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Jones v. Wallace

Oregon Supreme Court
628 P.2d 388 (1981)


While Wallace (defendant) was the sole shareholder of Capital Credit & Collection Service, Inc. (Capital), the directors adopted a bylaw requiring the presence of 100 percent of the voting shareholders at any shareholders’ meeting to constitute a quorum. Four years later, Jones and Gaarde (plaintiffs) became minority shareholders and directors. The plaintiffs allege that a majority of the board voted to remove Wallace and elect Jones president. At a subsequent board meeting without Gaarde or his proxy representative present, Wallace voted to oust and replace Jones and Gaarde. The plaintiffs filed suit in circuit court seeking a judgment declaring them Capital’s rightful directors. Summary judgment was granted in favor of the defendants on the ground that enough shareholders were present to constitute a quorum under the Oregon Business Corporation Act (Act), which cannot be modified by a bylaw. The Court of Appeals reversed, concluding that the bylaw was enforceable under a contract theory. The defendants appealed to the Oregon Supreme Court.

Rule of Law


Holding and Reasoning (Linde, J.)

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