§ 45-3-1201 — Commissioner's authority to take possession

(a) Requirements for Possession. (1) The commissioner in the commissioner's discretion may take possession of the books, records, and assets of every kind and character of any association subject to this chapter for any of the purposes enumerated in subsection (b) if it appears from reports or other information received by the commissioner or from any examination conducted pursuant to this chapter that: (A) The association is in an impaired condition; (B) The business of the association is being conducted in a fraudulent, unlawful, or unsafe manner; (C) The association is unable to continue normal operation; (D) Any examination conducted pursuant to this chapter is being or has been obstructed or impeded; or (E) The insurance of deposit accounts of the association has been or will be cancelled. (2) Unless the commissioner finds that an emergency exists that may result in loss to depositors or other creditors and that requires that the commissioner take immediate possession, the commissioner first shall send written notice by certified mail to the home office of the association, specifying the conditions criticized and stating a reasonable time within which correction shall be made. The notice shall also provide that the association shall have the opportunity to request a hearing in accordance with this chapter. (b) Purposes of Taking Possession. The purposes of taking possession of an association may be examination, further examination, conserving of its assets, restoration of impaired condition, reorganization, or liquidation. (c) Procedures for Possession; Power of Commissioner. (1) The commissioner shall take possession by posting upon the premises of the association a notice reciting that the commissioner is assuming possession pursuant to this section and the time, not earlier than the posting of the notice, when the commissioner's possession shall be deemed to commence. A copy of the notice shall be filed in a court of general jurisdiction in the county in which the home office is located. The commissioner shall notify the insurer insuring the deposit accounts of the association immediately upon commencing any action to assume possession. (2) When the commissioner has taken possession of an association, the commissioner shall be vested with the full and exclusive powers of management and control, including the power to continue or to discontinue the business, to stop or to limit the payment of its obligations, to employ any necessary assistants, to execute any instrument in the name of the association to commence, defend, and conduct in its name any action or proceeding in which it may be a party, to terminate the commissioner's possession by restoring the association to its board of directors and to reorganize or liquidate the association in accordance with this chapter. The commissioner may borrow money on behalf of and in the name of the association and may pledge, transfer, or otherwise utilize its assets to secure the loan. As soon as practicable after taking possession, the commissioner shall make an inventory of the assets and file a copy thereof with the court in which the notice of possession was filed. (3) When the commissioner has taken possession, there shall be a postponement until six (6) months after the commencement of possession of the date upon which any period of limitation fixed by a statute or agreement would otherwise expire on a claim or right of action of the association or upon which an appeal must be taken or a pleading or other document must be filed by the association in any pending action or proceeding. (d) Powers of Commissioner in Emergencies. (1) If, in the opinion of the commissioner, an emergency exists that will result in loss to depositors or other creditors, the commissioner may take immediate possession of an association without a prior hearing. Any person aggrieved by this action of the commissioner may seek review of the action by proceedings in accordance with title 27, chapter 9. (2) If the commissioner determines to liquidate the association, the commissioner shall send written notice of the determination to the association and to the directors, officers, stockholders, or members, depositors, and other known creditors thereof, together with a notice of the opportunity for any of them to request a hearing in accordance with this chapter. (3) If the commissioner shall determine to reorganize the association, the commissioner shall be required to afford a hearing to all interested parties, which hearing shall be conducted pursuant to the applicable provisions of this chapter. After the hearing, the commissioner shall enter an order proposing a reorganization plan. A copy of the plan shall be sent to each depositor and other creditor who will not receive payment of claim in full under the plan, together with notice that, unless within sixty (60) days the plan is disapproved in writing by persons holding one-third (1/3) or more of the aggregate amount of the claims, the commissioner will proceed to effect the reorganization in accordance with the plan. A department, agency, or political subdivision of this state holding a claim that will not be paid in full is authorized to participate as any other creditor. (e) Judgments; Liens; Preferences. No judgment, lien, garnishment, or attachment shall be executed upon any asset of the association while it is in the possession of the commissioner. Upon the election of the commissioner in connection with the liquidation or reorganization: (1) Any lien, garnishment, or attachment, other than an attorney's or mechanic's lien, obtained upon any asset of the association during the commissioner's possession or within four (4) months prior to commencement thereof shall be vacated, except liens created by the commissioner while in possession; and (2) Any transfer of an asset of the association made after or in contemplation of its impaired condition with intent to effect a preference shall be voided. (f) Expenses of Possession. All necessary and reasonable expenses of the commissioner's possession of an association and of its reorganization or liquidation shall be defrayed from the assets of the association.

Legislative History

Acts 1978, ch. 708, § 5.01; T.C.A., § 45-1701.