Bodnar v. Brinsfield

⁵²⁸ ADKINS, Judge. In happier days, before this case was filed in the Circuit Court for Cecil County (Rollins, J.), appellant Joan Gaven Bodnar and appellees Jay Royce Brinsfield, Robert Godfrey, and David F. McAleer were all involved in the operation of the Granary Restaurant and a marina in that county. The restaurant and marina were managed by The Granary, Inc. under a lease from Brinsfield. Brinsfield owned half the stock in The Granary, Inc.; the other half was owned by Voyageur Sail Center, Inc. Because of differences among the individuals, Brinsfield sued Bodnar, Godfrey and McAleer for declaratory and injunctive relief.

Bodnar in turn sued Brinsfield, Godfrey, and McAleer for “restaints and injunctive relief.” The cases were consolidated. In due course Judge Rollins dismissed Bodnar’s suit and issued a decree favorable to Brinsfield. That decree among other things voided the lease between The Granary, Inc. and Brinsfield and forfeited to Brinsfield Voyageur’s stock in The Granary, Inc. The effect of the decree was to make Brinsfield the sole owner of the stock of The Granary, Inc., and to give him control of the restaurant and marina. Bodnar’s chief complaint on appeal is that no declaratory decree should have issued because two parties necessary to the proceedings — The Granary, Inc. and Voyageur Sail Center, Inc. — were never joined as parties.

She also attacks what she claims is an illegal forfeiture of Voyageur’s stock in The Granary, Inc. and the dismissal of her suit against Brinsfield, Godfrey, and McAleer. We see no merit in her contentions and affirm Judge Rollins’s judgment. 1 ⁵²⁹ Facts Jay Brinsfield was at one time the sole stockholder in The Granary, Inc. and the owner of real estate improved by the Granary Restaurant and a marina. On March 3, 1983, The Granary, Inc. and Voyageur Sail Center, Inc. executed a stock subscription agreement by virtue of which 450 shares of the common stock of The Granary, Inc. were to be issued to Voyageur Sail Center, Inc. for a price of $252,000. Since Brinsfield then also owned 450 shares of The Granary, Inc., the effect of the agreement was to make Brinsfield and Voyageur equal owners of all the issued stock of The Granary, Inc. On the same date Brinsfield, The Granary, Inc., Voyageur, and Bodnar, Godfrey, and McAleer entered into a stockholders’ agreement with respect to the stock of The Granary, Inc. This agreement contained various provisions about the corporate structure and organization of The Granary, Inc.; it called for certain payments by the corporation to Brinsfield; and it required the corporation to provide Brinsfield with certain monthly reports.

It further provided that if the payments to Brinsfield were not made or if the monthly reports were not submitted, the stock in The Granary, Inc. held by Voyageur would be forfeited to The Granary, Inc. and cancelled “so that Brinsfield shall become the sole owner of outstanding shares in the corporation.” Apparently a lease from Brinsfield to The Granary, Inc. also was executed on March 3. Because of technical problems, it was superseded by a March 15 document under which Brinsfield as lessor leased the Granary Restaurant and marina to The Granary, Inc. It seems that all did not go well with the new venture. In August 1983, as we have recounted, Brinsfield sued Bodnar, Godfrey, and McAleer. He alleged violations of the stockholders’ agreement and disputes between the parties that ⁵³⁰ made it impossible to operate the restaurant and marina and The Granary, Inc. He asked that Bodnar, Godfrey, and McAleer be enjoined from entering the Granary and from interfering in any manner with the conduct of the business of The Granary, Inc., and that the court declare “who are the owners of The Granary, Inc. and Voyageur Sail Center, Inc., and the extent of the interest held by each owner; who was entitled to operate the Granary business; and further [to declare] the rights and responsibilities of the parties with regard to The Granary, Inc. and all property on the premises.” Neither The Granary, Inc. nor Voyageur was made a party to this suit nor was either a party to Bodnar’s subsequent suit for injunctive relief against Brinsfield, Godfrey, and McAleer.

In her suit, Bodnar also asked that Brinsfield’s stock in The Granary, Inc. be forfeited either to Voyageur or to her. And she raised issues about a potential sale of the business. Problems continued during the pendency of the suit. By the fall of 1983 The Granary, Inc. was having money difficulties.

It required an infusion of new capital. By agreement dated October 17, Bodnar agreed to invest $50,-000 in The Granary, Inc. by October 30. The consideration for this undertaking consisted of agreements by Godfrey, McAleer, Brinsfield, and Voyageur to permit Bodnar to run the restaurant and marina without interference from the others. If, however, Bodnar did not invest $50,000 by October 30, she, McAleer, Godfrey, and Voyageur agreed to vacate the restaurant and marina and to release their interests in The Granary, Inc. to Brinsfield upon payment of $500 to McAleer and $500 to Godfrey.

