Schmidt v. Anderson

• Decision Date: 30 January 1915
• Citation: 150 N.W. 871,29 N.D. 262
• Parties: SCHMIDT et al. v. ANDERSON et al.
• Court: North Dakota Supreme Court

29 N.D. 262

150 N.W. 871

SCHMIDT et al.

v.ANDERSON et al.

Supreme Court of North Dakota.

Jan. 9, 1915.

On Petition for Rehearing, Jan. 30, 1915.

Syllabus by the Court.

Section 4560, Comp. Laws 1913, requires that all the records of a domestic corporation, together with its stock and transfer books, must be kept open to the inspection of any stockholder, member, or creditor, and section 10016 makes officers or agents of such corporations, who have in custody any such record, book, paper, or document, and who refuse to give a stockholder or member an opportunity, during office hours, to inspect the same, guilty of a misdemeanor. It is held that the terms of said provisions are mandatory, but that the courts will not lend their aid to parties seeking to perpetrate a crime, when it is clear that they are endeavoring to make use of the examination of corporate records to aid them in so doing.

The fact that a stockholder desires to make use of the information, which he acquires from an inspection of the books and records of the corporation in which he holds stock, to aid a rival in business, or to aid him in litigation which he may desire to institute against the corporation, is no defense to his right under the statute.

The statutes referred to were enacted in the light of and to abrogate the rule at common law, which permitted officers of the corporation to sit in judgment on the motives of the applicant for desiring to make an examination, and to protect minority stockholders and prevent the delays incident to determining, through legal proceedings, the motives of those desiring to examine corporate records; and it is not for the courts to read, into a plain statute, qualifications which would destroy its effect.

On an application for mandamus, where the evidence is conflicting, the same rule applies to the findings of the court as is applicable to the verdict of a jury. It is not for the Supreme Court to determine in whose favor the evidence preponderates, but whether there is substantial competent evidence to sustain the findings.

The trial court found that the plaintiffs sought the examination of the books of the corporation, of which the defendants are president and secretary, for lawful and proper purposes, and at a proper time. Held, that the record discloses ample evidence to sustain such finding of the trial court.

Appeal from District Court, Cass County; C. A. Pollock, Judge.

Mandamus by Fred Schmidt and others against J. M. Anderson, as president of the Equity Co-operative Exchange, and another. Decision for plaintiffs, and defendants appeal. Affirmed, and rehearing denied.

Robinson & Lemke, of Fargo, M. D. Munn, of St. Paul, Minn., and Benjamin Drake, of Minneapolis, Minn., for appellants. J. M. Witherow, of Moorhead, Minn., and Engerud, Holt & Frame, of Fargo, for respondents.

SPALDING, C. J.

The defendants in this case are president and secretary-treasurer of the Equity Co-operative Exchange, a domestic corporation, organized to handle and deal in grain and farm products for profit, and having a paid-up capital cash stock of $23,675 and $13,300 paid by notes. Each of the plaintiffs is a stockholder in said corporation. As between the plaintiffs Greenfield and Crumpton and the defendants, there exists a controversy as to the amount of indebtedness owed by the Equity Exchange to said plaintiffs. All three plaintiffs, by their separate attorneys, made application for leave to inspect the books of the Exchange. When such inspection was in progress, the defendants refused to permit plaintiffs to complete it, whereupon this proceeding was instituted in the district court of Cass county to compel the defendants to permit plaintiffs to complete their examination of the books of the corporation.

Detailed reference need not be made to the very lengthy pleadings. The taking of testimony consumed several days, and the typewritten record of testimony covers 394 pages. In addition to this, the exhibits cover many additional pages of closely printed matter. The plaintiffs seem to have proceeded in the introduction of testimony on the theory that they would ascertain in the proceeding, if by no other means, the financial condition of the Exchange and its methods of doing business. The defendants introduced hundreds of pages of evidence in an attempt to show what had been said at congressional and legislative investigations, at farmers' meetings, and in other places, some of it, if competent, having a tendency to show that the Chamber of Commerce of Minneapolis, and its members, were not altogether fair in their dealings with customers; the whole record showing conclusively that strong rivalry or competition exists between the Exchange and said Chamber of Commerce, and that the Exchange was trying to instruct the farmers that it was to their interest to ship their grain to it.

[1][2] The defendants pleaded that said Chamber of Commerce was engaged in an unlawful conspiracy with the Chamber of Commerce of Chicago and the Board of Trade of Duluth to maintain a monopoly in the grain trade, and offered testimony to show that an inspection of the books might be used to aid the Minneapolis Chamber in its competition with the Exchange. The statute of this state, regarding the right of a stockholder to inspect and examine the records and books of the corporation in which he holds stock, is found in section 4560, Comp. Laws 1913, and reads as follows:

“* * * All such records shall be open to the inspection of any director, member or stockholder or creditor of the corporation. * * * Such stock and transfer book must be kept open to the inspection of any stockholder, member or creditor. * * *”

Section 10016, Comp. Laws 1913, provides:

“Every officer or agent of any corporation having or keeping an office within this state, who has in his custody or control any book, paper or document of such corporation, and who refuses to give to a stockholder or member of such corporation, lawfully demanding, during office hours, to inspect or take a copy of the same or any part thereof, a reasonable opportunity so to do, is guilty of a misdemeanor.”

As we construe the briefs and arguments of counsel, there is little, if any, controversy as to the meaning of section 4560, supra, except that appellants insist that it should be construed only as a declaration of the common law, and that the object and motive of the stockholder, who desires to make the inspection, may be inquired into, whereas the respondents contend that it does not admit of such inquiry. We are satisfied that, under the great weight of authority, it is mandatory. However, we may add that courts will not lend their aid to parties seeking to perpetrate a crime, when it is clear that they are endeavoring to make use of the examination to aid them in so doing. Many authorities are cited by counsel, both with reference to the common-law rule and the rule laid down by the different courts, under statutes like or similar to the foregoing provisions of our own. Where the terms of the statute are mandatory, like ours, it is immaterial that the stockholder desires to inspect the books in the interest of a rival corporationor to aid him in securing business, which otherwise might go to the corporation whose books he seeks to inspect, or to get information on which to predicate litigation which he may desire to institute against the company. Kimball v. Dern et al., 39 Utah, 181, 116 Pac. 28, 35 L. R. A. (N. S.) 134, Ann. Cas. 1913E, 166,...