Hub Construction Co. v. Breeders' Club , 74 N.H. 282 ( 1907 )

Mandamus is the appropriate remedy by which to enforce the right of corporate stockholders and members to inspection of the books and records of the corporation, and of creditors of the corporation in cases where such right is given by statute. 10 Cyc. 961, s. 20b; High Ex. Rem., ss. 308, 312; 2 Spell. Ex. Rel., s. 1610; Queen v. Railway, 3 E. B. 784. The proceeding is therefore to be considered as an application for such writ, and not as a bill of discovery. This is especially clear in this state, since the original of the statute under consideration was adopted in 1830 (Laws 1830, c. 13, s. 1), when, whatever may be the fact as to the existence of equitable principles as a part of the common law of the state, there was no court with general chancery powers, and the accepted construction of the law was that the court had no chancery power except what was specifically conferred by statute. Reynolds v. Fibre Co., 71 N.H. 332, 333; Wells v. Pierce, 27 N.H. 503, 512; Dover v. Portsmouth Bridge, 17 N.H. 200, 212. It is not probable, as the law was then understood, that in 1830 the legislature, in granting a right of inspection of the votes and proceedings of corporations to creditors whose demands were unpaid, contemplated a proceeding in equity for discovery, general authority for which was not specifically conferred upon the court until twelve years later. Reynolds v. Fibre Co., supra; Laws 1828, Nov. Sess., c. 95, s. 9 (Act of January 2, 1829); Laws 1832, c. 89, s. 9; R. S, c. 171, s. 6. As the proceeding is not a bill for discovery, or a petition in the nature of such a bill, it is immaterial whether the allegations of the petition are sufficient to sustain such a proceeding. The authorities cited by the defendant to sustain his contentions in this respect, and those construing statutes authorizing proceedings of this nature, are not in point.

This conclusion, however, does not meet all the objections raised by the defendant. Other grounds remain to be considered. Among them, the one first stated is that the relief sought may subject the defendant to pains and penalties, or some forfeiture, or something in the nature of a forfeiture. It is a sufficient answer to this contention that it is not supported by the facts in the case. By section 14, chapter 148, Public Statutes, the clerk or other officer or agent of a corporation is made liable to a penalty for the neglect or refusal to furnish, after demand, and payment or tender of his fees, a certified copy of any record, account, or paper which the party demanding is entitled to inspect. This is a penal statute and must be strictly construed. The penalty attaches to the neglect or refusal for the specified time to give the certified copy, and not to the refusal to permit inspection — the only matter now alleged against the clerk. As the defendant is not on the facts alleged liable to any penalty, compelling him to perform his statutory duty — the relief asked — will not subject him to one. Whether, if he had made himself liable to the penalty, that fact would excuse him from obeying the law permitting inspection, is not considered. As there is no penalty prescribed against any officer of a corporation who refuses to permit an inspection of the records, accounts, and papers of a corporation, the statute itself fails to provide a remedy, and the defendant's argument under his eighth ground — that the plaintiffs should first exhaust the remedy provided by the statute — is without support.

The remaining reasons urged in support of the demurrer — that the papers which the plaintiffs desire to inspect are not described with sufficient accuracy, that their materiality is not shown by clear averment, and that the plaintiffs are not entitled to a general inspection of the corporation papers — are in substance an objection that the facts upon which the plaintiffs rest their right to the writ are not definitely or sufficiently alleged.

"When a statute is relied upon as a declaration of a duty to do a thing, it should clearly appear by its terms or necessary implication that the performance of the act devolved upon the defendant, for the benefit of the petitioner; . . . and all the facts upon which rests the relator's claim to have the duty performed must be alleged in issuable form." 2 Spell. Ex. Rel., s. 1370. The statute upon which the plaintiffs rest their right is as follows: "All records, accounts, and papers of a corporation shall be open to the inspection of every member and stockholder of the corporation; and such portions thereof as have any relation to an overdue and unpaid demand of a creditor of the corporation, or to the collection of any such demand, shall be open to the inspection of the creditor and of his attorney." P. S., c. 148, s. 12. As the statute requires certain papers to be open to inspection, it follows by necessary implication that the duty devolves upon the person in charge of such papers to permit the exercise of the right of inspection by those to whom it is given. The defendant is alleged to be clerk of the corporation, and as such officer is the official custodian of certain of the records and papers of the corporation. P. S., c. 148, ss. 10, 11. The petition alleges certain records and papers to be in his possession and the existence of the plaintiffs' overdue and unpaid demand to which it is alleged the said records and papers have relation. The only allegation that appears to be open to the objection of insufficiency is the one alleging that the records and papers named have relation to the plaintiffs' demand.

