Opinion
14300
May 21, 1936.
Before BELLINGER, J., Kershaw, September, 1935. Order modified and as modified affirmed.
Action by D.A. Boykin as Conservator of The Bank of Camden against Hermitage Cotton Mills and others. From an order granting plaintiff's motion for discovery the named defendant appeals.
The order of Judge Bellinger requested to be reported follows:
This matter comes before me upon a motion for discovery under the provision of Rules 43, 44, 45, and 46 of the Circuit Court. The cause of action has been commenced and is pending upon a summons (complaint not served), and the plaintiff shows to the satisfaction of this court that discovery is necessary to enable him to intelligently draw his complaint.
The facts in this case are somewhat unusual. It has been made to appear to the Court by the affidavit of the plaintiff and notice and by the traverse to the return of the defendant Hermitage Cotton Mills (the Hermitage Warehouse Company having failed to put in an appearance and Parke, Davis Co. not having been served for reasons which will appear hereinafter) that in the year 1923 the Hermitage Warehouse Company was organized by a group of men who controlled the now defunct Bank of Camden and the Hermitage Cotton Mills. It appears these three institutions had interlocking boards of directors, stockholders, and executive officers. Plaintiff states that he is without information as to the exact degree in which these boards and staffs of officers were interlocking, owing to his lack of information contained in certain books, records, and documents, but does show that the president of the bank, Mr. H.G. Carrison, Sr., was director active vice-president of the bank, president of the warehouse in each of the other corporations; that Mr. C.H. Yates was company and director of the mill; that Mr. H.G. Carrison, Jr., was cashier of the bank, and subsequent to the transactions discussed herein resulting in the erection of a certain warehouse was elected a director and officer in the warehouse company; and that Mr. R.B. Pitts was president of the mill and was elected director of the bank and of the warehouse company at a time subsequent to these transactions. None of these allegations are denied in the return of the Hermitage Mills.
It is further shown that in 1924 the Hermitage Warehouse Company borrowed $7,500.00 from the Bank of Camden on an open note and, with this money and the money realized from the sale of stock, erected a warehouse on the property of the Hermitage Cotton Mills, in such a manner that the operation of the warehouse was utterly dependent on the continued service of water and electricity from the mill to the sprinkler system of the warehouse. Plaintiff also shows that the cost of constructing an independent water main and electric line would be prohibitive, the warehouse being located some distance from the City of Camden.
It appears that the warehouse company was offered a title to the property by the mill the day before this suit was instituted, but that the proffered deed contained restrictions which would have affected the marketability of the property and possibly render it incapable for use except for warehouse purposes. At the same time, it appears to the satisfaction of the Court, so far as the purposes of this motion are concerned, that the warehouse could not be used for warehouse purposes without the continuance of the services just referred to. It appears to the satisfaction of the Court from the moving papers and from the traverse that this service has been refused to the conservator who, under the proposed settlement, was to receive from the warehouse company such title as the mill deeded to it.
Plaintiff claims, and the Court feels that the claim has been substantiated, that he cannot intelligently draft a complaint in the absence of recourse to certain books, records, and documents which are in the possession of and under the control of the defendant and not in the possession of nor under the control of the plaintiff. This Court does not attempt at this juncture to pass on the merits of the plaintiff's case and could not well do so until a complaint is drawn. To require the Court to pass on the merits at this stage would be inconsistent with the purposes of a motion under the rules of this Court for discovery before a complaint is drawn. Plaintiff contends that there is a reasonable question as to which of the several causes of action he should rely on and that this question could not be intelligently decided until he gets the facts which he is seeking herein. Plaintiff mentions the following possibilities:
Constructive trust, injunction against the discontinuancy of service, suit on implied contract, suit on quasi-contract, suit against the mill and the warehouse as joint adventures. It would also seem to the Court that if the information requested reveal that the stock in the warehouse company was owned entirely by the stockholders of the mill, that an action might lie to pierce the corporate veil. See Cantey v. Summersett Co., 149 S.C. 513, 147 S.E., 635.
