Capital Co. v. Fox, 468-472.

Decision Date27 July 1936
Docket NumberNo. 468-472.,468-472.
Citation85 F.2d 97
PartiesCAPITAL CO. v. FOX, and five other cases.
CourtU.S. Court of Appeals — Second Circuit

Robert P. Levis, of New York City, for appellants.

Cravath, De Gersdorff, Swaine & Wood, of New York City (Samuel B. Stewart, Jr., of New York City, of counsel), for appellee.

Before L. HAND, AUGUSTUS N. HAND, and CHASE, Circuit Judges.

L. HAND, Circuit Judge.

These appeals are from orders denying motions to set aside subpœnas issued under section 779 (2) of the Civil Practice Act of New York (as added by Laws N.Y. 1935, c. 630) in proceedings supplementary to execution. On July 18, 1935, the plaintiff took judgment against the defendant, Fox, upon his confession in the sum of nearly $300,000; and on March 27, 1936, it served a subœna on each of the appellants, five firms of stockbrokers in the City of New York, and upon Berliner individually, a member of one of these. The subpœnas recited the entry of the judgment against Fox, and that the attorney for the plaintiff, the judgment creditor, had "reason to believe that the said party has property of the judgment debtor exceeding ten dollars in value." It commanded the person to whom it was directed, i. e., the "third party," to appear before the district court on April third, "to be examined under oath concerning property * * * of William Fox * * * in your possession now or at any time since January, 1929," which might be held either in his name or in the name of a number of persons designated; and it concluded with a direction "to produce at such examination all books, papers and records * * * which have * * * information concerning such property." This was verbatim the form prescribed by section 779 (2) and each subpœna was endorsed with a copy of section 781 of the Civil Practice Act (as added by Laws N.Y.1935, c. 630), which provides that the "third person is * * * forbidden to transfer * * * property belonging to the judgment debtor * * * until the further order of the court," and that anyone who violates "the provisions of such restraining provision, shall be subject to punishment by the court * * * as and for a contempt." Upon Berliner & Co. and Berliner, individually, the plaintiff also served ordinary subpœnas, which had no endorsement. All the "third parties" moved to set aside the subpœnas upon affidavits which asserted a privilege against the disclosure of any information in their possession regarding transactions with the persons named, who were their customers; but which did not deny that at some time they had had business with one or more of them. The plaintiff answered by affidavits alleging that a company, called the "All-Continent Corporation," made up of relatives and close associates of the defendant, Fox, had received $6,000,000 in cash from him at the end of the year 1930 and $870,000 later; that this money had in part been transferred back from that company to him; that he had a power of attorney to act in all the company's affairs as if its property was his own; that the company and the other persons named in the subpœnas were helping him to conceal his resources. The "third parties" replied with affidavits from Fox's wife and daughters denying that any of the property held by them belonged to him. The appeals from the orders denying these motions are based, first, upon the theory that the subpœnas constituted an unconstitutional search; second, that the injunction provided by section 781 of the Civil Practice Act of New York was issued without due process of law; third, that neither that section nor section 779 (2) applies to actions at law in the District Court of the Southern District of New York. The appellee moved to dismiss all the appeals and this is the first question to be decided.

As we have already said, a copy of section 781 of the Civil Practice Act of New York was endorsed upon all the subpœnas but two, which gave them the effect of an injunction. When the "third parties" moved to vacate them, they therefore moved to dissolve an injunction, and the case was within section 227 of title 28 of the U.S. Code (28 U.S.C.A. § 227) unless it makes a difference that the statute, not the court, imposed the restraint. The justification for an appeal from decrees refusing to dissolve an injunction is as good when the statute imposes the sanction as when a court does. It is to give the person restrained a chance to review the restraint; and it can surely make no difference that this is initially imposed without the intervention of a court. Besides, after the court has, as here, refused after a hearing to dissolve the injunction, the difference between the situation and one where the court issued it originally is to the last degree formal. The subpœna being enforceable by attachment, we regard it as precisely like a court's order for purposes of appeal. The opposite is however true as to the two "witness subpœnas" against Berliner and Berliner & Co. These were mesne process in the action or special proceeding; had they been ancillary to an administrative proceeding they would have been final, because they would have completed the court's action. As it was, they were merely interlocutory steps in a judicial proceeding. That is the distinction between Alexander v. United States, 201 U.S. 117, 26 S.Ct. 356, 50 L.Ed. 686, and Ellis v. Interstate Commerce Commission, 237 U.S. 434, 35 S.Ct. 645, 59 L. Ed. 1036, or First National Bank of Mobile v. United States, 267 U.S. 576, 45 S.Ct. 231, 69 L.Ed. 796. The appeals from the "witness subpœnas" are dismissed: the motions to dismiss the other appeals are denied.

