Court Opinion

ID: 5733571
Source: CourtListenerOpinion
Date Created: 2022-01-12 16:29:34.028701+00
Date Added: 2024-06-11T08:40:55.350202
License: Public Domain

Eager, J. (dissenting).
I would affirm on the opinion of Mr. Justice Hecht at Special Term. The provision of the by-laws that a “ majority of the directors shall constitute a quorum ”, is, of course, to be construed with due regard to the context, as a whole, of the section in which it is used. Immediately following, as it does, the opening sentence of the section providing for a board of directors of four, such provision for a majority to constitute a quorum clearly bespeaks a majority of a board of four. Furthermore, the Appellate Division in the Fourth Department has recently held that ‘ ‘ It is well established that a majority means a majority of the whole number of directors and a quorum remains the same even though there may be vacancies ” (Cirrincione v. Polizzi, 14 A D 2d 281, 283).
Here, on sound principles, the doctrine of estoppel, “ which is essentially equitable in its nature, and is founded on good conscience and fair dealing ” (Angerosa v. White Co., 248 App. Div. 425, 433, affd. 275 N. Y. 524) should not be applied against the petitioners. It is obvious that the assembling of a quorum of the directors for the purpose of the filling of the vacancy in the board would tend to perpetuate in the Kelly family the control of this corporation. The vacancy would be filled by a Kelly nominee. Thereupon, the Kelly family with their 50% stock holdings could deadlock the vote at future stockholders ’ meetings and effectively block an election of new or other directors by stockholders. Thus, their controlled board would continue in office. All this would tend to relegate the petitioners to the status of mere minority stockholders and defeat their rights as holders of 50% of the stock. This would give the Kelly family an undue *223and unconscionable advantage and thus, clearly, estoppel as a doctrine applicable for the promotion of justice, should not be applied here. (Angerosa v. White Co., supra; Lawrence v. American Nat. Bank, 54 N. Y. 432, 436; Troy Union R. R. Co. v. City of Troy, 132 Misc. 534, 546, affd. 227 App. Div. 351, affd. 253 N. Y. 597.) In any event, as pointed out by Mr. Justice Hecht, the copetitioner Gearing, a substantial stockholder, is not estopped from insisting upon compliance with the quorum requirements of the by-laws.
If, in fact, there is here an irresolvable deadlock in control of this corporation, there are remedies available, and, as stated by Mr. Justice Hecht (p. 676), the mere existence of a deadlock “ is insufficient basis for disregarding the by-law provisions.”
Rabin, J. P., McNally and Stevens, JJ., concur with Steuer, J.; Eager, J., dissents and votes to affirm in opinion.
Order entered on May 10, 1961 so far as appealed from reversed, on the law and on the facts, with $20 costs and disbursements to the appellants, and the petition dismissed.