California Financial Code
The commissioner may, whenever it appears to him or her that any of the conditions described in subdivisions (a) to (h), inclusive, exist with respect to a bank, forthwith take possession of the property and business of the bank and retain possession until the bank resumes business or its affairs are finally liquidated as herein provided. The bank, with the consent of the commissioner, may resume business subject to any conditions that may be prescribed by the commissioner. The term "bank" wherever used in this chapter includes trust companies.
(a) The tangible shareholders' equity of the bank is less than:
(1) In case the bank is a commercial bank or industrial bank, the greater of three percent of the bank's total assets or one million dollars ($1,000,000); or
(2) In case the bank is a trust company other than a commercial bank authorized to engage in trust business, one million dollars ($1,000,000).
(b) The bank has violated its articles or any law of this state.
(c) The bank is conducting its business in an unsafe or unauthorized manner.
(d) The bank refuses to submit its books, papers, and affairs to the inspection of any examiner.
(e) Any officer of the bank refuses to be examined upon oath touching the concerns of the bank.
(f) The bank has failed to pay any of its obligations as they came due or that is reasonably expected to be unable to pay its obligations as they come due.
(g) The bank is in a condition that it is unsound, unsafe, or inexpedient for it to transact business.
(h) The bank neglects or refuses to observe any order of the commissioner made pursuant to Section 1913 unless the enforcement of the order is restrained in a proceeding brought by the bank.
Whenever the commissioner has taken possession of the property and business of any bank, such bank, within 10 days after such taking, if it deems itself aggrieved thereby, may apply to the superior court in the county in which the head office of such bank is located to enjoin further proceedings. The court, after citing the commissioner to show cause why further proceedings should not be enjoined and after a hearing and a determination of the facts upon the merits may dismiss such application or enjoin the commissioner from further proceedings and direct him or her to surrender the property and business to such bank.
An appeal may be taken from the judgment of the court by the commissioner or by the bank in the manner provided by law for appeals from the judgment of a superior court to the court of appeal.
Upon taking possession of the property and business of any bank, the commissioner shall forthwith give notice of such fact to all persons holding or having in their possession any assets of such bank. No person knowing of such taking or who has been notified thereof shall have a lien or charge upon any assets of the bank for any payment, advance, or clearance thereafter made or for any liability thereafter incurred.
The giving of notice in accordance with this section shall not be deemed to be a prerequisite to the taking of possession of the property and business of the bank.
Upon taking possession of the property and business of any bank, the commissioner has authority and it is his or her duty to collect all moneys due to such bank and to do such other acts as are necessary or expedient to collect, conserve, or protect its assets, property, and business and he or she shall proceed to conserve or liquidate the affairs thereof as herein provided.
No attachment shall be issued against the property of any bank or trust company.
The commissioner, from time to time, under his or her official seal, may appoint one or more special deputy commissioners as his or her agent or agents with the powers specified in the certificate of appointment to assist him or her in the duty of conservation or of liquidation and distribution. The certificate of appointment shall be filed in the office of the commissioner and a certified copy in the office of the clerk of the county in which the head office of the bank is located. The commissioner may employ such counsel and procure such expert assistance and advice as may be necessary in the liquidation and distribution of the assets of the bank and for that purpose may retain such of the officers or employees of the bank as he or she may deem necessary.
The compensation of special deputies, counsel, and other employees and assistants appointed to assist in the liquidation of any bank and the distribution of its assets and all expenses of supervision and liquidation shall be fixed by the commissioner and shall be paid out of the funds of such bank in the hands of the commissioner. Such expenses of liquidation must be reported to the court upon each application for payment of a dividend.
Upon the commissioner taking possession of the business and property of any bank the superior court of the State of California for the county in which the head office of such bank is located shall have exclusive original jurisdiction of all proceedings relating thereto and of any action or other proceedings brought under the provisions of this chapter. All papers relating to such proceeding, including copies of the certificate of appointment of any special deputy and the inventories required to be filed, shall be filed and be made a part of the record of such proceeding without the payment of any additional fees therefor. No damages may be awarded in such proceeding but, if sought, may only be recovered in a separate action.
