Ex parte Moore
| Decision Date | 17 July 1925 |
| Citation | 6 F.2d 905 |
| Parties | Ex parte MOORE. In re SALE OF ASSETS OF FIRST NAT. BANK OF FLORENCE. |
| Court | U.S. District Court — District of South Carolina |
F. L. Willcox, of Florence, S. C., for petitioner.
D. G. Baker and Philip H. Arrowsmith, both of Florence, S. C., and W. C. Miller, of Charleston, S. C., for certain objecting creditors.
S. A. Moore, as receiver of the First National Bank of Florence, filed a petition under the provisions of section 5234 of the Revised Statutes, as amended May 15, 1916 (39 Stat. 121 Comp. Stat. § 9821), for authority to sell certain assets of the insolvent bank. The substantial facts set forth in the petition are as follows:
The First National Bank of Florence became insolvent, and under the act of Congress the petitioner was appointed receiver. Thereafter a national bank was organized with the name of the First National Bank in Florence, and made an offer to purchase the assets of the insolvent bank. For convenience, the First National Bank of Florence will be hereafter referred to as the insolvent bank, and the First National Bank in Florence as the purchasing bank. The proposed sale has been agreed to by about 98 per cent. in amount of the unsecured creditors and depositors of the bank, and has been approved by the Comptroller of the Currency. A contract embodying the terms and conditions of the sale has been entered into between the receiver and the purchasing bank subject to the approval of the court. The terms are somewhat complicated, and it will not be necessary to set them forth in detail, but they will be stated substantially and only in so far as they are pertinent to the consideration of the objections that have been made to the proposed sale. The plan provides for the division of the assets into two classes, one class termed the acceptable assets, which amount to $629,284.20, and the remainder, which are termed the unacceptable assets, and which amount to the sum of $476,743.45. The contract provides that the acceptable assets are to be purchased outright and become the absolute property of the purchasing bank. The unacceptable assets, however, are to be acquired and held in trust by the purchasing bank for the benefit of unsecured creditors on certain terms and conditions.
As a consideration for the sale of these assets, the purchasing bank agrees to certain things which, eliminating details, are as follows:
(1) The purchasing bank is to pay to the secured and preferred creditors of the insolvent bank 100 per cent. of such claims, with interest, thereby redeeming for the unsecured creditors all excess of value in the collateral pledged on such secured debts.
(2) The purchasing bank is to pay to each unsecured creditor and depositor of the insolvent bank 60 per cent. of such unsecured claims except as to those depositors or creditors for whom a different settlement is provided. This 60 per cent. payment is to be in the form of four certificates of deposit of the purchasing bank payable in installments at certain specified times.
(3) The purchasing bank is to allow all parties indebted to the insolvent bank offsets in all cases in which the parties are entitled thereto against the insolvent bank.
(4) The purchasing bank is to pay at specified times all of the following depositors in full, to wit: (a) Each depositor whose balance is $25 or less; (b) all Christmas savings accounts; (c) all vacation club accounts. The record does not show the amount of these small accounts, but it was stated at the hearing that they amount in round numbers to something over $20,000.
(5) The purchasing bank is to take over the banking house and equipment at an agreed price of $54,000, cash on hand, and acceptable assets that bear no interest at their face value, and such interest-bearing bills receivable as are acceptable, at their face value, plus interest to date of sale, or, if interest is paid to a date beyond the sale date, at a discount on the interest from the date of sale to the maturity of the bills receivable.
(6) The purchasing bank is to issue to the unsecured creditors certain certificates which will entitle them to participate in the proceeds of the collections of the unacceptable assets.
(7) The purchasing bank is to take over and hold all of the unacceptable assets, make collections thereof, and hold the collections in trust as a trust fund for the benefit of the unsecured creditors who hold the participating certificates hereinbefore mentioned. In making these collections the purchasing bank is to act in conjunction with three trustees nominated by a depositors' committee and one trustee nominated by a stockholders' committee of the insolvent bank. Provision is made for the removal of such trustees and filling of vacancies. The purchasing bank is to have full authority to sell, collect, or compound such unacceptable assets without submitting to the court such propositions for sale or compounding thereof as may be made from time to time. The trustees are to act without compensation, but all legal expenses, accounting expenses, and other necessary expenses to properly liquidate the unacceptable assets, including 3 per cent. of all amounts collected which the purchasing bank is to receive as compensation for its services, are to be a proper charge against the proceeds of such unacceptable assets, to be paid before dividends are distributed to those holding the participating certificates. But such charges and expenses are to be fair and reasonable, and, in case of disagreement, may be submitted to this court at the instance of any party in interest for decision as to such fairness and reasonableness. Provision is also made, in case there should be a surplus left over from such liquidation of the unacceptable assets after the payment of the unsecured creditors in full with legal interest, for such surplus to be paid over to the stockholders.
(8) The contract makes further provision that the trustees representing the depositors in the liquidation of the unacceptable assets, at the expiration of two years from the date of the confirmation of the sale, are to furnish certain data to the Comptroller of the Currency for the purpose of levy of an assessment against the stockholders, if such assessment be necessary, and provides that nothing in the agreement shall be construed to release the stockholders from the payment of any stock assessment.
Upon the filing of the petition the court fixed a date for a hearing, and ordered notice given by publication to all parties interested to appear and present any objections they might have to the proposed sale. Certain creditors appeared and filed their objections in writing. Among them was one unsecured depositor whose deposit amounted to $12,500. One depositor appeared by attorney and objected orally. The court received the objections, and heard arguments thereupon.
In Cook County Nat. Bank v. U. S., the Supreme Court held that the act authorizing the formation of national banks constituted by itself a complete system both for establishment as well as government of such banks, including their liability to be put in the hands of a receiver, "and the manner, in such event, in which their affairs shall be wound up, their circulating notes redeemed, and other debts paid or their property applied towards such payment." The court continued: "Everything essential to the formation of the banks * * * the winding up of the institutions and the distribution of their effects, are fully provided for, as in a separate code by itself, neither "limited nor enlarged by other statutory provisions with respect to the settlement of demands against insolvents or their estates." Cook County Nat. Bank v. U. S., 107 U. S. 448, 450, 2 S. Ct. 564, 27 L. Ed. 537.
Section 5234 of the Revised Statutes (Comp. Stats. 1918, § 9821), provides that the Comptroller of the Currency may appoint a receiver and require of him such bond and security as he deems proper. The duty of the receiver is, under the direction of the Comptroller, to take possession of the books and assets of every description of the bank, collect all debts due and claims belonging to it,
The application to this court for an order for the sale of assets is a step in the winding up of the affairs of the bank, and, if such order be granted, although made by a court of record of competent jurisdiction, still the funds...
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