Opinion ID: 1772073
Heading Depth: 2
Heading Rank: 1

Heading: liability of successor bank for punitive damages

Text: The merger between First Tennessee (a national bank) and Community First (a state bank) is governed by 12 U.S.C. § 215a. This statute provides, in pertinent part: (a) One or more national banking associations or one or more State banks, with the approval of the Comptroller, under an agreement not inconsistent with this subchapter, may merge into a national banking association located within the same State, under the charter of the receiving association. The merger agreement shall . . . . (4) provide that the receiving association shall be liable for all liabilities of the association or State bank being merged into the receiving association. The issue in this casewhether the words all liabilities includes liability for punitive damagesis one of statutory construction. The applicable principles of statutory construction of a federal statute are as follows: A familiar canon of statutory construction is that the starting point for interpreting a statute is the language of the statute itself. Absent a clearly expressed legislative intention to the contrary, that language must ordinarily be regarded as conclusive. Moreover, words will be interpreted as taking their ordinary, contemporary, common meaning, so that [i]n construing a federal statute it is appropriate to assume that the ordinary meaning of the language that Congress employed accurately expresses the legislative purpose. Therefore, if the words of the statute are unambiguous, the judicial inquiry is at an end, and the plain meaning of the text must be enforced because `courts must presume that a legislature says in a statute what it means and means in a statute what it says there.' Hudson v. Reno, 130 F.3d 1193, 1199 (6th Cir.1997), cert. denied, 525 U.S. 822, 119 S.Ct. 64, 142 L.Ed.2d 50 (1998) (citations omitted). In addition: [T]ext consists of words living a communal existence, in Judge Learned Hand's phrase, the meaning of each word informing the others and all in their aggregate tak[ing] their purport from the setting in which they are used. Over and over we have stressed that [i]n expounding a statute, we must not be guided by a single sentence or member of a sentence, but look to the provisions of the whole law, and to its object and policy. U.S. Nat'l Bank of Oregon v. Indep. Ins. Agents of Am., Inc., 508 U.S. 439, 455, 113 S.Ct. 2173, 2182, 124 L.Ed.2d 402, 418 (1993) (citations omitted). Therefore, we must interpret the statute as a whole, giving effect to each word and making every effort not to interpret a provision in a manner that renders other provisions of the same statute inconsistent, meaningless or superfluous. Cafarelli v. Yancy, 226 F.3d 492, 499 (6th Cir.2000). 12 U.S.C. § 215a(a)(4) requires the merger agreement to state that the receiving association shall be liable for all liabilities of the bank merging into the receiving association. Giving the words all liabilities their ordinary, contemporary, common meaning and assum[ing] that the ordinary meaning of the language that Congress employed accurately expresses the legislative purpose[,] we conclude that all liabilities means all liabilities. We reach this conclusion not only based upon the ordinary meaning of the word all but also upon consideration of the whole statute. The all liabilities provision of the federal bank merger statute is 12 U.S.C. § 215a(a)(4). The statute goes on to provide in § 215a(e): The corporate existence of each of the merging banks or banking associations participating in such merger shall be merged into and continued in the receiving association and such receiving association shall be deemed to be the same corporation as each bank or banking association participating in the merger. All rights, franchises, and interests of the individual merging banks or banking associations in and to every type of property (real, personal, and mixed) and choses in action shall be transferred to and vested in the receiving association by virtue of such merger without any deed or other transfer. The receiving association, upon the merger and without any order or other action on the part of any court or otherwise, shall hold and enjoy all rights of property, franchises, and interests, including appointments, designations, and nominations, and all other rights and interests as trustee, executor, administrator, registrar of stocks and bonds, guardian of estates, assignee, receiver, and committee of estates of lunatics, and in every other fiduciary capacity, in the same manner and to the same extent as such rights, franchises, and interests were held or enjoyed by any one of the merging banks or banking associations at the time of the merger, subject to the conditions hereinafter provided. 12 U.S.C. § 215a(e) (emphasis added). Under subsection (e), the corporate existence of Community First was merged into and continued in First Tennessee. Moreover, the statute requires that First Tennessee be deemed to be the same corporation as [Community First]. Because Community First continues in First Tennessee and First Tennessee is deemed to be the same corporation as [Community First], it only follows that First Tennessee is liable for any punitive damages assessed for Community First's pre-merger conduct. Subsection (e) also provides that [a]ll rights, franchises, and interests of the individual merging banks or banking associations in and to every type of property (real, personal, and mixed) and choses in action shall be transferred to and vested in the receiving association by virtue of such merger without any deed or other transfer. (Emphasis added.) Because Community First's choses in action were transferred to and vested in First Tennessee, First Tennessee is authorized by the statute to sue any party against whom Community First had a cause of action. Assuming hypothetically that Community First had a valid cause of action against a defendant for both compensatory and punitive damages, subsection (e) would appear to allow First Tennessee to pursue that claim after the merger. If First Tennessee may pursue a claim for punitive damages that Community First had against another party, then logic dictates that the converse should also be true First Tennessee should be liable for any punitive damages for which Community First would have been liable. If we were to interpret all liabilities in 12 U.S.C. § 215a(a)(4) to exclude punitive damages, we would be ignoring the ordinary meaning of the word all. In addition, such an interpretation would render subsection (a)(4) inconsistent with subsection (e).
