Court Opinion

ID: 5382869
Source: CourtListenerOpinion
Date Created: 2022-01-08 09:09:54.693932+00
Date Added: 2024-06-11T08:30:10.133656
License: Public Domain

Cohn, J. (dissenting).
Insofar as the constitutionality of section 61-b of the General Corporation Law is upheld, I agree that this court is bound by its decision in Shielcrawt v. Moffett (268 App. Div. 352). However, in all other respects, I dissent from the majority opinion.
The provision of the order in the action granting plaintiffs permission to vacate the order for security if within sixty days additional stockholders joined plaintiffs to a number sufficient to meet the requirements of the statute, was proper and in accord with the purpose of section 61-b. It was not the intent of the Legislature to withhold from an owner of small stock interest, a fair opportunity to show merit in his law suit by obtaining the joinder of other stockholders so as to reach the minimum standard set forth in the law. The statute is as fully met by such joinder of additional shareholders after the institution of the action as it would be by a joinder prior to its institution. The disposition made at Special Term, in the light of all the circumstances, is a wholly reasonable one and carries out the spirit of the legislation as indicated in Governor Dewey’s memorandum appproving the bill, in which he said: “ Even if the stockholder owns only a tiny percentage or only $5.00 worth of stock, it still should be simple to bring an action without putting up security. If his action has any merit at all, it should be easy enough to interest others who do hold at least 5%, or stock valued at $50,000.” (Emphasis ours.)
The order in the special proceeding granting an examination of defendant’s stock book was also proper. In addition to the common-law right given to a stockholder in a proper case to compel the inspection of the general books of the corporation, by statute an absolute right is given to inspect the stock book. (Stock Corporation Law, § 10; Matter of Steinway, 159 N. Y. 250, 264; People ex rel. Rottenberg v. Utah Gold & Copper M. Co., 135 App. Div. 418, 419; People ex rel. Callanan v. K., etc., R. R. Co., 106 App. Div. 349, 350-351.) It is not denied here that petitioners are qualified stockholders and that a demand upon the corporation’s directors for the inspection was made, which met with a refusal. The examination desired did not encompass “ a business or object other than the business óf the corporation ”. (Stock Corporation Law, § 10.) A stockholder should not be denied the statutory right to examine the stock book of his own company where the avowed purpose of the examination *445is to interest other stockholders in commencing, or participating in, a derivative suit designed to seek redress on behalf of the corporation for alleged malfeasance by its directors. Upon the conceded facts the right to the order was clear. (Matter of Steinway, supra; Matter of Durr v. Paragon Trading Corp., 270 N. Y. 464, 471.)
The orders should be affirmed.
Martin, P. J., and Townley, J., concur with Peck, J.; Glen-non and Cohn, JJ., dissent and vote to affirm both orders, in opinion by Cohn, J.
Order granting petitioners’ motion for an examination of the stock book of the defendant Macfadden Publications, Inc., reversed, with $10 costs and disbursements to the appellant, and the motion denied. Order granting the defendant corporation’s motion for security modified by deleting therefrom the provisions relating to the joinder of additional stockholders as parties plaintiff and as so modified affirmed, with $10 costs and disbursements to the defendant Macfadden Publications, Inc. Settle orders on notice. [See post, p. 840.]