Opinion ID: 1849893
Heading Depth: 1
Heading Rank: 2

Heading: The conduct of fiduciary business by a national bank is governed by federal law and regulations.

Text: Under the facts of this case, what federal law was applicable? Let's examine the facts and apply the law. The management of the bank had decided to consolidate. Since the bank held shares of its own stock as trustee, it could not vote the shares in the consolidation proceeding, because Tit. 12, § 61, U.S.C., prohibited it from voting these trust shares. That section provides, in part: In all elections of directors, each shareholder shall have the right to vote the number of shares owned by him for as many persons as there are directors to be elected, or to cumulate such shares and give one candidate as many votes as the number of directors multiplied by the number of his shares shall equal, or to distribute them on the same principle among as many candidates as he shall think fit; and in deciding all other questions at meetings of shareholders, each shareholder shall be entitled to one vote on each share of stock held by him;    and (3) shares of its own stock held by a national bank and one or more persons as trustees may be voted by such other person or persons, as trustees, in the same manner as if he or they were the sole trustee.    Whenever shares of stock cannot be voted by reason of being held by the bank as sole trustee such shares shall be excluded in determining whether matters voted upon by the shareholders were adopted by the requisite percentage of shares. (Emphasis added.) As I read this statute, when the question of merger came up, this section prohibited the bank from voting the trust stock. However, the statute specifically permitted Henley, as co-trustee, to vote this stock. Henley, acting under this statute, actually voted every share of the trust stock against the merger, as he had a legal right to do acting as he was under the statute as the sole trustee. A reading of Tit. 12, § 61, convinces me that when a national bank holds shares of its own stock as sole trustee, it cannot vote the stock and these shares are excluded in determining whether matters voted upon by the shareholders were adopted by the requisite percentage of shares. I believe this portion of Tit. 12, § 61, U.S.C., was added by Congress to the National Banking Act in 1966 to prevent an inequity. If shares so held by a bank in trust could not be voted, and were not excluded, voting rights belonging to the beneficiaries of the trust would, in effect, be given to the remaining shareholders. cf. Cleveland Trust Co. v. Eaton, 21 Ohio St.2d 129, 256 N.E.2d 198 (1970). When shares of its own stock are held by a national bank and one or more persons as trustees, then the other person or persons may vote the stock in the same manner as if he or they were the sole trustee. Henley, acting as sole trustee, became a dissenting shareholder, pursuant to federal law. The critical question at this point was: what duty did the bank have with regard to the trust? The majority seems to say, in effect, that the bank should have supported Henley's dissent even though it was against its business judgment. I disagree. Federal law prohibited the bank from voting the stock. Was the bank under a duty to support Henley's dissent, even though it, acting in good faith, thought his dissent was not in the best interest of the trust? I think not. If Henley had not dissented, the BTNB stock would have been exchanged for the new bank stock. Does the bank fail to give undivided loyalty to the trust by disagreeing with a business judgment exercised by a co-trustee, who is statutorily empowered to vote the shares as a sole trustee? I think not. I believe that federal law sufficiently protected this trust but even if I did not think' that, I believe that this Court should consider this case in the light of the finding by the trial court of an absence of bad faith on the part of the bank. In any event, when Henley decided to dissent, I believe that he became a dissenting stockholder under the provisions of federal law and from that point forward, national law provided, in detail, the procedure which had to be followed to determine the value of the shares. Tit. 12, § 215(b), U.S.C., provides, in part, that when a shareholder dissents from a plan of consolidation, he shall be entitled to receive the value of the shares so held by him when such consolidation is approved by the Comptroller   . The valuation of the shares is governed by national law. Tit. 12, § 215(c) provides: