Parish v. Maryland & Virginia Milk Producers Ass'n

when ampies illustrating the bus would be in the intersection lawfully He unlawfully. further instructed them before proceeding on a green signal that the have main- plaintiff must tained a lookout and proper must have permitted cross- lawfully vehicles to ing cross intersection before proceeding. appellants rely case of v. Belle strongly Valench Co., driver, Cab supra. Isle that case a cab was wait- who car, beside a ing street proceeded intersection blindly into the his when view was obstructed the street collided with car and another vehicle. The found for but jury the trial plaintiff granted court judgment n.o.v. On this Court re- appeal versed the judgment, reinstated the verdict judg- and entered for ment plaintiff holding jury had been question pre- sented. The case Valench in that there readily distinguishable the cab driver found negligent proceeding blindly into intersection, here according whereas there plaintiff his was no view and he could in- obstruction see whether the tersection was when clear he started to cross.

The case was submitted which was properly jury prop- erly instructed as the duties at of drivers an intersection con- signals. trolled automatic

Judgment with affirmed, costs. PARISH, al. v. MARYLAND AND VIRGINIA et ASSOCIATION,

MILK PRODUCERS INC., al. et Term, September [No. 1967.] 27, 1968. May Decided 26, 1968; Motions June and June rehearing de for filed 28, 1968.

nied June J., before C. Barnes, was argued The cause Hammond, Singley, McWilliams, Finan JJ. Brune, with whom and Herbert M.

Charles Norman Shaffer brief, Brune, Wayne on the for Iglehart, Robertson & E. were Parish, Lenn, al., per Frank P. proper et part appellants; brief, Parish, Frank son, Theodore F. on the for with whom Parish, other appellants. Theodore Jr., Paul were D. with whom S. Sar Murnaghan, Francis banes, Miller, Merrigan, on James R. Jr. Edward L. Association, brief, Milk Virginia for Producers Maryland Prescott, Jr., Inc., with whom were appellees; Stedman brief, Prettyman, Charles on Jacob B. Berkson and W. Maser, al., Peter with et other M. appellees; I. King, William Jr., Speert Sanger, Charles D. Berryl A. whom were Goldman, al., brief, et for Robert M. Executors Estate Robinson, Arthur other appellees. V. of the Court. majority J., opinion delivered Barnes, in and concurs in Dissent- part. dissents C. J., Hammond, 107, at opinion page ing infra. of whether third question involves appeal

This eight filed members plaintiffs, of complaint, amended bill Association, Milk Producers Virginia Maryland for Montgomery in the Circuit Court Association), Inc. (the indi- and thirty-four in the Association against County, equity, defendants, The Cir- a cause of action equity. stated vidual cuit Court it (Pugh, held that J.) did not and sustained de- murrers to it without leave to From amend. the order dismissing the complaint and requiring the plaintiffs to the costs pay entered by 29, 1967, the Circuit Court on March the present to appeal this Court was taken six timely eight plaintiffs. We have concluded that the Chancellor was in error in sustaining the demurrers. We will reverse the order of 29,1967, March and remand the case for proceedings. further The original 4, 1965, bill of complaint was filed February Frank Parish, P. Parish and F. Theodore his (Parish), wife who together single Association, owned a in the membership as a Association, directors, against derivative suit its its auditor and 9, 1965, two of its former On employees. April the Circuit Court granted leave six other members of the Association to parties intervene as inter- plaintiff of those (four vening plaintiffs and the two original are plaintiffs appellants and, the present appeal), on the same day, granted leave to file an amended bill of bill complaint. amended of complaint was 20, 1965, filed the same On day. the Circuit Court July (Shook, J.) sustained of com- demurrers to amended bill 23, plaint and on a second amended bill July of complaint with one exhibit filed. was Demurrers were filed to this bill and after hearings before the Circuit Court J.) some (Shook, and, of the demurrers were sustained to certain paragraphs toto, as to certain parties. There were numerous proceedings thereafter, answer, including extensions of time motions trials, separate motions for taking motion of the depositions, themselves, Parish to represent a motion plaintiffs for summary judgment, like, witnesses and all of which are protect importance little the present appeal one (with exception regard argument regard some of appellees to res as the Circuit Court judicata), J.), February (Pugh, 13, motions, an order passed dismissing all demurrers and then permitted amended of com- filing a third bill The third amended bill plaint. (the complaint), of complaint exhibits, with a number filed on duly February 1967, and, indicated, as we it from the have Chancellor’s sustaining order dismissing the demurrers to complaint,

34 costs, the that the the pay present requiring plaintiffs was taken.

appeal exhibits, its rather formidable eight The with complaint, record, 39 of with legal-size papers In the consists document. exhibits, 92 in the a total of record extract pages; 53 pages of 41 with 36 printed pages the consists printed complaint has 7 the Association added pages of exhibits to which pages brief, a total of 43 printed pages, its exhibit appendix the and its for both pages complaint or a total of 84 printed and the have appellees the Although appellants both exhibits. con- occasionally in their arguments their in both briefs exhibits, its it is in the material not complaint sidered the allegations complaint clear are confined to that we allega- from those and reasonable inferences and its exhibits de- of the sustaining considering propriety tions in Oliver, Founders 168 Standard v. murrers the Chancellor. 223, 317, 345-46, A. will confine We (1935). Md. inferences. allegations reasonable ourselves those designate par- complaint first five paragraphs The ties, describes Paragraph and defendant. plaintiff both as follows: plaintiffs Parish, As- members together are

(a) plaintiffs, farm, “Thorndale Their Maryland. residents of sociation and since continuously prior have owned they Farm” which 1952 until 1953, Association a member since milk to the sold with the Association— 1966 under two contracts spring 18, 1942 and of Mrs. Parish dated November one in the name 9, The contracts October 1961. in both names dated other A B as a part complaint. are as exhibits attached Parish, operated a member and was enrolled as Mrs. with the until 1957. In accordance terms the farm as a member contract, A, con- subsequent and the exhibit original B, to 1961 tract, farm from 1957 operated exhibit did Brothers, leasing arrangement but the the name of Schott in view of the provisions not the Parish membership terminate of Incorporation, Certificate of Article VIII the Association’s C, Schott filed as the complaint. exhibit the Oc- was terminated and Parish executed Brothers lease B) with the Association (exhibit tober 1961 contract Parish continued to operate the farm from 1961 until a bona fide sale of their cowherd in the spring of 1966. The

(b) E. plaintiffs, Wayne Lenn and Edwin Lenn, R. Brothers,” as “Lenn trading have been continuously members 1952, of the Association 2, since and reside at Route Culpeper, Virginia. (c) The plaintiff, A. Bernard Dahlgren, trading as “Wind- J. Farm,”

sor Lodge has been a continuously member of the Association since 1959 and resides at Huntley, Virginia.

(d) The E. plaintiff, Irving Eldridge, has continuously, since been a of member the Association and resides at Plains, The Virginia. The

(e) Wharff, plaintiff, Edward M. has Jr., continuously, since a been member Association and resides at Woodbine, Maryland.

(f) The plaintiff, B. Wenger, G. has Jr., continuously, since 1950, been a member of the Association and resides at Wood- stock, Virginia.

It is then the original complaint in the case was filed Parish plaintiffs on behalf of themselves and all other of members the Association and similarly situated named, the other subsequently plaintiffs, above having received Court, of the Circuit permission intervened as plaintiffs and adopted allegations Parish complaint. 2 describes the

Paragraph defendant Association. It is a corporation created and Maryland functioning as “farm co- under Code operative” Article (1957), Sections 377. A copy the Certificate Incorporation, amended to date, was as filed as complaint exhibit C. Under Article VII and VIII of Articles of Incorporation “the trust, Association has an the character of incorporated it acting consignee the members’ and as their milk-produce agent ** * finance, haul, store, ‘to handle process, transport, ad- standardize, vertise, market, grade, distribute and do any of * ** things the foregoing milk-produced its mem- [the] ” * * and derived products bers and therefrom *.’ by-products in statutory principal Association has office Frederick It doing is in County, regularly business Mont- Maryland. other counties of County many gomery Maryland the District of Columbia Virginia, also business doing States. elsewhere in United B. defendants William Hooper describes the

Paragraph as the (Robinson) princi- Arthur V. Robinson (Hooper) during officers the Association managing operating pal to 1963. who Hooper, of 1955 (approximately) period Association, resides manager secretary-treasurer-general of Co- in the District and is business Virginia engaged Robinson, original as a defendant was named who lumbia. n billof complaint of the milk manager processing and who was there, Laurel, on Sep- a resident died Maryland, at plant executors, M. Goldman and His Robert 1965. tember J. Sherwood, substituted as par- motion proper were on a Robert in Robinson’s place. ties defendant of the Asso directors 4 the defendant describes Paragraph de of the director of some arguments ciation. In view the fendants, allegations to set out necessary it will be that all but three of It alleges 4 in detail. some paragraph of the Association. directors are present listed below (cid:127)defendants Stull, Huff and Dr. Lester T. W. are Charles C. These three name each in parenthesis opposite Oscar S. Martin. The year member of became a each director when year indicates knowledge with the plaintiff’s accordance board of directors (cid:127)and belief: in Maryland

“Directors Resident A. (1962) Merhl Adams W. T. Fouche

Harry (1963) or earlier) F. (1953 Gladhill Upton earlier) or Paul B. Harlan (1953 I. King (1963) William Martz (1964)

Walter A. earlier) or Remsberg Homer (1953 J. end (Terminated T. Stull (1962) Charles C. 1964) (1959)

H. Lehman Toms David-Weitzer (1964) Virginia

Directors Resident H. Cockerill William (1962)

37 Crossman, C. William (1956) Jr.

Luther L. Day (1962)

Lester Huff October W. (1957) (Terminated 1964)

Dr. Oscar Martin S. (1957) (Terminated early

1965) Miller, Giles H. (1956) Jr.

Edward C. Norman (1951) Sanford,

W. W. (1963) Jr. C. T. Sollenberger (1963)

Alton A. White (1956)

Director Resident Virginia West Metre, I. D. Van Jr., (1953 earlier).

Said defendants have held the executive following offices the Association: Homer from 1953 1964 Remsberg, president

J. Norman, Edward C. first 1963 and vice-president president Metre,

I. D. Van first Jr., vice-president Gladhill, F. Upton second 1962 to vice-president Stull, Charles C. T. second vice-president The committees of principal policy-making Board of Directors with to matters herein com- respect Committee, plained are the Plant Executive Com- mittee and the Finance Committee. defendants The listed below are have been members of the follow- ing committees at times the matters herein during complained of:

Executive Committee Merhl A. Adams F.

Upton Gladhill

Charles C. T. Stull

Luther L. Day Crossman,

William C. Jr. Miller, Giles H. Jr.

Plant Committee F. Gladhill Upton

Edward Norman C. Miller, Giles H. Jr. Hahn

W. J.

Paul B. Harlan Emory Kirkpatrick

J. Howard Clark W.

Alton A. White Crossman,

William C. Jr,. Huff

Lester W. Homer Remsberg

J. I. Metre D. Van

Luther L. Day King I.

William H. Cockerill

William A. Adams

Merhl F. Potts J. Finance Committee F. Gladhill Upton

Edward C. Norman B. Harlan

Paul Miller, H. Giles Jr. are former directors defendants who following or the Finance Executive Committee served on the herein com- the matters during at times Committee of: plained

Executive Committee Fry 1960) Edwin D. (1954 to 1960) R. Marsh (1954 Paul Ramsburg* 1961) M. H. (1954 belief, is now this defendant information (*on deceased) to 1961) F. Potts

Jennings (1956 1962) Howard Clark (1960 W. Kirkpatrick (1962) Emory

J. Committee

Finance Carper (1954-1955) G. W. Hahn

W. (1954-1963) J. Basil Mobley* (1954 1961) second Vice President from 1953 or earlier (*was to 1961).” 5 describes the defendant Kendrick

Paragraph Wayne (Ken- as a drick) certified accountant in the public practicing District where, belief, of Columbia on information and he is a resident. He or the firm of Kendrick & of which “Wayne Company,” he ais all of the partner, prepared issued audited financial statements of the Association 1955 to during period present time. The references in the to the “defen- complaint dants” or to the “individual defendants” do not Ken- include drick unless otherwise indicated.

We now come paragraph which sets complaint out its objects and in three the first purposes parts, part being subdivided into 12 sub-parts. objects These are to purposes set forth:

FIRST. (1) series of acts which charge the plaintiffs waste, “constitute gross negligence, misman- illegality, culpable agement of the affairs of the Association and breach of trust and fiduciary duty by individual defendants who constituted its officers and directors at the times when the acts respective took place and who are hereinafter specified subsequent paragraphs this Amended Complaint;” acts of (2) self-dealing by certain defendants “hereinafter specified” to their profit and to the substantial injury Association;

(3) incorrect, issuance of misleading and contradictory reports financial statements to the members of the Asso- ciation defendants “who are hereinafter specified as officers and directors” including a false and misleading report at adopted Association’s Annual Meeting February 1964, on the acquisition, operation sale of the Embassy Dairy. Page 17 of this false and misleading report is filed as D, and, as exhibit complaint information upon belief, shows in the handwriting of Sollenberger, one of the directors, the of some of the falsity information; reported serious infractions of the

(4) anti-trust laws of the United States the defendants who by were officers and of directors the and Association caused it to purchase dairy violation of those laws and was thereafter ordered the United States District Court for the District of Columbia to divest itself of business; that dairy belief, information upon and the

(5) continued sale of fluid milk to at Embassy Dairy Class after the sale of price order; to dairy pursuant the District Court’s the then officers and directors (6) causing the Association to make an of improvident sale the with no dairy down pay- obtained, ment being out of cash except transferred by ; Association to the as cash purchaser assets of the business sold the then officers and (7) directors to falsely reporting that a $450,000 of was realized on the membership capital gain loss; sale of the when in fact it was made at a dairy the then officers and directors the Association (8) causing to reduce the price by allowing the “discount” purchaser $500,000 without with to it informing membership respect in the text of the next annual or in the state- report operating ;ment continuing manager the then officers and directors

(9) business on after the sale dairy payroll the Association’s retain control or influence to such dairy attempting over its as to frustrate the of the divestment operation purposes to heavy order the District Court and the Association expose order; for the violation of that penalties making the then and directors improvident officers (10) clear which so-called settlements with and Robinson Hooper more, $250,000 illegally for profits liabilities approximately to their own private diverted them from the Association business, in an even greater liabilities other competing con- amount, inadequate released for a grossly were purportedly ; sideration Association causing then officers and directors

(11) from Hooper business such purchase private competing of such advised being “an after price Robinson for excessive with others themselves and among derelictions and conspiring matters from to these relating information withhold vital from the the members the Association time these trans- date;” actions to information and other acts of fraud upon belief

(12) “upon the officers and directors breach membership by duties, their which fiduciary the details of remain at this time Dugan undisclosed but contained membership charged In connection with the in sub- Report.” conspiracy com- supra, it is the paragraph (1), object purpose officers, forth plaint set those actions of directors “combined, among others who have and confederated conspired and with other conceal from themselves each to and withhold the alleged members the information to relating foregoing the but by strategems transactions various obstructive including not to limited the the of Edward L. following:” refusal (a) directors, an of fur- Merrigan, agent the then officers and to nish a of list the of Association to members the the plaintiff, Parish, March, 1964; Frank their subsequent refusal (b) to furnish such a from Merrigan, list as set forth a letter general Association, counsel August for the letter of his 18, 1964, a of as copy which is filed of as the complaint E; exhibit (c) the of ade- refusal the then officers and directors to inform quately the of surrounding the facts membership the operation, disposition sale of the Embassy Dairy pur- suant to a meeting members’ resolution at annual adopted the of 24, 1964; members held on February the refusal by (d) the officers and Merrigan, directors and of their agent, at the 22, 1965, annual meeting of members held on February their and continued to subsequent refusal furnish any request- ing members the to examine or have a the opportunity of copy Dugan which Report outlines the results an investigation of conducted at the expense the Association Frank Dugan by which, information, upon the and consti- reports evidence tutes an admission allega- Association many tions in “an complaint; (e) illegal by the Board of attempt Directors through Amendment on By-Law March impose restrictions future upon derivative suits brought members requiring: an (1) application the Board Di- rectors and for suit authority is refused and (2) [if] of all attending vote members an

majority annual or special contrary to the laws of meeting-—all the State Maryland.” SECOND, the plaintiffs charge that are entitled to re- they accounting an the individual defendants quire to the Asso- great ciation “for the losses suffered it damage as a result said acts.” culpable

THIRD, charge are plaintiffs they entitled to request such as judicial may further action Association permit those who recover its losses from defendants are beyond and obtain such other relief as be jurisdiction ap- court’s may propriate.

