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Christmas Savings Funds Have No Priority Claim Jan. 27 The Comptroller of the Currency declined make any statement regarding the the Chelsea National Bank and Trust Company, Atlantic City, did for business quesofficial the treasury department said, that Christmas savings funds subject receivership regulations.
Runs After Withdrawals Not Heavy in Cash Demands Aggregate, Met Fully, Promptly ACCOUNTS 76 Substantial Depositors Show Faith in Soundness (Continued from Page One) fidence one firm in future Atlantic City. David Reed, Clearing House the city expressed the fact that bank deposits today were normal." Heads several city banks gathat home Mayor Bacharach last night to cuss the for early of the closed ChelseaSecond Bank and Trust They discuss for any plans, stating merely that foundation for the reopening of the bank and the tire prosperity Atlantic City pends upon confidence alty citizens, as well pressed by the lack of hysteria Francis McGinnis, of Philadelphia, national bank charge of the he had not had time more than begin his work looking into the bank's affairs and he not mitted by the rules the department make any public statement at this Calm Psychology Lauded bankers and finanofficials, the meeting Mayor Bacharach's home last themselves the calm displayed by lantic City They couldn't have any other city. The deposits normal and money came into This opinion the situation more than ordinary terest for circles. For many years they had been hearing iterated time and again that bank closing could occur Atlantic without ruining the nancial structure. long years this notion had reached the dignity of financial gospel the reactions this old dogma suddenly the test teresting observe. Clearing House Statement the text the statement issued by the Clearing House Association: members of the Atlantic City Clearing desire express citizens our their gratifor the splendid loyalty today support our financial regret that the Asing of one its member banks. the such courageous support expressed result in and finanical the community. dispatch from Trenton yesterday stated that included among owed depositors of the closed National Bank and Trust $50,000 State funds arising from the motor fuel tax.
Duell Brings Suit for Acto Safe Deposit cess Box receiver in charge One government Atlantic City banks closed the courts. access The deposit boxes, times the action before yesterday Judge Duell, attorney the Charles Chelsea National Bank which will brought action, tested Duell other papers deposit the National Bank which Second claims that Faircloth, receiver and Charles of the representative refuses permit him the open reporter saw mimeYesterday affidavit which ographed the closed banks are boxholders sign and asking alleged, they their keys in the permitted boxes, rented by year. formal address the After and blank space for insertceiver number and the leasee's the box certifies that name, affiant "not indebted to the Atlantic City National Northside Trust Company Union Naliquidation) Bank either tional maker, endorser guarantor, rectly indirectly any form obligation held any other the said banks. boxholder asked and sayeth that he shares of the capital holder any (Continued on Page Five)
No Access to Records Unless Real Evidence of Produced, management Acting Comptroller Awalt Rules Hints Probe Is Being ConChamber Committee Pushing Plans for Reorganization Access to the books of the closed National Bank and Trust Company denied by Awalt, Acting Comptroller of Currency. The refusal contained in letter sent Charles man, counsel for the Depositors Protective Association Samuel Comly, chairman of the Association when informed of the refusal, said like cold banking business appears very continued ought put preacher charge. think handling untouchable. letter that the receiver and the Comptroller under consideration the present pursued the conduct the bank prior closing. Facts, however. demanded. the statement made that officials cannot depend upon rumors circulate after the suspension bank. Text of Letter Hyman The letter Mr. Hyman follows: receipt your April wherein you state associated with execuDepositors' Protective Association Atlantic City. your garding this your quest delve into the books advised that the Comptroller the Currency and the most action necesassets the for among the crediThe receiver of bank the the the shareholders. and with Page Seven)
Receiver Chelsea Depositors Seek Clearing Up Discrepancies answer to letter claiming discrepancies in two statements of Charles Faircloth, receiver of the National Bank and Trust Company, being awaited by members of the Depositors' Protective Association The association, already denied access to the books the institution. declared in the letter that there difference of few hundred dollars" tween the statement issued April and the one giving the condition of the closing Mr. stated the being Comptroller the Currency The letter received from office by committee reply then Comptroller denying the right examine bank's affairs. Nothing in about difference the the committee Faircloth pointed out the discrepancies follows: your first statement the lowing item appeared: Assets actual April purportstatement the exact condition the bank suspension, assets of Which do you explain the discrepancy? April show unsecured liabilites suspension being This item, understand mean the amount of deposits. April show condition time of Time $2,116,863.67; How you explain April show secured and April rowed and payable) are shown
