Conroy v. Southern Maryland Agr. Ass'n

• Decision Date: 09 January 1934
• Docket Number: 55.
• Parties: CONROY v. SOUTHERN MARYLAND AGRICULTURAL ASS'N ET AL.
• Court: Maryland Court of Appeals

169 A. 802

165 Md. 494

CONROY v. SOUTHERN MARYLAND AGRICULTURAL ASS'N ET AL.

No. 55.

Court of Appeals of Maryland

January 9, 1934

Appeal from Circuit Court of Baltimore City; Charles F. Stein Judge.

Suit by Joseph A. Farrell and another against the Southern Maryland Agricultural Association, a body corporate, and others, in which Peter F. Conroy was permitted to intervene and made a party plaintiff. From an order dismissing intervener's petition and rescinding a former order, intervener appeals.

Appeal dismissed.

Argued before BOND, C.J., and URNER, ADKINS, OFFUTT, DIGGES, PARKE and SLOAN, JJ.

Isaac Lobe Straus, of Baltimore (Wm. Purnell Hall, of Baltimore, on the brief), for appellant.

Vernon Cook, of Baltimore, for appellee Matilda A. Bryan.

M Hampton Magruder, of Upper Marlboro, and William L. Rawls, of Baltimore, for appellees Southern Maryland Agricultural Ass'n and others.

OFFUTT Judge.

On October 19, 1931, Joseph A. Farrell and John Farrell, Jr., filed in the circuit court of Baltimore city, their bill of complaint against the Southern Maryland Agricultural Association, its officers and directors, in which they prayed the court: (1) To compel the defendants to call in and cancel certain shares of the capital stock of the association held by Matilda A. Bryan, James F. O'Hara, Sarah E. O'Hara, and James F. O'Hara, Jr.; (2) to compel the corporate defendant to cancel and declare invalid a meeting of its stockholders held on January 12, 1931, to amend its by-laws; (3a) to restrain the defendant directors from "any further activities" pending the suit; (3b) to restrain "all officers or employees" of the association, appointed or employed at the meeting of January 12, 1931, or at its annual stockholders' meeting held on May 6, 1931, or subsequently, from any corporate activity pending the suit.

The material facts alleged in the bill as a basis for that relief were that in 1920 the corporate defendant had increased its capital stock from $10,000 divided into 200 shares having a par value of $50, to $600,000, divided into 12,000 shares having a par value of $50, and had without the requisite authority illegally issued 5,800 shares of its new capital stock to James F. O'Hara and G. D. Bryan; that Matilda Bryan, widow of G. D. Bryan, and James F. O'Hara, Sarah E. O'Hara, and James F. O'Hara, Jr., son of James F. O'Hara, since deceased, of whom Sarah E. O'Hara and James F. O'Hara, Jr., are the present owners of that stock, were illegally permitted to vote it at the stockholders' meetings of January 12 and May 6, 1931; that at the meeting of January 12th the by-laws of the association were amended, and at the meeting of May 6, 1931, its directors were elected, and that those corporate actions were accomplished only because the holders of the 5,800 shares of stock were permitted to vote it at those meetings.

It was further alleged that, when the increase in the capital stock of the company was authorized, the stockholders of the association also, by resolution, approved the action of its board of directors in offering the new stock to persons who had paid for certain improvements, at $10 per share, and that, pursuant to the authority conferred by that resolution, 5,800 shares of stock were sold to O'Hara and Bryan, and that at the same time a stock dividend of 100 per cent. and a cash dividend of $5 per share were declared. The precise ground upon which the plaintiffs in that bill appear to have relied in support of their contention that the 5,800 shares of stock were illegally issued was that the purchasers did not pay the purchase price therefor before it was issued to them, and had not, in fact, ever paid for it. To that bill the defendants demurred on the ground that Mrs. Bryan and the O'Haras who owned the 5,800 shares of stock had not been joined as defendants. That demurrer was sustained, with leave to the plaintiffs to amend their bill, and they accordingly on January 19, 1932, filed their amended bill against the association, its directors, Matilda A. Bryan, Sarah E. O'Hara, and James F. O'Hara, Jr. In substance, the amended bill, after stating the circumstances under which the stock was issued to O'Hara and Bryan, alleged that Bryan had given his stock to Matilda A. Bryan, and that O'Hara had given his to Sarah E. O'Hara and James F. O'Hara, Jr., and that since said gifts both O'Hara and Bryan had died; that neither the original purchasers nor the present holders had ever paid for the stock, although through it they were enabled to control the corporation, and because of that control the corporation had failed to take any steps to collect the unpaid purchase price. Upon those facts they asked the following relief:

"(1) That the defendants, Tillie Bryan (Matilda A. Bryan), Sarah E. O'Hara and James F. O'Hara, Jr., may be required by decree of this Court to make payment for said 5,800 shares of said stock at the rate of $10.00 with interest from the date of issuance thereof, by a day to be fixed in said order, or the said stock may be thereupon cancelled and they be compelled to deliver the certificates therefor to said corporation for such cancellation.

