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 them by Anna Marie Checho.
9. The fair market value of capital stock of the Bank is at the present time approximately $125.00 per share.
10. In the latter part of April, 1974, Mr. Leuthe purchased 54 shares of Bank stock from the Estate of Violet L. Friske at a cost of $125.00 per share.
11. Said stock was transferred to Leuthe on the books of the Bank on May 7, 1974.
12. On or about June 12, 1974, Messrs. Leuthe and Checho had the stock in question received from Anna Marie Checho transferred into their respective names on the books of the bank.
13. As of June 12, 1974, and as of the date of the trial, James L. Leuthe and Salvatore Checho were the record and beneficial owners of 94 shares and 40 shares, respectively, of the Bank's Stock.
14. Prior to his death on June 24, 1972, the late Faust Capobianco had been a director of the Bank for four years.
15. In December, 1973 or early January, 1974, James L. Leuthe, on behalf of the Capobianco family, orally advised Roger N. Nanovic, Esq., solicitor for the Bank and a member of the Board of Directors, and Earl R. Silliman, President of the Bank and a member of the Board of Directors, that the Capobianco family desired to remove four members of the Board of Directors at the 1974 Annual Meeting of Shareholders -- Messrs. Nanovic, Holczman, Dannenberg and George -- to reduce the size of the Board of Directors to nine members and to nominate and elect Messrs. Leuthe, Checho, Silliman, Hoffman, Gruber, Smith, Cooper, Horwith and Longenbach as the members of the Board of Directors at the 1974 Shareholders Meeting. Messrs. Silliman and Nanovic reported their conversations with Mr. Leuthe to the Board of Directors and subsequently advised Mr. Leuthe that the Board of Directors would not agree to the request.
16. On or about January 4, 1974, there was mailed to the stockholders of the Bank a "Notice of the Stockholders Annual Meeting of The First National Bank of Palmerton" and a proposed proxy in favor of management's slate for directorate.
17. On January 11, 1974, Anna T. Capobianco caused to be served upon Earl R. Silliman, President of the Bank, a letter dated January 10, 1974 which is as follows:
Dear Mr. Silliman:
The undersigned is the holder of 1,900 shares of capital stock of The First National Bank of Palmerton.
The undersigned hereby nominates as candidates for election to the Board of Directors of The First National Bank of Palmerton at the Annual Meeting of the Shareholders of said bank to be held on January 29, 1974 the following persons:
Name Address Occupation
James L. Leuthe 228 North Broad St. Officer of garment
Allentown, Pa. 18101 manufacturer
Salvatore Checho The Lakes Apartments Officer of garment
Cedarcrest Blvd. manufacturer
Allentown, Pa. 18101
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