McQuade v. Stoneham (1934)

McQuade v. Stoneham
263 N.Y. 323, 189 N.E. 234 (Court of Appeals of New York 1934)

Facts: Plaintiff McQuade purchased 70 shares in the New York Giants baseball club from Stoneham. As a part of the purchase transaction, McQuade entered into an agreement with Stoneham in which McQuade would be made treasurer of the corporation and given an annual salary. The agreement was to remain in force as long as McQuade owned his shares. Later, McQuade was forced out as an officer when Stoneham failed to back him in board election. McQuade filed suit and the lower court refused to order reinstatement. However, McQuade was awarded damages for wrongful discharge, with a right to sue for future damages.

Issue: Whether the court should order specific performance of the control agreement?

Holding: No. Reversed and complaint dismissed.

Analysis: The minority shareholder — for which McQuade claimed he was being punished for protecting — did not complain about his discharge. Any duty owed by Stoneham was to the corporation, not to McQuade. Authority requires the court to hold a contract illegal and void if it precludes a board of directors, at the risk of incurring legal liability, from changing officers, salaries or policies or retaining individuals in office, except by consent of the contracting parties.

Previous post:

Next post: