The small key is one of the keys to the villa of Morton which is recovered by Edward Carnby in Alone in the Dark: The New Nightmare.
The New Nightmare[]
The office the key will be found by opening a trap door hidden in the attic floor, along with the key to the second floor, through the use of the crowbar. With it you can open a desk drawer in the Alan Morton's Office from which to retrieve a half-picture and a key to the library.