§ 23-36-117 — Classification of creditors - Payment of claims

(a) All creditors of an industrial loan institution of which the commissioner has taken charge are classifiable either as secured creditors, prior creditors, or general creditors. (b) (1) A secured creditor shall be a creditor who has security for his or her debt upon the property of the industrial loan institution of a nature to be assignable under this chapter or who owns a debt for which some endorser, surety, or other person secondarily liable for the industrial loan institution has security upon the industrial loan institution's property to the extent, in both instances, of the value of the security. (2) The value of the security of a secured creditor shall be determined by converting the security into money according to the terms of the agreement pursuant to which the security was delivered to the creditor or, in the absence of applicable terms of the agreement by the creditor and the Bank Commissioner, by agreement, arbitration, compromise, or litigation as the circuit court may direct. The expense of the conversions by the creditor and the commissioner shall be borne as the court may direct. (c) (1) A prior creditor shall be: (A) An employee, laborer, or clerk of the industrial loan institution, as and to the extent provided by this section; (B) The commissioner, as to deposits made by him or her in the industrial loan institution as depository for the moneys of another industrial loan institution or bank of which he or she has taken charge, to the extent of the deposits; (C) A prior creditor who is such by virtue of an act of Congress applicable to the industrial loan institution, as and to the extent provided by that act or to the extent provided in this section; (D) The owner of a special deposit expressly made as a special deposit in the industrial loan institution, evidenced by a writing signed by the industrial loan institution at the time and which it was not permitted to use in the course of its regular business; (E) The beneficiary of an express trust, distinguished from a constructive trust, a resulting trust, or a trust ex maleficio, of which the industrial loan institution was the trustee and which was evidenced by a writing signed by the industrial loan institution at the time; (F) The owner of the proceeds of a collection made by the industrial loan institution and not remitted by it, or of which its remittance has not been paid, when the collection was made otherwise than by honoring a check or other order upon the industrial loan institution or by a charge against the account of the depositor of the industrial loan institution, and the collection has had a distinctive identity in the hands of the industrial loan institution, has actually increased its cash assets, and has not resulted in merely shifting the liability upon its books from one of its creditors to another or new creditor; and (G) The owner of a remittance of the industrial loan institution, the proceeds of a collection made by the industrial loan institution by honoring a check or other upon itself, or by a charge against the account of its depositor, although the collection has not had a distinctive identity in the hands of the industrial loan institution, has not actually increased its cash assets, and has resulted in merely shifting the liability upon its books from one (1) of its creditors to another or new creditor in instances in which the remittance has been presented with due diligence for payment to the industrial loan institution or its drawee and is not paid, and when the instrument collected cannot be returned by the commissioner to the person who had transmitted it to the industrial loan institution for collection, the instrument having been surrendered by the industrial loan institution for collection in such manner prior to the commissioner's taking charge. (2) (A) It is made the duty of the commissioner to reverse the entries upon the books of the industrial loan institution as to all collections made in all instances where the unpaid remittance has been so presented with due diligence and where the instrument remains in the industrial loan institution unsurrendered. (B) By this reversal of entries, the instrument shall be deemed to be from its inception unpaid; thereupon, the commissioner shall return the instrument to the person who transmitted it to the industrial loan institution, which return shall be in extinguishment to the extent thereof of the remittance. (C) It is made unlawful for any officer or agent of any industrial loan institution organized under the laws of this state to surrender any instrument for the purpose of enabling a preference to be secured thereby under any of the provisions of this section, irrespective of any knowledge of or participation in such purpose by the person claiming or receiving the preference. (3) (A) All prior creditors, as defined in this section, except only employees, laborers, and clerks of the industrial loan institution and the commissioner and prior creditors under an act of Congress, who shall be paid in full out of any assets of the industrial loan institution available after the payment of the expenses of administration, shall have priority to the extent that they respectively may specifically identify their property in its original or traceable form into the hands of the commissioner and, if unable to so identify the property, to the extent that the assets in the hands of the commissioner, in the form of the lowest amount of cash on hand, exclusive of deposits in other industrial loan institutions and all other assets remaining in the industrial loan institution continuously after their respective priorities arose, when necessarily increased by the property, the cash on hand being deemed to have been so increased to the extent of any priorities which may be acquired under subdivision (c)(1)(G) of this section. (B) If the cash on hand is not sufficient to pay all prior creditors in full, the amount shall be prorated among them. (4) Beyond the extent of the priority of any prior creditor respectively and insofar as his or her priority to that extent cannot be paid in full, but not otherwise, the creditors shall be general creditors of the industrial loan institution. (d) All creditors not classified in this section as secured or prior creditors of the industrial loan institution, including the State of Arkansas and any of its subdivisions, shall be general creditors. (e) Creditors whose claims are unliquidated may liquidate the claims in such manner as the court may direct.

Legislative History

Acts 1941, No. 111, § 11; 1987, No. 71, § 1.