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CAPOBIANCO v. FIRST NATL. BANK OF PALMERTON

August 20, 1974

Anna T. CAPOBIANCO et al., Plaintiffs,
v.
The FIRST NATIONAL BANK OF PALMERTON et al., Defendants


Muir, District Judge.


The opinion of the court was delivered by: MUIR

Introduction.

 This case involves a controversy between several groups of shareholders to control the board of a national bank.

 Three questions are presented for decision: (1) Was there compliance with the section of the Bank's by-laws which provided that a shareholder nominating a director for election to the Board state "the total number of shares of capital stock of the Bank that will be voted for each proposed nominee; . . ."; (2) Is the by-law referred to valid in view of 12 U.S.C. § 61 which guarantees that in banking corporations the shareholder right to cumulative voting should not be abridged?; (3) Were two of the directors proposed by the shareholder faction challenging management, James L. Leuthe and Salvatore Checho, able to qualify as directors?

 Findings of Fact.

 1. The First National Bank of Palmerton (the "Bank") is a banking association organized under the National Banking Laws.

 2. Prior to and as of January 29, 1974, there were 16,000 shares of Capital Stock, $25.00 par value (the "Stock") of the Bank issued and outstanding.

 3. Plaintiff Anna Marie Checho is the daughter of Anna T. Capobianco and the late Faust Capobianco and is the wife of Salvatore Checho.

 4. Faust Capobianco was the husband of Anna T. Capobianco and the father-in-law of James L. Leuthe & Salvatore Checho.

 5. The Co-Executors of the Estate of Faust Capobianco are Anna T. Capobianco, Palmina Leuthe (the wife of James L. Leuthe and the daughter of Anna T. Capobianco), Anna Marie Checho, and First Valley Bank.

 6. At all times relevant to these proceedings before and as of January 29, 1974, Anna T. Capobianco was the record and beneficial owner of 1,904 shares of the Bank's Stock, the executors of the Estate of Faust Capobianco were the owners of 3,700 shares of the Bank's Stock, and Anna Marie Checho was the record owner of 231 shares of the Bank's Stock, an aggregate of 5,835 shares of the Bank's Stock representing 36.5% of the Bank's issued and outstanding shares of stock.

 7. Prior to the Annual Meeting on January 29, 1974, Anna Marie Checho agreed to sell 40 shares of the Bank's Stock then owned by her to each of James L. Leuthe and Salvatore Checho, or an aggregate of 80 shares. On January 29, 1974, Anna Marie Checho executed two separate assignments each relating to 40 shares of the Bank's Stock. In consideration for the 40 shares of Stock, Messrs. Leuthe and Checho each agreed to give Anna Marie Checho a demand note in the principal amount of $3,920.00.

 8. No money was or has been paid by Messrs. Leuthe or Checho for the stock purportedly transferred to ...


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