Case Name: Ashton B. Talbot, Resp't, v. The Doran & Wright Company, Limited, App'lt
Court: New York Court of Common Pleas
Jurisdiction: New York
Decision Date: 1890-04-07
Citations: 30 N.Y. St. Rep. 558
Docket Number: 
Parties: Ashton B. Talbot, Resp’t, v. The Doran & Wright Company, Limited, App’lt.
Judges: 
Reporter: New York State Reporter
Volume: 30
Pages: 558–561

Head Matter:
Ashton B. Talbot, Resp’t, v. The Doran & Wright Company, Limited, App’lt.
(New York Common Pleas,
General Term,
Filed April 7, 1890.)
1. Examination before trial—Brokers.
An objection that the object of the examination is to ascertain whether plaintiff has a cause of action cannot be sustained where the relation of the parties is that of principal and agent, or customer and broker.
2. Same.
In such, a case plaintiff is not hound to make out a case as a condition of the examination.
3. Same.
Where the fact to he determined is whether certain transactions were had hy an agent who has alleged them, the principal has a right to know the facts in advance of the trial in order to prepare therefor.
4. Same—Cobpobations.
Where the defendant is a corporation its principal officers, who are presumed to have transacted its business, may be examined. If they do not know the facts because some other agent was employed they can state who he was, and they can identify the entries of the transactions in the company’s books.
5. Same—Inspection op books.
Where the books have been so kept that an inspection thereof can be of no assistance without an examination of the defendant’s officers, this brings the case within subd. 7 of § 872 of the Code.
Appeal by defendant from an order of this court, denying motion of defendant to vacate an order obtained by plaintiff for the examination of defendant’s officers before trial, and for the production of its books and papers.
Shepard & Osborne, for app’lt; Tracy, MacFarland, Boardman ,d; Platt, for resp’t.

Opinion:
Daly, J.
The defendant corporation holds itself out as engaged in the business of broker, buying stocks, oil, etc., in the city of blew York; the plaintiff, residing in Philadelphia, transmitted, through one Fleshman in that city, orders to defendant in August, 1888, to purchase and sell oil for. him on commission, depositing with Fleshman margins aggregating $5,900, all of which were received by defendant less Fleshman's commissions. On August 31, 1888, the transactions were closed by an order from plaintiff to defendant to buy oil to close the account; Fleshman reported that it had been done, and that the plaintiff's loss was $5,403, and paid over to him $1,347 as a balance coming to him of the margins less the loss. The plaintiff charges that the defendant did not buy nor sell any oil as ordered by plaintiff, and demands judgment for the $5,403, with interest from August 31, 1888. An examination of the officers of the defendant corporation and an inspection of its books is sought for, because, as plaintiff swears, it is impossible to show in any other way that the plaintiff's orders were not executed; also for the purpose of showing that defendant is not a broker doing a legitimate business, but is merely engaged in gambling, etc.; also for the purpose of proving that Fleshman is its agent
The first objection made by defendants to the examination is that it is sought by plaintiff for the purpose of finding out whether he has a cause of action; and that examinations are never allowed for that purpose. Lathrop v. Brown, 5 Civ. Pro., 101; Kirkland v. Moss, 11 Abb. N. C., 421; Schepmoes v. Bousson, 1 id., 485 ; Kaufman v. Herzfeld, 1 How., N. S., 444. The cases first and last cited were similar to the present in that the examination sought was of parties who were stock or grain brokers, with respect to purchases and sales on account of a customer; and it was held that the examination could not be permitted when its object was to ascertain whether a cause of action or a counterclaim existed.