Decision Depositors Seek to Open Books; Many Enrollments The petition of the Depositors' Association obtain entry the books closed National Bank and Trust Company taken under advisement by Federal Judge Avis Camden terday. The petition charged irregularities in affairs the fore its closing. Charles attorney for the depositors, said last night that expects Judge Avis make known his Edward delegate the National Depositors Commitnight that more depositors closed restricted banks this city had registered with South unit of the committee headquarters 1320 Atlantic yesterday. Four volunteer clerks were kept busy all he ing the registrations the office kept hour and beyond closing time. registrations include every range from little girl deposit. We had no difficulty securing the deposits everyone more willto co-operate in obtaining Some of the tales told us on the first day pitiof those registering insisted that hear Mr. registration headquarters would be open daily from 10
Chelsea Delay Receiver Opposes Plea to Scan, Records, Issues State July deposicommittee the closed Chelsea-Second National Bank Trust Company, Atlantic City, today asked Federal Judge Avis for order authorizing access institution brief filed Charles Hyman, counsel the committee, stated committee intends instituting suit against directors the based on alleged regularities." The brief pointed out that the committee hopes sufficient information from the books of the from which proceed proposed action. George Bourgeois, counsel for Charles Faircloth, receiver for the bank, argued against the quest, that the bank's affairs are already under probe investigators the Department Justice the Federal Banking Judge continued the case for days. In the five months of the tion the the ChelNational Bank and Trust Company approximately twelfth the assets been turned into cash, according to the quarterly condition issued yesterday by Charles receiver. The statement showed the total cash from assets and stock assessments. (Continued on Page Four)
Withdrawals From ChelseaSecond Are an Issue filed the United District Court here today Bourgeois attorneys for Charles receiver ChelseaSecond Bank Trust Company, Atlantic City, insolvJoseph president and director of bank The suit to recover on stock amounting $1500 $3800 allegedly withdrawn Salus from his deposit accounts violation the bank known be precarious four counts are follows: recover $1500 account assessment levied the Comptroller the Currency on his stock bank count to recover $2500 withdrawn illegally from the deposit account Salus check him count recover illegally from account Salus Son drawn Salus Jan. 1933. count to recover $300 withdrawn by Salus from account check dated alleged in the bill of comfiled the court here today Coulomb that Mr Salus being president and tional Bank Trust Company knowing great difficulty which tinuing operate preferred himother in tion of the national bank act. Mr. Faircloth when seen yesteradmitted that the suit had been and the above quoted dispatch according his recolreluctant to comfurther the stating that the bill itself tells story
To the Citizens of Atlantic City: OME time prior to its closing, the Chelsea Second National Bank S borrowed a large amount of money from The Philadelphia National Bank, and deposited with that bank as collateral certain bonds, stocks, mortgages and notes, both secured and unsecured, the latter representing loans made by the Chelsea Second National Bank to its customers. When the Chelsea Second National Bank closed on January 26th, 1933, the balance owing to The Philadelphia National Bank was $889,677.78. In accordance with proper banking practice and for its own protection, The Philadelphia National Bank on January 27th, 1933, called the loan of the Chelsea Second National Bank and notified the Receiver of that institution that it demanded payment of the obligation. The Receiver of the Chelsea Second National Bank did not have sufficient money to pay this debt thus releasing the collateral, and The Philadelphia National Bank was obliged to become the liquidator of the loan. The marketable bonds and stocks were disposed of carefully over a period of approximately twelve months at prices which were considered satisfactory. The greater part of the remaining collateral consisted of customers' notes: -i. e. obligations of the depositors of the Chelsea Second National Bank to that bank. Obviously, these notes could not be liquidated in the same manner as stocks and bonds because there was no market for such obligations. The only method of liquidation which could be adopted by The Philadelphia National Bank was to collect the amount thereof from their respective makers, all of whom were citizens of Atlantic City and its