[199 U.S. 148, 149] The defendant in error was the owner of nearly one fifth of the capital stock of the Commercial National Bank of Ogden, Utah. As such shareholder he applied for leave to inspect the books, accounts, and loans of the bank, which was refused him. He alleges the reasons for seeking such inspection to be that he might ascertain the value of his stock in the bank, and whether the business affairs of the same had been conducted according to law. He charges that loans had been made to patrons of the bank of more than one tenth of the capital stock, in violation of law, and that an inspection of the books, accounts, and loans of the bank would reveal other irregularities. Upon the hearing in the district court the following findings of fact were made:
Upon this finding the court entered a judgment requiring the defendants to permit the plaintiff to inspect the books, accounts, and loans of the bank at such time or times as would not interfere with the business of the bank.
Messrs. Abbot R. Heywood and George McCormick for plaintiffs in error.
[199 U.S. 148, 151] Messrs. Hiram H. Henderson and Herbert R. Macmillan for defendant in error.
Mr. Justice Day delivered the opinion of the court:
While the state has no power to enact legislation contravening the Federal laws for the control of national banks (Davis v. Elmira Sav. Bank, 161 U.S. 275 , 40 L. ed. 700, 16 Sup. Ct. Rep. 502), Congress has provided that, for actions against them at law or in equity, they shall be deemed citizens of the state in which they are located, and that in such cases the circuit and district courts of the United States shall have such jurisdiction only as they would have in cases between individual citizens of the same state. 25 Stat. at L. 433, chap. 866, U. S. Comp. Stat. 1901, p. 508. If the stockholders had the legal right to enforce inspection, there is no room to question the authority of the state courts to enforce the right by granting the proper relief in ajudicial [199 U.S. 148, 153] proceeding. Petri v. Commercial Nat. Bank, 142 U.S. 644 , 35 L. ed. 1144, 12 Sup. Ct. Rep. 325; Continental Nat. Bank v. Buford, 191 U.S. 119 -123, 48 L. ed. 119-121, 24 Sup. Ct. Rep. 54.
Upon review in the supreme court of Utah, the judgment of the district court was affirmed, it being held that it was the common-law right of the shareholder to have the inspection demanded, and that the same had not been cut down by the act of Congress regulating the business of national banks. 27 Utah, 248, 75 Pac. 624.
There can be no question that the decisive weight of American authority recognizes the common-law right of the shareholder, for proper purposes and under reasonable regulations as to place and time, to inspect the books of the corporation of which he is a member. Morawetz, in his work on Private Corporations, 473, vol. 1, says:
In many of the states this right has been recognized in statutes which are generally held to be merely in affirmance of the common law. Nor do we find the authorities making an exception as to this right when a corporation which does a banking business is the subject of consideration. It is said to be customary for banking companies in England to insert in their constitutions a provision forbidding the inspection of customers' accounts by shareholders or creditors. Morgan's Case (1884) L. R. 28 Ch. Div. 620; Cook, Corp. 517, note. The subject appears to be now regulated by statute in England. Cook, Corp. 518. In Cockburn v. Union Bank, 13 La. Ann. 289, it was held that a stockholder in the Union Bank of Louisiana had the right to a writ of mandamus to compel the officers of the bank to allow him the privilege of inspecting the discount books of the bank within proper and reasonable hours, and in the course of the opinion it was said:
This case was cited with approval in State ex rel. Burke v. Citizens' Bank, 51 La. Ann. 426, 25 So. 318, and Tuttle v. Iron Nat. Bank, 170 N. Y. 9-12, 62 N. E. 761. In the latter case it was said: 'The principle upon which a stockholder is allowed access to the books of a corporation is as applicable to the case of a banking corporation as it is to any other kind of corporation.'