The case of Whitman v. National Manufacture Stores Corporation, 175 S.C. 464, 179 S.E., 478, seems to be the only case taken to our Supreme Court under these rules of Court for discovery before the complaint is drawn. In that case exceptions were taken to the order of Judge Greene allowing the discovery, on the grounds that the case was without merit. A perusal of the brief of the respondent in that case indicates that the learned counsel for the respondent argued very convincingly that a consideration of the merits at this stage of litigation was premature. Apparently the Supreme Court adopted this view.
Of course, if it should be shown that there is no possibility of holding the defendant on any sort of cause of action and that the effort to make a certain individual or corporation a party is frivolous or fantastic, we should be forced to a different conclusion. However, we are of opinion that it would be improper upon the showing made to the Court to hold that the element of frivolity or fantasy enters into the motion. We say this without prejudice to the rights of the defendants, such as they may, as the case progresses, appear to be.
Counsel for the mill took up in detail the several possible causes of action, in an effort to show that not one would apply in this case. Take the proposition of a suit on a quasi-contract. Counsel argued that a quasi-contract and an implied contract are identical and attached to their return a copy of a lease and of letters constituting leases, purporting to show that the warehouse company was in possession under an express contract. We gather that their argument is that an express contract excludes the idea of an implied contract and that, since " quasi-contract" and "implied contract" are interchangeable terms, no motion would lie on either theory. There are two answers to this contention. In the first place, assuming that the terms are interchangeable, it might be shown to the Court that the lease contracts were supported by grossly inadequate considerations and were mere blinds, designed to conceal the real purpose of the group in control. In such a case, a Court of Equity might well disregard the express contract or contracts. But despite the high regard which this Court has for the legal ability of the gentlemen who appeared for the respondent, we cannot accede to the argument that an implied contract is necessarily the same as a quasi-contract.
"Simple implied contracts are usually subdivided into contracts implied in fact and contracts implied in law. The first, it is needless to say, is a true contract, the agreement of the parties being inferred from the circumstances; the latter but a duty imposed by law, and treated as a contract for the purposes of a remedy only." Nevada Company v. Farnsworth (C.C.), 89 F., 164, 165.
The following is taken from Wojahn v. National Union Bank of Oshkosh, 144 Wis. 646, 129 N.W., 1068, 1077:
"From the foregoing we have these verities: (a) appellant was requested on behalf of respondent to perform for it services; (b) he complied with such request continuing his labor till the task assigned to him was ended; (c) his services were very valuable to the respondent. From such circumstances there arises, as matter of law, a presumption of fact that the services were performed under contractual relations. It is a mistake, in the technical sense, to speak of the contract as one implied by law. There are such contracts. They arise where there is a legal duty to respond in money which by a legal fiction may be enforced as upon an implied promise. In such case there is no element of contract strictly so-called. There is only the duty to which the law fixes a legal obligation of performance as in case of a promise inter partes. So it is called in the books a quasi-contract. There are implied contracts in the strict sense of the term. In this case we are dealing with the subject of implied contracts in such sense. Such a contract requires, the same as an express contract, the element of mutual meeting of minds and of intention to contract. The two species differ only in methods of proof. One is established by proof of expression of intention, the other by proof of circumstances from which the intention is implied as matter of fact."
The distinction between contract and quasi-contract is well stated in Columbus, N.V. T. Ry. Co. v. Gaffney (1901), 65 Ohio St., 104, 113, 61 N.E., 152, and in Board of Highway Commissioners v. City of Bloomington (1912), 253 Ill. [164], 165, 170, 97 N.E., 280, Ann. Cas., 1913-A, 471. See, also, 2 California Law Review, 171.
"In one case the contract is mere fiction, a form imposed in order to adapt the case to a given remedy; in the other it is a fact legitimately inferred. In one, the intention is disregarded; in the other, it is ascertained and enforced. In one, the duty defines the contract; in the other, the contract defines the duty." Hertzog v. Hertzog, 29 Pa., 465.
