Simonds v. Guaranty Bank & Trust Co.
Decision Date | 30 April 1980 |
Docket Number | Civ. No. 74-1105-K. |
Citation | 492 F. Supp. 1079 |
Court | U.S. District Court — District of Massachusetts |
Parties | Harlan K. SIMONDS, Jr., Plaintiff, v. GUARANTY BANK & TRUST CO. and James E. Smith, Comptroller of the Currency, Defendants. |
Edward H. Comer and Bruce J. Terris, Washington, D. C., Charles D. Bent, Fitchburg, Mass., Patricia G. Curtin, Steve Moulton, Moulton & Looney, Boston, Mass., for plaintiff, Harlan K. Simonds, Jr.
Herrick & Smith, William Shields, III, Boston, Mass., for Guaranty Bank & Trust Co.
Charles K. Mone, Asst. U. S. Atty., Boston, Mass., for U.S.A.
This case is before the court on plaintiff's motion for summary judgment and defendant Comptroller's motion for judgment on the pleadings or, alternatively, for summary judgment. Defendant Bank has filed a memorandum in opposition to plaintiff's motion for summary judgment and in support of defendant Comptroller's motion for summary judgment but has not itself formally moved for summary judgment.
Plaintiff was a shareholder of a bank, The First National Bank of Winchendon, who dissented to the bank's consolidation with defendant Guaranty Bank & Trust Co. Plaintiff's shares in the bank were appraised by defendant Comptroller of the Currency pursuant to 12 U.S.C. § 214a.
In finding a value of $358.79 per share for the 402 shares of First National Bank of Winchendon stock owned by plaintiff, defendant Comptroller, acting through Deputy Comptroller J. T. Watson, approved a recommendation of Assistant Chief National Bank Examiner W. C. Tiede made by a memorandum dated January 30, 1974, as follows:
Record of Appraisal at 008. The memorandum contains no explanation of why it was thought appropriate to give equal weight to the three calculations of value.
The January 30, 1974 memorandum makes no mention of the amount realized by defendant Guaranty Bank on its sale of the Guaranty stock that plaintiff would have received had he approved the consolidation. The author of the memorandum, W. C. Tiede, was advised in a memorandum of December 11, 1973 from Dorothy Kulig, a staff attorney, that "to consider that price in appraising Mr. Simonds' First National stock would be an unreasonable and invalid method of appraisal ... The appraisal may not consider the price which Guaranty received in the sale of what would have been Mr. Simonds' Guaranty stock." Record of Appraisal at 309.
Defendant Comptroller's motion for judgment on the pleadings is essentially based on the contention that the appraisal of the Comptroller is not subject to judicial review. He argues (1) that the court lacks subject matter jurisdiction because an appraisal under 12 U.S.C. § 214a is not subject to judicial review; and (2) that plaintiff has failed to state a claim upon which relief can be granted because defendant Comptroller has already performed the duty (an appraisal) owing to plaintiff under § 214a. The issue of the availability of judicial review already has been addressed in this case, by another judge of this court, in conjunction with defendant Bank's motion to dismiss. In an Order dated September 5, 1974 the court stated:
Though proper resolution of the reviewability issue is not beyond dispute, no reason has been found to disturb the earlier ruling of the court. In Hahn v. Gottlieb, 430 F.2d 1243, 1249 (1st Cir. 1970), the First Circuit Court of Appeals indicated that "in the absence of a clear declaration of Congressional intent" to preclude judicial review of agency action, three factors were determinative of the reviewability question:
first, the appropriateness of the issues raised for review by the courts; second, the need for judicial supervision to safeguard the interests of the plaintiffs; and third, the impact of review on the effectiveness of the agency in carrying out its assigned role.
In the present context, weighing these factors points to the appropriateness of judicial review: First, courts have traditionally dealt with valuation questions in the context of appraisal of dissenting shareholders' stock. See Note, Valuation of Dissenters' Stock Under Appraisal Statutes, 79 Harv.L. Rev. 1453 (1966). The issues raised are all the more appropriate for review when review is limited in scope, as is the review undertaken by this court in the remainder of this opinion. Cf. Martignette v. Sagamore Manufacturing Co., 340 Mass. 136, 163 N.E.2d 9 (1959) ( ). Second, without judicial supervision to safeguard his interests, plaintiff could be deprived of the fair value of his stock because the Comptroller appraised his stock in a manner that was arbitrary or not in accordance with law. Third, review of the limited scope here undertaken would not thwart the effectiveness of the Comptroller in making appraisals. Indeed, review of the type here undertaken should assist the Comptroller in making future appraisals by providing, through the judicial opinions explaining the grounds of decision, more guidance than the statute alone provides relative to how such appraisals should be made. For the foregoing reasons, the court reaffirms the previous ruling that judicial review of defendant Comptroller's appraisal of plaintiff's stock is not precluded.
The parties agree, and the court concurs, that once it is determined that defendant Comptroller's appraisal of plaintiff's stock is reviewable, the appropriate standard of review is that contained in 5 U.S.C. § 706(2)(A): Was the appraisal "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law"? "To make this finding the court must consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment." Citizens To Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 823, 28 L.Ed.2d 136 (1971).
The statute under which defendant Comptroller was making the appraisal in this case, 12 U.S.C. § 214a, provides in paragraph (b) that a shareholder of a national banking association who votes against the conversion, merger, or consolidation of the association into or with a State bank is entitled to receive in cash the "value" of his shares, to be determined as of the date of the shareholders' meeting authorizing the conversion, merger, or consolidation. The statute sets forth an appraisal procedure, but it does not define "value" and does not prescribe either a method or the criteria to be applied in determining "value." Also, there are no regulations regarding valuation, nor does there appear to be any reported case law on factors to be taken into account in valuing stock under 12 U.S.C. § 214a or the essentially analogous provisions of 12 U.S.C. §§ 215 and 215a. Likewise, the legislative history offers no guidance. See S.Rep.No.1104, 81st Cong., 2d Sess. 2-3, reprinted in 1950 U.S.Code Cong.Service, pp. 3012, 3013-3014.
The Comptroller and reviewing courts are nevertheless guided and constrained by a statutory objective which, though not explicitly stated, is manifest in the statute as a whole and from the relationship between the provision for appraisal of "value" and other provisions of the statute. That objective is to provide fair and reasonable compensation for the stock of the dissenting shareholder who objects to the merger and does not wish to exchange stock in a national banking association for stock in a state bank.
What guidelines are to be applied by the Commissioner in determining "value"...
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