ROLFE STATE BANK, Appellant, v. Charles A. GUNDERSON and Gloria K. Gunderson, Margaret Gunderson Moore, Clara Gunderson Hoover and Harold M. Hoover, Helen D. Gunderson, Deane C. Gunderson and Martha G. Carlson, Appellees.
No. 09-0651.
Supreme Court of Iowa.
Feb. 11, 2011.
561
Charles A. Gunderson, Rolfe, pro se and for remaining appellees.
APPEL, Justice.
In this case, the court is confronted with an issue of first impression regarding minority appraisal rights of the shareholders of a state bank in a reverse stock split. Specifically, we address whether
The Bank is an Iowa chartered state bank with its principal office in Rolfe, Iowa. Prior to the reverse stock split that gave rise to the litigation in this case, the vast majority of shares were held by Dixon Bankshares, Inc. The Gundersons were among thirty other shareholders who held a minority interest in the Bank.
Prior to a meeting of the board of directors to consider approval of a reverse stock split, the Bank‘s management hired BCC Advisors to provide an independent appraisal of the value of the Bank‘s common stock held by minority shareholders. The independent appraisal by BCC Advisors concluded that the fair market value of the shares as of June 30, 2008, was $1857 per share. In reaching this figure, BCC Advisors applied certain discounts to the value of the stock, including a minority discount and a discount for lack of marketability. These discounts amounted to a thirty-three percent reduction in the value of the common stock compared to the value of shares owned by Dixon Bankshares, the controlling shareholder.
Based upon the independent appraisal, the board of directors approved a reverse stock split, subject to shareholder approval. The board determined that, if the reverse stock split were approved, each minority shareholder whose ownership interests would be liquidated would be paid $2000 per share of common stock. The board based the $2000 figure on the appraisal made by BCC advisors.2 The shareholders, and subsequently the regulatory authorities, approved the reverse stock split.
As a result of the reverse stock split, the Gundersons were forced to surrender their minority shares to the Bank, and they filed a notice of their exercise of appraisal rights pursuant to
Pursuant to
The Gundersons answered and filed motions for partial summary judgment and for summary judgment, which presented three independent bases. First, the Gundersons asserted that
The district court sustained the Gundersons’ motion for partial summary judgment. The district court determined that, while the language in
II. Standard of Review.
This court reviews issues of statutory interpretation for correction of errors at law. State v. Sluyter, 763 N.W.2d 575, 579 (Iowa 2009). To the extent constitutional issues are raised, review is de novo. State v. Groves, 742 N.W.2d 90, 92 (Iowa 2007).
III. Discussion.
A. The Question of Ambiguity.
The question posed by this interlocutory appeal is whether
A statute is ambiguous “if reasonable minds could differ or be uncertain as to the meaning of a statute.” Holiday Inns Franchising, Inc. v. Branstad, 537 N.W.2d 724, 728 (Iowa 1995). Ambiguity not only arises from the meaning of particular words, but also “from the general scope and meaning of a statute when all its provisions are examined.” Id.; accord State v. Wiederien, 709 N.W.2d 538, 541 (Iowa 2006). Words are often chameleons, drawing their color from the context in which they are found. See Carolan v. Hill, 553 N.W.2d 882, 887 (Iowa 1996). The overall structure of a statute can have strong influence on the meaning of particular words and phrases. See AOL LLC v. Iowa Dep‘t of Revenue, 771 N.W.2d 404, 409 (Iowa 2009). As a result, courts should be circumspect regarding narrow claims of plain meaning and must strive to make sense of our law as a whole. Karl N. Llewellyn, Remarks on the Theory of Appellate Decision and the Rules or Canons About How Statutes Are to Be Construed, 3 Vand. L.Rev. 395, 399 (1950) (discussing the need to interpret words in context); 2A Norman J. Singer & J.D. Shambie Singer, Statutes and Statutory Construction, § 46.1, at 151-53 (Thompson/West 7th ed.2007) (describing difficulties in applying the plain meaning rule); see NLRB v. Federbush Co., 121 F.2d 954, 957 (2d Cir. 1941) (Judge Learned Hand explaining, “Words are not pebbles in alien juxtaposition; they have only a communal existence; and not only does the meaning of each interpenetrate the other, but all in their aggregate take their purport from the setting in which they are used....“).
3. a. Notwithstanding any contrary provision in chapter 490, division XIII, in determining the fair value of the shareholder‘s shares of a bank organized under this chapter or a bank holding company as defined in section 524.1801 in a transaction or event in which the shareholder is entitled to appraisal rights, due consideration shall be given to valuation factors recognized for federal tax purposes, including discounts for minority interests and discounts for lack of marketability.
The Bank contends that the plain language of
The Bank‘s approach, however, is not the only reasonable interpretation of
We conclude that reasonable minds could differ regarding the meaning of the statute. While the language used by the legislature at first blush appears to be broad, we have in many cases stated that broad and even unqualified language must be evaluated in its context. See Acker, 541 N.W.2d at 520 (stating that the meaning of the unqualified and broad term “any person” must be considered in its overall context); Boone State Bank & Trust Co. v. Westfield Ins. Co., 298 N.W.2d 315, 317 (Iowa 1980) (stating that broad language of a statute is “not conclusive” and is “affected by its context“). We agree with the Gundersons that it seems odd that an important change in appraisal law with respect to banks that covers a wide variety of transactions would be buried in a section of the Code dealing with bank mergers. It is at least plausible that the clause containing the phrase “transaction or event” is related only to bank holding companies and not to banks.
