PUBLISHED OPINION
Case No.: 95-1499
Complete
Title
of
Case:BLACK RIVER
COUNTRY BANK,
Petitioner-Appellant,
v.
WISCONSIN COMMISSIONER OF BANKING,
Respondent-Respondent.
Submitted
on Briefs: December 12, 1995
COURT COURT OF
APPEALS OF WISCONSIN
Opinion
Released: March 14, 1996
Opinion
Filed: March
14, 1996
Source
of APPEAL Appeal from an order
Full
Name JUDGE COURT: Circuit
Lower
Court. COUNTY: Jackson
(If
"Special" JUDGE: James
P. Fiedler
so
indicate)
JUDGES: Eich, C.J., Gartzke, P.J., and Dykman,
J.
Concurred:
Dissented:
Appellant
ATTORNEYSFor the petitioner-appellant the
cause was submitted on the briefs of Richard A. Radcliffe of Mubarak
& Radcliffe, S.C. of Tomah.
Respondent
ATTORNEYSFor the respondent-respondent the
cause was submitted on the brief of James E. Doyle, attorney general,
and Peter C. Anderson, assistant attorney general.
|
COURT OF
APPEALS DECISION DATED AND
RELEASED March
14, 1996 |
NOTICE |
|
A party may file with the Supreme Court a petition to review an
adverse decision by the Court of Appeals.
See § 808.10 and Rule
809.62, Stats. |
This opinion is subject to further editing. If published, the official version will appear in the bound
volume of the Official Reports. |
No. 95-1499
STATE OF WISCONSIN IN
COURT OF APPEALS
BLACK
RIVER COUNTRY BANK,
Petitioner-Appellant,
v.
WISCONSIN
COMMISSIONER OF BANKING,
Respondent-Respondent.
APPEAL
from an order of the circuit court for Jackson County: JAMES P.
FIEDLER, Judge. Affirmed.
Before
Eich, C.J., Gartzke, P.J., and Dykman, J.
DYKMAN,
J. Black River Country Bank appeals
from an order affirming an order of the Wisconsin Banking Review Board. The board affirmed an order of the
Commissioner of Banking directing Black River to pay an appraiser's fee as part
of the commissioner's approval of Black River's recapitalization plan. The issue is whether the commissioner has
the authority to order Black River to pay an appraiser's fee as part of
approving a reverse stock split.[1] We conclude that the commissioner has this
authority and therefore affirm.
BACKGROUND
The
following facts are not in dispute. On
July 27, 1993, about ninety-seven percent of Black River's shareholders
approved a reverse stock split intended to consolidate Black River with its
holding company. The split reduced the
number of authorized shares from 18,000 shares of common stock with a par value
of $10 to nine shares of common stock with a par value of $20,000. Black River asserted that the fair market
value of the minority shares before the split was $85 per share.
To
effectuate the reverse stock split, on July 29, Black River sought the
commissioner's approval of a proposed amendment to its articles of
incorporation pursuant to § 221.12, Stats.[2] The commissioner replied that an appraisal
of the value of the minority shareholders' stock must be conducted at Black
River's expense pursuant to § 221.25, Stats.[3] This had been the commissioner's practice
for the previous ten years.
The
minority shareholders selected an appraiser who informed Black River that his
fee would be $7,500. Black River
refused to pay the $7,500 fee and on February 17, 1994, the commissioner
ordered Black River to pay the fee in advance.
Black
River appealed the commissioner's order to the Wisconsin Banking Review
Board. The board conducted a hearing at
which the commissioner's administrator of the banks division testified that
until about ten years previously, the commissioner did not approve reverse
stock splits and instead required a bank to go through an interim bank merger
which triggered the protections for minority shareholders under § 221.25, Stats.
He testified that when approving reverse stock splits over the last ten
years, the commissioner did so with the condition that the minority
shareholders' interests were protected under § 221.25.[4]
The
board concluded that under § 221.12, Stats.,
the commissioner had discretion to approve or reject an amendment to a bank's
articles of incorporation, and that the commissioner acted reasonably when it
gave the minority shareholders the right to an independent appraisal under
§ 221.25, Stats., as a
condition of approving Black River's proposed amendment. The board also noted that under
§ 227.11(2)(c), Stats., the
commissioner may, but is not required to, promulgate rules requiring banks to
comply with § 221.25 when effecting a reverse stock split. The board also concluded that the $7,500
appraisal fee was reasonable because it fell within the range of fees
identified by expert witnesses.
However, the board concluded that it was unreasonable to require Black
River to pay the fee in advance.
Black
River sought judicial review pursuant to ch. 227, Stats., and the trial court affirmed. Black River appeals.
