Article 3. Liquidation By The Commissioner of California Financial Code >> Division 6. >> Chapter 6. >> Article 3.
If at any time after taking possession of the property and
business of a licensee it shall appear to the commissioner that it
would be futile to proceed as conservator with the conduct of the
business of such person he may apply to the superior court of the
county in which is located the principal office of such person in
this State for an order to liquidate and wind up the business of said
person. Upon a full hearing of such application, the court may make
an order directing the winding up and liquidation of the business of
such person by the commissioner, as liquidator.
Whenever the commissioner has taken possession of the
property and business of a licensee he may petition the superior
court for the appointment of a receiver to liquidate the affairs of
The commissioner may appoint one or more special deputies to
assist in the duties of liquidation and distribution under his
direction and may also employ such special legal counsel,
accountants, and assistants as may be needed and required and fix
their salaries and compensation. All such salaries and compensation
with other reasonable and necessary expenses as may be incurred in
the liquidation shall be paid by the commissioner from the funds of
the licensee in his hands. Such expenses shall include, among other
things, that part of the salary of the commissioner and of his
deputies, auditors, accountants, appraisers and other assistants, and
that part of the general expenses of the commissioner's office, as
fairly represent, in the opinion of the commissioner, the proportion
properly attributable to such liquidation.
In liquidating the affairs of a licensee the commissioner
(a) Collect all money due to, and claims of, the licensee and give
(b) Approve and pay all just and equitable claims.
(c) Commence and prosecute all actions and proceedings necessary
to enforce liquidation.
(d) Compound bad or doubtful debts or claims, borrow money, sell,
convey, or transfer real or personal property, on order of the
superior court of the county in this State in which the principal
office of the licensee is located. The order shall be made after
hearing and on such notice as the court prescribes.
After the issuance of an order of liquidation under Section
17635, any of the following transactions occurring within four months
prior to the application for such order shall be voidable by the
commissioner if such transaction has the effect of giving to or
enabling any creditor of the licensee to obtain a preference over any
other creditor, or to obtain a greater percentage of his debt than
any other creditor:
(a) A transfer of property of the licensee.
(b) The creation of a lien upon the property of the licensee.
(c) The suffering of a judgment against such person.
If the commissioner is in possession of the business,
property, and assets of a licensee, whether or not he is liquidating
the affairs of such licensee, the commissioner may:
(a) Apply to the superior court of the county in this State in
which the principal office of the licensee is located for an order
confirming any action taken by the commissioner, or authorizing the
commissioner to do any act or execute any instrument not expressly
authorized by this part. The order shall be given after a hearing on
such notice as the court prescribes.
(b) Pay and discharge any secured claims against the licensee,
whether or not such claims have been presented for payment. No
secured claim shall be paid in an amount larger than the value of the
security at the time of payment.
Claims for damages resulting from the disaffirmance of an
executory contract or lease by the commissioner may be filed and
allowed. No claim of a landlord for damages resulting from the
disaffirmance of an unexpired lease of real property or under any
covenant of such lease shall be allowed in an amount exceeding the
rent reserved by the lease, without acceleration, for the year
succeeding the date of the surrender of the premises plus the amount
of any unpaid accrued rent without acceleration. Any such claim must
be filed within 30 days of the date of such disaffirmance.
When the commissioner determines to liquidate a licensee, he
shall cause an inventory of all the assets of the licensee to be
made in duplicate, file the original with the court, and file the
duplicate in his office.
