Manice v. Powell

• Decision Date: 14 March 1911
• Citation: 94 N.E. 634,201 N.Y. 194
• Parties: PEOPLE ex rel. MANICE v. POWELL et al.
• Court: New York Court of Appeals Court of Appeals

201 N.Y. 194

94 N.E. 634

PEOPLE ex rel. MANICE

v.POWELL et al.

Court of Appeals of New York.

March 14, 1911.

Appeal from Supreme Court, Appellate Division, First Department.

Mandamus by the People, on the relation of William Manice, against William H. Powell and others to set aside proceedings by which relator was removed from the office of director of a domestic corporation, and for his reinstatement in such office. From an order of the Appellate Division (140 App. Div. 912,125 N. Y. Supp. 1139), affirming as a matter of law, and not in discretion, an order of the Special Term denying a motion for a peremptory mandamus, relator appeals. Affirmed.John M. Perry, for appellant.

Graham Sumner, for respondents.

CHASE, J.

The relator, who had been elected a director of the defendant Atlantic Terra Cotta Company for a term which will not expire until January, 1912, has been removed from his office as a director as hereinafter stated, and another person has been elected to fill the alleged vacancy, and he is now performing the duties as such director. The relator seeks by peremptory mandamus to set aside the proceedings by which it is alleged he was removed and to be reinstated in his office as a director.

The defendant Atlantic Terra Cotta Company is a domestic corporation organized in February, 1907, for the purpose of manufacturing and selling architectural terra cotta. Its certificate of incorporation provided for a board of three directors. Soon after the company was organized, the number of directors was increased from three to twelve by unanimousconsent of the stockholders, and the by-laws were amended to provide for a division of the directors into three classes of four directors each, and directors were thereafter elected for such terms, respectively, so that the term of office of four of such directors would expire each year. In January, 1909, the board of directors changed the general officers of the corporation by electing a new president, secretary, and treasurer, general superintendent, and general counsel. The relator was opposed to such changes, and it is alleged that he and those deposed from said offices were thereafter hostile to the new management.

Early in January, 1910, an amended certificate of incorporation, altering the original certificate of incorporation of the defendant corporation, was filed, by which there was included therein the following provision: ‘If the notice of any regular or special meeting of the board of directors shall contain a statement to the effect that the board will at such meeting consider whether sufficient cause exists for the removal of some specified person from the office of director of the corporation, and if the board, after consideration of such question, shall determine at such meeting by the affirmative vote of two-thirds of all the directors in office that sufficient cause exists for the removal of such person from such office, and that his removal is desirable and for the best interests of the corporation, and if such determination shall thereafter be approved and ratified at a duly called stockholders' meeting by the affirmative vote of the holders of two-thirds of the coutstanding stock of the corporation, then such person shall immediately cease to be a director of the corporation, and the resulting vacancy in the board of directors shall be filled as provided in the by-laws.’

Such alteration of the certificate of incorporation had been opposed by the relator, but it was authorized by a majority vote of the directors at a meeting held December 30, 1909, and by a vote of stockholders representing more than three-fifths of the capital stock at a meeting of stockholders called for that purpose and held December 24, 1909. The annual meeting of the stockholders was called to be held January 21, 1910, and also a special meeting of the stockholders to be held January 19th for the purpose of reducing the number of directors of the company from twelve to six. Before the meeting was held on January 19th a stockholder of the company brought an action to prevent such meeting being held upon the ground that a reduction in the number of the board of directors violated certain alleged contract rights specified in the complaint in that action. A temporary injunction was obtained. An appeal was taken to the Appellate Division from the order granting such temporary injunction, and the order was reversed and the motion denied. Bond v. Atlantic Terra Cotta Co., 137 App . Div. 671,122 N. Y. Supp. 425. The annual meeting of stockholders was adjourned from time to time until May 18th, and the special meeting of the stockholders for the purpose of reducing the number of directors was adjourned from time to time until April 26th. On April 26th, the order granting an injunction having been reversed and the motion having been denied, the special meeting of stockholders was held and the number of directors was reduced from twelve to six. On May 7th a special meeting of the directors of the company was called for May 11th, and included in the notice of such meeting was the following: ‘The board will at this meeting consider whether sufficient cause exists for the removal of William Manice from the office of director of the company.’ The meeting was at the request of counsel for Manice adjourned until the same hour on May 12th. At the meeting on May 12th the relator with his counsel and all the directors except one and the general counsel of the corporation were present, and a resolution was offered of which the following is a copy: ‘Whereas, William Manice has participated in the organization of the Federal Terra Cotta Company, a competitor of this company, and is now an officer and director of and otherwise interested in said company, and whereas, the conduct of said Manice has not in the judgment of this board been for the best interests of this company, resolved and determined, that sufficient cause exists for the removal of said Manice from the office of director of this company and that his removal from such office is desirable and for the best interests of this company.’

Counsel for the relator objected to the consideration of the resolution upon the ground that the amendment to the certificate of incorporation providing for removal of directors did not apply to the relator, because he was a member of the board at the time it was passed and his term of office had not yet expired, and upon the ground that there was no by-law authorizing the procedure. Counsel for the corporation suggested that the objection be put in the form of a motion, and it was so offered as a resolution and defeated by a vote of eight to three .

Counsel for the relator then asked that, inasmuch as the relator had then for the first time been apprised of the charges implied in the resolution, he should be allowed a reasonable time within which to confer with counsel and determine what answer to make to such charges. The chairman of the meeting asked relator's counsel what he considered a reasonable time, and suggested that the directors might be willing to allow him 10 or 15 minutes. Counsel for the relator replied that he meant by a reasonable time until Monday, May 16, 1910, which would mean four days. A motion was then made that the relator be granted a reasonable time, to wit, until Monday, May 16th, to confer with counsel and determine what answer to make to such charges, but it was defeated. The resolution to remove Manice from the office of director was then carried. The meeting did not occupy more than 5 or 10 minutes.

At the stockholders' meeting held May 18th four of the directors, two of those whose terms of office would expire in 1911, and two of those whose terms of office would expire in 1912 resigned, and but two were elected to take the place of those whose terms of office expired in 1910. The board then consisted of six directors, of whom, except for the removal that we have mentioned, the relator was one of the class whose term of office would expire in 1912. At such stockholders' meeting a resolution was offered that all of the acts of the board of directors, including the determination of the board of directors that sufficient cause exists for the removal of William Manice from the office of director of the company and that his removal is desirable and for the best interests of the company, be approved and ratified. A resolution was then offered as follows: ‘Whereas, the amendment of the certificate of incorporation adopted on or about the 24th December, 1909, which provided that the directors shall ‘consider’ whether sufficient cause exists to remove a director and that if the board after such ‘consideration’ shall ‘determine’ that cause exists, contemplates the furnishing to the person charged with a copy of the charge made against him and giving him an opportunity to confer with counsel and a reasonable time...