Haberman v. W состоящий в Federal Sav. & Loan Ass’n, 17 N.Y.2d 85 (1966)

A member of a federally chartered savings and loan association has a common-law right, similar to that of a corporate shareholder, to inspect the association’s membership list, subject to a showing of good faith and a proper purpose.

Summary

The New York Court of Appeals held that members of a federal savings and loan association have a common-law right to inspect the association’s membership list, analogous to shareholders’ rights in a corporation. This right is not absolute and is contingent upon the member demonstrating “good faith” and a “proper purpose” for seeking the inspection. The court emphasized that this right is limited to names and addresses only to protect the privacy of other members. The court reversed the lower court’s decision, remanding the case for a hearing to determine if the petitioners had the requisite “good faith”.

Facts

Haberman and Schulze, through their construction company, acquired an apartment building subject to a mortgage held by West Side Federal Savings and Loan Association. After West Side Federal denied their requests to increase the mortgage and refused to waive a prepayment charge and refund an origination fee, Haberman sued the association unsuccessfully. Subsequently, Haberman, Schulze, and Haberman’s sister-in-law opened savings accounts with the association and then initiated a special proceeding seeking to inspect the association’s minute book and membership list, alleging mismanagement by the board of directors.

Procedural History

The trial court granted the petition for inspection of the membership list but not the minute book, finding an issue of fact regarding the petitioners’ good faith. The Appellate Division affirmed. The Court of Appeals reversed the Appellate Division’s order and remitted the case to the Special Term for a hearing to determine the issue of fact regarding the petitioners’ good faith.

Issue(s)

1. Whether a member of a federally chartered savings and loan association possesses a common-law right to inspect the association’s membership list, similar to the right of a shareholder in a corporation.

2. Whether the enforcement of this inspection right is contingent upon the member demonstrating “good faith” and a “proper purpose”.

Holding

1. Yes, because the court found a close analogy between the rights and duties of a shareholder in a corporation and a member in a savings and loan association, justifying the extension of the common-law inspection right to association members.

2. Yes, because the common-law inspection right is enforceable subject to the sound discretion of the Trial Judge and upon a showing of good cause, good faith, and a proper purpose; an issue of fact concerning the petitioners’ good faith was raised in this case.

Court’s Reasoning

The court reasoned that while no New York statute directly applies to the internal management of federal savings and loan associations, the enactment of state corporate controls did not diminish common-law safeguards for shareholder inspection rights. The court drew a strong analogy between the rights of shareholders and association members, noting their similar financial interests, voting rights, and ability to participate in management. The court quoted Matter of Steinway, stating, “We do not think that the statute now in force is exclusive, or that it has abridged the common-law right of stockholders with reference to the examination of corporate books…By simply providing an additional remedy the existing remedy was not taken away.”

The court emphasized that the inspection right is not absolute and must be exercised in good faith and for a proper purpose. The court stated, “As this court stated in Matter of Steinway (supra, p. 263) : ‘We think that, according to the decided weight of authority, a stockholder has the right at common law to inspect the books of his corporation at a proper time and place, and for a proper purpose.’” It found a triable issue of fact regarding the petitioners’ good faith, given their prior dispute with the association and the timing of their request for inspection. The court determined that a hearing was necessary to resolve this factual issue before the inspection right could be enforced, since using the inspection right for harassment or personal gain, rather than for the benefit of the association, would be an improper purpose.