Impac Mortgage Hldgs. v. Timm
255 A.3d 89
Md.2021Background
- Impac issued 2,000,000 shares of 9.375% Series B preferred stock (Series B) in May 2004 and later reclassified remaining authorized B shares into 9.125% Series C preferred stock (Series C) and issued ~4,470,600 C shares.
- The Series B Articles Supplementary contained a Voting Provision requiring "the affirmative vote or consent of the holders of at least two‑thirds of the shares of the Series B Preferred Stock... (voting separately as a class with all series of Parity Preferred that the Corporation may issue upon which like voting rights have been conferred and are exercisable)" to amend rights that would materially and adversely affect Series B.
- In May–June 2009 Impac ran a tender offer/consent solicitation to repurchase Series B and C and amend their Articles; Impac counted Series B and C votes together and reported ~67.7% consent; Series B alone had ~66.2% (below two‑thirds).
- Timm (joined by Camac) sued, arguing the charter required the two‑thirds approval of Series B holders tallied separately; Circuit Court found the Voting Provision ambiguous, considered extrinsic evidence, and granted summary judgment for plaintiffs; Court of Special Appeals affirmed (holding the provision unambiguous but reaching same result).
- Maryland Court of Appeals held the Voting Provision ambiguous but resolved the ambiguity as a matter of law in favor of separate tallying based on the Series B prospectus summary and contemporaneous board resolution; alternatively, if ambiguity remained, the provision would be construed against Impac as drafter; the 2009 amendments were invalidated.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Voting Provision is ambiguous as to whether approvals must be tallied by Series B separately or collectively with Series C | Timm: provision requires two‑thirds of Series B counted separately; ambiguous at least | Impac: provision permits collective tally of parity series (Series B + C); in any event inartful but intended collective | Court: provision is ambiguous when read as a whole |
| Whether admissible extrinsic evidence resolves any ambiguity as a matter of law | Timm: prospectus summary and board resolution (public, contemporaneous) show reasonable investor would expect separate Series B voting | Impac: underwriter (Bear Stearns) and drafting counsel intended collective voting; testimony and comparative charts support that | Court: prospectus summary and board resolution (public contemporaneous materials) resolve ambiguity in favor of separate Series B voting |
| Whether the underwriter (Bear Stearns) was a party/drafter so that ambiguity should be construed against shareholders | Timm: underwriter was not a party to Articles Supplementary; shareholders are counterparties to the charter | Impac: Bear Stearns was a counterparty/ drafter of the offering documents and drafting intent shifts contra proferentem away from Impac | Court: Bear Stearns was not a party to the Articles Supplementary; shareholders are the charter counterparties; Bear Stearns’ role doesn’t make it drafter |
| If ambiguity persists, against whom should it be construed? | Timm: construed against Impac (the issuer/drafter) | Impac: attempted to shift drafting credit to Bear Stearns so ambiguity should not be construed against issuer | Court: if needed, apply contra proferentem against Impac (same practical result) |
Key Cases Cited
- Oliveira v. Sugarman, 451 Md. 208 (Md. 2017) (corporate charter is a contract between corporation and shareholders)
- Cochran v. Norkunas, 398 Md. 1 (Md. 2007) (objective/four‑corners approach to contract interpretation)
- Myers v. Kayhoe, 391 Md. 188 (Md. 2006) (plain meaning controls; subjective intent not dispositive)
- Ocean Petroleum Co., Inc. v. Yanek, 416 Md. 74 (Md. 2010) (definition and assessment of contractual ambiguity)
- Truck Ins. Exchange v. Marks Rentals, Inc., 288 Md. 428 (Md. 1980) (if extrinsic evidence presents no material factual dispute, contract interpretation is a question of law)
- Bank of N. Y. Mellon v. Commerzbank Capital Funding Trust JI, 65 A.3d 539 (Del. 2013) (public‑securityholder cases focus on reasonable expectations of investors who did not draft the instrument)
- Kaiser Aluminum Corp. v. Matheson, 681 A.2d 392 (Del. 1996) (when purchaser is not a drafting party, courts give effect to purchaser’s reasonable expectations)
- Owens v. Gretzel, 146 Md. 361 (Md. 1924) (contra proferentem canon: construe ambiguous drafting against drafter)