In State ex rel. Doyle v. Laughlin, 53 Mo. App. 542, a stockholder in an incorporated bank had been denied by the directors the right to inspect the books for the purpose of acquainting himself with the conduct of its affairs and to learn how it was managed. The court there held that he was entitled to a writ of mandamus to compel the inspection, and this notwithstanding the bank contended that it occupied such a confidential and trust relation to its customers and depositors that it would be a breach of duty on its part to open up the books to the inspection of the relator. The authorities are fully examined, and the right of the shareholders to inspect the books for proper purposes and at proper times is recognized, in Re Steinway, 159 N. Y. 251, 45 L. R. A. 461, 53 N. E. 1103; Com. ex rel. Sellers v. Phoenix Iron Co. 105 Pa. 111, 51 Am. Rep. 184. To the same effect are Deaderick v. Wilson, 8 Baxt. 108-137; Lewis v. Brainerd, 53 Vt. 520; and Huylar v. Cragin Cattle Co. 40 N. J. Eq. 392-398, 2 Atl. 274. In the latter case it was said:
The right of inspection rests upon the proposition that those in charge of the corporation are merely the agents of the stockholders, who are the real owners of the property. Cincinnati Volksblatt Co. v. Hoffmeister, 62 Ohio St. 189-201, 48 L. R. A. 732, 78 Am. St. Rep. 707, 56 N. E. 1033.
It is suggested in argument that, if the shareholder has this right, it may be abused, in that he may make an improper use of the knowledge thus gained. There is nothing in this record, however, to suggest, by way of argument or testimony, that the shareholder desired the information which the books would give for other than a lawful purpose. On the other hand, there is a distinct finding that the inspection was desired for the purpose of ascertaining the true financial condition of the bank, and for the purpose of enabling the complainant to find out the value of his stock, and whether its business was being conducted according to law. There is no suggestion that the complainant was acting in bad faith or from improper motives, or that he was seeking in any way to misuse the information which the books would afford him. We need not hold that there may not be circumstances which would justify the courts in withholding relief to a stockholder seeking an examination of the books and accounts of the bank. In the case before us no reason is shown for denying to the stockholder the right to know how his agents are conducting the affairs of a concern of which he is part owner. Many legal rights may be the subjects of abuse, but cannot be denied for that reason. A director, who has the right to an examination of the books, may abuse the confidence reposed in him. Certainly this possibility [199 U.S. 148, 156] will not be held to justify a denial of legal right, if such right exists in the shareholder. The possibility of the abuse of a legal right affords no ground for its denial. State ex rel. Doyle v. Laughlin, 53 Mo. App. 542; People ex rel. Gunst v. Goldstein, 37 App. Div. 550, 56 N. Y. Supp. 306. The text-books are to the same effect as the decided cases. Cook, Stocks & Stockholders, 511; Boone, Banking, 235; Angell & A. Priv. Corp. 607.
It does not follow that the courts will compel the inspection of the bank's books under all circumstances. In issuing the writ of mandamus the court will exercise a sound discretion, and grant the right under proper safeguards to protect the interests of all concerned. The writ should not be granted for speculative purposes, or to gratify idle curiosity, or to aid a blackmailer, but it may not be denied to the stockholder who seeks the information for legitimate purposes. Re Steinway, 159 N. Y. 250, 45 L. R. A. 461, 53 N. E. 1103; Thomp. Corp. 4412 et seq.
We are unable to find in 5211 (U. S. Rev. Stat., U. S. Comp. Stat. 1901, p. 3498), requiring reports to be made to the Comptroller of the Currency, or in 5240 (U. S. Comp. Stat. 1901, p. 3516), providing for the appointment of examiners to investigate the condition of national banks, anything which cuts down the usual common-law right in shareholders in such corporations.
In 5210 (U. S. Comp. Stat. 1901, p. 3498) it is provided that a list of shareholders shall be kept, subject to inspection by the shareholders and creditors of the corporation and the officers authorized to assess taxes under state authority. The purpose of this section seems obvious in view of the other provisions of the statute, authorizing taxation by the state, upon the shareholder,- 5219 (U. S. Comp. Stat. 1901, p. 3502),-and providing for the individual liability of the shareholder to an amount equal to his stock, in cases of insolvency. Sec. 5151 (U. S. Comp. Stat. 1901, p. 3465).
