Ford v. KeithFord v. Keith
- Reporters:
- , ,
- Before:
- Lavenski R. Smith
Lead Opinion
Appellant Bill J. Ford (“Ford”), Bank Commissioner of Arkansas, appeals an adverse decision from the Pulaski County Circuit Court in which the court determined that the Bank Commissioner’s decision to uphold a bank reorganization was ultra vires of the governing statute,
Facts
This case arises out of the conversion and merger of a state savings and loan into a state bank, and the ultimate freeze-out of the minority stockholders in the bank. For many years, the Benton Savings and Loan Association operated out of Benton, Arkansas, as a state savings and loan association operating under authority of the Arkansas Savings and Loan Board. Keith,
In April, 1997, Benton Savings and Loan filed an application with the Savings and Loan Board to move the home office of the Savings and Loan from Benton to Bryant, Arkansas. Mac Dodson, Arkansas Savings and Loan Supervisor, approved this move on May 13, 1997. Shortly thereafter, on July 15, 1997, Benton Savings and Loan’s board of directors passed a resolution to convert the Savings and Loan from a state-chartered savings and loan to a state-chartered bank. On July 28, 1997, a majority of the shareholders voted to pass this resolution for conversion, and the Arkansas Bank Commission and State Banking Board approved it on October 16, 1997. The new name of the bank was The Union Bank of Bryant (“Union Bank”).
Approximately one month later, Union Bank’s board of directors notified all of the shareholders that the directors had adopted an Agreement and Plan of Exchange proposing a cash payment of $18.50 per share by Bancshares for all of the minority stock in the bank, with the goal being that the bank would be wholly owned by Bancshares. Notice of the adopted Agreement also included notice that a special meeting of the shareholders would be held on December 16, 1997. The purpose of the special meeting would be to vote on the Agreement and, if approved by a majority of the shareholders, a hearing would be held the same day with the Arkansas Bank Commissioner to approve the plan.
The bank’s directors held the meeting on December 16, 1997. At the meeting, Bancshares, holding the vast majority of the shares in the bank, voted to approve the Agreement. Keith voted against the agreement. In addition, prior to the meeting, Keith gave notice to the bank that he would dissent from the vote in accordance with
A full hearing was held on February 9, 1998, at which the parties argued their positions on the matter. On July 6, 1998, Pulaski County Circuit Judge Bogard entered judgment against the Commissioner finding that the Plan of Exchange and Agreement approved by Ford was ultra vires of
Standard of Review
Decisions of the Banking Board and Commissioner are subject to the Arkansas Administrative Procedure Act,
administrative agencies are better equipped than courts, by specialization, insight through experience, and more flexible procedures to determine and analyze underlying legal issues affecting their agencies, and this recognition accounts for the limited scope of judicial review of administrative action and the refusal of the court to substitute its judgment and discretion for that of the administrative agency.
Wright, 311 Ark. at 130.
Evidence is given its strongest probative force in favor of the agency’s ruling, and we will not reverse an agency decision when there is substantial evidence to support it. Arkansas Bank & Trust Co. v. Douglass, 318 Ark. 457, 885 S.W.2d 863 (1994). To determine whether a decision is supported by substantial evidence, we review the entire record to ascertain if it is supported by relevant evidence that a reasonable mind might accept as adequate to support a conclusion. Wright, supra (citing Livingston v. Arkansas State Medical Bd., 288 Ark. 1, 701 S.W.2d 361 (1986); Partlow v. Arkansas State Police Comm’n, 271 Ark. 351, 609 S.W.2d 23 (1980)).
Statutory Construction and Interpretation
This case involves a first-impression interpretation of a banking statute. The basic rule of statutory construction is to give effect to the intent of the legislature. Kildow v. Baldwin Piano & Organ, 333 Ark. 335, 338-339, 969 S.W.2d 190, 191-192 (1998) (internal citations omitted). Where the language of a statute is plain and unambiguous, we determine legislative intent from the ordinary meaning of the language used. Id. The first rule in considering the meaning of a statute
The first and principal issue Keith argued before the Commissioner was that the proposed Plan of Exchange exceeded the authority and scope of
Under
(1) Is contrary to law;
(2) Is inequitable to the stockholders of the state bank involved;
(3) Would not provide a satisfactory means for disposing of shares of the state bank resulting from dissenting stockholders; or
(4) Would substantially reduce the security of or service to be rendered todepositors or other customers of the state bank or any affiliate bank of the state bank or the bank holding company.
