Katz v. Pratt Street Realty Co.

SlNGLEY, J., delivered the opinion of the Court. The appellants, members of the Katz family (the Katzes) were the owners of 45.44% of the common stock of The Pratt Street Realty Company (The Pratt Street Company), which owned 604-618 Portland Street, Baltimore, and of 29.26% of the common stock of Joseph M. Zamoiski Company (The Zamoiski Company), which owned 212-228 South Greene Street and 601-615 West Pratt Street, Baltimore. The appellees, members of the Zamoiski family (the Zamoiskis), were the owners of 54.56% of the common stock of The Pratt Street Company and 42.28% of the common stock of The Zamoiski Company. There came a time when the Katzes and the Zamoiskis attempted, through their respective counsel, to enter into an agreement intended to facilitate the dissolution of The Pratt Street Company.

It is a dispute over the proper interpretation of the agreement which has given rise to this appeal. We set out the pertinent parts of the “Memorandum of Understanding” (the Memorandum) between counsel for the Katzes and counsel for the Zamoiskis: “This Memorandum of Understanding, bearing date of 11th May, 1967, is made between Weinberg and Green, Attorneys authorized to act in behalf of Calman J. Zamoiski, Jr., and other members of the Zamoiski Family, on the one hand, and Nathan Patz, Attorney authorized to act in behalf of Joseph J. Katz and other members of the Katz Family, on the other hand. “1. They will jointly submit the attached letter to Walter D. Pinkard, Realtor, requesting him to certify by written determination to said ¹⁰⁶ named Attorneys jointly, the present fair market value of (a) 604-618 Portland Street, Baltimore, owned by The Pratt Street Realty Company, and (b) 212-228 South Greene Street, Baltimore, owned by The Jos. M. Zamoiski Co., and (c) 601-615 West Pratt Street, Baltimore, owned by The Jos.

M. Zamoiski Co., and to further so determine, in writing, the reasonable and fair allocation of the total proceeds of sale of the combined (above) properties, as between the two owners, in the event that the property is sold in one transaction by combining said parcels — if a different division of such sales proceeds, other than the values to be determined by Mr. Pinkard in respect of (a), (b), and (c) above is more reasonable and fair to the respective owners. “3.a. It is agreed between the Zamoiski Family and the Katz Family that a sale to parties or interests other than themselves or those related to them, except as herein specifically otherwise provided with respect to the prior options to the Families,- may be made at a price equal to or in excess of the price so determined and certified by Mr. Pinkard. It is agreed that all stockholders of both corporate property owners will vote in favor of such a sale to any such third party who or which offers a price for parcel (a) or parcels (b) and (c) equal to or exceeding the prices determined by Mr. Pinkard. “b. It is further now agreed that within fifteen (15) days after the receipt by counsel, as above provided, of Mr. Pinkard’s certification of value, the Katz Family shall have an option to purchase the Portland Street property and/or the combined parcels (b) and (c) at the prices therefor so certified by Mr. Pinkard; and if such option be not exercised in writing within ¹⁰⁷ that period of time, then the Zamoiski Family shall next have for the following fifteen (15) day-period an option to purchase those properties at the same prices, and if such option be not exercised in writing within that period of time, no further options shall be in effect as regards the properties. “c.

