Campbell v. American Zylonite Co.

Headnote

Examination of plaintiff before answer—sufficiency of affidavit for.

Non-presentation of an affidavit of merits does not render order extending time to answer null.

In an action brought against a corporation to compel the transfer to the plaintiff of stock represented by a certificate, and the issue of a new certificate to him, an affidavit by the treasurer of the corporation that the person in whose name the stock stands, and to whom said certificate was issued, had, before action commenced, notified the corporation that he owned the stock and plaintiff had no title ; that the circumstances under which plaintiff claimed to have obtained said certificate, and the title to the stock, were peculiarly within the knowledge of the plaintiff, and not within the knowledge of the defendant or of the affiant, and that, in the belief of the affiant, an examination of plaintiff would disclose facts material and necessary to enable defendant to frame its answer, is sufficient to support an order for the examination of plaintiff before answer.

Appeal by plaintiff from an order denying his motion to vacate and set aside an order for his examination.

The complaint alleged that defendant, on September 27, 1880, issued for value and delivered to Edwin M. Felt, a certificate for one hundred shares of its capital stock, of the par value of $100 ; by the terms of which certificate it was provided that the stock was transferable only by assignment on the back thereof, recorded in the books of the company, either in person or by attorney, and the surrender of the certificate ; that on September 29, 1880, Mr. Felt signed and sealed an assignment and power of attorney and indorsed the same on the back of the certificate, the name of the assignee and attorney not being inscribed therein in the blank spaces left for that purpose ; that said shares of stock were, on September 4, 1885, offered for sale in the city of New York, and purchased

by the plaintiff for $5,050, and the certificate was then and there delivered to plaintiff, who caused his name as assignee, and D. B. Wilmot, as attorney, to be written in the blanks therefor, and said assignment indorsed on said certificate ; that thereafter plaintiff presented- said certificate with said assignment on the back thereof having the blanks therein filled up as aforesaid, to the defendant, and offered to surrender said certificate and assignment, and demanded a transfer to him of said stock on the books of defendant, and demanded that defendant should issue a new or other certificate of stock to him in place of the certificate as offered to be surrendered ; that defendant refused to comply with such demands, and refused to recognize the plaintiff as the owner and holder of the stock, and prayed, (1) That defendant be directed, upon the surrender of said certificate, and the assignment thereof, to transfer said stock upon the books of said defendant to this plaintiff; (2) That the defendant also issue to this plaintiff a new certificate of the like amount of shares of its capital stock as is mentioned in the certificate now held by said plaintiff ; (3) That the plaintiff recover the costs of this action, and have such further and other relief as to the court may seem proper and just.

Defendant before answering, and on November 9, 1885, procured an ex parte order directing that plaintiff be examined and his deposition taken pursuant to sections StO-S'TS of the Code of Civil Procedure, and that for that .purpose he attend before one of the judges of this court, on March 25, 1885, at an hour and place therein specified.

This order was obtained upon the affidavit of the defendant’s treasurer setting forth the organization of the company, its place of business, its appearance in the action, the name of its attorney and his office address, the residence of the plaintiff in the action, the name of plaintiff’s attorneys in the action, and their office address, the pendency of the action, its general nature, the place of business and residence of the affiant, and then proceed

ing : “As an officer of the defendant I desire to be examined George Campbell, the plaintiff herein, who resides, I am informed and believe, at No. 130 West loth street, city, county and state of New York, and is of full age. The testimony of such person is material and necessary for me, to enable me to frame an answer herein.

“ 5. The facts which render such testimony material and necessary are, among others, as follows : The defendant has been served prior to the commencement of this action and to the demand for the transfer of the stock, as alleged in the complaint, with a notice, of which the following is a copy :

New York, Sept. 25th, 1885. £ To the American Zylonite Company,

£ Mr. Wood, Treasurer.

£ Having learned that a certificate for 100 shares of the stock of this company, issued to me, has been presented to you by Mr. George Campbell for transfer, I hereby notify you that I claim this certificate to be my property and that I am the owner of it, and that Mr. Campbell has no legal title to it, and the same cannot be transferred to him, and that I shall hold the company liable for any loss I may suffer if such transfer be made.

‘ Very respectfully,

£ Edwin M. Felt.’

