while, on the other hand, there is dictum to a contrary effect," and in some cases the rule has been expressly repudiated.78 At any rate, the injustice of the common-law rule when applied in all its strictness was keenly felt, which was probably one of the reasons why statutes were enacted making the right absolute.79 The general rule prevailing in this country is that it is not necessary that there should be any particular dispute to entitle the stockholder to exercise the right. Nothing more is required than that, acting in good faith for the protection of the interests of the corporation and his own interests, he desires to ascertain the condition of the company's business.80 "Such a right," said the New Jersey court, "is necessary to their protection. To say that they have the right, but that it can be enforced only when they have ascertained, in some way without the books, that their affairs have been mismanaged, or that their interests are in danger, is practically to deny the right in the majority of cases. Oftentimes frauds are discoverable only by examination of the books by an expert accountant.'' 81 There are some decisions where the court has attached to the statutory guaranty the common-law limitation referred to,82 but such a some controversy pending, or some question at issue, as to which the contents of the books were of consequence, and that it was not enough to show an expectation of benefit from knowing the contents. Lyon v. American Screw Co., 16 R. I. 472, 17 Atl. 61. 77The doctrine has not been adopted in America, the cases which go furthest in that direction holding that a dispute as to the alleged mismanagement of the corporation is enough to entitle the stockholder to an examination of the accounts to see whether there is ground for an action." Varney v. Baker, 194 Mass. 239, 10 Ann. Cas. 989, 80 N. E. 524. 78 Foster v. White, 86 Ala. 467, 6 So. 88. 79 State v. Pacific Brewing & Malting Co., 21 Wash. 451, 47 L. R. A. 208, 58 Pac. 584. The English rule has been modified by statute. See St. 8 & 9 Vict. c. 16, §§ 117, 119, and St. 25 & 26 Vict. c. 89, Table A 78. 80 United States. Guthrie v. Harkness, 199 U. S. 148, 50 L. Ed. 130, 4 Ann. Cas. 433. Massachusetts. Varney v. Baker, 194 Mass. 239, 10 Ann. Cas. 989, 80 N. E. 524. New Jersey. Huylar v. Cragin Cattle Co., 40 N. J. Eq. 392, 2 Atl. 274. New York. In re Steinway, 159 N. Y. 250, 45 L. R. A. 461, 53 N. E. 1103. Pennsylvania. Hodder v. George Hogg Co., 223 Pa. 196, 72 Atl. 553. Washington. State v. Pacific Brewing & Malting Co., 21 Wash. 451, 47 L. R. A. 208, 58 Pac. 584. 81 Huylar v. Cragin Cattle Co., 40 N. J. Eq. 392, 2 Atl. 274. 82 O'Hara v. National Biscuit Co., 69 N. J. L. 198, 54 Atl. 241. Gen. Corp. Act, § 33 (Pamph. 1898, p. 409), as to inspection of books, gives right to "stockholders," and such term not only defines class upon which right is conferred but states class by which right is to be enjoyed, namely that it must be in respect to rule is contrary to the great weight of authority,83 and under the statutory provisions, it is usually held that a stockholder is not confined to an object relating to his interest.84 The effect of the common-law rule may, however, be noticed in some of the earlier decisions where the right of inspection has been denied when sought for the benefit of the stockholder in his own private suit against certain individuals 85 or where the granting of extensive relief has been held improper on the ground that no laudable object was shown by the stockholder.86 § 2818. Investigation of corporate affairs-In general. The right of inspection is not to be denied on the ground that the stockholder is on unfriendly terms with the officers of the company whose records are sought to be inspected.87 Stockholders are entitled to full information as to the management relator's interests as a stockholder, or be germane to his status as such. O'Hara v. National Biscuit Co., 69 N. J. L. 198, 54 Atl. 241. 83 White v. Manter, 109 Me. 408, 42 L. R. A. (N. S.) 332, 84 Atl. 890. 84 Under the statute (Maine Rev. St. c. 47, § 20), the purpose of a stockholder in seeking inspection is not confined to his interest as a stockholder. White v. Manter, 109 Me. 408, 42 L. R. A. (N. S.) 332, 84 Atl. 890. 85 Where a stockholder seeks an information to aid him in a suit for deceit against certain directors, the writ will be denied, since the information is sought not as a stockholder but as plaintiff in a suit against individuals. Taylor v. Citizens' Nat. Bank of Saratoga Springs, 117 N. Y. App. Div. 348, 101 N. Y. Supp. 1039. 86 Where a stockholder occupied such position for six years and desired examination of the minutes of stockholders' meetings for twelve years, together with other books to ascertain if the business had been properly conducted, the writ was improperly granted as the stockholder without any laudable object was accorded most extensive relief. Colwell v. Colwell Lead Co., 76 N. Y. App. Div. 615, 78 N. Y. Supp. 607. Such a drastic remedy should never be granted except in emergency or for a necessary purpose and should be limited by some regard for the interests of the other stockholders and of the corporation. Colwell v. Colwell Lead Co., 76 N. Y. App. Div. 615, 78 N. Y. Supp. 607. 