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http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 300.011 - Reconstruction Finance Corp et a vs Birmingham Cotton Mills Inc Suits npainst FRBanks- FRB/INKS s .................o.r. 1 MVO TN Pr AS riirrICM! Z ?7)fl) f. - i941 •IP., tTL NOV 29 1941 Mr. Pollard Turman, Counsel, Fedora/ Reserve Bank of Atlanta, Atlanta, Georgia. Dear Mr. Turmaal This will acknowledge receipt of your 14,ttegLof abysm26, 1941 advising that, under the terms of a settlement reber cently agreed upon in connection with the foreclosure proceedings arising out of a default in the repayment of a loan made to the Birmingham Cotton Mils, Birmingham, A/abama, by the Federal Reserve Bank of Atlanta, Reconstrustion Memo. Corporation and the First National Bank of Birmingham, Alabama, the fee of Mr. D. K. Many, of the firm of Benner, Burr, MaKamy & 'Orman, who had been retained to represent the Federal Reserve Bank as special counsel in this matter, will be paid by the Birmingham Cotton Mills. Inasmuch as this fee will not be paid by the Federal Reserve Bank of Atlanta, it is; not necessary for it to be approved by the Board of Governors of the Federal Reserve System; but we are glad to have your advice as to the disposition of the matter in order to complete the Board's records on the subplot. It is noted that you have sent the Board's Counsel an outline of the terms of settlement. oesswat Very truly yours, -4) cfmster Ritorrih Cheater Yorriiie FOR APP oVAL Secretary. OF MR. ON BEHALF OF1 LuLiii,) L. ki Aproveds Dictated by.. Approved h •••31 -4 • cif- /6'• http://fraser.stlouisfed.org Carel* Federal Reserve Bank of St. Louis Orrifiri0 a l/1/j 11 "LI Copy • http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis REM IN 'nTh yass swam c MN 2 1941 z.100 a tI Novombor 28, 1941. Mr. Pollard Turman, Counalel, Federal Reserve Bauk of Atlanta, Atlanta, Georgia. Dear Ir. Turman: I have received your letter of November 26, 1941 and I am delighted to know that you have succeeded in arranging a satisfactory settlement of the foreclosure proceedings against the Birmingham Cotton Mills, Inc., Birmingham, Alabama. Please accept my hearty congratulations. With kind personal regards and all best wishes, Cordially yours, Walter Wyatt, General Counsel. IINtaft GENERAL COUNSEL'S OFFIGE 0 Dictated by. ee Approved bY.,..00000seseliess Revised by. taiptel , FEDERAL RESERVE BANK ( INPttr""C"irr.L.14° - MPD ' "I 0i-: C i - 19 4', OF ATLANTA f OFFICE OF ; COUNSEL November 26, 1941. Board of Governors of the Federal Reserve System, Washington, D. C. Dear Sirs: In a letter dated July 7, 1941, tdr. W. S. McLarin, Jr., President of this Bank, advised you of the employment by this bank of Mr. D. K. McKamy, of the firm of Benner, Burr, McKamy & Forman, Birmingham, Alabama, to act as special counsel to this bank in a foreclosure proceeding arising out of a default in the repayment of a loan made to the Birmingham Cotton Mills, Birmingham, Alabama, by the Federal Reserve Bank of Atlanta, Reconstruction Finance Corporation and the First National Bank of Birmingham, Alabama. Mr. McLarin stated that at the time of the employment of Mr. McKamy it was not thought that his fees would be in excess of $1,000, although no agreement was made as to the exact amount of the fee to be paid. Nevertheless, it was understood that the fee would be subject to the approval of the Board of Governors. Recently a settlement of the litigation has been agreed upon between the parties involved, one of the provisions of that agreement being that the Birmingham cotton Mills will pay to Mr. McKamy a fee of $1,000. Even though the fee is to be paid by the Birmingham Cotton Mills and is not in excess of $1,000, it was thought that you should be advised of this provision in the agreement of settlement in order that your files might be complete. Any vieds you may have and care to express on this subject will, of course, be greatly appreciated. Although the settlement has not been finally concluded, due to the fact that certain oi the documents are being revised, I have sent to the office of the General Counsel to the Board of Governors an outline of the terms of the settiement. Very truly yours, t .-11)4) a -t -e ollard Turman, Counsel. PT/w. . • ").-) http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 1 /4 1 - i i FEDERAL RESERVE BANK Ascir) TN FILM SECTION MI 2i 1941 OF ATLANTA OFFICE OF COUNSEL November 26, 1941. 