Summary
In Tilsen, this court held that the scope of review of the trial court's order under sec. 269.57 (1) is limited to a finding of an abuse of discretion.
Summary of this case from Whanger v. American Family Mut. Ins. Co.Opinion
October 8, 1954 —
November 9, 1954.
APPEAL from an order of the circuit court for Dane county: ALVIN C. REIS, Circuit Judge. Reversed.
For the appellant there was a brief and oral argument by Norman N. Rosen of Madison.
For the respondent there was a brief by Maurice B. Pasch of Madison.
Action by a discharged employee to recover damages for the discharge which is alleged to be wrongful and in breach of the contract of employment.
Defendant, owner of an insulation and construction business, employed plaintiff to manage the "built-up" roofing department under a written contract whose material provisions are:
"I. In consideration of the party of the second part devoting his best efforts and continuing to promote the business of the built-up roofing department of the D. R. Insulation Construction Company, the party of the first part agrees to compensate the party of the second part on the following basis:
"(1) The annual net profits of the built-up roofing department shall be divided between the parties in the manner following:
"(a) The party of the first part is to receive $6,000 of the first $13,000 of net profit and the party of the second part is to receive $7,000 for the year 1952 and if there be any profits beyond $13,000 such additional net profit shall be divided equally between the parties.
"(b) For the year 1953 the division of profits shall be the same as that set forth in section (1) (a) with the understanding that if there is an increase in net profits over 1952 such increase shall be divided on a basis of 55 per cent to the party of the second part and 45 per cent to the party of the first part.
"(c) For the year 1954 the division of net profit shall be on the same basis as that set forth in subsections (1) (a) and (1) (b), with the understanding that if there is an increase in net profits over 1953 such increase shall be divided on a basis of 60 per cent to the party of the second part and 40 per cent to the party of the first part."
On December 18, 1953, defendant discharged plaintiff, without cause, according to the complaint, but for good cause according to the answer.
When issue was joined, by verified petition plaintiff applied to the trial court for an order permitting him to inspect defendant's business records under the authority of sec. 269.57, Stats., which reads:
"INSPECTION OF DOCUMENTS AND PROPERTY; PHYSICAL EXAMINATION OF CLAIMANT. (1) The court, or a judge thereof, may, upon due notice and cause shown, order either party to give to the other, within a specified time, an inspection of property or inspection and copy or permission to take a copy of any books and documents in his possession or under his control containing evidence relating to the action or special proceeding or may require the deposit of the books or documents with the clerk and may require their production at the trial. . . ."
The petition informed the court that the issue concerned the net profit of the built-up roofing department for the years of the contract and that plaintiff could not safely proceed to trial without an inspection and copies of business records in defendant's possession and under defendant's control as follows:
"General ledger, general journal, purchase journal, sales journal, cash-receipts journal, cash-disbursements journal, canceled checks, bank statements, copies of the Wisconsin and federal income-tax returns of the defendant for the years 1952 and 1953, each."
The petition stated that the ledger is a book of original entry, relevant and material to show the net profit made by built-up roofing department for the years in question and the journals are books of original entry which substantiate and describe in detail the ledger entries; and the checks and bank statements are likewise material and relevant to substantiate the journal entries; while the income-tax returns contain profit schedules which reflect the net profit of the department in question. There was no affidavit or other written reply to the petition. An order to show cause brought it on for hearing before the trial court and the desired order was denied by that court without opinion.
The language of the statute identifies the order which plaintiff seeks to obtain as one discretionary with the trial court. Accordingly, we should not reverse unless convinced that the court's action constituted a clear abuse of discretion. The statute is a remedial one and must be construed liberally. Worthington P. M. Corp. v. Northwestern Iron Co. (1922), 176 Wis. 35, 186 N.W. 156. The burden of establishing such abuse of discretion is on the appellant. He submits that his petition is sufficient under the statute in stating that the desired documents are in the defendant's possession and control and not in his own and in describing how and why the evidence contained in them is material and relevant to the action. Defendant made no written reply or counteraffidavit to the petition and we do not understand him to claim now that the books of account do not contain the information by which the department's profit and, consequently, plaintiff's damages, if he is entitled to any, may be established. The pleadings are to be taken into consideration to determine the relevancy of the records sought to be produced. Hudson v. Graff (1948), 253 Wis. 1, 3, 33 N.W.2d 174. In the absence of any showing by the defendant of lack of materiality or relevancy, we consider that this petition cannot be dismissed for insufficiency.
