« AnteriorContinuar »
of right of examination, alleged affirmative- | driven into the realm of uncertainty, exly: “That the object and purpose of the pense, and delay. Such was not the intent plaintiff is to injure the corporation of of the framers of the Constitution, nor of which defendant is secretary, and to gain the legislature in enacting the statute. The information for the private use of plaintiff, statute is founded upon the principle that in connection with two other corporations, the shareholders have a right to be fully of which plaintiff is a stockholder, engaged informed as to the conditions of the corin a similar business to that of the corpora- poration, the manner in which its affairs tion represented by defendant."
are conducted, and how the capital to which It was conceded that appellants desired they have contributed is employed and to see the list of the corporation's custom managed. The shareholder is not required ers and their contracts. In sustaining the to show any reason or occasion for making striking out of this defense by the trial the examination. Nor can he be met with court, the supreme court said: “At com- the defense that his motives are improper.” mon law the stockholders of a corpora- This doctrine is adhered to in Kimball tion had the right to examine, at reason- v. Dern, 39 Utah, 181, 35 L.R.A. (N.S.) able times, the records and books of the 134, 116 Pac. 28, Ann. Cas. 1913E, 166, corporation. 2 Cook, Corp. § 513; Stone where the subject is treated at considerable v. Kellogg, 165 Ill. 204, 56 Am. St. Rep. length and many authorities reviewed. 240, 46 N. E. 222. But the writ would not Among the decisions which seem to regard issue as a matter of course to enforce a the statutory rule as being not quite so mere naked right, or to gratify mere idle unqualified as indicated in the California curiosity; but it was necessary for the and Wyoming decisions above noticed, we petitioner to show some specific interest note that of Foster v. White, 86 Ala. 467, at stake rendering the inspection necessary, 6 So. 88, where, referring to the statute of or some beneficial purpose for which the ex. that state giving the right of inspection, it amination was desired. High, Extr. Legal | is said: “The only express limitation is Rem. 3d ed. § 310. But the great weight of that the right shall be exercised at reasonthe American authorities is to the effect that able and proper times; the implied limitawhere the right is statutory it is not neces- tion is that it shall not be exercised from sary for the petition to aver or show the idle curiosity, or for improper or unlawful purposes or object of the inspection. Nei- purposes. In all other respects, the statuther is it any defense to allege that the tory right is absolute. The shareholder is objects and purposes are improper, and not required to show any reason or occasion that the petitioner desires to injure the rendering an examination opportune and business of the corporation. The clear proper, or a definite legitimate purpose. legal right given by the Constitution and The custodian of the books and papers canthe statute cannot be defeated by stopping not question or inquire into his motives to inquire into motives. If this were so, and purposes. If he has reason to believe the stockholder would be driven from the that they are improper or illegitimate, and certain definite right given him by the stat. refuses the inspection on this ground, he ute to the realm of uncertainty and specula- assumes the burden to prove them such. If tion. The small stockholder—whose rights it be said this construction of the statute are as sacred in the eyes of the law as those places it in the power of a single shareof the rich owner of the majority of the holder to greatly injure and impede the stock-would be refused the right of inspec- business, the answer is: The legislature retion given him by the statute, and when he garded his interests in the successful procomes into court setting forth his rights, motion of the objects of the corporation a and the fact that he is a stockholder, and sufficient protection against unnecessary or has been refused permission to inspect the injurious interference. The statute is foundbooks, he is met by an answer of the cor- ed on the principle that the shareholders poration setting forth that he is not seek have a right to be fully informed as to ing the information nor the inspection for the condition of the corporation, the manany legitimate purpose, and that his mo- ner in which its affairs are conducted, and tives are improper. In the trial of this how the capital, to which they have conaffirmative defense witnesses are required tributed, is employed and managed.” and expenses incurred. If the court should This language seems somewhat inharfind in favor of the corporation, and deny monious within itself. It would seem that, the petitioner's right, he is driven to an if the custodian of the corporate records canappeal. In the appellate court he is met not question or inquire into the notives by the rule that a finding of fact based upon or purposes of the stockholder in requesting conflicting testimony cannot be disturbed. the examination, that the custodian's right Thus the certain, adequate, and summary to withhold the privilege of examination is remedy for the right given by statute is entirely at an end except as to reasonable
ness of time; yet the court seems to conlation or theft of the record, or some other clude that there may be motives and pur- equally unlawful purpose. If the qualifyposes on the part of the stockholder which ing language of those courts means no more would warrant the custodian in withholding than this, we would be inclined to agree the privilege of examination aside from the with them; but there is no such unlawful question of reasonableness of time. We find purpose of relators here alleged or shown. similar observations by the Maryland court We are of the opinion that the inspection in Weihenmayer v. Bitner, 88 MD. 325, 45 of the books and records here sought by L.R.A. 446-457, 42 Atl. 245, where the relators cannot be withheld from them on right of examination was claimed under a the ground that they would thereby acstatute reading: "The president and direc- quire knowledge which would be used by tors of every corporation shall keep full, them in aid of the business of their other fair, and correct accounts of their transac- abstract company, to the detriment of the tions, which shall be open at all times to Kitsap Title Abstract Company. the inspection of the stockholders or mem- The judgment is reversed, with instrucbers."
