Pfirman v. Success Mining Company, Ltd.

• Decision Date: 19 June 1917
• Citation: 166 P. 216,30 Idaho 468
• Parties: FRANKLIN PFIRMAN, Respondent, v. SUCCESS MINING COMPANY, LIMITED, a Corporation, and E. H. BECKER, C. M. CARROLL, P. J. GEARON and JAMES GEARON, Directors of Said Corporation, and L. C. WILSON, Director and Secretary of Said Corporation, Appellants
• Court: Idaho Supreme Court

166 P. 216

30 Idaho 468

FRANKLIN PFIRMAN, Respondent, v. SUCCESS MINING COMPANY, LIMITED, a Corporation, and E. H. BECKER, C. M. CARROLL, P. J. GEARON and JAMES GEARON, Directors of Said Corporation, and L. C. WILSON, Director and Secretary of Said Corporation, Appellants

Supreme Court of Idaho

June 19, 1917

MANDAMUS-CORPORATION-CORPORATION RECORDS-STOCKHOLDERS-INSPECTION OF CORPORATE RECORDS-TAKING COPIES OF CORPORATE RECORDS.

1. It is an imperative rule that before making an application for a writ of mandate, an express demand or request must be made on the defendant to perform the act sought to be enforced by the writ.

2. The facts of this case examined, and held sufficient to sustain the findings of the lower court to the effect that there was a demand and a refusal.

3. The refusal to permit a stockholder to appoint his own agent or attorney to examine the records of the corporation was in effect a denial of his right to examine such records.

4. At common law the right to inspect the corporate records by a stockholder was a right incident to ownership. This right however, was limited to cases where an inspection was sought at proper times and in good faith for the purpose of protecting the interests of the corporation or his own interests as stockholder.

5. Under Rev. Codes, sections 2775, 2776 and 7122, the right of a stockholder to inspect and take copies of the records of a corporation is absolute.

6. The right to make copies of the records of a corporation follows as an incident to the right to examine and inspect the same.

[As to stockholder's right to inspect books of the corporation and remedies to enforce the right, see note in 107 Am.St 607]

APPEAL from the District Court of the First Judicial District, for Shoshone County. Hon. William W. Woods, Judge.

Petition for writ of mandate. Peremptory writ issued. Defendants appeal. Affirmed.

Judgment affirmed. Costs awarded to respondent.

J. E Gyde, for Appellants.

Before a writ of mandate will issue commanding that certain acts be done, there must be a demand and a refusal. (Price v. Riverside Land Co., 56 Cal. 431; Wilson v. Board of Directors, etc., 138 Cal. 67, 70 P. 1059; Oroville & V. R. R. Co. v. Supervisors of Plumas County, 37 Cal. 354; Moseley v. Collins, 133 Ala. 326, 32 So. 131; Lake Erie & W. R. Co. v. State, 139 Ind. 158, 38 N.E. 596; 13 Ency. Pl. & Pr. 617.)

The demand must be made upon the proper officer. (13 Ency. Pl. & Pr. 618.)

At common law the right to inspect the books and records of a corporation existed, but that right could only be exercised in good faith and for some just, useful or reasonable purpose. The right was not enforced for speculative purposes or to gratify idle curiosity, where the interests of the stockholders and their protection were not involved. (7 R. C. L. 326, sec. 303; Commonwealth v. Empire Pass Ry. Co., 134 Pa. 237, 19 A. 629; Hemmingway v. Hemmingway, 58 Conn. 443, 19 A. 766; Lyon v. American Screw Co., 16 R. I. 472, 17 A. 61; State v. Jessup & Moore Paper Co., 7 Penne. (Del.) 397, 72 A. 1057; In re Devengoechea, 86 N.J.L. 35, 91 A. 314.)

James A. Wayne, for Respondent.

The first refusal to permit an inspection of these records was made at the annual stockholders' meeting of April 3, 1916. No further notice or demand was necessary prior to the commencement of this action, for the reason that when one stockholder has reason to believe the demand will be refused, the necessity of such demand is obviated. (26 Cyc. 342.)

