Keeffe v. Citizens and Northern Bank

• Decision Date: 29 December 1986
• Docket Number: No. 86-5333,86-5333
• Citation: 808 F.2d 246
• Parties: KEEFFE, Carol Ann, Individually, & Keeffe, Carol Ann, as Trustee for Melissa Ann Keeffe, Appellant, v. CITIZENS AND NORTHERN BANK, & C.T. Conover, Comptroller of the Currency.
• Court: U.S. Court of Appeals — Third Circuit

Page 246

808 F.2d 246

KEEFFE, Carol Ann, Individually, & Keeffe, Carol Ann, as Trustee for Melissa Ann Keeffe, Appellant, v. CITIZENS AND NORTHERN BANK, & C.T. Conover, Comptroller of the Currency.

No. 86-5333.

United States Court of Appeals, Third Circuit.

Argued Nov. 17, 1986.

Decided Dec. 29, 1986.

David B. Keeffe (argued), De Sisti & Keeffe, P.C., Sayre, Pa., for appellant.

Raymond E. Ginn, Jr. (argued), Owlett & Lewis, P.C., Wellsboro, Pa., for appellee Citizens & Northern Bank.

James J. West, U.S. Atty., Barbara L. Kosik, Asst. U.S. Atty., Scranton, Pa., Eugene M. Katz, Rosa M. Koppel (argued), Litigation Div., Comptroller of the Currency, Washington, D.C., for appellee Comptroller of the Currency.

Before SEITZ, GIBBONS and HUNTER, Circuit Judges.

OPINION OF THE COURT

SEITZ, Circuit Judge.

Carol Ann Keeffe appeals a final judgment of the district court in favor of defendants Citizens & Northern Bank (Citizens) and C.T. Conover, Comptroller of the Currency (Comptroller). The controversy arises from the Comptroller's appraisal of Keeffe's stock following the merger of Farmers National Bank (Farmers) and Citizens. We have jurisdiction under 28 U.S.C. Sec. 1291 (1982).

I

On March 10, 1983, subject to stockholder approval, Farmers entered a merger agreement with Citizens. Under the terms of the agreement, Citizens would exchange 8 shares of its stock for each share of Farmers stock.

On March 15, 1983, the president of Commonwealth Bank & Trust Company (Commonwealth) wrote to the president of Farmers and expressed interest in a merger of the two banks. ¹ The letter indicated Commonwealth would offer Farmers approximately 14 shares of its stock for each share of Farmers stock. Since Commonwealth had a fair market value of $16 per share, under this plan Farmers shareholders would receive $224 worth of Commonwealth stock for each share held.

On May 2, 1983, the Farmers board of directors mailed the Farmers stockholders notification that it had approved the March 10 merger agreement with Citizens along with a proxy statement requesting approval of the agreement. The Farmers directors indicated that the Citizens stock had a fair market value of $25 per share at this time. Accordingly, Farmers shareholders would receive $200 worth of Citizens stock for each share of Farmers.

On May 18, 1983, Commonwealth extended a formal merger proposal to Farmers, offering 18 shares of its stock for each share of Farmers. Based on the $16 per share value of Commonwealth, Farmers shareholders would receive Commonwealth stock worth $288 for each share of Farmers. As an alternative, Commonwealth offered the Farmers shareholders a ten-year capital note with a face value of $234 and a stated interest rate of 10% interest for each Farmers share.

Citizens responded by increasing its offer for Farmers to 9 1/2 of its shares for each share of Farmers. Based upon the $25 per share value of Citizens, each Farmers shareholder would receive Citizens stock worth $237.50 for each share held. As an alternative, Citizens offered Farmers shareholders a five-year capital note with a principal value of $237.50 and a stated interest rate of 10 1/2% in exchange for each Farmers share.

The Farmers directors then voted to accept Citizens' later offer. On September 19, 1983 the Farmers shareholders voted their approval of the Citizens offer, and the banks merged. Keeffe, who held over 900 shares of Farmers stock, voted against the proposal and perfected her dissenter's rights pursuant to 12 U.S.C. Sec. 214a (1982) by surrendering her stock and requesting fair value for her shares. After negotiations, Citizens notified Keeffe that it appraised her shares of Farmers at $213.59. Keeffe rejected the appraisal. Pursuant to Section 214a, Citizens then requested the Comptroller to appraise the shares.

Keeffe submitted to the Comptroller a brief in support of her position regarding the value of the Farmers stock. The brief contained an appraisal prepared by Whitesell, a financial expert, which appraised the Farmers stock at $326.54 per share.

The Comptroller considered the arguments and submissions of the parties and conducted his own research. He appraised the Farmers stock at $228.67 per share as of September 19, 1983.

