Court Opinion

ID: 5215084
Source: CourtListenerOpinion
Date Created: 2022-01-06 16:21:10.091477+00
Date Added: 2024-06-11T08:27:25.780279
License: Public Domain

Thomas, J.:
The action is to recover a penalty of $250 from the defendants for refusal to allow an inspection of defendant company’s stock book, pursuant to article 3, section 33, of the Consolidated Laws of 1.909, chapter 59. The defendant company is a foreign corporation, having an office for the transaction of business in this .State, where it keeps its stock book and performs the principal business related thereto. The • plaintiff became the owner of 500 shares of the stock of the company about March, 1909, and on March twelfth demanded an inspection of the stock book from the defendant Zetterlund, treasurer, at No. 225 Fifth avenue, New York, and on July 22, 1909, renewed his. demand, with the added request that he might copy the names of the stockholders and their places of residence. Plaintiff testified : “ I told Mr. Zetterlund that I was a stockholder of the El Arco Mines Company and that I desired to see'the stock book as I wished to get a list of the stockholders. He then replied that he wouldn’t show me such a list unless I told him what I wished it for. I stated that I wanted to see who the stockholders were and get their addresses so I could communicate with them and see if they were satisfied with the present management of the company. * * * He replied that lie wouldn’t, let me see such a list but that if I would state my reasons in writing he would submit it to his counsel, and he said that his counsel had advised him that just as many times in court it was held that yon couldn’t see the list as that you could. * * * He said he knew what I wanted to see it for and" he wouldn’t show it to me.” Zetterlund testified: “ Mr. Hollaman came in our office and said I want to see the company’s books. As his request was rather broad I hesitated. Finally he came down to demand the stock ledger or stock book, I don’t know which, and I told him that inasmuch as I was aware of the fact that he was bending all his efforts against the best interests of the stockholders of the El Arco Mines Company that I wanted him to give me a written application for the book, and to state therein the purpose for which he wanted to know the names and addresses of all of the stockholders, and I also told him that I couldn’t act upon such application at that moment, but that I had to refer same to the company’s attorneys. * ■* * He told me that he didn’t have to have a written order, and I told him that it was no more than fair *864that he should, and with that the conversation ended and he left the office saying that-lie would see about it.” .
In People ex rel. Callanan v. Keeseville, etc., R. R. Co. (106 App. Div. 349) it was held: “ The motives actuating a stockholder in demanding an inspection of- the stock book are immaterial.” The court below refused a peremptory writ of mandamus to compel such, inspection, but the court on appeal held that the relator was entitled to it. That decision was made in June, 1905, and on December 6, 1907, in People ex rel. Hunter v. Nat. Park Bank (122 App. Div. 635) it was. held that “the granting of the writ is in the,discretion of the court and may be denied where the application is not made in good faith but for an ulterior purpose and to aid undisclosed persons in some undisclosed scheme against the corporation.” This opinion quotes from Matter of Steinway (159 N. Y. 250, 263), where, after discussing the right at common law of a stockholder to an inspection of the books of a corporation in which he is a stockholder, it is said: “ To the extent, however,, that an absolute right, is conferred by statute, nothing is left to the discretion of the court, but the writ should issue as a matter of course, although even then, doubtless, due precautions may be taken as to time and place so as to prevent interruption of business, or other serious inconvenience,” and states : “-I do not think it was intended to' hold that the court had no discretion to refuse a mandamus where the application was not made in good faith but for an ulterior purpose, and to aid undisclosed persons in undisclosed schemés against a corporation.” In April, 1908, in Henry v. Babcock & Wilcox Co. (125 App. Div. 538), it was decided that “ there can be no recovery in an action to enforce the penalty for a refusal to allow a stockholder to inspect the stock book and copy therefrom the names and addresses of the stockholders, together with the number of shares held by them, for there was no demand to inspect which could be separated from the demand to be allowed to copy.” . In the opinion it was said: “We have recently held that;the court may, in its discretion, refuse to compel by mandamus either a foreign or domestic corporation to' produce its stock book for inspection by a stockholder where it does not appear that such inspection is sought for a legitimate purpose,” and, referring to cases cited, adds': “These cases are to be distinguished from the present one, in that in them- appli*865cation was made for a writ of mandamus, the issuance of which rests in judicial discretion, but I do not see why the rule there announced should not be adopted here. * * * And whenever application is made to inspect, and the motive of the applicant is questioned, he should make known what the motive is, so that the person. having the book in charge may refuse to produce it if the purpose is to work an injury to the corporation or is purely personal to the applicant and not connected with any interest which he has in the corporation. Here, the plaintiff knew what his motive was. He refused to disclose it and it is fairly to be inferred from -that fact that the motive was not a proper one. * His motive having been questioned he was bound to disclose it and show that it was necessary for him to have the information and to make the extracts in order to properly protect his interest in the corporation itself.”
So the statute had been interpreted at the time of the event under consideration. The case of Henry v. Babcock & Wilcox Co. was reversed by the Court of Appeals in November, 1909 (196 N. Y. 302), where it was decided that “ Section 53 of the Stock Corporation Law [Gen. Laws, chap. 36 (Laws of 1892, chap. 688), § 53, as amd. by Laws of 1897, chap. 384; revised into Consol. Laws, chap. 59 (Laws of 1909, chap. 61), § 33] recognizes an absolute right in a stockholder to inspect the books of a corporation and imposes an absolute duty upon the corporation and the custodian of the stock book to permit-such inspection. The stockholder has a right to take memoranda therefrom in the course of his examination in order to assist his recollection.” Section 1961 of the Code reads: “ Whenever, by the decision of the Appellate Division of the Supreme Court, a construction is given to a statute, an act done, in good faith, and in conformity to that construction, after the decision was made, and before a reversal thereof by the Court of. Appeals, is so far valid, that the party doing it is not liable to any penalty or forfeiture, for an act that was adjudged lawful by the decision of the court below. But this- section does not control or .affect the decision of the Court of Appeals, upon an appeal actually taken before the reversal.” Whatever may be the meaning of the last sentence, the fact remains that the Appellate Division, in Henry v. Babcock & Wilcox Co. had construed this statute in an action for a penalty, so *866as to excuse the defendants in refusing examination -of tlie; book if they brought themselves within it.' The decision denied the, right of the stockholder to copy from the book the names and addresses, and held that the demand to so copy could'not be separated from a conjoined demand to inspect. So in the present case the demand was to see the stock book and get a list of the stocks holders. Plaintiff gave a legitimate reason for wishing the names and Addresses, as he wished to communicate with other stockholders in reference to the conduct of the company. The decision on which ; defendants rely was. erroneous, but it interpreted the defendants’ duty and rights at the time of the refusal on which the reedvery of the penalty is sought to be predicated.
The judgment and order of the' Municipal Court should be affirmed, with costs.
HiRschberg, P. J., Burr, Rich and CarR, JJ., concurred.
Judgment and order of the Municipal Court affirmed,, with costs.