{ "id": 8358037, "name": "WILLIAM A. CARTER, JR. v. WILSON CONSTRUCTION COMPANY, INC. and J. RAY WILSON, JR., Individually", "name_abbreviation": "Carter v. Wilson Construction Co.", "decision_date": "1986-10-07", "docket_number": "No. 8619SC227", "first_page": "61", "last_page": "68", "citations": [ { "type": "official", "cite": "83 N.C. App. 61" } ], "court": { "name_abbreviation": "N.C. Ct. App.", "id": 14983, "name": "North Carolina Court of Appeals" }, "jurisdiction": { "id": 5, "name_long": "North Carolina", "name": "N.C." }, "cites_to": [ { "cite": "120 S.E. 2d 548", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1961, "opinion_index": 0 }, { "cite": "255 N.C. 1", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8566930 ], "year": 1961, "opinion_index": 0, "case_paths": [ "/nc/255/0001-01" ] }, { "cite": "27 S.E. 2d 644", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1943, "pin_cites": [ { "page": "646" } ], "opinion_index": 0 }, { "cite": "223 N.C. 617", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8614518 ], "year": 1943, "pin_cites": [ { "page": "620" } ], "opinion_index": 0, "case_paths": [ "/nc/223/0617-01" ] }, { "cite": "176 S.E. 2d 521", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1970, "pin_cites": [ { "page": "523-24" } ], "opinion_index": 0 }, { "cite": "9 N.C. App. 361", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8550508 ], "year": 1970, "pin_cites": [ { "page": "365" } ], "opinion_index": 0, "case_paths": [ "/nc-app/9/0361-01" ] }, { "cite": "199 U.S. 148", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 3643870 ], "weight": 3, "year": 1905, "pin_cites": [ { "page": "156" }, { "page": "133" }, { "page": "6" } ], "opinion_index": 0, "case_paths": [ "/us/199/0148-01" ] }, { "cite": "144 S.E. 2d 843", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1905, "opinion_index": 0 }, { "cite": "15 A.L.R. 2d 11", "category": "reporters:specialty", "reporter": "A.L.R. 2d", "year": 1951, "opinion_index": 0 }, { "cite": "257 S.E. 2d 436", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1979, "opinion_index": 0 }, { "cite": "297 N.C. 611", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8572699, 8572745, 8572781, 8572718, 8572763 ], "year": 1979, "opinion_index": 0, "case_paths": [ "/nc/297/0611-01", "/nc/297/0611-03", "/nc/297/0611-05", "/nc/297/0611-02", "/nc/297/0611-04" ] }, { "cite": "253 S.E. 2d 339", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 3, "year": 1979, "pin_cites": [ { "page": "342" }, { "page": "344" } ], "opinion_index": 0 }, { "cite": "40 N.C. App. 467", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8551290 ], "year": 1979, "pin_cites": [ { "page": "473" } ], "opinion_index": 0, "case_paths": [ "/nc-app/40/0467-01" ] }, { "cite": "144 S.E. 2d 842", "category": "reporters:state_regional", "reporter": "S.E.2d", "opinion_index": 0 }, { "cite": "144 S.E. 2d 835", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1965, "pin_cites": [ { "page": "841" } ], "opinion_index": 0 }, { "cite": "265 N.C. 601", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8576536 ], "year": 1965, "pin_cites": [ { "page": "610" } ], "opinion_index": 0, "case_paths": [ "/nc/265/0601-01" ] } ], "analysis": { "cardinality": 709, "char_count": 17559, "ocr_confidence": 0.793, "pagerank": { "raw": 2.307832709393008e-07, "percentile": 0.7881285742913969 }, "sha256": "908eb07ac7993f6e029ff58f04b4529c1711bf4e420cccd2b0f60103b3abac6b", "simhash": "1:82e6655239049474", "word_count": 2779 }, "last_updated": "2023-07-14T16:07:52.921422+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [ "Judges BECTON and COZORT concur." ], "parties": [ "WILLIAM A. CARTER, JR. v. WILSON CONSTRUCTION COMPANY, INC. and J. RAY WILSON, JR., Individually" ], "opinions": [ { "text": "JOHNSON, Judge.\nPlaintiff owns 317 shares of the common stock of defendant corporation. Plaintiff also owns approximately twenty percent (20%) of the outstanding shares of Wilson Equipment Leasing, Inc., a company which leases equipment to defendant corporation and conducts related transactions with defendant corporation. Plaintiff is now part owner and employee of C & L Contracting, Inc., which, according to defendants, is \u201cin direct competition with [defendant corporation].