Article 4. Liquidation Of An Uninsured Licensee of California Financial Code >> Division 1. >> Chapter 7. >> Article 4.
Upon taking possession of the property and business of a
licensee that does not have federal deposit or share insurance, the
commissioner may sell, compromise, or compound any bad or doubtful
debt owing the licensee for a principal sum not exceeding ten
thousand dollars ($10,000), upon those terms as the commissioner may
deem proper. If the principal sum thereof exceeds ten thousand
dollars ($10,000), the commissioner may compromise, compound, or sell
the debt upon those terms as the court may approve. If it appears
improbable that a recovery on a debt can be had, and that the costs
of an action to collect would be lost, and the principal sum thereof
does not exceed five hundred dollars ($500), the commissioner may
determine that no suit thereon shall be brought. If the principal sum
of that debt exceeds ten thousand dollars ($10,000), the
commissioner may determine that no suit thereon be brought after
obtaining approval of the court.
The commissioner may sell any real or personal property of the
licensee for cash or on credit and on any other terms and conditions
as the commissioner may deem proper, subject to the approval of the
(a) The commissioner may, with the approval of the court, sell
any part or the whole of the business of a licensee to any other
licensee. The purchase and sale shall be approved by the purchasing
licensee, as follows:
(1) If the purchasing licensee is organized under the laws of this
state, by two-thirds of all of its directors.
(2) If the licensee is any licensee other than a licensee
organized under the laws of this state, in accordance with the laws
of the jurisdiction under which the licensee is organized.
(b) (1) Subject to any applicable federal statutes and
regulations, any bank or credit union organized under the laws of
this state may, with the approval of two-thirds of all of its
directors and of the commissioner, purchase from the receiver of a
national banking association or a federal credit union the whole or
any part of the business of the national banking association or
federal credit union.
(2) Subject to any applicable federal statutes and regulations and
any applicable laws of the jurisdiction under which a foreign
corporation is organized, any foreign corporation or any office of a
foreign corporation that is licensed by the commissioner to transact
business in this state and that is authorized to accept shares or
deposits in this state, may, with the approval of the commissioner,
purchase from the receiver of a national banking association or
federal credit union the whole or any part of the business of the
national banking association or federal credit union.
(c) The provisions of Chapter 12 (commencing with Section 1200)
and Chapter 13 (commencing with Section 1300) of Division 1 of Title
1 of the Corporations Code shall not apply to any purchase and sale
of the type described in subdivision (a) or (b).
(d) When a purchase and sale of the type described in subdivision
(a) or (b) becomes effective, the purchasing licensee shall, by
operation of law and without further transfer, substitution, act, or
deed, to the extent provided in the agreement of the purchase and
sale or in the order of the court approving the purchase and sale and
except as withheld or limited by the agreement or by the order:
(1) Succeed to the rights, obligations, properties, assets,
investments, shares, deposits, demands, and agreements of the
licensee whose business is sold, subject to the right of every
customer of the licensee whose shares or deposit is sold to withdraw
his or her shares or deposit in full on demand after the sale,
irrespective of the terms under which the deposit was made.
(2) Succeed to the rights, obligations, properties, assets,
investments, shares, deposits, demands, and agreements of the
licensee whose business is sold under all trusts, executorships,
administrations, guardianships, conservatorships, agencies, and other
fiduciary or representative capacities, to the same extent as though
the purchasing licensee had originally assumed, acquired, or owned
the same, subject to the rights of trustors and beneficiaries under
the trusts so sold to nominate another or succeeding trustee of the
trust so sold after the sale.
(3) Succeed to and be entitled to take and execute the appointment
to executorships, trusteeships, guardianships, conservatorships, and
other fiduciary and representative capacities to which the licensee
whose business is sold is or may be named in wills, whenever
probated, or to which it is or may be named or appointed by any other
(e) For purposes of subdivision (d), any purchase and sale of the
type referred to in subdivision (d) shall be deemed to be effective
at the time provided in the agreement of the purchase and sale or in
the order of the court approving the purchase and sale.
Within six months after taking possession of the property and
business of any licensee that does not have federal deposit or share
insurance, the commissioner may terminate or adopt any executory
contract to which the licensee may be a party, including leases of
real or personal property. Claims for damages resulting from the
termination of any contract or lease may be filed and allowed, but no
claim of a landlord for damages resulting from the rejection of an
unexpired lease of real property or under any covenant of the 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 claim shall be filed within 30 days of the
date of the termination or within the time that claims are to be
filed under Section 680, whichever is longer.
The commissioner, in his or her own name or in the name of the
licensee, may execute, acknowledge, and deliver any and all
conveyances and other instruments necessary or appropriate to
effectuate the sale of any real or personal property or to effectuate
any other transaction in connection with the liquidation of a
licensee or the distribution of its assets. Any conveyance or other
instrument executed by the commissioner pursuant to this authority
shall be valid and effectual for all purposes as though the same had
been executed by the officers of the licensee by authority of its
board of directors. Whenever the commissioner sells any real property
of the licensee a certified copy of the order of the court approving
the sale shall be recorded in the county in which any part of the
real property is located.