After hearing, Judge Rollins declared the lease between Brinsfield and The Granary, Inc. “null and void.” He found that Bodnar, Godfrey, and McAleer had failed to comply with pertinent portions of the stockholders’ agreement and that Bodnar had failed to provide the $50,000 in additional capital as required by the October 17 agreement. He forfeited Voyageur’s stock in The Granary, Inc. to Brinsfield and declared Brinsfield to be the sole stockholder of ⁵³¹ the latter corporation, conditioned upon his payment of $500 to Godfrey and $500 to McAleer. He enjoined Bodnar, Godfrey, and McAleer from “interfering in any manner with the operation of the business known as The Granary, Inc. or the Granary Restaurant and marina located in Georgetown, Maryland.” And he dismissed Bodnar’s suit for injunctive relief. Necessary Parties As we have observed, Brinsfield sought a declaratory judgment against Bodnar, Godfrey, and McAleer, as well as other relief.

The Maryland Uniform Declaratory Judgments Act requires that “a person who has or claims any interest which would be affected by the declaration shall be made a party.” Courts and Judicial Proceedings Art., § 3-405(a). Therefore, “all persons who have an interest in the declaration are necessary parties.” Bender v. Secretary, Department of Personnel, 290 Md. 345, 350 , 430 A.2d 66 (1981). That The Granary, Inc. and Voyageur Sail Center, Inc. were necessary parties to this suit cannot be doubted. As lessee of the Brinsfield lease, which the court held void, The Granary, Inc.’s interest is apparent.

As owner of 450 shares of The Granary, Inc.’s stock, which the court held forfeited, Voyageur’s interest is equally clear. The Granary, Inc. also had an interest of sorts in that issue. Moreover, Bodnar’s failure to object below to the lack of necessary parties does not prevent her from raising that objection on appeal. Under former Md.Rule 323 a.8., which was in force when this action was filed, “[wjant of necessary parties” was a basis for a motion raising preliminary objection but, like subject matter jurisdiction, the defense was not waived by failure to enter a preliminary objection.

It could be raised “at any time.” Md.Rule 323 b. The same is true under present Md.Rules 2-322 and 2-324. The presence of necessary parties “cannot be waived by the other parties to the proceedings,” Bender, supra, 290 Md. ⁵³² at 350, 430 A.2d 66 , and the absence of necessary parties may be raised for the first time on appeal. Kaliopulus v. Lumm, 155 Md. 30 , 141 A. 440 (1928).

Ordinarily, then, we would remand this case to permit joinder of The Granary, Inc. and Voyageur. Bender, supra, Kelley v. Davis, 233 Md. 494, 498 , 197 A.2d 230 (1964). There are, however, special circumstances presented in this record that persuade us not to follow that procedure. The primary purposes of the joinder requirement of § 3-405(a) are “to assure that a person’s rights are not adjudicated unless that person has had his ‘day in court’ ” and to prevent “multiplicity of litigation by assuring a determination of the entire controversy in a single proceeding.” Bender, 290 Md. at 351 , 430 A.2d 66 .

If these objectives are met — especially if the non-joined parties are bound by the decree — see Williams v. Moore, 215 Md. 181, 185-86 , 137 A.2d 193 (1957) — the formal non-joinder of necessary parties may not be fatal. There are occasions when those who are not parties to a suit may be bound by a judgment. “[Pjersons who are directly interested in a suit and have knowledge of its pendency and refuse or neglect to appear and avail themselves of their rights are concluded by the proceedings as effectually as if they were named in the record.” Williams v. Snebly, 92 Md. 9 , 48 A. 43 (1900). The Court of Appeals applied this rule in Snavely v. Berman, 143 Md. 75 , 121 A. 842 (1923). There, tenants had leased a store for the purpose of conducting a “ladies and gents” furnishing business.

The landlords covenanted not to lease to any other store “in the immediate vicinity” for the same type of business. Laken, another tenant in the same building, was limited by the terms of his lease to the operation of a merchant tailoring, cleaning, and repairing business, but began to sell men’s furnishings. The tenants successfully sued the landlords to enjoin the latter from continuing the rental of Laken’s store for that purpose. Laken was not ⁵³³ made a party to the suit, although he did testify in it.

The Court of Appeals opined: While Laken was not formally made a defendant in the suit, he knew of its pendency and of its relation to his interests, and could have become a party if he had so desired, and as a witness at the trial he stated his reasons ... for conducting a men’s furnishing store contrary to the terms of his lease. He is, therefore, bound by the decree [citations omitted]. 143 Md. at 77 , 121 A. 842 . More recently, in Reddick v. State, 213 Md. 18 , 130 A.2d 762 , cert. denied, 355 U.S. 832 , 78 S.Ct. 50 , 2 L.Ed.2d 44 (1957) the Court of Appeals considered a similar problem. Reddick was a declaratory judgment action in which the issue was which of two Boards of Medical Examiners was the “legal” representative of the Maryland State Homeopathic Medical Society for purposes of examining and licensing practitioners of that discipline.

All the members of Dr. Reddick’s allegedly illegal board were joined as defendants in the action brought by the State. None of the members of Dr. Chepko’s allegedly legal board were joined. In response to an objection to lack of necessary parties under what is now § 3-405(a) the Court of Appeals, assuming that the Dr. Chepko board members were necessary parties, reasoned: