Meyer v. Ford Industries, Inc.

• Decision Date: 17 July 1975
• Citation: 272 Or. 531,538 P.2d 353
• Parties: , 88 A.L.R.3d 653 Edward T. MEYER et al., Appellants, v. FORD INDUSTRIES, INC., a Washington Corporation, et al., Respondents.
• Court: Oregon Supreme Court

Page 353

538 P.2d 353

272 Or. 531, 88 A.L.R.3d 653

Edward T. MEYER et al., Appellants, v. FORD INDUSTRIES, INC., a Washington Corporation, et al., Respondents.

Supreme Court of Oregon, In Banc.

Argued and Submitted June 5, 1975.

Decided July 17, 1975.

Charles Robinowitz, Portland, argued the cause and filed the briefs for appellants.

Richard H. Williams, Portland, argued the cause for respondents. With him on the brief were Wayne Hilliard and Dezendorf, Spears, Lubersky & Campbell, Portland.

TONGUE, Justice.

This is an action for statutory damages under ORS 57.246(3) because of defendants' refusal of plaintiffs' request, as stockholders, to inspect certain documents claimed by them to be corporate 'books and records of account' for the purposes of that statute. Plaintiffs seek damages equal to 10 per cent of the value of their stock multiplied by eight, representing what they claim to have been eight 'independent, separate inspection requests.'

The trial court sustained defendants' motion to strike the allegations of plaintiffs' complaint listing the eight 'records' for which plaintiffs' requested inspection was refused and the allegations requesting 80 per cent statutory damages. Upon plaintiffs' refusal to plead further an order of dismissal was entered, from which plaintiffs appeal.

1. Plaintiffs requested 'records' for the refusal of which they are entitled to statutory damages under ORS 57.246(3).

Plaintiffs say that at common law a stockholder in a corporation has the right to inspect all corporate books, records, contracts, correspondence and other documents and data of any kind which have any relevance to a determination of the value of his stock. Plaintiffs contend that by the adoption in 1953 of the Model Business Corporation Act, including ORS 57.246(3), ¹ the Oregon legislature intended to 'expand and supplement' the common law inspection right of stockholders by providing a remedy of statutory damages to replace the less effective common law remedy of mandamus, but did not intend by this statute to 'restrict and qualify' that common law right. It follows, according to plaintiffs, that because they could have brought mandamus proceedings to enforce their common law and statutory right to inspect all the documents demanded by them, they are also entitled to demand statutory damages under ORS 57.246 for defendants' refusal to permit them to inspect such documents.

Defendants contend, on the contrary, that the words 'books and records of account' as used in ORS 57.246(3) must be given their 'ordinary meaning,' which is limited to 'regularly maintained accounting records,' particularly in view of the fact that plaintiffs seek to enforce a penalty, and one 'governed solely by statute,' with the result that they 'are not aided by cases discussing shareholder's common law right of inspection enforceable by writ of mandamus' and with the further result that they had no right to claim statutory damages for refusal to permit inspection of the documents demanded because such documents were not 'books and records of account' for the purposes of this statute. ²

The documents which defendants refused to permit plaintiffs to inspect, according to the allegations of their complaint, were the following:

'3. Agreement(s) relating to the purchase of Marcom, Inc.;

'4. Agreement(s) with Colonial Leasing Corp.;

'5. A preliminary year end statement of Ford Industries dated April 16, 1971 with attached commentary sheet;

'6. Records relating to the investment of $158,390 which Ford Industries contributed to its employee pension plan;

'7. Papers and written documents relating to the issuance and computation of a 9 percent $1.5 million convertible debenture to Roseburg Lumber Co.;

'8. Agreements between Ford Industries and any former employee of Ford Industries including, but not limited to, Herbert L. Brown;

'9. Records relating to the increase in a loan from $1,369,492 to $1,500,000 from Roseburg Lumber Co. to Ford Industries between July 31, 1970 and October 26, 1970; and

'10. Any written documents relating to an offer to purchase, merge with or underwrite any portion of Ford Industries.'

As stated by 5 Fletcher Cyclopedia Corporations (Perm. ed. 1967) 881--83, § 2239:

'The right of the stockholder at common law extends to all the books, papers, records, federal reports, and other data of the corporation as to assets, liabilities, contracts, operations and practices, including correspondence between the controlling officers relating to the internal affairs of the corporation. * * *'

In Rosentool v. Bonanza Oil and Mine Corp., 221 Or. 520, 533, 352 P.2d 138, 144 (1960), we quoted with approval from our previous decision in Bernert v. Multnomah Lbr. & Box Co. et al., 119 Or. 44, 48, 247 P. 155, 248 P. 156 (1926), as follows:

"They (the stockholders) 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?"

