Court Opinion

ID: 8050223
Source: CourtListenerOpinion
Date Created: 2022-09-09 04:11:07.299341+00
Date Added: 2024-06-11T16:37:40.282051
License: Public Domain

Nadeau, J.,
concurring specially: I concur in the per curiam opinion vacating the board’s order granting Portsmouth Savings Bank’s (Portsmouth or Bank) application for conversion from a mutual savings bank to a stock form of ownership and for its simultaneous acquisition by Amoskeag Bank Shares, Inc. The plan as submitted is unfair to the depositors of Portsmouth. The per curiam decision holds that the Bank’s charter vests rights in Portsmouth’s depositors to proportionate distributions of bank surplus in reasonable amounts and at reasonable intervals. Such a standard should not be unfamiliar to persons, such as bank trustees, entrusted with fiduciary and management responsibilities. Where questions arise, they may be submitted to the superior court, which regularly applies a reasonableness standard in a variety of contexts.
I write separately, further, to indicate my opinion that even in the absence of a finding of a vested property right, the fiduciary obligations of bank trustees compel them to advance the interests of depositors when structuring such transactions. Plan fairness, in my opinion, may never be defined so as to supersede these obligations.
While the trustees’ authority to propose a conversion-acquisition plan arises from the board’s statutorily-based regulations, their duty to compose one that was beneficial to depositors arose by virtue of their common law and statutory fiduciary obligations. Cogswell v. Bank, 59 N.H. 43 (1879); RSA 384:5. This court has long recognized that mutual savings bank trustees owe such a duty to depositors *208independent of any additional contract right or statutory entitlement. Cogswell supra. As beneficiaries of this duty, the depositors of Portsmouth are entitled to expect the trustees to represent and pursue their best interests in all management and policy decisions.
As the per curiam opinion has noted, the Portsmouth charter clearly expresses the fiduciary relationship obtaining between the trustees and the depositors. The assertion of such a relationship in the banking context is not novel to this court. On prior occasions, it has ruled that a bank “is held to a higher standard because it owes a fiduciary duty to its depositor.” PK’s Landscaping, Inc. v. N.E. Telephone Co., 128 N.H. 753, 758, 519 A.2d 285, 288 (1986); see also Exeter Banking Co. v. N.H. Ins. Co., 121 N.H. 1083, 438 A.2d 310 (1981). The court has also characterized a mortgagee’s duty of good faith and due diligence as “essentially that of a fiduciary.” Murphy v. Financial Development Corp., 126 N.H. 536, 541, 495 A.2d 1245, 1249 (1985). In fact, this court has recognized and significantly contributed to the trend of expanding the concept of fiduciary duty in order to prevent unjust enrichment of banks. Lash v. Cheshire County Savings Bank, Inc., 124 N.H. 435, 438, 474 A.2d 980, 981 (1984).
Furthermore, the court has recently held that trustees of the State retirement system owe a fiduciary obligation to its members and beneficiaries. N.H. Retirement System v. Sununu, 126 N.H. 104, 109, 489 A.2d 615, 619 (1985). The statute creating the system, upon which the court based its conclusion, bears remarkable similarity to the Bank’s charter in its simultaneous provision for corporate powers and trust responsibilities. RSA 100-A:2; Laws 1823, 27:2. Importantly, the decision also established that a fiduciary obligation, once found to exist, may not be undermined by executive branch review of trustee decisions. Presumably, the fiduciary duties themselves may not be eliminated by administrative regulation.
This body of New Hampshire law has not been displaced by N.H. Admin. Code Tru chapter 500. Nor are its directives affected by the court’s decision in In re City Sav. Bank, 113 N.H. 378, 309 A.2d 31 (1973), as is clear from the per curiam analysis. Rather, New Hampshire fiduciary law, to which the Bank’s trustees are subject, compels those so designated to serve the interests of their beneficiaries with fidelity and loyalty. In devising the plan of conversion-acquisition, the trustees were duty bound, not merely to preserve a presently enjoyable property interest, as Justice Souter’s dissent claims, but to act solely in furtherance of the general interests of depositors. Who else are the trustees directed, by charter or statute, *209to serve? And yet the trustees failed to make any provision for the benefit of depositors under the plan.
Clearly then, the starting point for any review of a plan of such significance to depositors, especially in light of the regulatory requirement of fairness to them, is the fiduciary obligation of the trustees. Whether the board intended to incorporate or ignore this obligation in its regulatory scheme should not deter this court from its responsibility to use its equitable powers to avoid injustice. This court should not permit bank trustees to derogate their fiduciary obligations. Where a fiduciary’s judgment manifests an abuse of discretion, as it does here, it may be set aside. Morse v. Trentini, 100 N.H. 153, 121 A.2d 563 (1956).
While business practices in the thirteen years since City Savings have changed dramatically, the fiduciary obligation of mutual savings bank trustees has remained constant. The fact that banks may now, by statute, be acquired without liquidation does not destroy that obligation, which exists independent of any specific property right. The obligation itself is the basis of depositors’ action in this case; no separate contract or statutory provision need be cited to support depositors’ claims. This is the heart and soul of fudiciary law. The relationship is the source of the right; its existence alone calls forth a higher duty. Lash v. Cheshire County Savings Bank, Inc. supra.
The Bank’s trustees ignored all legal and practical precedents which support depositor compensation, including the right of depositors to surplus upon solvent liquidation. They ignored, as well, current banking practice followed in nearly all similar transactions which benefit depositors financially. In its approval of the trustees’ plan, the board apparently considered irrelevant the fiduciary duty of the trustees to protect the general interests of depositors. If the board had appreciated the trustees’ overriding fiduciary obligation to the Bank’s depositors, it could not have reached the conclusion it did. Merely preserving the value of deposits and creating a liquidation account do not make an unfair plan fair.