Court Opinion

ID: 9763742
Source: CourtListenerOpinion
Date Created: 2023-08-29 02:54:30.023477+00
Date Added: 2024-06-11T12:57:44.738354
License: Public Domain

Robert L. Brown, Justice, dissenting. No one disagrees that the public policy has now been set in this state to separate banking institutions and insurance companies. The question before us, though, is whether the statutes in effect in 1990 required that separation in the case of Arkansas Bank & Trust Company (ABT). I do not believe that they did. The statutory language which was effective in 1990 and on which this case turns reads: However, those restrictions relative to the licensing of a lending institution agency, its agents, brokers, and solicitors, shall attach upon the transfer of the agency either by the transfer of ownership or the right of participation in the profits of the agency directly or indirectly to a lending institution. Ark. Code Ann. § 23-64-293(b)(3) (Supp. 1991). In 1980, ABT, which had an insurance agency as a component, was transferred to a one-bank holding company, ABT Bancshares Corporation. In 1990, ABT Bancshares Corporation was acquired by a multi-bank holding company, First Commercial Corporation (FCC). FCC is paid dividends and service fees by its bank subsidiaries including ABT Bancshares and provides management expertise and administrative services in return. The question then is whether this acquisition by FCC constituted a transfer enabling a bank to participate directly or indirectly in the profits of the insurance agency. If so, that would require FCC to divest itself of the insurance agency. FCC is not a lending institution. A lending institution is defined as “any entity which has a place of business in this state, at which place it accepts deposits of money from the public and lends money, including banks and savings and loan associations.” Ark. Code Ann. § 23-64-203(b)(4)(A) (1987). FCC clearly does not fit under this definition. It is a bank holding company. So the transfer of ABT Bancshares Corporation to FCC is not a transfer to a lending institution under § 23-64-293(b)(3) (Supp. 1991). That leaves the other bank subsidiaries of FCC. They are lending institutions but was a transfer made to them? Stated differently, do they participate directly or indirectly in the profits of the insurance agency because of the transfer to FCC? Surely they do not participate directly in the agency’s profits, and the Insurance Commissioner admitted this. Nor, to my way of thinking, do they participate indirectly in the agency’s profits. The Insurance Commissioner adopted a contorted theory that the service fees paid to FCC by the subsidiary banks are subsidized by ABT Bancshares’s dividend paid to FCC which is derived in part from insurance agency profits. This amounts to a participation by those banks in the insurance agency’s profits, according to the theory. I disagree with this convoluted reasoning. Again, all subsidiary banks as well as ABT Bancshares pay a dividend to the holding company as well as service fees for managerial services such as loan review, audit, and data processing. The money is pooled. All subsidiaries benefit from the reduced service fees, but that is a far cry from indirect participation in another subsidiary’s profits under anybody’s definition. The majority opinion goes on to say that the statute in effect at the time of the transfer of Arkansas Bancshares to FCC in 1990 embraced transfers of insurance agencies to bank holding companies. But if that were the case, why did the General Assembly find it necessary to amend this statute in 1993 in order to clarify it? By Act 592 of 1993, now codified at Ark. Code Ann. § 23-64-203(b) (Repl. 1994), the General Assembly included transfers to “affiliates” for the first time as grounds for causing the divestiture of a grandfathered insurance agency. “Affiliate” is defined under Act 592 as an entity which controls a lending institution. That means a holding company now would easily ■ qualify. The Emergency Clause attached to Act 592 says that the reason for the legislation is that the law is “in urgent need of clarification.” Furthermore, Act 592 is clearly prospective in application as it says it will apply only to transfers effected after January 1, 1993. Act 592 would require the result reached by the majority, but that Act was not effective in 1990. In 1990, holding companies, as affiliates, were not prohibited “participants” under the statute — only lending institutions were. What the majority opinion does is disregard the bank holding company structure in effect in 1990. I would reverse the order of the circuit court.