State Codes and Statutes
Statutes > Utah > Title-07 > Chapter-02 > 7-2-127-2-12. Powers of commissioner in possession -- Sale of assets -- Postpossessionfinancing -- New deposit instruments -- Executory contracts -- Transfer of property --Avoidance of transfers -- Avoidable preferences -- Setoff.
(1) Upon taking possession of the institution, the commissioner may do all thingsnecessary to preserve its assets and business, and shall rehabilitate, reorganize, or liquidate theaffairs of the institution in a manner he determines to be in the best interests of the institution'sdepositors and creditors. Any such determination by the commissioner may not be overruled bya reviewing court unless it is found to be arbitrary, capricious, fraudulent, or contrary to law. Inthe event of a liquidation, he shall collect all debts due and claims belonging to it, and maycompromise all bad or doubtful debts. He may sell, upon terms he may determine, any or all ofthe property of the institution for cash or other consideration. The commissioner shall give suchnotice as the court may direct to the institution of the time and place of hearing upon anapplication to the court for approval of the sale. The commissioner shall execute and deliver tothe purchaser of any property of the institution sold by him those deeds or instruments necessaryto evidence the passing of title.
(2) With approval of the court and upon terms and with priority determined by the court,the commissioner may borrow money and issue evidence of indebtedness. To secure repaymentof the indebtedness, he may mortgage, pledge, transfer in trust, or hypothecate any or all of theproperty of the institution superior to any charge on the property for expenses of the proceedingas provided in Section 7-2-14. These loans may be obtained for the purpose of facilitatingliquidation, protecting or preserving the assets in the charge of the commissioner, expediting themaking of distributions to depositors and other claimants, aiding in the reopening orreorganization of the institution or its merger or consolidation with another institution, or the saleof all of its assets. Neither the commissioner nor any special deputy or other person lawfully incharge of the affairs of the institution is under any personal obligation to repay those loans. Thecommissioner may take any action necessary or proper to consummate the loan and to providefor its repayment and to give bond when required for the faithful performance of all undertakingsin connection with it. The commissioner or special deputy shall make application to the court forapproval of any loan proposed under this section. Notice of hearing upon the application shall begiven as the court directs. At the hearing upon the application any stockholder or shareholder ofthe institution or any depositor or other creditor of the institution may appear and be heard on theapplication. Prior to the obtaining of a court order, the commissioner or special deputy in chargeof the affairs of the institution may make application or negotiate for the loan or loans subject tothe obtaining of the court order.
(3) With the approval of the court pursuant to a plan of reorganization or liquidationunder Section 7-2-18, the commissioner may provide for depositors to receive new depositinstruments from a depository institution that purchases or receives some or all of the assets ofthe institution in the possession of the commissioner. All new deposit instruments issued by theacquiring depository institution may, in accordance with the terms of the plan of reorganizationor liquidation, be subject to different amounts, terms, and interest rates than the original depositinstruments of the institution in the possession of the commissioner. All deposit instrumentsissued by the acquiring institution shall be considered new deposit obligations of the acquiringinstitution. The original deposit instruments issued by the institution in the possession of thecommissioner are not liabilities of the acquiring institution, unless assumed by the acquiringinstitution. Unpaid claims of depositors against the institution in the possession of the
commissioner continue, and may be provided for in the plan of reorganization or liquidation.
(4) The commissioner, after taking possession of any institution or other person subjectto the jurisdiction of the department, may terminate any executory contract, including standbyletters of credit, unexpired leases and unexpired employment contracts, to which the institutionor other person is a party. If the termination of an executory contract or unexpired leaseconstitutes a breach of the contract or lease, the date of the breach is the date on which thecommissioner took possession of the institution. Claims for damages for breach of an executorycontract shall be filed within 30 days of receipt of notice of the termination, and if allowed, shallbe paid in the same manner as all other allowable claims of the same priority out of the assets ofthe institution available to pay claims.
(5) With approval of the court and upon a showing by the commissioner that it is in thebest interests of the depositors and creditors, the commissioner may transfer property on accountof an indebtedness incurred by the institution prior to the date of the taking.
(6) (a) The commissioner may avoid any transfer of any interest of the institution inproperty or any obligation incurred by the institution that is void or voidable by a creditor underTitle 25, Chapter 6.
(b) The commissioner may avoid any transfer of any interest in real property of theinstitution that is void as against or voidable by a subsequent purchaser in good faith and for avaluable consideration of the same real property or any portion thereof who has duly recorded hisconveyance at the time possession of the institution is taken, whether or not such a purchaserexists.
