21 Wash. 451 | Wash. | 1899
The opinion of the court was delivered by
The Pacific Brewing & Malting Company is a corporation organized under the laws of, and doing business within, the state of Washington, and William Virges is the treasurer of, and is entitled to and has. possession and custody of the books of account of, said corporation. The respondent is a stockholder of the Pacific Brewing & Malting Company, owning 803 of the 5,000'
“ That relator as such stockholder has for some time been desirous of learning the true condition of the affairs of said company and of the management of its business and of the value and nature of relator’s interest and property therein as such stockholder, and of the manner and skill and fidelity with which relator’s interests as stockholder as aforesaid are and have been attended to and protected, and to that end has sought to inspect and examine, at proper and convenient times and without interruption or embarrassment to said company, or to the management, or transaction of the business thereof, the books of account of said corporation, and has requested and demanded of said respondents permission, access and opportunity to so examine said books of account, but said respondents and each of them have always refused and still refuse relator such permission, access and opportunity.”
The lower court caused an alternative writ to issue directing the appellants to permit the respondent to inspect the books, or show cause, on a date named, why a peremptory writ commanding them to do so should not issue. On the return day the appellants appeared and moved the court to quash the proceedings, for reasons which are hereafter noticed; and, on their motion being overruled, demurred, reciting the grounds contained in their motion, and the further ground that the alternative writ of mandate, and the affidavit on which it was based, did not state facts sufficient to constitute a cause of action, or to entitle the court to issue the writ, and that the respondent had a plain, speedy and adequate remedy in the ordinary course of law. The demurrer was also overruled; whereupon the appellants took issue upon the facts alleged, upon which a
1. The motion to quash and dismiss is based on the ground that the proceeding is not prosecuted in the name of the real party in interest, and is wrongly entitled. The contention is that in all special proceedings, where the state has no direct interest, it cannot be made a party, and its name should not he used in the title of such proceedings ; that the proper way to entitle such a cause is in the name of the interested party as plaintiff and the adverse party as defendant, after the manner required in an ordinary civil action. In support of this, the appellants cite subd. 1 and 2 of § 4753, and §§ 4824, 5738 and 5775 of Ballinger’s Code. Conceding the construction put upon the statute by the appellants to be the proper one, the result contended for by them would not necessarily follow. The court will not in the first instance, on its attention being called to this character of defect, quash the writ and dismiss the proceeding, but will first grant the applicant an opportunity to amend by striking out the name of the unnecessary party and inserting the name of the party beneficially interested in the writ, and will only dismiss when its order in this respect is disobeyed. But treating the motion to quash as, in effect, a motion to require the applicant to amend, should it be allowed? At common law, as formerly adjudicated in the courts of England and in some of the courts of this country, the writ of mandamus was regarded as purely a prerogative writ, issuable not of right, but only at the pleasure of the sovereign or state, and hence only in his or its name and as an attribute of sovereignty. . How, in this country, it is generally, if not universally, regarded as a writ of right, issuable as of
“ We are not inclined to extend the principles adjudicated in People v. Pacheco, on this point, beyond the facts of that case.”
It would seem, too, that in applying the principles announced in the eases cited to subsequent cases the courts of those states have not been entirely consistent. If it be error to join the state as prosecutor in a case where only a private prosecutor is interested, it ought to be equally so to join a private prosecutor with the state where the writ is prosecuted on behalf of the whole people — where the state alone is interested — yet this is constantly being done in
“ The right of the relator to bring an action by mandamus in the name of the state has been recognized from the earliest period of our history as a state, and may be regarded as a settled rule which, if changed, it should be done by the legislature.”
In State ex rel. Dakota Hail Ass’n v. Carey, 2 N. Dak. 36 (49 N. W. 164), a case where the attorney general appeared and moved to dismiss because the proceeding was not prosecuted in the name of the real party in interest, the court, citing the statute of that state, which declared that “every action must be prosecuted in the name of the real party in interest,” held that this section applied only to remedies formerly had by action at law or by suit in equity, and was not intended to'include special proceedings, such as mandamus, etc., saying:
“ We can see no good likely to result from changing the established practice in this respect, and, on the other hand, a change, not based on a new and well-considered statute would, in our opinion, tend to much confusion in the practice, and thereby greatly impair the usefulness of the writ.”