STANDARD OF REVIEW
We
apply three levels of deference to an agency's interpretation of a
statute. Jicha v. DILHR,
169 Wis.2d 284, 290, 485 N.W.2d 256, 258 (1992). The first level of review is the "great weight" standard
which we apply when the agency's experience, technical competence, and
specialized knowledge aid the agency in its interpretation and application of
the statute. Id. at
290-91, 485 N.W.2d at 258-59. The
second level is the "due weight" or "great bearing"
standard which we apply if the decision is very nearly one of first
impression. Id. at 291,
485 N.W.2d at 259. The lowest level of
review is the de novo standard which we apply if the case is one of
first impression for the agency and the agency lacks special expertise or
experience in determining the question presented. Id. When
deference is appropriate, we will affirm the agency's interpretation if it is
reasonable even though another interpretation would be equally reasonable. Carrion Corp. v. DOR, 179
Wis.2d 254, 265, 507 N.W.2d 356, 359 (Ct. App. 1993).
The
commissioner has, for at least the last ten years, interpreted §§ 221.12
and 221.25, Stats., as allowing
it to protect minority shareholders when approving amendments to articles of
incorporation for reverse stock splits.
In all eighteen cases between 1984 and 1994 involving reverse stock
splits, the commissioner has required that the minority shareholder provisions
of § 221.25 apply. This is a
longstanding and consistent agency interpretation of § 221.12 and §
221.25. Thus, we will give the
commissioner's interpretation "great weight" and affirm that
interpretation if it is reasonable.
DISCUSSION
Black
River rejects the commissioner's interpretation of §§ 221.12 and 221.25, Stats., and argues that the
commissioner lacks the authority to impose an appraisal fee when approving or
rejecting an amendment to effectuate a reverse stock split. Black River asserts that its amendment is
consistent with the portions of § 221.12 regulating reductions in capital,
and it promotes the depositors' best interests by strengthening corporate
control of Black River. It claims that
nothing in § 221.12 or any other state banking law permits the
commissioner to promote the interests of the minority shareholders over the
depositors. Black River also argues
that § 221.25 is unambiguous and regulates bank consolidations and mergers
only and not the internal corporate matters of a single bank.
Section 221.12,
Stats., contemplates the
commissioner's exercise of discretion in deciding whether to approve an
amendment. A plain reading of the
statutes reveals that the legislature intended to permit the commissioner to
protect the interests of minority shareholders by conditioning a reverse stock
split on compliance with § 221.25, Stats. If the commissioner has the power to reject
a reverse stock split under § 221.12, surely the commissioner may impose
reasonable conditions on approval of the split. Protecting minority shareholders through the provisions in
§ 221.25 is reasonable and can be fairly implied by the legislative
scheme. Indeed, before 1984, a bank
attempting to effect a reverse stock split had to proceed through an interim
merger, which, under § 221.25(1), requires the appointment of appraisers
whose fees are paid by the bank.
Black
River also argues that the commissioner lacks the authority to regulate the
payment of an appraisal fee. The
commissioner ordered Black River to pay the appraiser's $7,500 fee in advance. The board affirmed that part of the order
directing Black River to pay $7,500, but ordered that the payment did not have
to be paid in advance.
Section
221.25, Stats., requires a bank
to pay the fee of an appraiser selected by the minority shareholders. The authority to impose a reasonable fee is
implicit in an ability to require a Bank to pay this fee as a condition of
approval. The board concluded that the
$7,500 fee was reasonable and Black River has not demonstrated that this
conclusion is unsupported by substantial evidence. Accordingly, we affirm.
By
the Court.—Order affirmed.
[1] A reverse stock split is a reduction in the
number of shares outstanding, effectuated by calling in all shares and issuing
a smaller number. The capital of the
entity remains the same. The effect is
an increase in the value of each share.
Black's Law Dictionary
1320 (6th ed. 1990).
[2] Section 221.12, Stats., provides in pertinent part:
A bank may amend
its articles of incorporation in any manner not inconsistent with law, at any
time, by a vote of its stockholders representing two-thirds of the capital
stock taken at a meeting called for that purpose. The bank shall submit the amendment to the commissioner of banking. The amendment is not effective unless
approved by the commissioner.... No
increase of the capital shall be valid until the amount of the increase has
been subscribed and actually paid in.
The entire surplus fund of a bank, or as much as may be required, may be
declared and paid out as a stock dividend to apply on, and be converted into,
an increase of capital. No reduction of
capital shall be made to a less amount than is required under this chapter for
capital, nor be valid or warrant the cancellation of stock certificates or
diminish the personal liability of stockholders, until the reduction has been
approved by the commissioner.... The
approval may be given only when the commissioner is satisfied that the
reduction of the capital is in the best interests of the depositors.
[3] Section 221.25, Stats., provides in pertinent part:
(1) Any
2 or more banks may, with the approval of the commissioner of banking,
consolidate into one bank under the charter of either existing bank .... If ... [a] shareholder dissents from the
plan of consolidation as adopted and approved and desires to withdraw from such
bank, the shareholder shall be entitled to receive in cash the value of the
shares so held by the shareholder, to be ascertained by an appraisal made by a
committee of 3 persons, one to be selected by the shareholders ... the expense
of such appraisal shall be borne by the bank ....