(d) requires that one of the attorneys who will conduct the trial for each of the parties and ... any unrepresented parties must attend the final pretrial conference. The language of Rule 16's sanctions provision, Rule 16(f), reinforces Rule 16's distinction between represented and unrepresented parties. The only language in Rule 16(f)

MANION, Circuit Judge, joined by COFFEY, EASTERBROOK and RIPPLE, Circuit Judges, dissenting.

RIPPLE, Circuit Judge, with whom COFFEY, Circuit Judge, joins, dissenting.

Federal Rule of Civil Procedure 16 states that district courts may order the attorneys for the parties and any unrepresented parties to appear at pretrial settlement conferences. Despite this seemingly clear language, the majority holds that district courts have inherent power to compel parties represented by counsel to appear in court to discuss settlement. Because Rule 16 leaves no room for any such use of inherent power, I respectfully dissent. Inherent power is not a license for federal courts to do whatever seems necessary to move a case along. Inherent power is simply another name for the power of courts to make common law when statutes and rules do not address a particular area. Soo Line R. Co. v. Escanaba & Lake Superior R. Co., 840 F.2d 546, 551 (7th Cir.1988). Since inherent power's purpose is to fill gaps left by statute or rule, it necessarily follows that where a statute or rule specifically addresses a particular area, it is inappropriate to invoke inherent power to exceed the bounds the statute or rule sets. Cf. Bank of Nova Scotia v. United States, 487 U.S. 250, 108 S.Ct. 2369, 2373-74, 101 L.Ed.2d 228 (1988) (a federal court may not invoke its supervisory-i.e. inherent-power over criminal proceedings to circumvent Fed.R.Crim.P. 52(a)' s harmless error inquiry). We recently applied this principle in Strandell v. Jackson County, 838 F.2d 884 (7th Cir.1988). In Strandell, we recognized that district courts must exercise their inherent power in harmony with the Federal Rules of Civil Procedure. After carefully examining Rule 16 and its accompanying

I join the dissenting opinions of Judge Coffey and Judge Manion. I write separately only to emphasize that the most enduring-and dangerous-impact of the majority's opinion will not be its effect on the conduct of the pretrial conference, but on the relationship between the Judiciary and the Congress in establishing practice and procedure for the federal courts. Recognizing that the line between substance and procedure is at best an indistinct and vague one, the two branches of government have established a long tradition of shared responsibility for this aspect of governance. That tradition is embodied principally-although not exclusively-in the Rules Enabling Act. 28 U.S.C. 2072. That Act was designed to foster a uniform system of procedure throughout the federal system, supplemented but not altered, by local rules to take care of local problems. Experimentation at the local level in areas where policy choices have not been made at the national level is permitted. Moreover, there is no question that the judicial officer retains a substantial degree of inherent authority to

age | 56

specifically addressing appearance does not authorize sanctions if a party fails to appear; instead, sanctions are appropriate if no appearance is made on behalf of a party.... (Emphasis added.) This choice of language is significant. In the normal course, an attorney appears on behalf of a represented client at a pretrial conference. An unrepresented party has nobody to appear on his behalf except himself. P Congress has provided that litigants may conduct their own cases personally or by counsel .... 28 U.S.C. 1654 (emphasis added). Rule 16's distinction between represented and unrepresented parties is consistent with a litigant's statutory right to representation by an attorney. It is also consistent with the attorney's traditional role in litigation. Litigants hire attorneys to take advantage of the attorneys' training and skill and, as Judge Posner notes, to economize on their own investment of time in resolving disputes. Dissenting opinion at 657, Part of an attorney's expertise includes evaluating cases, advising litigants whether or not to settle, and conducting negotiations. I realize that attorneys may sometimes convey inadequate information to their clients regarding settlement. But an attorney has a strong self interest in realistically conveying to the client relevant information necessary for the client to make an informed settlement decision, and in accurately conveying the client's settlement position to the court and opposing litigants. The attorney also has an ethical duty to convey that information. The threat of malpractice suits and disciplinary proceedings should be sufficient to make any attorney think twice before trying to mislead his client or the court. Attorneys play an important role in our adversary system, and we should not denigrate that role by presuming that attorneys will be incompetent to perform one of the most important functions for which their clients hire them. Nor should we presume that Rule 16's drafters meant to encroach on a litigant's right to conduct his case through counsel. Rule 16's clear language shows that the rule's drafters presumed otherwise. The majority asserts that Rule 16 does not give any direction to the district court upon the issue of a court's authority to order litigants who are represented by counsel to appear for pretrial proceedings. Majority opinion at 651. But given Rule 16's clear language and consistent distinction between represented and unrepresented parties (a consistent distinction the majority ignores), that assertion is specious. The majority seems to be saying that district courts can order represented parties to appear at settlement conferences because Rule 16 does not explicitly say that district courts cannot order represented parties to appear.FN1 But that ignores the *668 drafters' decision in 1983 to specifically add unrepresented parties to the people a district court can order to appear under Rule 16. It also ignores the drafters' language in Rule 16(f) specifically addressing a failure to appear on behalf of a party at a pretrial conference. If the drafters had intended to allow district courts to order represented parties to appear, or to sanction parties for failing to appear (as opposed

to failing to send someone to appear), the drafters could have easily said so. FN1. The majority, citing Link v. Wabash R. Co., 370 U.S. 626, 82 S.Ct. 1386, 81 L.Ed.2d 734 (1962), asserts that the mere absence of language in the federal rules specifically authorizing or describing a particular judicial procedure should not, and does not, give rise to a negative implication of prohibition. Majority opinion at 652. That sweeping statement reads far too much into Link's narrow holding. Link held that a district court retained the inherent power to dismiss a case sua sponte for failure to prosecute in the face of Fed.R.Civ.P. 41(b), which merely authorized defendants to move for such dismissals. The Court in Link reasoned that given the longstanding-indeed, ancient-authority of trial courts to dismiss cases for want of prosecution, it would require a much clearer expression of purpose than Rule 41(b) provides for us to assume that it was intended to abrogate that power. 370 U.S. at 630-32, 82 S.Ct. at 1388-90. Link did not hold that negative implication is always an inappropriate tool to use in interpreting the federal rules. Link only held that in the context of the particular rule and the particular power involved in that case, any negative implication was not enough, by itself, to convince the Court that the rule's drafters meant to limit that power. While negative implication may not, by itself, completely answer what limits a particular rule places on a district court's power, it does provide a starting point for that analysis. As demonstrated in the text, this case involves much more than the mere absence of a particular procedure in Rule 16. Link does not relieve us of the responsibility of analyzing the language the drafters used-and did not use-in Rule 16. The majority offers no reason why the drafters used the language they did in Rule 16 if they did not intend to limit the district courts' authority to order represented parties to appear. No reason appears on Rule 16's face or in the advisory committee note. Apparently, the majority would chalk up the drafters' choice of language to inadvertence or sloppy draftsmanship. But a rule's words are meant to convey a meaning to those who read the rule. This court should give the drafters credit for being able to communicate what they actually intended. Furthermore, the process for amending the federal rules belies any inadvertence or sloppy draftsmanship. As Professors Wright and Miller have noted, [w]hen the Civil Rules are amended, the process is extremely careful. The Advisory Committee on Civil Rules includes lawyers, judges, and scholars with a national reputation for their expertness on matters of procedure, and it is assisted by a scholar of rank who acts as its Reporter. When it has agreed on a preliminary draft of amendments, thousands of copies of that draft are sent out to the profession. Many comments on the draft, and suggestions for improvement in it, then come back to the committee from bar association committees, individual lawyers and scholars, and in law review commentary. The draft is reevaluated and refined in the light

Janz N. Serrano of these comments. When the Advisory Committee has completed its work, the amendments still must be approved by the Standing Committee on Rules of Practice and Procedure, by the Judicial Conference of the United States, and by the Supreme Court, and Congress retains the power, though it never has exercised it, to disapprove the amendments. The process is calculated to ensure that any changes reflect the best thinking of the entire profession. 12 C. Wright & A. Miller, Federal Practice and Procedure 3152, at 220 (1973). It is incredible to believe that after this careful process, amended Rule 16 would expressly authorize district courts to order only attorneys and unrepresented parties to appear if the drafters also intended to allow district courts to order represented parties to appear. This is especially so given Rule 16's consistent distinction between represented and unrepresented parties, and that distinction's congruence with the statutory right to representation by an attorney and the attorney's traditional role in litigation. The advisory committee note accompanying the 1983 amendment of Rule 16 reinforces the conclusion that Rule 16 leaves no room for any inherent power to order represented parties to attend pretrial settlement*669 conferences. While the majority makes much of the drafters' general intent to allow district courts to make wider use of their powers and to manage actively their dockets, the majority offers little in the way of specifics. The advisory committee note does not discuss settlement conferences in much detail. The note does state, however, that [A]lthough it is not the purpose of Rule 16(b)(7) to impose settlement negotiations on unwilling litigants it is believed that providing a neutral forum for discussing the subject might foster it. The majority brushes aside this admonition by drawing a distinction between being required to attend a settlement conference and being required to negotiate. This distinction is puzzling. I suppose that if a represented party is required to come to court to state his position-even if that position is simply, I refuse to settle. See you at trial.-that would not be requiring the represented party to negotiate. But if that is all the majority is requiring, then the majority has recognized nothing more than a district court's inherent power to waste litigants' time doing what their attorneys could have done (and were hired to do). Rule 16's drafters could hardly have meant to approve (or allow) such a pointless exercise. The majority obviously does not envision that a settlement conference should be the pointless exercise sketched out above. The majority cites with approval the district court's statement that [t]he only requirement imposed by the magistrate was that [Oat's] representative be present with full authority to settle, should terms for settlement be proposed that were acceptable to [Oat]. Majority opinion at 653. The majority also states that a district court may require represented parties to come to court to

consider the possibility of settlement. But requiring that a party consider the possibility of settlement and that the party have authority to settle if another party proposes acceptable terms presupposes that besides stating his own position, the party must sit and listen to other parties' (and, possibly, the court's) proposals. How else could a representative with authority to settle act on terms he might find acceptable, P age | 57 except by listening to possible terms? It appears that the court is saying that a district court may order a represented party to appear in court both to talk and listen about settlement-in other words, to actually discuss settlement. I cannot see any meaningful distinction between this kind of activity and negotiation; after all, negotiation in large measure simply involves discussion. If a distinction does exist, it is so blurry as to be almost invisible, and certainly difficult, if not impossible, to enforce. The distinction is especially elusive in this case because, as Judge Easterbrook notes, dissenting opinion at 664, the magistrate's order that Oat send a representative with authority to settle could only mean that Oat's representative had to have the ability to settle by paying money-even if, as the majority claims, authority to settle did not mean that the representative had to be willing to use that ability. What is the point of insisting on such authority if not to require negotiation? The majority errs by interpreting the advisory committee's admonition against forced negotiations too narrowly. Rule 16 is dead set against any coercive settlement practices. The advisory committee note speaks only of facilitating-that is, providing a forum for the parties to voluntarily pursue-settlement. Cf. Strandell, 838 F.2d at 837. Even if it is possible to draw a distinction between discussing and negotiating that is reasonably possible to enforce, the kind of coerced participation by represented parties in settlement conferences that the majority seems to approve is close enough to forced negotiation to fall within the advisory committee's general admonition against forced settlement. Moreover, Rule 16 was not intended to require that an unwilling litigant be sidetracked from the normal course of litigation. Id. Rule 16's language and structure-its consistent distinction between represented and unrepresented partiesleave no doubt that in the normal course of litigation, including settlement discussions, the rule's drafters envisioned that courts would work with attorneys, not the attorneys' clients. Given *670 Rule 16's clear language, the advisory committee's comments leave no room for construing that rule to allow a district court to order represented parties, under threat of contempt (see Fed.R.Civ.P. 16(f) and 37(b)(2)(D)), to appear in court to discuss settlement. One may ask why the majority strains to get around Rule 16's clear language and the advisory committee's admonition against coercive settlement practices. Implicit in the majority's opinion-and explicit in the dissent to the panel opinion-is the notion that to effectively manage their case loads, district courts need the power to order represented parties to appear

at settlement conferences. See majority opinion at 650-51; G. Heileman Brewing Co. v. Joseph Oat Corp., 848 F.2d 1415, 1427 (7th Cir.1988) (dissenting opinion); see also Judge Posner's dissenting opinion at 657. Even if this is so (and I do not think it is), it does not justify expansively interpreting the district courts' inherent power to exceed the bounds Rule 16 sets. Moreover, as Judge Coffey and Judge Posner demonstrate, if any benefits do result from allowing district courts to order represented parties to attend settlement conferences, those benefits do not come without substantial costs. One of those costs is that expansively construing inherent power encourages judicial high-handedness. This case (in which Judge Posner has accurately labeled the magistrate's actions as arbitrary, unreasonable, willful, and indeed petulant, dissenting opinion at 658) and the case uninvolving the Secretary of Labor, Will, cited by Judge Coffey, dissenting opinion at 661-62, aptly demonstrate that danger. Another cost is the expense and imposition on litigants that litigants try to avoid by hiring attorneys. A third cost is the denigration of the attorney's role in litigation. Perhaps the greatest cost, as Judge Coffey explains in detail, dissenting opinion at 662, is the damage to the appearance of fairness and the federal court's image as a neutral forum, factors that are essential to the court's proper functioning. Say what we will about the difference between coercing settlement and coercing attendance, it is difficult to believe that a litigant who has been forced to appear against his will, and possibly to listen to the opposing party or a judicial officer berate his litigation position, is going to walk away from that experience feeling he will get a fair shake from the court at trial if he resists the pressure to capitulate. Obdurate litigants who unreasonably refuse to settle may cause headaches for the courts and opposing litigants. But litigants have no duty to settle, or even negotiate, and Rule 16 makes clear that federal courts have no business trying to force litigants to negotiate. If a litigant's position is legally or factually unsound, procedures such as judgment on the pleadings, Rule 12(b) dismissal, and summary judgment exist to dispose of the case at an early stage. District courts also have substantial power-of which they should take full advantage-to deter and punish frivolous litigation and undue delay. See 848 F.2d at 1421-22 (mentioning, among other things, the district courts' scheduling power under Rule 16 and the courts' sanctioning powers under Rule 16, Rule 11, and 28 U.S.C. 1927). And district courts still have other methods-without forcing unwilling litigants to appear in court under threat of contempt-to facilitate settlements, including the time-honored method of pushing cases to early trials. See id; see also Strandell, 838 F.2d at 887. Where these methods do not produce settlements, it is unlikely that coercion will. And where coercion does succeed in producing a settlement, it is unlikely that success will advance the cause of justice or the federal court's image as a neutral forum.

Janz N. Serrano In what seems to be an attempt to justify its result by implying that coercing represented parties to appear at settlement conferences has received widespread judicial approval, the majority asserts that requiring represented parties to appear in person ... has been part and parcel of ... settlement conferences for years. Majority opinion at 651 n. 4. The only case the majority cites for this statement is In re LaMarre, 494 F.2d 753 (6th Cir.1974). In LaMarre, counsel for plaintiffs and defendants indicated to the district court on the morning of trial that they had reached a *671 settlement. The defendant's insurer's claims manager, however, would not accept the settlement. The district court ordered the claims manager to appear in court to discuss the matter and, when the claims manager failed to appear, held him in criminal contempt. Id. at 754-55. The court of appeals upheld the court's general authority to order the claims manager to appear. Id. at 756. LaMarre is distinguishable. Because of the conflict between the defendant, his counsel (hired by the insurance company), and the insurance company, it is arguable that the insurance company was not a represented party (assuming that it was a party at all); even though the insurer hires and pays the attorney, the attorney's allegiance is to the defendant, not the insurer. If that's so, even the amended Rule 16 would not prohibit ordering the insurer's representative to appear in court because amended Rule 16 expressly authorizes district courts to order unrepresented parties to appear. More importantly, LaMarre, despite its broad language, see id. at 756, does not stand for any widespread judicial approval for ordering represented parties to appear at settlement conferences. LaMarre is the only appellate case (besides this case) that has even dealt with the issue. More importantly, the Sixth Circuit decided LaMarre long before the 1983 amendments to Rule 16. Since the Sixth Circuit could not consider Rule 16 as amended, LaMarre simply does not address whether Rule 16, as it now stands, limits the district court's power to order represented parties to appear at settlement conferences. The answer to the question that LaMarre could not address is clear. Rule 16, as amended, authorizes district courts to order only attorneys and unrepresented parties to appear at pretrial conferences. The rule consistently distinguishes between attorneys and unrepresented parties on one hand, and represented parties on the other. That distinction is consistent with litigants' statutory right to representation by counsel and with the attorney's traditional role in litigation, including settlement. No reason exists why Rule 16's drafters wrote the rule as they did if they did not mean what they said. Finally, the advisory committee note to the 1983 amendment of Rule 16 states that Rule 16 was not meant to impose settlement negotiations on unwilling litigants, and, more generally, that Rule 16 is dead set against any coercion in settlement. Taken together, all this can lead to only one

Janz N. Serrano conclusion: Rule 16 leaves no room for any inherent power in the district courts to order represented parties to appear at settlement conferences. Federal judges spend lots of time telling other officials to stay within constitutional and statutory bounds, however those bounds may chafe in particular circumstances. NewmanP age | 58 Green, Inc. v. Alfonzo-Larrain R., 854 F.2d 916, 926 (7th Cir.1988). However much federal courts may desire the power to address unwilling parties directly in endeavoring to induce settlements, Rule 16 commands that the courts work through the parties' attorneys if that is what the parties desire. Rather than straining to circumvent Rule 16's clear command, we should demand that those of us in the federal judiciary practice what we preach so much to others, and work within the entirely reasonable limits that Rule 16 sets. Because the magistrate did not have the power to order Oat to send a corporate representative to the settlement conference, I would reverse the district court's judgment.FN2 FN2. The majority also holds that Oat has waived any objection to the magistrate's order because Oat did not object before the settlement conference. See majority opinion at 654-55. For the reasons stated in the panel opinion, 848 F.2d at 1418, I would hold that Oat has not waived its right to object to the magistrate's order. I also agree with Judge Posner that even if the magistrate had the power to order Oat to send a corporate representative, other than its attorney, to the settlement conference, the magistrate abused his discretion in exercising that power. Even if a district court may order a corporate representative to appear, the court may not insist that the representative have authority to settle. See Fed.R.Civ.P. 16, advisory committee note (The reference to authority in Rule 16(c) is not intended to insist upon the ability to settle the litigation); see also Judge Easterbrook's dissenting opinion at 664. C.A.7 (Wis.),1989. G. Heileman Brewing Co., Inc. v. Joseph Oat Corp. 871 F.2d 648, 57 USLW 2566, 13 Fed.R.Serv.3d 8 END OF DOCUMENT

Supreme Court of the United States D. H. OVERMYER CO., INC., OF OHIO, et al., Petitioners, v. FRICK COMPANY. age | 59 P No. 69-5. Argued Nov. 9, 1971. Decided Feb. 24, 1972. After notice of the entry of judgment on a cognovit note, the maker filed in Ohio court of common pleas motions to stay execution and for new trial, and later a motion to vacate judgment. The maker also tendered answer and counterclaim. The motions were overruled and the Court of Appeals, Lucas County, affirmed. The Supreme Court of Ohio dismissed the appeal for want of any substantial constitutional question, and certiorari was granted. The Supreme Court, Mr. Justice Blackmun, held that where case did not involve unequal bargaining power or overreaching, and the parties' agreement from the start was not a contract of adhesion, and the maker's execution and delivery of a second note, which contained a cognovit provision which the first note had not contained, were for adequate consideration and were the product of negotiations carried on by corporate parties with the advice of competent counsel, and the maker despite the cognovit was not defenseless under state law, the maker voluntarily, intelligently and knowingly waived due process rights it otherwise possessed to prejudgment notice and hearing, and did so with full awareness of legal consequences. Affirmed. Mr. Justice Douglas filed a concurring opinion in which Mr. Justice Marshall concurred. Mr. Justice Powell and Mr. Justice Rehnquist took no part in consideration or decision.

corporations participating in the negotiations, the first note was replaced with a second, which contained a cognovit provision in conformity with Ohio law at that time whereby Overmyer consented in advance, should it default in interest or principal payments, to Frick's obtaining a judgment without notice or hearing, and issued certain second mortgages in Frick's **777 favor, Frick agreeing to release three mechanic's liens, to reduce the monthly payment amounts and interest rate, and to extend the time for final payment. When Overmyer, claiming a contract breach, stopped making payments on the new note, Frick, under the cognovit provision, through an attorney unknown to but on behalf of Overmyer, and without personal service on or prior notice to Overmyer, caused judgment to be entered on the note. Overmyer's motion to vacate the judgment was overruled after a post-judgment hearing, and the judgment court's decision was affirmed on appeal against Overmyer's contention that the cognovit procedure violated due process requirements. Held: Overmyer, for consideration and with full awareness of the legal consequences, waived its rights to prejudgment notice and hearing, and on the facts of this case, which involved contractual arrangements between two corporations acting with advice of counsel, the procedure under the cognovit clause (which is not unconstitutional per se) did not violate Overmyer's Fourteenth Amendment rights. Pp. 780-783. Affirmed. *175 Russell Morton Brown, Washington, D.C., for petitioners. Gregory M. Harvey, Philadelphia, Pa., for respondent. Mr. Justice BLACKMUN delivered the opinion of the Court.

Janz N. Serrano judgment by personal service or by registered or certified mail mailed to him at the address set forth in the petition.Senate Bill No. 85, 133 Ohio Laws 196-198 (1969-1970), effective Sept. 16, 1970, amended paragraphs (A) and (C), in ways not pertinent here, and added paragraph (D):(D) A warrant of attorney to confess judgment contained in any promissory note, bond, security agreement, lease, contract, or other evidence of indebtedness executed on or after January 1, 1971, is invalid and the courts are without authority to render a judgment based upon such a warrant unless there appears on the instrument evidencing the indebtedness, directly above or below the signature of each maker, or other person authorizing the confession, in such type size or distinctive marking that it appears more clearly and conspicuously than anything else on the document:Warning-By signing this paper you give up your right to notice and court trial. If you do not pay on time a court judgment may be taken against you without your prior knowledge and the powers of a court can be used to collect from you or your employer regardless of any claims you may have against the creditor whether for returned goods, faulty goods, failure on his part to comply with the agreement, or any other cause.

This case presents the issue of the constitutionality, under the Due Process Clause of the Fourteenth Amendment, of the cognovit note authorized by Ohio Rev.Code s 2323.13.FN1 FN1. When the judgment challenged here was entered in 1968 the statute read:Sec. 2323.13. (A) An attorney who confesses judgment in a case, at the time of making such confession, must produce the warrant of attorney for making it to the court before which he makes the confession, which shall be in the county where the maker or any one of several makers resides or in the county where the maker or any one of several makers signed the warrant of attorney authorizing confession of judgment, any agreement to the contrary notwithstanding; and the original or a copy of the warrant shall be filed with the clerk.(B) The attorney who represents the judgment creditor shall include in the petition a statement setting forth to the best of his knowledge the last known address of the defendant.(C) Immediately upon entering any such judgment the court shall notify the defendant of the entry of the

*176 The cognovit is the ancient legal device by which the debtor consents in advance to the holder's obtaining a judgment without notice or hearing, and possibly even with the appearance, on the debtor's behalf, of an attorney designated by the holder.FN2 It was known at least as far **778 back as Blackstone's time. 3 W. Blackstone, Commentaries *397.FN3 In a case applying Ohio law, it was *177 said that the purpose of the cognovit is to permit the note holder to obtain judgment without a trial of possible defenses which the signers of the notes might assert. Hadden v. Rumsey Products, Inc., 196 F.2d 92, 96 (CA2 1952). And long ago the cognovit method was described by the Chief Justice of New Jersey as the loosest way of binding a man's property that ever was devised in any civilized country. Alderman v. Diament, 7 N.J.L. 197, 198 (1824). Mr. Dickens noted it with obvious disfavor. Pickwick Papers, c. 47. The cognovit has been the subject of comment, much of it critical.FN4 FN2. The Iowa Supreme Court succinctly has defined a cognovit as the written authority of the debtor and his direction . . . to enter judgment against him as stated therein. Blott v. Blott, 227 Iowa 1108, 1111-1112, 290 N.W. 74, 76 (1940).In Jones v. John Hancock Mutual Life Insurance Co., 289 F.Supp. 930, 935 (WD Mich.1968), aff'd, 416 F.2d 829 (CA6 1969), Judge Fox, in applying Ohio law, pertinently observed:A cognovit note is not an ordinary note. It is indeed an extraordinary note which authorizes an attorney to confess judgment against the person or persons signing it. It is written authority of a debtor and a direction by him for the entry of a judgment against him if the obligation set forth in the note is not paid when due. Such a judgment may be taken by any person or any company holding the note, and it cuts off every

**776 *174 SyllabusFN* FN* The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U.S. 321, 337, 26 S.Ct. 282, 287, 50 L.Ed. 499. After a corporation (Overmyer) had defaulted in its payments for equipment manufactured and being installed by respondent company (Frick), and Overmyer under a postcontract arrangement had made a partial cash payment and issued an installment note for the balance, Frick completed the work, which Overmyer accepted as satisfactory. Thereafter Overmyer again asked for relief and, with counsel for both

defense which the maker of the note may otherwise have. It likewise cuts off all rights of appeal from any judgment taken on it.

R.I.Gen.Laws Ann. ss 19-25-24 and 19-25-36.

Janz N. Serrano willingness to accept an offer from Overmyer to pay $35,000 in cash provided the balance can be evidenced by interestbearing judgment notes. 4. On November 3 Frick filed three mechanic's leins against the Toledo property for a total of $194,031, the amount of the contract price allegedly unpaid at that time. 5. The parties continued to negotiate. In January 1967 Frick, in accommodation, agreed to complete the work upon an immediate cash payment of 10% ($19,403.10) and payment of the balance of $174,627.90 in 12 equal monthly installments with 6 1/2% interest per annum. On February 17 Overmyer made the 10% payment and executed an installment note calling for 12 monthly payments of $15,498.23 each beginning March 1, 1967. This note contained no confession-of-judgment provision. It recited that it did not operate as a waiver of the mechanic's liens, but it also stated that Frick would forgo enforcement of those lien rights so long as there was no default under the note. *180 6. Frick resumed its work, completed it, and sent Overmyer a notice of completion. On March 17 Overmyer's vice president acknowledged in writing that the system had been completed in a satisfactory manner and that it was accepted as per the contract conditions. 7. Subsequently, Overmyer requested additional time to make the installment payments. It also asked that Frick release the mechanic's liens against the Toledo property. Negotiations between the parties at that time finally resulted in an agreement in June 1967 that (a) Overmyer would execute a new note for the then-outstanding balance of $130,997 and calling for payment of that amount in 21 equal monthly installments of $6,891.85 each, beginning June 1, 1967, and ending in February 1969, two years after Frick's completion of the work (as contrasted with the $15,498.23 monthly installments ending February 1968 specified by the **780 first note); (b) the interest rate would be 6% rather than 6 1/2%; (c) Frick would release the three mechanic's liens; (d) Overmyer would execute second mortgages, with Frick as mortgagee, on property in Tampa and Louisville; and (e) Overmyer's new note would contain a confession-of-judgment clause. The new note, signed in Ohio by the two petitioners here, was delivered to Frick some months later by letter dated October 2, 1967, accompanied by five checks for the June through October payments. This letter was from Overmyer's general counsel to Frick's counsel. The second mortgages were executed and recorded, and the mechanic's liens were released. The note contained the following judgment clause: The undersigned hereby authorize any attorney designated by the Holder hereof to appear in any court of record in the State of Ohio, and waive this issuance and service of process, and confess a judgment*181 against the undersigned in favor of the Holder of this Note, for the

FN3. Historical references appear in General P Contract Purchase Corp. v. Max Keil Real Estate Co., 35 Del. age | 60 531, 532-533, 170 A. 797, 798 (1933), and First Nat. Bk. v. White, 220 Mo. 717, 728-732, 120 S.W. 36, 39-40 (1909).

FN8. See, for example, Conn.Gen.Stat.Rev. ss 42-88 and 36-236; Mich.Comp.Laws ss 600.2906 and 493.12, Mich.Stat.Ann. ss 27A.2906 and 23.667(12); Minn.Stat. ss 548.22, 168.71, and 56.12; N.J.Stat.Ann. s 2A:16-9.

FN4. Recent Cases, Confession of Judgments-Refusal of New York State to Enforce Pennsylvania Cognovit Judgments, 74 Dick.L.Rev. 750 (1970); Note, Enforcement of Sister State's Cognovit Judgments, 16 Wayne L.Rev. 1181 (1970); H. Goodrich, Conflict of Laws s 73, p. 122 (4th ed. 1964); Hopson, Cognovit Judgments: An Ignored Problem of Due Process and Full Faith and Credit, 29 U.Chi.L.Rev. 111 (1961); Hunter, The Warrant of Attorney to Confess Judgment, 8 Ohio St.L.J. 1 (1941); Note, A Clash in Ohio?: Cognovit Notes and the Business Ethic of the UCC, 35 U.Cin.L.Rev. 470 (1966); Comment, The Effect of Full Faith and Credit on Cognovit Judgments, 42 U.Colo.L.Rev. 173 (1970); Comment, Confessions of Judgment: The Due Process Defects, 43 Temp.L.Q. 279 (1970); Comment, Cognovit Judgments and the Full Faith and Credit Clause, 50 B.U.L.Rev. 330 (1970); Comment, Cognovit Judgments: Some Constitutional Considerations, 70 Col.L.Rev. 1118 (1970); Note, Confessions of Judgment, 102 U.Pa.L.Rev. 524 (1954); Note, Foreign Courts May Deny Full Faith and Credit to Cognovit Judgments and Must Do So When Entered Pursuant to an Unlimited Warrant of Attorney, 56 Va.L.Rev. 554 (1970); Note, Should a Cognovit Judgment Validly Entered in One State be Recognized by a Sister State?, 30 Md.L.Rev. 350 (1970).

In Ohio the cognovit has long been recognized by both statute and court decision. 1 Chase's Statutes, c. 243, s 34 (1810); Osborn v. Hawley, 19 Ohio 130 (1850); Marsden v. Soper, 11 Ohio St. 503 (1860); **779 Watson v. Paine, 25 Ohio St. 340 (1874); Clements v. Hull, 35 Ohio St. 141 (1878). The State's courts, however, give the instrument a strict and limited construction. See Peoples Banking Co. v. Brumfield Hay & Grain Co., 172 Ohio St. 545, 548, 179 N.E.2d 53, 55 (1961). This Court apparently has decided only two cases concerning cognovit notes, and both have come here in a full faith and credit context. National Exchange Bank v. Wiley, 195 U.S. 257, 25 S.Ct. 70, 49 L.Ed. 184 (1904); Grover & Baker Sewing Machine Co. v. Radcliffe, 137 U.S. 287, 11 S.Ct. 92, 34 L.Ed. 670 (1890). See American Surety Co. v. Baldwin, 287 U.S. 156, 53 S.Ct. 98, 77 L.Ed. 231 (1932).

I The argument that a provision of this kind is offensive to current notions of Fourteenth Amendment due process is, at first glance, an appealing one. However, here, as in nearly every case, facts are important. We state them chronologically: 1. Petitioners D. H. Overmyer Co., Inc., of Ohio, and D. H. Overmyer Co., Inc., of Kentucky, are segments of a warehousing enterprise that counsel at one point in *179 the litigation described as having built in three years . . .180 warehouses in thirty states. The corporate structure is complex. Because the identity and individuality of the respective corporate entities are not relevant here, we refer to the enterprise in the aggregate as Overmyer. 2. In 1966 a corporation, which then was or at a later date became an Overmyer affiliate, executed a contract with the respondent Frick Co. for the manufacture and installation by Frick, at a cost of $223,000, of an automatic refrigeration system in a warehouse under construction in Toledo, Ohio. 3. Overmyer fell behind in the progress payments due from it under the contract. By the end of September 1966 approximately $120,000 was overdue. Because of this delinquency, Frick stopped its work on October 10. Frick indicated to Overmyer, however, by letter on that date, its

Statutory treatment varies widely. Some States specifically authorize the cognovit.FN5 Others disallow it.FN6 *178 Some go so far as to make its employment a misdemeanor.FN7 The majority, however, regulate its use and many prohibit the device in small loans and consumer sales. FN8 FN5. Ill.Rev.Stat., c. 110, s 50; Mo.Rev.Stat. s 511.100; Ohio Rev.Code s 2323.13; Pa.Stat.Ann., Tit. 12, ss 738 and 739 and Pa. Rules of Civil Procedure 2950-2976, 12 P.S. Appendix; S.D.Comp.Laws s 21-26-1.

FN6. See, for example, Ala.Code, Tit. 20, s 16, and Tit. 62, s 248; Ariz.Rev.Stat.Ann. ss 6-629 and 44-143; Mass.Gen.Laws Ann., c. 231, s 13A.

FN7. Ind.Ann.Stat. ss 2-2904 and 2-2906, IC 1971, 34-2-25-1, 34-2-26-1; N.M.Stat.Ann. ss 21-9-16 and 21-9-18;

principal of this Note plus interest if the undersigned defaults in any payment of principal and interest and if said default shall continue for the period of fifteen (15) days. 8. On June 1, 1968, Overmyer ceased making the monthly payments under the new note and, asserting a breach by Frick of P the original contract, proceeded to institute a diversity age | 61 action against Frick in the United States District Court for the Southern District of New York. Overmyer sought damages in excess of $170,000 and a stay of all proceedings by Frick under the note. On July 5 Judge Frankel vacated an ex parte stay he had theretofore granted. On August 7 Judge Mansfield denied Overmyer's motion for reinstatement of the stay. He concluded, Plaintiff has failed to show any likelihood that it will prevail upon the merits. On the contrary, extensive documentary evidence furnished by defendant indicates that the plaintiff's action lacks merit. 9. On July 12, without prior notice to Overmyer, Frick caused judgment to be entered against Overmyer (specifically against the two petitioners here) in the Common Pleas Court of Lucas County, Ohio. The judgment amount was the balance then remaining on the note, namely, $62,370, plus interest from May 1, 1968, and costs. This judgment was effected through the appearance of an Ohio attorney on behalf of the defendants (petitioners here) in that Ohio action. His appearance was by virtue of the warrant of attorney in the second note. The lawyer waived the issuance and service of process and confessed the judgment. This attorney was not known to Overmyer, had not been retained by Overmyer, and had not communicated with the petitioners prior to the entry of the judgment. *182 10. As required by Ohio Rev.Code s 2323.13(C), the clerk of the state court, on July 16, mailed notices of the entry of the judgment on the cognovit note to Overmyer at addresses in New York, Ohio, and Kentucky. 11. On July 22 Overmyer, by counsel, filed in the Ohio court motions to stay execution and for a new trial. The latter motion referred to (i)rregularity in the proceedings of the rpevailing party and of the court . . . On August 6, Overmyer filed a motion to vacate judgment and tendered an answer and counterclaim alleging breach of contract by Frick, and damages. A hearing was held. Both sides submitted affidavits. Those submitted by Overmyer asserted lack of notice before judgment and alleged a breach of contract by Frick. A copy of Judge Mansfield's findings, conclusions, and opinion was placed in the record. On November 16 the court overruled each motion. 12. Overmyer appealed to the Court of Appeals for Lucas County, Ohio, specifically asserting deprivation of due process violative of the Ohio and Federal Constitutions. That court affirmed with a brief journal entry.

**781 13. The Supreme Court of Ohio, sua sponte dismisse(d) the appeal for the reason that no substantial constitutional question exists herein. We granted certiorari. 401 U.S. 992, 91 S.Ct. 1220, 28 L.Ed.2d 530 (1971).

II This chronology clearly reveals that Overmyer's situation, of which it now complains, is one brought about largely by its own misfortune and failure or inability to pay. The initial agreement between Overmyer and Frick was a routine construction subcontract. Frick agreed to do the work and Overmyer agreed to pay a designated amount for that work by progress payments at specified times. This contract was not accompanied by any promissory note. *183 Overmyer then became delinquent in its payments. Frick naturally refrained from further work. This impasse was resolved by the February 1967 post-contract arrangement, pursuant to which Overmyer made an immediate partial payment in cash and issued its installment note for the balance. Although Frick had suggested a confession-of-judgment clause, the note as executed and delivered contained no provision of that kind. [1] Frick completed its work and Overmyer accepted the work as satisfactory. Thereafter Overmyer again asked for relief. At this time counsel for each side participated in the negotiations. The first note was replaced by the second. The latter contained the confession-of-judgment provision Overmyer now finds so offensive. However, in exchange for that provision and for its execution of the second mortgages, Overmyer received benefit and consideration in the form of (a) Frick's release of the three mechanic's liens, (b) reduction in the amount of the monthly payment, (c) further time in which the total amount was to be paid, and (d) reduction of a half point in the interest rate. Were we concerned here only with the validity of the June 1967 agreement under principles of contract law, that issue would be readily resolved. Obviously and undeniably, Overmyer's execution and delivery of the second note were for an adequate consideration and were the product of negotiations carried on by corporate parties with the advice of competent counsel. More than mere contract law, however, is involved here.

Janz N. Serrano Petitioner Overmyer first asserts that the Ohio judgment is invalid because there was no personal service upon it, no voluntary appearance by it in Ohio, and no genuine appearance by an attorney on its behalf. Thus, *184 it is said, there was no personal jurisdiction over Overmyer in the Ohio proceeding. The petitioner invokes Pennoyer v. Neff, 95 U.S. 714, 732, 24 L.Ed. 565 (1878), and other cases decided here and by the Ohio courts enunciating accepted and long-established principles for in personam jurisdiction. McDonald v. Mabee, 243 U.S. 90, 91, 37 S.Ct. 343, 61 L.Ed. 608 (1917); Vanderbilt v. Vanderbilt, 354 U.S. 416, 418, 77 S.Ct. 1360, 1362, 1 L.Ed.2d 1456 (1957); Sears v. Weimer, 143 Ohio St. 312, 55 N.E.2d 413 (1944); Railroad Co. v. Goodman, 57 Ohio St. 641, 50 N.E. 1132 (1897); Cleveland Leader Printing Co. v. Green, 52 Ohio St. 487, 491, 40 N.E. 201, 203 (1895). It is further said that whether a defendant's appearance is voluntary is to be determined at the time of the court proceeding, not at a much earlier date when an agreement was signed; that an unauthorized appearance by an attorney on a defendant's behalf cannot confer jurisdiction; and that the lawyer who appeared in Ohio was not Overmyer's attorney in any sense of the word, but was only an agent of Frick. The argument then proceeds to constitutional grounds. It is said that due process requires reasonable notice and an opportunity to be heard, citing Boddie v. Connecticut, 401 U.S. 371, 378, 91 S.Ct. 780, 786, 28 L.Ed.2d 113 (1971). It is acknowledged, however, that the question **782 here is in a context of contract waiver, before suit has been filed, before any dispute has arisen and whereby a party gives up in advance his constitutional right to defend any suit by the other, to notice and an opportunity to be heard, no matter what defenses he may have, and to be represented by counsel of his own choice. FN9 In other words, Overmyer's position here specifically is that it is unconstitutional to waive in advance the right to present a defense in an action on the note.' FN10 It is conceded that in Ohio a court has the *185 power to open the judgment upon a proper showing. Bellows v. Bowlus, 83 Ohio App. 90, 93, 82 N.E.2d 429, 432 (1948). But it is claimed that such a move is discretionary and ordinarily will not be disturbed on appeal, and that it may not prevent execution before the debtor has notice. Griffin v. Griffin, 327 U.S. 220, 231-232, 66 S.Ct. 556, 561-562, 90 L.Ed. 635 (1946). Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970), and Sniadach v. Family Finance Corp., 395 U.S. 337, 89 S.Ct. 1820, 23 L.Ed.2d 349 (1969), are cited. FN9. Brief for Petitioners 16.

FN10. Trans. of Oral Arg. 17.

III

[2] The due process rights to notice and hearing prior to a civil judgment are subject to waiver. In National Equipment Rental, Ltd. v. Szukhent, 375 U.S. 311, 84 S.Ct. 411, 11 L.Ed.2d 354 (1964), the Court observed: (I)t is settled . . . that parties to a contract may agree in P age | 62 advance to submit to the jurisdiction of a given court, to permit notice to be served by the opposing party, or even to waive notice altogether. Id., at 315-316, 84 S.Ct., at 414. And in Boddie v. Connecticut, supra, the Court acknowledged that the hearing required by due process is subject to waiver. 401 U.S., at 378-379, 91 S.Ct., at 786. This, of course, parallels the recognition of waiver in the criminal context where personal liberty, rather than a property right, is involved. Illinois v. Allen, 397 U.S. 337, 342-343, 90 S.Ct. 1057, 1060, 25 L.Ed.2d 353 (1970) (right to be present at trial); Miranda v. Arizona, 384 U.S. 436, 444, 86 S.Ct. 1602, 1612, 16 L.Ed.2d 694 (1966) (rights to counsel and against compulsory self-incrimination); Fay v. Noia, 372 U.S. 391, 439, 83 S.Ct. 822, 849, 9 L.Ed.2d 837 (1963) (habeas corpus); Rogers v. United States, 340 U.S. 367, 371, 71 S.Ct. 438, 440, 95 L.Ed. 344 (1951) (right against compulsory self-incrimination). Even if, for present purposes, we assume that the standard for waiver in a corporate-property-right case of this kind is the same standard applicable to waiver in a criminal proceeding, that is, that it be voluntary, knowing, and intelligently made, *186 Brady v. United States, 397 U.S. 742, 748, 90 S.Ct. 1463, 1468, 25 L.Ed.2d 747 (1970); Miranda v. Arizona, 384 U.S., at 444, 86 S.Ct., at 1612, or an intentional relinquishment or abandonment of a known right or privilege, Johnson v. Zerbst, 304 U.S. 458, 464, 58 S.Ct., 1019, 1023, 82 L.Ed. 1461 (1938); Fay v. Noia, 372 U.S., at 439, 83 S.Ct., at 849, and even if, as the Court has said in the civil area, (w)e do not presume acquiescence in the loss of fundamental rights, Ohio Bell Tel. Co. v. Public Utilities Comm'n, 301 U.S. 292, 307, 57 S.Ct. 724, 731, 81 L.Ed. 1093 (1937), that standard was fully satisfied here. Overmyer is a corporation. Its corporate structure is complicated. Its activities are widespread. As its counsel in the Ohio post-judgment proceeding stated, it has built many warehouses in many States and has been party to tens of thousands of contracts with many contractors. This is not a case of unequal bargaining power or overreaching. The Overmyer-Frick agreement, from the start, was not a contract of adhesion. There was no refusal on Frick's part to deal with Overmyer unless Overmyer agreed to a cognovit. The initial contract between the two corporations contained no confession-of-judgment clause. When, later, the first installment note from **783 Overmyer came into being, it, too, contained no provision of that kind. It was only after Frick's work was completed and accepted by Overmyer, and when

Overmyer again became delinquent in its payments on the matured claim and asked for further relief, that the second note containing the clause was executed. Overmyer does not contend here that it or its counsel was not aware of the significance of the note and of the cognovit provision. Indeed, it could not do so in the light of the facts. Frick had suggested the provision in October 1966, but the first note, readjusting the progress payments, was executed without it. It appeared in the second note delivered by Overmyer's own counsel in return for substantial benefits and consideration to Overmyer. Particularly important, it would seem, was the *187 release of Frick's mechanic's liens, but there were, in addition, the monetary relief as to amount, time and interest rate. [3] Overmyer may not have been able to predict with accuracy just how or when Frick would proceed under the confession clause if further default by Overmyer occurred, as it did, but this inability does not in itself militate against effective waiver. See Brady v. United States, 397 U.S., at 757, 90 S.Ct., at 1473; McMann v. Richardson, 397 U.S. 759, 772-773, 90 S.Ct. 1441, 1449-1450, 25 L.Ed.2d 763 (1970). [4] We therefore hold that Overmyer, in its execution and delivery to Frick of the second installment note containing the cognovit provision, voluntarily, intelligently, and knowingly waived the rights it otherwise possessed to prejudgment notice and hearing, and that it did so with full awareness of the legal consequences. Insurance Co. v. Morse, 20 Wall. 445, 22 L.Ed. 365 (1874), affords no comfort to the petitioners. That case concerned the constitutional validity of a state statute that required a foreign insurance company, desiring to qualify in the State, to agree not to remove any suit against it to a federal court. The Court quite naturally struck down the statute, for it thwarted the authority vested by Congress in the federal courts and violated the Privileges and Immunities Clause. Myers v. Jenkins, 63 Ohio St. 101, 120, 57 N.E. 1089, 1093 (1900), involving an insurance contract that called for adjustment of claims through the company alone and without resort to the courts, is similarly unhelpful.

