INTERNATIONAL COAL MINING CO. v. PENNSYLVANIA R. CO. No. 69. 1. EVIDENCE-PRODUCTION OF BOOKS-CORPORATIONS. A corporation cannot refuse to produce its books in an action against it to recover damages for a violation of Interstate Commerce Act Feb. 4, 1887, c. 104, 24 Stat. 379 [U. S. Comp. St. 1901, p. 3154], on the ground the evidence therein may incriminate it.. 2. SAME. Books and papers required by an order of court to be produced by a party on the trial of a cause remain subject to objections to their relevancy as evidence which must be passed upon at the trial. On Rule for Production of Books and Papers. J. W. M. Newlin, for plaintiff. HOLLAND, District Judge. A petition was presented January 30, 1907, and a rule granted on the defendant to show cause why the books and papers set forth in the petition and statement should not be produced at the trial of the cause. The defendant makes answer: (1) That it should not be required to produce these books and papers because of facts averred and set forth in the third plea filed; (2) that, the action being one for the recovery of damages in the nature of a penalty under Interstate Commerce Act Feb. 4, 1887, c. 104, 24 Stat. 379 [U. S. Comp. St. 1901, p. 3154], the motion should be denied. The first question, which raises the right of the plaintiff to continue the suit, has been decided against the defendant in an opinion filed March 4, 1907. As to the second, we think that has practically been disposed of by Hale v. Henkel, 201 U. S. 43, 26 Sup. Ct. 370, 50 L. Ed. 652. In that case a subpoena duces tecum was served upon the witness Hale to produce certain books and papers belonging to certain corporations. The witness refused to produce the books, for the reason, among others, that the production of the books would incriminate the corporations. In the court below the objection was overruled and the witness required to produce the books. This view was sustained by the Supreme Court in an elaborate opinion by Judge Brown, where, on page 74 of 201 U. S., page 378 of 26 Sup. Ct. (50 L. Ed. 652), he uses the following language: "If, whenever an officer or employé of a corporation were summoned before a grand jury as a witness, he could refuse to produce the books and documents of such corporation, upon the ground that they would incriminate the corporation itself, it would result in the failure of a large number of cases where the illegal combination was determinable only upon the examination of such papers. Conceding that the witness was an officer of the corporation under investigation, and that he was entitled to assert the rights of the corporation with respect to the production of its books and papers, we are of the opinion that there is a clear distinction in this particular between an individ ual and a corporation, and that the latter has no right to refuse to submit its books and papers for an examination at the suit of the state. The individual may stand upon his constitutional rights as a citizen. He is entitled to carry on his private business in his own way. His power to contract is unlimited. He owes no duty to the state or to his neighbors to divulge his business, or to open his doors to an investigation, so far as it may tend to criminate him. He owes no such ty to the state, since he receives nothing therefrom, beyond the protection of his life and property. His rights are such as existed by the law of the land long antecedent to the organization of the state, and can only be taken from him by due process of law, and in accordance with the Constitution. Among his rights are a refusal to incriminate him, and the immunity of himself and his property from arrest or seizure except under a warrant of the law. He owes nothing to the public so long as he does not trespass upon their rights. "Upon the other hand, the corporation is a creature of the state. It is presumed to be incorporated for the benefit of the public. It receives certain special privileges and franchises, and holds them subject to the laws of the state and the limitations of its charter. Its powers are limited by law. It can make no contract not authorized by its charter. Its rights to act as a corporation are only preserved to it so long as it obeys the laws of its creation. There is a reserved right in the Legislature to investigate its contracts and find out whether it has exceeded its powers. It would be a strange anomaly to hold that a state, having chartered a corporation to make use of certain franchises, could not in the exercise of its sovereignty inquire how these franchises had been employed, and whether they had been abused, and demand the production of the corporate books and papers for that purpose. The defense amounts to this: That an officer of a corporation, which is charged with a criminal violation of the statute, may plead the criminality of such corporation as a refusal to produce its books. To state this proposition is to answer it. While an individual may lawfully refuse to answer incriminating questions unless protected by an immunity statute, it does not follow that a corporation, vested with special privileges and franchises, may refuse to show its hand when charged with an abuse of such privileges." The government was investigating the actions of certain corporations for a violation of the Sherman act to protect trade and commerce against unlawful restraints and monopolies, and the court said that