For to the charges par- as as to specification instance, ticular for defendants them each responsible made to the subsequent complaint. reference is paragraphs set are not re- why forth paragraph plaintiffs they Board bringing a condition of quired apply suit members, or to Directors of the Association (the Board), relief, as follows: The Board consisted defendants and the (a) applica- tion for relief of the matters to the defendants as directors unavailing, “would fruitless and complaint in the be futile,” condition and such “not as a required application alleging of is this suit.” This further elaborated bringing of that at the when the bill original 21 of the directors time in 4 of the complaint was filed are listed complaint paragraph of directors and named as defendants. Nineteen these are all when the year of Board during were members Board: and with Hooper settlements improvident

(1) approved 20; in alleged Robinson as paragraphs Frank at Association’s Dugan Professor (2) employed already acts wrongful investigate report to expense then Dugan Report obtained the alleged complaint, it to Association access members of the determined to refuse that had promised of the Association the president although available; made be would Dugan Report complaint, 24 of the 21 and alleged as (3) paragraphs As- members of conceal from to conspired concealed sociation information as to operations vital and particularly facts the causes of action establishing against various defendants which are described the complaint.

It was further alleged charges that the that complaint mem- of bers the Board during the who year have been named defendants, as be should required personally individually to account the Association for the losses suffered as a result of these acts. A majority present Board have been members of the Board 1959 and com- alleged since are in the plaint to be responsible account to for the Association losses suffered itby during the six It is then past years. alleged:

“It is therefore both from the apparent nature Complaint and the sought relief against directors them a request board to institute a suit against themselves an or if a accounting, such suit were Association, instituted in the name of the prosecute it would be fu- vigorously impartially tile. Complainants are therefore advised and aver they have the right to present maintain the represen- tative suit to establish the Association’s to an right accounting against these directors and the other de- fendants without first di- requesting the defendant rectors to institute such a suit the name of the Association.”

It further Frank alleged that Parish has repeatedly sought access to the Association’s list for the membership purpose informing the members matters in the complaint and, as can be seen from the summary be- correspondence Parish, tween Frank or his attorney, Association con- and the tained in the letter of its general August counsel dated 1964, (exhibit E), the directors have refused to consistently permit his bringing the matters to the attention (1) 10% the members for filing a (approximately number) pe- tition with the directors requiring special call meeting of 23, members under Code (1957), Article Section (2) general the a attending such convened membership specially meeting. assumed, plaintiffs that if be alleged arguendo, that might to

they otherwise be to expected request the members direct the institution of suit the doing Association before so a plaintiffs deny themselves the correct view of (which law), the are relieved from such the making they request by action of in the directors (listed paragraph complaint) members, in the preventing plaintiffs making appeal from an to to the list for that by refusing membership release purpose as Dugan to release the refusing Report particularized statement the com- wrongs of of of the many complained plaint.

It wrong- is further have stated the plaintiffs the ful acts of of Board in much as they the members the as detail are able to do the the minute books Dugan Report, without the charges against Hooper, Board and the statement Click, when general secretary, E. assistant manager, by James Board, Mr. Click all which resignation submitted his to 8, 1963, the resolution of the Board on November precipitated on No- finding delegated to conduct a fact study, subsequently committee, thereafter which vember to plant relating facts Dugan develop pertinent retained Frank J. testimony charges. Dugan to the Click Professor took a 75 and wrote covering transcript pages, witnesses directors, referred to all of which facts are page report made G, has been of which information exhibit none hands of although available it is plaintiffs alleged: defendants. It is then at for these impossible complainants

“It is therefore any greater particularity this time to with specify, voted than which of the defendants herein appears, for the responsibility favor of or otherwise assumed With acts which they complain. particular wrongful com- in this litigation of discovery procedures aid to the attention bring able to fully will be plainants the participation this actual facts Court the com- acts director-defendants each individual of.” plained jurisdiction had Court that the Circuit

It is further alleged

45 and that venue is laid in the Circuit Court for properly the independent reasons: doing the Association is

(1) regularly business in Mont- within gomery County the of Code meaning Article (1957), 95 Section (a), from apart doing the in

(2) by business the Association four Montgomery individual in County, co-defendants reside the County of provisions the Code Article (1957), Section adjudicate Circuit Court empowered the plaintiffs’ complaint against all defendants who are residents corporations the State of Maryland.

nowWe turn to the in paragraphs which complaint allege in regard the facts to various transactions mentioned already in alleged the complaint. 8 to in Paragraphs allege regard 15 the facts to the Embassy In Dairy. 8 it is that on paragraph alleged or about August 1, 1954, by directors, action of its a majority of whom suit, are (later listed) present defendants Association purchased the Embassy in the District of Columbia Dairy violation of the Sherman Clayton Anti-Trust Acts. It is alleged that according judicial findings in civil anti- trust brought suit States United the motives of the transaction were to “eliminate the largest producers non- area,” Association milk in the and “increase the Association’s * * * market,” control Washington and “the transaction was entered into with the intent and purpose restraining trade.” $3,890,000 The Association paid Embassy Dairy. findings its regard making to motive the Dis- United States trict Court for the District Columbia and relied “accepted upon evidence that ‘the price paid the Association was far excess of the actual and intrinsic value of the property pur- ” chased.’

It was further that the Association asserted unsuccess- fully “the colorable defense that was wholly exempt from control under the anti-trust laws and laws forbidding monop- olies.” Judgment establishing entered the purchase operation Embassy were clear violation of Dairy law and the District Court ordered the Association to divest itself of the entire The Association dairy property. prosecuted fruitless tire appeal Supreme Court of the United States cost, belief,

at a on information and $300,000, of more than and that affirmed and Court extended the judgment (Maryland Virginia States, Milk Producers Ass’n v. United S.U. the District holding that Court dis (1960)), wrongfully missed an additional under charge Section Sherman Act, stating anti-competitive Anti-Trust that “the Association’s far a co activities are so outside the of ‘legitimate objects’ n operative that, if constitute clear violations proved, they would n of fact, Association, 2 of the Act the Section Sherman by indeed, if it is the Association does not really dispute which this The District Court ^subject to under section.” liability 20, 1960, issued a final as judgment (subsequently June 22, 1960) pur a consent decree November (cid:127)amplified signed by to divest to was required promptly suant which the Association Action was taken pursuant itself of interest in Dairy. all the 1, who defendants 1961. The judgment January the n constituted the Board of the purchase which the approved the to have assented in 1954 are deemed Embassy Dairy they unless meeting or from the Board’s action unless absent n affirmatively Article dissent registered pursuant their infor in effect. On then Code Maryland (cid:127)Section 62(b) and did belief, present was of the defendants mation and each participated who register not The defendants his dissent. Hahn, Gladhill, Fry, Carper, the were: action the Board Potts, Norman, Rams Marsh, Harlan, Mobley, Kirkpatrick, and Rems deceased, belief) and on information hurg (since were belief, particularly actions these On information and herg. then president, the Association’s by 'investigated approved and including Executive Committee Remsberg, defendant Finance Committee Marsh and Fry defendants Gladhill, Hahn, Mobley Carper, including the defendants Finance Committees Executive Norman. The duties appearing By-laws XII of the XI and in Article (cid:127)appear n exhibit C. that: charge further they then The plaintiffs “* * * illegal, was Dairy of said acquisition Department from the clearance seeking without an Justice, was act of reckless mismanagement, and a proximate cause of substantial and loss heavy Association, damage as hereinafter set forth. have been Complainants denied access to minute books and other records of the Defendant Association and are therefore at this time unable to specify greater par- ticularity negligent acts and of indi- responsibility vidual defendants with to said respect acquisition.” paragraph improvident nature of the Embassy Dairy sale It alleged. are alleged that addition to purchase $3,890,000, price the Association expended large sums (the amount of which is not specifically ascertained plaintiffs without access to books records denied them) improve- ments to the Embassy between 1954 and 1961. On Dairy belief, information and the total adjusted cost basis of the as of the time Embassy Dairy sale in its 1961 exceeded $5,000,000. an By effective agreement January 4, 1960, memorandum of which was executed November Board, the Association acting by its of which 17 out suit, are members named defendants the sold Dairy the installments to Metropolitan Food Corporation (Metropolitan), which, a Virginia belief, on Corporation, information and had no substantial A assets. agreement the memorandum of copy is attached as exhibit F as a It the complaint. appears from the memorandum of agreement for price the total $3,250,000, the sale was “cash in plus banks and on hand” of the and the amount of its Dairy accounts receivable.

The assets sold were to consist of all the assets of the Division”, “Embassy the Dairy including “the stock of capital Bros., Richfield Corporation and Inc. Dairy Wake- Simpson t/a field the Dairy, acquisition and cost of which described” are later in and paragraph also included “an amount equal settlement,” the cash on or in hand banks as of the date of and receivable, that, the accounts so the and ac- from cash apart receivable, counts all $3,250,000. for assets were sold The terms were sale : cash

(a) sole at payment settlement was “an amount to the cash equal banks and on hand” so that no cash pay- the extent received by buyer except was made ment at date of settlement. the cash from the seller $250,000 for was bearing A non-interest note deliverable (b) in six months. due bearing A non-interest note was be delivered the

(c) receivable, and accounts but this note was amount of the notes subject were made and was to dis- collections only as payable items, for uncollected so that this note allowed and counts by cash outlay buyer. no substantial require would $3,000,000 A due semi-annual installments note for (d) settlement, with the balance of after the two beginning years F indicates $500,000 (Exhibit after settlement. years due annum from the per would bear interest at that this note 5% date of settlement). “Irving to bear the endorsement

The notes mentioned were unsecured, retaining seller not even D. “were Berger” but of the balance of Dairy payment lien assets terms requiring above stated By reason purchase price. turned buyer the cash over payment beyond no down sale, was wholly improvident no sale security, on the following consideration.” The made for an insubstantial Article (1957), named are deemed reason Code defendants action of the 21-member have assented to the 62(b) 23 Sec. Clark, which the terms and sale: Cross- Board approved Gladhill, Hahn, Harlan, Martin, Miller, man, Jr., Jr., Jr., Norman, Potts, deceased), Remsberg, Ramsburg (now Mobley, belief, that It is on information and alleged, Toms White. meetings at the Board when were present these directors did not dissent from the action taken. the action was taken and belief, that the sale alleged, on information It is further Remsberg, then president, considered particularly committee, includ- the executive vice-president, Mobley, by Potts, Clark, Marsh, and, defendants Miller ing the Hahn, committee, Gladhill, the defendants including finance the charge that and Norman. The further Mobley plaintiffs an terms “was defendants of sale and its these the approval in the gross negligence act of reckless and mismanagement substantial loss whereby duties as directors discharge their to Association. proximately has been caused” damage under of sale further that the terms charge The plaintiffs sources of income from the to the clear certain due business, with no actual invest- Dairy acquired purchaser by ment, to- being assured able was purchaser reasonably contract “without providing make all future under the payments for this single a of its own to as consideration paid dollar be sale, in sub- and was which purported closely approximated, had stance, which of substantial value gift corporate a assets $5,000,000.” cost Association not less than statements alleges misleading the false Paragraph Report sale in the Association’s regard Embassy Dairy is following for In this report 1960 issued 1961. February, alleged to appear: Washington to “a busi- made

(a) The sale was described as Berger,” to “Irving elsewhere made D. nessman” and as one corporate- true identity no mention was made of the in it. those interested purchaser or be “ade- represented installment were payments The

(b) unsecured, se- secured,” no were fact they whereas quately taken exhibit F. curity being by as shown whatever gain at being sale was described as a (c) “capital The $450,000” the sale was without profit whereas consummated loss, F and facts already in fact as shown at exhibit cost basis alleged as to the for property. are the

It who the sale alleged approved that directors issuing same defendant directors were for responsible who 1961, Marsh was except Annual for Report early then the Board and a member of Day no on longer the issuance the false and charge Board. The plaintiffs men- statements to the members the directors misleading fiduciary tioned a violation of the responsibility “constituted members, the Association and to its and was like- directors to wise an reckless mismanagement.” act of in regard 11 describes a false statement to the sale

Paragraph in the Annual issued in Dairy Report of Embassy stated that early “gain in which was there was $435,794.” allegations milk The sale of fluid division are similar 10. defendant directors to be Paragraph those Adams, Clark, false were: for this statement Cock- responsible erill, Gladhill, Harlan, Huff, Martin, Hahn, Day, Kirkpatrick, Toms, Miller, Norman, Stull, Remsberg, Van Metre and Jr., Gladhill, Remsberg, White. as and as president, vice-president, are to have considered and alleged particularly approved Clark, Gladhill, Day, as did and Miller Report Kirkpatrick Gladhill, Hahn, of the executive committee and Harlan and Nor- man the finance charges committee. same of breach of fiduciary mismanagement and of reckless are made. responsibility

Paragraph alleges the facts and circumstances regard $500,000 to the allowance of a discount the Embassy Dairy purchase It is that in action price alleged 1963. Board, $500',000' discount of on the Embassy Dairy pur- thereby chase was allowed the ultimate price price reducing paid belief, $3,250,000 $2,750,000. from to On it is information resold the Dairy to another Metropolitan Embassy Products, which corporation, Food Inc. de- (Eastern), Eastern clined to assume the balance due but the balance pay offered due, $500,000. less a discount of The Association collected noth- $3,000,000 on the endorsement ing by “Irving D. note Berger,” nor did the Association and the defendants pursue the bulk remedies sale available it on the transfer Metropoli- tan Embassy Dairy assets of which is espe- Eastern cially significant Metropolitan since claimed that was without assets to note to the Association. pay The directors named Adams, as defendants who were: approved arrangement Cockerill, Crossman, Fouche, Gladhill, Hahn, Harlan, Day, Jr., Huff, Martin, Miller, Norman, King, Jr., Jr., Remsberg, San- ford, Stull, Toms, Jr., Sollengerber, Van Metre and White. Gladhill, President Remsberg vice-presidents Norman Miller, Stull, as well Day, Crossman and Adams execu- Hahn, Gladhill, Norman, tive committee and Harlan and Miller committee, of the finance particularly considered and approved the arrangement. The plaintiffs charge that action “was negligent grossly and was an improvident act reckless mis- management” resulting $500,000 loss to the Association of and, alternative, future interest plus in the payments that the loss from negligent acts, i.e., resulted two grossly improvident (1) terms of sale without approving cash or security as was Board, done in 1960 by the then listed in Paragraph (2) assented who The defendants the discount 1963. approving times at both the Board and were members of transactions both Miller, Martin, Hahn, Huff, Gladhill, Jr., Crossman, were: Jr., Norman, and White. Remsberg, Toms Jr., mis- the in connection with the facts alleges 13 Paragraph Association of the Report in the Annual statement 1963 leading the matter and particularly in regard Embassy Dairy in the 1960 the statements $500,000 Not were only discount. $450,000 or a indicating gain of and Annual Reports 1961 (the report ,$435,795 operating in future any never corrected convert the so- its face $500,000 in would on discount of 1963 way in any the discount was not but profit loss), called into Re- In the 1963 Annual sale. Dairy with Embassy connected the Mem- of in the the item was “Statement port appearing only financial the Fund” appended bers’ Reserve 1963 Revolving of Payment “Discount allowed on East- statements as follows: Products, $500,000.00.” Food Inc. ern Food Note Eastern Products, Memoran- named in the Inc. not the purchaser men- itself, made no Annual Report dum of the Agreement no indication in and there was tion of the transaction the text the in with in the this was a note connection Report given that assets of of the Washington sale businessman” so-called “to and listed in 1964 The directors office Embassy Dairy. state- misleading the are deemed for Paragraph responsible mismanagement” ment an “act of reckless alleged which to be those defendants. Embassy of the allege relationship and 15 the Paragraphs Court the divestiture orders of the District sale to the Dairy 1, January of Agreement case. It is that the anti-trust 1961, the District Court the Association to was submitted with the Court’s di- complied determination that it for a solely I9601, 30, and January orders vestiture June The agree- the court on November 1960. was approved by 1961, and there- January, ment was consummated on about Agreement allowed. The $500,000 the “discount” was after 1, 1961, re- that certain would be employees provided January and taken over into the employ leased the Association R. Parks” be one so trans- naming especially purchaser, “J. general manager Asso- operating Parks was ferred. become, for ciation and was transferred Dairy and be- came, general manager operation for purchaser. belief, On information and plaintiffs allege the Asso- regular ciation continued pay compensation services “advice” to Parks and further him guaranteed against loss of his thus position salary, violating the and intent of spirit the divestiture exceeding orders authority given Association order court by the the sale in that such approving an arrangement constituted a reservation of to influence power the purchaser’s conduct and thereby require- vitiated court’s ment complete good divestiture This exposed faith. Association to a charge of of the anti-trust contempt order of the District with Court resulting heavy liabilities by way penalty. The defendant directors already have been responsible specified this prior paragraphs plaintiffs charge an “illegal violation was act of reckless mismanagement” on the responsible. the directors effect, in