As previously stated, in 1953 the Model Business Corporation Act was adopted in Oregon including its provision (as quoted above) ³ to the effect that upon refusing the request of a stockholder to inspect 'books and records of account,' among other things, a corporation is liable for a penalty of 10 per cent of the value of the stock of the stockholder. It has been stated that the purpose of this section of that Model Act was not only to 'preserve' the common law right of stockholders to examine books and records of account, ⁴ but also to 'enlarge' that right, which had been 'hampered by the delay and expense which often accompanied enforcement of the right' by mandamus. ⁵ Nevertheless, the official 'Comment' to this section of the Model Business Corporation Act says nothing directly about the scope and nature of the records intended to be made subject to the provision of that Act for statutory damages, but states only that under the Act a stockholder 'is entitled to inspect all relevant Books unless an improper purpose can be shown.' ⁶

According to Fletcher, Supra, 881--83, § 2239:

'* * * (t)he statutory right depends on the language of the statute, and the judicial interpretation of the right conferred thereunder. Generally speaking, the right of the stockholder extends to all books, papers, contracts, minutes, books or other instruments from which he can derive any information that will enable him to better protect his interests. * * *'

As also stated by Fletcher, Supra, 792, § 2215:

'* * * (S)ome statutes are general in terms and under them stockholders are given the broad right to examine and inspect the books, records and papers of the corporation at reasonable and proper times, other statutes differ from the common law rule in that they contain specific provisions as to the inspection of certain books or records only, * * *.'

The genesis of the Model Business Corporation Act as adopted in Oregon, including this provision of the Act, was the Illinois Business Corporations Act. ⁷ In turn, this provision of that Illinois statute was based upon an earlier Illinois statute which had been the subject of considerable litigation. ⁸

In cases involving the interpretation of the terms of a statute which are not clear and unambiguous it has been said that if the legislative intent can be clearly ascertained such terms should be so construed so as to give effect to that intent, regardless of their literal meaning. See State Highway Comm. v. Rawson, 210 Or. 593, 610--11, 312 P.2d 849 (1957), and cases cited therein. In that case we also quoted, with approval, from the dissenting opinion of Mr. Justice Lusk in Berry Transport, Inc. v. Heltzel, 202 Or. 161, 184, 272 P.2d 965, 975 (1954), as follows:

"* * * A court which treats a particular provision of a statute as though it were a waif without known parents, relatives or associates, is likely to miss the meaning of the particular provision. * * *'

As also held by this court in State ex rel. Western Seed v. Campbell, 250 Or. 262, 270--71, 442 P.2d 215, 219 (1968):

'* * * When one state borrows a statute from another state, the interpretation of the borrowed statute by the courts of the earlier enacting state ordinarily is persuasive. See Fleishhauer v. Bilstad et al., 233 Or. 578, 379 P.2d 880 (1963) (presumption that other state's interpretation is governing); School Dist. No. 1 ex rel. Lynch Co. v. A.G. Rushlight & Co., 232 Or. 341, 345, 375 P.2d 411 (1962). * * *' ⁹

Such a rule of statutory construction may not be directly in point in relation to the adoption of a so-called 'model' or 'uniform' act. Nevertheless, we find the decisions of the Illinois courts in their interpretation of the Illinois statute, as next discussed, to be highly persuasive, if not controlling, upon the question of the intended meaning, scope and application of the term 'books and records of account.'

In 1872 Illinois adopted a General Corporation Act, Laws 1871--72, p. 296, § 13. Section 13 of that Act provided that:

'* * * 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.' (Emphasis added)

That Act was amended in 1919 (General Corporation Act, Laws 1919, p. 312, § 38; Smith's Ill.Rev.Stat.1921, ch. 32, § 38). The term 'records and books of account' remained. The 10 percent penalty provision was added. In 1933 Illinois adopted a Business Corporation Act which included a provision for inspection of 'books and records of account'--the same term as in the Model Business Corporation Act, as adopted in Oregon in 1953. ¹⁰ In interpreting that statutory provision, as well as its predecessor, the Illinois courts appear to have held that it is coextensive with the common law right of inspection.

Thus, in Stone v. Kellogg, 165 Ill. 192, 46 N.E. 222 (1896), the Illinois Supreme Court rejected a...