Case ID: ad_75/html/0567-01.html
Source: Caselaw Access Project
Author: {"author": "Hatch, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

In the Matter of the Petition of Russell R. Coats, Respondent, for a Copy of the By-laws of the Empire City Fire Insurance Company, Appellant.
    
      Inspection of the by-laws of a corporation by a stockholder — it rests in the discretion of the court—when granted.
    
    The granting or refusing of an application by a stockholder for an inspection of the by-laws of a corporation rests in the sound discretion of the court in the exercise of its equitable jurisdiction, and, if satisfied that the application is made for an improper purpose or will result in an abuse of the privilege, the court will deny the same.
    An application for an inspection of the by-laws, which constitute part of the contract between the stockholder and the corporation, rests upon a different footing from an application for an inspection of the books and papers thereof, and it must be a strong case which will warrant the court in refusing to grant a stockholder an opportunity to inspect the by-laws.
    Appeal by the Empire City Fire Insurance Company, from an order of the Supreme Court, made at the New York Special Term and entered in the office of the clerk of the county of New York on the 18th day of September, 1902, granting a peremptory writ of mandamus commanding the officers and directors of the Empire City Fire Insurance Company to exhibit to the petitioner the by-laws of said company, or a copy of the same, and of such resolutions of the company as. have the force and effect of by-laws, or to permit the petitioner or his attorney to take extracts or copies therefrom between certain hours on a business day.
    
      Charles Gibson Bermett, for the appellant.
    
      Henry C. Quhriby, for the respondent.
   Hatch, J.:

The petition instituting this proceeding shows that the petitioner is the owner of more than 500 shares of stock of the Empire City Fire Insurance Company; that he has heretofore applied to said company for a copy of the by-laws of the company and leave to inspect the same, but that his application in each instance has been refused. In a prior proceeding (Matter of Coats, 73 App. Div. 178) an order was obtained by this petitioner for the inspection of the books and other papers of the company. Upon appeal this court reversed such order for the reason that it did not provide proper safeguards to prevent an abuse of the privilege of inspection, and that the opposing affidavits presented a case tending to establish that the application was not made in good faith, but for an improper ulterior purpose. This court, therefore, reversed the order. The appellant has embraced within its record upon this appeal the affidavits used in opposition to the application for the Order in the other proceeding, and also additional affidavits, tending to show that it has not denied the petitioner any right of inspection of the by-laws of which it is possessed.

The claim of the appellant is now, as it was before, that this application is not made in good faith. It is clear that the petitioner is not entitled to the inspection of the by-laws and resolutions as matter of right. The granting or refusing of the application rests in the sound discretion of the court in the exercise of its equitable jurisdiction, and if satisfied that the application is made for an improper purpose or will result in an abuse of the privilege it will deny the same. - (Matter of Steinway, 159 N. Y. 250.) The application for an inspection of the by-laws, however, rests upon a different footing from the application for an inspection of books and papers. The by-laws constitute a part of the contract between the stockholder and the corporation, and are binding upon both. (Rathbun v. Snow, 123 N. Y. 343, 349 ; Matthews v. A. P. S. N. Y., 136 id. 333.)

It must be a strong case, therefore, which would interpose t<> prevent a stockholder from an opportunity to examine the by-laws of the corporation, and thus inform himself of .the terms of the contract into which he has entered. He ought to be permitted to know the extent and terms of his obligations and the tenure upon which he holds his property.

It does not appear that the privilege to inspect the by-laws will be abused or that any ulterior purpose prejudicial to the corporation will be served thereby. We, therefore, think that a case was made' entitling the petitioner to an inspection and copy of the by-laws. The order as entered gives such right and preserves all of the rights of the corporation in permitting the inspection to which it is. entitled.

The order should, therefore, be affirmed, with ten dollars costs and disbursements.

Van Brunt, P. J., Patterson, Ingraham and Laughlin, JJ., concurred.

Order affirmed, with ten dollars costs and disbursements.