vicinity. The Philadelphia National Bank was alive to the fact that each one of the makers of these notes was a depositor in the Chelsea Second National Bank and had suffered the loss of his deposit by reason of the closing of the Bank; and it knew that by reason of the Chelsea Second National Bank pledging such notes, the makers of the notes had lost their right to offset against the amount owing on the notes, the amount of their deposits in the Chelsea Second National Bank. The Philadelphia National Bank was advised that it had the legal right to compel the makers of such notes to pay the full amount thereof, even though such makers had lost their deposits with the closing of the bank. It was definitely the duty of The Philadelphia National Bank to liquidate these notes and credit the amount collected against the loan of the Chelsea Second National Bank; but in collecting from the makers it was obvious that it would be working a hardship on them to collect the full amount of the note because of the circumstances above recited. In the first few collections, therefore, which the bank made, it effected settlements with each maker by having such maker pay in cash the difference between the face amount of his note and the amount of his deposit in the Chelsea Second National Bank, and took from him an assignment of his claim against the Chelsea Second National Bank for such deposit. Notice of these settlements was given by The Philadelphia National Bank to the Receiver of the Chelsea Second National Bank prior to the settlements being effected; and when the settlements were consummated the Receiver of the Chelsea Second National Bank was informed of them and also advised that the cash received in such settlement had been credited against the loan of The Philadelphia National Bank to the Chelsea Second National Bank. The Receiver notified The Philadelphia National Bank that he could not approve of such settlements, and that if The Philadelphia National Bank did not collect the full amount of the notes in cash from the makers thereof, it must nevertheless credit on its loan to the Chelsea Second National Bank the full face amount of such notes, even though it had compromised them for less. Faced with this ultimatum, but still being unwilling to force the depositors of the Chelsea Second National Bank by legal means or otherwise to pay the full face amount of their notes without regard to the losses suffered by them in the closing of the bank, The Philadelphia National Bank through its counsel took up the matter with the office of the Comptroller of the Currency at Washington by letter sent early in December, 1933, in which was set forth not only The Philadelphia National Bank's right to make such settlements, but the desirability of so doing under all the circumstances. A similar practice had been followed by The Philadelphia National Bank in liquidating the loans made by it in number of cases to other closed banks, and no objection by other receivers of banks had ever been filed. No reply was received to the communication sent to the Comptroller's office until almost the middle of February, 1934, a period of practically two months and a half; and in the meantime, The Philadelphia National Bank had continued to make some settlements on the basis described. The communication from the Comptroller's office supported the position taken by the Receiver of the Chelsea Second National Bank and declared that where such settlements were made without the consent of the Receiver and of the Comptroller, The Phila elphia National Bank must give credit for the full face value of such notes IN ALL CASES WHERE IT HAD NOT REDUCED THE COLLATERAL TO ITS OWN POSSESSION. If there- fore The Philadelphia National Bank wished to continue the liquidation of the notes on a basis which it thought fair to the depositors in and borrowers from the Chelsea Second National Bank, it now had no alternative but to follow the legal principle set forth in the letter from the Comptroller's office and reduce to its own possession all the collateral remaining in its hands as security for the Chelsea Second National Bank's loan. FOR THIS REASON ALONE, AND WITH ONLY THIS PURPOSE IN MIND, THE PHILADELPHIA NATIONAL BANK, ACTING IN ACCORDANCE WITH THE PROVISIONS OF THE NOTE OF THE CHELSEA SECOND NATIONAL BANK WHICH IT HELD, ADVERTISED FOR SALE AND SOLD AT PUBLIC AUCTION ALL OF THE REMAINING COLLATERAL Under the terms of its note, it could sell the collateral at any time with or without notice, at public or private sale, and could become the purchaser of the collateral offered freed from all trusts. Not only was the sale advertised, although there was no legal necessity for it, but the Receiver of the Chelsea Second National Bank was advised of the sale by registered mail and the Reconstruction Finance Corporation which held an assignment of any equity that there might have been in the collateral, was also notified of the sale by registered mail. With the exception of a few items, there were cutside bids for all parcels disposed of. The Reconstruction Finance Corporation had made a loan to the Chelsea Second National Bank subsequent