However, a minority shareholder’s dissent from the Plan of Exchange, in and of itself, is not sufficient to disallow the Plan. Rather than permitting deadlock, the statute authorizes the majority to proceed with its plan but provides for dissenters’ appraisal rights. Under
The legislature enacted the subject statutory provisions in 1997 and, to date, they have not been interpreted by this court. However, reorganization plans have been used in other jurisdictions. In particular, the Eighth Circuit Court of Appeals determined that a “freeze-out” merger under the National Bank Act, codified at
In contrast, the Eleventh Circuit Court of Appeals, three years before the NoDak decision, determined that “freeze-out” mergers were not valid, in part under the theory that “there is a longstanding equity tradition of protection of minority shareholders in American jurisprudence.” Lewis, 911 F.2d at 1561. In Lewis, the court determined that without express statutory authority, the Comptroller who was required to approve the merger plan had no authority to approve a merger which requires equally situated stockholders to take different forms of consideration.
The facts of the instant case differ from NoDak and Lewis. Here, the holding company did not create a “phantom bank” into which the stockholders could vote for Union Bank to merge. Instead, by a vote of the majority stockholder, Bancshares, it was decided under the Plan of Exchange that the minority stockholders must sell their stock to Bancshares, the holding company. On the other hand, Bancshares would not have to sell its shares. In fact, Bancshares would not even have to exchange its Union Bank shares with shares of some “phantom bank.” The practical effect of the process used is that the majority
The issue before us now is whether
While this nation’s jurisprudence in more recent years has moved away from its earlier staunch safeguards for minority stockholders, our general rules of statutory interpretation must still control to determine whether the actions taken here are valid under the statute notwithstanding the movement away from minority stockholder protection. As Keith argues, the statute is clear on its face that the sale of the shares must be a sale of “all” shares under Ark. Code. Ann.
Flere, no ambiguity exists in the statute to require us to analyze the language beyond its plain meaning. The statute at issue reads in pertinent part:
Authority to adopt plan of exchange — Approval hy commissioner required.
(a)(1) A state bank may adopt a plan of exchange of all of the outstanding capital stock held by its stockholders, for the consideration designated in this section to be paid or provided by a bank holding company which acquires the stock, in the manner provided in this subchapter. . . . [Emphasis added.]
In support of his argument, Ford argues that the change in the above statute which was enacted through Act 117 of 1999 indicates what the legislature truly intended in the original reorganization statutes. Act 117 of 1999, entitled “Clarification of the Procedures to Reorganize Using a A Plan of Exchange,” significantly modifies the 1997 statute. Specifically, subsection -601(a)(1) was changed to read “A state bank may adopt a plan of exchange for shares of the outstanding capital stock. . .” instead of “A state bank may adopt a plan of exchange of all of the outstanding capital stock. ...” (Emphasis added.) In addition, the legislature further changed the language of the statute by altering subsection -604(a)(1) and (2). In -604(a)(1), “and each shareholder of the state bank acquired shall thereupon cease to be a shareholder of the state bank” was changed to “and each shareholder of the state bank whose shares were acquired shall thereupon cease to be a shareholder of the state bank.” Furthermore, in subsection -604(a)(2), “The ownership of all shares of the issued and outstanding stock of the state bank. . .” changed to “The ownership of shares acquired in the plan of exchange. ...” While these changes may seem minor in nature, they are major in effect. Under the statute as amended, the actions that Bancshares took to consolidate the shares for 100% control of the bank may be permitted. However, despite the attempt to characterize Act 117 of 1999 as merely a “clarification” of the earlier statute, our rules of statutory interpretation do not allow us to consider the 1999 amendment as a “clarification” of the legislature’s intent. We briefly summarized the applicable statutory construction principles in State v. McLeod, 318 Ark. 781, 888 S.W.2d 639 (1994), where we stated:
In support of its position, the State correctly asserts that the basic rule of statutory construction, to which all other interpretive guides must yield, is to give effect to the intent of the legislature. Pugh v. St. Paul Fire & Marine Ins. Co., 317 Ark. 304, 877 S.W.2d 577 (1994). Yet, the State fails to note when a statute is clear, it is given its plain meaning, and that we will not search for legislative intent, rather, that intent must be gathered from the plain meaning of the language used. Pugh, supra. We are also very hesitant to interpret a legislative act in a manner contrary to its express language unless it is clear that a drafting error or omission has circumvented legislative intent. Neely v. State, 317 Ark. 312, 877 S.W.2d 589 (1994). In interpreting a statute and attempting to construe legislative intent, we look to the language of the statute, the subject matter, the object to be accomplished, the purpose to be served, the remedy provided, legislative history, and other appropriate means that throw light on the subject. McCoy v. Walker, 317 Ark. 86, 876 S.W.2d 252 (1994). We have recognized that changes made by subsequent amendments may be helpful in determining legislative intent. American Casualty Co. v. Mason, 312 Ark. 166, 848 S.W.2d 392 (1993).
