Opinion
12836
February 13, 1930.
Before RAMAGE, J., Clarendon, April, 1929. Affirmed.
The Home Bank Trust Company was adjudged insolvent in a proceeding by A.S. Fant, as bank examiner of the State of South Carolina, against the Bank, and C.R. Sprott was appointed receiver. Hugh McFaddin and others filed claims as certificate holders, which were approved, and, from a decree approving certain sales made by the receiver, the receiver and certain certificate holders and another appeal.
The decree of circuit Judge Ramage is as follows:
Home Bank Trust Company, a state banking corporation of Manning, was adjudged insolvent in the above captioned proceeding in 1926 and by order of this Court on December 17th of that year C.R. Sprott was appointed receiver, directed to convert all of the bank's assets into money with all reasonable speed, and was given "the right to sell the real or personal property at public or private sale and with or without notice or further authority" than that given in such order. Mr. Sprott promptly qualified by giving of bond and has since been in charge of the liquidation of the bank's affairs.
In the bank was a special deposit fund of about $60,000.00, the depositors in which held certificates by which the bank agreed to invest the money in real estate securities. A prior adjudication of this Court has established that the holders of these certificates are entitled to the assets belonging to this separate fund, principally real estate and real estate mortgages, and also to participate in any dividend from the general assets of the bank. No dividend has been paid from either source and so far these certificate holders have received nothing from the special fund or the general assets.
On October 26, 1928, the receiver sent to the certificate holders the following letter with a list of the properties of this fund in his hands:
"For nearly two years I have been trying to dispose of the properties held by Home Bank Trust Company as security for the payment of your certificates, but on account of the financial condition of the country I have not made very much progress in this direction.
"I have given a great deal of time and thought to this matter and I have developed a plan by which, in my opinion, these properties can be distributed equitably among all the certificate holders. Before asking the Court for an order to put this plan into execution, I wish to submit it to you for your approval or rejection or modification. In other words, I wish to lay before you my plan for liquidating the fund and hear any suggestions or changes or any other plan which any of you might have in mind. My sole desire is to close up this matter before the end of the year and in such a way that each certificate holder will share equitably in the assets.
"I am, therefore, asking for a meeting of all the certificate holders at the Home Bank Trust Co. building at 11 a. m., Thursday, November 8th. At this meeting I will make a report to you of all receipts and disbursements to date, and for your information, I enclose a list of the properties now on hand belonging to this fund. I trust that each one of you will either be present at the meeting or represented by your attorney."
The date of the meeting was thereafter changed and it was held on November 9, 1928. A very large majority of the certificates were represented either in the persons of the owners or by attorney. The receiver disclosed his plan and after extended discussion it was adopted with one change; the bidding power of the certificate holders was limited to the appraised value of the properties — any excess bid by a certificate holder to be paid in cash. This was suggested in order to prevent a large certificate holder buying in all the best properties, without paying out any money, which money would, of course, under the plan adopted, revert to the benefit of the certificate holders who did not buy. The only certificate holder who objected to this feature was the largest.
The following is the record of the certificate holders' meeting:
"Excerpt from minutes of the holders of the Mortgage Deposit Certificates of the Home Bank Trust Company held at the Bank in Manning, S.C. on November 9, 1928, pursuant to call of the receiver.
"Resolution by Mr. Thames:
"That a dividend be declared upon the certificates in a percentage proportionate to the appraised value of the assets in the fund and the property sold at auction by the receiver after two weeks newspaper advertisement; the certificate holders shall be permitted to bid and use their dividend percentages in payment of their purchases to the extent of the upset prices, to be hereafter fixed by appraisal, any excess bid to be paid in cash by the certificate holders who purchase;
"That before the sale the upset prices of all lands and mortgages be fixed by appraisal by an experienced land bank appraiser to be employed by the receiver and paid from the fund.
"Adopted.
"Motion by Mr. Myers:
"That the receiver appoint a committee of five to attend to details of appraisal and sale.
