Celina Mut. Ins. Co. v. American Druggists Ins. Co.
Decision Date | 25 May 1977 |
Citation | 6 O.O.3d 313,52 Ohio App.2d 304,369 N.E.2d 1066 |
Parties | , 6 O.O.3d 313 CELINA MUTUAL INSURANCE COMPANY, Appellant, v. AMERICAN DRUGGISTS INSURANCE COMPANY, Appellee. 1 |
Court | Ohio Court of Appeals |
Syllabus by the Court
1. The right of a shareholder in a domestic insurance company, other than a life insurance company, to examine and copy the record of the company's shareholders is, under R.C. 1701.98, governed by R.C. 1701.37(C), not by the provisions of R.C. Chapter 3925.
2. The fact that a shareholder has an interest in acquiring control of a company does not render his purpose in requesting to examine and copy shareholder lists unreasonable or improper, within the meaning of R.C. 1701.37(C).
Graydon, Head & Ritchey and John J. Kropp, Cincinnati, for appellant.
Taft, Stettinius & Hollister and Thomas Y. Allman, Cincinnati, for appellee.
This cause arises from the denial by the trial court of Plaintiff-appellant's prayer for a mandatory injunction ordering defendant-appellee to permit inspection and copying of the names and addresses of its shareholders. It presents two principal issues. First, is the right to inspect such list governed by the general corporation law or by the statutes dealing with domestic insurance companies? Secondly, does the fact that the shareholder may have an interest in acquiring the corporation make his request for the shareholder list unreasonable or improper?
Both appellant, Celina Mutual Insurance Company (hereinafter referred to as "Celina"), and appellee, American Druggists Insurance Company (hereinafter referred to as "ADI"), are domestic insurance corporations. The evidence reveals that between December 1975 and May 1976 there were conversations and correspondence between top officers of the two companies. Celina made clear throughout that it was interested in a possible merger or consolidation with or acquisition of ADI. Although contacts were at first cordial, the officers of ADI eventually made clear they were not interested in ADI being acquired by anyone and would not turn over the shareholder list requested to Celina. At that point Celina purchased shares in ADI and at the time of filing this action was the record owner of twenty-five shares. It then presented to ADI its written demand as follows:
Upon its demand being refused, Celina brought the present action seeking a mandatory injunction ordering ADI to permit its inspection and copying of the record of ADI shareholders.
ADI argues and the trial court held that since ADI is a domestic insurance company other than a life insurance company, the issues are governed by R.C. Chapter 3925. This chapter contains no provision for the right of a shareholder to demand a shareholder list. ADI specifically points to that portion of R.C. 3925.04 which states, in part:
"The board shall keep full and correct records of its transactions, which shall be open at all times to the inspection of the member or stockholders."
It contends that by failing to include in the section a right to inspect the shareholder list, the legislature intended there be no such right.
We see no merit in these contentions. R.C. Chapter 3925 makes no attempt to deal with every aspect of a corporation. It contains only such provisions as are specially required for the regulation of domestic insurance companies. R.C. Chapter 1701, on the other hand, deals with corporations for profit.
The determinative statute is R.C. 1701.98, which provides in pertinent part:
This section makes clear that the general corporation law governs all corporations except where there are special provisions as to designated classes of corporations on the same subject.
R.C. 1701.37(C) provides:
"Any shareholder of the corporation, upon written demand stating the specific purpose thereof, shall have the right to examine in person or by agent or attorney at any reasonable time and for any reasonable and proper purpose, the articles of the incorporation, its regulations, its books and records of account, minutes, and records of shareholders aforesaid, and voting trust agreements, if any, on file with the corporation, and to make copies or extracts thereof."
The provision for a right to inspect and copy the record of shareholders provided for by this section is clearly not dealing with the "same subject" as the provision, in R.C. 3925.04, for a right to inspect the record of board transactions. At the very least, R.C. 3925.04 is cumulative and under R.C. 1701.98 both it and R.C. 1701.37(C) must apply.
It must be borne in mind that the right of an owner of property to know who his fellow owners are is basic. It existed at common law and has been part of the statutory law of Ohio since 1884. 2 It defies common sense to interpolate into these statutes an intent on the part of the legislature to deprive shareholders in an insurance company of so fundamental a right. Appellee's citations, State, ex rel. Kearns, v. Rindsfoos (1954), 161 Ohio St. 60, 118 N.E.2d 138; State, ex rel. Great Fidelity Life Ins. Co., v. Circuit Court of Posey Co. (1972), 259 Ind. 441, 288 N.E.2d 143, and White v. Campbell (Fla.App. 1968), 215 So.2d 66, are inapposite.
Accordingly, we hold that Celina, as a shareholder in ADI, having made a written demand to inspect and copy the record of ADI shareholders, stating the specific purpose of its demand, is presumptively entitled, under R.C. 1701.37(C) to have its demand complied with.
ADI maintains and the trial court held that Celina's demand was not for a reasonable and proper purpose as required by the statute. We disagree. Celina's written demand, set out above, was for purposes approved in so many words by the courts in Lake v. Buckeye Steel Castings Co. (1965), 2 Ohio St.2d 101, 206 N.E.2d 566 and Grossman v. Cleveland Cartage Co. (1959), 8 Ohio Op.2d 492, 157 N.E.2d 154. Hence, as spelled out in paragraph two of the syllabus of Buckeye Steel Castings, supra, ADI has the burden of proving that Celina's demand was improper or unreasonable in order to excuse its failure to comply therewith.
A review of the transcript discloses no evidence that Celina could or would use the ADI shareholder list for any competitive advantage over ADI; that Celina's purpose was in any way to cause embarrassment or loss to ADI or its shareholders; or that its purpose was other than finding out all it could about ADI in order to determine whether it wished to purchase more stock in order to gain control or acquire ADI. Gordon Barker, president of ADI, did testify that he was concerned lest contact with ADI shareholders by another insurance company might raise doubts in their minds about ADI. This was, however, pure speculation on his part. One could equally speculate that such contact would increase the value the shareholders would place on their ADI holdings.
The issue then is whether a shareholder who has expressed an interest in acquiring control of a company acts with an improper or unreasonable purpose within the meaning of R.C. 1701.37(C) when he requests shareholder lists. No Ohio case deals specifically with this problem. Several, however, cast light on the underlying meaning of "improper or unreasonable." Most recently, in Buckeye Steel Castings, supra, the Supreme Court stated:
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