1,, (4 LC Mr. Walter Wyatt, General Counsel, Board of Governors of the Federal Reserve System, Washington, D. C. Dear Mr. Wyatt: _On.June 9, 1941j I sent you copies of the documents filed by the Federal Reserve Bank of Atian-ta, Reconstruction Finance Cor_oration and the First National Bank of Birmingham in connection with the foreclosure proceedings against the Birmingham Cotton Inc., Birmingham, Alabama. You will recall that the foreclosure arose out of a default the part of the Birmingham Cotton Mills in the repayment of a on loan in the amount of $250,000, made to it in January, 1940, by the three lending institutions. Recently a proposal of settlement was made by the Bir— mingham Cotton Mills, which proposal has been accepted by the lend— ing institutions. Briefly stated, the terms of the proposal of settlement provide that the Mills will place the loan in a current position and that the terms of repayment will be revised in a manner more favorable to this bank than originally provided in the note and In addition, the Mills will pay the attorneys' fees in— mortgage. curred by the lending institutions in connection with the foreclosure. Our attorney, Mr. D. K. McKamy, is to receive a fee of $1,000. De— spite the fact that the fee is to be provided by the Birmingham Cotton Mills, I have written the Board of Governors, advising them of this feature of the transaction. You will recall that this case has been a source of some concern to me, and I am very happy to be able to make this report. With highest regards, I am Sinc / PT/w. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ely yours, Ozztat( ollard Turman, Counsel. .1 http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Ir:H1 4ife / :17 C tlr June 19, 1941 Lir. Pollard Turman, Counsel, Federal Reserve Junk of Atlanta, Atlanta, Goorr7ia. Dear Mr. T'Irnant Please accept my thanks for your lgtiltr of June 9, 1941 enclosinr, for my information copies of the petition of foreclosure and of the answer and cross bill in the case of Reconstruction Finance Corporation, et al. v. Birmingham Cotton Mills, Inc. I have read these papers with much interest and I an very glad to have them for the files of this offico . I shall appreciate it if you will kindly keep me advised of any important developments in this case. ith kindost personal reards and all best wishes, I am Cordially ours, 7:alter Creneral Counsel. :•.Leha C f r S 1. led JU" FEDERAL RESERVE BANK Or I ATLANTA ' 4 OFFICE OF COUNSEL June 9, 1941. ''-` ;•rebe , Mr. vialter yatt, ueneral Counsel, Board of Governors of the Federal Reserve System, Washington, D. C. Dear Mr. iiyatt: You will recall that on your visit to Atlanta the latter part of March I discussed with you briefly the loan made by the ,1ederal Reserve Bank of Atiantal econstruction Finance Corpora— 1 tion and the first National bank of Birmingham, Alabama, to the (Birmingham Cotton Mills, inc., of Birmingham, in the amount of ) $250,000.00. The loan was made in January, 1940, and during the 12 months following that time the Mills lost money at such an alarming rate that the lending institutions were forced to take action to protect themselves. After a number of unsuccessful conferences with the officers of the Mills, foreclosure proceedings ere filed in the Circuit Court of the Tenth judicial Circuit of Alabama. Recently the respondents filed an answer and cross bill. I am enclosing in duplicate copies of the petition of foreclosure and of the answer and cross bill. I will advise you from time to time as to the progress made in this litigation. Sincerely yours, LA Pollard Turman, Counsel. PT/w. Enclosures t A • http://fraser.stlouisfed.org -/) Federal Reserve Bank of St. Louis COPY IN THE CIRCUIT COURT OF THE TENTH JUDICIAL CIRCUIT OF ALABAAA RECONSTRUCTI)N FINANCE CORPORATION, a corporation, THE FEDERAI, RESERVE BANK OF ATLANTA, a corporation, and THE FIRST NATIONAL BA.a 0: BIRMING— HAM, a corporation Complainants IN EQUITY No. 51356 VS BIMINGHAU COTTON ZLLS, INCORPac,ATED, a corporation, Respondent Now comes Birmingham Cotton Mills, Incorporated, respondent in the Aiove cause, and for answer to the original bill oi complaint filed herein says: 1) Respondent admits the averments of Section 1 of the bill of complaint. 