Horlick's Malted Milk Co. v. A. Spiegel Co.

KehwiN, J.

On the plaintiff’s appeal it is contended that the court below was in error in ordering the witness to answer certain questions and in ordering him committed for contempt in refusing to do so. .As appears from the complaint, the action was brought for what is known as unfair trade, the plaintiff claiming in its complaint that the defendant was selling products, not the product of the plaintiff, as and for the plaintiff’s product. The first group of questions under consideration are those relating to reports of sales. The plaintiff claimed the defendant made sales of products other than plaintiff’s and represented them to be the plaintiff’s product1. These questions are numbered in plaintiff’s brief and the printed case as follows: 378, 381, 382, 384, 385, 386, 387, 389, 395, 396, 397, 405, 406, 413, 415, 416, 424, 456, 457, 460, 482, 483, 507, 511, 512, and 517.

It developed during the examination that the plaintiff ob~ t'ained its alleged information upon which it made and verified its complaint from reports made through its employees. That one Sugden, an employee of plaintiff, employed one Bates to go to defendant’s store and procure a bottle and contents represented to contain plaintiff’s product. Counsel for defendants then sought to obtain the reports upon which the complaint was made and verified by a series of questions, hereinbefore set forth. Question No. 378 was as follows:

“Q. 378. Did you have any written reports from Bates and Sudgen (Sugden) or any other source as to the claimed substitution by the defendant Spiegel Company of some other malted milk for Horlick’s Malted Milk at their soda fountains ?”

Other questions pursued the same line of inquiry. The contention of plaintiff under this head is that the ruling of the court below requiring these questions to be answered was erroneous for the following reasons: “(a) The reports were not in themselves evidence nor relevant, (b) Reports of an agent to his principal are not admissions, (c) The reports were privileged, (d) Their production would constitute an unreasonable search and seizure, (e) The witness cannot bo interrogated as to matters not within his knowledge.”

Sub. 5 of sec. 4096, Stats., among other things, provides:

“But should the defendant desire an examination of the plaintiff, his or its agent, employee, or officer, before issue joined, said defendant shall be entitled to examine said plaintiff, agent, employee, or officer, on all points set out in the complaint, as though the same had been put in issue; but such examination shall not preclude the right to another examination after issue joined upon all the issues in the cause. ...”

This court has held that an examination under sec. 4096 is in the nature of a cross-examination. The statute has been given a liberal construction by this court. Erom time to time tbe legislature bas amended it so as to accomplish full disclosure under it. The statute in its present form provides for examination before issue joined or any pleading served; for examination after complaint' is served; and also for examination after issue joined. •

. In the instant case the examination was had after service of the complaint, hence the defendants were entitled “to examine said plaintiff, agent, employee, or officer, on all points set out in the complaint, as though the same had been put in issue.” The statute also provides that the examination under sec. 4096 shall be subject to the same rules as that of any other witness, but that the witness shall not' be compelled to disclose anything not relevant to the controversy. In the case at bar 'the examination was had under stipulation dispensing with notice and affidavit required by the statute in examinations before issue joined. It is therefore contended by counsel for plaintiff that the complaint stands alone as the basis of the examination, which must be confined -to the points set out in. it. Conceding this to be true for the purpose of this case, we still think that under the statute and the decisions of this court the examination is in the nature of a cross-examination. Cleveland v. Burnham, 60 Wis. 16, 21, 11 N. W. 126, 18 N. W. 190.

The examination of the witness in the instant case was subject to the same rules as that of any other witness, the only restriction being that he could not be compelled to disclose anything not relevant to the controversy. Kelly v. C. & N. W. R. Co. 60 Wis. 480, 19 N. W. 521; Richards v. Allis, 82 Wis. 509, 514, 52 N. W. 593.

The statute also provides (sub. 3) :

“The attendance of the party to be examined, and the production of all papers, books, files, records, things, and matters in the possession of such party, his or its assignors, officers, agents, or employees, relevant to the'controversy, may be compelled upon subpoena and the payment or tender of his" fees as a witness.”

Sec. 4097, Stats., provides for punishment for contempt in case of neglect' or refusal to testify or to have on the examination any papers, books, files, records, things, or matters in his possession relevant to the controversy. The theory of the statute is to afford full discovery of all matters relevant to the controversy. Schmidt v. Menasha W. W. Co. 92 Wis. 529, 66 N. W. 695; Hughes v. C., St. P., M. & O. R. Co. 122 Wis. 258, 99 N. W. 897.

The examination is very largely in the discretion of the trial court, and the order of the court in proceedings under the statute can only be disturbed for clear abuse of such discretion. American F. P. Co. v. American M. Co. 151 Wis. 385, 138 N. W. 1123.

Proceeding to the specific objections of counsel for plaintiff under this head we shall consider them in the order stated.

