Danielewicz v. Arnold

RAYMOND G. THIEME, Judge, Retired, Specially Assigned. Patricia Danielewicz appeals from the Circuit Court for Anne Arundel County’s decision granting appellee’s Motion for Summary Judgment. Appellant presents the following questions for our review, which we have rephrased for clarity: 1. Whether the trial court erred by determining that appellant lacked standing to sue both in her own capacity and derivatively for the corporation for claims against ⁶⁰⁹ an officer and director of a corporation for breach of fiduciary duty, negligence, civil conspiracy, and aiding and abetting. 2.

Whether the trial court erred by determining that corporate officers owe no fiduciary duties to an individual stockholder in the absence of actual fraud. 3. Whether the trial court erred by its interpretation of the rights and powers of a trustee under both the underlying trusts and Maryland law. 4. Whether the complaint had alleged specific facts sufficient to establish a dilution of the value of appellant’s stock interest in AFS. I. Arnold Factory Supply (AFS) was organized in 1965 by Mortimer and Helen Arnold.

At that time, 7,000 shares of common stock were issued, with 3,500 shares issued to Mortimer Arnold and 3,500 shares issued to Helen Arnold. Mortimer Arnold transferred 1,155 of his shares to their son, George Arnold, and Helen Arnold transferred 1,155 of her shares to their other son, Anthony Arnold. In 1969, Mortimer and Helen Arnold transferred 525 shares of AFS stock to Anthony. They also transferred 525 shares to George, as a life tenant, with a remainder, upon George’s death, to his daughter, appellant.

In accordance with Mortimer Arnold’s will, upon his death, his remaining 1,820 shares were transferred to a trust for the benefit of Helen Arnold during her lifetime. The will further provided that upon Helen Arnold’s death, 910 shares were to be transferred to Anthony outright and free of trust, and 910 shares were to be transferred to George to be held by him in trust for life, with the remainder to appellant. Helen Arnold’s will provided for 910 of her shares to be transferred to Anthony outright and free of trust, and 910 shares to George to be held by him in trust for life, with the remainder to appellant. Thus, in July of 1983, after both Mortimer and Helen Arnold had died, appellant held an interest in 2,345 of ⁶¹⁰ the outstanding shares of AFS (1,820 as a remainder in the trust for life held by George, pursuant to the wills of Mortimer and Helen Arnold, and a remainder in another 525 shares that were held by George as a life tenant). 1 In May of 1986, George and Anthony negotiated an agreement whereby AFS would redeem from Anthony his 3,500 shares of AFS stock for $200,000.

At the same time, they also negotiated for Anthony to sell to George 200 shares in another entity, Arnold Sales & Service, Inc. (AS & S) in exchange for $100,000. In August of 1987, the Board of Directors of AFS, which consisted of Andrew Danielewicz (appellant’s husband), George Arnold, and Diana Arnold, authorized the issuance of 1,750 shares to George in exchange for his 200 shares in AS & S, which he had bought from Anthony. George Arnold died in 1995, leaving 2,905 shares of AFS stock in a new trust of which appellee was the beneficiary. These shares represented a majority interest in AFS issued and outstanding stock at that time, as the corporation now owned 1,750 shares of the originally issued stock.

Diana Arnold and Terry Holinsky, as trustees, became the legal holders of the stock under the new trust created by George. Appellant’s interest in the shares that she owned became possessory at the time of George’s death. In 1996, appellee, as personal representative of George’s estate, filed a supplemental inventory, which disclosed George’s ownership in AFS. At this time, appellant became aware of the 1986 and 1987 transactions that had taken place regarding AFS stock.

Appellant filed a complaint in her individual capacity and derivatively on behalf of AFS against appellee, as an individual and as co-trustee of the Residuary Trust u/w/o George M. Arnold. Appellant claimed that appellee breached her fiduciary duty to appellant and to the corporation in participating in and consenting to the 1987 transaction. Appellant’s complaint ⁶¹¹ further alleged negligence, civil conspiracy, and aiding and abetting. Appellant’s Complaint cited the lack of any appraisal or valuation by the corporation to ascertain both the fair market value of Anthony’s 3,500 shares and his shares in AS & S. Appellant complained that, despite her interest in AFS, she was not provided with any notice or information concerning either of these transactions, nor was she provided with notice or information pertaining to the transaction in which George was given 1,750 shares of AFS stock in exchange for his 200 shares of AS & S stock.

