$56. Right to Inspect Records. Every stockholder possesses the common law right to examine the books and records of the corporation, in person or by agent, at any proper time and for any proper purpose. But the common law right does not exist for the purpose of enabling the stockholder to gratify idle curiosity. The right may be exercised however, for the purpose of obtaining evidence to be used in pending litigation against the corporation, and the rule is not changed by the fact that the books might be brought into court under a subpoena duces tecum2. When the right of inspection is conferred by statute, the right is absolute and the motive is immaterial. A stockholder having the right of inspection may make abstracts, memoranda and copies of the records, and may call in the aid of agents, accountants and attorneys. Where the right exists and permission to exercise it is refused, mandamus lies for its enforcement66. The right of inspection carries with it certain burdens. For example, every stockholder, when dealing with the company as a member, is conclusively presumed to know the corporate bylaws67. So in dealing with other stockholders, or with directors, a stockholder is presumed in the absence of fraud, to have equal knowledge of the condition of the company-68. 332-338; Kalamazoo Novelty_Wks. v. Macalister, 40 Mich. 84; Township of Taymouth v. Koehler, 35 Mich. 21-3, 4; Handley v. Stutz, 139 U. S. 417, 35 L. ed. 227-232. 60. Woodworth v. Old Second National Bank, 154 Mich. 459-467. 61. People v. Walker, 9 Mich. 328-330. In this case Chief Justice Martin said: “While, in the absence of any statutory provision to that effect, a corporator may, at the common law, have a mandamus to compel the custos of corporate records and documents to allow him to inspect them, yet, to entitle himself to the aid of the court, he must show that he has made a proper demand upon the custos at a proper time and place, and for a proper reason, and has been refused. * * * The principle seems to be, and very properly, too, that the party asking the writ must have some interest at stake which renders the inspection necessary." 62. Woodworth v. Old Second National Bank, 154 Mich. 459. 63. Thomp. Corp., Sec. 4412; Cook's Corp., Sec. 514. 64. Weihenmayer V. Bitner 88 Md. 325, 45 L. R. A. 446; Cincinnati Volksblatt Co. v. Hoffmeister, 62 Ohio St. 189, 48 L. R. A. 732. 65. Cook's Corp., Sec. 518-519. 66. People v. Walker, 9 Mich. 328-330. 67. Marshall's Corp., p. 885. This presumption does not obtain where the stockholder deals with the corporation upon the footing of a stranger. Pearsall v. Western Union Telegraph Co., 124 N. Y. 256. 68. Walsh v. Goulden, 130 Mich. 531-540. In this case Justice Grant stated that: "In the purchase and sale of stock between Although executive management of a corporation may be, and generally is, vested exclusively in the board of directors, the stockholders undoubtedly have the right to appoint a committee to investigate the condition of the concern. This is practically nothing more than a combined exercise of their individual right to examine the corporate books. It seems that, where the stockholders regularly pass a resolution requiring investigation, the cost of investigation becomes a liability of the corporation which it may be required to pay69. $57. By-Laws. By-laws are the self-made statutes of the corporation. All stockholders have constructive notice of them when dealing with the corporation as members, but not when dealing with it as strangers. Non-stockholders are not affected by corporate laws, except where actual notice is shown70; nor will courts take judicial notice of by-law provisions1. By-laws are ordinarily made by the stockholders, but may be made by the directors if the charter so provides 2. The by-laws are an important factor in determining the rights of members73. One who has availed himself of the rights conferred by a by-law is thereafter estopped to deny the by-law's validity. By-laws must operate equally as to all members75. It is fundamental that a corporation can not override the law of its being. It follows that a by-law inconsistent with the corporate charter, public policy, or the general law of the State, is void". Thus, by-laws can not operate retroactively78, nor can they work a forfeiture in the absence to what amounts to Stockholders there must be some actual misrepresentation in order to constitute a fraud. Mere silence is not sufficient. The books of the corporation are open to all stockholders alike, and each may inform himself of the condition of the company.' 69. Star Line of Steamers v. Van Vliet, 43 Mich. 364. 70. Hallenbeck V. Powers & Walker Casket Co., 117 Mich. 680684. 71. Portage Lake, etc., Society v. Phillips, 36 Mich. 21-23. 72. Cahill v. Kalamazoo Mut. Ins. Co.. 2 Doug. (Mich) 137. V. 73. Union Mut. Ins. Co. Montgomery, 70 Mich. 587-594; Michigan Mut. Ass'n v. Rolfe, 76 Mich. 146. 