Majority
p. 34JOSEPH B. HEISHON, Plaintiff, Appellant and Respondent, v. THE KNICKERBOCKER LIFE INSURANCE COMPANY, JOHN A. NICHOLS and CHARLES M. HIBBARD, Defendants, Appellants and Respondents.[1]
Headnote
I. Parties, examination of.1. Before complaint served.
(a) Affidavits, sufficiency of. ¡
1. When they indicate that the examination may be- necessary
p. 35Before Van Vorst and Speir, JJ. Decided March 3, 1879.
to enable the plaintiff to give formal expression to the allegations which must in the end constitute his complaint, they are sufficient.
2. Fullness oe statement oe cause oe action, eepect oe.
(a) Does not establish no necessity for an examination, when.
This was a motion noticed for and made at special term, for the examination of defendants Nichols and Hibbard, and an inspection of the books of the company, before service of the complaint, for the purpose of enabling the plaintiff to make and serve his complaint.
The application was made on the petition of the plaintiff, the affidavits of James F. Emery, Mark Uhl, Joseph H. Wells, and of plaintiff, and the annual reports of the company from 1867 to "1876, both inclusive, which reports are not contained in the appeal book, but which were read, according to plaintiffs’ points, to show a deficit of over $2,286,000 in the financial management of the company, and an unlawful disbursement of over $5,049,000 in canceling and reducing the amount and number of the company’s risks.
In opposition to the application, the affidavit of Charles M. Hibbard was read.
The affidavit of Emery set forth that he was the plaintiff’s agent in the matter of this action, and made the affidavit on his behalf; and alleged:
“This action is brought as well for the benefit of the plaintiff as of all other piolicy-holders of said corporation similarly situated, who may come in and contribute to the prosecution hereof and become parties hereto.
“The nature of the action, the substance of the
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cánse of action, and the nature of the judgment which will be demanded herein, are as follows, substantially:
“The plaintiff claims, and in his complaint will aver, that the transaction hereinbefore set forth of the procuring from him of the surrender and cancellation of his "said four policies, and the inducing of him to accept said three new policies, in exchange therefor, was a fraudulent transaction, by reason of its having been a part and parcel of the said fraudulent and unlawful ‘scheme’ for ‘twisting’ policies, and of its having been made by said defendants part and parcel of the said wrongful conspiracy and combination, and by reason of the wrongful extortion and procurement from him of his said note for $167.67, and by reason of „ the said false and fraudulent pretenses and representations, made to him, to induce him to enter into such transaction, and by reason of its having been a breach of trust on the part of said defendants ; said plaintiff will further claim and allege, that he was and is entitled to vote as a corporator, by reason of his rights as a policy-holder, in the election of directors ; also, that the entire assets of said corporation, which amounted to over $7,000,000 at that time, were held in trust for the plaintiff, and all other policy-holders, at all times since the date of plaintiff’s policy first above. mentioned ; that his said four policies were mutual, or participating policies, and entitled to share in all the profits of said corporation ; and that, by reason thereof, said plaintiff was and is, at any time, entitled to an accounting of the business and affairs of said corporation, and entitled to demand and have all rights and remedies, incident to the visitorial powers of a court of equity, over all trust relations and trust ■ estates ; and that said defendants were and are the trustees of the plaintiff, as a policy-holder in said corporation.
