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KAHN v. AMERICAN CONE & PRETZEL COMPANY ET AL. (06/26/50)

June 26, 1950

KAHN
v.
AMERICAN CONE & PRETZEL COMPANY ET AL., APPELLANTS



Appeal, No. 180, Jan. T., 1950, from judgment of Court of Common Pleas No. 7 of Philadelphia County, March T., 1949, No. 631, in case of Herman Kahn v. American Cone & Pretzel Company et al. Judgment affirmed.

COUNSEL

Morton P. Rome, with him Thomas F. Devine, M. Walton Sporkin, Jr., and Sundheim, Folz, Kamsler & Goodis, for appellants.

Bernard Eskin, with him Wolf, Block, Schorr & Solis-Cohen, for appellee.

Before Drew, C.j., Stern, Stearne, Jones and Bell, JJ.

Author: Jones

[ 365 Pa. Page 162]

OPINION BY MR. JUSTICE JONES

In this case, the plaintiff, a stockholder of a West Virginia corporation, registered to do business in Pennsylvania, brought suit in mandamus in the court below to compel the corporation and its officers to allow him to inspect such of the corporation's books and records as would disclose the names and addresses of the company's stockholders. The motive for the effort, as found by the court below, was that the plaintiff wished to form a protective committee of preferred stockholders to act in the interest of his investment. The two officers of the corporation named as defendants are citizens and residents of Pennsylvania and were duly served. Furthermore, the corporation maintains its principal office in Pennsylvania and there keeps its books and records which the plaintiff desires to inspect. The lower court entered a judgment awarding the plaintiff a peremptory writ; and the defendants have appealed.

[ 365 Pa. Page 163]

It is well settled in this State that a court will not take jurisdiction for the purpose of regulating or interfering with the internal management or affairs of a foreign corporation: Ferrari v. Level Coal Mining Co., Inc., 358 Pa. 44, 55 A.2d 755; Hopkins v. Great Western Fuse Company, 343 Pa. 438, 440, 22 A.2d 717; Kelly v. Brackenridge Brewing Company, Inc., 318 Pa. 254, 256, 178 A. 487; Thompson v. Southern Connellsville Coke Co., 269 Pa. 500, 502-503, 112 A. 533. Section 1001 of the Business Corporation Law of May 5, 1933, P.L. 364 (15 PS § 2852-1001), confirms the rule, so far as an exercise of the Commonwealth's power over a registered foreign corporation is concerned, by providing that "... nothing in this act contained shall be construed to authorize this Commonwealth to regulate the organization or the internal affairs of such [foreign] corporation."

There is no arbitrary line of demarcation, however, between what does and what does not constitute the character of internal affairs wherewith a local court will not interfere in the case of a foreign corporation. The general rule is that the granting of a right to inspect a foreign corporation's books and records, which are within the jurisdiction, does not so offend: see 20 C.J.S., Corporations, § 1883. As stated in 23 Am. Jur., Foreign Corporations, § 435, "It has been held in numerous cases that a court will entertain jurisdiction of an action to compel an inspection of the corporate books of a foreign corporation and will require an officer having custody thereof to permit a proper person to examine and copy the same where such books are within the jurisdiction" (Emphasis supplied). See, also, Restatement, Conflict of Laws, §§ 192-202; and Fletcher, Cyclopedia Corporations (Perm. Ed.), Vol. 5, § 2229. With respect to the specific question, such as is here involved, Section 200 of the Restatement, cit. supra, declares that "A court will entertain a suit by a shareholder

[ 365 Pa. Page 164]

    of a foreign corporation to compel the officers of the corporation to allow him to inspect the books or properties of the corporation which are within the state." The law of Pennsylvania is in accord with these principles: see Conerty v. Butler County Oil Refining Co., 301 Pa. 417, 420, 152 A. 672; Tierney v. Indian Ridge Coal & Coke Company, 256 Pa. 340, 342, 100 A. 814; and Machen v. Machen & Mayer Electrical Mfg. Co., 237 Pa. 212, 219-222, 85 A. 100.

In determining upon what conditions and to what extent a stockholder of a foreign corporation will be accorded a right of inspection, a local court will follow the law of the corporation's domicile unless a local statute defines the rights of inspection of stockholders of all corporations doing business in the State: Restatement, Conflict of Laws, § 200, Comment a. There is such a statute in Pennsylvania. Section 1010 of the Business Corporation Law, supra, provides that "A foreign business corporation which shall have received a certificate of authority under this act, so long as such certificate of authority shall not be revoked or cancelled, shall enjoy the same rights and privileges as a domestic business corporation, but no more, and, except as in this act otherwise provided, shall be subject to the same liabilities, restrictions, duties ...


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