Lead Opinion
The RAMCO companies ask us to prohibit enforcement of a District Court order requiring RAMCO to open up its corporate books
A New York court rendered a judgment in excess of three million dollars in favor of U.S. Trust and against Robert E. Yaw. Yaw is one of four shareholders of RAMCO. Pursuant to Yaw’s pledge of RAMCO stock to U.S. Trust the latter has possession of Yaw’s certificates of RAMCO stock.
U.S. Trust brought its judgment to the District Court of Tulsa County. See
RAMCO claims that Dynamic is a competitor, and that release of its corporate books and records, particularly the reserve reports, will damage RAMCO. Dynamic claims it is not a competitor, and has agreed not to release the RAMCO information to others. RAMCO provided audited financial statements on the companies, but declined to provide other records, particularly the copies of reserve studies.
The New York judgment is not in the record before us. The parties state that it is for money in the amount of $3,208,400.67. None of the parties have claimed that the judgment ordered the sale of the stock, and no special execution or attachment on the stock has issued from the Tulsa County proceeding. See 12 O.S.1991 §§ 732, 841, 902.
U.S. Trust does not cite or rely upon any provision of the Uniform Commercial Code for its discovery of the records. It relies, basically, upon its status as a pledgee of the stock, and asserts that it should have the same inspection rights as a stockholder.
Our statutes clearly recognize that a “shareholder of record” may seek certain corporate records. 18 O.S.1991 § 1065(A). The inspection must be for a proper purpose. Id. at § 1065(C)(2)(b). The purpose must be “reasonably related to such person’s interest as a shareholder.” Id. at § 1065(B). If ac
Does U.S. Trust, as a pledgee, have a common law right to inspect the corporate records? We conclude it does not. At common law a stockholder was entitled to insрect the books of a corporation.
U.S. Trust cites to an encyclopedia for the proposition that a pledgee has a common law inspection right to the corporate records. That encyclopedia, in addition to noting the authority to the contrary, relies upon two opinions. In re Citizens’ Savings & Trust Co.,
The authority to the contrary, In re Brooklyn First Nat. Bank,
U.S. Trust also relies upon 12 O.S.1991 § 848 and related statutory authority for proceedings in aid of execution. Property of a judgment debtor is subject to the payment of a judgment. 12 O.S.1991 § 841. A judgment debtor may be compelled to answer concerning the debtor’s property, and upon the discovery of property of the debtor “such proceedings as provided by law may be had for the application of such property toward the satisfaction of said judgment.”
The ultimate purpose of these procedures is to effect the application of a judgment debtor’s property to a judgment.
In a § 850 proceeding U.S. Trust may compel a witness to produce relevant and admissible evidence as measured by its claim against Yaw. Stone v. Coleman,
The trial court, by its order of November 15,1994, required of RAMCO the production of: 1. any and all shareholder or board resolutions of the companies; 2. any and all board or shareholder consent actions for the companies; 3. any and all minutes of board or shareholder meetings of the companies; 4. copies of any reserve studies relating to the property owned or leased by the companies; and 5. information regarding accounts payable and accounts receivable for the companies. The order included all subsidiaries and affiliates. It exceeds the relevant inquiry a creditor may make of a non-party’s records in a § 850 proceeding, and thus, prohibition may properly issue. Jones Packing Company v. Caldwell,
On the eve of this opinion’s adoption the parties advise that the stock has now been sold by U.S. Trust, and they jointly move that the action be dismissed as moot. We note that the joint motion to dismiss asks for remand with directions that the trial court vacate its order, which would be consistent with the result reached by us. We decline to dismiss, believing our opinion may provide guidance should the problem arise in the future. Let the writ issue prohibiting the respondent, or any other assigned judge in the cause, from enforcement of the order of November 15, 1994.
Notes
. 12 O.S.1991 § 848:
Witnesses may be required, upon the order of the judge, to appear and testify upon any proceedings herein provided in the same manner as upon the trial of an issue.
. The record indicates that a corporate document, or a portion thereof, has been, or will be, made available to U.S. Trust which reflects the value of the stock as determined by RAMCO.
. See 12 O.S.1991 § 732, (defining three types of executions); 12 O.S.1991 § 841, (any non-exеmpt interest of judgment debtor is subject to payment of judgment); 12 O.S.1991 § 902, (when judgment is not for the recovery of money or real property it may be enforced by attachment).
. Judicial application of a debtor’s goods, chattels, and real property to a judgment is effectuated by a public sale. See 12 O.S.1991 § 757, (sale of goods and chattels by public sale); 12 O.S.1991 § 764 (public notice of sale of realty); Okmulgee Motor Sales Co. v. Prentice,
. Lewis v. Brainerd,
. Rex v. Tailors’ Company, [1831] 2 Barn. & Adol. 115, 109 E.R. 1086; Rex v. Babb, [1790] 3 T.R. 579, 100 E.R. 743; Mutter v. Eastern and Midlands Railway, [1888] 38 Ch.D. 92, 106; In re Steinway,
. Doggett v. North American Life Ins. Co.,
. At the beginning of this century one author explained the stockholder’s inspection rights of corporate books under the common law and the then recently enacted statutes. William Clark, Handbook on the Law of Private Corporations, 325-328 (F. Tiffany 2d ed. 1907). The author explained that the person demanding access to the records must be the stockholder, or an agent acting for the stockholder, at 325, 327-328, citing, State ex rel. Bulkey v. Whited & Wheless,
. State ex rel. Brumley v. Jessup & Moore Paper Co., 1 Boyce (Del.) 379,
. The Wisconsin one-paragraph opinion, In re Citizens’ Savings & Trust Co.,
Dissenting Opinion
dissenting.