The Comptroller's decision was accompanied by a memorandum outlining in detail the methodology, commonly known as the "Delaware Block Method," used in evaluating the stock. The Delaware Block Method is based on a weighting of the following four measures of a stock's value: fair market value, book value, adjusted book value, and investment value. The memorandum described the four measures and set forth the weight, if any, given each in the Comptroller's appraisal. He assigned no weight to fair market value or book value of the Farmers stock.

Keeffe subsequently filed this action in the district court contending that the appraisal was unreasonable, arbitrary and capricious. Jurisdiction was based, inter alia, on 28 U.S.C. Sec. 1331 (1982). The complaint also sought interest on the Farmers shares for the period between the surrender of the shares and the tender of the stock's value following the Comptroller's appraisal. Finally, the complaint alleged that Keeffe had been deprived of property without due process in violation of the Fifth Amendment. The district court granted summary judgment for Citizens and the Comptroller, holding that the appraisal was not arbitrary, unreasonable or capricious. The court's memorandum opinion did not mention Keeffe's request for interest or her constitutional claim. This appeal followed.

II

Before turning to the merits, we must consider Citizens' contention that the Comptroller's appraisal under Section 214a is not reviewable in federal court. ² Citizens relies on the language of Section 214a(b): "... the Comptroller shall upon written request of any interested party, cause an appraisal to be made, which shall be final and binding on all parties."

The Administrative Procedure Act (APA) confers a general cause of action upon persons "adversely affected or aggrieved by agency action within the meaning of a relevant statute," 5 U.S.C. Sec. 702 (Supp.III 1985), except to the extent a relevant statute precludes judicial review, 5 U.S.C. Sec. 701(a)(1) (1982). The Supreme Court has stated that "the question whether a statute precludes judicial review 'is determined not only from its express language, but also from the structure of the statutory scheme, its objective, its legislative history, and the nature of the administrative action involved.' " Lindahl v. Office of Personnel Management, 470 U.S. 768, 779, 105 S.Ct. 1620, 1627, 84 L.Ed.2d 674 (1985), quoting Block v. Community Nutrition Institute, 467 U.S. 340, 345, 104 S.Ct. 2450, 2454, 81 L.Ed.2d 270 (1984); Wheaton Industries v. United States Environmental Protection Agency, 781 F.2d 354, 356-57 (3rd Cir.1986). There remains a presumption in favor of judicial review of administrative action. Block, 467 U.S. at 349.

There is scant case law considering the reviewability of the Comptroller's appraisals of dissenters' stock in the bank merger context. In Beerly v. Dep't of Treasury, 768 F.2d 942, 944-45 (7th Cir.1985), cert. denied, --- U.S. ----, 106 S.Ct. 1184, 89 L.Ed.2d 301 (1986), the seventh circuit determined that a Comptroller's appraisal under 12 U.S.C. Sec. 215a (1982) is reviewable in federal court. Section 215a is a sister provision of Section 214a, dealing with slightly different bank mergers, and it contains the same "final and binding" language as Section 214a. See 12 U.S.C. Sec. 215a(c) & (d) (1982). The court based its determination in part on a presumption of judicial review, citing Abbott Laboratories v. Gardner, 387 U.S. 136, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967). It also relied on the notion that appraisal of dissenters' shares is traditionally a judicial function, one which invites judicial review when performed by an administrative agency rather than a court.

The only other reported decision considering the reviewability of Comptroller appraisals in this context is Simonds v. Guaranty Bank and Trust Co., 492 F.Supp. 1079 (D.Mass.1979). The Simonds court determined that the Comptroller's appraisals under Section 214a were reviewable. The court relied upon: (i) the Abbott Laboratories presumption of reviewability; (ii) the fact that courts have traditionally considered valuation questions in the context of appraisal of dissenting shareholders' stock; (iii) a desire to protect the shareholder from arbitrary agency action; and (iv) the notion that review would not reduce the Comptroller's effectiveness in making appraisals. Simonds, 492 F.Supp. at 1081-82.

The strongest argument against reviewability of appraisals under Section 214a is the statutory language quoted above. This language, however, does not explicitly forbid review. There is a palpable difference between the "final and binding" language of Section 214a(b) and the language of statutes cited by the Supreme Court in Lindahl as examples of statutes in which Congress intended to preclude review. See Lindahl, 470 U.S. at 779-80, 105 S.Ct. at 1627-28, citing 5 U.S.C. Sec. 8128(b) (1982) (compensation for work injuries) ("The action of the Secretary [of Labor] or his designee in allowing or denying a payment under this subchapter is--(1) final and conclusive for all purposes and with respect to all questions of law and fact; and (2) not subject to review by another official of the United States or by a court by mandamus or otherwise.").

The remaining factors relied on by the Block court, moreover, indicate that Congress did not intend to preclude judicial review of Comptroller appraisals under Section 214a. The legislative history gives no indication that Congress intended to preclude judicial review. No objective of the statutory scheme would be frustrated, nor any part of the statutory structure impaired, by judicial review of the Comptroller's appraisals. In...