In re Steinway

• Citation: 53 N.E. 1103,159 N.Y. 250
• Parties: In re STEINWAY.
• Decision Date: 06 June 1899
• Court: New York Court of Appeals

159 N.Y. 250

53 N.E. 1103

In re STEINWAY.

Court of Appeals of New York.

June 6, 1899.

Appeal from supreme court, appellate division, First department.

Application by Henry W. T. Steinway for mandamus against the officers and directors of Steinway & Sons, a corporation, to compel defendants to permit an inspection of the books of the corporation. From a judgment of the appellate division (52 N. Y. Supp. 343) reversing a judgment of special term for defendants, they appeal. Affirmed.

Edward C. James, for appellants.

Wheeler H. Peckham, for respondents.

VANN, J.

Steinway & Sons, once a copartnership, became a corporation in 1876, under the general manufacturing act of 1848, and the relator has been a stockholder therein ever since. He now holds 1,440 shares of its stock, of the par value of $144,000, out of a total of 20,000 shares, of the value of $2,000,000, but with an actual value much in excess of that sum. He has not been an officer of the corporation since 1881, and he has had no means of knowing much about the management of its affairs since 1892, when he was given an opportunity to examine the books. Since then he has been substantially ignorant as to all the details of the management, and has had no access to the books or records. Learning of certain practices that he considered improper, on April 12, 1894, and March 27, 1895, he made protests in writing to the company, but no attention was paid to them. On the 6th of April, 1896, he made a written request for leave to examine the books, but, receiving no reply, on the 15th of that month he wrote requesting information, proper in character, upon certain subjects; and to this communication he received an answer from the secretary, dated April 23, 1896, written in behalf of the board of trustees, virtually refusing the information asked for, on the ground that the relator intended to use it in ‘hostility to the interest of the stockholders.’ On the 5th of April, 1897, he endeavored to ascertain certain material facts at the annual meeting, but without success; and thereupon he requested the officers and directors to afford his accountants and attorneys access to the books of account, vouchers, and records of the company for the years 1892 to 1896, inclusive, for the purpose of examining the same. Receiving no reply, on the 8th of May, 1897, he served a written request upon the treasurer for a statement in writing, under oath, of the affairs of the company, embracing a particular account of all its assets and liabilities for each of the several fiscal years from 1892 to 1896, inclusive; and in response to this he received a general statement placing the assets at more than $3,000,000, but distributed into only 14 items, 8 of which were over $100,000 each. The liabilities included but 8 items, 3 of which were the capital stock, the surplus, and the profit of 1896. This was the first information as to the company's affairs which the petitioner had been able to obtain in five years, except that he once saw the balance sheet and inventory of January, 1893. Since 1891 the dividends declared by the company have dwindled in amount. In 1896 the dividend was only 5 per cent., but never before since 1883 had less than 10 per cent., and sometimes as much as 18 and 20 per cent., been divided in dividends. The relator claimed, in his petition for a writ of mandamus to permit inspection of the books, that the officers of the corporation were engaged in an attempt to form an English stock company for the control of its business, with the design of selling their shares of the capital stock, or exchanging them for a much greater amount of shares in the English company, and that efforts had been made by the stockholders and officers to induce him to sell his stock at $250 a share; but, as he insisted, it was impossible for him to fix upon any price without an opportunity to investigate the condition of the company. He specified various acts which he alleged to be improper on the part of the officers, such as the payment of exorbitant rentals, carrying on a banking business, allowing unusual rates of interest, inventorying the assets too low, and paying the trustees salaries, with no equivalent in services. The opposing affidavits contain a large amount of matter relating to aggravating conduct on the part of the relator in the past, and alleging improper motives and ulterior aims on his part. Many general allegations of the petition were denied in haec verba, without stating the real facts. The president and other officers of the corporation denied the allegations of improper conduct on their part, and claimed that the relator wished to force them to buy him out at an extravagant price. As no alternative writ was issued, and the relator proceeded to argument upon his petition and the opposing affidavits, his right to a peremptory writ depends upon the conceded facts, the same as if he had demurred to the allegations of the defendants. People v. New York Cent. & H. R. R. Co., 156 N. Y. 570, 51 N. E. 312;Haebler v. Exchange, 149 N. Y. 414, 44 N. E. 87;People v. City of Brooklyn, 149 N. Y. 215, 43 N. E. 554;People v. Rome, W. & O. R. Co., 103 N. Y. 95, 8 N. E. 369; Code Civ. Proc. § 2070. While many of the facts alleged in the petition were denied, enough were left undenied to present a case for the exercise of judgment and discretion on the part of the supreme court, provided it has power, in any case not expressly covered by statute, to authorize the inspection, wholly or in part, of the books of a manufacturing corporation, upon the application of a stockholder. The special term denied the application of the relator for a peremptory writ of mandamus commanding the officers of the corporation to exhibit certain of its books and papers to him, but upon appeal to the appellate division the order of the special term was reversed by a divided vote, and the prayer of the petition granted, with certain regulations as to the time, place, and manner of exhibiting the books and papers. The appellate division allowed an appeal to this court, and certified the following question for decision: ‘Has the supreme court the power, upon the petition of a stockholder, to compel by mandamus the corporation to exhibit its books for his inspection?’ The relator does not claim that the power in question has been conferred upon the court by statute, but he insists that it is a part of its inherent power. This position involves an inquiry into the origin and extent of the authority of the supreme court, and its power of visitation, or of examining into the affairs of corporations according to the common law.