Paragraph summarized with the mat- respect to ters set forth in 8 to 15 inclusive the mis- Paragraphs “gross management, gross negligence and dereliction the di- of of duty” alleged rectors to be as responsible, follows: (a) Authorizing and the approving Embassy Dairy purchase $4,890,000 prior extensive additions without making clearance as to anti-trust matters the of from Department Jus- tice. was,

(b) the which Approving price on information and be- lief, grossly excessive view of the of the District finding Court. sums, $50,000, In

(c) wasting large exceeding in fruitless an litigation to sustain indefensible transaction. In

(d) into a sale hastily entering of the Embassy Dairy 1, 1961, property January with a purchaser of doubtful re- sponsibility, without any actual down payment and on terms which amounted to a gift corporate of assets.

(e) concealing In from members true the misrepresenting terms and conditions of the sale and even the of the identity purchaser. In future

(f) falsely representing that payments were “ade- secured” were quately they when unsecured. In the sale made at a when profit was

(g) representing in fact it was made at a loss. wasting $500,000 In funds

(h) of members’ allowing the its purchaser “discount” to successor. In the misleading statements

(i) making regard “discount.” Parks,

(j) continuing approving compensation to charge. the Association to thereby exposing contempt facts certain Paragraph alleges regard acquisition Bros., as of the stock Richfield and capital Simpson trading Wakefield Model Farm It is Dairy (Wakefield). $1,000,000' exact has was in excess amount price but Associa-

not been disclosed. The Annual Report tion, however, were companies facing does disclose that “these in- their bill.” This and unable milk stock bankruptcy pay which among Embassy Dairy was the assets of placed vestment as milk of the Association. the “fluid division” operated litigation acquisi- was made in the anti-trust Complaint and, following of Richfield decision tion and Wakefield Court the United which sustained Supreme States n complaint also, the consent decree of these properties 22, 1960, itself to divest November Association required dairies these assets The total investment the three also. laws, including purchase made violation the anti-trust additions, $5,000,000, all exceeded prices, improvements indicated, sold, for no additional assets as above which were consideration, loss resulting further adding to thereby sale, gross neg- from which loss resulted from Association already directors specified on the of the defendant ligence in prior paragraphs. 18, 19, regard facts in 20 and certain allege

Paragraphs Robinson, and the settlement improvident to Hooper the Dugan Report. the full with them and suppression belief, on and alleged, 18 it is information Paragraph 1963, in fla- to prior and Robinson had the defendants Hooper trusted as fiduciary responsibilities of their disregard grant use of their by making Association and and of the officers agents acts of following consummated the powers, official and positions the the Association: expense at aggrandizement personal (a) Robinson acquired large tracts of land near agricultural Laurel, Maryland sold it to the Association at a substan- tial profit, the land although was not needed Association for the amount and cost un- purposes being of the land description, available to but included the rec- plaintiffs Association’s ords. Laurel, a acquired Robinson milk near

(b) processing plant known Acres Plant” “Olney Dairy Acres), Products (Olney 1, 1955, he which sold Association December for $1,000,000, a representing large profit unconscionable him. Here are but again figures unavailable to the plaintiffs, they believe are included in the files and rec- they Association’s ords. Secretary-Treasurer While General

(c) Hooper Manager of the Association and of the manager Robinson was plant, acquired or constructed a milk in Flor- they Laurel plant and, time, $1,300,000 ida gross short diverted over worth of business from the Association’s their Florida plant to Laurel plant, being diversions consummated mere entries by books of the plant, Laurel clear “constituting misappropriations of assets of the Hooper Association said and Robinson.” milk

(d) purchased from the at They products Association price low a high sold at to customers product price of the Association. When

(e) questioned were as to these they operations they caused the Association to Florida buy the themselves plant from at an after excessive price was no plant longer operating.

(f) Robinson went personally owning into business of and, operating trucks means his official position, required be products plant to hauled and delivered in Laurel his trucks. Hooper and Robinson

(g) caused cer- pay Association tain excess percentage compensation Robinson aggregating $130,000 year over one members paying Associa- tion too little their milk and surplus thereby inflating overstating so as to profits plant higher result com- pensation for Robinson under the excess percentage arrange- ments made by the Association.

55 employ inexperienced caused the Association (h) They in positions and Robinson Hooper relatives and incompetent in the employ elsewhere plant of trust at the Laurel Association. following: alleges 19

Paragraph As- directors of the the then 1964 year “During defendants, having as 4 sociation listed paragraph at- their brought to or all of these matters had some tention, with settlement wholly improvident reached said and Robinson which by Hooper the defendants officers, as agents were removed resigned defendants Association, but their employees were pay severance rights salary, compensation all forfeiture of the clear notwithstanding recognized, conduct; said de- which reason of their rights by such $95,000.00 sum of wholly inadequate fendants paid from the Associa- obtaining gains illegally out of their tion, ag- to compensation alleged rights as said well re- $40,000.00 a general gregating approximately wholly settlement was lease from the Association. Such them to retain allowing unjustifiable, unreasonable and gains, profits of dollars of hundreds of thousands infor- Association. On taken from the illegally benefits belief, made said settlement was mation and such investigation, adequate without defendant directors in reckless care and indeed exercise of due without the Association of the rights flagrant disregard and its members.” allege the the plaintiffs Paragraph Subparagraph (a), certain regard to statements specific

source of detailed in a Special and Robinson wrongs by Hooper committed in the summer 1964 the Association Report prepared meetings regional of oral purpose presentation for the as a is attached Report Special Association. This be- allege they The plaintiffs as exhibit G. the complaint is true and Report in the Special of facts lieve the statement facts as their own. all that statement of adopt in the Record printed pages G consists of 16 Extract. Exhibit It is entitled of Facts Contained in “Statements Special Report Prepared by Maryland Milk Virginia Producers Association.” This gives first in re- background Statement gard to the employment arrangements and contracts Hooper and Robinson. had been Hooper the Association employed by for 29 his years He prior dismissal. became General Manager and Secretary-Treasurer in 1956. His most recent management (cid:127)contract a provided $30,000 for a salary deferred year, plus compensation at the rate of per year any earnings 1% Association in excess of the value of milk as determined by Federal Order $50,855.55 amounted (which in the Re- %2 31, serve Account as of December 1963), a plus Pension Plan furnished the Massachusetts Mutual Insurance Com- Life pany the use a plus residential at Bar- property Lake croft, Virginia, $200, rental of monthly which was carried on the Association’s $60,422.12 books at a net value of (the cost of the residence is stated) not and which had the Hooper right to purchase at its net value at time any his during employment or within six months after termination of employment. G next describes how

Exhibit Robinson came to be employed Association. On November the Association pur- chased from Robinson and his then partner Melvin Berman the manufacturing dairy products business then being operated as Laurel, Acres Olney Dairy Products in Maryland. The pur- $1,000,000 chase price was for the business and approximately 20 acres of land with improvements. Additional land was ac- from quired the parties around July 1957. As of December 31, 1963, investment, the Association’s total capital less depre- ciation, in its Manufacturing $3,549,725.24. Laurel Division was In the beginning, Robinson and his then partner Berman were as employed Their managers. compensation was each of the 5% net profits resulting from the operation of the Laurel plant, maximum compensation $20,000 for each not to exceed a year $40,000. or a total of Berman later withdrew and thereafter Robinson was sole manager and received of the net profits 10% from resulting the operation plant. his latest Laurel employment contract Robinson was obligated “cooperate fully with the General Manager and the Board Directors carry- out all ing policy directives” and he was obligated as follows: “The said agrees Robinson to devote such time to management the said business as be neces- may to conduct sary said business at the highest degree of * * * shall, times, efficiency, said business at all have first call the time and effort of the said upon Robinson, but he shall right, have the subject foregoing, engage other businesses for his own account, said business or shall not providing enterprise conflict with the interest Association.” The exact figures for the profits net from the operation of Division, 1958-1963, Manufacturing are then given follows: 360,302.14 $ 827,450.55 1,003,700.97 1,020,875.58 1961 563,732.41 1962 383,213.49 1963 $4,159,435.14 Total Net Profit Robinson received the following from compensation 1958 1962: through 40,000.00

1958 $ 64,602.66 1959 77,376.20 113,430.62 62,636,93 The then an gives Statement account various trans- actions which led to the first finally change management. The Products, one inwas to regard Harrison Inc. Dairy Jackson- ville, Florida. The purchase arrangements the proposed op- erations and Robinson of these facili- by Hooper dairy Florida ties “were never officially approved or Board formally * * * at time to the commencement of the any prior operation making of the investment.” The then sets forth Statement following: Dugan’s Finding

“Professor Fact to be re- Report, on, ferred has certain to later information developed time, that time Hooper which shows from to Mr. and/ or Mr. advised the President of the Asso- Robinson ciation and some the directors that an investment had been made in the Harrison but on each operation; occasions, either ex- of these the advice given nebulous or that the tremely gave impression pro- gram had been embarked these two upon by employees ef- for the the Association its purpose benefiting fort to new markets in the of Florida. gain State on,

“Later that the actual developed ownership Products, the stock in had been Harrison Inc. Dairy in the names of their placed by Robinson Hooper fact, children and Mr. wife. This respective Hooper’s brought when the attention of the President of the him Association the Fall of caused to conclude do’, that ‘This never finally will with result brought he the matter attention Board of time, At Directors. Board was not possessed of any details sales regarding day day operation Harrison, but the little it did know about the opera- tion convinced it that it the nucleus represented possible conflictof interest.” In January, the Board sent the Committee Executive inspect Harrison This Com- operation. Jacksonville 9, 1962, mittee after its voted on trip, February to recommend to the Board that Harrison Products be Dairy purchased the Association from and Robinson who were Hooper acting voting trustees for their families. Board on the same day, 9, 1962, February adopted recommendation and authorized “— purchase sole of the Board purpose to being try every means available to any eliminate area possible for con- flict interest its among employees.” Kendrick was authorized to audit the Harrison furnish operation and to a Certified Bal- ance and Profit and Sheet for Harrison as of Loss Statement 21, 1962, March and certified supply figures on which the purchase could be price based.

After the were reports completed, the Association in- entered agreement to an the entire purchase Harrison operation for $81,341.27. The details of the payment purchase price $40,000 were agreement, was given. paid signing of upon $20,000 1, 1962, subject adjustments to certain possible June $21,341.27 the balance of was received proof when written from the Internal the Har- Revenue approval Service 31, 1961, rison return for the if period ended October no addi- assessed, assessed, tional income tax were and if the additional amounts would be deducted from the After the price. purchase Harrison, purchase of this was and the corporation dissolved operation Manu- Jacksonville, became the Florida Jacksonville facturing Division of the figures Association. The specific the operation of this Division are be summarized given may as follows :

(a) 31, 1962, For the six months ended December the sales Cheese, from Cottage Powder and Milk amounted Skim Sterile $110,854.79 upon $5,045.53 which a net profit of was made. (b) For the year $250,784.58 1963 the sales were and there was a net profit $14,032.38. These

(c) are figures with the net compared sales and profit for the month 5j/2 period of control of operation by the same Hooper sale, Robinson prior to from May 31, 1961, October during which period the sales amounted to $749,352.03 with a net profit, $54,085.26, before income taxes of so that the sales were three times larger during the month J2 than period for the entire year $54,- and the net profit 085.26 as contrasted $19,000 with approximately for the 18 month period ending December It 1963. is then stated:

“These facts constituted a danger signal which con- large vinced a segment of the Board of Directors a thorough, independent Fact Finding Study Audit fact, were absolutely essential. some members of the Board itself had commenced to make in- already studies dependent of their own to determine what was wrong and why.” then turns to a consideration of the Mutual Statement Sales, Division,

Milk Milk Inc. Mutual Packaging Sales Oneida, Robinson, Inc. transaction at New York. un- (Mutual) the Board known to when it authorized of Plarri- purchase new venture son, another upon had embarked brand “already cor- these Mutual Robinson formed of New York.” the State very in Oneida plant construct a milk processing porations Milk Mutual Plant for the similar to Association’s Laurel York, of consisting a federation of New Producers Federation of bargaining cooperatives comprised approximately 1961, and proceeded began June, members. This venture around Robin- in 1962 completed until of the plant the construction ap- or official in this venture had no formal son’s participation President of the Association. of Board or of the proval Oneida in the construction only Robinson not participated Federation, ac- but later on Mutual and in its sale to the plant, that plant. manager operation as cepted employment together with the Harrison problem, These activities on top then before several unanswered questions pending “other management practice Board” Robinson’s involving policies Laurel, in the Board’s refusal to renew Robinson’s at resulted on December 1963. employment expired contract when ac- then the event which gives precipitated Statement Click tion the Board. November On E. James Association, tendered his (Click), Secretary Assistant charges against Hooper. a statement of resignation presented resigna- refused After a discussion the Board Click’s general tion and the president a resolution that committee of adopted investigation make a full vice-presidents the first and second ap- of the affairs and that sufficient funds be Association At a of the Board propriated purpose. Special Meeting 22, 1963, on November com- powers investigating Plant then mittee were Committee which was delegated take the deemed into' empowered necessary to^ steps inquire the affairs its findings Association report Board as The Board also decided that quickly possible. Ed- ward the Association’s new General Merrigan (Merrigan), J. Counsel, be forthwith invited to attend all of the Board. meetings The employment of Professor Frank Dugan (Professor J. School,, Dugan), of the Georgetown University Graduate Law was then described. Professor Dugan, enjoys who a national fact-finder, as a reputation arbitrator and as a Dean former School, the Graduate Law was employed the Association to the rele- developing the purpose act Special as Counsel management operation the recent regard facts to vant the Harrison to reference of the with particular Association The Manufacturing Division. and the Matter operation Kendrick to work made with arrangements Committee Plant authorized to was Merrigan with Dugan, Professor closely take statements authorized to was Dugan Professor cooperate. officer, Association and to employee director or any from He heard testimony. court to transcribe the a employ reporter well ex- as testimony pages 19 witnesses and took files Witnesses and documents. amining hundreds of pages investigation The took place afforded the to counsel. right were Dugan Professor February December to 1964. from his recommen- containing filed a 75-page Report, Confidential Kendrick, who had C. Clif- replaced dations and E. conclusions. ford, accountant, communication the was in constant regular and, Merrigan, Professor de- Dugan together they with with records, in detailed various veloped reports, supported by audit matter, Mutual and the to the Harrison the affair regard Laurel Manufacturing Plant relations with both. gives Dugan’s then the “essence” of Professor Statement investigation based the and audit. The Harrison upon

Report, and Mutual are the ones covered. principally transactions Harrison,

In it is stated the sale Har- regard that after ice rison of cream mix area became unprofit- Jacksonville able, devised a made Hooper whereby and Robinson sales plan Laurel were Manufacturing simply Association’s Division diverted, Harrison, through entries which bookkeeping only, on each di- price up received the benefit of a mark “paper” sale. from old custo- verted sales were diverted Some Plant, mers and in the orders those cases from Laurel at filled old customers were taken Plant were Laurel at the Plant. On product with manufactured the books Laurel Association, however, was credited Harrison sale made from but no On delivery Laurel Jacksonville. from Laurel to the old custo- contrary, delivery directly went books, under Division mers. Harrison’s the same Mana- kept Laurel, directed the at reflected bookkeeping who ger employees from the “purchases” by each of these Harrison Laurel Plant, but at a price considerably below that which Harrison’s books showed as the price per pound charged to the actual cus- short, tomer. Harrison was interposed as “Phantom broker” between Association and the old customers of the Associa- tion, which lost the difference in price thus gratuitously given None to Harrison. old customers—with one exception— Florida, was located in but were located in Maryland, Virginia, was, effect, New York or Wisconsin. Robinson simultaneously sole both saleswum for Harrison and the Plant. Any Laurel “new” customers developed by Robinson through to purchase Harrison could obviously and should have been credited directly Association, without the differential price brokerage favor of Here again, Harrison. the deliveries were made di- rectly customers, from the Plant to the new Harrison’s Laurel function being exclusively collect the uncalled for “paper” profit.