“Plaintiff will also claim and aver in his complaint
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herein, that said individual defendants, and divers other persons unknown to me or the plaintiff, have, at divers'times since the issuing of plaintiff’s policy first above mentioned, diverted, misappropriated and converted to their own use large amounts of money belonging to said corporation, and forming part of the said trust estate; that illegal dividends have been made, from time to time, to stockholders of said corporation, who were and are unknown to me, or the plaintiff; and that said corporation, by and through its board of directors and its officers, has done and committed divers acts and things which were illegal and in excess of the powers of said corporation, thereby working a forfeiture of its charter. Said plaintiff will claim and aver that he was deceived in said transaction ; that he released and surrendered his said four policies, and gave said note and accepted said new policies, while wholly ignorant as to the value of his said old policies, and of the true amounts of the dividends, or profits, which stood to their credit on the books of the company ; and as to the true position of the company as to financial solvency and prosperity ; and as to the correctness of the computations upon which said surrender and changes were made; and as to the justice or necessity of his giving and paying said note ; and also as to all other material facts touching the said transaction ; and that he had no sufficient knowledge of the true nature of the transaction, or of the fraud so practiced upon him, until about November, 1877.
“ Said Heishon will further allege and claim, that he paid certain premiums on said new policies ; and that he was and is, on an accounting, entitled to certain large dividends and profits upon his said old policies ; and that there will be found due to him, by and in said corporation, sufficient amounts to pay and cancel all the premiums which have become due and are unpaid, if any, on said old policies : and that he is en
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title d to a rescission of said transactions, and to pay up all premiums which may be found due .from him on a restoration of said old policies.
“ The judgment or decree demanded herein will be for a cancellation and rescission of the whole of said transactions with him ; the cancellation of said three new policies, and the restoration and reinstatement of the said four old policies to their position prior to such surrender, and the restoration of said plaintiff to all his rights, as they existed under said four old policies; and for an accounting as to the profits or dividends lawfully due or belonging to said four policies and each of them ; and for a general exhibit and accounting of the management of the affairs of said corporation ; and for a restoration and return by the officers and stockholders of said corporation, and by said defendants, Nichols and Hibbard, of all moneys wrongfully received or used, or misapplied by any or either of them, out of said trust funds, or in any manner in connection with the business of said corporation, or any of the matters aforesaid; and for the right, on such account being taken, to pay up any premiums which may be found due by said plaintiff, to said corporation, and to continue said old policies thereafter in full force and effect; and for such other, or such further relief in the premises, as to the court may seem proper ; and for the appointment of a receiver, to continue hereafter the regular business of said corporation, and for the cancellation and retirement of the entire guarantee capital of said company, if the same shall seem to be necessary to insure its future solvency.
‘ ‘ For the purpose of enabling the plaintiff to make and serve his complaint herein, it is necessary to take the examinations or depositions of said defendants, John A. Nichols and Charles M. Hibbard, individually, and of the said John A. Nichols, as the president, and on behalf of said corporation, touching the mat
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ters hereinbefore set forth, to wit: To examine said corporation, by and through its said president, as to all facts relating to the said policies, old and new, so issued, to said plaintiff ; the said surrender thereof by said plaintiff ; the amount paid or allowed to plaintiff for the same; also the facts touching the carrying out of said scheme ; the number and amount in the whole, of all such surrenders or changes, and the nature thereof; the surrenders themselves, signed by the policy-holders ; the names of the stockholders of said corporation, the amounts of stock held by them respectively, that they may be made defendants herein, if the plaintiff be so advised ; whether or not any dividends or profits have wrongfully accrued or been paid to any person, and to whom, in the course of the business, and out of the funds of said corporation, since the dates of the plaintiff’s said four old policies ; all of which matters will appear in and by the books, records and papers of said corporation, and which are within the knowledge and under the official control of said John A. Nichols, as such president.
“To examine said Nichols individually, as to what, if any, amounts of money, dividends, or profits, he has made or received, out of and by means of the said unlawful acts and matters hereinbefore set forth, either as an officer, employee, or stockholder; and as to his knowledge of the said wrongful acts of said Hibbard ; and when such knowledge was acquired.
