Ellis v. State National Bank of Alabama, 28452.

• Decision Date: 29 December 1970
• Docket Number: No. 28452.,28452.
• Citation: 434 F.2d 1182
• Parties: William H. ELLIS, Plaintiff-Appellee, v. STATE NATIONAL BANK OF ALABAMA et al., Defendants-Appellants. The AMERICAN NATIONAL BANK OF GADSDEN et al., Plaintiffs-Appellees, v. CENTRAL BANK AND TRUST COMPANY et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

434 F.2d 1182 (1970)

William H. ELLIS, Plaintiff-Appellee, v. STATE NATIONAL BANK OF ALABAMA et al., Defendants-Appellants.

The AMERICAN NATIONAL BANK OF GADSDEN et al., Plaintiffs-Appellees, v. CENTRAL BANK AND TRUST COMPANY et al., Defendants-Appellants.

No. 28452.

United States Court of Appeals, Fifth Circuit.

October 28, 1970.

Rehearing Denied and Rehearing Denied December 29, 1970.

Julian Harris, Norman H. Harris, Decatur, Ala., Sam W. Pipes, Mobile, Ala., Schuyler A. Baker, S. Eason Balch, James H. Hancock, Birmingham, Ala., for defendants-appellants.

James A. Simpson, Robert McDavid Smith, James E. Simpson, William G. Somerville, Jr., Birmingham, Ala., for plaintiffs-appellees.

Truman Hobbs, MacDonald Gallion, Atty. Gen. of Ala., David W. Clark, Asst. Atty. Gen., Montgomery, Ala., for other interested parties.

Before SIMPSON, MORGAN and INGRAHAM, Circuit Judges.

Rehearing Denied and Rehearing En Banc Denied December 29, 1970.

SIMPSON, Circuit Judge:

State National Bank of Alabama (State National) is a national banking association organized under the laws of the United States with its principal place of business in Decatur, Alabama. Central Bank and Trust Company (Central) is a state banking corporation organized under the laws of the State of Alabama with its principal office in Birmingham, Alabama. This litigation was generated when the banks sought to merge State National with Central under Central's state charter.

William Ellis, a stockholder of State National, brought a shareholder's derivative suit seeking to block the proposed merger. In a separate suit, The First National Bank of Birmingham and seven other banks¹ also sought to prevent the merger. Both actions were filed in the Northern District of Alabama. They were consolidated. The parties sought a declaration of (1) whether the proposed merger violated federal banking laws contained in Title 12, U.S.C., Sections 214-214c, (2) whether the branch banking laws of Alabama would be violated by the proposed merger, and (3) whether the proposed merger violated the federal antitrust laws.

In the trial below, the first two issues were separated for trial. The antitrust question was not considered. Since all the relevant facts were stipulated, we deal, as did the court below, with legal issues only. The trial court, in its order, found that the merger was invalid because it violated federal law, and thereupon found it unnecessary to decide the branch banking issue. We affirm.

The ultimate determination of this case rests upon an examination and interpretation of the interplay between federal and Alabama statutes. Under the provisions of Title 12, U.S.C., Sections 214-214c, Congress has authorized national banks to merge into state banks if state law is not contravened and if state banks in the particular state can "without approval by any State authority convert into and merge or consolidate with national banking associations under limitations or conditions no more restrictive than those contained in Section 214a". (Emphasis added).

The undisputed purpose of these statutes which were first enacted in 1950, is to promote equality between the federal and state banking systems. Prior to this legislation state banks could convert into or consolidate with national banks but there was no corollary and corresponding provision allowing national banks to convert into or consolidate with state banks. Congress attempted to rectify this inequity by permitting national banks to join state systems with the proviso that such transfers were permissible only to the extent that state banks could freely move into the national system.