tions to the trial court to enter its judg. The court said: "The right thus giv. ment compelling respondents to permit reen to the stockholder is unconditional and lators to examine the books and records unqualified.
It is stated in the an- of the company, including its books and swer to the petition that Weihenmayer is records showing the list of its customers engaged in the manufacture and sale of and prices paid by them for abstracts. hosiery and knit goods, and is a rival and competitor of the Windsor Knitting Mills Crow, Ch. J., and Gose, Chadwick, and in business, and that he desires an exam. Morris, JJ., ination of the books, documents, and records of the corporation for the purpose of obtaining information to be used by him in the conduct of his own business, to the WEST VIRGINIA SUPREME COURT
OF APPEALS. injury and loss of the said corporation.
But the petitioner's right would STATE OF WEST VIRGINIA EX REL. not be forfeited by any such cause. The
THOMAS G. AULTMAN, right is given to him as a stockholder by statute, and is absolute, and not made to C. F. ICE, President, et al., Plffs. in Err. depend upon any circumstance but the ownership of the stock. It is easy to see
(- W. Va. -, 84 S. E. 181.) that there might be good reasons for refusing an application; for instance, if it Mandamus clerical error amend
ment. were made for some evil, improper, or un
1. A clerical error in the date of the issulawful purpose. And, if such purpose were
ance of a mandamus nisi may be cured by alleged and proved, the writ would be de.
an amendment. nied.”
Same - recital of petition. Whatever the view of the court in this
2. An alternative writ of mandamus need last quoted language is as to reasons and not recite the filing of a petition for award motives on the part of the stockholder war- thereof. ranting the custodian refusing inspection Parties inspection of corporate books. of the records, it is apparent that the fact 3. In a proceeding to compel the officers that such stockholder is interested in a of a private corporation to allow one of its rival concern which is in competition with directors to inspect its books, papers, recthe corporation, and might, by the examin- ords, and correspondence, the corporation ation of the books of the corporation, ac
itself is not a necessary party.
to obtain inspection of quire and use knowledge in aid of the Mandamus
books other concern to the detriment of the cor
capacity. poration by way of competition, his right out for such purpose, is not vitiated by
4. An alternative writ of mandamus, sued to the inspection of the books would not recital of the relator's dual status of stockthereby be affected in the least. It is pos- holder and director, and failure formally to sible that the Alabama and Maryland courts claim the right of inspection in one of the had in mind a possible inspection of the two capacities indicated by the recitals. books and records of the corporation by a Same - motion demurrer. stockholder with a view of disclosing some
5. A motion for the award of a perempsecret process of manufacturing an article, possessed and used by the corporation, or
Headnotes by POFFENBARGER, J. where the motives and purpose of the Note. As to right of stockholder to stockholder would be to get temporary pos- inspect books of corporation, see footnote session of a record for the purpose of muti- to State ex rel. Gwinn v. Bucklin, ante, 285.
tory writ of mandamus, unaccompanied by P. R. Co. v. San Francisco, 27 Cal. 655; a replication to the return to the alterna- Ward v. Flood, 48 Cal. 36, 17 Am. Rep. tive writ, is equivalent to a demurrer to the 405; Beard v. Lee County, 51 Miss. 542; return.