A denial of the right to inspect such books and records through the medium of agents is in effect a denial of the right of the stockholder himself to make such inspection. (Mitchell v. Rubber Reclaiming Co. (N.J. Eq.), 24 A. 407; Cincinnati Volksblatt Co. v. Hoffmeister, 62 Ohio St. 189, 78 Am. St. 707, 56 N.E. 1033, 48 L. R. A. 732.)

The right of a stockholder to make this inspection is not abridged or influenced in any manner by the motives which prompt the application to inspect, and no matter how improper the motives may be, and even though it be established that it is one of his purposes to use such information against the interests of the corporation, he still has the right to inspect. (Johnson v. Langdon, 135 Cal. 624, 87 Am. St. 156, 67 P. 1050; Weinhenmayer v. Bitner, 88 Md. 325, 42 A. 245; 10 Cyc. 956; White v. Manter, 109 Me. 408, 84 A. 890, 42 L. R. A. (N. S.) 332; Kimball v. Dern, 39 Utah 181, Ann. Cas. 1913E, 166, 116 P. 28, 35 L. R. A. (N. S.) 134; Poor v. Yarnell, 28 Cal.App. 714, 153 P. 976.)

RICE, J. Budge, C. J., and Morgan, J., concur.

OPINION

RICE, J.

This suit was brought in the District Court for Shoshone county by the respondent herein for the purpose of obtaining a writ of mandate against the appellants requiring them to permit an examination of the records of appellant corporation and to permit the respondent to make copies of the same. The court after filing its findings of fact and conclusions of law, ordered and decreed that a peremptory writ issue to the defendants requiring them to permit the plaintiff personally or through his agents, auditors, bookkeepers, accountants and attorneys to inspect, examine and take copies of the records, books and papers in the office of the Success Mining Company, of every kind and nature and description whatsoever, save and except reports of any engineers and maps prepared for the use of defendant corporation in certain pending litigation.

The respondent is the owner of 100 shares of the capital stock of the appellant corporation, and as such stockholder attended the annual meeting of the stockholders held on the 3d day of April, 1916. During the course of said meeting he made informal demand upon the officers of the appellant corporation of the privilege of examining and inspecting a certain ore contract between the appellant corporation and the Graeselli Chemical Company. He was informed by the secretary of the appellant corporation that neither the ore contract nor any other matter pertaining to the company's affairs would be given out except at the option of the officers of the company, and subsequently, upon the 18th day of April, 1916, he made a formal oral and written demand upon the secretary of the appellant corporation, demanding the right to examine and inspect all the records of the corporation. At this time the secretary of the appellant corporation invited the respondent to make a personal examination and inspection of all the records of the company at its office, but stated that the contract between appellant corporation and the Graeselli Chemical Company was at the mine office several miles away, and that he had no control over the same. Appellant's secretary was willing that the respondent make a personal examination, but declined to permit such examination to be made by an agent, unless such agent was acceptable to himself. The secretary also refused to permit a copy to be made of the list of stockholders. Upon the 19th day of April, 1916, this suit was filed.

It is without doubt the law that before a writ of mandate will issue commanding certain acts to be done, there must be a demand and a refusal. (Price v. Riverside Land Co., 56 Cal. 431.) The appellants contend that in this case none of its officers ever refused to permit the respondent to examine the records in the office of the appellant corporation at Wallace, and that as to the contract with the Graeselli Chemical Company, respondent never demanded an examination of the same. The refusal to permit respondent to appoint his own attorney or agent to make the examination was in effect a denial of his right. (Mitchell v. Rubber Reclaiming Co. (N.J. Eq.), 24 A. 407.) There is no dispute but that the secretary of the appellant corporation absolutely refused to permit respondent to take copies of the records in the office of the company. Upon the entire proof offered at the trial the evidence of such demand and refusal is sufficient to sustain the findings of the lower court.

The error to which our attention is next directed is the action of the lower court in sustaining objections to the two following questions asked witness Howarth: First, "From your experience as a mining broker, what is your opinion as to the advisability, the taking into the--taking into...