UNION INTERCHANGE INC v. GRIESINGER

Reset A A Font size: Print

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

UNION INTERCHANGE, INC., a California Corporation; Universal Interchange, Inc., a California Corporation, Plaintiffs and Respondents, v. F. W. GRIESINGER, Individually and as Commissioner of the Division of Real Estate of the Department of Investment of the State of California, and Edmund G. Brown, Individually and as Attorney General of the State of California, Defendants and Appellants.*

Civ. 23141.

Decided: February 11, 1959

Edmund G. Brown, Atty. Gen., Lee B. Stanton, Neal J. Gobar, Deputy Attys. Gen., for appellants. Alvin G. Greenwald, Los Angeles, for respondents.

A history of the instant litigation discloses that on September 2, 1955, plaintiffs filed a verified complaint for declaratory relief and injunction asking the court to declare their business operations to be outside certain amendments to Chapter 4, Real Estate Law (Stats.1955, Chapter 1678), hereinafter referred to as the Advance Fee Amendments, or said Amendments unconstitutional; and to enjoin defendants from enforcing the law against them. Plaintiffs therein detailed the general character, extent and operations of the two corporations, alleging the sole business of Universal Interchange, Inc. to be that of publishing and advertising properties for sale in its publications, Broker's Bulletin and Buyer's Digest; and that of Union Interchange, Inc. to be the solicitation and sale of advertising space in Unversal's publications. They further declared that defendants intend to enforce the Advance Fee Amendments against them when the law becomes effective September 7, 1955, require their employees to secure licenses as real estate and/or business opportunity brokers and salesmen, and upon their failure to do so, file criminal complaints against them; that said law is unconstitutional and if defendants are not restrained from enforcing it against them, plaintiffs will suffer irreparable injury. Plaintiffs also sought a temporary restraining order and preliminary injunction pending final determination of the cause.

After service of the complaint defendants, in opposition to a temporary restraining order, filed points and authorities, copy of Decision of Real Estate Commissioner, and Affidavit of Herman F. Roth. Thereupon, a Temporary Restraining Order was issued, as well as an Order to Show Cause re Preliminary Injunction, directing defendants to appear on September 22, 1955, to show cause why they should not be restrained from enforcing the Amendments against plaintiffs pending the determination of the action, a copy of which was personally served on each defendant September 13, 1955.

A contested hearing on the Order to Show Cause re Preliminary Injunction was held on September 22, 1955, at which all counsel were present; and on October 24, 1955, the court issued a preliminary injunction wherein defendants were ‘enjoined and restrained, pending the determination of this cause, from interfering with the plaintiffs * * * by instituting any criminal complaint, action or proceeding against them for a violation of * * * the Advance Fee Amendments.’ (Emphasis added.) It was personally served on each defendant November 2, 1955. No appeal was taken therefrom.

On June 12, 1956, defendants filed their Answer and Cross-Complaint for accounting, injunction and appointment of a receiver. Based on these pleadings, their Supplemental Answer, and Affidavit of Winston D. Lawson, defendants sought a preliminary injunction to prevent plaintiffs from continuting their business operations, which application was denied December 13, 1956.

In August, 1957, defendants filed a second Supplemental Answer attaching a Memorandum Decision, Superior Court, Hartford County, Connecticut, dated October 19, 1956 (United Interchange, Inc. v. Spellacy, [since reversed by the Connecticut Supreme Court, 144 Conn. 647, 136 A.2d 801, declaring the Connecticut Advance Fee Amendments unconstitutional]), Affidavits of five of plaintiffs' former customers and Affidavit of Lee B. Stanton, Deputy Attorney General. Based thereon, defendants again applied for a preliminary injunction against plaintiffs and, in addition, sought to have the lower court vacate and dissolve plaintiffs' preliminary injunction of October 24, 1955.