Appellant claimed that “Diana and George Arnold either knew or had reason to know of [ajppellant’s interest in a majority of the shares of AFS at that time as the stock ledger reflected her interest.” Appellant asserted that Diana and George Arnold owed her and the corporation itself a fiduciary duty to disclose to her the 1987 transaction and to act honestly and in good faith. She also averred that the 1987 transaction was unfair to AFS because it overvalued the AS & S stock, resulting in overpayment for George’s shares of AS & S, and that this transaction divested her of majority ownership of AFS stock, albeit that interest was held by her as a beneficial and remainder interest. Appellee filed a Motion to Dismiss or, in the Alternative, Motion for Summary Judgment. Appellee contended in her Motion that appellant lacked standing to sue either individually or derivatively because she was not a stockholder at the time of the alleged wrong, she had acquired her stock from one of the alleged wrongdoers, and because any action belonged only to AFS.

Appellee further contended that appellant’s Complaint had failed to state a claim upon which relief could be granted because no duty of care was owed to appellant at the time of the alleged wrong. A hearing on appellee’s Motion was conducted on June 12, 2000, by the Circuit Court for Anne Arundel County. The court granted appellee’s Motion for Summary Judgment, holding that appellant lacked standing to bring her lawsuit both individually and derivatively, and that appellant had failed to ⁶¹² state a cause of action because she was owed no duty by appellee at the time of the alleged wrong. Subsequently, appellant filed this appeal.

II

Appellant contends that the court erred in granting appellee’s motion for summary judgment when material facts were in dispute. Pursuant to Md. Rule 2-501(e), “[t]he court shall enter judgment in favor of or against the moving party if the motion and response show that there is no genuine dispute as to any material fact and that the party in whose favor judgment is entered is entitled to judgment as a matter of law.” Md. Rule 2-501(e). See, e.g., Murphy v. Merzbacher, 346 Md. 525, 531 , 697 A.2d 861 (1997); Bowen v. Smith, 342 Md. 449, 454 , 677 A.2d 81 (1996); Rosenblatt v. Exxon Company, U.S.A., 335 Md. 58, 68 , 642 A.2d 180 (1994); McGraw v. Loyola Ford, Inc., 124 Md.App. 560, 572 , 723 A.2d 502 , cert. denied, 353 Md. 473 , 727 A.2d 382 (1999). A material fact is one that will alter the outcome of the case, depending upon the factfinder’s resolution of the dispute.

King v. Bankerd, 303 Md. 98, 111 , 492 A.2d 608 (1985). The Court of Appeals has stated that “the proper standard for reviewing the granting of a summary judgment motion should be whether the trial court was legally correct.” Goodwich v. Sinai Hosp. of Baltimore, Inc., 343 Md. 185, 208 , 680 A.2d 1067 (1996); Heat & Power Corp. v. Air Prods. & Chems., Inc., 320 Md. 584, 592 , 578 A.2d 1202 (1990). The purpose of the summary judgment procedure is not to try the case or to decide the factual disputes, but to decide whether there is an issue of fact that is sufficiently material to be tried. See Coffey v. Derby Steel Co., 291 Md. 241, 247 , 434 A.2d 564 (1981); Berkey v. Delia, 287 Md. 302, 304 , 413 A.2d 170 (1980).

When a court determines whether any factual issues exist, it must resolve all inferences against the moving party. Tennant v. Shoppers Food Warehouse Md. Corp., 115 Md.App. 381, 386 , 693 A.2d 370 (1997). The plaintiff, however, must submit some evidence in which the jury could reasonably ⁶¹³ find for the plaintiff in order to defeat the motion. Beatty v. Trailmaster Prod.

