Renbaum v. Custom Holding, Inc., 386 Md. 28

Summary

The Maryland Court of Appeals considered whether a trial court properly reopened a judgment to receive additional evidence and ordered the involuntary dissolution of a closely held corporation based on alleged director deadlock. The court held that the trial court did not abuse its discretion under Maryland Rule 2-534 in considering evidence arising before entry of judgment, but concluded that the evidence was insufficient to warrant dissolution under the Maryland corporate dissolution statute. The court also addressed the appointment of independent counsel for the corporation.

Holdings

1. A circuit court may exercise its broad discretion under Maryland Rule 2-534 to open a judgment and receive additional evidence concerning events occurring after trial but before entry of judgment, provided the motion is timely and the opposing party has an opportunity to be heard.
2. Involuntary dissolution under Maryland Corporations and Associations Article § 3-413(a)(1) requires a present director deadlock, not merely a division or disagreement, concerning management of the corporation's affairs.
3. Section 3-413(a)(1) requires a current conflict; a formal vote is not indispensable if the conduct of the directors demonstrates that the required vote cannot be obtained; the directors must be more than merely divided; and the dispute must concern management of the corporation's affairs.
4. The dividend dispute could not support dissolution because, before the revised judgment was entered, the Class B directors accepted the proposed $4 million dividend without conditions and no current division remained.
5. The disagreement over selection of corporate counsel did not constitute the statutory deadlock necessary for involuntary dissolution because it did not impair Custom's primary corporate function or prevent it from performing its corporate powers.
6. The circuit court did not err by appointing independent counsel for Custom because the board of directors could not agree on counsel to represent the corporation in the dissolution proceeding.

Questions Presented

1. Whether the circuit court abused its discretion by granting a Rule 2-534 motion and admitting evidence concerning events occurring after trial but before entry of judgment.
2. Whether director disagreement over dividends and corporate counsel satisfied Maryland Corporations and Associations Article § 3-413(a)(1)'s requirement that directors be so divided regarding management that the votes required for board action cannot be obtained.
3. Whether the circuit court erred by appointing independent counsel for Custom Holding when the directors could not agree on counsel for the dissolution proceeding.

Disposition

reversed_and_remanded