The commissioner, in the name of the delinquent licensee or in
his or her own name, may prosecute and defend any and all actions
and other legal proceedings appropriate or necessary to the
liquidation of the licensee.
The commissioner from time to time shall deposit all moneys
coming into his or her hands in the course of the liquidation of the
licensee in one or more state banks or state credit unions and in the
event of the suspension or insolvency of the depositary shall be
preferred before all other deposits.
The commissioner shall make an inventory of the assets of the
licensee in duplicate and file one in the office of the commissioner
and one with the clerk of the county in which the head office of the
licensee is located to be filed with the papers in the liquidation
proceedings. The inventory shall be open for inspection at all
When the time fixed for the presentation of claims has
expired, the commissioner shall make in duplicate a full and complete
list of all claims presented, including and specifying claims that
have been rejected by the commissioner, and a list of all claims of
customers as shown by the books or records of the licensee for which
claims have not yet been presented, and shall file one copy of the
list in the commissioner's office and one with the clerk of the
county in which the head office of the licensee is located to be
filed with the papers in the liquidation proceedings. Before each
application to the court for leave to declare a dividend, the
commissioner shall file a supplemental list of claims presented since
the last preceding list was filed, including and specifying any
claims that have been rejected by him or her. The list of claims and
of claims of customers as shown by the books or records of the
licensee shall be open for inspection at all reasonable times.
The commissioner shall cause notice to be given by
advertisement in any newspapers of general circulation as he or she
may select weekly for three consecutive months, calling on all
persons who have claims against the licensee to present the same to
the commissioner and make legal proof thereof at a place to be
specified therein and within four months of the date of the first
publication of the notice, which date shall be specified in the
notice. The notice shall also state that all claims other than those
of customers appearing upon the books or records of the licensee
shall be forever barred if not filed within the four months' period
and that all claims of customers appearing upon the books or records
of the licensee will be forever barred, except as herein provided, if
not filed prior to the filing of a petition for a final dividend.
The commissioner shall also mail a similar notice to all persons,
including customers whose names appear as creditors upon the books of
the licensee and whose addresses appear upon the books or records of
the licensee, and shall enclose therewith a printed form of notice
All claims of every kind against the licensee or against any
property owned or held by the licensee shall be presented to the
commissioner in writing verified by the claimant or someone on his or
her behalf within four months of the date of the first publication
of the notice to creditors. Any claim, other than the claim of a
customer whose claim appears upon the books or records of the
licensee, not presented within the four months' period shall be
forever barred and any claim of a customer whose claim appears upon
the books or records of the licensee that is not so presented prior
to the date of the filing of the petition of the commissioner with
the court for approval of the payment of the final dividend shall be
forever barred except as to any moneys remaining after all debts for
which claims were duly filed have been paid in full with interest. If
the commissioner doubts the validity of any claim, he or she may
reject the claim and serve notice of the rejection upon the claimant
either by mail or personally. An affidavit of the mailing or personal
service of the notice shall be prima facie evidence of the receipt
thereof and shall be filed with the commissioner. Any action upon a
rejected claim shall be brought within three months after the date of
mailing or personal service of the notice of rejection.
At any time and from time to time after the expiration of the
time fixed for the presentation of claims, the commissioner, after
obtaining approval of the court, may declare and pay one or more
dividends upon all approved claims out of the funds remaining in his
or her hands after the payment of expenses and after setting aside an
amount sufficient to pay to all customers, who have not yet filed
claims but whose claims appear upon the books or records of the
licensee, their pro rata share of the funds then available for the
payment of a dividend. At any time after the expiration of one year
from the date of the first publication of notice to creditors and
after obtaining the approval of the court, the commissioner may
declare and pay a final dividend.
(a) Expenses and claims of unsecured creditors have priority
in the following order:
(1) Expenses of liquidation and approved claims for fees and
assessments due the department.
(2) Approved claims given priority under other provisions of state
or federal law, including, but not limited to, Sections 676 and 710.
(3) Approved claims for "deposits," as that term is defined in 12
U.S.C. Section 1813(l), but including obligations of the type
described in 12 U.S.C. Section 1813(l)(5)(A) and (B).
(4) Approved claims for other general liabilities.
(5) Approved claims for obligations subordinated to deposits and
other general liabilities.
(b) Interest shall be given the same priority as the claim on
which it is based, but no interest shall be paid on any claim until
the principal of all claims within the same class has been paid or
adequately provided for in full.
(c) Any funds remaining shall be paid to the members or
shareholders, as appropriate.
Objections to any claim not rejected by the commissioner may
be made by any person interested by filing a copy of the objection
with the commissioner, who shall present the copy to the court at the
time of the next application for approval of the declaration of a
dividend. The court shall thereupon dispose of the objections or may
order a reference for that purpose, and should the objections to any
claim be sustained by the court or by the referee, the claim shall
not be allowed by the commissioner until the claimant has established
the claim by judgment.
