Court Opinion

ID: 9554106
Source: CourtListenerOpinion
Date Created: 2023-08-07 19:41:46.7301+00
Date Added: 2024-06-11T15:33:01.306123
License: Public Domain

WELCH, J.
(dissenting.)
I think the majority opinion confuses the right of a shareholder to examine corporate books to protect his own interests with the right here claimed by McLain to obtain a list of all other shareholders and addresses.
He definitely seeks this list for use for his own personal interests. Such a list in this or another corporation could be so used for many personal purposes far too numerous to mention.
Without permission of the stockholders I have grave doubt that such a list should be furnished to a stockholder any more than to a nonstockholder who wanted it for personal interest use.
There has been no refusal to permit full examination of other books and records of this corporation and the making of notes or abstracts therefrom. The only thing here involved is the furnishing of a list of stockholders with addresses. There has been no mismanagement of corporate affairs.
In approaching the question as to- Mc-Lain’s equitable rights consideration should be given to the company with which we are dealing, the purposes for which it was organized, the stockholders who own it, the difficulties in inducing them to attend stockholders’ meetings, also the nature of the properties owned and the directors reports to the stockholders. The latter paid but little attention to the affairs of the company until the year 1956 when it came into considerable money.
Consideration should also be given to Mc-Lain as a stockholder. He had little invested. After the stock appeared to be valuable he attempted to deal sharply with the other stockholders and their heirs. He attempted to acquire more stock for much less than its actual value and through agents made improper. statements to his costock-holders. His actions caused much confusion among the stockholders who questioned his motives.
Consideration should further be given to the fact that McLain’s activities were *1058brought to the attention of the board. The board then requested McLain to attend a board meeting to discuss his purpose in demanding the stockholders list and addresses. A time was set for the meeting for McLain’s convenience, but he refused to meet with the board or to aid it in resolving the question of whether it should ignore his past actions and furnish him the list of stockholders and addresses. The board did not rely upon its own judgment as to McLain’s demands, but requested advice from their attorney. I find no criticism for the board for their so-called “belated offer” to allow McLain to examine the stockholders list and other records by reason of waiting for advice from their counsel.
It is important to note that McLain and his counsel in their testimony did not deny the implication and charges of McLain’s sharp dealings with the stockholders.
No presumption of good-faith can be attributed- to McLain’s demands for the names and addresses of the stockholders when he refused to meet with the board of directors personally so that the board might ascertain his intentions and determine what was proper for it to do.
The good faith of the board was spelled out in a long letter written to McLain after his demand. This letter was dated September 30, 1957, and its substance is a refutation of any bad faith on the part of the board. In it McLain was advised that after his demand for the stockholders list with their addresses, the directors had a special meeting to consider it. Also, that the board had been informed as to Mc-Lain’s activities in attempting to purchase stock in the company; also that McLain’s activities included the soliciting of proxies in an effort to obtain control of the company to the end that accumulated funds could be used for acquiring other properties instead of the paying of dividends as required by the by-laws. The board recounted that when invited McLain first agreed to appear at the special meeting of the board, but later refused to appear. The board recited that there was no objection to McLain’s inspection of the minute and other books and records, and of the stockholders list, which list had been at all the stockholders meetings and was subject to the inspection of all; the board also advised McLain he could inspect the list of .properties owned by the company. The letter reiterated that neither McLain nor any other stockholder had ever been refused the right to inspect the books and records. But the board refused to permit McLain a copy of the stockholders list with addresses, but it did agree to mail any communication which McLain desired to send to the stockholders.
This letter is evidence of the best of faith on the part of the directors and McLain’s refusal to act under the terms of it is at least some indication of bad faith on his part.
In view of the board’s offer there was only one legal question before the trial court. This was whether one stockholder can make a demand for a list of the names and addresses of the stockholders and be entitled to receive this, ipso facto, and simply because he had made the demand. Since McLain could inspect the list of stockholders but not make a copy thereof the officials rightly took the position that he wanted such list for an improper purpose and not for the best interests of the company.
The trial court found in this case that there was no mismanagement of the company on the part of the officers and directors, and all of the attorneys in the case stated to the trial judge that mismanagement was not an issue in the case.