Under 5 Alabama Code, Sections 181-184, any state bank is allowed to "convert into" or "consolidate with" a national bank without approval of the State Banking Superintendent. Clearly if the appellant national bank desired to convert into or consolidate with an Alabama state bank it could do so without controversy. It is crucial to note that the Alabama statute makes no specific reference to mergers with national banks. Merger is dealt with in Title 5 Alabama Code, Sections 170-175, which pertain to any bank doing business in the state of Alabama. These statutes require approval of a merger by the State Banking Superintendent. The district court thus concluded:

"The language used by Congress throughout the statute is inducive in construing the statute to mean, that unless a State bank can convert into, merge with and consolidate with a national bank without State approval, then a national bank can convert into, merge with and consolidate with a State bank. In other words, if a national bank and a State bank wish to merge, with the surviving bank to be the State bank, the law of the State where the national bank is located must allow a State bank to merge with a national bank without approval of any State authority. Under existing Alabama law, this cannot be accomplished. This construction certainly is the most logical in light of the Congressional intent to keep the national and state banking systems on an equal level of operation as illustrated by the legislative history of Section 214c." (Emphasis added).

I.

Federal Law

A. "And-or"

Title 12, U.S.C., Section 214c states in part: "no such conversion, merger or consolidation shall take place * * * unless * * * State banks may without approval by any State authority convert into and merge or consolidate with national banking systems". (Emphasis added)

The appellants rely on the common rubric of statutory construction that a statute is open to construction only when the language used in the statute is ambiguous. The appellants assert that there is no ambiguity in the statute and that it is open to a single meaning only. The appellants argue that Congress made its intent crystal clear by using the conjunctive "and" between convert into and merge and the disjunctive "or" between merge and consolidate with. The appellants urge that by using the words "and"-"or" in such a precise manner Congress unquestionably meant to require that state law must provide for an unfettered transfer of a state bank to a national bank in two instances: conversion and corporate combination (either a merger or a consolidation). The appellants' ultimate contention is that the district court erroneously construed the statute to require three reciprocal transfer provisions; i. e. conversion, consolidation, and merger.

If the appellants' position is accepted, the district court must be reversed because the applicable Alabama law, Title 5, Alabama Code, Sections 181-184, clearly permits corporate combination. The statutes provide for the unfettered transfer of a state bank into the national banking system and consolidation (a form of corporate combination) with a national bank.²

Study of the statute convinces us that the meaning of the statute cannot be gleaned from the simplistic but rigid device of grammatical construction, parsing or classification. We disagree that the wording is so clear as to preclude the necessity of judicial interpretation of the state. We are convinced that resort must be had to the legislative history to determine Congressional intent and the real meaning of the statute.

The appellants make much of the fact that the "and-or" phraseology is used only once in the entire statutory scheme. Section 214a authorizes a national bank to convert into or merge or consolidate with a state bank. The appellants suggest that the disjunctive "or" in Section 214a is deliberately used so as to authorize national to state transfers by any of the three methods. In like manner the appellants reason that the "ors" contained in Section 214a(a) and Section 214a(b) are deliberately used so as to give the statute operative effect.

The appellants logically contend that the exclusive use of the "and-or" language in 214c is no less deliberate. The phraseology in 214c describes the conditions that state law must meet in order for a national bank to transfer into the state system. Appellants' theory is that Congress by the use of the precise words "and-or" is specifying that in order for the state to comply with the terms of the statute the state law must provide authority for the unrestricted transfer of a state bank into a national bank by way of conversion and either consolidation or merger. The final effect of the appellants' analysis is that the separate terms, "merger" and "consolidation", are used in Section 214c as mere synonyms to connote a generic concept of corporate combination.

We do not agree that Congress used its "ands" and "ors" in the rigid manner suggested by the appellants. In the Act's title and in the committee reports, the words "and" and "or" are used in random fashion. For example the Act's title, as reprinted in 1950 U.S.Code Cong.Serv., p. 462, reads:

"An act to provide for the conversion of national banking associations into and their merger or consolidation with State banks, and for other purposes." (Emphasis added).

The significance of the language is that the title describes essentially what is contained in Section 214a. The appellants, as previously stated, contend that the disjunctive "or" is essential to the meaning of Section 214a. Yet Congress, when describing the Act used the same "and-or" language which the appellants assert is unique to and used with specificity in Section 214c.

In the introductory paragraph of the Senate Committee Report³ the words "and"-"or" are used to describe national to state transfer, the subject matter of Section 214a. Conversely, the same report when addressing itself to the subject matter of Section 214c (state to national transfers) uses the phrase "convert into, or merge or consolidate". (Emphasis added).

These illustrations adequately demonstrate that Congress had no deliberate design in using "and" or "or" in the statute. Thus we must reject the appellants' theory. The "and-or" language in Section 214c does not dictate the...