(a) It is first insisted that the reports were not in themselves evidence nor relevant. In considering this objection it will be well to keep in mind the nature of the action. It may be regarded as an action based upon unfair trade. In all such actions brought in equity to restrain others from selling an article alleged to be an invasion of the plaintiff’s rights, the plaintiff must come into court with clean hands. Lemke v. Dietz, 121 Wis. 102, 98 N. W. 936; United States T. Co. v. McGreenery, 144 Fed. 531; Capewell H. N. Co. v. Putnam N. Co. 140 Fed. 670.

The plaintiff must be able to maintain that the claim set up in its complaint was founded in truth and its commodity what it purported to be and that' it was not itself deceiving the public. The question, also, whether the sales which plaintiff claims the defendants made were deceptive sales was relevant, and this, of course, makes relevant the question of how the sales were made, and whether there was in fact deception, how and to whom the sales were made, what the purchaser asked for, and what he was given. .

The averment in the complaint that, the sales were deceptive is upon-information and belief, and tliis averment is based upon reports. The reports are therefore relevant because they may show that the sales were not in fact deceptive or that they were deceptive. There are perhaps other reasons why the reports were relevant, but the foregoing are sufficient for the'present. It' is therefore clear that the reports were relevant to jthe inquiry. While they, might not be competent to establish the truth of the facts therein stated, they were facts tending to show the basis of the plaintiff’s claim as set up in its complaint and the ground of plaintiff’s belief as to whether it had a cause of action or not. The cases cited by plaintiff under this head do not reach the question here. La Abra S. M. Co. v. U. S. 175 U. S. 423, 20 Sup. Ct. 168, holds that' the admissions of agents do not always bind the principal. This is good law, but' does not apply here. The question here is, Were such reports made, what were they, and did they form a basis for the action? Other cases are cited to the effect' that reports or statements made under certain circumstances do not bind the principal and, are not admissions. It developed on the examination in the case at bar that the complaint was made, verified, and the action begun on the strength of the reports which were sought to be obtained on the examination.

(b) The point' made by counsel for plaintiff under this head to the effect that reports of an agent to his principal are not admissions, is sufficiently answered by what has been heretofore said.

(c) It' is urged under this head that the reports were privileged. This contention is based upon the ground that the reports called for were made by employees either to plaintiff’s attorneys or to the witness as a corporate officer for the purpose of enabling plaintiff to prosecute this action, hence the reports are within the privilege of attorney and client. But the court in ordering the witness to answer limited its order as follows: “Excepting that said Á. J. Horlick need not, in answer to a'ny of said interrogatories, testify as to any conversations or reports of plaintiff’s officers or agents with or to plaintiff’s attorneys, or conversations or reports by plaintiff’s attorneys witb or to plaintiff’s officers or agents.” Counsel for plaintiff insists that the court construed the privilege too narrowly, and that the privilege should extend to all reports from employees and agents which were made to a superior officer for the purpose of enabling the corporation to bring and prosecute this action or which were used therefor.

Our statute, sec. 4016, defines the privilege existing between attorney and client thus: “An attorney or counselor at law shall not be allowed to disclose a communication made by his client to him or his advice given thereon in the course of his professional employment.” This statute has been construed by this court. Koeber v. Somers, 108 Wis. 497, 84 N. W. 991; Herman v. Schlesinger, 114 Wis. 382, 90 N. W. 460.

Dudley v. Beck, 3 Wis. 274, is relied upon by plaintiff. An examination of this case will show that it does not extend the privilege beyond the terms of the present statute. In that case the question of usury was the issue and the relation of attorney and client' existed in respect to the controversy. The examination was upon commission under the old practice to take testimony out of the state. The lower court held the communications privileged, and this court reversed it, holding they were not. But the whole question has been gone over by this court in later cases, notably Koeber v. Somers, supra, and Herman v. Schlesinger, supra, and the privilege confined strictly within the limits of the statute. The case of Dudley v. Beck, supra, is discussed in Koeber v. Somers, supra.

Many decisions are cited from other jurisdictions by counsel for plaintiff, all of which have been examined. Many of them are not in point, and others distinguishable from the case at bar. We shall not prolong this opinion by a discussion of them, because we think the case here is ruled by our statute and the decisions of this court. The restriction ■ of the examination by the court below was as broad as the privilege guaranteed by the statute.