Defendants filed their Notice of Motion to Dissolve and Vacate Preliminary Injunction on October 1, 1957. The motion was specifically based on Sections 532 and 533, Code of Civil Procedure, and made on the sole ground of two decisions (Hamilton v. Treadwell, No. Civil A. 9242, California Superior Court, and United Interchange, Inc. v. Spellacy, supra, (Connecticut Superior Court). In opposition to defendant's motion, plaintiffs filed certain affidavits and points and authorities, claiming that the preliminary injunction of October 24, 1955, was issued on notice to defendants, that no facts have been presented warranting dissolution thereof, that Hamilton v. Treadwell is not applicable to the instant case, that similar or identical statutes in other jurisdictions have been declared unconstitutional, and that if the preliminary injunction is dissolved, plaintiffs will suffer irreparable injury. After hearing, both motions were denied. Defendants appeal only from the order denying their motion to dissolve plaintiffs' preliminary injunction.

Appellants contend that the Advance Fee Amendments are constitutional and that the lower court abused its discretion in refusing to dissolve the preliminary injunction, in that plaintiffs are operating without licenses and the public is being substantially injured thereby.

The granting, denying, dissolving, or refusing to dissolve a preliminary injunction rests in the sound discretion of the trial court (Kendall v. Foulks, 180 Cal. 171, 179 P. 886; McCoy v. Matich, 128 Cal.App.2d 50, 274 P.2d 714) and whether there was an abuse thereof depends upon a consideration of all the particular circumstances of each individual case (Daniels v. Williams, 125 Cal.App.2d 310, 270 P.2d 556).

The record shows that the preliminary injunction of October 24, 1955, was issued only after notice and an adversary hearing upon a verified complaint, defendants' opposing points and authorities, a Decision of the Real Estate Commissioner and an Affidavit of Herman F. Roth. The Notice of Motion to Dissolve was based ‘upon all documents, records and pleadings on file,’ defendants having filed no affidavit in support thereof, the sole ground for the motion being the decisions of Hamilton v. Treadwell, supra, and United Interchange, Inc. v. Spellacy, supra. No change of circumstances was alleged. In opposition to defendants' motion, plaintiffs filed the affidavits of Paul M. Guyer and Neal Fisher and points and authorities. Presented for the trial court's determination were considerations relating to irreparable injury to plaintiffs' property rights by the dissolution of the preliminary injunction, as compared with the resulting prejudice to the public; the constitutionality of the Advanced Fee Amendments; and the power of the court to order dissolution of a preliminary injunction issued upon notice.

As to the first consideration, which is primarily factual, we are bound by the rule that the trial court's discretion should be exercised in favor of the party most likely to be injured (McCoy v. Matich, 128 Cal.App.2d 50, 274 P.2d 714; Riviello v. Journeyman Barbers etc., Union, 88 Cal.App.2d 499, 199 P.2d 400), and that the trial court is the judge of the credibility of the affidavits for it is its province to resolve all conflicts (Voeltz v. Bakery, etc., Union, 40 Cal.2d 382, 254 P.2d 553). Therefore, we will view the affidavits and verified pleadings before the trial judge in the light most favorable to respondents. Northwestern Pac. R. R. Co. v. Lumber & S. W. Union, 31 Cal.2d 441, 443, 189 P.2d 277.