This court has said that one, if not the principal, object of this section was to acquire information as to the shareholders upon whom may rest individual liability for contracts, debts, or other engagements of the bank. Pauly v. State Loan & T. Co. 165 U.S. 606 , 608-621, 41 L. ed. 844, 845-850, 17 Sup. Ct. Rep. 465. [199 U.S. 148, 157] It is true that for some purposes a national bank is a public institution, notwithstanding it is the subject of private ownership. It may issue bills, which circulate as part of the currency of the country. It is subject to examination, and, in a large measure, to the supervision, of the Comptroller of the Currency. It is examined at stated periods, and may be the subject of special examination by order of the Comptroller. But it is owned by shareholders, like other banking institutions. It is subject by statute to be sued in the courts of the state. 25 Stat. at L. 433, chap. 866, U. S. Comp. Stat. 1901, p. 508. There is nothing in the banking act, as we read it, which limits a shareholder or shareholders, seeking knowledge for a lawful purpose of an institution in which they have a proprietary interest, to an application to the Comptroller for an examination by a public officer of the affairs of their company. A director need only own 10 shares of the stock. Rev. Stat. 5146, U. S. Comp. Stat. 1901, p. 3463. The directors together need not necessarily own the controlling interest in the bank. Yet it is contended they, or the officers of their choice, may deny stockholders the privilege of inspecting, for legitimate purposes, the property which belongs to them.
But, it is said, the right of the shareholder to inspect the books is cut off by 5241 (U. S. Comp. Stat. 1901, p. 3517), providing 'no association shall be subject to any visitorial powers other than such as are authorized by this title, or are vested in the courts of justice.' We are unable to find any definition of 'visitorial powers' which can be held to include the common-law right of the shareholder to inspect the books of the corporation. 'Visitation' is defined by Bouvier (Law Dict. vol. 2, p. 1199) as follows:
The meaning of this section was before Judge Baxter in the case of First Nat. Bank v. Hughes, 6 Fed. 737, and of the meaning of the term 'visitorial powers,' as used in 5241, that learned judge said:
At common law the right of visitation was exercised by the King as to civil corporations, and as to eleemosynary ones, by the founder or donor. 1 Cooley's Bl. Com. 481. 'In the United States the legislature is the visitor of all corporations created by it, where there is no individual founder or donor, and may direct judicial proceedings against such corporations for such abuses or neglects as would at common law cause a forfeiture of their charters.' 1 Cooley's Bl. Com. 482, note.
In the case before us the supreme court of Utah quotes from Merrill on Mandamus, as follows:
In no case or authority that we have been able to find has there been a definition of this right which would include the private right of the shareholder to have an examination of the business in which he is interested, and the right of discovery of the methods and means by which the agents of the corporation are conducting its affairs. The right of visitation [199 U.S. 148, 159] being a public right, existing in the state for the purpose of examining into the conduct of the corporation with a view to keeping it within its legal powers, Congress had in mind, in passing this section, that in other sections of the law it had made full and complete provision for investigation by the Comptroller of the Currency and examiners appointed by him, and authorizing the appointment of a receiver to take possession of the business with a view to winding up the affairs of the bank. It was the intention that this statute should contain a full code of provisions upon the subject, and that no state law or enactment should undertake to exercise the right of visitation over a national corporation. Except in so far as such corporation was liable to control in the courts of justice, this act was to be the full measure of visitorial power.
That the statute did not intend, in withholding visitorial powers, to take away the right to proceed in courts of justice to enforce such recognized rights as are here involved, is evident from the language used. If the right to compel the inspection of books was a well-recognized common-law remedy, as we have no doubt it was, even if included in visitorial powers as the terms are used in the statute, it would belong to that class 'vested in courts of justice' which are expressly excepted from the inhibition of the statute.
Finding nothing in the act of Congress limiting the common-law right of the shareholder, we think that, under the circumstances of this case, he was wrongfully denied an inspection of the books and accounts of the bank by its officers, and the judgment of the Supreme Court of Utah is affirmed.