87 Cobb v. Lagarde & Sons, 129 Ala. 488, 30 So. 326; Ellsworth v. Dorwart, 95 Iowa 108, 58 Am. St. Rep. 427, 63 N. W. 588; State v. German Mut. Life Ins. Co., 169 Mo. App. 354, 152 S. W. 618; In re Hastings, 128 N. Y. App. Div. 516, 112 N. Y. Supp. 800; In re O'Neill, 47 N. Y. Misc. 495, 95 N. Y. Supp. 964. On the petition of a stockholder for a writ of mandamus to enforce his statutory right to inspect the books of a corporation, it was held that an answer setting forth that the relator cherished animosity towards the company's president, and had threatened to injure the business of the company by disclosing its business secrets to customers and business rivals, showed no ground for denying the writ. Meysenburg v. People, 88 Ill. App. 328. of the corporation and the manner of expenditure of its funds,88 especially in a case of mismanagement.8 89 The lapse of a considerable period of time is an indication that the stockholder is entitled to inspection,90 and where a petitioner shows that he is a stockholder and is unable to secure information as to the financial standing of company and its method of conducting its business, a prima facie case of good faith is presented.91 The fact that the stockholder seeking to inspect the books is an officer and stockholder in an illegal monopoly does not deprive him of his rights.92 § 2819. For purpose of suit by stockholder. This right of a stockholder to inspect the books is not affected by the fact that the object may be to commence an action against the majority stockholders, the officers or the corporation to correct abuses.93 88 Klotz v. Pan-American Match Co., 221 Mass. 38, 108 N. E. 764. Thus a stockholder is entitled to information as to the management of the corporation and the manner of the expenditure of funds on property of the sister of the president. People v. Ludwig & Co., 126 N. Y. App. Div. 696, 111 N. Y. Supp. 94. 89 Powelson v. Tennessee Eastern Elec. Co., 220 Mass. 380, Ann. Cas. 1917 A 102, 107 N. E. 997. When a stockholder furnishes data warranting a conclusion of mismanagement and that the affairs of the company are not conducted in a proper manner and in the interest of the stockholders, he has the right to demand an examination of the books, records and accounts so that, he may protect his interests. Kuhbach v. Irving Cut Glass Co., 220 Pa. 427, 28 L. R. A. (N. S.) 185, 69 Atl. 981. The fact that a stockholder is for some reason dissatisfied with the conduct of the business of the corporation will not prevent enforcement of the right of inspection. Butler v. Martin, 220 Mass. 224, 107 N. E. 999. 90 Where the relator had not had access to the books for about two IV Priv. Corp.--47 years, the demand is not such as clearly to show abuse of the statutory right. State v. Doe Run Lead Co. (Mo. App.), 178 S. W. 298. A petitioner is entitled to inspection where no proper report had been made by the corporation from the commencement of its existence, a period of about three years, and the petitioner had been. unable to ascertain the condition of the company. In re O'Neill, 47 N. Y. Misc. 495, 95 N. Y. Supp. 964. 91 State v. Monida & Y. Stage Co., 110 Minn. 193, 125 N. W. 676, 124 N. W. 971. 92 State v. Lazarus, 127 Mo. App. 401, 105 S. W. 780. 93 A stockholder who has been refused access to the books, papers and records of a corporation may obtain inspection by mandamus, though his purpose is to prepare and file a bill in equity to obtain relief against abuses. Rochester v. Indiana County Gas Co., 246 Pa. 571, 92 Atl. 717. An averment of intention to file a bill in equity to restrain the officers from mismanagement and of the need of information to that end is sufficient for granting mandamus. Hodder Where the statute is mandatory, it is immaterial that the stockholder desires to get information on which to predicate litigation which he may desire to institute against the company.94 The indiscreet action of a stockholder in furnishing an account of his litigation to a newspaper does not deprive him of his rights.95 Usually, stockholders are entitled to inspection, where the information is necessary for the prosecution of a private lawsuit,96 and it has been held that such a purpose is not vexatious, improper or unlawful." § 2820. Ascertainment of value of stock. A stockholder who desires to ascertain the value of his stock is entitled to inspection," v. George Hogg Co., 223 Pa. 196, 72 Atl. 553. The fact that the inspection sought by a director may disclose a right of action in him against the corporation or some of its agents does not preclude the right of inspection. State v. Ice, 75 W. Va. 476, 84 S. E. 181. The right of inspection cannot be denied when the purpose of a stockholder is to enforce a claim against the corporation itself. White v. Manter, 109 Me. 408, 42 L. R. A. (N. S.) 332, 84 Atl. 890. Where a stockholder alleges that bonds were redeemed by the company for more than market value at the time of redemption, he is entitled to a writ so that the corporation or stockholder may proceed against the directors for wrongs. Hitchcock v. Union Ferry Co. of New York & Brooklyn, 157 N. Y. App. Div. 328, 142 N. Y. Supp. 247. 