Case Name: FENLON v. DEMPSEY
Court: New York Supreme Court, General Term
Jurisdiction: New York
Decision Date: 1888-11
Citations: 22 Abb. N. Cas. 114
Docket Number: 
Parties: FENLON v. DEMPSEY.
Judges: 
Reporter: Abbott's New Cases
Volume: 22
Pages: 114–121

Head Matter:
FENLON v. DEMPSEY.
N. Y. Supreme Court, First Department, General Term ;
November, 1888.
[Affirming in part, and reversing in part, 21 Abb. N. C. 291.]
1. Examination before i/rial; discovery and inspection of corporate boohs ; failure to produce.] Upon a reference to a referee to take proof of the facts constituting an alleged c'ontempt on the part of •officers of a corporation failing to produce corporate books, which they were ordered to produce upon an examination before trial, •the burden of proving that the books were not in their possession -was upon the defendants ; and a justification of their failure to «comply with the order could only be shown by the production of •common law proof that the books called for did not exist, or that they could not be produced because they knew nothing, of their whereabouts and could not ascertain the same.
'2. Evidence ; burden of proof; presumption of misdemeanor.] Where a law under which a corporation was organized required the trustees to keep a book of the character called for in an order to produce upon an examination before trial, or their failure to keep such book was prescribed a misdemeanor,—Held, that the burden of proof to excuse their neglect to produce the book because of its non-existence, or their absense of knowledge as to the whereabouts •of the book, was upon the officers, as the presumption was that •the trustees had done their duty and had not been guilty of a misdemeanor.
3. Contempt; fine.] The allowance within the discretion of the court of a certain sum as counsel fee by way of indemnity to the plaintiff’s attorney, in a proceeding in which the defendants were adjudged guilty of a contempt, cannot be sustained; but. the amount of such indemnity must be ascertained by evidence.
Appeal from order adjudging officers of a corporation in contempt for failure to produce books upon an examination before trial.
The facts appear sufficiently in the opinion.
See this case at special term, fully reported in 21 Abb, N. C. 291.
Abram Kling {Louis P. Levy, attorney), for the appel- ' lants.
John McCrone, for the respondent.
The corporation here referred to—The Union Square Printing Company—was organized under the Manufacturing Act of 1848 (c. 40). The 25th section of that act reads as follows : “ It shall be the duty of the trustees of every such corporation or company, to cause a book to be kept by the treasurer or clerk'thereof, containing the names of all persons alphabetically arranged, who are or shall, within six years, have been stockholders of such company, and showing their places of residence, the number of shares of stock held by them respectively, and the time when they respectively became the owners of such shares; and the amount of stock actually paid in ; which book shall, during the usual business hours of the day, on every day except Sunday, and the fourth day of July, be open for the inspection of stockholders and creditors of the company, and their personal representatives, at the office or principal place of business of such company, in the county where its business operations shall be located ; and any and every such stockholder. creditor or representative, shall have a right to make extracts from such book ; and no transfer of stock shall be valid for any purpose whatever, except to render the person to whom it shall be transferred, liable for the debts of the company, according to the provisions •of this act, until it shall have been entered therein as required by this section, by an entry showing to and from whom transferred. Such book .shall be presumptive evidence of the facts therein stated in favor of the plaintiff in any suit or proceeding against such company, or against .any one or more stockholders. Every officer or agent of any such company who shall neglect to make any proper entry in such book, or shall refuse or neglect to exhibit the same, or allow the same to be inspected, and extracts to be taken therefrom, as provided by this section, shall be deemed guilty of a misdemeanor, and the company shall forfeit and pay to the party injured, a penalty of fifty dollars for every such neglect or refusal, and all the damages resulting therefrom ; and every company that shall neglect to keep such book open for inspection as aforesaid, shall forfeit to the people the sum of fifty dollars for every day it shall so neglect, to be sued for and recovered in the name of the people, by the district attorney of the county in which the business of such corporation shall be located ; and when so recovered, the amount shall be paid into the treasury of such county for the use thereof.”

Opinion:
Van Brunt, P. J.
