Case Name: The People ex rel. Edward A. Stauffer, Relator, v. Bonwit Bros. et al., Respondents
Court: New York Supreme Court
Jurisdiction: New York
Decision Date: 1910-09
Citations: 69 Misc. 70
Docket Number: 
Parties: The People ex rel. Edward A. Stauffer, Relator, v. Bonwit Bros. et al., Respondents.
Judges: 
Reporter: New York Miscellaneous Reports
Volume: 69
Pages: 70–72

Head Matter:
The People ex rel. Edward A. Stauffer, Relator, v. Bonwit Bros. et al., Respondents.
(Supreme Court, New York Special Term,
September, 1910.)
Corporations — Rights of stockholders and actions by them — In general — Right to inspect books of corporation.
Estoppel — Equitable estoppel and estoppel in pais — Facts creating estoppels — Ratification and affirmance — Participation in acts.
Two directors of a corporation claiming to be the only persons interested in it may not deny to the third director the right to examine the corporate books on the ground that he is without interest in the corporation and a mere dummy put forward by them because the statute required three directors.
A clause contained in an order to show cause why the relator, the third director, in such a case should not be permitted to examine the corporate books, staying defendants from removing relator pending the proceeding, is not an injunction within the meaning of section 305 of the General Corporation Law, nor does it suspend the general and ordinary business of the corporation but it is of doubtful efficacy.
Motion to examine books of a corporation,
Arthur B. Hyman, for relator.
Max D. Steuer, for respondents.

Opinion:
Whitney, J.
Relator is secretary and a director of the defendant corporation. His right as such to examine its books is undisputed. People ex rel. McInnes v. Columbia Bag Co., 103 App. Div. 208; People ex rel. Leach v. Central Fish Co., 117 id. 77; People ex rel, Grant v. Atlantic Terra Cotta Co., 196 N. Y. 523. But the other two directors refused to allow him to exercise his right and took proceedings to call a special meeting of themselves as stack:' holders to amend the by-laws and remove him from office forthwith. Ho malfeasance on his part is charged. ' Their theory is that the corporation is a mere partnership in corporate form; that they own it and he never has had any pecuniary interest in it; that he is a mere dummy who has been put forward by them because the statute requires three directors; that in fact they are the corporation, and he is merely a means whereby, without benefit or protection for himself, they may escape .personal liability for the risks of the business which they are carrying on. But they cannot be heard to say that- they have created a dummy director for the purpose of enjoying a corporate asylum without dividing their real powers with the third person required by the statute to share them. Belator must be taken to be a real director, who has been incurring the real responsibilities and risks of that position, and is equal to either of his colleagues in directorial power and standing. Por his own protection and that of the creditors he is entitled to examine the books up to the time of his removal, and, if the removal be sudden, then I think that he should have opportunity for a reasonable time thereafter to do so. The order to show cause contains a clause staying defendants from removing him or amending the by-laws so as to permit his removal pending the final disposition of this application.They ask for the immediate excision of this clause from the order, claiming that it violates section 305 of the General Corporation Law, since the order to show cause was granted without notice to them. I think that there are two answers to this. First, the amendment of the by-laws and sudden decapitation of the secretary are not the general and ordinary business of the corporation, and a temporary restraint of these specific acts is not such a restraint from the performance of the duties of the majority directors as is contemplated by that section. So to rule would be going beyond even Wilkie v. Rochester & State Line R. R. Co., 12 Hun, 242, upon which they rely, and I doubt whether that case, which seems never to have been followed, is to be regarded as law. Second, this is not an injunction and the section cited is, therefore, not applicable. I doubt whether such a stay clause in such an order has any efficacy whatever — whether relator . could prevent his immediate removal otherwise than by beginning a suit in equity, giving the requisite undertaking and obtaining a temporary injunction in regular form. But for tbe reasons heretofore stated, I do not think that it was necessary for him to procure such an injunction in order to obtain an inspection off. the books.
Motion granted.