Court Opinion

ID: 8809137
Source: CourtListenerOpinion
Date Created: 2022-11-26 14:57:18.065049+00
Date Added: 2024-06-11T17:04:13.037673
License: Public Domain

Mr. Justice Willis delivered the opinion of the court. The question whether or not appellee is entitled to a writ of mandamus to compel appellant as an officer of the W: T. Raleigh Medical Company to permit him to examine the books of account and records of that corporation, is presented by the demurrer to appellant’s answer to the petition. Appellee was a stockholder owning $3,500 at its face value of the capital stock. He had large interests to protect and the right to inform himself as to the affairs and conditions of the company, if necessary by the examination of the records and books of account of the company at any reasonable and proper time. The petition was amply sufficient, and unless it can be said that the 'answer showed sufficient reason for refusing the writ, the judgment of the Circuit Court must be affirmed. The rights at common law of the stockholders of a corporation to examine its books and records, and the effect of section 13, chapter 32 of the Revised Statutes of this state upon the common law right, are fully considered in Stone v. Kellogg, 165 Ill. 192, a case similar to the one at bar. The court there quoted with approval from Foster v. White, 86 Ala. 467, where it was held that a provision of the Alabama statute similar to our own was not merely declaratory of the common law, but was enacted to protect small and minority stockholders against the power of the majority, by furnishing an opportunity and mode to ascertain, establish and maintain their rights, and intelligently to perform their corporate duties; that the only express limitation to the right of inspection of a stockholder under that statute was that the right should be exercised at reasonable and proper times; and that the implied limitation was that it should not be exercised from idle curiosity or for improper or unlawful purposes; that in all other respects the statutory right was absolute; that the statute was founded on the principle that the shareholder had a right to he fully informed as to the condition of the corporation, the manner in which its affairs were conducted and how the capital stock to which he had contributed was employed and managed. The court said in the Stone case: “This interpretation of the statute of Alabama made by the Supreme Court of that state is, we think, a correct one, and is as liberal to the officers and agents of the corporation having the custody of the books, or to the majority of the stockholders or directors under whose orders they may act, as would he permissible to give to our own statute.” Appellant does not question the authority of Stone v. Kellogg, supra, but contends that the averments in the answer bring the case at bar within the implied limitation, that the right of inspection shall not be exercised for improper or unlawful purposes; and in support thereof argues that up to January 1, 1908, the petitioner, being in the active management of the company, was fully cognizant of its financial condition; that just prior to his filing the petition he was furnished with a statement of the financial condition of the company at its annual meeting; that he had started a competing company; that upon leaving the employ of the company, he carried away monthly and weekly statements that had come into his hands as manager, and that in so doing, his motive was sinister; that he had used the statements furnished him as a stockholder in procuring an increased assessment of the property of the company. The petition alleged that appellee never had complete and full access to all the records and books of account of the company; that the annual statement did not show the amount of cash on hand; and this was not denied by the answer. The answer admitted that appellant borrowed $10,000 from the company, and averred that it was paid back with interest, but at what rate of interest the answer did not state. The petitioner had a right to know what use was being made of the money in which he had an interest and what the income from it was, and was not obliged to rely upon appellant’s report for the information when an inspection of the books and records would show the actual condition. The averment in the answer upon which appellant bases his charge that appellee’s motive was sinister in carrying away the weekly and monthly reports furnished him while manager, was, that in organizing the Furst-McNess Company, he “used the statements furnished him as an employe of the company for the purpose of showing to capitalists the wonderful money-making prospects of such a business.” The only way in which appellant could1 be thereby injured would be by the creation of competition. As competition is legitimate in business and in accord with public policy, the motive prompting it cannot be said to be sinister. The fact that appellee was interested in a rival and competing company does not necessarily indicate an improper and unlawful purpose in asking inspection of the books of account and records. In Cobb v. Lagarde, 129 Ala. 494, a case similar to the one at bar, an answer was filed charging bad faith, improper purpose, hostility, and that petitioners were owners of and engaged in a rival and competitive business; and the court there said: “The fact of the petitioners being stockholders in a rival concern, and that they may thereby gain some advantage by an inspection of the books of the defendant company, does not necessarily show an improper purpose in making demand for inspection, and will not deprive them, as stockholders, of their right of investigation into the management of the affairs of said company.” Appellee’s purpose in furnishing information from which the taxes of the company were raised cannot be said to be unlawful. His interest had to bear its proportion of the increased tax, and he is to be commended therefor rather than deprived of a legal right. There was no sufficient allegation in the answer from which it can be made to appear from the admission made by the deniurrer that the object and purpose of the petitioner were improper and unlawful or were to injure' the corporation. “It is no sufficient answer to such a petition to impugn the motives of the petitioner.” Stone v. Kellogg, supra. Appellee stated in his petition that he had no desire to see the formulas or become informed of the process by which said Rawleigh’s remedies were prepared; that in seeking said examination he had no intention or desire to see the list of the names of salesmen or any of them in the employ of said W. T. Rawleigh Medical Company, and that he so stated to said defendant, W. T. Rawleigh, said president and treasurer, when he demanded to see said books of account and records; that in these matters he was willing to submit to any reasonable restrictions consistent with due and adequate protection of his own interest, which the court had power to impose. We are of the opinion that the court below sufficiently protected appellant’s rights by the limitations placed upon appellée’s right of inspection; therefore there was no error in sustaining the demurrer to the answer. The judgment is affirmed. Affirmed.