Court Opinion

ID: 9864954
Source: CourtListenerOpinion
Date Created: 2023-09-25 16:18:11.314485+00
Date Added: 2024-06-11T12:36:16.861684
License: Public Domain

Mr. Justice Butler
concurring in part and dissenting in part.
I concur in the reversal of the judgment in part.
1. Sections 2267 and 2268, C. L., have come down to us from early days through several statutory compilations. The former section gives to stockholders of all *38corporations, ‘ ‘ except railroad and telegraph companies, ’ ’ the right to inspect and to copy or make extracts from all corporate hooks, accounts and papers. The latter gives to stockholders and creditors of all corporations, “except railroad and telegraph corporations, and industrial corporations having a paid up capital of $20,-000,000 and maintaining a stock transfer agency in the city of New York,” the right to inspect and make extracts from the hook containing a list of stockholders, the number of shares held by each, the transfers, etc., which book, for convenience, will be referred to as the stock ledger. Mandamus is the proceeding resorted to to enforce the right conferred by these provisions. Similar provisions are found in the statutes of other states. Some authorities hold that the right thus conferred is a limited or qualified right; that in a mandamus proceeding the court may, in the exercise of its discretion, refuse the writ where the inspection is sought for improper purposes. Other authorities hold that the statutory right is an absolute right, and that the court cannot inquire into the motives of the applicant; that the writ cannot be denied upon the ground that his motives are improper. “It cannot be said that the weight of authority supports either side of the question. There is abundant authority supporting each side.” American Mortgage Co. v. Rosenbaum, 114 O. St. 231, 151 N. E. 122. In 1919, in Wire v. Fisher, 66 Colo. 545, we chose the latter rule as the better rule, and decided that the right conferred by section 2268, to inspect the stock ledger, is an absolute right, not a qualified or conditional one, and that the right cannot be defeated by showing improper motives. That decision was followed in Jameson v. Hanawalt, 67 Colo. 153, 186 Pac. 717, also decided in 1919. In that case the opinion is short, but the record shows that the plaintiff’s motives in seeking an inspection of the books and accounts under section 2267 were more reprehensible than those attributed to the plaintiff in the present case.
*39By two decisions, therefore, we have declared it to be the law in this state that the right to inspect given by a statute in absolute, unqualified terms is an absolute, unqualified right, and that in a mandamus proceeding the courts cannot inquire into the motives or purpose of the applicant, and we have rendered no decision to the contrary.
Since we construed these two sections in Wire v. Fisher, supra, and Jameson v. Hanawalt, supra, there have been five sessions of the Legislature, and that body has not seen fit to amend section 2267. This would seem to indicate that our construction of that section expressed truly the intent of the Legislature in passing the section. Maryland Casualty Co. v. Industrial Commission, 86 Colo. 553, 554, 283 Pac. 548. Furthermore, in 1927 the Legislature, for reasons satisfactory to it, amended section 2268, so as to permit the court, in its discretion, to refuse to order an inspection of the stock ledger unless satisfied that the stockholder or the judgment creditor demands the inspection “in good faith and has a substantial interest, in his capacity as such judgment creditor or stockholder, in demanding the right.” The fact that the Legislature differentiated between the two sections by amending section 2268, and leaving section 2267 as it was, is another indication of the legislative intent that section 2267, as construed by this court, should continue to be the law in this state with reference to the inspection of all books, accounts and papers, except only the stock ledger. It is our duty to harmonize the two sections, if possible, so that each may be given effect. People ex. rel. v. Board of County Commissioners of Chaffee County, 86 Colo. 249. Construing the two sections together, they mean this: Where stockholders or judgment creditors of corporations, with the exceptions stated in section 2268, seek a writ of mandamus to compel the corporate officers to permit them to inspect the stock ledger, the court may, in its discretion, refuse the writ in the circumstances stated in thát section, as *40amended in 1927.. But where stockholders of corporations, with the exceptions stated in section 2267, seek to mandamus the officers of corporations to permit them to inspect any or all of the books, accounts and papers, the court cannot deny the writ, as to any but the stock ledger, on account of the improper motives of the applicants. The inspection of the stock ledger is excepted because such inspection is specially provided for by another section, namely, section 2268, as amended in 1927.
