In the Matter of the Estate of THE ARIZONA BANK, a Corporation, Insolvent.
Y. C. WHITE, Superintendent of Banks of the State of Arizona and Ex-officio Receiver of THE ARIZONA BANK, a Corporation, Insolvent, Appellee QUALITY OIL COMPANY, a Corporation, ROSS H. BLAKELY, BURT OGBURN et al., Appellants,
APPEAL from a judgment of the Superior Court of the County of Maricopa. G. A. Rodgers, Judge. Judgment affirmed.
Messrs. Windes & Miller, for Appellant Quality Oil Company.
Mr. Herbert B. Shoemaker and Mr. Frank H. Swenson, for All Other Appellants.
Messrs. Moore & Shimmel, for Appellee.
[42 Ariz. 64] ROSS, C. J.
This appeal involves the power and authority of the superintendent of banks as ex-officio receiver to sell en masse at private sale the assets of the Arizona Bank, an insolvent, and to compromise certain claims or demands against the bank's directors and stockholders to whom, under the guise of dividends, were paid large sums of money from the bank's capital and assets; and also to compromise a claim for stockholders' liability. The offer of purchase and compromise made to the superintendent comes from the last-named group, and associates, in the form of a written proposal by the Northern Arizona Securities Company, an Arizona corporation, as their representative. The proposed contract of purchase and settlement was by the superintendent of banks duly submitted, together with a petition asking that it be approved, to the superior court of Maricopa county, Judge G. A. RODGERS sitting, and, after due and ample notice and a hearing lasting two days during which many witnesses were examined, was approved by the court and the superintendent ordered and directed to accept and execute it.
The creditors and depositors of the insolvent bank are between 7,000 and 8,000 in number. The appellants, approximately 130 in number, are the persons or concerns who appeared at the hearing and objected to the contract and to its being approved or carried into execution.
Prior to December 18, 1930, the insolvent carried on a commercial banking business under the name of the Arizona Central Bank, with headquarters at Flagstaff and branches at Winslow, Williams and Kingman. It had an issued and outstanding capital stock of 5,000 shares of the par value of $100 per share owned and distributed as follows: 3,845 by First Securities Company, Limited,
a California corporation; 363 by Ellen A. Brophy; 90 by George Kingdon; 273 by J. S. Douglas; 185 by Lulu H. Robinson; [42 Ariz. 65] 86 by E. A. Haight; 86 by C. J. Walters; 27 by C. B. Wilson; 25 by Katherine M. Wilson; 10 by Charles B. Wilson, Jr.; and 10 by James Mars Wilson. On said day the First Securities Company, limited, sold or pretended to sell, its 3,845 shares of the capital stock of the bank to one Leo M. Meeker, who as a part of the consideration agreed to reduce the capital stock from $500,000 to $250,000, its surplus from $250,000 to $50,000, and its undivided profits by $125,000, making a $575,000 reduction in capital and assets, and to distribute said sum to the stockholders above named by way of dividends at the rate of $115 per share. On that day, a special meeting of the stockholders of said bank, the president thereof (who was also the president of the First Securities Company, Limited) resigned and Leo M. Meeker was elected president in his place and a director of the bank, and the contract to reduce the stock, the surplus and undivided profits, as above stated, was by the stockholders and directors duly approved, as was also the "dividend" payments. The dividends on the 3,845 shares of stock paid to Meeker were passed on to the First Securities Company, Limited, and others, Meeker being financially irresponsible and a mere figurehead.
Under the new organization the bank moved its headquarters to Phoenix and continued to operate with branches at Flagstaff, Winslow, Williams, Kingman and Chandler, until June 24, 1932, with all the appearance of solvency. However, on the last-named date it was discovered that the bank was hopelessly insolvent and it was taken over by the then superintendent of banks, S.W. Ellery, who in turn was succeeded by Lloyd Thomas, the present superintendent's predecessor.
In September, 1932, Lloyd Thomas, superintendent, commenced a suit in the superior court of Maricopa [42 Ariz. 66] county, being numbered 37829-C on the docket of said court, against the Security First National Bank of Los Angeles, First Securities Company, Limited, Northern Arizona Securities Company, Grand Canyon Sheep Company, Three V Livestock Company, Colin Campbell Livestock Company, H. J. McClung, C. B. Wilson, C. J. Walters, E. A. Haight, and Leo M. Meeker, alleging that they jointly and severally converted the $575,000 taken from the bank's assets and capital; and included in said suit a cause of action against the First Securities Company, Limited, for stockholders' liability, on the theory that it had sold the 3,845 shares of stock to Meeker while the bank was in a failing condition.
On December 20th, George W. Miller and wife, Allen E., John A. and Edwin E. Ware, Louis L. Wallace and K. W. Davidson, of Kingman, Mohave county, who had been induced by Meeker to purchase 170 shares of stock in said bank at $150 per share, commenced an action in said Mohave county (which was later removed to Maricopa county and docketed as cause No. 38794-B) against the Arizona Bank, the superintendent of banks as receiver, and the same defendants as in cause No. 37829-C, praying that their contracts of purchase be canceled; that they be repaid what they had paid for stock, to wit, $150 per share, and, alternatively, should they be held to be stockholders, that they recover of defendants damages in the sum of $100 per share to cover the statutory liability thereon; or for the total sum of $42,500.
The Northern Arizona Securities Company in the contract has agreed to pay to the superintendent of banks, in compromise and settlement of these two suits, and for all the assets of the insolvent, "except (a) cash on hand as of December 17, 1932, in the sum of $105,881.97; (b) securities pledged as collateral for the payment of deposits of public moneys; (c) stockholders' liability and payments on account [42 Ariz. 67] thereof, and (d) furniture and fixtures of said bank in its head office at Phoenix and its branch at Chandler, Arizona," the sum of $850,000: $50,000 in cash, and the balance if and when the contract and settlement are approved by the court, with this reservation: That $42,500 ...