"Adopted.
"The receiver appointed as such committee, Messrs. Davis, DuRant, Thames, Lesesne and Stukes."
The appraisal was had and the receiver presented to Judge Shipp his petition in which he stated that he had foreclosed nearly all of the mortgages in this fund, had bought the lands in at the foreclosure sales and had been unable to dispose of them to advantage; that they had been appraised by a professional appraiser; and prayed for an order for the sale "in order to wind up the matter," which order should provide that each certificate holder be allowed to use as cash in settlement for his purchases forty per cent of the amount of his approved claim.
His Honor, Judge Shipp, then rendered his order, dated December 1, 1928, directing the sale by the receiver at auction before the court house door after two weeks advertisement of all the assets of this special fund for cash or upon stipulated credit terms. The order further contained the following:
"That each of the holders of certificates in the said real estate mortgage fund shall have the right to bid and use as cash in the payment of any purchase of any of said assets an amount equal to forty per cent of his or her approved claim against the said fund. Such allowance or credit to be charged against and deducted from the first dividend paid such certificate holder.
"That no tract shall be sold at a less price than the appraised value of same as fixed in the appraisal employed by the receiver as appears by his report on file with the said receiver.
"That any assets remaining in hand unsold after the sale above provided for may be sold by the receiver on the same terms as above set out at either public or private sale at not less than the appraised value thereof as shown by the said appraisal.
"That any sales made at public auction shall be subject to confirmation and approval by the Court, but later sales may be made as above provided without further approval at the discretion of the receiver.
"That should the holder of any certificate in the real estate mortgage fund be the purchaser of any of the assets above directed to be sold at a price greater than the appraised or upset price as fixed herein, then the excess of such upset price shall be in cash and not with the credit or certificate above directed to be allowed."
This order was consented to by all of the attorneys constituting the committee above referred to except Mr. DuRant. As the receiver's attorney, he prepared and presented the order to the Court.
The receiver then published the required advertisement of the sale and such notice contained no reference to upset prices. It was in large display type, three columns in width and not the usual inconspicuous legal notice of sale. It was as follows:
"Receiver's Sale."Pursuant to an order of the Court, I will sell at public auction, in front of the court house door at Manning on Saturday morning, December 15th, at 11 o'clock, the following described real estate and real estate mortgages belonging to what is known as the Real Estate Mortgage Fund of Home Bank Trust Company. (Here follows descriptions of properties.)
"Terms: One-third cash, balance in annual installments over a period not to exceed five years with interest on deferred payments at the rate of 7 per cent as fixed in the order of the Court.
"For any further information call or write C.R. Sprott, receiver."
He also sent to all of the certificate holders a letter of which the following is a specimen:
"To all certificate holders in the Real Estate Mortgage Fund of Home Bank Trust Company:
"In accordance with your instructions I have had all of the real estate and mortgages in the Real Estate Mortgage Fund appraised by Mr. A.D. Harby, a professional land bank appraiser of Sumter.
"In order to save the expense of additional printing I enclose a copy of the list of properties sent you some weeks ago on which I have numbered each tract and mortgage, and have entered the upset price as fixed by Mr. Harby and confirmed by the Committee of Attorneys, and the Court.
"I am advertising these properties in The Manning Times tomorrow for sale at 11 o'clock a. m. Saturday, December 15th, in front of the court house door at Manning.
"At this sale each certificate holder will be allowed to use forty per cent of his or her certificate as cash in the payment of any property purchased up to the upset price; and, because I believe it will best protect your interest, I urge you to be present and exercise this privilege. Under the order of the Court I am permitted to offer these properties on terms of one-third cash and the balance in annual installments not to exceed five, with 7 per cent interest on the deferred payments. As I construe this order, it gives you the privilege of purchasing property at this sale up to three times forty per cent of your claim without immediate cash outlay except any excess bid over the upset price.
