Jones v. Wallace

While Wallace (defendant) was Capital Credit & Collection Service's sole shareholder, its directors adopted a bylaw requiring 100 percent shareholder attendance to constitute a quorum at any shareholders' meeting. Years later, Jones and Gaarde (plaintiffs) became minority shareholders and directors, and after the board voted to remove Wallace and install Jones as president, Wallace held a later meeting — without Gaarde or his proxy present — at which he voted to oust Jones and Gaarde and reinstall himself. The plaintiffs sued to be declared Capital's rightful directors; the trial court granted summary judgment for Wallace, reasoning the Oregon Business Corporation Act's default majority-quorum rule (which a bylaw cannot override) meant enough shareholders were present at Wallace's meeting to form a quorum. The Court of Appeals reversed, holding the 100-percent bylaw was still enforceable as a private contract among shareholders, and the case reached the Oregon Supreme Court.