EXHIBIT 5
Venable, Baetjer and Howard, LLP
1800 Mercantile Bank & Trust Building
2 Hopkins Plaza
Baltimore, Maryland 21201
July 9, 1998
Monterey Homes Corporation
6613 North Scottsdale Road, Suite 200
Scottsdale, Arizona 85250
Re: Registration Statement on Form S-3 relating to
2,509,660 Shares of the Common Stock of Monterey Homes Corporation
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Ladies and Gentlemen:
We have acted as special Maryland law counsel to Monterey Homes
Corporation, a Maryland corporation (the "Company"), in connection with a
registration statement on Form S-3 of the Company (as the same may be amended
from time to time, the "Registration Statement") filed by the Company with the
Securities and Exchange Commission (the "Commission") pursuant to the Securities
Act of 1933. The Registration Statement relates to an aggregate of 2,509,662
shares (the "Shares") of the Common Stock, par value $0.01 per share, of the
Company ("Common Stock") to be sold by certain stockholders (the "Selling
Stockholders"), as described in the Registration Statement. The Shares consist
of (i) 1,787,937 shares of Common Stock currently outstanding (the "Outstanding
Shares"); (ii) 43,946 shares of Common Stock underlying currently outstanding
warrants (the "Warrant Shares"); (iii) 177,778 shares of Common Stock which the
Company is contractually obligated to issue to the Selling Stockholders in two
installments on or as soon as practicable after January 1, 1999 (88,888 Shares)
and January 1, 2000 (88,890 Shares) (the "Contingent Shares"); and (iv) an
aggregate of 500,001 shares of Common Stock underlying stock options granted to
the Selling Shareholders (the "Option Shares").
In connection with the opinion set forth herein, we have considered
such questions of law as we have deemed necessary as a basis for the opinions
set forth below, and we have examined or otherwise are familiar with originals
or copies, certified or otherwise identified to our satisfaction, of the
following: (i) the Registration Statement; (ii) the Amended and Restated
Articles of Incorporation, as amended, of the Company, as currently in effect;
(iii) the Bylaws, as amended, of the Company, as currently in effect; (iv)
certain resolutions of the Board of Directors of the Company relating to the
Shares and Certificates of the Secretary of the Company relating to such
resolutions; and (v) such other documents as we have deemed necessary or
appropriate as a basis for such opinions. In our examination, we have assumed
without independent verification the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to
us as certified or photostatic copies and the authenticity of the originals of
such copies. As to any facts material to this opinion that we did not
independently establish or verify, we have relied solely upon statements and
representations of officers and other representatives of the Company and others,
including, without limitation, the Secretary's Certificates referred to in
clause (iv) of the first sentence of this paragraph.
Based upon the foregoing, we are of the opinion that:
(1) The Outstanding Shares have been duly authorized and validly issued
and are fully paid and nonassessable.
(2) The Warrant Shares, when issued and paid for in accordance with the
terms of the Warrant Agreement filed as Exhibit 10.8 to the Registration
Statement and of the Assumption Agreement filed as Exhibit 10.9 to the
Registration Statement, will be validly issued, fully paid and nonassessable.
(3) The Contingent Shares, when issued in accordance with the Escrow
and Contingent Stock Agreement filed as Exhibit 10.7 to the Registration
Statement, will be validly issued, fully paid and nonassessable.
(4) The Option Shares, when issued and paid for in accordance with the
Stock Option Agreements filed as Exhibits 10.1, 10.2 and 10.3 to the
Registration Statement, as applicable, will be validly issued, fully paid and
nonassessable.
This letter is strictly limited to the matters expressly set forth
herein and no statements or opinions should be inferred beyond such matters.
This opinion is limited to the laws of the State of Maryland (without regard to
the principles of conflicts of laws thereof) and is based upon and limited to
such laws and regulations in effect as of the date hereof. We assume no
obligation to update the opinion set forth herein.
We hereby consent to the filing of this opinion with the Commission as
Exhibit 5 to the Registration Statement.
Very truly yours,
/s/ VENABLE, BAETJER AND HOWARD, LLP
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