“To examine said Hibbard as to the wrongful acts and matters hereinbefore set forth and charged to him personally, as to the true mathematical calculations and values relating to said four old policies, for all the purposes aforesaid; as to the extent and number of the said false records, so alleged to have been made by him ; and as to the false or other entries made in connection therewith, in the books of the said corporation, so far as he knows the same ; and as to the use made
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by him of said note of $167.67, and whether or not, he, or any other person, and who, received or used the proceeds thereof; and as to what amount of money he wrongfully exacted or received from myself in connection as aforesaid with my said employment, and what use he made of the same ; and whether or not he paid the same over to said corporation.
“I further aver, that said corporation has been requested to "produce, or to allow an examination of, the plaintiff’s release, or releases, of his said four old policies ; and I am informed that it has refused to grant such request; and that it is necessary that each of said twisted policies, and the releases thereof, be exhibited to plaintiff’s counsel to enable the plaintiff to make his said complaint; and I ask, on behalf of said plaintiff, that an order be made, directing said defendants to be examined as herein set forth, and according to law and the practice of this court; and directing said corporation to deposit with the clerk of this court all the said twisted policies (517) whose numbers are given in ‘ Exhibit A,’ forming part of this affidavit, and the releases thereof, on or before the day fixed for such examinations, that the plaintiff and his attorney may inspect and copy the same for the purpose aforesaid.”
Prior to the statements above extracted, the affidavit had in substance set forth that said company was organized on a basis of a guarantee capital stock of $100,000, divided into $25 shares, with power to increase ; that by its charter, and various amendments thereof, the owners of the guaranteed capital were entitled to an annual interest of seven per cent, and to twenty per cent, of the net earnings, the remaining profits to be divided equitably among those policy-holders whose policies were issued on the mutual or participation plan; ,and each insurer to whom profits should be apportioned was entitled to
p. 41
one vote under qertain conditions, at each election of directors ; and the business of the company was placed under the control of a board of directors, one-half of whom were required to be stockholders, and the remainder might be chosen from among the insurers for life; and it was provided that the business of the company should be conducted on the mutual principle, but that any person might obtain insurance without participation in the profits.
It had further set forth that the business of the company had been almost wholly conducted on the mutual principle.
It had further set forth that prior to October 24, 1866, the company had issued to the plaintiff on his four several applications its four several policies, by each of which, in consideration of certain payments to be made, it insured the plaintiff’s life during the whole continuance thereof, in the sums in said policies mentioned (to wit: $1,500, $2,000, $1,500, $5,000), upon certain terms and conditions which the affiant was unable to specify, the policies being in possession of the company.
It had further set forth that plaintiff had kept and performed all the terms and conditions of said four policies to be by him kept and performed, until November 21, 1873.
It had further alleged as follows : “Said plaintiff has informed me, and I verily believe from such information, and from the nature and circumstances of the transactions hereinafter named, that said plaintiff is not sufficiently familiar with the facts, and has not the requisite knowledge, or information, touching all the matters herein referred to, to enable him to make this affidavit, or to make and serve his complaint in this action, nor does he know the sources of such requisite knowledge or information from which the same can be obtained, nor do I myself, except as herein set forth.”
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It had then further alleged that about February 1, 1873, the company employed the affiant to obtain from the holders of old policies on which a large liability had accrued, and as against which the company was required by law to keep safely invested a large reserve, and to obtain from the holders of premium loan, or note, policies, the surrender and cancellation of the same, and to induce them to accept in exchange therefor new policies, to be issued at the advanced ages of the insured, and at the increased rates of premium required at said advanced ages; and also employed the affiant to purchase outstanding policies for amounts considerably less than the legal reserve required to be kept thereon ; it had further alleged that the affiant was so employed for the purpose of carrying out an extensive scheme of procuring the cancellation of said old policies by means of fraudulent concealment of facts, and false and fraudulent statements, and had set forth the general character of" the concealments and misrepresentations to be adopted. It had then averred that said scheme was adopted mainly under the management and direction of defendants Nichols and Hibbard, and that the affiant was employed at the instance of said Nichols for the express purpose of carrying out such scheme, and then proceeded: “ The object of such scheme was, and my instructions were, by the means aforesaid, and by all or any means, to induce as many as possible of the policy-holders of said company to surrender and cancel their policies, the effect of which would be, and was, very greatly to lessen the apparent 1 liabilities ’ of the company, at least to the extent of the £ reserve ’ set free, or liberated, by the process of cancellation of policies, less the expenses and allowances ; also to get rid of a large amount of premium notes and loan notes; also to acquire a large amount of apparently new business ; and also to wrongfully and unlawfully make and acquire a large amount of apparent profits,
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out of which large dividends of money or scrip could be wrongfully and unlawfully made, to and for the owners of the said guarantee capital.”