Dividends remaining unpaid and any sums available for payment
of shares or deposits for which no claim was filed, which remain in
the hands of the commissioner six months after the order for the
payment of a final dividend, shall be deposited in the State
Treasury. The shares or deposits shall be deemed to have been
received under Chapter 7 (commencing with Section 1500) of Title 10
of Part 3 of the Code of Civil Procedure, and shall be subject to
claim or other disposition as provided in that chapter. The
commissioner may pay over the moneys held by him or her to the
persons respectively entitled thereto at any time prior to depositing
the shares or deposits in the State Treasury, upon being furnished
satisfactory evidence of the persons' right to the same.
Whenever, under the provisions of this article, the
commissioner is required to transmit unclaimed money or other
unclaimed property to any state officer for deposit in the State
Treasury, the commissioner, upon request of the Controller, shall
transmit to the Controller all signature cards and any other
identifying information available from the records of the licensee,
covering the money or other property. Upon receipt by the Controller
of the signature cards or other identifying information, the licensee
and the commissioner shall be relieved of all responsibility
therefor. The signature cards and other identifying information may
be destroyed or otherwise disposed of by the Controller whenever, in
his or her discretion, their further retention by him or her is no
longer required in the interest of the customers or the state.
All approved claims of customers and other creditors shall
bear interest at the rate provided by law on judgments from the date
that the commissioner takes possession of the property and business
of the licensee.
If the licensee has in its possession for safekeeping or
storage any jewelry, plate, money, specie, bullion, stocks, bonds,
securities, valuable papers, or other valuable personal property, or
has rented any vaults, safes, or safe-deposit boxes, the commissioner
shall cause to be mailed, by registered mail, postage prepaid, to
any known person claiming to be or appearing on the books of the
licensee to be the owner of the property or to the person in whose
name the safe, vault, or box stands a notice notifying the person to
remove all of the personal property within a specified fixed period
of not less than 60 days.
On the last day fixed in the notice for the removal of the
property or on the date when the property is removed or the box
surrendered, any contract between the person owning the property or
holding the box and the licensee shall cease and the amount of the
unearned prepaid rent or charges, if any, shall become a debt of the
licensee to the person.
If any property is not removed within the time fixed by the
notice mailed by the commissioner, the commissioner may dispose of
the property as the court, on application thereto, shall direct. The
commissioner may cause any safe, vault, or box to be opened in his or
her presence or in the presence of one of the special deputy
commissioners and of a notary not an officer or employee of the
licensee or of the commissioner. The contents thereof, if any, shall
be sealed by the notary in a package upon which the notary shall
distinctly mark the name and address of the person in whose name the
safe or box stands upon the books of the licensee and shall attach
thereon a list and a description of the property within the package.
The package so sealed and addressed, together with the list and
description may be kept by the commissioner in one or more of the
safes or boxes of the licensee or elsewhere until delivered to the
person whose name it bears or until otherwise disposed of as directed
by the court.
(a) When the commissioner has completed the liquidation of the
licensee, he or she shall petition the court for an order declaring
the licensee duly wound up and dissolved.
(b) After any notice as the court may direct and a hearing, the
court may make an order declaring the licensee duly wound up and
dissolved. The order shall declare all of the following:
(1) The licensee has been duly wound up.
(2) A final franchise tax return, if any, as described by Section
23332 of the Revenue and Taxation Code, has been filed with the
Franchise Tax Board as required under Part 10.2 (commencing with
Section 18401) of Division 2 of the Revenue and Taxation Code, and
any tax or penalty due under the Corporation Tax Law has been paid,
and the licensee's known debts and liabilities have been paid or
adequately provided for, or any taxes, penalties, debts, and
liabilities have been paid so far as the licensee's assets permitted,
as the case may be. If there are known debts or liabilities for the
payment of which adequate provision has been made, the order shall
describe the provision, setting forth any information necessary to
enable the creditor or other person to whom payment is to be made to
appear and claim payment of the debt or liability.
(3) All known assets of the licensee have been distributed to its
shareholders or wholly applied on account of the licensee's debts and
(4) The licensee is dissolved.
(c) The court may make additional orders and grant further relief
as it deems proper upon the evidence submitted.
(d) Upon the making of the order declaring the licensee dissolved,
the corporate existence of the licensee shall cease, except for the
purposes of any necessary further winding up.
(e) Upon the making of the order declaring the licensee dissolved,
the commissioner shall file with the Secretary of State a copy of
the order, certified by the clerk of the court.
Whenever this article requires court approval of any step in
the liquidation proceedings, approval shall be given after a hearing
upon notice as the court may direct. At the hearing, the court may by
order approve the actions of the commissioner for which he or she
has petitioned the court's approval or it may, by appropriate order,
otherwise direct the commissioner in the matter in connection with
which the petition was filed.
Whenever, in the opinion of the commissioner, the liquidation
or reorganization of any licensee taken in charge by him or her would
be facilitated, or the public interests and the interests of
customers or stockholders would be served, the commissioner may
borrow money on behalf of the licensee from any federal agency
authorized to lend money to receivers, trustees, liquidating agents,
or other agents or supervisory authorities in charge of licensees
that are closed or in process of liquidation and, with approval of
the court, the commissioner may secure any borrowings by the pledge
of the assets of the licensee in any manner and amount the
commissioner deems necessary, proper, or expedient.