On November 10, 1887, an order was made by Mr. Justice Barrett that the Union Square Printing Company, a corporation, be examined, and its-deposition taken in this action, pursuant to sections 872, 873 of the Code of Civil Procedure, and for that purpose that John Dempsey, as president, and George D. Carroll, as treasurer of the defendant corporation, be examined, and produce at the time mentioned in said order, the book or books of the defendant corporation, showing the ownership and transfer of stock therein, and its business ledger or blotter, as well as its by laws and books, etc. This order-was duly served upon the defendants, together with a, subpoena duces tecum.
The defendant failed to appear upon the return day of said order. On November 18, Mr. Justice Barrett-granted an order to show canse why the said Dempsey and Carroll should not be punished and fined as for contempt for their neglect and disobedience of said order, and of said subpoena duces tecum. Upon the return of said order, a. motion was entertained by 'the justice, then holding the. Special Term, to vacate and set aside the order upon the affidavits then presented, which motion was denied, and the-motion to punish the defendants, Dempsey and Carroll, as-prayed for, granted with costs, unless they attended on the day and place fixed in said order with the books called for in said original order, and submitted to examination then, and from time to time thereafter as might be necessary.
The defendants appeared pursuant to this order, and-were examined, but they refused to produce the books as-provided for in said order. On January 30,- 1888, the •order made on November 26, 1887, adjudging the defendants in contempt, unless they appeared and were examined, •and produced the books, was amended by adding thereto •the statement that the intent of the order was simply to •sustain the original order for the examination of the •defendants, and that the court did not pass upon the question whether the defendants had in their possession the •books which they were required to produce. On December 28, 1887, Mr. Justice La whence granted an order upon papers therein recited, that the -defendants show cause why they should not be punished for contempt, In neglecting •and refusing to produce the books called for by said original order, to wit, the stock ledger and minute book of the •defendant company. Upon the hearing of this order to show cause, an order was entered referring it to a referee to take proof as to the facts constituting the alleged contempt, and to report the same, with his opinion thereon. When the' parties came before the referee, the moving parties introduced the original affidavit and order for the •examination of the defendants, and the production of the books. These papers, the learned referee received as .pleadings, defining the issues involved in this proceeding, and not as evidence as to the commission of the contempt, .and held that the contempt must be established by common law proof. The plaintiff thereupon examined a witness for the purpose of showing that the defendants had failed to •comply with the order by producing the books called for. The defendants attempted to prove upon the cross-examination of the witness, what the defendants had testified to •upon their examination, which evidence was excluded by the referee, upon the ground that the examination had been reduced to writing and signed. This examination of the •defendants was marked for identification, but, as far as the minutes go, there is nothing to show that it was ever offered as evidence before the referee. No evidence whatever was offered upon the part of the defendants. The-referee thereupon reported that the parties had been guilty of contempt. The motion to punish for contempt was-renewed by the plaintiff, and a motion made by the defendants to set aside the referee's report upon the ground of misconduct on the part of the referee. The motion to set aside the report was denied, and the motion to punish for contempt was granted, and from the orders thereupon entered these appeals are taken.
It was claimed in support of the motion to set aside the report that the referee had refused to consider the affidavits or depositions mentioned in the order of reference, other than such affidavits as were introduced in evidence by the plaintiff's attorney before him ; and that as these affidavits-raised an issue as to the possession of the books, it was necessary that the plaintiff, before he was entitled to these proceedings, should prove before the referee by common law proof that the defendants had possession of the books-in question.
As far as the disposition of this motion was concerned it was entirely immaterial whether the referee considered: these affidavits and depositions or not. The case was tried by the referee as though the question to be determined was whether the defendants were to be deemed in possession of these books on the proof presented before him ; and he found that under the circumstances the burden of proof of showing the fact that these books were not in their possession was upon the defendants, and in this we think he was clearly right, for,two reasons : First, because the order of Mr. Justice JBarbktt required the production of the books, and if the defendants did not obey this order they, were bound to show the reason why, and this under the ruling of the referee made at the suggestion of the defendants'' counsel could only be. done by the production of common law proof that the .books called for did not exist, or that they could not be produced by defendants because they knew nothing of their whereabouts, and could not ascertain the same.