In addition to the federal bank merger statute, Culbreath relies upon Tenn.Code Ann. § 48-21-108(a)(3), pertaining to mergers of Tennessee corporations. Section 48-21-108(a)(3) provides: All liabilities of each corporation or partnership that is a party to the merger shall be vested [at the effective time of the merger] in the surviving corporation or partnership. Again, Culbreath argues that all liabilities means all liabilities. First Tennessee is owned by a holding company, First Tennessee National Corporation. At the time of the merger, Community First was also owned by a holding company, Community Bancshares, Inc. (Both holding companies were Tennessee corporations.) The merger agreement between the two holding companies provided that First Tennessee National Corp. would be the surviving corporation, pursuant to the provisions of, and with the effects provided in, the Tennessee Code. Additionally, the choice-of-law provision of the holding companies' merger agreement stated that the agreement shall be governed by, and interpreted in accordance with, the laws of the State of Tennessee. While the merger of the two holding companies is clearly governed by state law, it is not so clear that the merger of the two subsidiary banks (which occurred via a separate merger agreement) is controlled by the Tennessee corporate merger statute. See Tenn.Code Ann. § 45-2-1302(a) (2000) (governing merger of state bank into national bank and providing that [t]he action to be taken by such merging . . . bank . . . and its rights and liabilities . . ., shall be the same as those prescribed for national banks at the time of the action by the laws of the United States and not by the laws of this state). Because the parties have not addressed the effect of § 45-2-1302(a) on this case and because our construction of the federal bank merger statute makes it unnecessary to do so, we do not decide whether Tenn.Code Ann. § 48-21-108(a)(3) is applicable and, if so, whether it imposes liability on a successor corporation for punitive damages.
In addition to the federal bank merger statute and the Tennessee corporate merger statute, Culbreath relies upon the merger agreement between First Tennessee and Community First. Consistent with the requirement of 12 U.S.C. § 215a, the merger agreement between the two banks (not the holding companies' merger agreement) provided that First Tennessee would be liable for all liabilities of Community First. In fact, the merger agreement was even more explicit than the federal bank merger statute. The merger agreement provided that at the effective time of the merger, First Tennessee shall be liable for all liabilities of each of the participating banks and all deposits, debts, liabilities, obligations and contracts of each of the participating banks, whether material or immaterial, accrued, contingent or otherwise . . . shall become those of the Association, and shall not be released or impaired by the merger, and all rights of creditors and other obligees . . . shall be preserved unimpaired.  (Emphasis added.) As one court has stated in a similar case, It is difficult to imagine a more comprehensive statement of assumption of liability than that which is contained in this merger agreement. Douglas v. Bank of New England/Old Colony, N.A., 566 A.2d 939, 941 (R.I.1989) (holding successor national bank liable for punitive damages judgment against bank that merged into successor national bank). Under the merger agreement, the bank expressly assumed all liabilities (whether . . . accrued, contingent or otherwise). First Tennessee is therefore liable for the punitive damages arising from Community First's pre-merger conduct. Otherwise, Community First's contingent liability to Culbreath at the time of the merger would have been released or impaired in contravention of the express terms of the agreement.