Pagett v. Westport Precision, Inc.

• Decision Date: 20 April 2004
• Docket Number: (AC 23304)
• Citation: 82 Conn. App. 526,845 A.2d 455
• Court: Connecticut Court of Appeals
• Parties: MICHAEL G. PAGETT v. WESTPORT PRECISION, INC.

82 Conn. App. 526

845 A.2d 455

MICHAEL G. PAGETT v. WESTPORT PRECISION, INC.

(AC 23304)

Court of Appeals of Connecticut.

Argued January 13, 2004.

Officially released April 20, 2004.

Flynn, McLachlan and Hennessy, JS. Paul L. McCullough, for the appellant-appellee (defendant).

Jonathan D. Elliott, with whom, on the brief, was Sabato P. Fiano, for the appellee-appellant (plaintiff).

Opinion

FLYNN, J.

The defendant, Westport Precision, Inc., appeals from the judgment of the trial court ordering the issuance of a writ of mandamus to the plaintiff, Michael G. Pagett, pursuant to General Statutes § 33-946 (b) and (c). The order required the defendant to allow the plaintiff, a minority shareholder who was a former employee currently engaged in litigation against the defendant, to inspect and to copy certain corporate financial records and tax returns. On appeal, the defendant argues that the court improperly granted the writ of mandamus after incorrectly finding that the plaintiff (1) had established that his demand was made in good faith and for a proper purpose, (2) had stated his purpose with reasonable particularity and (3) had proven that the records requested were directly connected with his purpose. On cross appeal, the plaintiff appeals from the judgment denying him attorney's fees pursuant to General Statutes § 33-948 (c). The plaintiff argues that the court improperly denied his petition because there was no evidence that the defendant had a good faith reason for denying the plaintiff access to the requested records.

We affirm the court's granting of the writ of mandamus because we have determined that the plaintiff met the requirements of § 33-946 (b) and (c). We reverse the court's ruling on the plaintiffs cross appeal regarding attorney's fees and remand the matter to the court with direction to award attorney's fees to the plaintiff.

I

We first address the issue of whether the writ of mandamus was properly granted. The defendant claims that the plaintiff did not meet the requirements of § 33-946 (c), namely, that the plaintiff (1) had not established that his demand was made in good faith and for a proper purpose, (2) had not stated his purpose with reasonable particularity and (3) failed to prove that the records requested were directly connected with his purpose.

"When the factual basis of the court's decision is challenged, [we] must determine whether the facts are supported by the evidence or whether they are clearly erroneous.... In such cases, the trier's determination of fact will be disturbed only in the clearest of circumstances, where its conclusion could not reasonably be reached." (Internal quotation marks omitted.) McManus v. Roggi, 78 Conn. App. 288, 294, 826 A.2d 1275 (2003).

The defendant's claims turn in part on our construction of § 33-946 (b) and (c). "Issues of statutory construction raise questions of law, over which we exercise plenary review." Celentano v. Oaks Condominium Assn., 265 Conn. 579, 588, 830 A.2d 164 (2003). "When we construe a statute, [o]ur fundamental objective is to ascertain and give effect to the apparent intent of the legislature.... In seeking to discern that intent, we look to the words of the statute itself, to the legislative history and circumstances surrounding its enactment, to the legislative policy it was designed to implement, and to its relationship to existing legislation and common law principles governing the same general subject matter.... Furthermore, [w]e presume that laws are enacted in view of existing relevant statutes... because the legislature is presumed to have created a consistent body of law.... [I]n the absence of guidance from the language of the statute or the legislative history, we look to common law principles.... It is assumed that all legislation is interpreted in light of the common law at the time of enactment....

"We construe each sentence, clause or phrase to have a purpose behind it.... In addition, we presume that the legislature intends sensible results from the statutes it enacts.... Therefore, we read each statute in a manner that will not thwart its intended purpose or lead to absurd results.... Words in a statute must be given their plain and ordinary meaning ... unless the context indicates that a different meaning was intended.... No word or phrase in a statute is to be rendered mere surplusage.... In applying those principles, we keep in mind that the legislature is presumed to have intended a reasonable, just and constitutional result.... In construing a statute that is remedial, we do so liberally in favor of those whom the legislature intended to benefit." (Citations omitted; internal quotation marks omitted.) Hibner v. Bruening, 78 Conn. App. 456, 458-59, 828 A.2d 150 (2003).

