RANGER v. CHAMPlON COTTON-PRESS CO. et al.
(OfJrcuf,t Oourt, D. South OaroLina. July 5,1892.)
CO!tPOR.lTIONS-RIGHTS 011 SHAREHOLDERS-INSPECTION 011 BOOKS.
III the Uni.ted States, a shareholder in a corporation has the right, under proper safeguards, to inspect the books of the concern, ullless the charter or by-laws otherwise provide.
SAME-ll:QUITY JURISDICTION-ORDER 1I0R INSPECTION.
A court of equity may. in its discretion, order the officers of a corporation to permit a'shareholder to inspect its books at any stage of the proceedings, but it will not do so upot;l' the mere filing of the bill, or after service and before answer, except upon the most pressing necessity; since defendants may deny that plaintiff is a shareholder, or may set up that the charter or by-laws modify his right to Buch inspection.
InEquity. Bill by Louis Ranger against the Champion Cotton-Press Company ,and others. Heard on a motion for leave to inspect the books of the defendant company. Denied. Mitchell &; Smith, for complainant. Lord, NathanB &; B'rJjan, for defendants. SIMONTON, District Judge. Motion for leave to inspect books of the defendant company. This bill was filed on 24th June ult. It is by one claiming to be a corporator in the Champion Cotton-Press Company against the corporation, B. F. McCabe, Mrs. Elizabeth Dowie, and her husband, Margaret B. Mure, William Mure, and William Fatman. It alleges that the capital of the company is $84,000, divided into 120 shares of 8700 each, of which the company has 19, Mrs. Dowie 15, Miss Mure 15, William Mure 10, E. D. Mure 6, William Fatman 20, and B.F. McCabe 15, and these, with the 20 shares held by complainant, constitute all the capital stock; that McCabe is president and superintendent and William Mure vice president and secretary and treasurer; that no exhibit of the affairs of the company was made; no annual meeting held in 1891, as required by the by-laws; that at the annual meeting held in 1892, complainant requested and demanded a full exhibit of the business of the company, and leave to examine its books for the purpose of ascertaining the condition of its business, and that these were peremptorily refused by the president and other officers. It charges mismanagement by Mr. McCabe as president, and misuse of the funds of the company, especially of a fund of $25,640.95; that this sum should be divided among the stockholders; and that Mr. McCabe and the other officers refused so to do. Charges that the funds of the company have been deposited in the name of B. F. McCabe, and are drawn on his check, whereas the by-laws require them to be deposited in the company's name, and drawn out by the check of the treasurer, countersigned by the president; that the president makes use of his position, ,'aided by the treasurer, in evading any accounting by the former; that complainant is entitled to an examination and inspection of the books of the company by" himself, or by his attorneys and experts, and that this is wholly denied to him by the president aud other
officers of . at;ld the of preventmg the proper approprIatIon of moneys of tKe company. The prayer is for a, for such of boo,ks.<;>f the company as he is entitled to, for an account from B. F. McCabe, superintendent and president, for decla£'ation of a dividend, for· the appointment of .a salEdt9d df t4eprope):'fy,." having been filed 'on 24th June, the complall1ant, on 30th June, alter all defendants bad been servedwithproQess, made his motion,OOtice of which is ;27th June, that ftll tbeb9Qksand papers of the company be court,orsome otberconvenipnt place. for the examination ,itispection, of. cOl.¢:plainant or his attorneys, and, auchexpert bookkeepers and accountants as he may employ. The motion is resisted by cOlll?sel,rewesenting the, company, and B., F. McCabe, and William Mure,'viooVresident and secretary and treasurer.' . ' There can' be no' doubt that in this country a shareholder has the right, under proper safeguards, to inspect the books of the corporation, unless the charter or the by-la;Wsprovide otherwise. 1 Whart. Ev. § 746; Ang. & A. Corp. § 681. Mr. Morawetz in his book says the memberE! of: 11 simple partnership ,.are entitled to the partnership books and l!