Janz N. Serrano observed above, are important, and those facts amply demonstrate that a cognovit provision may well serve a proper and useful purpose in the commercial world and at the same time not be vulnerable to constitutional attack. 2. Our holding, of course, is not controlling precedent for other facts of other cases. For example, where the contract is one of adhesion, where there is great disparity in bargaining power, and where the debtor receives nothing for the cognovit provision, other legal consequences may ensue. 3. Overmyer, merely because of its execution of the cognovit note, is not rendered defenseless. It concedes that in Ohio the judgment court may vacate its judgment upon a showing of a valid defense and, indeed, Overmyer had a postjudgment hearing in the Ohio court. If there were defenses such as prior payment or mistaken identity, those defenses could be asserted. And there is nothing we see that prevented Overmyer from pursuing its breach-of-contract claim against Frick in a proper forum. Here, again, that is precisely what Overmyer has attempted to do, thus far unsuccessfully, in the Southern District of New York. The judgment is affirmed.

**784 Mr. Justice POWELL and Mr. Justice REHNQUIST took no part in the consideration or decision of this case.

Mr. Justice DOUGLAS, with whom Mr. Justice MARSHALL concurs, concurring.

IV Some concluding comments are in order: [5] 1. Our holding necessarily means that a cognovit clause is not, per se, violative of Fourteenth Amendment due process. Overmyer could prevail here only if the clause were constitutionally invalid. The facts of this case, as *188 we

I agree that the heavy burden against the waiver of constitutional rights, which applies even in civil matters, Ohio Bell Tel. Co. v. Public Utilities Comm'n, 301 U.S. 292, 307, 57 S.Ct. 724, 731, 81 L.Ed. 1093 (1937); *189 Aetna Ins. Co. v. Kennedy, 301 U.S. 389, 393, 57 S.Ct. 809, 811, 81 L.Ed. 1177 (1937), has been effectively rebutted by the evidence presented in this record. Whatever procedural hardship the Ohio confession-of-judgment scheme worked upon the petitioners was voluntarily and understandingly self-inflicted through the arm's-length bargaining of these corporate parties. I add a word concerning the contention that opening of confessed judgments in Ohio is merely discretionary and requires a higher burden of persuasion than is ordinarily imposed upon defendants. As I read the Ohio law of cognovit notes, trial judges have traditionally enjoyed wide discretion in vacating confessed judgments. 32 Ohio Jur.2d, Judgments s 558 (1958). In Livingstone v. Rebman, 169 Ohio St. 109, 158 N.E.2d

Janz N. Serrano 366 (1959), however, the Ohio Supreme Court imposed certain safeguards on the exercise of a judge's discretion in opening confessed judgments. That case also involved a petition to open a confessed judgment where, as here, the debtor alleged the affirmative defense of failure of consideration. Using the preponderance-of-the-evidence test, the trial court had found insufficient support for the debtor's claim and had dismissed P age | 63 the motion to open. On appeal, however, the Ohio Supreme Court reversed on the degree of proof needed to vacate a confessed judgment. Said the court: (I)f there is credible evidence supporting the defense . . . from which reasonable minds may reach different conclusions, it is then the duty of the court to suspend the judgment and permit the issue raised by the pleadings to be tried by a jury, or, if a jury is waived, by the court. Id., at 121-122, 158 N.E.2d, at 375. (Emphasis supplied.) Thus it would appear that the Ohio confessed judgment may be opened if the debtor poses a jury question, that *190 is, if his evidence would have been sufficient to prevent a directed verdict against him. That standard is a minimal obstacle.FN* FN* Thus the Ohio system places no undue burden of proof upon the debtor desiring to open a confessed judgment, in marked contrast to the Pennsylvania procedure involved in Swarb v. Lennox, 405 U.S. 191, 92 S.Ct. 767, 31 L.Ed.2d 138. In Pennsylvania, in order to vacate such a judgment, a borrower must prove his defense by the preponderance of the evidence rather than by merely mustering enough evidence to present a jury question. Once the judgment is vacated, moreover, he must again prevail by that standard at a subsequent trial. In effect, the Pennsylvania confessed debtor is required to win two consecutive trials, not simply one. Given the proclivities of reasonable men to differ over the probative value of jury questions, the Pennsylvania requirement of twice sustaining the preponderance of the evidence imposes a stiffer burden of persuasion. The fact that a trial judge is duty-bound to vacate judgments obtained through cognovit clauses where debtors present jury questions is a complete answer to the contention that unbridled discretion governs the disposition of petitions to vacate. See also Goodyear v. Stone, 169 Ohio St. 124, 158 N.E.2d 376 (1959); McMillen v. Willard Garage Inc., 14 Ohio App.2d 112, 115, 237 N.E.2d 155, 158 (1968); Central National Bank of Cleveland v. Standard Loan & Finance, 5 Ohio App.2d 101, 104, 195 N.E.2d 597, 600 (1964). The record shows that the petitioners were given every opportunity after judgment to explain their affirmative defense to the state courts and that the defense was rejected solely because the evidence adduced in support thereof was too thin to warrant further presentation to a jury. U.S.Ohio 1972. D. H. Overmyer Co., Inc. of Ohio v. Frick Co., 405 U.S. 174, 92 S.Ct. 775, 31 L.Ed.2d 124, 61 O.O.2d 528 Briefs and Other Related Documents (Back to top) 1971 WL 136003 (Appellate Brief) Brief for Respondent (Oct. 05, 1971) 1971 WL 133595 (Appellate Brief) Brief for Petitioners (Jul. 27, 1971) Original Image of this Document with Appendix (PDF) END OF DOCUMENT

Supreme Court of Appeals of Virginia. COX ET AL. v. HAGAN. age | 64 P Sept. 17, 1919. Error to Circuit Court, Scott County. Action by C. F. Hagan against R. W. Cox and others. Judgment for plaintiff, and defendants bring error. Reversed and remanded. KeyCite Citing References for this Headnote 56 Bills and Notes 56II Construction and Operation 56k126 k. Attorney fees and costs. Most Cited Cases A note contained the following provision: The makers and indorsers of this note hereby * * * agree to pay costs of collection or ten per cent. attorney's fee in case payment shall not be made at maturity. Costs of collection refers not to cost of suit, which are recoverable by law, but to the attorney's fee for service in making or attempting to make collection. The proper construction of the provision in the note under consideration therefore is that the makers and indorsers of the note agreed to pay the lawful holder thereof such reasonable attorney's fee as such holder may actually incur for services of attorney in making collection thereof, not exceeding ten per cent. maximum stipulated. KeyCite Citing References for this Headnote 56 Bills and Notes 56VIII Rights and Liabilities on Indorsement or Transfer 56VIII(A) Before Delivery to or Transfer by Payee 56k253 k. Order of liability. Most Cited Cases 56 Bills and Notes KeyCite Citing References for this Headnote 56VIII Rights and Liabilities on Indorsement or Transfer 56VIII(B) Indorsement for Transfer 56k298 k. Order of liability. Most Cited Cases 56 Bills and Notes KeyCite Citing References for this Headnote 56XI Actions 56k472 Plea, Answer, or Affidavit of Defense 56k473 k. Form and requisites in general. Most Cited Cases The long and universally established rule at common law is that * * * the liability of indorsers, in the absence of special agreement, is successive and not joint. This rule has become a part of our statute law, subsection 68 of 2841-a of the Code of 1904. In the instant case it appeared from the note in suit that the plaintiff was the last indorser thereof, except the payees named in the note. In the special plea referred to in the next preceding syllabus there was no allegation that the plaintiff indorsed the note prior to the signing of it by the defendants setting up the plea. Hence taking the allegation of the plea to be true that the defendants were mere indorsers of the note, still on the face of the record they were prior indorsers to the

Janz N. Serrano plaintiff. And in the absence of any allegation in the plea of an actual agreement between the parties that their liability should be otherwise, the prima facie order of liability negatives the conclusion of the plea and renders it bad. KeyCite Citing References for this Headnote 56 Bills and Notes 56VIII Rights and Liabilities on Indorsement or Transfer 56VIII(A) Before Delivery to or Transfer by Payee 56k257 Rights of Indorser 56k258 k. In general. Most Cited Cases 56 Bills and Notes KeyCite Citing References for this Headnote 56XI Actions 56k472 Plea, Answer, or Affidavit of Defense 56k473 k. Form and requisites in general. Most Cited Cases The plaintiff was the last indorser on the note, other than the payees and indorsees thereof named therein, and paid and took up the note upon default. An indorser of a note who, upon the default of the maker, satisfies the demands of the indorsee, and takes up the note, becomes the lawful holder and may enforce the terms of the contract against all prior indorsers as well as against the maker. It is, therefore, immaterial, so far as the plaintiff's right of action was concerned, whether the comakers were makers or indorsers of or sureties on the note. As to the plaintiff they were all principal obligors, unless indeed there had been an agreement between themselves and the plaintiff that their obligation should be otherwise, which the plea does not allege. Hence the plea under consideration interposed no valid defense to the action, and for that reason there was no error in the action of the court below in refusing to allow it to be filed. KeyCite Citing References for this Headnote 56 Bills and Notes 56VIII Rights and Liabilities on Indorsement or Transfer 56VIII(D) Holders in Due Course 56k364 Defenses Against Holders in Due Course 56k371 k. Accommodation paper. Most Cited Cases While, as between themselves, parol evidence is admissible to show the actual relations to one another of apparent joint makers of a note, as that the relationship of surety in truth exists as to one or more of them, yet such evidence is admissible only against parties having knowledge of such relationship at the time they entered into the contract, and is not admissible against an innocent purchaser.

West Headnotes

KeyCite Citing References for this Headnote 56 Bills and Notes 56II Construction and Operation 56k126 k. Attorney fees and costs. Most Cited Cases Where the makers and indorsers of a note agreed therein to pay costs of collection and 10 per cent. attorney's fees in case of nonpayment at maturity, although plaintiff, indorser, may not have paid the payees or indorsees any costs of the collection or attorney's fee, because of default of makers or other prior parties, if the plaintiff after payment had to place the note with an attorney for collection, he was entitled to recover of the makers and prior parties the amount of such expense of costs of collection or attorney's fees. KeyCite Citing References for this Headnote 56 Bills and Notes 56II Construction and Operation 56k126 k. Attorney fees and costs. Most Cited Cases The provision for attorney's fees is in substance as if it had been to pay such reasonable attorney's fee for collection actually incurred by the lawful holder of the note, up to but not exceeding ten per cent. of the amount of the debt due to the holder of the note, principal and interest, in case of nonpayment of the note at maturity. The rule in this State is, in effect, that such a contract is valid and enforceable to the extent of a reasonable attorney's fee incurred as aforesaid, not exceeding the percentage named in the note.

Janz N. Serrano KeyCite Citing References for this Headnote 56 Bills and Notes 56X Payment and Discharge 56k434 k. Recovery of payments. Most Cited Cases P The makers and indorsers of a note agreed to pay costs of collection or ten per cent. attorney's fee in case payment should not be made at maturity. Held: That although the plaintiff, an indorser who took up the note upon maturity, might not have paid the payees or indorsees of the note any costs of collection or attorney's fee, yet if by reason of the default of the makers of or other prior parties to the obligation, the plaintiff after the payment of it by him had to place the note in the hands of an attorney for collection, he was entitled to recover judgment against the makers of and prior parties to the obligation for such an amount of expense incurred by him of costs of collection or attorney's fee as the contract when properly construed provides for. KeyCite Citing References for this Headnote 56 Bills and Notes 56XI Actions 56k472 Plea, Answer, or Affidavit of Defense 56k473 k. Form and requisites in general. Most Cited Cases A plea by defendants, sued on a note by an indorser, that they were also only indorsers, was fatally defective because not containing the further allegation that plaintiff and defendants had agreed at the time of the execution and indorsement of the note that they should be jointly liable as sureties for the true makers, or allegations to such effect. KeyCite Citing References for this Headnote 56 Bills and Notes 56XI Actions 56k472 Plea, Answer, or Affidavit of Defense 56k473 k. Form and requisites in general. Most Cited Cases In an action by the indorser of a note, who had paid and taken up the note upon default, against the makers thereof, two of the makers filed a special plea alleging, in substance, that although their signatures appeared on the note as co-makers, they were not in fact principal obligors but sureties only for certain co-makers of the note, the latter being in truth the principal obligors. The plea, however, did not allege that the plaintiff had any notice of such suretyship relation of the parties before he endorsed the note. Held; That there was no error in the action of the court below in sustaining the general objection of the plaintiff to the special plea. KeyCite Citing References for this Headnote 56 Bills and Notes 56XI Actions 56k472 Plea, Answer, or Affidavit of Defense 56k473 k. Form and requisites in general. Most Cited Cases In an action by an indorser who has taken up the note against the makers, there was no error in refusing to allow a special plea to be filed alleging that the plaintiff was entitled to recover only such costs of collection as he in fact paid and was legally bound to pay his own attorney, as that defense could have been as well made under a plea of the general issue as by special plea. KeyCite Citing References for this Headnote 56 Bills and Notes 56XI Actions 56k472 Plea, Answer, or Affidavit of Defense 56k473 k. Form and requisites in general. Most Cited Cases In an action by an indorser who had paid and taken up the note at maturity, two of the makers filed a special plea that they were only indorsers on the note as was the plaintiff, and the plaintiff knew at the time that they were only indorsers jointly liable with him. Held: That this would have been a good plea if it had contained the further allegation that the plaintiff and defendants had agreed at the time of their execution or indorsement of the note that they should be jointly liable as sureties for the true makers and principal obligors, or allegations to that effect as the plea, however contained no such allegation, it was fatally defective. KeyCite Citing References for this Headnote 56 Bills and Notes 56XI Actions 56k472 Plea, Answer, or Affidavit of Defense 56k474 k. Traverses or denials and admissions in general. Most Cited Cases In view of Code 1904, 3299, relating to special pleas of set-off, the defense that the amount claimed by plaintiff, indorser of a note, as attorney's fees, is unreasonable in amount and unconscionable, can be made by special plea; although, the contract not being under seal, the matter could be set up by general denial. KeyCite Citing References for this Headnote 56 Bills and Notes 56XI Actions 56k472 Plea, Answer, or Affidavit of Defense 56k474 k. Traverses or denials and admissions in general. Most Cited Cases 56 Bills and Notes KeyCite Citing References for this Headnote 56XI Actions 56k472 Plea, Answer, or Affidavit of Defense 56k485 k. Verification. Most Cited Cases If in an action by an indorser against the maker of a note, defense by way of special plea under 3299, Code of 1904, be adopted to plaintiff's claim for attorney's fee, the plea should allege the amount to the extent of which the defendant claims the attorney's fee in question is unreasonable or unconscionable, and should also allege the facts on which such claim is based with sufficient detail and certainty to apprise the plaintiff of the nature of the defense and to enable the court, on the facts being found or admitted, to decide whether the matter relied on constitutes a valid claim to the relief sought. And the plea should be verified by affidavit. KeyCite Citing References for this Headnote 56 Bills and Notes 56XI Actions 56k472 Plea, Answer, or Affidavit of Defense 56k485 k. Verification. Most Cited Cases In an action by an indorser who had paid a note against the makers, two of the makers filed a special plea alleging that the plaintiff ought not to have and to maintain his action for the ten per cent. attorney fee demanded because the sum demanded was unreasonable, unjust, inequitable, unfair and oppressive. Held: That there was no error in the action of the court below in sustaining a general objection to the plea, as the plea was not verified by affidavit as required by section 3299, Code of 1904, nor did it allege the amount to which the defendants were entitled by reason of the matters contained in the plea, as required by that section. KeyCite Citing References for this Headnote 56 Bills and Notes 56XI Actions 56k489 Issues, Proof, and Variance

age | 65

56k489(5) k. Evidence admissible under general issue. Most Cited Cases The defense in an action by an indorser, who has taken up and paid the note at maturity against the makers, that the amount claimed by plaintiff as attorney's fee under the P obligation sued on and provided for therein is unreasonable in age | 66 amount or unconscionable, can be made by special plea under section 3299 of the Code of 1904, although there is no necessity therefor. As the contract in suit is not under seal and the defendant seeks no recovery of any excess over the plaintiff's demand, the defense can be set up under the general issue of nonassumpsit, if the action be one in assumpsit, and the issue made by a general denial of the facts alleged in the notice of motion for judgment is not less comprehensive. KeyCite Citing References for this Headnote 56 Bills and Notes 56XI Actions 56k528 Amount of Recovery 56k534 k. Attorney fees. Most Cited Cases Upon the issue being made as to the amount recoverable under the attorney's fee provision of a note sued upon by indorser, the judge should allow only a reasonable amount considering the attorney's services actually performed in collecting the debt, in view of the customary charges of the profession in the locality for such services, not exceeding the maximum stipulated in the obligation, and, where the services of an attorney were not in fact employed by the holder, no attorney's fee should be allowed. KeyCite Citing References for this Headnote 56 Bills and Notes 56XI Actions 56k535 Trial 56k537 Questions for Jury 56k537(1) k. In general. Most Cited Cases In an indorser's action upon a note, where defendants pleaded under Code 1904, 3299, that the amount claimed for attorney's fees was unreasonable and unconscionable, if the pleaded facts are admitted, the sufficiency of the defense, including the determination of the amount that should be recovered, is for the determination of the judge, while, if the issue upon the plea be one of fact, it must be tried by the jury under proper court instructions, unless all matters of fact and law are submitted for the judge's decision under the statute by consent of the parties. KeyCite Citing References for this Headnote

56 Bills and Notes 56XI Actions 56k535 Trial 56k537 Questions for Jury 56k537(1) k. In general. Most Cited Cases In every case, the facts being admitted or found, the determination of what may be recovered as an attorney's fee under a provision in the obligation in suit creating the obligation of payment of such a fee, is for the judge of the trial court in an action at law, and, of course, is also for such judge where the question arises in a suit in equity. KeyCite Citing References for this Headnote 302 Pleading 302I Form and Allegations in General 302k8 Matters of Fact or Conclusions 302k8(1) k. In general. Most Cited Cases A plea alleging mere conclusions of law, without alleging facts from which these conclusions are sought to be drawn, with sufficient detail and certainty to apprise plaintiff of the nature of the defense and to enable the court upon facts admitted or found to decide whether the matter relied on constituted a valid claim to the relief sought, was properly rejected. KeyCite Citing References for this Headnote 302 Pleading 302I Form and Allegations in General 302k8 Matters of Fact or Conclusions 302k8(1) k. In general. Most Cited Cases A plea is bad which alleges mere conclusions of law and does not allege the facts from which those conclusions are sought to be drawn with sufficient detail and certainty to apprise the opposite party of the nature of the defense and to enable the court upon the facts admitted or found to decide whether the matter relied on constituted a valid claim to the relief sought. KeyCite Citing References for this Headnote 302 Pleading 302I Form and Allegations in General 302k8 Matters of Fact or Conclusions 302k8(5) k. Allegations or denials of indebtedness. Most Cited Cases

Janz N. Serrano A plea by defendants, sued as makers of a note, that the plaintiff, an indorser, was only entitled to recover the pro rata amount due by these defendants as indorsers, because each indorser assumes the same liability as every other, is a mere conclusion of law and erroneous; in view of Code 1904, 2841a, subsec. 68, under which the liability of indorsers, in the absence of special agreement, is successive and not joint. KeyCite Citing References for this Headnote 302 Pleading 302III Responses or Responsive Pleadings in General 302III(C) Traverses or Denials and Admissions 302k124 k. Specific denials under codes of procedure. Most Cited Cases Section 3299, Code of 1904, provides that defendant may file a plea alleging any failure in the consideration of the contract or fraud in its procurement, or any breach of any warranty to him of the title or the soundness of personal property, or any other matter as would entitle him either to recover damages at law from the plaintiff or relief in equity against the obligation of the contract. The connection of the language of the statute is such that the words or any other matter do not refer to matters of the same kind previously mentioned in the statute except in one particular, namely, in the particular that they must contain the feature of being matters directly connected with and injuries growing out of the contract sued on. KeyCite Citing References for this Headnote 302 Pleading 302III Responses or Responsive Pleadings in General 302III(C) Traverses or Denials and Admissions 302k124 k. Specific denials under codes of procedure. Most Cited Cases The purpose of section 3299, Code of 1904, plainly is to allow all matters in controversy between the plaintiff and defendant arising out of the same cause of action-i.e., all matters of recoupment-to be disposed of in one action at law, so as to avoid the necessity of a separate suit having to be brought by the defendant, whether at law or in equity, to determine any such matter. KeyCite Citing References for this Headnote 302 Pleading 302III Responses or Responsive Pleadings in General 302III(D) Matter in Avoidance 302k136 k. Matter available under general issue or general denial. Most Cited Cases

Janz N. Serrano A special plea, that plaintiff claiming to be surety on a note was entitled to recover only such costs of collection as he in fact paid and was regularly bound to pay his own attorney, was properly disallowed, since such defense could have been made under the general issue thereon. P KeyCite Citing References for this Headnote Where a final judgment ought to be, but owing to the court's delay has not been, entered, the court, if it has such power, uses the papers, proceedings, and evidence in the case as the same existed at the time to which the order or decree is proposed to relate back, as the basis of its action and enters the decree to which the party was then entitled, but may not do so where the delay was imputable to any negligence or even misapprehension of the parties. KeyCite Citing References for this Headnote 228 Judgment 228VII Entry, Record, and Docketing 228k273 Entry Nunc Pro Tunc 228k273(1) k. In general. Most Cited Cases 228 Judgment KeyCite Citing References for this Headnote 228VII Entry, Record, and Docketing 228k273 Entry Nunc Pro Tunc 228k273(2) k. Failure to enter judgment at time of rendition. Most Cited Cases There are two classes of cases in which it has been held proper to enter judgments and decrees nunc pro tunc. The first class embraces those cases in which the suitors have done all in their power to place the cause in a condition to be decided by the court, but in which, owing to the delay of the court, no final judgment has been entered. The second class embraces those cases in which judgments though pronounced by the court, have, from accident or mistake of the officers of the court, never been entered on the records of the court. KeyCite Citing References for this Headnote 228 Judgment 228VII Entry, Record, and Docketing 228k273 Entry Nunc Pro Tunc 228k273(1) k. In general. Most Cited Cases Cases where no judgment has been entered, the court uses the papers and proceedings and evidence in the case, as the same existed at the time to which the order or decree is proposed to relate back, as the basis of its action, and acts on such record at the subsequent time when the motion for the nunc pro tunc order or decree is made. The court enters now for then such order or decree as it finds from such record the party moving for the nunc pro tunc order was then entitled to, and it is held that this power should be exercised with great caution and circumspection. KeyCite Citing References for this Headnote 228 Judgment 228VII Entry, Record, and Docketing 228k273 Entry Nunc Pro Tunc 228k273(1) k. In general. Most Cited Cases In Virginia practice the office of a judgment nunc pro tunc is to record some act of the court done at a former time which was not then carried into the record, and the power of the court to make such entries is restricted to placing upon the record evidence of judicial action which has been actually taken. It may be used to make the record speak the truth, but not to make it speak what it did not speak but ought to have spoken. If the court has not rendered a judgment that it might or should have rendered, it has no power to remedy these errors or omissions by ordering the entry nunc pro tunc of a proper judgment. KeyCite Citing References for this Headnote 228 Judgment 228VII Entry, Record, and Docketing 228k273 Entry Nunc Pro Tunc 228k273(1) k. In general. Most Cited Cases In all cases in Virginia since the Acts of 1897-8, p. 507, Code of 1904, section 3567, the exercise of the power to enter judgment nunc pro tunc presupposes the actual rendition of a judgment and a mere right to a judgment will not furnish the basis for such an entry. KeyCite Citing References for this Headnote 228 Judgment 228VII Entry, Record, and Docketing 228k273 Entry Nunc Pro Tunc 228k273(4) k. Existence of previous judgment or order. Most Cited Cases In view of Code 1904, 3567, providing that the lien of a judgment shall in no case relate back to a time prior to that on or at which the judgment was rendered, the courts do not possess the power to enter nunc pro tunc judgments in cases where suitors have done all in their power to have the cause decided, but owing to the delay of the court no final judgment has been entered, but only in cases where, from accident or mistake of the court officers, the judgment or order entered had never been entered upon the records. KeyCite Citing References for this Headnote 361 Statutes 361VI Construction and Operation

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302 Pleading 302III Responses or Responsive Pleadings in General 302III(E) Set-Off, Counterclaim, and Cross-Complaint 302k142 k. Form and requisites of plea or answer in general. Most Cited Cases 302 Pleading KeyCite Citing References for this Headnote 302VIII Verification 302k289 Necessity for Verification and Effect of Omission 302k290 In General 302k290(3) k. Plea, answer, or reply. Most Cited Cases A plea not verified by affidavit and not alleging the amount to which defendant is entitled, by reason of the matters contained in the plea, as required by Code 1904, 3299, relating to plea of set-off, is insufficient as against a general objection. KeyCite Citing References for this Headnote 228 Judgment 228VII Entry, Record, and Docketing 228k273 Entry Nunc Pro Tunc 228k273(1) k. In general. Most Cited Cases 267 Motions KeyCite Citing References for this Headnote 267k56 Entry or Filing of Orders 267k56(2) k. Entry nunc pro tunc. Most Cited Cases The power to affect the operation of a judgment or order, or change its import by a judgment or order nunc pro tunc, should be exercised with caution and circumspection. KeyCite Citing References for this Headnote 228 Judgment 228VII Entry, Record, and Docketing 228k273 Entry Nunc Pro Tunc 228k273(1) k. In general. Most Cited Cases

361VI(A) General Rules of Construction 361k187 Meaning of Language 361k194 k. General and specific words and provisions. Most Cited Cases The ejusdem generis rule is only a rule of construction P intended to throw light on a statute of otherwise doubtful and age | 68 import and has no application where the language of the statute plainly manifests a contrary purpose. In such case the obvious intention of the legislature must be given effect rather than defeated by the misapplication of the rule. KeyCite Citing References for this Headnote 157 Evidence 157XI Parol or Extrinsic Evidence Affecting Writings 157XI(A) Contradicting, Varying, or Adding to Terms of Written Instrument 157k423 Nature and Extent of Liability 157k423(6) k. Bills and notes and indorsement thereof. Most Cited Cases As between parties liable upon a note, having knowledge of their true relations one to another, parol evidence is admissible to show the true relationship, regardless of where the signatures appear on the note, whether as makers or indorsers, and under Negotiable Instruments Law, 2841a, subsec. 68, indorsers are liable prima facie in the order of their indorsement, but evidence is admissible to show that as between or among themselves they have agreed otherwise. KeyCite Citing References for this Headnote 157 Evidence 157XI Parol or Extrinsic Evidence Affecting Writings 157XI(A) Contradicting, Varying, or Adding to Terms of Written Instrument 157k423 Nature and Extent of Liability 157k423(8) k. Principal or surety. Most Cited Cases While as between themselves parol evidence is admissible to show the actual relations to one another of apparent joint makers of a note, as that the relationship of surety in truth exists as to one or more of them, yet such evidence is admissible only against parties having knowledge of such relationship at the time of the entering into the contract by them. If a person sign a note as maker, but is, in fact, a surety, and there is nothing on the face of the note to show his true relation, he will be treated and considered as a principal, with respect to all who have no notice of the suretyship. KeyCite Citing References for this Headnote

157 Evidence 157XI Parol or Extrinsic Evidence Affecting Writings 157XI(A) Contradicting, Varying, or Adding to Terms of Written Instrument 157k423 Nature and Extent of Liability 157k423(8) k. Principal or surety. Most Cited Cases As between the parties liable upon a note having knowledge of their true relations one to another, parol evidence is admissible to show such true relationship regardless of where the signatures appear on the note, whether as maker or indorsers and regardless of the order of sequence of the indorsements. And by statute in Virginia (subsection 68 of section 2841-a of the negotiable instrument law), it is provided as follows: As respects one another, indorsers are liable prima facie in the order in which they indorse; but evidence is admissible to show that as between or among themselves they have agreed otherwise. KeyCite Citing References for this Headnote 30 Appeal and Error 30XVII Determination and Disposition of Cause 30XVII(D) Reversal 30k1177 Necessity of New Trial 30k1177(2) k. Defects in proceedings in lower court in general. Most Cited Cases Where the only error in the record of a case was the entry of a nunc pro tunc judgment, which might be cured by the entry of the same judgment by Supreme Court to take effect as of the date in fact entered by the court below, yet, where plaintiffs in error claim to have several substantial defenses attempted to be set up by rejected special pleas, the defects in which are formal, a new trial should be granted. KeyCite Citing References for this Headnote 30 Appeal and Error 30XVII Determination and Disposition of Cause 30XVII(D) Reversal 30k1178 Ordering New Trial, and Directing Further Proceedings in Lower Court 30k1178(1) k. In general. Most Cited Cases Where the only error in the record was the erroneous entry of a judgment nunc pro tunc, it might have been cured by entry of the same judgment by the Supreme Court of Appeals to take effect as of the date on which it was in fact entered by the court below. But in view of the fact that the plaintiffs in error claimed to have several substantial defenses attempted to be set up by special pleas and of the fact that the defects in such pleas were formal, the Supreme Court of Appeals granted a new trial of the case so that the plaintiffs in error might have

Janz N. Serrano an opportunity to amend such pleas and thus properly present their defenses to the plaintiff's demand, should they be so advised. *668 This action at law was instituted in the court below by the defendant in error, Hagan (hereinafter referred to as plaintiff, or as plaintiff in the court below), by the following notice of motion for judgment: To R. W. Cox, L. F. Cox, Mrs. R. W. Cox, Mary Cox, G. B. Bickley and R. E. Bickley: You and each of you are hereby notified that on the 1st day of the next term of the circuit court for Scott county (being the September term, 1917), I will move the circuit court for Scott county for a judgment against you and each of you for the sum of $2,750.00 with interest thereon from the 28th day of June, 1917, until paid, the same being due by you to me on account of a certain note executed by all of you as makers, payable to Head & Sloan, bearing date December 28th, 1916, and due six months after date for the sum of $2,500.00 which said note was indorsed by me and which note not having been paid at maturity by either of you as you had agreed demand was made upon me for payment thereof and payment thereof was accordingly made by me on the 29th day of June, 1917, by the terms of which note it is provided that all homestead exemptions are waived and in which you and each of you agreed to pay 10 per cent. attorney's fees for collection in case payment thereof should not be made at maturity, and by reasons of said note and the provisions thereof, and the nonpayment thereof by you and the payment thereof by me to the holder thereof, and by reason of said note having been placed in the hands of attorneys for collection and action hath accrued to me to have and demand of you the said sum of $2,750.00 above mentioned, which said note is in the following words and figures, to wit: Gate City, Va., Dec. 28, 1916. $2,500.00. Due June 28th, 1917. 6 months after date we, or either of the makers or indorsers, value received, promise to pay to the order of Head & Sloan twenty-five hundred dollars. Negotiable and payable at the People's National Bank of Gate City, Virginia, with six per cent. interest after maturity. The makers and indorsers of this note hereby waive presentment, protest and notice of dishonor, and consent that the time of payment may be extended without notice thereof and hereby waive the benefit of their homestead exemptions as to this obligation; and further agree to pay costs of collection,

Janz N. Serrano or ten per cent. attorney's fee in case payment shall not be made at maturity. R. W. Cox. L. F. Cox. age | 69 P Mrs. R. W. Cox. Mary Cox. G. B. Bickley. R. E. Bickley.' Which said note was indorsed as follows: C. F. Hagan, Head & Sloan, By D. C. Sloan,' Respectfully, Charles F. Hagan. By Robert L. Pennington, Attorney. On the calling of said notice of motion for judgment the defendants, L. F. Cox and Mary Cox, offered two special pleas, designated as plea No. 1 and plea No. 2, which are as follows: This day came the defendants L. F. Cox and Mary Cox, by counsel, and say that the plaintiff ought not to have and to maintain his action for the ten per centum attorney demanded in said notice because the said sum demanded is unreasonable, unjust, inequitable, unfair and oppressive. And this defendants are ready to verify. The plaintiff thereupon objected to the filing of such pleas, and the court sustained the objection, to which action of the court the two defendants, who are the plaintiffs in error, excepted. The record does not disclose whether any specific grounds of objection to the pleas were assigned before the court below, or whether such specification was asked for there by the plaintiffs in error. Upon such objection to the pleas being sustained as aforesaid, the plaintiffs in error did not plead the general issue or interpose a demurrer*669 or any other plea in defense of the action or attempt to do so, at that time or during that term of the court. The other defendants interposed no defense whatever to the action, and the following entry was made by the clerk on the court docket: C. F. Hagan v. L. F. Cox et al. Notice of Motion. Judgment against Mrs. R. W. Cox and R. E. Bickley (see papers). (Order entered at September term, 1917.) And on a subsequent day of the same term of court, to wit, on Thursday, September 13, 1917, judgment was entered in favor of the plaintiff against the defendants, Mrs. R. W. Cox and R. E. Bickley, for the sum of twenty-five hundred dollars ($2,500.00), with interest from the 28th day of June, 1917, until paid and the costs of this suit, together with ten (10) per cent. attorney's fee thereon. No other order was entered and no other memorandum was made concerning the case by the clerk or judge at that term of the court. note, or proof thereof with the Referee in Bankruptcy, to whom the aforesaid bankruptcy proceeding was referred. The foregoing plea was sworn to before me, September 5th, 1917. D. C. At the January term, 1918, of the court, the plaintiff moved the court to enter a nunc pro tunc order, giving judgment in his favor against the defendants who are the plaintiffs in error. The record does not disclose on what ground such motion was made. When the plaintiff by counsel asked the court at its January term for such nunc pro tunc order, the plaintiffs in error offered and asked the court before such order was entered to be allowed to file two additional pleas, designated plea No. 3 and plea No. 4, which are as follows:

Plea No. 2.

Plea No. 3.

The defendants L. F. Cox and Mary Cox come, and say that the plaintiff ought not to have and to maintain his action for the ten per centum attorney's fee in the notice of motion for judgment demanded, because the said notice shows that said C. F. Hagan is an indorser of the note sued on, and does not show that he paid nor that he was legally bound to pay said attorney's fee. And of this they put themselves upon the country and this they are ready to verify.

Plea No. 4.

Plea No. 1.

This day came the defendants L. F. Cox and Mary Cox, by counsel, and say that the plaintiff ought not further to have and to maintain his action against them at this time because the said note, and the sum demanded in the notice, is the note and the amount due and owing by the Sulphur Springs Lumber Company, a partnership composed of R. W. Cox and G. B. Bickley, and said money was put and placed into the business of the said Sulphur Springs Lumber Company and was used therein, and these defendants further say that the said firm of the Sulphur Springs Lumber Company and the members of said firm, viz.: R. W. Cox and G. B. Bickley, have been duly adjudged bankrupts, by the District Court for the Western District of Virginia, and the said proceeding is now pending in said court. These defendants further say that the said note was filed as a part of the indebtedness of said partnership and the members thereof. These defendants are only sureties on said notes, and the plaintiff recognized the truth of this plea by filing the said

The defendants come and say that the said C. F. Hagan ought not to have and to maintain his action for the sum in the notice demanded, because the said note was executed by R. W. Cox and G. B. Bickley and these defendants were only indorsers on the note as was the plaintiff. The note was executed for the benefit of the Sulphur Springs Lumber Co., composed of R. W. Cox and G. B. Bickley, and the money procured went into the business of said company. The plaintiff knew at the time that these defendants were only indorsers and jointly liable with him. The plaintiff is only entitled to recover the pro rata amount due by these defendants as indorsers, because each indorser assumes the same liability as every other. And this they are ready to verify. The plaintiff thereupon objected to the filing of such pleas, and the court sustained the objection. The record is the same in its lack of disclosure, with respect to whether any specific grounds of objection were assigned before the court below to these pleas or were called for there by the plaintiffs in error, as is noted above with regard to the pleas Nos. 1 and 2 aforesaid. The record is also the same upon the point that, upon the objection to pleas Nos.

3 and 4 being sustained, the plaintiffs in error interposed no further defense to the action. And, so far as the record discloses, there was not at any time a trial of the case as if upon any issue joined. The court thereupon at the January term, 1918, on said motion of the plaintiff, entered the nunc pro tunc order under P age | 70 review as an order which should have been entered at the September term, 1917, which order rendered judgment in favor of the plaintiff against the plaintiffs in error for the sum of $2,750 with interest from the 28th day of June, 1917, until paid, and the costs of this action, the amount claimed in the plaintiff's notice of motion. W. S. Cox, of Gate City, for plaintiffs in error. R. L. Pennington, of Bristol, for defendant in error. SIMS, J. (after stating the facts as above).

and takes up the note, becomes the lawful holder and may enforce the terms of the contract against all prior indorsers * * * as well as against the maker. * * * 3 R. C. L. 337, p. 1121. It is therefore immaterial, so far as the plaintiff's right of action was concerned, whether the plaintiffs in error were makers or indorsers of or sureties on the note. As to the plaintiff they were all principal obligors, unless indeed there had been an agreement between themselves and the plaintiff that their obligation should be otherwise, which the plea, as aforesaid, does not allege. Hence the plea under consideration interposed no valid defense to the action, and for that reason, there was no error in the action of the court below in refusing to allow it to be filed. [2][3] 2. Was there error in the action of the court below in sustaining the general objection of the plaintiff to special plea No. 2 set forth in the statement preceding this opinion? This question must be answered in the negative for several reasons. (a) The plea is not verified by affidavit as required by the statute under which it was filed. See section 3299 of the Code. Watkins v. Hopkins, 13 Grat. (54 Va.) 743. (b) The plea does not allege the amount to which he (the defendant) is entitled by reason of the matters contained in the plea, as is required by such statute. Tyson v. Williamson, 96 Va. 636, 32 S. E. 42; Richmond Ice Co. v. Crystal Ice Co., 99 Va. 239, 37 S. E. 851. (c) The plea is bad because it violates the rule against the allegation of mere conclusions of law and does not allege the facts from which those conclusions are sought to be drawn with sufficient detail and certainty to apprise the opposite party of the nature of the defense and to enable the court upon the facts admitted or found to decide whether the matter relied on constituted a valid claim to the relief sought. Burtners v. Keran, 24 Grat. (65 Va.) 42; Watkins v. Hopkins, supra, 13 Grat. (54 Va.) 743. [4] 3. Was there error in the action of the court below in sustaining the general objection of the plaintiff to special plea No. 3 set forth in the statement preceding this opinion? This question must be answered in the negative. If the plea here under consideration means to allege that the plaintiff was entitled to recover only such costs of collection as he in fact paid and was legally bound to pay his own attorney, that defense could have been as well made under a plea of the general issue as by special plea. There was therefore in such case no error in the action of the court in refusing to allow such special plea to be filed.

Janz N. Serrano [5] If the plea means to allege that the plaintiff was entitled to recover only such costs of collection or attorney's fee as he paid and was legally bound to pay to the payee or indorsees of the note who held it at the time the plaintiff paid the note, this position is not sustained by the provisions of the note aforesaid on the subject. Such provisions constitute the terms of the contract on that subject which the plaintiff as lawful holder of the note after its payment by him had the right to enforce against the makers and all prior indorsers of the note. The note expressly provides that-The makers and indorsers of this note * * * agree to pay costs of collection or ten per cent. attorney's fee in case payment shall not be made at maturity. Therefore although the plaintiff may not have paid the payees or indorsees of the note any costs of collection or attorney's fee, yet if by reason of the default of the makers of or other prior parties to the obligation, the plaintiff after the payment of it by him aforesaid had to place the note in the hands of an attorney for collection, as he alleges in the notice for judgment was done, he was entitled to recover judgment against the makers of and prior parties to the obligation for such an amount of expense incurred by him of costs of collection or attorney's fee as the contract when properly construed provides for. For this reason also the court below was right in refusing to allow the plea under consideration to be filed. [6][7][8] 4. Was there error in the action of the court below in sustaining the general objection of the plaintiff to special plea No. 4 set forth in the statement preceding this opinion? This question must be answered in the negative. This plea is, in substance, the same as special plea No. 1 above mentioned, except that it alleges that the plaintiff knew of the suretyship alleged at the time the note was executed, and that the plaintiffs in error were in truth merely indorsers of the note. While there is much conflict among the authorities on the subject, the prevailing rule seems to be that as between the parties liable upon a note having knowledge of their true relations one to another, parol evidence *671 is admissible to show such true relationship regardless of where the signatures appear on the note, whether as maker or indorsers and regardless of the order of sequence of the indorsements. 8 Cyc. (K) pp. 262, 263; 3 R. C. L., 338, p. 1123. And by statute with us (subsection 68 of section 2841a of the Negotiable Instrument Law), it is provided as follows: As respects one another, indorsers are liable prima facie in the order in which they indorse; but evidence is admissible to show that as between or among themselves they have agreed otherwise.

