People Ex Rel. Manice v. Powell

Facts

Manice (P) was elected a director of Atlantic Terra Cotta Company (D) for a term that would not expire until January 1912. D 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 unanimous consent of the stockholders, and the by-laws were amended to provide for a division of the directors into three classes of four directors each. 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. Manice (P) was opposed to such changes. Manice (P) and those deposed from said offices were thereafter hostile to the new management. Early in January 1910, an amended certificate of incorporation was filed, by which a director could be removed from office. It required an 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 outstanding 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 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. A special meeting of the stockholders was to be held on January 19 for the purpose of reducing the number of directors of the company from twelve to six. A stockholder of the company brought an action to prevent such a meeting from being held on 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. The order was reversed and the motion was denied. A special meeting of stockholders was held and the number of directors was reduced from twelve to six. On May 7 a special meeting was called for the removal of Manice (P). It was alleged, 'Whereas, William Manice (P) 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.'They voted to remove Manice (P). Manice (P) claimed that the certificate of incorporation providing for removal of directors did not apply to him 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. Shareholders voted and removed Manice (P) and a new director was immediately elected. Manice (P) claims that his alleged removal is wholly illegal and void. Special Term denied the motion for a peremptory mandamus: 'As a director he was but an agent of the corporation, and the principles of the law of agency were applicable to him. If wrongfully removed before the expiration of the period for which he was elected, he is entitled to recover if damages have resulted; but he cannot insist upon being retained in a fiduciary relation towards the stockholders against the latter's wishes. The stockholders had the power to revoke the agency, though not the right.' Ps appealed. 

Issues

Rule of Law

Holding and Decision

Legal Analysis

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