174 N.W. 621 | N.D. | 1919
Lead Opinion
This is an action for mandamus by a stockholder to compel the inspection of corporate records and books. The defendants have appealed from the judgment of the trial court awarding a peremptory writ. The facts are■ substantially as follows:
The plaintiff is fifty-six years old. He is a Norwegian, neither understanding nor reading English. He is a single man, and for the last ten years has worked out, earning on an average of $100 to $125 per year. In September, 1916, he bought thirteen shares of stock in the defendant company of the par value of $100 per share, paying $120 per share. Later he bought thirteen shares more. Ever since he owned the stock he has received 12 per cent dividends January 1st of each .year. His own attorney in the record.terms his client to be a subnormal specimen. The plaintiff went to the annual stockholders’ meeting in January, 1917 and 1918, and to a special stockholders’ meeting in October, 1917. He testifies that at one of these meetings when they were voting to change the name he got the impression that the stock was not very good. He does not remember clearly. He became afraid that he was going to lose his money. In March or April, 1918, he went to see Attorney Nestos. He told his attorney that he wanted $3,120 for his stock. Nestos saw the president of the company and inquired
The president of the defendant company testifies that he is willing to permit the plaintiff in any manner to examine the books or papers and also any attorney for the plaintiff, if his attitude and behavior were satisfactory to him. That it was the threats and intimidation. that occasioned the action taken.
This action came to trial in November, 1918, and, in January, 1919, the trial court made findings in favor of the plaintiff, pursuant to which a peremptory writ of mandamus was entered requiring the appellants to submit to an examination of all their records, books, and assets by the plaintiff, his counsel herein, or such other attorney as plaintiff may hereafter select, together with the assistance of a stenographer and accountant.
The appellants have assigned some ten specifications of error. These are deemed to be without merit excepting as they concern the statutory right of a stockholder to examine the books and records of a corporation, and the right of the court in a mandamus action to exercise an equitable discretion where improper motives are disclosed in the record.
The trial court, in its findings, determined that no improper motives for the inspection of the books and records were shown or established, and, in a memorandum opinion, stated that it is immaterial what the motive may be where the stockholder seeks to use the right granted to him by the statute.
The respondent cites some authorities to the effect that the right to the writ is not discretionary. Likewise, Schmidt v. Anderson, 29 N. D. 262, 150 N. W. 871, is cited, wherein it is directly stated that it is immaterial if the stockholder desires to inspect the books in the interest of a rival corporation, or to aid him in securing business which might otherwise go to a corporation whose books he seeks to inspect, upon the ground that the statute (Comp. Laws 1913, § 4560) is mandatory, and where the right is shown it is absolute. As far as the language in such case seeks to assert or imply that in a special proceeding of mandamus, no equitable discretion exists, and that the court must issue the writ like a mere adding machine, upon the showing that a person is a stockholder and desires to malve inspection, no matter what his motives may be, the case should be and is hereby expressly overruled. See Eaton v. Manter, 114 Me. 259, 95 Atl. 948; State ex rel. Humphrey v. Monida & Y. Stage Co. 110 Minn. 193, 124 N. W. 971, 125 N. W. 676; notes in 45 L.R.A. 446; 20 L.R.A.(N.S.) 185; 42 L.R.A.(N.S.) 332; and 107 Am. St. Rep. 674. It is shocking to the American sense
A consideration of the evidence in ihis record reveals this outstanding feature permeating the entire case of the plaintiff; namely, that the plaintiff desires to sell his stock to the defendant corporation or its president, and that if he cannot so sell, he is disposed to occasion expense and trouble by a vast, laborious examination of all of the assets of the defendant corporation. The defendants are willing, and so assert, in the record, to permit the plaintiff himself to examine the books in any manner, or to permit any attorney that is satisfactory to so do. It is further apparent in this record that this action and this method of procedure has been suggested, initiated, and maintained by the attorney for the plaintiff. He states that his client is subnormal. He is desirous himself to investigate these books. Furthermore, it appears that this very attorney, on a previous occasion, used this statutory right as a means, at least indirectly, of compelling the defendant corporation to buy the stock of his client in order to avoid a laborious investigation. There is no claim in the record that the defendant company is insolvent; that its officers have been guilty of fraud, deception, or improper acts. There is, further, nothing in the record that discloses any refusal whatsoever to give to the plaintiff himself full information concerning the corporation; that shows any dissatisfaction concerning
It is accordingly ordered that the peremptory writ of mandamus herein be vacated, with directions to issue a new peremptory writ, without costs, permitting the plaintiff, and any person or persons necessary to assist him, suitable to the parties, to make inspection of any and all
Concurrence in Part
(concurring in part and dissenting in part). Not being in accord with the majority of the court in all the reasoning leading to the conclusion arrived at, and believing that the conclusion is in part erroneous, I find it necessary to state the facts as I see them in order that my views of the case may be better understood.