a corporation "has no right to refuse (in such case) to submit its books and papers for examination at the suit of the state"; but the principle is the same when there is an application for the production of books at the suit of an individual, who claims to have been injured by a violation of the interstate commerce act. The corporation cannot refuse to produce its books in a claim for damages resulting from a violation of this act. Nelson v. U. S., 201 U. S. 92, 26 Sup. Ct. 358, 50 L. Ed. 673, to the same effect. The plaintiff in this case is entitled to the production of such books and papers as are relevant and pertinent to the issues involved; but the court will not make the rule absolute, as the question of the relevancy of whatever books and papers are called for must be passed upon at the trial. Bas v. Steele, Fed. Cas. No. 1,088, 3 Wash. C. C. 381; Dunham v. Riley, Fed. Cas. No. 4,155, 4 Wash. C. C. 126; Iasigi v. Brown, Fed. Cas. No. 6,993, 1 Curt. 401; Cassett et al. v. Mitchell Coal & Coke Co. (decided in this circuit) 150 Fed. 32. It is ordered therefore that the defendant be required to produce the books and papers specified in the petition at the trial of the cause, unless it shows cause at the trial why the same should not be produced. On Making Rule Absolute. On March 25, 1907, an order was made on the defendant in this case to produce books and papers at the trial of the case. A petition had been presented, under section 724, Rev. St. [U. S. Comp. St. 1901, p. 583], by the plaintiff for the production of books and papers. The defendant made answer, with other matters, that the action being one for the recovery of damages, in the nature of a penalty under the interstate commerce act, the mot on should be denied. The order to produce was not made absolute, but the question of requiring the production was left open for settlement at the trial. In this I think the order was not in proper form. It was the intention of the court to require the production of the books, for the reason that the action is not for a penalty in a sense to exempt the defendant from the production of books in an action of this kind, and even if it be regarded as a suit for the recovery of damages ́ as a penalty, or in the nature of a penalty, the defendant, being a corporation, is not entitled to the privilege of refusing to produce its books and papers in a suit of this kind. Hale v. Henkel, 201 U. S. 43, 26 Sup. Ct. 370, 50 L. Ed. 652; Nelson v. U. S., 201 U. S. 92, 26 Sup. Ct. 358, 50 L. Ed. 673. And now, April 2, 1907, on motion of James W. M. Newlin, for the plaintiff, and the answer, filed by the defendant to the rule returnable February 13, 1907, on the defendant to show cause why it should not produce upon the trial the documentary evidence set forth in the affidavit of J. Chester Wilson, the secretary of the plaintiff, upon which the rule to show cause was granted, having been determined by the court to be insufficient, it is ordered that the defendant shall produce the said documentary evidence at the trial of the cause, and the rule to show cause is made absolute. UNITED STATES, to Use of PHOENIX IRON CO., v. CALIFORNIA BRIDGE & CONSTRUCTION CO. et al. (Circuit Court, E. D. Pennsylvania. March 28, 1907.) No. 14. 1. Courts JuRISDICTION OF FEDERAL COURTS-ACTION AGAINST SURETY COMPANY. Conceding that a surety company which has furnished a bond for a contractor for government work is given the privilege of being sued thereon only in the district in which the bond was made, or in that where it has its principal office, by Act Aug. 13, 1894, c. 282, § 5, 28 Stat. 280 (U. S. Comp. St. 1901, p. 2316], which provides that it may be sued in the federal courts in either of such districts, yet a company waived such privilege where it entered appearance, pleaded to the merits, and took depositions before moving to dismiss. 2. UNITED STATES-BOND OF CONTRACTOR FOR PUBLIC WORK-LIABILITY OF SURETY. A bond given by a contractor for government work, conditioned as previded by Act Aug. 13, 1894, c. 282, 28 Stat. 279 [U. S. Comp. St. 1901, p. 2315], is in effect two separate instruments; one securing performance of the contract to the United States, and the other the payment by the contractor of bills for labor and materials furnished, and in the latter aspect the surety is not discharged from liability by a variation of the contract which might relieve it from liability to the United States, as by a change in the site of a building. At Law. On motion to dismiss for want of jurisdiction, motion for new trial, and motion for judgment for American Surety Company notwithstanding the verdict. Harris S. Sparhawk, Samuel Scoville, Jr., and Charles H. Edmunds, for Phoenix Iron Co. Dickson, McCouch & Glasgow, for American Surety Co. J. B. MCPHERSON, District Judge. This is a suit brought to the use of the Phoenix Iron Company upon a contractor's bond given under Act Cong. Aug. 13, 1894, c. 280, 28 Stat. 278; 2 Supp. Rev. St. p. 236 [U. S. Comp. St. 1901, p. 2523]. The American Surety Company is the only defendant that was served, and the trial resulted in a verdict in favor of the use plaintiff. A motion to dismiss the suit for want of jurisdiction was made on November 19, 1906, three days after the trial. This was the renewal of a similar motion that was made on May 17, 1905, and denied in the following August. Both motions depend upon these facts: The California Bridge