Opinion
No. 30476
Decided May 1, 1946.
Depositions — Subpoena duces tenure — Refusal of witness to produce papers and documents on advice of counsel — Notary public may commit witness for contempt, when — Officer of corporation must produce books or papers, when.
1. A party to an action may through proper subpoena issued by a notary public compel an adverse party to produce before the notary as evidence specified papers and documents in the adverse party's possession, and if he refuses to produce such papers and documents for no other reason than that his refusal is on advice of counsel, he may, after having been instructed by the notary to produce them, be committed for contempt for such refusal.
2. An officer of a corporation having in his possession and custody books and papers of such corporation, which are described in a subpoena duces tecum directed to him, must produce such books or papers upon proper demand or be held in contempt for refusal to do so.
APPEAL from the Court of Appeals of Cuyahoga county.
The Consumers Home Equipment Company of Detroit, hereinafter called Consumers, was engaged in the sale of household furnishings and equipment at retail by solicitation from door to door. The Company maintained an office in Cleveland with Theodore I. Bott as its manager, Joseph Friedman as its credit manager, and Edward Garber as one of its salesmen.
In October 1944, a corporation was organized as the Peoples Home Equipment Company, hereinafter called Peoples, to engage in the same line of business in the city of Cleveland. Garber left Consumers in February 1944, Friedman in October 1944, and each went with Peoples. Bott continued with Consumers and took no active part in the business of Peoples until February 1945 when he left Consumers, and from that date he devoted a part of his time to the business of Peoples, and became its president.
Consumers claimed that shortly preceding the time these men left it its place of business was burglarized and merchandise, valued at approximately $1,200, was removed. Money in the place of business was not disturbed. This alleged burglary was reported by Bott. Neither Bott, Friedman nor Garber was arrested nor was either charged with the burglary prior to April 26, 1945.
On the date last named, Consumers instituted an action in the Common Pleas Court of Cuyahoga county against Peoples, Bott and Friedman. The petition in that action alleged that in May 1943 Bott was employed by Consumers as its manager and Friedman as its credit manager; that while in the employ of Consumers, Bott and Friedman entered into a conspiracy to cheat and defraud Consumers of its assets and, in furtherance of such conspiracy, caused the alleged burglary to be made and thereby secured to themselves merchandise of Consumers to the value and amount of $1,200; that in furtherance of the conspiracy they secured a location near the place of business of Consumers, incorporated as Peoples Home Equipment Company and operated a similar business with merchandise secured as above alleged and with additional merchandise of the value of $3,485.28, which they surreptitiously secured from time to time from Consumers, no part of the value of which had been paid to Consumers by the defendants or any of them; that the defendants are now operating such business on West Third street in Cleveland with merchandise belonging to Consumers or with the proceeds realized in the disposition of the merchandise of Consumers; that defendants are operating the business on the good will established by Consumers in the city of Cleveland; and that they are making sales to customers obtained by the defendants while they were employed and paid by Consumers. The prayer of the petition was that the individual defendants be restrained and enjoined from continuing to operate such business; that a receiver be appointed to take over the business and manage it; that the business be liquidated and the proceeds applied to the claim of Consumers, which claim amounts to $4,685.28; and that a judgment be awarded against Bott and Friedman for such amount.
To this petition defendants Bott and Friedman each filed an answer in the form of a general denial.
Sometime later, Consumers took the deposition of Bott in that action, before Henry W. Toll as notary public. The notary public issued a subpoena duces tecum requiring Bott to produce Peoples' salesmen's order slips and collectors' route cards showing sales from October 1, 1944, to January 1, 1945, upon which cards are recorded the name and address of customers and purchases made.
Bott brought with him the order slips and collectors route cards. When counsel for Consumers asked for inspection of the slips and cards, Bott refused to permit the inspection.
