Lawson v. Black Diamond Coal Mining Co. , 44 Wash. 26 ( 1906 )

Rudkin, J.

The complaint in this action alleges that the plaintiff and his assignors rendered and performed services, at the special instance and request of the defendant, in securing a purchaser for certain coal mines and other properties owned by the defendant in King county; that by and through such services, the Pacific Coast Company, a corporation, was induced to purchase said property for the sum of. $1,100,000; that the defendant' received and accepted the benefit of the services so performed by the plaintiff and his assignors, and sold and delivered said properties to the Pacific Coast Company, receiving the sum of $1,100,000 in payment therefor, and that the reasonable and agreed value of the services so performed is five per cent of the sum for which said properties sold, or $55,000, no part of which has been paid. The answer admits the sale of the properties to the Pacific Coast Company, and the price for which the same were sold, but in substance denies the remaining allegations of the complaint.

The action was commenced and the complaint filed on July 13, 1904. The answer was filed on the 16th day of November, 1904. On November 22, 1904, the plaintiff propounded interrogatories to the defendant to the number of eighteen, for the discovery of facts and documents materia] to the support of the action. On December 12, 1904, a motion was interposed by the defendant to strike each and all of these interrogatories. This motion was denied on January 18, 1905, and the defendant was allowed ten days to further answer. March 20, 1905, answers to the interrogatories were filed, and bn March 25, 1905, the plaintiff moved the court to strike certain of the answers and to require the defendant to answer the interrogatories more specifically in certain particulars specified in the motion. This motion was argued and submitted on the 23d day of April, 1905, and on the 18th day of May, 1905, the court announced its ruling, in the absence of the parties, granting the motion, but no time was fixed within which further answers should be made. October 17, 1905, the plaintiff filed a motion to strike the answer of the defendant and for judgment according to the prayer of the complaint, for failure to answer the interrogatories propounded to it. A hearing was had on this motion October 21, 1905, and the motion was granted, the answer stricken, and the default of the defendant declared and entered. On the 3d day of November, 1905, judgment was entered against the defendant according to the prayer of the complaint, without the taking of proof. From this judgment the defendant appeals.

The interrogatories in question were propounded under Bal. Code,'§ 6009 (P- O. § 969), which provides as follows:

“Instead of the examination being had at the trial, as provided by the last section, the plaintiff, at the time of filing his complaint or afterwards, and the defendant, at the time of filing his answer or afterwards, may file in the clerk’s office interrogatories for the discovery of facts and documents material to the support or defense of the action, to be answered on oath .by the adverse party.”

The answer was stricken and judgment taken by default, under Bal. Code, § 6013 (P. C. § 973), which provides as follows:

“If a party refuse to attend and testify at the trial, or to give his' deposition, or to answer any interrogatories filed, his complaint, answer or reply may be stricken out, and judg: ment taken against him, and he may also, in the discretion of the court, be proceeded against as in other cases for a contempt: Provided, That the preceding sections shall not be construed so as to compel any person to answer any question when cuch answer may tend to criminate himself.”

The appellant earnestly insists that § 6013, supra, deprives it of its property without due process of law, in violation of § 1 of the Fourteenth Article of Amendments to the constitution of the United States. If the statute be construed as authorizing the striking of the answer and the taking of judgment by default, for failure to answer interrogatories,, solely as a punishment for contempt, and without any regard to the substance of the interrogatories or the nature of the discovery sought, this objection would seem to be well taken. McVeigh v. United States, 11 Wall. 259, 20 L. Ed. 80; Winsor v. McVeigh, 93 U. S. 274, 23 L. Ed. 914; Hovey v. Elliott, 167 U. S. 409, 17 Sup. Ct. 841, 42 L. Ed. 215. If, on the other hand, the refusal of a party to attend and testify at the trial, or to give his deposition, be treated as an implied admission of the facts at issue on his part, the same as a failure to deny the allegations of a pleading, we think the statute is free from constitutional objection. From a party’s refusal to testify it may well be presumed that, if his testimony were given, it would sustain the cause of action or defense of his adversary, and we think that this is a presumption the law and the courts have a right to indulge. On the same principle, the refusal of a party to answer interrogatories may be treated as an implied admission of the facts in relation to which a discovery is sought. But, if there are numerous issues in a case, and a discovery is sought only as to one of these issues, the striking of the answer and the taking of judgment on all the issues, for failure to make discovery as to one, can only be justified on the theory that the judgment is given as a punishment for the failure to make discovery, and it may ivell be doubted whether such a proceeding can be-sustained under the authorities above cited.