Substantially the same arrangement was made in regard to the Mutual transaction Robinson. Robinson made a deal with Weldon Farm Products a (Weldon), New York export toward the end company, of 1961 whereby Weldon and other exporters were told could skim they buy powder to be manu- factured at Mutual the new Oneida Plant aat certain price and that Robinson would guarantee price. construction of the Oneida Plant ran into and work was delays en- stopped on tirely the construction of that fall plant of 1961 and did not commence until April 1962. To the skim supply Robinson powder, turned to the Plant and a employed Laurel “Harrison-type” arrangement bookkeeping whereby the Asso- ciation sold (on only) books to Mutual and Mutual resold however, to Weldon. These shipments, were made from directly Weldon, Plant to but Mutual Laurel received sub- very stantial fee or differential brokerage price on those sales. Mutual $800,452.68 paid Association for the product, but Mutual $946,318.42. resold to Weldon Mutual did pay freight. The gross to Mutual from the profit bookkeeping entries $100,256.23. amounted to The “back-up papers” clearly estab- lished all sales from the Association were made ff> directly from Plant Weldon the Laurel without going through any facili- ties of Mutual. It is then stated: Counsel, Association, Mr. its General through

“The Mr. Robinson to pro- Merrigan, formally requested Sales, Mutual Milk Inc. and Mutual duce the books of Division, exactly Inc. to show Packaging Milk Sales differential or was allowed to mark-up a price why Mutual, cooperate, Mr. Robinson agreed but while invoices only. limited this to sales finally production he Mutual were corporation pro- The books of the never duced.” Dugan when confronted Professor with the Mu-

Hooper, transaction, thought stated that he that Mutual was tual-Weldon Weldon and that when he checked the prices they of line did not seem out with Government sales. When asked that skim sales to Mutual powder the fact were “consis- why getting, the lowest Association tently usually below notice, did not him put the Government support prices,” he stated: * *

“* in the has light what come Iup, would cer- it, not, but I did at time tainly question except to it with them as discuss to whether or not was Association, best interests of the because I did not want more stuff get any Government warehouses.” audit, Dugan Board, As a result of the Report its at 12, 1964, February meeting voted that be asked Hooper claimed he had a resign. Hooper contract with the Associa- under, intended tion which he to work wished to consult his did not consider the matters attorney alleged to justify termination of his contract. The Board then adopted motion his duties as General relieving Hooper Manager and remov- him as Secretary-Treasurer. ing Hooper’s employment contract 1963, terminated at the end of had had not been renewed. It is stated that Board’s reasons for terminating Hooper’s were: the Board (1) felt that employment Hooper’s contract Robinson’s, had like expired at employment end By-Laws that under the General (2) Manager, subject Directors, was to the control of fully responsible for carry- Association; on the entire business of the ing a majority Board felt that the facts disclosed the Dugan Report made Hooper responsible directly indirectly over-all losses sustained. The Statement ended with the following summary: therefore,

“In summary the crucial facts concern- Mr. ing Hooper were his (1) direct involvement the Harrison operation and (2) his failure to stop price advantages Mutual, given to Harrison and even though those prices generally were below the Govern- ment support prices they were consistently lower than those allowed to other customers of the Associa- tion’s Manufacturing Division. Proof of this last fact is evidence since both Harrison and Mutual were able to ‘re-sell’ consistently the products they purchased from Laurel our Plant at higher than those prices they regularly received from this Association.” In Paragraph Subparagraph (b), Robin- alleged son and until their Hooper, resignations or removal from of- fice in “did in fact administer and direct the entire busi- ness of funds, the Association.” All of the books and account- ing Association were entrusted to their hands Board. and Robinson Hooper by reason of their and au- power “were in fact thority fiduciaries if they same extent as had been the chief executive officers of the Association.” It then alleged: delegations of power

“Said authority to Hooper and Robinson the Board of Directors were unrea- sonable and excessive and in the placed hands of said individuals the power to defraud the Association and sum misappropriate large shown in G.” Exhibit In it is Subparagraph (c) alleged that and Robin- Hooper assets, son together misappropriated corporate funds and busi- G, ness as described exhibit and in so doing, “they together violated the fiduciary obligations which had they assumed with business, respect operations of the entire and more par- ticularly, the Laurel Plant.” it is Subparagraphs (d) (e) the facts set

forth in exhibit G demonstrate a between conspiracy Hooper assets, funds and and misappropriate corporate Robinson doing In business and to the Association. collectively defraud assets and they this became constructive trustees of all of the so by obtained the Association. property participated Each breach of trust the other. The Association continued by hold and equitable title to the diverted hence property Hooper could by misappro- Robinson not back paying priated extinguish the Association’s title to property equitable release, the remainder of the property; by so-called obtained was, is, them an void and inadequate consideration be should set aside the Court. it is Subparagraph (g) alleged notwithstanding Board,

disclosure of facts in exhibit G appearing the Board “remained ‘very significantly when it came divided time to on vote whether Hooper Mr. should have been termi- manager, nated as general question previously whether Mr. Robinson should have been retained at the Laurel ” alleged Plant.’ It is then as follows:

“In light the manifest frauds committed said defendants, complainants charge only persons subject to undue pressure and influence said de- fendants, or persons their implicated acts wrongful could have supported them in retaining office. Com- are plainants unable to name the directors who unrea- sonably Robinson supported votes, in said Hooper but that those charge directors condoned the frauds and committed wrongs by said Robinson and Hooper, endeavored to prevent disclosure of said frauds and wrongs to the members of Association. The records will Association disclose the names of said di- rectors, complainants, as well as this Honorable Court, are entitled to full disclosure thereof.” 21 of the Paragraph complaint considers the Dugan Report. It 1964; that it promulgated that Parish and other requested members repeatedly that they be permitted to it; examine that the defendants have conspired together to sup- it; and, press that President at Remsberg, the Annual Meeting advised that Eebruary, the Report was being prepared it

and as soon as was members would be completed permitted it, “but said defendant directors refused to to examine the have then the chief executive promise by honor said and commitment It is then alleged: officerof the Association.” that charges and belief complainant “On information for justifiable said is not suppression Report the of have and said defendants the any corporate purpose, that it the of apprehension same because ..suppressed liability the may lay personal foundation imposing the them for losses suffered Association.” huge on de- it is that the In and 23 certain of Paragraphs alleged directors, to the identity plain- fendant whose is not available time, together suppress, tiffs this further “to at have conspired in re- color the falsify and information due members” rightfully Association, Re- both its Annual gard operation this, otherwise, ob- and have hindered and ports by doing a long to the defrauders to over bring justice structed efforts se- the into false sense of period by lulling of members years running them take no until after the of curity causing action the com- many statute limitations as to of the acts three-year is plained applicable) the statute of limitations (if and obstructions have made it more difficult to ascer- delay tain facts It necessary to establish these claims. prove directors, identity is that also certain defendant whose alleged fraudulently is available to have not presently plaintiffs, concealed causes action of and have collec- complained fraudulently themselves tively conspired among concealed to conceal those causes of action. with others 24 it conspiracy, already is that the Paragraph mentioned, to the facts Re- Dugan withhold disclosed is demonstrated the conduct and remarks of an autho- port at mem- of the Board the Annual Meeting rized representative 22, 1965, bers in an February on contained from the excerpt that filed as ex- meeting as transcript complaint hibit This exhibit between gives colloquy Merrigan, H. Association, Fulks, counsel of the and Mr. a member general Fulks the direct put question Merrigan: the Association. * * * I, member, can I ask to see the Dugan “Can original it, I can I have that Report? Merrigan replied Can read it?” matter persisted “It is a involved in a Fullc proceeding.” court “* * * Can I it or I Is under stated: see can’t see it? it standing and the directors on After rug it?” denying it, standing was under the and the directors rug Merrigan “There nothing Bugan Report stated: essentially that has not told Did already you. you been attend last meetings when the directors made a at spring, report you, your district After Fulks stated that he in Florida at meeting?” time, event, “In Merrigan stated: the substance any of the Dugan has been Report already available most of the members made all meetings.” —to of the members who attended their district After background the Professor giving the employment Dugan, Merrigan stated:

“It was a made fact-finding who thing. Dugan Professor his that report insisted as own employment would he do that if his only would be confiden- report tial, because make he wanted to an honest straightfor- ward answer which not else could be used anywhere him, he against if went and out did an He job. honest took approximately two three thousand pages testimony then a made report which he himself ‘confidential,’ wrote across front cover meaning it that was for the use of The re- day Board. that Board, port filed with the the Board took certain extreme against actions some at that employees time.

All of this was involved—could have been involved litigation which would not helped have your back- bit, either. yard poultry one So Board of Direc- tors their best judgment have put not it on the front page Washington Post inor the Culpeper in the Frederick newspaper or newspaper as other are to But trying do. there is people nothing in that that member report essentially any should not already if know he went to his last meetings spring.

“The Dugan answer will Report not cir- be to that culated around people want put it in the until court newspaper that, we should says do then it it is the court’s is no our longer judgment, judgment.” Dugan made the report further stated that Professor

Merrigan and that he attorney as an acting professional capacity his He it. made “insisted that the cover attorney-client privilege he Fulks as to whether pressed by Board.” When again “The answer replied, Dugan Merrigan could see the Report, no, time is the matter is involved at the because present court proceeding.” Ken- conspiracy Paragraph participation accountant, facts,

drick, regard the true to conceal As- and Robinson and the losses Hooper derelictions of Wakefield Richfield Embassy, in the sale of the sociation assets, misleading issuing incorrect Dairy by consciously matters are The details alleged. statements in to these respect financial no in the 1963 given. are then There was disclosure statements, February certified Kendrick under date of $1,- diversion of and Robinson improper Hooper 300,000 business to their Florida plant of the Association’s entries, had been Ken- although brought these matters book statements issued Ken- drick’s attention. 1961 financial in the Annual Associa- Report drick and included $435,794 on the a “so-called” capital gain tion included Em- sale, the sale disclosing without included Wake- bassy stock, or charge-offs and Richfield losses exceed- field had The $1,000,000 to these assets been incurred. ing applicable carried statement into gain operating fictitious capital 1961; $500,000 in was allowed yet 1963 when discount sale, this was included in the operating to this not applicable to The any mentioned in footnote the statement. statement or contained in a charge the transaction was mention of only as “Discount allowed on payment identified surplus Eastern $500,000.00.”, which, Products,. it is alleged, Food Inc. Note * * * did identify knew not the loss as appli- “Kendrick well sale must be Embassy Dairy and therefore deemed to the cable the fact' from the intentionally concealed members have Report to whom said was issued.” Association it that because long In course Paragraph of facts from the and concealment conspiracy membership, the members were not to vote at the position intelligently 22, 1965, Annual and to determined Meeting have February whether the defendant directors should been replaced by have new directors and further that will be able to vote they never until full intelligently they regard have information in acts of management made through litigation available this otherwise and until particularly Dugan is made Report available among for circulation the members. A resolution was 22, 1965, made at the of members February meeting express confidence in the directors and to rendered pay any judgments against this, them. The plaintiffs against voted endeavored to it, minutes, be recognized to speak against but the on informa- belief, tion and Wharff”, state that one “Mrs. only person, voted it, against though even there was a It large vote opposition. is alleged that the resolution is without legal significance, but demonstrates that the present officers and are now in directors control of the Association and “it would have been fu- wholly tile” for the plaintiffs apply to the with rea- any membership sonable hope that any might authorize the of a suit filing against directors the name of the Association. Paragraph the times and circumstances in regard to

when the plaintiffs discovered the wrongs of in complained the complaint are set out. Without giving the detailed facts al- leged, it is sufficient to state that the did plaintiffs not learn of the wrongs, notice, or facts them on putting until 1964 (the plaintiff Wenger knew some facts either December 1963 or January 1964). Parish learned of the Hooper wrongdoing February, when they received a circular letter from M. Belmost Verstandig, the public relations official of the Associa- tion, of the dismissal complaining of Hooper Board “on ground everything Mr. had Hooper done was done with the full knowledge Board of Directors and with their full consent and The approval.” derelictions of Hooper Robinson were announced by Remsberg, as president of the As- sociation, at the Annual Meeting late in February, 1964. plaintiffs learned in late 1964 of the substantial losses in the sale, Embassy and were prevented from learning these facts earlier by the fraudulent concealment the directors. Begin- ning in May, advised, were plaintiffs at regional meet- been Association, completed had investigation ings of Dugan Report and promised and “an the expected outline of The plaintiffs at such meetings.” read to those orally present Re- Dugan of the outline of asked to see and obtain copy Parish, sought “also were refused. but these port requests members than of more five percent obtained the signatures records of to the books and on access requesting petitions not being proper but said was denied as request Association re- were answers to which Parish propounded questions, form.” November, 1964, who fused. Present counsel was employed reasonable claims and filed with investigated the immediately County, Baltimore in the Court for Circuit diligence complaint 4, 1965. February by filing present complaint followed 7,1965. The intervened on April other plaintiffs that: The for relief are prayers be to account required 1. The individual defendants with dealings them from derived profits by Association for all in the com- alleged matters respect Association with ; plaint Kendrick, defendants, deter- be including

2. individual As- liable to the jointly severally mined and decreed to be connivance, acts, by “through for all losses suffered sociation of them duty inattention and derelictions of negligence, culpable them”; and each of and Robinson Hooper

3. releases general The purported ; aside and cancelled .shouldbe set and maintain ap- to institute 4. The Association be ordered jurisdic- in other counsel litigation by independent propriate can- as defendants in this suit who named against tions persons not the court’s process; be reached relief. and further 5. The have other plaintiffs Parish, an affidavit Frank P. is followed The complaint n oneof correct, the facts “are true plaintiffs, belief, made on information allegations as to (cid:127)except investigation made a he has reasonable allegations, as to such be true and correct to best of and certifies them to thereof and belief.” his information knowledge, defendant raise the fol- the various parties The demurrers of for our consideration: lowing questions

71 Does the sufficient facts which constitute complaint allege 1. fraud, assets, or gross negligence actionable waste of corporate directors ? culpable mismanagement on the of the part 2. Does to excuse the allege grounds sufficient complaint from their remedies before plaintiffs exhausting intra-corporate to institute the seeking suit ? present

3. Does the entitled the complaint allege plain- facts which tiffs to disclosure records in Association’s view provisions of Code Article 51 ? (1957), Section 4. Are the claims the defendant directors which arose against more than ? three of suit barred laches years prior filing

5. Are the matters in the barred complained complaint judicata the doctrine of res as director defendants to those whose demurrers to the Amended Bill of sus- Complaint were Second tained without leave amend ? Parish’s,

6. theDo as plaintiffs, have to maintain a standing derivative action on behalf of the Association when sold they their cowherd in the spring 1966?