State ex rel. Clark v. Smith, 104 Mo. 661, Corporation inspection of books
16 S. W. 503; State ex rel. Walnut Street director. rector may disclose a right of action in him Comrs. 7 Wend. 474; People ex rel. Tenth 6. That the inspection sought by a di- R., Co. v. Neville, 110 Mo. 345, 19 S. W.
491; People ex rel. Bentley v. Highway against the corporation or some of its agents does not preclude his right to in. Nat. Bank v. Board of Apportionment, 64 spect the books, papers, and records of the N. Y. 627; People ex rel. Lawrence v. Westcorporation.
chester County, 73 N. Y. 173; People ex Mandamus for inspection of books rel. Sickles v. Becker, 3 N. Y. S. R. 202; - defense indefiniteness.
Haebler v. New York Produce Exch. 149 7. An averment, in general terms, that N. Y. 414, 44 N. E. 87; State ex rel. respondents are advised that one of the Hurt v. Alexander, 115 Tenn. 156, 90 S. purposes of the relator, in seeking such W. 20; State ex rel. Rumbold v. Gordon, inspection, is to enable him to obtain knowl. 238 Mo. 168, 142 S. W. 315, Ann. Cas. edge of the corporate business for communication to rival or competing concerns, 1913A, 312; Cummings v. Armstrong, 34 unsupported by any allegation of facts, in W. Va. 1, 11 S. E. 742; Note to Re Steindicating the source of such information, the way, 45 L.R.A. 461; Legendre v. New Or. identity of such rival concerns, or connec- leans Brewing Asso. 45 La. Ann. 669, 40 tion of the relator therewith, is too indefi- Am. St. Rep. 243, 12 So. 837; Stone v. nite, and therefore insufficient as a defense Kellogg, 165 Ill. 192, 56 Am. St. Rep. to the writ.
240, 46 N. E. 222; People ex rel. Bishop Corporation inspection of books
v. Walker, 9 Mich. 328; State ex rel. Rosenaid of agent.
8. A director of a corporation is entitled feld v. Einstein, 46 N. J. L. 479; People to have the assistance of his attorney or
ex rel. McElwee v. Produce Exch. Trust agent, in the exercise of his right to inspect Co. 53 App. Div. 93, 65 N. Y. Supp. 926 ; its books, papers, and records, provided the Re Coats, 73 App. Div. 178, 76 N. Y. Supp. latter has no interest adverse to the cor- 730; Re Kennedy, 75 App. Div. 188, poration, rendering his employment therein 77 N. Y. Supp. 714; Hemingway v. Hemimproper.
ingway, 58 Conn. 443, 19 Atl. 766; Mitchell
v. Rubber Reclaiming Co. N. J. Eq. (January 12, 1915.)
24 Atl. 407; Lipscomb v. Condon, 56 W. Va.
433, 67 L.R.A. 670, 107 Am. St. Rep. E RROR to the Circuit Court for Marion 938, 49 S. E. 392; State ex rel. Matheny
County, to review a judgment affirm- v. County Ct. 47 W. Va. 672, 35 S. E. 959. ing a judgment of the Intermediate Court, Mr. Charles B. Johnson, for defendant awarding a writ of mandamus compelling in error: respondents to permit relator to inspect the Relator was entitled to amend. books, records, and other documents of a Mason v. Ohio River R. Co. 51 W. Va. a company in which he was a stockholder. 183, 41 S. E. 418; Hebb v. Clayton, 45 Affirmed.
W. Va. 578, 32 S. E. 187; Fisher y. CharlesThe facts are stated in the opinion. ton, 17 W. Va. 628; Miller v. Zeigler, 44
Messrs. George M. Alexander, Charles W. Va. 484, 67 Am. St. Rep. 777, 29 S. E. Powell, and A. J. Colborn, for plaintiffs 981. in error:
The writ need not recite filing of petiIt was error to overrule the motion to tion. quash the alternative writ.