“ lb is peculiarly and particularly within the knowledge of the plaintiff what were the circumstances attending the sale of the stock referred to in the complaint, alleged in the complaint as having occurred on September 4, 1885 ; who offered the same for sale ; upon what notice such sale was held ; where it was held ; who were present when it was made ; who sold such stock to the plaintiff ; who delivered the same to him ; the nature and extent of the notice the plaintiff may have had of any claim that such stock did not belong to the party selling the same, and of the equities of said Felt in said certificate ; what amount, if any, of the alleged purchase price for said stock

has been actually paid by the plaintiff, to whom such amount or amounts were paid ; and at what dates and where, and of plaintiff’s knowledge of all proceedings affecting said alleged sale before and after the same. I believe that such examination will disclose facts material and necessary to enable the defendant to frame his answer, all of which are peculiarly within the knowledge of the plaintiff, and not within that of either defendant or deponent.

“6. I desire, as an officer of the defendant, to use the testimony taken on said examination in the preparation of the answer herein.

“ 7. The time to answer herein expires to-day, November 9, 1885, and no extension of time has been had.”

Plaintiff on the complaint and the affidavit on which the order for examination was made, and an affidavit showing that the original time to answer had expired, and that an extension of time obtained by defendant was procured without presenting, filing, or serving an affidavit of merits, moved to vacate or set aside the order. This motion was denied, and from the order entered upon its denial, the present appeal was taken.

argued :—I. The defendant was in default—the time in which to serve an answer having expired. This objection was made upon the return of the order to show cause, and the order for the examination. In the order of examination, dated November 9, 1885, a provision was made extending time to answer, but, as no affidavit of merits had been presented, served or filed, the extension was a nullity (Gen’l Rule, 24 ; § 782 Code).

II. The affidavit upon which the order was granted is defective, (a) It fails to state the nature of the defense sought to be interposed, (b) It fails to show the facts sought to be elicited are necessary and material (General Rule, 83; Schepmoes v. Bousson, Abb. N. C. 481; Rob

ertson v. Russell, 20 Hun, 243 ; Code Civ. Pro. § 872). Mere averment of necessity and materiality is insufficient (Crooke v. Corbin, 23 Hun, 176 ; Robertson v. Russel, 20 Ib. 243 ; Matter of Bryan, 3 Abb. N. C. 289 ; Corbett v. De Comeau, 44 Super. Ct. 306 ; Shethar v. Babcock, 1 Civ. Pro. 83). (c) It does not set out what facts, if elicited, would constitute a defense (Shaw v. Van Rensselaer, 60 How. 143 ; Williams v. Harden, 1 Barb. Ch. 298 ; Beach v. Mayor, 14 Hun, 79 : Green v. Allen, 7 Week. Dig. 250).

III. The facts alleged and set forth in the affidavit as necessary and material, and those which it alleges the examination may disclose, would not constitute a defense to the action (Cushman v. Thayer Manf. Co., 76 N. Y. 365 ; McNeil v. Tenth National Bank, 46 Ib. 331; N. Y. & N. H. R. R. Co. v. Schuyler, 34 Ib. 30, 80). It makes no difference, and it is wholly immaterial whether or not Campbell gave adequate consideration for the stock, or “what were the circumstances attending the sale of the stock . . . who offered the same for sale ; upon what notice such sale was .held ; where it was held ; who were present ; who sold such stock; . . . the notice plaintiff may have had of any equities of said Felt in said certificate,” etc (Cushman v. Thayer Manf. Co., 76 N. Y. 365 ; McNeil v. First National Bank, 44 Ib. 331 ; N. Y. & N. H. R. R. Co. v. Schuyler, 34 Ib. 30, 80). The case of Hutchinson v. Lawrence ( 29 Hun, 450 ), differs materially from this. There Hutchinson was not able to ascertain what transpired which produced his dismissal, or whether or not the rules and regulations relating thereto had been complied with; he asked for an order to examine the president of the exchange, who knew what had taken place, in order that he might ascertain the facts which were clearly material and necessary to properly frame his complaint, while, as we have shown, the facts sought to be inquired into under the affidavit and order appealed from, are not material to any defense which the defendant seeks to or could interpose.