to the loan of The Philadelphia National Bank, and the Chelsea Second National Bank had assigned to the Reconstruction Finance Corporation, as part of the security for such loan, all or any equity that there might be in the collateral held by The Philadelphia National Bank as security for its loan. Neither the Receiver nor the Reconstruction Finance Corporation, made any attempt to protect their respective interests. Since the sale has been held, the Reconstruction Finance Corporation, at its own request, has been given every opportunity to make a reappraisal of all of the assets of the Chelsea Second National Bank which had been pledged with The Philadelphia National Bank. IN VIEW OF THE FACT THAT NO OFFER HAS BEEN RECEIVED BY THE PHILADELPHIA NATIONAL BANK EVEN CLOSELY APPROACHING THE BALANCE DUE TO SAID BANK, IT MUST IN JUSTICE BE ASSUMED THAT NEITHER THE RECEIVER OF THE CHELSEA SECOND NATIONAL BANK, THE RECONSTRUCTION FINANCE CORPORATION NOR THE BANKS IN ATLANTIC CITY, WHICH HELD A FURTHER ASSIGNMENT OF ANY EQUITY WHICH MIGHT HAVE EXISTED AFTER THE CLAIM OF THE RECONSTRUCTION FINANCE CORPORATION, BELIEVE ANY EQUITY EXISTS IN THE COLLATERAL OVER AND ABOVE THE AMOUNT DUE THE PHILADELPHIA NATIONAL BANK. THE PHILADELPHIA NATIONAL BANK
Salus Drops Litigation Shore Real Estate Broker Discontinues Residence Determination ner, of Trenton. counsel for Joseph W. Salus, Atlantic City and Philadelphia real estate broker. today withdrew motion to determine the legal residence of his client before Judge John Boyd Avis in United States District Court. In withdrawing the motion Salus has 20 days in which to answer suit for $5300 brought against him by Charles A. Faircloth, receiver for the ChelseaSecond National Bank and Trust Company, of Atlantic City. Faircloth is demanding $1500 on stock assessment against Salus, who was former director of the bank. The receiver is also demanding $3800 for three checks which, he claims, Salus withdrew from the bank several days before it closed because he knew of its unsteady After the suit was filed. Salus' counsel sought to delay the proceeding determine whether he was legal resident of Philadelphia or Atlantic City, where the papers were served on him.
Salus Drops Litigation Shore Real Estate Broker Discontinues Residence Determination CAMDEN, May 11.-Louis Rudner, of Trenton, counsel for Joseph W. Salus, Atlantic City and Philadelphia real estate broker. today withdrew motion to determine the legal residence of his client before Judge John Boyd Avis in United States District Court. In withdrawing the motion Salus has 20 days in which to answer suit for $5300 brought against him by Charles A. Faircloth. receiver for the ChelseaSecond National Bank and Trust Company, of Atlantic City. Faircloth is demanding $1500 on stock assessment against Salus, who former director of the bank. The receiver also demanding $3800 for three checks which, he claims, Salus withdrew from the bank days before it closed because he knew of its unsteady condition. After the suit was filed. Salus' counsel sought to delay the proceeding to determine whether he was legal resident of Philadelphia or Atlantic City, where the papers were served on him.
Judge Accuses Bank Receiver Camden, N. J., Aug 17 (AP)-An assertion that the affairs of the closed Chelsea-Second National Bank & Trust Company of Atlantic City had been "mismanaged most horribly' was made today by Judge John Boyd Avis in United States District Court. He made the accusation in taking under advisement an application by the banks receiver to dismiss a "suit for discovery" brought by a group of depositors. Charleh A. Faircloth, the receiver. asked that he be relieved of the necessity of answering 113 questions, many in the nature of accusations, asked by the depositors committee 'Why haven't the people a right to know what happened. and what happens to their money?" Judge Avis asked. Why can a receiver say, in effect. "This is your money but we are going to handle it in private'? "The receiver has some obligations to depositors and others. The more hear about these banks the sorrier am for their depositors. If the responsible persons are able to pay they should pay.
Judge Accuses Bank Receiver Camden, N. J., Aug 17 (A)-An assertion that the affairs of the closed Chelsea National Bank & Trust Company of Atlantic City had been "mismanaged most horribly" was made today by Judge John Boyd Avis in United States District Court. He made the accusation in taking under advisement an application by the banks receiver to dismiss "suit for discovery" brought by group of depositors. Charleh Faircloth, the receiver, asked that he be relieved of the necessity of answering 113 questions, many in the nature of accusations, asked by the depositors' "Why haven't the people a right to know what happened, and what happens to their money?" Judge Avis asked. "Why can a receiver say, in effect. "This is your money but we are going to handle it in private" "The receiver has some obligations to depositors and others. The more hear about these banks the sorrier am for their depositors. If the responsible persons are able to pay they should pay.'
