nation opportune and proper, or a definite or legitimate purpose. The custodian of the books and papers can not question or inquire into his motives and purposes. If he has reason to believe that they are improper or illegitimate and refuses the inspection on this ground, he assumes the burden to prove them as such. If it be said this construction of the statute places it in the power of a single shareholder to greatly injure and impede the business, the answer is, the legislature regarded his interests in the successful promotion of the objects of the corporation a sufficient protection against unnecessary or injurious interference."1

The inconvenience and abuses which might result from a general recognition of the view that the right is absolute and may be exercised arbitrarily are many. For instance, a principal shareholder in a rival company might become a shareholder for the very purpose of becoming informed of the condition financially and otherwise of a corporation, and use the information thus acquired greatly to his interest and its prejudice. It is said in some of the cases that the possession of the right of inspection is necessary to enable a stockholder to vote understandingly. But great inconvenience would necessarily result where the stockholders are numerous if each of them were entitled to a mandamus to enforce his right of inspection for the mere purpose of qualifying him to vote.

Both reason and the weight of authority are in support of the proposition that a shareholder is entitled to mandamus to compel the custodian of books and papers to allow him an inspection and copies of them in case of refusal only at reasonable times and for definite proper purposes. Within these terms should be held

1 Foster v. White, 86 Ala. 467; 6 So. 88. See also, State v. St. L. & S. F. Ry. Co., 29 Mo. App. 301; State v. Sportsman's P., etc., Ass'n, Id. 326.

to come a purpose to become informed of the financial condition and the progress of the business where the desired information is withheld from any improper cause.1

§ 658. Discretion of the court. The application is addressed to the sound discretion of the court, and should be refused unless the right is made clear. The power of the court should not be wielded so as to cause frequent annoyance and prejudice to the agents of the corporation and other stockholders. A reference may be had to ascertain the truth of the facts alleged in the affidavits upon which the application is based.3

2

A mere suspicion of wrongdoing by the agents is not sufficient, though the petition allege an intention to bring suit. The inspection must be necessary to settle some property right, or some existing controversy, or to determine some question of vital interest. The controversy upon which light is sought need not necessarily be with the corporation itself or its officers, but may be with a third party.5

1 Com. v. Phoenix Iron Co., 105 Pa. St. 111; citing King v. Merchant Tailors' Co., 2 Barn. & Aid. 115; Reg. v. Maraquita Min. Co., 1 El. & El. 289; People v. R. R. Co., 50 N. Y. Sup. Ct. 456; Rosenfeld v. Einstein, 46 N. J. Law, 479; In re Burton & Sadlers' Co., 31 Law J. Q. B. 62; People v. Pac. M. S. S. Co., 50 Barb. 280; Cockburn v. Un. B'k, 13 La. An. 289. All these cases except the last hold that something more must be shown than the mere benefit of general knowledge to be derived from the books as to the proper conduct of the business. See also, Lyon v. Am. Screw Co. (R. I.), 26 Am. & Eng. Corp. Cas. 132, n.; 17 Atl. 61; App. of Empire Pass. Ry. Co., 7 Ry. & Corp. L. J. 470; Buck v. Collins, 51 Ga. 391; Webber v. Townley, 43 Mich. 34; 5 N. 971; Bean v. People, 7 Col. 200; 2 P. 909.

2 Re Sage, 70 N. Y. 220; People ex rel. Field v. Northern Pac. R. R. Co., 50 N. Y. Sup. Ct. 456; s. c. 18 Fed. Rep. 471; Reg. v. Wilts & Berks. Canal Nav. Co., 29 L. T. 922.

9 People v. St. L., etc., R. Co., 44 Hun, 552.

Cent. R. R. Co. v. Ry. Co., 53 How. Pr. 45.

5 Mayor, etc., v. Graves, 8 T. R. 590; Rex v. Newcastle, 2 Str. 1223. It was granted to allow an inspection of the discount book, though there was neither a suit pending nor an intention to bring suit. Cockburn v. Un. B'k, 13 La. Ann.

There is a distinction made between cases where the inspection is sought of the ordinary books and records. of the corporation, and those where an inspection of the minutes of a directors' meeting is demanded. A much stronger and plainer showing must be made in the latter than in the former case. The reason for this distinction is the fact that what directors resolve upon in conducting the affairs of the corporation often requires secrecy, and their most important plans might be thwarted if, upon slight grounds, any stockholder had the power to make them public.

