Lyon v. Am. Screw Co.

• Decision Date: 16 February 1889
• Citation: 16 R.I. 472,17 A. 61
• Court: Rhode Island Supreme Court
• Parties: LYON et al. v. AMERICAN SCREW CO.

17 A. 61

16 R.I. 472

LYON et al.

v. AMERICAN SCREW CO.

Supreme Court of Rhode Island.

Feb. 16, 1889.

Petition by Lucius Lyon and others for mandamus to compel the American Screw Company to allow them, as stockholders, to inspect the books of the company.

Benjamin N. Lapham, for petitioners. James Tillinghast, for respondent.

STINESS, J. The petitioners own two shares each of the stock of the American Screw Company, and pray for a writ of mandamus to compel the defendant to allow them, as such stockholders, to inspect the books of the company. It appears that an inspection of the books of account of the company was offered them upon their demand; but the particular book which they desired to see was the stock ledger, or book containing a list of the stockholders, with their names and addresses, which was refused them by the officers of the company. An inspection of this book or list is the special prayer of the petition.

The relation of stockholders to a private corporation is somewhat complex. The corporation is a distinct being, but they are its members. It does acts to which they are not parties, but in the result they are personally interested. In reality they are the corporation, and its property their property; yet it must act independently by its agents, and manage and control its property by them. From such a relation it is evident that stockholders are entitled to full knowledge of its affairs; that even owners of small interests should not be deprived of the substantial benefit arising from such knowledge, nor of a voice in the management; while, at the same time, the corporation should be as free as possible to transact its business. Since it is not a partnership, every member cannot have the same privileges as a partner would have, and consequently the right of a stockholder must be subject to some limitation. One of the privileges incident to ownership of stock in a corporation is that of an inspection of the books and condition of the company. This privilege, in general, becomes a right when the inspection is sought at proper times, and for proper purposes; and, in particular, when it is specially given, either by the law of the state, or by the charter and by-laws of the company. Cases of the latter class are illustrated by two in New York reports. A statute provided that the book containing the names of the stockholders should be open to the examination of every stockholder for 30 days previous to any election of directors. In Cotheal v. Brouwer, 5 N. Y. 562, this right given by the statute, together with the right to take a copy or memorandum, was recognized, and a statutory penalty imposed for a refusal of it. In People v. Steam-Ship Co., 50 Barb. 280, the right to inspect the list of stockholders was given in the charter, and the right so given was enforced by mandamus. But the writ of mandamus issues as of course only when a specific legal right, clearly established, is to be enforced. High, Extr. Rem. §§ 9, 277. In eases like those cited above, the legislature by statute or charter, or the company by by-laws, have assured to the stockholder a right to examine the books of the company, irrespective of his purpose in so doing; and the right thus given cannot be denied him, for it is not within the province of the company or the court to inquire into the reasonableness of the request. The by-laws of the defendant company provide that the treasurer shall "keep, or cause to be kept, a full and accurate account of all the business of the company, in suitable books, which books shall at all times be open to the inspection of any of the stockholders." The right guarantied to the stockholders in this provision is the right to inspect the books of account of the business of the company. The petitioners' right, to this extent, is not denied by the defendant.

But the petitioners argue that the transfer of stock is a part of the business of the company, and that consequently the stock ledger is included within the operation of the by-law. We do not so understand it. An "account of all the business of the company" has reference to its manufacturing and commercial transactions. A list of stockholders would neither naturally nor properly be included in an account of the business. Hence a book containing the names of the stockholders is not, in our opinion, within the provisions of the by-law. There is nothing in the charter nor in the statutes relating to this matter. If, then, the petitioners have not an express and absolute right to examine this book, but only what may be termed a privilege so to do, incident to ownership of stock, the question comes, under what circumstances may this privilege be enforced as a right? The answer has already been given,—at proper times, and for proper purposes. One reason for this limitation is that a stockholder should not be entitled to call upon the court to enforce that which is not given him by law, or the rule of the company, unless the circumstances show that he needs such aid for some reasonable and proper purpose. While all the privileges of a stockholder should be fully accorded to him when occasion requires, the affairs of the company should not be interfered with without such requisite occasion. The rule to be observed is well stated in People v. Railroad Co., 11 Hun, I, affirmed in Re Sage, 70 N. Y. 220, as follows: "To hold that every person who shows himself to be...