Fuller v. Alexander Hollander & Co. , 61 N.J. Eq. 648 ( 1900 )

The opinion of the court was delivered by

Collins, J.

We have not examined the question considered by the learned vice-chancellor, because we think that the order advised was coram non judice. The order was made after summary hearing upon an original petition not filed in, or referring to, any pending cause. The petitioner alleged that he was the holder of stock in a company formed under the General Corporation act of this state, and was also the secretary and treasurer thereof, and that, except the stock and transfer-books, all the books of the company were in the city of Hew York, in the custody of the president of the company. He further alleged that the president owed the company, and that he believed its funds had been illegitimately used. He further alleged that he had demanded and had been denied an accounting by the president, and had been refused an examination of the books and papers of the company. He prayed that the president might be ordered forthwith to produce, at a convenient place within this state, for examination by the petitioner, all the books, accounts and memoranda that would show the financial condition of the company.

Unless support can be found for such a proceeding- in section 44 of the revised General Corporation act (P. L. of 1896 p. 292), it can be found nowhere. The inherent jurisdiction of the court of chancery to compel the production, for inspection, of books and papers, whether of an individual or corporation, is confined to cases where the same are evidential in a cause pending in the court (Lawless v. Fleming, 11 Dick. Ch. Rep. 816), and cases arising under a bill filed for relief as well as discovery, or under a bill filed for discovery only, in aid of a prosecution or defence in litigation, pending or contemplated. Pom. Eq. Jur. §§ 190, 209; Dan. Ch. Pl. & Pr. ch. 42. We have found no judicial opinion declaring any ampler power, except In re Steinway, 159 N. Y. 250, 258, which was on mandamus, but in which it was said, by Mr. Justice Vann, that, from an early day in England, the court of chancery had enforced by motion and the king’s bench by mandamus the right of a cofporator to inspect, for a proper purpose, the books and papers of the corporation. The chancery cases cited are instances of incidental orders, in pending proceedings, authorized by recent acts of parliament, and do not bear out the dictum of the learned judge.

The sole remedy of a stockholder wrongfully refused inspection of the books or papers of a corporation is by mandamus. In the earlier English cases the judges of the king’s bench generally refused that prerogative writ where the defendant was a private corporation, but its jurisdiction to grant it is indisputable,, and in this country, where the corporate rights rest on statute, the exercise of such jurisdiction is universal. Rosenfeld v. Einstein, 17 Vr. 479; Commonwealth v. Phœnix Iron Co., 105 Pa. St. 111, where the authorities are cited.

It will be found that the cases in this country where production, for inspection, has been ordered in an independent proceeding, not strictly mandamus, have been in states where the jurisdiction of the courts of law and equity has been blended, and the line of demarcation between remedies has become indistinct. Thomp. Gorp. § 4432.

Our court of chancery claims no inherent jurisdiction in this regard. In Stettauer v. New York and Scranton Construction Co., 15 Stew. Eq. 46, 53, Chancellor Runyon held that the mere refusal of permission to a stockholder to examine the books of a corporation was not a ground for equitable interference, the law furnishing an adequate remedy in the writ of mandamus, and he sustained a demurrer to a bill filed to compel such permission. The same learned chancellor, however, was of opinion that a provision of the General Corporation act, substantially the same, as that above cited, authorized the compulsory production in this state, and, impliedly, inspection, of the books (but not other papers and memoranda) of a corporation that, by the grace of the legislature, were customarily kept without the state, and this on the mere petition of a stockholder that he was denied such inspection; and he made order accordingly. Huylar v. Cragin Cattle Co., 13 Stew. Eq. 392; S. C., 15 Stew. Eq. 139. Vice-Chancellor Bird ordered production for inspection under like circumstances. Mitchell v. Rubber Co., 24 Atl. Rep. 407. There are probably other unreported cases of the assumption of such a power, but we think it unauthorized. It is, at least, doubtful whether, since the adoption of the constitution of 1844, this branch of the jurisdiction of our supreme court can be conferred on another tribunal. Flanigan v. Guggenheim Smelting Co., 34 Vr. 647; Green v. Heritage, 35 Vr. 567. As we construe the statute involved, the legislature has not attempted to do so.

As now subsisting, section 44 of the General Corporation act, after declaring that the directors of any corporation may, if the by-laws or certificate of incorporation so provide, keep the books of the corporation, except the stock and transfer-books, outside of the state, provides as follows:

“The court of chancery or the supreme court, or any justice thereof, may, upon proper cause shown, summarily order any or all of the books of said corporation to be forthwith brought within this state, and kept therein at such place and for such time as may be designated in such order, and the charter of any corporation failing to comply with such order may be declared forfeited by the court making such order, and it shall thereupon cease to be a corporation, and all its directors and officers shall be liable to be punished for contempt of court for disobedience of such order.”

We discern in this stature no legislative purpose to enlarge jurisdiction for the compulsory production of books for inspection. The true construction of the section quoted, so far as it confers power upon a justice of the supreme court or upon the court of chancery, is that whenever proper cause is shown to the judicial authority whose action is invoked, the books of a corporation that are by law permitted to be kept outside the state may be summarily ordered brought within the territorial control of such judicial authority. Proper cause would be shown by presenting a situation within the range of such authority, in which the production of the books would subserve some lawful or useful end within the judicial control. No other jurisdiction is conferred.

The statute is useful, if not necessary, because of the summary character of the proceeding it authorizes, because of its drastic penalty for disobedience, and because eases may, and frequently do, arise where the corporation itself is not a party to litigation in which, nevertheless, its books may be legal evidence, but it cannot be construed so as to support the order appealed from, which must, therefore, be reversed.

For reversal—The Chancellor, Chief-Justice,Van Syokel, Dixon, Garrison, Collins, Port, Hendrickson, Bogert, Adams, Vredenburgh, Voorhees—12.

For affirmance—None.