D. M. Rogers et al., Appellants, v. First National Bank of St. George et al., Appellees, 410 F.2d 579 (4th Cir. 1969)

Five minority stockholders of the First National Bank of St. George, South Carolina, sought an injunction prohibiting the merger of that bank with the First National Bank in Orangeburg. The District Court denied the injunction, and we affirm.

At a regular meeting of the directors of the St. George bank, a majority of its directors voted in favor of a merger into the Orangeburg bank and voted to present the merger agreement to the shareholders for their approval. Notice of the meeting was printed in the local newspaper as required by law.¹  The notice specified the time, place, and object of the shareholders meeting but did not establish an earlier record date for determination of those shareholders entitled to vote at the meeting.

At the meeting, 124½ votes more than the required two-thirds majority²  were cast in favor of the merger. The Comptroller of the Currency approved the merger, and the District Court, after a full hearing, dissolved a temporary restraining order and denied the plaintiffs an injunction. We granted a temporary restraining order pending an accelerated appeal.

Three alleged irregularities in the marking of proxies are said to vitiate the vote and to require the enjoining of the merger.³ 

Joseph W. Wimberly voted 140 shares of stock in the name of "Joseph W. Wimberly as Natural Guardian for [each of his five minor children.]" Plaintiffs contend that these votes are invalid for failure of Wimberly to register as guardian for his children under the South Carolina Uniform Gift to Minors Act.⁴  The record reveals, however, that the stock was registered in the name of Joseph W. Wimberly as natural guardian for each of his children. Whatever may be the propriety of a parent voting as natural guardian stock registered solely in the name of his minor child, the voting of stock in a fiduciary capacity is proper when the fiduciary relationship is revealed in the stock registration and the fiduciary is the record holder of the legal title.⁵  The Uniform Gift to Minors Act was designed to meet other problems, not to restrict the voting powers of fiduciaries with respect to stock registered in the name of the fiduciary.

When marking one of his proxy statements, Wimberly failed to mark whether he was casting the votes for or against the merger. Wimberly was present at the stockholders meeting. His intention to vote for the merger is clearly evidenced by the facts that he voted other stock in his own name and in his name as a fiduciary for the merger, that he placed his ballot or caused it to be placed in the spot designated for affirmative proxies, and that he subsequently executed an affidavit stating that he intented to vote all of the stock for the merger. Under the circumstances, we think his action in having his proxy placed in the pile for votes in favor of the merger was the equivalent of an affirmative answer to a roll call vote.⁶ 

Complaint is made that proxies representing 610 favorable votes of persons not present at the meeting were undated. Plaintiffs contend that if South Carolina law controls, then these votes must be set aside since South Carolina law requires that every proxy be dated.⁷  We need not decide whether this provision of the South Carolina Code conflicts with the provision of the National Bank Act as amended⁸  which requires only that proxies be "duly authorized in writing." It is clear that the South Carolina requirement that all proxies be dated is designed to enforce the rule that no proxy shall be valid more than eleven months after the date of its execution. Here, the proxies were addressed to the specific question of merger and necessarily were executed at some time between the first notice of the meeting and the stockholders meetings, a period of approximately two months. The ill sought to be cured by the South Carolina statute is the prevention of the voting of a general proxy over a prolonged period. We decline to hold it applicable to a proxy on a specific question which could not have been executed earlier than two months before its exercise.

The appellants contend that the vote of the shareholders should be set aside because of a failure of the board of directors to fix a record date not less than ten days prior to the meeting for determining shareholders entitled to vote at the meeting. South Carolina law plainly provides for the fixing of such a date.⁹  The application of South Carolina law to a merger of national banks would, however, conflict with the terms of 12 U.S.C.A. § 215(a) which requires only that the vote "be ratified and confirmed by the affirmative vote of the shareholders of each such * * * bank owning at least two-thirds of its capital stock outstanding * * *." The general rule is that a statute providing for the vote of shareholders is interpreted as requiring the vote of shareholders of record as of the date of the vote, absent a contrary bylaw.¹⁰  Indeed, South Carolina had a statute similar to the federal statute¹¹  prior to her adoption of the Business Corporation Act in 1964.¹²  Plaintiffs do not urge that under the former South Carolina statute stockholders, as of the date of voting, could not have participated in that voting; rather, they contend that South Carolina's present statute is in no way inconsistent with, but supplemental to, federal law. We find, on the contrary, an intention on the part of Congress to permit a bank desiring to merge to select any date, including the date of voting, as the record date. Indeed, if considerations of convenience are not overridding, there is strong reason to permit the record owner of recently acquired stock to vote at the meeting in preference to its former owner.

Finally, plaintiffs contend that the plan of merger must be set aside because the First National Bank in Orangeburg, after the agreement to merge had been approved by the stockholders of both banks, issued 500 shares of its stock in exchange for a piece of property required for bank purposes. It is conceded that the transaction improved the bank's net asset value, but the transaction is urged as a technical violation of the merger agreement.¹³  In the absence of a contention that shareholders of the merged bank would be able to contest the issuance of stock for property,¹⁴  we decline to set aside the merger. If consummation of this transaction had been delayed until the merger was consummated, no one would have a right to complain. Its earlier consummation was, at most, a technical violation of the merger agreement which could be waived by the St. George bank through its board of directors or a majority of its stockholders.

Accordingly, we affirm the denial by the District Court of the injunction forbidding merger of the First National Bank of St. George into the First National Bank in Orangeburg; we dissolve our temporary restraining order except insofar as it requires posting of bond by the plaintiffs, and we remand to the District Court for a determination of damages, if any, to the defendant occasioned by the delay in the merger as a result of this action and the temporary restraining orders.

Affirmed and remanded.