In its determination on October 24, 1955, that the preliminary injunction should issue, and on October 14, 1957, that the same should not be dissolved, the trial court had before it, among other documents, the verified complaint, which presented in detail plaintiffs' business operations and the injury which would result thereto if the Amendments were enforced before their constitutionality, or their applicability to plaintiffs, could be determined on the trial on the merits. The following is a short summary of plaintiffs' activities as alleged in their complaint. Universal, a California corporation engaged in interstate commerce, publishes the Broker's Bulletin and Buyer's Digest containing advertisements of business opportunities and real estate for sale or exchange. Its only business is that of publishing and advertising property for sale. Union, a California corporation, is engaged in soliciting and selling advertising space in Universal publications. It handles in each issue of the Digest upwards of 2,000 ads representing a monthly contract value in excess of $200,000. Its salesmen operate in 16 states and has a monthly payroll in excess of $20,000. Union employs approximately 125 persons, most of whom are nonresidents and not qualified to meet the licensing provisions under California law. Its agents and rep resentatives do not engage in any activities to bring them within the purview of the law, and even if the Amendments are constitutional, they do not apply to plaintiffs. If plaintiffs' representatives are required to obtain licenses, most of them will be forced to leave their employ. Since they are highly skilled and irreplaceable, Union's entire sales organization will be disrupted which, in turn, will jeopardize the entire publishing and advertising business of Universal in which plaintiffs have valuable good will, substantial interests, investments, and property rights. Neither Union nor Universal, nor any of its employees, is engaged in the brokerage business, but are engaged solely in soliciting and publishing advertisements for the sale and exchange of businesses and properties. Their operations, the amount and kind of advertising fee charged, the nature of their ads, the terms of their advertising contracts and the extent of their participation between prospective buyers and their advertisers, are not compatible with a brokerage business, and they do not enter into any fee or commission agreement between advertisers, brokers, and buyers, or act as brokers or agents, or engage in any activities sufficient to bring them within the Amendments. They allege that as applied to plaintiffs, the Amendments are unconstitutional in that they are arbitrary, unreasonable, capricious, discriminatory and in violation of Article 1, Sec. 9; Art. 1, Sec. 11; Art. 1, Sec. 13; Art. 1, Sec. 16; and Art. 1, Sec. 21, of the State Constitution, and Amendment 1; Amendment 14, Sec. 1; and Art. 1, Sec. 10, Clause 1, of the United States Constitution.

In opposition to the preliminary injunction, defendants placed directly in issue the constitutionality of the law, asserting it constitutes a reasonable and valid exercise of the police power of the State to regulate the business of selling real estate and business opportunities, and applies to plaintiffs' operations. Before the court also was a Decision of the Real Estate Commission, January 1, 1951, to show that the present manager of plaintiffs' Hollywood office once had his license as a business opportunity and real estate broker revoked because of misrepresentations made in procuring listings and advertising contracts for a business known as Central Listing Plan; and the involvement of others associated with plaintiffs in similar activities. On the factual issue of whether the public was being injured by permitting plaintiffs to operate pending determination of the cause, defendants further presented through the Affidavit of Herman F. Roth that during the two preceding years the Division of Real Estate had received numerous complaints from prospective sellers of properties and businesses who had entered into contracts with plaintiffs, and who were led to believe by them that they were in the business of selling properties and businesses, and that in some instances, they need not pay the fee until their properties were sold. In support of the alleged fraudulent and misleading representations, copy of a letter received from each of eight persons was attached.

On these pleadings, affidavits and points and authorities, including decisions of courts in various jurisdictions relating to statutes and business activities similar or identical to the California law and plaintiffs' operations (National Business and Property Exchange, Inc. v. Oklahoma Real Est. Comm., D.C.Okl., 1955, 170 F.Supp. 904, the trial court on October 24, 1955, issued the preliminary injunction. At that time two considerations were before the court, the irreparable injury to plaintiffs' extensive business activities and valuable property interests, if the Amendments are enforced pending final determination of the cause, as compared to the injury resulting to the public if plaintiffs are permitted to operate; and the constitutionality of the Amendments.

