Burton v. Carey

• Decision Date: 20 March 1936
• Docket Number: No. 7817.,7817.
• Parties: BURTON et al. v. CAREY, Corporation Com'r of Oregon, et al.
• Court: U.S. Court of Appeals — Ninth Circuit

82 F.2d 657 (1936)

BURTON et al. v. CAREY, Corporation Com'r of Oregon, et al.^*

No. 7817.

Circuit Court of Appeals, Ninth Circuit.

March 20, 1936.

J. H. Stockman and G. A. Heikkila, both of Portland, Or., for appellants.

I. H. Van Winkle, Atty. Gen., Willard H. Wirtz, Atty., Corporation Commission, of Salem, Or., and D. P. Price and John F. Logan, both of Portland, Or., for appellees.

Before WILBUR, DENMAN, and MATHEWS, Circuit Judges.

MATHEWS, Circuit Judge.

This appeal is from a decree dismissing a bill of complaint wherein appellants prayed for the appointment of a receiver for Union Savings & Loan Association, an Oregon corporation, which had been taken over and was being operated by the corporation commissioner of the state of Oregon. Appellants are members and shareholders of the association.

Section 52, c. 373, p. 768, Oregon Laws 1931, provides: "The directors of a savings and loan association may at any time call upon the corporation commissioner to take possession of and operate the properties and business of the association in the interests of its investors, creditors and shareholders and said corporation commissioner forthwith shall comply with such request by assigning the supervisor or bonded deputy from his department to such task."

Pursuant to section 52, the directors of Union Savings & Loan Association called upon the commissioner to take possession of and operate the properties and business of the association in the interests of its investors, creditors and shareholders. The commissioner complied with their request and assigned a bonded deputy to such task on or about November 4, 1931.

Section 54, c. 373, p. 770, Oregon Laws 1931, as amended by section 15, c. 328, p. 517, Oregon Laws 1933, provides: "Whenever the losses of any mutual savings and loan association resulting from the depreciation in value of its securities or otherwise, exceed its contingent reserve fund, undivided profits, surplus and current earnings, so that the estimated value of its assets is less than the total amount due its creditors and members, the corporation commissioner, upon petition of such savings and loan association, approved by a two-thirds vote of its members at a meeting regularly called and held for that purpose, may order a reduction of its liability to its members, except upon juvenile shares, in such manner as to distribute the loss equitably among its members. If, thereafter, such association shall realize from such assets a greater amount than was fixed in the order of reduction, such excess shall be divided among members whose credits were so reduced, but to the extent of such reduction only."

Proceeding under section 54, the commissioner, on petition of Union Savings & Loan Association, approved by a twothirds vote of its members at a meeting regularly called and held for that purpose, ordered that the association's liability to its members be reduced from $1,697,831.27 to $1,018,698.77; it having been determined by an appraisement of its assets that the estimated value thereof was less by $679,132.50 than the total amount due its creditors and members. This reduction, referred to in the pleadings as a "chargeoff," was made on May 3, 1933. It was made for the purpose of, and as a basis for, negotiating a sale of the property and assets of the association, and was made subject to the approval of the circuit court of the state of Oregon. The record does not indicate that it ever was so approved or that it ever became effective.

Section 60, c. 373, p. 772, Oregon Laws 1931, as amended by section 16, c. 328, p. 518, Oregon Laws 1933, provides that, upon taking possession of the property and business of any savings and loan association, the corporation commissioner may apply to the circuit court in and for the judicial district in which the principal office of the association is located, "for instructions or directions relating to the claims of creditors and rights of members and to such other matters affecting the interests of said association, its members and creditors," and that, upon the order of the circuit court, the commissioner "may sell, exchange or otherwise dispose of any of the real estate or other property of such association, or may transfer, sell or otherwise dispose in whole or in part, its assets, engagements, funds and property on such terms as the court shall direct and, upon the terms of sale, exchange, compromise or settlement directed by the court, shall make, execute and deliver such deeds or other instruments in writing as shall be deemed necessary to evidence the passing of the title."

Proceeding under section 60, the commissioner filed with the circuit court for the proper judicial district a petition stating that, subject to the court's approval, he had entered into a contract with O. B. Berrien for the sale and transfer to Berrien of all the property and assets of Union Savings & Loan Association, on the terms specified in the proposed contract, a copy of which was annexed to the petition. The commissioner recommended that the proposed contract be approved, executed, and carried out. The petition was set down for hearing, notice was given to all interested parties, including appellants, hearings were had, and on October 3, 1933, the circuit court made an order approving the commissioner's recommendation and directing him to execute and carry out the proposed contract. Thereupon, before the court's order could be complied with, appellants brought this suit, and, as a consequence, the Berrien contract was never executed or carried out.

Receivership was sought on the ground of maladministration. Instances of such maladministration specifically complained of were the "charge-off," or reduction in the association's liability to its shareholders, and the contract for the sale of its property and assets to Berrien. There were other and more general charges of maladministration, such as the withholding of information from shareholders, the dissemination of false information, and the employment of an incompetent deputy to manage the affairs of the association, but the "charge-off" and the Berrien contract constituted appellants' principal grounds of suit.

On final hearing, the district court found that the charges of maladministration were not established, and that there was no ground for the appointment of a receiver or for granting any other relief. Accordingly, on August 3, 1934, a decree was entered...