We first look to the words of the statute. Section 33-946 (b) provides in relevant part: "A shareholder of a corporation is entitled to inspect and copy, during regular business hours at a reasonable location specified by the corporation, any of the following records of the corporation if the shareholder meets the requirements of subsection (c) of this section and gives the corporation written notice of his demand at least five business days before the date on which he wishes to inspect and copy...." Subsection (b) lists, inter alia, "accounting records" among the type of records that may be inspected. General Statutes § 33-946 (b).

The plain meaning of what, when and where records may be inspected is clear from the statutory language. Five days after filing a written request, at a place the corporation designates, a shareholder is entitled to inspect accounting records. The plain and ordinary meaning of these terms is clear, and the parties have not disputed their meaning.

Subsection (b) conditions this entitlement to inspection on meeting "the requirements of subsection (c) of this section...." General Statutes § 33-946 (b). The parties disagree as to whether the plaintiff met the requirements of subsection (c). Section 33-946 (c) provides that "[a] shareholder may inspect and copy the records described in subsection (b) of this section only if: (1) His demand is made in good faith and for a proper purpose; (2) he describes with reasonable particularity his purpose and the records he desires to inspect; and (3) the records are directly connected with his purpose." When, as in this case, a shareholder believes that he meets this test and wrongly has been denied access to corporation documents, he may apply to the Superior Court for a writ of mandamus. See MMI Investments, LLC v. Eastern Co., 45 Conn. Sup. 101, 108, 701 A.2d 50 (1996).

The defendant challenges whether the plaintiff has met these three statutory prongs. No statutory definition of the required "good faith," "proper purpose," "reasonable particularity" in the description of that purpose or "direct connection" with that purpose is incorporated within the language of § 33-946 (c). Nor is the meaning plainly evident from the language used. Nor has our Supreme Court or this court previously construed these terms.

In construing this language, we consider the statute's remedial purpose and give it a liberal construction. See Hibner v. Bruening, supra, 78 Conn. App. 459. Statutes providing for inspection by shareholders should be liberally construed in favor of shareholders. See Dines v. Harris, 88 Colo. 22, 34, 291 P. 1024 (1930).¹

We are persuaded by authority from sister states that have construed similar statutes and concluded that a shareholder's status as an owner is the spring from which statutory inspection rights flow. "The basis of a shareholder's right to inspect the books and records of a corporation is his ownership of the corporate property and assets through his ownership of shares; as an owner, he has the right to inform himself as to the management of the corporate property by directors and officers who are his trustees in direct charge of the property." Tucson Gas & Electric Co. v. Schantz, 5 Ariz. App. 511, 513, 428 P.2d 686 (1967). A corporation is not an entity that can be separated from its members, for in reality those running the corporation "are merely the agents of the [shareholders]...." Cooke v. Outland, 265 N.C. 601, 610, 144 S.E.2d 835 (1965); see also Bank of Giles County v. Mason, 199 Va. 176, 181, 98 S.E.2d 905 (1957). Furthermore, "[a shareholder] in a corporation has, in the very nature of things and upon principles of equity, good faith, and fair dealing, the right to know how the affairs of the company are conducted and whether the capital of which he has contributed a share is being prudently and profitably employed." (Internal quotation marks omitted.) State ex rel. Fussell v. McLendon, 109 So. 2d 783, 786 (Fla. App. 1959).

A

Section 33-946 (c) requires that a shareholder's demand to inspect and to copy the records must be made in good faith and for a proper purpose. We first turn to the defendant's contention that the court incorrectly found that this requirement had been met. We disagree.

Our case law has defined good faith in other contexts and circumstances. Good faith has been defined as honesty of purpose, lack of intent to defraud and honest intent to refrain from taking unconscientious advantage of another. Snyder v. Reshenk, 131 Conn. 252, 257, 38 A.2d 803 (1944). Applying this definition to the record before us, we conclude that the court's implicit finding of good faith was not clearly erroneous.

Section 33-946 (c) does not define what is meant by "proper purpose." At common law, a proper purpose has been held to be a purpose that is "for a lawful and reasonable purpose germane to [the plaintiffs] status as a shareholder...." (Internal quotation marks omitted.) Cooke v. (Jutland, supra, 265 N.C. 614. A purpose will be found to be improper if it is "for speculative or trading purposes or for any purpose inimical to the interest of the corporation or of its shareholders." (Internal quotation marks...