It had then further set forth that during the employment of the affiant, he and his assistants had obtained, in the manner and for the purposes aforesaid, the cancellation of one thousand policies or more, and then proceeded to allege: “I cannot give an exact estimate, or statement, of the precise extent of my services, or make any exact estimate of the gain or profit to said company, or to its stockholders, or to said defendants personally, for the reason, that shortly after the termination of my said employment, my desks, which contained the books, papers and records connected with my said business and employment, and nearly all of my private books and papers, and which were in the rooms used by myself and my assistants, and in the building of said corporation occupied by it for its offices, were wrongfully broken open, and said books, records and papers taken, or stolen therefrom, and I have never since seen them, or been able to obtain them; and I verily believe that they were so taken by said defendant, Charles M. Hibbard, and one Upson, then and now chief bookkeeper of said company.”
It had then further set forth that in the course of the affiant’s employment, he had instructed various local agents of the company located in different parts of the country in the “method and mysteries” of obtaining cancellations of policies, and on information and belief, that subsequent to his employment the said scheme was extensively prosecuted by many, if not all, the agents of the company.
This affidavit then proceeded as follows :
“From all the facts and information herein alleged, I verily believe that a very large amount of money— many hundreds of thousands of dollars—of wrongful or illegal profit or gain resulted to the company, and
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to all the stockholders thereof, by means of the adoption and prosecution of said alleged scheme.”
It had then set forth, on information and belief, that defendant, Nichols, owned a majority of the guarantee' capital, and was thereby enabled to, and in fact did, exercise absolute control of the management of said company, and that he had thereby wrongfully and inequitably acquired enormous profits for himself and fellow stockholders, to the great detriment of the policy-holders. It had further set forth that defendant, Hibbard, during the time of the affiant’s employment, had been, and still was, the actuary of the company, on a fixed salary. It had further alleged that Hibbard had informed the affiant that said Nichols (who, prior to being the president, had been vice-president of the company) had, previous to his vice-presidency, been general manager of the company for the Southern territory, and had accumulated a large business; and, in view of negotiations for the purchase by the company of his renewal interest in that business, he, Hibbard, at the request of said Nichols, had given a double valuation to such interest, and that such interest had been purchased by the company for a large amount. It had further set forth that in obtaining the surrender of old policies, the affiant and his assistants in nearly all cases obtained the necessary signatures to surrenders on the back of the policies without filling in the blank left for that purpose the consideration for the surrender, and that such blanks were afterwards, in some instances, and at least twenty-five, filled up by Hibbard with different and larger amounts than the true ones ; that the affiant believed such to be the practice of Hibbard in most cases ; that he, the affiant, called said Nichols’ attention to this practice of Hibbard, and exhibited to him papers sustaining the allegations as to the practice of Hibbard in this respect, but that Nichols never, to the affiant’s
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knowledge, took any action in that behalf against Hibbard. The affidavit had then further alleged : “I further state from the fact of said Hibbard’s falsifying, as aforesaid, the said surrenders, and the same having been brought, as aforesaid, to the knowledge of the defendant Nichols, and no action having been taking thereon against said Hibbard, there is-good reason to believe, and I do believe, that said individual defendants combined and conspired together to cheat and defraud the said policy-holders, by means of said £ scheme,’ and by false records and papers, and by causing the books of said corporation to be falsely kept, and thereby to obtain for their own use and benefit large illegal gains.”
