Conroy v. Southern Maryland Agricultural Ass'n

Oeeutt, J\, delivered the opinion of the Court. ' On October 19th, 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, J ames 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 12th, 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 12th, 1931, or at its annual stockholders’ meeting held on May 6th, 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 ⁴⁹⁷ of James E. O’Hara, since deceased, of whom Sarah E. O’Hara and J ames E. O’Hara, J r., are the present owners of that stock, were illegally permitted to vote it at the stockholders’ meetings of January 12th and May 6th, 193'i ; that at the meeting of January 12th the "by-laws of the association were amended, and at the meeting of May 6th, 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 ten dollars 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 one hundred per cent, and a cash dividend of five dollars 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 19th, 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 E. 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 corpora ⁴⁹⁸ tion, and because of that control tbe corporation had failed to take any steps to collect the unpaid purchase price. Upon these facts they asked the following relief: “(1) That the defendants, Tillie Bryan (Matilda A. Bryan), Sarah E. O’Hara and James E. 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 E. O’Hara, Ji\, 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 7th, 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 15th, 1932, and the answer of Sarah E. O’Hara and James F. O’Hara, Jr., filed on March 29th, 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. ⁴⁹⁹ On August 8th, 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 28th, 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 forty-six shares of the two hundred 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, hut that, in violation of such right, only five hundred and ninety-eight 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 17 th 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 hlagruder, 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; J ames B. Berry, 3 shares. “Your petitioner believes that the said James F. O’Hara and John Farrell, Jr., actually owned the shares so as ⁵⁰⁰ 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 susberibed 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 17th, 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 31st, 1920, in presenting and attempting to accept and effectuate the offer of said James F. O’Hara and G. D. Bryan, to take said 11,800 shares of stock at $10.00 per share, as herein-above set forth; and also its action in declaring said stock dividend of. 100% in the manner, and with the intention, upon the basis and with the effect, hereinabove particularly set forth, and also its action in declaring said cash dividend of $5.00 per share in the manner and with the intention and upon the basis and with the effect hereinabove particularly set forth, be, all and singular, declared illegal, null and void”; (3) that “all issues of said 11,800 shares of sto'ck” to the said G. D. Bryan, and all issues of “said shares of stock” which he “attempted to give or transfer” to the defendant Tillie Bryan “be declared illegal, null and void”; (4) that all issues of said increase of “11,800 shares of stock” to James F. O’Hara, and all issues of said stock which the said O’Hara “attempted” to give or transfer to Sarah E. O’Hara and James F. O’Hara, Jr., be declared void; (5) and (6) that Mrs. Bryan and the O’Haras, respectively, be required to account for all dividends received by them upon said stock; (7) that the shares of stock issued to the individ ⁵⁰¹ ual defendants named as directors of the association be declared null and void; (8) that petitioner be allowed his “legal right” to subscribe to 46/200 of the issue of 11,800 shares of the new stock. The petitioner then “in the alternative” prayed: (9) “That the defendants Tillie Bryan, Sarah E. O’Hara, and James E. O’Hara, Jr., may be required by decree of this court to* make payment for said 11,800 shares of said stock at the rate of $10 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”; (10) that Mrs. Bryan and the O’Haras be enjoined from voting said stock or acting as the tona fide holders thereof, and enjoining the association from transferring said stock or permitting the same to be voted at any stockholders’ meeting; (11) that, in the event that payment, be made for the stock with interest, the expenses of the petitioner be paid; and (12) for general relief. Upon that petition a sh,ow cause order was passed, and on November 15th, 1932, the association and its directors, Mrs. Bryan and the O’Haras, by way of cause, severally filed petitions identical in form, in which they suggested that Conroy’s petition be dismissed and stricken from the files, and the order thereon be rescinded, on the grounds (1) that Oonroy had been guilty of “unreasonable delay and laches in filing his petition, and (2) that the petition makes allegations entirely foreign to the subject-matter of the original bill and inconsistent with the allegations of the original bill and asks relief entirely different from that asked in the original bill and is not germane to the subject-matter of the original bill, and if treated as a part of the original bill would make the same multifarious.” Upon these several petitions the court on April 1st, 1933, passed this order: “That the motions of Matilda A. Bryan and others to rescind the order of October 28, 1932, which latter order was passed on the petition of Peter E. Conroy filed on or about that date are hereby sustained and granted, and the petition of Peter F. Conroy filed on or about October ⁵⁰² 28, 1932, is hereby dismissed and the order of October 28, 1932, passed on said petition is hereby rescinded, all without prejudice to' the right of Peter F. Conroy to file such independent proceedings separate and apart from the present cause as he may deem proper. And with leave to him to move within thirty days to rescind the order of Aug. 8, 1932, making him a party to this cause so that if advised he may file such independent proceeding.” From that order Conroy .appealed.

The effect of the order was not, necessarily, to dismiss Conroy as a party to the suit, although it reserved to him the privilege of moving for a rescission of the order making him •a party, if he deemed such action appropriate to his seeking relief in an independent action. Yor did it prevent him from litigating in this proceeding any issue made by the pleadings as he found them when he was made a party. If his petition introduced no issues in the case other than those already made when he became a party, he was not injured by its dismissal, for in that case it was no more than a restatement of existing issues. If, on the other hand, his petition did raise additional issues different from those made by the pleadings as he found them when he came into the case, then in dismissing it the court acted within the proper limits of a sound discretion. 47 C. J. 103, 116.

There may be cases in which an intervener may be entitled ••as a matter of right to assert in a proceeding in which he has been allowed to intervene claims adverse to those of any or all of the original parties, even though the exercise of the right involves the introduction of additional issues, where that is necessary to protect his interests which will be concluded by the ultimate decision, and where such issues are consistent with and incidental to the objects and purposes of the suit ibidem, but this is not such a case. While the authorities are not in accord as to the right of one interested in the subject-matter of an equity proceeding to intervene therein, the rule in this state, and one generally recognized elsewhere, is that the right to so intervene is not, unless the proceeding is in rem and the ultimate decree will ⁵⁰³ finally determine some interest, claim, or property right of the petitioner, absolute, but rests in the sound discretion of the court. Stirn v. Radio-Keith-Orpheum Corp., 163 Md. 398 , 163 A. 696, 697 ; Miller’s Equity Proc., secs. 77-81; Credits Commutation Co. v. United States, 177 U. S. 315 , 20 S. Ct. 636 , 44 L. Ed. 782 (cited with approval in Stirn v. Badio-Keith-Orpheum Corp., supra); Alexander v. Md. Trust Company, 106 Md. 189 , 66 A. 836 ; 18 Rose’s Notes on U. S. Rep. 499-500; note, 123 Am. St. Rep. 280 .

And in the note in the report last cited the annotator points ont that intervention has no historical support, but rests upon statute, that it was borrowed from the civil law, and, while employed to some extent in the English ecclesiastical courts, it was unknown