94 Schmidt v. Anderson, 29 N. D. 262, 150 N. W. 871. 95 People v. Ludwig & Co., 126 N. Y. App. Div. 696, 111 N. Y. Supp. 94. 96 Where a stockholder desires to examine the books and documents of a bank to ascertain the losses suffered by the bank in certain dealings, and to determine the existence and contents of certain named documents, the same being necessary as primary evidence in a lawsuit, the purpose of the demand is legitimate and proper. Woodworth v. Old Second Nat. Bank, 154 Mich. 459, 118 N. W. 581, 117 N. W. 893, 15 Det. L. N. 773. But where a stockholder has commenced an action of deceit against a person who is president of the corporation, and seeks examination of books to ascertain whether defendant in his action of deceit told the truth or not, the rights of the stockholder are not affected, and the inspection is sought for improper purpose. Schondelmeyer V. Columbia Fire proofing Co., 219 Pa. 610, 69 Atl. 49. And see In re De Vengoechea, 86 N. J. L. 35, 91 Atl. 314; Taylor v. Citizens' Nat. Bank of Saratoga Springs, 117 N. Y. App. Div. 348, 101 N. Y. Supp. 1039. 97 Where a petitioner alleged that the purpose in inspecting the records was to judge the value of the stock, and defendant contended that petitioner's real purpose was to find out the stock owned by former husband, so that information might be obtained on a petition for alimony, and similar facts, the court would not hold that under the broad right given by the statute the purpose was vexatious, improper or unlawful. White v. Manter, 109 Me. 408, 42 L. R. A. (N. S.) 332, 84 Atl. 890. 98 State v. Jessup & Moore Paper Co., 27 Del. 248, 88 Atl. 449, 24 Del. 379, 77 Atl. 16; Lawshe v. Royal Baking Powder Co., 54 N. Y. Misc. 220, 1 and a demand for inspection for such purpose is not improper." The fact that a stockholder fails to vote at a stockholders' meeting does not suggest bad faith in seeking information as to the value of his stock.1 § 2821. Inspection of by-laws and minutes. An application for inspection of the by-laws rests on a different footing than inspection of books and papers. The by-laws constitute a part of the contract between the stockholder and corporation and are binding upon both, and it must be a strong case which would prevent a stockholder from an opportunity to examine the by-laws so that he may be informed as to the terms of the contract into which he has entered.2 And some decisions indicate a tendency to take the same view of the stockholder's right to examine the minutes of the corporation, although there are decisions to the contrary. § 2822. Improper or unlawful purposes. The right of inspection will not be enforced for the gratification of mere idle curiosity or for speculative purposes or for purposes hostile to the interests of the corporation and if it appears that the right of inspection is not sought 104 N. Y. Supp. 361; Neubert v. Armstrong Water Co., 211 Pa. 582, 61 Atl. 123. 99 A demand for inspection is apparently in good faith and for the purpose of obtaining information to which a stockholder is entitled, where the applicant states that he desires to sell his stock, and has offered to sell it to other stockholders, and seeks information so that he may determine value and further offer it for sale. Garcin v. Trenton Rubber Mfg. Co. (N. J. L.), 60 Atl. 1098. A proper purpose for the examination of the books is shown where the stockholders alleged that other stockholders in control of the corporation had tried to compel them to sell their stock at less than its value and had refused information whereby the minority stockholders could determine the value of their stock. Neubert v. Armstrong Water Co., 211 Pa. 582, 61 Atl. 123. 1 State v. Jessup & Moore Paper Co., 27 Del. 248, 88 Atl. 449. 2 In re Coats, 75 N. Y. App. Div. 567, 78 N. Y. Supp. 429. 3 Officers ought not to deny to stockholders an opportunity, properly applied for, to examine the minutes. Streit v. Citizens Fire Ins. Co., 29 N. J. Eq. 21. And see Stone v. Kellogg, 165 Ill. 192, 56 Am. St. Rep. 240, 46 N. E. 222, aff'g 62 Ill. App. 444. 4 Reg. v. Mariquita & N. G. Min. Co., 1 E. & E. 289; Birmingham, etc., Ry. Co. v. White, 1 Q. B. 282. See also Colwell v. Colwell Lead Co., 76 N. Y. App. Div. 615, 78 N. Y. Supp. 607, where right to examine books and minutes was denied, and Alabama, etc., R. Co. v. Rowley, 9 Fla. 508. 5 United States. Guthrie v. Harkness, 199 U. S. 148, 50 L. Ed. 130, 4 Ann. Cas. 433. Alabama. Foster v. White, 86 Ala. 467, 6 So. 88. |