The affidavit had then alleged that plaintiff, in pursuance of said scheme, was induced by one of the affiant’s assistants named E. H. Nichols, to surrender his four old policies and to accept new ones at his then advanced age, and at largely increased rates of premiums for the kind of policies issued; that, as the affiant was informed and believes, such surrender was induced by the fraudulent and false representations of facts in the manner and of the character in the affidavit thereinbefore set forth, and by the assurance, contrary to the fact, that he, the plaintiff, was receiving as large an allowance for his old policies as he was equitably entitled to.
It had then alleged that plaintiff was required, as part of the transaction, to give his note at ninety days to the affiant’s order for $167.67 ; that said note was required to be given by said Hib.bard, and was procured by him to be discounted by his brother-in-law, Charles H. Brinkerhoff, and that, as affiant believed from the aforesaid facts, the proceeds of the discount were appropriated to the use of said Hibbard, if not to both Hibbard and Nichols.
It further alleged that plaintiff’s original policies,
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with the surrender thereof, having the consideration left in blank, were delivered to the company.
It then proceeded as follows :
“ Said note is now in my possession, as are also the four policy slips, made for said four old policies ; but neither myself nor said plaintiff, as he informs me, can now recollect the exact terms of said transaction, or change of said four policies, nor can I recollect the amount falsely filled in in this case by said Hibbard in plaintiff'’ s surrender, but he did fill the same up with a false amount; nor do I know what entries, or whether tribe or false, have been made touching such transaction in the books of said corporation, nor does the plaintiff have knowledge, as he informs me, nor have I myself the requisite knowledge of the necessary facts upon which to make and serve a complaint in this action; nor do we or either of us know of any source from which the requisite knowledge or information of all such necessary facts can be obtained, other than from an examination of the said individual defendants, and of the said comp any?'
Then came the above extracted statement of the nature of the action, of the substance of the cause of action, of the nature of the judgment to be demanded, and of the information desired to be obtained from Hibbard and Nichols, and by an inspection of the books. The affidavit also contained allegations as to Hibbard’s extorting large sums of money from the affiant in connection with said business of changing policies.
The affidavit of Uhl corroborated that of Emery, as to the modes and manner in which surrenders were obtained, and as to the procuring of signatures to surrenders having the considerations left blank ; and averred that he, the affiant, was instructed by Hibbard so to procure the signatures ; it also averred that Hibbard instructed him to make false representations of the
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nature and character set forth in Emery’s affidavit, and instructed him to make any and all representations which should be necessary to obtain said surrenders ; the affidavit further averred that there was not a single case of change with which the affiant had any connection, wherein the just and lawful rights under the surrendered policy were received by the assured. It then proceeded as follows: “As matter of business honesty, our only justification, in our own minds, as agents, was that we were assured, and I was assured by Mr. Hibbard, that the method adopted for disposing of the old policies, as set forth in said Emery's affidavit, toas absolutely necessary to save the Knickerbocker from bankruptcy.”
The affidavit of Wells set forth that he was Emery’s assistant in procuring changes of policies, and that of his own knowledge the statements contained in said Emery’s affidavit, relating to the nature of the business done, the manner in which it was done, the instructions given by Hibbard in relation to the mode of doing the business, and the compliance with such instructions by himself, or by Emery and his other assistants, to the best of his information and belief, are true.