"Mr. Harby's detailed appraisal is too long to print and send out, but I will be glad to give you the details on any tract in which you are interested, and any other information I have that you may wish.
"Yours very truly,
"C.R., Sprott, Receiver.
"Mr. Hugh McFaddin, "New Zion, S.C. R.F.D.,
"The amount of your claim is ................ $ 671.48 7,870.48
"The amount you may use as payment on purchase is .................................... 3,408.93"
The sale was well attended. The receiver's report shows that about ten parcels of land and mortgages were bid off at and above the appraised values, but all, or all save one small one, were bought by the certificate holders, who were bidding upon the purchasing power of their certificates under the order and not in contemplation of payment in cash. Having been unable to get bids as high as the appraised values upon the remaining tracts, about eighteen, either from certificate holders or others, the receiver offered them again, this time to the highest bidders regardless of the appraised values, having first announced that the high bids would be submitted to the Court.
By that means bids were received upon all the remaining tracts and they were knocked down to the respective high bidders, some of whom were certificate holders and some outsiders.
The matter came on before me at the spring term of this Court upon the report of the receiver in which he recommends confirmation of the sales made at and above the appraised values, if such be fair to the (other) certificate holders, and also upon the opposition of Mr. DuRant, as Treasurer, who is the largest certificate holder, to confirmation of the sales upon the grounds:
"First: That the bidding was chilled by the provision requiring the payment of cash by certificate holders if their bids were more than the appraised value of property being sold.
"Second: That by the confirmation of said sale bidders who were certificate holders will receive forty per cent (40%) upon their certificates, while others who did not bid will receive about half of said amount, or less."
Upon the questions involved I first heard arguments, reserving my decision for the filing of written arguments; then I thought it well to hear testimony which I did from those certificate holders actively in favor of confirmation, represented by P.B. Thames, Esq., and T.H. Stukes, Esq., and also from the receiver and Mr. DuRant, opposing confirmation. No other certificate holders appeared, although all had notice, so it appears that the others are content with the result of the sale.
There was considerable testimony which I have carefully considered. At its conclusion I again heard arguments pro and con.
The first objection to confirmation is directed rather to the terms of the order of Judge Shipp from which no appeal was taken. In fact, it was procured as a consent order and all parties are bound by it, and I am without jurisdiction to alter it.
Furthermore, the provision now objected to was the plan deliberately (and, as it appears to me, wisely) adopted by the certificate holders.
As to the second ground of objection I find from the testimony and record that it is based upon a misconception of fact. The certificate holders who bought with forty per cent of their certificates are not actually getting a forty per cent dividend for they are getting lands, largely unmarketable, as their dividend. The conclusion is inevitable that the lands are not salable at the appraised values. The sale, well advertised, attended and conducted, and upon desirable terms, is proof enough. The Court may well take judicial notice, from present judicial experiences, of the many foreclosures of mortgages taken upon appraisals as were had in this instance. The testimony is uncontradicted that the lands are nearly all poorly located, without improvements or timber and altogether undesirable, with many of the tracts untenanted. That they are not in demand is conclusively demonstrated by the facts that the receiver has been unable heretofore to dispose of them in his two years of administration and that most of them have been through foreclosure sales in that time without attracting purchasers. I find from the testimony that many of the tracts are well sold at any price, so undesirable are they.
The two grounds of objection to confirmation are, therefore, overruled, and it is so ordered, adjudged and decreed.
The further suggestion of Mr. DuRant that he and others be allowed to raise bids is impracticable. The hammer has fallen. He was at the sale and bid in much property. Other certificate holders might raise some of his bids, as one who was a witness before me offered to do.
The clear preponderance of the testimony shows that the property brought all it was worth and that which was sold upon the certificates, much more than it was worth. The receiver had the authority to sell as he did and such action on his part was to the advantage of the depositors in that it is the means of getting to the end of the liquidation. Almost two and a half years have passed since the appointment of the receiver and the confirmation of this sale will result in the certificate holders getting their first dividends from the fund. They will thereby fare as equitably as can probably be devised; those who bid in property will get over-valued real estate for forty per cent of their claims and the others will get a proportionate amount in cash derived from the other sales. None can complain for all had the same opportunities.
