SMITH METROPOLITAN MARKET CO v. SUPERIOR COURT IN AND FOR LOS ANGELES COUNTY

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District Court of Appeal, Second District, Division 1, California.

C.S. SMITH METROPOLITAN MARKET CO. et al. v. SUPERIOR COURT IN AND FOR LOS ANGELES COUNTY.*

Civ. 12427

Decided: January 18, 1940

Pierson & Block, of Los Angeles, for petitioners. J.H. O'Connor, Co. Counsel, and Douglas De Coster, Deputy Co. Counsel, both of Los Angeles, for respondent.

This proceeding is for prohibition to prevent the superior court from enforcing the mandate of a subpoena duces tecum issued by it requiring one Duncan W. Drucquer to produce for the inspection of the party plaintiff who secured such subpoena certain documents, or be held in contempt of court.

The controversy arises out of a certain action commenced in the Superior Court of Los Angeles County, No. 44283, and entitled “Food and Grocery Bureau of Southern California, a corporation, Plaintiff, vs. C.S. Smith Metropolitan Market Co., Ltd., a corporation, Defendant”, and which last-named corporation appears herein as one of the petitioners. The action just mentioned is one for an injunction for alleged violations of the California Unfair Practices Act (Stats.1913, ch. 276, p. 508, as amended by Stats.1935, ch. 477, p. 1546, and as further amended by Stats.1937, ch. 860, p. 2395). The complaint therein charges that on divers and various dates during the year 1939 defendant offered for sale, advertised for sale and did sell certain merchandise below cost. Section 3 of the Unfair Practices Act, supra, defines “cost” when applied to distribution as meaning “the invoice or replacement cost, whichever is lower, of the article or product to the distributor and vendor plus the cost of doing business by said distributor and vendor”; while the act defines the “cost of doing business” or “overhead expense” as “all costs of doing business incurred in the conduct of such business and must include without limitation the following items of expense: labor (including salaries of executives and officers), rent, interest on borrowed capital, depreciation, selling cost, maintenance of equipment, delivery costs, credit losses, all types of licenses, taxes, insurance and advertising”. From the foregoing it is at once apparent that the main and vital issue in a case such as the one above referred to, where the defendant denies that the charged sales were made below cost, is for the plaintiff to prove and the trial court to determine the invoice or replacement cost and the “cost of doing business” of the defendant in question. Confronted with this problem, the plaintiff in the action procured a subpoena duces tecum in the superior court directed to Duncan W. Drucquer, one of the petitioners herein, who is concededly a cost accountant and who in such professional capacity admittedly made an examination of certain of the corporate defendant's books and records for the year 1939. As grounds for the issuance of such subpoena duces tecum, plaintiff in the action caused to be filed in the trial court an affidavit setting forth that the said cost accountant, Duncan W. Drucquer, had during the year 1939 “made an analysis and examination of the books and records of the defendant corporation for the purpose of determining, among other things, what the cost of doing business of said defendant was at and during the time or period covered by said examination and inspection; and affiant has likewise been informed that, during the course of said examination, analysis and inspection, said Duncan W. Drucquer, an accountant, made certain work sheets and working papers, in which he recorded various figures and facts taken from the books of said defendant corporation and appertaining to said defendant's cost of doing business, and that said working papers and work sheets of said witness Duncan W. Drucquer will contain said facts and figures, from which said witness Duncan W. Drucquer will be able to testify as to said defendant's cost of doing business, and that such testimony will therefore be material and relevant in proving what said defendant's cost of doing business is and was, at the time and during the period of time said defendant is charged with having sold said articles described in the complaint below its cost; and that said documents in the possession or under the control of said witness Duncan W. Drucquer contain said figures and facts, and will show said figures and facts appertaining to said defendant's cost of doing business.

“That said witness Duncan W. Drucquer is the only person who can establish said facts and figures contained in his said working sheets and working papers and the meaning of said figures and facts as applied to said defendant's cost of doing business. That one of the issues on said Order to Show Cause hearing which the plaintiff has the burden of establishing is the cost of doing business of the defendant corporation; and that said witness Drucquer, from said work sheets and working papers, will be able to testify and establish facts and figures relevant and material to what said cost of doing business is and was, at all times mentioned in plaintiff's complaint, and what said defendant's cost of doing business was on the articles and products said defendant is charged with having sold below cost.” (Italics added.)