2) Respondent ddmite the averments of Section 2 of the bill of complaint. 3) Respondent admits the averments of Section 3 of the bill of comrlaint. 4) There is no dispute but that all after—acquired property ac— quired by Respondent constituting pLi.rt of the plant, m chinery and equipment of HesponJence, ,nd not constituting, inventories for manufacture or sale or stock in process or items excnangeab_Le or consumubJ.e in Lue usuul course oi businss, became subject to the mortgge. It is not necessary th t such ites be ascertained by the process of this court since respondent stands http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 0 m. ready and willing to check all such iLems ALAI co:11,-a inants at any time and execute a supplemental indenture describing same; nor hJs res,iondent at any time refused to execute such instrument; nor is any person asserting or pro— posing to assert claim prier to said mortgage to any such item on said mort— gaged premises to which title nas vested in res,ondent. 5) Itespondent admits the averments of eection 5 of the bill of complaint. 6) The averments of Section 6 do not constitute an accurate quo— tatien of the obligations assumed by the mortgagee* 7) Aeseonaene aenees we avermenes 01 eeceion 7 01 ene reiee 01 complaint, as therein steted, and denies that there was any representation or warranty to the effect that .86,000 should be expended eor machinery* On the contrary the resolution of the Board of Directors of RFC authoriiing the loan provided te.t no exceeding $86,000 of the proceeds should be ueed for such purposes. aespondent had no reason to assume th t Ric meant or in— tended not less than $86,000. As a condition to the loan, RFC required that respondent enter into a management agreeeent with I:. D. Sanders conferring upon the latter full authority of management and operations and whatever was expended from the proceeds of said loan was expended Ivor under the direc— tion of Sanders and pursuant to the management agreeeient required and ap— proved by RFC as a condition to the loan. 8) Respondent denies the averments of Section 8 of the bill of complaint .nd avers that there was no default .ith respect to said note or mortgage, when on April 5, 1941, naeice of purported acceleration dated April http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 4, le41, was received ey respondene. On pne conerary, eor some -came prior to January 12, 1941, RFC by threats of proceedings based on complaint as to the disburse,lients by Sanders for operating expenses irem the proceeds of the loan, had obtaieed from respondent, pursuant te tne latter's desire to conform to the desires of the holder or holders of Lele note and mortgage, whether legally so obligated or not, consent to alloa, subject to revocation, : 30,000 in cash to remain on deposit ,ith respondent's depository, First -$ National Bank of birmin01 m, hxcept as withdrawn by cheek countersigned by or on behalf of RFC. ,:hen the first installment of 2500 on the loan fell due on January 12, 1941, there .:as under negotiation and conference between respondent, the holders of said n:)te and mortgage and Sanders, the matter, of a working arrangement lookin . to the agreed deferring of the time for the installment pay4ents to begin and other matters. The conference continued, the mill having in the meantime been closed do_n due in part to the impound— ing of funds as aforesaid, until shortly before the res4pLion of operations in April. These conferences held out to respondent the reasonable under— standing and assurance that the mortgagee and respondent could and would agree on a basis for deferrng the beginning of installments, and fairly implied that pending the negotiations to that end acceleration would not be declared since respondent was prepared to :lake payment out of ,erking funds at any time. Counsel for RFC having arrived at a tentative basis for egree— meat aith respondent to that end, subject to approval by RFC, undertook to present the matter to the latter, and respondent not hearing the result and conceiving that RFC might desire to put respondent in the attitude of tech— http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis nical default, on April 4, 1941, and before the alleged purported accelera— tion of maturity referred to in the bill of complaint aas posted to or re— ceived by respondent, made tender of all installments