The material questions raised by the assignments of error will be disposed of in their order as stated below. [1] 1. Was there error in the action of the court below in sustaining the general objection of the plaintiff to special plea No. 1 set forth in the statement preceding this opinion? The question must be answered in the negative. The plea is, in substance, that, although the signatures of the plaintiffs in error appear on the note in said suit as comakers, they were not in fact principal obligors but sureties only for certain comakers of the note; the latter being in truth the principal obligors. The plea, however, does not allege that the plaintiff had any notice of such suretyship relation of the parties before he indorsed the note. Now, while as between themselves parol evidence is admissible to show the actual relations to one another of apparent joint makers of a note, as that the relationship of surety in truth exists as to one or more of them (8 Cyc. [K] pp. 262, 263; 8 C. J., 106, p. 70) yet such evidence is admissible only against parties having knowledge of such relationship at the time of the entering into the contract by them (Id., p. 264). If a person sign a note as maker, but is, in *670 fact, a surety, and there is nothing on the face of the note to show his true relation, he will be treated and considered as a principal, with respect to all who have no notice of the suretyship. 3 R. C. L., 354, p. 1138. See, also, 8 C. J. 105, pp. 69, 70. The plaintiff was the last indorser on the note, other than the payees and indorsees thereof named therein and paid and took up the note upon default as set forth in the statement preceding this opinion. * * * An indorser of a note who, upon the default of the maker, satisfies the demands of the indorsee,

The plea under consideration would therefore have been a good plea if it had contained the further allegation that the plaintiff in the court below and the plaintiffs in error had agreed at the time of their execution or indorsement of the note that they should be jointly liable as sureties for the true makers and principal obligors, or allegations to that effect. The plea, however, contains no such allegation, and it is fatally P age | 71 defective because of the lack of such allegation. The plea does allege that the plaintiff knew at the time that these defendants were only * * * jointly liable with him, and that the plaintiff is only entitled to recover the pro rata amount due by these defendants as indorsers, because each indorser assumes the same liability as every other. But this is a mere conclusion of law and an erroneous one. The long and universally established rule at common law is that * * * the liability of indorsers, in the absence of special agreement, is successive and not joint. 3 R. C. L., 349, p. 1135. This rule has become a part of our statute law as aforesaid (subsection 68 of section 2841a of the Code). It appears from the note in suit, as aforesaid, that the plaintiff is the last indorser thereof, except the payees named in the note. There is no allegation in the plea under consideration that the plaintiff indorsed the note prior to the signing of it by the plaintiffs in error. Hence, taking the allegation of the plea to be true that the plaintiffs in error were mere indorsers of the note, still on the face of the record they were prior indorsers to the plaintiff. And in the absence of any allegation in the plea of an actual agreement between the parties that their liability should be otherwise, the prima facie order of liability aforesaid, now fixed by statute with us, negatives the conclusion of the plea and renders it bad. [9][10] 5. Was there error in the action of the court below in entering the judgment against the plaintiffs in error by a nunc pro tunc order? This question must be answered in the affirmative. As laid down by the authorities on the subject which are relied on by the plaintiff in the court below: There are two classes of cases in which it has been held proper to enter judgments and decrees nunc pro tunc. The first class embraces those cases in which the suitors have done all in their power to place the cause in a condition to be decided by the court, but in which, owing to the delay of the court, no final judgment has been entered. The second class embraces those cases in which judgment though pronounced by the court, have, from accident or mistake of the officers of the court, never been entered on the records of the court. Note in 4 Am. St. Rep. at pages 828-830. See, to same effect, Freeman on Judgments (4th Ed.) 57. The order in the instant case must be sustained, if at all, as having been entered in the first class of cases above mentioned. In such class of cases the court uses the papers and

proceedings and evidence in the case, as the same existed at the time to which the order or decree is proposed to relate back, as the basis of its action, and acts on such record at the subsequent time when the motion for the nunc pro tunc order or decree is made. The court enters now for then such order or decree as it finds from such record the party moving for the nunc pro tunc order was then entitled to. It will be at once perceived that such practice, if generally pursued, would greatly tend to destroy that confidence which is, and of right ought to be, reposed in the verity of judgments. Accordingly the authorities hold that the power to affect their operation or change their import by judgments or orders nunc pro tunc should be exercised with caution and circumspection (15 R. C. L. 63, p. 622); and we find it laid down by the very authorities relied on by the plaintiff that no case could be ranked among the first class in which the delay to render or enter judgment was imputable to any negligence or even misapprehension of the parties (Freeman on Judgments, 57); and that the practice of entering such judgments in the first class of cases was confined chiefly, if not exclusively, to those cases where, after trial and submission of a case, one of the parties died. * * * That as the suitor, who brought his action on to trial and caused it to be heard and submitted, had manifestly been guilty of no laches, the court protected him from any prejudice he might suffer by the death of his adversary after such submission and instead of permitting the action to abate, directed the judgment to be given effect, of necessity, as far back as the day of submission. Id. 57. In the note in 4 Am. St. Rep., supra, at page 830, it is also said, it is true, that while the cases in which nunc pro tunc judgments are ordered without any judgment actually rendered by the court nearly always arise from the death of one of the parties, yet they are not always restricted to that cause. But the only *672 other character of cases cited in which such a judgment has been entered is that of Springfield v. Worcester, 2 Cush. (Mass.) 52, where, while judgment was suspended to permit a hearing of reserved questions of law, the statute upon which the action was brought was repealed without a saving clause. * * * Under these circumstances, the court ordered a judgment to be entered as of a day prior to the date of the repeal of the statute. [11] But the better rule seems to be that in such case the court had no jurisdiction to enter such a nunc pro tunc order. 15 R. C. L. 63, p. 622. And as to the need of nunc pro tunc judgments or decrees to protect suitors from prejudice they might otherwise suffer by the death of adversaries that was met at common law by the fiction of making judgments bear date as of the first day of the term, if the case was so matured on docket that judgment might have been entered on that day, upon the theory that the entire term of court is in contemplation of law but one day. 15 R. C. L. 57, pp. 617, 618. This fiction of the law has been long regulated by statute with us. Section 3567 of the Code; 2 Barton's Chy. Pr. pp. 917, 918, 928; Burks' Pl. & Pr. p. 607. Prior to the amendment of section

Janz N. Serrano 3567 aforesaid, by Acts of 1897-98, p. 507 (subject to certain statutory provisions concerning the docketing thereof in order to affect purchasers for valuable consideration without notice), the lien of a judgment entered in court in a cause on docket and so matured that judgment might have been rendered on the first day of the term, although entered after the commencement of the term, related back to the first day of the term. But since such amendment such statute has provided that-The lien of a judgment shall in no case relate back to a day or other time prior to that on or at which the judgment was rendered. See 2 Pollard's Code, 1904, 3567, and note and authorities there cited. In view of the history of the subject and of the lastmentioned statutory provision, we are of opinion that, whatever may be true of other jurisdictions, with us the courts no longer possess the power to enter nunc pro tunc judgments in cases falling within the first class, but only possess such power in cases falling within the second class above mentioned. That is to say, we are of opinion that with us the office of a judgment nunc pro tunc is to record some act of the court done at a former time which was not then carried into the record, and the power of the court to make such entries is restricted to placing upon the record evidence of judicial action which has been actually taken. It may be used to make the record speak the truth, but not to make it speak what it did not speak but ought to have spoken. If the court has not rendered a judgment that it might or should have rendered, * * * it has no power to remedy these errors or omissions by ordering the entry nunc pro tunc of a proper judgment. * * * In all cases (in this state, certainly since said statute of the Acts of 1897-98 was enacted) the exercise of the power to enter judgment nunc pro tunc presupposes the actual rendition of a judgment and a mere right to a judgment will not furnish the basis for such an entry. 15 R. C. L. 64, pp. 622, 623. [12] The judgment under review was therefore erroneous and must be reversed. This being the only error we find in the record, it might be cured by entry of the same judgment by us to take effect as of the date on which it was in fact entered by the court below. But in view of the fact that the plaintiffs in error claim to have several substantial defenses attempted to be set up by the special pleas aforesaid and of the fact that the defects in such pleas are formal, we feel that the plaintiffs in error should have an opportunity to amend such pleas and thus properly present such defenses to the plaintiff's demand, should they be so advised. We shall therefore grant a new trial of the case. Having reached the above conclusion, it becomes necessary for us to refer to certain questions in connection

with the attorney's fee provision in the note in suit, which are raised in the brief for the plaintiff (the defendant in error), and, also, to pass upon the proper construction which should be given to the provisions in the note in suit on the subject of the costs of collection and the attorney's fee therein mentioned about which question is also raised in the brief for plaintiff; since both subjects are likely to give rise to the same questions P age | 72 on a new trial. [13] 6. The first questions next above referred to are whether the defense, that the amount claimed by a plaintiff as attorney's fee under the obligation sued on and provided for therein is unreasonable in amount or unconscionable, can be made by special plea under section 3299 of the Code? And, if so, how the issue made by the plea should be tried, whether by the court without or with a jury? Section 3299 aforesaid, so far as material, provides as follows: In any action on a contract, the defendant may file a plea, alleging any such failure in the consideration of the contract, or fraud in its procurement, or any such breach of any warranty to him of the title or the soundness of personal property, for the price or value whereof he entered into the contract, or any other matter as would entitle him either to recover damages at law from the plaintiff, * * * or to relief in equity, in whole or in part, against the obligation of the contract; * * * and * * * alleging the amount to which he is entitled by reason of the matters contained in the *673 plea. Every such plea shall be verified by affidavit. We are of opinion that the defense in question can be made by such plea, although there is no necessity therefor. Where the contract in suit is not under seal and the defendant seeks no recovery of any excess over the plaintiff's demand, the defense can be set up under the general issue of nonassumpsit, if the action be one in assumpsit (Burks' Pl. & Pr. 739, pp. 448-452), and the issue made by a general denial of the facts alleged in the notice in the case in judgment is not less comprehensive. The connection of the language of the statute is such that the words or any other matter do not refer to matters of the same kind previously mentioned in the statute except in one particular, namely, in the particular that they must contain the feature of being matters directly connected with and injuries growing out of the contract sued on. American Mang. Co. v. Va. Mang. Co., 91 Va. 272, at pages 281, 282, 21 S. E. 466, at page 467. As plainly set forth in the statute itself, they are any other matter as would entitle him [the defendant] to recover damages at law from the plaintiff * * * or to relief in equity, in whole or in part, against the obligation of the contract. (Italics supplied.) That the matters allowed to be pleaded under such statute must be such as would entitle the defendant to the recovery or relief mentioned against the obligation of the

contract sued on is, plainly, the only restrictive meaning which is imposed by the ejusdem generis rule, when that rule is properly applied to the words any other matter. Such rule, as said by this court in Commonwealth v. Werth, 116 Va. at page 607, 82 S. E. at page 695, Ann. Cas. 1916D, 1263, is only a rule of construction, and intended to throw light on a statute of otherwise doubtful import, and has no application where the language of the statute plainly manifests a contrary purpose. In such case the obvious intention of the Legislature must be given effect rather than defeated by the misapplication of a rule. The language of the statute under consideration, beginning with the words or any other matter, etc., was not in the statute when the preceding portion of it was first enacted. Such language was added by Act of March, 1873 (Acts 1872-73, p. 196), so that the purpose of the statute could be fully accomplished. That purpose plainly is to allow all matters in controversy between the plaintiff and defendant arising out of the same cause of action-- i. e., all matters of recoupment--to be disposed of in one action at law, so as to avoid the necessity of a separate suit having to be brought by the defendant, whether at law or in equity, to determine any such matter. American Mang. Co. v. Va. Mang. Co., supra, 91 Va. 272, at page 282, 21 S. E. 466; 1 Barton's Law Pr. p. 514 et seq.; 4 Minor's Inst. 706 et seq. [14] If defense by way of special plea under section 3299 of the Code be adopted, the plea should allege the amount to the extent of which the defendant claims the attorney's fee in question is unreasonable or unconscionable, and should also allege the facts on which such claim is based with sufficient detail and certainty to apprise the plaintiff of the nature of the defense and to enable the court on the facts being found or admitted, to decide whether the matter relied on constitutes a valid claim to the relief sought. And the plea should be verified by affidavit. [15] As to the procedure upon the plea: The procedure should be the same as upon a plea under such statute of any other matter pleadable thereunder. If the issue upon the plea is such that the facts pleaded are admitted, the sufficiency of the defense, including the determination of what amount should be recovered as an attorney's fee, is for the determination of the judge. If the issue upon the plea is one of fact, that issue must be tried by jury, subject to such proper instruction as may be given by the judge including instruction as to what amount may be recovered as an attorney's fee under such a state of facts as may be found by the jury to exist, unless all matters of fact as well as of law are submitted for decision to the judge under the statute in such case made and provided or by consent of parties, in which latter case the determination of the amount recoverable as a reasonable attorney's fee, as well as of the facts in the case, is for the judge. In other words, in every case, the facts being admitted or found, the determination of what may be recovered as an attorney's fee under a provision in the obligation in suit

Janz N. Serrano creating the obligation of payment of such a fee, is for the judge of the trial court in an action at law, and, of course, is also for such judge where the question arises in a suit in equity. [16] Further, the judge, upon the issue being made as to what amount is recoverable under the attorney's fee provision aforesaid, should allow only such an amount as may be reasonable, considering the services of the attorney actually performed in and about the collection of the debt in view of the customary charges of the profession in the locality for such services, not exceeding the maximum amount stipulated in the obligation And where the services of an attorney are not in fact employed by the holder of the obligation, and the latter party seeks such recovery, no recovery should be allowed of any attorney's fee. Bank v. Wood, 125 Tenn. 6, 140 S. W. 31; 2 Va. Law Reg. (N. S.) 321; Triplett v. Bank, 121 Va. 189, 92 S. E. 897; Colley v. Summers, etc., Co., 119 Va. 439, 89 S. E. 906, Ann. Cas. 1917D, 375. The question remaining for our consideration,*674 as likely to arise upon a new trial of the case, is as follows: [17] 7. What is the proper construction of the obligation in the note in suit on the subject of the attorney's fee? The obligation of the note is in the following form: The makers and indorsers of this note hereby * * * agree to pay costs of collection or ten per cent. attorney's fee in case payment shall not be made at maturity. (Italics supplied.) Costs of collection refers, not to costs of suit, which are recoverable by law, but to the attorney's fee for services in making or attempting to make collection. 3 R. C. L. 83, pp. 895, 896. The proper construction of the provision in the note under consideration therefore is that the makers and indorsers of the note agreed to pay the lawful holder thereof such reasonable attorney's fee as such holder may actually incur for services of attorney in making collection thereof, not exceeding the 10 per cent. maximum stipulated, payment of the note not having been made by the former in accordance with their obligation. Such an agreement is the same in substance as if it had been to pay such reasonable attorney's fee for collection actually incurred by the lawful holder of the note, up to but not exceeding 10 per cent. of the amount of the debt due to the holder of the note, principal and interest, in case of nonpayment of the note as aforesaid at maturity. The rule in this state is, in effect, that such a contract is valid and enforceable to the extent of a reasonable attorney's fee, incurred as aforesaid, not exceeding the percentage named in the note. Colley v. Summers, etc., Co., supra, 119 Va. 439, 89 S. E. 906, Ann. Cas. 1917D, 375; Triplett v. Bank, supra, 121 Va. 189, 92 S. E. 897. Because of the error of the court below in entering the judgment under review nunc pro tunc, the same will be set

Janz N. Serrano aside and annulled, with leave to the plaintiffs in error to amend their pleadings or to plead anew, and a new trial may be had by the plaintiffs in error, if they are so advised, not in conflict with the views expressed in this opinion. Reversed and remanded. age | 73 P Va. 1919. COX ET AL. v. HAGAN. 125 Va. 656, 100 S.E. 666 END OF DOCUMENT

Janz N. Serrano Circuit Court of Appeals, Second Circuit. AMERICAN MACHINE & METALS, Inc. v. DE BOTHEZAT IMPELLER CO., Inc. age | 74 P No. 129, Docket 20816. March 10, 1948. Appeal from the District Court of the United STates for the Southern District of New York. Action by American Machine & Metals, Inc., against De Bothezat Impeller Company, Inc., under the Declaratory Judgment Act, Judicial Code, Sec. 274d, 28 U.S.C.A. 400 for a judgment declaring legal relations of the parties, if the plaintiff should exercise a power of termination contained in contract with the defendant. From judgment of dismissal granted on defendant's motion before answer pursuant to rule 12(b) of the Federal Rules of Civil Procedure, 28 U.S.C.A.following section 723c, 75 F.Supp. 421, the plaintiff appeals. Reversed and remanded. the products. So long as the contract continued the fees were to be paid on net sales' regardless of whether the plaintiff's products were covered by the patents or whether the patents had expired. The contract contained no expiration date but could be terminated at any time by the plaintiff on six months' notice. In the event of such termination the plaintiff was to transfer the patents back to the defendant and to cease using the name De Bothezat, which it agreed to use in its literature and sales promotion while the contract continued.*536 Since February 19, 1946 the plaintiff has neither manufactured nor sold any product for which possession of the patents is essential. The plaintiff desires and intends' to exercise its right of termination under the contract and desires and intends' to continue in the business of selling fans and ventilating equipment. The defendant at various times has made claims and assertions to the plaintiff and other persons to the effect that upon termination of the contract the plaintiff will no longer have the right to continue the manufacture of fans and ventilating equipment, and has led plaintiff to believe that upon termination of the contract defendant will sue plaintiff if it does not cease the manufacture and sale of fans and ventilating equipment. Said claims and assertions by defendant are without basis and an actual controversy exists between the parties, and plaintiff seeks a declaration of the rights of the parties in order to avoid the possible accrual of avoidable damages. The prayer requests a declaration particularly with respect to the proper interpretation and effect of the agreement and that the court declare the right of plaintiff to continue to manufacture and sell fans and other noninfringing products after termination of the agreement and without the payment of further sums to defendant. In concluding that no controversy exists the district judge noted that the plaintiff has not yet given notice of termination of the contract and may never do so; the opinion states (75 F.Supp. 421, 424): In this case, if the court should decide that plaintiff might terminate and continue its manufacture and sale of products other than those covered by patents, plaintiff might and probably would terminate. If the court should decide otherwise, plaintiff would probably continue under the agreement until its termination and no controversy such as now claimed to exist might ever be present. In other words, plaintiff has not elected what it wishes to do and its action might and could render academic the very declaration which it seeks. The complaint is, therefore, dismissed because no justiciable controversy exists which would justify the maintenance of an action under the Declaratory Judgment Statute. The relief prayed for should not be granted at this time either as a matter of discretion or otherwise. [1] We think the judge construed the statute too narrowly. As the Supreme Court said in Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273, 61 S.Ct. 510, 85 L.Ed. 826, the difference between an abstract question and a controversy is one of degree. If notice of termination had been given, the defendant apparently concedes that there might be an actual controversy, although even after termination it would still be optional with the plaintiff whether to continue the business and an adverse decision would probably induce him not to continue. Before termination, the controversy is one step further removed from actuality but not so far removed as to present only an abstract question, in our opinion. Once the notice of termination is given, it is beyond recall; the dispute between the parties concerns the right of the plaintiff to continue business if that contingency happens. Where there is an actual controversy over contingent rights, a declaratory judgment may nevertheless be granted. Pennsylvania Casualty Co. v. Upchurch, 5 Cir., 139 F.2d 892, 894; Franklin Life Ins. Co. v. Johnson, 10 Cir., 157 F.2d 653, 658; Sigal v. Wise, 114 Conn. 297, 158 A. 891, 892, 893; Borchard, Declaratory Judgments, pp. 422-3. In Sigal v. Wise, supra, the tenant of premises destroyed by fire sought a declaration of his right to use the premises if the landlord should rebuild. Although the right claimed was contingent, the court thought that its present determination may well serve a very real practical need of the parties for guidance in their future conduct. There, it is true, the contingency was within the control of the defendant, not of the plaintiff as here, but that does not seem to be a material distinction. After bringing the contingency to pass it will be too late to avoid an action for damages if the plaintiff acts as he intends by continuing the business. The very purpose of the declaratory judgment procedure is to prevent the accrual of such avoidable damages. This procedure has long been recognized in the *537 law of Scotland and we may well be guided by Lord Justice Dunedin's opinion in Russian C. & I. Bank v. British Bank (1921), 2 A.c. 438, 448. There the British bank had obtained a loan from the Russian bank and pledged securities to protect the lender. In order to decide whether to exercise its privilege of redeeming the pledged securities, the British bank wanted to know whether the loan was repayable in rubles or sterling- a question on which the parties were in dispute. Lord Dunedin was of opinion that the case was an appropriate one for a declaratory judgment even though it was probable that if sterling was declared to be the required currency the British bank would not exercise its privilege of redemption. This seems indistinguishable from the case at bar. Also pertinent are Altvater v. Freeman, 319 U.S. 359, 63 S.Ct. 1115, 87 L.Ed. 1450, and Sola Electric Co. v. Jefferson Electric Co. 317 U.S. 173, 63 S.Ct. 172, 87 L.Ed. 165. In the latter case the Supreme Court permitted a patent licensee to seek a declaratory judgment as to the validity of certain patents without previously relinquishing its rights under the license.

SWAN, Circuit Judge.

This appeal presents a question under the Declaratory Judgment Act, 28 U.S.C.A. 400, which authorizes the courts of the United States in cases of actual controversy to declare rights and other legal relations of any interested party petitioning for such declaration, without regard to whether further relief is or could be sought. Before answering the complaint, the defendant moved, pursuant to Rule 12(b) of the Federal Rules of Civil Procedure, 28 U.s.C.A.following section 723, for dismissal of the action on the ground that (a) the complaint fails to state a claim upon which relief can be granted, and (b) the court lacks jurisdiction because there is no matter in controversy between the parties. This motion was granted for the reason, as we read the district court's opinion, that the facts alleged in the complaint did not show the existence of an actual controversy. From the judgment of dismissal the plaintiff has appealed. In summary the allegations of the complaint are the following: In 1934 the parties entered into a contract under which the defendant conveyed to the plaintiff certain patents and certain physical equipment for the making of fans and other products and the plaintiff agreed to pay the defendant license fees (not less than $5,000 annually) based on the net sales' of

Janz N. Serrano [2] Johnson v. Interstate Transit Lines, 10 Cir., 163 F.2d 125, and Perlberg v. Northwestern Mut. Life Ins. Co., E.D. Pa., 62 F.Supp. 76, relied upon by the appellee, did not involve such an irrevocable choice as the termination of the contract presents to the plaintiff in the case at bar. Failure to declare his seniority rights did not seriously affect the employee in the P age | 75 Johnson case, since he was not threatened with immediate loss of employment or status; and the insured in the Perlberg case, seeking a declaration as to the consequences of a default, would have been able even in the event of a default to reinstate his policy without penalty, or failing that to receive paid-up insurance or the cash surrender value. By the decision below the appellant here must act on his own view of his rights' and risk an otherwise profitable business in order to present a justiciable controversy. The Declaratory Judgments Act was designed to obviate just this sourt of peril, and we believe its benefits should be available to one in the appellant's situation. S.Rep.No. 1005, 73d Cong., 2 Sess., pp. 2-3; Borchard, Declaratory Judgments, pp. 58, 930. Judgment reversed and cause remanded for trial on the merits.

C.A.2 1948. American Machine & Metals, v. De Bothezat Impeller Co. 166 F.2d 535, 76 U.S.P.Q. 549 END OF DOCUMENT

Supreme Court of the United States INTERNATIONAL LONGSHOREMEN'S AND WAREHOUSEMEN'S UNION, LOCAL 37, et al. v. BOYD, District Director, Immigration and Naturalization P Service. No. 195. Argued Jan. 6, 1954. Decided March 8, 1954. Suit to enjoin the District Director of Immigration and Naturalization from so construing provision of the Immigration and Nationality Act as to treat aliens domiciled in continental United States, returning from temporary work in Alaska, as if they were aliens entering United States for the first time. The United States District Court for the Western District of Washington, 111 F.Supp. 802, entertained the suit but dismissed it on the merits, and the plaintiffs appealed. The Supreme Court, Mr. Justice Frankfurter, held that suit was an attempt to procure court ruling that if certain facts occurred in the future, the sanctions of the statute would not be applied to them, and it did not pose a concrete case as required for the proper exercise of the judicial function. Judgment vacated, with directions to dismiss complaint. Mr. Justice Black and Mr. Justice Douglas, dissented.

District Court entertained the suit but dismissed it on the merits. 111 F.Supp. 802. In our order of October 12, 1953, we postponed the question of jurisdiction to the hearing on the merits. 346 U.S. 804, 74 S.Ct. 43. FN* This section states that the exclusionary provisions of s 212(a) shall, with exceptions not here relevant, be applicable to any alien who shall leave Hawaii, Alaska, Guam, Puerto Rico, or the Virgin Islands of the United States, and who seeks to enter the continental United States * * *. 8 U.S.C. s 1182(d) (7), 8 U.S.C.A. s 1182(d)(7).

age | 76

On this appeal, appellee contends that the District Court should not have reached the statutory and constitutional questions-that it should have dismissed the suit for want of a case or controversy, for lack of standing on the union's part to bring this action, because the Attorney General was an indispensable party, and because habeas corpus is the exclusive method for judicial inquiry in deportation cases. Since the first objection is conclusive, there is an end of the matter. [1] [2] Appellants in effect asked the District Court to rule that a statute the sanctions of which had not been set in motion against individuals on whose behalf relief was *224 sought, because an occasion for doing so had not arisen, would not be applied to them if in the future such a contingency should arise. That is not a lawsuit to enforce a right; it is an endeavor to obtain a court's assurance that a statute does not govern hypothetical situations that may or may not make the challenged statute applicable. Determination of the scope and constitutionality of legislation in advance of its immediate adverse effect in the context of a concrete case involves too remote and abstract an inquiry for the proper exercise of the judicial function. United Public Workers v. Mitchell, 330 U.S. 75, 67 S.Ct. 556, 91 L.Ed. 754; see Muskrat v. United States, 219 U.S. 346, 31 S.Ct. 250, 55 L.Ed. 246, and Alabama State Federation of Labor v. McAdory, 325 U.S. 450, 65 S.Ct. 1384, 89 L.Ed. 1725. Since we do not have on the record before us a controversy appropriate for adjudication, the judgment of the District Court must be vacated, with directions to dismiss the complaint. It is so ordered. Judgment vacated with directions to dismiss the complaint.

Janz N. Serrano on by the majority for dismissing the case, I am not in disagreement. Of course federal courts do not pass on the meaning or constitutionality of statutes as they might be thought to govern mere hypothetical situations. * * * Nor should courts entertain such statutory challenges on behalf of persons upon whom adverse statutory effects are too remote and abstract an inquiry**449 for the proper exercise of the judicial function. But as I read the record it shows that judicial action is absolutely essential to save a large group of wage earners on whose behalf this action is brought from irreparable harm due to alleged lawless enforcement of a federal statute. My view makes it necessary for me to set out the facts *225 with a little more detail than they appear in the Court's opinion. Every summer members of the appellant union go from the west coast of continental United States to Alaska to work in salmon and herring canneries under collective-bargaining agreements. As the 1953 canning season approached the union and its members looked forward to this Alaska employment. A troublesome question arose, however, on account of the Immigration and Nationality Act of 1952, 66 Stat. 182. Section 212(d)(7) of this new Act has language that given one construction provides that all aliens seeking admission to continental United States from Alaska, even those previously accepted as permanent United States residents, shall be examined as if entering from a foreign country with a view to excluding them on any of the many grounds applicable to aliens generally. This new law created an acute problem for the union and its numerous members who were lawful alien residents, since aliens generally can be excluded from this country for many reasons which would not justify deporting aliens lawfully residing here. The union and its members insisted on another construction. They denied that Congress intended to require alien workers to forfeit their right to live in this country for no reason at all except that they went to Alaska, territory of the United States, to engage in lawful work under a lawfully authorized collective-bargaining contract. The defendant immigration officer announced that the union's interpretation was wrong and that workers going to Alaska would be subject to examination and exclusion. This is the controversy. It was to test the right of the immigration officer to apply s 212(d)(7) to make these workers subject to exclusion that this suit was filed by the union and two of its officers on behalf of themselves and all union members who are aliens and permanent residents. True, the action *226 was begun before the union members went to Alaska for the 1953 canning season. But it is not only admitted that the Immigration official intended to enforce s 212(d)(7) as the union and these workers feared. It is admitted here that he has since done precisely that. All 1953 alien cannery workers have actually been subjected to the wearisome routine of immigration procedure as though they had never lived here. And some of the union members are evidently about to be denied the right

Mr. Justice FRANKFURTER delivered the opinion of the Court.

This is an action by Local 37 of the International Longshoremen's and Warehousemen's Union and several of its alien members to enjoin the District Director**448 of Immigration and Naturalization at Seattle from so construing s 212(d)(7) of the Immigration and Nationality *223 Act of 1952 FN* as to treat aliens domiciled in the continental United States returning from temporary work in Alaska as if they were aliens entering the United States for the first time. Declaratory relief to the same effect is also sought. Since petitioners asserted in the alternative that such a construction of the challenged statute would be unconstitutional, a three-judge district court was convened. The case came before it on stipulated facts and issues of law, from which it appeared that the union has over three thousand members who work every summer in the herring an salmon canneries of Alaska, that some of these are aliens, and that if alien workers going to Alaska for the 1953 canning season were excluded on their return, their contract and property rights (would) be jeopardized and forfeited. The

Mr. Justice BLACK, with whom Mr. Justice DOUGLAS concurs, dissenting.

This looks to me like the very kind of case or controversy courts should decide. With the abstract principles of law relied

Janz N. Serrano ever to return to their homes on grounds that could not have been legally applied to them had they stayed in California or Washington instead of going to Alaska to work for an important American industry. Thus the threatened injury which the Court dismisses as remote and hypothetical has come about. For going to Alaska P age | 77 to engage in honest employment many of these workers may lose the home this country once afforded them. This is a strange penalty to put on productive work. Maybe this is what Congress meant by passing s 212(d)(7). And maybe in these times such a law would be held constitutional. But even so, can it be that a challenge to this law on behalf of those whom it hits the hardest is so frivolous that it should be dismissed for want of a controversy that courts should decide? Workers threatened with irreparable damages, like others, should have their cases tried.

U.S. 1954. INTERNATIONAL LONGSHOREMEN'S AND WARE. U. v. BOYD 347 U.S. 222, 74 S.Ct. 447, 98 L.Ed. 650

Supreme Court of the United States REPUBLIC NATURAL GAS CO. v. STATE OF OKLAHOMA et al. age | 78 P No. 134. Argued Jan. 6, 1948. Decided May 3, 1948. Proceeding in the matter of the appeal of the Republic Natural Gas Company from an order of the Oklahoma State Corporation Commission determining correlative rights of owners of natural gas drawn from a common source. From a judgment, 198 Okl. 350, 180 P.2d 1009, affirming the order, the Republic Natural Gas Company appeals. Appeal dismissed. Mr. Justice RUTLEDGE, Mr. Justice BLACK, Mr. Justice MURPHY, and Mr. Justice BURTON dissenting.

Mr. Justice FRANKFURTER delivered the opinion of the Court.

This is an appeal from a decision of the Supreme Court of Oklahoma, arising from an order of the State *63 Corporation Commission which concerned the correlative rights of owners of natural gas drawn from a common source. Since 1913, Oklahoma has regulated the extraction of natural gas, partly to prevent waste and partly to avoid excessive drainage as between producers sharing the same pool. The legislation provided that owners might take from a common source amounts of gas proportionate to the natural flow of their respective wells, but not more than 25% of that natural flow without the consent of the Corporation Commission; that any person taking gas away from a gas field, except for certain specified purposes, shall take ratably from each owner of the gas in proportion to his interest in said gas'; and that such ratable taking was to be upon terms agreed upon by the various well owners, or, in the event of failure to agree, upon terms fixed by the Corporation Commission.FN1 FN1 L.1913, c. 198, ss 1-3, Okl.Stat.1941, tit. 52, ss 231-33:Section 1. All natural gas under the surface of any land in this state is hereby declared to be and is the property of the owners, or gas lessees, of the surface under which gas is located in its original state.Section 2. Any owner or oil and gas lessee, of the surface, having the right to drill for gas shall have the right to sink a well to the natural gas underneath the same

and to take gas therefrom until the gas under such surface is exhausted. In case other parties, having the right to drill into the common reservoir of gas, drill a well or wells into the same, then the amount of gas each owner may take therefrom shall be proportionate to the natural flow of his well or wells to the natural flow of the well or wells of such other owners of the same common source of supply of gas, such natural flow to be determined by any standard measurement at the beginning of each calendar month; provided, that not more than twenty-five percent of the natural flow of any well shall be taken, unless for good cause shown, and upon notice and hearing the Corporation Commission may, by proper order, permit the taking of a greater amount. The drilling of a gas well or wells by any owner or lessee of the surface shall be regarded as reducing to possession his share of such gas as is shown by his well.Section 3. Any person, firm or corporation, taking gas from a gas field, except for purposes of developing a gas or oil field, and operating oil wells, and for the purpose of his own domestic use, shall take ratably from each owner of the gas in proportion to his interest in said gas, upon such terms as may be agreed upon between said owners and the party taking such, or in case they cannot agree at such a price and upon such terms as may be fixed by the Corporation Commission after notice and hearing; provided, that each owner shall be required to deliver his gas to a common point of delivery on or adjacent to the surface overlying such gas. * * *See also L.1915, c. 197, ss 4, 5, Okl.Stat.1941, tit. 52, ss 239, 240:Section 4. That whenever the full production from any common source of supply of natural gas in this state is in excess of the market demands, then any person, firm or corporation, having the right to drill into and produce gas from any such common source of supply, may take therefrom only such proportion of the natural gas that may be marketed without waste, as the natural flow of the well or wells owned or controlled by any such person, firm or corporation bears to the total natural flow of such common source of supply having due regard to the acreage drained by each well, so as to prevent any such person, firm or corporation securing any unfair proportion of the gas therefrom; provided, that the Corporation Commission may by proper order, permit the taking of a greater amount whenever it shall deem such taking reasonable or equitable. The said commission is authorized and directed to prescribe rules and regulations for the determination of the natural flow of any such well or wells, and to regulate the taking of natural gas from any or all such common sources of supply within the state, so as to prevent waste, protect the interests of the public, and of all those having a right to produce therefrom, and to prevent unreasonable discrimination in favor of any one such common source of supply as against another.Section 5. That every person, firm or corporation, now or hereafter engaged in the business of purchasing and selling natural gas in this state, shall be a common purchaser thereof, and shall purchase all of the natural gas which may be offered for sale, and which may reasonably be reached by its trunk lines, or gathering lines without discrimination in favor of one producer as against another, or in favor of any one source of supply as against

Janz N. Serrano another save as authorized by the Corporation Commission after due notice and hearing; but if any such person, firm or corporation, shall be unable to purchase all the gas so offered, then it shall purchase natural gas from each producer ratably. It shall be unlawful for any such common purchaser to discriminate between like grades and pressures of natural gas, or in favor of its own production, or of production in which it may be directly or indirectly interested, either in whole or in part, but for the purpose of prorating the natural gas to be marketed, such production shall be treated in like manner as that of any other producer or person, and shall be taken only in the ratable proportion that such production bears to the total production available for marketing. The Corporation Commission shall have authority to make regulations for the delivery, metering and equitable purchasing and taking of all such gas and shall have authority to relieve any such common purchaser, after due notice and hearing, from the duty of purchasing gas of an inferior quality or grade.

The Hugoton Gas Field is one of the largest in the United States, covering a vast area in several States, including Oklahoma. **975 It was discovered in 1924 or 1925, *64 but the Oklahoma portion was not developed until 1937. Republic, a Delaware corporation, obtained permission to do business in Oklahoma in 1938, purchased gas leases in this field and drilled wells, removing the gas in its own pipelines. In 1944, the Peerless Oil and Gas Company completed a well in a portion of the gas field otherwise tapped only by Republic. It had no market for the gas obtained from this well, nor means of transporting such gas to any market. It offered to sell the gas to Republic, which refused it. Peerless then applied to the *65 Corporation Commission for an order requiring Republic to take such gas from it ratably-that is, to take the same proportion of the natural flow of Peerless' well as Republic took of the natural flow of its own wells. After a hearing, the Commission found that the production of natural gas in the Hugoton field was in excess of the market demand; that Republic had qualified to do business in Oklahoma with full knowledge of the existing legislation requiring the ratable taking of natural gas; and that Republic was taking more than its ratable share *66 of gas from that portion of the field tapped both by its wells and that belonging to Peerless, thereby draining gas away from Peerless' tract and, in effect, taking property belonging to Peerless. The Commission ordered Republic: 1. * * * to take gas ratably from applicant's (Peerless') well * * *, and to make necessary connection as soon as applicant lays a line connecting said well with respondent's (Republic's) line, and to continue to do so until the further order of this Commission; provided that, applicant shall lay its line from its well to the lines of respondent at some point designated by the respondent, but in said Section 14 in which said well of Peerless Oil and Gas Company has been drilled; and said respondent is required to make said designation

immediately and without unreasonable delay, and in event of failure of respondent so to do, respondent shall no longer be permitted to **976 produce any of its wells located in the Hugoton Oklahoma Gas Field. 2. The terms and conditions of such taking of natural gas by P Republic Natural Gas Company from said Peerless Oil and age | 79 Gas Company's well shall be determined and agreed upon by and between applicant and respondent; and in the event said parties are unable to agree, applicant and respondent are hereby granted the right to make further application to the Commission for an order fixing such terms and conditions; and the Commission retains jurisdiction hereof for said purpose. On appeal, the Oklahoma Supreme Court affirmed, holding that Republic, having been given leave to enter the State on the basis of the legislation governing natural gas production, might not challenge its validity, and that neither the order nor the legislation on which it is based *67 runs counter to asserted constitutional rights. 198 Okl. 350, 180 P.2d 1009. The court interpreted the Commission's order as giving Republic a choice between taking the gas from Peerless and paying therefor direct, or marketing the gas and accounting to Peerless therefor, or to shut in its own production from the same common source of supply. 198 Okl. at page 356, 180 P.2d at page 1016. Invoking both the Due Process and the Equal Protection clauses of the Fourteenth Amendment, Republic appealed to this Court. This case raises thorny questions concerning the regulation of fugacious minerals, of moment both to States whose economy is especially involved and to the private enterprises which develop these natural resources. Cf. Thompson v. Consolidated Gas Utilities Corp., 300 U.S. 55, 57 S.Ct. 364, 81 L.Ed. 510; Railroad Commission of Texas v. Rowan & Nichols Oil Co., 310 U.S. 573, 60 S.Ct. 1021, 84 L.Ed. 1368, Id., 311 U.S. 570, 61 S.Ct. 343, 85 L.Ed. 358. Before reaching these constitutional issues, we must determine whether or not we have jurisdiction to do so. [1] Ever since 1789, Congress has granted this Court the power of review in State litigation only after the highest court of a State in which a decision in a suit could be had has rendered a final judgment or decree. s 237 of the Judicial Code, 28 U.S.C. s 344, 28 U.S.C.A. s 344, rephrasing s 25 of the Act of September 24, 1789, 1 Stat. 73, 85. Designed to avoid the evils of piecemeal review, this reflects a marked characteristic of the federal judicial system, unlike that of some of the States. This prerequisite for the exercise of the appellate powers of this Court is especially pertinent when a constitutional barrier is asserted against a State court's decision on matters peculiarly of local concern. Close observance of this limitation upon the Court is not regard for a strangling technicality. History bears ample testimony that it is an important factor in securing harmonious State-federal relations.

[2] [3] No self-enforcing formula defining when a judgment is final can be devised. Tests have been indicated *68 which are helpful in giving direction and emphasis to decision from case to case. Thus, the requirement of finality has not been met merely because the major issues in a case have been decided and only a few loose ends remain to be tied up-for example, where liability has been determined and all that needs to be adjudicated is the amount of damages. Bruce v. Tobin, 245 U.S. 18, 38 S.Ct. 7, 62 L.Ed. 123; Martinez v. International Banking Corp., 220 U.S. 214, 223, 31 S.Ct. 408, 411, 55 L.Ed. 438; Mississippi Central R. Co. v. Smith, 295 U.S. 718, 55 S.Ct. 830, 79 L.Ed. 1673. On the other hand, if nothing more than a ministerial act remains to be done, such as the entry of a judgment upon a mandate, the decree is regarded as concluding the case and is immediately reviewable. Board of Commissioners v. Lucas, 93 U.S. 108, 23 L.Ed. 822; Mower v. Fletcher, 114 U.S. 127, 5 S.Ct. 799, 29 L.Ed. 117. There have been instances where the Court has entertained an appeal of an order that otherwise might be deemed interlocutory, because the controversy had proceeded to a point where a losing party would be irreparably injured if review were unavailing. Cf. **977 Clark v. Williard, 294 U.S. 211, 55 S.Ct. 356, 79 L.Ed. 865, 98 A.L.R. 347; Gumbel v. Pitkin, 113 U.S. 545, 5 S.Ct. 616, 28 L.Ed. 1128 and compare Forgay v. Conrad, 6 How. 201, 204, 12 L.Ed. 404, with Barnard v. Gibson, 7 How. 650, 657, 12 L.Ed. 857. For related reasons, an order decreeing immediate transfer of possession of physical property is final for purposes of review even though an accounting for profits is to follow. In such cases the accounting is deemed a severed controversy and not part of the main case. Forgay v. Conrad, supra; Carondelet Canal & Navigation Co. v. Louisiana, 233 U.S. 362, 34 S.Ct. 627, 58 L.Ed. 1001; Radio Station WOW v. Johnson, 326 U.S. 120, 65 S.Ct. 1475, 89 L.Ed. 2092. But a decision that a taking by eminent domain is for a public use, where the amount of compensation has not been determined, is not deemed final, certainly where the property will not change hands until after the award of compensation. Grays Harbor Logging Co. v. Coats-Fordney Logging Co., 243 U.S. 251, 37 S.Ct. 295, 61 L.Ed. 702; *69 cf. Luxton v. North River Bridge Co., 147 U.S. 337, 13 S.Ct. 356, 37 L.Ed. 194; Catlin v. United States, 324 U.S. 229, 65 S.Ct. 631, 89 L.Ed. 911.FN2 One thing is clear. The considerations that determine finality are not abstractions but have reference to very real interests-not merely those of the immediate parties but, more particularly, those that pertain to the smooth functioning of our judicial system. FN2 In the Catlin case our decision was based on the general rule that condemnation orders prior to determination of just compensation are not appealable. The wartime statutes there involved were urged by the claimants as a reason for not applying the general rule. We rejected this contention.