Upon the filing of such affidavit and pursuant to an order made by Kurtz Kauffman, court commissioner of Los Angeles county, the subpoena was issued commanding said Duncan W. Drucquer to appear before a designated notary public upon a definite date, then and there to testify as a witness and to give his deposition. Subd. 6, sec. 2021, Code Civ.Proc. Said subpoena further directed the witness to bring with him and to produce at the taking of his deposition certain documents described in said subpoena as follows: “The original work sheets and working papers of Duncan W. Drucquer pertaining to the analysis and examination by Duncan W. Drucquer of the books and records of C.S. Smith Metropolitan Market Co. Ltd., made in 1939.” Following the issuance of such subpoena petitioner herein, C.S. Smith Metropolitan Market Co., Ltd., moved the superior court to “annul, vacate and recall subpoena duces tecum, and for an order staying the taking of deposition of Duncan W. Drucquer pending hearing of said motion”. The motion was denied. Said Drucquer appeared pursuant to the terms of such subpoena and refused to answer certain questions propounded to him. Thereafter plaintiff in the action procured from the trial court an order entitled “Order to Show Cause Why Duncan W. Drucquer Should Not Answer Certain Questions In His Deposition And Should Not Produce For The Inspection of Plaintiff's Attorneys Certain Documents Or Be Held In Contempt of Court”. Thereupon petitioner sought and obtained the alternative writ of prohibition herein, directed to said superior court.

Petitioner is entitled to the relief sought. It is elementary that a subpoena duces tecum is available only for the purpose of obtaining evidence and it must appear from the affidavit upon which the subpoena is based that the documents, records or things sought to be obtained by the subpoena duces tecum are material and admissible in evidence as exhibits. Assuming that the court commissioner is vested with authority to issue a subpoena duces tecum, it is evident that the affidavit upon which the subpoena herein was based was not only insufficient but in addition revealed on its face that the documents sought to be obtained were not evidence nor could they be used as such in the circumstances upon which affiant relied.

The facts sought to be proven manifestly could be established only by the books of the corporation. The so-called “work sheets” of the accountant Drucquer at most were merely his private memoranda made during the examination by him of the books. Although they could be used by him to refresh his recollection, if necessary for such purpose when called as a witness, it does not follow that such memoranda are the proper object of a subpoena duces tecum. If used by the witness they may be examined by opposing counsel. If, upon cross-examination, a discrepancy develops from a comparison of the testimony of the witness and the memoranda used by the witness, such memoranda then become admissible as evidence of such discrepancy.

When it appears from an examination of the witness that such witness can testify only by refreshing his recollection from memoranda, the court has power to order the witness so to do, and a refusal in the circumstances would amount to a contempt. Referring to the subject, Wigmore points out that: “The rule should apply, moreover, to a memorandum consulted for refreshment before trial and not brought by the witness into court; for, though there is no objection to a memory being thus stimulated, yet the risk of imposition and the need of safeguard is just as great. It is simple and feasible enough for the Court to require that the paper be sent for and exhibited before the end of the trial.” (Italics included.) Wigmore on Evidence, vol. I, p. 855. The affidavit in support of the subpoena duces tecum as above noted also avers that Drucquer is the only person who can establish the facts and figures contained in the working sheets and working papers. So much may be conceded, but Drucquer is not the only witness who can testify as to the contents of the books of the corporation. With regard to records that are properly receivable in evidence, Wigmore sets forth the rule as follows: “In order to state the rule, then, in terms which will indicate in the rule itself what documents are included in its scope, it must be noted that the production required is the production of the document whose contents are to be proved in the state of the issues.” (Italics included). Wigmore on Evidence, supra, vol. II, p. 1476.

Drucquer's private memoranda are not to be proved “in the state of the issues”. The books of the corporation are the best evidence, and as to them Drucquer's private memoranda are merely hearsay.

In the circumstances, the court exceeded its jurisdiction in the first instance in issuing the subpoena, and in the second, in ordering the witness to show cause why he should not “Produce for the Inspection of Plaintiff's Attorneys Certain Documents”. (Italics added.)

For the foregoing reasons, the alternative writ is made peremptory.

I dissent. Conceding, as stated in the prevailing opinion, that “a subpoena duces tecum is available only for the purpose of obtaining evidence”, I cannot agree with my colleagues in their statement that the documents herein sought by such subpoena “were not evidence nor could they be used as such in the circumstances upon which affiant relied”.

It seems to me that the accountant's “work sheets” might well be admissible under the provisions of subdivision 5 of section 1855 of the Code of Civil Procedure, to prove as set forth in the affidavit for issuance of the subpoena “what said defendant's cost of doing business is and was, at the time and during the period of time said defendant is charged with having sold said articles described in the complaint below its cost”. Section 1000 of the Code of Civil Procedure authorizes what is commonly known as a bill of discovery, which accords to either party to an action the right to inspect material or pertinent entries of accounts or documents in the possession or under the control of the other party. Union Trust Company of San Diego v. Superior Court, 11 Cal.2d 449, 81 P.2d 150, 118 A.L.R. 259. Surely a party is not compelled to bring into court all of his adversary's books of account when there is in existence evidence of the “general result of the whole” thereof in the form of an accountant's “work sheets” showing the “cost price” and “cost of doing business” with reference to the particular commodities in connection with the sale of which the complaint charges a violation of the Unfair Practices Act. Again, the documents here sought under the subpoena might well possess evidentiary value in the matter of possible impeachment of the witness who made them and who has such documents in his possession. I am impressed that where, as here, the documents sought to be subpoenaed possess potential evidentiary value it does not lie within the power of an appellate court to determine their admissibility or non-admissibility in advance of their production. To my mind that is a question addressed in the first instance to the trial court for determination when the documents are produced. The only way in which the materiality of the documents can be determined is through examination of them by the trial court and the only method by which such examination can be brought about is through the medium of the subpoena duces tecum.

