Stone v. Kellogg

Mr. Justice Waterman delivered the opinion op the Court. The petition after setting forth attempts of the petitioner to obtain an inspection of the books of the company, and also setting forth the correspondence admitted to have taken place, contains the following : “ That at the time fixed in said letters, to wit, June 25, 1894, the complainant called on the defendant Chapman and asked him if he had received his communication of the 21st, heretofore referred to, and would allow the complainant to inspect the records and accounts referred to in it; to which the said Chapman replied: “I regret to say that I must respectfully decline to let you see them.” To this allegation the defendant made the following o o reply: “ This defendant further and expressly denies that either' this defendant or any other officer of said company has at any time refused to the petitioner the right to examine any of the records or accounts of said company which the petitioner was lawfully entitled to examine, either as a stockholder or director of said company. And he avers that according to his best information and belief the said petitioner is, and at all times has been, fully acquainted with all the facts which, by his petition, he represents himself as desiring to ascertain. And that the real purpose of his application for books, papers, records and accounts is not and never has been the asceTtaining of any facts which the petitioner was legitimately entitled to know, but that such purpose is and always has been to discover some possible ground of attack upon said company and its management, contrary to the interests of said company, and for the private advantage of the petitioner.” This answer is insufficient. Instead of denying the aliegations of the petition, it takes refuge under the word “ lawfully,” assuming that the petitioner has no right to examine any of the records or accounts of the company which he has asked to be permitted to inspect. The information and belief of the respondent that the petitioner is fully acquainted with the facts he desires to ascertain, is of no consequence. The question is not what the respondent is informed, or believes, as to the acquaintance of the petitioner. The court is called to consider the petitioner’s right to see the records of a company of which he is a director and in which he is a stockholder. Nor is it the province of the respondent to determine how much of the records and affairs of the company all or any of its directors may “ legitimately ” know; or to assume that the real purpose of a director who is endeavoring to find out what the company has done and is doing, is to discover a ground of attack upon the company and its “ management,” contrary to what the respondent assumes to be for the inter-' est of the company. Mor is the encomium bestowed in the answers upon the distinguished gentlemen,, other than the petitioner, who compose the directory, material. Doubtless the majority are serving the company with fidelity and zeal; yet the petitioner has, as a director and stockholder, a right to differ with them in respect to the proper policy to be pursued in the management of the company, and a right, by actual inspection, to know what its records show it is doing. High on Extraordinary- Remedies, Secs. 80S, 309, 310; Spelling on Private Corp., Vol. 2, Secs. 656, 657; Cook on Stock and Stockholders, Vol. 1, Sec 511; Lewis v. Brainard, 53 Vt. 519; Huyler v. Cragin Cattle Co., 40 N. J. Eq. 392. The books and records of the company do not belong to any of its officers and' agents as such; they are the property of the company of which each director is a trustee, bound to equally serve the interests of all the cestuis que trust. Angell & Ames on Corp., Sec. 681; Redfield on Railways, 327; Grant on Corp., 311. The majority of a board of directors can not exclude the minority from knowledge of what the company is doing, or from access to its files and records. The respondents do not pretend to have been acting under either a rule of the company or the order of a majority of the directors. The answer of one, adopted by the other respondent, contains the following attempted justification : “ This defendant shows that he has not, and never has had, any personal interest or concern in the matter of said Kellogg’s demands, but that all his doings in the matter have been prompted by what he conceived to be his duty as an officer of the company. He says that so far as he has any control over the matter, he is entirely willing, as stated in his letter, Exhibit D, aforesaid, that said Kellogg should examine the “ records and books of account” of the company, but that the interpretation placed upon those terms by said Kellogg in conversation with this defendant, and in his demands and letters, was so broad as to be, in the judgment of this defendant, wholly unwarranted by law, even if said Kellogg had been acting from proper motives, and with a sincere desire for the advantage of the Central Union Company, or of said Kellogg himself as a stockholder therein. This defendant shows that so far as he has had control over the matter, he felt and still feels unwilling to take the responsibility of interpreting the rights claimed by said Kellogg in the broad sense asserted by him, but was and is willing to obey any order which the board of directors might make in that behalf.” The respondents thus again assume the right to select the “ records and books of account ” which a stockholder and director may be permitted to examine. The law of this State gives to neither of the respondents or a majority of the directors any such right. Section 13, chapter 32, Revised Statutes of Illinois, is as follows: “ It shall be the duty of the directors or trustees of every stock corporation to cause to be kept at its principal office or place of business in this State, correct books of account of all its business, and every stockholder in such corporation shall have the right at all reasonable times, by himself or by his attorney, to examine the records and books of account of the corporation.” It is not merely thé right of petitioner to examine the records and books of account of the company in which he is a director—it is his duty, if he has reason to think that they contain that, a knowledge of which, if obtained by him, will be of service to stockholders, the trustee of all of whom he is. If, in Commonwealth v. Phoenix Iron Co., 105 Penn. St. 111, and Commonwealth v. Empire Pass. Ry. Co., 134 Penn. St. 237, there is intended to be announced that a “ suspicious ” stockholder is not entitled to the writ of mandamus to permit him to examine the books of a corporation, we can not give our assent to such doctrine. The fact that a director is suspicious that affairs are not properly or judiciously managed, is a reason why he should investigate; nor are we able to perceive any good reason why a suspicious stockholder can be turned aside with the answer that his suspicion is a mere caprice or his motives bad. JNor are we willing to accede to the proposition that the corporation is remediless if a stockholder or director attempts to make improper use of information which by virtue of such relation he obtains. Thompson on Corporations, Secs. 4009-4012, 4016. The allegation of the petitioner setting forth just and proper reasons for his desire to examine the records and accounts of the company is not one upon which an issue of ; fact can be raised by answers imputing to him base and un-' worthy motives. The judgment of the Circuit Court is affirmed.