The origin of the supreme court was through a statute passed by the legislature of the colony of New York on the 6th day of May, 1691, whereby, among other things, it was enacted ‘that there shall be held and kept a Supreame Court of Judicature, which shall be Duely & Constantly kept att the Citty of New Yorke and not Elsewhere, att the severall & Respective times hereafter mentioned. And that there be five Justices at Least appointed & Commissionated to hold the same court, two whereof together with one Chief Justice to be a Quorum. Which Supream Court are hereby fully Impowered and Authorized to have Cognizance of all pleas, Civill Criminall, and Mixt, as fully and amply to all Intents & purposes whatsoever, as the Courts of Kings Bench, Comon Pleas, & Exchequer within their Majestyes Kingdome of England, have or ought to have, * * *.’ This statute was to remain in force for only two years, but it was renewed, recognized, and continued by colonial act or royal ordinance substantially in the words quoted until the adoption of our first constitution. 1 Col. Laws, pp. 226-229, 303-306, 358, 380; 2 Col. Laws, 462, 639, 948; 3 Col. Laws, 546, 780, 1007; 4 Col. Laws, 1088; 5 Col. Laws, 73. As has been well said by a recent writer: ‘This act founded the supreme court. * * * Not only did this act erect the tribunal which still continues the great law court of the state, but it vested in it a jurisdiction which change of government and constant reforms and revolutions in procedure have been powerless to abridge in any material respect; for, while its jurisdiction has been enlarged by its union with the court of chancery, its ancient jurisdiction still remains unimpaired. The supreme court of the province was the instrument by which the great body of the jurisprudence of the English common law was applied to New York.’ Fowler's Organization of the Supreme Court, 19 Alb. Law J. 211. The court of chancery was created, or, as some insist, continued, by the same act, and was subsequently kept in force in the same way. Hoff. Ch. Prac. 14; Grah. Jur. 140. Aside from the colonial statutes, which created and continued such courts only for fixed terms, royal ordinances were resorted to when the legislature failed to act, upon the theory that such action was authorized by the charter of the colony. The most notable were those passed by the governor and council on the 15th of May, 1699, and the 3d of April, 1704; which are referred to by the revisers in a note to 1 Rev. Laws, p. 213, and published in full in appendix No. 5 at the end of the second volume of the Revised Laws. These ordinances, which were questioned but never overthrown, are substantially the same as the original act of 1691. Chalm. Col. Op. 249; 5 Col. Doc. 952; 1 E. D. Smith, introduction, p. 50. The supreme court, as thus continued by Lord Bellamont's ordinance of 1699, and the court of chancery, as continued by ordinance on the 20th of August, 1701, and the 7th of November, 1704, were the same tribunals and possessed the same powers as those organized by the colonial legislature. Appendix No. 7, 2 Rev. Laws, p. 13. They were still in existence and exercising their powers when the convention met to organize a state government. ‘Such parts of the common law of England and of the statute law of England and Great Britain,...