(c) The commissioner may avoid any transfer of any interest in property of the institutionor any obligation incurred by the institution that is invalid or void as against, or is voidable by acreditor that extends credit to the institution at the time possession of the institution is taken bythe commissioner, and that obtains, at such time and with respect to such credit, a judgment lienor a lien by attachment, levy, execution, garnishment, or other judicial lien on the propertyinvolved, whether or not such a creditor exists.
(d) The right of the commissioner under Subsections (6)(b) and (c) to avoid any transferof any interest in property of the institution shall be unaffected by and without regard to anyknowledge of the commissioner or of any creditor of the institution.
(e) "Transfer" means every mode, direct or indirect, absolute or conditional, voluntary orinvoluntary, or disposing of or parting with property or with an interest in property, includingretention of title as a security interest.
(f) The commissioner may avoid and recover any payment or other transfer of anyinterest in property of the institution to or for the benefit of a creditor, for or on account of anantecedent debt owed by the institution before the transfer was made if the creditor at the time ofsuch transfer had reasonable cause to believe that the institution was insolvent, and if thepayment or other transfer will allow the creditor to obtain a greater percentage of his debt than hewould be entitled to under the provisions of Section 7-2-15. For the purposes of this subsection:
(i) antecedent debt does not include earned wages and salaries and other operatingexpenses incurred and paid in the normal course of business;
(ii) a transfer of any interest in real property is deemed to have been made or sufferedwhen it became so far perfected that a subsequent good faith purchaser of the property from theinstitution for a valuable consideration could not acquire an interest superior to the transferee;and
(iii) a transfer of property other than real property is deemed to have been made orsuffered when it became so far perfected that a creditor on a simple contract could not acquire alien by attachment, levy, execution, garnishment, or other judicial lien superior to the interest ofthe transferee.
(g) For purposes of this section, "date of possession" means the earlier of the date thecommissioner takes possession of a financial institution under Title 7, Chapter 2, or the datewhen the commissioner enters an order suspending payments to depositors and other creditorsunder Section 7-2-19.
(7) (a) With or without the prior approval of the court, the commissioner or any federaldeposit insurance agency appointed by him as receiver or liquidator of a depository institutionclosed by the commissioner under the provisions of this chapter may setoff against the depositsor other liabilities of the institution any debts or other obligations of the depositor or claimantdue and owing to the institution. The amount of any setoff against the liabilities of the institutionshall be no greater than the amount the depositor or claimant would receive pursuant to Section7-2-15 after final liquidation of the institution. When the liquidation value of a depositor's orclaimant's claim against the institution will or may be less than the full amount of the claim,setoff may be made prior to final liquidation if the commissioner or any receiver or liquidatorappointed by him can reasonably estimate the liquidation value of the claim, and the court, afternotice and opportunity for hearing, approves the estimate for purposes of making the setoff. Ifthe right of setoff is exercised, the commissioner or any receiver or liquidator appointed by himshall give written notice to the depositor or claimant of the amount setoff.
(b) The existence and amount of a debtor or creditor relationship or both, between theinstitution and its depositor or claimant and the right to the proceeds in a deposit account shall bedetermined solely by the books and records of the institution.
(c) Any contract purporting to affect the right of setoff shall be in writing and signed bythe depositor-debtor and an authorized officer of the institution and be maintained as a part of therecords of the institution.
(d) Any claim that a deposit account is a special account not subject to setoff because itwas maintained for a specific purpose or to satisfy a particular obligation other than satisfactionof or as security for an indebtedness to the institution or that the right to the deposit actuallybelongs to a third party does not affect the right to setoff of the commissioner or any receiver orliquidator appointed by him unless the special nature of the account is clearly shown in the booksand records of the institution.
(e) In the absence of any other instrument in writing, the terms and provisions of thesignature card applicable to a particular account in effect at the time the commissioner takespossession of the institution shall be determinative of the right of setoff by the commissioner orany receiver or liquidator appointed by him.
(f) Knowledge of the institution or of any director, officer, or employee of the institutionthat the nature of the account is other than as shown in the books and records of the institutiondoes not affect the right of setoff by the commissioner or any receiver or liquidator appointed byhim.
(g) The liability of the commissioner or any receiver or liquidator appointed by him forexercising a right of setoff other than as authorized by this section shall be only to a person whoestablishes by the procedure set forth in Section 7-2-6 that his interest in the account is superiorto that of the person whose debt to the institution was setoff against the account. The amount of
any such liability shall be no greater than the amount of the setoff and neither the commissioneror any receiver or liquidator appointed by him shall be liable for any action taken under thissection unless the action taken is determined by the court to be arbitrary or capricious.
Amended by Chapter 378, 2010 General Session
