Case Title: Towle v. Robinson Springs Corp.

Citation: 168 Vt. 226, 719 A.2d 880

Docket Number: 

State: vermont

Court: Vermont Supreme Court

Date: 1998-08-28T00:00:00Z

Document:
Towle v. Robinson Springs Corp.  (97-328); 168 Vt. 226; 719 A.2d 880

[Filed 28-Aug-1998]

       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal revision before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of Decisions,
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any errors in order that corrections may be made before this opinion goes
  to press.

                            No. 97-328

Roderick M. Towle, as Executor               Supreme Court
of the Estate of James F. Tooley
                                             On Appeal from
    v.                                       Lamoille Superior Court

Robinson Springs Corporation and             May Term, 1998
Olaf Rasmussen

Ronald F. Kilburn, J.

       Peter G. Anderson, Stowe, for Plaintiff-Appellee.

       Harold B. Stevens and Elizabeth A. Magovern, Law Clerk (On the Brief),
  of Stevens Law Office, for Defendant-Appellant.

PRESENT:  Amestoy, C.J., Dooley, Morse, Johnson and Skoglund, JJ.

       AMESTOY, C.J.   Defendant Robinson Springs Corporation (RSC) appeals
  from an order of the Lamoille Superior Court directing it to provide James
  F. Tooley access to its books and records and to pay the shareholder's
  attorney's fees.(FN1)  RSC argues that the court erred in (1) ordering it to
  allow the shareholder to inspect its records and adopting the shareholder s
  proposed findings verbatim, and (2) awarding attorney s fees.  We affirm
  the trial court's ruling, but remand for further evidence as to the
  reasonableness of the award of attorney's fees.

       Tooley was a shareholder of RSC, a closely held Vermont corporation. 
  In 1995, he requested to inspect RSC's books and records in order to
  examine its accounting practices and allegedly excessive expenses.  RSC
  denied this request.  Later the same year, Tooley renewed his request,
  asking to inspect RSC's payroll journals, cash disbursement journals,
  purchase

 

  journals, cash receipts journals, the general ledger, and RSC's federal and
  state corporate income tax returns.  Tooley requested these materials for
  the stated purposes of valuating his shares of RSC stock and ascertaining
  the financial status and health of the corporation.  RSC again denied the
  request.  In response to this refusal, Tooley sought an injunction
  requiring RSC to make its books and records available for inspection and
  examination.

       The court found that Tooley had made the request in good faith and for
  a proper purpose. See 11A V.S.A. § 16.02(c)(1) (requiring such showing as
  prerequisite to inspection rights).  The court also found that RSC had no
  reasonable basis to deny the request because it had failed to meet its
  burden to prove that the request was made for an improper purpose.  The
  court then ordered RSC to produce specific corporate records for
  inspection, and, pursuant to 11A V.S.A. § 16.04(c), to pay all costs,
  including Tooley's reasonable attorney's fees.  RSC appeals.

                  I.  The Shareholder's Right to Inspection

       RSC argues that the court erred in ordering the inspection of its
  books and records because Tooley did not have a proper purpose to conduct
  the inspection and because substituted items would suffice.  Vermont's
  Business Corporation Act, 11A V.S.A. §§ 1.01 - 20.16, permits a shareholder
  to inspect and copy corporate records only if "(1) the shareholder
  establishes that the shareholder's demand is made in good faith and for a
  proper purpose; (2) the shareholder describes with reasonable particularity
  the shareholder's purpose and the records the shareholder desires to
  inspect; and (3) the records are directly connected with the shareholder's
  purpose."  Id. § 16.02(c).  In a request to inspect corporate records, the
  shareholder bears the initial burden of stating a proper purpose.  See 11A
  V.S.A. § 16.02(c)(1).

       There is little guidance from Vermont case law on what constitutes a
  proper purpose. Vermont's Business Corporations Act does not directly
  follow the Model Business Corporation Act, but we have looked in the past
  to both commentary on the Model Act and case law from other states to
  provide guidance in interpreting Vermont's law.  See Kalanges v. Champlain
  Valley Exposition, 160 Vt. 644, 645,