A study of the law relating to interlocking directors and affiliate corporations and a study of situations arising thereunder, where one corporation is impoverished and another affiliate corporation enriched, is sufficient to convince this Court that if the allegations in the moving papers can be sustained in Court, by competent testimony, that the plaintiff has some proper relief. Further inquiry into the merits would seem to be improper at this stage. Attention is called to the following quotation from the case of Sage et al. v. Culver et al., 147 N.Y., 241, 41 N.E., 513, 514, cited by Judge Aldrich (which holding was followed by the Supreme Court) in the case of Stahn v. Catawba Mills, 53 S.C. 519: "When it can fairly be gathered from all the allegations of a complaint that the officers and directors of a corporation have made use of relations of trust and confidence in order to secure or promote some selfish interests enough is then averred to set a court of equity in motion, and to require an answer from the defendants in regard to the facts."
The Supreme Court also said in the Stahn case: "Directors are personally liable to the corporation, or in a proper case to any stockholder, for losses arising from their fraud, breach of trust or gross negligence in the management or disposition of the corporate property, and any person or corporation participating in such fraudulent conduct, or corruptly receiving the corporate property fraudulently disposed of, is likewise liable." (Italics supplied.)
Attention is also called to the case of Equitable Trust Company v. Columbia National Bank, 145 S.C. 91, at page 127, 142 S.E., 811.
In the opinion of Judge Northcott, in Tower Hill-Connellsville Coke Co. v. Piedmont Coal Company (C.C.A.), 64 F.2d 817, 823, 91 A.L.R., 648, the Court said:
"Transactions between corporations having interlocking directorates, the fairness and good faith of which transactions are challenged, are jealously regarded by the law, and those who would sustain them must show their entire fairness. As was said by Judge Soper of this Court in Finefrock v. Kenova Mine Car Company [C.C.A.], 22 F.2d 627, 632: `The rule is that the relation of directors to corporations is of such a fiduciary nature that transactions between boards, having common members, are regarded as jealously by the law as personal dealings between a director and his corporation. Where the fairness of such transactions is challenged, the burden is upon those who would maintain them to show their entire fairness. The Supreme Court has been consistently emphatic in the application of the rule, and has declared it to be founded upon the soundest morality and the soundest business policy.'"
In the case of Pitney, J., in Corsicana National Bank v. Johnson, 251 U.S. 68, 40 S.Ct., 82, 91, 64 L.Ed., 141, the Court said: "The fact that the same persons were directors and managers of both corporations subjects their dealings inter sese to close scrutiny. That two corporations have a majority or even the whole membership of their boards of directors in common does not necessarily render transactions between them void; but transactions resulting from the agency of officers or directors acting at the same time for both must be deemed presumptively fraudulent, unless expressly authorized or ratified by the stockholders; and certainly, where the circumstances show, as by the undisputed evidence they tended to show in this case, that the transaction would be of great advantage to one corporation at the expense of the other, especially where, in addition to this, the personal interests of the directors, or any of them, would be enhanced at the expense of the stockholders, the transaction is voidable by the stockholders within a reasonable time after discovery of the fraud."
These cases of interlocking directors are particularly important in connection with the decision of the Court in the case of People's Bank v. Helms et al., 140 S.C. 107, 138 S.E., 622, where the Court held, in passing on a motion for discovery under the Code, that upon an issue of fraud the scope of the inquiry permitted by the order of discovery must be broader than otherwise would be the case.
The modern trend of decisions is in the direction of widening the application and use of motion for discovery. As Judge William Howard Taft said in the case of Shaw v. Ohio Edison Installation Company, 9 Ohio Dec., 809-812: "There is no objection that I know, why each party should not know the other's case." Another great American jurist, Mr. Justice Cardozo, in the case of Sinclair Refining Company v. Jenkins Petroleum Process Company, 289 U.S. 689, 700, 53 S.Ct., 736, 737, 77 L.Ed., 1449, 88 A.L.R., 496, said. "At times, cases will not be proved or will be proved clumsily or wastefully, if the litigant is not permitted to gather his evidence in advance."