No appeal having been taken from the order granting the preliminary injunction, it became final (Woodbine v. Van Horn, 29 Cal.2d 95, 173 P.2d 17). Even so, the trial court in its determination on the motion to dissolve was not precluded from considering all matters relied upon by the lower court in granting it in the first instance. However, since October 24, 1955, other verified documents of a probative nature have become part of the record. Among them is the Affidavit of Edgar R. Carver, filed in support of plaintiffs' good faith in proceeding by way of an action for declaratory relief, wherein he alleged that prior to the effective date of the Amendments, September 7, 1955, he, as plaintiffs' attorney, unsuccessfully sought an opinion from the Division of Real Estate relative to their applicability to plaintiffs' business activities which he set out in detail. Also before the court were answers of defendants and cross-complaint, together with several affidavits in support of their first unsuccessful application for a preliminary injunction, setting forth the organization and activities of plaintiffs, the danger to the public if they are permitted to operate and the complaints of five of plaintiffs' dissatisfied customers. The answers appear to be unverified. Defendant's cross-complaint simply incorporates by reference admissions, denials and allegations contained in the answer and supplemental answer. However, almost every allegation therein is made on information and belief and such a document for purposes of the motion is similar to an affidavit on information and belief, which is hearsay and incompetent evidence (Bank of America Nat. Trust & Savings Ass'n v. Williams, 89 Cal.App.2d 21, 200 P.2d 151). Defendant's Affidavit of Winston D. Lawson, former sales manager of Union, gave names of its employees, their duties and salaries, and a description of its sales operations. The affidavits of Joseph D. Trambly, Leno Rovazzini, Shee Ah Lor, K. Okamoto, and Charles W. Lower, alleged they were former customers of plaintiffs, had been misled by their representatives as to the contents of advertising contracts, and misinformed that they were business opportunity brokers. The Affidavit of Lee B. Stanton alleged generally that similar misrepresentations by plaintiffs' agents are continuing and that the five persons were defrauded by plaintiffs.

In opposition to defendants' motion to dissolve, the affidavits of Paul M. Guyer, president of Union, and Neal Fisher, tell quite another story of plaintiffs' activities and their dealings with the five customers. Guyer declared the satisfaction and praise of brokers, advertisers and customers who have dealt, and who are dealing, with plaintiffs, with the services rendered by them; and included letters from Lynn Barr, a subscribing broker; Leonard A. Malone, advertiser; Mrs. H. W. Bowers, buyer; and R. I. Low, subscribing broker. This placed in direct conflict the factual issue concerning injury to the public. To meet the claims of Trambly, Rovazzini, Ah Lor, Okamoto and Lower that they were defrauded, Neal Fisher alleged he talked to counsel for one of them and investigated the records relating to all, and presented copies of correspondence with them. The statements of the five were controverted by Neal Fisher's affidavit, creating another factual dispute.

The trial judge, in denying the motion, did not state his reasons therefor, but in resolving the conflicts in the affidavits, the lower court in deciding the preliminary injunction should continue, could well have found on the record before us that the alleged misdealing, misrepresentations and fraud of plaintiffs' representatives, in connection with the five dissatisfied customers were untrue; that their only real complaint was that they did not make sales through the advertising services of plaintiffs and to avoid paying their bills for services rendered, made the objections; and that no substantial damage was suffered by them, two having paid nothing to plaintiffs, and three having paid a total of $435. In answer to the claim of Lee B. Stanton that the public is being injured by plaintiffs' continued operations based upon complaints received from the public, the trial judge could have found this to be untrue, or, if true, not sufficiently substantial, since other advertisers and users of Buyer's Digest hold a different opinion of the Digest as demonstrated by the Affidavit of Paul M. Guyer. Also justified is the trial court's implied finding that if the Amendments are enforced against plaintiffs prior to a determination of the cause, in jeopardy of irreparable injury is the employment of a substantial number of persons; a lucrative business in advertising, good will, extensive business interests, and the entire business operations of Universal, dependent upon the sales organization of Union.

We do not know the trial court's disposition on the issue of constitutionality. We cannot assume it determined the law constitutional or unconstitutional, but we can assume from the extensive points and authorities presented, particularly the varied opinions of courts of different jurisdictions including Oklahoma, Connecticut and Maine, relative to the unconstitutionality of similar or identical statutes, that it considered and weighed the issue and determined that there existed a constitutional question, sufficiently serious, along with other considerations, to justify a suspension of the law's enforcement against plaintiffs until the issue could be determined on the trial of the cause (Wade v. City and County of San Francisco, 82 Cal.App.2d 337, 186 P.2d 181; Brock v. Superior Court, 12 Cal.2d 605, 86 P.2d 805). Aside from commenting that the constitutional question appears to be a substantial one and was undoubtedly one of the factors considered by the trial court in the exercise of its discretion, in accordance with the familiar principle that an appellate court will not review questions unnecessary to its decision, we will not further discuss the issue of constitutionality.