The commissioner may sell, compromise, or compound any bad or doubtful debt owing the bank, which is for a principal sum not exceeding five hundred dollars ($500), upon such terms as the commissioner may deem proper, and, if the principal sum thereof exceeds five hundred dollars ($500), the commissioner may compromise, compound, or sell the same upon such terms as the court may approve.
If it appears improbable that a recovery on any 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, and if the principal sum thereof exceeds five hundred dollars ($500), 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 bank for cash or on credit and on such other terms and conditions as the commissioner may deem proper, subject to the approval of the court.
(a) The commissioner may, with the approval of the court and of the commissioner, sell any part or the whole of the business of the bank to any other bank. Such purchase and sale shall be approved by the purchasing bank, as follows:
(1) In case the purchasing bank is a bank organized under the laws of this state, by two-thirds of all of its directors.
(2) In case the bank is any bank other than a bank organized under the laws of this state, in accordance with the laws of the jurisdiction under the laws of which the bank is organized.
(b) (1) Subject to any applicable federal statutes and regulations, any bank 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 the whole or any part of the business of such national banking association.
(2) Subject to any applicable federal statutes and regulations and any applicable laws of the jurisdiction under the laws of which such foreign banking corporation is organized, any foreign banking corporation which is licensed by the commissioner under Article 1 (commencing with Section 1750) of Chapter 14 to transact banking business in this state and which is authorized under Sections 1756 and 1756.1 to accept deposits in this state, may, with the approval of the commissioner, purchase from the receiver of a national banking association the whole or any part of the business of such national banking association.
(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 or, in case the receiver of a national banking association sells the whole or any part of the business of such national banking association to another national banking association, when such purchase and sale becomes effective, the purchasing bank shall, ipso facto and 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 such agreement or by such order:
(1) Succeed to the rights, obligations, properties, assets, investments, deposits, demands, and agreements of the bank whose business is sold, subject to the right of every depositor of such bank whose deposit is sold to withdraw his or her deposit in full on demand after such sale, irrespective of the terms under which the deposit was made;
(2) Succeed to the rights, obligations, properties, assets, investments, deposits, demands, and agreements of the bank 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 bank 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; and
(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 bank 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 instrument.
(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 such time as is provided in the agreement of such 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 bank the commissioner may terminate or adopt any executory contract to which the bank may be a party including leases of real or personal property. Claims for damages resulting from the termination of any such 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 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 termination or within the time that claims must be filed under Section 3118, whichever is longer.
The commissioner in his or her own name or in the name of the bank 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 the bank 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 bank by authority of its board of directors. Whenever the commissioner sells any real property of the bank a certified copy of the order of the court approving the same shall be recorded in the county in which any part of such real property is located.
The commissioner in the name of the delinquent bank 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 such bank.
The commissioner from time to time shall deposit all moneys coming into his or her hands in the course of the liquidation of the bank in one or more state banks and in the event of the suspension or insolvency of the depositary they shall be preferred before all other deposits.
The commissioner shall make an inventory of the assets of the bank 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 bank is located to be filed with the papers in the liquidation proceedings. Such inventory shall be open for inspection at all reasonable times.
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 such claims as have been rejected by the commissioner, and a list of all claims of depositors as shown by the books or records of said bank for which claims have not yet been presented, and shall file one copy of said list in the commissioner's office and one with the clerk of the county in which the head office of the bank 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 such claims as have been rejected by him or her. Such list of claims and of claims of depositors as shown by the books or records of the bank shall be open for inspection at all reasonable times.
The commissioner shall cause notice to be given by advertisement in such newspapers of general circulation as he or she may select weekly for three consecutive months, calling on all persons who have claims against the bank 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 such notice, which date shall be specified in the notice. Such notice shall also state that all claims other than those of depositors appearing upon the books or records of the bank shall be forever barred if not filed within said four months' period and that all claims of depositors appearing upon the books or records of the bank 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 depositors, whose names appear as creditors upon the books of the bank and whose addresses appear upon the books or records of the bank and shall enclose therewith a printed form of notice of claim.
