McQuade v. Stoneham & McGraw, 263 NY 323, 189 N.E. 234 (1934) p.handout
Action by Francis X. McQuade against Charles A. Stoneham and another. The action is brought to compel specific performance of an agreement between the parties, entered into to secure the control of National Exhibition Company, also called the Baseball Club. This was one of Stoneham's enterprises which used the New York polo grounds for its home games. McGraw was manager of the Giants. McQuade was at the time the contract was entered into a city magistrate. He resigned December 8, 1930. Defendant Stoneham became the owner of 1,306 shares, or a majority of the stock of National Exhibition Company. Plaintiff and defendant McGraw each purchased 70 shares of his stock. Plaintiff paid Stoneham $50,338.10 for the stock he purchased.
Judgment for plaintiff for $42,827.38, and other relief (142 Misc. 842, 256 N. Y. S. 431) was unanimously affirmed by the Appellate Division (238 App. Div. 827, 262 N. Y. S. 966), and plaintiff appeals by permission.
Directors are exclusive executive representatives of corporation charged with administration of its internal affairs and management and use of assets.
Stockholders may not by agreement among themselves control directors in exercise of judgment vested in them by virtue of their office to elect officers and fix salaries. Contract precluding directors at risk of incurring legal liability, from changing officers, salaries, or policies, or retaining individuals in office except by consent of contracting parties was void. The illegality was not temporary and unexpected. It lasted for a period of years. Removal of the legal obstacle to the plaintiff's continuance in office came too late after his tenure of office was terminated. The judgment of the Appellate Division and that of the Trial Term should be reversed and the complaint dismissed, with costs in all courts. Even though we should assume that the contract was not illegal in purpose at its inception, it created a combination which resulted in a succession of illegal acts. The defendant cannot be held in damages for refusal to continue such a combination. The plaintiff can recover no compensation for loss of opportunity to perform services forbidden by law. The agreement here was trying to go over the power of the board of directors. It would have tied the hands of the board by the shareholders.
Created on: Friday, October 15, 1999 at 12:31:59 (PDT)