The notary declared Bott, as a witness, in contempt and issued a writ of attachment to the sheriff of Cuyahoga county, who took Bott into custody. Bott then instituted the instant proceeding in habeas corpus in the Court of Appeals of Cuyahoga county, seeking his discharge from the custody of the sheriff. The Court of Appeals, on July 9, 1945, granted Bott's application and discharged him.
Consumers, which is not a party to the habeas corpus proceeding, filed a notice of appeal to this court on questions of law. Bott filed a motion to dismiss the appeal but this motion was overruled and the case is now in this court for review.
Mr. Stanley B. Gilson and Mr. J.W. McCarron, for appellant, Consumers Home Equipment Company.
Mr. Suggs Garber, Mr. William M. Byrnes and Mr. William A. Kave, for appellee, Theodore I. Bott.
The question for the determination of this court may be stated as follows:
In an action brought by a merchandising corporation against another corporation and certain of its officers, engaged in the same line of business in the same city, to recover the value of merchandise which plaintiff corporation claims was stolen from it by certain of its former employees who left its employ and thereafter organized the defendant corporation, became officers of, and engaged in selling for, the defendant corporation the same types of merchandise as sold by the plaintiff corporation, may a notary public as such, at the instance of the plaintiff corporation taking the deposition of one of such officers of the defendant corporation before trial of the action, require such witness to produce sales slips and route cards used in the business of the defendant corporation for a period of three months after it engaged in business, upon which slips and cards are recorded the names and addresses of the defendant's purchasing customers, and may such notary, on refusal of the witness to produce such slips and cards without making claim or giving a reason for such refusal, commit such witness for contempt?
Consumers claims that it has a right to take the deposition of the witness and to require him to produce the slips and cards in question on the theory that they will show that Peoples in the early months of its operation sold merchandise which its officers, while in the employ of Consumers, stole from the latter. On the other hand, Bott claims that this action was brought by Consumers solely for competitive purposes and that the records in question are sought by Consumers, not in good faith, but for the purpose of an unfair business campaign to harass the individual defendants and their customers.
In the process of obtaining pertinent and legitimate information for the determination of justiciable questions, courts encounter great difficulty in balancing the interests of public and private rights against the interest of private security. The matter is made more difficult where evidence on controversial questions is taken, not in open court where its competency and relevancy may be judicially determined, but before trial before a notary public whose power to determine competency and relevancy is extremely limited. One observation may be appropriately made to the effect that in order that truth may prevail and wrong may not be shielded, courts should be slow to suppress evidence which perchance may turn out to be competent and relevant and to reveal the truth.
By virtue of Sections 11550 to 11555, both inclusive, General Code, a party to an action is given broad authority to inspect books, papers and documents under the control of the adverse party, and to require the adverse party to produce them as evidence either in court or before an officer authorized to take testimony in the case; and Section 11503, General Code, provides that, by subpoena issued to a witness, a notary public may require the witness to testify and to bring with him any book or writing or other thing under his control, which he may be compelled to produce as evidence.
In connection with the cross-examination of the witness Bott by counsel for Consumers, the record shows the following proceedings:
"Q. Mr. Bott, you were asked by subpoena duces tecum to bring with you the collectors' route cards, do you have those with you? A. Yes.
"Q. And then also sales slips that you have in your business? A. Yes.
"Q. Have you those with you? A. Yes. * * *
"Mr. McCarron: Well, we want the order slips from which sales are recorded and the names of customers, that's the first thing we want.
"Q. You say you have those and we ask you to produce, those, that is for the period up to January 1, 1945, have you got those with you? A. Yes.
"Q. Will you kindly produce them?
"Mr. Garber: Objection.
"Mr. Gilson: Is there an objection to the question or objection to producing them?
"Mr. Garber: No, the objection is to producing them.
"The witness: Upon advice of counsel I refuse to do it.
"Q. Well have you the collectors' route cards upon which is transcribed information from the sales slips from which permanent record is made of the names of the customers? A. Yes.
"Q. Have you those cards for the period your company has transacted business up until the first of January, 1945? A. Yes.