If the foregoing be a correct statement of the law upon the issue therein treated then there are several questions presented in the petition for the writ and by respondent court's demurrer thereto which in my opinion should receive consideration. The sufficiency of the facts stated in the petition to warrant the issuance of a writ of prohibition is challenged by respondent court, in connection with which it is urged that such a writ cannot legally be granted by an appellate court to prevent a superior court from proceeding in a contempt matter merely upon the ground that the inferior tribunal has erred in the proceeding out of which the alleged contempt arose, citing Monhar v. Superior Court, 12 Cal.2d 715, 87 P.2d 694; Wessels v. Superior Court, 200 Cal. 403, 253 P. 135; and Commercial Bank v. Superior Court, 192 Cal. 395, 220 P. 422; that in such case the remedy of the one aggrieved is to first present his defense upon the hearing of the contempt proceeding and if there adjudged guilty of contempt to make application to a higher court for a writ of certiorari or habeas corpus. But that is not the situation in the instant case, because, if the contentions of the petitioners are true, the superior court was without power or jurisdiction to either issue the subpoena duces tecum or proceed further toward enforcing by contempt proceedings or otherwise the mandate contained in the subpoena. In my opinion petitioners have not mistaken their remedy. At most, under the facts of this case, the question is mainly one of discretion and I feel it is the better policy to dispose of the questions raised on their merits rather than put the parties to further vexation and expense. Davis v. Superior Court, 184 Cal. 691, 696, 195 P. 390. Prohibition is the proper procedure by which to arrest 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 where there is not a plain, speedy or adequate remedy in the ordinary course of law. Code Civ.Proc., secs. 1102, 1103; Havemeyer v. Superior Court, 84 Cal. 327, 389, 24 P. 121, 10 L.R.A. 627, 18 Am.St.Rep. 192. Where, as here, petitioners allege that the respondent court by the issuance of the subpoena duces tecum invaded their constitutional right to be secure against unreasonable or unnecessary seizure of their private papers and documents, Const. of Cal., art. I, sec. 19, it would seem that prohibition is the proper proceeding to restrain such invasion, because if the order in question contravenes the constitution then it must of necessity be without and in excess of jurisdiction. Especially is this true where, as here, petitioners made an effort to obtain relief in the court which it is now sought to enjoin by moving said court to recall and annul the subpoena duces tecum in question.

The first claim urged by petitioners is that the subpoena duces tecum is void because it was issued upon the order of a court commissioner when, assert petitioners, the issuance of such process requires a judicial determination. In this contention my opinion is that petitioners cannot be sustained, because subdivision 1 of section 259a of the Code of Civil Procedure expressly confers upon the court commissioner the power “to hear and determine ex parte motions, for orders * in the superior court of the county * for which he is appointed”; while section 14 of article VI of our state Constitution authorities authorizes the legislature to provide for the appointment of court commissioners and to grant to such commissioners authority to perform chambers business of the judges of the superior courts. The case of Southern Pacific Co. v. Superior Court, 93 P.2d 276; Id., 93 P.2d 1055, recently decided by this court, is not controlling, for the reason that a hearing thereon was granted by the Supreme Court and also because in that case the subpoena duces tecum was issued by the clerk of the court without an order of either a judge or a court commissioner. Under the aforesaid constitutional and statutory provisions, the making of an order directing the issuance of a subpoena duces tecum is clearly within the powers of a court commissioner in Los Angeles county.

