State ex rel. Theile v. Cities Service Co

• Decision Date: 10 January 1922
• Citation: 31 Del. 514,115 A. 773
• Court: Supreme Court of Delaware
• Parties: STATE ex rel. THEILE v. CITIES SERVICE CO

115 A. 773

31 Del. 514

STATE ex rel. THEILE v. CITIES SERVICE CO

Supreme Court of Delaware

January 10, 1922

Ayres J. Stockly and Daniel O. Hasytings both of Wilmington for plaintiff in error

Wolcott Ch., Pennewill, C.J., and Richard J., sitting.

OPINION

WOLCOTT Chancellor, delivering the opinion of the court, after making the foregoing statement:

In this state, the return to the alternative writ is conclusive and is to be taken as true for the purpose of the case. State ex rel. Brumley v. J. & M. Paper Co., 1 Boyce, 379, 77 A. 16, 30 L.R.A.(N.S.) 290. So also are all the allegations in the alternative writ which are not denied in the return. Bay State Gas Co. et al. v. Content & Co., 4 Pennewill, 238, 56 A. 1114.

The plaintiff in error contends (1) that by virtue of the provisions of section 29 of the General Corporation Law, he has an absolute, unqualified right to inspect the books in question, and that the court has no discretion in cases under the statute to deny him the aid of the remedy of mandamus in his attempt to secure the enjoyment of this right, when the corporation has, after due application by him, refused to allow the inspection; or (2) if it be conceded that there is any judicial discretion in the matter, yet the facts set forth in the return do not justify a refusal of the writ in this case.

The defendant in error controverts the first proposition contending that notwithstanding the absolute terms of the statutory provision above quoted, the issuance of the peremptory writ in such cases nevertheless rests in the sound discretion of the court, and urges, with respect to the second proposition, that the facts in this case address an unfavorable appeal to this discretion.

We shall dispose of the points in controversy in the order in which they are above stated.

With respect to the first point, it is to be observed that heretofore mandamus has always been regarded in this state as it was at common law, namely, as a writ issuable only in the exercise of a sound judicial discretion. McCoy v State, 2 Mary. 544, 36 A. 81; State v. J. & M. Paper Co., supra. If the plaintiff in error succeeds in establishing his first contention, the writ of mandamus in cases under section 29 of the General Corporation Law, must be held to be issuable as of course. And thus this extraordinary remedy will in such cases lose one of its chief characteristics, which has from the time of its original employment always adhered to it. It seems to us that if the Legislature, in the enactment of section 29 of the General Corporation Law, had intended to thus alter the ancient nature of this remedy so as to make it available to suitors in all cases under this section as freely as the common and ordinary writs that are issuable as of course, it would have so provided in express and positive terms.

At common law the writ of mandamus was available to stockholders of corporations to secure to them the right of inspection of corporate books of all kinds, provided, of course, the petitioning stockholder could bring his case within the rules that controlled the courts in the exercise of their sound judicial discretion. Upon the stockholder was the burden of showing to the court in the first instance those special circumstances which would justify it in interposing its mandatory process in his behalf. At common law, the right to inspect corporate books was a qualified right, and allowable only when the stockholder was actuated by motives that were lawful and proper and by a purpose to subserve his interests as a holder of the corporate stock. And, accordingly, the petitioner was required to bring his case by adequate averments in his petition, within the limitations of the right above indicated.

But where there is such a statutory provision concerning books as we have in this state (section 29, General Corporation Alw; paragraph 1943, Revised Code of 1915) the petitioner need allege in his petition nothing more than the bare essentials necessary to bring it within the statute, viz. that (a) the defendant company is a corporation; (b) that petitioner is a stockholder therein; (c) that there was a proper demand and refusal; and (d) that defendant failed to comply with the duty imposed by the law and sought to be enforced by the proceeding. Bay State Gas Co. et al. v. Content & Co., supra.

This is the extent to which the Bay State Gas Company Case goes. It simply disposes of a question of pleading. It does not, as was contended by the plaintiff in error, in any wise dispose of the question now before us, namely, whether the court may in a case under the statute here involved, exercise a discretion when the facts are presented for decision on the merits.

The question is, therefore, an open one in this jurisdiction. The authorities in other jurisdictions are apparently at variance with one another. Yet, a careful study of them will, we think, reveal but little conflict in the result, though there may be a lack of uniformity in the reasoning by which that result is reached.