Fisher V. Charleston, 17 W. Va. 628; Fisher v. Charleston, 17 W. Va. 595; Highs, Extr. Legal Rem. § 530. Lipscomb v. Condon, 56 W. Va. 416, 67 Relator was entitled to inspect with the L.R.A. 670, 107 Am. St. Rep. 938, 49 S. agent. E. 392; Hebb v. Cayton, 45 W. Va. 578, 2 Cook, Corp. 6th ed. § 516; 10 Cyc. 32 S. E. 187; Doolittle v. County Ct. 28 958; 26 Am. & Eng. Enc. Law, 954; Mitchell W. Va. 158; People ex rel. Leach v. Cen: v. Rubber Reclaiming Co. 1. J. Eq. tral Fish Co. 117 App. Div. 77, 101 N. Y. 24 Atl. 407; Foster v. White, 86 Ala. 467, Supp. 1108.
6 So. 88; People ex rel. Clason v. Nassau It was error to sustain plaintiff's motion Ferry Co. 86 Hun, 128, 33 N. Y. Supp. 244; for a peremptory writ, and to award the Cincinnati Volksblatt Co. v. Hoffmeister,
62 Ohio St. 189, 48 L.R.A. 732, 78 Am. St. 13 Enc. Pl. & Pr. 699, 708; 2 Spelling, Rep. 707, 56 N. E. 1033; Ellsworth v. Inj. $ 1674: Swann v. Work, 24 Miss. 439; Dorwart, 95 Iowa, 108, 58 Am. St. Rep. Smith v. St. Lawrence County, 148 N. Y. 427, 63 N. W. 588; People ex rel. McInnes 187, 42 N. E. 592; People ex rel. Central ! v. Columbia Paper Bag Co. 103 App. Div. 208, 92 N. Y. Supp. 1084; Huylar v. Cragin | 151 S. W. 790; Sands v. Calking, 30 How. Cattle Co. 40 N. J. Eq. 392, 2 Atl. 274; Pr. 1; Seneca County Bank v. GarlingRanger v. Champion Cotton-Press Co. 52 house, 4 How. Pr. 174; White v. Hampton, Fed, 611; State ex rel. Martin v. Bienville 9 Iowa, 181; Patterson v. Lord, 47 Ind. Oil Works Co. 28 La. Ann. 204; Com. ex 203; Kirkpatrick v. Holman, 25 Ind. 293; rel. Sellers v. Phænix Iron Co. 105 Pa. Bourland v. Sickles, 26 Ill. 497. 111, 51 Am. Rep. 184, 113 Pa. 563, 6 Atl. The right to amend the return, if any, 75; Kuhbach v. Irving Cut Glass Co. 220 was not denied, Pa. 427, 20 L.R.A. (N.S.) 185, 69 Atl. 981; Benson v. Looney, 160 Ill. App. 326; 2 State ex rel. Keller v. Grymes, 65 W. Va. Dan. Ch. Pl. & Pr. 1st Am. ed. § 9, pp. 451, 64 S. E. 730, 17 Ann. Cas. 833; Rex v. 804-806. Merchant Tailor's Co. 2 Barn. & Ad. 115; 2 Wigmore, Ev. pp. 1064, 1067, 1068; 1 Poffenbarger, J., delivered the opinion Am. & Eng. Enc. Law, 719; Browder v. of the court: Southern R. Co. 107 Va. 10, 57 S. E. 572; The judgment of the intermediate court Willis v. Western U. Teleg. Co. 150 N. C. of Marion county, affirmed by the circuit 318, 64 S. E. 11; 2 Jones, Ev. p. 511. court of that county, and brought here for
The corporation itself was not a neces- review, awarded a peremptory writ of mansary party.
