CITIZENS'NAT. BANK IN WAXAHACHIE v. CITIZENS'NAT. BANK
| Decision Date | 29 January 1935 |
| Docket Number | No. 4731.,4731. |
| Parties | CITIZENS' NAT. BANK IN WAXAHACHIE v. CITIZENS' NAT. BANK OF WAXAHACHIE et al. |
| Court | U.S. District Court — Northern District of Texas |
Clark & Rice, of Dallas, Tex., for the motion.
Locke, Locke, Stroud & Randolph and Maurice Purnell, all of Dallas, Tex., opposed.
This is a suit for $75,190.16, brought by the plaintiff as the assignee of certain assets of the defendant bank, and as the holder of an indemnifying promissory note in the sum of $200,000. On January 2, 1931, the Citizens' National Bank of Waxahachie, finding itself in distress, sold to the plaintiff all of its properties and assets, both ledger and nonledger, consisting of cash on hand, and in its vaults, balances with correspondents, notes and other evidences of indebtedness, bonds, warrants, and securities, banking house premises, and other real estate owned, and all other properties of whatsoever kind and character and wherever situated, however evidenced, "to protect and compensate party of the second part (the plaintiff bank being the party of the second part) for the liabilities herein and hereby assumed by it, and party of the first part hereby agrees to properly transfer such assets by endorsement, or by execution of any instrument necessary to make such conveyance effective, but such assets so transferred shall be divided into two classes, one of which shall be known and herein referred to as `class A' assets, the other of which shall be known and hereafter referred to as `class B' assets, a complete and detailed list of each being hereto attached. * * *"
The class B assets aggregated the sum of $213,052.31. These were items which the plaintiff bank did not care to place in its active assets, "and while title thereto is vested in the party of the second part, it is understood and agreed that such assets shall be held as collateral to secure payment of that certain promissory note of the party of the first part, in favor of the party of the second part, in the sum of $200,000.00 of even date herewith, due and payable on demand. * * *" The class A assets aggregated the sum of $1,580,503.15, and were estimated to be solvent and accessible, while those listed in class B were thought to have a problematical or indeterminate value. "And the consideration of the party of the first part's executing its promissory note, above referred to, is that of offsetting and covering any loss in the class B assets in excess of the present capital structure of the party of the first part." Upon the failure of the party of the first part to pay the note, if payment was demanded, at the maturity date, or at any subsequent date, it was agreed that "full, final, and complete title to, and ownership of, all of class B assets shall then pass to the party of the second part, in which event the value of such assets shall be determined by a committee of three persons, one to be selected by the party of the first part, one by the party of the second part, and the third by the two so chosen, which committee shall appraise the class B assets to determine their then reasonable cash value, and the value thereby determined shall be applied as a credit on the said first party's note of $200,000.00, * * * and the party of the first part obligates itself to promptly pay the balance that is then due thereon." The contract provided that the plaintiff should have possession of all of the assets and the right to sell, compromise, or settle any or all of the property, "but no compromise of any evidence of indebtedness herein transferred and conveyed, for less than its face value, or sale of any real estate for less than the carrying value thereof, as shown by the books of the party of the first part, shall be made without notice to and granting party of the first part, the privilege of purchasing, within ten days, such assets at the compromise or sale valuation." The right of transfer from class A to class B, or from class B to class A, was likewise given. "It is hereby specially declared by the party of the first part that it fully intends to protect party of the second part against loss by reason of the liabilities herein and hereby assumed, and this contract and agreement shall be liberally interpreted to that end, but such protection against loss shall not exceed the amount of $200,000.00, as evidenced by the note of the party of the first part, herein referred to." There was also a provision with reference to the assumption of liens and the payment of taxes, which was left optional with the party of the second part, but if any such items were paid the party of the first part was to reimburse.
The plaintiff bank assumed all of the liabilities of the defendant bank as shown by the ledgers at the time of the consummation of the transaction, save and except "the liability of the party of the first part to its shareholders on account of their capital stock investment." "When the party of the first part has effected settlement of its obligation of $200,000.00, if demand for such settlement was made, then and in that event the party of the second part agrees and obligates itself to transfer and reconvey to the party of the first part any and all of the class B assets, including the cash collected, that then may remain therein." It was also stipulated that "party of the first part obligates itself to proceed without delay after the consummation of this contract and agreement to formally vote itself into liquidation and terminate its active banking business."
The whereases in the beginning of this agreement exhibit discovery by the national bank examiners of losses of various substantial amounts and slow and doubtful paper which could not be liquidated and converted into money, "which losses and doubtful assets aggregate an amount in excess of the capital stock, surplus and profits of said party of the first part, creating, in the judgment of the directors of the party of the first part, an acute situation in its affairs, it likewise being the judgment of said directors that it would not be possible at this time, nor within the near future, to collect in full an assessment upon the shareholders, and that an attempt to do so now would probably seriously embarrass the party of the first part, * * *" and that it was the judgment of the...
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