A re-sale would duplicate the expense and further delay the liquidation without reasonable prospect of benefit. It would jeopardize the interest of the certificate holders and should not be undertaken.
It is, therefore, ordered and adjudged that the sales made by the receiver in this matter on December 15, 1928, be, and the same hereby are, confirmed, ratified and approved; and he is hereby ordered to prepare and tender, within thirty days from the date of this decree, to the respective successful bidders proper conveyances of the real estate and assignments of the mortgages and/or other choses purchased by them, respectively; and that he deliver possession of such property to such successful bidders upon their compliances with their bids by payment of the respective amounts thereof or compliance with the credit terms of the sale upon tender of deeds or assignments (as the case may be) to them, or within a reasonable time thereafter.
It is further ordered that in such settlements the certificate holders shall be allowed credit upon the total amount of their purchases of forty per cent (40%) of the respective amounts of their claims against the fund — their certificates. Upon exhaustion of the total amount of his certificate or certificates, a holder who has purchased is required to pay cash or comply with the credit terms of the sale for the balance of his purchase or purchases. A holder whose total purchases are less than the amount of his certificate or certificates shall have the latter — his claim against the fund — reduced by the total amount of his purchases. The attorneys who bid in parcels of the property shall within the above stated period of thirty days furnish the receiver with the name of the person or persons in whose behalf such bids were made and to whom conveyances of such property shall be made. If any attorney was bidding for a group of certificate holders, the names of the members of such group shall be furnished and the proportions in which they joined in the bid, and the conveyances shall be made to them jointly in such proportions or to any one of them as directed by such attorney.
It is further ordered that there shall be no assignment of bids from a non-certificate holder to a certificate holder for the effect of such would be to reduce the cash receipt of the sale and the receiver shall not recognize or be bound or affected by any such attempted transfers. All of the certificate holders had ample opportunity to purchase and all had full notice of such opportunity.
It is further ordered and adjudged that the receiver shall affix to each conveyance a proper amount of State revenue stamps, but stamps upon all credit obligations to the receiver shall be at the expense of the purchasers availing themselves of such credit; and further that taxes for the year 1928 and prior years due the State or any subdivision thereof shall be paid by the receiver, but taxes falling due hereafter shall be borne by the respective purchasers and the latter shall receive all rents, income and profits collected or collectible from and after January 1, 1929; and if the receiver has collected any such he shall pay the amount of same to the purchasers of the respective properties from which collected and he shall assign and deliver to the purchasers any and all uncollected obligations for rent which he now holds from present and/or former tenants.
It is further ordered that the said receiver may employ attorneys to assist him in the preparation of the conveyances and credit obligations herein directed to be given and taken by him, respectively, and in otherwise carrying into effect this order and decree.
It is further ordered that any party hereto, including any successful bidder at the sale, may hereafter apply for any order or other process necessary to effectuate the terms hereof; and this proceeding shall be held open for such purpose.
Messrs. DuRant Sneeden, for appellants.
Messrs. Dinkins Stukes, for respondents, cite: As to sale: 108 S.C. 329; 141 S.C. 143; 149 S.E., 339; 32 S.C. 77; 59 S.C. 215. Inadequacy of price insufficient to prevent confirmation of judicial sale: 99 S.C. 118.
Mr. Preston B. Thames, also for respondents.
February 13, 1930. The opinion of the Court was delivered by
The conclusions of his Honor, C.J. Ramage, circuit Judge, in this case are satisfactory to this Court. His decree, which will be reported, is hereby affirmed.
MR. CHIEF JUSTICE WATTS and MESSRS. JUSTICES COTHRAN, STABLER and CARTER concur.