Lisle v. Shipp

California Court of Appeal Jan 11, 1929 No. Docket No. 5548.Published

Before: Conrey

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Holding. A stockholder of one corporation does not have a legal right to inspect the books and records of a second corporation merely because the first corporation owns stock in the second, absent a showing of fraudulent mismanagement or specific equitable grounds.

Issues

Whether a stockholder of a parent corporation has a statutory right to inspect the books of a subsidiary corporation.
Whether a stockholder may exercise a corporation's right of inspection of another entity's books in the absence of alleged fraud or mismanagement.

Disposition. affirmed

Quotations verified verbatim against the opinion

“appellant was not in any position entitling him to exercise on behalf of the Haden company, its right of inspection of the books or other properties of the Metropolitan corporation.”

“no facts were presented which entitle the petitioner to act on behalf of the Haden company, or to assert on his own behalf any right of inspection of the books and properties of the Metropolitan corporation.”

CONREY, P. J.

According to the petition or corn-plaint filed in the court helow, the following facts appear: Haden Securities Company, Inc., is a California corporation having 10,000 shares, of which petitioner is owner of 200 shares. E. S. Shipp is the owner of more than 5,000 shares, and is president of the corporation. His wife, E. H. Shipp, is the owner of 100 shares, and is the secretary and treasurer of the corporation. Shipp and his wife are two of the three directors, and are, therefore, in practical control of the business of the corporation.

Metropolitan Finance Corporation is a California corporation wherein Shipp is the owner of a majority of the issued capital stock, and is its president. Defendant Hemphill is the secretary of that corporation. It is alleged that Shipp, being general manager of the Haden company, sold some of its properties, and invested the proceeds thereof, with other

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money of the company, amounting in all to the sum of $69,600, by using it for the purchase of stock of the Metropolitan corporation.

The petition does not allege any facts showing misconduct or want of. good faith on the part of the officers of the Haden company in the above-mentioned transactions. Nevertheless, basing his claim upon his status as a stockholder in the Haden company, petitioner demanded that he be permitted to inspect the books, files, and properties of the Metropolitan corporation. That demand having been refused, he made application in the superior court for a writ of mandate requiring that he be allowed to make said inspection. An alternative writ of mandate was issued, and a hearing was had on the merits on the return date. This hearing appears to have occurred in open court, with argument by counsel for the respective parties, and without any return or pleading filed on the behalf of the defendants. It must be presumed, therefore, that the application for the peremptory writ was denied upon the ground that the facts stated by petitioner were insufficient to establish his right to the writ. It is from this judgment that the plaintiff appeals.

It is provided by the constitution of California, article XII, section 14, that every corporation (with certain exceptions which have no application here) shall keep certain books and records which shall be subject to inspection by “every person having an interest therein. ’ ’ Under the provisions of sections 377 and 378 of the Civil Code, the records of all corporations for profit shall be open to inspection of any

Lisle v. Shipp

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CONREY, P. J.

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