\u201d\nDefendant Wilson is president of the corporate defendant Wilson Construction Company, Inc. Plaintiff, through his attorney, made two written demands for the information at issue prior to filing his complaint. Defendant Wilson responded after the second letter of demand, refusing to make the requested information available.\nPlaintiff subsequently instituted this action alleging in his complaint, inter alia, that he is a former officer and employee of defendant corporation; that since his resignation as officer and employee on 8 November 1983 he has been unable to gain information regarding defendant corporation; that he is informed and believes that the financial condition of defendant corporation has deteriorated and that such deterioration may be due to improper management; and that his offer to sell his stock to defendant corporation was rejected. Plaintiff further alleged that he requested the information for the following stated purpose: \u201cin order to determine the value of his shares, the financial condition of the company, and whether it is efficiently and properly managed in the best interests of the corporation.\u201d\nDefendants contend in their first Assignment of Error that the court erred in finding that plaintiff had a proper purpose for obtaining access to the corporate information he requested. Defendants further contend that plaintiffs stated purpose was \u201ca mask for more illegitimate purposes that would damage [defendant corporation\u2019s] ability to compete.\u201d Defendants characterize plaintiff as a \u201cdisgruntled minority shareholder\u201d who \u201cleft his position without notice,\u201d leaving both companies \u201cin pretty bad shape\u201d in order to start his own competing business.\nPlaintiff requested access to the records of Wilson Equipment Leasing in the same two letters he requested access to the records at issue. Defendant Wilson granted plaintiffs request to examine those records at the same time he denied plaintiffs request to see defendant corporation\u2019s records. Defendants argue that plaintiffs failure to examine the records of Wilson Equipment Leasing as of the time of trial is further evidence of plaintiffs bad faith and his desire to harass the corporate defendant\u2019s management.\nThe pertinent portion of G.S. 55-38 provides as follows:\n(b) A qualified shareholder, upon written demand stating the purpose thereof, shall have the right, in person, or by attorney, accountant or other agent, at any reasonable time or times, for any proper purpose, to examine at the place where they are kept and make extracts from, the books and records of account, minutes and record of shareholders of a domestic corporation or those of a foreign corporation actually or customarily kept by it within this State. ... A shareholder\u2019s rights under this subsection may be enforced by an action in the nature of mandamus.\n(Emphasis added.)\nIt is undisputed by the parties that plaintiff is a qualified shareholder. The issue is whether plaintiffs request to examine the corporate records was for \u201cany proper purpose.\u201d Absent a statutory restriction, a shareholder has a common law right to inspect and examine the books and records of the corporation, given to him for the protection of his interests. Cooke v. Outland, 265 N.C. 601, 610, 144 S.E. 2d 835, 841 (1965). G.S. 55-38(b) does not give a qualified shareholder an absolute right of inspection and examination for a mere fishing expedition, or for a purpose not germane to the protection of his economic interest as a shareholder in the corporation. Id. at 611, 144 S.E. 2d 842. For a shareholder to have the right to actually visit a corporation\u2019s office and possibly disrupt its normal operation in order to inspect corporate books and records of account, our legislature has correctly decided that his motives must be \u201cproper.\u201d Morgan v. McLeod, 40 N.C. App. 467, 473, 253 S.E. 2d 339, 342, disc. rev. denied, 297 N.C. 611, 257 S.E. 2d 436 (1979). Purposes which previously have been deemed proper are the shareholder\u2019s good faith desire to (1) determine the value of his stock; (2) investigate the conduct of the management; and (3) determine the financial condition of the corporation. See Cooke v. Outland, supra, at 611-12, 144 S.E. 2d at 842 (quoting Annot., 15 A.L.R. 2d 11 secs. 7-8 (1951)). The burden of proof rests upon the defendants, if they wish to defeat the shareholder\u2019s demand, to allege and show by facts, if they can, that the shareholder is motivated by some improper purpose. Id. at 615, 144 S.E. 2d at 845. \u201cIn 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.