Actually the trial court permitted substantial evidence charging McLain with being a sharp dealer and seeking the stockholders list for an improper purpose. But, when McLain charged the officers of the company with purported derelictions of duty to the stockholders and then by his objections prevented evidence refuting these charges, he narrowed the case down to this one point: If one stockholder demands that he be furnished a copy of the names and addresses of his co-stockholders, was *1059he entitled to this, ipso facto, as his legal right? Under this fact situation, I do not hold this to be the law in Oklahoma.
There are amicus curiae briefs filed herein by attorneys representing REA groups and others, and as pointed out by them the cooperative officials guard their stockholders lists from the general public until certain presumptions of law and fact are overcome. Otherwise, any stockholder of a cooperative could demand a list of the names and addresses of his co-stockholders and furnish the same to commercial houses, or candidates for office, or for some improper purpose that would constitute a nuisance to the cooperative. Solicitors could also become a nuisance to the stockholders whose names had been furnished.
The Oklahoma statute here involved is Title 18 O.S.A. § 1.71(e), page 461, which provides that “upon proof by a shareholder, or other person possessing such right, of proper purpose,” a court in Oklahoma may compel by mandamus, the production for examination by the shareholder of the books and records of a corporation.
The decisions of all courts on this question of demand hold that if the demand has been made, and a reply is filed by the corporation asserting the demand is for the purpose of defrauding other stockholders, and not for a proper purpose, the burden then shifts to the plaintiff to show that his purpose is a proper one. Hecht v. Select Theatres Corp., Sup., 91 N.Y.S.2d 464; State ex rel. Miller v. Loft, Inc., 4 W.W.Harr. 538, 34 Del. 538, 156 A. 170; Sawers v. American Phenolic Corp., 404 Ill. 440, 89 N.E.2d 374, 15 A.L.R.2d 1; State ex rel. Cochran v. Penn Beaver Oil Co., 4 W.W.Harr. 81, 34 Del. 81, 143 A. 257; Bresnick v. Saypol, 269 App.Div. 915, 57 N.Y.S.2d 504; Capron v. Pacific Southwest Discount Corp., 6 Cal.App.2d 436, 44 P.2d 629; Doggett v. North American Life Ins. Co., 396 Ill. 354, 71 N.E.2d 686; People ex rel. v. Produce Exchange Trust Co., 65 N.Y.S. 926; Holdsworth v. Goodall-Sanford, Inc., Me., 55 A.2d 130, 174 A.L.R. 257; Morris v. Broadview, Inc., 385 Ill. 228, 52 N.E.2d 769; Re De Vengoechea, 86 N.J.Law 35, 91 A. 314; Vernam v. Scott, 12 N.J.Misc. 177, 171 A. 171; Excise Board of Tulsa Co. v. City of Tulsa, 180 Okl. 248, 68 P.2d 823; 13 Am.Jur. Sec. 446, p. 493; Guthrie v. Harkness, 199 U.S. 148, 26 S.Ct. 4, 50 L.Ed. 130; Bruning v. Hoboken Ptg. & Pub. Co., 67 N.J.Law 119, 50 A. 906; 18 C.J.S. Corporations § 510, p. 1187; Guaranty Old Line Life Co. v. McCallum, Tex.Civ.App., 97 S.W.2d 966.
Sawers v. American Phenolic Corporation, 404 Ill. 440, 89 N.E.2d 374, 15 A.L.R.2d 1, is the parent case on the question involved here. The facts are on all fours. There the petitioner was an investment broker and owner of stock in the defendant corporation, and he sought a writ of mandamus to enable him to copy the list of stockholders. The petitioner alleged and stated in his evidence, when asked as to his purpose for copying the stock list, that he wanted “to communicate on the earnings and the royalties: with the stockholders and “that the amount of the royalty payments was too high.” “He further admitted that he might want to offer himself as a director - but this was not his intention at the time of the request.” “He merely wanted to examine the books to determine whether or not further action was necessary and wished the stock list for that purpose.” “He admitted also that the Company had opened the books and records and the stock lists to his inspection, but refused to let him copy the list of the stockholders.” “The Company, in addition to opening its books and records to the petitioner herein, has offered to mail all material or any communications from the petitioner to the stockholders at petitioner’s expense, but the petitioner has not availed himself of this privilege.”
