Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

MATTER RYE PSYCHIATRIC HOSPITAL CENTER v. JACK C. SCHOENHOLTZ ET AL. (11/19/85)

COURT OF APPEALS OF NEW YORK 1985.NY.52156 <http://www.versuslaw.com>; 488 N.E.2d 63; 66 N.Y.2d 333 decided: November 19, 1985. IN THE MATTER OF RYE PSYCHIATRIC HOSPITAL CENTER, INC. DAVID E. DONIGER ET AL., RESPONDENTS,v.JACK C. SCHOENHOLTZ ET AL., APPELLANTS Appeal, by permission of the Court of Appeals, from an order of the Appellate Division of the Supreme Court in the Second Judicial Department, entered May 7, 1984, which, inter alia, modified, on the law, and, as so modified, affirmed an order of the Supreme Court at Special Term (Lucille Polk Buell,, J.), entered in Westchester County, granting a motion by respondents for reargument, and upon reargument, adhering to the original decision (1) granting the petition, (2) declaring that a special meeting of the shareholders of respondent Rye Psychiatric Hospital Center, Inc., held on November 12, 1982 is null and void, and (3) declaring that the election of the three individual respondents as directors of the corporation at that meeting is null and void and that the subsequent action of the board of directors (electing the individual respondents as the corporate officers) under the authority of that election is unauthorized and invalid. The modification consisted of deleting the decretal paragraph of the original decision which declared that the special meeting is null and void, and replacing it with a provision denying so much of petitioners' application as sought to set aside the election of the three individual respondents as directors of the corporation. Counsel Michael J. Trainor for appellants. Julius W. Cohn for respondents. Jasen, J. Chief Judge Wachtler and Judges Meyer, Kaye, Alexander and Titone concur; Judge Simons taking no part. Author: Jasen


Appeal, by permission of the Court of Appeals, from an order of the Appellate Division of the Supreme Court in the Second Judicial Department, entered May 7, 1984, which, inter alia, modified, on the law, and, as so modified, affirmed an order of the Supreme Court at Special Term (Lucille Polk Buell,, J.), entered in Westchester County, granting a motion by respondents for reargument, and upon reargument, adhering to the original decision (1) granting the petition, (2) declaring that a special meeting of the shareholders of respondent Rye Psychiatric Hospital Center, Inc., held on November 12, 1982 is null and void, and (3) declaring that the election of the three individual respondents as directors of the corporation at that meeting is null and void and that the subsequent action of the board of directors (electing the individual respondents as the corporate officers) under the authority of that election is unauthorized and invalid. The modification consisted of deleting the decretal paragraph of the original decision which declared that the special meeting is null and void, and replacing it with a provision denying so much of petitioners' application as sought to set aside the election of the three individual respondents as directors of the corporation.

Jasen, J. Chief Judge Wachtler and Judges Meyer, Kaye, Alexander and Titone concur; Judge Simons taking no part.

Author: Jasen

 Opinion OF THE COURT

The issue of first impression presented on this appeal is whether the Business Corporation Law permits the number of directors constituting a corporate board to be determined by custom, usage and acquiescence, where there is no governing provision in the bylaws. We hold that it does not.

Respondent Rye Psychiatric Hospital Center (Rye Center) is a private psychiatric hospital incorporated in October 1973. At the time of incorporation, Rye Center had five equal shareholders who adopted corporate bylaws but failed to specify the size of the board of directors. In 1977, a sixth individual purchased an equal share in Rye Center. Although the bylaws remained silent on the number of directors, the parties conducted business as though the six of them, as the corporate shareholders, also constituted the board of directors.

In August 1982, petitioners, three of the shareholders, commenced an article 78 proceeding challenging the status of the sixth shareholder as a member of the board. The proceeding was eventually dismissed but, during its pendency, respondents, the remaining three shareholders, decided that the composition of the corporate board, for which there had concededly been no election at least since 1977, ought to be settled by a special meeting of the shareholders. One of the respondents formally demanded the special meeting and another, in his capacity as secretary of Rye Center, notified each of the shareholders in writing that such would be held on November 12, 1982, "for the purpose of electing directors". Petitioners initially sought to obtain a temporary restraining order but, ultimately, chose instead simply to boycott the special meeting.

On the scheduled date, the special meeting proceeded in the petitioners' absence. The respondents, all of whom were present, elected themselves as the three directors of Rye Center. Immediately thereafter, the respondents held a meeting of the board of directors and elected themselves to all the corporate offices.

Subsequent to being notified of the results of the meetings held on November 12, 1982, petitioners commenced this proceeding pursuant to Business Corporation Law ยง 619, seeking to nullify the respondents' election of themselves as directors and then as officers of Rye Center. Special Term granted the petition and declared the election of directors to be null and void and the subsequent actions of the board of directors under the authority of that election to be unauthorized and invalid. The court held, inter alia, that the three shareholders present at the meeting in question failed to elect a full complement of six directors, that they had no authority to reduce that number and, therefore, that they failed to fulfill the sole purpose for which the special meeting had been called. On reargument, Special Term adhered to its original decision.

On appeal, the Appellate Division modified Special Term's order by declaring the election of three directors to be valid but affirmed insofar as that order set aside respondents' election of themselves as the corporate officers. The court held, inter alia, that proper notice of the special meeting had been given to all parties and that the respondents did have the necessary quorum at the special meeting to elect themselves as directors. The court also ruled, however, that the size of the board of directors had been established as six by the parties' prior course of dealings, that the three individual respondents did not constitute the quorum necessary to reduce that number at the meeting and, therefore, that the three petitioners remain on the board, together with respondents, as three ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.