\u201d Id. at 613, 144 S.E. 2d 843, quoting Guthrie v. Harkness, 199 U.S. 148, 156, 50 L.Ed. 130, 133, 26 S.Ct. 4, 6 (1905).\nHere, plaintiff stated a proper purpose in his complaint. Defendants must overcome the presumption of good faith in plaintiffs favor by showing that plaintiffs purpose is improper. The evidence adduced at trial by plaintiff tended to show: that plaintiff tried to sell his stock in defendant corporation to defendant corporation, who declined plaintiff s offer to sell; that plaintiff had personally guaranteed the debts of Wilson Equipment Leasing, a corporation which conducted related transactions with defendant corporation, including indemnifying its debts and extending loans; that plaintiff had reason to believe, based on information obtained from defendant corporation\u2019s management consultant, that certain purchases had not been put on the corporate books; that funds were shuffled between Wilson Equipment Leasing and defendant corporation; and that the net worth of defendant corporation decreased from August 1983 to August 1984. This evidence supports plaintiffs allegation of a proper purpose.\nThe evidence adduced at trial by defendants showed that plaintiff is currently part owner and employee of a business, C & L Contracting. According to the testimony of defendant Wilson, \u201c[W]e are in direct competition on all work in the [Pjiedmont, North Carolina, that is bridge work\u201d and that to allow plaintiff access to the books and records of accounts of defendant corporation \u201cwould put us at a disadvantage.\u201d\nThis evidence is insufficient to override the presumption that plaintiff is acting in good faith. As stated in Cooke v. Outland, supra, at 613, 144 S.E. 2d at 843, the mere possibility that a shareholder may abuse his right to gain access to corporate information will not be held to justify a denial of a legal right, if such right exists in the shareholder. The trial court properly exercised its discretion in issuing a writ of mandamus. This Assignment of Error is overruled.\nNext, defendants contend that the court erred in assessing total penalties of $1,000.00, that is $500.00 from each defendant. Specifically, defendants contend that the penalty is improper in the following regards: (1) the maximum total penalty allowed under G.S. 55-38(d) is $500.00; (2) the court erroneously failed to find mitigating circumstances which would allow for a decrease in the amount of the penalty; and (3) the penalty was based on a value of \u201cat least $20,000.00\u201d for plaintiffs shares in defendant corporation at the time of trial, a value that was insufficiently supported by the evidence. We disagree with each of these contentions. We will address each contention in turn.\nG.S. 55-38(d) provides, in pertinent part;\n(d) Any officer or agent or corporation refusing to mail a statement as required by G.S. 55-37 or refusing to allow a qualified shareholder to examine and make extracts from the aforesaid books and records of account, minutes and record of shareholders, for any proper purpose, shall be liable to such shareholder in a penalty of ten percent (10%) of the value of the shares owned by such shareholder, but not to exceed five hundred dollars ($500.00), in addition to any other damages or remedy afforded him by law, but the court may decrease the amount of such penalty on a finding of mitigating circumstances.\nThe plain meaning of the disjunctive \u201cor\u201d indicates that the ceiling penalty of $500.00 may be assessed against each of \u201c[a]ny officer or agent or corporation.\u201d G.S. 55-38(d). In Morgan v. McLeod, supra, the corporate defendant was assessed a penalty of $500.00 and the two individual defendant officers were assessed a penalty of $251.00 each.\nTwo, although the statute provides that \u201cthe court may decrease the amount of such penalty on a finding of mitigating circumstances,\u201d there is no authority compelling the court to find mitigating circumstances. We are unpersuaded by defendants\u2019 argument that the corporation\u2019s good faith interest in \u201cwanting to protect its current business practices from being divulged to a direct competitor\u201d requires finding a mitigating circumstance sufficient to compel a decrease in the penalty.