In the event of any such exercise of any such option, settlement shall be made of the property or properties so involved in such option exercise within sixty days of the date of the exercise of such option, by payment of the certified price in cash, at the time fixed for settlement at which time a deed, with special warranty, further assurance and against encumbrances clauses shall be executed and delivered, on the form presently employed by the Daily Record Company for Baltimore City properties, with all transfer and documentary stamps being divided equally between the Seller and such Buyer, title to be good and merchantable and in the same condition as at present, free of liens and encumbrances, except the existing leases, and excepting for the existing and recorded easement in favor of the Portland Street property with respect to the sidetrack of the B & 0 Railroad, with rent, water rent, taxes and all other public charges, on an annual basis against the premises, to be apportioned as of date of settlement, as of which date possession shall be given subject to presently existing leases as aforesaid if the same shall still be in effect. “5. In the event of negotiations, condemnation or other action with respect to sale of the properties, to any third party including any government or governmental agency, it shall be recognized that Weinberg and Green as counsel for the corporate property owners shall afford to ¹⁰⁸ Nathan Patz every opportunity to represent effectively the interests of the Katz Family as substantial minority stockholders of both corporations. * * * “7. The Pratt Street Realty Company has filed with the Internal Revenue Service, following its adoption by that Company, of a plan of liquidation. The procedure provided by this Memorandum is intended to enable that Company to complete its liquidation within the period required by such plan.

It is agreed that, promptly after the execution of this Memorandum, The Pratt Street Realty Company shall distribute, by way of partial liquidation distribution, to its stockholders in the proportion of their respective stockholdings in said corporation, the gross collection received as a result of the fire loss in 1966 at the Portland Street location. It is further agreed that in the event of a sale of the Portland Street property, in accordance with the terms of this Memorandum, is not completed by August 31, 1967, either alone or in conjunction with the Greene Street property, then as another step in the liquidation proceedings of The Pratt Street Realty Company, the Portland Street property will be distributed in kind to its stockholders as tenants in common in the same proportion as their respective stockholdings in said Company, by a deed of conveyance from said Corporation to said stockholders, the cost of recording and preparation of which shall be borne by said Corporation. Such conveyance to be made within fifteen (15) days after August 31, 1967, in such event. ■ “As Witness the execution of this Memorandum of Understanding on the day and year first hereinabove written, by the above named au ¹⁰⁹ thorized Attorneys acting for their disclosed principals and clients, aforementioned. MILTON S. SCHILLER NATHAN PATZ” One of the curious things about the Memorandum is that the members of the Katz Family, other than Joseph J. Katz and the members of the Zamoiski Family, other than Calman J. Zamoiski, Jr., are not identified.

We can only assume that their identity and the interests which they held were well known to each other and to the two corporations. On the day that the Memorandum was signed, counsel for the Katzes and the Zamoiskis wrote to Mr. Pinkard: “The undersigned are counsel for stockholders of The Pratt Street Realty Company and The Jos. M. Zamoiski Co., the owners of three parcels of ground and improvements located in Block 676 of Baltimore City. The parcel which is owned by The Pratt Street Realty Company (Parcel A), is known as 604-618 Portland Street; the other two' parcels which are owned by The Jos.

M. Zamoiski Co. are 212-228 South Greene Street (Parcel B) and 601-615 West Pratt Street (Parcel C). “We ask you to inspect and appraise these three parcels and to certify to us jointly in writing as follows: “1. The fair market value of Parcel A, of Parcel B and of Parcel C considered as separate parcels. “2. The fair market value of the parcel which results from combining Parcel A and Parcel B. “3. The fair market value which results from combining Parcel B and Parcel C. “4.