74. Stradley v. Cargill Elevator Co., 135 Mich. 367-375. 75. Stewart v. Father Matthews Society, 41 Mich. 67-69. 76. Supreme Lodge v. Nairn, 60 Mich. 44-54. 77. Pulford v. Fire Dept. 31 & St. L. R. Co.. due process of law79. An unreasonable by-law is void80. Thus, a by-law providing that agents of the corporation shall not be deemed its agents, but shall be held to be the agents of those who deal with them, is unreasonable and is a nullitys Compliance with a by-law may be waived by the corporation. Thus where a by-law provided that no debts should be contracted except by authority of the board of directors, it was held that, after obligations had been incurred for goods and services of which the corporation had had the benefit, the by-law could not be invoked to defeat liability for payment82. So also where by-laws determine the eligibility of members, and one who is ineligible has been, without fraud on his part, admitted to the corporation, the by-law provision making him ineligible is held waived. Where by-laws provide for annual dues, such 'dues are not, like unpaid stock subscriptions, assets for the benefit of creditors. So long as the members pay the dues as provided, nothing more can be required. Equity will not compel an assessment of dues for the purpose of paying corporate debts. Power to make and alter by-laws does not confer power to so adopt a new by-law, or to so amend an old one, as to impair vested rights. Such rights remain unchanged, notwithstanding the 79. When a corporation has a right to fine or expel a member, enforcement of the right must be predicated upon an explicit claim or charge brought home to the member, who must be given an opportunity to be heard in his own defense, and an opportunity to be present at the taking of testimony against him, and to introduce evidence in his own behalf. When these rights are accorded and the proceeding is under lawful authority, it will be sustained Burton v. St. George's Society, 28 Mich. 260-263. But where these rights, or any of them are withheld, the proceeding is void, Erd v. Bavarian Assn. 67 Mich. 233-236; Burt v. Grand Lodge, 66 Mich. 85; Allnutt V. Subsidiary High Court, 62 Mich. 110-114; Pulford v. Fire Dept., 31 Mich. 457-464; Westcott v. Minn. Mining Co., 23 Mich. 145; People v. Mechanic's Aid Society, 22 Mich. 86. The right to complain may be lost by laches. Bostwick v. Fire Dept., 49 Mich. 513. 80. Allnutt v. Subsidiary High Court, 62 Mich. 110-113. 81. Wagner v. Knights of Honor, 128 Mich. 660-667; Hoskins v. Rochester Savings & Loan Ass'n, 133 Mich. 505-508. See also opinion of Justice Brown, in Knights of Pythias v. Withers, 177 U. S. 260, 44 L. ed. 762. 82. McCracken v. Halsey Fire Engine Co, 57 Mich. 361. 83. Wagner V. Knights of Honor, 128 Mich. 660; Davidson v. Old People's Mut. Society, 39 Minn. 303, 1 L. R. A. 482. 84. Johnson Electric Service Co. v. Chamber of Commerce, 124 Mich. 115-120. 85. Kern v. Arbeiter Verein, 139 Mich. 233-245; Pokrefky V. Firemen's Fund Ass'n, 121 Mich. 456. amendment, unless waived by acquiescence or participation in the amendatory actions. 86. Wheeler v. Order of Iron Hall, 110 Mich. 437; Starling v. Royal Templars, 108 Mich. 440; Becker v. Farmer's Mut. Ins. Co., 48 Mich. 610. CHAPTER VII. MANAGEMENT-RIGHTS AND LIABILITIES OF OFFICERS AND AGENTS. Directors. $58. $59. Officers. $60. Powers of Officers. $61. President. $62. Vice-President. §63. Secretary. $64. Treasurer. $65. General Manager. $66. Corporation Counsel. §67. Joinder of Offices. §68. General Powers of Officers and Agents. §70. Agents in Adverse Interests. $71. Fraud and Torts of Agents. $72. Statements of Officers and Agents. $73. Knowledge of Officers and Agents. $58. Directors. The ordinary management of a corporation is vested in its board of directors1. In their official capacity the directors sustain a fiduciary relation toward the corporation and its stockholders2. Thus, if the directors sell corporate property and obtain a secret profit for themselves from the transaction, the secret profit will be treated, in equity, as an asset of the corporation. But, in the absence of gross misconduct or fraud upon the part of the managing board, a court of equity will not interfere with the management, except pursuant to some statutory authority. Where officers are mere "dummies," used as a blind 1. Genesee Savings Bank V. Michigan Barge Co., 52 Mich. 438445; Star Line of Steamers v. Van Vliet, 43 Mich. 364. 2. Because the corporate books are equally open to all stockholders, a director may lawfully profit by his superior knowledge of the corporation condition, so long as he makes no actual misrepresent V. ation. Mere silence concerning his 4. Hunter v. Roberts, Throp & Co., 83 Mich. 63-71; Cicotte v. Anciaux, 53 Mich. 227-235: LaGrange v. State Treasurer, 24 Mich. 468471. |