Manson v. Curtis

New York Court of Appeals · 1918 · Corporations

223 N.Y. 313 (1918)

Updated August 22, 2026

Corporationsboard of directorsshareholder agreementsvoting controlpublic policyillegal contractssterilized boardmanagement authority

Facts

The Bermuda-Atlantic Steamship Company operated a steamship between New York and Bermuda, and plaintiff had previously controlled and managed its successful business. Plaintiff and defendant each owned $55,000 in stock, Culver owned $40,000, and others owned the remainder; defendant sought plaintiff's consent to buy Culver's shares, which would give defendant majority control. In exchange for plaintiff's consent, defendant agreed that for one year plaintiff would continue as general manager and shape corporate policy without interference from a merely nominal president, that each side would name three directors and jointly choose a seventh disinterested director, that defendant would sell plaintiff twenty shares, and that defendant would lend the corporation needed repair funds. Plaintiff alleged defendant never intended to perform, used majority control to install others in management, refused to transfer the shares or create the voting arrangement for the seventh director, and the corporation later became bankrupt, rendering plaintiff's stock and debt claim valueless.

Issue

Was the November 1911 agreement enforceable, or was it illegal and void because it effectively withdrew management of the corporation from the board of directors and vested it in the plaintiff? If the agreement was illegal, could plaintiff recover damages for its breach or for defendant's alleged secret intent not to perform it?

Rule

Stockholders may validly combine their interests and voting powers to obtain control of a corporation, elect particular directors, and secure adoption of a specific business policy, so long as the agreement does not violate an express charter or statute and does not contemplate fraud, oppression, wrong to other stockholders, or another illegal object. But the affairs of a corporation must be managed by its board of directors, whose powers are original and statutory; therefore, stockholders cannot by agreement create a passive or sterilized board or divorce management of corporate affairs from the board and vest it exclusively in a shareholder or other person.

See the holding & full analysis

Create a free KwikCourt account to unlock the rest of this brief — and practice the case.

The court's holding and reasoning
Doctrine tests, pitfalls & exam hypotheticals
10 practice questions + 4 AI-graded essays on this case

Free sample · practice this case

Test yourself

One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Portland, Oregon, Nora Patel and Evan Brooks together own 58% of Cascadia Harbor Logistics, a fictional shipping company. They sign an agreement that they will vote their shares together to elect five named directors and to support expansion into Alaska, but the agreement says nothing about how the directors must act after election.

Is the agreement most likely enforceable?

Explanation. The majority opinion permits shareholders to unite their voting power to obtain control, elect particular directors, and secure adoption of a business policy, provided the agreement does not violate statute, charter, or contemplate fraud or other illegality. This hypothetical leaves management with the directors after election, so it does not create a passive or sterilized board.