Jones v. Wallace

628 P.2d 388 (1981)

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Nature of the Case

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Facts

Wallace (D) was the sole shareholder of Capital Credit & Collection Service, Inc. as well as one of its directors. In 1972, the directors adopted bylaws which included a provision requiring the presence of 100 percent of the voting shareholders at any shareholders’ meeting to constitute a quorum. In 1976 plaintiffs Jones and Gaarde (Ps) each purchased 49-1/2 shares of the corporation's stock. d retained 100 shares or 50.25 percent. The three shareholders also constituted the board of directors. In June 1979, a majority of the directors removed D as president and elected Jones (P) president and Gaarde (P) secretary of the corporation. The next month a shareholders' meeting occurred at which Gaarde (P) was not present, and D used his majority of the voting shares to remove both the minority shareholders as directors of the corporation and to replace them with Roberts and Smith (D). Ps sued for a declaratory judgment that they remain directors and officers of the corporation. D got a summary judgment on the grounds that the shareholders' meeting satisfied the statutory quorum requirement, and that this requirement could not be overridden by the bylaw. The Court of Appeals reversed: The bylaw could be enforced as a contract among assenting shareholders. D appealed.