Opinion
No. 146.
February 3, 1930.
Appeal from the District Court of the United States for the Southern District of New York.
Suit by Archibald H. Whan and others against the Green Star Steamship Corporation, for which a receiver was appointed. From an order denying an application of the Continental Insurance Company and another for production of books and papers by the receiver, applicants appeal.
Affirmed without prejudice.
In 1921 a federal receiver was appointed for the Green Star Steamship Corporation in the above-entitled suit. Subsequently, the present appellants, the insurance companies, brought an action at law against the Equitable Trust Company of New York in the state court. See 127 Misc. Rep. 45, 215 N.Y.S. 281. That action has not yet been reached for trial; when it is, the insurance companies expect to need to use upon the trial evidence contained in books and papers of the Green Star Steamship Corporation, now in the possession of the federal receiver. They applied to the District Court for an order directing the receiver (1) to produce such books and papers upon the trial in the state court, if subsequently demanded by the insurance companies; and (2) to permit accountants for the insurance companies to examine the books and papers prior to the trial. The supporting affidavit sets out, among other things, that the complexity of the books of account will render them unintelligible to a jury, unless expert accountants have previously made an analysis of them. The receiver appeared in opposition, as did also attorneys for Green Star Steamship Corporation. The latter's opposing affidavit concedes that the books will be produced upon the trial of the action in response to a subpœna duces tecum, but objects that examination before trial is not authorized by the state practice. This appeal challenges an order which denied the application. Affirmed.
M.E. Harby, of New York City, for appellants.
Bigham, Englar Jones, of New York City (Charles F. Quantrell, D. Roger Englar and P.J. Kooiman, all of New York City, of counsel), for Green Star Steamship Corporation.
Chadbourne, Hunt, Jaeckel Brown, of New York City (William M. Chadbourne, of New York City, of counsel), for receiver.
Before SWAN, AUGUSTUS N. HAND, and CHASE, Circuit Judges.
With the appellants' general assertion that the principle of comity requires a federal court, whose receiver has possession of documents, to facilitate in every proper manner the production of evidence required for litigation pending in a state court, we are in thorough accord. See Dier v. Banton, 262 U.S. 147, 151, 43 S. Ct. 533, 67 L. Ed. 915. The existence of a federal receivership should not be allowed to hamper litigants in a state court from securing their evidence, provided production or examination of the receiver's books and papers can be had without interference with due administration of the receivership. On the other hand, the accident of a federal receivership should give state litigants no greater rights to procure evidence before trial than they would have, if the receivership did not exist. The state court, which has the main suit before it, ought in general to be able to proceed unimpeded by the federal receivership, but nothing more should follow from the fact of a receivership. Therefore we think that the granting by the District Court of a motion for examination of the receiver's books before trial should depend, where, as here, there is no suggestion that such examination would interfere with administration of the receivership, upon a ruling of the state court. Whether the books should be examined before trial is a question of state practice. Decisions as to federal practice have nothing to do with it. Many state cases, we are told, have denied the right to examine before trial witnesses who are not parties to the suit; other cases, it is claimed, have recognized the right where special circumstances indicate that justice requires such an examination. Whether such special circumstances exist in the litigation now pending in the state court should be decided by that tribunal, which is familiar with the issues being litigated, rather than by the District Court, where these issues are but incidentally involved. If the state court shall direct examination of the receiver or of his books, then on a renewal of the appellants' motion the District Court should make the desired order.
It was urged upon the argument that the application to the District Court should be considered as a bill for discovery in aid of the state suit. Whether a motion in receivership proceedings supported by affidavit may be deemed the equivalent of a formal bill of discovery we need not say. If it were, no authority has been cited to show that a bill of discovery will lie against a mere witness, who has no interest in the main suit. All the authorities which we have discovered on a somewhat cursory examination indicate clearly that it will not lie. Burgess v. Smith, 2 Barb. Ch. (N.Y.) 276, 280; Post v. Boardman, 10 Paige (N.Y.) 580, 582; American Security Trust Co. v. Brooks, 225 Mass. 500, 502, 114 N.E. 732; Norwood v. Memphis C.R. Co., 72 Ala. 563, 566; Burchard v. MacFarlane [1891] 2 Q.B.D. 241; Story, Eq. Pl. § 569; 18 C.J. 1063.
It is conceded that the books may be used upon the trial if a subpœna duces tecum shall issue from the state court for their production. The appellants express the fear that the order appealed from, if unreversed, may be construed as forbidding such production in response to a subpœna subsequently issued. Any such danger may be obviated by our mandate.
For the foregoing reasons, the judgment is affirmed, and it is ordered that the mandate shall provide upon its face that the affirmance is without prejudice to a new application to the District Court in aid of any order or subpœna issued by the state court for the production of the receiver's books and papers, either upon the trial of the action or for examination before trial.