But in the case of Judah, Assignee, v. Lane, 14 Daly, 308; 12 N. Y. State Rep., 130, where it was claimed that the defendant, as broker for the plaintiff's assignor, had bought and sold stocks and grain for him and had rendered accounts which the plaintiff claimed were false, the general term of this court permitted an examination of defendant before trial. It was said in the opinion in the case that the allegations of fraudulent practices made in plaintiff's affidavit were to be taken as confessed because the motion to vacate the examination was made upon the plaintiff's papers; also that the plaintiff's accusations were substantiated by the facts set forth in his papers; but it is not necessary in, order to obtain an order for examination that the plaintiff's alleged cause of action should be admitted, or that evidence in support of it should be set forth in tKe application for the order. The Code does not require it. Sections 872-3. The case is an authority for permitting an examination of defendants for the purpose of ascertaining what dealings were actually had by the broker on account of his customers, where the latter, or his assignee, brings an action for that purpose. This is in accord with the decision of the general term of the supreme court of this department in Miller v. Kent, 59 How. Pr., 322, where the examination of the defendants, brokers, as to purchases and sales of land for the plaintiff was allowed before trial in an action brought to compel an accóunting. It was said by the court that " a commission merchant or broker has no right to conceal from his customers any portion of his business and dealings in relation to the property alleged to have been bought and sold ; and where he withholds the fullest information on that subject, the right to examination before trial in an action brought to recover alleged profits, or to adjust the unsettled accounts, should be fully accorded."
In both of the above cases it might have been objected that the object of the examination was to ascertain whether plaintiff had a cause of action; but this objection cannot be sustained where the relation of the parties is that of principal and agent, as in the case of a customer and his broker. That relation existed between the plaintiff in this case and the defendant corporation.
The second objection to the examination is that there is no good reason for the examination of defendant's officers before, rather than at the trial. This objection is not a good one where the fact to be determined is whether certain transactions were or were not had by an agent who has alleged them. The principal has the right to know the facts in advance of the trial in order to investigate such transactions and make preparations for the trial.
The next objection is that there is no allegation in the plaintiff's affidavits that the officers of defendant sought to be examined have knowledge of the fact whether oil was or was not bought or sold by defendant for plaintiff. To this objection it may be answered that the defendant being a corporation could only buy or sell through its agents; that the parties required to appear and submit to examination are its officers and agents who are presumed to have transacted its business and to know what business it did or did not transact, and what orders it did or did not execute. If these officers (the president, vice-president and secretary) do not know the facts because some other agent was employed in the transactions, they can state who that agent was. But nothing of the sort is alleged; and as the books of the concern are to be produced upon the examination, and the transactions, if any, appear upon them, it is only necessary for the parties under examination to identify the entries and testify what they know.of the transactions represented by such entries.
This brings us to the next objection, that the affidavits do nor show the facts necessary to support an order for the production and inspection of books and papers. Under the seventh subdivision of § 872 of the Code, the order for the examination of the officers of a corporation shall direct the production of books and papers, as to the contents of which an examination or inspection is desired. This section applies to an examination " depending upon or auxiliary to oral examination," Levey v. N. Y. C. & H. R. R. Co., 53 Supr. Ct., 263, and in such a case the practice as to-inspection of books and papers under § 805 does not apply.
Here the object of the inspection of the books is to assist the officers of the defendant company to answer" respecting the matters in dispute, and to enable them if they can to identify the entries of transactions on plaintiff's behalf. As it is alleged that the name of the plaintiff does not appear upon the books, and that transactions on his behalf were designated and recorded under certain numbers by which his orders were transmitted to defendants, it is manifest that an inspection of the books can be of no assistance without an examination of the defendant's officers, and this brings the cases within subd. 7 of § 872.
The objection that the allegations of the plaintiff's affidavits are upon information and belief, and that there is mere suspicion or conjecture as a basis for the examination, is not a sound one under the circumstances of this case.
The plaintiff is entitled to the information he seeks from his brokers, and is not bound to make out a case against them as a. condition of the examination. The case of Central C. T. R. R. v. Twenty-third Street R. R. Co., 53 How. Pr., 45, applies to proceedings for inspection solely.
The order should be affirmed, with ten dollars costs.
Bischoff, J., concurs.