This is an appeal from a judgment awarding to the plaintiff a peremptory writ of mandamus. The writ directs the defendants to forthwith allow the plaintiff, by and through his attorney, John H. Lewis, together with such accountant and stenographer as the plaintiff or his attorney may bring with him for such purpose, to examine all of the books, papers, records, and assets of the defendant corporation; to make copies thereof, such examination and inspection to be made at any time during the business hours of the corporation or from 9 a. m. to 3 p. m. of every day except Sunday and legal holidays. An alternative writ of mandamus was issued by the district judge, based on the petition and affidavit of John H. Lewis, and the affidavit of one William Bakeman. Upon the hearing on the return day of the alternative writ, the following facts were established by the testimony of witnesses: Anton Lien, the plaintiff, some time prior to the commencement of this proceeding, became the owner of fifty-two shares of stock of the par value of $2,600 in the Savings, Loan, & Trust Company, having purchased the stock at 120 or for the price of $3,120. So far as it appears from the record, he purchased the stock voluntarily and without any special solicitation
Toumans testified that he would have been glad to have let Mr. Lien, personally, look over the books if he wished to do so, and that any stockholder could get anything he wanted by coming like a gentleman and asking for it; also that he would be willing to let a stockholder’s attorney look at them except when he comes “in a threatening attitude and tries to force his way,” but that he was not willing to allow him to bring a stenographer and an accountant without an order of the district court. He also gave as a reason for the refusal, to use his own words, that he “figured that Lewis was after — that he was in a conspiracy with those other fellows and my competitors, especially with Rasmussen at Carpió; that what he wanted to do and they wanted to do was to get possession of the list of stockholders and their postoffice addresses, so that they could prejudice them and get them to start similar actions.”
It appears that the investment of the plaintiff in the stock of the defendant corporation comprises the major portion of his property, and represents the accumulation of his earnings extending over a number of years.
The question for decision upon this record is the right of the stockholder Anton Lien to inspect the books and records of the defendant corporation with a view to ascertaining the value of his stock, so that he might intelligently deal with the same. We cannot, with propriety, dispose of this right by considering it as secondary to any personal quarrel there may be between Youmans, the president of the defendant company, and Lewis, the plaintiff’s attorney.
Section 4560, Compiled Laws of 1913, requires all corporations for profit “to keep a record of all their business transactions; a journal of all meetings of their directors, members, or stockholders, with the time and place of holding the same, whether regular or special ...” and that “the record must embrace every act done or ordered to be done; who were present and who were absent; ” etc. It also requires that “all such records shall he open to the inspection of any director, member, or stockholder or creditor of the corporation.” The same section provides
This statute treats of two sets of records, — (1) a record of business transactions and a journal of meetings; and (2) a stock and transfer record. The first is required to be open to inspection and the second to be kept open to inspection. If there is any distinction between these two requirements, it is in favor of a more ready access on the part of the stockholders to the stock and transfer book than to the records of business transactions and journal of meetings. The distinction between the right of inspection of the two classes of records designated in our statutes is one that has received both legislative and judicial recognition in at least one state (New York). See People ex rel. Clason v. Nassau Ferry Co. 86 Hun, 128, 33 N. Y. Supp. 244; People ex rel. Gunst v. Goldstein, 37 App. Div. 550, 56 N. Y. Supp. 306; People ex rel. Harriman v. Paton, 20 Abb. N. C. 195; People ex rel. Callanan v. Keeseville, A. C. & L. C. R. Co. 106 App. Div. 349, 94 N. Y. Supp. 555. The right to inspect the stock record is there held to be broader than the right to inspect the record of business transactions. It seems clear that our statute gives to every stockholder the right to ascertain who are co-owners of the stock of the corporation, and this right is not at all limited by the fact that there may be a large number of stockholders in the enterprise. We do not find in the statutes anywhere evidence of a legislative intention to protect as confidential the list of stockholders in banking corporations. On the contrary, § 2116, Compiled Laws of 1913, requires that a duplicate copy of a statement showing the full and correct list of stockholders, with names and residences, be filed with the county auditor, and no provision is made that will protect the list so filed from inspection by anyone who may be interested therein. Thus, so far as the principal objection made by Youmans is concerned (that he feared his competitors desired to obtain a list of the stockholders), it is groundless, as the list could presumably be obtained from another source; at any rate it is not a confidential list.