damus, commanding the respondents, presi10 Cyc. 962; High, Extr. Legal Rem. $dent and secretary and treasurer of a cor311; 2 Spelling, Inj. & Extr. Rem. § 1635; poration known as the Fairmont Box Car 20 Enc. Pl. & Pr. 796, 797; Wood, Man. Loader Company, to permit the relator, a damus, p. 12; Swift v. State, 7 Houst. stockholder in the company and a director (Del.) 338, 40 Am. St. Rep. 127, 32 Atl. thereof, to inspect the records, books, 143; People ex rel. Muir v. Throop, 12 papers, contracts, and other documents beWend. 183.
longing to it and in their custody, and Relator was entitled to inspect to secure allow him the privilege of assistance by information upon which to base suit against his agent in so doing, the company, or other stockholders or di- Waged with vigor, skill, and ability on rectors, or strangers.
both sides, the contest developed, in the Woodworth v. Old Second Nat. Bank, court of its initiation, several questions of 154 Mich. 459, 117 N. W. 893, 118 N. W. procedure, and reliance, in the appellate 581; Hodder v. George Hogg Co. 223 Pa. courts, upon technical grounds for both 196, 72 Atl. 553; Com. ex rel. Sellers v. affirmance and reversal. Phenix Iron Co. 105 Pa. 111, 51 Am. Rep. One exception is based on an adverse 184, 113 Pa. 563, 6 Atl. 75; Re Steinway, ruling on a motion to quash the alternative 159 N. Y. 250, 45 L.R.A. 461, 53 N. E. 1103; writ, because: (1) Its date was two days People ex rel. Muir v. Throop, 12 Wend. earlier than that of the order awarding it; 183; Cook, Stock & Stockholders, 3d ed. (2) it did not show the filing of a petition § 511; State ex rel. Keller v. Grymes, 65 for issuance thereof; (3) the corporation W. Va. 451, 64 S. E. 730, 17 Ann. Cas. was not made a party; and (4) although 833; People ex rel. Leach v. Central Fish averring the relator to be both a stockCo. 117 App. Div. 77, 101 N. Y. Supp. holder and a director, it failed to set forth 1108; State ex rel. Richardson v. Swift, the capacity in which he desired relief. 7 Houst. (Del.) 137, 30 Atl. 781.
An amendment, the propriety of which The peremptory writ was properly award- seems to be clear beyond doubt, cured the ed on the alternative writ and return. first one of these alleged defects. It was
State ex rel. Keller v. Grymes, 65 W. Va. shown by affidavits to have been a mere 451, 64 S. E. 730, 17 Ann. Cas. 833; misprision of the clerk of the court. People ex rel. McInnes v. Columbia Paper No recital of the petition was necessary. Bag Co. 103 App. Div. 208, 92 N. Y. Supp. The writ itself constitutes the declaration 1084; People ex rel. Leach v. Central Fish in this form of action. Mason v. Ohio Co. 117 App. Div. 77, 101 N. Y. Supp. 1108; River R. Co. 51 W. Va. 183, 41 S. E. 418; People ex rel. Muir v. Throop, 12 Wend. Fisher v. Charleston, 17 W. Va. 628. The 183; Stone v. Kellogg, 62 Ill. App. 444; petition is, in law, mere memorandum or Mitchell v. Rubber Reclaiming Co. N. affidavit, supplying the materials for the J. Eq. 24 Atl. 407; Cook, Stock & recitals of fact in the mandamus nisi. Stockbrokers, 3d ed. 511; 10 Cyc. 770; No corporate interest in the litigation, 16 Enc. Pl. & Pr. 564, 565; Hogg, Pl. & not adequately represented by the governForms, pp. 174, 175; 2 Spelling, Inj. & ing officers proceeded against, is perceived. Extr. Rem. § 1669; Fisher v. Charleston, Through them, the corporation has notice, 17 W. Va. 628; 1 Chitty Pl. p. 521; and they act for it, just as effectually as if Sehnert v. Schipper & Block, 168 Ill. App. it were a formal party. The situation dif245; Korach v. Loeffel, 168 Mo. App. 414, fers radically from that in which the interests of a person having no notice and The corporation was organized in Novemnot in any sense represented are to be ber, 1905, under a charter issued under the affected, as in Armstrong v. County Ct. 15 laws of this state in October, 1905, to A. W. Va. 190.