As noted in McLeod, when the express language of a statute is clear, later statutory changes should only be considered if it is obvious that there has been a drafting error or omission.
The “error or omission” concept stems from our caselaw referring to a drafting error or omission.1 Here, it cannot be said that there was a drafting error or omission in the language used by the legislature in the 1997 statutes when the words used are consistent with a valid, recognized procedure, i.e., the establishment of a “phantom bank,” to accomplish the “reorganization” of a state bank. Merely because Act 117 of 1999 changes the language in the statute, thus changing the available procedures to allow a reorganization, does not necessarily mean that an error occurred in the drafting of the 1997 statute. As such, we hold that there was no drafting error or omission in the 1997 statute, and Bancshares’s actions, approved by the Commissioner, were ultra vires of the statute.
Joinder of Parties
The Commissioner argues in his second point to this court that Bancshares and Union Bank were necessary parties to this action, and should have been joined in the lawsuit pursuant to
Under the A.P.A., Bancshares and Union Bank did not have to be listed as parties, they just had to be served with notice of the proceedings. This was done. In addition,
Appellant has not challenged the circuit court’s ruling remanding the case to the Commissioner for further proceedings based on the court’s view that Keith had not been provided “an acceptable opportunity to present evidence or testimony for a fair price for their shares.” The ruling of the circuit court reversing the Commissioner therefore stands.
Commissioner’s decision reversed.
Circuit Court’s decision affirmed.
Arnold, C.J., and Glaze and Thornton, JJ., dissent.Notes
See McLeod, supra (statute clear on no award of attorney’s fees in trade practice cases; no error or omission); Coleman v. State, 327 Ark. 381, 938 S.W.2d 845 (1997) (drafting error not to raise threshold to $500 in the theft-by-receiving statute as it had done in the theft statute); Neely v. State, 317 Ark. 312, 877 S.W.2d 589 (1994) (obvious from context that effective date of statute for criminal offenders was 1993 and not 1983). It must be clear that a drafting error or omission has circumvented legislative intent. See Rosario v. State, 319 Ark. 764, 894 S.W.2d 888 (1995) (possession of a handgun was erroneously omitted from the definition of a “delinquent juvenile”).
Dissenting Opinion
dissenting. Although I agree with the majority’s recitation of the applicable standard of review, I disagree with the majority’s application of that standard to the facts in the instant case. I cannot say that the commission’s interpretation of Ark. Code Ann.
When we are presented with a matter of first impression, as here, this court is vested with a pivotal responsibility to determine the meaning of a statute. See In re Adoption of Martindale, 327 Ark. 685, 688-89, 940 S.W.2d 491 (1997) (citing Arkansas Dep’t of Health v. Westark Christian Action Council, 322 Ark. 440, 910 S.W.2d 199 (1995); Peters v. State, 321 Ark. 276, 902 S.W.2d 757 (1995): Furman v. Holloway, 312 Ark. 378, 849 S.W.2d 520 (1993)). The majority’s interpretation that
I respectfully disagree with the majority’s interpretation and adopt the position advanced by the Arkansas Bankers Association and Arkansas Community Bankers Association, who filed an amicus curiae brief in this matter. When read as a whole, the purpose of these statutory provisions is to allow a reorganization through a plan of exchange that will result in a bank holding company becoming the sole stockholder of a bank. The commission’s interpretation of Ark. Code Ann. sections 23-48-601—605 recognized that purpose by permitting the instant transaction.
As further evidence of the legislature’s intent, we may also consider subsequent amendments to the statute. Rosario v. State, 319 Ark. 764, 769, 894 S.W.2d 888 1995). Via Act 117 of 1999, the legislature enacted an amendment to
In conclusion, the interpretation advanced by the majority is counter to the overall purposes and provisions of the Arkansas Banking Code. We should not disregard the legislature’s enactment of its intent in this area. In light of the great deference afforded an agency’s interpretation, Arkansas State Medical Bd. v. Bolding, 324 Ark. 238, 244, 920 S.W.2d 825 (1996), the ambiguity in