State ex rel. Pillsbury v. Honeywell, Inc.

• Decision Date: 22 October 1971
• Docket Number: No. 42541,42541
• Citation: State ex rel. Pillsbury v. Honeywell, Inc., 291 Minn. 322, 191 N.W.2d 406 (Minn. 1971)
• Parties: , 50 A.L.R.3d 1046 STATE of Minnesota ex rel. Charles A. PILLSBURY, Appellant, v. HONEYWELL, INC., Respondent.
• Court: Minnesota Supreme Court

Page 406

191 N.W.2d 406

291 Minn. 322, 50 A.L.R.3d 1046

STATE of Minnesota ex rel. Charles A. PILLSBURY, Appellant, v.HONEYWELL, INC., Respondent.

No. 42541.

Supreme Court of Minnesota.

Oct. 22, 1971.

Syllabus by the Court

1.In determining the right of a shareholder to inspect corporate books and records, there is no need to decide whether the law of the state of incorporation or local law applies when the test which is determinative of that right in both states is identical.

2.A stockholder who bought shares in a corporation for the sole purpose of bringing a suit to compel production of corporate books and records, who is motivated by preexisting social and political beliefs, and who has no concern for the economic well-being of the corporation, does not have a proper purpose germane to his interest as a shareholder and, therefore, cannot compel production of a corporation's shareholder lists or business records.

3.A trial court need not accept a shareholder's allegation that he has a proper purpose, but may make an independent assessment of the shareholder's motives.

4.Where a shareholder is motivated solely by preexisting social and political beliefs and has no economic concern for the well-being of the corporation or himself, the fact that he seeks to achieve his political objectives by electing directors with similar beliefs will not entitle him to inspection.

5.In a mandamus action, it is not reversible error for the trial court to refuse to strike respondent's answer although it preceded the issuance of an alternative writ.

6.In a mandamus action where the trial court permits respondent's answer to precede the issuance of an alternative writ, the cause of action has commenced, and respondent may serve notice of a deposition without a showing of cause.

7.Petitioner in a mandamus action is not entitled to a jury trial if the trial court finds as a matter of law from the deposition that no grounds for issuance of the writ exist.

John Remington Graham, Minneapolis, for appellant.

Dorsey, Marquart, Windhorst, West & Halladay and Bernard G. Heinzen and Robert A. Heiberg, Minneapolis, for respondent; Sigurd Ueland, Jr., Honeywell, Inc., Minneapolis, of counsel.

Heard and considered en banc.

OPINION

KELLY, Justice.

Petitioner appeals from an order and judgment of the district court denying all relief prayed for in a petition for writs of mandamus to compelrespondent, Honeywell, Inc., (Honeywell) to produce its original shareholder ledger, current shareholder ledger, and all corporate records dealing with weapons and munitions manufacture.We must affirm.

The issues raised by petitioner are as follows: (1) Whether Minnesota or Delaware law determines the right of a shareholder to inspect respondent's corporate books and records; (2) whether petitioner, who bought shares in respondent corporation for the purpose of changing its policy of manufacturing war munitions, had a proper purpose germane to a shareholder's interest; (3) whether the respondent in a mandamus action may answer before the issuance of an alternative writ; (4) whether a deposition may be considered by the trial court after the filing of a petition for an alternative writ of mandamus and an answer to the petition; and (5) whether petitioner was improperly denied a jury trial where the trial court found all questions of fact answered by the pleadings and petitioner's deposition.

Petitioner attended a meeting on July 3, 1969, of a group involved in what was known as the 'Honeywell Project.'Participants in the project believed that American involvement in Vietnam was wrong, that a substantial portion of Honeywell's production consisted of munitions used in that war, and that Honeywell should stop this production of munitions.Petitioner had long opposed the Vietnam war, but it was at the July 3rd meeting that he first learned of Honeywell's involvement.He was shocked at the knowledge that Honeywell had a large government contract to produce anti-personnel fragmentation bombs.Upset because of knowledge that such bombs were produced in his own community by a company which he had known and respected, petitioner determined to stop Honeywell's munitions production.

On July 14, 1969, petitioner ordered his fiscal agent to purchase 100 shares of Honeywell.He admits that the sole purpose of the purchase was to give himself a voice in Honeywell's affairs so he could persuade Honeywell to cease producing munitions.Apparently not aware of that purpose, petitioner's agent registered the stock in the name of a Pillsbury family nominee--Quad & Co.Upon discovering the nature of the registration, petitioner bought one share of Honeywell in his own name on August 11, 1969.In his deposition testimony petitioner made clear the reason for his purchase of Honeywell's shares:

'q * * * (D)o I understand that you requested Mr. Lacey to buy these 100 shares of Honeywell in order to follow up on the desire you had to bring to Honeywell management and to stockholders these theses that you have told us about here today?

