In re Coats

Headnote

1. Stockholders—Examination op Corporation Books.

The right of a stockholder to examine corppration books accrues as well to a stockholder in a fire insurance company as any other corporation.

2. Mandamos—Affidavits—Presumption as to Truthfulness.

On application for a peremptory writ of mandamus the affidavits of respondent must be taken as true, as a peremptory writ can issue only on conceded facts.

3. Same—Application for Inspection of Corporation Books—Sufficiency

of Showing.

Petitioner applied for mandamus to compel defendant insurance company to allow him to inspect its books, alleging that he owned about one-fou'th of all the stock; that from reports showing a decrease in surplus and increase in losses he had become alarmed for the security of his investment, but had been denied access to the books and refused specific information as to the management and condition of the company; and that he had made a formal offer to purchase all the stock of the company at a price higher than market quotations. Respondent’s affidavits showed that petitioner had long been employed, and at the time of acquiring this stock was still employed, as stenographer by a man who was attempting to gain control of the company, and who had made an offer to purchase all the stock, similar to that made by petitioner; that this person bore the reputation in insurance circles of being a “wrecker,” and had been denounced in trade journals and by an insurance commissioner for his connection with unsavory transactions resulting in companies with which he was connected going into liquidation; and that petitioner was merely acting as a tool to enable this person to obtain control of the company. Held, that an order granting an inspection was not authorized by the facts.

4. Same—Nature and Extent of Examination.

An order granting an inspection of all respondent’s books and papers covering a certain period, without limitation as to the place or duration of the investigation, was too broad in any event.

6. Same—Denial of Application without Prejudice.

The inspection should be denied, however, with leave to renew the application.

Appeal from special term, New York county.

Petition by Russell R. Coats for a peremptory writ of mandamus to compel respondent Empire City Fire Insurance Company to allow petitioner to inspect its books. From an order granting the petition, respondent appeals.

Reversed.

The petitioner avers that he is the holder of about one-fourth of the capital stock of the Empire City Eire Insurance Company, and that from the reports of the company, which show a decrease in surplus and an increase in losses, and from its failure to continue the payment of dividends, he became alarmed for the security of his investments, but his request for specific information as to the financial management and condition has been refused, that he had made a formal offer to purchase all the stock of the company at par, or above the market quotation, but such offer to the president and directors was not considered; that subsequently three serious fires in Norfolk, Va., in Waterbury, Conn., and Paterson, N. J., occurred, •and he requested access to the books of the company, but was refused. In opposition to the motion made by the petitioner for a peremptory writ of mandamus for inspection of the books of the company, affidavits were submitted particularly with a view to showing that the petitioner, Coats, is not the real party in interest, but that he is acting for other persons, who ■are bent on getting possession of the company for the purpose of throwing it into liquidation. Thus it is stated, and not denied, that Coats for many years has been employed as a stenographer by Price, who, with Baker, is endeavoring to get control of the company; and it is averred that within three months there was transferred to Coats upon the books of the company no less than $40,000 worth of stock, some of which had passed through Baker’s hands, who, it is conceded, has been actively engaged in purchasing the stock of this company, writing letters to stockholders derogatory of the company, and offering them exceptional prices, and to the president himself the sum of $5,000, and an assured position in other work, for stock transfers. The purposes of Price are disclosed by his letter to the president of the company, in which he says he “represents the largest single owner,” and is desirous of obtaining control, and is in a position to purchase all of the stock provided upon terms attractive to his principals, and he had recently purchased the Eagle Eire Insurance Company. In connection with such operations, particularly concerning the Hanover Fire Insurance Company, proof was offered that Price had been characterized and condemned in the Weekly Underwriter, an insurance periodical, as an avowed wrecker; and that the purchase and subsequent liquidation of the Merchants’ Eire Insurance Company, of which Price held stock, was similarly severely denounced by an insurance commissioner. There is but one affidavit in reply, which is by Price, and therein he asserts that Baker is not his agent, that all reference to him (Price) in the affidavits is irrelevant, that he does not intend to wreck the company, and that statements to that effect are untrue. The special term granted a peremptory writ to the petitioner commanding the company to exhibit to him “and his attorney and accountants all the books of accounts, vouchers, and letters and other papers, * * * and all minutes * * * covering the period from September 1, 1901, to the time of such exhibition; and to permit them and each of them freely to examine the same, and to take extracts therefrom, * * * from day to day, during ordinary business hours, and in such a manner as not to interrupt more than necessary the business of the said corporation.” From the order so entered the insurance company appeals.