Janz N. Serrano On which side of the line, however faint and faltering at times, dividing judgments that were deemed final from those found not to be so, does the judgment before us fall? The order of the Oklahoma Corporation Commission, as affirmed below, terminates some but not all issues in this proceeding. Republic is required to take ratably from Peerless, but it may do so in any one of three ways. If, as is most probable, Republic would choose not to close down its own wells, under the Commission's order it must allow Peerless to connect its well to Republic's pipeline. But there has been left open for later determination, in event of failure to reach agreement, the terms upon which Republic must take the gas, the rates which it must pay on purchase, or may charge if it sells as agent of Peerless. Does either its alternative character, or the fact that it leaves matters still open for determination, so qualify the order as to make it short of final for present review? [4] [5] [6] [7] [8] [9] We turn first to the latter point. Certainly what remains to be done cannot be characterized as merely ministerial. Whether or not the amount of gas to be taken by Republic from Peerless can be ascertained through application of a formula, the determination of the *70 price to be paid for the gas if purchased, or the fees to be paid to Republic for marketing it if sold on behalf of Peerless, clearly requires the exercise of judgment.FN3 Nor is there any immediate threat of irreparable damage to Republic, rendering postponed review so illusory as to make the decree final now or never. The Commission's order requires Republic to designate a point on its pipeline at which Peerless might attach a line, and after Peerless had done so to connect it immediately. But it does not appear that the order requires Republic to commence taking Peerless' gas before the terms of taking have either been agreed upon or ordered by the Commission. Nor does it appear that Republic would have to bear the expense of connecting the pipeline, nor that such expense would be substantial. Indeed, the incurring of some loss, before a process preliminary**978 to review nere is exhausted, is not in itself sufficient to authorize our intervention. Cf. Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41, 50-52, 58 S.Ct. 459, 463, 464, 82 L.Ed. 638. But even if the Commission's order were construed to require Republic to take and dispose of Peerless' gas immediately-and we are not so advised by the State Court-there is no ground for assuming that any loss that Republic might incur could not be recovered should the completed direction of the Oklahoma Commission, on affirmance by that State's Supreme Court ultimately be found to be unconstitutional. Merely because a party to a litigation may be temporarily out of pocket, is not sufficient to warrant immediate review of an incomplete State judgment. Appellant, of course, has the burden of *71 affirmatively establishing this Court's jurisdiction. Memphis Natural Gas Co. v. Beeler, 315 U.S. 649, 651, 62 S.Ct. 857, 859, 86 L.Ed. 1090. The policy against premature constitutional adjudications demands that any doubts in maintaining this burden be resolved against jurisdiction. See citation of cases in the

concurring opinion of Mr. Justice Brandeis in Ashwander v. Tennessee Valley Authority, 297 U.S. 288, 341, 345, 348, 56 S.Ct. 466, 480, 482, 483, 80 L.Ed. 688. FN3 This case is unlike those in which a rate had been fixed, subject to a continuing jurisdiction to modify it later. Cf. Market Street R. Co. v. Railroad Commission, 324 U.S. P age | 80 548, 65 S.Ct. 770, 89 L.Ed. 1171; St. Louis, Iron Mountain & Southern R. Co. v. Southern Express Co., 108 U.S. 24, 2 S.Ct. 6, 27 L.Ed. 638. Here, no rates have been set, and their future establishment has been left open.

review by this court. Collins v. Miller, 252 U.S. 364, 371, 40 S.Ct. 347, 350, 64 L.Ed. 616. This makes it unnecessary to consider whether the mere fact that the decree gave alternative commands precluded it from being final. Cf. Paducah v. East Tennessee Tel.Co., 229 U.S. 476, 33 S.Ct. 816, 57 L.Ed. 1286; Jones' Adm'r v. Craig, 127 U.S. 213, 8 S.Ct. 1175, 32 L.Ed. 147; Note, 48 Harv.L.Rev. 302, 305-306. Since the judgment now appealed from lacks the necessary finality, we cannot consider the merits. All of Republic's constitutional objections are of course saved. Appeal dismissed.

Janz N. Serrano the variables are presented only in the abstract. Tomorrow the facts will be known, when the precise impact of the order on appellant will be determined. Thus to me the *74 policy against premature constitutional adjudication precludes us from saying the judgment in the present case is final.

Mr. Justice RUTLEDGE, with whom Mr. Justice BLACK, Mr. Justice MURPHY, and Mr. Justice BURTON join, dissenting.

[10] [11] The condemnation precedents attract this case more persuasively than do the accounting cases. Where it is claimed that a decree transferring property overrides an asserted federal right, as in Forgay v. Conrad, supra, and Radio Station WOW v. Johnson, supra, no disposition of the subsequent accounting proceeding can possibly make up for the defeated party's loss, since the party who has lost the property must also pay to his opponent what the accounting decrees. Hence his desire to appeal the issue of the right to the property will almost certainly persist. On the other hand, in an eminent domain case, as in a case like this, the fate of the whole litigation may well be affected by the fate of the unresolved contingencies of the litigation. An adequate award in an eminent domain case or a profitable rate in the case before us might well satisfy the losing party to acquiesce in the disposition of the earlier issue. It is of course not our province to discourage appeals. But for the soundest of reasons we ought not to pass on constitutional issues before they have reached a definitive stop. Another similarity between this case and the condemnation cases calls for abstention until what is organically one litigation has been concluded in the State. It is that the matters left open may generate additional federal questions. This brings into vivid relevance the policy against fragmentary review. In accounting cases, that which still remains to be litigated can scarcely give rise to new federal questions. *72 The policy against fragmentary review has therefore little bearing. But contests over valuation in eminent domain cases, as price-fixing in this type of case, are inherently provocative of constitutional claims. This potentiality of additional federal questions arising out of the same controversy has led this Court to find want of the necessary finality of adjudicated constitutional issues in condemnation decrees before valuation has been made. Like considerations are relevant here. [12] In short, the guiding considerations for determining whether the decree of the court below possesses requisite finality lead to the conclusion that this case must await its culmination in the judicial process of the State before we can assume jurisdiction. Only one branch of the case has been finally disposed of below; therefore none of it is ripe for

**979 Mr. Justice DOUGLAS, concurring.

The judgment of the Oklahoma court is not final merely because it establishes that Republic has no right to drain away the Peerless gas without paying for it. I think it would be conceded that, even so, the judgment would not be final if it offered appellant three alternative ways to comply and there were doubts as to the constitutionality of any one of them. Then we would wait *73 to see which of the alternatives was ultimately selected or imposed before reviewing the constitutionality of any of them. But there would be no more reason to defer decision on the merits in that case than in this. For the constitutional questions would be isolated in each and we would be as uncertain in one as in the other which of the alternatives would actually apply to appellant. And the principle seems to me to be the same even when a majority of us would sustain the order whatever alternative was chosen as its sanction. There is, of course, in the one case the chance of saving the order only if one remedy rather than another is chosen, while in the other the order would survive whichever was chosen. But in each we would be giving needless constitutional dissertations on some points. That is nontheless true in a case where the constitutional questions seem to a majority of us simple, uncomplicated and of no great dignity. For the single constitutional question necessary for decision will not be isolated until the precise pinch of the order on the appellant is known. It will not be known in the present case at least until appellant elects or is required (1) to shut down, (2) to become a carrier of the Peerless gas, or (3) to purchase it. The legal, as well as the economic, relationship which Republic will bear to Peerless will vary as one or another choice is made. To make Republic a carrier is to submit it to different business risks than to make it a purchaser. The fact that each would raise only questions of due process' under the Fourteenth Amendment does not mean that the questions are identical. Even when reasonableness is the test, judges have developed great contrariety of opinions. The point is that today

I think the Oklahoma Supreme Court's judgment is final for the purposes of s 237 of the Judicial Code, 28 U.S.C. s 344, 28 U.S.C.A. s 344, that the state commission's order is valid, and that deferring decision on the merits to some indefinite future time will only prolong an already lengthy litigation unnecessarily and with possible irreparable harm to one party or the other. Appellant, Republic Natural Gas Company, has operated gas wells in the Hugoton Gas Field for many years. It was the first major producer to exploit the Oklahoma portion of the field,FN1 having constructed its own gathering system and pipe lines extending from Oklahoma into Kansas. With only minor exceptions Republic has never carried any but its own gas in its pipe lines. FN2 198 Okl. at page 352, 180 P.2d 1009. FN1 Republic has 92 wells in Kansas and 38 in Oklahoma. FN2 The Oklahoma Supreme Court found it unnecessary to consider whether Republic was either a common carrier or a common purchaser of gas. 198 Okl. at page 353, 180 P.2d 1009. The term common purchaser is explained in Okl.Stat., tit. 52, s 240. In 1944 appellee, Peerless Company, completed its only well in Oklahoma, in the Hugoton field. This well is not connected**980 to any pipe line. It therefore presently lies dormant. Surrounding Republic wells drilled into the same reservoir concededly are draining gas constantly from under the Peerless land. FN3 Except for the part of *75 Republic's gathering system which runs across the Peerless land, no market outlet that would take sufficient gas to justify production of the Peerless well is close enough to make it financially practical for Peerless to construct its own pipe line. It is undisputed that the only feasible method of producing the well is to require Republic to take Peerless gas into its gathering system.FN4 FN3 Appellant concedes that the operation of the Republic wells is draining gas from under the dormant Peerless well. The findings of the commission state: (d) Republic * * * is taking and will continue to take more than its proportionate part of the natural gas in said field unless required to take ratably from said well of Peerless. * * *(e) Republic * * * is draining gas from underneath said Section 14

into which said Peerless Oil and Gas Company's well has been drilled, and will continue to drain gas from underneath said Section 14 until all the gas thereunder has been drained and Peerless * * * will be prevented from taking its proportionate share of the natural gas in the field unless Republic * * * is required to take gas ratably from (Peerless). FN4 The Report of the commission states: It is P age | 81 evident from all the facts and circumstances in this case that if the Peerless Company is to be allowed to produce gas from its well, this gas must be by it transported fifteen to thirty miles, unless said gas is transported or disposed of by the Republic Natural Gas Company.It would be impractical from a financial standpoint to construct a pipeline to any city or other market outlet that would take sufficient gas to justify the production of this well; and it would be impossible to economically operate the well under present conditions existing in that field unless the gas is taken into the pipeline of the Republic Natural Gas Company. For this reason Peerless applied to the Oklahoma Corporate Commission for an order compelling Republic to connect its pipe line to the Peerless well and to purchase gas from Peerless at a price to be fixed by the commission. After hearing, the commission concluded that the applicable Oklahoma statutes FN5 required it to enforce ratable taking and ratable production of gas as between Republic and Peerless. FN5 Okl.Stat., tit. 52, ss 232, 233, 239, 240, 243. The commission recognized alternative methods of protecting Peerless from loss due to drainage, first by ordering *76 all wells in the area to shut down completely, and second by ordering Republic to purchase from Peerless. Since the first method was considered harsh, the second was preferred. Accordingly the commission issued an order requiring Republic to take gas ratably from the Peerless well as soon as the necessary connection could be made, allowing it, however, the alternative of closing down all of its wells in the Oklahoma portion of the field if it preferred this to taking the Peerless gas. The terms and conditions of the taking were to be determined by the parties; but, in the event of failure to agree, they were granted the right to make further application to the Commission for an order fixing such terms and conditions * * *.'FN6 The taking,**981 however, was not to await this agreement or further order; it was to begin at once.FN7 FN6 The order required Republic 1. * * * to take gas ratably from (Peerless) and to make necessary connection as soon as applicant lays a line connecting said well with respondent's line, and to continue to do so until the further order of this Commission; provided that, applicant shall lay its line from its well to the lines of respondent at some point designated by the respondent, but in said Section 14 in which said well of Peerless * * * has been drilled; and said respondent is required to make said designation immediately and without unreasonable delay, and in event of failure of respondent so to do, respondent shall no longer be permitted to produce any of its wells located in the Hugoton Gas Field. (Emphasis added.)2.

The terms and conditions of such taking of natural gas by (Republic) from (Peerless) shall be determined and agreed upon by and between applicant and respondent; and in the event said parties are unable to agree, applicant and respondent are hereby granted the right to make further application to the Commission for an order fixing such terms and conditions; and the Commission retains jurisdiction hereof for said purpose. FN7 See note 6. The order's language leaves no room for the inference, which appears to be injected here, that the taking was not required to begin until the terms had been agreed upon or determined by further order. *77 Affirming the order, the Supreme Court of Oklahoma construed the state statutes to authorize the administrative action. 198 Okl. 350, 180 P.2d 1009. The case thus presents on the merits the question whether a state, as a means of adjusting private correlative rights in a common reservoir, has the power in such circumstances as these to compel one private producer to share his market with another, when otherwise his production would drain off that other's ratable share of the gas in place and thus appropriate it to himself.

Janz N. Serrano determinations. The Gospel Army case represents a typical instance for applying the terms and the policy of s 237.FN9 But not every decision by a state court of last resort leaving the controversy open to further proceedings and orders is either inconclusive of the issues or premature for purposes of review under s 237. This appears most recently from the decision in Radio Station WOW v. Johnson, 326 U.S. 120, 65 S.Ct. 1475, 89 L.Ed. 2092, which applied a settled line of authorities to that effect. Cf. Richfield Oil Corp. v. State Board of Equalization, 329 U.S. 69, 67 S.Ct. 156, 91 L.Ed. 80. FN8 Some of the considerations are enumerated in Radio Station WOW v. Johnson, 326 U.S. 120, 123, 124, 65 S.Ct. 1475, 1477, 1478, 89 L.Ed. 2092. FN9 Under California procedure the state supreme court's unqualified order for reversal was effective to remand the case for a new trial and (place) the parties in the same position as if the case had never been tried. ' 331 U.S. at page 546, 67 S.Ct. at page 1430, and authorities cited. The effect was thus to leave all issues inconclusively determined pending further proceedings in the trial court. In such cases the formulation of the test of finality made in the Gospel Army and like decisions has not been followed. Instead that question, in the special circumstances, has been treated as posing essentially a practical problem, not one to be determined either by the label attached to the state court judgment by local law, **982 Richfield Oil Corp. v. State Board of Equalization, supra, or by the merely mechanical inquiry whether some further order or proceeding beyond the ministerial act of entering the judgment may be had or necessary after our decision is rendered. Radio Station WOW v. Johnson, supra, 326 U.S. at page 125, 65 S.Ct. at page 1478. The WOW opinion noted that the typical case for applying the broader, less mechanical approach to the *79 question of finality had involved judgments directing the immediate delivery of property, to be followed by an accounting decreed in the same order. It stated, with reference to these and like situations: In effect, such a controversy is a multiple litigation allowing review of the adjudication which is concluded because it is independent of, and unaffected by, another litigation with which it happens to be entangled. 326 U.S. at page 126, 65 S.Ct. at page 1479. Accordingly, since the two phases of the controversy were separate and distinct, we exercised our jurisdiction to determine the federal questions involved in the phase concluded by the state court's decision. This was done, although the judgment required further and possibly extensive judicial proceedings before the other and separable phase of the accounting could reach a final determination.FN10 Those further proceedings involved very much more than ministerial acts'; indeed the determination of a complicated accounting requires the highest order of judicial discretion. FN10 The two prior decisions deemed decisive against mechanical determination of finality in such situations

I. The majority consider that the proceedings in the state tribunals have not terminated in a final judgment from which appeal to this Court lies, and therefore refuse to adjudicate this question. In the strictest sense the state proceedings will not be completed until the parties have agreed upon the terms and conditions of Republic's taking of gas from Peerless or, if they do not agree, until the commission has issued an additional order fixing those terms. Since it is not certain that the parties will agree, the possibility remains that a further order may be required before all phases of the controversy are disposed of. It is this possibility, as I think a remote one, which furnishes one of the grounds for concluding that the Oklahoma court's judgment is not final within the meaning and policy of s 237. The fact that all phases of the litigation are not concluded does not necessarily defeat our jurisdiction. This is true, although as recently as Gospel Army v. Los Angeles, 331 U.S. 543, 67 S.Ct. 1428, 91 L.Ed. 1662, we reiterated that, for a judgment to be final and reviewable under s 237, it must end the litigation by fully determining the rights of the parties, so that nothing remains to be done by the trial court except the ministerial act of entering the judgment which the *78 appellate court * * * directed. 331 U.S. at page 546, 67 S.Ct. at page 1430. This is the general rule, grounded in a variety of considerations reflected in the statutory commandFN8 and coming down to the sum that, in exercising the jurisdiction conferred by s 237, this Court is not to be concerned with reviewing inconclusive, piecemeal, or repetitious

were Forgay v. Conrad, 6 How. 201, 12 L.Ed. 404, and Carondelet Canal & Navigation Co. v. Louisiana, 233 U.S. 362, 34 S.Ct. 627, 58 L.Ed. 1001, the former of which we noted had stood on our books for nearly a hundred years in an opinion carrying the authority, especially weighty in such matters, of Chief Justice Taney. 326 U.S. 120, 125, 65 S.Ct. 1475. Notwithstanding this and despite the want of strict P age | 82 finality, jurisdiction was sustained bcause a number of factors were felt to require that action in order to give effect to the policy of s 237 providing for review, rather than to a merely mechanical application of its terms for denying review. There was nothing tentative or inconclusive about the Nebraska court's judgment for immediate delivery of the property. Nor was it necessary to execution of that phase of the judgment to have contemporaneous conclusion*80 of the accounting phase. Except for the latter, the judgment was ripe for review. Indeed immediate execution without review of the federal questions affecting the delivery phase until after the accounting had been completed, offered the possibility of irreparable harm to one or possibly both of the parties. This factor obviously tended to make later full review partly or wholly futile. Moreover, until the delivery phase had been settled, it could not be known whether the accounting would be necessary, for that need was consequentially incident to and dependent upon determination of the core of the litigation, which was the right to delivery. In these circumstances it was rightly considered more consistent with the intent and purpose of s 237 to allow immediate review, notwithstanding the possibility of a later further review in the accounting phase, than to deny review with the chance that a later one might not fully save the parties' rights. The section's policy to furnish full, adequate and prompt review outweighed any design to secure absolute and literal finality. In all these respects this case presents a parallel to the WOW case too close, in my opinion, for distinguishing between them. Republic is not directed to negotiate terms and on completing the negotiation to make its facilities available to Peerless. It is ordered to make a connection with Peerless and to begin carrying gas at once. That phase of the order, like the delivery phase in the accounting cases, does not await the fixing of the terms whether by agreement or by further order.FN11 It is a **983 present obligation, effective immediately and without qualification.FN12 See Knox Nat. Farm Loan Ass'n v. Phillips, 300 U.S. 194, 198, 57 S.Ct. 418, 420, 81 L.Ed. 599, 108 A.L.R. 738. FN11 See notes 6, 7 supra and text. FN12 In the remote event that Republic should elect to shut down production, there would be no need for a further order or agreement of the parties, and the presently erected obstacle to finality would be completely removed.

*81 Moreover there is nothing tentative or inconclusive about this phase of the order or the state judgment sustaining it. That phase not only is separable from the matter of fixing the terms; like the order for delivery in the WOW case, it is the main core of the controversy to which the aspect of fixing terms is both consequential and incidental. The WOW order required immediate delivery of property, with consequent possibility of irreparable harm. Here the order required immediate acceptance of delivery, with similar possibility of injury for one party or the other.FN13 FN13 To permit Republic to continue drainage from beneath Peerless' land for the indefinite period required for sending the case back to the Oklahoma tribunals and then bringing it back here a second time will be to deprive Peerless of that gas unless the state law allows compensation for such continued taking from the date of the present order. It is at least highly doubtful that the state law allows such a remedy, even if the order is eventually held valid.On the other hand, if the order should be invalidated on the deferred review, Republic will have been put to further and unnecessary delay, uncertainty and expense in ascertaining its rights, merely to secure a determination which cannot possibly affect them. If this may not be irreparable injury, it certainly is not the policy of s 237. Neither is there greater likelihood of piecemeal consideration of constitutional and other questions than in the WOW case. Cf. 326 U.S. at page 127, 65 S.Ct. at page 1480. The matter of fixing terms here hardly can be more difficult practically or more complex legally than making the accounting in the WOW case.FN14 It is hard also to see how one would be either more or less likely to throw up new constitutional issues than *82 the other. Nor can the WOW case be taken to rule that this Court could not or would not consider constitutional issues arising on the accounting phase, unlikely though the necessity for its doing so may have been. There is thus a substantially complete parallel between the situation now presented and that in the WOW line of cases. FN14 In view of marketing conditions in this industry, no such problem of valuation or of reaching agreement upon it would be presented as, for instance, in the case of seeking to place a value upon real estate taken by condemnation for public use or valuation of property for ratemaking purposes. The idea that determining the value of the gas taken here would present all the difficulties of valuing a railroad for rate-making purposes blows the matter up beyond all the practicalities of the situation. In one respect this case is stronger for finding appealable finality. For here no further order may be necessary or made, since present resolution of the basic constitutional problem in all probability will end the entire controversy. That certainly would be the result if the decision should go against Peerless or if Republic should elect to shut down production. And if the decision should be in Peerless' favor, it is hardly likely that the parties will be unable to agree upon terms since, in case of

Janz N. Serrano failure to agree, the commission will prescribe them.FN15 The case indeed is not basically a controversy over terms at all. They present only a contingent, collateral matter. What is fundamentally at stake is the right of Republic to take the gas from beneath Peerless' land and market it without paying Peerless for it. Once that question is finally determined, as it can be only by this Court's decision of the constitutional question, the need for a further order will become highly improbable. FN15 See note 14. This case therefore is one in which the need for further proceedings may never arise and almost certainly would not do so if the constitutional question were now determined. Indeed, in a closer factual application that the WOW case, it presents **984 in the jurisdictional aspect an almost exact parallel to the order reviewed in Pierce Oil Corp. v. Phoenix Refining Co., 259 U.S. 125, 42 S.Ct. 440, 66 L.Ed. 855, where the Oklahoma commission required the appellant to carry oil for the appellee at unspecified rates. Cf. *83 Gulf Refining Co. v. United States, 269 U.S. 125, 46 S.Ct. 52, 70 L.Ed. 195; Clark v. Williard, 292 U.S. 112, 54 S.Ct. 615, 78 L.Ed. 1160. The parallel to the WOW line of decisions, however, is put aside and this case is decided by analogy to condemnation cases, particularly Grays Harbor Logging Co. v. Coats-Fordney Logging Co., 243 U.S. 251, 37 S.Ct. 295, 61 L.Ed. 702. The analogy is inapposite. It is true that in such cases this Court generally, though not uniformly,FN16 has held that the trial court judgment is not final until after the award of compensation is made. The decisions were properly rendered, but for reasons not applicable here. In the Grays Harbor case the state constitution and controlling legislation prohibited the transfer of the condemned property until after the compensation had been determined and paid. Thus the issue of the right to take was necessarily dependent for final resolution on the determination of the amount of compensation.FN17 The controversy was not separable into distinct phases as in the WOW case and here. 243 U.S. at page 256, 37 S.Ct. at page 297.FN18 Nor had the state judgment already affected the appellant's property rights, as was true in the WOW case and is true here. FN16 Wheeling & Belmont Bridge Co. v. Wheeling Bridge Co., 138 U.S. 287, 11 S.Ct. 301, 34 L.Ed. 967. FN17 The same was said to be true of Luxton v. North River Bridge Co., 147 U.S. 337, 13 S.Ct. 356, 37 L.Ed. 194. See id. 147 U.S. at page 341, 13 S.Ct. at page 358. FN18 Moreover, under state practice review of the condemnation order by the state supreme court was by certiorari, not by appeal which lay only from the order fixing damages. As a matter of state law, therefore, the judgment on the condemnation order was interlocutory. See, however, as to this Catlin v. United States, 324 U.S. 229, 234, 65 S.Ct. 631, 634, 89 L.Ed. 911; Luxton v. North River Bridge Co., 147 U.S. 337, 13 S.Ct. 356, 37 L.Ed. 194.

In Catlin v. United States, 324 U.S. 229, 65 S.Ct. 631, 89 L.Ed. 911, the question of the right to take was settled conclusively below before the award of damages was fixed. But there to have permitted an appeal from the order transferring possession would have produced delays inconsistent with the overriding*84 purpose and policy of the War Purposes and Declaration of Taking Acts. 26 Stat. 316, as amended by 40 Stat. P age | 83 241, 518, 50 U.S.C.A. s 171; 46 Stat. 1421, 40 U.S.C.A. ss 258a258e. 324 U.S. at pages 235, 238, 240, 65 S.Ct. at pages 634, 636, 637. Here the converse is true, for to refuse to pass on the merits can serve only to prolong the litigation without compensating advantage for the policy of s 237 or other enactment. There is no overriding policy of independent legislation, comparable to that of the War Purposes and Declaration of Taking Acts, dictating denial or deferring of review. The asserted analogy to the Grays Harbor, Catlin and Luxton (see note 17) cases therefore does not hold for the entirely different situations now presented. In them either there was no separable phase of the litigation; or statutory policy independent of s 237 or other like requirement of finality forbade review before ultimate disposition of every phase of the litigation in the state or inferior federal courts. The condemnation cases therefore, though generally uniform in denying review of orders for condemnation prior to award of damages, are not uniform in resting this result wholly on the requirement of finality made by s 237 and like provisions for review, but frequently rest on other and independent grounds pertinent to the application of those provisions. The penumbral area of appealable finality, see 326 U.S. at page 124, 65 S.Ct. at page 1478, may not be sweeping in its scope. It is nevertheless one essential to prevent the letter of the section from overriding its reason. For this purpose it would seem to comprehend any situation presenting separable phases of litigation, **985 one involving the core or crux of the controversy between the parties, the other collateral matters dependent for the necessity of their consideration and decision upon final and unqualified disposition of the hub of the dispute. If a merely mechanical application of s 237 is to be avoided, it cannot be taken that the practical approach of the WOW line of decisions must *85 be limited exclusively to cases where an accounting is ordered to follow delivery of property decreed at the same time. The reason of the exception, indeed of s 237 itself, is not so limited. Because the delivery and accounting cases are not the only ones presenting such problems, judgment must be given some play in other situations as well to decide whether the vices excluded by the policies underlying s 237 are present, as they may be or not according to the character and effects of the particular determination sought to be reviewed. Finally, it hardly can be that merely the alternative character of the order per se deprives it of finality, regardless of whether any of the alternatives presents a substantial

federal question. Because Republic is allowed to choose between shutting down its wells and carrying or purchasing the Peerless gas, it seems to be thought that the order lacks finality until that choice is made, even though when made either course would be clearly within the state's power to require. The argument woud have more force if the difference between the alternatives were great enough to make it likely that contrary results might be reached on the different alternatives. But where as here the difference emphasized, e.g., is merely between the passage of title before and after the carriage, it is hard to see how there could be more difficulty with one alternative than with the other. See Part II; also Part IV. So minor a distinction hardly furnishes a substantial basis for contrariety of judicial opinion on due process questions. Nor is it suggested that allowing the choice between either of those two courses and shutting down presents greater difficulty. Given constitutionality of all alternatives, it no more transcends state power to permit the party affected to select the course least onerous than to require him to follow the one most burdensome. It is eually hard to see how giving the choice destroys the order's *86 finality, unless again a wholly mechanical conception of that term as used in s 237 is to control. The section's policy is against hypothetical, premature and piecemeal constitutional decision, not against a choice of alternatives presenting no such problem. Here the question is whether Oklahoma can offer Republic the choice of shutting down production or taking and paying for the Peerless gas. Either course will protect the latter's rights against drainage by Republic. Either standing alone in the order's terms would not affect finality. Neither, merely upon the premise that alternative character per se destroys finality, presents a doubtful question of constitutionality. And finally the alternative of shutting down, realistically considered, is more nearly sanction than alternative mode of compliance.FN19 FN19 Cf. Wabash & Erie Canal v. Beers, 1 Black 54, 17 L.Ed. 41; Milwaukee & Minnesota R. Co. v. Soutter, 2 Wall. 440, 17 L.Ed. 860.Control of production, of course, is the core of state conservation programs. In Champlin Refining Co. v. Corporation Commission, 286 U.S. 210, 52 S.Ct. 559, 76 L.Ed. 1062, 86 A.L.R. 403, proration orders limiting production of oil wells to as little as six per cent of capacity were sustained. See 286 U.S. at page 229, 52 S.Ct. at page 562. Cf. Walls v. Midland Carbon Co., 254 U.S. 300, 41 S.Ct. 118, 65 L.Ed. 276; Lindsley v. Natural Carbonic Gas Co., 220 U.S. 61, 31 S.Ct. 337, 55 L.Ed. 369, Ann.Cas.1912C, 160. The power of a state to protect correlative rights hardly can be regarded as furnishing a less solid basis for control of production than the power to prevent waste. See note 29 and text infra. In such circumstances to say that coupling the two courses alternatively deprives the order of finality seems to me to be giving to the terms of s 237 a mechanical application out

Janz N. Serrano of harmony with the section's policy, just as does refusing to decide**986 the case before it is known whether a further order may be necessary for fixing the price of the Peerless gas. Such a view can only handicap administrative action either by forcing orders to specify a single course of compliance when alternatives may be much more desirable, or by delaying review and thus *87 effective administrative action until one or perhaps all of the alternatives in turn are tried out first in election and then in review. A decision now would settle every substantial pending phase of the controversy. At the most but a minor consequential and separable aspect would remain for remotely possible further action in the state tribunals. It is to the interest of both parties, and the state authorities as well, that their rights be determined and the controversy be ended. And on the facts the question of jurisdiction is closely related to the merits. In view of all these considerations, to deny the parties our judgment now is to make a fetish of technical finality without securing any of the substantial advantages for constitutional adjudication which s 237, in the light of its underlying policies, was designed to attain. Instead that section becomes an instrument of sheer delay for the performance of our function, for executing those of state agencies, and for settling parties' rights. The section has no such office. By declaring now that the state may follow either of two clearly permissible courses and allow those with whom it deals to choose between them, we would not speak hypothetically or prematurely or violate any other policy underlying s 237.

II. Beyond the matter of jurisdiction, there is in this case no such question concerning its exercise as arose in Rescue Army v. Municipal Court, 331 U.S. 549, 67 S.Ct. 1409, 91 L.Ed. 1666. The constitutional issues are not speculative, premature or presented abstractly en masse. The alternative character of the state judgment does not prevent the federal questions from being sufficiently precise and concrete for purposes of decision here, although various ambiguities have been suggested. *88 Thus it is said that we cannot tell whether the order compels Republic to share its market or merely requires it ot carry gas to a market which Peerless must obtain for itself. Cf. Thompson v. Consolidated Gas Utilities Corp., 300 U.S. 55, 57 S.Ct. 364, 81 L.Ed. 510. The order here is not subject to such an ambiguity. It in terms commands Republic to take Peerless gas and to pay for itFN20. FN20 In its report the commission concluded that Republic should be required to * * * allow the Peerless gas to enter the Republic pipeline, and pay the Peerless Company for the gas. The order itself in unqualified terms directs Republic to take gas ratably from (Peerless) * * * as soon as applicant

lays a line connecting said well with respondent's line * * *. See notes 6, 7.Since neither the commission's report nor the state supreme court's opinion suggests that the command was qualified by the condition that Peerless obtain its own market, we need not read such a condition into the order. The commission report states that Republic offers to transport the Peerless gas if market can be obtained by (Peerless) * * *. P It is also suggested that we cannot tell whether Republic age | 84 will have to purchase gas from Peerless or just transport the gas to market and account for the profits. But whether legal title passes at one end of the Republic line or at the other is, as we have noted, wholly immaterial as a matter of constitutional law. Cf. The Pipe Line Cases, (United States v. Ohio Oil Co.) 234 U.S. 548, 34 S.Ct. 956, 58 L.Ed. 1459. In either event under the order and judgment Republic must take Peerless gas into its system, must pay for it and, unless its market should expand suddenly far beyond present expectations, must therefore share its market with Peerless. It is said further that we cannot be sure whether the commission intends to make Republic act as a common carrier. The only basis for this doubt is the fact that the commission's findings state that Republic is a common carrier and common purchaser. But the state supreme court upheld the order on the assumption that **987 those findings were incorrect. The justification for requiring*89 Republic to carry Peerless gas is based primarily on the fact of drainage caused by Republic's production.

Republic has no such right. The Constitution did not impress upon the states in a rigid mold either the common-law feudal system of land tenures or any of the modified and variant forms of tenure prevailing in the states in 1789. Rather it left them free to devise and establish their own systems of property law adapted to their varying local conditions and to the peculiar needs and desires of their inhabitants. The original constitution placed no explicit limitation upon the powers of the states in *90 this respect.FN21 Not until the Fourteenth Amendment was ratified, nearly eight decades later, was one introduced. FN21 The nearest approximations perhaps were in the prohibitions against state legislation impairing the obligation of contracts and against ex post facto legislation before the latter was limited to criminal and penal consequences. Calder v. Bull, 3 Dall. 386, 1 L.Ed. 648. See Hale, The Supreme Court and the Contract Clause, 57 Harv.L.Rev. 512, 621, 852. The Fourteenth Amendment was not designed to nullify state power to create institutions of property in accord with local needs and policies. Whether or not it was intended to secure substantive individual rights as well as procedural ones,FN22 it was not a strait jacket immobilizing state power to change or alter institutions of property in the public interest.FN23 Almost innumerable decisions have demonstrated this, even though the Amendment has been effective to create substantial limitations upon the methods by which the changes deemed necessary may be made. FN22 See Mr. Justice Black dissenting in McCart v. Indianapolis Water Co., 302 U.S. 419, 423, 58 S.Ct. 324, 325, 82 L.Ed. 336; Boudin, Truth and Fiction about the Fourteenth Amendment, 16 N.Y.U.L.Q.Rev. 19. FN23 It is precisely in cases where the Amendment has been made thus effective, often by giving expansive scope to the idea of property, that its interpretations have failed to withstand the test of time. Compare Ribnik v. McBride, 277 U.S. 350, 48 S.Ct. 545, 72 L.Ed. 913, 56 A.L.R. 1327, with Olsen v. Nebraska, 313 U.S. 236, 61 S.Ct. 862, 85 L.Ed. 1305, 133 A.L.R. 1500; Adair v. United States, 208 U.S. 161, 28 S.Ct. 277, 52 L.Ed. 436, 13 Ann.Cas. 764 and Coppage v. Kansas, 236 U.S. 1, 35 S.Ct. 240, 59 L.Ed. 441, L.R.A.1915C, 960, with Phelps Dodge Corp. v. National Labor Relations Board, 313 U.S. 177, 187, 61 S.Ct. 845, 849, 85 L.Ed. 1271, 133 A.L.R. 1217; Lochner v. New York, 198 U.S. 45, 25 S.Ct. 539, 49 L.Ed. 937, 3 Ann.Cas. 1133, and Adkins v. Children's Hospital, 261 U.S. 525, 43 S.Ct. 394, 67 L.Ed. 785, 24 A.L.R. 1238, with West Coast Hotel Co. v. Parrish, 300 U.S. 379, 57 S.Ct. 578, 81 L.Ed. 703, 108 A.L.R. 1330. The basic question here is really one of substantive due process. It relates primarily to whether Oklahoma can curtail the **988 unqualified right of capture which appellant conceives it acquired by virtue of and as an unalterable incident to its acquisition of surface rights including the right to drill for gas. For, in denying that the state *91 can enforce the only feasible method of limitation consistent with

Janz N. Serrano production by Peerless, Republic in effect is saying that the state cannot restrict its right to take all gas in the common reservoir, including all that can be drained from beneath Peerless' lease and the lands of other owners similarly situated. This is, for the particular circumstances, a denial of the state's power to protect correlative rights in the field or to regulate appellant's taking in the interest of others having equal rights proportionate to their surface holdings. For, though Republic concedes it is bound by Oklahoma's statutory requirement of pro rata production, that requirement becomes merely a time factor affecting the rate and length of the period of Republic's drainage, not the total quantity eventually to be taken, if Republic can defy the commission's order and thus leave Peerless in its present helpless condition. The contention is bold and far reaching, more especially when account is taken of the nature of the industry. Natural gas in place is volatile and fugitive, once a single outlet is opened. When extracted it cannot be stored in quantity, but must be marketed ultimately at burner tips in the time necessary for conveyance to them from the well mouth. The competitive struggle for the industry's rewards is particularly intense in the initial stage of developing a field. By the industry's very nature large outlays of capital are required for successful continuing production and marketing. All those factors however tend toward monopoly once success has been achieved in a particular field. These peculiar qualities, moreover, have been reflected in the legal rights relating to the ownership of gas in place, as well as its extraction. They have been adapted to its nature and to that of the competitive struggle regarding it. Only a specialist in this branch of the law, which varies from state to state, can undertake to say *92 with any reliable degree of precision what rights may be in particular situations. These difficulties, intensified by the competitive struggle for the product and the inadequacy of common-law ideas to control it, have forced both the states and the federal government to adopt extensive regulatory measures in recent years. This has been necessary both to conserve the public interest in this rapidly depleting natural resourceFN24 and to secure fair adjustment of private rights in the industry. Rather than being a sacred, untouchable enclave of the common law, the field by its very nature lends itself especially to governmental intervention for such purposes. In this respect it is hardly comparable to situations comprehending only conventional manufacturers and merchants of consumable goods. FN24 Cf. Federal Power Commission v. Hope Natural Gas Co., 320 U.S. 591, 64 S.Ct. 281, 88 L.Ed. 333, dissenting opinion of Mr. Justice Jackson, 320 U.S. at page 628, 64 S.Ct. at page 300. In accordance with Oklahoma's law, appellant does not assert title to the gas in place. It asserts only the right to capture what it can produce. But that right, unqualified, would include the right to take gas from beneath others' lands. So

III. It has been noted previously that the question on the merits is not unrelated to the issue of finality. To it, accordingly, attention is now directed. The real fight, as has been stated, is over the right of Republic to drain away the Peerless gas without paying for it. The question as cast in legal terms is whether the due process and equal protection clauses of the Fourteenth Amendment deny Oklahoma the power to give one private producer from a common pool the option to shut down production altogether or to purchase gas from another for the purpose of adjusting their correlative rights in the pool, when that is the only practical or feasible alternative consistent with production by both to protect the latter from drainage by the former. Republic denies the state's power to do this. Its basic position is that it has a federal constitutional right to drain off all the gas in the field, unless other owners of producing rights can supply their own facilities for marketing their production, regardless of varying conditions in different competitive situations and regardless of all consequent practical considerations affecting feasibility of furnishing such facilities.

taken, it defies their rights to a proportionate share and the state's power to secure them, if for reasons rendering marketing through their own facilities unfeasible they cannot join in the unrestrained competitive draining. So far as the federal Constitution is concerned, there is no such unrestricted fee simple in the right to drain gas from P age | 85 beneath an adjacent owner's land. It is far too late, if it ever was otherwise, to urge that the states are impotent to restrict this unfettered race or to put it upon terms of proportionate equality by whatever measures may be reasonably necessary to that end. Indeed our constitutional history is replete with instances where the states have altered and restricted schemes of property *93 rights in response to the public interest and the states' local needs. In **989 some cases this has gone to the extent of abolishing basic common-law conceptions entirely and substituting new ones indigenous to their areas and the problems they present. Perhaps the most extensive and obvious illustrations are to be found in the systems developed in our arid and mountainous western states for governing rights in the waters of flowing streams and mining rights in respect to precious metals.FN25 Others are not lacking.FN26 FN25 See Clark v. Nash, 198 U.S. 361, 25 S.Ct. 676, 49 L.Ed. 1085, 4 Ann.Cas. 1171; Fallbrook Irrigation District v. Bradley, 164 U.S. 112, 17 S.Ct. 56, 41 L.Ed. 369; Kansas v. Colorado, 206 U.S. 46, 93, 94, 27 S.Ct. 655, 665, 666, 51 L.Ed. 956; United States v. Rio Grande Dam & Irrigation Co., 174 U.S. 690, 702, 703, 19 S.Ct. 770, 774, 775, 43 L.Ed. 1136; Strickley v. Highland Boy Gold Mining Co., 200 U.S. 527, 26 S.Ct. 301, 50 L.Ed. 581, 4 Ann.Cas. 1174; Parley's Park Silver Mining Co. v. Kerr, 130 U.S. 256, 9 S.Ct. 511, 32 L.Ed. 906; Butte City Water Co. v. Baker, 196 U.S. 119, 25 S.Ct. 211, 49 L.Ed. 409; Kendall v. San Juan Silver Mining Co., 144 U.S. 658, 12 S.Ct. 779, 36 L.Ed. 583; Clason v. Matko, 223 U.S. 646, 32 S.Ct. 392, 56 L.Ed. 588. FN26 Head v. Amoskeag Mfg. Co., 113 U.S. 9, 5 S.Ct. 441, 28 L.Ed. 889; Wurts v. Hoagland, 114 U.S. 606, 5 S.Ct. 1086, 29 L.Ed. 229; Bacon v. Walker, 204 U.S. 311, 27 S.Ct. 289, 51 L.Ed. 499; cf. Ferry v. Spokane, P. & S.R. Co., 258 U.S. 314, 42 S.Ct. 358, 66 L.Ed. 635, 20 A.L.R. 1326; Campbell v. California, 200 U.S. 87, 26 S.Ct. 182, 50 L.Ed. 382. It hardly can be maintained that the creation and control of rights respecting the ownership, extraction and marketing of natural gas are less broadly subject to state control than those relating to waters for irrigation and other uses or to the extraction of precious metals in the regions where those matters have called into play the states' authority to act in the manner best suited to local conditions and the needs of their inhabitants. The similarities of the situations and the problems, for purposes of constitutionality in the exercise of those powers, are so obvious they do not need to be specified. Historically, the states' freedom to exercise broad powers in defining and regulating rights of ownership and production of natural gas has been recognized almost as long and quite as completely as their similar freedoms to act in relation to water

rights and mining rights. In *94 a line of cases beginning a half century ago with Ohio Oil Co. v. Indiana, 177 U.S. 190, 20 S.Ct. 576, 44 L.Ed. 729, this Court has upheld various types of state regulatory schemes designed to prevent waste and to protect the coequal rights' of the several owners of a common source of supply.FN27 These cases clearly recognize that the state regulation may be justified on alternative grounds, either to prevent waste or to adjust private correlative rights.FN28 FN27 Ohio Oil Co. v. Indiana, 177 U.S. 190, 20 S.Ct. 576, 44 L.Ed. 729; Lindsley v. Natural Carbonic Gas Co., 220 U.S. 61, 31 S.Ct. 337, 55 L.Ed. 369, Ann.Cas.1912C, 160; Walls v. Midland Carbon Co., 254 U.S. 300, 41 S.Ct. 118, 65 L.Ed. 276; Bandini Petroleum Co. v. Superior Court, 284 U.S. 8, 52 S.Ct. 103, 76 L.Ed. 136, 78 A.L.R. 826; Champlin Refining Co. v. Corporation Commission, 286 U.S. 210, 52 S.Ct. 559, 76 L.Ed. 1062, 86 A.L.R. 403; Hunter Co. v. McHugh, 320 U.S. 222, 64 S.Ct. 19, 88 L.Ed. 5. FN28 See Hardwicke, The Rule of Capture, 13 Tex.L.Rev. 391, 414-422; Marshall and Meyers, Legal Planning of Petroleum Production, 41 Yale L.J. 33, 48-52; Ely, The Conservation of Oil, 51 Harv.L.Rev. 1209, 1222-1225; Ford, Controlling the Production of Oil, 30 Mich.L.Rev. 1170, 1181, 1192. It is true, as appellant points out, that none of those cases presented the specific issue of whether the state may adjust correlative rights independently of a conservation program. But it is not true that this power is merely incidental to the fundamental right of the state to preserve its natural resources. In fact, if one power were incidental to the other, the Ohio Oil case would support the view that waste prevention is justifiable because it serves the purpose of protecting all the collective owners * * *. 177 U.S. at page 210, 20 S.Ct. at page 584.FN29 Moreover, it is **990 significant that the opinion in Bandini Petroleum Co. v. Superior Court specifically states that the California regulation*95 is valid on its face, even if viewed as a measure designed purely for the protection of correlative rights. 284 U.S. 8, 22, 52 S.Ct. 103, 108.FN30 FN29 Independently of any statute, several states have granted equitable relief against waste in order to protect the correlative rights of common owners of a reservoir of gas or oil. Louisville Gas Co. v. Kentucky Heating Co., 117 Ky. 71, 77 S.W. 368, 70 L.R.A. 558; Manufacturers Gas & Oil Co. v. Indiana Natural Gas & Oil Co., 155 Ind. 461, 474, 475, 57 N.E. 912, 50 L.R.A. 768; Ross v. Damm, 278 Mich. 388, 270 N.W. 722; Higgins Oil & Fuel Co. v. Guaranty Oil Co., 145 La. 233, 82 So. 206, 5 A.L.R. 411; Atkinson v. Virginia Oil & Gas Co., 72 W.Va. 707, 79 S.E. 647, 48 L.R.A.,N.S., 167. FN30 The Supreme Court of Texas has recently upheld administrative action designed solely to protect correlative rights. Corzelius v. Harrell, 143 Tex. 509, 186 S.W.2d 961. Note, 24 Tex.L.Rev. 97. Oklahoma's power to regulate correlative rights in the Hugoton field therefore does not stem from her interest merely in the preservation of natural resources. It stems rather from

Janz N. Serrano the basic aim and authority of any government which seeks to protect the rights of its citizens and to secure a just accommodation of them when they clash.FN31 That authority is constantly exercised in our system in relation to other types of property.FN32 In view of this *96 fact and of what has been said concerning conditions in this industry, it would be incongruous for us to hold that oil and gas law is the one phase of property law that cannot be modified except for conservation purposes. Especially in the light of its origin and development a laissez faire atmosphere appropriate for fostering intense competitive expansions, see Merrill, The Evolution of Oil and Gas Law, 13 Miss.L.J. 281, the states should be allowed certainly not less freedom to evolve new property rules to keep pace with changing industrial conditions than they possess in nearly every other branch of the law.FN33 Here as elsewhere, in considering the proper scope for state experimentation, it is important that we indulge every reasonable **991 presumption in favor of the states' action. They should be free to improve their regulatory techniques as scientific knowledge advances, for here too experimentation is the lifeblood of progress. See Mr. Justice Brandeis dissenting in New State Ice Co. v. Liebmann, 285 U.S. 262, 280, 52 S.Ct. 371, 375, 76 L.Ed. 747. FN31 Oklahoma can prevent agents of Republic from going on Peerless' land by force of arms and there drilling a well and stealing gas. The state's power to prevent larceny and trespass and to enjoin any use of property that creates a nuisance for a neighboring property owner also justifies the regulation of common property for the mutual advantage of its several owners. Head v. Amoskeag Mfg. Co., 113 U.S. 9, 5 S.Ct. 441, 28 L.Ed. 889; Bacon v. Walker, 204 U.S. 311, 27 S.Ct. 289, 51 L.Ed. 499.Under certain circumstances a state may compel one individual to surrender private property solely to enable another to exploit the potential resources of his private property. Thus in Clark v. Nash, 198 U.S. 361, 25 S.Ct. 676, 49 L.Ed. 1085, 4 Ann.Cas. 1171, the plaintiff's land could be made productive only by enlarging an irrigation ditch across defendant's land, and in Strickley v. Highland Boy Gold Mining Company, 200 U.S. 527, 26 S.Ct. 301, 50 L.Ed. 581, 4 Ann.Cas. 1174, the mining company could deliver its ore to market only by constructing an aerial bucket line across defendant's land. Here Peerless can exploit its property only if Republic is compelled to take its gas to market. Moreover, until Peerless is able to produce the gas under its land, this gas will continue to be withdrawn by Republic. In effect Republic is now exploiting Peerless' property. FN32 E.g., Head v. Amoskeag Mfg. Co., 113 U.S. 9, 5 S.Ct. 441, 28 L.Ed. 889; Wurts v. Hoagland, 114 U.S. 606, 5 S.Ct. 1086, 29 L.Ed. 229; Fallbrook Irrigation District v. Bradley, 164 U.S. 112, 17 S.Ct. 56, 41 L.Ed. 369; Bacon v. Walker, 204 U.S. 311, 27 S.Ct. 289, 51 L.Ed. 499; Plymouth Coal Co. v. Pennsylvania, 232 U.S. 531, 34 S.Ct. 359, 58 L.Ed. 713; Jackman v. Rosenbaum Co., 260 U.S. 22, 43 S.Ct. 9, 67 L.Ed. 107. FN33 It is submitted that through the judicial and legislative processes correlative right-duty relations against

injury and non-compensated and preventable drainage do exist, but the difficulty of finding and proving the facts in a particular situation is such that the usual remedies of damages and injunction might not be practicable. It seems more advisable that legislatures enact statutes expressly declaring the existence of these correlative right-duty relations in landowners, apart from public rights against waste, and P age | 86 authorize an administrative agency, after a finding of facts, to promulgate rules and regulations for their protection and authorize the Commission or private owners to enforce such rules and regulations through actions in the courts. Summers, Legal Rights against Drainage of Oil and Gas, 18 Tex.L.Rev. 27, 47. IV. The remaining narrow issue is whether the most practical method of achieving a fair accommodation of the *97 correlative rights of the parties is invalid because Republic is required to take and to pay for gas that it does not want-at least does not want if it must pay for it. Appellant relies heavily on Thompson v. Consolidated Gas Utilities Corp., 300 U.S. 55, 57 S.Ct. 364, 81 L.Ed. 510, where this Court invalidated an order limiting respondent's production so severely that it would have had to purchase gas from unconnected wells in its vicinity in order to satisfy its commitments. Thus the necessary effect of that order was comparable to the effect of the order under review here. But there is a crucial difference between the cases. In deciding the Thompson case the Court explicitly assumed that the order could be upheld if reasonably designed either to prevent waste or to prevent undue drainage of gas from the reserves of well owners lacking pipe line connections.'FN34 Because of a geological anomaly there was a general drainage in the gas field away from the connected wells toward the unconnected wells, 300 U.S. at pages 71-73, 57 S.Ct. at pages 371, 372, so that the producing wells, rather than draining gas away from the dormant wells, would only reduce their own loss by producing as much as possible. Therefore the limitation on their production could not be justified, since it was neither for the purpose of preventing waste nor a reasonable regulation of correlative rights. Instead of protecting one party from loss, it operated to aggravate the effect of the drainage away from the owners of connected wells. They suffered, not only by an increased drainage loss, but also by the consequence that they were forced to share their facilities and market with the very parties who profited by their loss. The Court held that such an order requiring one company to share its market with another was unconstitutional inasmuch *98 as it was not justified either as a conservation measure or as a reasonable adjustment of correlative rights. The latter justification is present in this case.

