Leslie v. Commercial Nat. Bank in Shreveport, 83.

• Court: U.S. District Court — Western District of Louisiana
• Citation: Leslie v. Commercial Nat. Bank in Shreveport, 28 F.Supp. 927 (W.D. La. 1939)
• Decision Date: 24 July 1939
• Docket Number: No. 83.,83.
• Parties: LESLIE v. COMMERCIAL NAT. BANK IN SHREVEPORT.

28 F. Supp. 927

LESLIE v. COMMERCIAL NAT. BANK IN SHREVEPORT.

No. 83.

District Court, W. D. Louisiana, Shreveport Division.

July 24, 1939.

Monroe & Lemann, of New Orleans, La., and Foster, Hall & Smith, of Shreveport, La., for plaintiff.

Lee & Lee, Cook, Cook & Egan, and Herold, Cousin & Herold, all of Shreveport, La., and J. Fair Hardin, of Shreveport, La., for defendant.

DAWKINS, District Judge.

Plaintiff, as the Receiver of the Commercial National Bank of Shreveport, in liquidation (hereafter referred to as the old Bank, brought this suit against the Commercial National Bank in Shreveport (hereafter called the new Bank) for an accounting under a contract by which the former transferred to the latter all of its assets as a Banking institution. The contract is quoted as follows:

"This agreement, made and entered into this 3rd day of December, 1932, by and between The Commercial National Bank of Shreveport, a corporation organized and existing under the laws of the United States and having its principal office in the City of Shreveport, State of Louisiana, hereinafter called Party of the First Part; and the Commercial National Bank in Shreveport, a corporation organized and existing under the laws of the United States and having its principal office in the City of Shreveport, State of Louisiana, hereinafter called Party of the Second Part:

"Witnesseth:

"Whereas, because of adverse economic conditions existing in the Shreveport community and for other reasons, these conditions being aggravated by the general adverse economic, industrial and agricultural depression; and

"Whereas, a National Bank Examiner, in the usual discharge of his official duty, has made an examination of the affairs of Party of the First Part and in the classification of its assets has disclosed a substantial amount of losses, which seriously impair the capital stock of Party of the First Part, and a substantial amount of slow and doubtful assets from which further serious losses are anticipated by him; the careful analysis and classification by the National Bank Examiner having been made in conjunction and collaboration with a committee from the Board of Directors; the members of which committee are in substantial agreement with the said examiner; and

"Whereas, the condition of the affairs of Party of the First Part thus reflected produces a crisis; and it is the matured judgment of the directors of Party of the First Part that it is very much to the interest of the depositors and other creditors, the shareholders, the Shreveport community generally and to the general banking structure that the affairs of the Party of the First Part be liquidated in an orderly manner with the assistance of Party of the Second Part, as herein provided, and in order to supplement said assets and to indemnify and make whole Party of the Second Part in the assumption of the liabilities of Party of the First Part, as hereinafter provided, Party of the First Part has executed and delivered to Party of the Second Part its certain promissory note in the sum of One Million Dollars ($1,000,000.00), of even date herewith, and due in one (1) year, with interest at six per cent (6%) per annum from date, interest payable quarterly; and

"Whereas, Party of the Second Part has agreed, under certain terms and conditions hereinafter set out, to assist in the orderly liquidation of the affairs of Party of the First Part, under a plan that will insure full protection to the depositors and other creditors of Party of the First Part and will in the greatest possible degree, consistent with its own interest, protect the interest of the shareholders and alleviate the injury, actual and potential, which would devolve on the Shreveport community and other interests set out above by the forced liquidation of the affairs of Party of the First Part;

"Now, therefore:

"I. Party of the First Part has sold and by these presents does sell, transfer, assign, convey, set-over and deliver to Party of the Second Part all of its assets of every kind including cash, checks and drafts on hand and in its vaults; balances with its correspondents and remittances in transit; overdrafts; stocks, bonds, warrants, vouchers and securities; notes and bills receivable with their respective collaterals as such; debts and evidences of debt; real estate, banking, house, furniture and fixtures; and all other property and evidences of property of whatsoever nature and wheresoever located; and the officers of Party of the First Part are authorized and instructed to make any endorsement or assignment, execute and deliver any deed or other document, and to do any other lawful thing considered necessary or desirable to make legal the transfer of assets herein provided for and to put the title to same in Party of the Second Part and, in addition thereto and in support thereof, Party of the First Part has executed its certain promissory note in the sum of One Million Dollars ($1,000,000.00), of even date herewith, due in one year, with interest thereon at the rate of six per cent (6%) per annum from date, with interest payable quarterly, which note is the legal and binding obligation of Party of the First Part and Party of the First Part agrees and binds itself to pay the same according to its face and tenor.