§ 659. Does not generally lie to compel transfer of shares. -As shares of stock in a trading corporation are supposed to possess a market value, which may be made the basis for calculating the measure of damages for any losses resulting from a failure or refusal to enter their transfer on the registry of the corporation, it is not usual to grant relief by mandamus in such cases.2 Besides his legal remedy in damages, he may sue in equity

289. To discover frauds of the existence of which there was a well founded belief. Huylar v. Craigin Cattle Co., 42 N. J. Eq. 392, the court saying:-" Stockholders are entitled to inspect the books of the company for proper purposes at proper times, and they are entitled to such inspection though their only object is to ascertain whether their affairs have been properly conducted by the directors or managers. Such a right is necessary to their protection." To enable a stockholder to ascertain whether a by-law exists entitling him to an office. Reg. v. The Sadlers' Co., 10 W. R. 77. The extent of the petitioner's interest must be shown. Hatch v. City B'k of N. O., 1 Rob. (La.) 470; State v. Bienville Oil Wks., 28 La. Ann. 204. An allegation of a general purpose of ascertaining the condition of the company is insufficient. People v. Walker, 9 Mich. 328. The writ will be refused the owner of a small interest whose application is based upon the non-payment of dividends for a long period, no mismanagement being alleged. Lyon v. Am. Screw Co. (R. I.), 17 A. 61.

1 See A. & F. R. Co. v. Rowley, 9 Fla. 508; Queen v. Marquita Min. Co., 1 El. & E. 289.

2 Tobey v. Hakes, 54 Conn. 274; 7 A. 551; Burnsville Tp. Co. v. State, 119 Ind. 382; 20 N. E. 421; holding also that the writ will not lie to one possessing only an equitable title to the stock; Law Guar. Tr. Soc. v. Bank of England, 24Q. B. D. 406; Tobey v. Hakes, 54 Conn. 274; 7 A. 551.

for specific performance by having a transfer decreed.1 There is an exception to this general rule, however, where it is by statute made the plain ministerial duty of the corporation to make the proper entries of transfer after sale of shares under execution against the original shareholders. In such cases the sheriff does not put the purchaser in possession, but the proper officer of the corporation is pro hoc vicea public officer and if he refuses to do it mandamus is the proper remedy to compel the proper entry to be made. It is obvious that the purchaser can have the specific relief which he seeks in no other way.3

1 Morehead v. Western N. C. R. Co., 96 N. C. 362; 2 S. E. 247. In such action the corporation is not a necessary party. Gould v. Head, 41 F. 240. But the administrator must be made a party to an action to compel a corporation to issue to a person claiming title thereto new certificates of stock standing in the name of a deceased person. Baltimore Retort, etc.. Co. v. Mali, 65 Md. 39; 3 A. 286.

2 Bailey v. Strohecker, 38 Ga. 259.

* Memphis Appel. Put. Co. v. Pike, 9 Heisk. 698.

CHAPTER XXV.

ACTION BETWEEN THE CORPORATION AND PROMOTERS.

$660. When action will lie.

661. Meaning of the term “promoter."

662. Promoters entitled to profit fairly earned.

663. Rights of the corporation herein.

664. When agreements between incorporators enforced. 665. Personal liability of promoters.

666. Liability to account.

667. Parties.

§ 660. When action will lie.—Analogous to the action which a member may maintain against officers of the corporation, for wrongs perpetrated by them, while acting officially for the corporation, is that given them in the name of the corporation against promoters for fraud practiced upon collective rights anterior to and pending the formation of the corporation. And, of course, the corporation may sue in its own name and right.

66

§ 661. Meaning of the term "promoter."-By the term promoter" is meant one who undertakes to form a company with reference to a given project and to set it going, and who takes the necessary steps to get it going. When used in connection with corporations, it

1 Twycross v. Grant, L. R. 2 C. P. Div. 469, 541. To constitute a person a promoter of a railroad corporation, it must affirmatively appear that he was acting for and in behalf of the proposed incorporation, or that he assumed so to act, and that on the strength of this authority or assumption the party complaining so dealt with him. St. Louis F. S. & W. R. Co. v. Tiernan, 37 Kan. 606; 15 P. 544; 39 Am. & Eng. R. Cas. 525.