Whether the papers have any relation to the plaintiffs' demand or its collection would seem to be an inference to be drawn from the facts in the case. Whether a particular inference can be drawn is a question of law; and there seems to be force in the defendant's contention that the facts from which such inference is claimed to be drawn should be alleged, thereby affording the opportunity for a joinder of issue on the questions of fact and law involved. The plaintiffs, by amendment to their petition, set forth various items of information which they desire to obtain. It also appears from the defendant's pleading that the corporation is insolvent. From this fact and the nature of the information asked for by the plaintiffs, it may be inferred that the relation between the records and papers the plaintiffs desire to inspect and their unpaid demand and its collection is the assistance the information that may be disclosed thereby may render in the collection of their demand, by the enforcement of the individual liability of the officers and stockholders of the corporation. P. S., cc. 150, 151; Carter, Rice Co. v. Hano Co., 73 N.H. 588. It is not to be inferred as matter of law that the plaintiffs have knowledge of the particular records, accounts, and papers in the defendant's possession; and an allegation that they desire to inspect all papers containing specified information to which the statute entitles them, as having some relation upon the ground suggested, or some other which may be alleged, to their demand or its collection, would seem to be as definite a description as could be obtained in advance. Upon the interpretation of the amendment above suggested, the record discloses all the facts which in this respect the defendant claims should be shown by the allegations of the petition. The objection therefore upon the whole record is merely formal, and can be easily obviated by inserting in the petition by amendment the fact of the insolvency of the corporation and the desire of the plaintiffs to inspect, in addition to the papers named in the petition, all records, accounts, and papers containing the information specified in the amendment. As the amendment will obviate the objection, it is not necessary to further consider its necessity. Fellows v. Judge,72 N.H. 466, 467; Peaslee v. Dudley, 63 N.H. 220. The objection to indefiniteness in the order can be cured in the same way, by limiting the inspection to the records, accounts, and papers containing the information specified in the amended petition.

The great weight of the American authorities as to the stockholders' right of inspection is to the effect that when the right is statutory it is not necessary for the petition to aver or show the purposes or objects of the inspection. Cincinnati etc. Co. v. Hoffmeister, 62 Ohio St. 189, 198, — 78 Am. St. Rep. 707; Stone v. Kellogg, 165 Ill. 192, 206, — 56 Am. St. Rep. 240; Ellsworth v. Dorwart, 95 Ia. 108, — 58 Am. St. Rep. 427; Johnson v. Langdon, 135 Cal. 624, 626, — 87 Am. St. Rep. 156. The cases proceed upon the principle that where a party has a legal right to do a thing, the motive that may move him to act is not a proper subject even for judicial investigation. Friel v. Plumer 69 N.H. 498, 499; Horan v. Byrnes,72 N.H. 93, 98; 10 Cyc. 956, s. 4. In the present case, no reason appears why the plaintiffs should be required to allege more than the statute defines as the basis of their right. Whether such an application was for a proper purpose would ordinarily be determined in the trial of the question whether the subjects of the inspection desired bore any relation to the creditor's unpaid demand or its collection.

Without deciding whether the motives or purposes of a creditor in seeking to enforce the right given by statute might not be such as to defeat his application for mandamus, the present case is disposed of by the conclusion that the allegation of all the facts made essential by the statute is upon demurrer a sufficient statement of the ground upon which the right is demanded. The admissibility of the records, papers, and accounts as evidence in some proceeding brought by the creditor against the corporation, or some other, is not made a test of his right to inspect them. It cannot be said as matter of law that such papers have not some relation to the creditor's demand or to its collection, though the documents themselves may not be admissible as evidence in a proceeding to enforce the creditor's right.

Case discharged.

All concurred.