40 N.J. Eq. 392 | New York Court of Chancery | 1885
This is an application by petition for an order that the books of the Cragin Cattle Co., which, it is alleged in the petition, are kept out of this state, and in the city of Philadelphia, in Pennsylvania, be brought into this state. The company is a corporation created under the general law. The application is made
The petition states that on the 6th of October last one of the-petitioners, Mr. Ridder, on behalf of all of them, called at the-office of the company in Philadelphia and demanded of the president and treasurer permission to inspect the books at a proper time, and that those officers refused to permit such inspection of any of the books except the stock-book, and that on the 10th of November last, at a meeting of the .stockholders held in Camden,, in this state, at which were present the owners of one hundred and forty-five shares of stock other than those held by the petitioners, Mr. Ridder, speaking for himself and Mr. and Mrs.. Huylar, asked permission to examine the books, stating that the president had refused to permit him to do so, and that the petitioners having invested $85,500 in the stock of the company were desirous of knowing something about its affairs; that Mr. Woodman, one of the stockholders, then said that he understood that Mr. Huylar had vilified the company, and the officers had determined that he should not see the books without the order of the court. The petition states, also, that although Mr. Huylar then denied that he had vilified the company, and challenged the production of any evidence that he had done so, an inspection of the books was denied by a formal vote. The petition alleges,, also, that by the by-laws no one can dispose of his or her stock to any one not already a stockholder of the company, without the-consent of the' board of directors. It further states that no financial report other than a mere statement of receipts and expendi
The respondents’ counsel argues that the chancellor has no jurisdiction to make the order for which application is made. The ground of the objection is that the statute which gives to the chancellor or the supreme court, or any justice thereof, the power tó make such order, declares that in case of non-compliance by the company with the order, the chancellor or supreme court may declare the charter forfeited, and that from the time of such declaration the company shall cease to be a corporation; and it is urged that the legislature has not itself the power to declare such forfeiture of-vested rights of franchise acquired under such charters as are held to be contracts between the legislature and the company and that if it has such power it cannot delegate it, but must exercise it itself. The company was incorporated January 27th, 1883, under the act “concerning corporations,” which provides, among other things, that the charter of every corporation which shall thereafter be granted by or created under any of the acts of the legislature shall .be subject to alteration, suspension and repeal, in the discretion of the legislature. Rev. jp. 178 § 6. That provision is applicable to and part of the charter of this company. And the company (it was incorporated after the passage of the fiftieth section of the act) took its charter subject to the provisions of that section. Morris and Essex R. R. Co. v. Commrs. of R. R. Taxation, 8 Vr. 228. It is, therefore, as if there were a provision in the charter of the company •that if the chancellor or the supreme court, or any justice thereof, shall order it to bring its books into the state and it shall fail to comply, the chancellor or the supreme court may declare its charter forfeited, and it shall therefrom cease to be a corporation.
It is a very clear proposition that the legislature has the power to confer upon a court authority to declare a charter forfeited for a specified misfeasance or malfeasance. The act gives authority to the chancellor or supreme court, or any justice thereof, upon proper cause shown, summarily to order that the books be brought into the state. The respondents’ counsel insists that the .provision gives no authority to order that an inspection be per
The fiftieth section of the act concerning corporations isamendatory of that act, and it provides that where it is not. otherwise provided by law, the meetings of the stockholders of all corporations shall be held at the principal office or place of' business of the company in this state; that the directors may hold their meetings and have an office and keep the books (except the stock and transfer-books) outside of this state, if the bylaws of the company so provide. But the company is in such, case required to maintain a principal office or place of business in this state and have an agent in charge thereof, in which place-shall be kept the stock and transfer-books for the inspection of all who are authorized to see them, and for the transfer of the-
The order is to fix the place and length of time at and for which the books are to be kept here. The latter must be governed by the object for which the books are to be produced. In this case the complaint is that persons entitled to an inspection are denied that right. The fact being established that the right is denied, the question remains whether that constitutes proper cause within the meaning of the section for ordering that the books be brought into this state. Stockholders are entitled to inspect-'the books of the company for proper purposes at proper times. Field on Corp. § 118; Cockburn v. Union Bank, 13 La. Ann. 289; Ang. & Ames on Corp. § 681: People v. Throop, 12 Wend. 183; Rosenfeld v. Einstein, 17 Vr. 479. And they are entitled to such inspection, though their only object is to ascertain whether their affairs have been properly conducted by the directors or managers. Such a right is necessary .to their protection. To say that they have the right, but that it •can be enforced only when they have ascertained, in some way without the books, that their affairs have been mismanaged, or that their interests are in danger, is practically to deny the right .in the majority of cases. Oftentimes frauds are discoverable only by examination of the books by an expert accountant. The books are not the private property of the directors or managers, but are the records of their transactions as trustees for the stockholders. In Union Bank v. Knapp, 3 Pick. 96, it was held that .a bank is bound to produce its books for the inspection of a depositor upon proper occasions, and that the officers of the bank having charge of them are, so far, the agents of both parties. If, under the permission given by the fiftieth section, a domestic corporation should keep its books in a distant state or territory {in this case the company might keep its books on its ranch in
The refusal is, under the circumstances, proper cause for ordering that the books be brought into this state, in order that the petitioners may have an opportunity of inspecting them here. 'The section gives power to order that the applicant for the order be permitted to inspect the books after they shall have been brought into this state — not, indeed, expressly, but by implication. The books are to be brought into the state to answer a purpose, and the legislature intended to give power to effectuate that purpose. The first proviso of the section is expressly intended to secure a right of inspection of certain books which are kept in this state, and the other is intended to secure the same right, upon occasion, as to the books which the company may lawfully keep out of the state.
I will order that the books be brought to the principal office of the company, in Camden, within one day from the date of the order, and kept there for ten days consecutively, and that the petitioners have an opportunity to examine them there during proper hours of each day.