In the case at bar, when McLain was asked by his counsel to tell the court why he wanted to examine the shareholders’ record and take extracts therefrom, his answer was:
“There is possibly several reasons, but the principal reason is to determine who the *1060legal stockholders' are; the present management of the Company and who the shareholders are and certain shares they might acknowledge; and also to obtain a list of the shareholders and addresses so that we can check these stockholders out; attempt to have them present, either in person or by proxy; so that the shareholders will be legally represented and have a say so as to who the directors are and see how the management policies should be formed; in other words, check out the facts and give them to the stockholders.” (C.M. 235-236)
The reasons given by McLain parallel the reasons given by the petitioner in the Saw-ers case, supra. Further, the opinion in that case states that Sawers bought his stock in 1947 and in March, 1948, made his request for the stockholders list; that he never entered into any discussions with the officers of the company, never asked any one about the company, and never attended stockholders’ meetings. The record here shows, without dispute, that McLain became a stockholder in 1944; that he attended only two stockholders’ meetings, in 1954 and 1957; that he never entered into any discussions with the officers of the company, and never asked any officer or director about any matters concerning the company.
The Illinois Supreme Court, on the facts laid before it in the Sawers case, laid down the criteria by which a court could determine the honest intent and good faith of a stockholder asking for a list of the stockholders and their addresses, as follows:
“To maintain the proper purpose • required by statute some effort should be made by the shareholder to determine the condition of corporate affairs of the corporation in which he is interested. This effort could be shown by attendance at stockholders’ meetings, examination of the books and records of the corporation and from evidence of effort on the part of the shareholder to determine the financial situation and the character of management of the corporation in question These requirements would seem to be inherent in the term ‘proper purpose. * * * ’ (At page 379 of. 89 N.E.2d, Syllabus 5, at page 9 of 15 A.L.R.2d)
“In this cause the shareholder has not availed himself of the opportunity to ascertain any facts concerning the management of the business. Had the purpose of the petitioner here been merely the communication with other stockholders in the corporation, he could have availed himself of the offer of the corporation to mail any information to the stockholders which petitioner desired. His actions here are not indicative of sufficient interest to satisfy the meaning of proper purpose.” At page 380 of 89 N.E.2d, at page 11 of 15 A.L.R.2d.
The Oklahoma statute was taken from the statutes of the State of Illinois, S.H.A. ch. 32, Sec. 157.45. (See our statutes, Title 18, Sec. 1.71, subsection (e) foot note.) But our statute omits the words “record of shareholders” which appear in the Illinois statute. The majority opinion does not mention or refer to the history of this statute.
In determining the meaning of a statute of this State, adopted from another State, the decisions of that state will be accorded some recognition even if not followed by this court. In the majority opinion the Sawers case is not mentioned or discussed.
Here no official was accused by McLain of mishandling one dollar of funds, or of any official wrongdoing in any manner. If such charge were made this would go legally to the internal affairs of the company and McLain’s suit should have been in equity and specifically for this purpose. A mandamus action does not lie to change the internal management of a corporation.
In Rock Creek Oil Company v. Moore, Tex.Civ.App., 41 S.W.2d 501, 503, the court there held :
“Mandamus is not a writ of right. It issues to remedy a wrong, not to promote one, and will not be granted in aid of those who do not come into court with clean hands.” United States ex rel. Turner v. Fisher, 222 U.S. 204, 32 S.Ct. 37, 56 L.Ed. 165.
*1061The court in Davids v. Sillcox, 1946, 188 Misc. 45, 66 N.Y.S.2d 508, 514, said:
“The blackmailer, the scandalmonger, the irresponsible busybody and troublemaker, the professed seeker of information which is really intended to he used for some ulterior purpose, will be given no consideration by the court.”
Knox v. Coburn, 117 Me. 409, 104 A. 789, and State ex rel. Watkins v. Cassell, Mo.App., 294 S.W. 647, both cited by the majority opinion do not apply to the fact situation involved here. In those two cases there was not involved the charges against the plaintiff as were made here, to-wit: That he is a sharp trader and that he desired the list to serve his own personal interests and possibly to take advantage of his co-stockholders. The proof shows that McLain did obtain some of the shares of stock from widows of shareholders for $25.00 and $50.00, whereas the true value of the stock was much more than that amount. The majority opinion emphasizes the fact that McLain’s attorneys offered in court to have him return some of the stock certificates and take his money back. But the record evidence shows the company was merely trying to protect the stockholders and the corporation and that McLain’s purpose in demanding the stockholders list was not a proper purpose.