The denials contained in the examination of the defendants could hot be received as such proof, even if offered for that purpose, which they were not, because they were not common law proof. The reference was ordered because these denials did not satisfy the learned justice before whom the motion was made, and he desired that an oral examination should be had upon this point before an officer, who could see the .witnesses and judge from their appearance, as well as from the testimony given, of the verity of their utterances. The books having been ordered to be produced, the burden was upon the defendants to excuse their failure to obey. The second reason why the burden of proof was upon the defendants to excuse their neglect to produce the books is because, under the law under which the Union Square Printing Company was organized, the trustees were bound to keep a book of the character called for by the subpoena, and the failure to keep such a book was prescribed by the statute to be a misdemeanor. The presumption, therefore, was that the trustees of this corporation had performed their duty, had not been guilty of a misdemeanor, and had kept the book in question, and such being' the fact, that the book was in existence, and had been kept as required by the statute. Each trustee was liable to be compelled to produce that book in court under the provisions of the Code, for the purpose of being used in connection with his examination, to refresh his memory upon points upon which he might be examined, by reference thereto.
In the case of People v. Pease (27 N. Y. 45, 74), this rule in regard to presumption is distinctly recognized. In that case the question arose as to the right of a person who was. alien born to vote. It was claimed that in the absence of any proof of naturalization, such vote must be disallowed ;. the court upon the other hand held that as the voter could; not be presumed to have committed a crime, which he would have done had he voted without bein'* naturalized, in the absence of all proof upon the subject, it must be presumed that he had been a citizen before offering his vote, and the principle laid down by Greenleaf in his work on evidence, that " where the negative allegation involves a charge of criminal neglect of duty, whether official or otherwise, or fraud, or the wrongful violation of actual lawful possession of property, the party making the allegation must prove it, for in these cases the presumption of law, which is always in favor of innocence and quiet possession, is in favor of the party charged," was referred to with approval. And the court proceed to say that the request to charge in the case cited involved something more than a criminal neglect of duty or fraud. If the party voted without naturalization the act constituted it a misdemeanor. The presumption against positive crime cannot be less strong than the presumption against fraud or criminal neglect of duty. The negative, therefore, which was involved in the plaintiff's request could not be presumed, but required to be proved by the party alleging it.
Applying the principles above enunciated to the case a,t bar, the presumption is that these trustees had done their duty, and had kept the book required by law, and it being in existence it was supposed to be in the custody of the corporation, and its officers could be compelled to produce it. If no such book was in existence it was the duty of the defendants to have shown the fact by competent common law proof, according to the principles which were claimed upon the reference by their counsel, and which position was conceded by the referee.
We think, as far as this motion to punish for contempt is concerned, the counsel for the defendants has entirely mistaken the presumptions arising from the position of the defendants, and that if he desired to excuse the failure to produce these books, either because of their non-existence, or that they were not under the control of the defendants, it was necessary for to establish those facts before the ref dree by evidence upon his part. He having failed to do so •the defendants stood before the court without any justification for the violation of the orders which have been made against them.
The allowance of the $100 counsel fee to the plaintiff's .attorney by way of indemnity cannot be sustained. While the court has the power to impose as a fine an indemnity for legal expenses incurred in addition to those properly taxable, the amount of such indemnity must be ascertained by evidence, to which is to be applied the same rules of law •as upon the trial of an action brought for the injury. The •amount of such indemnity is in no sense in the discretion of the court, but the judgment of the court must be founded upon legal proof (Ludlow v. Knox, 7 Abb. Pr. N. S. 420). There was no such proof offered as to this $100 allowed for counsel fee, and consequently the order appealed from was erroneous and must be reversed and the proceedings remitted to the Special Term for further procedure, but without costs.
Beady and Bartlett, JJ., concurred.
This order, omitting its formal parts, is set forth in 21 Abb. N. C. 292, n.
The substance of the order here referred to, is given in 21 Abb. N. C. 293, n.