Sanders v. Neely, 35632.

• Court: United States State Supreme Court of Mississippi
• Citation: 197 Miss. 66,19 So.2d 424
• Decision Date: 09 October 1944
• Docket Number: 35632.
• Parties: SANDERS v. NEELY et al.

19 So.2d 424

197 Miss. 66

SANDERS
v.
NEELY et al.

No. 35632.

Supreme Court of Mississippi

October 9, 1944

[19 So.2d 425]

Cameron & Wills, of Meridian, and Geo. E. Shaw, of Jackson, for appellant.

Niles Moseley and Creekmore & Creekmore, all of Jackson, for appellees.

Greek L. Rice, Atty. Gen., and Wells, Wells, Lipscomb & Newman, and Green & Green, all of Jackson, amici curiae.

McGEHEE, Justice.

There are two questions here for decision: First, whether or not the provisions of Chapter 3, Vol. 4, Title 22, Sections 5616-5834 inclusive, Code of 1942, regulating insurance companies and prescribing the duties of the Commissioner of Insurance in regard to the examination thereof, were intended by the Legislature to abrogate or repeal the common law right of a stockholder in a domestic insurance company to inspect the books and records of such corporation; second, if such common law right of the stockholder still exists in this State, then does the petition of the appellant, R. D. Sanders, filed herein against the appellees, Standard Life Insurance Company of the South and its executive officers, asking for the issuance of a writ of mandamus to enforce such right of inspection, contain the necessary allegations of merit to withstand the demurrer of the defendants thereto, when such petition alleges in substance that the defendant insurance company is a domestic corporation; that the petitioner owns a substantial amount of the capital stock thereof; that he had asked the executive officers of said insurance company to permit him to inspect its books and records "at such times and under conditions that would not interfere with the operation or conduct of the affairs" thereof; that such request was made on several occasions shortly prior to the filing of the petition herein, and had in each instance been refused; and that the purpose of such stockholder in making the request was "in order to ascertain and know how the affairs of the Company are conducted and whether or not the capital of which he has contributed a share is being prudently and profitably employed, and in order that he may protect the business and interests of said corporation and his interests as such stockholder; * * *."

The trial court was of the opinion that the first of the foregoing questions should be answered in the affirmative; also, the court sustained the further contention of the defendants to the effect that the petition was otherwise insufficient to state a case for the relief prayed for because of its failure to allege that the petitioner had requested such right of inspection in good faith and with proper motives, or that he desired to thereby obtain information germane to his interest as a stockholder and essential to the protection of his rights as such, or to allege wherein the inspection would serve any good purpose or promote the welfare of either the stockholder or said corporation; and because the petition also failed to affirmatively show that such inspection was not desired merely to satisfy an idle curiosity, or for the purposes of speculation, or to display a spirit of hostility to the corporation. The demurrer having been sustained upon the foregoing theories, the petitioner declined to amend, and the proceeding was dismissed.

It would seem more conducive to the logical sequence of this opinion if we should discuss the two stated questions here involved in their reverse order; that is to say, if we should first determine what the right of the stockholder was at common law before we undertake to say whether or not the Legislature has clearly manifested an intention to abrogate or repeal such right by the enactment of the provisions of the said Code Chapter on Insurance.

The common law right of a stockholder to inspect the books and records of [19 So.2d 426] his corporation is stated in 13 Am.Jur. 480, as follows: "A stockholder 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. In order to obtain this information he has * * * a common-law right, at proper and seasonable times, to inspect all the books and records of the corporation." And, it is not contended by counsel for the appellees herein that this is not an accurate statement of the rule, but it is stated by them, and correctly so, that this common law right can be exercised by the stockholder only in good faith and for a just, useful or reasonable purpose germane to his interest as a stockholder; and that such right will not be enforced by the courts for speculative purpose or to gratify idle curiosity, and particularly when the purpose of the inspection is hostile to the corporation. In other words, the appellees contend that to this extend the right is not absolute, but is a qualified one.