On the merits of plaintiff's application, the damage issue concerns the profit of the built-up roofing department. By the employment contract plaintiff was to share in that profit. It requires little argument to convince us that the reasonable and natural sources of information from which business profits are ascertained are the business books of account and, if the entries need confirmation, the documents from or on account of which the book entries were made, including those documents and records called for by plaintiff's petition. Defendant does not say that this information is not in the books and records whose inspection plaintiff seeks, or that it is available to plaintiff elsewhere. He submits, however, that it is the fact and was known to the trial court that the built-up roofing department is one division of his construction business with no separate records of its own and that to comply with plaintiff's demand gives plaintiff access to much information with which he is not concerned which would be particularly harmful to defendant because plaintiff is now a business competitor.
In a profit-sharing enterprise whose difficulties are reported in Hudson v. Graff, supra, we said it seemed futile for the defendant to claim that the information concerning profits which plaintiff sought to obtain from an inspection of defendant's business records, more extensive than that which is demanded here, was irrelevant or unnecessary, and we added (p. 7):
". . .it is obvious under the facts stated in the affidavits and pleadings that Hudson and Graff were jointly engaged in the transactions in question under agreements which entitled Hudson to share in some of the net profits thereof, and that he is therefore entitled in this action for an accounting in relation thereto and to have the court order, as it did, Graff to produce for inspection and examination by the plaintiff and his accountant and attorneys the records, etc., listed in said Exhibit A at the place and time specified in the order, in so far as it is within Graff's power so to do." (Emphasis supplied.)
In Ellinger v. Equitable Life Assur. Society (1907), 132 Wis. 259, 111 N.W. 567, the plaintiff's contract gave him a share in the profits of certain policies. He could only ascertain the amount to which he was entitled from information to be derived from the defendant. Although the defendant had given him statements of his share, he applied for an inspection of records under the statute we consider now, then known as sec. 4183, Stats. We said (p. 267):
"The plaintiff was not bound to accept the defendant's volunteered statements as to such amounts, but for the purpose mentioned had the right to an inspection of any books, papers, or documents in the defendant's possession or under its control." (Emphasis supplied.)
In both the Ellinger and the Hudson Cases the trial courts granted the petitions for inspection and we recognize that decisions that discretion was not abused by the grant are not decisions that discretion would have been abused by refusal. But, in view of the language concerning rights and information which a party is entitled to obtain by inspection, we cannot doubt that the justices who spoke so strongly would have held the denial of the right to be a clear abuse of discretion. At any rate, we so hold in the profit-sharing case before us. The data to determine profits is stated to be in the designated books and records in defendant's possession. Information necessary to plaintiff's proof of damage can be derived only from the defendant. He has a "right" to the inspection. He is "entitled" to it. It is not his fault that defendant has mixed this information with that having to do with parts of the business to which plaintiff is a stranger. Defendant cites Worthington P. M. Corp. v. Northwestern Iron Co., supra, and Northern Wisconsin Co-op. Tobacco Pool v. Oleson (1927), 191 Wis. 586, 211 N.W. 923, decrying fishing expeditions and commissions to ransack the adverse party's books and papers. We do not read plaintiff's petition as demanding such procedures which, certainly, are not to be tolerated. But the fact that defendant's system of bookkeeping may mix information to which plaintiff is not entitled with that which he has a right to obtain cannot be the ground, 'without an abuse of discretion, on which to deny him the acknowledged and established right.
The order granting the inspection and the taking of copies may and should guard against the abuses of "fishing" and "ransacking" by confining the search to those items having to do with the built-up roofing department's profits, under suitable conditions of inspection, as was done by the orders in the Hudson and Ellinger Cases, supra.
By the Court. — Order reversed. Cause remanded with directions to enter an order permitting inspection of books and records described in plaintiff's petition not inconsistent with the opinion.