Two appeals in one record from the Circuit Court for Anne Arundel County (SACHSE, J.).
The cause was argued before Henderson, Prescott, Horney and Sybert, JJ., and Keating, J., Associate Judge of the Second Judicial Circuit, specially assigned; and reargued before Brune, C.J., and Henderson, Hammond, Prescott, Horney, Marbury and Sybert, JJ.
HAMMOND, J., delivered the opinion of the Court.
The president and vice-president of the Prince George's Country Club, Inc., a Maryland corporation, having been authorized by the Board to do so, executed on behalf of the Club a purported contract for the sale to Community Builders, Inc., another Maryland corporation, of substantially all of its assets, including one hundred fifty-three acres of land, for a price of $1,300,000. The contract was signed also by the corporate real estate broker which procured the sale, Edw. R. Carr, Inc., the
appellee. Since the sale was of substantially all of the assets of a Maryland corporation the provisions of Code (1957), Art. 23, Secs. 65 and 66 (as to corporate "Consolidation, Merger and other Transfers of Property") were applicable and controlling. Sec. 65 provides that a Maryland corporation having capital stock (as the Club does) "may, in accordance with this subtitle * * * (3) [s]ell, lease, exchange or transfer all, or substantially all, its property and assets * * *." Sec. 66 a provides that every such sale "shall be effected in accordance with the provisions of this section." Subsection (b) requires adoption of a 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 of the meeting of stockholders, and subsection (d) states that "[t]he proposed articles shall be approved by the stockholders by the affirmative vote of two-thirds of all the votes entitled to be cast thereon." Subsection (i) provides that "a transfer of property and assets of a corporation of this State, shall be effective when the articles of * * * transfer have been accepted for record by the Commission." 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.
When the sale of the Club's assets was presented to the stockholders of the Club for approval, the proposal did not receive the affirmative vote of two-thirds of those entitled to vote thereon and, for this reason, the Club returned to the purchaser the $75,000 deposit that had been given to it direct. The broker which had procured the purchaser sued the Club, alleging that it had earned a commission when the contract was signed, and also sued the officers and directors and certain stockholders personally on the theory that they had tortiously interfered with or by misrepresentation induced the contract between the broker and the Club.
The defendants below demurred to all counts. The demurrer to the count against the Club for the commission was overruled, those to the other three counts seeking recovery against the
individuals were sustained. After the trial, at which it was stipulated that the broker had procured a purchaser who was ready, willing and able to perform, Judge Sachse found, contrary to the broker's contention, that the sale was of substantially all the assets of the Club, that the stockholders had not approved the sale as required by Sec. 66 (d) of Art. 23 of the Code, but that the contract was not illegal or void but "at most, ultra vires," and held that, relying on Sec. 124 of Art. 23 of the Code, the broker was entitled to "compensation for the loss or damage" sustained, which he set at the contract figure of $55,000.
The Club appealed from the judgment for the broker and the broker cross-appealed in an effort to reverse the sustaining of the Club's demurrers to the three counts seeking recovery against the officers and directors individually.
It appears from the record that the Club has one hundred stockholders, each owning one share of stock; that it owned and operated a country club with a golf course, tennis courts, swimming pool, clubhouse and restaurant. There were about six hundred members.
Sometime prior to November 1960, there began consideration of a sale of the Club's real property and a move to a new location. At a stockholders meeting on November 7, 1961, a committee presented two alternatives: (1) the present stockholders could put up more "permanent paid-in capital" or (2) "that the real estate be sold and those who wanted to have a country club in the county start over again at a new location." The committee felt that the better course would be for the present stockholders to take their capital gains from the sale of the land "and those who wanted to retire from the scene could do so, and those who wanted to support a program of finding new real estate and starting over again would be free to proceed in this manner."
At this point the president asked Mr. Lloyd Coates, vicepresident of Edw. R. Carr, Inc., the broker (who was not a member or stockholder of the Club but who had been invited to appear), to give advice to the stockholders. Mr. Coates said the value of the Club's land had "enhanced tremendously" in the last five years, that if he were a shareholder he would do
the following: (1) employ a land planner to work with the Park and Planning Commission and the County Commissioners "to find the highest and best use for the property" (an euphemism, obviously, for having it rezoned for the densest possible use) and what this would cost, (2) engage an appraiser, not a member of the Club, to value the property (a) at its current use and (b) at its highest and best use, and (3) employ "a bona fide tax consultant" and "an experienced builder." A stockholder then rose to express his views that the only thing to do was to sell the property so that those who did not wish to join in plans for a new club "could be paid off for their stock and leave."
The fifty-six stockholders present authorized a Committee on Relocation and Reorganization, which had just been created, to formulate a plan for the reorganization and relocation of the Club and to find an appropriate site and report to the January meeting of stockholders.
At the January meeting the Committee reported that the president had, in his name and with his personal funds, acquired an option on a site of four hundred fifty acres, of which three hundred twenty-two acres could be a site for a Club, at Route 301 and Central Avenue, and that the Board unanimously was in favor of the taking over of the option. The chairman of another committee, that of Disposition of Current Property, then suggested that in view of the prospective new site, steps be taken to interest a number of prospective purchasers for the present site, who would then be invited to make bids.
At this point, Mr. Coates was invited once more into the meeting. He revealed that he had an unnamed prospective buyer who would pay over $1,000,000 for the Club's land and assets, other than the golf course equipment, with a down payment of $50,000 "to be placed in escrow upon ratification of agreement."
The minutes of the meeting then say:
"Since there were many differences of opinion as to the value of the present property, it was impossible to make definite decision on offer at this meeting; therefore, matter of negotiation was turned over to Mr. Green's committee to be handled by them.
"For purposes of clarification, Dr. Brainin asked
that it be pointed out that, in moving the Club to a new location, the present corporation would be completely liquidated, all obligations paid, and a new corporate structure formed for purpose of purchasing the new property."
The president then suggested that those of the present stockholders who were "interested in investing in the acquisition of this 450 acres of land for the purpose of constructing a new country club on 322 acres and using the balance of the acreage for land speculation, pledge a cash amount for the next three years in order that it would be possible to proceed with the purchase."
The president continued: "It was necessary that the President have this information inasmuch as he had a group of five people available who would take this property as a syndicate, in the event the club owners were not interested."
Of the forty-five stockholders present, only twenty-six made pledges.
The meeting then authorized the Green Committee to make decisions and take such action as they deemed advisable for the acquisition of new property and the disposition of current property. (It is stipulated by the appellee that this did not constitute the requisite approval of the stockholders to the sale here in dispute under Code (1957), Art. 23, Secs. 65 and 66.)
The Committee and the Board, after some negotiation approved a sale and the Club, on March 31, 1961, over the signature of its president and vice-president, purported to sell to Community Builders, Inc., the real property described in the ...