White v. Smith , 256 N.C. 218 ( 1962 )

123 S.E.2d 628 (1962) 256 N.C. 218

Van R. WHITE, R. A. Wilkinson, W. R. Hupman, Talmadge M. Jobe, T. E. Pender, J. M. Mclntyre, Arthur A. Bradley, W. B. James, Jr., W. S. Harris, F. M. Southerland
v.
Neal SMITH and First Savings and Loan Association.

No. 739.

Supreme Court of North Carolina.

January 12, 1962.

Dalton, Long & Latham for plaintiff appellees.

L. J. Phipps, Chapel Hill, and Howard Manning, Raleigh, for defendant appellants.

RODMAN, Justice.

Appellants state as the single question for determination: "The question involved in this case is the right, if any, of one or more members or shareholders of a savings and loan association to obtain a list of the names and addresses of the members of the association for the purpose of discussing with, campaigning among, and soliciting proxies from other members or shareholders in preparation for a shareholders' meeting."

The answer to the question propounded requires a determination of the public policy of this State ascertained by a consideration of the common law and legislative enactments modifying that law.

At common law stockholders in private corporations have the right to make reasonable inspection of a corporation's books to assure themselves of efficient management. Respess v. Rex Spinning Co., 191 N.C. 809, 133 S.E. 391; 13 Am.Jur. 482.

Chapter 2, P.L.1901, is entitled "An act to revise the Corporation Law of North Carolina." Sec. 38 of that Act required every domestic corporation to keep at its principal office a stock book "which shall contain the names and addresses of the stockholders, the number of shares held by them respectively, which shall at all times during the usual hours for business be open to the examination of every stockholder * * *." The books so required to be kept are determinative of a challenged right to vote.

Manifestly this statutory provision was intended to provide each shareholder of a domestic corporation with adequate information to campaign among and solicit proxies from other members or shareholders in preparation for a shareholders' meeting.

The quoted provision of the 1901 Act was incorporated in each subsequent codification of our statutory law. See Revisal, § 1180; C.S. § 1170; G.S. 55-107 (1943 ed.). It remained in force until 1 July 1957 when c. 1371, S.L.1955, took effect. That Act, entitled "Business Corporation Act," is c. 55 of the 1960 edition of the General Statutes. The 1955 Act contains two sections relating to records which must be kept to show stock ownership. G.S. § 55-37(a) (3) requires corporations to keep "a record of its shareholders, giving the names and addresses of all shareholders and the number and class of the shares held by each." This section does not specifically provide for an inspection of the record by the shareholders, but it does provide: "Any shareholder may apply for a writ of mandamus to compel a corporation and its officers and directors to comply with this section." But section 37(a) (3) is supplemented by 55-64, which requires an alphabetical list of the shareholders with their addresses and number of shares held by each. This alphabetical list must be kept open and subject to shareholders' inspection for at least ten days before each stockholders' meeting.

The explanatory comment accompanying the bill which became the Business Corporation Act makes it clear that the right of a shareholder to know his associates and the extent of their holdings was not abridged but enlarged. The comment under sec. 64 says: "Purpose: To provide vital information as to shareholdings for the benefit of any shareholder. Present N. C. counterparts: G.S. 55-107 does not require a voting list such as this, but does make the stock and transfer books available to the shareholder."

If these statutory provisions are applicable to building and loan associations, plaintiffs have an undoubted right to know in time to wage an effective campaign for the election of directors the names of the other shareholders.

Do these provisions apply to building and loan associations? We think clear legislative history demands an affirmative answer. The Legislature of 1903 appointed a commission "to compile, collate, revise and digest all the Public Statute Laws of this State now in force * * *." See c. 314, P.L.1903. Sec. 3 of that Act provided: "The Commissioners shall designate such statutes or parts of statutes * * * as shall seem to them necessary to improve and perfect the whole." The commission was directed to file its report not later than 15 November 1904. In its codification of the laws relating to building and loan associations it exercised the discretionary power given it by sec. 3 of the Act of 1903 and inserted what is now G.S. § 54-7. The 1905 Legislature approved the work of the commission appointed in 1903 and enacted a codification known as the Revisal of 1905. The commission's recommendation that building and loan associations should be subject to the laws relating to private corporations became sec. 3882 of the Revisal of 1905 and has been a part of our law since that date.

Appellants, in support of their contention that the record of shareholders is confidential and not subject to inspection by stockholders generally, rely on Daurelle v. Traders Federal Savings & Loan Ass'n, W.Va., 104 S.E.2d 320. There, plaintiff, a shareholder, sought to obtain a list of the shareholders and their addresses. The corporation declined to permit him to make an examination. He sought a writ of mandamus to compel the association to permit inspection. Prior to the hearing defendant association, over plaintiff's protest, but as authorized by statute, called and redeemed his shares. The lower court denied the writ. This ruling was affirmed on appeal. The appellate court based its ruling on two grounds: First, under the statutes of West Virginia, a shareholder of a building and loan association had no right to inspect its records. It said: "Comparison with and consideration of the provisions of the earlier statutes, which have been omitted from the present statute and the Code of 1931, and the provisions of the present statute, clearly indicate that in enacting the present statute the Legislature intended to deprive the stockholder of his common-law right to inspect the books and records of the corporation and to give him instead only such rights of that nature as are expressly mentioned in the statute. To give the statute any other meaning or effect would emasculate the statute and defeat the purpose of the Legislature in enacting it." As an additional reason for affirming the ruling of the lower court, the appellate court held that the association was acting in its lawful rights when it called and redeemed plaintiff's stock, and since he had ceased to be a shareholder, he could in no event have the right to inspect.

Ulmar v. Falmouth Loan & Building Ass'n, 93 Me. 302, 45 A. 32, State ex rel. Catonio v. Italo-American Homestead Ass'n, 177 La. 766, 149 So. 449, and State ex rel. Schomberg v. Home Mut. Building & Loan Ass'n, 220 Wis. 649, 265 N.W. 701, which deny a shareholder of a building and loan association the right to inspect books in general are based on interpretations of the statutes of those States. Each State, of course, must decide for itself its public policy.

As we interpret our statutes, our Legislature has declared a different public policy. The right to inspect stock books in banks is specifically given. G.S. § 53-85. As previously noted, specific provision is made for inspection of books of private corporations. Mandamus is expressly declared the appropriate means of compelling compliance. G.S. 55-37(b). The Business Corporation Act is applicable "to every corporation for profit, and, so far as appropriate, to every corporation not for profit having a capital stock * * *." G.S. § 55-3(a). Building and loan associations do have, by express statutory provision, a capital stock. G.S. § 54-5.

We perceive no sound reason why stockholders in private corporations should be permitted to know the names of their associates and thereby conduct an effective campaign for the election of those they deem most competent to conduct the affairs of the corporation, but this right should be denied to those who invest in shares of building and loan associations. Henzel v. Patterson Building & Loan Ass'n No. 2, 128 Pa.Super. 531, 194 A. 683, supports the conclusion here reached.

The judgment circumscribes and limits the right of inspection in such manner as to prevent an inspection for an improper purpose.

Affirmed.