When the commissioner determines to liquidate a licensee he
shall cause notice to be given by publication once a week for four
successive weeks in some newspaper of general circulation published
at or near the principal place of business in this State of such
licensee, to all persons having claims against the licensee as
creditors, investors, or otherwise, requiring them to present and
file their claims and make legal proof thereof at a place and within
a time designated in such publication. The time shall be not less
than six months after the first publication. Within 10 days after the
first publication the commissioner shall cause a copy of such notice
to be mailed to all persons whose names appear of record upon the
licensee's books as creditors, or as parties to an uncompleted escrow
All claims, demands, or causes of action of creditors, and
persons other than the parties to an escrow transaction against the
licensee or against any property owned or held by it in trust or
otherwise, must be presented to the commissioner in writing, verified
by the claimant, or someone in his behalf, within the period
specified in the notice for the presentation of claims, whether or
not an action is pending to enforce any such claim or demand. The
commissioner shall not approve any claim not so presented, and any
such claim, demand or cause of action not so presented is forever
Upon the expiration of the time fixed for the presentation
of claims, the commissioner shall prepare in duplicate a full and
complete schedule of all claims presented, specifying by classes
those that have been approved and those that have been disapproved
and shall file the original with the court and the duplicate in his
Not later than five days after the time of filing the
schedule of claims with the court, written notice shall be mailed to
all claimants whose claims have been rejected. Action to enforce the
payment of or to establish any rejected claim must be brought and
service had within four months from and after the date of filing of
the schedule of claims with the proper court or all such actions are
Regardless of any law of this state, the judges of the
superior court of the county in this state in which the principal
office of the licensee is located may, whenever the judges deem it
necessary or advisable, hold hearings relating to the sale, exchange,
or other disposition of any real property or any personal property
of the licensee regardless of the location of the property. The
hearings shall be held at the county seat of any county in this state
or at the places in the home county of the superior court at which
sessions are held.
If it appears improbable that anything can be realized from
any property of the licensee and that the cost of maintaining,
preserving, or protecting the property would probably be lost, the
court may direct the commissioner to abandon the property.
For the purpose of executing and performing any of the
powers and duties conferred upon him by this article, the
commissioner may in the name of the licensee or in his own name
prosecute and defend any suit or other legal proceeding and may in
the name of the licensee or in his own name as commissioner execute,
acknowledge, and deliver any and all deeds, assignments, releases,
requests for reconveyance, and other instruments necessary and proper
to effectuate any sale of real or personal property or other
transaction in connection with the liquidation of the licensee. Any
deed, assignment, release, request for reconveyance, or other
instrument executed pursuant to this section is valid and effectual
for all purposes as though it was executed by the officers of such
licensee with the authority of its board of directors.
If any real property of the licensee sold by the
commissioner is located in a county other than the county in which
the application to the court for permission to sell the property was
made, the commissioner shall cause a certified copy of the order
authorizing or ratifying such sale to be recorded in the office of
the recorder of the county in which the real property is located.
When the commissioner has (a) fully liquidated all claims
other than claims of stockholders, and (b) made due provision for any
and all known but unclaimed liabilities, excepting claims of
stockholders, and (c) paid all expenses of liquidation, then upon the
written request of the holders of a majority of the stock of such
licensee he shall deliver to the licensee or its trustees any surplus
that then remains in his hands, together with all the records and
effects. The licensee or its trustees shall have title to such
surplus, records, and effects free from any claim of the
Upon the payment of a final dividend in liquidation, the
commissioner shall prepare and file with the court a full and final
statement of the liquidation, including a summary of the receipts and
disbursements, and a duplicate of such statement shall be filed in
the office of the commissioner. After hearing and approval by the
court, the liquidation shall be closed.
In making its order approving the commissioner's final
statement of the liquidation of a licensee, the court shall determine
the amounts of the liquidating dividends to which claimants and
investors are entitled but that then remain unpaid or unclaimed in
the hands of the commissioner. The order of the court shall direct
the commissioner to deposit the amounts with the Controller. All
amounts so deposited shall be deemed to be deposited with the
Controller under Chapter 7 (commencing with Section 1500) of Title 10
of Part 3 of the Code of Civil Procedure, and may be recovered in
the manner prescribed in that chapter.
The order of the court approving the final statement on
liquidation shall provide for the destruction or other disposition of
the books and records of the licensee or pertaining to the
liquidation of the licensee, and the court may declare the licensee
dissolved as a corporation.