Inc., 330 Md. 726 , 625 A.2d 1005 (1993). In order for there to be disputed facts sufficient to render summary judgment inappropriate “there must be evidence on which the jury could reasonably find for the plaintiff.” Seaboard Sur. Co. v. Richard, F. Kline, Inc., 91 Md.App. 236, 244 , 603 A.2d 1357 (1992). This Court has held that “fcjonclusory denials or bald allegations will not defeat a motion for summary judgment.” Barber v. Eastern Karting Co., 108 Md.App. 659, 672 , 673 A.2d 744 (1996) (citing Seaboard, 91 Md.App. at 243 , 603 A.2d 1357 ).

Moreover, “a mere scintilla of evidence in support of the non-moving party’s claim is insufficient to avoid the grant of summary judgment.” Barber, 108 Md.App. at 672 , 673 A.2d 744 (citing Beatty, 330 Md. at 738 , 625 A.2d 1005 ). Having set forth the appropriate standard of review, we now turn to the legal issues raised in this appeal.

III

Appellant’s first contention concerns the trial judge’s determination that she lacked standing to bring forth her claim, both as an individual and through a derivative action. 2 The trial court found that appellant lacked standing in an individual capacity because her vested remainder did not provide her with a present possessory interest in the shares until George’s life estate expired upon his death. The trial court noted that appellant had “no standing individually as a stockholder to bring an action against Defendant for Defendant’s acts prior to Plaintiffs possession.” This principle, referred to as the contemporaneous ownership rule, provides that “a shareholder does not have standing to recover against directors for acts which took place prior to the shareholder becoming a shareholder.” Hecht v. Resolution Trust Corp., 333 Md. 324, 350 , 635 A.2d 394 (1994); Eisler v. Eastern States Corp., 182 Md. 329, 335 , 35 A.2d 118 (1943); Matthews v. Headley Chocolate Co., 130 Md. 523, 534 , 100 A. 645 (1917). ⁶¹⁴ “ ‘Stockholder’ means a person who holds shares of stock in a corporation and includes a member of a corporation organized without capital stock.” Md.Code (1975, 1999 RepLVol.), § 1-101 of the Corporations and Associations Article. Appellant argues that her vested remainder interest in the shares conveyed to George through the life estate, as well as a vested beneficial interest in the shares conveyed to George as trustee under the wills of her grandparents, sufficiently rendered her a “holder,” and provided her with standing. She asserts that “[a] vested remainder is a present interest in property which may be sold or conveyed” and adds that “a vested remainder is an interest in fee simple.” Although these assertions regarding the type of interests she possessed are correct, it does not necessarily follow that her vested remainder interests provided her with standing to sue the directors of AFS either individually or derivatively.

Appellant cites Willoughby v. Trevisonno, 202 Md. 442, 449-50 , 97 A.2d 307 (1953); and Dean v. Director of Finance of Montgomery County, 96 Md.App. 80, 89 , 623 A.2d 707 (1993) in support of her position regarding her standing to sue based on her vested remainder interests in AFS stock. We find that neither case stands for the proposition that one derives standing to sue, in a corporate setting such as the one presented here, based on a vested remainder interest. In Willoughby , the Court of Appeals found that where fraud or undue influence is alleged, it is an exception to the rule that those only who have a clear, legal, and equitable title to land, connected with possession, have any right to claim the interference of a court of equity to give them peace or dissipate a cloud on title. In the case at bar, however, no instance of fraud or undue influence is alleged.

Further, Willoughby is inapposite to the case at hand, as that case involved a declaratory action pertaining to a future interest in land, pursuant to a deed, while the present case deals specifically with corporate shares and a vested remainderman’s standing to sue corporate directors. Appellant cites Dean in support of her assertion that her vested remainder interests represented fee simple interests in ⁶¹⁵ the AFS shares. That type of analysis is irrelevant for our purposes here. We think it matters not whether her interest is in fee simple; the only issue relevant to our discussion on her standing is whether she had a present possessory interest so that she could be considered a “stockholder,” see supra.

In fact, we stated in Dean that “a remainder is a fee simple interest lacking only present possession.” Dean, 96 Md.App. at 88 , 623 A.2d 707 . (Emphasis added.) None of the cases appellant cites supports her assertion that she was a “stockholder” at the relevant time, and without present possession of the stock in AFS, we cannot find that appellant was a “holder” of stock. Although the corporation’s officers and directors may have known of appellant’s remainder interests in shares of AFS, this cannot be said to have conferred upon her stock “holder” status. As the trial court correctly concluded, appellant’s “vested remainder became a present possessory interest when George Arnold’s life estate expired, upon his death.