FN34 300 U.S. at pages 76, 77, 57 S.Ct. at page 374. This assumption is repeated several times in the opinion. See 300 U.S. at pages 58, 67, 69 and 72, 73, 57 S.Ct. at pages 365, 370, 371, 372. The fact that Republic is compelled either to purchase Peerless' gas or to carry it to market and account for the profits does not make the regulation unreasonable. If that were the sole cause for complaint, the state could take the more drastic step of requiring all the well owners to shut down completely until all were able to produce on a ratable basis or came to some agreement effective to make this possible. It is clearly within the state's power to require Republic to compensate Peerless for the gas drained from under the Peerless land. Patterson v. Stanolind Oil & Gas Co., 305 U.S. 376, 59 S.Ct. 259, 83 L.Ed. 231. Here, instead of requiring Republic to make a cash payment based on the estimated amount of drainage, the commission has selected what is unquestionably a more accurate method of adjusting the correlative rights. Even if it could be assumed that this method imposed a somewhat heavier burden on Republic than possible alternatives, it does not follow that the method selected by the commission is unconstitutional. For we have constantly recognized the propriety of allowing wide discretion to the administrative agencies who are best qualified to select the most reasonable solutions to the thorny problems that accompany regulation in this highly **992 technical field. Railroad Commission of Texas v. Rowan & Nichols Oil Co., 310 U.S. 573, 60 S.Ct. 1021, 84 L.Ed. 1368. Keeping in mind the fact that property law is peculiarly a matter of local concern, the special difficulty of defining and regulating property rights in natural gas, the respect due to experts in this field, and the rather unusual facts this record presents, I cannot say that the state is without power to enter this order. It is suggested that the order, since it includes the requirement of purchase and not merely of transportation *99 and accounting for profits, becomes invalid because it shifts from Peerless to Republic the business risk incident to ownership and sale of the gas. Possibly this might furnish a more serious basis for objection in materially different circumstances. But, apart from what has already been said, in those now presented I conceive no substantially greater harm to be possible, from the order's operation, than depriving Republic of the right to drain gas from beneath Peerless' lease without liability to pay for the gas so drained. This assumes that if the parties should be unable to agree upon terms the commission will fix them in a manner taking due account of prevailing market conditions relevant to the price to be paid, as well as reasonable compensation for the use of Republic's facilities. With those limitations properly applied, it is hard to see what great business risk will be shifted to Republic. For, as we have already noted, the commodity is one not subject to storage, must be sold as soon as it is transported to the point of consumption, and therefore cannot

Janz N. Serrano be subject to possible wide fluctuation in selling price between the times of purchase and sale by Republic. The facts here, it seems to me, justify the commission's action. Whether others materially different may do so should be left to be considered when they arise. I would affirm the judgment of the Supreme Court of Oklahoma.

U.S. 1948. REPUBLIC NATURAL GAS CO. v. STATE OF OKLAHOMA 334 U.S. 62, 68 S.Ct. 972, 92 L.Ed. 1212 Briefs and Other Related Documents (Back to top) 1947 WL 44199 (Appellate Brief) Brief of Appellees (Dec. 29, 1947) 1947 WL 44198 (Appellate Brief) Brief of Appellant (Dec. 23, 1947) 1947 WL 44200 (Appellate Brief) Brief of Appellant in Opposition to Motion to Dismiss Appeal. (Jun. 26, 1947) 1947 WL 44197 (Appellate Brief) Statement as to Jurisdiction (May 14, 1947) END OF DOCUMENT

Supreme Court of the United States SWIFT & CO. PACKERS et al. v. COMPANIA COLOMBIANA DEL CARIBE, S.A. age | 87 P No. 230. Argued Dec. 14-15, 1949. Decided June 5, 1950. Action in admiralty upon a libel in personam for loss of cargo accompanied by prayer for foreign attachment by Swift & Company Packers and others against Compania Colombiana Del Caribe, S.A. and another. The United States District Court of the Canal Zone Joseph J. Hancock, J., 83 F.Supp. 273, entered an order vacating the attachment on the motion of the named respondent, and the libellants appealed. The Court of Appeals for the Fifth Circuit, Sibley, Circuit Judge, 175 F.2d 513, affirmed the order, and the libellants brought certiorari. The Supreme Court, Mr. Justice Frankfurter, held that the admiralty court in which the libel was filed for loss of cargo carried in Colombian corporation's vessel which sank, accompanied by prayer for foreign attachment of another vessel which had been allegedly fraudulently transferred by the Colombian corporation to a second Colombian corporation, had jurisdiction to determine the claim of fraud. Order reversed and case remanded.

particularly a vessel known as the Alacran, or Caribe. This vessel was thereupon attached by the marshal. On March 8, libellants filed a supplemental and amended libel, and on the basis of the following allegations joined the Compania Colombiana Del Caribe, S.A., as respondent. On or shortly prior to March 4, the Compania Del Caribe had been organized under the laws of Colombia and the Alacran had been transferred by Transmaritima to Del Caribe in fraud of the rights of libellants. The latter company had been organized by directors, officers and stockholders of Transmaritima, but no funds had been paid into its treasury for the issue of its stock, and the transfer of the Alacran was without real consideration. Del Caribe was merely the creature or alter ego of Transmaritima and they should be held to be, as they are, one and the same. Del Caribe, on or about March 4, had had the Vessel's name changed from Alacran to Caribe, and a new register had been issued accordingly. In the alternative, the claim was that Del Caribe was indebted to Transmaritima for at least a substantial part if not all of the purchase price of the Caribe. [1] Attachment of the vessel was again prayed on what appears to have been either of two grounds: since Transmaritima and Del Caribe were really one and the same, it mattered not which was deemed to be the owner of the Caribe; since the transfer of the Caribe to Del Caribe was a fraudulent **864 transfer to be set aside, the vessel was in reality Transmaritima's property and Del Caribe should be garnished. On the basis of the amended libel another attachment of the Caribe was made.FN1 FN1. The Marshal's return failed to state that respondents could not be found within the jurisdiction. Cf. International Grain Ceiling Co. v. Dill, 13 Fed.Cas. page 70, No. 7,053, 10 Ben. 92. The Court of Appeals properly held this to be a formal defect, easily correctible on remand.

Janz N. Serrano On August 16, Del Caribe gave notice of a motion to dismiss the libel as to it and vacate the attachment. Various grounds were urged calling into question the jurisdiction of the court, the propriety of its exercise, and the adequacy of the allegations to state a claim in the libel. An accompanying affidavit set forth matters relating to the transfer. On September 20, the District Court found that the nondelivery of the cargo was due to the beaching of the Cali in January, 1948; that Del Caribe had been organized in the latter part of February, 1948; and that Transmaritima had sold and transferred the Caribe to Del Caribe on February 25.FN2 From these facts the district judge concluded that there was no jurisdiction in admiralty to inquire into the relations between the two *688 respondent companies or the sale of the Caribe. In any event, the court declined to exercise jurisdiction to look into the transfer since it had taken place between two foreign corporations and in a foreign country. Accordingly, the attachment was ordered to be vacated. While libellants submitted additional evidence upon a rehearing, the court adhered to its original views. 83 F.Supp. 273. FN2. The district judge also found that the stockholders and managing officers of the two respondents were not identical, but these facts were irrelevant to his disposition of the case and are to the disposition made here.

Mr. Justice FRANKFURTER delivered the opinion of the Court.

The Court of Appeals affirmed. It held that jurisdiction to set aside a fraudulent transfer before judgment on the main claim was at best doubtful, that there was discretion to decline jurisdiction on principles of forum non conveniens, and that, in any event, libellants had not sustained their burden of producing proof that the transfer was fraudulent.FN3 175 F.2d 513. FN3. The District Court did not dismiss the garnishment proceeding against Del Caribe, since that company was allegedly indebted to Transmaritima and some of the property of the Cali had been attached aboard the Caribe. The Court of Appeals suggested that the issue of fraud in the transfer of the Caribe could be adjudicated as part of the garnishment proceeding.

The question before us is the propriety of an order of the District Court for the Canal Zone vacating a foreign attachment of a vessel made in a libel in personam. We granted certiorari because important questions relating to the scope of admiralty jurisdiction and its exercise are in issue. 338 U.S. 813, 70 S.Ct. 76. On March 7, 1948, the libel was filed against Compania Transmaritima Colombiana, S.A., a Colombian corporation, by Swift & Company Packers, a Nevada corporation, certain Cuban corporations and individuals, and a Colombian citizen. They brought the libel as owners of rice shipped from Ecuador to Cuba. It was alleged that the cargo had been delivered in good order to the M/V Cali, owned and operated by Transmaritima, and that the vessel had sunk, or partially sunk, off the island of Grand Cayman with resulting nondelivery of the cargo. This was supplemented by allegations of negligence. Process was prayed with the further request that if the respondent could not be found its goods and chattels *686 be attached,

*687 With the supplemental libel, libellants submitted a list of interrogatories to be propounded to Del Caribe, calculated to disclose the true status of that company and of the transfer to it of the Caribe. On March 15, respondents gave notice that they would move for an order dismissing the libel and vacating the attachment. An accompanying affidavit relied primarily on the doctrine of forum non conveniens. The District Court overruled this motion on March 31. The parties then entered into stipulations whereby the respondents' time to answer the libel and interrogatories was extended to June 17. On June 11, they answered, putting in issue various questions relating to the liability arising out of the sinking of the Cali and to the transfer of the Caribe. At the same time Del Caribe objected to the nterrogatories on various grounds. No disposition of these objections appears from the record.

This we believe to be a fair re sume of an uncommonly confused and opaque record. It is especially hampering that the record is not clearer than it is when legal issues of real complexity are in controversy. I. There is a threshold question as to the jurisdiction of the court below to entertain the appeal. It is claimed that the order vacating the attachment was not a final order and therefore not reviewable.

[2] [3] We believe that the order comes squarely within the considerations of our recent decision in **865 Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528. The litigation arising out of the claim of the libellants has not run its entire course, but the order now here, like that in the Cohen case, appears to fall in that small P age | 88 class which finally determine claims of right separable from, and collateral to, rights asserted in the action, too important*689 to be denied review and too independent of the cause itself to require that appellate consideration be deferred until the whole case is adjudicated. 337 U.S. at page 546, 69 S.Ct. at page 1225, 93 L.Ed. 1528. Appellate review of the order dissolving the attachment at a later date would be an empty rite after the vessel had been released and the restoration of the attachment only theoretically possible. Cf. The Panaghia Kathariotisa, 3 Cir., 165 F.2d 430. Under these circumstances the provision for appeals only from final decisions in 28 U.S.C. s 1291, 28 U.S.C.A. s 1291, should not be construed so as to deny effective review of a claim fairly severable from the context of a larger litigious process. See Cobbledick v. United States, 309 U.S. 323, 328-329, 60 S.Ct. 540, 542, 543, 84 L.Ed. 783. The situation is quite different where an attachment is upheld pending determination of the principal claim. Such was Cushing v. Laird, 107 U.S. 69, 2 S.Ct. 196, 27 L.Ed. 391, which is urged on us. In such a situation the rights of all the parties can be adequately protected while the litigation on the main claim proceeds. [4] [5] II. On finding that the Caribe had been sold by Transmaritima to Del Caribe prior to the filing of the libel the District Court deemed itself without jurisdiction to determine whether the transfer was fraudulent. In consequence it felt compelled to treat Del Caribe as the owner of the vessel, and since only the property of Transmaritima could be validly attached the attachment had to be vacated.FN4 FN4. Libellants also sought to hold Del Caribe personally liable for the destruction of the Cali's cargo of rice on the ground that it was merely the alter ego of Transmaritima. Success on this theory would render the issue of fraudulent transfer irrelevant, for then the assets of either company could be attached. The jurisdiction of a court of admiralty to determine the question of alter ego is undoubted. The Willem Van Driel, Sr., 4 Cir., 252 F. 35; Luckenbach S.S. Co. v. W. R. Grace & Co., 4 Cir., 267 F. 676; Yone Suzuki v. Central Argentine R. Co., 2 Cir., 27 F.2d 795, 806; Kingston Dry Dock Co. v. Lake Champlain Transp. Co., 2 Cir., 31 F.2d 265; Gardner v. Dantzler Lumber & Export Co., 5 Cir., 98 F.2d 478. But it is settled doctrine that, apart from any transfer of assets by Transmaritima to Del Caribe, the latter company could not be held personally liable on an alter ego theory, since it came into existence after the Cali sank. Yone Suzuki v. Central Argentine R. Co., supra; Kingston Dry Dock Co. v. Lake Champlain Transp. Co., supra.It is important to note, however, that the

relationship between the two respondent companies has an obvious relevance to the issue of fraudulent transfer.

The reasoning of the District Court was based on the view that a claim of fraud in the transfer of a vessel *690 was a matter for determination by a court of equity and therefore outside the bounds of admiralty jurisdiction. There is a good deal of loose talk to this effect in the reports, concurrent with talk that courts of admiralty exercise their jurisdiction upon equitable principles. Even as to admiralty jurisdiction we must be wary of verbal generalizations unrelated to their applications. Not the least creative achievement of judicial lawmaking is the body of doctrines that has been derived from the brief words of the Constitution extending the judicial power to all Cases of admiralty and maritime Jurisdiction. U.S.Const. Art. III, s 2. But it would be beyond human achievement even of a long line of judges especially equipped for dealing with admiralty matters to have produced a wholly harmonious body of admiralty law, or to have written opinions that should not have lent themselves through largeness or looseness of statement beyond the scope of their adjudications. [6] Unquestionably a court of admiralty will not enforce an independent equitable **866 claim merely because it pertains to maritime property. E.g., The Eclipse, 135 U.S. 599, 608, 10 S.Ct. 873, 875, 34 L.Ed. 269 and cases cited. The reasoning of the District Court would be pertinent if the libellants, as creditors of Transmaritima, had gone into admiralty by way of a creditor's bill to set aside a pretended sale of the Caribe as a fraudulent*691 transfer. But that is not the case before us. Libellants went into admiralty on a claim arising upon a contract of affreightment supplemented by charges of negligence in the nondelivery of a sea cargo-matters obviously within admiralty jurisdiction. As an incident to that claim, in order to secure respondents' appearance and to insure the fruits of a decree in libellants' favor, they made an attachment under General Admiralty Rule 2, 28 U.S.C.A.FN5 The issue of fraud arises in connection with the attachment as a means of effectuating a claim incontestably in admiralty. To deny an admiralty court jurisdiction over this subsidiary or derivative issue in a litigation clearly maritime would require an absolute rule that admiralty is rigorously excluded from all contact with nonmaritime transactions and from all equitable relief, even though such nonmaritime transactions come into play, and such equitable relief is sought, in the course of admiralty's exercise of its jurisdiction over a matter exclusively maritime. It would be strange indeed thus to hobble a legal system that has been so responsive to the practicalities of maritime commerce and so inventive in adapting its jurisdiction to the needs of that commerce. Controversies between admiralty and common law are familiar legal history. See Mr. Justice Story's classic opinion in De Lovio v. Boit, 7 Fed.Cas. page 418, No. 3,776, 2 Gall. 398; 4 Benedict on Admiralty cc. 61-63 (Knauth ed. 1940.) We find no restriction

Janz N. Serrano upon admiralty by chancery*692 so unrelenting as to bar the grant of any equitable relief even when that relief is subsidiary to issues wholly within admiralty jurisdiction. Certainly there is no ground for believing that this restriction was accepted as a matter of course by the framers of the Constitution so that such sterilization of admiralty jurisdiction can be said to have been presupposed by Article III of the Constitution. FN5. The relevant portion of General Admiralty Rule 2 is as follows:In suits in personam the mesne process shall be by a simple monition in the nature of a summons to appear and answer to the suit, or by a simple warrant of arrest of the person of the respondent in the nature of a capias, as the libellant may, in his libel or information pray for or elect; in either case with a clause therein to attach his goods and chattels, or credits and effects in the hands of the garnishees named in the libel to the amount sued for, if said respondent shall not be found within the district.

A few illustrative cases will take us out of the fog of generalities, for the decisions dealing with concrete situations afford a working approach even if not a rigid rule. Nonmaritime contracts may be examined to determine whether they constitute a valid defense, although the same contracts will not support a libel or cross-libel for affirmative relief. Armour & Co. v. Fort Morgan S.S. Co., 270 U.S. 253, 258260, 46 S.Ct. 212, 213, 214, 70 L.Ed. 571. An equitable claim which does not support a possessory suit may be availed of as a valid defense against a similar suit by the holder of legal title. Chirurg v. Knickerbocker Steam Towage Co., D.C., 174 F. 188; cf. The Daisy, D.C., 29 F. 300; see Morrison, Remedial Powers of the Admiralty, 43 Yale L.J. 1, 21 (1933). Admiralty cannot entertain a suit to reform a release from liability executed under a mutual mistake merely because it pertains to a maritime claim; but when such a release is pleaded in defense against assertion of that claim, admiralty is not barred from determining whether it was executed by the parties under mutual mistake. Rice v. Charles Dreifus Co., 2 Cir., 96 F.2d 80. And so as to accounting, It is true that a court of admiralty will not entertain a suit for an accounting as such: as, for example, an accounting between co-owners of a vessel, or between maritime adventurers, or between principal and agent * * * (citing cases). Nevertheless,**867 it has never been true, when an accounting is necessary to the complete adjustment of rights over which admiralty has independent jurisdiction, that it will suspend its remedies midway and require the *693 parties to resort to another court. W. E. Hedger Transp. Corp. v. Ira S. Bushey & Sons, Inc., 2 Cir., 155 F.2d 321, 323, per Learned Hand, J. In each of these cases a holding that admiralty must stay its hands as to a matter intrinsically nonmaritime but necessary to the complete adjustment of rights over which admiralty has independent jurisdiction would have seriously

age | 89

impaired the discharge by admiralty of the task which belongs to it. To recognize these subsidiary powers of admiralty to deal justly with the claims that are within its jurisdiction is not to enlarge the admiralty jurisdiction but to avoid its mutilating restriction. To generalize beyond this is to invite misleading or empty abstractions. P [7] [8] We can now see the immediate problem in its proper perspective. The process of foreign attachment is known of old in admiralty. It has two purposes: to secure a respondent's appearance and to assure satisfaction in case the suit is successful. Manro v. Almeida, 10 Wheat. 473, 489, 6 L.Ed. 369. While the process may be utilized only when a respondent is not found within the jurisdiction, an attachment is not dissolved by the subsequent appearance of respondent. See Birdsall v. Germain Co., D.C., 227 F. 953, 955; 2 Benedict on Admiralty s 290 (Knauth ed. 1940). Disputes over ownership of attached vessels are of course inevitable since only the respondent's property may be attached. E.g., Cushing v. Laird, 107 U.S. 69, 2 S.Ct. 196, 27 L.Ed. 391; cf. McGahern V. Koppers Coal Co., 3 Cir., 108 F.2d 652; Kingston Dry Dock Co. v. Lake Champlain Transp. Co., 2 Cir., 31 F.2d 265. Inevitably such disputes may involve transactions not themselves the subject matter of an independent libel. If jurisdiction be wanting in a court of admiralty when such a controversy arises in the context of an attachment made in a libel over which the court indubitably has jurisdiction, a congenital defect would have to be attributed to the ancient process of foreign attachment. If colorable transfers of property were immune to challenge in *694 a court of admiralty when a libel in personam has been brought in a District where the respondent cannot be personally served, admiralty jurisdiction would be sacrificed to a sterile theory of judicial separatism. No support for such a conclusion is to be found in any decision of this Court or in those of the lower courts which have had so large a share in the development of admiralty law. The relevant rulings look the other way. In Lee v. Thompson, 15 Fed.Cas. page 233, No. 8,202, 3 Woods 167, Mr. Justice Bradley held that an admiralty court had power to look into an allegedly fraudulent transfer where the question was relevant to execution upon a decree in admiralty. He fully recognized that a libel based solely on the transfer could not be maintained, but where that issue was incidental to its general jurisdiction, and for maintaining the same, it (the admiralty court) has plenary power to decide, and frequently does decide, conflicting claims to property. Without such power its jurisdiction would often be defeated. 15 Fed.Cas. at page 235, No. 8,202, 3 Woods at page 173. The force of Mr. Justice Bradley's decision is sought to be cut down in that it dealt with execution on a judgment and not with an attachment.FN6 The fact is, however, that Mr. Justice Bradley relied in his reasoning on the process of foreign attachment, and reason rejects any significant distinction between the jurisdiction of admiralty to inquire into a fraudulent transfer in

the two situations. In both admiralty is not seized of jurisdiction to correct a fraud simply because it is a fraud; that's the business of equity. The basis of admiralty's power is to **868 protect its jurisdiction from being thwarted by a fraudulent transfer, and that applies equally whether it is concerned *695 with executing its judgment or authorizing an attachment to secure an independent maritime claim. Cf. The New York, 2 Cir., 113 F. 810; The Columbia, D.C., 100 F. 890 (judgment in admiralty vacated because obtained by fraud). FN6. The Court of Appeals apparently regarded this distinction as important, for it held that the issues relating to the vessel Caribe might be adjudicated in the garnishment proceeding but not in connection with the attachment.

Janz N. Serrano See 5 Benedict on Admiralty (Whitman ed. 1949) 234.

[9] We must conclude that the District Court was not without power to look into the transfer of the Caribe under the circumstances of this suit. But because power exists, its use is not inexorable. Cf. Com. of Massachusetts v. State of Missouri, 308 U.S. 1, 19, 60 S.Ct. 39, 43, 84 L.Ed. 3. We would be passing on situations not before us were we to attempt now to define when power which we recognize should be withheld. In the circumstances of this case the power should be exercised, for there are good reasons for the attachment. If the libellants are ultimately successful, judgment may well avail them nothing unless duly secured. Cf. Asiatic Petroleum Corp. v. Italia Societa Anonima Di Navigazione, 3 Cir., 119 F.2d 610. The issues of fact on which libellants' claim of fraud turn do not appear to be complicated and they may be speedily adjudicated by the District Court prior to a hearing on the affreightment contract. [10] [11] III. It is urged that, even if there existed power to ascertain whether the transfer was fraudulent, vacation of the attachment was justified by libellants' failure to establish a prima facie case of fraud. No doubt, the ultimate burden of establishing a fraudulent transfer was upon libellants. See Cushing v. Laird, 107 U.S. 69, 83-84, 2 S.Ct. 196, 207, 27 L.Ed. 391. Under Admiralty Rule 23 of the District Court for the Canal Zone, FN7 the district judge might have required *696 lebellants to present their proof in order to determine whether substantial questions of fact were raised respecting the fraudulence of the transfer. Had libellants then failed to respond without adequate reason, the attachment would properly have been vacated. FN7. The relevant portion of Rule 23 is as follows:In case of the attachment of property * * * the party arrested or any person having a right to intervene in respect of the thing attached, may, upon evidence showing any improper practice or a manifest want of equity on the part of the libellant, have an order from the judge requiring the libellant to show cause instanter why the arrest or attachment should not be vacated.

Rule 23 was in substance invoked by respondents, as the Court of Appeals held, but the record does not support the view that its invocation put libellants to their proof that the transfer was fraudulent. They had no reason to believe that such proof was needed before trial. Neither of the two motions of respondents to vacate the attachment rested on an absence of fraud as a matter of fact. Respondents presented evidence through affidavits that a new corporation had been formed and a transfer of title to the vessel effected, but this was only to support their charges that the court lacked jurisdiction, that in any event it should decline jurisdiction under principles of forum non conveniens, and that the allegations in the libel did not state a cause of action. Nor were libellants put on notice by the District Court's first opinion to put in proof on rehearing. Its holding was based on lack of jurisdiction to inquire into the transfer or, alternatively, on discretion to decline its exercise. Quite clearly it did not determine the issue of fraud in the transfer. The opinion denying rehearing did not break new ground. On these facts, the attachment could not be vacated for a failure of libellants to support their charge of a fraudulent transfer.FN8 FN8. The eight months intervening between the filing of the libel and the opinion on rehearing were spent largely on respondents' motions and to afford respondents opportunity to file answers. It is also pertinent that libellants' interrogatories to Del Caribe were never answered and the exceptions taken to them never passed on by the District Court. The evidence contained in respondents' affidavits was inadequate to support any determination of the fraud issue. Of course, if the court had required libellants to present such proof as they had, it would have been for them to move that the exceptions to the interrogatories be overruled. But, as indicated, the importance of such a move was never made clear.

**869 *697 [12] IV. There remains the question whether the District Court's order may be justified as an exercise of discretion to decline jurisdiction under the doctrine of forum non conveniens. The doctrine is of long standing in admiralty, but this Court has not previously had to apply it to a suit brought by a United States citizen. Such application has been rare even in the lower federal courts. Cf. Canada Malting Co. v. Paterson Steamships, Ltd., 285 U.S. 413, 52 S.Ct. 413, 76 L.Ed. 837; United States Merchants' & Shippers' Ins. Co. v. A/S Den Norske Afrika OG Australie Line, 2 Cir., 65 F.2d 392; see Braucher, The Inconvenient Federal Forum, 60 Harv.L.Rev. 908, 920-921 (1947); Bickel, Forum Non Conveniens in Admiralty, 35 Cornell L.Q. 12, 41-47 (1949). We need not now decide the abstract question whether United States admiralty courts may decline jurisdiction over libels brought by United

Janz N. Serrano States citizens. Discretion could not sustain declination in this case. Application of forum non conveniens principles to a suit by a United States citizen against a foreign respondent brings into force considerations very different from those in suits between foreigners.FN9 The District Court gave no indication that it recognized such considerations. Its opinion indicates that P in so far as it may have exercised discretion to decline age | 90 jurisdiction it was moved to do so by its view that such jurisdiction does not exist. But, in any event, it was improper under the circumstances here shown to remit a United States citizen to the courts of a foreign country without assuring the citizen that respondents *698 would appear in those courts and that security would be given equal to what had been obtained by attachment in the District Court. The power of the District Court to give a libellant such assurance is shown by Canada Malting Co. v. Paterson Steamships, Ltd., 285 U.S. 413, 424, 52 S.Ct. 413, 416, 76 L.Ed. 837. See also City of Agra, D.C., 35 F.Supp. 351. While the District Court exercised discretion to vacate only the attachment and not to dismiss the entire libel, libellants' rights were seriously impaired by their loss of security. The importance of the right to proceed by attachment to afford security has been emphasized. E.g., In re Louisville Underwriters, 134 U.S. 488, 10 S.Ct. 587, 33 L.Ed. 991; Asiatic Petroleum Corp. v. Italia Societa Anonima Di Navigazione, 3 Cir., 119 F.2d 610. Libellants' right to maintain the attachment will depend on their ability to prove fraud in the transfer of the Caribe upon a hearing. They are entitled to have that hearing. FN9. Compare Koster v. (American) Lumbermens Mutual Casualty Co., 330 U.S. 518, 524, 67 S.Ct. 828, 832, 91 L.Ed. 1067: In any balancing of conveniences, a real showing of convenience by a plaintiff who has sued in his home forum will normally outweigh the inconvenience the defendant may have shown. See also O'Neill v. Cunard White Star, Ltd., 2 Cir., 160 F.2d 446.

The case must be reversed and remanded for proceedings not inconsistent with this opinion. Reversed and remanded.

Mr. Justice DOUGLAS took no part in the consideration or decision of this case.

END OF DOCUMENT

CITY OF LOS ANGELES et al., Respondents, v. WILLIAM YOUNG, Justice of the Peace of Los Angeles Township, Appellant. Supreme Court of California. L. A. No. 313. September 15, 1897.

APPEAL from a judgment of the Superior Court of Los Angeles County. Lucien Shaw, Judge. The facts are stated in the opinion of the court. *295 W. P. Hyatt, for Appellant. W. E. Dunn, for Respondents. *296 HENSHAW, J.

age | 91

Janz N. Serrano evidence that the affidavit contained proof that the notice had been given, it being further said: The return did not, moreover, purport to show that the justice had given any notice, nor did it contain or refer to the service of any notice given by him, and as all notices are required to be in writing (Code Civ. Proc., sec. 1010), such notice, if it had existed, would have formed a part of the return by the justice. The case at bar differs in essential particulars from that of Jones v. Justice's Court, supra. Here the justice returned, as by the writ he was commanded to do: 1. A transcript of his docket entries, by which it appeared that on May 22d notice was issued, and upon May 25th notice was returned and filed; and 2. The papers and files in the case, amongst which is a written notice of the date set for the hearing of demurrer, addressed to W. E. Dunn, attorney for defendants, dated May 22d, and notifying defendants' attorney that the demurrer had been set for hearing upon the twenty-fifth day of May, 1896, at 1.30 o'clock P.M. This notice bears the indorsement: Received copy of the within notice, -, 1896. W. E. DUNN, Attorneys for Defendant. Served H. H. Y. Upon the hearing it was permitted to be shown that H. H. Y. are the initials of H. H. Yonken, a constable, and that he served the notice in question upon the twenty-third day of May, 1896, by leaving a copy thereof with a man in the office of W. E. Dunn, which man acknowledged service of the notice as above set forth in the name of Dunn. This testimony, introduced by petitioners, was followed under objection of appellants by the testimony of the attorney, Dunn, who swore that he did not know who signed his name to the notice; that it was not signed by anyone authorized so to do; and that in fact he had never received notice of the time set for the hearing of the demurrer. Upon certiorari, if it becomes necessary for the court of review to be put in possession of the facts upon which the court below acted, and which are not technically of record, it is competent for that court to require the lower court to certify such facts in its return to the writ, and this statement of facts would *298 then be a part of the record. (2 Spelling on Extraordinary Relief, sec. 2020.) Under this principle it was not, perhaps, improper for the trial court to admit the evidence of Yonken, not as contradicting the record of the justice, but as supplemental thereto. ( People ex rel. Whitney v. San Francisco Fire Dept., 14 Cal. 479.) But it may be set down as a universal rule that, as the province of the writ of certiorari is to review a record of an inferior court, board, or tribunal, and to determine from the

CERTIORARI-JUSTICE'S JUDGMENT-DEFAULTDEMURRER-NOTICE OF HEARING-RECORD PROOF OF SERVICE-SUPPLEMENTAL EVIDENCE OF CONSTABLEDISPROOF OF RECORD BY ATTORNEY INADMISSIBLE. Where a judgment was rendered by default in a justices' court after an appearance and filing of a demurrer by an attorney for the defendant, and the overruling of the same, and the expiration of time to answer thereafter, and the docket showed that notice of hearing of the demurrer was issued three days before the hearing, and was returned and filed on that day, bearing an indorsement of receipt of a copy of the notice with blank date, purporting to be signed by the attorney for the defendant, followed by the memorandum Served H. H. Y., upon certiorari to review the judgment, though it may be proper to admit proof supplemental to the record to show that the memorandum bore the initials of the constable who served the notice, and that two days before the hearing he delivered the copy of the notice to a man in the office of defendant's attorney, who signed the attorney's name to the acknowledgment of service, yet evidence of such attorney is not admissible to impeach the record of service, by disproving the authority of the person in his office to make the acknowledgment, and denying that he in fact received notice of the hearing. ID.-REVIEW OF FACTS UPON CERTIORARI-EVIDENCEPROVINCE OF WRIT-TRIAL OF FACTS DE NOVO NOT PERMITTED. Upon certiorari, if it becomes necessary for the court of review to be put in possession of the facts upon which the court below acted, and which are not technically of record, it is competent for that court to require the lower court to certify such facts in its return to the writ, and its statement of facts is part of the record, and it seems that upon this principle the court of review may hear evidence supplemental to the record, in aid of the jurisdiction appearing from the record; but the province of the writ being to review the record of an inferior court, board, or tribunal, and to determine therefrom whether it has exceeded its jurisdiction, its inquiry into the evidence is limited to that upon which the inferior tribunal acted; and where its jurisdiction depended upon a question of fact, that question cannot be tried de novo upon its merits, nor can evidence dehors the record and contradicting it, to show want of jurisdiction, ever be permitted.

This is an appeal from the judgment of the superior court upon a writ of review vacating and annulling a judgment rendered in a justice's court. One McCombs in the justice's court of the township of Los Angeles had instituted a suit against the city of Los Angeles and C. Compton. The defendants appeared in said action by their attorney W. E. Dunn, and interposed demurrers to the complaint. Thereafter the justice of the peace heard and passed upon the demurrers, overruled them, and granted defendants two days' time in which to answer. Defendants failed to answer, and judgment by default was entered for plaintiff. The statutory period of thirty days during which an appeal could have been taken to the superior court passed, and afterward the defendants in that action obtained from the superior court of the county a writ of review. After hearing upon this writ the superior court annulled the judgment of the justice's court, and this appeal followed. The contention of petitioners in the superior court was that neither they nor their attorney had been served with notice of the time set for the trial; that service of such notice upon them is, under section 850 of the Code of Civil Procedure, an imperative prerequisite to the jurisdiction of the justice of the peace to try the cause; and that under the writ they were entitled to show and did show to the satisfaction of the superior court, by legal and competent evidence, that no notice had in fact been served. Respondents' contention that the service of notice of the time set for trial is a jurisdictional prerequisite is supported by the case of Jones v. Justice's Court, 97 Cal. 523. As appears by that case, the entry in the justice's docket was to the effect merely that at the time set for trial no one appeared for defendant, and that counsel for the adverse party stated that notice of trial had been served on counsel for defendant, and that he would produce the same. This was manifestly no proof of service of the notice, and it was so held by this court. There was also an affidavit of the service of the notice filed in that case, but this affidavit was not embodied in the return of the justice to the superior court, and this court further held in that regard that the superior court was not required to accept the above *297 memorandum in the justice's docket as any

Janz N. Serrano record whether such court, board, or tribunal has exceeded its jurisdiction, evidence dehors the record, and contradicting it, is never permitted. The common-law writ of certiorari tried nothing but the jurisdiction, and incidentally the regularity of the proceedings upon which the jurisdiction depends. In many cases, therefore, under such writs, the evidence upon which the P court acted in determining its jurisdiction was made a part age | 92 of the record and reviewed under the writ, but the inquiry was always limited to the evidence before the tribunal whose determination was under review. If the jurisdiction of the inferior tribunal depended upon a question of fact, that fact was never tried de novo upon its merits, but the inquiry thereupon was limited strictly to the evidence upon which the inferior tribunal acted. ( People ex rel. Whitney v. San Francisco Fire Dept., supra.) In this essential feature, then, as above suggested, does this case differ from the case of Jones v. Justice's Court, supra. In that case the court, limiting its inquiry to the return, found there had been no service of notice of the time set for trial. In this case the court reaches its conclusion by admitting and considering the parol testimony of the attorney, Dunn, to impeach and contradict the record of the justice which in itself was legally sufficient to show jurisdiction. This may not be done. The evidence of Dunn should not have been admitted. Therefore, the judgment is reversed and the cause remanded.

Temple, J., and McFarland, J., concurred.