The Hermitage Cotton Mills, in its return, sets out that the moving papers are insufficient to justify relief in that they fail to show that any request for the information had been made to the Hermitage Cotton Mills or that the Hermitage Cotton Mills had refused such request. The rules of Court under which this motion is brought do not seem to require that such a request be made. It seems that a showing that the books, papers, and documents are not in the possession and under the control of an adverse party would seem to be sufficient. Moreover, it appears from the moving papers that both corporations have shown an indisposition to discuss the matter and that their dealings with the plaintiff in the premises have been anything but frank. The law does not require a party to do a useless thing or to make a futile demand. In the case of Stahn v. Catawba Mills, supra, the Court said: "We think the complaint shows facts from which the Court could reasonably infer that plaintiff could not obtain redress within the corporation, in which case it is not necessary to allege facts showing an honest effort to procure corporate action." It would seem that the analogy to the present situation is fairly strong. The Court takes the further view that the return of the defendant shows the extent to which the Hermitage Cotton Mills are willing to go in supplying information and that, to require an additional demand and motion, would merely serve to needlessly consume the time of counsel and the Court.
I attach some significance to the fact that the defendant Hermitage Warehouse Company filed no return and failed to appear by counsel. This seems to lend plausibility to the plaintiff's theory that there is at least a prima facie indication that the mill and the warehouse were not separate corporations in a bona fide sense and that he is entitled to the aid of this Court in pursuing his investigations along this line by being permitted to examine the books, records, and documents of the mill and of the warehouse company.
Nor can this Court overlook Paragraph 4 of the lease, dated March 1, 1932, executed by the mill, as lessor, to the warehouse company, as lessee; and attached to the return of the respondent. This paragraph reads as follows:
"It is further understood that this lease is subject to the provisions of an option heretofore executed by the Hermitage Cotton Mills to the Bay Company and the Hermitage Warehouse Company agrees upon the exercise of the option by the said Bay Company, to immediately relinquish possession of the premises so let to the Hermitage Cotton Mills, of the Bay Company, and to thereafter hold the said premises only upon such terms as are contained in paragraph eight (8) of the option above referred to."
The question naturally arises, What are the contents of Paragraph 8 of the Bay contract? Is the plaintiff not entitled to see this contract? What right had the mill, in 1932, to contract away the rights of the warehouse company and of the creditors of the warehouse company in a property erected in 1924, and largely paid out of the proceeds of a loan obtained on an open note, by the warehouse company solely from the bank? This paragraph alone would seem to make the transactions which lie in the background of this motion prima facie colorable.
I am not unmindful of the inconvenience which will result to the mill and to the warehouse company as a result of the granting of this order. However, considerations of conveniences must yield to the desires of the Courts to see that justice is done between parties litigant. As was said by the Supreme Court of the State of Washington, in the case of State ex rel., etc., v. Superior Court, 109 Wn., 634, 187 P., 358, 361, 9 A.L.R., 157: "If it were the rule that witnesses might respond or not to the subpoena according to the inconvenience they might suffer by responding, lawsuits would be conducted according to private rather than public convenience."
Let it not be thought that this Court is attempting to adjudicate the merits of this transaction or that it has condemned the motives or actions of any of the parties involved. It may be that the only suit the plaintiff has is against the warehouse company on an open note and that no question should be raised about the actions of any of these parties. If so, the whole truth should come out so that this may be known. It may be that some of the parties actually controlled these corporations in an improper manner, and that many or some of the directors who held positions on the board of two or all three of these corporations had nothing to do with the transaction and are merely the victims of the situation which resulted from their positions. If so, the record should certainly be kept clear. The best way to keep the record clear, in the judgment of this Court, is to grant the pending motion so that these transactions may be thoroughly aerated.
It appears that Parke, Davis Co. was made a party because the plaintiff had certain information to the effect that a certain corporation known as the Bay Company had an option on the mill property and that the Bay Company had been bought out by Parke, Davis Co. It appears from the return that Parke, Davis Co. have no interest in the matter. However, the lease dated March 1, 1932, a copy of which is attached to the return, does indicate that the Bay Company may be a proper party, depending on the type of cause of action followed by the plaintiff. The plaintiff has moved that the Bay Company be submitted as a party defendant in place of Parke, Davis Co., and I think this motion should be allowed.
Now, then, upon motion of Wittkowsky Wittkowsky, attorneys for the plaintiff, it is ordered:
(1) That the Bay Company be substituted as a party defendant in place of Parke, Davis Co.
