Downing Development Corp. v. Brazelton, 207

• Decision Date: 06 May 1969
• Docket Number: No. 207,207
• Citation: 253 Md. 390,252 A.2d 849
• Parties: DOWNING DEVELOPMENT CORPORATION v. Terrill BRAZELTON et al.
• Court: Maryland Court of Appeals

Page 390

253 Md. 390

252 A.2d 849

DOWNING DEVELOPMENT CORPORATION v. Terrill BRAZELTON et al.

No. 207.

Court of Appeals of Maryland.

May 6, 1969.

John Hanson Briscoe and James A. Kenney, III, Leonardtown (Neal P. Myerberg, Lexington Park, and Briscoe & Kenney, Leonardtown, on the brief), for appellant.

Oliver R. Guyther, Leonardtown, for Wicomico Realty Development Corp., and another.

William O. E. Sterling, Leonardtown, for Terrill Brazelton and another.

Before HAMMOND, C. J., and MARBURY, BARNES, McWILLIAMS, FINAN and SINGLEY, JJ.

FINAN, Judge.

This case involves a declaration of the rights of parties under a contract of sale of 700 acres of valuable real estate in St. Mary's County owned by the Aviation Yacht and Country Club, Inc., a non-stock Maryland corporation.

On February 14, 1968, Downing Development Corporation (appellant) filed a petition in the Circuit Court for St. Mary's County seeking a declaratory judgment against Terrell Brazelton, (president of the Aviation Yacht and Country Club, Inc.), Aviation Yacht and Country Club, Inc., Wicomico Realty Development Corporation and B. Guerry Moore and Robert R. Rodenberg, agents for R.R.R. & G., Inc. (all appellees). The appellant prayed that a declaratory judgment be rendered, adjudicating the respective rights and duties of the parties under four separate contracts of sale which the Aviation Yacht and Country Club, Inc. (Club) had allegedly executed for the sale of all, or substantially all, of its corporate assets, and a further declaration that appellant's contract represented the only valid agreement of the four contracts in question.

It appears that on January 17, 1968, the Club entered into a so-called formal contract with the appellant under which terms the Club purported to sell to appellant all, or substantially all, of its assets, consisting of 700 acres of land suitable for real estate development, at and for the price of $2,140,000, payable by appellant as follows: $5,000.00 deposit at the time of execution of the contract; $100,000 in cash at the time of the conveyance of the property, of which the deposit was to be a part, and the balance of $2,040,000 as follows: (1) $800,000 secured by a first deed of trust due in three years at 7% (seven per cent) per annum, payable quarterly; (2) $740,000 represented by a note or notes secured by a deed of trust covering the property, due in ten years and bearing interest at 2% (two per cent) per annum, payable quarterly; and (3) $500,000 represented by a non-interest bearing unsecured note payable in ten years. The contract was signed by representatives of both parties on January 17, 1968.

Section 8 of the purported contract provided, in pertinent part, that such contract 'is made upon Buyer securing satisfactory financing of the purchase price.' It further provided that 'No later than January 23, 1968, (unless such time is extended by the Seller) the Buyer must give written notice to the seller that such condition has been satisfied and scheduled settlement for a date no later than thirty days following the date of notification. If such notice is not given within the time herein provided, this contract shall be null and void and the deposite given hereunder shall be refunded to the Buyer.'

The Club refused to honor the contract and advanced the following reasons for refusal to perform:

1. That the owners and management of the Club failed to fllow the statutory requirements set forth in sections 66 and 70 of Article 23, Code (1967 Repl.Vol.).

2. That appellant failed to comply with and perform certain terms and conditions specified in the contract with particular reference to its method of financing; and that appellant's attempt to comply with such conditions amounted to a counteroffer which was not agreeable to the Club or ever accepted by it.

On March 5, 1968, the hearing began in the Circuit Court for St. Mary's County and the following day at the close of the appellant's case, appellees made a motion to dismiss. On June 13, 1968, the court filed a written opinion accompanied by a decree determining the validity of the various contracts and granting the appellees' motion to dismiss.

The lower court in its opinion held that the appellant's contract with the Club, dated January 17, 1968, was invalid ab initio and consequently it was unnecessary to delve into additional areas of contention concerning whether appellant did or did not comply with and perform certain terms and conditions specified in the contract. The lower court further determined that the contract between the Club and R.R.R. & G., Inc. was a valid and subsisting contract binding between the parties. The appellant appeals from the lower court's declaration of the invalidity of its contract and the validity of the contract with R.R. & G., Inc.