' (d) It is contended under this head that the production of the. reports would constitute an unreasonable search and seizure, because it would allow defendants to uncover the business transactions of plaintiff, including its trade secrets. Whether the defendants were entitled to the trade secrets of plaintiff respecting the matter in controversy we need not decide, because we think the order of the court below does not go to the extent of requiring their production, as appears from the questions falling under this head, namely, Nos. 387, 405, 406, 413, 415, 424, 378, 381, 397, 424, 416, 374, 378, 384, 385, 386, and 446. Of these questions No. 381 is a fair example. “Q. 381. 'If you. have any reports upon which you base your belief as to the truthfulness of that1 allegation, will you please tell me by whom such reports were made, whether in writing or by parol ?” This question was objected to on several grounds, and among others that an order compelling an answer would constitute an unreasonable search and seizure under secs. 11 and 22 of art. I. Const, of Wis., and the Fourth amendment to the constitution of the United States, and sec. 1 of the' Fourteenth amendment to the federal constitution. On this point1 counsel relies on Hale v. Henkel, 201 U. S. 43, 26 Sup. Ct. 370. That case is clearly distinguishable from the instant case. There it was held that an order for books and papers may be so drastic and unreasonable as to violate the constitutional provisions. Referring to the order the court said:

“It does not require the production of a single contract, or of contracts with a particular corporation, or a limited number of documents, but all understandings, contract's, or correspondence between the MacAndrews & Forbes Company, and no less than six different companies, as well as all reports made and accounts rendered by such companies from the date of the organization of the MacAndrews & Forbes Company, as well as all letters received by that company since its organization from more than a dozen different companies, situated in seven different states in the Union.”

The opinion further refers to the fact that the order was so sweeping, if executed, as to put a stop to the business of the company and therefore was unreasonable. No such objection can be made to the order here. The evidence sought to be obtained in the instant case was relevant on the matters put in issue by the plaintiff's complaint, and the order imposed no unreasonable burden upon the plaintiff. If the examination under the statute should be limited as insisted by counsel for plaintiff, the beneficent purpose of the statute so often referred to by this court' would be greatly impaired. Boyd v. U. S. 116 U. S. 616, 6 Sup. Ct. 524, is also cited by counsel for plaintiff, but it will be seen that that case is not in point here. In that case it was held that the seizure or compulsory production of a man's private papers, to be used in evidence against him in a prosecution for a crime, penalty, or forfeiture, is unconstitutional.

(e) Respecting the point that a witness cannot be compelled to answer as to matters not within his knowledge, an examination of the record convinces us that no such order was made. The evidence developed upon the examination shows that the witness wa's only ordered to testify or produce where he had knowledge of the facts or could produce the things.

Question No. 400, asking for shape and style of dispensing jars from which the substitution was alleged to have been made and which for a time were in possession of the defendants, and question No. 416, asking for dates on which the substituted product' was offered for sale, and question No. 511, asking for name of employee or'officer of the defendant company who it is claimed threatened to continue tbe substitution, were objected to as calling for evidence within the knowledge of the defendants and not within the personal knowledge of the witness, on the ground that the purpose of the statute is to give the party seeking the examination discovery of the facts not within his knowledge.

Counsel on this point relies on Badger B. M. Co. v. Daly. 137 Wis. 601, 119 N. W. 328; Ellinger v. Equitable L. A. Soc. 138 Wis. 390, 120 N. W. 235. We cannot see that these cases are in point here. In Badger B. M. Co. v. Daly, supra, the appeal was from an order limiting the examination asked by defendants, and it was held that the order was proper under the discretionary power of the court, and that no further examination than as provided by the order was necessary, and that matters on which examination was asked and not allowed by the order were obviously within the knowledge of the defendants. In the Ellinger Case it was held that the affidavit of a party for examination under see. 4096 is not conclusive upon the trial court as to matters necessary to enable him to plead; and. such court may in its discretion limit the subjects to which the examination shall extend or may forbid the examination entirely, and its discretion will not be disturbed unless there be abuse of discretion. It is by no means clear from what developed upon the examination that the evidence sought was obviously in the possession of the defendants, and the court below was in a better position to pass upon that question than this court. It cannot be said in the instant case that there was an abuse of discretion.

Questions Nos. 363 and 364 ask for ingredients of an abandoned product of plaintiff, and for the ingredients of “Horlick’s Malted Milk,” its present product. The ingredients of the plaintiff’s product involved a vital issue in the case, because it was necessary to determine whether the plaintiff’s product was wliat it was represented to be; therefore the evidence as t'o what the ingredients are, was relevant to the issue.

Questions Nos. 374 and 446 ask that the witness produce certain bottles and contents which were in defendant’s store and from which the substitution was made. Testimony of the witness showed that two dispensing jars labeled “Hor-lick’s Malted Milk” from which’ the substituted product was alleged to have been sold by defendant were given to the agent of the plaintiff by the defendant’s employees, and the production of these bottles and contents was requested by the questions under discussion..

