## Facts

- Charlestown Boot & Shoe Company operated as a New Hampshire dividend-paying manufacturing corporation beginning in 1871.
- Dunsmore (from 1871) and Willard (from 1873) served continuously as directors through successive elections.
- In December 1874, shareholders voted to appoint a committee, including a non-director (Osgood), to work with the directors to close the corporation’s affairs; Osgood offered to serve.
- The directors allegedly refused to allow Osgood to act with them in managing and winding up the business.
- The directors allegedly continued operations and mishandled corporate affairs, causing corporate losses.
- The directors allegedly did not procure fire insurance for corporate property.
- In 1878, corporate buildings and machinery were destroyed by fire, and the corporation sustained losses because the property was uninsured.
- Shareholders brought suit in the corporation’s name against the directors, alleging negligent refusal to work with Osgood and negligent failure to insure.

## Issues

1. Whether shareholders of a dividend-paying corporation may, by vote, require directors to act jointly with a non-director in managing or winding up the corporation’s business.
2. Whether directors have a legal duty, solely by virtue of office, to keep corporate property insured such that failure to insure states a negligence claim without additional facts establishing a duty to insure.

## Decision

- The court sustained the directors’ demurrer for failure to state a cause of action.
- The shareholder vote purporting to require the directors to act with Osgood was beyond corporate authority and void; directors were not liable for refusing to comply.
- As a categorical rule, directors do not have an automatic legal duty to insure corporate property; the pleading was deficient because it did not allege facts showing a specific duty to insure.

## Legal Principles

- In a dividend-paying corporation governed by statute vesting management in the board, shareholders may set broad corporate policy, but management remains with directors and authorized officers or agents.
- A corporation cannot compel directors to share managerial authority with, or be controlled by, a person who is not a director, absent lawful authorization.
- Directors owe a duty of ordinary care and diligence and may be liable for ordinary negligence, but liability depends on the existence of a legally recognized duty.
- Failure to insure corporate property is not, by itself, actionable negligence; a plaintiff must allege a source of duty (e.g., statute, charter, by-law, or other recognized obligation) requiring insurance.

## Conclusion

The court held that shareholders could not restructure corporate management by forcing directors to act with a non-director, and that a negligence claim based on uninsured fire loss fails absent allegations establishing a specific legal duty to insure.


Charlestown Boot & Shoe Co. v. Dunsmore, 60 N.H. 85 (N.H. 1880)