Abrahams v. Rand

Callahan, J. TMs is a stockholder’s derivative action on behalf of the defendant Remington Rand, Inc. The individual defendants are alleged to have participated or acquiesced in wasteful acts to the detriment of the corporation through the instrumentality of the defendant Leeford Advertising Agency, Inc. The plaintiff has obtained a direction for examination of the Remington and Leeford corporations before trial, with discovery and inspection of books and records. We think that the pretrial examination of the Remington corporation and discovery were improperly granted. The answer of this defendant raised no issues as to the allegations of the complaint. Under such circumstances the plaintiff and the corporation are not adverse parties within the meaning of section 288 of the Civil Practice Act. The case of Mencher v. Richards (283 N. Y. 176) held nothing to the contrary. The record and briefs on appeal in that case indicate that the only question raised was whether the subject matter of the examination was barred by the Statute of Limitations. The opinion of the Court of Appeals states that the action was to be treated as if the corporation was the plaintiff in order to decide what period of limitation was applicable. We see no reason for treating the Remington corporation differently in the present situation. There is an additional reason for denying pretrial examination of the Remington corporation. The complaint is based entirely on information and belief. The moving aEdavits make no attempt to disclose the sources of the plaintiff’s information or the grounds for his belief. It is quite apparent that he has no personal knowledge in the premises. Nor are any facts stated from which the court may determine whether reasonable grounds exist for believing that an examination would tend to establish the matters charged in the complaint. If an examination before trial can be had for the mere asking on naked charges alleged on information and belief and no more, then a party, in effect, is being examined to ascertain whether a cause of action exists. The parties to an action like the present should not be harassed by an examination before trial without a credible showing of facts warranting such examination. We find that the examination of the Leeford corporation before trial, as distinguished from discovery, was not opposed, although there is a dispute as to what oEcer should be examined. Under the circumstances, we find that it should be conducted through Sylvia H. Chesley, its treasurer, without prejudice to [404] further examination through other officers to the extent that the necessity and propriety of such additional examination may thereafter be shown. The provisions for discovery, however, should be stricken, and any necessary books within the control of Leeford or otherwise capable of production may be used pursuant to section 296 of the Civil Practice Act. The orders appealed from should be modified accordingly, and, as so modified, affirmed, with one bill of $20 costs and disbursements to the appellants. Settle order.