In State ex rel. Huston v. Commissioners of Perry County, 5 Ohio St. 497, it is said:
“ The question as to the prosecution of the writ in the name of the state, is purely technical; and if this mode of prosecution be informal under the code, leave would of course be given to amend. But we incline to think this mode of proceeding in mandamus proper. The writ is, from its very nature and definition, ‘a command issuing in the name of the sovereign authority.’ Bouvier’s Diet.*457 Blackstone says, ‘It is a command issuing in the king’s name.’ In the United States it has always been issued in the name of the sovereignty by which it has been authorized. We apprehend the code does not contemplate an essential change in the character of the writ or the proceedings under it. Brom the nature of the remedy, this suit, then, is properly prosecuted in the name of the state.” Collett v. Allison, 1 Okl. 42 (25 Pac. 516) ; State ex rel. Curtis v. McCullough, 3 Nev. 202; Chumasero v. Potts, 2 Mont. 242; Territory ex rel. Tanner v. Potts, 3 Mont. 364; Ohio ex rel. Parrott v. Board of Public Works, 36 Ohio St. 409; Whitesides v. Stuart, 91 Tenn. 710 (20 S. W. 245).
In all the numerous applications for this writ made before this court, and before the superior courts and brought here on appeal, the proceedings have been, with perhaps one exception, prosecuted in the name of the state on the relation of the party beneficially interested, and, as is stated by the counsel for appellants in their brief, “it is believed that this is the first time that the question of practice presented by the case at bar has been submitted to this court for its decision.” It is proper to add that this practically uniform construction of the statutes relating to this subject by the learned and distinguished counsel who appear before the bar of this court is entitled to great weight in determining what is the proper practice, and that when a practice is once established radical innovations are to be avoided, especially where no real evil is corrected by the change. We conclude, therefore, that this proceeding is properly brought in the name of the state, on the relation of the party beneficially interested.
2. Another question is, has the respondent shown facts sufficient to authorize the court to direct that a writ of mandamus issue ? The stockholders of a corporation have at common law, for a proper purpose, and at seasonable times, a right to inspect any or all books and records of the corporation. While this right is universally recog
“ The master and wardens, who have the care of the documents in question, are bound to produce them if a proper occasion is made out, in a matter affecting the members of the corporation. But I think the members have no right on speculative grounds to call for an examination of the books and muniments, in order to see if by possibility the company’s affairs may be better administered than they think they are at present. If they have any complaint to make, some suit should be instituted, some definite matter charged; and then the question will arise whether or not the court will grant a mandamus.”
Taunton, J., said: „
“ There is no express rule that to warrant an application to inspect corporation documents there must actually have been a suit instituted; but it is necessary that there should be some particular matter in dispute, between members, or between the corporation and individuals in it; there must be some controversy, some specific purpose in respect of which the examination becomes necessary.”
Patteson, J., said:
“ I am far from saying that there may not be particular instances in which a corporator may apply for a mandamus to inspect documents, or some of them, of the kind here mentioned, if he can show a specific ground of application, and that the granting of it is necessary to prevent his suffering injury, or to enable him'to perform his duties. But he must state a definite object; and here that is not done.”
The injustice of the rule, when applied in all its strictness, has been so keenly felt that in England, and in many of the United States, the right of inspection of corporate books is now guaranteed to the stockholders by statute, and such statutes seem to be generally held not to be innovations in, but declaratory of, the common law. The tendency of the modern decisions, also, is towards holding that a stockholder, as such, has a right to inspect the books and other documents of the corporation, where his sole object is to inform himself as to the manner in which the business of the corporation is being conducted. In State ex rel. Doyle v. Laughlin, 53 Mo. App. 542, the facts were that the relator was a stockholder in a banking corporation, and as such stockholder requested of the directors and officers of the bank the privilege of examining the books of the bank for the sole purpose of acquainting himself with the condition of its affairs, and how the bank was being managed. On the request being refused, he brought mandamus to compel the officers to allow such inspection. The court said:
*461 “ The right of a stockholder to examine and inspect all the hooks and records of a corporation at all seasonable times and to be thereby informed of the condition of the corporation and its property is a common-law right. . . It is quite obvious therefore that the relator has a clear right to examine the books of the bank in question. And thongh the relator in his application for the alternative writ took the precaution to state the purposes for which he sought to exercise the right of inspection, this upon principle we think was unnecessary. If the right of' inspection of the corporate books exists, whether under the statute or at common law, the purpose of the exercise of the right is immaterial. State ex rel. v. Sportsman's Park, 29 Mo. App. [326] supra. Because the right may be made the subject of abuse does not prove that it does not exist. The manner in which it may be exercised might well be regulated by the by-laws of the corporation. Such regulations would, of course, have to be reasonable. The right could not be regulated out of existence.”