The claim of the plaintiff is that these questions were improper for the reason that a party to a civil action is not entitled to an order for inspection of real or personal property in the possession of the opposing party in the absence of statute, and that sec. 4096, which provides for the production of “all papers, books, files, records, things, and matters . . . may be compelled upon subpoena, . . .” does not include physical objects. We think the construction of counsel is too narrow. The jars and contents, under the issues raised by the complaint, 'were doubtless among the most important' matters in the case. The fact that they were physical objects did not exclude them from the terms of the statute. “Books, files, and records” are in a sense physical things, at least to the extent of the material of which they are composed, although they contain written information. The board or shingle on which the scaler of logs or lumber keeps his account is a physical thing, yet it would not' be contended that, if it contained evidence relevant to the case, production of it could'not be compelled under this statute. The purpose of the statute is to get inspection of the evidence contained in the books, files, records, and things. If the things, namely, the jars and contents, were relevant to the controversy, they come within the terms of the statute.

Under tbis bead we are cited by counsel for plaintiff to Carpenter v. Winn, 221 U. S. 533, 31 Sup. Ct. 683. Tbe question in tbat case turned on tbe construction of sec. ?24, E. S. of U. S., being tbe fifteenth section of tbe Judiciary Act, as to whether tbis act, which provided for production “in tbe trial,” was’ broad enough to require production before trial. Tbe court held that tbe provision was a substitute for tbe bill of discovery, and. that it could be invoked only when tbe document sought “contained evidence pertinent -to tbe issue” and “in cases and under circumstances, when they might be compelled to produce tbe same by tbe ordinary rules 'of proceeding in chancery.” We are not limited, however, under our statute, which is a substitute for tbe bill of discovery, to tbe rules in chancery under tbe bill of diseovéry. Discovery was not a matter of strict right in equity under tbe bill of discovery. Discovery under sec. 4096 is broader thán in equity. Kelly v. C. & N. W. R. Co. 60 Wis. 480, 19 N. W. 521; Schmidt v. Menasha W. W. Co. 92 Wis. 529, 66 N. W. 695; Hughes v. C., St. P., M. & O. R. Co. 122 Wis. 258, 99 N. W. 897.

In Meier v. Paulus, 70 Wis. 165 (35 N. W. 301), at page 170 tbis court said:

“The very object of tbe old bill of discovery was to procure evidence against tbe opposite party, to be used on tbe trial of an action. . . . Tbe statute undoubtedly goes further than tbe bill of discovery, and not only allows an examination of tbe party as to those matters which tbe party seeking tbe examination cannot prove by other witnesses or testimony, but it allows an examination as to all tbe material issues in tbe action.”

It is further insisted tbat a group of questions asking for names and addresses of witnesses were improper. Eor example, question No. 405 reads: “Q. You say you bad some reports concerning the facts alleged to which I have called your attention. Who were these reports from?” “Q. No. 371. Where can Mr. Jack Bates, one of your employees whom you got to call on Mr. Spiegel, be addressed so that he can be reached ?” “Q. 444. What is the chemist’s name ?” There was no abuse of discretion in ordering these questions answered, under the authorities hereinbefore cited. Counsel cites on this point Collins v. C. & N. W. R. Co. 150 Wis. 305, 136 N. W. 628. In that case it was held, on trial of the case, not error to exclude a question on cross-examination of plaintiff as to whether he had subpoenaed a certain named witness and as to whether he knew that such person would be a witness. The case has no bearing here. Wabash & W. R. Co. v. Morgan, 132 Ind. 430, 31 N. E. 661, 32 N. E. 85, is cited as being directly in point. The case seems somewhat' in point, but we think it distinguishable, and if not distinguishable we cannot follow it under the liberal construction given our statute. But in the Indiana case the decision turned on the point that the questions were useless for any purpose. The form of the question was, “Who told you so?” 132 Ind. at page 436. The court held that the statute required the witness to testify t'o matters within his knowledge and that the question asked did not concern any matter stated in the pleadings.

Spinney v. Boston E. R. Co. 188 Mass. 30, 73 N. E. 1021, is also cited. But that case turned upon a statute providing that “the party interrogated shall not be obliged ... to disclose the names of the witnesses by whom, or the manner in which, he proposes to prove his own case.” So the ease has no bearing here.

Without further extending this opinion, it is sufficient to say that we are convinced that there was no abuse of discretion in ordering the several questions answered, therefore the part of the order appealed from by the plaintiff must be affirmed.

We are of opinion that the defendants’ appeal must be dismissed for tlie reason that the part of the order appealed from by defendants is not appealable. Sec. 3069, Stats.

By the Court. — That part of the order appealed from by the plaintiff is affirmed. The defendants’ appeal is dismissed.

BaRkes, J., dissents from the decision on plaintiff’s appeal;

Case Details

Case Name: Horlick's Malted Milk Co. v. A. Spiegel Co.

Court Name: Wisconsin Supreme Court

Date Published: Dec 9, 1913

Citation: 144 N.W. 272

Court Abbreviation: Wis.