7. a derivative suit be maintained in May regard to events antedating of a member of the membership Association? 8. Does the complaint facts which would allege justify the setting aside of the general release to the defendant Robinson?

9. Is the complaint multifarious as to the defendant Robin- son?

We will consider these questions the order indicated.

1. are opinion We the complaint alleges sufficient constitute, facie, facts fraud, prima actionable waste of cor- assets, porate gross negligence culpable mismanagement on the defendant directors. part In ruling on a demurrer to a bill of complaint, truth of all material alleged, relevant facts properly together with the in- facts, ferences which may reasonably be drawn from those is ad- Houser, mitted. Killen v. See Md. A. 2d 527 (1965), and prior Maryland cases cited in that opinion case. Maryland Rule 301 b permits adoption of an exhibit by reference as part of a bill of complaint.

It has been set necessary us to out some detail the al- legations of as complaint the Chancellor was of the opinion inferences, not

that these did allegations, with their reasonable assets, fraud, negli- state gross actionable waste of corporate of the defendant gence or culpable mismanagement indicated, the Chan- directors. not with agree As we have we do certain phrases cellor’s conclusion. In the Chancellor’s opinion com- and statements found in some of the paragraphs are treated portions are selected and these selected plaint portions These selected representative of the entire complaint. the com- are taken from 6 and of paragraphs for most part which, seen, introductory as has been are plaint paragraphs many is in subsequent paragraphs those that follow. It these concealment, fraud, gross illegality, of the ultimate facts of the to conceal assets and negligence, conspiracy waste of corporate 8 paragraphs certain the appear. allegations losses See and sale operation 15 17 to the through relating purchase, Division, through Milk 18 of the Association’s Fluid paragraphs Robinson, 24 through 20 21 relating to Hooper paragraphs the direc- by concealment relating membership to the from into the investigation op- tor the results defendants of of their affairs and para- eration and of the Association management in the conspiracy 25 in to Kendrick’s graph regard participation to conceal. md

Fraud Concealment and the the director defendants alleged against The fraud allegations charging defendant Kendrick consists principally been accu- them facts which should have with concealment of members, but which disclosed the Association and its rately an- of false and misleading were concealed publication alleged. A to conceal is also nual See reports. conspiracy 24, supra. 13 and allegations paragraphs fraud result from may well established actionable It is material facts as well as the false state- the concealment of from Singer, material v. 227 Md. ment of facts. See Levin that it is not neces- A. 2d 423 It is well-settled (1961). equally with “fraud” or with specifically the defendants sary charge indicate are alleged if the facts fraud or “acting fraudulently” from the facts. As alleged such that fraud is necessarily implied Deceit, Am. Fraud Jur., pages was stated § 74-75: con- be though

“Fraud well even may pleaded ‘fraud- duct to is not to be alleged expressly referred ulent,’ are such as constitute the facts provided alleged will fraud in from which fraud themselves or are facts less be are not implied. charged The acts necessarily is fraudulent ‘fraud’ or ‘fraudulent’ because word not them. employed by pleader characterizing words, other an facts from which allegation fraud results is necessarily conclusion of sufficient.

Neither that the de- law nor equity requires specific tails fraud is of the transaction which predicated, or facts are be Con- merely evidentiary, pleaded. which versely, fraud is sufficiently alleged, plead- where facts ing allegations not affected superfluous not constituting fraud.” omitted.) (Footnotes Fraud, also 37 374. See page § C.J.S. case, In the have present plaintiffs paragraphs 22 and 23 that there was a certain concealment fraudulent directors, defendant is not available identity whose yet plaintiffs, and that collectively they fraudulently have concealed and among themselves to conceal causes conspired Thus, action of the Association. fraud has been specifically charged in the complaint after facts it the have establishing been alleged. previously concealment,

The fraud and as as the well clear breach of fiduciary duty on the and are Hooper spe- Robinson cifically alleged in graphically 20 of paragraphs 19 the fraud, the complaint. Many of acts of specific doubledealing and breach of fiduciary duty are described in detail exhibit G, taken, which is a statement from the part, Dugan Report and which was circulated by the defendant for use in directors oral presentation the to members at the district meetings. There to be appears by no contention the defendants allega- that these tions are not sufficient to charge Hooper Robinson with fraud, concealment, and breach of doubledealing fiduciary duty. The defendants take the position that the general given release Hooper Robinson is a shown to be bar the face complete on complaint. As we will later in point out this opinion, is position not well founded.

It stand corporation is clear officers and directors of a in a stock sufficiently corporation’s confidential relation to the material them reveal all facts impose duty upon holders to Packard, to the transactions. A. B. C. Inc. v. General corporate Corp., 1960). 2d Cir. (9th Motors F. See C.J.S. Fraud, more The confidential relation is even page 248. § The in a member such as the Association. apparent corporation not indicate that the members have allegations of complaint As been informed the officers and directors of by properly set forth in sociation in transactions regard to the various and, indeed, by been that the members have deceived complaint have been lulled into false Annual The members Reports. take by failing has been damaged inaction and Association its so that defenses rights possible action assert promptly event, and, been any accrued has may limitations have necessary difficult the facts made more to ascertain and have Association. establish claims of the which in themselves sufficiently alleges facts complaint directors by indicate a fraudulent the defendant concealment Robinson defendant auditor and active fraud by Hooper fi- them and well as a fraudulent concealment breach of material, re- facts duty. The concealed were duciary properly members, lied and its and the Associa- the Association has damage alleged. tion’s therefrom been resulting corporate assets and Gross waste negligence, culpable mismanagement. It that courts will interfere generally is well established not at with of a management the internal corporation request of a or member. The conduct of the minority stockholder corporation’s affairs are the hands the board of placed and if the majority directors the board exercises properly judgment, ordinarily its the directors are not liable. This business rule, however, subject sound general important excep- tion will be held liable if the funds of they permit that directors or to be lost or wasted corporate corporation property culpable negligence. their gross Robinson, 419, in Booth

In 1881 v. 55 Md. Judge Alvey, Court, for the cases in in country Eng- reviewed this

75 land and established the Maryland law that directors were per for sonally liable of their consequences gross negligence, rule adopting the expressed by House in Overend v. Lords Gibb, 5 480 Booth (1872). v. Robinson was cited L.R. H.L. with Parr, 245, in approval followed Fisher v. Md. 48 92 A. 621 ; Conrad, 224, in (1901) Reus Co. v. 101 Md. 60 A. 737 Loan Gaither, 564, (1905); in v. 103 Md. 64 26 Emerson A. (1906); Penniman, in 452, v. Murphy 105 Md. 66 A. 282 in (1907); Miller, 458, ; Foutz v. 112 Md. 76 A. 1111 (1910) and in Car Basshor, 419, rington v. 118 Md. 84 A. 746 (1912). Car Basshor, rington v. the Court compared the liability one of the directors of the Hammond Ice from Company resulting his gross and culpable negligence with the ordinary negligence of other directors who were held not to be liable under the facts of that case.

We do not understand that our predecessors intended to de part from this well established rule by the opinion of Court 66, 77, Pritchard 620, v. Myers, Md. A. 625-26 (1938), inasmuch as Court opinion that case relies Carrington Basshor, Miller, Penniman, v. Murphy Foutz v. v. Gaither, and Emerson v. although language opinion might seem to indicate liability for the failure to exercise rea sonable skill and care rather than for negligence. Fein gross Cf. berg v. George Washington 393, Cemetery, 226 Md. 2dA. 72 (1961).

The Maryland Brune, law is summarized in Maryland Cor porate Practice, Law and 226, Rev. page Ed. Sec.

follows:

“In addition to the specific liabilities and statutory outlined, penalties just course, a director be may, liable to the its corporation or receiver the conse- quences of Thus, breach of his duties. fiduciary it is said that directors are liable for ‘gross and culpable negligence’ the discharge or omission of their du- ties.” (Footnote omitted.) Fletcher, Corporations,

See also 3 page where it § is stated: the funds of if suffer they are also liable

“Directors by wasted be lost or or its property the corporation the duties of and inattention negligence gross omitted.) trust.” (Footnotes the Fourth Circuit for Court of Appeals The United States Co., 2d 877 112 F. McQuillen Cash Register in v. National law, approval with quoted governed by Maryland a case (1940), Coleman Judge law summary Maryland given of the case, as follows: in the same the District Court attempt a court of equity “It is not function of are of the who persons its for that judgment to substitute affairs, it once has a corporation’s control of lawfully ultra is neither their conduct been determined that vires, illegal, negligent.” (Em- nor grossly fraudulent, 2d 883) F. phasis supplied.) (112 to estab- facts sufficient the complaint alleges In our opinion, negligence, for gross defendant directors liability lish the of the mismanagement. and culpable assets corporate waste of matters. Hooper-Robinson The and elaborated fortified allegations complaint, G, placed indicate that Board facts in exhibit appearing man- general Association’s confidence in Hooper, complete divi- Robinson, manufacturing manager ager, and the. Association in the employment had been Hooper sion. secre- general manager and became since February in 1956. Robinson’s employ- the Association tary-treasurer the Association purchased in 1955 when manager began ment Robin- business from dairy manufacturing products the Laurel the com- allegations It clear from the and Berman. son and Robin- Hooper statements in exhibit G and the plaint the Association com- to defraud May, son in conspired Products, Inc. Florida Dairy Harrison through with peting It is clear that accounts. also the Association’s diverting of the Board approval did not obtain and Robinson Hooper but, misled the contrary, president on the the operation, nature the Harrison regard the directors some of trust and affording complete that the It be operation. may confidence to Hooper Robinson at this time could be said to be only ordinary negligence, but in the Fall of beginning 1961, when the president of the Association discovered that the stock of Harrison in the names of the and Robin- Hooper wife, son children and after Hooper’s certainly January 1962, when February Committee had been to Executive Florida to inspect the Harrison operation, allegations complaint regard to the conduct of the Board concerning Hooper Robinson are sufficient to indicate gross negligence and culpable mismanagement. The nature of the competing Harrison operation was known to the clearly Com- Executive 9, 1962, when, mittee and to the Board on February extraordi- narily the enough, Committee recommended to the Executive Board, recommendation, and the Board the accepted purchase Association Harrison from the families of two con- Robinson, spirators, Hooper for the “sole to purpose” try means “to eliminate every any area possible of conflict of in- terest among its employees.” Kendrick was instructed to make an March, audit 1962, of the Harrison operation as of in order to supply figures on which the purchase price could be based. 12, 1962, On April operation Harrison was purchased for $81,341.27. The reasonable inferences from this are (1) Board had actual knowledge of the conflict in interest which Hooper Robinson had engaged, and instead (2) of imme- diately investigating Harrison operation as related to the Association, the Board not this, but, failed only to do on the contrary, purchased competing operation eliminate the conflict of interest of the faithless employees. in exhibit Later customers, G it that the appears diversion of the Association’s and their accounts from the Association to Harrison appeared' on the Association, books of either Harrison both, or the or and the fraudulent and illegal fee” “brokerage or differ- price ential could have obviously been discovered in the spring of 1962 if the indicated investigation the Hooper-Robinson op- Moreover, eration had been made. other facts appeared which cried out for a complete investigation of the Hooper-Robinson- operation of the Association’s affairs. G, As appears exhibit the audit of the Harrison operation showed that while Hooper and Robinson were operating the conflicting business for the 8, 1961, to October May from period 5 month y2

approximately $749,352.03 with 31, 1961, in the amount there were sales taxes, $54,085.26, whereas for income net before profit, 1962, 31, sales of there were only December ended six months the entire $5,045.53 and for $110,854.79 a net profit with $250,784.58 profit with a net were sales there year 1963 the direc- should have put difference $14,032.38. startling This Here the books again its cause. ascertain on inquiry tors would have disclosed the Association Harrison and of records of true situation. however, the Board—and apparently done was Nothing, Click, the assistant sec- been done—until have would nothing 1963, 8, tendered his and made resignation November retary, This Hooper. courageous charges against statement of at the special meeting caused Board action proper finally 1963, into the affairs of steps inquire to take November Dugan Professor employed Thereafter the Association. The Board did in- nothing out. brought then the facts were of either Robinson from the Hooper conduct vestigate of the wrongful conduct in the knowledge actual of their time until November of in January, matter .Harrison and ten If investi- months. an year of one (cid:127)period approximately dis- gation likely made the Board would most have had been in as the plant Mutual venture Oneida covered the Robinson If this con- after January there not until 1962. was completed (he been partici- in interest had discovered flict of Robinson’s employed and was plant of the Oneida the construction pated the entire scheme by Mutual), operation (cid:127)as of this manager n defraudthe Association The have been effectuated. would never Hooper the investigate operation (cid:127)failure the Board to em- faithless were knowledge they actual after Robinson misman- is, culpable gross negligence prvma jade, ployees resul- for directors are liable defendant the for which agement later, the As will consider we Association. tant to the losses gen- that the to indicate are sufficient the complaint allegations the improvident, Robinson was and to to Hooper release eral and, mismanagement and culpable negligence gross result aside. set should be prima jade,

79 the Dairy The Purchase and Violations Embassy Act. the Anti-Trust Sherman 15, facts in re- alleges The 8 to the complaint, paragraphs District gard Dairy purchase Embassy Columbia with the laws of the intent to violate anti-trust States, regard United the various court to this proceedings violation, im- of the sale of and the requirement Embassy sale, discount, $500,000 provement and the to cir- attempt cumvent the decree of the United District Court for the States District of Columbia. 1, 1954, Board,

On August by authorization Embassy purchased by Association. United District States in a Court the District of Columbia suit filed the United against States Association the violation of the enjoin Sher found, merits, man Anti-Trust laws after a trial on the this purchase was entered into “with the intent and purpose of restraining trade.” United v. Maryland Virginia & See States Ass’n, 880, Milk Producers 168 F. 881 D. Supp. (D. C. 1959) Earlier, (Holtzoff, this same had held J.). Court that the “price paid by the Association for the was far in transfer excess of the actual and intrinsic value of United property purchased.” See Virginia Ass’n, States v. Maryland & Milk Producers 167 F. Supp. (D. D. C. 1958) (Holtzoff, J.). The District Court had earlier held that the Association had not violated 2 of Section Anti-Trust (see United Sherman v. States Maryland Ass’n, Virginia & Milk Producers 167 F. Supp. D. C. (D. 1958) (Holtzoff, J.) but this decision was reversed the Supreme Court of the United Maryland States Milk Virginia States, Producers Ass’n v. United 362 U. S. C. 2d S. 880 (1960) L. (Black, J.). Ed. The Su States,

preme however, Court of the United affirmed the deci sion of District Court holding the Association had vio lated 1 and 3 Sections Anti-Trust Act Sherman and or a divestiture dering assets Embassy within a reasonable complaint time. The that the alleges Association’s appeal to the Supreme Court was “fruitless”—as it indeed turned out to be— $300,000.00. and that it cost than more The cost of Embassy $3,890,000, alleged to the Association was to be in addition to which the Association expended large sums in improvements

80 and, belief, from 1954 to 1961 on information and cost basis of the Embassy at the time of its sale in was property $5,000,000. 4, 1960, excess of On November a memorandum of executed, sale Embassy for the assets was January effective 1961—approved by Board—by members of the which the assets were Embassy sold to Food Cor- Metropolitan belief, which on information and “had assets.” The poration, no $3,250,000, for the assets no selling price Embassy but cash or other assets were The cash paid by Metropolitan. paid was that in the hands This on the date of settlement. Embassy sale also included the capital stock of Wakefield Simpson. The terms of sale have been already set forth and appears that there was indeed no cash or other assets down paid purchasers, $250,000 the non-interest bearing note for was pay- able from only collections made on the notes and accounts re- ceivable, $3,000,000 note, and the in- semi-annual payable $100,000 stallments of each final year over a 15 with a period $500,000, settlement of first installment to begin years settlement, after date of was not secured or by any mortgage pledge of assets but bear did the endorsement of D. Ber- Irving This ger. exhibit E in arrangement, supported by regard to sale, terms of is alleged gift to be a assets of sub- corporate stantial value which has cost Association not less than $5,000,000.

