Case Name: In the Matter of Ethel C. Gearing et al., Appellants, v. Joseph A. Kelly et al., Respondents
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 1962-04-05
Citations: 11 N.Y.2d 201
Docket Number: 
Parties: In the Matter of Ethel C. Gearing et al., Appellants, v. Joseph A. Kelly et al., Respondents.
Judges: 
Reporter: New York Reports
Volume: 11
Pages: 201–205

Head Matter:
In the Matter of Ethel C. Gearing et al., Appellants, v. Joseph A. Kelly et al., Respondents.
Argued January 24, 1962;
decided April 5, 1962.
William Mertens for appellants.
I. Under respondent corporation’s by-laws, the required quorum is three of the four directors provided for in the by-laws. This requirement remains constant and is not affected by vacancies in the membership in the board. (Erie R. R. Co. v. City of Buffalo, 180 N. Y. 192; Mitchell v. Forest City Print. Co., 187 App. Div. 743; Craig Medicine Co. v. Merchants’ Bank, 59 Hun 561.) II. It is proper and legal for a director to absent herself from a meeting so as to prevent the assembling of a quorum. Such absence does not estop the director from challenging an invalid election. (Hexter v. Columbia Baking Co., 16 Del. Ch. 263; Angerosa v. White Co., 248 App. Div. 425, 275 N. Y. 524; Lawrence v. American Nat. Bank, 54 N. Y. 432; Troy Union R. R. Co. v. City of Troy, 132 Misc. 534, 227 App. Div. 351, 253 N. Y. 597.) III. Petitioner Gearing, a substantial stockholder, is not estopped from insisting upon compliance with the quorum requirements of the by-laws. She has a right to obtain an order setting aside the illegal election. (Matter of Hoe & Co. [Cullom-Rein], 14 Misc 2d 500, 285 App. Div. 927, 309 N. Y. 719; Matter of Scheel, 134 App. Div. 442; Matter of Green Bus Lines [Turner], 166 Misc. 800; Matter of Empire State Supreme Lodge of Degree of Honor, 118 App. Div. 616; Matter of Auer v. Dressel, 306 N. Y. 427.) IV. The directions of the order entered at Special Term with respect to a new election were proper. (Matter of Wyatt v. Armstrong, 186 Misc. 216.) V. Respondents’ present temporary control of the board of directors has been obtained in violation of their fiduciary obligations to petitioners. (Kavanaugh v. Kavanaugh Knitting Co., 226 N. Y. 185.)
Edward Ross Aranow, Herbert J. Brown, Robert J. Ward and Michael P. Rosenthal for respondents.
I. Under the by-laws of the company, a majority of the directors in office constitutes a quorum for the filling of a vacant directorship. (Matter of Chelsea Exch. Corp., 18 Del. Ch. 287; Erie R. R. Co. v. City of Buffalo, 180 N. Y. 192; Benintendi v. Kenton Hotel, 294 N. Y. 112; Johnson v. Dodd, 56 N. Y. 76; Mitchell v. Forest City Print. Co., 107 Misc. 709, 187 App. Div. 743; Craig Medicine Co. v. Merchants’ Bank, 59 Hun 561.) II. Petitioners cannot take advantage of the deliberate absence of Mary G. Meacham from the meeting in violation of her duties as a director. (Imperator Realty Co. v. Tull, 228 N. Y. 447; Matter of Syracuse, C. & N. Y. R. R. Co., 91 N. Y. 1; People ex rel. Leach v. Central Fish Co., 117 App. Div. 77; Lazar v. Knolls Co-op. Section No. 2, 205 Misc. 748; Matter of P. F. Keogh, Inc., 192 App. Div. 624; Matter of Bushwick Sav. & Loan Assn., 189 Misc. 316; Matter of Ohrbach v. Kirkeby, 3 A D 2d 269; Matter of Radom & Neidorff, 307 N. Y. 1; Matter of Green Bus Lines [Turner], 166 MisC. 800; Matter of Scheel, 134 App. Div. 442; Wallace v. First Trust Co. of Albany, 251 App. Div. 253; Matter of Braico, 235 App. Div. 132, 260 N. Y. 625.) III. Even if this court concludes that the election of Julian Hemphill was invalid, it should require a new election to be held by the board of directors and should direct that Mrs. Meacham attend that election. (Matter of Faehndrich, 2 N Y 2d 468; Matter of Young v. Jebbett, 213 App. Div. 774; Matter of Robert Clarke, Inc., 186 App. Div. 216; Matter of Societá Mutuo, 255 App. Div. 815.)

Opinion:
Per Curiam.
Appellants, who' own 50% of the stock of the Radium Chemical Company, Inc., seek, within the provisions of section 25 of the General Corporation Law, to set aside the election of a director.
In a proceeding under that section, the court sits as a court of equity which may order a new election ' ' as justice may require ". We have concluded, as did the majority of the Appellate Division, that appellants have failed to show that justice requires a new election, in that they may not now complain of an irregularity which they themselves have caused.
Mrs. Meacham stayed away from the meeting of March 6, 1961 for the sole purpose of preventing a quorum from assembling, and intended, in that manner, to paralyze the board. There can be no doubt, and indeed it is not even suggested, that she lacked notice or in any manner found it temporarily inconvenient to present herself at that particular time and place. It is certain, then, that Mrs. Meacham's absence from the noticed meeting of the board was intentional and deliberate. Much is said by appellants about a desire to protect their equal ownership of stock through equal representation on the board. It is, however, clear that such balance was voluntarily surrendered in 1955. Whether this was done in reliance on representations of Kelly, Sr., as alleged in the plenary suit, is properly a matter for that litigation, rather than the summary type of action here.
The relief sought by appellants, the ordering of a new election, would, furthermore, be of no avail to them, for Mrs. Meacham would then be required, as evidence of her good faith, to attend. Such a futile act will not be ordered (see Matter of Hoe & Co., 14 Misc 2d 500, affd. 285 App. Div. 927, affd. 309 N. Y. 719).
The identity of interests of the appellants is readily apparent. Mrs. Gearing has fully indorsed and supported all of the demands and actions of her daughter, and has associated herself with the refusal to attend the directors' meeting. A court of equity need not permit Mrs. Gearing to attack actions of the board of directors which were marred through conduct of the director whom she has actively encouraged. To do so would allow a director to refuse to attend meetings, knowing that thereafter an associated stockholder could frustrate corporate action until all of their joint demands were met.
The failure of Mrs. Meacham to attend the directors' meeting, under the present circumstances, bars appellants from invoking an exercise of the equitable powers lodged in the courts under the statute. (See, also, Imperator Realty Co. v. Tull, 228 N. Y. 447, 457.)
The order appealed from should be affirmed, with costs.