On the merits the first objection is threefold: (1.) to the generality of the proposed examination; (2.) to the absence of any supporting affidavit; (3.) to the direction to produce the documents in court. The proceedings supplementary to execution of New York, dating back as they do to the Revised Statutes, were not indeed on all fours with the preceding remedies given by the court of chancery to judgment creditors. Ex parte Boyd, 105 U.S. 647, 26 L. Ed. 1200. But there is no reason on that account why they should not be enforced here, and this applies as well to "third party" proceedings as to an examination of the judgment debtor himself. Until September 1, 1935, the law (old section 785, Civil Practice Act of New York), required the order of a judge to examine a "third party," supported by affidavit that he had "personal property" of the judgment debtor or was indebted to him. The examination was before the judge or a referee, and was designed to pave the way for the collection of undiscovered or non-leviable assets. The need of an affidavit caused much difficulty, and often resulted in balking the statute, since the very reason for the examination was to find out those facts which the plaintiff was required to state in advance. For this reason a new subdivision was added to "Old section 785," now section 779 (as added by Laws N.Y.1935, c. 630), which dispensed with affidavit and order, and substituted a subpœna issued, like a subpœna ad testificandum, by the attorney, though supported by a declaration of his belief that the "third party" had property available upon the judgment. There can be no question of the purpose of the legislature, and while the Appellate Division for the Second Department has held in New York Credit Men's Association v. Schneider, 247 App.Div. 896, 286 N.Y.S. 978, that the judgment creditor must answer when the "third party" moves upon affidavit to vacate such a subpœna, that condition was here fulfilled. We do not understand that decision to mean that the court is to go back to the practice before the amendment and decide upon all the affidavits whether the judgment creditor has made out a prima facie case that an examination will prove justified. If so, the change was merely one of form, that is, in the time when he must comply with the old requirements. Until the Court of Appeals so rules we will not put so crippling an interpretation upon the amendment. Therefore the question resolves itself into one of power.

It is quite true that to allow an uncontrolled examination into the affairs of anyone whom the judgment creditor might select would be oppressive; might indeed be so much so as to fall within the Fourteenth Amendment, U.S.Const. The statute does nothing of the kind; the examination is conducted before a judge or a referee, who is to keep it within bounds and exclude prying into irrelevant matters. Such a limitation will not serve the "third parties" at bar; in order to succeed they must maintain that they cannot be summoned to court at all. That position would be equally open to every witness, in every court, in every suit; consistently applied, it would completely frustrate the administration of justice. No authority is cited for so extravagant a pretension; we should not follow it, if it existed, unless it were authoritative upon us. These subpœnas perform the common office of a subpœna, so far as they merely require attendance and submission...

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12 cases
  • Kamelgard v. Macura, 08-4254.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • October 23, 2009
    ...College. Fed.R.Civ.P. 26(b)(1), 45; Gotham Holdings, LP v. Health Grades, Inc., 580 F.3d 664. (7th Cir.2009); Capital Co. v. Fox, 85 F.2d 97, 100-01 (2d Cir.1936) (L.Hand, J.). Instead he wanted to depose the bariatric surgeon who had told him in June 2007 in California about the investigat......
  • Kauffman v. Wrenn
    • United States
    • United States Appellate Court of Illinois
    • December 10, 2015
    ...was the debtor's in fact.’ ” Fox Cartage, Inc., 126 Ill.2d at 315, 127 Ill.Dec. 952, 533 N.E.2d 1080 (quoting Capital Co. v. Fox, 85 F.2d 97, 101 (2d Cir.1936) ); see also Mendez v. Republic Bank, 725 F.3d 651, 653 (7th Cir.2013) (“If the third party releases the property without a court or......
  • Falsone v. United States, 14559.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • June 26, 1953
    ...and court orders ancillary to an administrative proceeding and final because they complete the court's action. Capital Company v. Fox, 2d Cir., 85 F.2d 97, 99, 106 A.L.R. 376. Professor Moore seems to follow the same distinction. Moore's Commentary on the United States Judicial Code (1949),......
  • Bank of Aspen v. Fox Cartage, Inc., 2-86-0695
    • United States
    • United States Appellate Court of Illinois
    • July 2, 1987
    ...it to be unconstitutional because it permitted the clerk of the court to issue an injunction without a court order. (Capitol Co. v. Fox (2d Cir.1936), 85 F.2d 97, aff'd (1936), 299 U.S. 105, 57 S.Ct. 57, 81 L.Ed. 67.) The legislative commentary quotes a portion of that decision, including t......
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