No showing is made in this record to the effect that this particular examination would subject the defendant to any more inconvenience than would be necessarily incident to any examination at any time. It
Counsel for the appellant, in their argument, request the court to reexamine the question of law decided in the case of Schmidt v. Anderson, 29 N. D. 262, 150 N. W. 871, wherein it was held that the provisions of § 4560,"Compiled Laws of 1913, were mandatory, and that the right of inspection would not be denied on account of the fact that the stockholder desired to make use of the information obtained to aid a rival in business.- In the opinion of the writer, it is unnecessary to reexamine the holding in the case referred to; for, upon a careful examination of the record presented, he is convinced that there is no evidence to warrant a finding that the plaintiff was actuated by any improper motive. While there is some evidence from which it might be inferred that the attitude of the plaintiff’s attorney -was threatening; that he was likely to make improper use of the legal right of the stockholder to know the condition of the corporation • and that he threatened to subject the corporation to the inconvenience of an inspection as a means of coercing the president of the corporation to buy his client’s stock, — the writer is satisfied from the record that the client was not acting from any improper motives in exercising his right. In fact-, there is no evidence whatever that he was acting from bad motives. It is his right to safeguard his own hard-earned savings that is involved, and this, as above indicated, must not be subordinated to any personal quarrel between an attorney and an officer of the corporation.
Since there is nothing in this record which can, in any event, abridge the stockholder’s right, the principle involved in Schmidt v. Anderson, supra, is clearly not controlling here.
On account of the facts, however, which go to show that business rivals of the defendant's may be more or less interested in this proceeding, it is thought proper to remark that, in case any misuse of the informa
Since it appears that the objections raised by the defendants are based upon an apparent connection between the plaintiff’s attorney and parties whose interests conflict with those of the defendants, the question of examination through agents is involved. The propriety of allowing the examination to be made by the attorney designated is not, however, urged by counsel. It would seem to be clear that if the stockholder be a mere tool of the designing competitors, and that fact appears to-the reasonable satisfaction of the court, the court would be amply justified in refusing to permit the agents or attorneys so asking to avail themselves of the stockholder’s right to have access to the records of the corporation. The statute does not throw the records of the corporation open to competitors to make any use thereof that they may see fit. It only gives the right to the stockholder, director, or creditor; and while the free exercise of the right thus defined in the statute might readily result in giving information to those not fairly entitled thereto, and while it may be difficult to protect the corporation from such consequences, nevertheless, where the likelihood of abuse through designing agents fairly appears to the court, it should not actively aid those who are not stockholders in carrying out such illegal designs. If, therefore, it should appear that there is reasonable ground to suspect the presence of improper motives on the part of those who are active in, arousing the interest of the stockholder, the court should require the right of inspection to be so exercised as not to aid in the unlawful design. This it might do by suggesting the appointment of another agent. Manifestly, it is not particularly the function of an attorney at law to act as an expert accountant or appraiser of securities. He performs his full duty when he sees that the rights of his client are protected. Neither is it any part .of the duties of an attorney, as such, to act as a selling agent for stock a client may own in a corporation, though he may render valuable advice in that connection. The attorney, then, cannot complain of any order designed to prevent the information from being misused.
In the case of State ex rel. Humphrey v. Monida & Y. Stage Co., 110 Minn. 193, 124 N. W. 971, 125 N. W. 676, it was sought by mandamus to compel the defendants to permit a stockholder to examine the books and accounts of the corporation. In answer to the petition, the
In the instant case there is a finding that there is no evidence of a motive on the part of the plaintiff in seehing to examine the records of the corporation to vex, annoy, and harass the corporation, or to aid its competitors or persons hostile to it. But there is no finding with reference to the attitude of the agent or attorney, or as to whether, in view of past relations, it were deemed by the court to be inadvisable that he be permitted to inspect the books; although, as a conclusion of law, it is stated that the “plaintiff is entitled either by himself or by his attorney, J. H. Lewis, or such attorney as he may hereafter select to examine,” etc.
