The New York herald., 1877-03-17
Rights Of Stockholders to Inspect the
Books Of a Corporation.
WOES OF A WEALTHY OCTOGENARIAN.
Application Of the Mcum and Tuum Principle
TO Theatrical Managers.
SERVICE EXTRAORDINARY OF A COMPLAINT

and others to compel the Lake Snore ana aiiChigau
Southern Railroad Company to give tho names Of its
directors and tho Farmers Loan and Trust Company,
in which is kept the transfer books. to exhibit tho
samo, Is still kept up In undated zeal In the courts
AS will be remembered mandamus was applied for
IN tho Supreme Court compelling the giving the nor
nation sought such mandamus being really directed
against William H. Vanderbilt, who, In turn, resisss
the granting OF tho mandamuS On the argument OF
tho case at Special Term tho application was denied.
An appeal was promptly taken to the General Term'
where The argued yesterday at great length,
Nessrs Henry s. Bennett A. J. Vanderpoel and Hob
ert Sewall appearing on behalf Of the appellants and
Messra Evarts, Southmayd Choatc beng counsel Tor
tho respondents
Mr.. Bennett devoted his portion OF the argument
specially the right of member OF corporation to
nm inspection OF the books Of that corporation. He
contended that at common law member OF corpora
tion had right In tho absence OF any statute for
bidding Its exercise. The right Of person to an In
spcctiou OF tho books OF corporation in which he is
shareholder hc said, similar to aud rested upon
tho same general principle the right Of partner TO
nm inspection OF the books Of partnership Of which
he was member Tho latter right was too well SET
tied and TOO generally recognized to admit OF dispute,
for 1t was nor less than the rgnt OF an owner
10 inquire and control the management Of his own
property. The fact that he was not the exclusive
owner the property, and that therefore he enjoyed
that right in common with others. did not impair his
individual right prevent him from exercising IT,
Nor could the TACT that he with others, constituted
corpuraton destroy that right, for stockholder IN
corporation possessed an HIS 'naivdHa rgn's, en-
Yer or The bylaws, passed in conformity thereto.
corporation must necessarily act through directors
or trustees but Whatever rights and powers those a.
recturs or trustees had we're derived solely from the
shareholders owners who delegated 10 them their
powers But such powers SO delegated were not lost
In he OtIerS. they conferred oDSO-
Iutey and unreservedly ON the directors; put tney
constituted trust which the trustees or dlrec.ors
the to wit-the real owners OF the prop
erly The election therefore, Of directors by share
holders operated TO vest tor certain period IN the
directors powers tho corporate property
But the delegation OF thesc powers was conditioned
upon tine faithful discharge oi tho trust created In
Ease the powers so conferred were egtimately
ssed the trust betrayed, the purpose Tor wnch u
created would bc aeieated and tho right 20 exer-
else the powers SO delegated would cease. When,
therefore director undertook ut tho election 0f
shareholder the duties oi his Office there was an i'm
piled Obligation perform those duties with ndeliIy
ana the shareholder surrendered TO him his powers
upon tho alth OF that obligation and mpltedly re-
served to himself the right to withdraw tnose
principal always had the right 10 inspect the books
and inquire into tho transactions OF the agent whom
he authorized conduct his business This right was
his only protection against fraud and the abuse VI the
trust and authority conferred To deprive him OF this
right might render him Tor the time being remcdiless
against the frauds Of an unscrupuious agent And In
proportion 10 the degree OF confidence and authority
bestowed did tho necessity Tor the exercise OF TINS
right exist To say that because shareholder has
clothed trustee with iul power for certain period
10 manage Ills INTERESTS therefore the acts OF that
trustee should op that period be beyond the reach OF
tuouiry aud OF accountability, was virtually TO make
tho rcmedilcss against the imposition and
fraud Of director Now, II this doctrine Dc sonna,
believed and showed ground Tor believing that MS
agents. trustees directors were abusing their trust
and mismanagng his property had the right to inquire
into their proceedings, and it became the duty oil the
directors TO answer his inquiries. This right and
duty necessarily resulted from the relation ,n 0' con- n
nature and obligations OF the implied con-
tract under which the shareholder had sur
director. The mere tact that o director conscien-
tiously believed that he performing faithfully his
duty 10 the shareholder no why be should
decline TO answer the reasonable inquiries OF share
holder withhold from him the necessary nforma
ton 1t enough to know that tho shareholder had
reason believe, and did believe, and had set tortn
grounds for believing that bis Interests were being
sacrificed. This gave him tho right to make the IN.
