42 Del. 423 | Del. Super. Ct. | 1944
delivering the opinion of the Court:
We shall attempt to answer the questions presented in the order we have adopted.
1. Can a Board of Directors of a Delaware Corporation require one of its members to state his reasons for examination of books and records ?
Unfortunately, there are no decisions in this State considering the right of inspection of books by a Director of a corporation. There are, however, a number of cases dealing with the right of inspection by stockholders, and between the two classes there exists such an analogy as to make the consideration of these latter cases have pertinency. While the relative rights of inspection by stockholders and Directors may be somewhat different, and these rights be based upon different principles, yet there is much in common between them. The real basis of the right of stockholders to inspect books is the right of ownership of corporate property held by such stockholder through the medium of his ownership of shares: the right of a Director to examine books grows out of the fact that he is a representative of all the stockholders and, in a sense, a managing partner of the corporation. 2 Machen on Corp., Sec. 1101. Every administrative employee of the company is an agent of the Directors, and it is such Director’s right and, perhaps, his duty to satis
We think a Director need not state to his fellow Directors the reason for a desired examination by him of the corporate records, and that such fellow Directors cannot require such reasons.
2. We think the Relator’s petition, with exhibits filed therewith, were sufficient to show a refusal of the requested examination. The request was explicit. The answer of the company clearly showed that it intended not to grant the requested examination until the Relator, a Di
3. We see no objection to the present petition from the standpoint of pleading.
4. We now come to the last contention of the defendant in its motion to dismiss the petition and, indeed, the one chiefly relied upon at the argument. The defendant company concedes that a stockholder having the right to examine certain corporate books may avail himse'f of assistance in such examination, so as to make such examination effective. This assistance may be furnished by attorney, accountant or other agency as may be requisite. It concedes that this examination may be made by the properly accredited and responsible agents of the stockholder without the personal attendance of the stockholder. It concedes that a Director has a right to examine; the books of the company, and for this purpose may have the assistance of other persons. It insists, however, that when the Director avails himself of assistance in such examination that the Director must be personally present at all times of the investigation. It is this narrow question then that we must now consider. To sustain its contention the defendant cites two cases, Dandini v. Superior Court, 38 Cal. App. 2d 32, 100 P. 2d 535, and People ex rel. Bartels v. Borgstede, 169 App. Div. 421, 155 N. Y. S. 322.
Any language of the first cited case as bearing out the contention of the defendant may, we think, be readily classified as mere dicta. In that case, a Judge by his order had given a limited and restricted right to a Director to examine books: he had carefully stricken out the right of the Director
In People ex rel. Bartels v. Borgstede, 169 App. Div. 421, 155 N. Y. S. 322, 323, the Court conceded that a stockholder, with whom rested a right but no duty, could examine certain corporate records, and for that purpose could appoint an agent: it conceded that the right of a Director to examine the corporate books was unquestioned, and that an attorney ■ or accountant might aid such Director. The Court, however, said that the Director upon whom was placed a right and upon whom was impliedly cast a duty to acquire a knowledge of company affairs must himself make “the search through the corporate books.” The Court impliedly holds that the Director must be personally present and, perhaps, join in the actual search for information.
With this conclusion we are not in accord.
To a stockholder, as we have seen, is given, under ordinary circumstances, a right of examination of certain books of a corporation in which said stockholder has an in- . terest. This right may be exercised or not as the stockholder sees fit. To a Director of the company is given a somewhat similar right of examination, but in view of his position there may be cast upon him the duty of making such examination if it be necessary to give him the proper knowledge of the affairs of the company. Both rights of examination carry with them the means of making the examination effective, viz., the right to avail themselves of the requisite assistance in order to ascertain the desired facts. Indeed, this right must operate more strongly in favor of one who acts as a Director or Trustee for others, and upon whom may be cast individual responsibility and personal liability. We think
What reason can exist to require the personal presence of a Director at an examination to which he may contribute nothing whatever? That “reason is the soul of the law” has ever been a maxim adopted by the Courts and its continuance, as such, has become a chief objective of judicial effort.
There is no question of any delegation of authority or duty resting upon the Director. That authority and duty still remain. There is merely the employment of assistance in acquiring the information requisite in one in a position of trust and responsibility. Our Courts in recent years have seen the directorate of a corporation include those of a foreign nation without any ability to speak or read the English language and to whom, without assistance the corporate books would have no meaning. We have seen a Director totally unable to see. Any requirement that these Directors be personally present at any examination of corporate books or records would, we think, be wholly devoid of reason.
From the nature of the present proceeding, being, a motion to dismiss the petition, we have not considered the exact nature of a Director’s right to examine books, nor any limitation thereon, for such matters can more properly be considered when an answer, if any, be filed.
The conclusions herein reached are supported in reasoning by the text and cases cited in 5 Fletcher on Corporations (Perm,. Ed.) Sec. 2235; 2 Cook on Corporations, Sec. 511; 2 Thompson on Corporations (3d Ed.) Sec. 1282; 6 Thompson on Corp., Sec. 4530; 2 Machen on Corp., Sec. 1101; Annotations in 22 A. L. R. 59; 80 A. L. R. 1510.