Until that point, Plaintiff did not have present possession of her remainder interest.” We find no law standing for appellant’s proposition that her vested remainder cloaked her with standing to sue. On the contrary, we are inclined to think that her vested remainder did not provide her with standing, as her vested remainder was not a present possessory interest in the shares. Appellant has failed to present circumstances whereby she can be said to be a “holder” in order to have standing to sue as an individual. In Ettridge v. TSI Group, Inc., 314 Md. 32 , 548 A.2d 813 (1988), our Court of Appeals noted that the principal considerations supporting the rule are these: 1) a stockholder bringing suit after acquiring his shares has sustained no injury because he received what he paid for; 2) to permit such an action would result in a windfall to the subsequent stockholder; and, 3) permitting such action would allow the stockholder to reap a profit from wrongs done to others, thus furthering such speculation.

Id. at 42 , 548 A.2d 813 (citation omitted). Although the first consideration quoted from Ettridge has limited applicability here because appellant did not buy her ⁶¹⁶ shares, instead receiving her shares gratuitously, we think that the reasoning set forth in Ettridge nonetheless generally applies to the present circumstances. Furthermore, even if it be said that appellant was a “stockholder” at the time of the alleged wrong, she nonetheless had no standing to sue in her individual capacity because the facts alleged by appellant raise a cause of action that may be pursued only by the corporation, or by a shareholder in the name of the corporation, and not by an individual shareholder in her individual capacity. Appellant suggests that she does have a cause of action as an individual, reasoning that “the dilution of her majority interest in AFS as a result of actions taken by Diana Arnold and George Arnold are damages sustained by her individually, and not to the corporation.” The Court of Appeals, in Waller v. Waller, 187 Md. 185 , 49 A.2d 449 (1946), enunciated the well-settled law on this issue: It is a general rule that an action at law to recover damages for an injury to a corporation can be brought only in the name of the corporation itself acting through its directors, and not by an individual stockholder though the injury may incidentally result in diminishing or destroying the value of the stock.

The reason for this rule is that the cause of action for injury to the property of a corporation or for impairment or destruction of its business is in the corporation, and such an injury, although it may diminish the value of the capital stock, is not primarily or necessarily a damage to the stockholder, and hence the stockholder’s derivative right can be asserted only through the corporation. The rule is advantageous not only because it avoids a multiplicity of suits by the various stockholders, but also because any damages so recovered will be available for the payment of debts of the corporation, and, if any surplus remains, for distribution to the stockholders in proportion to the number of shares held by each. Miller v. Preston, 174 Md. 302 , 199 A. 471 (1938); Wells v. Dane, 101 Me. 67 , 63 A. 324 (1905); Caldwell v. Eubanks, 326 Mo. 185 , 30 S.W.2d 976 , 72 A.L.R. 621, 625 (1930); Stinnett v. Paramount-Famous Lasky Corporation, Tex.Com.App., 37 S.W.2d 145 ⁶¹⁷ (1931); Cullum v. General Motors Acceptance Corporation, Tex.Civ.App., 115 S.W.2d 1196 (1938); Commonwealth of Massachusetts v. Davis, 140 Tex. 398 , 168 S.W.2d 216 (1943); Green v. Victor Talking Machine Co., 2 Cir., 24 F.2d 378 , 59 A.L.R. 1091 (1928), certiorari denied 278 U.S. 602 , 49 S.Ct. 9 , 73 L.Ed. 530 . Generally, therefore, a stockholder cannot maintain an action at law against an officer or director of the corporation to recover damages for fraud, embezzlement, or other breach of trust which depreciated the capital stock or rendered it valueless.

Where directors commit a breach of trust, they are liable to the corporation, not to its creditors or stockholders, and any damages recovered are assets of the corporation, and the equities of the creditors and stockholders are sought and obtained through the medium of the corporate entity. Pritchard v. Myers, 174 Md. 66, 77 , 197 A. 620 , 116 A.L.R. 775 ; Smith v. Hurd, 12 Metc. (Mass.) 371, 46 Am. Dec. 690 . * * * The rule is applicable even when the wrongful acts were done maliciously with intent to injure a particular stockholder.

