The questions in this case arise upon exceptions to the sale of certain mortgage premises, situated in Baltimore City, under a decree of Court.
The appellee, the Gray Improvement Company of Baltimore City, is a corporation duly incorporated under the laws of the State and on the 8th of April, 1897, executed a mortgage upon ten acres of unimproved land, situate near Druid Hill Park, Baltimore, to secure the payment of the sum of fifty-four thousand dollars, authorized by a resolution of its board of directors to be borrowed from Letitia E. Hanna and others, mortgagees.
This mortgage being in default, a decree for the sale of the property was passed on the 23rd of May, 1904, by the Circuit Court of Baltimore City, and Mr. Richard Bernard, a member of the Baltimore Bar, was appointed trustee to make the sale.
The property was advertised for sale in accordance with the terms of the decree, and was sold on the 20th day of June, 1904, to John Waters of Baltimore County, for the sum of seventy-six thousand and five hundred dollars. *Page 432
It appears from the report of the trustee that "the lot of ground is composed of parts of three tracts, which are together embraced in one description," and contains ten acres of land more or less.
The trustee first offered the property in four separate parcels, but the amount aggregating only twenty-four thousand five hundred dollars from a sale in that manner, it was afterwards offered as an entirety and thus sold to the purchaser.
Subsequently, on the 16th of July, 1904, the appellants, who are minority stockholders of the mortgagor corporation, filed exceptions to the ratification of the sale, asking that the sale as thus made be vacated and set aside.
The grounds relied upon and briefly stated, are substantially these:
1st. That the property was insufficiently advertised; 2nd. That the trustee improperly advertised the property to be sold "as an entirety;" 3rd. That the price was grossly inadequate; 4th. That the property should have been sold as building lots; 5th. That the trustee sold more of said property than was absolutely necessary for the satisfaction of the mortgage debt and proper expenses of the sale.
On the 27th of January, 1905, the appellees, the mortgagors, filed a motion to overrule and dismiss the exceptions to the sale, because the exceptants are minority stockholders, owning only one-eighth of the capital stock of the corporation, and have no standing to attack the sale as made by the trustee.
It further appears, that on the 28th of January the appellants, two of the stockholders of the mortgagor company petitioned the Court to intervene as party defendants and maintain their exceptions, averring that the president of the company, had refused to take such action as would protect the interests of the stockholders.
The appellees, mortgagees, demurred to this petition and the mortgagor company filed an answer thereto. The answer states, "that all the stockholders except the appellants believe that the trustee, who besides representing the mortgagee represents *Page 433 about three-eighths of the capital stock of the company, did all in his power to realize the best price and that his conduct met the approval of seven-eighths of the stockholders of the company; that the petitioners are the holders of the remaining one-eighth, and are largely interested in the contiguous vacant land, which has been for some time on the market; that their effort to control the management of the company is unjust inequitable, and vexatious, and the majority of the stockholders are acting for the interest of the company.
The case was heard on the petition, answer and the demurrer, and from a decree sustaining the demurrer, refusing the application to be made parties, overruling the exceptions and ratifying the sale, an appeal has been taken.
The principal question in dispute and the one upon which the decision of the case must turn, is whether the appellants, who are minority stockholders of the mortgagor corporation, have presented such a case as gives them a standing in Court, to defend, apart from the corporation itself, a contest or litigation involving the corporate rights and duties of the company.
The law involving the rights of individuals or minority stockholders to sue or defend independent of the corporation itself, has been firmly established by adjudications of both the Federal and State Courts.
In Shaw v. Davis et al., 78 Md. 316, JUDGE McSHERRY, in speaking for this Court, said: "It may be stated, as the result of all the authorities, that whenever any action of either directors or stockholders is relied on in a suit by a minority stockholder for the purpose of invoking the interposition of a Court of equity, if the act complained of be neither ultravires, fraudulent nor illegal, the Court will refuse its intervention because powerless to grant it, and will leave all such matters to be disposed of by the majority of the stockholders in such manner as their interest may dictate and their action will be binding on all, whether approved of by the minority or not." And MR. JUSTICE MILLER, in Hawes v.Oakland, 104 U.S., *Page 434 said, while the cases admit the right of a stockholder to sue in cases where the corporation is the proper party to bring the suit, they limit this right to cases where the directors are guilty of a fraud or a breach of trust, or are proceeding ultravires. And it will be found that the English cases are to the same effect.
It is needless then for us to prolong this opinion by a further citation from decided cases, or to enlarge upon the obvious and manifest reason for the rule.
The case at bar presents no fact that would invoke the jurisdiction of the Court under the well-settled rule of law above stated.
According to the record, the appellants who own one-eighth of the capital stock of the company are the only stockholders who desire the sale vacated. It is further shown that all of the stockholders of the company were present or were represented at the sale made by the trustee, and are satisfied with the mode and manner of the sale.
In the answer of the company, it is stated "that all the stockholders except the appellant believe that the trustee who besides representing the mortgagee represents about three-eighths of the capital stock of the company did all in his power to realize the best price possible and his conduct met the approval of the company backed up by seven-eighths of its stockholders."
We find nothing under the facts of the case, that would justify a reversal of the order appealed from and it will be affirmed.
Order affirmed, with costs.
(Decided January 9th, 1906.) *Page 435