
    Charles D. Thompson, as Receiver of the International Automobile and Vehicle Tire Company, Appellant, v. Adelbert H. Alden and Others, Respondents.
    First Department,
    December 3, 1909.
    Discovery — accounting — examination of adverse party — production of books.
    Although a party suing for an accounting is not entitled to examine his adversary before trial, if on the pleadings he is entitled to an interlocutory judgment for an accounting, he is, nevertheless, entitled to such examination where the evidence sought is material and necessary to establish his right to an interlocutory judgment for an accounting..
    Where the plaintiff as receiver of a corporation alleges that the defendants individually and as officers both of the plaintiffs corporation and another corporation, have so manipulated the assets of the plaintiff’s corporation that the other corporation has acquired a large part thereof, as to which transactions an accounting is demanded, it is proper for an order for an examination before trial to require the defendants.as officers to produce the books and papers of the corporation to which the assets were transferred. It is the duty of the referee before whom such cause is tried to confine the examination to facts within the terms of the order.
    Appeal by the plaintiff, Charles D. Thompson, as receiver, etc., from an order of the Supreme Court, made at the Hew York Special Term and entered in the office of the clerk of the county of Hew York on the 4th day of October, 1909, vacating- an order for the examination of certain of the defendants before trial.
    
      
      Edward P. Lyon, for the appellant.
    
      John W. Ingram, for the respondents.
   Ingraham, J.:

This action is brought, for an accounting of nymeys due to the-corporation of which the plaintiff is receiver. The general ground -upon which the plaintiff seeks to hold -these defendants liable is that' ' the corporation of which the plaintiff is receiver and the defendant International Rubber Company, were both controlled by the individual defendants; that these individual defendants so manipulated the property of the plaintiff corporation that, the defendant corporations acquired a, large part of the property and. moneys of the. plaintiff corporation. The relief asked. for is' that the defendants and each of them be adjudged to account, to the plaintiff as receiver . for. all moneys received by them, or either of them, growing out of the transactions set forth in the complaint, and- to pay over to the plaintiff as such receiver such sum or sums as may be found due upon such an accounting, and also that the defendants be decreed to turn over to the plaintiff as such.receiver certain property of the plaintiff corporation. The défendahts,' answering this complaint, deny most of the allegations upon which the .cause of action is based, and set up several affirmative defenses.

■ It is quite clear that upon the pleadings the plaintiff would not be entitled to an accounting, but many facts alleged in the complaint

. that are denied by the answer will have to be proved, and it is to Obtain evidence of these facts to be used upon.the trial that the plaintiff seeks to. examine the- individual defendants who, as holders of a majority of the stock, control the defendant corporations and .the plaintiff corporation. The provisions of the Code (§§ 870-872) give to. a party, to the action a right to- examine "an adverse party before trial to secure material evidence- to be used upon the trial of the action. It is quite clear that where, upon the pleadings, the plaintiff would be entitled to an interlocutory judgment for an. accounting, and the only subject in. litigation is the taking and stating of the - account, an. examination before trial' is not necessary, as Upon the , trial it would not be nécessary to prove any facts, and so the examination of witnesses either before or at the trial is not required. Where, however, in an action for an accounting to entitle a plaintiff to an interlocutory judgment to take and state the accounts, it is necessary to prove facts, taking of the testimony is essential, and to secure evidence to support his contention either party has a right to examine the adverse party either before or at the trial. On applications of this character what we have tried to emphasize is, that an examination before trial is only provided for to allow a party to obtain evidence for use at the trial, and to justify an order for an examination it must appear that the witness sought to be examined can testify to facts which are material on the trial to the party making the application, and. where it appears from the pleadings that the plaintiff to obtain the judgment which he demands must prove facts at the trial, he may then examine an adverse party before trial to prove such facts upon the trial. That seems to be this case. We think, therefore, that the plaintiff was entitled to examine the defendants before trial and that the order was improperly vacated.

The order for the examination requires one individual defendant to be examined as a witness and other defendants to be examined individually and as director, treasurer and manager of the Commercial Company, defendant, and also as treasurer of the International Rubber Company, defendant, and these witnesses are required to produce certain books of account of the corporation of which they are officers, showing the goods or moneys furnished by each of said companies to the plaintiff corporation and the payments- made to each. of said companies by plaintiff corporation. Subdivision 7 of section 872 of the Code provides that if the party sought to be examined is a corporation the affidavit must state the names of the officers or directors thereof, or any of them whose testimony is necessary and material, or the books and papers as to the contents of which an examination or inspection is desired, and the order to be made in respect thereto shall direct the examination of such persons and the production of such books and papers.

Considering the nature of this action and the facts necessary for the plaintiff to prove, I think this provision in the order was-justified. While it is quite true that a general inspection and discovery of the books and papers of the defendant corporations could not be compelled in this proceeding, where as a part of the examination of the witnesses, who were the officers of the company, it is apparent that this examination could not be complete without the presence of such books and papers as will be necessary to refresh the recollection of the witnesses and enable them, to testify, the production of such books and papers will be required. The witnesses are to be examined before a referee, and lie will have the power to prevent any abuse of this order and confine the examination to such . facts as are within the terms of the order.

My conclusion is, that the order appealed from should be reversed, with ten dollars costs and disbursements, and the order for the examination of the parties specified reinstated, the’ time for the examination to be fixed upon the settlement of the order.

Laughlin, Clarice, Houghton and Scott, J'J., concurred.

• Order reversed, with ten dollars costs and disbursements, and Order directed as stated in opinion.  