State v. Middlesex Banking Co.

• Decision Date: 08 November 1913
• Court: Connecticut Supreme Court
• Parties: STATE ex rel. COSTELLO. v. MIDDLESEX BANKING CO.

88 A. 861

87 Conn. 438

STATE ex rel. COSTELLO.

v. MIDDLESEX BANKING CO.

Supreme Court of Errors of Connecticut.

Nov. 8, 1913.

Appeal from Superior Court, Hartford County; Marcus H. Holcomb, Judge.

Alternative writ of mandamus by the State, on relation of Alfred F. Costello, against the Middlesex Banking Company, to compel relator, as one of respondent's stockholders, to inspect its stock books to obtain the names and addresses of its stockholders, or to show cause to the contrary. A demurrer to respondent's return was sustained, and judgment rendered for relator, from which respondent appeals. Affirmed.

The pleadings show that the relator is a stockholder of the defendant corporation; that he has made demands to be permitted to examine its books for the purpose of obtaining the names and addresses of its stockholders and the number of shares held by each and that these demands have been refused. The return sets up matters effecting the relator's motive and purpose in making these demands as furnishing a sufficient reason why the peremptory writ asked for should not issue. These matters stand admitted by the demurrer. The allegations, in substance, are that the relator has no interest in the corporation or in its stockholders as a bona fide investor; that his only interest therein is that of a broker and trader; that he acquired his stock, not for purposes of investment as a bona fide stockholder, but as a broker merely and for the speculative purpose of trading therein for profit; that he does not seek the information desired for the protection of any interest he has as stockholder, or for any purpose germane to such interest; that he seeks it solely that he may be enabled to trade in the shares of the corporation for his own personal profit and at their expense; and that the information sought has a commercial value as an investment list, and is salable, to be sent broadcast over the country, a use detrimental to the corporation and to its stockholders.

Frank D. Haines, of Middletown, for appellant.

William C. Hungerford, of Hartford, for appellee.

PRENTICE, C. J. (after stating the facts as above). [1] The right of Inspection of the books and records of a corporation at reasonable times and for proper purposes is a common-law privilege incident to the ownership of shares in a corporation. Guthrie v. Harkness, 199 U. S. 148, 26 Sup. Ct. 4, 50 L. Ed. 130, 4 Ann. Cas. 433; Matter of Steinway, 159 N. Y. 250, 258, 53 N. E. 1103. 45 L. R. A. 461; Thompson on Corporations, § 4515. This common-law right is a qualified and not an absolute one. It is qualified by the condition, among others, that the purpose of the stockholder desiring to make the examination is germane to his interest as such stockholder, proper and lawful in its character, and not inimical to the interests of the corporation itself. Guthrie v. Harkness, 199 U. S. 148, 156, 26 Sup. Ct. 4, 50 L. Ed. 130, 4 Ann. Cas. 433; Varney v. Baker, 194 Mass. 239, 241, 80 N. E. 524, 10 Ann. Cas. 989; Hemingway v. Hemingway, 58 Conn. 443, 445, 19 Atl. 766. Courts will not enforce its recognition under other conditions. They will do so only when the desired examination would be reasonable and in the interests of essential justice. It is incumbent upon the party desiring the examination to show the existence of these conditions, else judicial aid will be denied him. Bruning v. Hoboken Printing Co., 67 N. J. Law, 119, 50 Atl. 906; Thompson on Corporations, § 4540.

This subject, however, is one with which legislation is competent to deal, and statutes have been repeatedly enacted either confirming or enlarging the common-law right. Our statute (chapter 215, § 1, P. A. 1911¹) is such a statute. Unlike the common-law rule it is confined to a limited class of corporate books and records, to wit, those which disclose stock ownership, and does not embrace within its provisions books and records generally. The rule laid down with respect to this limited class is unqualified in its terms save as to the time and place of examination. It is broadly provided that the designated books shall be open to the examination of every stockholder. Beyond question here is an enlargement of the common-law right as respects these particular books. The right, which at common law is qualified, is by the statute made absolute. It manifestly was the legislative intent, and the language of the statute is apt for the effectuation of that intent, that a stockholder seeking information afforded by the stock books should be relieved of the burden of first showing a satisfactory reason and proper purpose, and that it be sufficient for him to show that he was a stockholder. The history of this statute, succeeding as it did one which had long been in existence, requiring the name, residence, and number of shares of stockholders of corporations to be spread upon the public records in the office of town clerks, and the strict requirements contained in the first part of the section under review, touching the general subject of publicity to stockholders of stock ownership, leave no room for doubt upon this point. Rev. Stat. 1902, § 3344; Rev. Stat 1875, p. 280, § 17.

It is urged that the statute is merely confirmatory of the common law, and the case of O'Hara v. National Biscuit Co., 69 N. J. Law, 198, 54 Atl. 241, is cited in support of that proposition. Clearly that was not the legislative intent, else why did the General Assembly select stock books for special treatment, while the right of inspection of all other books was left to be regulated by the common law? Why this waste of legislation? Prior to the revision of our corporation law, made in chapter 157, P. A. 1901, there had been for a number of years upon our statute books provision governing the right of inspection of all the books of a corporation without distinction between them. Rev. Stat. 1888, § 1953. In the revision this provision was omitted, and the right of inspection was left to be regulated by the common law, except as to stock books concerning which the present regulation was made. Section 21. It is impossible to believe that this action was taken unintelligently and without the definite purpose to put stock books upon a different plane from that occupied by the general books of a corporation.

But this conclusion as to the strict legal right of the relator is not of itself sufficient to entitle him to the judgment which he seeks in these mandamus proceedings. In such proceedings the writ is not issued as a matter of right, but in the exercise of a Judicial discretion which takes into account other considerations than the legal right of the relator. Chesebro v. Babcock, 59 Conn. 213, 217, 22...