Case ID: ad_106/html/0349-01.html
Source: Caselaw Access Project
Author: {"author": "Houghton, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

The People of the State of New York ex rel. Michael J. Callanan, Appellant, v. Keeseville, Ausable Chasm and Lake Champlain Railroad Company and Others, Respondents.
    
      Corporate books — an inspection by a stockholder of the general business books rests in the discretion of the court — an inspection of the stock book is an absolute right — the motive of the stockholder considered in the former, and not in the latter case.
    
    The right of a stockholder of a corporation to inspect the general business books of the corporation rests solely upon a common-law basis, and the granting or withholding of it, on refusal by the corporation, rests solely in the sound discretion of the court.
    The court will not grant the stockholder’s application for an inspection of such books unless he seeks to learn something which he has a right to know for his own protection, and his application must be in good faith and not for the purpose of injuring or annoying the corporation.
    The right of a stockholder of a corporation to inspect the stock book of such corporation stands upon a different basis. It is not only a common-law right, but is an absolute statutory right conferred by section 29 of the Stock Corporation Law (Laws of 1890, chap. 564, as amd. by Laws of 1892, chap. 688; Laws of 1900, chap. 128, and Laws of 1901, chap. 354).
    The motives actuating a stockholder in demanding an inspection of the stock hook are immaterial.
    Appeal by the People of the State of New York and by the relator, Michael J. Callanan, from an order of the Supreme Court, made at the St. Lawrence Special Term and entered in the office of the clerk of the county of Essex on the 8th day of April, 1905, denying the relator’s motion for a peremptory writ of mandamus.
    
      Frank E. Smith and Weeds, Conway & Cotter, for the appellant, relator.
    
      Thomas O’Connor, for the respondents.
   Houghton, J.:

The relator is a stockholder of the respondent corporation whose officers are the individual respondents.

On the 24th of March, 1905, he received notice of a special meeting of the stockholders called for April eighth following, for the purpose of voting an increase of the capital stock of the corporation from $60,000 to $1,000,000.

Prior to the day appointed for the meeting relator went to the office of the corporation and demanded of the person in charge that he be permitted to inspect the stock book of the company. Such permission was refused, the excuse being that the person .in charge did not know the combination of the safe or have any power to permit inspection. Thereupon the relator presented himself to the office of the secretary, who resided in another village, in whose charge the stock book actually was, and demanded that he be permittéd to'see it. The secretary himself was absent and commuuication was had with him by telephone and he refused to allow the-clerk in charge of his office to permit the relator to inspect the book in his absence, saying, however, that he himself would be home in three days, when he would give the relator such information as lie-was entitled to. The relator then applied to the president of the corporation, who lived in still another place, and was told by him that he did not know where the stock book was unless it was at the secretary’s office, but no effort was made by him - to procure an inspection of it by the relator.

The relator did what he could by way of demanding inspection of the stock book in applying at the office of the company where it should have been kept, and at the office of the secretary where it was actually kept. We think his demand was sufficient and that he had an absolute right of inspection, and that the peremptory writ of mandamus should have been granted.

Section .29 of the Stock Corporation Law (Laws of 1890, chap. 564, as amd. by Laws of 1892, chap. 688; Laws of 1900, chap. 128, and Laws of 1901, chap. 354) provides that “the stock-book of every súch (stock): corporation shall be open daily, during at least three business hours, for the inspection of its stockholders and judgment creditors,- who may make extracts therefrom.”

With respect to the general business books of a corporation, the court will not order an inspection by the stockholder unless he seeks to learn something which he has the right to know for his own protection, and his application must be in good faith and not for the purpose of injuring or annoying the corporation. (People ex rel. McElwee v. Produce Exchange Trust Co., 53 App. Div. 93; Matter of Kennedy, 75 id. 188; Matter of Latimer v. Herzog Teleseme Co., Id. 522; Matter of Coats, Id. 567; Matter of Colwell v. Colwell Lead Co., 76 id. 615.) The right of inspection of books of this character by a stockholder is a common-law right, and the granting or withholding of it on refusal by the corporation rests in the sound discretion of the court. But the inspection of the stock book is upon a different footing, and is a right given absolutely to the stockholder by statute in addition to his common-law rights. (Matter of Steinway, 159 N. Y. 250, 264.) In the course of the opinion in this case, Vann, J., says: “ The statute merely strengthened the common-law rule with reférence to one part thereof and left the remainder unaffected. It dealt with but a single book (stock book), and as to that it amplified the qualified right previously existing by making it absolute and extending it to judgment creditors. The stock book has no relation to the business' carried on by a corporation, and the change was doubtless made to enable stockholders, to promptly learn who are entitled to vote for directors, and judgment creditors to learn who are liable as stockholders for a failure', to comply with the provisions of the act. The statute is silent as to the other books, and provides no system of inspection as a substitute for the right of examination at common law.”

The distinction between an inspection of the general books of' the corporation and its stock book is illustrated by the case of' People ex rel. Clason v. Nassau Ferry Company (86 Hun, 128), where general inspection was denied and inspection of the stock book given as a matter of right.

The motives of a stockholder in inspecting the stock book alone-are immaterial. (People ex rel. Gunst v. Goldstein, 37 App. Div. 550; People ex rel. Harriman v. Paton, 20 Abb. N. C. 195.)

An important meeting of the corporation had been called and was. about to take place. The relator had the right to inspect the stock book of the corporation for the purpose of ascertaining who were its stockholders and who had a right to vote to increase its stock. It was a privilege accorded him expressly by the statute, and lie. should have been granted inspection.

The order denying the peremptory writ of mandamus should be reversed, with costs and disbursements, and the' motion for the peremptory writ of mandamus granted, with twenty dollars costs.

All concurred.

Order denying the peremptory writ of mandamus reversed, with, costs, and the motion for the peremptory-writ of mandamus granted,, with twenty dollars costs.