(2) That C.H. Yates and H.G. Carrison, Jr., as executive officers of the Hermitage Warehouse Company, shall be required to permit discovery of the books, papers, and documents of the Hermitage Warehouse Company in the following manner:
(a) They shall deposit with the clerk of Court for Kershaw County the complete books of account for the said corporation; or they, in lieu thereof, shall serve the attorneys for the plaintiff with sworn statements, showing the assets and liabilities of the Hermitage Warehouse Company at the time a certain loan of $7,500.00 was made to it by the Bank of Camden in 1924; the assets and liabilities of the said corporation as of August 19, 1935; and showing the total receipts and disbursements of the said corporation from the date of said loan down to August 19, 1935, showing the source of each item received and the parties to whom each item was distributed; and showing the total cost of the erection of the warehouse, sprinkler system, and appurtenant water and electric service.
(b) They shall deposit with said clerk the stock book of said corporation or shall serve said attorneys with a list of all stockholders of said corporation as of the date of the loan and as of August 19, 1935, showing the number of shares held by each shareholder as of the two dates.
(c) They shall deposit with the said clerk the minutes of the meetings of the stockholders and of the directors of the said corporation, from the date of the organization of the corporation, to August 19, 1935, or shall serve aforesaid attorneys with copies of the same.
(d) They shall deposit with the said clerk any blueprints or plans and specifications of the water and electric system connected with the warehouse sprinkler system or serve a copy of the same on the said attorneys. If they have no such information, they shall file with the said clerk within the time hereinafter prescribed for filing, a sworn statement, stating such fact.
(e) They shall deposit with the said clerk or serve copies on the said attorneys, the following: All letters received from the Hermitage Cotton Mills, its officers or directors, or from any other parties whatsoever, and copies of letters sent to the Hermitage Cotton Mills, its officers or directors or to any other parties whatsoever, discussing or containing any reference to the erection, ownership, operation, leasing, or disposition of the warehouse referred to in the affidavit, including letters having reference to the installation or maintenance of the aforesaid sprinkler system, such letters to be restricted to those written between the date when the charter of the Hermitage Warehouse Company was granted and of August 19, 1935. If they have no such information, they shall file with the said clerk within the time hereinafter prescribed for filing, a sworn statement, stating such fact.
(f) They shall file with the said clerk or serve on the said attorneys a sworn list of the officers and directors of the Hermitage Warehouse Company at the time of said loan and of August 19, 1935.
(g) They shall file with said clerk or serve said attorneys, in addition to the purported copies of leases contained in the return of the Hermitage Cotton Mills, copies of any correspondence or memoranda relating to such leases, or they shall file with the said clerk a sworn statement, within the time hereinafter prescribed for filing, showing that they have no such letters or memoranda.
(3) That R.B. Pitts and C.H. Zemp, as executive officers of the Hermitage Cotton Mills, shall be required to permit discovery of the books, papers, and documents of the said corporation in the following manner:
(a) They shall deposit with the said clerk the minutes of the directors of the said corporation, from the date of the organization of the warehouse company to August 19, 1935, or shall serve aforesaid attorneys with copies of the same.
(d) They shall file with the aforesaid clerk, or serve on stock book of said corporation or shall serve said attorneys with a list of all stockholders of said corporation, as of the time of the obtaining of aforesaid loan by the warehouse company and as of August 19, 1935, showing the number of shares held by each shareholder as of the two dates.
(c) They shall deposit with the said clerk or serve copies on the said attorneys, the following: All letters received from the Hermitage Warehouse Company, its officers or directors or from any other parties whatsoever, and copies of letters sent to the Hermitage Warehouse Company, its officers or directors or to any other parties whatsoever, discussing or containing any reference to the erection, ownership, operation, leasing, or disposition of the warehouse referred to in the affidavit, including letters having reference to the installation or maintenance of the aforesaid sprinkler system, such letters to be restricted to those written between the date when the charter of the Hermitage Warehouse Company was granted and the 19th day of August, 1935. If they have no such information, they shall file with the said clerk, within the time hereinafter prescribed for filing, a sworn statement setting forth such fact.
(d) They shall file with the aforesaid clerk, or serve on the aforesaid counsel a copy of the contract or option, executed by the Hermitage Cotton Mills to the Bay Company, referred to in Paragraph 4 of the lease dated March 1, 1932, from the mill to the warehouse company, attached to the return of the mill.