It may be conceded that such right as a stockholder may have in this State to inspect and examine the books and records of his corporation are governed by the common law, since we have no statute providing therefor, and also that the same is qualified to the extent above stated. Nevertheless, it will be seen that the allegation contained in the petition before us setting forth the purpose for which the inspection was desired has clearly brought the petitioner within the rule entitling him thereto, unless the defendants shall plead and prove as an affirmative defense in response to the petition that the stockholder in the instant case is actuated by bad motives or that the inspection is not desired in order to obtain information germane to his interest as a stockholder, but is for speculative purposes or to gratify idle curiosity, or out of a spirit of hostility to the welfare of the corporation, since good motives and a proper purpose will be presumed, and the converse thereof cannot be assumed by the court in passing upon the sufficiency of the petition herein if we are to follow the well established rule in that behalf as stated in 13 Am.Jur. 488, where it is said: "It will not be presumed, however, when a request for inspection is made that the motive of the stockholder is an improper one or that his purpose is other than in the interest of the corporation; and if the motive or purpose is charged to be otherwise, the burden is on the officers refusing the request or the corporation to establish it." Also see Note in 80 A.L.R. 1520; and William Coale Development Co. v. Kennedy, 121 Ohio St. 582, 170 N.E. 434.

Unless such a defensive showing is made by an affirmative plea and proof in support thereof, the proper exercise of judicial discretion would require the issuance of the writ of mandamus prayed for, under such limitations as in the sound discretion of the court may appear just and reasonable, provided, of course, that such common law right has not been abrogated or repealed in this State, since it is conceded that if such right exists at all then it may be enforced by mandamus as a proper remedy.

Many of the states, if not a majority of them, have enacted statutes guaranteeing such right of inspection, and the only distinction between the common law right and that given by these statutes is that at common law the right is qualified to the extent hereinbefore mentioned as to the motives of the stockholder, etc., whereas, under the statutes the motive is immaterial, the right being an absolute one. So that for the purpose of this decision, and assuming that the stockholder still has such common law right in this State, the decisions of the courts in other jurisdictions where the right is governed by statute should be deemed applicable here, in the absence of the affirmative plea and proof hereinbefore referred to.

This brings us to a consideration of the question as to whether or not the common law right of the stockholder has been abrogated or repealed by our Code Chapter on Insurance. To the extent that statutes, by their terms and necessary implications, and the common law are not repugnant, they co-exist and will be given effect. The presumption is that the Legislature does not intend to make alterations in the law beyond what it explicitly declares, either by express terms or by necessary implication, and does not intend to overthrow fundamental principles or to infringe existing rights, without expressing or clearly implying such intention. Duncan v. Rudolph, 245 Ala. 175, 16 So.2d 313. And, the rule is stated in 59 C.J. 1040, [19 So.2d 427] that: "Statutes are not to be understood as affecting any change in the common law beyond that which is clearly indicated, either by express terms or by necessary implication from the language used. * * *" This principle is so established by both reason and authority that we deem a citation of the numerous cases so holding in this and other jurisdictions to be unnecessary.

It is relevant to observe that no case has been called to our attention wherein it has been held that statutes regulating various kinds of insurance and providing for the examination of the companies by a commissioner of insurance have the effect of abrogating or adversely affecting a stockholder's right of inspection. But, it is stated in 13 Am.Jur. 481, that "No distinction seems to be drawn between the various classes of corporations in regard to the right of inspection." The precise question does not appear to have been decided, but in the case of Burns v. Drennen, 220 Ala. 404, 125 So. 667, the statutory right of the stockholder for an inspection was enforced where the president of the insurance company refused the inspection, basing his refusal upon the ground that when such request was made the stockholder was engaged in litigation which rendered his attitude one of hostility to the corporation, and also because of a recent examination of the company by the Insurance Department...