In State ex rel. Bourdette v. New Orleans Gaslight Co., 49 La. An. 1556 (22 South. 815), the court said:
“Ho better way of safeguarding the interests of the public can, perhaps, be devised, or one that may be so easily and readily applied, as the right to the frequent, sudden and speedy examination of the books of corporations in the stock or shares of which investors and speculators are invited to trade. The recognition of this fact attests alike the wisdom and purpose of the framers of the constitution. The question here presented was virtually passed upon in Legendre v. Brewing Association, 45 La. An. 669 (12 South. 837), and adversely to the pretensions of defendant corporation herein. See also State ex rel. Martin v. Bienville Oil Works Co., 28 La. An. 204; Cockburn v. Union Bank, 13 La. An. 289. In the United States the prevailing doctrine appears to be that the individual shareholders in a corporation have the same right as the members of an ordinary partnership to examine their company’s books, although they have no power to interfere with the management. (Morawetz, Priv. Corp., § 473.) This doctrine obtains with all the more force in*462 this state by reason of its recognition in the constitution itself.”
In Lewis v. Brainerd, 53 Vt. 519, an action brought under a statute to recover a penalty fixed by the statute for refusing to permit a stockholder to examine the books, the court, on affirming a judgment recovered for such refusal, said:
“ The shareholders in a corporation hold the franchise, and are the owners of the corporate property; and as such owners they have the right, at common law, to examine and inspect all the books and records of the corporation, at all seasonable times; and to be, thereby, informed of the condition of the corporation and its property. Our statute provides the method of securing and enforcing such rights. The statute is remedial; it was enacted to secure rights and suppress fraud and wrong; and should be so construed and enforced as effectually to carry out the purpose of the legislature, and remedy the evil sought to be prevented.”
In Huylar v. Cragin Cattle Co., 40 N. J. Eq. 392 (2 Atl. 274), it is said:
“ Stockholders are entitled to inspect the books of the company for proper purposes at proper times. 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.”
See, further, Cockburn v. Union Bank, 13 La. An. 289; State ex rel. Martin v. Bienville Oil Works Co., 28 La. An. 204; Ranger v. Champion Cotton-Press Co., 51 Fed.
In § 4418, the author in the last work cited quotes from the English cases announcing the rule that the right to inspect the books of a corporation will not be enforced unless there is a defined, distinct dispute, and adds:
“ It should be carefully added, however, that this theory has gained no considerable footing in America, nor is it based npon any foundation of sense. Subject to the convenience of the others, or of the common agency which acts for all, it is the right of every proprietor to know how the business in which he has embarked his money is being carried on, whether there is any dispute about it or not. ETor can this principle have any application where the right is given by statute.”
In § 440Y the same author says:
“ In corporate management, or mismanagement, no more frequent or more aggravated species of outrage exists than the refusal of those in possession of the corporate books to disclose to the stockholders the written evidences of their stewardship; and in many cases nothing short of severe pecuniary forfeitures, followed by imprisonment as for. crime, will afford an adequate protection to minority stockholders.”
Corporations, owing to the ease with which they can be formed under the liberal provisions of the statute and, affording as they do a limited liability for investors, have become a favorite means for the combination of capital, and are now engaged in almost every variety and character of business. In fact, they have largely superseded partnerships. ETot having behind them the personal responsibility and fortunes of the promoters, or that of those who may have invested in their capital stock, the interests of the public at large require, and especially that part of the public dealing with them, that the courts adopt the rule
3. It is contended that the writ should have been refused because it is not shown that the demand for an inspection was made during business hours, or at the place of business of the corporation, or that the person making the demand was the agent of the respondent, or had any lawful right to represent her in the transaction. These objections would come with more force had the refusal to permit an inspection on the part of the officer in charge of the books been based upon some one, or all, of these grounds. But the refusal was made upon the broad ground that the respondent, as such shareholder, had no right to inspect the books of the company at any time or for any purpose, and the main dispute in the court below seems to
The judgment is affirmed.
Gordon, C. J., and Beavis and Dunbar, JJ., concur.