The plaintiff’s petition and his affidavit was as follows :
“I, Joseph B. Heishon, being duly sworn, do depose and say : I am the plaintiff in this action; I have heard read the annexed affidavit of James F. Emery, and know the contents thereof. Said Emery is my agent, as alleged ; and all facts and information and statements in said affidavit, alleged to have been stated, given and made by me, were so stated, given and made. It is true that I do not possess the requisite knowledge or information of facts, as therein alleged, to enable me to make my complaint in this action. It is true that I was induced, as therein alleged, to surrender my four old policies by the said E. H. Nichols,
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acting as agent of the said Knickerbocker Life Insurance Company, and to accept three new policies, and pay the premiums thereon, and to make, deliver, and afterwards to pay the note of $167.67, in the manner, for the purposes, and by means of the fraudulent concealment and misrepresentation of material facts, as in said affidavit alleged. All the allegations contained in said affidavit touching any acts or doings of mine, relating to the nature and the object of this action ; the nature of my cause of action herein ; the character of the judgment and relief which I shall seek herein, and the necessity for the examinations and disclosures of books and papers as therein set forth, are true. Said E. H. Nichols came from New York to Salem, N. J., then my residence, for the express purpose of obtaining my surrender of my said old policies. He labored faithfully with me during two days to obtain my consent "thereto. I was very reluctant to assent to his proposals ; I could not then understand how it could be to my interest or benefit to do so ; said Nichols represented to me that it was decidedly to my interest to do so, and the company would, and did, allow me, in the transaction, more than I was justly or equitably entitled to. I do not now recollect the precise allowance made to me, or the exact figures involved in the transaction; I was ignorant then, and until November, 1877, of the nature of the transaction, of the existence of any general scheme for purchasing, or obtaining surrenders of the policies ; also ignorant of the mathematical nature of the life insurance business, and of the value of my old policies, and of the ‘ surrender value’ thereof, and of the ‘ reserve ’ accumulated thereon, and of the financial standing and condition of the Knickerbocker, and of the real object and purpose of. its officers in obtaining said surrenders, and of all other material facts- set forth in said affidavit, and the same were falsely and fraudulently misstated and mis
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represented by said E. H. Nichols to me ; but whether knowingly done on his part personally, I cannot state. I do not think that he personally knew all the wrong he was instrumental in effecting.”
“ To the Honorable, the Superior Court of the City of Hew Torlc, and the Justices thereof:
“Thepetition of Joseph B. Heishon, plaintiff above named* shows to your honorable court:
“That the nature of the above entitled action, and of the cause of action herein, and of the judgment- and relief sought herein, are correctly set forth in the annexed affidavits of James F. Emery, and your petitioner ; and the necessity for the production and inspection of the books, records, and papers kept by the defendant, the Knickerbocker Life Insurance Company, is also therein correctly set forth.
“Your petitioner further respectfully shows that it is necessary to have a production and disclosure of the following books and papers, to enable your petitioner to properly prepare and serve his complaint herein, namely :—the original policies, the numbers of which, and the names of the insured in which, are given in the foregoing ‘ Exhibit Aand the agreements or instruments of surrender, or release, of each of said policies, whereby the assured surrendered the same to said corporation; and the policy-registers, and dividend books, in which were kept the record of said policies and the dividends thereon ; also the cash-books • containing the entries made from and after February 1, 1873, of surrender values, payments, or disbursements of money, paid and made upon the surrender of said numbered policies:
“Your petitioner therefore prays, that an order be made herein pursuant to the practice of your honorable court, directing said corporation, and John A. Nichols,- the president thereof, and George F. Stiffen, who is the secretary thereof, to deposit with the clerk
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of this court said books and papers, at such time, and under such directions and restrictions, as the court shall fix, in order that the same may be fully and freely inspected by your petitioner’s counsel herein, for the purposes aforesaid ; or that said company and its said officers, in such time and manner as the court shall direct, allow a full and free inspection of such books and papers by your, petitioner’s counsel, and by such assistants as he may properly employ for that purpose, for the purposes aforesaid ; and that your petitioner have such other or further relief in the premises, as to the court shall seem proper ; and your petitioner will ever pray.”