It is immaterial whether the directors were animated merely by greed or by hostility toward a particular stockholder, for the wrongdoing affects all the stockholders alike. Seitz v. Michel, 148 Minn. 80 , 181 N.W. 102 , 12 A.L.R. 1060, 1068 . It is accordingly held that a stockholder cannot sue individually to recover damages for injuries to the corporation, notwithstanding that the directors may have entered into an unlawful conspiracy for the specific purpose of ruining the corporation. Niles v. New York Central & Hudson River R. Co., 176 N.Y. 119 , 68 N.E. 142 ; Parascandola v. National Surety Co., 249 N.Y. 335 , 164 N.E. 242 , 62 A.L.R. 551, 558 .

We specifically hold that where conspirators ruin a person financially by forcing into receivership a corporation in which he was a large stockholder, in order to eliminate him as an officer and to acquire control of the corporation, the wrongs are suffered by the injured person in his capacity as a stockholder, and the ⁶¹⁸ action to recover for resulting injuries should be brought by the receiver. Miller v. Preston, 174 Md. 302, 313 , 199 A. 471 . Waller, 187 Md. at 189-91 , 49 A.2d 449 . Appellant concedes that the general rule is as articulated in Waller , but points out additional language from Waller , which she suggests is applicable to the facts of the present case: Unquestionably a stockholder may bring suit in his own name to recover damages from an officer of a corporation for acts which are violations of a duty arising from contract or otherwise and owing directly from the officer to the injured stockholder, though such acts are also violations of duty owing to the corporation.

General Rubber Co. v. Benedict, 215 N.Y. 18 , 109 N.E. 96 , L.R.A.1915F, 617; Mairs v. Madden, 307 Mass. 378 , 30 N.E. 242 [ 30 N.E.2d 242 ], 245, 132 A.L.R. 256, 259 ; Ritchie v. McMullen, 6 Cir., 79 F. 522, 533 , certiorari denied, 168 U.S. 710 , 18 S.Ct. 945 , 42 L.Ed. 1212 ; Chase National Bank v. Sayles, 1 Cir., 30 F.2d 178 . Id. at 192 , 49 A.2d 449 . Appellant’s reliance on this principle, however, is entirely misplaced as it applies to the facts of the instant case. Appellant does not claim that there occurred “a violation of a duty arising from contract.” Rather, appellant claims, as “the injured stockholder,” that she was owed a duty “directly from the officer,” and names Diana Arnold and George Arnold as those officers owing her a direct duty.

We find no merit to this contention. The Waller Court, after setting forth this language indicating that there may be instances where “a stockholder may bring suit in his own name,” immediately went on to provide examples of situations in which courts have allowed for a stockholder to bring suit in his own name against officers of a corporation. For example, in Vierling v. Baxter, 293 Pa. 52 , 141 A. 728 , it was held that a stockholder could bring suit against the officers of the corporation for defrauding him of his patents, royalties, and other property, because the gravamen of his ⁶¹⁹ complaint was not the damage to the corporation or its stockholders in general but to himself personally. Likewise, in Cutting v. Bryan, 9 Cir., 30 F.2d 754 , where a corporate officer entered into a contract to convey to the corporation the title to certain property which had been taken in his own name, it was decided that individual stockholders could bring suit against him, because he held the property in trust for the benefit of the stockholders.

Again, in Blakeslee v. Sottile, 118 Misc. 513 , 194 N.Y.S. 752 , where the manager of an incorporated automobile sales agency, who held a considerable amount of the capital stock as a trustee, impaired the business by persuading the automobile manufacturer to transfer the agency’s contract to another company, it was held that the owner of the stock could bring suit against the manager for violating his fiduciary duty. Waller, 187 Md. at 193 , 49 A.2d 449 . In the present case, none of these circumstances set forth by the Waller Court applies in order to support appellant’s contention that she had standing to sue in her individual capacity as a “shareholder.” Appellant has not alleged the presence of fraud. Moreover, George was the trustee of appellant’s beneficial shares, but he was not named in appellant’s action.