due by respondent to that date, and prior to the filing of this answer has made like tender of the installments due April 12 and May 12, 1941. RFC has in each case declined to permit adequate cash balances on deposit to the credit of respondent to be withdrawn and applied and has induced the depository to take like action. By that means RFC has in effect assumed charge and control of respondent's business and has itself brought about the alleged default of ,hich it seeks to take advantage and is and should be declared to be estopped from assert— ins defftuit svith respect to the payaaut of 6:4414 instaants. Respondent has likewise tendered payment of any amount ,,ue on or under the note or mortgage and compliance Ath any oblic,ation incident thereto, express or implied, but complainant has stood upon its premature and inapt acceleration of full maturity and has declined to accept anything short of payment of the loan in fUll, ith interest. Aespondent further renews said tenders and offers to do equity in the premises. The so—called acceleration notice referred to as Exhibit C was not Ln fact posted or delivered to respondent until after tender as aforesaid. 9) Respondent denies the averments of Section 9 of the bill of complaint, except as to the execution of the document referred to as Exhibit "D". despondent denies th,t respondent's net current assets were below 175,000 and avers that if, as a result of jactitation of acceleration and http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis default and assertion of control over resondentis funds uld affairs, RFC dakes it impractical to operate its mill Lnd .aaintain its current positions RFC would be and should be declared to be estopped from alleging default by reason thereof; and respoedent denies th_t there was at the time of filing said bill or now is default ,ith respect to said note or mortgage under or because of said agreement. (Exhibit D) 10) Respondent denies the averments of Section 10 of the bill of complaint and denies (41-t there Las been any default by respondent with respect to the matters alleged. 11) iteseondent denies the averments of Section 11 and denies that there has been any default by respondent with respect te the matters alleged, and offers and is willing to execute any and all documents or instruments contemplated by the mortgage or in fact necessary o furtier any interest or equity of complainants thereunder whether required or not. As to after acquired property there is none except such as has been installed in the mill or on the mortgaged property; no one is adversely claiming same; and no possible interest of complainants has been prejudiced with respect thereto. 12) ilespondent is not advised except by hearsay of the facts averred in Section 12 of the bill of complaint and denies the same. 13) Respondent denies that there has been any default, justify- ing the incurring of liability for attorney's fees and denies liability wieh reepeet thereto. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Further answerihg said bill of complaint, respondent avers that respondent is operating its mill property subject to said mortgage profitably and is conserving the assets, value and proceeds thereof ith a vie to the payment in full of said note and mortgage but that respondent has been and is being subjected to unlawful and inequitable handicaps and interferences by RFC, in the following respects: 1 1. RFC has demanded of First National Bank that it sequester and apply in payment upon the note and mortgage all balances on aeposit to the credit of respondent with said Bank. 2. Aw a CWW-J-4.d011 iav forbearuLio frchA tilre,,tened and foreclosures RFC exacted of respondent a terminable agreement that funds should not be withdrsom except on a countersignature by an agent or representative of RFC. This procedure hz.s in effect amounted to a substantial as- sumption of control over respondent's funds, necess,ry to the payment of its current obligations and is now currently interfering with the profitable operation of the mill property. 3. RFC has advised parties negotiating Idth respondent A.th a view to managing and increasing output th-t the mortgage lias in default, has intimated ta_lt the property could be bought by such parties on foreclosure, and by jactitating default and foreclosure has prejudiced salessnd has ore vented tie orderly and most efficient and pr)fitable operation of the business. 