The affidavit of Hibbard denied the allegations contained in the affidavit of Emery as to the character of his employment, as to the company’s setting on foot a scheme to procure the surrender of policies by any fraudulent concealment or misrepresentation, as to the instruction given with reference to the manner of carrying out any such scheme, as to defendant Nichols acquiring large gains and profits for himself and fellow stockholders and exercising absolute control over the business of the company, as to filling up blank surrenders with any different amount than the true one, as to the exaction of money from said Emery, as to his taking a wrongful advantage of his position or privileges connected with said company ; and set forth that he had no agency whatever in procuring the surrender of plaintiff’s policies ; that neither he nor the company required the plaintiff to give any note on such transfer; that several days after the surrender Emery brought him a note, which he believes to be the one referred to in Emery’s affidavit, and requested him procure its discount, which he did through Brinckerhoff, and the proceeds were either paid to Emery or credited to him in account for money owed by him to the affiant.
This affidavit also denied the statements contained
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in Uhl’s affidavit, as to instructions given to him, and statements and assurances made to him by the affiant.
It also set forth that the only employment of said Emery was to procure the substitution of a class of policies theretofore and for many years issued by the company, upon which the premium was paid in part by a note made by the policy-holder for the premium due on the policy, and known as a premium note, for policies upon which the premium should be paid wholly in cash ; and in connection with such employment to procure such new insurance as he might be able. It then set forth as follows :
‘ ‘ The business for which said Emery was employed, as aforesaid, was designed by said company to procure the general welfare of its policy-holders as a body, by removing the complication incident to the note system already mentioned, and, in point of fact, resulted in very inconsiderable profit, if any, to said company. That, in the experience of said company, said note system proved very unsatisfactory to its policy-holders ; and the interests of the company and of its policy-holders seemed to the officers of the company to demand a change. That a large majority of the life insurance companies, which have transacted business to any extent upon said note system, at or about the same time when said Knickerbocker Life Insurance Company inaugurated the change aforesaid, had adopted the change instituted by said company, to wit: By changing from the note system to the cash system, with respect to the payments of premiums upon life insurance policies. Said Emery was not instructed by said company, nor expected by it, to offer to policy-holders in the course of his employment as aforesaid, any other than a fair inducement and consideration for changing their policies from the note system to the cash system ; that said consideration and inducement consisted in some cases in returning
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to the policy-holder the note held by the company against the old policy, upon which the policy-holder was obliged to pay interest annually, in addition to the premium named in the old policy. Sometimes, in returning the note so held, and paying a portion of the premium on the new policy; in some, in paying several premiums on the new policy; and in some instances, in addition to returning the note and paying one or more premiums on the new policy, the payment of a cash sum to the policy-holder, as the circumstances of each individual case might warrant.”
The judge who held the special term granted the motion as to the examination of Nichols and Hibbard, but denied it as to the inspection of the books.
A special term order was entered in conformity with the decision.
Both parties appealed.
Johnson, Cantine & Deming, attorneys, and Henry W. Johnson, of counsel, for defendant, upon the questions considered by the court, urged:
I. Assuming that the plaintiff could be entitled to such a judgment from this court as the moving papers state he will ask in his complaint, those papers contain a complete demonstration that no examination is necessary to enable him to frame his complaint as the basis for such a judgment. These averments are complete in themselves, and a motion to make them more definite and certain would not be granted. An examination of the defendants, therefore, could only be necessary to enable the plaintiff to obtain evidence in support of those averments—not to enable him to make them.
II. The fifth point of the learned counsel is a virtual concession that Emery’s affidavit discloses all the facts necessary to enable the plaintiff to frame his complaint; but, while conceding this, the plaintiff
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claims an examination of the defendants, because he does not believe what Emery swears to. This is the proposition plainly deducible from the argument of the learned counsel. “Emery’s affidavit does not satisfy the conscience of the plaintiff, so far as to warrant him in swearing to a complaint, in which he must aver a belief in the information.” Thus the learned counsel puts his client in this remarkable attitude before the court—that he has selected an agent to prosecute his claim who has made oath to certain facts, but the plaintiff himself does not believe them to be true.