All claims of every kind against the bank or against any property owned or held by such bank shall be presented to the commissioner in writing verified by the claimant or someone in 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 depositor whose claim appears upon the books or records of the bank, not so presented within said four months' period shall be forever barred and any claim of a depositor whose claim appears upon the books or records of the bank which 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 same and serve notice of such rejection upon the claimant either by mail or personally. An affidavit of the mailing or personal service of such notice shall be prima facie evidence of the receipt thereof and shall be filed with the commissioner. Any action upon a claim so rejected must 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 depositors, who have not yet filed claims but whose claims appear upon the books or records of the bank, 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 3114 and 3240.
(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 shareholders.
Objections to any claim not rejected by the commissioner may be made by any person interested by filing a copy of such objections with the commissioner, who shall present the same to the court at the time of the next application for approval of the declaration of a dividend. The court shall thereupon dispose of said 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, such 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 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. Such deposits shall be deemed to have been received under the provisions of 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 said Chapter 7 (commencing with Section 1500) of Title 10. The commissioner may pay over the moneys so held by him or her to the persons respectively entitled thereto at any time prior to such deposit, upon being furnished satisfactory evidence of their right to the same.
Whenever, under the provisions of this chapter, 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 such other identifying information as may be available from the records of the bank, covering such money or other property. Upon receipt by the Controller of such signature cards or other identifying information, the bank and the commissioner shall be relieved of all responsibility therefor. Such 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 depositors or this state.
All approved claims of depositors 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 bank.
Should the bank have in its possession for safekeeping or storage any jewelry, plate, money, specie, bullion, stocks, bonds, securities, valuable papers, or other valuable personal property or should it have 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 bank to be the owner of such property or to the person in whose name the safe, vault, or box stands a notice notifying such person to remove all such personal property within a specified fixed period of not less than 60 days.
On the last day fixed in said notice for the removal of such property or on the date when such property is removed or the box surrendered any contract between the person owning such property or holding said box and the bank shall cease and the amount of the unearned prepaid rent or charges, if any, shall become a debt of the bank to said person.
If any property be not removed within the time fixed by notice mailed by the commissioner, the commissioner may make such disposition 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 public not an officer or employee of the bank or of the commissioner. The contents thereof, if any, shall be sealed up by such notary public in a package upon which such notary public shall distinctly mark the name and address of the person in whose name such safe or box stands upon the books of the bank and shall attach thereto a list and a description of the property therein. 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 bank 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 bank, he or she shall petition the court for an order declaring the bank duly wound up and dissolved.
(b) After such notice as the court may direct and a hearing, the court may make an order declaring the bank duly wound up and dissolved. Such order shall declare:
(1) That the bank has been duly wound up;
(2) That a final franchise tax return, 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 that any tax or penalty due under the Corporation Tax Law has been paid, and that the bank's known debts and liabilities have been paid or adequately provided for, or that such taxes, penalties, debts, and liabilities have been paid so far as the bank'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 such provision, setting forth such information as may be 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) That all known assets of the bank have been distributed to its shareholders or wholly applied on account of the bank's debts and liabilities; and
(4) That the bank is dissolved.
(c) The court may make such additional orders and grant such further relief as it deems proper upon the evidence submitted.
(d) Upon the making of the order declaring the bank dissolved, the corporate existence of the bank shall cease, except for the purposes of any necessary further winding up.
(e) Upon the making of the order declaring the bank dissolved, the commissioner shall forthwith file with the Secretary of State a copy of such order, certified by the clerk of the court.
Whenever pursuant to the provisions of this chapter the approval of the court is required of any step in the liquidation proceedings such approval shall be given after a hearing had upon such notice as the court may direct. At any such 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 bank taken in charge by him or her would be facilitated thereby, or the public interests and the interests of depositors or stockholders would be served thereby, the commissioner shall have power to borrow money in behalf of such bank from any federal agency authorized to lend money to receivers, trustees, liquidating agents, or other agents or supervisory authorities in charge of banks which are closed or in process of liquidation, and with approval of the court, the commissioner may secure such borrowings by the pledge of the assets of any such bank in such manner and amount as may to the commissioner seem necessary, proper, or expedient.