\nThree, this Court alluded to the difficulty in valuing stock in a closed corporation in Morgan v. McLeod, supra, at 475, 253 S.E. 2d at 344. \u201cSince it is a relative term, it is necessary that its true meaning be determined by the context in which it appears.\u201d Id.\nIn the case sub judice, the court made the following finding of fact:\n12. Evidence was presented by the plaintiff-petitioner in the form of a financial statement for the defendant-respondent corporation showing the shareholders\u2019 equity to be $81.98 per share as of August 31, 1983, and while the defendant-respondent, J. Ray Wilson, Jr., president of the defendant-respondent, Wilson Construction Co., Inc., testified the said corporation was worthless at the time of trial, it is found that the value of plaintiff-petitioner\u2019s 317 shares is worth at least $20,000.00 at the time of trial.\nThe only evidence bearing on value that was not specifically addressed in this finding of fact is defendant Wilson\u2019s testimony to the effect that an August 1984 financial statement showed an unspecified decrease in value from the August 1983 financial statement. However, no financial statement for 1984 was introduced into evidence. The evidence before the court on 9 May 1985, the day of trial, regarding value was: a 1983 financial statement showing a value of $81.98 per share for 317 shares, which totals $25,987.66, and defendant\u2019s testimony that plaintiffs stock is now worth zero. The trial court\u2019s finding of fact is conclusive if supported by any competent evidence. Little v. Little, 9 N.C. App. 361, 365, 176 S.E. 2d 521, 523-24 (1970). The evidence in the case sub judice is sufficient to support the court\u2019s finding that the value of plaintiffs shares was worth at least $20,000.00 at the time of trial. This Assignment of Error is overruled.\nIn defendants\u2019 last Assignment of Error they challenge the propriety of an award of attorney\u2019s fees in the amount of $250.00. The court made the following finding of fact with respect to attorney\u2019s fees:\n13. The plaintiff-petitioner\u2019s attorney of record rendered valuable legal services to the plaintiff-petitioner in the prosecution of this action.\nThe court made the following conclusion of law with respect to attorney\u2019s fees:\n2. The plaintiff-petitioner is entitled, pursuant to N.C.G.S. [sec.] 55-38(d) to an award from each defendant-respondent of a penalty of 10% of the value of the shares owned by plaintiff-petitioner, not to exceed $500.00, together with a reasonable attorney\u2019s fee due to the unwarranted and unjustified refusal by the said defendants-respondents.\nIn this jurisdiction attorney\u2019s fees may not be taxed as a part of the costs, absent an express statutory provision for attorney\u2019s fees. Hopkins v. Barnhardt, 223 N.C. 617, 620, 27 S.E. 2d 644, 646 (1943). Although G.S. 55-38 does provide for a penalty, it does not expressly provide for an award of attorney\u2019s fees. Statutes imposing a penalty are to be strictly construed. Carolina Milk Producers Assoc. Co-op., Inc. v. Melville Dairy, Inc., 255 N.C. 1, 120 S.E. 2d 548 (1961). G.S. 55-38 does not provide statutory authority for an attorney fee award. We know of no other statutory authority for this attorney fee award based on the court\u2019s finding and conclusion as stated above. The award of attorney\u2019s fees in the amount of $250.00 has no statutory basis and cannot stand. Accordingly, we reverse only that portion of the court\u2019s judgment awarding attorney\u2019s fees.\nAffirmed in part.\nReversed in part.\nJudges BECTON and COZORT concur.", "type": "majority", "author": "JOHNSON, Judge." } ], "attorneys": [ "Woodson, Linn, Sayers, Lawther & Short, by Donald D. Sayers, for plaintiff appellee.", "Kluttz, Hamlin, Reamer, Blankenship and Kluttz, by Richard R. Reamer, for defendant appellants." ], "corrections": "", "head_matter": "WILLIAM A. CARTER, JR. v. WILSON CONSTRUCTION COMPANY, INC. and J. RAY WILSON, JR., Individually\nNo. 8619SC227\n(Filed 7 October 1986)\n1. Corporations 8 5.1\u2014 examination of corporate records \u2014 shareholder action-showing of proper purpose\nPlaintiff shareholder\u2019s evidence was sufficient to show that his request to examine the records of defendant corporation was for \u201cany proper purpose\u201d within the meaning of N.C.G.S. \u00a7 55-38(b) where it tended to show that plaintiff offered to sell his stock in defendant