"Q. Will you produce those? * * *
"The witness: On advice of counsel I do not produce them.
"Q. Well, do you refuse to produce either the salesmen's order slips or collectors' route cards? A. On advice of counsel I refuse.
"Q. Mr. Bott, all the slips and route cards that I am asking you to produce are the slips and route cards of the Peoples Home Equipment Company from the time that they started to operate up until the first of January, 1945, now these are the documents that I am asking you to produce now, do you understand? A. Yes.
"And these you refuse to produce? A. Yes."
It will be noted that neither the witness, Bott, nor his counsel made any claim of privilege as a reason for the refusal to produce the salesmen's sales slips or the customers' route cards as ordered. The only reason given or explanation made for the refusal was that it was made "on advice of counsel." No claim was made that the slips or route cards, if produced, were incompetent or irrelevant as evidence. The notary did not have an opportunity to inspect them as to their nature or relevancy. The witness and his counsel alone, without reason given, determined that matter. Under such circumstances the witness could not defend his position and the notary was well within his power and authority to commit the witness for contempt. Bevan v. Krieger, Sheriff, 289 U.S. 459, 77 L.Ed., 1316, 53 S.Ct., 661, reviewing cases originating in Ohio.
In the case of In re Merkle, 40 Kan. 27, 19 P. 401, wherein a witness sought a writ of habeas corpus, the court held:
"A party to an action can compel a witness to give his deposition in the case prior to the trial, even though such witness resides in the county in which the action is brought; and where a witness duly subpoenaed to testify in a cause before a notary public, in giving his deposition refuses to answer certain questions propounded to him, for no other reason than that he is instructed by counsel not to do so, after having been instructed by the notary to answer them, he may be committed by the notary for contempt for such refusal."
If the action had been against Bott alone as the defendant and he had refused to produce the papers demanded of him, on the ground that to do so might tend to incriminate him, a different question might arise. Under such circumstances, the witness has a right to claim privilege on that ground and if the nature of his inquiry or the nature of the documents or records demanded indicates that they might be incriminating, the notary cannot lawfully require the production. But the witness has no such immunity if the testimony or production of documents does not involve self incrimination or privileged communication and the objection is merely to the competency or relevancy of the evidence sought. Harding v. American Glucose Co., 182 Ill. 551, 55 N.E. 577, 74 Am. St. Rep., 189, 64 L.R.A., 738; In re Martin, Jr., 141 Ohio St. 87, 102, 47 N.E.2d 388.
There is another reason why Bott could not lawfully refuse to produce the documents demanded under subpoena. The documents whose inspection was demanded were the records and property of Peoples and were in the custody of its president, Bott, who, as a witness, had them present at the hearing pursuant to the order of the notary public for their production. Corporations are not entitled to all the constitutional immunities and protections in private security which private individuals have in such matters. Hence, an officer of a corporation cannot refuse to produce its records in his possession, upon the plea that they either will incriminate him or may incriminate it.
On this subject, Justice Hughes, speaking for the Supreme Court of the United States in the leading case of Wilson v. United States, 221 U.S. 361, 55 L.Ed., 771, 31 S.Ct., 538, Ann. Cas. 1912D, 558, involving the obligation of the president of the United Wireless Telegraph Company, a Maine corporation, under subpoena duces tecum to produce before a federal grand jury for inspection, in a case charging fraud in the use of the mails, letter-press copy books of the corporation in his possession, said:
"We come then to the broader contention of the appellant, — thus stated in the argument of his counsel: 'An officer of a corporation who actually holds, the physical possession, custody and control of books or papers of the corporation which he is required by a subpoena duces tecum to produce, is entitled to the same protection against exposing the contents thereof which would tend to incriminate him, as if the books and papers were absolutely his own.' That is, the power of the courts to require their production depends not upon their character as corporate books and the duty of the corporation to submit them to examination, but upon the particular custody in which they may be found. If they are in the actual custody of an officer whose criminal conduct they would disclose, then, as this argument would have it, his possession must be deemed inviolable, and, maintaining the absolute control which alone will insure protection from their being used against him in a criminal proceeding, he may defy the authority of the corporation whose officer or fiduciary he is, and assert against the visitatorial power of the state, and the authority of the government in enforcing its laws, an impassable barrier. * * *
"The fundamental ground of decision in this class of cases, is that where, by virtue of their character and the rules of law applicable to them, the books and papers are held subject to examination by the demanding authority, the custodian has no privilege to refuse production although their contents tend to criminate him. In assuming their custody he has accepted the incident obligation to permit inspection.
