Stone v. Kellogg

• Decision Date: 09 November 1896
• Citation: 46 N.E. 222,165 Ill. 192
• Parties: STONE et al. v. KELLOGG.
• Court: Illinois Supreme Court

165 Ill. 192

46 N.E. 222

STONE et al.

v.KELLOGG.¹

Supreme Court of Illinois.

Nov. 9, 1896.

Appeal from appellate court, First district.

Application by Milo G. Kellogg for a writ of mandamus to Henry B. Stone and others. Judgment for petitioner was affirmed by the appellate court (62 Ill. App. 444), and defendants appeal. Affirmed.Williams, Holt & Wheeler, for appellants.

C. H. Aldrich, for appellee.

Appellee filed his petition in the circuit court of Cook county for a writ of mandamus to compel appellants, respectively, the president and secretary of the Central Union Telephone Company, an Illinois corporation, to permit him to examine the records, books of account, and papers of the company. Appellee owns 761 shares, of the par value of $100 each, of the capital stock of the company, and is, and has been from its first organization, one of its directors.

The petition alleged, among other things, not necessary to be set out here, that: ‘For several years prior to June 22, 1894, the petitioner, owing to poor health, absence from the country, and other engagements, had not given the affairs of the company such careful attention as his personal and official interests demanded; and, having heard rumors that the agents and officers of the company immediately intrusted with the management of its affairs were not administering their trusts for the interests of the shareholders, he, on the 22d day of June, 1894, as such director and stockholder, and with proper motives, applied to the defendant Wilson S. Chapman, the secretary of said company. to see the minute book of the board of directors, which said secretary permitted him to do. That after examining said minute book the petitioner asked to see the minute book of the executive committee,-the business of the company under its by-laws being almost wholly managed by its president and executive board appointed by the board of directors,-but Mr. Chapman informed the petitioner he could not see such minute book without the permission of the president of the company, Mr. Stone, and also informed the petitioner that he thought he ought not to see such record, because the petitioner had filed a request with the department of justice of the United States that the government should institute suit to repeal the Berliner patent, in which the Central Union Telephone Company was interested as a licensee of the American Bell Telephone Company. On or about May 25th, the petitioner again called on Mr. Chapman, and renewed his request to see such minute book of the executive committee, but Mr. Chapman told the petitioner that Mr. Stone, the president of the company, had directed him to refuse the petitioner the privilege of seeing such minute book. The petitioner then asked to see the contracts between the American Bell Telephone Company and the Central Union Telephone Company. Mr. Chapman refused to permit him to do so, but referred the petitioner to Mr. Stone, the president of the company. The petitioner and Mr. Stone had a conference about four or five o'clock of the same day,-May 25th,-and Mr. Stone refused to allow the petitioner the right to see such minute book and contracts, giving as his reason that the petitioner had caused the institution of the suit by the United States government to annul the Berliner patent, and a suit against the Western Electric Company, and a suit against the American Bell Telephone Company, and the Great Southern Telephone and Telegraph Company. After some more attempts to meet Mr. Stone, the petitioner and he had another conference on the 14th day of June, 1894, when Mr. Stone again denied the request of the petitioner, and told him to present the matter to the board of directors, which Mr. Kellogg refused to do. The petitioner then made a formal demand in writing of the president of the company, Mr. Stone, on the 18th day of June, 1894, to be permitted to examine the records and books of the company, both collectively and each separately, specified in such demand. To this demand Mr. Stone replied by letter of June 20th, acknowledging the receipt of the demand, but again denying the request until Mr. Kellogg should apply to the board of directors, and have them pass on the matter. To this letter Mr. Kellogg replied, renewing his demand as a director and stockholder, and declined to apply to the board of directors. On the 21st of June, 1894, Mr. Kellogg addressed to the secretary, Mr. Chapman, a letter informing him that he should present himself at the company's office on June 25, 1895, for the purpose of examining the records and books, in accordance with the letter he had addressed to Mr. Stone. And on the 25th, in pursuance of said letter, Mr. Kellogg presented himself at the office of the company for such examination, but was refused permission to do so.’

