Federal Deposit Ins. Corp. v. Am. Bank Trust Shares
| Decision Date | 26 October 1978 |
| Docket Number | Civ. A. No. 74-1782. |
| Citation | 460 F. Supp. 549 |
| Court | U.S. District Court — District of South Carolina |
| Parties | FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff, v. AMERICAN BANK TRUST SHARES, INC. (ABTS), Carl Joe Taylor, Individually and as a shareholder of American Bank Trust Shares, Inc. (ABTS), suing in behalf of himself and all other shareholders of said corporation, and for the benefit of said corporation's subsidiary company, American Bank & Trust (AB&T), Howard H. Lamar, H. Ciremba Amick, William F. Lambert, Harry L. Parker, Banks H. Good, Augustus T. Allen, Douglas R. Bryant, Sr., Robert B. Fickling, James H. Gressette, Dick G. McTeer, Jack G. Vallentine, Marshall B. Williams, J. W. Wall, Jr., Albert E. Odom, William H. Grier, Luther H. Adden, Jr., Sidney Robinson Bagby, Dr. J. O. Ryan, A. G. Dwyer, Estate of Dr. C. P. Ryan, Sr., by its Executor Dr. C. P. Ryan, Jr., J. E. Smith, C. J. Getsinger, Weldon E. Wall, Catherine H. Hightower, R. P. Preacher, H. Kleigh Purdy, Jr., Dr. T. B. Carroll, Jr., Harold Wall, A. G. Martin, J. Glenn Jarrell, J. W. Wall, Sr., F. A. Nimmer, Jr., suing derivatively on behalf of American Bank Trust Shares, Inc. (ABTS), and on behalf of themselves and all other stockholders similarly situated, Sadie G. Schein, Individually and suing on behalf of all other Capital Noteholders of American Bank & Trust (AB&T), Defendants. |
COPYRIGHT MATERIAL OMITTED
Charles H. Gibbs, Charleston, S. C., Myers N. Fisher, J. Craig Gilliland, Washington, D. C., for plaintiff.
Henry Hammer, Columbia, S. C., Lawrence Gressette, St. Matthews, S. C., for Marshall B. Williams, Douglas R. Bryant, Sr., James H. Gressette, Jack G. Vallentine, Luther H. Adden, Jr., Augustus T. Allen.
Douglas McKay and F. Earl Ellis, Jr., Columbia, S. C., for H. Ciremba Amick.
Charles W. Wofford, Greenville, S. C., for Howard Lamar, Harry Parker and Albert Odom.
Jeter E. Rhodes, Jr., Thomas McCutchen, Columbia, S. C., Terry E. Richardson, Jr., Barnwell, S. C., for Robert B. Fickling.
J. Buford Grier, Rock Hill, S. C., for William H. Grier, Banks H. Good, Dick G. McTeer and J. W. Wall, Jr.
W. Eugene Rutledge, Birmingham, Ala., James D. Pruett, Gadsden, Ala., Wm. McG. Morrison, Jr., Charleston, S. C., W. Stancil Starnes, Starnes, Starnes & Reddoch, Birmingham, Ala., for Sidney Robinson Bagby, et al.
J. Randolph Pelzer, No. Charleston, S. C., for F.D.I.C.
Francis T. Draine, Columbia, S. C., for defendant Carl Joe Taylor & Class in State Court Action and Sadie G. Schein.
Pursuant to due notice, this matter was heard before this court commencing on October 2, 1978, in the United States District Courthouse in Aiken, South Carolina.
The matter of the AB&T receivership has been before me over a period of years at this point. In the court's Order of April 23, 1976, this court determined that the Federal Deposit Insurance Corporation FDIC was the owner of all derivative causes of action against the officers, directors, and employees of American Bank & Trust AB&T and American Bank Trust Shares, Inc. ABTS, for any harm done to AB&T. The shareholders of ABTS could only bring suit on such causes of action in a derivative capacity, which they have done. FDIC brought this suit asking for a declaratory judgment that it was the owner of these causes of action, and asked the court to stay the shareholders' derivative suits of various natures.
The court stayed the Bagby defendants' cause of action, which had been brought derivatively on behalf of the class of all ABTS shareholders hereinafter referred to as "Shareholders". The court also stayed the Schein suit brought in state court by subordinated capital noteholders. In order that all litigation involving AB&T and ABTS would proceed in an orderly manner, the court stayed the foregoing causes of action pending further order of this court, and directed FDIC to proceed immediately with its causes of action against such officers, directors and employees.
