Bernert v. Multnomah Lumber & Box Co.
| Decision Date | 22 June 1926 |
| Citation | 119 Or. 44,247 P. 155 |
| Parties | BERNERT v. MULTNOMAH LUMBER & BOX CO. ET AL. [a1] |
| Court | Oregon Supreme Court |
Department 2.
Appeal from Circuit Court, Multnomah County; Robert Tucker, Judge.
Mandamus by Carl Bernert against the Multnomah Lumber & Box Company and others. Peremptory writ granted, and defendants appeal. Writ sustained.
This is a mandamus proceeding instituted by a stockholder of the defendant corporation to compel it to submit to an inspection of its books and records. The alternative writ, so far as material herein, recites that the relator is a stockholder that he desires an inspection of the company's books and records to ascertain its financial status and the advisability of its obtaining more money by means of a contemplated bond issue; that relator is the owner of 45 shares of stock of the par value of $100 each; and that a demand at a reasonable time was made for such inspection, but it was refused.
Defendants answered, admitting the alleged company is a corporation and that relator is a stockholder therein; that he made a request for inspection of its books and records at a reasonable time and that such request was refused. It is further alleged that relator has an ulterior motive and purpose in desiring an inspection and that it would be inimical to the interests of the defendants for him so to do. Defendants, in substance aver that plaintiff and other persons named were engaged in a conspiracy to defraud the company and its stockholders; that information was desired in order to carry out such fraudulent design; and that defendants as a result of knowledge thus obtained would be subjected to base and groundless litigation.
Petitioner replies, denying the charge of had faith, and alleging affirmatively that the defendant company and his counsel had entered into a written agreement whereby he was expressly given the right to inspect its books and records.
The trial court allowed a motion for judgment on the pleadings and thereupon issued a peremptory writ directing the defendants to submit to such inspection, under certain well-defined restrictions. Defendants appeal.
John A Collier and Earl F. Bernard, both of Portland (Collier Collier & Bernard, of Portland, on the brief), for appellants.
W. P. La Roche, of Portland (L. E. Crouch and J. F. Reilly, both of Portland, on the brief), for respondent.
BELT, J. (after stating the facts as above).
In many jurisdictions various statutes have been enacted either confirming or enlarging the common-law rule. Turning to section 6870, Or. Laws, it is provided:
It will be observed that the right of examination is not limited to stockholders, but includes "any person interested therein and applying therefor." Nor is it provided that the purpose of the inspection be stated. The only restriction is the inspection shall be made at reasonable hours. Without doubt, a stockholder is an "interested person" within the meaning of the statute.
The effect of the statute is to give stockholders an absolute legal right to inspect the books and records of a company in which they are interested. It was enacted for their protection. Why should it not be so? They are the owners of the corporate property. The directors and other officers of the corporation are their agents and trustees. Is it not proper for the beneficiaries to inquire into the administration of the trust? Those who thus invest money may well investigate as to the manner in which it is being used, and the fact that this statutory right may result in abuse is in itself no reason for denying relief. That harm might result in subjecting corporate records to inspection by stockholders who are suspected of having sinister designs is generally more fanciful than real. When business is operated on a sound financial basis and the affairs of a company are conducted honestly and legitimately, seldom does harm result by turning on the light of day.
So far as the strict legal right of inspection is concerned, it is immaterial what the motive or purpose may be. The right conferred is absolute and unconditional. Petitioner's averments concerning his purpose and motive were superfluous. As stated in 7 R. C. L. 330:
This statement of the rule of practice is in conflict with the overwhelming weight of authority and the better reasoned cases, and may be considered as expressly overruled.
What we have heretofore said pertains to the legal right of inspection. We now pass to the question as to whether the relator is entitled to the extraordinary remedy of mandamus to enforce such statutory right, regardless of his motives or purposes. If it be shown by the pleadings that he is entitled to such right of inspection, does it follow as a matter of course that a peremptory writ shall issue, or does it rest within the sound legal discretion of the court? On this question the authorities are in conflict. See cases collated in valuable note, 22 A. L. R. 43. We believe, however, in keeping with the decided weight of authority, that, because relator has a strict legal right to an examination of defendant company's books and records, it does not follow that he can resort to mandamus if he has an unlawful or wrongful purpose. As stated in State ex rel. v. Funk, 105 Or. 134, 209 P. 113, 25 A. L. R. 625: --citing United States v. Fisher, 222 U.S. 204, 32 S.Ct. 37, 56 L.Ed. 165.
If it be established by pleadings or proof that a stockholder, in desiring an inspection, has a sinister design or an ulterior motive which may...
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Bernert v. Multnomah Lumber & Box Co.
...2. Appeal from Circuit Court, Multnomah County; Robert Tucker, Judge. On petition for rehearing. Petition denied. For former opinion, see 247 P. 155. John Collier and Earl F. Bernard, both of Portland ( Collier, Collier & Bernard, of Portland, on the brief), for appellants. W. P. La Roche, ......