The meaning of
B. Legislative Intent and Section 524.1406(3)(a) .
” ‘The polestar of statutory interpretation is to give effect to the legislative intent of a statute.’ ” Klinge v. Bentien, 725 N.W.2d 13, 18 (Iowa 2006) (quoting State v. Schultz, 604 N.W.2d 60, 62 (Iowa 1999)). In determining legislative intent, we avoid placing undue importance on isolated portions of an enactment by construing all parts of the enactment together. Gen. Elec. Co. v. Iowa State Bd. of Tax Review, 702 N.W.2d 485, 489 (Iowa 2005). In the end, the object of our inquiry is to seek a result ” ‘that will advance, rather than defeat, the statute‘s purpose.’ ” Klinge, 725 N.W.2d at 18 (quoting Schultz, 604 N.W.2d at 62).
We begin our analysis of legislative intent by reviewing the legislative history related to reverse stock splits and to marketability and minority discounts. The trail begins with our decision in Security State Bank v. Ziegeldorf, 554 N.W.2d 884 (Iowa 1996). In Ziegeldorf, we considered the meaning of the term “fair value” under
In 1999, the legislature responded to our decision in Ziegeldorf as to bank mergers by amending the Iowa Banking Act through the enactment of House File 445. 1999 Iowa Acts ch. 162, § 1 (codified at
In 2000, the legislature revisited the issue of marketability and minority discounts in the context of bank holding companies by enacting House File 2197. 2000 Iowa Acts ch. 1211, §§ 1-3 (codified at
The first section of House File 2197 added a new provision to the dissenter‘s rights provisions of the Iowa Business Corporation Act by amending
The second section of House File 2197 amended the definition of “fair value” in
With respect to a dissenter‘s shares that are shares of a corporation that is a bank holding company as defined in section 524.1801, the factors identified in section 524.1406, subsection 3, paragraph “a“, shall also be considered.
Id. § 2. This language in House File 2197, like section one, applied only to bank holding companies. Id. It expanded the use of marketability and minority discounts to in-
The third section of House File 2197 amended
3. a. Notwithstanding any contrary provision in chapter 490, division XIII [the Iowa Business Corporation Act division dealing with rights of dissenting shareholders], in determining the fair value of shareholder‘s shares
under this sectionof a bank organized under this chapter or a bank holding company as defined in section 524.1801 in a transaction or event in which the shareholder is entitled to the rights and remedies of a dissenting shareholder, due consideration shall be given to valuation issuesacknowledged and authorized by the Internal Revenue Code, as defined in section 422.3factors recognized for federal and estate tax purposes, including discounts for minority interests and discounts for lack of marketability.
Id. Aside from technical changes, the remaining language in section three largely ensures that the procedural provisions of
The explanation of House File 2197 states, “This bill provides for determination of value of the shares of a dissenting shareholder of a bank holding company.” H.F. 2197, 78th G.A., Reg. Sess., explanation (Iowa 2000). The explanation also notes that the bill provides “a corporation that is a bank holding company may elect to have fair value of the bank holding company‘s shares determined under Code section 524.1406, notwithstanding the provisions of Code chapter 490 relating to corporations.” Id. The explanation does not contain any suggestion that the applicability of marketability and minority discounts to banks has been affected in any way by the legislation. Id.
In light of this legislative history, we view the gist of the issue before us as this: Did the legislature in House File 2197 intend to expand the applicability of valuation factors, including lack of marketability and minority discounts, to transactions—other than bank mergers—involving banks? We conclude that the legislature intended in House File 2197 to expand the availability of the valuation factors, including lack of marketability and minority discounts, to bank holding companies, but the legislature did not intend to affect the preexisting law with respect to banks. We reach this conclusion for several reasons.
At the outset, we regard it as unlikely that the legislature would place a significant expansion of the application of minority and marketability discounts with respect to a wide variety of transactions in a division of the Iowa Banking Act dealing solely with bank mergers. Although such an approach is conceivable, it defies logical drafting and would be a trap for the unwary. Instead, if the legislature intended to broadly apply marketability and minority discounts to banks in all transactions in which shareholders are entitled to appraisal rights, it would have more likely placed this language in the general provisions of the Iowa Business Corporation Act.
Indeed, this is exactly what the legislature did with respect to bank holding companies. In section two of House File 2197, the legislature announced in the Iowa Business Corporation Act in straight-
The language in section three of House File 2197 may be interpreted in a fashion consistent with this approach. The new language of section three appears to have been designed to blend the preexisting law found in
Our approach is supported by the explanation of House File 2197. It is striking that the explanation of the bill is expressed solely in terms of expanding valuation discounts to bank holding companies. See H.F. 2197, explanation. The explanation does not mention the expansion of the applicability of these discounts to banks. Id. We think it unlikely that the legislature would have intended to significantly expand the applicability of these discounts with respect to banks in an ambiguous legislative provision that fails to mention the expansion in the explanation. See City of Cedar Rapids v. James Props., Inc., 701 N.W.2d 673, 677 (Iowa 2005) (“We give weight to explanations attached to bills as indications of legislative intent.“).
The Bank asserts that the title of House File 2197, as enacted by the legislature, suggests that the legislature intended to apply valuation discounts equally to banks and bank holding companies. See State v. Iowa Dist. Ct., 630 N.W.2d 778, 781 (Iowa 2001) (explaining that the statute‘s title may be considered in determining legislative intent). House File 2197 was entitled, “An Act relating to the determination of fair value of the shares of dissenting shareholders of a bank or bank holding company.” 2000 Iowa Acts ch. 1211. The Bank argues that the title‘s reference to banks and bank holding companies is evidence of the legislature‘s intent to alter substantive provisions within the Iowa Banking Act with respect to valuation of a bank‘s shares.
Finally, the first two sections of House File 2197 both explicitly cross-reference
In sum, the statutory context and legislative history of
IV. Conclusion.
We conclude that the minority and lack of marketability discount provisions of
AFFIRMED.
APPEL
JUSTICE