Coming now to a consideration of petitioner's final contention, which is that the facts set forth in the affidavit in support of the motion for issuance of the subpoena duces tecum were insufficient to warrant the issuance thereof, requiring as the process did the production of private books, papers and documents of petitioners for inspection by plaintiff in the lawsuit when such plaintiff corporation was composed of competitors of the corporate petitioner in business. That the right of the people to be secure against unreasonable or unnecessary seizure of their private papers and documents is regarded as a highly sacred one, is established by the fact that the people themselves have written into the organic law of the commonwealth terms which guarantee and safeguard the perfect enjoyment of such right. California Const., art. I, sec. 19. As was so explicitly pointed out in Ex parte Clarke, 126 Cal. 235, 238, 58 P. 546, 547, 46 L.R.A. 835, 77 Am.St.Rep. 176, “To compel a person to deliver his books and papers to another who does not claim any ownership in them is to violate the sanctity of most important private rights, and is not to be tolerated except when warranted by some law clearly not inconsistent with the constitutional provision.” In Ex parte Clarke, supra, it is further said: “The privacy of private books and papers is not only of inestimable value to the owner on account of various personal and sentimental reasons, but is of the greatest value also from mere business considerations. The exposure of a man's methods of business would frequently be highly injurious to him, and, although really solvent, might produce such embarrassments as would ruin him. His right, therefore, to the sole possession and knowledge of his private books and papers is not to be violated except where the power to do so clearly appears.”

However, the cases seem to hold that the search and seizure clause of the Constitution was not intended to interfere with the power of the courts to compel, through a subpoena duces tecum, the production, upon a judicial proceeding, of documentary evidence in proper cases. In the exercise of their inherent power to elicit evidence in the trial of a cause judicial tribunals should be limited only by that which might constitute in the specific instance “unreasonable” search and seizure. A court may therefore require a person to deliver up for examination in a judicial proceeding his private books and papers when two essential facts are made to appear by clear and unequivocal proof, viz.: (1) that such person has a book, paper or document containing evidence material to the issue before the court, and (2) that the precise book, paper or document containing such evidence is designated or so described that it may be identified. With these rules in mind, let us turn to the record to ascertain therefrom whether the affidavit upon which the subpoena duces tecum herein was issued meets the prescribed tests. As heretofore pointed out, the principal and vital issue in the case under consideration is to determine both the invoice or replacement cost and the “cost of doing business” of the defendant in such litigation. It was therefore essential and material that the trial court be informed as to what said costs were. Read in the light of the complaint in the main action, the affidavit heretofore quoted clearly established the materiality to the main issue in the action of the documents sought to be subpoenaed. That courts may, in determining the materiality of the documents, resort to the pleadings in the action is established in Union Trust Company of San Diego v. Superior Court, supra.

The second of the prescribed rules, requiring a specific designation or description of the documents sought to be subpoenaed, was squarely met by the terms of the affidavit when it designated the documents as “The original work sheets and working papers of Duncan W. Drucquer pertaining to the analysis and examination by Duncan W. Drucquer of the books and records of C.S. Smith Metropolitan Market Co., Ltd., made in 1939”, followed by the further cogent description of them as being the documents upon which the witness “recorded various figures and facts taken from the books of said defendant corporation and appertaining to said defendant's cost of doing business.” (Italics added.) The term “working sheets and working papers” has a definite and well established meaning, very familiar to accountants and businessmen. The meaning thereof was thus referred to by the supreme court of Massachusetts in Ipswitch Mills v. Dillon, 1927, 260 Mass. 453, 157 N.E. 604, 605, 53 A.L.R. 792, “It was found by the trial judge that work sheets meant papers on which original compilations, computations and analyses are made by accountants, which later are gathered together in a summary form and the figures rendered in a schedule, exhibit, report or return upon which the accountant is working.” The affidavit here in question unequivocally shows that the documents sought were work sheets and working papers within the definition just set forth.

Petitioners' claim that the subpoena duces tecum was so broad in its terms that it would permit plaintiff in the action to embark upon a so-called “fishing expedition”, thereby obtaining private information and valuable trade secrets of petitioning corporation and exposing such private information to the latter's competitors, all to its irreparable injury, finds a complete answer in the following quotation from the case of Union Trust Company of San Diego v. Superior Court, supra, 11 Cal.2d at page 464, 81 P.2d at page 158, 118 A.L.R. 259, “Furthermore, in the case of Dalton v. Calhoun County District Court, 164 Iowa 187, 145 N.W. 498, Ann.Cas.1916D, 695, where this protective provision was urged as a bar to the issuance of an order of inspection, it was stated * that as a rule the provision ‘has reference to criminal or quasi criminal proceeding, or to forfeiture and not the statutory methods for obtaining evidence’. The court, in the latter case, went on to say that, ‘* we must presume that the trial court in exercising the discretion granted to it in such matters, and in the fairness which may be expected to control its acts in the matter, will permit no examination or discovery not necessary to the case, nor want in proper regard for the rights of both litigants'. In every case, much must necessarily be left in the first instance to the sound discretion of the trial judge.”

By reason of the foregoing, I am of the opinion that the petition before this court does not state facts sufficient to warrant the issuance of the writ of prohibition prayed for and that the demurrer of respondent court thereto should be sustained, the alternative writ hereinbefore issued discharged, and a peremptory writ denied.

DORAN, Justice.

I concur: YORK, P.J.