McLain complained that he had trouble getting his stock purchases transferred on the company books. As soon as the officials, however, ascertained that the assignments of this stock were proper, transfers were properly made on the books.
Summary
In arriving at a proper conclusion in this case we have the following basic facts:
1. The Panhandle company from 1926 to 1956 had only sufficient income to pay annual expenses and in some years small dividends.
2. The company offered McLain an open inspection of its books — and he actually had them audited — and all the records, including the right to scan the stockholders list; the only thing ever denied him was to be furnished a list of the stockholders’ names and addresses; the company offered to send any letter or communication that McLain desired to the stockholders when he so requested.
3. At the July, 1957, stockholders meeting McLain insisted that the approximate $79,000.00 cash on hand be not paid out as dividends but that it be used for purchasing additional mineral rights without submission for a vote of the stockholders. He stated that by watching death lists and contacting widows and orphans he had found they were always ready and willing to sell their properties cheap. Also, that even if the majority of the stockholders were farmers, and that, under the by-laws no additional interests could be purchased without submitting this to the stockholders, he, McLain, thought they should be ignored.
4. McLain sent letters in his wife’s maiden name to a number of stockholders whose names he had obtained from the county clerk’s records, offering $25.09 per share for stock. At that time ' he knew there was some $79,000.00 in cash, or approximately $50.00 per share of the stock outstanding. This offer of only a fraction of the actual value of the stock, which value he knew — was fraudulent on its face. Mc-Lain also hired one Starkey for $25.00 per day plus expenses to contact as many stockholders as he could to try to buy their stock, and if he could not to get their proxies. He erroneously informed Starkey the company would not let him see the company hooks and records; Starkey swore he contacted at least 300 stockholders whom he told the company would not let McLain, a stockholder, see its books and records, that he contacted two elderly ladies, widows of deceased stockholders, that he bought one share of stock from each, telling them they had the right to sign their deceased' husbands’ names to the stock certificates to transfer the stock, that some of these certificates of stock he purchased were transferred to him or to his wife or son, others to McLain’s daughter and a clerk in his office. At the time McLain and. Starkey *1062were contacting stockholders and prior thereto McLain had not requested or demanded to see or go over the company-books and records; yet the stockholders were advised by them that Panhandle’s officials had refused McLain the right of inspection of the books. This inaccurate statement wrongfully maligned the officers and directors of the company.
5. The majority opinion ignores or overlooks the fact that after McLain made his demand for the stockholders list, the company’s officers on September 19, 1957, per the letter mentioned above, agreed that he could have unlimited access to the books and records of the company. It was only because of McLain’s prior activities set forth above that he was denied his request for the stockholders list, and to copy it.
The majority entirely disregards as unimportant the evidence as McLain’s actions prior to making his demand and the filing of this suit. Further, it ignores the permission granted McLain to inspect and examine all the books and records. It discredits any evidence set up by Panhandle showing it had acted solely to try to prevent the stockholders from selling their stock for the woefully inadequate amount offered by McLain for their stock. It refers to a lack of a quorum at stockholders’ meetings, and ignores the fact that the election of officers by the board of directors was legal and at all times as provided by the by-laws of the company. It overlooks the evidence that year after year the company records showed the outstanding stock stood at approximately 1,465 shares and that this was brought to the attention of the stockholders. It emphasizes the number of stockholders that had died or could not be reached through their post office addresses on the records, but fails to mention the active efforts made annually by the company to locate missing stockholders.
The majority opinion directs its comments and findings to the alleged shortcomings of the internal management of the company despite the fact that the trial court found — and all attorneys in the case stated to the trial judge — that there was no mismanagement and such was not an issue in the case. Thus, the majority opinion is not based on the same theory on which the trial court reached its conclusion. If in the opinion of this court this case is to be decided on the question of whether or not there was mismanagement, we should have simply reversed the case and sent it back to the trial court with instructions to determine whether there was sufficient mismanagement to entitle McLain to the relief sued for.