Assuming that the statute is valid, however, even if construed contrary to the above views, we are still satisfied that a party invoking its penalty must show that his adversary has failed to make discovery of facts material to the support of the action or defense. To illustrate: The fourth, fifth and sixth interrogatories propounded in this case make inquiry as to the number of shares of stock in the appellant corporation, the name, residence and number of shares owned by each stockholder, and the transfers made between the time the alleged contract was entered into between the plaintiff and his assignors and the appellant corporation, and the time of the sale to the Pacific Coast Company. Ordinarily, in a personal action against a corporation for the recovery of a money judgment, such inquiries are wholly irrelevant, and it would surely not be contended that a failure to make a discovery as to such facts would warrant the striking of the answer and the entry of a judgment by default, unless something further were shown. In the light of this rule, let us examine the interrogatories, the answers to which are claimed to be insufficient and to warrant the ruling of the court below.

The 8th, 9th, 10th, 11th, 13th, 14th No. 1, 14th No. 2, and 15th interrogatories inquire as to negotiations between D. O. Mills, or any one on his behalf, or on behalf of the appellant corporation, with James J. Hill, or any one on his behalf, or any officer, stockholder, or person interested in or representing the Pacific Coast Company, looking to a sale of the properties in question to the Pacific Coast Company; as to any offers made by D. O. Mills, or any person on his behalf, or any person having an interest in the appellant corporation, to sell said properties to the Pacific Coast Company; as to any offers made by James J. Hill, or any one on his behalf, or any officer or stockholder of the Pacific Coast Company, looking to a purchase of said properties; whether any officer or employee of the Great Northern Railway Company ever made any offer to D. O. Mills, or any one on his behalf, or any officer or stockholder or person interested in the appellant corporation, looking to a purchase of said properties; and required the appellant to set forth fully all such offers and negotiations. The 12th interrogatory required the appellant to attach to its answers copies of any correspondence between D. O. Mills and the appellant corporation, or any of its officers, relating to the sale or purchase of said properties. The 17th interrogatory required the appellant to attach copies of all correspondence between D. O. Mills and H. H. Taylor, president of the appellant corporation, relating to the sale or purchase of said properties. These interrogatories were answered by the president of the appellant corporation, and such answers were adopted by the corporation itself. The substance of the answers to the 8th, 9th, 10th, 11th, 18th, 14th No. 1, 14th No. 2, and 15th interrogatories was, that the deponent was informed and believed that D. O. Mills did have negotiations with James J. Hill, looking to the sale of all said properties, and that the deponent had in his possession, as the personal agent of D. O. Mills, certain correspondence between D. O. Mills and James J. Hill, in reference to said sale, but that such correspondence was not in the custody of the appellant corporation, or in the custody of the deponent, as an officer of said corporation, or of any other officer of said corporation as such officer; and that the deponent had no knowledge of any other negotiations of said D. O. Mills in reference to such matters, except from hearsay and information derived from said D. O. Mills; that the deponent had no knowledge of any offer of said D. O. Mills to sell said properties, except from hearsay and the personal correspondence of said Mills above referred to, and that deponent had no knowledge of any offers made by the said Hill to purchase said properties except such as was derived from hearsay. The answers then set forth in detail the negotiations for the sale of said properties conducted by .persons other than said Mills. The answer to the 12th interrogatory was that there was no correspondence between D. O. Mills and the appellant corporation, or between Mills and the deponent, as an officer of said corporation, in relation to such sale; that the deponent bad no knowledge of any correspondence between Mills and any other officer of appellant corporation, and if any such correspondence passed the same was not in the custody or possession of the appellant corporation, or the deponent. No answer was made to the 17th interrogatory, calling for copies of the correspondence between D. O. Mills and H. H. Taylor, relating to the sale or purchase of said properties.

