Clark v. Dodge - Lecture notes 5 PDF

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Clark v Dodge Case Brief and Notes for Business Organizations I...

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CLARK v. DODGE 269 N.Y. 410, 199 N.E. 641 (1936) FACTS: Parties: Plaintiff: Clark Defendant: Dodge Procedural History:  Relevant Facts: 

Two corporate Δ are NJ corporations

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Δ main office, factory and assets are located in NY

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Clark owned 25% and Dodge owned 75% in each corporation

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Dodge took no active part in the business

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Dodge was a director and through his ownership of stock controlled other directors in both corporations

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Dodge was the president of Bell & Co and general manager of Hollings-Smith

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Clark was director, treasurer and general manager of Bell & Co and also had charge of major portion of the business of Hollings-Smith

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Clark was the only one who knew the formulas for the medicine

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Dodge and Clark entered into a written agreement which stated that they should continue in the efficient management and control of the business so long as he should remain faithful, efficient and competent to so manage and control said business also that Clark should not be the only one to know the formula

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Dodge did not vote his stock to keep Π as director and general manager and prevented Clark from receiving is part of the income

ISSUE: 

Whether the contract is illegal as against public policy within the decision in McQuade v. Stoneham

PARTIES’ ARGUMENTS: Appellant:

 Appellee:  DISPOSITION OF THE COURT:  RULE OF LAW: 

The business of a corporation shall be managed by its board of directors

HOLDING: 

The contract is not illegal

COURT’S REASONING:   

If the enforcement of a contract damages nobody, not even the public then there is no reason for it to be illegal Where directors are the sole stockholders there seems to be no objection to enforcing an agreement among them to vote for certain people as officers The contract to vote Clark as director was legal, to keep Clark as general manager as long as he was effective harms no one...