Also before the trial court was the matter relating to its power to dissolve a preliminary injunction issued on notice and not reserving the power to dissolve it prior to a determination of the cause. Although, as suggested by appellants, the legal issue may not have been argued, plaintiffs nevertheless laid the matter before the trial court by way of their points and authorities.

Sections 532 and 533, Code of Civil Procedure, the basis of defendants' motion, relate to the modification and dissolution of preliminary injunctions. Briefly, the applicable section 532 provides in pertinent part that ‘if an injunction is granted without notice to a person enjoined, he may apply, upon reasonable notice * * * to dissolve or modify the same.’ (Emphasis added.) This is the only statutory authority for dissolution (Eisenberg v. Superior Court, 193 Cal. 575, 226 P. 617), and thereunder the court's power extends only to a preliminary injunction issued without notice to the person restrained. For over half a century the courts of this state have so held. Eisenberg v. Superior Court, 193 Cal. 575, 226 P. 617; Natoma Water & Mining Co. v. Parker, 16 Cal. 83; Natoma Water & Mining Co. v. Clarkin, 14 Cal. 544; Ots v. Superior Court, 10 Cal.App. 168, 101 P. 431; Humphrey v. Buena Vista Water Co., 2 Cal.App. 540, 84 P. 296. A review of these decisions and a full discussion of the rule appears in United Railroads v. Superior Court, 170 Cal. 755, 151 P. 129, 132. Citing Holtum v. Greif, 144 Cal. 521, 525, 78 P. 11, that ‘(T)he decision of the trial court having been once made after regular submission of the motion its power is exhausted, it is functus officio,’ and recognizing that sections 525–533, Code of Civil Procedure, provide a complete system of law and procedure refusing, modifying and dissolving preliminary injunctions, the court held the right to move for dissolution of a preliminary injunction is limited to cases where the injunction was granted without notice; and the superior court is without power to suspend or vacate a preliminary injunction granted upon notice and hearing until final determination of the cause.

Excepted from this rule is the situation in which the preliminary injunction itself contains a clause in which the court reserves the court's power to modify or dissolve it. Eisenberg v. Superior Court, 193 Cal. 575, 226 P. 617. If by its terms, the preliminary injunction is to continue ‘until further order of this court,’ it may be modified or dissolved (Wolf v. Board of Supervisors, 150 Cal. 285, 89 P. 85, 86; State Comp. Ins. Fund v. Maloney, 121 Cal.App.2d 33, 262 P.2d 662); as where it is made ‘without prejudice to the right of the defendant, at any time hereafter, to move to vacate the injunction * * * whenever so advised.’ Wheeler v. Superior Court, 82 Cal.App. 202, 255 P. 275, 276.

Therefore, unless the right to move for dissolution is expressly reserved, a defendant's remedy, when a preliminary injunction is granted after notice and hearing, is by appeal, the privilege of moving for dissolution being otherwise limited to cases wherein the injunction is granted without notice (27 Cal.Jur.2d, Sec. 90, page 216, Injunctions).

The record before us disclaims any right of defendants to apply to the lower court for a dissolution of the preliminary injunction, and the power of the lower court to dissolve the same. They have at no time claimed that the preliminary injunction was issued without notice to them or that the court reserved power therein to dissolve it before the trial on the merits. Actually it was issued upon notice to defendants and after an adversary hearing, at which all counsel were present. Nor did the court reserve any power to terminate, dissolve or vacate the preliminary injunction prior to the trial on the merits, for the order itself unreservedly and specifically enjoins defendants from enforcing the Amendments ‘pending the determination of this cause.’

Appellants claim that notwithstanding the clear language of section 532, the United Railroad case, and the lack of reservation of power to dissolve, the inherent power of the court and considerations of fairness and equity require the determination that the lower court was justified in entertaining the motion to dissolve a preliminary injunction issued on notice pending a determination of the cause. Defendants cite numerous authorities justifying modification of provisional injunctions on the ground of maintaining the status quo. Three relate to the power of the trial court to grant a preliminary injunction pending appeal from an order denying a preliminary injunction; two deal with permanent injunctions not involving Sections 532 and 533; one relates to a preliminary injunction in which the court reserved the power to modify it, and in six, all over sixty years old, it could not be ascertained if the preliminary injunctions had been issued without notice. We find none of these cases to be controlling in the situation at bar.