The fair market value which results from combining Parcel A, Parcel B and Parcel C as one combined parcel. In this connection, if the ¹¹⁰ combined value is different from the sum of the separate values, please certify the proper allocation of that whole value as among the parcels.” On 17 August 1967, Mr. Walter D. Pinkard, the appraiser designated in the Memorandum, returned his report, which appraised the properties as follows: Separate Value Combined Value The Pratt Street Company Property $ 35,000 $ 85,400 The Zamoiski Company Property 103,924 1 150,3921 $138,924 $235,792 On 30 August 1967, Mr. Nathan Patz, as counsel for the Katzes, wrote the following letter: “In behalf of Joseph J. Katz and other members of the Katz Family, and pursuant to the Memorandum of Understanding of May 11, 1967 between Weinberg and Green, Attorneys, for certain interests therein referred to, on the one hand, and Nathan Patz, Attorney, for the other interests therein referred to, on the other hand, this written notice is given within less than fifteen (15) days after the receipt of the appraisal report from Walter D. Pinkard, Realtor that the Katz interests exercise hereby, separately and independently, the option to purchase the Portland Street property, • in fee simple, with the Railroad Side Track Agreement pertaining thereto, for the sum of money certified in the Walter D. Pinkard appraisal or certification of value thereof, viz.: $35,000.00. “Consummation of this sale will be completed subject to title verification and the absence of ¹¹¹ other liens or encumbrances, except as noted in said appraisal aforementioned, within the time provided by paragraph 3.b. of the aforementioned Memorandum of Understanding. “It is noted that the fifteen (15) days period permitted by said Instrument does not expire until the close of September 1, 1967 and until then is still open to other possible option exercises by the Katz Family interests referred to with respect to other properties appraised by the above named Realtor. “This notice is being delivered by hand today and is countersigned, in addition to the signature of counsel for the Katz interests, by Ernestine K. Feldman, individually, and as custodian for her children — stockholders in said Pratt Street Realty Company, and by Joseph J. Katz, individually and as custodian for his children— stockholders in said Pratt Street Realty Company.” and a day later, on 31 August 1967, wrote a second letter: “In behalf of Joseph J. Katz and other members of the Katz Family, and pursuant to the Memorandum of Understanding of May 11, 1967 between Weinberg and Green, Attorneys, for certain interests therein referred to, on the one hand, and Nathan Patz, Attorney, for the other interests therein referred to, on the other hand, this written notice is given within less than fifteen (15) days after the receipt of the appraisal report from Walter D. Pinkard Realtor, that the Katz interests exercise hereby, separately and independently, the option to purchase the properties numbered 613-15 West Pratt Street, subject to an irredeemable ground rent of $276.00 and 212-28 South Greene Street, ¹¹² in fee, except that No. 212 is subject to an irredeemable ground rent of $90.00 and No. 228 is subject to an irredeemable ground rent of $100.00 and 601-11 West Pratt Street, in fee simple, all subjectvto the existing tenants’ outstanding leases, and subject to the railroad side track agreement now in existence. “It is to be noted that through a clerical omission the certification of value of the above properties of Walter D. Pinkard, Realtor, treated all of the properties in the group numbered 212-28 South Greene Street, as being in fee simple, when it is understood that two of those numbered properties are subject to the above mentioned ground rents of $90.00 and $100.00 (and it is understood that the values for those numbered properties so certified by Realtor Pinkard are being reduced by a correction supplement to be issued by Mr. Pinkard as a result of the fact that those two numbered properties on Greene Street are not fee simple, as his certification assumed, but are subject to such ground rents). “The prices so certified by Mr. Pinkard which become the option purchase prices hereunder are, $23,954.00 (as to 613-15 West Pratt Street) and $42,210.00 (as to 212-28 South Greene Street, subject to the reduction referred to above on account of the existence of the two above mentioned ground rents on two of these numbered properties) and $37,760.00 (as to 601-11 West Pratt Street). Consummation of this sale will be completed subject to title verification and the absence of other liens or encumbrances within the time provided by paragraph 3.b. of the aforementioned Memorandum of Understanding. “The total of such certified values, according to the appraisal report, aggregates $103,924.00 (subject to being reduced by the aforementioned ¹¹³ corrective supplement of Mr. Pinkard allowing for the fact that two of the Greene Street properties are subject to the noted ground rents instead of such properties being in fee simple as assumed by Mr. Pinkard. Thus the certified prices and consequently these option purchase prices will reflect, when the supplement is received, such correction.) “It is requested now that, as above evidenced, the Katz Family interests have so purchased the above described properties, subject to the railroad side track agreement, and that a sale has thus been accomplished, the leases referred to in the appraisal report of Mr. Pinkard or copies