The petition then proceeds as follows: ‘Your petitioner has been informed and believes that when, nearly twelve years ago, the American Bell Telephone Company obtained the control of the majority of the stock of the Central Union Telephone Company, or its predecessors, there was a writing entered into or an agreement made and reduced to writing, and assented to by the American Bell Telephone Company, which regulated the relations between the companies, and was intended to conserve and protect the interests of the minority stockholders, in view of the fact that the American Bell Telephone Company was to have the ownership of the majority of the stock of the Central Union Telephone Company, and would have interests in the management of the Central Union Telephone Company adverse to the interests of the other stockholders; and your petitioner believes that the present management of the Central Union Telephone Company is in important particulars contrary to the express terms of said writing of agreement; and your petitioner believes that said writing or agreement is among the records and papers of the Central Union Telephone Company, controlled by said Stone and Chapman. Your petitioner desires to obtain access to this writing or agreement, relating to the working arrangement of the companies, as well as all other books and records contemplated in his said letter of June 18th, marked ‘ExhibitC.’ And the complainant further gives the court to understand and be informed that he has reason to fear and believe, and does fear and believe, that by reason of the relations of the American Bell Telephone Company and its control thereof, by reason of its ownership of a majority of the stock thereof, and the further facts as to the large salary paid to the defendant Stone, and also that the defendant Stone is related by marriage to the Forbeses, who are among the largest owners of the stock of the American Bell Telephone Company, the affairs of the Central Union Telephone Company have not been, and are not now, carefully and economically administered, but that contracts and business arrangements have been made, and are now in force, with the American Bell Telephone Company, which have been entered into with a reckless disregard of the interests and rights of such minority holders, and with a desire rather to serve the interests of the American Bell Telephone Company than of the Central Union Telephone Company; that while complainant does not and has not contemplated any litigation against the Central Union Telephone Company, if he could have these evils corrected, or if he could first induce the stockholders and board of directors of said company to correct the same, he has intended, by all lawful means within his power, to induce the said company to so conduct its affairs as shall best subserve the interests of the stockholders, and not dispose of large portions of its revenue to the American Bell Telephone Company in payment of royalties on articles no longer covered by patents, or as rentals for articles which could be purchased outright at much less than the amount paid as rent per annum, or conduct the business in other ways contrary to the interests of the Central Union Telephone Company; ‘that it has been, is now, and will be, his course of conduct to pursue his course with a view to secure the honest and economical administration of the affairs of this company, and that he has no other purpose in view, and has no desire to publish the result of his investigation to the courts, or to the public in any way, and is willing to submit to any reasonable restrictions, consistent with the due and adequate protection of his own interests, which the court may think it has power to impose, and to give any reasonable security to abide by such restriction, reserving to himself only the right, in the event that it becomes necessary in his judgment so to do, to seek such relief as he may be advised the law affords to protect his interest in said company, which embraces a large portion of his fortune.’‘By means whereof the petitioner is prevented from examining the books of account and records of said Central Union Telephone Company, as he is by law entitled to do, and of which the said defendants have the sole custody and control; wherefore the petitioner prays a writ of mandamus, directed to said Henry B. Stone and William S. Chapman, president and secretary, respectively, of the Central Union Telephone Company, commanding them, and each of them, forthwith to admit the complainant to the office of the said Central Union Telephone Company, and to give to him full access to all books of account and records of the said company, including therein the records of the executive committee of the board of directors thereof, and of all the contracts entered into by said company with the American Bell Telephone Company, or by either of said companies, through any agent, officer, or servant thereof, with the other; and that such admittance and access be permitted from day to day during business hours, and in such a manner as not to interrupt the order of business of the corporation, to the...