Thus, assuming only for purposes of this particular contention that appellant was indeed a “stockholder,” we nonetheless disagree with appellant regarding whether circumstances existed that would have allowed her to sue in an individual capacity. See also Miller v. Preston, 174 Md. 302 , 199 A. 471 (1938). Appellant also avers that Diana Arnold and George Arnold breached their fiduciary duties of loyalty, disclosure, and good faith to Appellant when they participated in and consented to the August 1987 [transaction that diluted Appellant’s interest in AFS and achieved a shift in the controlling interest in AFS from Appellant to George Arnold (and ultimately to Diana Arnold following George’s death). We note, however, that this alleged breach of fiduciary duty does not set forth a basis for an exception to the ⁶²⁰ general rule articulated in Waller , which we have discussed, supra.

The appellant in Waller had been the majority shareholder in M. Waller Corp., and had brought suit against several officers and directors of the corporation to recover damages for destruction of the value of his stock. Appellant alleged that, pursuant to an arbitration award, he was entitled to a majority share of the corporation’s stock, but that “his brother conspired with the other defendants to obtain control of the corporation and did everything he could to ruin plaintiff financially and destroy the value of his stock.” Id. at 188 , 49 A.2d 449 . The corporation was eventually placed in the hands of receivers. The trial court had entered judgment in favor of the defendants in that case, and the Court of Appeals affirmed.

The Court remarked that appellant’s declaration does not allege the violation of any right personal to plaintiff, but only violation of rights common to all the stockholders. Hence, any wrongs committed by defendants were done to the corporation, affected all the stockholders of the corporation, and could be redressed only by an action brought by the corporation or its receivers.... Nor did there exist in this case any fiduciary duty other than that which the law imposes upon all officers and directors. It is generally stated that directors occupy a fiduciary relation to the corporation and all its stockholders, but they are not trustees for the individual stockholders, Booth v. Robinson, 55 Md. 419, 436 ; Acker, Merrall & Condit Co. v. McGaw, 106 Md. 536, 557 , 68 A. 17 ; Llewellyn v. Queen City Dairy, 187 Md. 49 , 48 A.2d 322, 327 .

The reason for this distinction is that in law the corporation has a separate existence as a distinct person, in which all the corporate property is vested and to which the directors are responsible for a strict and faithful discharge of their duty, but there is no legal privity or immediate connection between the directors and the individual stockholders. Waller, 187 Md. at 194 , 49 A.2d 449 . The Court’s decision in Waller is dispositive of the present case on the issue of appellant’s standing to sue in a capacity as an individual stockholder. In her Reply Brief submitted to ⁶²¹ this Court, appellant attempts to distinguish Waller from this case.

She states: In the instant case, unlike the situation in Waller , Diana and George Arnold owed a duty to Appellant, who sustained individual harm—the dilution of her interest in AFS resulting in a shift in the controlling interest in AFS from Appellant to Diana Arnold’s husband, George Arnold. Certainly the loss of a controlling interest in AFS can only be an injury to the Appellant. Appellant fails to recognize, however, that the facts of the present case are actually not distinguishable from those of Waller . Appellant in that case similarly complained of his loss of his controlling share of the corporation’s stock.

We obviously recognize Waller as being well-settled law, evidenced by adherence to it by numerous courts since its decree. Further, after a review of the facts of both Waller and the instant case, if we were asked to choose which appellant had alleged or suffered more direct, and even intentional, personal injury as a result of actions by officers of a corporation, we would likely find that appellant in the instant case suffered less personal and direct injury than did appellant in Waller—and in order to make this statement, we assume for a moment that appellant in this case did actually suffer compensable injury as a result of the actions for which she complains. We have been provided with no basis, nor can we find one, that would justify dealing with appellant’s claims in the present case any differently than the manner in which the Waller Court handled that appellant’s claims. We certainly have not been provided with grounds to cloak appellant in this case with more means of redress for individual harm suffered than was provided by the Court of Appeals in Waller .