As indicated above, counsel for the appellants have not argued that the attorney designated in the power of attorney should b¿ excluded from participation in any examination that might be ordered; and, in the absence of such contention on this appeal, it has seemed to the winter that the cause should be more properly remanded to the trial court for a finding on such matter in the light of the views of this court as expressed concerning it, and that as so modified the judgment should be affirmed.
Concurrence in Part
(concurring in part and dissenting in part). The plaintiff who is a stockholder in the defendant corporation instituted a mandamus proceeding to compel the defendants to permit plaintiff to examine the books of the corporation. The record shows that the different witnesses, including the plaintiff, his attorney, and the officers of the defendant corporation, appeared personally before the trial court, and were sworn and examined as witnesses. The trial resulted in findings and conclusions in favor of the plaintiff, awarding the plaintiff a peremptory writ of mandamus as prayed for.
It is undisputed that the plaintiff is a stockholder in the defendant corporation, and has invested in its stock the greater portions of the savings of a lifetime. The right of a stockholder to inspect the books of a corporation was recognized at common law; and in this state such right is clearly and unequivocally granted by § 4560, Comp. Laws 1913, which requires all corporations for profit “to keep a record of all their business transactions; a journal of all meetings of their directors, members or stockholders, with the time and place of holding the same, whether regular or special . . . and that “the record must embrace every act done or ordered to be done; who were present and who were absent,” etc. It also requires that “all such records shall he open to the .inspection of any director, member, or stockholder or creditor of the corporation.” Not only is the language of the statute plain and specific, but it was construed by this court in Schmidt v. Anderson, 29 N. D. 262, 150 N. W. 871. That decision was handed down January 9, 1915, while the fourteenth legislative assembly was in session. If the rule announced in Schmidt v. Anderson was contrary to the intention of the lawmakers, it could readily have been changed by legislative enactment during the 1915, 1917, or 1919 sessions of the legislature. Such change could have been proposed by the people by initiative petition to the legislative assemblies which convened in 1917 and 1919. Yet, although three successive legislative assemblies impliedly assented to the construction placed upon § 4560 in Schmidt v. Anderson, a bare majority of this court by judicial fiat set aside the established law of the state, and mulcted the plaintiff for costs of the appeal because he relied upon the law of the state, and sought to invoke a right granted to him thereby.
If the agents of the stockholders — the officers and directors — may
The observation made in the majority opinion, “that there is no claim in the record that the defendant company is insolvent; that its officers have been guilty of fraud, deception, or improper acts,” was effectively answered by the supreme court of New Jersey in Huylar v. Cragin Cattle Co. 40 N. J. Eq. 392, 2 Atl. 274, as follows: “To say that they [the stockholders] have the right [of examination], 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
Nor do I believe that the distinction which the majority members attempt to draw between the Weight to be given to findings of fact in a case like this, and in other actions at law tried by the court without a jury, is sound. If — as the majority members hold — motive is to be a determining factor, then the reasons for the weight usually given to the findings of fact of the trial court are peculiarly applicable. Motive is a mental state or process which induces an act of volition; a determin-. ing impulse. Century Diet. Manifestly the trial judge who sees the parties, and hears their story, and observes their demeanor, is in a far bettor position to determine such mental state or process than are the members of this court, who have only the cold paper record before them. As was well said by this court in Jasper v. Hazen, 4 N. D. 1, 5, 23 L.R.A. 58, 58 N. W. 454: “Every practitioner of extended experience knows how absolutely essential it is, in order to ascertain the truth from parol evidence, that the tribunal who is to pass upon the evidence should see the witness upon the stand. The printed page containing the evidence gives, oftentimes, a radically different impression from that made at the hearing. The opportunity of observing the witnesses and their interest or lack of interest in the case, their prejudices and passions, their mental capacities and powers of observation and memory, and the use they have made of these powers, their entire deportment on the stand, and conduct under cross-examination, — these and many other circumstances that attend personal observation are undoubted auxiliaries in ascertaining truth. Of all these helps this court is deprived, while the trial court possesses them fully. It is obvious that, if these things be disregarded, mistakes will be made, and injustice be done.”
It is well to remember that under the Constitution and laws of this state the district court is invested with power to try and determine all questions of law and fact in cases like the one before us, and that this court has appellate jurisdiction only. Const. §§ 86, 103. If the writ of mandamus is discretionary in cases like the one before us (as the majority members say it is), then manifestly the discretion to be exercised is that of the trial court. And under the most elementary prin
Concurrence Opinion
I concur in the result and in the censure of the proceedings by counsel.