The judgment, so far as it orders an inspection of all books, etc., except the stock ledger, is right, and should be affirmed.
2. In view of the Legislature’s attitude, indicating an approval of our construction of section 2267, I cannot concur in the overruling of Jameson v. Hanawalt, supra, construing that section, or in the overruling of Wire v. Fisher, supra, announcing the principle applied in the Jameson-Hanawalt case. If time has shown the rule there announced to be unwise, it would be better to leave to the Legislature, at its approaching session, the question of changing’ the law. As stated in the majority opinion, that is the course pursued in California, and I believe it to be the better course. Amendment by the Legislature would act prospectively, whereas amendment by this court would act retrospectively, and would charge the trial court with error in having followed the decisions of this court. There are occasions where it is proper to overrule previous decisions, but this does not impress me as being such an occasion. The present case does not seem to me to be one in which there is an urgent call for retrospective amendment of the law. In another suit Harris is charged with the violation of trust as a director. It is said that in the present case he seeks an inspection for the purpose of discovering trade secrets and the material used in the preparation of the company’s suit against him, in order to cripple the company in that suit and to promote the interests of himself and his codefendants as competitors of the company. Harris *41was a director of the company, and had been a director for many years. He was not a “dummy” director, but was the owner of nearly one-fifth of the outstanding capital stock. The directors are the managers of the affairs of the corporation. C. L., section 2243 (8). The corporate powers are vested in the board of directors. C. L., section 2263. It is not only the privilege of directors, but it is their duty, to know about the corporate business — all of the business, including so-called “trade secrets.” Surely the business of the corporation, however secret as to outsiders, was not concealed from a director. If it was, by what authority was it done? It is not easy to understand the claim that, among the books, accounts and papers there appear any business matters that, as to director Harris, were secrets. Nor is it clear how the company could be improperly prejudiced by an inspection of the corporate records for the purpose of discovering evidence for use in the suit brought against Harris. If there is nothing in those records that would disprove the charges made against Harris, the company would suffer no harm; but if the records contain anythingthat would disprove those serious charges, it certainly would not further the interests of justice to judicially sanction the concealment of such defensive matter.
3. For the following reason the judgment, so far as it ordered an inspection of the stock ledger, should be reversed. The plaintiff sought the inspection of all the books, accounts and papers. The trial court held that under the statute, as construed by us in Wire v. Fisher, supra, and Jameson v. Hanawalt, supra, the court is not permitted to exercise any discretion in the matter; that it cannot inquire into the motives of the plaintiff in seeking an inspection, and for that reason the court ordered the issuance of a peremptory writ of mandamus, commanding the defendants to permit the plaintiff to inspect, and to make copies of or extracts from all the books, accounts and papers of the corporation, which, of course, *42includes the stock ledger. Indeed, there are averments indicating that the plaintiff relies, so far as his right to inspect the stock ledger is concerned, upon section 2268, C. L. As we have seen, by virtue of the amendment of 1927, the court has discretion to refuse, in the circumstances stated in amended section 2268, to order an inspection of the stock ledger. What the order of the court would have been with reference to an inspection of the stock ledger if the court had felt at liberty to exercise, and had exercised, its discretion in the matter, does not appear. Upon remand of the case, the trial court should consider all the facts and circumstances, and unless satisfied that, in demanding an inspection of the stock ledger, the plaintiff is acting in good faith and has a substantial interest, in his capacity as stockholder, in demanding the right, the court may refuse to order an inspection of the stock ledger.
For the reason herein stated, and for that reason only, I concur in the reversal of the judgment, so far as it orders an inspection of the stock ledger.
Mr. Justice Campbell and Mr. Justice Burke authorize me to say that they concur in this opinion, with the following qualification: They construe section 2268 to mean that the court is given discretion to deny the right to inspect only when a by-law of the corporation limits the right of inspection. As the Colorado and Utah Company has no such by-law, they conclude that the court has no right to refuse an inspection because of any improper motive on the part of the plaintiff. In their opinion, therefore, the judgment should be affirmed in its entirety.