Appellant’s argument pertaining to her individual standing to sue does not end here. Alternatively, appellant suggests that we apply the equitable rule that a party has standing to sue in such circumstances when the party’s shares devolved upon the party by operation of law after the alleged wrongdoing. In the present case, appellant’s stock interest in ⁶²² AFS devolved upon her through operation of law, as her interest arose under the wills of her grandparents, and became possessory upon the death of the life tenant, her father. This doctrine has its origin in the Supreme Court case of Hawes v. Oakland, 104 U.S. 450 , 26 L.Ed. 827 (1881).

We point out to appellant, however, that courts, beginning -with the Supreme Court in Hawes , have applied this rule to confer standing in this manner only in shareholder derivative actions, and not in actions where a shareholder is suing in an individual capacity. As such, the rule is inapplicable regarding appellant’s standing to sue individually, and we shall therefore consider this rule only as it pertains to appellant’s standing to sue derivatively. We therefore find that appellant lacked standing to sue in an individual capacity. It is elementary that no action to recover damages for any wrong can be maintained unless brought in the name of the proper party plaintiff.

The question whether a particular action at law should be brought by a corporation or by a stockholder therein is decided by determining which has the right of action. Waller, 187 Md. at 194 , 49 A.2d 449 . We turn now to consider whether appellant possessed standing in order to sue in a derivative capacity.

IV

As is the case with standing to sue individually, one must have been a shareholder at the time of the alleged -wrong in order to have standing to sue derivatively. Appellant’s assertion regarding the applicability of the rule set forth in Hawes , however, arguably applies in her derivative action. In Hawes , the Supreme Court held that, when a shareholder sues the corporation, he must state an allegation that complainant was a shareholder at the time of the transactions of which he complains, or that his shares have devolved on him since by operation of law, and that the suit is not a collusive one to confer on a court of the United States jurisdiction in a case of which it could other ⁶²³ wise have no cognizance, should be in the bill, which should be verified by affidavit. Id. at 461 (emphasis added).

Appellant’s shares in AFS devolved on her by operation of law, and thus it can be said, as it pertains only to her standing to sue derivatively, that it may be irrelevant in this regard whether she owned a present possessory interest in the shares at the time of the alleged wrong. 3 In her Reply Brief, appellant asserts that McQuillen v. Nat’l Cash Register Co., 22 F.Supp. 867 (D.Md.1938), is applicable in this case, and argues that McQuillen thus confers onto her standing to sue because the shares in question devolved on her by operation of law. We agree with the premise of this contention, but only to a point. 4 In McQuillen , the Federal District Court discussed whether the plaintiffs were “shareholders at the time of the grievances of which they complained.” Id. at 872 . The court, in determining whether the plaintiffs in that case had standing to sue, looked to Equity Rule 27, which has since been codified as Federal Rule 23.1, which states in pertinent part, that a plaintiff must allege that he was a “shareholder at the time of the transaction of which he complains, or that his share had devolved on him since by operation of law.” Id. at 871 . Pursuant to the Federal Rule, the court found that the plaintiffs in that case were not “stockholders” at the time of the particular transaction of which they complained.

Thus, the court stated that “it next becomes necessary to determine whether these shares ... may have devolved on them ‘by operation of law.’ ” Id. The court explained that “[t]he phrase ‘operation of law’ is used in [Equity Rule 27, now Federal Rule ⁶²⁴ 23.1] to indicate the manner in which a party acquires rights and sometimes liabilities without any act or cooperation of the party himself.” Id. The McQuillen court ultimately held, however, that “the shares did not so devolve upon the plaintiffs” in such a manner. Id.

That case was subsequently appealed to the United States Court of Appeals for the Fourth Circuit. 5 McQuillen v. Nat’l Cash Register Co., 112 F.2d 877 (4th Cir.1940). The U.S. Court of Appeals affirmed the judgments of the District Court, and applied Federal Rule 23.1 in its analysis. The Court stated: In stockholders’ bills, Equity Rule 27 (now Federal Rules of Civil Procedure, Rule 23) requires the plaintiff to allege, among other things, that he was a “shareholder at the time of the transaction of which he complains, or that his share had devolved on him since by operation of law”. Judge Coleman found, quite properly we think, that the shares in question were not a part of the trust estate when appellants became trustees, but that they were subsequently purchased by the appellants as trustees.

Accordingly he held, again we