(e) They shall file with the aforesaid clerk or serve on the aforesaid counsel a sworn list of the officers and directors of the Hermitage Cotton Mills, as of the time of the aforesaid lease and as of August 19, 1935.
(4) All statements filed or served in accordance with the foregoing shall be sworn to.
(5) All books, papers, documents, or statements called for hereinabove shall be served on plaintiff's counsel within thirty days of the date of this order or shall be filed with the clerk within thirty days thereof, and remain in his possession for a period expiring thirty days from the date of such filing.
(6) In the event that the books, papers, and documents called for hereinabove shall fail to reveal to the plaintiff sufficient information to enable him to intelligently draw his complaint, or in the event the officers of the Hermitage Cotton Mills and of the Hermitage Warehouse Company, or any of them, shall fail to comply with this order, then the plaintiff shall have leave to apply to this Court for such further orders or for such rule as may seem necessary or appropriate.
(7) This order shall stay the time within which the plaintiff shall be required to serve his complaint for the period of thirty days after the sworn information herein required shall have been delivered to plaintiff's counsel or filed with the Clerk of Court.
Messrs. Murdoch M. Johnson and Robinson Robinson, for appellant, cite: Discovery: 40 S.C. 393; 18 S.E., 929; 3 Rich. Eq., 148 2 Strob. Eq., 155; 48 S.C. 80; 26 S.E., 1; 107 S.C. 109; 91 S.E., 973; 115 S.C. 443; 106 S.E., 224; 51 Va., 1; 41 S.E., 421; 14 Cyc., 342; 292 Pac., 531; 18 C.J., 1121; 239 N.W., 541; 23 N.E., 387; 191 Wis. 586; 211 N.W., 923; 75 S.W.2d 666; 159 Pac., 737; 4 A.L.R., 619; 245 N.Y., 24; 156 N.E., 84; 52 A.L.R., 200; 161 N.E., 137; 58 A.L.R., 1256; 42 Ind., 364; 71 Pac., 602; 14 Cyc., 370. Subject-matter of discovery must be admissible evidence: 192 Cal., 395; 220 Pac., 422; 51 Va., 1; 41 S.E., 421; 264 U.S. 298; 32 A.L.R., 789; 44 Sup. Ct., 336; 211 U.S. 407; 53 L.Ed., 253; 29 Sup. Ct., 115. Intention of statutes: 202 N.C. 439; 153 S.E., 581; 179 S.E., 395; 25 R.C.L., 1053. Necessity of previous demand: 40 S.C. 393; 18 S.E., 929; 48 S.C. 80; 26 S.E., 1; 107 S.C. 109; 91 S.E., 973.
Messrs. Wittkowsky Wittkowsky, for respondent, cite: Discovery: 175 S.C. 464; 179 S.E., 478; 10 Fed., 529; 5 Pa., 41; 115 Wis. 31; 91 N.W., 114; 162 A., 581; 53 S.C. 519; 87 S.C. 301; 178 S.E., 838; 51 A., 1075; 18 C.J., 1121; 153 S.E., 260. As to trade secrets: 110 Pac., 547; 29 L.R.A. (N.S.), 716; 15 Fed., 716; 102 A., 373.
May 21, 1936. The opinion of the Court was delivered by
The defendant Hermitage Cotton Mills brings its appeal to this Court upon several exceptions from an order for discovery, issued by Hon. G. Duncan Bellinger, Circuit Judge, of date September 30, 1935, and from a subsequent order, dated October 12, 1935, in which a modification of the first order was refused.
The appellant excepts (eighth exception) to that portion of the Circuit Court order (Paragraph 3, Subdivision a), which requires it to deposit with the Clerk of the Court the minutes of the directors of the said corporation for a period covering approximately eleven years, whether they relate to its dealings with the Hermitage Warehouse Company or not.