Appellants further claim that the trial court has become ‘a handmaiden to inequity’ in that there is a clear change of circumstances, and the court should be permitted to ‘modify its decree to meet unforeseen changes in circumstances and to thus maintain the status quo.’ Until now defendants have never relied upon a change of circumstances. Their sole ground for dissolution in the trial court was the two court decisions. In support of their motion they filed no affidavits setting forth any change in factual situation, relying entirely upon those already in the record, particularly the affidavits filed in support of their first unsuccessful application for preliminary injunction. It is obvious from the record that the matter of change of circumstances was not before the lower court. Furthermore, in reviewing that before the trial court when the preliminary injunction was issued, October 24, 1955, and that before the court on October 17, 1957, when the motion to dissolve was denied, we find no circumstances sufficient to justify the holding that a change of condition existed on the latter date.

Appellants cite as determinative of this issue Branker v. Superior Court, 165 Cal.App.2d 816, 332 P.2d 711, wherein the court held the superior court has power to hear and determine on its merits a motion to dissolve an injunction pendente lite, which was issued on notice, and restrained defendants pending the trial of the action on its merits. Relying upon Sontag Chain Stores Co. v. Superior Court, 18 Cal.2d 92, 113 P.2d 689, and Woods v. Corsey, 89 Cal.App.2d 105, 200 P.2d 208, involving permanent injunctions wherein the court resorted to its inherent power to modify or vacate, it held that the trial court has jurisdiction on a motion to determine whether there had been a change in the controlling factors upon which the injunction rested, or whether the end of justice would be served by a modification of the order. Appellants therein argued that Sontag Chain Stores Co. v. Superior Court, 18 Cal.2d 92, 113 P.2d 689, overruled United Railroads v. Superior Court, 170 Cal. 755, 151 P. 129, relied upon by respondents. The court apparently accepted this position. However, we find difficulty in subscribing to this view due to the basic difference between preliminary and permanent injunctions. The factor which warrants resort to the inherent power of the court to modify or dissolve a permanent injunction does not exist in a preliminary order. As pointed out by the Supreme Court in the Sontag case, a permanent injunction is of a continuous, endless nature and has always been ‘subject, upon a proper showing, to modification or dissolution by the court which rendered it. The court's power in this respect is an inherent one.’ 18 Cal.2d 92, 94–95, 113 P.2d 689, 690.

Although dilatory, cumbersome and circuitous remedies by way of contempt, certiorari, habeas corpus, or an independent action in equity are available, no direct method of vacating or modifying a permanent injunction is provided. This justifies the use of the inherent power of the court to terminate it when continuance of the restraint is no longer warranted. Since a preliminary injunction pends only until the cause is determined on its merits, at which time after hearing it may be vacated, modified or continued in force, no justification arises for resort to the court's power outside of the statutory authority provided in sections 532, 533, Code of Civil Procedure.

The Supreme Court in the Sontag case recognized the distinction between a permanent and a preliminary injunction by referring to Ots v. Superior Court, 10 Cal.App. 168, 101 P. 431, United Railroads v. Superior Court, 170 Cal. 755, 151 P. 129, and other cases, in this way: ‘A review of these authorities reveals that, in many instances, the decree under consideration was not of the nature or classification of the one here in question, and also that earlier pronouncements have been modified or distinguished by later rulings,’ citing Wheeler v. Superior Court, 82 Cal.App. 202, 255 P. 275 (involving a preliminary injunction in which power was reserved) and other cases not here in point. That the Supreme Court therein did not overrule the United Railroads case is obvious from its language 18 Cal.2d at page 96, 113 P.2d at page 691: ‘for present purposes it is sufficient to state that no California case is cited which touches the precise point here under discussion, or which is here controlling.’

For the foregoing reasons the order is affirmed.

LILLIE, Justice.

WHITE, P. J., and FOURT, J., concur.

Copied to clipboard