State ex rel. Keller v. Grymes

• Decision Date: 20 April 1909
• Citation: 64 S.E. 728,65 W.Va. 451
• Parties: STATE ex rel. KELLER v. GRYMES.
• Court: West Virginia Supreme Court

64 S.E. 728

65 W.Va. 451

STATE ex rel. KELLER v. GRYMES.

Supreme Court of Appeals of West Virginia.

April 20, 1909

Submitted March 16, 1908.

Syllabus by the Court.

Each member of the board of directors of a private corporation is clothed by law with equal rights and powers, and each has a right, at all reasonable times, to make an investigation of the property and funds, books, correspondence, and papers of his corporation, which are in the possession of its agent or general manager, and to make copies thereof for his own information as such director.

[Ed Note.-For other cases, see Corporations, Cent. Dig. § 1375 1/2; Dec. Dig. § 311. ^[*]]

The right conferred by general law on an individual director to make such investigation is not abrogated by section 2276 of the Code of 1906.

[Ed Note.-For other cases, see Corporations, Cent. Dig. § 1375 1/2; Dec. Dig. § 311. ^[*]]

If a statute is susceptible of two constructions, one consistent with pre-existing rights and the other in derogation thereof the courts will give to it that construction which preserves the pre-existing rights.

[Ed Note.-For other cases, see Statutes, Cent. Dig. § 320; Dec. Dig. § 239. ^[*] ]

Error to Circuit Court, Kanawha County.

Mandamus by the State, on the relation of one Keller, to compel J. C. Grymes to give relator full access to all the correspondence, books, records, and papers of the Wake Forest Mining Company. A peremptory writ was awarded, and Grymes brings error. Affirmed.

Brown, Jackson & Knight, for plaintiff in error.

Price, Smith, Spilman & Clay, for defendant in error.

WILLIAMS J.

This is a proceeding by mandamus in the circuit court of Kanawha county, and involves the question of the right of a director of a corporation, who is also one of its stockholders, to inspect and make copies of so much of the books, records, accounts, and correspondence of such corporation as he may desire. The relator is a stockholder and director in the Wake Forest Mining Company, a West Virginia corporation, engaged in the business of mining and selling coal in Kanawha county. Its capital stock consists of 250 shares of the par value of $100 each. Relator owns 30 shares, and is one of the directors, of whom there are 5, and has been a stockholder and director since the formation of said company in the year 1902. J. C. Grymes, another stockholder, is also one of the directors, and is president, treasurer, and general manager of the company, and keeper of the records, contracts, papers, and correspondence of the company. Relator filed his petition in the circuit court of Kanawha county on the 27th day of August, 1907, praying for a writ of mandamus against said Grymes to compel him to give relator "full and free access to all correspondence, books, records, and papers of said company." He alleged in his petition that his sole purpose in making the demand "was in order to ascertain whether the affairs of said Wake Forest Mining Company were being honestly and economically administered in the equal and impartial interests of all its stockholders, and to ascertain facts which it was his right and duty to know as a director of said company; and that he had, and has now, no interests adverse to those of said company in any way." The alternative writ issued, and the defendant moved to quash it, which motion was overruled. Respondent then answered, admitting many of the facts recited in the writ and denying others. He admits that relator was not permitted to examine the "pay rolls and general books, including journals, ledger, and cash books of the Wake Forest Mining Company, the daily and monthly cost sheets showing operating expenses and the general books of the company and other of its records showing the cost of producing coal, the salary and wages paid, and the other items of expenses charged against, the gross proceeds of sale of coal." Respondent attempts to justify his refusal to permit the inspection of such records, etc., on the ground that relator and W. R. J. Zimmerman, another stockholder and director, desire the information for the purpose of harassing and annoying the management of the said company by trying to force the other stockholders to buy their shares of stock at an extravagant price, or to force the other stockholders to sell to them their shares of stock. He alleges that Zimmerman and relator are brothers-in-law, and are friendly to each other and unfriendly to the management of said company; that they are employed by rival coal companies, the said Zimmerman being employed by the New River Consolidated Coal Company and the said Keller by the Sandy Creek Company; that the former of said companies is selling its coal in competition with the coal sold by the Carbon Fuel Company; and that the latter rival company owns or controls mines in the Kanawha coal fields and in the state of Ohio, and also produces and sells coal in competition with the Carbon Fuel Company. But it is not alleged that either relator or Zimmerman has any interest in said rival companies other than that derived from their employment. He alleges that if said rival coal companies employing relator and Zimmerman could obtain the information which relator seeks, it would be of great detriment to the Carbon Fuel Company and the companies whose coal it sells, including the Wake Forest Mining Company; but respondent does not allege that relator is seeking the information for the purpose of disclosing it to said rival companies, or that he would so disclose it, if he could get it. Relator demurred to respondent's return to the writ, and the court sustained the demurrer; and, respondent not desiring to make any other or further answer, a peremptory writ was awarded on the 11th day of November, 1907. To the judgment of the circuit court granting this writ respondent obtained a writ of error from this court. T. A. Bartlam, vice president and secretary of the Wake Forest Mining Company, and J. R. Thomas, another director, were also named as defendants in relator's petition. But they made their separate returns, expressing their willingness to permit relator to examine any and all records and books pertaining to the business of the company, and the proceeding was discontinued as to them.

The question which this record presents for our decision is: Has a director in a private corporation a right to know all the details of the business affairs of his corporation? The question would seem to answer itself. A director directs, guides, manages. He is one of the trustees, intrusted with the direction and management of the business pertaining to his corporation. Then is it not necessary that he should have all the information in regard to the affairs of his company that he can obtain, in order that he may direct its operations intelligently and according to his best judgment in the interest of all the stockholders whom he represents? Of what value to his company would his judgment and services as director be if the keeper of its accounts and records should withhold from him all information in regard to the details of the business? Can the general manager of a corporation, even though he be a director, withhold the books, records, and papers of which he is only the custodian, and which are the property of the whole corporation? We say not. The general manager is the creature of the directors, and his powers cannot exceed theirs. The creature is not greater than his creator. The director is a trustee or agent of his corporation. He is the trusted representative of all the stockholders, and is entitled to all the information belonging to his company that will enable him to manage and direct the affairs of his corporation to its best interests.

His duties and responsibilities, and consequently his rights, are much greater than those of a mere stockholder, and at the common law even a stockholder was permitted to inspect the books and records of the corporation, provided he did so without interfering with its business operation, and, in order to defeat his right to do so, it was necessary to show that he wanted the information for some improper purpose. Cook on Stock and Stockholders (3d Ed.) § 511, thus states the law: "The stockholders of a corporation had at common law a right to examine at any reasonable time any one or all of the books and records of the corporartion." And in the same section, in regard to the right of a director, he says: "A director has an absolute right to examine all the books of the company, even though he is hostile to the corporation. But in Connecticut a contrary rule is laid down where he is seeking information in order to organize a rival company"-citing the case of Heminway v. Heminway, 58 Conn. 443, 19 A. 766. This was an action for an assault brought by one director against another for an assault committed on him in taking from his possession a letter file which he was using for the purpose of copying the contents. It appears that there were only these two directors, and that they constituted the company each owning one-half the stock, and that the one who complained of the assault was seeking the information for the purpose of forming a rival company. The assault was justified on the ground (1) that no more force was used than was necessary to take from him the papers; and (2) that the party assaulted was seeking to get the information for a purpose detrimental to the corporation. The...