The principal objection urged against these answers is their failure to set forth the details of the negotiations between D. O. Mills and other parties relating to the sale or purchase of the properties in question, and the failure of the appellant to attach to its answers the correspondence called for. D. O. Mills is a resident of the city of New York. His only connection with the appellant corporation, so far as disclosed by the record before us, is this: He owns 15,751 of the 50,000 shares of the capital stock of the appellant, and holds an additional five hundred shares as trustee; and H. H. Taylor, the president of the appellant corporation, is the personal agent of D. O. Mills, located at San Francisco, California. It will scarcely be contended that these facts of themselves make the negotiations or correspondence of D. O. Mills competent evidence against the appellant, and we do not understand that the respondent so contends. The functions of stockholders of a corporation are exceedingly limited. They have no power as such to negotiate, contract, or correspond for the corporation of winch they are stockholders, and such negotiations, contracts or correspondence do not bind the corporation, unless previously authorized or subsequently ratified by it. Cook, Stockholders (2d ed.), §§ 708-711. Nor did the fact that the president of the corporation was the personal agent of the stockholder transform the stockholder into an agent of the corporation or its president.

But the respondent contends that he could show, by other testimony, not only that D. O. Mills was a large stockholder, but that, through other stockholders, he absolutely controlled the policy of the appellant corporation, named its board of directors and put in charge of its affairs his personal agent Taylor, and that Taylor, and therefore Mills, had power to make all negotiations for the sale of the properties. Such a showing, if made, would doubtless show the materiality of the facts sought „to be elicited by the interrogatories. On the trial of an action courts often admit evidence out of order, the relevancy of which does not appear, on the promise of counsel to connect it and show its materiality during the progress of the trial, and this same practice doubtless prevails in the settlement of interrogatories to be attached to commissions to take depositions and, on motion, to strike interrogatories, such as was interposed in this case. But when a party invokes the harsh remedy of striking a pleading and taking a judgment by default, he must not only allege, but must prove, the facts showing the materiality of the facts of which a discovery is sought, where such materiality does not appear from the interrogatories themselves, and no such showing was made in this case. In other words, he must prove that his adversary has failed or refused to make discovery of material facts.

The appellant further contends that the court was not warranted in striking the answer and giving judgment by default for failure to produce the correspondence called for. Bal. Code, §• 6047 (P. C. § 1011), provides as follows:

“Any court, or judge thereof, in which an action is pending may, upon notice, order either party to give to the other, within a specified time, an inspection and copy, or permission to take a copy, of any book, document, or paper in his possession, or under his control, containing evidence relating to the merits of the action or defense therein. If compliance with the order be refused, the court may exclude the book, document, or paper from being given in evidence, or if wanted as evidence by the party applying, may direct the jury to presume it such as he alleges it to be, and the court may also punish the party refusing as for contempt. This section shall not be construed to prevent a party from compelling another to produce books, papers or documents where he is examined as a witness.”

This and § 6009, supra, are parts of the original practice act of 1854. We do not think that it was the intention of the legislature to furnish a cumulative remedy by these two sections found in the same act. The purpose of § 6009 was evidently to enable a party to discover the existence and whereabouts of documents in order that he might subpoena the person having their custody, and have the same produced at the trial, or obtain an inspection and copy under § 6047. Counsel for respondent say that this is not the proper construction of the statute, because § .6047 expressly provides that it shall not be construed to prevent a party from com-' pelling another to produce books, papers or documents when he is examined as a witness. The answer to this contention is that the party to whom interrogatories are propounded is not examined as a witness at the trial. When a party is examined as a witness, he has a right to show by cross-examination that the documents sought are not material, and he has the same opportunity when an inspection is demanded under § 6047. And where an attempt is made to inquire into the private papers of a party, especially when not a party to the action, a showing of materiality should always be required. These views are in accord with the doubt expressed in Cully v. Northern Pac. R. Co., 35 Wash. 241, 77 Pac. 202. The court there said:

“It may well be doubted whether, under § 6009, sufra, the production of any documentary evidence could be demanded, in view of the provisions of § 6047, Bal. Code, which makes ample provision for the inspection of books and papers in the hands of the opposite party material to the issue, and for permission to make copies thereof.”

We think the construction we have adopted is consistent with the statute and consistent with the constitution, and gives to the party propounding interrogatories or demanding documents the full benefit of any advantage he might derive from the answers if made or the documents if produced. When the court struck the answer to the interrogatories and required more specific answers, it should have fixed a time within which further answers should be filed, in order that the time of the appellant’s default might be definitely known, unless the time is fixed by some rule of court of which we are not advised.

The judgment is reversed, and the appellant will be allowed ten days in which to further answer the interrogatories after the remittitur is filed in the court below, and all further proceedings in the case will be in accordance with this opinion.

Mount, C. J., Hadley, and Crow, JJ., concur.