The majority opinion voices some criticism of the Panhandle officers for not having its properties appraised nor advising the stockholders of the value of the stock. The officials contend, and I believe correctly from the evidence, that this criticism is not just; and does not rise to such importance that McLain should be furnished the stockholders list to correct this. Actually McBee’s evidence in the case shows appraisal at $434,980.00, or $269.00 per share.
The net effect of the majority opinion is that McLain should be given the list of the stockholders and their addresses so that he could contact them to correct some of the alleged insignificant acts of the officials and revise the internal management of the company. To hold thus would be authorizing that to be done indirectly which cannot be done directly; that is, permit by legal fiat, in a mandamus action, the changing of the internal management of a corporation by the courts.
If there had been any internal mismanagement — and all parties agree that there was none — the proper remedy would have been a suit in equity to oust the officers.
Mandamus is not a writ of right. It issues to remedy a wrong, not to promote one, and will not be granted in aid of those who do not come into court with clean hands. United States ex rel. Turner v. Fisher, 222 U.S. 204, 32 S.Ct. 37, 56 L.Ed. 165. Guaranty Old Line Life Ins. Co. v. McCallum, supra. State ex rel. Paschall v. Scott, 41 Wash.2d 71, 247 P.2d 543; Re De Ven-*1063goechea, 86 N.J.Law 35, 91 A. 314, supra. Verman v. Scott, 12 N.J.Misc. 177, 171 A. 171, supra. Excise Board of Tulsa County v. City of Tulsa, 180 Okl. 248, supra. 18 C.J.S. Corporations § 510, p. 1187.
McLain’s law suit from a legal standpoint actually is predicated solely on the following points:
1. That for twenty-five years there has not been a quorum present at any annual stockholders’ meeting.
The answer to this is: The record shows that it has not been the fault of the management by the present officers of the company that there has been no quorum — rather it is a lack of interest on the part of the stockholders to appear after an annual meeting was properly called. The officers of the Company have properly notified all of the stockholders of each annual meeting and most of them have failed to appear at the meetings. On this point there is no basis for a writ of mandamus to issue in behalf of McLain.
2. That five members of the present board of Directors were not elected by shareholders.
The record shows that the board of directors was properly elected in the first place as required by the statute and the by-laws; that when a vacancy has occurred on the board, and a quorum was not present at a stockholders’ meeting, the vacancies were filled by the remaining directors as provided by the statute and the bylaws. On this point McLain has no legal grounds for a writ of mandamus.
3. That the officers have sent proper notices to all the shareholders of the annual meetings but for some reason the shareholders have not come forth with sufficient proxies to have a quorum present at the stockholders’ meetings.
Certainly this does not constitute legal grounds for McLain to have a writ of mandamus.
If McLain relied upon internal mismanagement, then his remedy was in a suit to oust the officials, but instead he filed a mandamus action to obtain a list of the stockholders’ names and addresses.
In conclusion, the majority opinion in this case should not stand as the law in Oklahoma, because it is subject to being misinterpreted by the bench and the bar. The law in this case should be that expressed by the Supreme Court of Illinois in Sawers v. American Phenolic Corp., supra, as that case interpreted a similar statute. Under the fact situation as set out in the majority opinion, the bench and the bar in the future might take the position that the demand of a stockholder for a list of his co-stockholders should be granted, ipso facto, regardless of the facts involved.’
Actually, in a suit where a demand is made for such a list, and an answer is filed by the defendant corporation, asserting that the list is requested for fraudulent purposes and the demand is not made for a proper purpose, the issues are clearly drawn in the trial court. The burden of proof should then be upon the plaintiff to show that his demand is for a proper purpose, and if the fact situation develops that the true reason of the plaintiff is to obtain the list for his own selfish purposes, the Oklahoma court should follow the Illinois court and the almost universal ruling of every court that has passed directly on this question, and should deny the writ.
Such a clarification of the Oklahoma law should be announced herein so that there can be no misinterpretation of the majority opinion, and the bench and bar of Oklahoma may not be misled in the future. If the majority opinion stands as the law and without clarification, the cooperative corporations of Oklahoma might be subjected to manifest injustices. So will other corporations seeking to guard the confidence of their stockholders’ list and to protect their stockholders from harassment by unrestricted demands and to prevent use of the stockholders’ list for personal private purposes.
I respectfully dissent.