Cal. 1897. CITY OF LOS ANGELES et al., Respondents, v. WILLIAM YOUNG, Justice of the Peace of Los Angeles Township, Appellant. 118 Cal. 295, 50 P. 534 END OF DOCUMENT

Janz N. Serrano THEODORE HAVEMEYER ET AL., PETITIONERS, v. SUPERIOR COURT, ETC., RESPONDENT. No. 13709. Supreme Court of California June 9, 1890. and stockholders as the only parties whose interest can demand the appointment of a receiver of such corporation. ID.--RIGHTS OF STOCKHOLDERS AND CREDITORS-NECESSITY OF RECEIVER. It is at the option of a creditor or stockholder to have a receiver of a dissolved corporation appointed, in a suit brought for that purpose, provided facts can be alleged showing that a receiver is necessary; but if the directors are sued and brought into court without sufficient cause, even by a creditor or stockholder, they will recover costs. ID.--INTEREST OF STATE IN DISTRIBUTION OF CORPORATE ASSETS. The people of the state have no interest to be affected by the appointment of a receiver of the property of a dissolved corporation, which has forfeited its charter, for the purpose of distributing it among the stockholders and creditors of the corporation. ID.--PUNISHMENT OF STOCKHOLDER--JUDGMENT OF FORFEITURE--FINE--CONFISCATION OF PROPERTY. The appointment of a receiver to administer the assets of a corporation which has forfeited its charter is not designed or prescribed by the legislature as a penalty or part of the punishment to be visited upon the stockholders of the corporation in a proceeding in quo warranto; but the punishment is limited to the forfeiture of the charter, and the fine which the court may in its discretion impose; and the court cannot further affect the corporate property by its judgment, or confiscate or take it away from the stockholders. ID.--WANT OF PENAL LEGISLATION--PROVINCE OF COURT. It is no part of the function of a court to supply the want of penal legislation; and it cannot punish the stockholders of a corporation for the abuse of its charter beyond the terms of the law. ID.--BREAKING UP MONOPOLY--RIGHTS OF STOCKHOLDERS. The state is not warranted in taking into its control, by means of a receiver appointed in a quo warranto proceeding, the assets of a corporation which has been found to have forfeited its charter by entering into a monopoly to the disadvantage of the state, merely for the purpose of breaking up the monopoly; nor can it prevent the stockholders, in whom the assets of the corporation vest upon its dissolution, from doing with them whatever other natural persons may do with their property. ID.--CONTRACT IN RESTRAINT OF TRADE--EXTENT OF PENALTY. The only penalty which the law attaches to the contracts of natural persons in restraint of trade is to make them nonenforceable. ID.--RECEIVER APPOINTED AFTER JUDGMENT--SUSPENSIVE APPEAL. The functions of a receiver appointed after judgment for the purpose of carrying the judgment into effect are suspended by an appeal upon which a sufficient undertaking is given to stay proceedings upon the judgment; nor can a receiver be appointed to carry a judgment into effect after a stay bond has been given. ID.--STAY OF PROCEEDINGS UPON JUDGMENT OF FORFEITURE OF CORPORATE CHARTER. The giving of a sufficient undertaking upon appeal to stay execution of a judgment declaring the forfeiture of a corporate charter, and imposing a fine upon the corporation, suspends all proceedings upon the judgment for enforcement thereof, and precludes the subsequent appointment of a receiver by the superior court to carry its judgment of forfeiture into effect. ID.--VOID ORDER APPOINTING RECEIVER. An order appointing a receiver in a quo warranto proceeding against a corporation upon judgment of forfeiture is void in toto, not only as to strangers to the quo warranto, but also as to the corporation and its stockholders and vendees. ID.--RES ADJUDICATA--RIGHTS OF STOCKHOLDERS WHO BECOME PURCHASERS. Though the stockholders of a corporation may in a certain sense be parties to an action to forfeit its franchise, so as to be bound by the judgment rendered within the issues, they are not bound by any judgment or order foreign to the issues, embracing a receivership of property which they have acquired from the corporation as its vendees, and which they had a right to purchase and enter into possession of with the same rights as any stranger would have had. ID.--PURCHASE PENDENTE LITE. A purchase by the stockholders of a corporation of its property, pending an action to forfeit its franchise, is not in fraud of the rights of the state, which has no lien on the property and cannot attack the sale. ID.--ACTION FOR FORFEITURE--POWER OF CORPORATION PENDENTE LITE. Up to the date of its dissolution, a corporation, pending an action for forfeiture of its franchise, has the same power of disposing of its property honestly and in good faith that any corporation has. ID.--ATTACKING BONA FIDES OF SALE TO STOCKHOLDERS. The bona fides of a sale of the property of a corporation to its stockholders, pending such action, cannot be questioned or attacked by means of an ex parte order appointing a receiver of the property sold, without affording the vendees, as such, an opportunity to contest the order, and giving them a day in court to adduce testimony to sustain their claim of ownership.

age | 93

APPOINTMENT OF RECEIVER--FORFEITURE OF CORPORATE CHARTER--JURISDICTION IN QUO WARRANTO. The superior court has no jurisdiction to appoint a receiver of the property of a corporation in a quo warranto proceeding, upon judgment of forfeiture of its corporate charter. The rendition of the judgment authorized by section 808 of the Code of Civil Procedure ends the proceeding, and no receiver can be appointed unless a new suit is commenced by a creditor or stockholder of the corporation for that purpose, under section 565 of the Code of Civil Procedure. ID.--DISPOSITION OF PROPERTY OF DISSOLVED CORPORATION. When a corporation ceases to exist, from whatever cause, its property is left to be disposed of according to law; and upon the dissolution of a trading corporation by judgment of forfeiture, its property neither reverts to the grantors, nor escheats to the state, but belongs, after payment of its debts, to those who were stockholders at the date of its dissolution. ID.--JURISDICTION OF EQUITY. In the absence of a statute regulating the matter, a court of equity would have the right, at the suit of a stockholder or creditor, to appoint a receiver to administer the property of a dissolved corporation. ID.--CONSTRUCTION OF CODE--RIGHTS OF DIRECTORS UPON INVOLUNTARY DISSOLUTION. Under sections 400 and 565 of the Code of Civil Procedure, both of which refer to involuntary as well as voluntary dissolutions of corporations, the administration and distribution of the assets of a dissolved corporation is left, as a rule, to the directors in office at the date of dissolution, though such dissolution be upon judgment of forfeiture; and the appointment of a receiver is an exception, to be made only in cases of neglect of duty or abuse of power by the directors, when required for the protection of the rights of a creditor or stockholder. ID.--RECEIVER IN CASES OF FORFEITURE. The provision of section 564 of the Code of Civil Procedure, to the effect that a receiver may be appointed when a corporation has forfeited its charter, does not mean that a receiver must be appointed, in such case, on the ground that the public has an interest that the power should be exercised; but the true construction of that provision is to be found in section 565 of the same code, which enumerates the creditors

age | 94

ID.--CONTEST OF RECEIVERSHIP BY STOCKHOLDERS. The fact that the appointment of a receiver of the property of a corporation was contested by the stockholders, who requested that the trustees might be permitted to settle the business, does not bind them by an order appointing a receiver of P property held by them as purchasers from the corporation. ID.--ORDER APPOINTING RECEIVER--SPECIFIC DESCRIPTION OF PROPERTY--POSSESSION OF STRANGER TO ACTION. The specific description of property in an order appointing a receiver, even in case where a specific description is appropriate, does not give the receiver a right to take the property from the possession of a stranger to the action who claims to be a purchaser in good faith. WRIT OF PROHIBITION--SERVICE UPON PARTY IN INTEREST-RULE OF SUPREME COURT. The rule of this court requiring that a petition for a writ of prohibition against a court shall disclose the names of the real parties in interest does not require that such parties be named as defendants in the writ, but only that their names should be disclosed by the petition, and that service of a copy of the petition and writ should be made upon them. ID.--ABATEMENT--POSTPONEMENT. The effect of a failure to serve such parties would not be an abatement of the whole proceeding, but, at most, merely require a postponement of the hearing until they could be served, and have a reasonable time to appear. ID.--INDIRECT REPRESENTATION OF PARTY IN INTEREST. The object of the rule requiring the party in interest to be served is substantially met, though there be no personal service upon him, if he is in fact represented by attorneys who appear in behalf of the judge of the superior court. ID.--WHEN PROHIBITION LIES. Prohibition arrests the proceedings of an inferior judicial tribunal or officer when such proceedings are without or in excess of jurisdiction, and where there is not a plain, speedy, and adequate remedy in the ordinary course of law. ID.--PREVENTIVE AND REMEDIAL OFFICE OF WRIT-ANNULLING PROCEEDINGS PARTIALLY COMPLETED. The operation of the writ of prohibition is primarily and principally preventive, rather than remedial, and is excluded where the action of the inferior tribunal is fully completed, and nothing remains to be done under its void order; but if its action is only partially and not fully completed, further proceedings may be stayed, and in such case the office of the writ is so far remedial that it will annul such prior proceedings as may be necessary to make the remedy complete. ID.--ARRESTING AND ANNULLING ACTION OF RECEIVER UNDER VOID ORDER.

Though the writ of prohibition does not run against ministerial officers, nor to arrest completed action, yet, if a receiver has been appointed and is acting under a void judicial order appointing him, and directing him to seize and hold certain property, and he has seized and is holding the property thereunder, the property in his hands must be regarded as in the hands of the court, whose instrument the receiver is; and since action by the court is necessary so long as the property remains undisposed of, there is judicial action to be arrested and injury to be prevented, and a writ of prohibition will run to and operate directly upon the court, and indirectly upon the receiver, to prevent further action, and to annul the action taken under the void order, and compel restoration of the property seized. ID.--RELIEF BY MOTION--SUIT AGAINST RECEIVER--APPEAL. The existence of a right to move the court to set aside such void order, or to apply to the court for leave to sue the receiver in ejectment or in forcible entry, or to appeal from the order, will not preclude the granting of a writ of prohibition, as neither of those remedies is speedy or adequate to prevent a deprivation of the possession or use of the property ordered to be seized. ID.--SEIZURE OF PROPERTY IN POSSESSION OF STRANGER-DISTINCTION BETWEEN ACTS OF RECEIVER AND ACTS OF COURT. When a receiver acts in excess of authority in seizing property lawfully in possession of a stranger to the suit, he having a valid appointment which contains no directions in excess of the jurisdiction of the court, his void action may be resisted or remedied in other proper modes, and prohibition will not lie to prevent it; but when the court has exceeded its jurisdiction in appointing the receiver, or in directing him to take specific property out of the possession of a stranger, the wrong is in the order of the court, and prohibition will lie to prevent the resulting injury, which is directly due to the action of the court. ID.--DISCRETION AS TO WRIT. A court having jurisdiction to issue the writ of prohibition has no discretion to refuse it when demanded by the real party in interest in a proper case; but such party is entitled to the writ ex debito justiti, if he suffers from the usurpation of jurisdiction by an inferior tribunal. ID.--PRELIMINARY OBJECTION TO JURISDICTION--OBJECTION DISCLOSED BY RECORD. If a want of jurisdiction is apparent on the face of the proceeding in the lower court, no plea or preliminary objection is necessary before suing out the writ of prohibition. ID.--OBJECTION REQUIRING PROOF. If the proceeding in the lower court is not on its face in excess of jurisdiction, but is so in fact by reason of the existence of some matter not disclosed, such matter ought to

Janz N. Serrano be averred in some proper form, to make the want of jurisdiction appear. ID.--PRELIMINARY OBJECTION NOT ESSENTIAL TO JURISDICTION OF WRIT--LACHES. It is not, however, essential to the jurisdiction of the higher tribunal to grant a writ of prohibition that a preliminary objection to the jurisdiction of the lower court be presented in that court. The rule requiring it is one of practice merely, and the neglect to observe it is only laches, which may or may not be excused, according to circumstances. ID.--RULE OF PRACTICE. By the rule of practice adopted by this court, the writ of prohibition will not be issued until the objection to its want or excess of jurisdiction has been made in or overruled by the lower court, the whole foundation of the rule being the respect and consideration due to the lower court, and the expediency of preventing unnecessary litigation. ID.--SUFFICIENCY OF OBJECTION. It is not necessary that the preliminary objection to the jurisdiction of the lower court should be made by formal plea or motion, nor that steps should be taken therein which there was no opportunity to take, before applying for the writ of prohibition to arrest a threatened seizure of property under a void order; but it is sufficient if such objections to the jurisdiction as there was opportunity to make in the lower court were urged therein, and overruled before the writ is applied for. ID.--TEST OF JURISDICTION AS TO TIME OF COMPLETION OF ACTS PROHIBITED. It is the time when the writ of prohibition is ordered, and not the time when it is served, that fixes the extent of the power of the higher court to interfere with the proceeding in the lower court. ID.--MATERIALITY OF POSSESSION OF RECEIVER-CONTEMPT. So far as concerns prohibition of the action of the superior court in holding possession of property seized under a void order appointing a receiver and directing him to seize specific property claimed by a stranger, it is immaterial whether the seizure of possession was or was not complete before the writ was ordered, the completion of possession being only material to be inquired into upon a proceeding for contempt for taking possession in violation of the writ. ID.--TRYING TITLE--DUE PROCESS OF LAW. The title to property cannot be tried upon a writ of prohibition; and when a court by its order has taken property out of the actual possession of a stranger to the proceeding, who claims it as his own, the order is in excess of jurisdiction and void, irrespective of the actual state of the title; because no man can be deprived of his property without due process of

law, nor can a court take property from his possession without a hearing, and compel him to prove title to regain it. WRIT of prohibition to the Superior Court of the city and county of San Francisco, Department No. 6, Hon. William T. Wallace, judge. P The facts are stated in the opinion of the court. age | 95 *332 Wilson & Wilson, and Garber, Boalt & Bishop, for Petitioners. The court on appeal having secured the payment of the fine to the state, the appeal caused a suspension of the judgment below for all purposes, and it is not even evidence of any fact between the parties. ( Woodbury v. Bowman, 13 Cal. 634; Thornton v. Mahoney, 24 Cal. 569; McGarrahan v. Maxwell, 28 Cal. 89; 49 Cal. 331, 336; Murray v. Green, 64 Cal. 369; Freeman on Judgments, 328.) The state, therefore, having no interest in the appointment of a receiver, could not propose a receiver. (Beach on Receivers, sec. 31; High on Receivers, sec. 11; Attorney-General v. Day, 2 Madd. 216; Smith v. Wells, 20 How. Pr. 58; O'Mahoney v. Belmont, 62 N. Y. 133, 143.) A receiver is only allowed, upon the principle of quia timet, to prevent probable injury to a claimant having a present or future fixed title to or lien upon the property, to justify taking it out of the hands of trustees otherwise entitled to administer it. ( Dougherty v. McDougal, 10 Ga. 125; Haimer v. Carpenter, 1 Woods, 265; 2 Story's Eq. Jur., sec. 826; Mays v. Rose, 1 Freem. (Miss.) 718; Overton v. Memphis & L. R. R. R. Co., 10 Fed. Rep. 866; Voshell v. Hyman, 26 Md. 92; Speight v. Peters, 9 Gill, 472; Chicago & A. Oil & M. Co. v. United States, 57 Pa. St. 83, 91; Beach on Receivers, sec. 123; High on Receivers, secs. 83, 84, 88, 89.) The provision that the directors of a corporation, at the time of its dissolution, shall remain trustees, is called by Chancellor Kent a just and wise provision, and this view is affirmed by the courts. (2 Kent's Com. 368, and note; Owen v. Smith, 31 Barb. 641; Heath v. Barnum, 50 N. Y. 595; In re Pontises, 26 Hun, 232; Code Civ. Proc., sec. 565.) When the property of the dissolved corporation has once vested in its trustees upon a dissolution, it cannot arbitrarily be subsequently divested. ( People v. O'Brien, 111 N. Y. 55, 58, 63.) In an action of quo warranto, the judgment is wholly at law, and there can be no equitable relief, since *333 the code does not provide therefor, or give equity any jurisdiction over the action. (Civ. Code, sec. 399; Code Civ. Proc., sec. 809; Slee v. Bloom, 5 Johns. Ch. 381.) The judgment is limited to the seizure of the franchise of the corporation, and cannot be extended to the seizure of its property. ( State v. Ashley, 1 Ark. 304, 305; State Bank v. State, 1 Blackf. 268, 281; Morawetz on Corporations, 1033, 1104.) There being no grant of jurisdiction to appoint a receiver at suit of the state in quo warranto, there is no such jurisdiction, as the statutory power to appoint a receiver cannot be extended by implication. (Beach on Receivers, secs. 403, 407, 408; High on Receivers, sec. 289; Matter of Boynton, 34 Hun, 371; Lehigh v. Central, 43 Hun, 546; Matter of the Mail, 22 Abb.

N. C. 227; United States Trust Co. v. New York, 101 N. Y. 484; Boggs v. McIntosh, 23 Barb. 591; People v. Washington Ice Co., 18 Abb. 383.) No case is made in the record for a receiver, and a decree not founded upon written pleadings or allegations is in excess of jurisdiction, and void. ( Windsor v. McVeigh, 93 U. S. 282; Sabirego v. Maverick, 124 U. S. 292; Smith v. Woolfolk, 115 U. S. 148; United States v. Walker, 109 U. S. 266; The J. W. French, 13 Fed. Rep. 23; Hardy v. McClellan, 53 Miss. 512; Welburn v. McCall, 7 Heisk. 271; Justice v. McBroom, 1 Lea, 555.) A fortiori did the court exceed its jurisdiction in not only appointing a receiver, but in authorizing him and clothing him with a specific and special power to wrest from these petitioners property in their possession, under claim of right, for a long period before the receiver was even applied for. It matters not that the conveyance under which the petitioners claim was made after the quo warranto was brought. There is absolutely no place here for the application of any doctrine or rule of lis pendens. ( Payne v. Root, 121 Ill. 82; Wade on Notice, sec. 351; Andrews v. Pascheon, 67 Wis. 414; City of San Jos v. Fulton, 45 Cal. 319; Freeman on Judgments, 2d ed., sec. 196; Bennett on Lis Pendens,*334 secs. 91, 94; Miller v. Sherry, 2 Wells, 237; Lewis v. Mew, 1 Strob. Eq. 130; Hamlin v. Bevan, 7 Ohio, 316; 28 Am. Dec. 625; Jaffray v. Brown, 17 Hun, 556; Brightman v. Brightman, 1 R. I. 130; Dovey's Appeal, 97 Pa. St. 153; Seisfeld v. Kirkbride, 62 Tex. 455; Feigley v. Feigley, 7 Md. 563; 61 Am. Dec. 375; Low v. Pratt, 59 Ill. 438.) A receiver cannot be vested with title of a date previous to his appointment. ( Artisan's Bank v. Treadwell, 34 Barb. 559; Van Alstyane v. Cook, 25 N. Y. 495, 496; High on Receivers, sec. 136; Beach on Receivers, sec. 168.) A party in possession claiming title must have trial of his right by due process of law before he can be dispossessed. ( McCoombs v. Merrihew, 40 Mich. 725; Salling v. Johnson, 25 Mich. 491; State v. Michell, 2 Bail. 225; Queen v. Judge, L. R. 20 Q. B. Div. 167; White v. Gates, 42 Ohio St. 111; Mays v. Wherry, 3 Tenn. Ch. 34; Sea Ins. Co. v. Stebbins, 8 Paige, 567; Higgins v. Bailey, 7 Rob. (N. Y.) 613; Bostwick v. Isbell, 41 Conn. 305; People v. O'Brien, 111 N. Y. 62; Ex parte Hollis, 59 Cal. 405; Ex parte Casey, 71 Cal. 270; Searles v. Jacksonville R. R. Co., 2 Woods, 626; Gradinstein's Appeal, 49 Pa. St. 321; Jones v. Schall, 45 Mich. 380; Arnold v. Bright, 41 Mich. 210; Wattson v. Dowling, 26 Cal. 125; Tevis v. Ellis, 25 Cal. 515; Long v. Neville, 29 Cal. 131; Mayo v. Sprout, 45 Cal. 99; Baker v. Backus, 32 Ill. 80; Olmstead v. Rochester, 46 Hun, 552.) Prohibition will lie to prevent the exercise of unauthorized judicial power, in any case. ( Quimbo v. Appo, 20 N. Y. 540.) The remedy includes the delivery or restitution of property seized and held without jurisdiction. (Fitzherbert's Natura Brevium, 45, 46; 2 Harris Entries, 450, 451; 2 Chitty's Practice, 354, 355; White v. Field, 12 Com. B., N. S. (104 Eng. Com. L.) 383; French v. Noel, 22 Gratt. 454.) Prohibition will lie to prevent the holding of property under a void order of court. ( Gist v. Cole, 2 Nott & McC. 461; 10 Am. Dec. 616; Ex parte Morgan Smith, 23 Ala. 94; Queen v. Judge, 20 Q. B. Div. 167.) It will lie to prohibit carrying a void *335 order or judgment into execution. ( State v. Michell, 2 Bail. 225, Hutson v. Lowry, 2 Va. Cas. 42; French v. Noel, 22 Gratt. 454; Jones v. Owen, 5 Dowl. & L. 669; Marsden v. Wardle,

Janz N. Serrano 3 El. & B. 695; Thompson v. Ingham, 14 Q. B. 710; Zylstra v. Corporation, 1 Bay, 375; Ramsay v. Court, 2 Bay, 180; Ingersoll v. Buchanan, 1 W. Va. 184.) A plea to the jurisdiction in the lower court is not an essential prerequisite to the writ. ( Mayor of London v. Cox, L. R. 2 H. L. 239, 278, 280.) When want of jurisdiction appears upon the face of the proceedings, an objection in the court below is not essential. ( Mayor of London v. Cox, L. R. 2 H. L. 239, 278, 280; Ex parte Hill, 38 Ala. 429, 443.) The holding by the receiver of specified property described in the order of his appointment is the holding of the court. ( Coburn v. Ames, 57 Cal. 203; Elliott v. Warford, 4 Md. 80; Van Rensselaer v. Emery, 9 How. Pr. 138; Williamson v. Wilson, 1 Bland, 421; Beverly v. Brooke, 4 Gratt. 211; Angel v. Smith, 9 Vern. 337; Battle v. Davis, 66 N. C. 252; De Visser v. Blackston, 6 Blatchf. 235; Mays v. Rose, Freem. (Miss.) 718; Bruce v. Manchester & K. R. R. Co., 19 Fed. Rep. 342; Field v. Jones, 11 Ga. 417; Elliott v. United States Ins. Co., 7 Md. 307; Wiswall v. Sampson, 14 How. 65; Peale v. Phips, 14 How. 368; King v. O. & M. R. R. Co., 7 Biss. 529; Thompson v. Scott, 4 Dill. 510; Richards v. C. & O. R. R. Co., 1 Hughes, 32.) It follows that prohibition should lie to prevent an unauthorized consummation of a seizure by the court of property over which it has no jurisdiction, and which belongs to persons not parties to the suit. ( Arnold v. Bright, 41 Mich. 210; Jones v. Schall, 45 Mich. 379.) A writ of possession is not fully executed, so as to prevent a stay of proceedings from operating until the party in possession is fully dispossessed. ( Lee Chuck v. Quan Wo Chung Co., 81 Cal. 222.) There is no disseisin of any portion of premises of which the owner remains in actual possession, though some other portion of the premises is held adversely under a claim of right to the whole. (*336 Bellis v. Bellis, 122 Mass. 417; Bradley v. West, 60 Mo. 33; Ross v. Roadhouse, 36 Cal. 580.) Where a receiver attempts a forcible entry upon the possession of a stranger to the suit, he certainly ought not to be held to have consummated the entry until he has acquired such an actual, peaceable, and exclusive possession as would entitle him in turn to maintain an action of forcible entry and detainer against an intruder. But it is well settled that that action will not lie in favor of one who has a mere scrambling, interrupted, and disputed possession or control. ( House v. Keiser, 8 Cal. 500; Hoag v. Pierce, 28 Cal. 188, 191; Voll v. Butler, 49 Cal. 74; Bowers v. Cherokee Bob, 45 Cal. 496; Conroy v. Duane, 45 Cal. 597; Tivnen v. Monahan, 76 Cal. 131; Anderson v. Mills, 40 Ark. 194; Johnson v. West, 41 Ark. 535; Blake v. McCray, 65 Miss. 443.) In cases of mixed possession, the legal seisin is according to title. ( Codman v. Winslow, 10 Mass. 146; Hall v. Powell, 4 Serg. & R. 465; 8 Am. Dec. 722; Cheney v. Ringgold, 2 Har. & J. 87-94; Hall v. Gittings, 2 Har. & J. 112, 115; Mather v. Ministers etc., 3 Serg. & R. 509; 8 Am. Dec. 663; Tillinghast's Adams on Ejectment, 54, and notes; Davidson's Lessee v. Beatty, 3 Har. & McH. 621; Hunt v. Wickliffe, 2 Pet. 201; Green v. Liter, 8 Cranch, 229.) William M. Pierson, for Superior Court, Respondent.

No application was made to the court below by plea to the jurisdiction, or by affidavit, before the application to this court. Such application was jurisdictional. (High on Extraordinary Legal Remedies, sec. 773; rule 28, Supreme Court; Ex parte Hamilton, 51 Ala. 62; Barnes v. Gottschalk, 3 Mo. App. 111; Ex parte McMechan, 12 Ark. 70; Ex parte Little Rock, 26 Ark. 52; Ex parte Williams, 4 Ark. 537; Wells on Jurisdiction, secs. 111, P age | 96 502; State v. Iaage, 29 La. Ann. 806, 808; Shortt on Prohibition, *486, 487; Chester v. Colby, 52 Cal. 517; Southern P. R. R. Co. v. Superior Court, 59 Cal. 476.) The court had the *337 power to appoint a receiver of the dissolved corporation. (Code Civ. Proc., sec. 564, subds. 4, 5; Civ. Code, sec. 400; French Bank Case, 53 Cal. 527, 541, 550, 553; Folger v. Columbian Ins. Co., 99 Mass. 267; 96 Am. Dec. 747; Miami Co. v. Gano, 13 Ohio Rep. 269; Columbian Co. v. De Golyer, 115 Mass. 69; Hubbell v. Syracuse Co., 42 Hun, 182; Attorney-General v. Mutual Ins. Co., 77 N. Y. 275; Vermont Co. v. Vermont Cent. Co., 46 Vt. 792; People v. North River Sugar Ref. Co., 6 N. Y. Sup. Ct. 408; Secord v. Wickenham, 29 Kan. 748; People v. Northern R. R. Co., 42 N. Y. 217; Bacon v. Robertson, 18 How. 488; Lum v. Robertson, 6 Wall. 277; note to 12 Am. Dec. 243; National Bank v. Colby, 21 Wall. 614; High on Receivers, sec. 203.) The court had the jurisdiction and power to define in the order appointing the receiver the property which the receiver was to take. ( Crow v. Wood, 13 Beav. 271; High on Receivers, sec. 87; Edwards on Receivers, 79-81; O'Mahoney v. Belmont, 62 N. Y. 148; Curran v. Craig, 22 Fed. Rep. 101; Ex parte Cohen, 5 Cal. 494.) The court had the jurisdiction and power to decide whether the petitioners herein in possession were in such possession as agents or trustees of the corporation. Being stockholders in the corporation they were prima facie in possession as such, and not in their own right. ( Ex parte Cohen, 5 Cal.494; Parker v. Browning, 8 Paige, 388; 35 Am. Dec. 717; Edwards on Receivers, 2d ed., p. 145; Howell v. Ripley, 10 Paige, 46; High on Receivers, sec. 129, 145; Greese v. Beal, 5 Wis. 230; United States v. Mormon Church, 18 Pac. Rep. 39.) The corporate franchises belong to the share-holders. (Morawetz on Private Corporations, secs. 922, 930; Fistram v. Hay, 122 Ill. 293; Paul v. Virginia, 8 Wall. 181; Memphis R. R. Co. v. Commissioners, 112 U. S. 619; Waterman on Corporations, secs. 158, 159; Pierce v. Emery, 32 N. H. 484, 507; Coe v. Columbus R. R. Co., 10 Ohio St. 385; 75 Am. Dec. 518; State v. Sherman, 22 Ohio St. 411, 428; 2 Kent's Com. 267; *338 Hall v. Sullivan, 21 Law Rep. 138; Bouvier's Law Dict., tit. Charter.) When the corporators applied to the state for the charter, they asked, among other franchises, that they have the right to sue and be sued by their corporate name. ( People v. Kingston etc. Co., 23 Wend. 205.) The stockholders are bound by the judgment and its consequences,--the compulsory winding up. ( Hedges v. Superior Court, 67 Cal. 405; High on Receivers, sec. 140; Clapp v. Peterson, 104 Ill. 31; Wetherbee v. Baker, 35 N. J. Eq. 501, 507; Morawetz on Private Corporations, sec. 886; Bigelow on Estoppel, 4th ed., p. 129, note 8; Great Western Tel. Co. v. Gray, 122 Ill. 637; State v. Atchison R. R. Co., 38 N. W. Rep. 47.) The court having jurisdiction to appoint a receiver, no irregularity in the appointment can be considered upon prohibition. (

People v. Supervisors, 47 Cal. 81; People v. Whitney, 47 Cal. 584; Chester v. Colby, 52 Cal. 516; Bandy v. Ransom, 54 Cal. 87; Clark v. Superior Court, 55 Cal. 199; Wreden v. Superior Court, 55 Cal. 504; Coker v. Superior Court, 58 Cal. 178; Hedges v. Superior Court, 67 Cal. 405; Ah Goon v. Superior Court, 61 Cal. 555.) When duly appointed receiver, he became a ministerial officer. He has and can exercise no judicial function. He is merely an executive officer of the court. Prohibition will not lie against him. ( Haile v. Superior Court, 78 Cal. 418; Hobart v. Tillson, 66 Cal. 210; People v. Board, 54 Cal. 404; Le Conte v. Berkeley, 57 Cal. 269; Spring V. W. Co. v. San Francisco, 52 Cal. 111; Maurer v. Mitchell, 53 Cal. 289; Ex parte Bradlacht, 2 Hill, 367; Arnold v. Shields, 5 Dana, 18; 30 Am. Dec. 669; Barnes v. Gottschalk, 3 Mo. App. 222.) The writ of prohibition cannot have any retroactive effect. Its function is not and does not purport to have the effect to nullify or in the least affect any judicial action already taken. The respondent had acted twenty-four hours before the writ was applied for. ( Hall v. Superior Court, 63 Cal. 179; United States v. Hoffman, 4 Wall. 158-163; Dayton v. Paine, 13 Minn. 454.) A scrambling possession of a receiver is something unheard of *339 in the literature of jurisprudence. His possession was complete when he went upon the premises and exhibited his authority. The law was then in possession. Those who refused to recognize him were simply in contempt, whether the order was valid or not. (Sir Samuel Romilly in Ames v. Trustees, 20 Beav. 332, 353; High on Receivers, sec. 143; Ex parte Cochran, 20 L. R. Eq. 286; Maynard v. Bond, 67 Mo. 318; Edrington v. Pridham, 65 Tex. 612, 616; Vermont Co. v. Vermont Cent. Co., 46 Vt. 792.) Petitioners had a plain, speedy, and adequate remedy at law by application to the lower court, by certiorari, by summary proceeding for a trespass, or by appeal. Having such, prohibition does not lie. ( Haile v. Superior Court, 78 Cal. 418; High on Receivers, sec. 139; Commissioners v. Spilter, 13 Ind. 235; Ex parte Smith, 34 Ala. 455; Kemp v. Vintulett, 58 Ga. 419; State v. Judge, 11 Wis. 50; State v. Beame, 31 Wis. 600; People v. Clute, 42 How. Pr. 157; Larcon v. Hammond, 18 B. Mon. 673; Supervisors v. Wingfield, 27 Gratt. 329.) If the court had jurisdiction to appoint a receiver, the question whether the property taken by the receiver belonged to the defendant or was claimed by A, cannot be tried on prohibition. To so hold would be to hold that trespass, forcible entry, or ejectment, could be tried on prohibition. ( Haile v. Superior Court, 78 Cal. 418.) Sullivan & Sullivan, and W. H. Metson, for P. Reddy, Receiver, Respondent. Prohibition is a prerogative writ of grace, and not of right. (High on Extraordinary Legal Remedies, 765.) The corporators are bound by the judgment against the corporation, and by the order appointing a receiver of its property. ( San Mateo County v. S. P. Co., 8 Saw. 238; Burke v. Badlam, 58 Cal. 601; Freeman on Judgments, sec. 174; Valentine v. Mahoney, 37 Cal. 389; Stoddard v. Thompson, 31 Iowa, 80; Conger v. Chilcote, 42 Iowa, 18; Elliott v. Hayden, 104 Mass. 180.) Having assumed in the course of the proceedings that the property belonged *340 to

Janz N. Serrano the corporation, and contested a receivership of its property, they are estopped from claiming the property. ( Page v. Fazeacrely, 36 Barb. 396.) Persons not parties to the record who instigate or take part in the litigation are estopped by its result. ( Landis v. Hamilton, 17 Mo. 561; Strong v. Phnix Ins. Co., 62 Mo. 295; 21 Am. Rep. 417; Noonan v. Nunan, 76 Cal. 49; Shiels v. Barrow, 17 How. 144; Donman v. Intelligency Co., 70 Mo. 175; Kune v. Weil, 73 Mo. 215; Truesdale v. Sarles, 104 N. Y. 167; Rue v. Perry, 63 Barb. 43.) There could be no valid purchase by persons with actual notice of the pending suit, though no notice of lis pendens was filed. ( Abadie v. Lobero, 36 Cal. 390; Montgomery v. Byers, 21 Cal. 107; Ferrea v. Chabot, 63 Cal. 568; Story's Eq. Pl., sec. 156.) The seizure of the property by the receiver did not affect the title, and does not deprive the possessor of property without due process of law. (High on Receivers, 143; In re Cohen, 5 Cal. 494; Geisse v. Reall, 5 Wis. 224; Thornton v. Washington Savings Bank, 76 Va. 432; Vermont and Canada R'y Co. v. Vt. C. R. R., 46 Vt. 798; Ames v. Trustees, 20 Beav. 353; Noe v. Gibson, 7 Paige, 515.) When the writ was served the receiver was rightfully in possession of the premises under a valid order of the superior court, made in a case of which it had jurisdiction, and against parties who were clearly subject to its judgment and orders. ( Ex parte Cochran, L. R. 20 Eq. 286; Maynard v. Bonn, 67 Mo. 318; Edrington v. Pridham, 65 Tex. 612, 616; Angel v. Smith, 9 Ves. 339; Brooks v. Greathead, 1 Jacob & W. 178; Beach on Receivers, 213, 224, 225; 2 Daniel's Chancery Practice, 1743, 1744.) Prohibition will not lie when there is another remedy in the ordinary course of law. ( Levy v. Wilson, 69 Cal. 105; Clarke v. Superior Court, 55 Cal. 199; Superior Court v. Stanislaus County, 55 Cal. 504; High on Extraordinary Legal Remedies, sec. 770.) Want of jurisdiction must appear upon the face of the record, to justify prohibition. ( Buggan v. Bennett, 4 *341 Burr. 2035; Ex parte Easton, 95 U. S. 68; Broeck v. Barge John Welch, 2 Fed. Rep. 372.) If jurisdiction depends upon disputed facts, the existence of such facts cannot be tested on prohibition. (High on Extraordinary Legal Remedies, 788; Ex parte Brandlacht, 2 Hill, 367; Succession of Whipple, 2 La. Ann. 236; State v. Judge, 10 Rob. (La.) 169; People v. Surrogate, 16 Abb. N. C. 241.) Prohibition will not lie to try title to property. ( More v. Superior Court, 64 Cal. 345; Sullivan v. Shanklin, 63 Cal. 251; W. & M. Wagon Road Co. v. Supervisors, 64 Cal. 69; Van Zandt v. Argentine Mfg. Co., 2 McCrary, 642; Mamer v. State, 107 Ind. 539; Robertson v. Bingley, 1 McCord Eq. 193; Hale v. Superior Court, 78 Cal. 418; Ex parte Easton, 95 U. S. 77; Broeck v. Barge John Welch, 2 Fed. Rep. 371.) Prohibition does not lie to a ministerial officer. ( Maurer v. Mitchell, 53 Cal. 201; Camron v. Kenfield, 57 Cal. 553; Farmers' Union v. Tresher, 62 Cal. 210; Hull v. Superior Court, 63 Cal. 179; People v. Election Comm'rs, 54 Cal. 403.) Prohibition is preventive, not remedial, and will not lie where the proceeding is completed; nor is it appropriate to procure annulment of proceedings already had. (High on Extraordinary Legal Remedies, 766; More v. Superior Court, 64 Cal. 345; Coker v. Superior Court, 58 Cal. 179; Hull v. Superior Court, 63 Cal. 179; United States v. Hoffmann, 4 Wall. 158; Ex parte Easton, 95 U. S. 72; Hawes on Jurisdiction, sec. 158; Wells

Janz N. Serrano on Jurisdiction, sec. 512; Dayton v. Payne, 13 Minn. 495; People v. Excise Comm'rs, 61 How. Pr. 514; 5 Wait's Actions and Defenses, 254; Thompson v. Tracy, 60 N. Y. 31; People v. Seward, 7 Wend. 518; State v. Scott, 1 Bail. 294; State v. Judge, 38 La. Ann. 178; In re Denton, 1 Hurl. & C. 654.) Prohibition will not issue until after plea of jurisdiction and refusal thereof by the inferior tribunal. (High on Extraordinary Legal Remedies, 773; P age | 97 State v. Judge, 28 La. Ann. 806; Ex parte McMeechan, 12 Ark. 70; Ex parte City of Little Rock, 26 Ark. 502; Hudson v. Superior Court, 42 Mich. 239; Ex parte Williams, 4 Ark. 137; Wells on Jurisdiction, 502.) Meantime--on January 18th--the corporation duly *343 served and filed its notice of appeal to this court from the judgment against it, and at the same time filed in due form a bond in the penal sum of twelve thousand dollars to stay proceedings on said judgment. After hearing the motion for a receiver, the judge of the superior court held the matter under advisement until February 17th, on which day he made an order as follows (after reciting the previous proceedings):-It is ordered that Patrick Reddy, a resident of the city and county of San Francisco, state of California, be, and he hereby is, appointed receiver of the property and effects of the defendant, wherever the same may be situate, including the American Sugar Refinery, situate at the southwest corner of Union and Battery streets, in this city and county, and its appurtenances. It is further ordered that the defendant, its officers, agents, attorneys, servants, and employees, and all persons and corporations, associations, or firms holding any of the defendant's property in trust for said defendant or its stockholders, do immediately, upon the production of this order, surrender into the possession of said receiver all the said property, real, personal, and mixed, wherever situate, belonging to said defendant, including all its books, records, and papers. And it is further ordered that said receiver do immediately take into his exclusive possession all the books, records, and papers of said defendant, and all the said property, real, personal, and mixed, of the said defendant, including the said American Sugar Refinery so, as aforesaid, situate in said city and county, and hold the same pending the appeal from the judgment herein, and the final determination of the motion for new trial, and until the further order of this court; and that said receiver at once close the said refinery, and do not dispose of any of the said property of the said defendant until the further order of this court. It is further ordered, and I hereby direct, that the *344 said receiver execute to the state of California an undertaking, with two sufficient sureties, to be approved by me, in the sum of ten thousand dollars, to the effect that he will faithfully discharge the duties of receiver in the above-entitled action. Dated February 17, 1890. WILLIAM T. WALLACE, Judge. On the same day a second order was made, which, after reciting the one above quoted, and the fact that the receiver had executed and filed a sufficient undertaking as therein required, and had taken the oath of office, concludes as follows:-Now, therefore, it is hereby ordered that said receiver be, and he is hereby, invested with all the power and authority mentioned and conferred in said order hereinabove recited, to the same extent as if the same were again here repeated and recited at length. Dated February 17, 1890. WILLIAM T. WALLACE, Judge. Immediately upon the issuance of this order, Mr. Reddy proceeded to the sugar refinery therein mentioned, which he found in full operation under the direction and control of a superintendent, foreman, and others in the pay and employment of the petitioners herein, who claim to have purchased the property and to have received a conveyance thereof from the American Sugar Refinery Company in the month of March, 1889, since which time they assert that they have been in full and complete possession as absolute owners in their own exclusive right. Mr. Reddy, however, demanded of those in charge that they should immediately transfer the possession of the premises and everything connected with and contained in the refinery to him, as receiver, and he claims that on the evening of the 17th he had succeeded in obtaining full and absolute possession and control of the entire establishment. This claim is disputed by the petitioners,*345 and whether it is true or not is one of the principal questions in the case. The facts upon which its solution depends will be reviewed when the question is reached. Meantime, and for the purposes of this preliminary statement, it is sufficient to say that the petitioners and the receiver each claim to have had possession of the refinery on the 17th of February and on the following day. The receiver claims that his possession was complete and absolute from and after the evening of the 17th. The petitioners contend that, at most, there was a mere scramble for possession by the receiver up to the time when he was served with notice of the alternative writ of prohibition herein on the afternoon of February 18th. The first notice that the petitioners, or their employees, had of the order appointing the receiver, and directing him to take possession of the sugar refinery, was Mr. Reddy's demand for possession and proclamation of his authority. The agents in charge of the refinery, before yielding to his demands, asked to be allowed an opportunity of obtaining legal advice as to their rights and duties in the matter. This was conceded by Mr. Reddy, upon the understanding that the superintendent of the refinery would notify him at ten o'clock next morning what course he had decided to take. Availing themselves of this respite, the agents of petitioners consulted counsel, and during the night of February 17th, affidavits were prepared upon which to base an application to Judge Wallace for a suspension or modification of his order. Prior to ten o'clock on the

*342 BEATTY, C. J.

This is an original application for a writ of prohibition to the superior court of the city and county of San Francisco, department No. 6, William T. Wallace, judge, commanding and directing said court and judge, and the receiver of said court, Patrick Reddy, Esq., to desist and refrain from proceeding or acting upon or in pursuance of a certain order appointing said receiver. The importance of the case, not only as regards the interests at stake, but also in respect to the questions of law and practice which it involves, will justify, if it does not require, a somewhat detailed statement of the facts out of which it arises. It appears that in the month of November, 1888, the people of the state of California, on the relation of the attorneygeneral, commenced an action in said superior court against the American Sugar Refinery Company, a California corporation, for the purpose of forfeiting its charter. The corporation appeared and answered the complaint, and after trial the judgment of said superior court was pronounced, declaring the forfeiture and imposing upon the corporation defendant a fine of five thousand dollars and costs of suit. The judgment was rendered January 8, 1890, and on the same day, at the instance of the attorneys representing the state, a rule was issued and served requiring said corporation and its attorneys to show cause on the 10th of January why a receiver should not be appointed to take charge of the estate and effects of the said defendant corporation, and to distribute the same according to law, or to preserve the same pending an appeal herein, if such appeal be taken herein, on the ground that said defendant corporation has been dissolved and has forfeited its corporate rights. On the return day of the rule, the corporation appeared, and the hearing was continued until January 20th.

following morning, Mr. Reddy was notified of this intended application, and at about the hour of ten o'clock he and his counsel, and counsel for petitioners, met Judge Wallace at his chambers, where, at least, an informal application was made to the judge for a stay of proceedings pending a motion to set aside or modify his previous order directing the receiver to take P possession of and close the refinery. What *346 occurred age | 98 at this interview is one of the principal points of controversy in the case, as involving a question of practice or procedure. The facts will be stated, so far as necessary, when we come to consider that question. For the present it is sufficient to say that Judge Wallace refused to grant any stay of proceedings for even an hour, unless the petitioners would at once desist from all opposition to the receiver, and yield instant and absolute possession of the refinery and other property. This condition was not assented to, and it was then agreed between Mr. Reddy and his counsel, upon one side, and counsel for petitioners on the other, that at the hour of twelve o'clock on that day counsel for Mr. Reddy should be informed what further steps the petitioners had decided to take, and whether they would further oppose his claims, as receiver, to the possession of the refinery. At twelve o'clock, counsel for Mr. Reddy was notified in substance that his right to the possession could not be admitted, and that his taking possession would be opposed so far as it could be done without a resort to actual force or violence. Meantime, Mr. Reddy had again attempted to assert and enforce his possession and authority at the refinery, and had met with such resistance that he felt it necessary to resort to the court for its aid. He therefore made and filed an affidavit entitled in the action against the American Sugar Refinery Company, in which, after reciting the various proceedings and orders therein, including his appointment and qualification as receiver, he proceeded as follows:-That deponent, as such receiver, entered into possession of the American Sugar Refinery, and the property therein situate, in the city and county of San Francisco; that H. C. Mott and R. H. Sprague impede, hinder, and delay this deponent in the discharge of his duties as such receiver, and refuse to allow deponent to take into his possession and control certain property situate on the premises aforesaid; that said parties last-above named, *347 notwithstanding the receiver's possession of said premises, dispute his right to said possession and resist the full enforcement of the order and judgment of this court, and especially of the order hereinabove set forth. Wherefore this deponent prays this honorable court to give its order and direction to the sheriff of said city and county of San Francisco to enforce the orders and direction of this court as duly given and made in and by the order hereinabove set forth, and to do and perform all acts which may be necessary to place said receiver in complete possession of said American Sugar Refinery, and all and singular the

property therein situated, and the property of said defendant of whatever character and wherever situated. Immediately upon the filing of this affidavit of the receiver, and at about the hour of 1:30, P. M., of February 18th, Judge Wallace made and filed an order which, after reciting the previous proceedings, concludes as follows:-Now, you, the said sheriff, are hereby required to execute and enforce each and every, all and singular, the matters in said order appointing a receiver contained, in so far as may be necessary to place said receiver in possession, and to do and perform all acts which may be necessary to place Patrick Reddy, said receiver, in exclusive, full, and complete possession of the land and premises known as the American Sugar Refinery, situated at the southwest corner of Union and Battery streets, in said city and county of San Francisco, and of all and singular the property, real and personal, of said American Sugar Refinery Company, in said city and county of San Francisco. And you, said sheriff, are directed to make return of said order appointing a receiver, and of this order, within ten days after your receipt hereof, with what you have done indorsed thereon. WILLIAM T. WALLACE, Judge. This order, which the superior judge and sheriff denominate a writ, was afterward, on February 28, 1890, *348 filed by the sheriff, with the following return indorsed thereon:-I, C. S. Laumeister, sheriff of the city and county of San Francisco, state of California, certify that the annexed and accompanying orders and writs, issued out of the superior court of the city and county of San Francisco, were placed in my hands at 1:45, P. M., on Tuesday, February 18, 1890. In obedience to the said orders and writ I proceeded to the premises designated therein, and found Patrick Reddy, who had theretofore been appointed by said honorable court as receiver in said action, in possession of said premises, in said orders and writ mentioned and described; that I found upon said premises certain persons who, I was informed, were interfering with the possession and enjoyment of said premises by said receiver; that I thereupon exhibited said order and requested said persons to retire from said premises, and that said persons thereupon retired from said premises described in said writ and order, and thereupon left said Patrick Reddy in the peaceful and undisturbed and undisputed possession of the land and premises known as the American Sugar Refinery, situated at the southwest corner of Union and Battery streets, in said city and county, with the appurtenances thereto belonging, and the fixtures therein, and all property, real and personal, appertaining thereto; that I also found said receiver in possession of the office of the American Sugar Refinery Company at No. 220 California Street, and I left him in possession thereof; that I also found said receiver in

Janz N. Serrano possession of an office and premises situated in the second story of a building, No. 124 California Street, which said office and premises were designated with the name, the American Sugar Refinery Company, and I left said receiver in absolute possession of said premises last-above described, and all of the premises and property hereinabove mentioned and described; that all of said actions and proceedings done, had, and performed by me, under *349 and in obedience to said orders and writ, were done, had, and performed, and completed at and before the hour of three o'clock, P. M., of said eighteenth day of February, 1890. While these proceedings by and on behalf of the receiver were in progress, the petitioners were applying here for a writ of prohibition, and about the hour of two o'clock, P. M., February 18th, an order for the issuance of an alternative writ was made and filed. The writ issued in pursuance of our order was served on the receiver about 3:30 o'clock, P. M., and upon Judge Wallace about six o'clock, P. M. In their petition for the writ the petitioners set out the whole proceedings in the case of the People v. American Sugar Refinery Company down to and including the order appointing the receiver, and the order supplementary thereto. They allege that ever since the twenty-first day of March, 1889, they have been the owners in fee-simple in their own right of the several tracts and parcels of land in San Francisco, which they specifically describe, and upon which are situate the sugar refinery and the various shops and offices appertaining; that ever since said date they have been carrying on in said buildings the business of refining sugars for sale in the markets of California and elsewhere; that they, also, have offices, furniture, books, and other personal property used by them in and about said business; that they do not use, hold, or possess said property, or any part thereof, in trust, for the use or benefit of the American Sugar Refining Company, the defendant in the action referred to, or any of its directors, trustees, creditors, or stockholders, but solely for themselves, and for their own exclusive use and benefit, and have ever since said thirty-first day of March, 1889, been in the quiet and peaceable possession of the same, claiming title thereto and the exclusive ownership thereof; that since September, 1889, Henry C. Mott has been the general agent and *350 attorney in fact of the petitioners, in actual charge and custody of all of said property, and duly authorized to conduct said business. They then allege the demands of Reddy to be let into the possession of said property, their refusal and resistance, the damage that would result from a stoppage of the works, and that Reddy is threatening to cause the arrest of said agent and the superintendent of the works for contempt of the superior court in resisting the said order.