The court assumеs today its original jurisdiction to prohibit the respondent-judge from
I
THE ANATOMY OF LITIGATION
On August 10,1989 Yaw executed a pledge agreement giving Trust a security interest in his Rameo stock and placed his shares in Trust’s possession. After Yaw’s default Trust secured a money judgment against him in a New York Supreme Court and then domesticated it in Tulsa County on October 29, 1993 under the provisions of 12 O.S.1991 § 721.
To facilitate this transaction Trust undertook to acquire data from Rameo to aid itself and Dynamic [the prospective purchaser] in assessing the value of Yaw’s Rameo stock. Trust secured a subpoena duces tecum (from the Tulsa County District Court) calling upon Rameo to produce thirteen categories of data. Rameo initially produced all but six of the items sought.
In conjunction with the subpoena for the production of Ramco’s audited financial statements, a “protective order” was enterеd
On November 15, 1994 the court ordered Rameo to produce five more items of data.
II
TRUST, QUA JUDGMENT CREDITOR OF YAW, IS ENTITLED TO THE COURT’S AID IN ITS EFFORTS TO PROTECT THE RAMCO STOCK SALE AGAINST COMPLAINTS THAT IT WAS NOT AT A FAIR PRICE
Since Trust’s New York money judgment
To assist the judgment creditor in discovering and identifying the judgment debtor’s assets, the legal system has long provided certain equitable redress.
OUR LAW WILL NOT EXTEND TO TRUST A RIGHT TO SELL YAW’S RAMCO STOCK AND ALSO DENY IT A LEGALLY SAFE WAY TO VALUE THE SHARES OFFERED FOR SALE
Trust’s actions, questioned in today’s proceedings, essentially consist of efforts to satisfy its judgment by securing appraisement of stock antecedent to a sale of the judgment dеbtor’s assets in its possession. By a subpoena duces tecum Trust is not seeking to secure a shareholder’s broad right to inspect
IV
TRUST IS ALSO ENTITLED TO THE DATA IN RAMCO’S POSSESSION BECAUSE THEY ARE NECESSARY TO VALUE ITS RAMCO STOCK BY GENERALLY ACCEPTED ACCOUNTING PROCEDURES
Qua judgment creditor, Trust also is entitled to secure the data items essential for pre-sale appraisement of Yaw’s Rameo shares. Trust seeks no more information than the very minimum it must have under generally accepted aсcounting standards. Its efforts bear no analogy to a shareholder’s statutory or common-law quest for inspection, i.e., assertion of a right to know the full sweep of corporate activity. Trust’s quest for disclosure is appropriately most narrowly focused.
V
TRUST’S QUEST IS LIMITED TO DISCLOSURE OF DATA NECESSARY TO EFFECTUATE A LEGALLY SAFE SALE OF YAW’S RAMCO STOCK AND DOES NOT AMOUNT TO GENERAL DISCOVERY OF RAMCO’S BUSINESS RECORDS
The supplementary remedy that is available to a judgment creditor is ancillary to the original action in which the judgment was rendered.
VI
TODAY’S OPINION RESOLVES MOOTED ISSUES UNDER THE LIKELIHOOD-OF-RECURRENCE EXCEPTION TO THE MOOTNESS DOCTRINE
By their February 6, 1995 joint motion before this court Rameo and Trust seek this cause’s dismissal because the proceeding has been mooted by Trust’s completed sale of Yaw’s Rameo stock. Inasmuch as the important legal issue in dispute here is likely to recur, the court nonetheless proceeds to decide this no longer lively contest under an exception to the mootness doctrine.
VII
SUMMARY
Today’s writ denies a judgment creditor the opportunity to conduct a legally safe sale of a debtor’s stock in a privately held corporation. The court’s pronouncement is made sans opportunity to examine all of the comprehensive record of evidence presented to the respondent judge.
The respondent judge’s November 15 order, entered in a § 848 supplementary proceeding, should be left undisturbed. It compels disclosure of data absolutely necessary to appraise — in a legally safe manner — Ram-co’s stock by application of generally accepted accounting principles.
I would subject Trust neithеr to the hazard of a debtor’s tort claim nor to a post-judgment dispute over the amount of credit rightly due the debtor as the sale’s proceeds. Because Trust is deprived today of a valuable protection against possible complaints that its sale was not at a fair price,
. The November 15 order requires Rameo to produce: (1) all shareholder or board resolutions of Rameo and its subsidiaries [Companies]; (2) all board or shareholder consent actions for the Companies; (3) all minutes of board or shareholder meetings of the Companies; (4) copies of any reserve studies relating to the property owned or leased by the Companies; and (5) information regarding the accounts payable and accounts receivable of the Compаnies. For a general discussion of how the respondent judge formulated the categories of data ordered produced, see infra note 22.
