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Mountain Manor, Inc. (MMI) was incorporated in 1974. The charter authorized 10,000 shares, but only 56 shares of that stock were initially issued. Roby acquired 12 shares. An agreement was executed on behalf of the corporation and by the then-current stockholders which precluded those stockholders from selling any of their stock without first offering it to the corporation. The corporation was given the option of matching any bona fide offer from a third party or paying book value, whichever was less. A corporation owned and controlled by P, Mountain Manor Realty, Inc. (Realty), purchased the property upon which MMI operated the rehabilitation center, and on June 10, 1977, it entered into a ten-year lease with MMI. On July 6, 1977, P was elected a director of MMI. In June, 1978, he and E. Gordon Leatherman assumed control of the company by buying out all of the stockholders except Roby. MMI stock was owned as follows: P, 22 shares; Leatherman, 22 shares; Roby, 12 shares. Leatherman managed the day-to-day affairs of the company until May, 1980, when P was elected president and assumed active command. P, Leatherman, and Roby constituted the Board of Directors. P began to look for someone to buy his stock. He signed a letter promising Roby a five percent commission if he (Roby) obtained a buyer. Through Roby, P was introduced to D and Joseph Francus. P agreed to sell his stock to them for $5,400 a share; but the sale was not consummated. D and P continued their discussions, but never came to terms. Unknown to P, D was also negotiating with Roby and Leatherman, who previously had declined to sell their stock. About a year after the aborted sale of P's stock -- D bought Leatherman's 22 shares and Roby's 12 shares. Leatherman and Roby resigned as directors, and called for a special meeting of stockholders to be called. P challenged the sale of Roby's 12 shares as it violated the stockholders' agreement, to which Roby was a party. Conway called a special stockholders meeting for October 23, 1981, for electing directors of the Corporation along with the matter of ownership of the stock of the corporation. P, without notice to Buccheri, Leatherman, or Roby, called a special meeting of directors for October 22, 1981. He invited his attorney and two acquaintances -- Margaret Faulstich, who had been one of MMI's initial stockholders, and William C. Widman, an insurance agent who had placed some insurance for MMI. P, as sole surviving director, elected Faulstich and Widman as directors to fill the vacancies created by the resignations. P presented an offer by Realty to purchase 13 shares of MMI stock at a price of $7,000 a share, the purchase price to be paid by means of a credit of $91,000 against the arrearage of rent due by MMI to Realty on the lease. The price was subject to upward adjustment to match the price paid by Buccheri for Roby's stock if that price was more than $7,000 a share. The board accepted the offer and authorized the issuance of the 13 shares to Realty. Realty executed a 'Credit Toward Rent,' which was delivered to MMI, and MMI issued stock certificate no. 14, evidencing 13 shares to Realty. At the stockholders meeting the next day, P announced that the company did not recognize the sale of Roby's 12 shares. He distributed copies of the minutes of the October 22 directors' meeting showing the sale of the 13 shares to Realty. Purporting to vote 35 shares (his 22 and Realty's 13), P nominated himself, Faulstich, and Widman as directors. Counsel for Buccheri, who was also in attendance, disputed the validity of Realty's 13 shares; and, on the authority of the 34 shares owned by D or by D and Roby, D nominated a different slate. The vote was either 35-34 in favor of P's slate or 34-22 in favor of the D slate. P filed an action seeking a declaratory judgment that (1) because it contravened the 1974 stockholders agreement, the sale of Roby's 12 shares to Buccheri was invalid and Buccheri was therefore not the lawful owner of those 12 shares, (2) 13 shares of MMI stock were validly issued to Realty on October 22, 1981, and (3) the corporate directors were P, Faulstich, and Widman. The court ruled that the sale of stock by Roby was not valid. It then declared that the 13 shares 'were not legally issued to the Realty because the transaction was completely illegal.' Sec. 2-408B of the Corporations and Associations Article of the Annotated Code of Maryland provides as follows: Notwithstanding any provision of the By-Laws to the contrary, a quorum may not be less than: (i) One-third of the entire board of directors or (ii) Two directors.' P could not transact any business of the corporation as a sole stockholder because he would be in violation of the above statute. The court declared that Conway, Faulstich, and Widman did not constitute the directors of MMI. P appealed.

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