Foster v. White, 86 Ala. 467, 6 So. 88, decided in 1888, is the earliest case which we have found where the right of a stockholder to a mandamus under a statute similar to ours has been discussed. In that case, there was a petition by a stockholder for mandamus to secure from a corporation a statutory right to inspect books. A demurrer to the petition was filed on the ground, among others, that the petition failed to allege that the demand for an inspection of the books was made for any lawful purpose, nor did the petition specify any particular purpose. The question presented was, therefore, one of pleading, and in this respect is similar to the question presented in the Delaware case of Bay State Gas Co. et al. v. Content & Co., supra. But the Alabama court, in disposing of the question before it, took occasion to express its views concerning the effect of the statute upon the common law rule governing mandamus in such cases. Because of the frequency with which this case has been cited, as well as because of the soundness of its view, we quote freely from its language:

"Section 1677 of Code 1886, declares: 'The stockholders of all private corporations have the right of access to, inspection and examination of, the books, records and papers of the corporation, at reasonable and proper times.' As we do not concur in the proposition, that the statute is merely declaratory of the common law, it becomes unnecessary to consider the character and extent of the right of a shareholder, in the absence of statutory regulations, to inspect and examine the books and records of the corporation of which he is a member. The statute was enacted in view of the restrictions and limitations placed by the common law upon the exercise of the right; and the purpose is to protect small and minority stockholders against the power of the majority, and against the mismanagement and faithlessness of agents and officers, by furnishing mode and opportunity to ascertain, establish, and maintain their rights, and to intelligently perform their corporate duties. Its terms are clear and comprehensive, and afford narrow room for construction. It was intended to enlarge and disembarrass the exercise of the right, rendering it consistent and coextensive with the stockholder's right, as a common owner of the property, books, and papers of the corporation, and with the duties and obligations of the managing officers, as agents and trustees. The only express limitation is that the right shall be exercised at reasonable and proper times. The implied limitation is that it shall not be exercised from idle curiosity, or for improper or unlawful purposes. In all other respects the statutory right is absolute. The shareholder is not required to show any reason or occasion rendering an examination opportune and proper, or a definite or legitimate purpose. The custodian of the books and papers cannot question or inquire into his motives and purposes. If he has reason to believe that they are improper or illegitimate, and refuses the inspection on this ground, he assumes the burden to prove them such."

Foster v. White was approved by the later Alabama case of Winter v. Baldwin, 89 Ala. 483, 7 So. 734. Its principle has likewise been accepted in the following cases: Weihenmayer v. Bitner, 88 Md. 325, 42 A. 245, 45 L.R.A. 446; Wight v. Heublein, 111 Md. 649, 75 A. 507; Stone v. Kellogg, 165 Ill. 192, 46 N.E. 222, 56 Am.St.Rep. 240; Rodger Ballast Car Co. v. Perrin, 88 Ill.App. 324; Meysenburg v. People, 88 Ill.App. 328; Furst v. W. T. Rawleigh Medical Co., 282 Ill. 366, 118 N.E. 763; Comm. v. Empire Pass. Ry. Co., 134 Pa. 237, 19 A. 629; State v. New Orleans Gaslight Co., 49 La.Ann. 1556, 22 So. 815; Legendre & Co. v. New Orleans Brewing Ass'n, 45 La.Ann. 669, 12 So. 837, 40 Am.St.Rep. 243; State v. Doe Run Lead Co. (Mo. App.) 178 S.W. 298; Wyoming Coal Mining Co. v. State, 15 Wyo. 97, 87 P. 339, 984, 123 Am.St.Rep. 1014 (where the right, however, was founded on a by-law rather than on a statute).

The foregoing cases sustain the proposition that where there is a statute similar to the one involved in this case, such statute is not intended to be declaratory of the common-law rule theretofore prevailing, but on the contrary (as was not the case at common law) the statute gives a right to the stockholder so positive in its terms that he need not show any reason or occasion rendering an examination opportune and proper, or a definite or legitimate purpose; but though this be true, yet if the corporation or the custodian of its books can show that the petitioner seeks to inspect the books from idle curiosity, for an improper or unlawful purpose, such showing constitutes a sufficient ground for a refusal to permit...