They further allege that they have, through their said agent, Henry C. Mott, respectfully presented the foregoing facts to said superior court, and called its attention to the excess of jurisdiction by it committed in making said order, and in directing said receiver to enter upon and take possession and control of their said property; and that they have requested said P court to modify its said order so as to direct him to bring a age | 99 proper action for the recovery of said property instead of taking possession without action, which request they say said superior court has denied. They further allege that said orders, so far as they authorize the receiver to take the property in their possession and claimed by them, are beyond the power and jurisdiction of the court, and in violation of their rights; that they are not parties to said action of the people against said American Sugar Refinery Company, nor did they make any appearance or participate in any respect in said action. They further allege that, after said judgment against the Sugar Refinery Company, said company, on the 18th of January, 1890, had taken and perfected an appeal therefrom to this court, and had filed an undertaking sufficient to stay the execution thereof. And, averring that they have no plain, speedy, or adequate remedy against said proceedings of the superior court in ordinary course of law, they pray that a writ *351 of prohibition herein may be issued to said superior court of the city and county of San Francisco, department No. 6, and the judge thereof, commanding and directing said court, and said judge, and also its said receiver, Patrick Reddy, to desist and refrain from further proceedings upon the order aforesaid appointing its said receiver, and from exercising any of the powers in said order granted with regard to any property in the possession of said Havemeyers & Elder through their agents or employees, and especially said sugar refinery, and from interfering with or disturbing the possession and control of the said Havemeyers & Elder of the said sugar refinery, or any other property by them possessed and claimed in their own right. The order made by us upon the filing of this petition directed the issuance of an alternative writ of prohibition to department No. 6 of the superior court of the city and county of San Francisco, and to Hon. W. T. Wallace, judge of said court, in accordance with the prayer of the petition, commanding said court and judge, either through said Patrick Reddy, receiver, or otherwise, from taking possession of or interfering with the possession or control by said Havemeyers & Elder, through their agents, or otherwise, of any property, real or personal, in their possession, and claimed by them in their own right, and especially of the said property situate on the southwest corner of Union and Battery streets, in said city and county, and the refinery situate thereon, or from interfering with the agents and employees of said Havemeyers & Elder in the conduct of

the business of the same, or from exercising any of the powers granted to said receiver in the order appointing him, so far as enforcing the same is concerned against said Havemeyers & Elder. Said order further directed said court and judge to show cause on March 3d why said prohibition should not be made absolute and perpetual, and that in the *352 mean time, until further ordered, all proceedings in said action upon the said order so appointing said receiver be stayed, so far as the said Havemeyers & Elder, and the property, real and personal, in their possession at the time said order was made appointing said receiver, are concerned. The writ issued in pursuance of this order, in the name of the people and under the seal of the court, was, in substance, a repetition of the order, with some amplification of its terms, and not only the writ, but copies of the order and petition upon which it was founded, were served at the hours above mentioned on Judge Wallace and Mr. Reddy. On February 25th, which was prior to the day upon which the respondent was required to show cause against the prohibition, affidavits were filed on behalf of the petitioners, alleging that the respondent and the receiver had committed a contempt of this court in proceeding under said order appointing the receiver contrary to the injunction contained in our order for the writ of prohibition; whereupon, we made and directed to be served upon Judge Wallace and Mr. Reddy another order, in which, after reciting the substance of the charge contained in said affidavits, we commanded them to show cause, on March 3d, why they should not be adjudged guilty of contempt, and why the receiver should not be compelled to withdraw and retire from the sugar refinery, and make restitution of the personal property which he had taken into his possession. On March 3, 1890, Judge Wallace and Mr. Reddy appeared and answered in both proceedings,--the prohibition and the contempt,--and they were heard, argued, and submitted together. It is not necessary in this connection to set forth in detail the matters contained in the answers of the respondent and the receiver. It is sufficient to say that the answer of Judge Wallace contains denials and averments,*353 upon which he claims that his power and jurisdiction to appoint a receiver of the property of the American Sugar Refinery is complete, and also that he had the like power and jurisdiction in the action against the corporation to command and authorize the receiver to take the specific property described in his order, notwithstanding it was in possession of the petitioners, under claim of exclusive ownership. As to the matter of contempt, Judge Wallace takes the position that the effect of our order for and writ of prohibition

Janz N. Serrano was simply to tie his hands and shut his mouth, so that he could not, without a violation of its terms, give any order or direction to the receiver whatsoever, or in any manner interfere with his proceedings; and he shows that he strictly adhered to this role of inaction. Mr. Reddy says that he and his counsel construed our order and writ in the same way, so far as it affected Judge Wallace, and therefore that he refrained from seeking any advice or direction from the superior court as to his own duties in the premises, relying in that matter wholly upon the advice of counsel, which he followed in good faith. He says that he was advised,--and that such was his own opinion,--that the effect of the writ and order upon him was to confine him to the exact position in which they found him at the moment they were served. He contends that when the writ and order were served on him, he was in complete and absolute possession, to the exclusion of petitioners, of the sugar refinery, offices, shops, machinery and supplies, books, papers, etc., engaged in working up about fifty thousand dollars' worth of sugar then in solution, preparatory to shutting down the works, and that he did nothing except to retain the possession which he had, and to shut down the works as soon as possible. From this general statement of the case, the nature of the questions to be decided is sufficiently shown. *354 We have nothing whatever to do with any question as to the validity, correctness, or propriety of the judgment of fine and forfeiture pronounced against the American Sugar Refinery Company in the action instituted by the attorneygeneral in behalf of the people of the state. For all the purposes of this case that judgment is assumed to be absolutely just and valid, though suspended by the appeal. But conceding the perfect validity of that judgment, the question remains, whether the superior court had any jurisdiction to make the order appointing the receiver and directing him to take specific property from the possession of the petitioners, who were not parties to the action, and were claiming said property in their own right. Subordinate to this main question are a variety of others, which have been elaborately discussed by counsel; as, for instance, whether prohibition is the proper remedy when the court has exceeded its jurisdiction in appointing a receiver; whether, conceding it to be the proper remedy in such case, the petitioners have complied with the necessary conditions of its issuance; whether the court should not, in the exercise of its discretion, refuse its aid to these petitioners, even if they have proceeded correctly in the matter of practice, and this not only because they have other plain, speedy, and adequate remedies, in the ordinary course of law, but principally because they are participes criminis with the corporation in the misconduct for which its charter has been forfeited.

There are still other questions involved in the matter of the prohibition, and then there are the questions arising in the proceeding for contempt. We shall proceed to discuss such of these points as we deem material, in about the order in which they have been stated. P *355 And, first, as to the power of the superior court to make the order complained of. The appointment of receivers and their powers and duties are regulated by sections 564 et seq. of the Code of Civil Procedure. It is therein provided that a receiver may be appointed by the court in which an action is pending, or by the judge thereof, in various cases, and among others:-5. In the cases where a corporation has been dissolved, or is insolvent, or in imminent danger of insolvency, or has forfeited its corporate rights. It is not necessary to refer to other grounds for the exercise of the power of appointment, because it is distinctly admitted by respondent and his counsel that the order here in question finds its sole support in the clause just quoted. The learned judge of the superior court, respondent here, in ruling upon the motion for a receiver, prepared and filed a written opinion, to which we have been referred as containing the essence of the argument on his behalf respecting the question under consideration, and we know of no better way to state the position for which he contends than to quote the opinion in full. It is as follows:-It was lately decided here that the corporation defendant had grossly abused its corporate franchise,--united itself with the Sugar Refinery Company in maintaining a monopoly of the article of refined sugar, destroying competition in its production, deteriorating its quality, and arbitrarily increasing its cost to consumers. Judgment of forfeiture of its corporate charter and the imposition of a fine of five thousand dollars followed. The attorney-general now applies for the appointment of a receiver of the corporate estate and effects. 1. It is to be observed, in limine, that the application for a receiver in a case of this impression is not to be *356 dealt with as one made to a court of equity in the exercise of its preventive jurisdiction. The proceeding is for a forfeiture. That circumstance would of itself be fatal to an application made to a court of equity for a receiver; for equity never, under any circumstances, lends its aid to enforce a forfeiture or penalty, or anything in the nature of either.

As observed by Chancellor Kent in Livingston v. Tompkins, It may be laid down as a fundamental doctrine of the court that equity does not assist the recovery of a penalty or forfeiture, or anything of the nature of a forfeiture. (4 Johns. Ch. 431; 8 Am. Dec. 598.) The proceeding is now, as in its inception, distinctively at law, and, as observed by the learned counsel for the defendant, without a single incident of a court of equity connected with it; the information in the nature quo warranto with which it began, the judgment which followed, and the present application for a receiver, are but the successive steps taken in an action at law, and therefore to be governed by rules of mere law, and wholly irrespective of equitable consideration. Whether the receiver shall be appointed is dependent upon a statutory condition of fact,--the fact that the corporation has forfeited its corporate rights. The Code of Civil Procedure, section 564, so far as pertinent to the case, is as follows: A receiver may be appointed . when a corporation . has forfeited its corporate rights. And that the defendant is precisely in that category is the purport of the decision already rendered. Under the New York code, sections 1798-1801, a receiver is provided for in the judgment itself; under the California code, by an order entered subsequent to judgment. The difference is practically but one of sequence; the principle common to both statutes is, that an ascertained forfeiture implies a receiver. So it was substantially ruled in New York, in 1865,--the statute of that *357 state being then much the same as ours,--in People v. Washington Ice Company, that an application for a receiver, made by the attorney-general before forfeiture ascertained, was premature, and not to be entertained by the court. (18 Abb. Rep. 383.) Recurring, then, to the statute of this state (Code Civ. Proc., sec. 564), the language is, that upon forfeiture a receiver may be appointed, etc. Now, though the word may is but permissive in ordinary signification, it here means must,'--a receiver must be appointed, etc. That this is the settled rule of interpretation is pointed out in Potter's Dwarris, text and note, page 220. It is there said as follows: May, in a statute, means must whenever . the public have an interest in having the act done which is authorized by such permissive language; again, Words of permission shall, in certain cases, be obligatory; when a statute directs the doing of a thing for the sake of justice, the word may means shall. So in Newburgh Turnpike Company v. Miller, Chancellor Kent observed as follows: And in respect to statutes, the rule of construction seems to be that the word may means must or shall, . in cases when the public interest and rights are concerned, and when the public have a claim de jure that the power shall be exercised. (5 Johns. Ch. 113; 9 Am. Dec. 274.)

Janz N. Serrano That the public have an interest, that the doing of a particular thing is for the sake of justice,'--change may to must; convert a word of permission to one of obligation. This principle is peculiarly applicable to the circumstances of this case. To guard the public interest and vindicate justice is the distinctive purpose of this proceeding by the attorney-general; to maintain that a corporation, as being but a creature of the law, must obey the law,--cannot be permitted to violate it with impunity; that its stockholders must respect the obligation they assume to the public when they sought and accepted their franchise at the hands *358 of that public; that they must observe the policy upon which the commercial police power of the state proceeds,--the policy which, notoriously disfavoring restraint of trade, absolutely forbids corporations to embark in monopoly in an article classed among the necessaries of human life,--these features characterize this as a case of grave public interest, and one in the vindication of which the court is bound to employ all the powers provided by the law, one of which is the power to appoint a receiver of the estate and effects of the delinquent corporation. 2. Nor is this conclusion, founded as it is upon the text of the Code of Civil Procedure, already referred to, inconsistent with section 400 of the Civil Code, to the effect that stockholders in a dissolved corporation may, in the discretion of the court, be permitted to administer and wind up its business affairs. In my judgment, this provision has reference only to cases of voluntary corporate dissolution. A similar provision is found in the Revised Statutes of the state of New York (3769, sec. 77), and is there limited to cases of voluntary dissolution, as in the nature of things it ought to be here, under the true construction of our statute. In cases of voluntary corporate dissolution, the stockholders are without fault,--or may be,--therefore, the court has a discretion to permit them to hold and distribute the corporate assets, but this is not such a case. Here the corporate franchise has not been voluntarily surrendered, but has been forfeited because of the misconduct of the entire body of the stockholders already ascertained,--in fact become the distinct ground upon which the forfeiture proceeds. For, as pointed out in my opinion heretofore filed in this case, the judgment in this action, though in form one against the corporation, is in fact against the stockholders, who, as there said, were the actual owners of the corporate franchise, a forfeiture of which was adjudged. *359 The misconduct by which the corporate charter was lost was, therefore, the misconduct of the stockholders sued and making defense here by their corporate name,--American Sugar Refinery Company.

age | 100

As observed by Mr. Chief Justice Nelson in People v. Kingston and Middletown Turnpike Road Company, Though the proceedings by information be against the corporate body, it is the acts or omissions of the individual corporators that are the subject of the judgment of the court. The powers and privileges are conferred and the conditions enjoined upon them; they obtained the grant and agreed to perform the conditions, etc. P age | 101 (23 Wend. 205; 35 Am. Dec. 551.) Upon this view it would indeed have been somewhat singular had the Civil Code conferred upon stockholders thus convicted of the breach of one important trust the immediate exercise of another trust, and one in itself of no slight importance,--the trust of administering and distributing the assets of the dissolved corporation. Such inconsistency is not to be attributed to that code. Beside, it will be seen, upon looking into the decisions at large, that such a practice has never been pursued by the courts. Stockholders whose ascertained misconduct has already operated a forfeiture of the corporate franchise have never been permitted to assume the administration of the corporate assets. Even in cases of voluntary dissolution,--cases in which no malfeasance of the stockholders appeared,--inquiry has often been made by the court as to whether the dissolution had in point of fact been brought about by the misfeasance or mismangement of the particular person seeking to become a trustee of the corporate affairs. I must therefore decline to permit the offending stockholders here, or their nominees, to become the trustees of the corporate assets. 3. But one other question remains to be considered, which will now be stated. *360 An appeal from the judgment of forfeiture has been taken,--taken and perfected in such a form as to stay the judgment, pending the appeal, if that be possible. The judgment was rendered here on the sixth day of January; on the 8th, this application for a receiver was made and set down for hearing on the 10th; was actually heard on the twentieth day of January; the appeal was taken on the 18th, while the application was yet pending, and some two days before it was submitted for decision. It is now claimed that the judgment is stayed by the appeal, and that, as a consequence of such stay, the power of the court to appoint a receiver has ceased. But, in my opinion, no appeal, in whatever form it be taken, can operate a present stay of a judgment of the character of the one rendered in this case. To hold that it can is to imply that a corporation already dissolved for ascertained corporate abuses may by this means practically rehabilitate itself at pleasure,--resume its proper corporate existence,-despite the judgment, and so continue its misemployment of its franchise for an indefinite period of time. The correctness of a construction leading to such results may well be doubted.

But waiving this, and assuming that the judgment has been stayed by the appeal taken, it would not follow that the authority to appoint has been superseded because of the appeal. The subject of appeals, as well as their effect when taken, is governed by the Code of Civil Procedure (sec. 946). An appeal stays all further proceedings . upon the judgment, . or upon the matters embraced therein; . but the court . may proceed upon any other matter embraced in the action, etc. That the appointment of a receiver is a matter embraced in the action has already been pointed out in connection with section 564 of the same code; the appeal from the judgment does not suspend the power to *361 appoint, unless the appointment be a matter embraced in the judgment, which it is not (as upon inspection of the judgment will appear), or is itself distinctively a proceeding upon the judgment. That the appointment of a receiver in a cause is not a proceeding upon the judgment in that cause, but is merely ancillary in character, is understood to have been often ruled in our courts. It is not necessary for me, however, to cite the cases nor to enter now upon an analysis of the text of the statute, because I consider the recent ruling in Baughman's case 72 Cal. 572, as directly in point in support of the power. An appeal from the judgment had been taken in that case, yet the authority of the court over the general subject of receivership appears to have been upheld, notwithstanding the pending appeal from the judgment. In that case it was the power to remove which was immediately in question; here it is the power to appoint; but these powers must co-exist; any construction of the statute which would uphold either must necessarily uphold the other. The conclusion reached is, that the application must be granted, and a receiver appointed; an order to that effect will now be entered. WILLIAM T. WALLACE, Judge. Dated February 17, 1890. As we cannot accept the conclusions reached in this opinion, we will state as briefly as possible in what we think their unsoundness consists. The assumption which forms the basis of the entire argument is, that the appointment of a receiver to administer its assets is one of the penalties designed, and in effect prescribed, by the legislature as part of the punishment to be visited upon the stockholders of a corporation, which by any misconduct of its own has incurred a forfeiture of its charter. There is, in our opinion, little to justify this assumption, even in the statutes of New York, upon the supposed *362 construction of which so much reliance is placed. But if such were the declared or plainly implied policy of that state, the significant fact remains, that our statutes not only contain no

Janz N. Serrano semblance of such a declaration, but that our legislature, in framing the law of this state, while looking to the statutes and codes of New York for a model and guide, has deliberately rejected every provision from which such an implication might arise, and in place thereof has substituted one of opposite import. In order to a due appreciation of the force and meaning of these statutes, it is necessary to consider, for a moment, the subject with which they deal. When a corporation ceases to exist, from whatever cause, whether from lapse of time, voluntary dissolution, or judgment of forfeiture for neglect or abuse of its powers, it necessarily results that its property is left to be disposed of according to law. Even in those times when the doctrine prevailed that such of its property as did not revert to its grantors was forfeited or escheated to the crown, some officer exercising a general authority under the common law or statutes, or invested with a special authority for the occasion, was charged with the duty of collecting the assets for the benefit of the king, or his donee; and since it has come to be recognized everywhere that, upon the dissolution of a trading corporation, its property neither reverts to its grantors nor escheats to the state, but belongs, after payment of its debts, to those who were stockholders at the date of dissolution, the appointment of some officer with the same or more minutely defined authority is a recognized necessity. Some means must be provided for winding up the corporation and distributing its assets according to the equitable rights of those interested. In the absence of any statute regulating the matter, a court of equity would have the undoubted right, in a proper proceeding instituted by a creditor or a stockholder, to appoint a receiver to administer the property. But in many of *363 the states, statutes have been passed expressly providing for the appointment of receivers, or trustees exercising the same functions, though sometimes called by other names. In all cases it is made their duty to collect the assets, pay the debts, and distribute the surplus pro rata to the stockholders. As this is precisely what a court of equity would have done in the absence of a statute, it is to be inferred that the motive of such legislation has been to accomplish some other object,--some object, that is to say, for which express legislation was necessary. This inference is fully justified and amply borne out by reference to the different statutes. They seem to have been enacted with the object, in some instances, of abrogating the old law of forfeiture, and reversion; in others, of committing the administration to other courts than courts of equity; in others, to provide general and uniform rules of procedure, as to giving notice to creditors, etc., to take the place of rules of court and specific orders to be made by the chancellor in each particular case; in others, to keep the matter out of the courts altogether, as by allowing the dissolved corporation to continue its existence for a term for purposes of liquidation, but for no other purpose. The whole mass of this legislation seems to be pervaded by the one idea of simplifying, expediting, and cheapening the means of

accomplishing the one object of transferring to the stockholders of a defunct corporation their full share of its surplus assets. There is, from beginning to end, no suggestion of added penalites or punishment after death. Now, to revert to the New York statutes in force at the date of the decision in People v. Washington Ice Company, cited P age | 102 in the opinion of Judge Wallace. They provided, as ours do, for both voluntary and involuntary dissolution of corporations, and in express terms directed the appointment of receivers in all cases, whether voluntary or involuntary; they also contained minute and specific directions as to the duties of receivers, notice to *364 creditors, fees and commissions, settlement of accounts, etc., very similar to our statutes regulating the proceedings of executors and administrators. The object of such legislation is apparent, and clearly it is not the infliction of penalties, but merely the conservation of rights. In view of these provisions of the New York statute, it is difficult to see how the general principle can be deduced from the decision referred to that an ascertained forfeiture implies a receiver. That was not the question litigated in the case, and was not decided. The point decided was, that in an action to forfeit a charter a receiver could not be appointed until after judgment dissolving the corporation; in other words, that there is no forfeiture in the sense of the statute until the judgment of dissolution is entered. All that this implies is, that after judgment a receiver may, not that he must, be appointed, and therefore the implication falls short of what the statute under consideration expressly enjoined, viz., that it should be the duty of the attorney-general, immediately after the rendition of such judgment [of forfeiture], to institute proceedings for that purpose (the appointment of a receiver). (Voorhies' Code, sec. 444.) Nothing, therefore, can be gained for the argument by reference to this decision. It merely construes the New York statute on a point not in controversy here. And even if it had been otherwise, the question would have remained, whether our law is the same in substance as the law of New York. The opinion of the superior court assumes that it was much the same as ours. We think, on the contrary, that the points of difference between our law and that of New York are much more striking and manifest than the points of resemblance. The laws of New York, it is true, recognize, as our laws do, and as, in the nature of things, every law on the subject must, the necessity of providing some *365 means of administering the assets of a defunct corporation, and the propriety, in the absence of other provision, of appointing a receiver for that purpose; but there the resemblance ends. In New York, as we have seen, there was no other provision, and the appointment of a receiver was

made obligatory in all cases of dissolution, whether voluntary or involuntary. That was the rule, to which there was no exception. Under our codes, on the contrary, the rule is not to appoint a receiver, but to leave the whole matter of liquidation and distribution to the exclusive control of the directors of the corporation in office at the date of dissolution. The appointment of a receiver is the exception, not the rule, and is not to be made unless some party interested, either a creditor or a stockholder, can show that for the protection of his rights the appointment of a receiver and the administration of the assets under the control and superintendence of a court of equity is necessary; and even then no receiver will be appointed upon his ex parte application without requiring ample security by his undertaking with sufficient sureties for all damages that may be caused by the appointment if it shall turn out that it was made without sufficient cause. In support of this statement we refer to the following provisions of the codes:-Sections 399 and 400 of the Civil Code are as follows:-Sec. 399. The dissolution of corporations is provided for: 1. If involuntary, in chapter 5 of title 10, part 2, of the Code of Civil Procedure. [Secs. 802, 810.] 2. If voluntary, in title 6, part 3, of the Code of Civil Procedure. [[Secs. 1227-1233.] Sec. 400. Unless other persons are appointed by the court, the directors or managers of the affairs of such corporation at the time of its dissolution are trustees of the creditors and stockholders or members of the corporation dissolved, and have full power to settle the affairs of the corporation. *366 Sections 565 and 566 of the Code of Civil Procedure are as follows:-Sec. 565. Upon the dissolution of any corporation, the superior court of the county in which the corporation carries on its business or has its principal place of business, on application of any creditor of the corporation, or of any stockholder or member thereof, may appoint one or more persons to be receivers or trustees of the corporation, to take charge of the estate and effects thereof, and to collect the debts and property due and belonging to the corporation, and to pay the outstanding debts thereof, and to divide the moneys and other property that shall remain over among the stockholders or members. Sec. 566. No party or attorney or person interested in an action can be appointed receiver therein, without the written consent of the parties, filed with the clerk. If a receiver be appointed upon an ex parte application, the court, before making the order, may require from the applicant an undertaking, with sufficient sureties, in an amount to be fixed by the court, to the effect that the applicant will pay to the

Janz N. Serrano defendant all damages he may sustain by reason of the appointment of such receiver and the entry by him upon his duties, in case the applicant shall have procured such appointment wrongfully, maliciously, or without sufficient cause, and the court may, in its discretion, at any time after said appointment, require an additional undertaking. It will be observed that section 399 of the Civil Code refers to those parts of the Code of Civil Procedure which provide for involuntary as well as voluntary dissolutions, and that section 400, by its terms, applies as well to one kind of dissolution as to the other. By its own unaided force, without the intervention or any necessity for the intervention of a court, it makes the directors managers of the affairs of the corporation and trustees for the creditors and stockholders, with full power of settlement. *367 These trustees, like trustees in general, are of course amenable to the jurisdiction of a court of equity, and may be called to account there for any neglect of duty or abuse of power. But until they are so called to account in an independent action or proceeding by a party in interest, no court has any excuse for interference; and if they are sued and brought into court without sufficient cause, even by a creditor or stockholder, they will recover costs. But in the opinion of the superior court these provisions of our statutes are, upon their true construction, to be limited to cases of voluntary dissolution. It seems to us that the terms of the law are too plain in an opposite sense to admit of construction, and even if it were otherwise, that the reasons given for the construction adopted are wholly insufficient. In section 399 of the Civil Code, separate reference is made, first, to cases of involuntary dissolution, and second, to cases of voluntary dissolution. Then, right on the heels of this reference follows the provision for the settlement of the affairs of such corporation. If it was the intention of the legislature to limit this provision to cases of voluntary dissolution, nothing could have been easier or more natural than to say so. And if it were true that this section of our code is similar to the section cited from the Revised Statutes of New York (3769, sec. 77), and that that section is limited to cases of voluntary dissolution, the fact that our legislature has adopted the provision without the limitation would be a strong circumstance indicative of an intention to make its operation general. But in truth the two sections are not substantially the same. Section 400 of our Civil Code, as is apparent, provides a means of settlement of the affairs of a dissolved corporation without the intervention of a court, unless such intervention is specially invoked, and that is its whole scope. The section cited from the Revised Statutes of New York is part of a scheme in which the *368 rule is to appoint a receiver in all cases; and it merely provides that any of the directors, trustees, or other officers of such corporation, or any of its stockholders, may be appointed receivers. It is not by any means clear, moreover, that this provision was limited to cases of voluntary dissolution. It is true that it is found in an article relating to

voluntary dissolutions, but that article is by reference made part of the law of involuntary dissolution. The very section of the New York Code of Civil Procedure, section 444, which enjoins upon the attorney-general the duty of applying for a receiver whenever the charter of a corporation has been forfeited at the suit of the state, makes the article relating to voluntary dissolutions the measure and limit of the power of P age | 103 the court to restrain the corporation, to appoint a receiver of its property, and to take an account, and to make distribution thereof among its creditors ; from which it is perfectly evident that the legislature of New York intended no discrimination against the stockholders of a corporation which had forfeited its charter by misconduct; for if they were to enjoy every advantage in the management and distribution of their property that the law afforded to stockholders in corporations voluntarily dissolved, how can it be claimed that the law was framed with a view to punishment in one case, unless that was its object and effect in all cases? It is therefore plain that if any foundation exists for the notion that the appointment of a receiver, in case of a forfeited charter, is part of the punishment prescribed for the offenses of the corporation, that foundation must be sought elsewhere than in the statutes and decisions of the state of New York. Where, then, is it to be found? The first general consideration suggested in the opinion of the superior court is, that it would indeed have been somewhat singular had the Civil Code conferred upon stockholders thus convicted of the breach of one *369 important trust the immediate exercise of another trust, and one in itself of no slight importance,--the trust of administering and distributing the assets of the dissolved corporation. Such inconsistency is not to be attributed to that code. We admit that no inconsistency should be attributed to the law; but before we construe a section of the code contrary to its obvious meaning, we should be very certain that such construction is necessary, in order to prevent a conflict with some other provision of controlling force, or some legal principle of general application. It is not pretended that the literal purport of section 400 of the Civil Code and section 565 of the Code of Civil Procedure conflicts with any other statutory provision; but the idea seems to be, that it is absurd to suppose that the legislature would have left to the directors of a corporation convicted of violating their duty to the people of the state the power and discretion to pay their own debts, and divide their own property, subject to the right of a court of equity to interfere and compel them to proceed properly, if any occasion for such interference should arise. We confess that there does not appear to us to be any absurdity in this supposition. Because a corporation has violated its duty to the public, it does not follow that its members cannot be trusted to look out for their own interests.

Quite the contrary; for it is usually a too exclusive regard for their own interests that constitutes their dereliction to the public. As to creditors, their interests must in most cases be opposed to the appointment of a receiver. They will be paid more quickly and more certainly without a receiver than with one. If there is any one thing more certain than another, it is that the appointment of a receiver implies a material diminution of the fund out of which creditors are to be paid. For, in the first place, the fees of the receiver, his counsel, and assistants, are to be subtracted. Then the estate *370 must, in many cases, as it has been in this case, be condemned to unproductive idleness and disuse, and exposed to danger of loss and dilapidation from rust and decay during the long and tedious progress of the legal proceedings that are necessarily entailed. And all this time the creditors must wait and look on, while the fund upon which they rely for payment is being depleted by the processes above referred to. On the other hand, supposing the affairs of the defunct corporation to be under the control of its late directors as trustees for its creditors and stockholders, the creditors have nothing to do but present their demands and receive payment in the ordinary course of business, or if payment is refused or delayed, they may proceed to enforce their demands. How much better this is for the creditors than to have to wait upon the motions of a receiver and the court, under whose order he acts, every one knows who has had any experience of the two methods of settling the business of a partnership or a corporation. And then it is, as we have seen, always at the option of a creditor or stockholder to have a receiver, if they can allege facts showing that a receiver is necessary. So far, therefore, as the rights and interests of the sole beneficiaries of the trust are concerned, there is no need to construe section 400 of the Civil Code and section 565 of the Code of Civil Procedure contrary to their express terms, in order to rescue the legislature from the imputation of having enacted an absurdity. On the contrary, the rule which they prescribe, according to their natural and obvious construction, by which they apply as well to cases of forfeiture of charter as to cases of voluntary dissolution, is most salutary, so far as the beneficiaries are concerned, and such construction must prevail, unless, indeed, it be true that the paramount interests of the people of the state demand a different construction. This proposition that the people of the state have an *371 interest in the appointment of a receiver, whenever the charter of a corporation has been forfeited, was decided adversely to the contention of the respondent at an early stage of these proceedings in ruling upon a preliminary objection made by counsel for the state, who appeared specially for that purpose,-an objection founded upon a clause of the twenty-eighth rule of this court, which reads as follows: In case any court, judge, or other officer, or any board or other tribunal, in the discharge of duties of a public character, be named in the application as

Janz N. Serrano respondent, the affidavit or petition shall also disclose the name or names of the real party or parties, if any, in interest, or whose interest would be directly affected by the proceedings, and in such case it shall be the duty of the applicant obtaining an order for any such writ to serve, or cause to be served, upon such party or parties in interest a true copy of the affidavit or petition, and of the writ issued thereon, in like manner as the same is required to be served upon the respondent named in the application and proceedings, and to produce and file in the office of the clerk of this court the like evidence of such service. Neither the petition nor the writ herein was served upon the state or its attorneys, and the objection made in behalf of the state was, that the hearing could not proceed, and that the alternative writ must be quashed, for the reason that it appeared on the face of the petition that the state was the real party in interest, or whose interest would be directly affected by the proceedings. The court, however, were unanimously of the opinion, and so decided, that the state had no interest to be affected, and that the only persons interested were the creditors and stockholders of the corporation. It must be confessed, however, that when this ruling was made we did not understand, and of course did not consider, the real position of respondent with respect to this *372 matter. It did not occur to us, and if the point was suggested in the course of the argument upon this preliminary objection, it failed to impress us at the time, that any person could have an interest in the appointment or removal of a receiver, except those who would be entitled to share in the distribution of the fund committed to his control; and as it was conceded that the state had no interest in the fund, we naturally concluded that the interests of the state could not possibly be affected by any result of these proceedings, and ruled accordingly. But in the light of the fuller argument made at and since the hearing, we perceive that the real claim of the state remains to be stated and considered. Before, however, proceeding to this discussion, we take occasion to say a few words as to the proper construction of the rule of court above cited. It does not, as counsel seem to suppose, require that the state should have been made a formal party to this proceeding, by being named as a defendant in the petition or writ, but only that the names of the parties really interested should be disclosed by the petition, and that service of a copy of the petition and writ should be made upon them. ( Baker v. Superior Court, 71 Cal. 583.) The effect, therefore, of a failure to serve such parties would not be an abatement of the whole proceeding, but, at most, to require a postponement of the hearing or trial until they could be served and have a reasonable time to appear.

On the face of the petition in this case, it did not seem to us that the state could have any interest in the controversy over the appointment of the receiver. If it had been otherwise, it would perhaps have been our duty in advance to order service of the petition and writ upon the representatives of the state, and certainly we should have been bound, of our own motion, to require proof of such service before proceeding P age | 104 with the hearing of *373 the rule to show cause; or if, on the hearing, the fact had been developed that a party not named or served had an interest to be affected, it would have been our duty to suspend the proceeding until such party was served and brought in. As it was, however, we were proceeding properly with the hearing when the objection of the state was interposed. The motion made to quash the alternative writ was not sustainable upon any view of the state's rights or interest in the matter, and after listening to the argument then advanced in support of the state's claim of interest, and its right to the benefit of the rule, we decided that the claim was unfounded, and that the rule did not apply. But if we had then understood, as we now understand, the ground upon which the state bases its claim of interest, we should probably have ordered service of the petition and writ on the attorneys of the state, and should have allowed them in that capacity to take part in the subsequent proceedings. No harm, however, has resulted from our misconception of the state's position. Although there was no service of notice upon its attorneys, eo nomine, such service was made upon the judge of the superior court, who has been formally represented throughout these proceedings by one of the attorneys of the state, and actually by both of them. The whole object of the rule, therefore, has been fulfilled so far as the state is concerned, the only difference being that its attorneys have had only one copy of the writ and petition instead of two, and that they have been compelled to speak in the name of the superior judge, instead of that of the state. But in his name and upon his behalf they have presented every argument and raised every issue which could have been made in behalf of the state if it had even been a formal party to the proceedings, which, as we have seen, the rule does not require. *374 We will now return from this digression to consider what those arguments are. It will be seen, by reference to the opinion of the superior court, above quoted, that the provision of section 564 of the Code of Civil Procedure, to the effect that a receiver may be appointed when a corporation has forfeited its charter, is construed to mean that in such case a receiver must be appointed, and this because the public has an interest that the power should be exercised. To our minds it is perfectly clear that the true construction of this clause of section 564 is found in the very next section of the code, wherein it is specifically enacted that upon the dissolution of any corporation, the superior court of the county in which the corporation carries

on its business, or has its principal place of business, on application of any creditor of the corporation, or of any stockholder or member thereof, may appoint one or more persons to be receivers, etc. Here is an express enumeration of the parties, and the only parties ( expressio unius est exclusio alterius), whose interest demands that may should be read must; and considering this language in connection with section 400 of the Civil Code, which, as we have seen, provides that the directors in office at the date of its dissolution shall settle the affairs of a corporation, unless some other persons are appointed, we should never have thought of looking further for a definition of the circumstances under which a receiver could be appointed. In terms, both sections apply as well to cases of involuntary as to cases of voluntary dissolution, and they do in fact provide a most salutary rule for the protection of all persons interested in the property. But it is held that they must be construed out of their obvious sense, and limited in their application to cases of voluntary dissolution, because, and only because, in cases of forfeiture for corporate misconduct, the stockholders cannot be adequately punished or restrained without the intervention of a *375 receiver, and, consequently, that the interest of the public, in the imposition of such punishment and restraint, requires the conversion of may into must, thus making the appointment of a receiver obligatory in all cases of forfeiture. This proposition, which is, in effect, stated in the opinion above quoted, is much more plainly and directly put in the argument made by the respondent here. He asks if it is possible that this controversy between the state and a concern with millions of capital is limited to the imposition of a fine of five thousand dollars, and the cancellation of a charter the duplicate of which can be obtained while we are talking here, and he answers his own question as follows: I understand the great interest of the state is to break down the monopoly. To do that, it seizes the means and utensils,--the business with which the monopoly has been proceeding. It scatters it. It divides it up. A receiver is appointed for that purpose. That is part of the penalty. That is a part of the penalty provided by law because they have forfeited their corporate rights,--no other reason. Translated into terms specifically applicable to the case before us, the meaning of this is, that if a corporation organized for the purpose of refining sugar enters into a combination with other corporations, through the medium of what is called a trust, for the purpose of limiting the production and keeping up the price of refined sugar, the courts will not only forfeit its charter and impose the utmost fine which the law prescribes for such offenses, but they must go further, and by the hands of a receiver seize into their possession all the property of the defunct corporation, and especially its sugar-refining plant, not for the purpose of preserving and protecting it, and as speedily and economically as possible distributing it to those who are equitably entitled, viz., creditors and stockholders, but for the quite opposite purpose of shutting it up and condemning it to

Janz N. Serrano rust and idleness *376 until such time as it can be unfitted completely for the purpose to which it is best adapted by dividing it up and scattering it. We confess that this is to us a novel doctrine, and one which does not, upon any ground, commend itself to our judgment. It may not be the rule in this state to construe penal legislation strictly, but even here, when a court is asked to impose a penalty for infraction of a law, the first inquiry is, What penalty does the law prescribe? The answer to this question is sought, not in labored construction of other statutes, but in the express term of the act defining the offense. Now, what is the case here? In section 803 of the Code of Civil Procedure, the legislature has enjoined upon the attorneygeneral the duty of bringing actions for the forfeiture of corporate franchises whenever he has reason to believe that they are unlawfully held or exercised. This was his sole authority for bringing his quo warranto against the American Sugar Refinery Company, and it is upon this chapter of the code that the judgment of forfeiture depends. Section 809, in the same chapter, defines the character of the judgment that must be rendered when the defendant is found guilty, viz., that the defendant be excluded from the franchise it has abused, and the court may also, in its discretion, impose upon the defendant a fine not exceeding five thousand dollars, which fine, when collected, must be paid into the treasury of the state. This is absolutely all the punishment that the legislature has in terms prescribed; and if any other was intended, especially if such other punishment was designed to be severe beyond comparison with that expressly defined, it is passing strange that the courts should have been left to work it out by a doubtful construction of other parts of the codes. But, to our minds, the gravest objection to the doctrine lies in the consequences which it involves. Obviously, *377 there is no measure or limit to the punishment which may be inflicted in the manner indicated, except in the discretion of the court and the moderation of its receiver. The duty of the receiver is not conservation, but destruction. In whatever business the offending corporation may have been engaged, his first step must be to shut up its works; however vast the capital invested, it must be condemned to lie idle and unproductive until it can be divided up and scattered. It must not be sold as a whole, complete and adapted to the work for which it was designed, and for which alone it possesses any considerable value. To do so would defeat the whole object of the receivership; for not only would the offending stockholders get off without adequate punishment, but there would be nothing to prevent them from buying in their own property and again putting it into the combination. It must, therefore, be divided up and scattered, and its value in great measure destroyed. The stockholders, when they finally realize upon their property, must be content to receive, not the proceeds of a wellappointed manufactory in complete running order, but the price of a lot of old iron and second-hand machinery, sold in

lots according to the discretion of a receiver, acting with a view, not to their interest as stockholders, but solely with a view to the interest of the public in punishing them. We cannot assent to a doctrine involving such consequences. If it is really true that our laws, as they are written, provide no adequate punishment for corporate P age | 105 transgressions, let the legislature take the matter in hand. It is no part of the function of a court to supply the want of penal legislation. Its judgments in such case, beside being wholly unauthorized, would always operate as bills of attainder or ex post facto laws, both of which are not only abhorrent to our ideas of justice, but are expressly forbidden by our charters of government. But perhaps it is not fair to regard the doctrine under *378 discussion as implying that the primary object of the laws, as it construes them, is the punishment of the stockholders. It may be said that the real purpose is only to break up the monopoly, and that the punishment involved is merely incidental and unavoidable; that it is right to break up the monopoly, and if, unfortunately for them, the stockholders suffer in the process, they have themselves alone to blame. Regarded from this point of view, it seems to us that the doctrine is still wholly indefensible. When a corporation is dissolved, its property, as we have seen, vests in its stockholders, subject only to the claims of creditors, and is thereafter held upon the same tenure and subject to the same conditions as similar property owned by other natural persons. What others may do they may do. They owe no further or higher duty to the public, and are under no other restraints. Therefore, unless some ground can be shown upon which the state can take a sugar refinery away from a private citizen who has inherited it, or bought it, or built it, and can shut it up preparatory to dividing and scattering it, upon the ground that he has entered into an agreement with some other private citizen owning another refinery, to limit the output of both establishments with a view to keeping up the price of the refined product, no ground can be shown which will warrant the state in taking similar property from natural persons who have succeeded thereto on the death of a corporation. Confessedly, there is no warrant to be found for such a proceeding in case of a natural person. That contracts in restraint of trade are unlawful, or, at least, opposed to the policy of the law, is conceded, but the only penalty they entail is, that courts refuse to enforce them, just as they refuse to enforce any contract which is opposed to public policy or good morals; but no one ever heard of a proceeding to confiscate or destroy, either wholly or partially, the property which is the subject*379 of such a contract. So far the legislature has seen fit to attach no other punishment to contracts of natural persons in restraint of trade than to make them non-enforceable; and where the legislature has stopped,

it is not only becoming, but necessary, that the courts should stop. As to the property of a corporation, the legislature has given no indication of an intention to forfeit it or take it away from the stockholders, except to the extent of a fine of five thousand dollars, which the court is authorized in its discretion to impose. What is forfeited to the state, and all that is forfeited, is the charter,--the right to be a corporation; and this is resumed solely upon the ground that the condition upon which it was granted has been violated. The doctrine is, that corporate charters are granted upon the implied condition that the privileges conferred will be used for the advantage, or at least not to the disadvantage, of the state. If this condition is broken, the charter which the state has given is taken back by the state; but the property which the corporation has acquired with its own means goes to those who have paid for it, and they have the right to deal with it just as others similarly situated may deal with their property. Whatever the law prevents other natural persons from doing they are prevented from doing,-nothing more. This doctrine is plainly enough indicated in the case of People v. North River Sugar Refining Co., 22 Abb. N. C. 164, cited and relied upon by respondent, and in the cases therein referred to, and it is shown, moreover, in those cases, that the privileges and powers of a corporation are essential to membership of the trust and to any effective monopoly. To become a member of the trust, the sugar refiner must be a corporation, and the corporation being dissolved, it is impossible that its stockholders should keep up the arrangement. And so as to monopolies in general, they are only dangerous when corporations are the parties to the agreement by which *380 they are attempted. ( Leslie v. Lorillard, 110 N. Y. 519.) At least this is the opinion of some courts, and it suggests a reason why the legislature has omitted to prescribe any penalty beyond non-enforcement in case of such agreements between natural persons. But we need not speculate upon these matters. The law being plain, we are not concerned with its expediency. The conclusion which inevitably follows from these views is, that, in an action under sections 802 et seq. of the Code of Civil Procedure, the rendition of the judgment authorized by section 809 ends the proceedings so far as the superior court is concerned, and that no receiver of the corporate property can be appointed unless a new and distinct proceeding is commenced by a creditor or stockholder of the corporation. (Code Civ. Proc., sec. 565.) Such new and distinct proceeding upon the part of the beneficiaries, or some of them, is the essential condition of any jurisdiction in the court to take the property out of the control of the trustees designated by law. (Civ. Code, sec. 400.) An order appointing a receiver without such application is, therefore, void, not only as to strangers to the quo warranto,