The false and misleading statements the Annual Reports 1961 and 1962 are alleged, as well as the discount of $500,000 $3,000,000 note, during 1963 on the without col- any from, lection or against, had Berger, who endorsed proceeding the note. It is only not did the original transaction loss, in a rather result than the “capital gain” stated in the An- nual but this Reports, “discount” further increased the loss. the ultimate

Although determination that there has been a violation of the anti-trust laws of the United by a cor- States se, not, per result in poration may a finding gross negligence mismanagement on the culpable directors of the allegations corporation, complaint this case estab- lish, prima such jade, gross negligence misman- culpable alleged, As the directors agement. deliberately purchased Em- to eliminate bassy competition violate the anti-trust laws

81 clearly indi- reviewed the District Court by the evidence the decision of the cates that this was the situation. view of Borden in v. Supreme Court of the United United States States Co., 182, 308 U. de- (1939), Ct. 84 L. S. S. Ed. cided apparent before the in purchase Embassy of it that the from the possible exemption of the Association op- was, eration prima of the anti-trust laws was it so doubtful that an facie, gross mismanagement act of negligence culpable $3,890,000'—far to proceed with the expenditure excess of the actual and intrinsic value of the expend property—and further amounts on the obtain- property, without first Embassy ing clearance from the regard Department Justice not, whether or opinion, purchase its the would the violate anti-trust laws. $1,750,000

The sale of the assets for Embassy less than the sale, cost to the Association the extraordinary provisions without the cash payment any or delivery by assets be a purchaser—alleged corporation without assets—with no $3,000,000 security mortgage note by a of as- pledge sets $500,000 with a later discount of without a proceeding against, are, or even a demand upon, endorser of the note prima facie, acts of gross negligence or culpable mismanage- ment directors involved. This also indicated by mis- leading statements appearing the Annual Reports of 1961 and these misleading statements also involve Kendrick with the involved directors as paragraph 15 of the complaint. course, be,

It that the may involved directors be able may to show at the trial on the merits that their conduct in all or matters above set forth was not grossly negligent or the result of culpable mismanagement, but as we have in- indicate, allegations dicated the of the complaint prima facie, that the involved directors were grossly negligent or guilty culpable mismanagement.

2. We are of the opinion complaint alleges sufficient to excuse the from grounds plaintiffs exhausting their intra- remedies before corporate seeking institute the present suit. It is well established that ordinarily courts will not en- behalf of cor

tertain suit a stockholder on derivative remedies have until poration intra-corporate appears stockholder. been unsuccessfully pursued complaining that, stock speaking, complaining This means generally itself to holder must com upon make demand corporation action, been refused mence the that this demand has and show rule, however, to a subject This well- ignored. general or i.e., demand is re that no such recognized exception, prior it v. when be futile. Our quired predecessors would Eisler 333, 118, 329, 2d 182 Md. 35 A. Corporation, States Eastern Corporations, the stating cited 14 1339 as (1943) 119 § C.J. rule as general follows: en- sue to “Before stockholder the may Corporation it, to or rights wrongs force and its to redress protect must an effort he first make earnest and unsuccessful itself, the by to obtain remedial action Corporation directors, by then by ap- first application But he need of the plication to the stockholders. body an such that not do so where the circumstances are application would be (Emphasis supplied.) futile.” District Coleman in his the Judge opinion United States Maryland for the District of sustain considering Court fraud on the sufficiency complaint part the of a ing charging McQuillen of a v. National corporation, the directors stock Co., aff’d, 1938), 22 867 Md. 112 Register Supp. (D. Cash F. denied, 695, 61 F. 2d 877 cert. 311 U. C. (4th 1940), Cir. S. S. 729, denied, rehearing 311 450 U. 61 85 S. (1940), L. E. 316, 85 474 stated: C. (1940), S. L. E.

“It is well that this Rule portion Equity settled must be in a man- practical, 271 common-sense applied Hudson v. Albany Susque- ner. Delaware & Co. & hanna 213 29 Ct. Railroad U. Company, S. S. portion Equity provided as 1. Rule 27 referred to follows: The complaint particularity forth the must “set with efforts bill part plaintiff action as he desires on secure such and, necessary, trustees, managing of the if stock- directors or action, holders, failure to such or and the causes of his obtain making for not such effort.” reasons Com 862; Krause Brevard Tanniu v. L. Ed. the bill Cir., suit present 538. In F. pany, has plaintiffs complain the fraud of which alleges that Na directors of the been committed present all been of which have Register Company, tional Cash bill made defendant. The further states parties to secure action on the made no effort plaintiffs have directors, officers, or stockholders for is, and has been many reason that 'The Company de years, dominated controlled individual fendants, constitute a large majority, practically who all, If indi officers and directors. present suit, were vidual defendants conduct this permitted them for the against would be prosecuted company It thus that an clearly themselves.’ appears appeal futile, be since it is on the directors would apparent face of the that their interests are pleadings antagonistic to those the usual plaintiffs. Surely, prelimi nary incident a stockholder suit steps instituting of this are kind not to be treated as indispensable, when the interests of the are directors antagonistic those corporation, of the and such fact is shown The same pleadings. commonsense rule must appli be cable with respect requirement of first appeal ing to through regular stockholders or meet special ings.” cases.) F. (Citing (22 Supp. 874) also 2d Corporations, 19 Am. See 77. page § Jur.

As we are forth, of the opinion, as set above that the allega- tions state complaint causes of action the de- against fendant fraud, concealment, directors for acts of gross illegality, negligence, corporate waste of assets and to conceal conspiracy action, losses and causes of it is a alleged that majority Association’s present Board have participated various acts, of the alleged it is clear that to us it would be futile for the plaintiffs to make demand those upon directors to cause the Association to them sue to recover for their own in- wrongful juries to It Association. is well established under these cir- cumstances that plaintiffs, as minority members of the As-

84

sociation, the usual requirement they are excused from as a condition precedent a demand directors prior upon make Indeed, Court action. as the Supreme a derivative to maintaining 185, 192, Eubanks, v. 326 Mo. of Missouri stated Caldwell “* * * not per- the court would 2d (1930) 30 W. 979 S. themselves litigation against mit them to conduct (directors) v. Farmers Winter willing even if were to do so.” Edu- they See America, 257, 107 N. Coop. Minn. cational Union 259 5 2d App. Russell v. Cal. Weyand, W. 2d 226 (1961). 369, 241 Div. Taylor, App. 381 Bissell v. 229 42 P. 2d (1935), Co., Mortgage Finance and Y. 717 (1930), N. S. Craftsmen Brown, also 1945). D. N. Y. (S. v. 64 F. Supp. Inc. See Fletcher, 5965 at Cyclopedia Corporations, page § it is stated: where the al- is excused where

“Demand on the director board of constitute a wrongdoers majority leged * * omitted.) directors *.” (Footnotes demand excused from making prior are also plaintiffs Here suit. the derivative instituting the members before upon di majority would be futile as again such demand prima facie, defendants charged, of the Association are rectors will sue. the Association conduct for which wrongful with Association, un the Association these directors control As prose could not management effectively properly der their McQuillen Register v. National Cash litigation. cute the See Co., Co., Railroad v. Kansas supra, City Hand Southern at the 1931). Y. It also 2d 712 D. N. (S. F. 22, 1965, filing time after February short meeting annual 4, 1965, a resolution February case on present the suit in the express of the members majority allegedly passed to indem undertaking Board and in the present confidence ing might be which any judgments the payment them for nify them, al be carried a resolution declared to against rendered recognized be unsuccessfully tried the though complainants fu action indicates the extraordinary This it. against and speak the com by demand on the members a prior of tility requiring Club, N. Country v. Aldecress See Escoett plainants. J. Farmers and Winter v. Educational A. 2d (1954), America, supra. Coop. Union of too,

Then it is that the were refused plaintiffs (un members, as we shall later so lawfully the list of point out) that it ac would have been them to practically impossible the quaint with the relevant facts con membership allegedly cealed from the members of the Board. fact alone suffi This cient to excuse the de making members from minority prior mand upon general the v. Aldecress membership. Escoett See Club, Country supra.

Nor a may the fraudulent majority membership ratify Minis, action of the directors. Penn. R. Co. v. 120 Md. R. Cf. 461, 87 A. 1062 Corporations, 19 Am. 2d (1913). also See Jur. 542, pages 78-79: § “A requirement of application general body stockholders is not absolute and will readily give way in the interests of A justice. stockholder need not seek action the stockholders as a body, where under facts he cannot it do so or would be unreasonable Thus, useless to it. if require body of stockholders has no adequate power or authority remedy wrong stockholders, asserted individual an ap- plication to it to redress the before bringing wrong representative action is It has held unnecessary. been if a stockholder’s derivative action is based upon an alleged wrong committed against directors corporation, of such a be nature as to beyond ratifica- tion aby stockholders, majority as in the case fraud, it is necessary not to make a demand upon the stockholders before bringing action. Resort to general body stockholders would be unneces- * * * sary where to be futile affirmatively appeared or impracticable or otherwise unwarranted.” (Em- phasis supplied.) (Footnotes omitted.) For the reasons stated it already seems that the apparent plaintiffs are not required to pursue remedy of mandamus directors, against as the Chancellor thought was required. framing a suit prosecuting against the defendant directors would the exercise require personal judgment Belt, would not be mere ministerial act. Devin v. 70 Md. See 86 be 375, per cannot

352, 354, The directors 376 (1889). 17 A. them against the Association the litigation mitted to control ineffec be a of mandamus would issuance of writ so that the be it would issued where will not be tual. A writ of mandamus v. Bd. Co. Comms. and nugatory. unavailing See Oxford Co., 209 also 34 373, A. 2d 239 (1956). Dev. Md. 121 See Mandamus 830. Jur., page Am. § mind kept be entire should this considering question, is to be more authorities in the more modern that the trend or stock members suits of minority tolerant of the derivative makes, transactions of corporate holders. The size and complexity therapeutics,” of “legal and this form necessary important en his article a used D. Hornstein by George quote phrase in Counsel' Factor ‘Salvage’ titled “Legal Therapeutics: Awards,” Horn also (1956). Fee Harv. Rev. See L. Suits,” stein, Derivative “The Counsel Fee Stockholder’s The allegations, 580. Col. L. Rev. 784 (1939) A.L.R.2d are, to excuse of the sufficient opinion, our complaint and the the Board from demand plaintiffs making prior upon manda from general remedy membership pursuing mus against the Board.

3. of whether or interesting We will now question consider facts entitled the to. alleges plaintiffs not the which complaint records in view of the corporate provisions disclosure of as, 51. This (1957), provides Code Article section Section follows: hours; in- may usual business what be During

“(a) stockholder of dur- spected.—Any corporation may, hours, usual business ing inspect copy bylaws, stockholders, the minutes of the proceedings annual statement of the affairs of the corporation, trust on file in the any voting agreement office of corporation. capital percent Holders stock.—Any “(b) of five more are and for at least six persons

one or who been stockholders of record months have of five per- cent, in the stock aggregate, outstanding capital class of a of this any corporation State: “(1) May, upon inspect written request, copy, or usual person by agent attorney, during busi- hours, ness books of account corporation’s stock ledger.

“(2) May present to officer or resident any agent of the a a corporation request written statement of affairs, its shall be the of the duty corporation to prepare and to have available on file at the prin- office cipal within the corporation within State after twenty days such such a statement request, sworn to by the a president or or the trea- vice-president treasurer, surer or an assistant forth in setting reason- able detail its assets and liabilities as of a reasonably current date.

“(3) May, the case any corporation which does not maintain original or a duplicate stock State, ledger at its office a principal present writ- ten request officer or resident any agent of cor- stockholders; poration for a list of its and it shall be duty corporation and to have prepare available on file at the office of the principal corpora- State, tion in the within after re- twenty days such a list quest, containing the names and addresses of all stockholders and the number of shares of each class stockholder, held each certified to as an correct by officer of the corporation or stock transfer agent or the registrar.”

It will be observed that 51 does not purport Section to apply to members in a member corporation.

Code (1957), however, Article 132 (b), pro- Section vides : stockholder,

“Wherever the shares, term holder of or other Article, equivalent words are used in this they shall be members, deemed to include unless the con- text otherwise clearly requires.” (Emphasis supplied.) In our opinion the context does clearly require holding that it was not the legislative intent that the provisions of Section Indeed, this

51 include history “members.” legislative section shows this. law,

At common a stock corporation, stockholder of in had a right well as a member of a member corporation, records, there a proper purpose spect corporate provided for the the stockholders upon The burden was inspection. in a manda members this allege proper purpose and prove the de mus officials to compel permit action to corporate Fletcher, Rev. Corporations sired inspection. Cyclopedia (1967 2214, 2251. Vol.) §§ and of law stockholders Maryland right this common broadened 471 of substantially by Chapter

members was article of in the then corporate 1868 which provided Laws Code, 5: existing then Section “That the President and Directors of every corpora- full, fair their tion shall and correct accounts of keep transactions, all times to the which shall be at open or members and they of the stockholders inspection shall a full and true statement of annually prepare certified to which shall be affairs of Corporation, at the Secretary the President and and submitted members.” (Em- annual of the stockholders or meeting phasis supplied.) 67 with given by

There a similar right inspection was Section lists. or members’ respect to stockholders’ this of the com- broadening It should be observed (1) members, both stockholders and mon law included right that either or allege prove there was no (2) requirement had a for the Our they purpose inspection. predeces- proper sors, held in Weihen- statutory provisions, these construing Bitner, 325, a man- mayer (1898), v. 88 Md. stockholder’s “ab- that this inspection, right damus action to compel circumstances but own- depend upon solute and not made to however, Court, if the out that pointed of stock.” ership evil, an improper was for unlawful inspection purpose corporate be denied might the writ of mandamus purpose if a such on the allege prove purpose were to defendant of the stockholder. general

In the article Code corporate revision in 1908 the which the of the Court language decision with three new Weihenmayer v. Bitner rested was replaced sections, 240 of Chapter which were 48 and Sections and 74 of the of 1908 (Article Laws Section Code): Rights.

