Opinion
09-21-1903
McALPIN et al. v. UNIVERSAL TOBACCO CO. et al.
Robert H. McCarter and Wheeler H. Peckham, for the motion. Gilbert Collins, opposed.
Bill by Edwin A. McAlpin and others against the Universal Tobacco Company and others. Application to stay proceedings under an order for the examination of the books of defendants pending appeal. Granted.
Robert H. McCarter and Wheeler H. Peckham, for the motion.
Gilbert Collins, opposed.
MAGIE, Ch. The bill in this cause prays that an agreement entered into by certain holders of stock of the defendant corporation, providing for a "voting trust," should be declared void or set aside by decree, and the defendant corporation should be decreed to issue certificates of its stock to such of the beneficial owners thereof as should surrender the voting trust certificates held by them, and that an election of directors should be thereupon ordered, or, in the alternative, that two persons who now hold the position of voting trustees under said agreement should be removed as trustees, and proper trustees should be appointed in their place by the court, or chosen by the beneficial owners of the common stock of the corporation under direction of the court, and that in the meantime a receiver should be appointed to manage the affairs and conduct the business of the corporation. It further prays that the issue and negotiation of certain bonds of the corporation should be restrained, and the mortgages on which it was proposed to issue them should be canceled, and that certain of the defendants should be compelled to surrender bonds which had been already issued. There is a general prayer for further relief. In the prayer for process, the injunction asked was limited to the issue, negotiation, and delivery of such bonds, and to the assignment and disposal of such as had been issued. Upon filing the bill, an order to show cause was allowed, why an injunction should not be issued and a receiver appointed pending the proceedings, as prayed for. During the hearing of the order to show cause, the vice chancellor, presiding, advised a further order to the following effect, viz.: That the officers and directors of the defendant company do permit the complainants' counsel, under the direction of one of the masters of this court, and with the aid of such clerks and accountants as said master may select, or as may be selected by the complainants with his approval, to make an examination of such of the books, vouchers, and papers of the company as said counsel may desire, and to take copies thereof, and that the examination should be made at the office of the company in New York, unless the books, vouchers, and papers were produced In New Jersey, when the examination should be there made. A notice of an appeal from this order for examination of books, vouchers, and papers has been given, and the present application is for an order staying proceedings under the order for such examination, to allow the appeal to be presented before the examination is required to be permitted.
This application practically concedes that the appeal does not, ipso facto, stay proceedings under the order appealed from, but that such stay must be obtained by an order of this court, or by the order of the Court of Errors and Appeals. In considering the question thus presented, I am not to review the order appealed from, or to determine whether or not it was rightly made. All that I am to consider is whether there are objections to the order which can be presented on the appeal, and which raise a fair question respecting its validity. If I find there are such questions which may be thus presented, I am further toconsider whether a stay pending the presentation of such questions ought to be interposed.
Preliminarily, I take up the objection presented against a stay, viz., that this is not an order from which an appeal will lie. If this position is clearly correct, and if no reasonable question can be raised in respect to its correctness, no stay should be allowed, for an appeal from such an order would be sham and frivolous. But if a reasonable argument may be made for the appeal, I am not at liberty to deprive the appealing party of the opportunity of presenting the question, if to refuse the stay will practically deprive him of the benefit of his appeal. I do not deem it essential to examine the evidence now before the vice chancellor, who is hearing the order to show cause. The order appealed from was made as an incident in the progress of the proceedings, upon a petition of the complainants. Two grounds were stated therein upon which the order was asked. One ground was that an examination of all the books and papers of the corporation was essential to enable the complainants to make propositions for the reorganization of the corporation. The other was that an examination of such books and papers would furnish evidence in the pending proceedings. This petition was properly treated by the vice chancellor as a mere motion for the order. The order made thereon may be supported on the grounds thus presented, or on any other grounds which furnish support to it.
The first of the two grounds stated in the petition is so manifestly incapable of supporting such an order that it was abandoned on the argument before me, and it was not contended that the order could be supported thereon. The contention before me has been that the order was sustainable on the other ground, viz., that the court has power to require one of two contending parties, in an issue pending before it, to disclose to the other evidence in its possession which is relevant to the issue, and which the moving party desires to present to the court. It was not contended that the order could be supported on any other ground. I am unable to discover any other ground on which it could have been made. But the contention further is that the order, on the ground thus relied on, was so manifestly proper to be made, that no reasonable objection can be presented thereto, and that the appeal is therefore manifestly frivolous. I have reached the conclusion that the appeal cannot be pronounced to be frivolous, because there are grounds of objection to the order" presenting serious questions, which the appealing party has a right to have reviewed by a court of review.
While the bill has not been answered, and the cause is therefore not at issue, there is an issue before this court raised upon the order to show cause. According to the practice of this court, that order is asked upon the bill and its accompanying affidavits, and upon other affidavits admitted before the vice chancellor. It is contested by the defendants by counter affidavits admitted and now before the court. The question at issue is whether such an injunction as prayed for by the bill is proper to be made, and whether pending the further proceeding a receiver should be appointed. In that contest each party is entitled to present evidence, and the court may undoubtedly require the production of evidence within the control of one party, and relevant to the issue, and desired by the other party. An order for the production of such evidence, and nothing more, may possibly be an order which cannot be reviewed on appeal. If such an order is appealable, I think no order should be made to stay the production of evidence thus directed to be produced. But there is a question whether the order up pealed from is an order for the production of evidence. It does not direct the production of any specific evidence pointed out and shown to be relevant to the issue under trial. It is a direction to the defendants, who are officers of the corporation, to produce all the books, vouchers, and papers of the corporation which complainants' counsel may call for, and to permit copies thereof to be made, without reference to their relevancy to the issue pending. It may be argued that it is not an order for evidence, but rather, at the best, an order permitting a search for evidence, in which, incidentally, all the transactions and business of the corporation are laid open, not only to counsel and officers employed, but eventually to the public. I do not pronounce upon these objections, or determine their validity. It is sufficient to say that I deem them to present serious questions proper to be reviewed.
This determination does not necessarily require the stay applied for to be granted. Whether it should be granted depends upon whether its refusal, and the consequent permission to proceed under the order appealed from, will deprive the party appealing of the benefit of his appeal. It seems to be obvious that the refusal of the stay will deprive the appealing party of the benefit of his appeal, and that the order appealed from is open to objections which the appealing party may properly present on its appeal. If a stay be denied, the examination required by the order will proceed, and a subsequent reversal of the order will be of no avail to defendants.
It results that a stay will be allowed, extending to the next session of the Court of Errors and Appeals.