Court Rejects Shareholder Request To Block Purchase of Chase Offices

A New York State Supreme Court judge allowed Community Bank System Inc. to proceed with its purchase of 15 Chase Manhattan Corp. branches over the objection of three shareholders.

The three shareholders, who together own less than 1% of the bank's stock, are suing the bank and the board of directors to block the transaction and a stock offering to finance it. The shareholders argue that the Dewitt-based bank is paying too much for the branches and $455 million of deposits, sapping its capital.

But the court disagreed, rejecting the request for a preliminary injunction and dismissing one shareholder, Mary Elizabeth White, because she purchased her stock after the deal was announced.

"The bank's board of directors has demonstrated to this court that they arrived at a business judgment after carefully considering all of the reasonably anticipated risks," wrote justice Harold J. Hughes. "It does not appear likely to this court that the plaintiffs will succeed upon the merits."

In dismissing Ms. White's claims, the judge noted that there was no "legitimate basis" for her buying stock, except to sue the $916 million- asset bank, which is "the very type of conduct . . . (the law) is designed to prevent."

The judge also ordered the remaining shareholders, who jointly possess just 300 shares, to post $50,000 security for the bank's legal costs if they pursue the case further.

"We are very pleased with the decision," said Sanford A. Belden, chief executive of Community.

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