Court Upholds Depositors' Right To Quiz Receiver of Closed Bank Aug. 18 assertion that affairs the closed ChelseaSecond National Trust company Atlantic City made yesterday Judge John Boyd in the United district here, taking under advisement an application the bank's dismiss for recovery" brought by group of depositors. Charles the receiver, that the necessity 113 questions, nature accusations, asked the "Why have not the people right and what happens their money?" Judge Avis can say, but are going handle in private?' receiver has some obligations depositors and others. The more hear about these banks the sorrier am for their depositors. If the responpersons able pay they should Faircloth's attorney, George Bourdepositors only "fishing expedition," that their not specific, that they had right information unless would tell the of information which prompt the accusations they stockholders depositors the closed January, 1933, deposits, and that the has fused proper legal action against the officers.
Judge Raps Bank In Atlantic City Says Affairs Mismanaged Horribly and That Depositore Have Some Rights That the affairs of the closed Chelsea-Second National Bank and Trust Company of Atlantic City had been "mismanaged most horrobly" was made yesterday by Judge John Boyd Avis in U. S. District Court at Camden, in taking under advisement an application by the bank's receiver to dismiss a "suit for discovery" brought by a group of depositors. Charles A. Faircloth. the receiver, asked to be relieved of the necessity of answering 113 questions, asked by the depositors' committee. "Why have not the people a right to know what happened and what happens to their money ?" said Judge Avis. "Why can a receiver say, in effect. "This is your money, but we are going to handle it in private?' The more hear about these banks the sorrier I am for the depositors. The stockholders and depositors assert that the bank's officers allowed large withdrawals before it closed in January, 1933, when it had $5,000,000 deposits, and that the receiver has refused to take proper legal action against the officers.
Judge Avis Wants Responsibility Placed For Failures ASKS PAYMENT TO FULL LIMIT Persons responsible for bank failshould be forced to make restitution to the limit of their resources, Judge John Boyd declared in District court in Camden yesterday. Intimating that he would act favorably the of the closed Chelsea Second National Bank Atlantic City, who are attempting obtain information bank's condition, Judge about insolvent banks the sympathy for the has been mismanaged horribly.' Judge Avis turned to George Bourgeois, attorney for Charles Faircloth, the bank's ceiver, and demanded: "Why haven't the depositors the right know what the financial condition bank at time its insolvency? Why can receiver others say them that although we will handle any these cases, when the the bank's failure can pay they ought to, the fullest extent to which they are able. The situation in there responsibility, there force charges that have made be rumors, the deposiand stockholders are making legations fact. receiver effort everything is legally did not answer the jurbut the in the for an were specific enough. the wanted more he insisted, they should tell how they of the which they original the bill charged that falsely and illegally represented to good condition, that the receiver refused take the proper action bring the bank's ofthat and the bank, that large withdrawals just before the closed. filed against the bank and Faircloth by Samuel Comly, Elizabeth and Ralph Johnson, all of City, representing and Comly had $6000 deposit, while held 420 shares of bank stock. Charles Hymen, Atlantic City, attorney petitioners, pointed out that the bill merely asked about status. Judge held the under but he allow the bill, with on the questions. deposits of and 23,000 when closed 1933. Hymen after the hearing that Faircloth declared he not answer cost the bank $10,000 to divulge the information, would take long while and hold liquidation, that disclosure affecting business people Atlantic the depositors to tain information blocked several times by technical objections offered by the receiver. ON O'CONNELL Albany, and John Oley Percey Geary, fugitive in the kidnaping John O'Connell, been forwarded Detroit, today. in the for the kidnapers of John Labatt.
Court Criticizes Bank Receivers CAMDEN, N. J., Aug. 18.-Bank receivers were sharply criticised by Federal Judge Avis. Depositors of the closed Chelsea Second National Bank of Atlantic City ap plied to him for an order directing receivers of the institution to tell them what was being done. In taking the motion under advisement, Judge Avis said: "The more hear of insolvent banks the more sympathy have for the depositors. Why can't the receiver say to them that this money is yours, but we handle it privately?