(2) That the writ of injunction may issue from this Honorable Court restraining in the meantime the said Tillie Bryan (Matilda A. Bryan), Sarah E. O'Hara and James F. O'Hara, Jr., from voting said stock at any meetings of the stockholders thereof, or in any way acting as true and bona fide holders of the shares of said stock, and restraining the said Southern Maryland Agricultural Association, defendant, its officers and agents, from transferring said stock or from permitting the same to be voted at any stockholders' meeting of said corporation.

(3) That in the event payment of said stock with interest as aforesaid to the said corporation be made, all expenses of the complainants herein be paid and discharged by said defendant corporation."

The association and its directors on March 7, 1932, filed an answer to that bill in which, in substance, they set up two defenses: (1) That the plaintiffs were estopped to deny the legality of the transaction by which 5,800 shares of the capital stock of the association were sold to O'Hara and Bryan; and (2) that the stock was paid for by advances made to the association by O'Hara and Bryan before it was issued to them. The answer of Matilda A. Bryan filed March 15, 1932, and the answer of Sarah E. O'Hara and James F. O'Hara, Jr., filed on March 29, 1932, in addition to those defenses, set up limitations as a defense against any claim that the association might have, and laches as a defense against the plaintiffs' claim.

On August 8, 1932, after the case was at issue upon those pleadings, Peter F. Conroy, alleging that he was a stockholder of the association, filed a petition praying leave to intervene in the suit, and by an ex parte order passed on the same day was permitted to intervene and made a party plaintiff.

On October 28, 1932, he filed a petition in the case in which he alleged that the entire transaction through which 5,800 shares of stock were issued to O'Hara and Bryan was illegal and void, and further alleged that he (Conroy), at the time when the capital stock of the association was increased, held 46 shares of the 200 shares of its original capital stock, that being the total issue then authorized, and that by virtue of such ownership he had a preferential right to subscribe to 46/200 of the new stock, but that, in violation of such right, only 598 shares of the new stock were issued to him; and that the purchasers thereof had not paid for the 5,800 shares of stock issued to them. He further alleged:

"That following said incorporation of said defendant corporation, and continuing until and upon said 17th day of November, 1920, the remaining 154 shares of the 200 shares of capital stock then authorized and recorded as outstanding, were held by the following persons in the following amounts, namely: James F. O'Hara, 47 shares and John Farrell, Jr., 47 shares; and were recorded to be held as follows: W. Hampton Magruder, defendant herein, 3 shares; Dr. Nelson Ryan, 3 shares; Horace Crosier, 3 shares; George S. Dove, 3 shares; John F. Fisher, 3 shares; Francis F. Carmody, 3 shares; R. Lee Mullikin, 3 shares; W. Bladen Jackson, 3 shares; W. Booth Bowie, 3 shares; J. Charles Sheriff, 3 shares; C. A. M. Wells, 3 shares; Richard J. Swaron, 3 shares; J. Enos Ray, Jr., 3 shares; T. Howard Duckett, 3 shares; Jas. B. Belt, 3 shares; Theo. W. Magruder, 3 shares; Claude H. Owens, 3 shares; William G. Brooks, 3 shares; Robert L. Hall, 3 shares; James B. Berry, 3 shares.

Your petitioner believes that the said James F. O'Hara and John Farrell, Jr., actually owned the shares so as aforesaid held by them respectively, but alleges that the other persons last above named as recorded or alleged holders of shares of stock of said corporation were not the owners of the shares of stock issued to them, and have never, in any manner whatever subscribed or paid for, or owned, any of the stock of said corporation, the only owners of the stock of said corporation on said 17th of November, 1920, being your petitioner as aforesaid, James F. O'Hara and John Farrell. Jr."

Upon that petition he prayed: (1) That the "resolution and action" of the directors and stockholders of the association at the meeting of November 17, 1920, which authorized "said 11,800 shares of increased stock to be offered for sale" at $10 per share to the persons who had "financed the improvements and expenditures," be declared void; (2) "that the resolution and action of the executive committee of the said defendant corporation, at its meeting on December 31, 1920, in presenting and attempting to accept and effectuate the offer of said ...