W. J. Butler, attorney, and of counsel, for plaintiff, as to the questions considered by the court, urged:
V. Defendants claim that plaintiff has shown that he needs no examination to enable him to frame his complaint. It is necessary to present a case showing the substance, if not all the .particulars of a perfect cause of action ; the order could not otherwise be granted ; but it shall not therefore be objected that no examination is. necessary because Emery’s affidavit shows the substance of a cause of action ; and, besides, Emery’s affidavit does not satisfy the conscience of the plaintiff, so far as to warrant him in swearing to a complaint, in which he must aver a belief in the information.
There were other points raised by counsel, which the court deemed it unnecessary to pass on.
The proceeding before the judge at special term was a petition on the part of the plaintiff, accompanied by affidavits requiring the defendants, Nichols and Hibbard, to appear and be examined, for the purpose of enabling the plaintiff “ to make and serve his complaint,” and also
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for an order requiring the defendant corporation, its president and secretary, to deposit, with the clerk of this court, certain of its books and papers, containing entries during several years, in order that the same may be inspected by the plaintiff for the same purpose.
The application for the deposit and inspection of the books and papers was denied by the judge at special term, but an order was made for the appearance of the defendants to be examined. The plaintiff’s need, out of which these proceedings originated, is by himself limited. If there was no such need existing, both applications should have shared the same fate.
It is urged, by the counsel for the defendant, that the plaintiff’s affidavits show him to be in possession of all the facts necessary to prepare his complaint. In substance the same objection was urged, without avail, in Glenney v. Stedwell ( 64 N. Y. 120 , 128).
It is true the plaintiff is in possession of facts and information, as appears by his affidavit, sufficient to indicate that he is entitled to relief of some character in a court of equity.
Subdivision 2 of section 872 of the Code of Civil Procedure calls upon the plaintiff to show, in his moving papers, the nature of the action, and the substance of the cause of action, and of the judgment demanded therein. This he has done to a marked degree.
But plaintiff claims that the defendants, Nichols and Hibbard, are in possession of facts which will enable him accurately to state his cause of action with the fullness of detail necessary to be stated in a complaint for equitable relief, where transactions of the character of those indicated in the plaintiff’s moving papers are to be investigated.
This action is unusual and peculiar as to character. The relation of the defendants to the company, and * their alleged participation in the transactions of which
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complaint is made, clearly enough indicate that their personal examination may be necessary to enable the plaintiff to give formal expression to the allegations which must, in the end, constitute his complaint, and upon which the ultimate relief to which he may be entitled, and the extent thereof, in so far as the complaint can disclose the same, must be based.
We would give no license to any vexatious inquiry into the affairs of these defendants in their relations with the company, not connected with a statement of the plaintiff’s cause of action, nor would we place them under any unnecessary burden, nor subject them to an examination to ascertain whether the plaintiff has a cause of action. The statute and the power of the court can be invoked for no such purpose.
A cause of action is set up, and the inquiry should be limited to such matters only as are necessary to enable the plaintiff to prepare his complaint.
As the plaintiff may be limited on the trial to the allegations of his complaint, and his relief, in substance, be restricted thereby, it is proper, it seems to us, that in order to widen the range of inquiry, and to enable the plaintiff to demand the additional relief indicated by the facts and knowledge alleged to be in the possession of these defendants, and which are essential to be stated in the complaint, and cannot be otherwise obtained, that they should submit to an examination.
The judge before whom they are to be examined will see to it, that the inquiry is confined within proper limits.
We think the order for an examination of the books was properly denied, but the order for the defendants’ examination is affirmed.
Both orders are affirmed with costs.
Speir, J., concurred.
Cases cited
- Glenney v. Stedwell 64 N. Y. 120 at 128 p. 54