qury imposed on the director the duty OF answer
ing the inquiry. If the shareholder compelled 10
until he had convincing or legal evidence OF the
betrayal OF his rights before ho could exercise even
the right of in vestiguon, he virtually remcdess
That would secure 10 director who was ekiliui
enough to conceal the evidence OF his msdeeds,
virtual immunity. This right Of inspection was
based, not the ground that the director had
been guilty of any msdeed betrayal OF trust,
but on tho ground that the shareholder bad the inter-
est Of ownership IN the corporate property, and,
though the shareholder had parted with the right to
control and manage his property hc still retained this
right full knowledge of all tho official acts OF his
officers officials themselves had SO as to enable
him TO ascertain whether their duty TO him was per-
formed Nor could the fact that this right was liable
abuse 10 be unrcssonaby exercised impair or ex-
tingush the right itself. Such abuse could be pro.
vented regulated only BY the charter or bylaws Ii
tue right exists at common law shareholder could
deprived OF II, except through the charter or
bylaws Of the corporation or by special statute. Nor
could the TACT that legislative statute exists, declar
ing that the shareholder had the right 10 an inspection
oi books within certain period and under certain cr-
lp pQt rnndu n
right OF inspection at any other period or under any
other circumstances The principe 'expressio unus
ct excuso aerus' could not be applied when party
already enjoyed by law right. for such case tho
OF the right must be prohibcd by the repeal
OF the law granting IT, Alter arguing upon these
points at great length aud quoting numerous authori-
ties support o his POSITION Mr Bennett concluded
by asserting that his clients had right TO tho nspec.
tiou sought; that theJ were IN position to demand
such inspection; that Mr. Vandcrbilts management
had been against the interests OF the Lake Shore road
and IN favor OF the New York Cen,ra that the object
Of hrs clients consult With their
and devise some plan to save tho corporate property;
shat ho order OF mandamus should issue anu tnat the
order denying Il should be reversed. Air. Scwe iol
lowed also with argument enforcing the legal prop
ositiou submitted by Mr.. Bennett
Mr. Choate, In reply, spoke also at great length,
starting with the proposition that where railroad
corporation created uLdcr the laws OF tho state Of
New YORK, deriving It's lie and existence from such
laws, II becomes thereby New York corporation,
Notwithstanding the fact that some of the component
elements, by the combination OF which the corpora.
ton ormed may have been foreign to that State,
an that there II 10 more foundation claim that
4 corporation formed under the laws OF New York by
the consolidation Of domestic and foreign corpora-
sion Is foreign corporation than there would he Tor
CLAIM that corporation created under our laws by
combination OF persons, some OF whom were nom
residents OF this State, ioreIgn corporation. He
thcn proceeded to argue that the rights oi stockhod
ers and the duties OF transfer agents o this
company, respect to the examination and
exhibition Of transfer books, are governed
BIZ the provisions OF The Revised statutes
and not by the provisions Of the act of 1922 that at
the common law tho stockbolder had no absolute
richt 10 the nation OF the books OF the corpora
ton OF which he member that the privilege OF
examining the books depended upon his ability TO
snow to tho Court TO which application made
that a epecia occasion had arisen which rendered II
proper that be should have an opportunity 10 make
such an examination order TO enable him TO perform
tomc duty which devoved upon him US corpora,or.
nd that otherwise could not obtain
except under circumstances IN respect TO pending
action In winch inspection oil the BOOKS would have
Lecn granted 10 strao2cE
Al The termination OF the argument the Court took
the papers, reserviDg It's decision.
rpOUrpT nE FOIJR SCORE