. On October 15, 1993 Trust secured judgment against Yaw in the amount of $3,203,400.67 in United States Trust Company of New York v. Robert E. Yaw, Index No. 6462/92, Supreme Court of New York. This judgment was domesticated in Tulsa County on October 29, 1993 by compliance with the provisions of 12 O.S.1991 § 721 [see infra note 6].
. Yaw executed a pledge agreement dated August 10, 1989 by which he granted Trust a security interest in his Rameo stock. It is undisputed that Trust has possession of Yaw’s Rameo stock certificates. Yaw’s pledge provides that if his Rameo shares are sold, the sale proceeds should be applied toward satisfying his obligation. In selling Yaw’s stock Trust is neither an interloper nor an officious volunteer. See N.Y. [U.C.C.] §§ 9-203, 9-304, 9-305 (1994).
. Our jurisprudence recognizes a pledgee’s right to sell pledged property at a private sale. Ardmore State Bank v. Mason,
. See my analysis, infra note 18.
. The pertinent terms of 12 O.S.1991 § 721 are:
“A copy of any foreign judgment authenticated in accordance with the applicable Act of Congress or of the statutes of this statе may be filed in the office of the court clerk of any county of this state.... A judgment so filed has the same effect ... as a judgment of a district court of this state and may be enforced or satisfied in like manner...." [Emphasis added.]
. The pertinent provisions of 12 O.S.1991 § 731 provide:
"Executions shall be deemed process of the court, and shall be issued by the clerk, and directed to the sheriff of the county....”
. The court's order requires that Rameo ⅛ audited financial statements, furnished to Trust and Dynamic, be kept confidential. [Rameo claims that Dynamiс was one of its competitors.]
. See supra note 1 for the November 15, 1993 nisi prius order's terms.
. See supra note 2 for the money judgment's terms.
. By the terms of the Uniform Foreign Money-Judgment Recognition Act, 12 O.S.1991 §§ 710 et seq., Trust’s money judgment against Yaw acquired domestic recognition and became entitled to local execution relief.
. Trust’s judgment is enforceable under the Uniform Enforcement of Foreign Judgments Acts, 12 O.S.1991 §§ 719 et seq.
. In 1988 the legislature effectively abolished the common-law requirement — that one must exhaust legal remedies before resorting to equity— when it amended 12 O.S.1991 § 735 [effective November 1, 1988], The amendment provides that, in addition to execution, issuance of a garnishment summons — an equitable remedy — will extend the period during which a judgment remains enforceable (and is kept from falling into dormancy).
. The law has long recognized "supplementary proceedings” — i.e., proceedings subsequent to judgment or execution — to aid judgment creditors in identifying and applying debtors’ assets to the judgments' satisfaction. See H. Oleck, Debt- or-Creditor Law § 17 at 66 (1962); J.W. Smith, The Equitable Remedies of Creditors §§ 200 et seq. (1899); A.C. Freeman, A Treatise on the Law of Judgments § 848 at 1795-98 (1925); see also Honce v. Schram,
. Supplementary proceedings — while in the nature of a creditor’s bill — are in lieu of them and are matters of equitable cognizance. Historically they were used in aid of execution to reach beyond the limits of common-law process and compel that "which ought to have been done.” J.W. Smith, The Equitable Remedies of Creditors, supra note 14, § 4 at 11. The propriety of affording equitable relief lies within the discretion of the nisi prius court. Mid-America Corporation v. Geismar, Okl.,
. The pertinent terms of 12 O.S.1991 § 848 are:
"Witnesses may be required, upon the order of the judge, to appear and testify upon any proceedings herein provided in the same manner as upon the trial of an issue."
. With the enaсtment of Business Incorporation Act in 1947, a shareholder became entitled to inspect corporate records “for any proper purpose." Wolozyn v. Begarek, Okl.,
. Equity imposes upon one selling pledged collateral the affirmative duty to obtain a fair and reasonable price. See Whitman v. Boston Terminal Refrigerating Co.,
. See supra note 17 for the history of a shareholder’s right to inspect.
. See supra note 14, J.W. Smith, The Equitable Remedies of Creditors § 4 at 10.
. Stone v. Coleman, Okl.,
. Our paperwork reveals that the respondent judge heard testimony of what was required, under generally accepted accounting principles, to value the stock of a privately held corporation. See Exhibit “B” to Ramco's abstract of record in
.Our jurisprudence recognizes two “escape hatches” from the strictures of the mootness doctrine. These are (1) the public-interest and (2) the likelihood-of-recurrence exceptions. City of Oklahoma City v. Oklahoma Tax Com'n, Okl.,
. The law’s general principles of fairness are applicable to all post-judgment judicial sales. The safeguards that govern judicial sales can be no less protective of the debtor than those imposed on contractually authorized private sales. Cate v. Archon Oil Co., Inc., Okl.,
. See Ruden, supra note 18 at 1225.