Read Drug & Chemical Co. v. Nattans

Urner, J., delivered the opinion of the Court. A demurrer was sustained to the bill for specific performance in this case, and the plaintiff having declined to amend, the bill was dismissed. The case stated in the bill of complaint is substantially as follows: The plaintiff corporation is the owner of a drug business in Baltimore which it conducts in a building, occupied by it as lessee, at the southeast corner of Howard and Lexington streets.. The business was established many years ago by Arthur Nattans and was subsequently transferred by him to the corporation now in charge, whose organization he effected and the whole of whose stock he owned or controlled.

Mr. Nattans was also the owner of the leasehold estate in the property in which the business was then and is now being conducted. Upon his death in 1905 the property passed under his will to his wife, Jennie Nattans, for life, with vested remainders in their children. The stock held by Mr. Nattans in the drug company was bequeathed to trustees to be held for the benefit of the testator’s widow and his children, including those by a former marriage. The corporate ⁶⁹ enterprise was thereafter managed by a board of directors composed of Mrs* Rattans, her sons, Ralph A. Rattans and Arthur Rattans, Jr., and Samuel L. Bachrach, a son-in-law of the testator.

Mrs. Rattans became president of the company and Ralph A. Rattans its general manager. By a lease executed on January 21, 1908, the store property was demised by Mrs. Rattans to the company for the term of ten years, computed from July 1, 1907, and ending on June 30, 1917, -at a yearly rent of $11,000. The lease was. signed by Mrs. Rattans individually and also as president of the lessee corporation. In the summer of 1914 the property was seriously damaged by fire.

At that time the company was also occupying, under' lease, an adjacent building to the south known as the Hamman property. After the fire questions arose as to the cost of restoring the Rattans building, what part of the cost should be borne by the drug company as tenant, and what extension should be made of the existing lease. Upon the recommendation of Ralph A. Rattans, as general manager, it was. decided by the company that it would expend about $30,000 in repairing and improving both of the leased buildings, so that they might be used advantageously as one store, provided the leases were renewed and the owners would turn over to the company such amounts as they received on account of the insurance on the buildings. A resolution was accordingly passed by the board of directors authorizing the general manager to make an agreement with Mrs. Rattans for the cancellation of the current lease and for the execution of a new lease for twelve and one-half years, beginning January 1, 1915, at a rental of $16,000 per annum for the first four years, $18,000 per annum for1 the second four years, and $20,000 per annum for the remainder of the term.

In this action of the directors Mrs. Rattans participated as a member of the board. It is. alleged that she had personally fixed and agreed upon the increased rentals and the extension of term mentioned in the resolution. A new lease for the Hamman property, creating a term which would expire at the same time1 as the proposed new ⁷⁰ Rattans lease, was prepared and executed, Mrs. Rattans signing on behalf of the drug company as its president. The projected lease extending the term for the Rattans property, which was to have been signed by Mrs. Rattans individually as lessor, and in her capacity of president of the company as lessee, remained unexecuted.

Revertheless all the contemplated improvements were made with the company’s funds, the payments being made, and the checks therefor being drawn, by Mrs. Rattans and her son Ralph, as president and general manager, respectively. These appropriations were made by the company in reliance upon the agreement of Mrs. Rattans to execute -a new lease for her property in accordance with the terms adopted by the resolution of the board of directors. In the meantime a controversy arose between Mr. Bachrach and the other directors, who were Mrs. Rattans and her two sons, over the'action of the latter in passing a resolution providing additional compensation and a life contract for Ralph A. Rattans, as general manager, and also for an increase of salary for his brother, Arthur Rattans, who was serving as assistant manager, and proceedings were