US SUPREME COURT DECISIONS

States have no power to enact legislation contravening federal laws for the control of national banks, but such banks are, for actions against them at law or in equity, deemed citizens of the states in which they are located, and the federal courts have such jurisdiction only as they have in cases between individual citizens of the same states.

The shareholder has a common law right, for proper purposes and under reasonable regulations as to time and place, to inspect the books of the corporation of which he is a member.

The possibility of the abuse of a legal right affords no ground for its denial, and while an examination of the books of a corporation should not be granted for speculative or improper purposes, it should not be denied when asked for legitimate purposes. chanrobles.com-red

Page 199 U. S. 149

Where stockholders of a national bank have the legal right to enforce inspection, the state court has authority to enforce the right by granting the proper relief in a judicial proceeding. Nothing in sec. 5211, Rev.Stat. requiring reports by, or in sec. 5240, Rev.Stat. providing for examination of, national banks cuts down the usual common law rights of shareholders in such corporations. The term visitorial powers as used in sec. 5241 does not include the common law right of the shareholder to inspect the books of the corporation.

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:

"1. That the Commercial National Bank of Ogden, Utah, is a corporation organized and existing under and by virtue of the laws of the United States; that said corporation is doing a banking business in Ogden City, Weber County, State of Utah; that the capital stock of said bank is $100,000, divided into 1,000 shares of the par value of $100.00 per share."

"2. That the defendants are directors and have under their control and in their possession all books, papers, accounts, and loans of said Commercial National Bank."

"3. That there is no acting cashier of said bank, and that there has been no such cashier since the first day of November, 1902; that J. W. Guthrie is president, A. R. Heywood, vice-president, and R. T. Hume is assistant cashier of said bank."

"4. That on or about the first day of February, 1903, plaintiff made a demand upon said directors at the banking house of said bank, and also upon J. W. Guthrie, as president, A. R.

Page 199 U. S. 150

Heywood, as vice-president and general manager of said bank, and upon R. T. Hume, as assistant cashier of said bank, for permission to permit plaintiff to inspect all books, accounts, and loans of the said bank, and plaintiff made demand for such inspection at such time or times as would not interfere with the proper conducting and operating of said bank."

"5. That each and all of said persons refused permission to plaintiff to inspect the said books, accounts, and loans of said bank at any time or at all and they still refuse to permit such inspection."

"6. That the plaintiff is the owner and has in his possession 183 1/3 shares of the capital stock of said bank, of the par value of $18,333.33, and that said stock appears on the stock books of said bank in the name of the said plaintiff."

"7. That plaintiff sought and now seeks the inspection of the books, accounts, and loans of said bank for the purpose of ascertaining the true financial condition of said bank, and also for the purpose of ascertaining the value of his stock in said bank, and also for the purpose of ascertaining whether the business affairs of the said bank have been conducted according to law."

"The court further finds that sufficient reason exists for the inspection of said books and accounts of said bank."

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. chanrobles.com-red

Page 199 U. S. 152