In our opinion, the scope of the order in this respect is too broad and all-inclusive. Surely, only comparatively few of these minutes contain any reference to the warehouse company. If discovery were allowed to this extent, the petitioner would obtain a great mass of confidential matter, wholly irrelevant to his cause of action. Private records of the Hermitage Cotton Mills, unrelated to the warehouse company, would be opened before him, with resultant damage to the appellant, and with no advantage to the petitioner in the preparation of his pleadings. We can see no reasonable justification for adopting a course which would inevitably result in a fishing expedition.
Necessarily, in proceedings of this kind, no specific rule can be formulated which will be adequate for all situations. Always the facts and circumstances vary in the particular cases presented. In their consideration of the question, Courts have been, and must be, largely governed by general rules.
It was held in Wells v. Holman, 115 S.C. 443, 106 S.E., 224, 225: "It must be assumed that the exercise of the discretion lodged in the circuit judge will prevent an abuse of this privilege in an attempt to embark upon a `fishing excursion' or to pry into the private concerns of the adversary."
In our view, the order of discovery should be limited and confined to such minutes and the portions thereof as refer to the Hermitage Warehouse Company. The right to inspect private books and papers is often an important matter in the administration of justice, but the exercise of the right is of such a delicate nature that the Courts should carefully guard against its abuse. Whitman v. Weller, 39 Ind., 515.
By Exception 11 the appellant assigns error with reference to the requirement contained in Paragraph 3, Subdivision c, of the order, having to do with the production of certain correspondence therein referred to. This provision of the order, in our opinion, should remain intact, except that it should be modified to provide that the appellant shall not be required to produce for inspection any confidential communications, if there be any, between it and its attorneys, concerning the Hermitage Warehouse Company. Furthermore, while we think it proper to require that all letters received from, and copies of letters written to, the warehouse company be produced by the appellant, concerning the matters mentioned in the order, this requirement should not be extended to letters received by the appellant "from any other parties whatsoever," and written "to any other parties whatsoever", relating to the same subject-matter. This provision goes too far afield.
Exception 12 assigns error of law to the Circuit Judge in requiring the appellant (Paragraph 3, Subdivision d) to furnish to the plaintiff a copy of the contract between this defendant and the Bay Company; the alleged error being that this contract has nothing to do with the plaintiff's cause of action, and, being of a confidential nature, is not subject to an order of discovery in a procedure of this kind, and its publication would work irreparable harm to this defendant.
In its verified return to the motion for discovery, the appellant submitted as a part thereof a copy of a certain contract of date March 1, 1932, entered into between it and the Hermitage Warehouse Company, and it called attention to the fact that in this contract there is a recitation that property of the Hermitage Cotton Mills is under option to the Bay Company, and it asserts that this recital is incorrect; that the Bay Company has no option upon the physical property of the cotton mills, but that it has an option on some stock of the individual stockholders; and that the Bay Company has no connection with the Hermitage Cotton Mills which would affect in any way the relations of the cotton mills with the warehouse company.
In its petition for a modification of the order, the appellant, in the effort to protect from publication this confidential agreement, requested leave to deliver the original contract between itself and the Bay Company to the Court so that the Court might examine the contract for the purpose of ascertaining if it had any connection whatever with the Hermitage Warehouse Company, or with regard to any contemplated action by the plaintiff.
In view of this candid offer of inspection made by the appellant, and the positive sworn statement in its return that the contract in question has absolutely no connection with the warehouse company, and upon the further consideration that its publication might prove most injurious and embarrassing to either or both of the contracting parties, without being of any aid to the plaintiff, this portion of the order should be stricken out.
The return of the appellant sufficiently discloses the nature of the Bay Company's option, showing that it cannot conceivably be material to any cause of action that petitioner might have. Instead of being an option upon the physical properties of the cotton mills it is an option upon the holdings of the cotton mills' stockholders.
We do not see how such a contract could in anywise affect the rights of the petitioners. Its publication might result in the greatest harm to appellant, and its worth to the petitioner has not been demonstrated.
We have given careful consideration to all of the exceptions, and overrule all of them except Nos. 8, 11, and 12. The orders appealed from are affirmed and made the judgment of this Court, except as herein modified.
Let the order of his Honor, Judge Bellinger, of date September 30, 1935, be reported.
MR. CHIEF JUSTICE STABLER and MESSRS. JUSTICES CARTER, BONHAM and BAKER concur.