Janz N. Serrano but is even void as to the corporation and its stockholders and vendees. We have no doubt of the correctness of this conclusion; but if we were wholly mistaken in our views, and if it were true, as held by the respondent, that the appointment of a receiver for the purpose of inflicting one of the penalties designed by the law and essential to its efficacy is obligatory, we cannot see how it is possible to avoid the conclusion that the enforcement of this as well as other parts of the penalty was suspended by the appeal from the judgment. According to the plain and unambiguous terms of the statute, proceedings upon any appealable judgment or order may be stayed by the filing of a sufficient undertaking, except in a few enumerated cases, of which this *381 is not one. (Code Civ. Proc., sec. 949.) Confessedly a sufficient undertaking was filed in this case to stay the judgment, if that was possible. (Opinion of Judge Wallace, supra.) But it is held, in the face of the statute, that a stay was not possible, and this, again, upon the plea of necessity, in order to prevent an apprehended abuse. We do not think the reason suggested is sufficient to override the law. The allowance of an appeal in such cases implies the right of the corporation to question the validity of a judgment of forfeiture until it has been affirmed here; and it is not correct to say that a stay of proceedings would operate a rehabilitation of a dissolved corporation, when the sole object of the appeal is to determine the question whether there has been a valid judgment of dissolution. But evidently the respondent was unwilling to stand upon the proposition that a stay was not possible. Waiving that, and assuming that the judgment has been stayed, he concludes that the power to appoint a receiver is nevertheless not suspended because the order of appointment is not embraced in the judgment, and is not a proceeding upon the judgment. It is true that the order of appointment is not embraced in the judgment; but that is not the test. An execution is not embraced in the judgment, but an appeal duly perfected stays execution. In truth, it is not correct to say that a judgment or matters embraced in a judgment are stayed by the appeal, and the statute does not say so. What it says is, that proceedings upon the judgment and matters embraced therein are stayed by the perfecting of an appeal. (Code Civ. Proc., sec. 946.) That is to say, the execution--the enforcement--of the judgment is suspended. Now, here it is conceded that no receiver of the corporation could be appointed until after judgment, and that the only purpose of his appointment is to carry the judgment into effect,--by taking away the property of *382 the corporation and scattering and dividing it. How, then, is it possible that this is not a proceeding upon the judgment? According to the argument, the things to be done by the

Janz N. Serrano receiver constitute the only substantial and effective punishment which it is in the power of the state to inflict; the rest is a mere trifle. But it is, nevertheless, held that this ruinous penalty which follows the judgment, and but for the judgment could never be in-inflicted, is not a proceeding upon the judgment, and therefore is not stayed by the appeal. And this P conclusion is rested upon the authority of rulings which it age | 106 is said have often been made by our courts. Undoubtedly it has often been held that the appointment of a receiver is merely ancillary, and undoubtedly his appointment often is merely ancillary; that is to say, he is appointed before judgment for the purpose of protecting, pending the litigation, property which is the subject of the litigation. But sometimes he is appointed after judgment for the purpose of carrying the judgment into effect; in which case his appointment and his proceedings thereunder are not merely ancillary. In the former case his functions are not necessarily suspended during the appeal, and neither is the power of the court to remove him or control him suspended by the appeal. But in the latter case-- as, for instance, where a receiver has been appointed to sell mortgaged premises under decree of foreclosure--his proceedings are suspended by the appeal. The only case cited by respondent--a case supposed to cover the whole ground and to conclude the question--is that of Baughman v. Superior Court, 72 Cal. 572, which was of the former class. There the litigation was about the right to certain grain described in the pleadings. Upon the filing of the complaint, and upon the ex parte application of the plaintiff, the court appointed a receiver to take charge of the grain, pending the action, to preserve it for the benefit *383 of the party who might prove to be entitled to it. The defendant demurred to the complaint; his demurrer was sustained, and final judgment entered in his favor, from which plaintiff appealed to this court. After the appeal was perfected, the superior court discharged the receiver, and this court decided that the power of the superior court to do so was not suspended by the appeal. We do not doubt the correctness of that decision; but we are unable to see the resemblance between the case where a receiver is appointed before judgment, to preserve property pending the litigation, and one in which he is appointed after judgment, to dispose of the property in order to make the judgment effective. We know of no case that comes nearer supporting the proposition to which it was cited than this case, and we feel certain that there is as little to support it in the rulings of our courts as in the text of the codes. As to considerations of expediency, they should not weigh when the law is plain; but if we were to look to the consequences of the doctrine contended for, we should find therein nothing to commend it. We assume, for every purpose of this decision, that the judgment of forfeiture in this case was not only just, but legal; correct not only in substance, but in form,--free from error. But it does not follow that all similar cases will be equally well decided. It is possible--the constitution and the laws assume the possibility--that some case may arise in which the judgment of forfeiture will be not only erroneous, but unjust, and that it will be reversed on appeal. But the rule applied in this case must also be applied in that case. If this judgment must be executed in the manner indicated, so must that. A receiver must be appointed; he must seize all the property; he must shut up the factories, discharge the employees, prevent the fulfillment of contracts, subject the corporation to every sort of loss and damage that can *384 be inflicted by the stoppage of a great and complicated industry having its ramifications throughout the business centers of the entire coast. And not only this, for if he must go to this extent,-if nothing the corporation or its stockholders can do will stop him,--then nothing but the forbearance of the superior judge will prevent the completion of the process. For this injury caused by an erroneous judgment, a reversal on appeal affords no redress; for no security has been given by the undertaking of sureties, or otherwise, to indemnify the corporation or its stockholders. The sureties of the receiver merely undertake that he will faithfully execute the orders of the court; and according to the precedent in this case, they are bound in a trifling amount. If the receiver obeys orders, they are exonerated; and if his orders contemplate the infliction of punishment by the indirect and partial destruction of the property, the more completely they are exonerated, the greater the damage inflicted for which there is no redress. Unless it is to be assumed that such results as these comport with the justice and policy of a great state, the inevitable consequences of the doctrine contended for utterly condemn it. If, therefore, the state could demand the appointment of a receiver upon the ground and for the purposes stated, the appeal operated as a stay of such proceeding, and for that reason the appointment in this case would have been an excess of authority. But we do not rest our decision on this ground. We rely upon the proposition that a receiver of a dissolved corporation is only to be appointed when necessary for the purpose of preserving and distributing the property, and only upon application of a party interested, viz., a creditor or stockholder. This conclusion relieves us of the necessity of dwelling at length upon other objections to the validity of the order of the superior court. If it was totally void as to *385 all the world, it was, of course, void as to these petitioners, without regard to the special manner in which they were affected by it. It is proper, however, to add that we think these objections urged by petitioners in their character as purchasers of the refinery are well founded. They were not parties to the quo warranto in their character of purchasers. It may be true that the stockholders of a corporation are in a certain sense parties to an action to forfeit its franchise, but they are not parties in any other sense than that they are bound by the consequences of such judgment as the court in that action has power to give. If the court goes outside of the issues in the action, and renders a judgment or makes an order embracing matters entirely foreign to such issues, certainly the stockholders are not bound by such judgment or order. Even conceding, then, for the sake of the argument, that the order of the superior court would have been valid if confined to property of the corporation, it cannot be claimed that it was valid if it embraced the property of vendees of the corporation. There does, indeed, seem to be a sort of claim hinted at, rather than directly asserted, in one of the briefs, that a purchase pendente lite is in fraud of the rights of the state in such cases as this, and therefore void. But there appears to be no foundation for this claim. The state by its action acquired no lien on any of the property of the corporation, and it is difficult to understand upon what ground it can attack a sale pendente lite. Up to the date of its dissolution, the corporation had the same power of disposing of its property honestly and in good faith that any corporation has, and, like any other corporation, it could sell to its stockholders. It matters not, therefore, that these petitioners were stockholders; they had the right to purchase; and if they did so, and entered into possession of the property, they had *386 the same rights in their character of purchasers that any stranger would have had. It is claimed by respondent that the evidence in the quo warranto case showed that the transfer to the petitioners was a sham. This may be so, but the petitioners were not parties to that proceeding for the purpose of defending their purchase. Its validity was not in issue in that action, and could not, by any legal possibility, have been tried and determined therein. If any evidence came out in relation to the transfer, it was but incidental to other issues, and the petitioners could have no opportunity of rebutting it. If the bona fides of their purchase was to be attacked, and the validity of the transfer drawn in question, they were entitled to their day in court and an opportunity of adducing testimony to sustain their claim of ownership. But it is said these petitioners did appear, did submit themselves to the jurisdiction of the court, and did have an

Janz N. Serrano opportunity to contest the making of this order; and consequently that the order, even though erroneous, is binding on them until reversed. The foundation for this assertion is, that, in response to the rule to show cause why a receiver should not be appointed, these petitioners, in common with all the other stockholders of the corporation, filed an affidavit showing that there were no creditors, and a request that the P age | 107 trustees of the corporation might be allowed to settle its business. In other words, they opposed the appointment of a receiver, upon the ground that no party in interest asked or desired a receiver. This is all that can be said; they opposed the appointment of a receiver of the property of the corporation. There was not a word in the pleadings or judgment in the original action, or in the rule to show cause, about any specific property, and of course no issue or opportunity to try the validity of the transfer of the refinery to the petitioners. The order, therefore, assumed *387 to determine a question that was never tried, and never anywhere put in issue. But the form of the order is defended on the ground that the rule is well settled that the order should describe, with sufficient certainty, the property which the receiver is to take, and unless this is done, he cannot hold it. Of course the property must be described with sufficient certainty; but it is sufficient, in appointing the receiver or assignee of an insolvent, or a corporation, or partnership, or the executor or administrator of a decedent, to mention, generally, all the property of the insolvent, the corporation, the partnership, or the decedent. If a specific description was necessary, what would justify the receiver in this case, or in any of the cases supposed, in taking property not specifically described? The truth is, in all such cases the receiver justifies and defends his possession by showing title in the person under whom he claims. Of course, when a litigation concerns some specific property described in the pleadings, it is proper, in appointing a receiver, to so describe the property in the order. But such is not the case here. And even in cases where a specific description is appropriate, it gives the receiver no right to take the property from the possession of a stranger to the action. The case of Ex parte Cohen, 5 Cal. 494, is cited to sustain the proposition that the court had power and jurisdiction to decide whether the petitioners herein were in possession as agents or trustees of the corporation. The case does not sustain the proposition. It merely holds that a court may, in a proper case, order, not only the party, but his agents and servants, to deliver property to a receiver. But it does not decide that when a third party is in possession, claiming to be owner in his own right, a court may determine without a hearing that he is a mere agent or servant. To say that a court *388 may make an order binding upon the servant or agent of a party to the action does not mean that a court or the receiver may take property out of the possession of a stranger claiming it as a purchaser in good faith, and throw upon him the burden of proving that he is not an agent or servant. Another objection urged by counsel for respondent is, that these petitioners, having tried the quo warranto case in the superior court on the theory that the corporation was carrying on the business of the refinery, are estopped from asserting here that they are the owners. There are many answers to this objection; but we deem it sufficient to say that we can look only to the pleadings, findings, and judgment in the quo warranto case to find what was tried, or what was the theory of the trial. The issues in that case all related to the conduct of the corporation prior to the filing of the information by the attorney-general, while the claim of the petitioners is, that they purchased the property after all the pleadings were filed, and just before the trial. Besides, the evidence to which we have been referred shows very clearly that the transfer to petitioners was disclosed on the trial, and it cannot be said that they practiced any concealment or deception as to their claim, even if their purchase, pending the action, had been material. We do not see how it was material, but whether it was, or not, it cannot be doubted that the superior court was fully advised of their claims before the receiver was appointed. How else, indeed, could it have been concluded that the transfer was a sham? We have thus gone cursorily over the propositions most strongly pressed by counsel in the attempt to sustain this order. They all rest upon the assumption that the court was authorized, without any application by a creditor or stockholder, to appoint a receiver. That assumption being shown to be unfounded, all the propositions*389 resting upon it necessarily fall, but nevertheless we thought it proper to notice them. We also desire, before taking leave of this branch of the case, to say a word as to the decision in Eastline R. R. Co. v. State, cited in an addendum to respondent's brief as decisive of the whole question raised by petitioners. We cannot see that it decides anything in point. It merely holds that a Texas statute which directs the appointment of a receiver in cases of forfeiture of corporate franchises is constitutional. There is no question here as to the constitutionality of a statute. We have no such statute. We come now to the questions as to the remedy. Prohibition arrests the proceedings of an inferior judicial tribunal or officer when such proceedings are without or in excess of the jurisdiction of such tribunal or officer, and the writ issues in all cases where there is not a plain, speedy, and adequate remedy in the ordinary course of law. (Code Civ. Proc., secs. 1102, 1103.) We have shown that the superior court, in appointing the receiver, exceeded its jurisdiction, and there is no question that the petitioners are seriously injured by the enforcement of the order. If, then, they have no plain, speedy, and adequate remedy in ordinary course of law, they are clearly entitled to the benefit of the writ of prohibition to arrest the proceedings under the void order. It is claimed, however, that, so far as the superior court is concerned, there is nothing to arrest; that its order was made and executed before the alternative writ was issued; that the receiver alone is now acting, and that the writ does not run against him. It is true the writ does not run against ministerial officers, and it is also true that its operation is preventive, rather than remedial. But property in the hands of a receiver is in the hands of the court. The receiver is the mere instrument of the court, and what he does the *390 court does. It is the court, therefore, and not the receiver, which holds, administers, and disposes of the property in his hands; and so long as the property remains undisposed of, action by the court is necessary. In such case there is judicial action to be arrested, injury to be prevented, and a writ of prohibition is appropriate for that purpose. The writ runs to the court, and operates directly upon the court, but indirectly upon the receiver. If it is served upon the receiver, it is only that he may have timely notice that the proceedings of the court are arrested, and may stay his hand, as he is bound to do, having no power to act independently of the court, from which he derives all his authority. In this case, when the petition was filed, and our alternative writ directed to issue, the receiver, as we shall see, was still striving to gain complete possession of the refinery and other property claimed by the petitioners; and even if he had been in complete control, that would have been but the first of a series of steps to be taken in carrying out the purpose of his appointment. The keeping of the property in such a case is a continuous wrong; the closing down of the works is an independent wrong; the use of a portion of the property to preserve the rest is an unlawful interference with the rights of those lawfully in possession. Besides all this, there remained to be carried out the sale and final distribution of the property. By the very terms of the order appointing the receiver, he is to hold the property subject to the further orders of the court concerning it, and the necessity of such further orders would be implied, if it had not been expressly indicated. As we understand the authorities on this point, the operation of the writ of prohibition is excluded only in cases where the action of the inferior tribunal is completed, and nothing remains to be done in pursuance of *391 its void order. If its action is not completed and ended, its further

proceedings may be stayed, and if it is necessary for the purpose of affording complete and adequate relief, what has been done will be undone. If this were not so, the inferior court, by proceeding expeditiously and arbitrarily, could defeat the remedy. Great reliance is placed by counsel for respondent upon the decisions P age | 108 of this court, such as Chester v. Colby, 52 Cal. 517, and S. P. R. R. Co. v. Superior Court, 59 Cal. 476, to the effect that when an inferior court or tribunal is proceeding, or threatening to proceed, in excess of its jurisdiction, the objection to its want of jurisdiction must be first submitted to such inferior court or tribunal, and by it overruled, before resort is had to a higher court for a writ of prohibition; and undoubtedly such is the established rule of practice in this state. But if this is the law, it must inevitably happen in every case--as it would probably happen in many cases under any rule--that the lower court will make its ruling on the question of jurisdiction before any prohibition can be sued out, and if it holds that it has jurisdiction, and makes orders in consonance with that view, the writ of prohibition will be of no avail unless it affords the means, not only of arresting future action, but of undoing past action. In other words, the two positions contended for would practically abolish the remedy. No better illustration of the working of this theory can be found than is afforded by the present case. When the order to show cause why a receiver should not be appointed was served, neither these petitioners, nor the defendant corporation, nor its stockholders, could have got a writ to prohibit the appointment of a receiver without first objecting in the superior court to its want of jurisdiction. Such objection, as we have seen, was made. It would have been sufficient to have objected that there was no application by a creditor or stockholder for a receiver, and no grounds alleged for such appointment; *392 but the defendant corporation or its stockholders went further; they showed affirmatively that there were no creditors, and that all the stockholders desired the statutory trustees to settle the business of the corporation. They showed everything, in short, necessary to sustain their objection to the jurisdiction, and the opinion of the superior judge, supra, shows that their objections were strenuously urged and maturely considered. But what happened? After holding the matter under advisement for nearly a month, the respondent filed an opinion overruling the objections to his jurisdiction, and on the same day appointed a receiver, who on the same day qualified by taking the oath and filing his bond, procured an order approving his bond and confirming his powers, and actually--according to his own views--had possession of the vast property in controversy before the agent of the petitioners or their attorneys had any notice that their objections to the jurisdiction had been overruled. If such proceedings, conducted with such precipitate haste, can deprive the injured party of a remedy to which he is clearly entitled, then our law must be lame and impotent indeed.

But, happily, there is no foundation for the claim that an inferior court can, by mere haste and precipitancy, defeat the appropriate remedy for excesses of jurisdiction, at least in a case where it may be intercepted before its action is fully completed. We are referred by counsel for respondent to a number of decisions of this court which are supposed to sustain their position on this point, but we do not find them at all in conflict with our views. Not one of them related to a case like this, and the general expressions to be found in the opinions must, of course, be construed with reference to the facts of the particular case. In Hull v. Superior Court, 63 Cal. 179, it was said that prohibition was not available to prevent the acts of a de *393 facto ministerial officer, nor to prevent judicial acts already done. The attempt in that case was to try the right to the office of sheriff. It was decided that this could not be done by prohibition; and what was said as to judicial acts already done had reference to the acts of the superior judge recognizing the official character of the incumbent de facto of the office. Such acts must of necessity have been complete and ended past remedy. In More v. Superior Court, 64 Cal. 345, it was held that the order of the superior court was not in excess of its jurisdiction, which was a sufficient reason for dismissing the proceeding, and it was in fact dismissed on that ground. What else was said in the opinion seems to have been in answer to a claim that the court had power to undo something that the receiver had done in excess of his authority. It ought not to be necessary to point out the distinction between that case and this. Here the order of the court is in excess of its jurisdiction, and the court, through its receiver, is doing, and continuing to do, and threatening to complete, a series of proceedings which are a wrong and injury to the petitioners. In that case the order of the court was regular and valid. The court, to which the writ alone runs, had done nothing in excess of its jurisdiction, but the receiver, as was claimed, was doing or had done something which, as a receiver, he had no right to do. Of course the writ of prohibition was not the proper remedy in such a case. The case of Coker v. Superior Court, 58 Cal. 177, does not touch the point, the decision being that the superior court had not exceeded its jurisdiction. Other decisions, cited from the reports of other states, are equally inapplicable, but we have no time to review them. We will, however, refer to the language quoted by counsel from High on Extraordinary Legal Remedies, section 766. He quotes the following: Another distinguishing*394 feature of the writ is, that it is a preventive rather than a corrective

Janz N. Serrano remedy, and issues only to prevent the commission of a future act, and not to undo an act already performed. To show what this means, he should have quoted what follows, in the next sentence: Where, therefore, the proceedings which it is sought to prohibit has already been disposed of by the court, and nothing remains to be done either by the court or the parties, the cause having been absolutely dismissed by the inferior tribunal, prohibition will not lie, etc. This is really the whole extent of the rule. Where the proceeding in the lower court has ended, and the court has nothing further to do in pursuance or in completion of its order, or where it has dismissed the proceeding, prohibition is no remedy; but where anything remains to be done by the court, prohibition not only prevents what remains to be done, but gives complete relief by undoing what has been done. (See forms of writs cited, 2 Chitty's Practice, 354, 355; Ex parte Morgan Smith, 33 Ala., N. S., 94; Jones v. Owen, 5 Dowl. & L. 669; Marsden v. Wardle, 3 El. & B. 659, and cases therein cited; Sargeant v. Dale, L. R. 2 Q. B. 558.) In White v. Field, 12 Com. B., N. S., 383, the court says (p. 412): The writs in the register and elsewhere which conclude with a mandamus to the court Christian to recall an excommunication already erroneously fulminated, or a sequestration wrongly issued, are all, as to the prohibitory part, peremptory, and the mandamus to revoke the unauthorized proceedings only accessory to the peremptory prohibition and necessary to give it effect. Here is a clear indication of the extent of the remedial office of the writ. It is primarily and principally preventive,--its office is to arrest proceedings; but when a case arises in which there are proceedings to be stayed or prevented, it will also annul such prior proceedings as may be necessary to make the remedy complete. The principle is that which prevails in equity. When there *395 is jurisdiction, the court will afford complete relief. A party will not be compelled to resort to more than one proceeding or more than one court for redress of one injury. (See also French v. Noel, 22 Gratt. 454.) Many other cases are cited in the brief of counsel for petitioners to this point, and might be cited here, but it is unnecessary. In the nature of things it must be true that when a receiver has got possession of property under a void commission, and the future acts of the court, i. e., the sale of the property and distribution of its proceeds, are arrested by prohibition, the writ will also require a restoration of the property to the petitioner; for otherwise prohibition would be worse than no remedy at all. It would prevent the owner from getting either the property or its proceeds. The receiver would continue to hold it discharged of the duty of accounting for it. We will next consider the objection that prohibition will not lie because the petitioners had other plain, speedy, and adequate remedies in due course of law.

It is suggested that they might have moved the court below to withdraw its order for a receiver. But suppose the court insisted that everything should be absolutely given over to the possession of the receiver before he would listen to any application for a revocation or modification of his order, can it be said that a motion only to be considered on such conditions afforded an adequate remedy, or any remedy? And suppose the P age | 109 motion had been heard and denied, would that have helped them? After all it would have been necessary to appeal to some other court for relief. But surely counsel can scarcely be serious in contending that because a party can move a court to set aside an invalid order, therefore he cannot have a writ of prohibition; for if this were so, there never could be a writ of prohibition; such a motion would always be possible. The most that can be claimed is, that an application should be made to the lower court *396 before moving for the writ. But this is another point to which we shall refer hereafter. It is also suggested that the petitioners might have bowed to the authority of the receiver, given him possession of everything, and then obtained leave from the superior court to sue him in ejectment, or that they might have sued him in forcible entry. It is true, the petitioners might have done this, but the remedy would have been neither speedy nor adequate. They had the right not merely to get their property back after a long and expensive litigation,--they had a right to keep it. The wrong with which they were threatened when they applied for the writ, and when the writ issued, was the deprivation of the possession and the use of their property. To give the property up in the hope of being allowed by the superior court to sue for it and recover it after years of litigation, was neither an adequate nor a speedy remedy. It would be as reasonable to say that an injunction should never issue to restrain a threatened injury, because the party injured may always have his action for damages. But there is a distinction affecting this question which counsel seem to have wholly overlooked,--a distinction, that is to say, between acts of the receiver and acts of the court. When a receiver holds by a valid appointment containing no directions in excess of the jurisdiction of the court, so long as he acts in pursuance of the orders of the court he cannot ordinarily invade the rights of parties or strangers to the litigation. If he does an injury, he does it by exceeding his authority. In such case the fault is his, and his alone. If he attempts to take property lawfully in the possession of another, and to which he is not entitled, his attempt may be resisted, just as any other trespasser may be resisted, and the person defending his lawful possession is not brought in conflict with the court. If he by any means gains possession of the property claimed by a stranger, the court *397 will either order him to restore it, or if the title is in doubt, permit an action to be brought against him to try the title.

But when the court has exceeded its jurisdiction in appointing a receiver, or in directing him to take specific property out of the possession of a stranger, the injury that results is directly due to the action of the court; the wrong is in the order of the court, not in the receiver's transgression of the order. In such case it seems clear that the appropriate remedy is in some writ or proceeding which operates upon the court, as such, to restrain its judicial action, and not in the sort of resistance that may be opposed to an ordinary wrong-doer, or in such an action as may be brought against a private person who has committed a trespass. However confident he may be of his right to resist, no prudent man will take the risk of resisting the plain terms of an order of court, and no rule of practice should be laid down which will compel a man in that situation to defend his possession by force in order to avoid the necessity of resorting to an action to recover it. On the contrary, all men should be encouraged to avoid forcible resistance to orders of courts, no matter how plainly in excess of jurisdiction, by firmly upholding and freely administering the remedies provided for the summary correction of such excesses. But it is said that the order appointing the receiver was appealable, and therefore prohibition will not lie. The statute does not say that the writ will not issue in any case where there is an appeal. There must not only be a right of appeal, but the appeal must furnish an adequate remedy, in order to prevent the issuance of the writ. A number of cases have been decided in this court in which writs of prohibition have been refused because there was a right of appeal, but in all of those cases the appeal afforded a complete and adequate remedy for the threatened excess of jurisdiction. *398 In Childs v. Edmunds, 10 Pac. Rep. 130, the petitioner had a right to appeal, and by his appeal he could stay the enforcement of the writ of assistance. More than this, it does not appear that any excess of jurisdiction had been committed in ordering the writ of assistance; and if so, appeal was the only remedy. In Mancello v. Belrude, 11 Pac. Rep. 501, and Levy v. Wilson, 69 Cal. 105, appeal was a complete and adequate remedy. In Clark v. Superior Court, 55 Cal. 199, and Wreden v. Superior Court, 55 Cal. 504, there was no excess of jurisdiction, and appeal was the only remedy. The same is true of the case of Powelson v. Lockwood, 82 Cal. 613. The difference between this case and all those referred to is, that here an appeal would have afforded no remedy for the wrong with which the petitioners were threatened. By means of an appeal, at the end of about a year and a half, in the ordinary course, they could have procured a reversal of the order,--if, indeed, as strangers to the action in which it was made, they had any right to appeal,--but in the mean time they would have been irreparably damaged, unless upon the taking

Janz N. Serrano of the appeal the court would have suspended action under the order. But the court had already decided that no appeal could by possibility stay the appointment of a receiver and the seizure of the property by him. And so it would have been necessary to make a motion to suspend the order, and for a restoration of the property or a withdrawal of the receiver, wait until that order was overruled, and a bill of exceptions settled, and take another appeal from that order, as was done in Lee Chuck v. Quan Wo Chung Company, 81 Cal. 222; or some other proceeding would have been necessary, involving ruinous delay. For in the mean time the receiver would have gained complete possession of the refinery and other property; the refinery would have been closed, stock injured, contracts*399 broken, employees discharged or kept in idleness, and every possible damage inflicted, without any security for the loss. In such a case there was no adequate remedy, except by a proceeding which would prevent the receiver from taking possession of the property, and the writ of prohibition was, as has been shown, the appropriate remedy for that purpose. It has, it is true, been in great measure shorn of its efficacy by the precipitate haste of the receiver in proceeding under the order of the superior court, but the propriety of the course pursued by the petitioners is to be judged, not by the consequences of what the receiver has done, but by the case upon which their petition was founded and our writ awarded. The fact, therefore, if it be a fact, that the petitioners could have appealed from the order appointing the receiver, does not preclude them from having the writ of prohibition. The case of Haile v. Superior Court, 78 Cal. 418, so much relied on by counsel at the oral argument, and cited again with emphasis in the briefs since filed, is, as we pointed out at the hearing, radically different from this case. There the order of the superior court was in no respect in excess of its jurisdiction. The receiver was regularly appointed in a proper case to take charge of the estate of a voluntary insolvent. He was not directed to take any specific property; the court had decided nothing against the claims of the petitioner, and was not assuming to decide anything with respect to his claims. The court, in short, had done nothing which could have been prohibited. But it was feared by the petitioner that the receiver might sell property previously assigned to him by the insolvent, and he wanted such action by the receiver restrained. He feared, in other words, that the receiver would exceed his authority and commit a trespass. We said, in vacating the alternative *400 writ, that if the receiver had taken any property belonging to the petitioner under the order of the superior court, he had done so without authority, and was a mere trespasser, for which plaintiff had a remedy by action, and that he could not resort to the extraordinary remedy of prohibition.

What bearing this decision can be supposed to have upon a case where the order of the court is in excess of its jurisdiction, and where the object of the proceeding is primarily to restrain the court in its judicial action, and only indirectly affects the receiver, who has done nothing except what the court has commanded him to do, we have thus far failed to comprehend. We have pointed out in another P age | 110 connection the reasons for allowing a summary remedy to arrest judicial action in excess of jurisdiction, and the difference between the situation of a person wronged by such action and one threatened by a private trespasser. In the one case the party threatened has a right to resist the trespass by force if necessary; in the other, though he may have the right to resist, it is against the policy of the law to encourage such resistance, and a summary remedy is given to arrest the proceeding. It is next urged, in behalf of respondent, that prohibition will not lie to try title to property. Which means, in its application to this case, that the petitioners cannot be allowed to show, in this proceeding, that they are the owners of the refinery. But we think counsel have misapprehended the bearing of the proposition which they lay down, and to which we assent. It is true, the title to the property cannot be tried in this proceeding, but what this means is, that, when a court, by its order, has taken property out of the actual possession of a stranger to the proceeding, who claims it as his own, the order is in excess of jurisdiction, irrespective of the actual state of the title. Whether the party in possession really held the title or not, the order *401 is void, because no man can be deprived of his property without due process of law. A court cannot take property from his possession without a hearing, and compel him to prove title in order to regain it. It is next suggested that the writ of prohibition does not issue ex debito justiti, but it is to be granted or withheld, in the sound discretion of the court, and that in this case it ought not to be allowed in favor of these petitioners, because they are members of the sugar trust, monopolists, and are the tempters who seduced the American Sugar Refinery into the combination. There is no competent proof before us of these facts; but assuming them to be so, the law is not such as counsel claim it to be. A decision may be found here and there saying in a loose way that the issuance of the writ is in the discretion of the court, and a statement, in general terms, to the same effect, may be cited from text-writers, who merely echo the decisions, but it never was the law that a court having jurisdiction to issue the writ had any discretion to refuse it when demanded by the real party in interest bringing himself clearly within the law. If such an idea has obtained anywhere, it has been in consequence of a misunderstanding of the English cases.

In England the practice in prohibition was analogous to the practice in other actions at law. An original writ (of prohibition) issued for the purpose of securing an appearance, and after appearance the pleadings followed; that is, the plaintiff declared, the defendant pleaded or demurred, and so on. But there was this difference between the writ of prohibition and other original writs, that whereas the writs in ordinary actions issued of course on application of the plaintiff, the writ of prohibition did not issue of course, but only upon affidavit showing grounds for its issuance. Another difference was, that, not only the party injuriously affected by the proceedings of the inferior court, *402 but any subject of the king, was allowed to interfere to prevent an excess of jurisdiction, and in case of suit by a stranger to the proceeding to be stayed, the superior courts exercised a discretion in granting or withholding the writ, but never when the party affected was the plaintiff. This whole subject is reviewed exhaustively in the case of Mayor of London v. Cox, L. R. 2 H. L. 278, 280. The following quotation from an opinion of Lord Chief Justice Cockburn, therein cited (p. 280), shows what the law on this point is:-I entirely concur in the proposition that although the court will listen to a person who is a stranger, and who interferes to point out that some other court had exceeded its jurisdiction, whereby some wrong or grievance has been sustained, yet that it is not ex debito justiti, but a matter upon which the court may properly exercise its discretion, as distinguished from the case of a party aggrieved, who is entitled to relief ex debito justiti, if he suffers from the usurpation of jurisdiction by another court. ( In re Foster, 4 Best & S. 187.) In this state, it is always the party aggrieved who sues; and if he shows a case for the issuance of the writ, the court cannot refuse it on the ground that he is a bad man, and deserves the punishment he is threatened with, or upon any other consideration which appeals to the mere discretion of the judge. We come finally to the proposition upon which counsel for respondent insists most strenuously, viz., that the jurisdiction of the court to grant a peremptory writ of prohibition depends absolutely upon the allegation and proof by petitioners that before filing their petition here they had pleaded to the jurisdiction of the superior court, and that their plea had been overruled. To sustain this proposition they cite the decisions of this court, above referred to ( Chester v. Colby, 53 Cal. 517, and S. P. R. R. v. Superior Court, 59 Cal. 476), and they cite a number of decisions from the courts of other states. *403 It is clear that the California cases do not support the contention of respondent. In each of them a party to the proceeding in the lower court was the petitioner for the writ,

Janz N. Serrano and all that was held in the first case was, that, an objection to the jurisdiction of the lower court having been taken by demurrer, and being undecided there, this court would not interfere by prohibition before that court had overruled the objection. In the second case, it was held that the party must in some form object to the want of jurisdiction of the lower court before the writ of prohibition would issue. In neither case was the failure to make such objection held to be jurisdictional, but the refusal to issue the writ was put upon the ground that prohibition is a prerogative writ, and consequently that the court had and ought to exercise the right to make its issuance subject to reasonable conditions, and that it was reasonable to give the lower court an opportunity to correct itself before calling the judge to answer here. We have no doubt that both decisions are correct in all that they decided, and in all that was said in the opinions on this point. To the extent that its issuance may be made subject to reasonable conditions applicable equally to all cases and all suitors, the writ of prohibition is, no doubt, a prerogative writ, though it may be doubted if that is a correct term of description; for, in the same sense, all writs might be called prerogative writs. And we are satisfied that the rule of practice established by these decisions is a proper and wholesome rule, recommended by important considerations of expediency. When a party has an opportunity of objecting in the lower court that it is proceeding or is asked to proceed in a matter without or in a manner exceeding its jurisdiction, he ought to make the objection there. It is only fair to the court that the objection should be brought to its attention in some proper form. If no objection*404 is made,--the party having every opportunity to object,--the court may reasonably infer that no ground of objection exists, and not only is the court entitled to the advice and suggestions of the party with reference to objections apparent on the record,--there are many cases in which the ground of objection would not appear unless set forth by plea in some form. And it is to be presumed that any valid objection properly brought to the attention of the court would generally prevail, and that all necessity for a writ of prohibition would be obviated. Therefore, the interest of the public in preventing unnecessary litigation, as well as consideration for the judge of the lower court, demand that the objection should be made at the first opportunity. These are the reasons of the rule, and they indicate its scope and the extent of its application, as the authorities very fully show. We have not time to review the cases, other than those cited from the reports of this state, but we refer to the case of Mayor of London v. Cox, L. R. 2 H. L. 278, 280, in which the learning of the subject is exhausted. That was a case appealed from the court of exchequer to the exchequer chamber, and finally to the house of lords. Before deciding it, the lords requested the opinion of the justices of the queen's bench on two questions, the second being as follows: Whether the garnishees in the lord mayor's court could maintain an

action for a prohibition without having pleaded in the lord mayor's court. To which the justices unanimously responded that they could. This was in accordance with the unanimous decision both of the court of exchequer and exchequer chamber, which was accordingly affirmed in the house of lords. The answer of the justices, prepared by Justice Willes, contains a P full review of all the cases, showing that even in England the age | 111 subject had not been clearly understood, and that some inconsistent and erroneous decisions had been made. It is not surprising, therefore, that in some of the United States *405 the same confusion has arisen, and that some cases have been erroneously decided, to the effect, for instance, that the issuance of the writ is in the discretion of the court, and that a formal plea to the jurisdiction of the lower court is an essential prerequisite to its issuance. Fortunately no such decisions have been made in this court, though in deciding Chester v. Colby, 53 Cal. 517, an Arkansas case is cited with approval which apparently does go to the extent claimed by respondent. But we are fully at liberty, without questioning the authority of any case decided in this court, to adopt the correct rule and doctrine as expounded and laid down in the case of Mayor of London v. Cox, L. R. 2 H. L. 278, 280. Without going into the niceties of the subject, it may be said that the following propositions, applicable to this case, are fully supported by the decision in that case:-1. If a want of jurisdiction is apparent on the face of the proceeding in the lower court, no plea or preliminary objection is necessary before suing out the writ of prohibition. 2. If the proceeding in the lower court is not on its face without the jurisdiction of such court, but is so in fact by reason of the existence of some matter not disclosed, such matter ought to be averred in some proper form, in order to make the want of jurisdiction appear. 3. But this is not essential to the jurisdiction of the superior court to grant prohibition. It is only laches, which may or may not be excused, according to circumstances. Accordingly, we find that frequently a failure to plead in the lower court was excused for the reason that it appeared that the plea would have been rejected if made. The whole question in fact was one of practice merely, not of jurisdiction, and the objection which most frequently prevailed to the granting of the writ was, not that the application came too early, but that it came too late. *406 The rule which we have adopted is founded upon the same considerations, and directed to the same end. Our jurisdiction is ample to arrest by prohibition any proceeding without or in excess of the jurisdiction of the superior court, but by statute we are forbidden to do so when there is a plain, speedy, and adequate remedy in ordinary course of law; and by the practice which we have adopted and prescribed for

ourselves, we will not issue the writ until the objection to its want or excess of jurisdiction has in some form been made in and overruled by the lower court, the whole foundation of the rule being the respect and consideration due to the lower court, and the expediency of preventing unnecessary litigation. Applying these principles to the present case, we find that the petitioners were not, in their character of purchasers of the specific property described in the order appointing the receiver, parties to the quo warranto, or the rule to show cause why the receiver should not be appointed, and in that character they had no opportunity to object until after Mr. Reddy appeared at the refinery armed with an order of court authorizing him to take it into his possession. As stockholders of the corporation, however, it is contended, and may be conceded, that they were virtually defendants in the quo warranto, and parties affected by the rule to show cause. But it clearly appears that in that character they made every objection that could be made to the order asked, which did not refer to any specific property. They filed an affidavit showing that there were no creditors of the corporation, and a certificate showing that all the stockholders had requested the directors to close up the business of the corporation. They also brought to the attention of the court the fact that an appeal from the judgment of forfeiture had been taken and perfected. All these objections went to the jurisdiction; they were *407 all argued, all maturely considered, and all overruled, in a carefully prepared opinion in writing. What more could possibly be necessary, in order to authorize us, under any rule prevailing anywhere, to examine and decide upon the objections so made and so overruled? Certainly nothing that has ever been decided by this court, and nothing in the reason of the rule. Even as to the objections to the order, as made, upon grounds peculiarly affecting the petitioners as purchasers of the specific property therein described, they did everything which the reason of the rule requires. It is objected that they did not file a formal plea, make a formal motion, and await a decision of the superior court before moving here. But what opportunity were they allowed to take these steps? The first notice they had of the order empowering the receiver to take the property claimed by them was his appearance at the refinery demanding immediate possession, and asserting his authority and control. In the short respite of one night which was granted them, they prepared affidavits setting forth their claims upon which to base an application for such a stay as would enable them to move for a suspension or modification of the order. Their attorney sought the

Janz N. Serrano respondent at his chambers at the earliest possible moment, stated to him the substance of the affidavits, and the nature of his application. He also stated that there was a scramble for the possession of the refinery between the receiver and the agents and employees of the petitioners. Thereupon the respondent distinctly informed him that his application would not be considered unless full and complete possession of the property was first delivered to the receiver. To have yielded to this condition would have been to give up the whole controversy, and submit to the very wrong which it was their object to prevent. They were not bound, therefore, to move upon such terms, and being advised, and fully believing,--what the event *408 proved to be the fact,-- that the respondent and the receiver would proceed with all expedition to enforce the invalid order, they were justified in filing their petition without further delay. It is unnecessary, in this view, to determine whether the affidavit of Mr. Mott was actually read to Judge Wallace or not, and we shall not attempt to reconcile the conflict in the testimony upon that point. In any event, it is certain that our jurisdiction to issue a peremptory writ is complete, and equally certain that the respondent has no reason to complain that objections to his order were not submitted to his decision before this proceeding was instituted. It is also unnecessary to enter into any detailed discussion of the testimony as to the extent or completeness of Mr. Reddy's possession at the time the writ was served. It is the time when the writ is ordered, not the time when it is served, that fixes the extent of our power to interfere with the proceeding in the lower court. But even this is immaterial in this case; for we have shown that, so long as property in the hands of a receiver remains subject to further judicial action which may be arrested by the prohibition, the remedy will be made complete by ordering its restoration. So far, therefore, as the prohibition is concerned, it makes no difference if we assume that Mr. Reddy had complete possession at the time we ordered the alternative writ. It is only with respect to the proceeding for contempt that the facts relating to the possession of the receiver are material. In considering the question of contempt, it will be necessary to examine with some care the evidence on this point, and as this will necessarily occupy some time, and as it is important that the petitioners should have as speedy relief as possible, we will make that matter the subject of a separate opinion to be filed, at our earliest *409 convenience. In the mean time an absolute and peremptory writ of prohibition will issue in accordance with the views herein expressed.

SHARPSTEIN, J., MCFARLAND, J., PATERSON, J., WORKS, J., and FOX, J., concurred.

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Mr. Justice Thornton, being absent from the state, did not participate in the decision. age | 112 P 10 L.R.A. 627, 84 Cal. 327, 24 P. 121, 18 Am.St.Rep. 192 END OF DOCUMENT