“Stockholders’ “Demanding Statement 47. If person persons owning “Sec. any aggregate five cent of the stock per outstanding capital of any this cent of corporation of five (or per any State stock, class of if such two or have been more classes issued), shall treasurer president or present affairs, written request for statement of its it shall oath, be his such a duty to make statement under em- bracing a particular account of its assets and liabilities detail, and to the same and on file at the ready have principal office the corporation days within twenty after the presentation of such And such state- request.

ment shall at all during times business hours be open stockholder, to the inspection any and he shall be en- titled to the same. And if copy such or trea- president surer delivered, to whom shall request such be shall statement, neglect to file such he shall forfeit pay to the person sum of presenting request the fifty dollars for each every day’s and if he shall delay; refuse to permit stockholder such any state- inspect same, ment and he copy the shall forfeit pay such sum stockholder the of fifty dollars for each and every refusal.

“Inspection Books. of 48. The of “Sec. books every of this corporation State, including such books as show the names of the thereof, stockholders and their places of residence and them, the number of shares held by shall the during usual business hours of be every business day open for of inspection any person holding or in the persons aggregate stock, five cent of the per outstanding capital thereof, or five per any cent of class if two or more this issued, at its office principal classes have been State; corporation of such every agent officer or any same, of guilty shall be who shall refuse to exhibit misdemeanor, shall forfeit a and the corporation inspection such demanding stockholder pay such sum of for refusal. fifty every dollars of Directors “Duties Liabilities "Accounts and Statements directors, and trustees 49. The managers “Sec. fair shall full and corporation of this every keep State transactions; annually accounts of shall they their a statement affairs of full and true of the prepare annual shall be submitted at the corporation, which of the members.” meeting (Emphasis stockholders supplied.) laws in significant

It is that this change corporation pro- to the cent stockholders regard requirement five for per statement, for the a viding filing corporate preparation a and treasurer for non-com- penalty upon president with books, for the pliance providing inspection corporate list, sanction on the the stockholder’s with criminal including on the agent officers and and a corporation penalty $50 stockholders, refusal, with no corporation applied only to “members,” 49 in the submis- mention of but regard Section it should be sub- provided sion of annual statement at mitted the annual or members.” meeting “stockholders deliberate inclusion of “stockholders” in Sections 48 and the the words “or in these exclusion of members” sec- their tions inclusion indicates to us 49) (but Section it was not intended that the five cent restriction was in- per tended to “members” or to apply to “member corporations.” itself, only This is not clear from the of the statute language but also from the the five cent restriction. This purpose per five cent restriction was to abuse per prevent an common books, right single law stockholder to demand inspection etc., attendant possible with substantial when expense, insignificant amount of the holding stock compared was, short, stock It whole structure. to prevent “strike” five cent less than litigious holding per suits stockholders Generally a stock. corporate of the stock of class of corporate at any one stock a stock be corporation may purchased time the other stockholders any without consent of prior or of the type corporation. board directors of that are not business cent limitations underlying reasons the five per in “member” which has no shares generally a present corporation be purchased approval one at will without by any the board In member corpora- of directors or of the members. Association, tions is not freely generally membership bought or member admitted to mem- sold. On the a is contrary and, unlike of shares a bership by quite Board the holder stock corporation, has one vote of his only regardless capital milk investment business. This producing relationship far more analogous holding than it is to partnership stock in a stock must corporation. granted, be “Membership” vote, not freely acquired each member has one by purchase, death would terminate the as there is no membership, provi- sion for succession of the membership to the personal repre- short, sentatives or assigns of the member. purpose five cent per limitation does in a mem- apply not to member ber corporation such as the Association and are we opin- ion that the General did that limita- Assembly not intend that tion to a apply The member in a member member. corporation continued to have his right of without the five inspection per cent limitation. We do not need decide his whether common law right of inspection his under statutory right of inspection continued, Chapter of the Acts of 3868 as under either as- sumption, the five per cent limitation did apply not and under the allegations of the it that the complaint appears purpose of the demand for was an inspection one intended entirely proper for the ultimate benefit of the Association itself. Heublein,

In Wight v. 111 Md. 75 A. 507 our (1910), predecessors, in a case a demand involving stockholder owning more than five per cent of the stock in a corporate dis- tilling did not find company, decide the necessary to nature of the stockholder’s right of inspection the answer of the cor- poration to the mandamus an petition clearly indicated improper motive on the petitioner-stockholder seeking the awas As there books and records.

inspection corporate the purpose demurrer the answer which admitted for court that the trial demurrer was held the improper purpose, v. answer. In Jackson the demurrer to the improperly overruled kins, 557, before had Hop Md. 78 A. 4 Court (1910), 113 an Epis of alleged vestryman it a mandamus action filed an by 1798, of Act Vestry (Act Church established under copal answer In the the records of the church. Chapter 24) inspect the petitioner it was denied that to the for a mandamus petition this that the demurrer to was a and the Court held vestryman con It was then of the answer was overruled. portion properly tended, however, member of the that he was a petitioner and, such, The as Court right inspection. church as had the of sumed, a member of that the deciding, petitioner without church, have Vestry “may ordinarily established under the Act to require” court law ask for a mandamus standing a of the church “to per the books of person having custody of this mit him necessary them.” It was not to decide inspect issue, because, event, the petition the answer to any as such a member had established a “compet the petitioner of in defiance of the ecclesiastical ing” Sunday authority school the church and desired the for an inspection improper purpose. however, men We think that the Court did not significant, it is recent Act of tion the cent in the then per requirement five 1908, to a mem 240 as even Chapter possibly being applicable that the Court indicating ber a member thus corporation, did not think that it was so applicable. 1916, 72, (Laws 73 and 74 the 1911 Chap Code

Sections 596, ter enacted 240 of the previously by Chapter Laws 1908) were amended by eliminating provision declaring refusal and the each to be a misdemeanor penalty $50 refusal to with the five cent holder of comply request per 1927, In stock. corporate Chapter Laws 1927, there were amendments that the unimportant requiring cent at the of five or more of the stock corporation request per file at its holders and have on office in the prepare principal a list of stockholders if the original stock duplicate State ledgers were not at such office. kept principal only change thereafter to the institution of suit in the prior present case oc curred the general revision of Article 23 of the Code by 135 of the Chapter of 1951 which enacted what is now Raws Code, Article Section of the 1957 set out above already It full. will be observed that there has been change no in the important language in regard to the applicability of Section since the passage of the Act of Chapter so that the legislative intent that the five cent per requirement should not 1° members apply of member has corporations continued until time. present as a plaintiff member of the Each Association was, therefore, entitled to examine the books and records Association, the list of the including general and the membership full Dugan Report. regard Dugan it was Report, indicated officials

of the Association that Professor Dugan gave “confidential” and to allow the report members plaintiff to see it would breach “confidence,” and, event, this the any plaintiff members would use the to report place its contents in the press and in- thereby jure the Association. The with the first difficulty contention is that when the Dugan was Report given by Professor as Dugan an attorney to his client the report lost whatever “confidential” character it might otherwise have There had. can be no confi- dential nature of an attorney’s to his client report so far as the client concerned. The confidence restricts disclosure the by consent; attorney without the client’s it does not restrict the client. This is clearly the case when the is in- report involved tended to client, form the basis of future possible action the as too, was the situation the present case. Then the client had issued what already purported to be the “substance” of the Report to the members so that any confidential quality of the Dugan had been dissolved Report by this action the Asso- Any ciation. member after that action had the right to inspect original the to see whether Report the Board had in fact made full, objective summary of the Report had omitted possibly of it portions unfavorable to the Board and indicating possible directors. The liability of the reluctance of the Board to exhibit under all original Report the of the circumstances alleged in the indicates the reasonableness on the complaint of the plain- tiffs, members, in minority insisting on seeing the full Re- the excuse the given by Nor can Board or its port. representa- the be used the plaintiffs pub- tives that material would of the Associa- injury in the licity purposes newspapers the al- plaintiffs of the fact that thought tion be valid view the had what the Board to be the substance of ready represented the thus would come from facts publicity whatever Report the summarized either occurred or was within the power had short, if that to make it occur. In the plaintiffs representation was a true and correct sum- the Fact (exhibit G) Statement correct, already the the plaintiffs mary Dugan Report basic and whatever Associa- damage had the information dan- had either or the tion could suffer from occurred publicity Dugan not increased ger by showing copy would be In entitled to our were opinion they Report plaintiffs. it. see states opinion complaint sufficiently view our having action the defendant directors without against

causes of full need seen the we not consider whether Dugan Report, case, the plain- under the unusual circumstances of present be usual of mandamus remedy tiffs would confined Association, its them officers and to show agents, compel books, Doubtless report. by appro- records requested able priate discovery will be to obtain proceedings plaintiffs books, records do we report. of those Nor production allegation paragraph need to consider whether or not Parish also “Complainants sought (g) complaint more than five cent of signatures per and obtained the requesting members on access the books and records petitions being but said was denied as request the Association not Ar- allegation form” is a sufficient with compliance proper 23, 51, that 51 assuming, arguendo, ticle would Section Section demands of of members as well as to such inspection to apply demands by stockholders.

4. claims the that the the defendant opinion against We are of three years which arose more than to the time prior directors filed are not barred laches. by suit was 4, filed February case was present The suit the 1965. us three that the urge upon year directors stat- The defendant 57, by (1957), established Code Article ute limitations Sec- 95 than three tion 1 is arose more applicable to transactions which had to that notice years plaintiffs date which the prior could and should more and in time investigated have promptly the to have filed within three There period. the complaint year are two answers this is that in 27 paragraph to contention. One of the that was fraudulent complaint there plaintiffs allege concealment of the of action the defendant principal by causes not, not, directors and reasonably did could plaintiffs discover of the existence causes of action to late prior 1964, 1963 or early well within three year from period discovery It causes action and time filing suit. is provided by statute that where adverse an party keeps party in ignorance fraud, of the cause action right bring was, suit will be deemed have first occurred when the fraud or with usual and ordinary diligence might have been known or 57, discovered. Code Article 14. (1957), Section Brack See Evans, v. 187 Md. A. 2d (1963). complaint, face, on its shows similarly no lack of diligence on the part of the plaintiffs seeking any discover possible causes of action against the defendant directors other parties.

The other answer is there is in the nothing allegations of the complaint to show that defendant directors have suf- fered any prejudice or disadvantage delay in filing suit so that the doctrine laches does not regardless apply passage of more than the or statutory period of an unreasonable Spangler Co., Sprosty Bag time. v. 176-77, Md. 36 A. 2d 690 (1944), quoting with approval from 4 Pomeroy, Jurisprudence, Equity as (Third 1906) Ed. § follows: “Laches, significance, is legal not mere delay, but delay works a disadvantage another. long So condition, are in parties the same it matters little whether one presses right promptly slowly, within law, when, limits allowed but knowing his rights, he takes no to enforce them until steps the condition has, faith, other party good become so changed that he state, cannot be restored to his former if the enforced, be right delay becomes inequitable, and op- an against erates estoppel the assertion of right.”

5. that the matters in the have concluded complained We judicata barred the doctrine of res as to by are not complaint demurrers were sustained with- defendant directors whose those out to amend. leave arises on prior rulings prior

This interesting question hear- after plaintiffs. Judge bills of filed complaint Shook of the defendant King the demurrer director ing argument on on bill an order complaint, passed to the second amended 13, 1966, leave to his demurrer without sustaining December that Judge same the docket entries indicate day amend. On the Marty, directors the demurrers of the defendant sustained Shook Weitzer, Fouche, Stull, there is no indication Adams and but amend was leave to regard one or the other in to whether way Court this these granted. were taken from orders No appeals 13, 1967, however, have as we within February On thirty days. all indicated, dismissing an order already Judge Pugh passed motions, prejudice and other without pleadings demurrers of complaint. file a third amended bill directed the plaintiffs on plaintiffs This third amended bill of was filed complaint 28, 1967, involved principally and is the February complaint case. the present directors, however, that the contend seven defendant judicata preclude on demurrer were res prior rulings amended them in the third against from plaintiffs proceeding bill that Rule 373 d Maryland pro- of complaint. argue They e Rule (as (e) provides vides does) Section an a demurrer an entire declaration (bill order sustaining include leave to amend shall be deemed to complaint) without a final for costs for the judgment demurring and constitute demurrer, in decision in that a on view of our party; judgment Schenker, Moodhe Md. 4 A. 2d 453 may, v. (1939), if made the facts and not technical consider- upon on ations, on the merits which will a sub- judgment be support and, judicata; defense of res that since the record in sequent case the second amended bill contains present complaint demurrer, and the are barred in rulings plaintiffs third amended bill of complaint by judicata doctrine res as to the or same similar matters raised or which were could have been raised in the second amended bill of complaint.

The difficulty with is that this contention Rule 605 Maryland (a) a requires different result. Rule 605 (a) provides:

“Where more than one claim for relief is presented action, an claim, counterclaim, whether as an original cross-claim, claim, or third-party court direct may the entry of a final judgment one more but upon or less express than all of de- upon the claims an only termination that is no there reason just delay for upon express an direction the entry judgment. for of direction, In the absence such of determination and any decision, order other or form of however designated, adjudicates which than less all the shall claims not claims, terminate action as to of any and the order or other of form decision is subject to revision

at time before the any entry judgment adjudicating all the claims.” (Emphasis supplied.) This rule applies to suits at equity well as to actions law. There can be doubt little that all of the bills of complaint claims, filed in i.e., this case multiple involved an account- (1) ing to for the Association profits derived Hooper Robinson, a determination and (2) decree that each of the de- fendant directors and the auditor jointly Association are liable for losses severally to the resulting Association from fraud, concealment, their conduct, gross negligence, illegal waste assets and corporate conspiracy to conceal by issuing losses false and a misleading reports, (3) decree cancel- declaratory ling and general aside the setting release to Hooper Robin- son, nature (4) relief appointment of receiver appropriate against institute suits others the court’s beyond relief. jurisdiction and other (5) involved, bar,

Where claims are multiple as in case at Rule 605 a that the trial required by may court direct a final claims, one less than all judgment upon but only upon an determination (a) that there is express no for just reason delay (b) upon express an direction for the entry judg- ment. rule provides The further the absence of such decision, how- order or form my direction

determination and shall all the claims less than adjudicates designated, ever which the claims. any the action as to not terminate his demurrer order which sustained King regard express determination there no to amend” “without leave direction express and no delay reason for just that there was no e that in Rule 345 for costs. judgment provision to enter be amend shall leave to of a demurrer without sustaining does final for costs judgment deemed to include and constitute trial express direction court an not amount to un- claim cases multiple for costs judgment required entry a. der Rule 605 were directors six defendant remaining

The demurrers of was “sustained,” indication of whether there without an merely determination was no express amend or not. There leave to an direction express reason for or delay that there was no just a termi- was therefore not The order judgment to enter for costs. defendant directors the seven of the claims of any nation of mentioned. Rule 605 a which illustrates the wisdom of

The case present the Federal Rules of Civil was Rule 54 (b) was designed, Federal Rule Rule 605 a is identical with Procedure (Maryland as far as possible, piecemeal appeals 54 “to (b)), prevent confusion, which would be delay expense thereby avoid Durling in the same more suit.” appeals two or by having caused 878, 554, 549, 2d 880 210 Md. 123 A. (1956). See Kennedy, v. 427, Sears, 351 Mackey, Co. v. U. 76 C. Roebuck & S. S. Corp. v. Lake- 895, (1956); Parkway 1297 100 Southern Ed. L. Atkins, 2d 107 Cir. (D.C. 1959), 273 F. Corp., wood Park Cabrera, 277 F. 2d (9th 1960). Ltd. v. 922 Cir. Kroll (Guam),

6. that complaint alleges plaintiff, of the Paragraph (a) Parish, enrolled as member of the Association Mrs. as a member Thorndale Farm from that and operated milk the Association. From selling time until name un- operated farm was Schott Brothers 1961 the Parish, Mrs. this Mr. and but lease under the from der lease Association did not Incorporation deprive Certificate that membership during Parish their plaintiffs continued but, Thereafter Mr. period, it. contrary, required As- Mrs. Parish executed the contract with the October which as exhibit B. sociation is filed as complaint It is the farm from they continuously operated so 1961 “until the bona fide sale of their cowherd in the spring 1966.” There is no that Mr. and Mrs. Parish are no allegation longer members of the Association. Association, however, us that urges Mr. and upon Mrs.