We are presented with the following issues: (1) Was the appellant's contract of January 17, 1968, invalid ab initio for failing to comply with section 66 of Article 23, Code (1967 Repl.Vol.); and (2) Was the trial court in error in finding the contract with R.R.R. & G., Inc. to be a valid agreement based on the evidence in the record?

Before discussing the merits of the issues we should like to dispense with a preliminary matter raised by the appellant, that the lower court erred in dismissing the appellant's petition for declaratory relief without rendering a declaration of the rights of the parties. The appellant contends that such a dismissal should be equated with the sustaining of a demurrer and that this Court has repeatedly held that '* * * a demurrer should be used in declaratory actions only to challenge the legal availability or appropriateness of the remedy.' Hunt v. Montgomery County, 248 Md. 403, 409, 237 A.2d 35, 38 (1968); Kacur v. Employers Mutual Casualty Company, Md., 251 A.2d 870 (1969). However, we do not think this argument is valid in this case because, although the lower court concluded its written opinion by stating that '* * * the motion of the defendant to dismiss is hereby granted.', the written opinion delineated in some detail the rights of the parties under the contracts and the reasons for the holding of the court.

In addition, of even date with the filing of the written opinion a decree was entered by the court which is actually declaratory in nature. Accordingly, what the appellant is arguing about for all practical purposes constitutes a matter of form, rather than substance, and we find no merit in this contention.

I

The record reveals, and the lower court so found, that there was no controversy over the fact that the sale embraced substantially all of the assets of the Club which is a Maryland corporation; therefore, it at once becomes manifest that the provisions of Article 23, section 66 of the Code were applicable. Subsection 66(a) provides that '* * * every such sale, * * * of all or substantially all the property and assets of a corporation of this State shall be effected in accordance with the provisions of this section, * * *.' Subsection (b) requires the adoption of the resolution of the board of directors, (1) declaring that the sale is advisable 'upon the terms and conditions set forth in a proposed form of * * * articles of sale, * * *' and (2) directing that the proposed articles be submitted for the action of the stockholders, Subsection (c) deals with notice to the stockholders of the meeting and Subsection (d) states that 'The proposed articles shall be approved by the stockholders by the affirmative vote of two thirds of all the votes entitled to be cast thereon * * *.'

Section 70 sets forth in detail the procedures to be followed to accomplish the requirements set forth in section 66.

While the above mentioned procedures are set forth in Part I 'STOCK CORPORATIONS' of Article 23, it must be noted that Part II 'NONSTOCK CORPORATIOS' of Article 23, provides in subsection 132(a) that, 'Except as otherwise provided * * *, every corporation of this State without capital stock shall comply with all provisions of Part I, Stock Corporations, * * *.', and subsection 132(b) provides, 'Wherever the term stockholder, * * * (is) used in this article, they shall be deemed to include members, * * *.'

The testimony of appellee Brazelton revealed that the Club had 250 charter members, 38 life members and 100 golf associate members, the latter group being the only class without voting privileges. In Prince George's Country Club, Inc. v. Edward R. Carr, Inc., 235 Md. 591 202 A.2d 354 (1964) Judge Hammond, now Chief Judge, writing for the Court stated: '* * * The statutory requirements must be met if there is to be an effective sale of all or substantially all the assets of a Maryland stock corporation. Brune, Maryland Corporation Law and Practice (Rev.Ed.), Sec. 316.' Id. at 596, 202 A.2d at 356. Prince George's Country Club involved the validity of a contract covering the sale of 98% of the assets of a country club whose members were also stockholders and although the direct question at issue was a claim for a brokerage commission on the contract to sell the assets of the corporation, we think that the case is apposite to the one at bar. This is especially true when we consider that under subsection 132(a) of Article 23, a 'member' of a non-stock corporation is to be considered the same as a stockholder insofar as the requirements of sections 66 and 70 of Article 23 are concerned.

In the case of In re May Oil Burner Corporation, 38 F.Supp. 516 (D.Md.1941), the court dismissed proceedings brought by the corporation to obtain court approval of an arrangement with creditors under the Bankruptcy Act for want of consent of two-thirds of the stockholders, although the 'so-called arrangements' had been accepted by 63% of the stockholders, the court stating:

'* * * Under Maryland law, a sale and transfer of all of the assets of a corporation can only be made when two-thirds of the holders of the outstanding stock of the corporation...