"What then is the status of the books and papers of a corporation, which has not been created as a more instrumentality of government, but has been formed pursuant to voluntary agreement and hence is called a private corporation? They are not public records in the sense that they relate to public transactions, or, in the absence of particular requirements, are open to general inspection or must be kept or filed in a special manner. They have reference to business transacted for the benefit of the group of individuals whose association has the advantage of corporate organization. But the corporate form of business activity, with its chartered privileges, raises a distinction when the authority of government demands the examination of books. That demand, expressed in lawful process, confining its requirements within the limits which reason imposes in the circumstances of the case, the corporation has no privilege to refuse. It cannot resist production upon the ground of self-crimination. Although the object of the inquiry may be to detect the abuses it has committed, to discover its violations of law and to inflict punishment by forfeiture of franchises or otherwise, it must submit its books and papers to duly constituted authority when demand is suitably made. This is involved in the reservation of the visitatorial power of the state, and in the authority of the national government where the corporate activities are in the domain subject to the powers of Congress. * * *
"The appellant held the corporate books subject to the corporate duty. If the corporation were guilty of misconduct, he could not withhold its books to save it; and if he were implicated in the violations of law, he could not withhold the books to protect himself from the effect of their disclosures. The reserved power of visitation would seriously be embarrassed, if not wholly defeated in its effective exercise, if guilty officers could refuse inspection of the records and papers of the corporation. No personal privilege to which they are entitled requires such a conclusion. It would not be a recognition, but an unjustifiable extension, of the personal rights they enjoy. They may decline to utter upon the witness stand a single self-criminating word. They may demand that any accusation against them individually be established without the aid of their oral testimony or the compulsory production by them of their private papers. But the visitatorial power which exists with respect to the corporation of necessity reaches the corporate books without regard to the conduct of the custodian."
It is true that the Wilson case, supra, was decided by a divided court, one justice dissenting, but the doctrine of the case was approved in the recent case of Oklahoma Press Publishing Co. v. Walling, Admr., ___ U.S. ___, 90 L.Ed. (Adv. Op.), 436, 447, one justice dissenting. It is true, also, that those cases involved governmental action against corporations for alleged illegal practices, but we see no difference in principle where the rule therein established is applied in cases involving alleged private wrongs on the part of a defendant corporation, especially since the same corporate offense might involve both a public and a private wrong under the law. If such documents must be produced in a criminal prosecution they must likewise be produced as evidence in a civil action for damages growing out of the same unlawful act. It is not so clear that a corporate officer having in his custody books and papers of the corporation can be compelled to testify concerning them if such testimony would tend to criminate him, but he must at least produce the books and papers, and this is the only question before us in the instant case. See 8 Wigmore on Evidence (3 Ed.), 342, 346, Sections 2259 a and 2259 b; Nekoosa Edwards Paper Co. v. News Publishing Co., 174 Wis. 107, 182 N.W. 919; State v. Standard Oil Co., 218 Mo.), 1, 116 S.W. 902; United States v. Austin-Bagley Co., 31 F.2d 229.
The judgment of the Court of Appeals is reversed and the cause is remanded to that court for further proceedings according to law.
Judgment reversed and cause remanded.
WEYGANDT, C.J., ZIMMERMAN, WILLIAMS, TURNER and MATTHIAS, JJ., concur.