W. Rapp, Chas. L. Merrifield, C. D. FlemThe remaining ground of the motion is ing, A. C. Ice, and S. A. Boehm; but Geo. likewise untenable. Under some circum- T. Watson, Chas. F. Ice, and John H. Huhn stances, the relator has admitted right of took the bulk of the capital stock, in coninspection in either and both capacities, sideration of their assignments to the corand the same relief would be granted in poration of certain United States patents either case. If the facts set forth in addi- and applications for such patents then tion to the averment of his character as a pending, all of which were for box car stockholder do not confer such right upon loaders and improvements upon such mahim as a stockholder, but do give it to him chines. Each of them so obtained 65 shares as a director, the averment of his owner of the par value of $100 each. Only seven ship of stock can be treated as harmless additional shares were issued. There is surplusage. Sprinkle v. Duty, 54 W. Va. some controversy as to equitable interests 559, 46 S. E. 557. If, on the contrary, he and rights in the patents and applications has the right in both capacities, relief for patents, but they are of minor imporcould not be denied him because he has tance, if at all material. The corporation unnecessarily shown himself to be doubly does not manufacture any of the patented entitled to it.
machines. They are made, exploited, and Recital here of the contents of the plead- marketed by the Fairmont Mining Machinings, or even of the substance thereof, ery Company, under a verbal contract, and would not materially aid in the solution of the net profits divided between the two corthe questions raised. The writ, return, porations. They are used by the Fairmont and amended return all cover unnecessary Coal Company and the Consolidation Coal ground and partake largely of the character Company, allied concerns, and unfairness of the pleadings in an equity suit. Right to the Box Car Loader Company and its of personal inspection is not denied. On stockholders, in the relations of these comthe contrary, it is distinctly admitted and panies, is charged. The relator seems to had been formally invited. Only the al- be of the opinion that the Box Car Loader leged right of inspection by an agent or Company should erect a plant and manuattorney is denied, and this denial is sup- facture and market its own machines. Litplemented by the assertion of impropriety tle, if any, materiality in the contentions in the purpose for which the inspection is respecting these matters is perceived. Aultdemanded. A few days before the writ was man, the relator, purchased Huhn's stock obtained, the relator caused a written de- and such other rights and interests as he mand for the right of inspection by himself had in and against the company, on the and his agent or attorney to be served on 15th day of June, 1909, and was subsethe respondents. The president responded quently elected a director. At the date of thereto by a letter, conceding in the most the award of the mandamus nisi, Aultman comprehensive terms the right to inspect was prosecuting an action of debt against as a director, and tendering for such pur- Huhn for the recovery of $400 which he pose all books, papers, and records of the claimed had been wrongfully paid to Huhn company; but the letter was silent as to by the corporation or some of its agents. the admission of an agent or attorney for Dismissing said action, he commenced ansuch purpose. On the occasion of the de. other action, one of assumpsit, against livery of the notice or demand, however, Huhn on the same demand, which seems to the right of inspection by agent or attorney have been still pending at the date of the was expressly denied and has never been judgment here complained of. These facts, conceded or admitted, and is not now. suggesting the possibility of a claim by the
Deeming the return and the amended re- relator, against the company or some of its turn insufficient, the relator moved the agents, on account of transactions with court to grant the peremptory writ, and Huhn, constitute the basis of a charge of neither formally demurred nor replied. All improper motive or purpose in the demand parties treat the motion as the equivalent for inspection. They are supplemented by of a demurrer to the return and the amend an averment, in general terms, of the exed return. Courts generally so regard it. istence of keen and active competition in Fisher v. Charleston, supra; People ex rel. the business of supplying car loading maCentral P. R. Co. v. San Francisco, 27 Cal. chines, and purpose on the part of the 655; Ward v. Flood, 48 Cal. 36, 17 Am. relator to obtain knowledge of the methods Rep. 405; Beard v. Lee County, 51 Miss. of the company and facts in its possession, 542; State ex rel. Clark v. Smith, 104 Mo. for communication to its competitors, to its 661, 16 S. W. 503.
injury and damage. The alternative writ