Company is a corporation organized under the laws of the state of California, and was a resident of the Northern district of that state at the time when the contract in question was entered into. The American Surety Company is a corporation of the state of New York, and has now, and has always had, its principal office in that state. This suit was begun in the common pleas court of Philadelphia county within the territorial area of the Eastern district of Pennsylvania, and service was made upon an agent of the surety company, who had been duly appointed for that purpose in obedience to the laws of the state of Pennsylvania. The case was afterwards removed to the Circuit Court, and these motions to dismiss were subsequently made. What effect would have been given to a motion to dismiss, if it had been seasonably made, need not be declared, in view of the following additional facts, all of which appear on the record: The suit having been originally brought in the common pleas of Philadelphia county on September 17, 1900, a general appearance for the surety company was entered shortly afterward by R. C. Dale, and at his instance the case was removed to the Circuit Court in February, 1901. Mr. Dale's name was duly entered on the docket of the Circuit Court as counsel for the surety company, and on March 27, 1901, he filed an affidavit of defense to the merits of the plaintiff's claim. On March 12, 1902, he put the case at issue by pleading non assumpsit, and on October 25, 1902, depositions on behalf of the surety company, to be used at the trial, were filed in the office of the clerk. In February, 1905, Mr. Dale having died meanwhile, the present counsel for the surety company entered a general appearance for his client, and on May 17, 1905, made the first motion to dismiss for want of jurisdiction; the second motion, which is now pending, having been made a few days after the trial. Under these facts, I think it is clear that, if section 5 of the Act of August 13, 1894, c. 282, 28 Stat. 280 [U. S. Comp. St. 1901, p. 2316], gives to the surety company the exclusive privilege of being sued either in the district in which the bond was made or guarantied, or in the district in which its principal office is located that is to say, either in California or New York-the privilege was waived by the entry of general appearances, the filing of an affidavit of defense upon the merits, the taking of depositions in preparation for trial, and the filing of a general issue plea, before the motion to dismiss was made. This is the ground on which the first motion to dismiss was denied, and I have seen no reason to change my opinion since that decision was made. The pending motion to dismiss is therefore refused. I do not wish to be understood as assenting to the proposition that section 5 of the act of 1894 is to be construed as the surety company contends. That proposition will be considered when its decision is properly involved. The ruling now is that, if its correctness be assumed, the company's privilege was waived. The motions for a new trial, and for judgment notwithstanding the verdict, must also be dismissed. Both are based upon the averment that the contract, as originally entered into by the bridge company, the principal contractor, contemplated the erection of a building upon a particular site; and therefore that, as this site was afterwards changed by the government, the contract was thereby so materially varied as to discharge the surety. The contention overlooks the fact, I think, that a suit such as this is not governed by the ordinary rules that are applicable to a surety's obligation. Under these rules he may sometimes escape the payment of what is justly and equitably due, because his contract has been so varied as to enable him to set up successfully a legal defense to the action; but the present suit is peculiar in its nature, because it is founded upon the act of 1894, to which reference has already been made in the first sentence of this opinion. The bond given under that statute is in effect two separate instruments; one given to the United States to insure the faithful performance by the contractor of his obligations to the government, and the other given to the United States as a merely nominal plaintiff for the purpose of insuring the faithful discharge of the contractor's obligations to his subcontractors. It is "the usual penal bond with good and sufficient sureties" that is given to the United States; but to this undertaking is added "the additional obligations that such contractor or contractors shall promptly make payments to all persons supplying him or them labor and materials in the prosecution of the work provided for in such contract." This is an agreement as distinct as if it were contained in a separate instrument, and it is this agreement which the bridge company violated, and the surety company is now asked to make good. That the Phoenix Iron Company did supply the contractor with materials for the prosecution of the work provided for in the contract cannot be denied. These materials were shipped to, and were received by, the contractor, and were inspected and accepted by the government. They were also paid for by the government, and were afterwards used in the building that was erected upon the second site by another contractor. In my opinion, these facts establish, beyond question, the surety's liability. It is, 152 F.-36 |