Court Opinion

ID: 5222765
Source: CourtListenerOpinion
Date Created: 2022-01-06 16:37:48.649084+00
Date Added: 2024-06-11T08:27:32.517346
License: Public Domain

Ingraham, P. J.
(dissenting):
The plaintiffs, as trustees in bankruptcy of the stock brokerage firm of J. M. Eiske & Go., seek to recover in this action the sum of $45,970.51 due to the bankrupt on account of the purchase and sales of stocks and securities by the bankrupt for, on account and at the request of the defendant, the complaint alleging that an account- showing that balance was ' stated between the plaintiffs and defendant. The defendant denies the stating of the account and then sets up, as an *282affirmative defense that, upon the representations of one Has-kins, the defendant was induced to participate in a pool or joint venture to operate in the stock of a foreign corporation; that the representations were false, and relying upon them the defendant did not realize the profits to which he was entitled; that the bankrupt failed to perform its part of the contract in various particulars specified; that the affairs of the pool have never been adjusted and that an action is pending for that purpose. There is a further defense that the purpose of the formation of said pool was illegitimate and contrary to public policy, and the defendant then sets up a counterclaim which the plaintiffs by their reply have denied.
The action being at issue, the plaintiffs seek to examine the defendant before trial not only to prove their cause of action on an account stated, but also for the purpose of disproving the' defendant’s affirmative defenses. Among other facts, the plaintiffs wish to prove by the examination of the defendant that the sales of securities involved in the cause of action were made at the defendant’s special instance and request and for his account, and that the defendant agreed to reimburse the bankrupt for the amount expended in the said purchase of securities, that the bankrupt actually signed the pool agreement by the actual and express authorization of the defendant upon promises well 'known to him, and that the defendant did not rely upon any representations made in connection with the bankrupt, but that all these purchases were well known to the defendant and ratified and confirmed by him, and also various other particulars which it would be necessary for the plaintiffs to. prove to overcome the defenses and the counterclaim.
■ This affidavit, therefore, sets forth the facts and circumstances which establish that the testimony that the plaintiffs seek to obtain by the examination of the defendant is necessary to enable the plaintiffs to disprove the defendant’s defenses and counterclaim. The plaintiffs are trustees in bankruptcy and necessarily have no personal knowledge of the circumstances under which these transactions were carried on. It is not a cross-examination of the defendant as to the facts which it was necessary for him to prove, but independent evidence. to meet *283and defeat his defenses as alleged. The affidavit complies with section 872 of the Code of Civil Procedure, and the facts and circumstances showing such a compliance are fully set forth as required by rule 82 of the General Eules of Practice. The provisions of the Code of Civil Procedure (§§ 870, 872, 873) authorize a judge of the court to order an examination of an adverse party to avoid a defense or a cause of action as well as to establish such a defense arid cause of action. (Herbage v. City of Utica, 109 N. Y. 81.) I think the case is brought directly within Alden v. O’Brien (138 App. Div. 249). The plaintiffs are suing as trustees in bankruptcy of a bankrupt firm to recover money due the firm on account of stock transactions for the benefit of creditors. It seems to be conceded that there were large purchases and sales of stock on account of the defendant which resulted in a loss, which loss was actually paid by the bankrupt firm. The plaintiffs have no personal knowledge of the transactions and I think the ends of justice require that the court should allow them to prove their cause of action by examining the defendant as well as by an examination of the members of the bankrupt firm. There can be no question but that plaintiffs would be justified in calling the defendant on the trial as a witness to prove the facts stated in the affidavit as material and essential evidence for the plaintiffs, both in sustaining their cause of action and overcoming the defendant’s defenses. The provisions of the Code of Civil Procedure {supra) expressly authorize an examination of the defendant before trial at the instance of the plaintiff, and this certainly is a case in which the court should give the plaintiffs the fullest opportunity of proving their right to recover this money.
I, therefore, think the order should be affirmed.
Laughlin, J., concurred.
Order modified as directed in opinion, and as modified affirmed, without costs. Order to be settled on notice.