"II. In consideration of the premises and assets herein transferred, conveyed and delivered and the One Million Dollar note above described, Party of the Second Part has assumed and by these presents does assume, become liable for and agrees to pay, all and singular, the liabilities of Party of the First Part, of whatsoever nature and description; save and except its liability to its shareholders on account of their capital investment for which Party of the Second Part assumes no liability whatsoever; and save and except, further, the One Million Dollar note above referred to, for which Party of the Second Part assumes no liability whatsoever and which Party of the First Part agrees and binds itself to pay, according to its face and tenor.

"III. Party of the First Part shall have the right and it shall be its duty to select a committee to be known as STOCKHOLDERS COMMITTEE which shall consist of three (3) members which shall select its own Chairman and otherwise perfect its own organization; and said Committee shall have power and it shall be its duty to represent the shareholders of Party of the First Part in the liquidation of the assets herein transferred and the members of said Committee shall serve without compensation. Any two (2) of the said Committee shall be authorized to act and at least two (2) members of said Committee may be members of the Board of Directors of Party of the Second Part.

"The title to the assets herein transferred shall be vested in Party of the Second Part and Party of the Second Part shall have full power and authority to collect, renew, extend, sell, trade, compromise and otherwise handle and adjust the assets herein conveyed as may seem proper and most expedient to its officers and directors and its officers and agents shall not be responsible for errors in judgment but only for fraud; but, Party of the Second Part shall not sell any parcel of real estate at less than its book value without the consent of the Stockholders Committee unless thirty (30) days' notice shall have been given the said Stockholders Committee during which period of time the said Stockholders Committee shall have the right to redeem such real estate at the price of the proposed sale; and

"Party of the Second Part shall not compromise any note or other evidence of debt or sell any personal property at less than its book value without the consent of the Stockholders Committee unless seven (7) days' notice shall have been given the said Stockholders Committee during which period of time the said Stockholders Committee shall have the right to redeem the said note or other article to be compromised or sold at the price of the proposed compromise or sale; and

"It shall be the duty of the Stockholders Committee to assist the officers of Party of the Second Part in liquidating and winding up the affairs of Party of the First Part but members of said Committee shall not have access to any of the assets herein transferred except during business hours and in the presence of a representative of Party of the Second Part or with its consent and approval.

"IV. Party of the Second Part shall, as soon as practicable after the execution hereof, divide into `Class A', `Class B' and `Class C' all of the assets hereby transferred.

"(a) `Class A' assets shall include all cash on hand and may include balances due from correspondents and such other assets as Party of the Second Part may select; and `Class A' assets shall not be entitled to the privilege of substitution and exchange as provided below for `Class B' and `Class C' assets.

"(b) `Class B' assets shall be selected in an amount which, when added to `Class A' assets above described, shall equal the total liabilities herein assumed by Party of the Second Part, and for the purpose of this classification the One Million Dollar ($1,000,000.00) note above referred to shall be considered a `Class B' asset; and shall be set up on the general ledger of Party of the Second Part in an account or accounts to be called `Class B' assets; and suitable subsidiary records of `Class B' assets shall be kept in detail.

"(c) `Class C' assets are those now believed to have a problematical and indeterminate value, and all assets of Party of the First Part, both ledger and non-ledger, not included in `Class A' or `Class B' shall be considered `Class C' assets, but the record of `Class C' assets shall not appear on the general ledger of Party of the Second Part but Party of the Second Part shall keep suitable subsidiary records of `Class C' assets in detail; and all unknown assets shall be a part of `Class C' assets.

"Party of the Second Part shall have the right and...