'A Yes.That was my motivation.'

The 'theses' referred to are petitioner's beliefs concerning the propriety of producing munitions for the Vietnam war.

During July 1969, Subsequent to the July 3, 1969, meeting and after he had ordered his agent to purchase the 100 shares of Honeywell stock, petitioner inquired into a trust which had been formed for his benefit by his grandmother.The purpose of the inquiry was to discover whether shares of Honeywell were included in the trust.It was then, For the first time, that petitioner discovered that he had a contingent beneficial interest under the terms of the trust in 242 shares of Honeywell.

Prior to the instigation of this suit, petitioner submitted two formal demands to Honeywell requesting that it produce its original shareholder ledger, current shareholder ledger, and all corporate records dealing with weapons and munitions manufacture.Honeywell refused.

On November 24, 1969, a petition was filed for writs of mandamus ordering Honeywell to produce the above mentioned records.In response, Honeywell answered the petition and served a notice of deposition on petitioner, who moved that the answer be stricken as procedurally premature and that an order be issued to limit the deposition.After a hearing, the trial court denied the motion, and the deposition was taken on December 15, 1969.

In the deposition petitioner outlined his beliefs concerning the Vietnam war and his purpose for his involvement with Honeywell.He expressed his desire to communicate with other shareholders in the hope of altering Honeywell's board of directors and thereby changing its policy.To this end, he testified, business records are necessary to insure accuracy.

A hearing was held on January 8, 1970, during which Honeywell introduced the deposition, conceded all material facts stated therein, and argued that petitioner was not entitled to any relief as a matter of law.Petitioner asked that alternative writs of mandamus issue for all the relief requested in his petition.On April 8, 1970, the trial court dismissed the petition, holding that the relief requested was for an improper and indefinite purpose.Petitioner contends in this appeal that the dismissal was in error.

1.Honeywell is a Delaware corporation doing business in Minnesota.Both petitioner and Honeywell spent considerable effort in arguing whether Delaware or Minnesota law applies.The trial court, applying Delaware law, determined that the outcome of the case rested upon whether or not petitioner has a proper purpose germane to his interest as a shareholder.Del.Code Ann. tit. 8, § 220(Supp. 1968).This test is derived from the common law and is applicable in Minnesota.See, Sanders v. Pacific Gamble Robinson Co., 250 Minn. 265, 84 N.W.2d 919(1957).¹Minn.St. c. 300, upon which petitioner relies, applies only to firms incorporated under that chapter.We need not rule on whether the lower court applied the right state law since the test used was correct.

Under the Delaware statute the shareholder must prove a proper purpose to inspect corporate records other than shareholder lists.Del.Code Ann. tit. 8, § 220(c)(Supp.1968).This facet of the law did not affect the trial court's findings of fact.The case was decided solely on the pleadings and the deposition of petitioner, the court determining from them that petitioner was not entitled to relief as a matter of law.Thus, problems of burden of proof did not confront the trial court and this issue was not even raised in this court.

2.The trial court ordered judgment for Honeywell, ruling that petitioner had not demonstrated a proper purpose germane to his interest as a stockholder.Petitioner contends that a stockholder who disagrees with management has an absolute right to inspect corporate records for purposes of soliciting proxies.He would have this court rule that such solicitation is per se a 'proper purpose.'Honeywell argues that a 'proper purpose' contemplates concern with investment return.We agree with Honeywell.

This court has had several occasions to rule on the propriety of shareholders' demands for inspection of corporate books and records.Minn.St. 300.32, not applicable here, has been held to be declaratory of the common-law principle that a stockholder is entitled to inspection for a proper purpose germane to his business interests.While inspection will not be permitted for purposes of curiosity, speculation, or vexation, adverseness to management and a desire to gain control of the corporation for economic benefit does not indicate an improper purpose.²

Several courts agree with petitioner's contention that a mere desire to communicate with other shareholders is, per se, a proper purpose.Lake v. Buckeye Steel Castings Co., 2 Ohio St.2d 101, 206 N.E.2d 566(1965).This would seem to confer an almost absolute right to inspection.We believe...