corporation to the corporation but his offer was refused; plaintiff had personally guaranteed the debts of a leasing company which conducted related transactions with defendant corporation, including indemnifying its debts and extending loans; and plaintiff had reason to believe, based on information obtained from defendant corporation\u2019s management consultant, that certain purchases had not been put on the corporate books, that funds were shuffled between the leasing company and defendant corporation, and that the net worth of defendant corporation had decreased in the past year. Furthermore, defendants\u2019 evidence that plaintiff is currently part owner and employee of a business in competition with defendant corporation was insufficient to override the presumption that plaintiff is acting in good faith.\n2. Corporations 8 5.1\u2014 examination of corporate records \u2014 shareholder action\u2014 statutory penalty\nThe trial court could properly assess under N.C.G.S. \u00a7 55-38(d) a $500 penalty against a corporation and another $500 penalty against the corporation\u2019s president for refusing to allow a qualified shareholder to examine the corporation\u2019s records, the maximum total penalty not being limited by the statute to $500.\n3. Corporations 8 5.1\u2014 examination of corporate records \u2014 alleged good faith refusal \u2014 no mitigating circumstance\nDefendants\u2019 contention that a corporation\u2019s refusal to allow a qualified shareholder to examine its records was based on its good faith interest in \u201cwanting to protect its current business practices from being divulged to a direct competitor\u201d did not require the trial court to find a mitigating circumstance to compel a decrease in the penalty assessed under N.C.G.S. \u00a7 55-38(d) for the refusal to allow the shareholder to examine the corporation\u2019s records.\n4. Corporations \u00a7 5.1\u2014 examination of corporate records \u2014 shareholder action\u2014 statutory penalty \u2014 value of stock\nThe evidence was sufficient to support the court\u2019s finding that the value of plaintiffs shares in defendant corporation was at least $20,000 at the time of trial and to support the amount of the penalty assessed by the court under N.C.G.S. \u00a7 55-38(d).\n5. Attorneys at Law 8 7.5\u2014 examination of corporate records \u2014 shareholder action \u2014attorney fee not allowable\nThe trial court erred in taxing an attorney fee as part of the costs in a shareholder\u2019s action under N.C.G.S. \u00a7 55-38 for a writ of mandamus requiring defendants to permit plaintiff to examine a corporation\u2019s records and to recover a penalty for defendants\u2019 refusal to permit plaintiff to examine the records, since there was no statutory basis for the award of such a fee.\nAppeal by defendants from Freeman, Judge. Judgment entered and writ of mandamus issued 1 October 1985 in Superior Court, Rowan County. Heard in the Court of Appeals 20 August 1986.\nOn 14 September 1984, plaintiff, a minority stockholder in defendant corporation, instituted this action petitioning for a writ of mandamus ordering defendants to make available to plaintiff books and records of account, minutes, and record of shareholders of defendant corporation. The complaint also prayed for penalties to be assessed against defendants in the amount of ten percent (10%) of the value of plaintiffs shares, not to exceed five hundred dollars ($500.00) pursuant to G.S. 55-38(d) and for an award of attorney\u2019s fees. On 2 January 1985, defendants answered. On 1 October 1985, the court concluded the following as a matter of law: that defendants\u2019 refusal to allow plaintiff to examine the corporate records was improper; that plaintiff was entitled to a writ of mandamus; that plaintiff was entitled to recover a penalty of $500.00 from each defendant; and that plaintiff was entitled to recover from defendants jointly and severally the sum of two hundred fifty dollars ($250.00) as reasonable attorney\u2019s fees due to \u201cthe unwarranted and unjustified refusal\u201d of defendants to make the requested records available to plaintiff. Defendants appeal.\nWoodson, Linn, Sayers, Lawther & Short, by Donald D. Sayers, for plaintiff appellee.\nKluttz, Hamlin, Reamer, Blankenship and Kluttz, by Richard R. Reamer, for defendant appellants." }, "file_name": "0061-01", "first_page_order": 89, "last_page_order": 96 }