The Shareholders appealed from the April 1976 Order. On appeal the Fourth Circuit agreed that FDIC had apparent title to these causes of action. It further ruled that this court must first decide certain issues which the court had invited the Shareholders to litigate in the state court, but which they had failed to do.
Pursuant to remand by the Fourth Circuit, all parties were permitted to conduct such discovery as they desired, and the case was certified as a class action, so that all shareholders who did not opt out would be parties and would be bound by any final judgment in this case.
After a hearing to determine whether or not this should be a non-jury or a jury trial, the court determined that the case must proceed non-jury. At the request of the Shareholders the court certified this issue for an early appeal to the Fourth Circuit. That Court denied the petition for an early appeal, and this court proceeded to hear the case non-jury.
The court has now heard all the evidence presented by the Shareholders under their counterclaim wherein they had the burden of proof. It also heard the evidence presented by FDIC. The court has also received and studied the briefs filed by counsel for the parties.
During the trial the court endeavored to proceed as directed by the Fourth Circuit Court of Appeals in its opinion of July 8, 1977, which vacated the prior Order of this court of April 1976.
Although the Fourth Circuit agreed with this court's conclusion that FDIC had established apparent title to the derivative causes of action asserted by the Bagby shareholders, it concluded that before FDIC should be permitted to pursue such causes of action, this court must hear and determine the issues raised in the Shareholders' counterclaim pertaining to the manner and method whereby FDIC acquired the title to such causes of action.
The chief factual and legal issues raised by the Shareholders' counterclaim, which the Fourth Circuit has instructed this court to hear and determine, are as follows:
Based upon the Shareholders' trial brief, the court was of the opinion the Shareholders' main contention to be litigated in this trial was the issue of the constitutionality of three South Carolina statutes; that is Sections 8-273, 8-274, and 8-276 of the 1962 Code of Laws, which are now contained in the 1976 Code as Sections 34-3-630, 34-3-640, and 34-3-660.
However, at the commencement of the trial the court was advised by the Shareholders' counsel that they were not abandoning their contentions of fraud and illegal action on the part of FDIC. So the court heard evidence presented on all of the issues.
In their counterclaim, the Shareholders ask that the appointment of FDIC as a receiver of AB&T be revoked; that the sale of the assets to Southern Bank and Trust Company and to FDIC be rescinded; and that the South Carolina State Board of Bank Control be enjoined from appointing any receiver for AB&T.
The factual background of the demise and subsequent closing of AB&T by the State Board of Bank Control and the appointment of FDIC as receiver is not in dispute.
AB&T, over a period of time before the September 20, 1974, closing date, had expanded and merged with several other banking institutions all over the state. AB&T committed itself to numerous personal property and real estate loans, and for several months prior to its closing, its liquidity became increasingly impaired.
When the bankruptcy of the Belser Company and its affiliated corporations occurred in the late summer of 1974, it became apparent that AB&T could not survive without substantial outside assistance from its participating banks, the Federal Reserve Bank and/or FDIC.
The record further substantiates that the FDIC did everything reasonably within its power to assist AB&T to survive, including the making of a hurried financial report at the request of Mr. Lamar, its President, in early September, 1974, to assist AB&T in attempting to get financial help from the Federal Reserve Bank. FDIC also loaned AB&T nine million dollars on promissory notes to assist it with its dire short-term liquidity problem.
When the State Board of Bank Control, Mr. Cleveland, the South Carolina Commissioner of Banking, and the FDIC officials familiar with the situation realized that AB&T was hopelessly involved, and could not be revitalized under the plan presented by it pursuant to the efforts of AB&T Vice President Bagwell, the State Board of Bank Control, acting under the South Carolina Banking laws, as of 6:00 p. m. on September 20, 1974, closed AB&T and all of its branches, and tendered appointment as receiver of the bank to FDIC. FDIC accepted the appointment and immediately took over all of the assets of AB&T. This action was taken pursuant to the South Carolina statutes, supra, which are a part of the South Carolina Banking laws.
Anticipating that the bank could not survive for long, the FDIC, prior to the 20th of September, had prepared and submitted to at least four of the larger banks in South Carolina, a bid package seeking to sell certain assets of AB&T on the basis of the purchase and assumption agreement which the FDIC had prepared.
Southern Bank and Trust of Greenville, the highest bidder, agreed to pay a premium of some five and a half million dollars for the purchase of certain assets and the...
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