Parish have no “a member” standing as former to maintain the derivative action in this case on behalf of the Association. It relies the well upon rule that a stockholder recognized in the usual stock sue corporation cannot unless he is a stockholder at the time the derivative suit is instituted ifor he transfers his stock, lite, pendente he has no further right to maintain the suit. This rule is founded upon theory the very interest a stockholder has in the corporation represented his hold- ing of the stock of the corporation and when he transfers this another, interest to his interest ceases and passes to the trans- feree of the stock. in the Membership Association is not nego- tiable or transferrable member to another person. Al- though it is true as the Association points out that order to be eligible for admission as a member the firm “person, or cor- poration must be engaged dairying or owning leasing land on which is carried on dairying sharing the products therefrom,” and upon admission such member “shall have vot- ing power and property rights therein on the same basis as all other members” as in provided Article XIV (b) of the Certif-

icate of Incorporation, there is no provision in the Certificate of Incorporation which indicates that cowherd, the sale aof ipso jacto, results in a cancellation of existing membership. The re- maining provisions Article XIV indicate the contrary. For example, the remaining portion itself, Subsection (b) there- is a provision that if a is partnership admitted to membership dissolved, and is each co-partner who continues to produce milk as an individual shall succeed to individual membership, and' * * * the outstanding membership dissolved partnership shall be cancelled” and each individual shall be entitled to re- and shall ceive an individual accept membership certificate with- out further fees. that a (d)

Subsection member who fails to remain provides qualified provided “shall not be entitled (b) Subsection to vote or hold office or participate any of benefits of ** until Association said shall be restored qualifications There is also member so “who provision any qualified shall fail all milk him to market or for produced acquired by with the terms and compliance provisions marketing (cid:127)agreements, Article XIV here- referred to subsection (b) n of, force, and then in shall not cease be a member hereof Directors, vote, unless and until the Board of aby majority passes a resolution to that effect.” specific far allegations provisions as the complaint

So concerned, -of exhibit C Certificate of are Incorporation) (the are not still there is to show that and Mrs. Parish Mr. nothing Article XIV members of the Association. (d) Subsection results in the "indicates that the failure to remain qualified only vote, hold in the .loss of the office or bene- right participate restored, until fits of the Association is not qualification or that accrued are prior is discontinued benefits membership agree- forfeited. there is a violation of a marketing when Even ment, member- the member not from automatically expelled is aby majority but resolution the Board vote ship, specific of a member. without Assuming, for the required expulsion that the loss of in the Association would (cid:127)deciding, membership behalf right terminate the to maintain a derivative suit on Association, there is nothing complaint face of the n or exhibits to indicate that the Parish are not still plaintiffs are along members of the Association and as such entitled with 'the other to maintain the derivative suit. plaintiffs

7. Parish, that the in- urges plaintiffs The Association “who in their status as a member of single stituted the proceedings Association,” standing had no to maintain the derivative suit with to actions to October respect complained prior Association, with the when their contract they signed up- in a (cid:127)on the to stockholders stock Our analogy corporation. pre- that stockholders must been such have held have at decessors acts wrongful injuring “.thetime the took corporation

101 place order to a bring derivative suit on of the behalf cor poration to recover damages from those resulting wrongful 329, acts. v. Corp., Eisler 182 Md. A. 2d Eastern States 35 Co., 118 (1943), 523, Matthews v. Headley Chocolate 130 Md. Brune, 100 A. 645 (1917); Maryland Corporation Law Practice, 251, 257, 252, 255, 260 and p. p. 271. p. § § §

Assuming, deciding, without in a the members member like the corporation Association would analogy subject be by the rule applicable stockholders a corporation, stock doctrine would not be in the case inasmuch applicable present as paragraph (a) complaint alleges that Mrs. Parish a 1941, was member of the Association an signed agree- since ment 18, 1942, with the Association on November operated 1957, farm, Thorndale Farm until then leased the which during time Mrs. Parish’s individual to a ownership changed joint lease, tenancy with her husband and after the termination tenants, members, the joint Parish, Mr. and Mrs. executed 9, the agreement with Association of October 1961. view owners, of the law joint and certainly tenants the en- tireties, per hold et tout my per Property, Real (see Tiffany, 418, 430 (3rd ed.)), the mere change individual own- § § joint ership ownership would not deprive right of the joint owner to maintain a suit derivative on the of the As- sociation for wrongful arising acts after which all of the wrongful acts do the case. present

8. The executors of the estate of Robinson contend that the com- plaint allege does not facts which would the court in justify set- aside ting general release executed and apparently delivered to Robinson the Association in We disagree. 1964. Ordi- a release, defense based narily upon release is A complete. however, ais contract and may be set aside for the same reasons for which any other contract be Thomas may avoided. v. Erie Insurance Exchange, 229 Md. 182 A. 2d 823 (1962). If fraud, the release is obtained may be set aside for this Spitze Co., reason. v. B & O Railroad 23 A. Md. fraud,

(1892). In addition to actual which is not in when the complaint, release is challenged, to it party who stands a confidential to the other relationship has party fraud, by release was not obtained

burden of that the showing Corp. Concrete Indurated over-reaching. undue influence or See Abbott, 2d (1950). 74 A. v. 195 Md. in- sufficient facts complaint

In our the opinion, alleges Robinson, dicate, stand as well as did prima Hooper, that jade, have they in a confidential Association relationship release establishing general given by the burden fraud, them in 1964 was not obtained their Association to It that either Robin- over-reaching. may undue influence or be both, or be able to in their answers may allege son or Hooper, general at the trial of the case on the merits that prove transaction, release was in an untainted arms-length obtained fraud, undue influence their and when over-reaching part or had, had, the Association or should have a full and complete matter, the relevant knowledge of facts but the concerning burden of all is showing of this Robinson and upon Hooper. now in allegations

We consider the the complaint which estab- lish, prima jacie, confidential relationship Hooper Robinson to the Association.

In it that the facts paragraph 20(a) appearing in the in statement of fact attached Special Report as of the complaint as exhibit G are correct and these facts G, are as their own. In adopted by plaintiffs exhibit appears was first in Hooper employed the Association 1935 as accountant and office manager. He became general manager and secretary-treasurer 1956. his contract of em- ployment general manager as he was given “the usual powers of a general manager of an enterprise including general power, Directors, under the supervision the Board of to conduct the Association, this oj such to include con- powers general affairs trol over the buying selling Association’s products * * was, (Emphasis Robinson with then supplied.) his Berman, partner 1955 as manu- employed manager of the facturing division at the Laurel Plant. Later Berman withdrew and Robinson was manager. sole The Laurel Plant had been from purchased Robinson and Berman and in Robinson’s em- ployment contract with the Association he obligated * * * “give the same executive direction and the same skilled said given operation had theretofore that he management business.” and Robinson Hooper in exhibit G that further appears

It the stock of together placed affair the Harrison arranged Hooper’s children and their respective names of Harrison wife, voting trustees acting Robinson Hooper il- fraudulent and discovered the after the Board stock. Even Harrison, not investi- it did with activities connection legal Robinson, contrary agreed but on either gate Hooper wrong two doers Harrison from the April, purchase con- area of $81,341.27 any possible in order to “eliminate to be alleged is In this 18(e) price flict of interest.” paragraph in alleged paragraph it is further “an excessive price,” them diverted had between that and Robinson Hooper 18(c) from the As- $1,300,000 in worth of business gross excess of Robinson, Plant, controlled managed by sociation’s Laurel G, it appears in Florida. In exhibit to the Harrison operation and the Harrison that was “sole-salesman” for both Robinson Laurel Plant. indicates, Robinson

In the latter of exhibit G Weldon, would buy made whereby the “deal” with Weldon erected by milk to be skim at the new Oneida powder plant Mutual, corporation.” to in “Robinson’s referred exhibit G as in engaged by The same was operation” “Harrison type Packag- Robinson Mutual Milk Sales so that “Mr. Robinson’s ing price fee brokerage Division received a substantial very Mutual, in corporation, differential their sales.” Robinson’s Plant, of Laurel bought skim from the Association’s powder $800,452.68 which and resold the Robinson was for manager, made $946,318.42, being product shipments Weldon in York. The from the Laurel Plant to New directly Weldon $100,- gross to Mutual on the entries was profit bookkeeping 256.23. It it in G that even significant is that exhibit appears Robinson, after unlawful conduct of discovery Association to show the never did receive the Mutual books in figures although exact these books regard mark-up, were demanded counsel for the Association provided investigation Robinson. There was no or Robinson Hooper Click, until resignation tendered assistant his secretary, 8, 1963,

on November and presented his charges against Professor Hooper. Dugan was retained on December and even after his Report was presented to the Board contain- ing the detailed facts in regard to the misconduct of Hooper Robinson, Hooper removed the Board as general manager and 12, 1964, secretary-treasurer February Hooper even then that maintaining the matters disclosed did not justify termination of his contract and there was a significant division in the in Board regard to this matter. Robinson’s contract had expired was not renewed.

It is in alleged paragraph Robinson 20(a) participated in each breach of trust by Hooper, Hooper each breach Robinson, of trust by they having between conspired themselves to misappropriate corporate assets. paragraph 18(g) alleged that Robinson and Hooper

caused the Association to pay excessive compensation to Robin- son, amounting $130,000; one to over year in paragraph 18(h) they caused the Association to employ inexperienced and incompetent relatives Hooper Robinson positions of trust in the Laurel Plant and elsewhere employ the Association. Even after the termination of em- Hooper’s it is ployment, that the re- paragraph 27(a) public lations official of the Association issued a circular com- letter plaining the termination on the ground that actions Hooper’s were done with the full consent and knowledge, approval the Board. In addition it that after the transaction the Board and the auditor to conceal the true facts conspired in regard to the derelictions of and Robinson. Hooper

From all of these facts the reasonable inference is that Hooper and Robinson were in actual control of the of the operations Association and dominated and controlled those operations. The Board relied them trusted them upon implicitly, completely and were guided them in by regard the Association’s affairs. Because of circumstances, all these facts and and Hooper Robinson stood in position such confidence and trust to the Board and to the Association that and each one of them they had the burden of that showing transactions between them were fraud, free from the taint undue influence or over-reaching. short, under facts the and circumstances the alleged circumstances, reasonable inferences from those facts and Robinson well as has the burden of (as Hooper) showing fair, fraud, general the release was free from undue influence over-reaching, that the Association executed gen the eral with knowledge release full facts. the applicable By G, above, facts appearing exhibit referred to it is already concerned, clear far that so as Robinson is the did Association books, not the Mutual the general receive demanded counsel by Association, to the execution the prior by Association general prima It appears, facie, release. thus that the As sociation did not in fact have full and complete knowledge in Mutual amounts details of Robinson’s misconduct general transaction at the time It is release executed. clear from the that a general authorities release of a person in a re standing fiduciary relation to a does not corporation lease person such a though relationship even the official person has been terminated in sub corporation stantial prior time release. There still execution must be a full and frank in the fiduciary disclosure by person in order relationship to sustain the effectiveness of the release. Deutsch, Irving Trust Co. v. 73 F. 2d 121 Cir. See 1934). (2d Marco, 669; Stevens v. 684 App. Cal. 2d P. 2d -85 Hawker 2d 491 Cir. (1956). Worley, v. F. (8th Cf. 1929). plaintiffs alleged 20 that paragraph Hooper trustees, Robinson were maleficio, constructive or trustees ex assets, of all the funds and obtained them their by property breaches of trust and that could not back (a) they by paying part of the misappropriated extinguish the property Associa- tion’s equitable title to the remainder the “so-called release” which is void them for obtained an consider- inadequate ation, alternative, in the such (b), they, as constructive trustees, showing fairly have burden of that the release was however, obtained. In our opinion, showing burden bona fide circumstances surrounding the obtention of the release is upon Robinson not (and because are construc- Hooper) they because, indicated, tive but prima trustees as we have they, facie, in a position were of confidential with Board relation and the Association.

9. The executors of Robinson also contend that the complaint is multifarious as to Robinson. Again we do not agree.

The Maryland Rules have sought to liberalize the com- prior mon law and in equity rules regard to joinder of parties and of claims in one action. Rule 313 d permits joinder separate claims involving different plaintiffs or defendants or both whenever any substantial question of law or fact common to all claims “or for other any reason the claims may con- be of in veniently disposed the same proceeding.” The defense may multifariousness still be raised and be in effective cer- cases, tain 283, but, see Rule in our opinion, present case is not one in which the defense of multifariousness can be suc- cessfully made.

The executors for Robinson point out that some of the trans- actions in alleged the complaint arose prior Robinson’s em- ployment the Association and that Robinson’s estate should not have the trial of those claims combined with the claims him against with attendant delay expense. allegations in however, the complaint, are such that all of the transactions alleged have some connection with the others complaint. Hooper' Robinson are with charged conspiracy to misappropriate funds and each corporate allegedly partici- pated the misconduct of the other. Their confidential rela- with tionship the Board and the Association make relevant all matters which Robinson took the leading part. It would be far more inconvenient to the transactions attempt separate in which Robinson leading apparently played against claims him from the other transactions and than claims case, would be to consider all of the claims in one especially when all of the claims are tried an suit before the equity words, Chancellor. In other it is our that all of the opinion claims “may be of in the same disposed conveniently proceed- and, hence, ing” all of may joined the claims be the present suit in accordance with the of Rule 313 d. See provisions Carl, Martin v. 213 Md. 132 A. 2d 601 Town- (1957), send v. 192 Md. 63 A. 2d 743 Morgan, (1949). stated,

For all of the reasons the order Chancellor sustaining the demurrers of the without leave parties various amend be reversed and must the case remanded to the lower court so that the defendant their parties file and may answers be that further had in proceedings may regular course. reversed,

Order case remanded for proceedings in accordance further with this opinion, the costs be paid follows: one-half of costs to paid by be the appellee, Maryland Virginia and Milk Association, Inc., Producers remaining one-half of costs to be paid equal parts by appellees Mary- other than land and Milk Pro- Virginia Association, ducers Inc. J.,C. concurring dissenting part: Hammond, I have considerable doubt that the allegations against any defendant other than Hooper charge Robinson sufficiently fraud or the gross or culpable negligence discharge omis- sion liable, of duties to make him I necessary but bow to the contrary views of my brethren on this As to point. Robinson and Hooper during their periods the Associ- employment by ation, fraud or breach of a well been fiduciary may have duty alleged but to me it appears that release them clearly given when were no exe- they longer employed negotiated cuted in good faith at length, knowledge arms after full of all the facts been had obtained from Dugan Association report, is unassailable as far as are concerned. they This is say that fraud and breach of fiduciary duty tainted the transactions that led to the release been may have alleged, but that there is no sufficient allegation that fraud or other invalidating agent in its obtention exe- played any part view, cution. In and the executors my Hooper of Robinson should be let out. v. PRZYBOROWSKI LAMBDIN

Opinion of the Court. Md. [250 LAMBDIN, ux. v. PRZYBOROWSKI et Term, 123, September

[No. 1967.] 28, 1968. Decided May C. J., before argued

The cause was Hammond, Hor- Singley, Barnes, ney , Marbury, McWilliams JJ. on the Gordon, with whom were Gordon & Goodman Daniel brief, for appellants. Stark, with whom was Sidney Rosenberg

Alexander brief, for appellees. the Court. opinion delivered J.,

Barnes,

Case Details

Case Name: Parish v. Maryland & Virginia Milk Producers Ass'n

Court Name: Court of Appeals of Maryland

Date Published: Jun 26, 1968

Citation: 242 A.2d 512

Docket Number: [No. 103, September Term, 1967.]

Court Abbreviation: Md.