Auer v. Dressel

New York Court of Appeals · 1954 · Corporations

306 N.Y. 427 (1954)

Updated August 22, 2026

Corporationsspecial stockholders meetingmandamusby-lawscorporate presidentmandatory dutyclass votingdirector removal for cause

Facts

Hoe's by-laws required the president to call a special meeting whenever requested in writing by stockholders owning a majority of the capital stock entitled to vote at that meeting. Petitioners, holders of record of slightly more than 55% of the class A stock, submitted written requests for a special class A meeting, but the president did not call it. In response to the article 78 petition, the president and corporation denied knowledge sufficient to form a belief as to whether the signers held the required shares, even though the signed requests had been before the president for at least ten days. The requested meeting was to consider resolutions endorsing former president Auer and demanding his reinstatement, proposing by-law and charter changes about filling vacancies in class A directorships, considering charges against four directors and possible removal and replacement, and amending the by-laws regarding a directors' quorum.

Issue

Whether the president of the corporation could be compelled by mandamus to call the requested special class A stockholders' meeting when the by-laws made that call mandatory upon written request by a majority of the voting class A stockholders. Also, whether the stated purposes for the meeting were sufficiently proper that the president could not refuse to call the meeting on that ground.

Rule

When corporate by-laws provide that the president shall call a special meeting upon written request of stockholders owning the requisite voting shares, the president has no discretion to refuse once such a demand is made. Perfunctory denials that do not genuinely dispute stock ownership raise no issue, and summary relief is proper. Stockholders who have the power to elect directors have the inherent power to remove them for cause, and may consider by-law changes concerning the filling of vacancies in the directors they elect, so long as nothing shown makes the proposed action unlawful on its face.

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Lakefront Tool Works, a New York corporation based in Buffalo, has bylaws stating: "The president shall call a special meeting whenever requested in writing by holders of a majority of the shares entitled to vote at that meeting." Holders of 52% of the corporation's Series B voting shares submit a signed written request for a Series B meeting to consider several resolutions, but president Nora Benton refuses because she believes the proposals are unwise for the company.

If the Series B stockholders seek mandamus to compel Nora to call the meeting, what is the strongest argument for granting relief?

Explanation. Where the bylaws provide that the president shall call a special meeting upon written request by the requisite voting stockholders, the duty is mandatory, not discretionary. The officer cannot refuse because she dislikes or questions the wisdom of the proposed action. That is the core rule applied by the majority.