-()counts whenever they desire. Corp. § 473. He excludes large companies and,coJ:'porations from this rule, but in the same says: "However, ,in the United States the prevailing doctrille appe'axs to be that the individual shareholders. in a corporation ,have. the as the members of an ordinary partnership to examine their company's books, they have no power to interfere with the managemeqt:" It is insisted, however;that the normal mode of assertingtl;lis right)s by mandWl!1u8,and that, complainant having asked it in thi$bill as ancillary to the equitable, relief prayed, the court can at this stage eXl.j.mine the billnnu decide whether it gives him any locUS 8tandi; or if hebe properly in court, it would be best to await the up l;'Jf the issues in the case at the proper time or proper pleadings·. A searching critidsm of the bill wus made in argument. But, from the view that I take of this motion, we need not enter upon its examination. }..S a matter of practice, I am inclined to the opinion that the court, within its discretion, can order authorities to permit a shareholder an inspection of the books of the corporation at any stagt:l of ,the suit. But it will not make such an order upon the filing of the bill, or before the parties have appeared, a,nd pleaded, except under the most pressing necessity. Indeed. the courts of equity act ex parte when there is dp.nger of immediate or irreparable damage, or of some impellding change in the circumstancesQf tpeparties w4ich may in) pede justice or inj ustice. WhAn th(lse:, :rel;tsons do. not .exist, thihgs will tll:ke their course. Where the order would be lent to agecree for cou.rt will it.. Daniells, Pr: star page1829. Where, also, the order may force the hand of the defendant, and compel him to disclose, his defense prematurely, it should be refused. The first prayer in this bill is for the jnspection of these books, in the words of the present motion. If the motion be granted,
CROSBY LUMBER CO,_ t/. SUlTlt
this case is gained. It may his whole cas, may be decided. Beside' this, while the right of examination of books is l1B Stated, this qualification must also be noted. If the defenddents denythaf complainant is a stockholder, oruverthat the charter or by provisi,onstherein, modify this right, be raised which co'uld not be tried at this stage of the, case, The defendants :need not e\7en present them at this stage. On the whole" it seems'prematute to grant order, now. The motion is dismissed to the renewal of the motion at a later stage of th' without
',(Ctrcuit CIrWI't Qf Appeals, Third Circuit. April139,189lJ.)
and others formed a to which plaintiff contributed 1I1arp part ,Of the capital, in tbe fO,rm, of real and personal property. Afterwards it wu ,ag'reedtio form a corporation, the partners to take stock tberein .. to We full aJllQunt Ofttleir :i:qterest in ilie Jirni as' sucb interest shall appear on the 1st day of October, 1888." A dispute arose as to the of plaintitf's interest, and in Janllary, 1ll89" the corporation declared his interest in the concern forfeited, and excluded him from any share in its management. He then brought an action for damages. ,which. em the trial, took tbe form of an accounting as to his interest. HeW. tllat p"laintiff was entitled to recover the value of his Interest at the time it wa.i1 take!' trombim, and tllat in 110mputlng the same there should· be included, not ollly the technlcalprqfits, but also tl1e.increase in of the of the cOl1cern. , On tbe amount thus found to be due, plaintltf time he was excluded from the concern.
entitled to interest trom the
Plain.ittf testified tbat he. also yut into tbe concern a steam' boiler owned by him, f But on the bQoks the company he was credited with only 1200, the other $200 being credited to, N.· another stockholder. who, had formerly been in P8.rtne.rshipwith plaintiff. . Defendant otfered in evidence a pa.per executed lonlr &fte.rllle.f<irm.ation of the co.rlloration, and purporting to beana.ssignment bIR. of a half interest in tne boner. . BeJel, that tile paper W88 properly exclude4, 88 it could have no etfect upon any title previousiy vested in plaintiff.
Where instructions to the jury are proper in themselves, tile' glvillR erroneouda reason,the,l'efor, which is not applicable to the, case, and which manifestllcoul not have udsled the jury, is'nt) ground for reverilal. IL BAMB-REvlBW-AsslGNlIlINTS OJ' ERROR. '.rile assignments of error are to be considered with reference to thetbeory on which the ,cause was actually tliad by mutual consent of the parties, and the f011llal claim madein'the statement and declaration is not controlling.
Where is evidence to sustain a verdict. a circuit court.of appeals baa 110 power to reverse the judgment on the ground 'that' the 'jul.'l erred in the amoullt of,theirll.nding.' '
'$rJ'or Court ofthe United .States for the Weatern Distpct of Pennsylvania. . , , . '. · . iAction J.ohn Smith against the Crospy Company, IAwitEid;brought, ,originally in a state court, .a.nd removed to the below. Verdict and judgment for .plamtiff ill .the Bum of &10,527.84. Defendant brings ,agreement, John Smith, LouisL. Newerf, and punder the name of Smith,