4. RFC has moreover insisted that any agreement looking to con- tinued operations must be conditioned upon he stationInL in the plant of a , representative of aC and tiiat as a uonditi.A1 to refv -intnii fro furtlior http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis proceedings or effort to sequestrate the funds on deposit, all checks be countersigned by RFC. Under these conditions respondent is directly and materially hampered in the profitable operation of the mortgaged property. RespoAdent has no desire or intent to impair the security of the mortgage or to take any action that could in ,my respect jeopardize payment in full of that ob— ligation, as a prior and recognized lien. Respondent avers th, t it is in— fol:wed and believes and upon such inforwation wad be.J.ef “vers —a mdal can be operated under existing and prospective markets and conditions :Aost profitably, -.rid Gnat by increasing output and the number of shifts can he made to earn a return subst—ntially greater than the resuls even no being realized, but that respondent cannot take advantage of existing !aarkets and opportunities if subjected to the public jactitation of default and inter— ferences, referred to herein, or the threat of such action except upon con— dition thAt respondent subject the use of its working funds to employees of RFC who knoa nothing of mill operations or otherwise comply Ath conditions laid do7,11 by RFC. PREUISES CONSIDERED, this respondent prus Gliut this answer be re— ceived and entertained as a cross—bill against complainant Reconstruction Fi— nance Corporation, and, to the extent th,t they m_Ly have any equity or in— terest in the note and mortgage referred to herein, The Iirst National B,Ink of Birminghm and the Federal Reserve Bank of itlantai that said complainants be axle parties hereto by the issue of appropriate process commanding them to appear herein and answer this bill of complaint .ithih the time required by law. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis And respondent prays that on final hearing this Court, by appropriate —7— decree herein (1) decree, determine and declare that there was not at the time of the filing of the bill of complaint outstanding any event of default authorizing the acceleration A: the maturity of respondent's note referred to in 1- 1ie bill of complaint; , (2) that so—called acceleration notice (ExAbit C to the bill of complaint) was premature and in operative; (3) entt th,J.t if, technically or otherwise, notwithstanding respond— bona fide advice and understanding to the contrary, default Tas or is outstanding in any respect, the nature thereof be defined and respondent be given a reasonable opportunity to remedy tile same; (4) that Reconstruction iinance Corporation be enjoined and re— strained from ,actitation of default and from threats f interference, based on such alleged default, except upon compliance by respondent ith managerial or other conditi)ns or the impounding of cash on deposit; (5) That RFC be enjoLned and restrained from asserting any claim or right to or lien upon :my funds on deposit to the credit of this respondent; (6) that this Court determine and decree in favor of this respond— ent and against ,..econstruction Finance Corporation the damages resulting proximately to this respondent from the jactitations of default Lnd inter— ference based thereon and from a continuation of the insistence of managerial control, including the right to countersin cnecks, imposed udon respondent as a condition to forebearance by reconstruction Iinance Corporation from http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis public default proceedings, and direct the manner of off—setting the amount of such money decree against any part of the payments due or to become due on said note and mortgage and payable to Reconstruction iinnce Corpor.Aion; (7) that the bill of complaint be dismissed. nd respondent prays for such other, further or different relief as may seem meet and proper. Respectfully submitted. BIRdINGH:a COTTON MILLS, INCOaPOHIATED By (sif;ned) Chas. , J')nes President espolldent .nd Cross—Complaind.nt CABANISS & JOHNSTON Solicitors for Respondent and Cross—Complainant http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis RECONSTRUCTION FINANCE CORPORATION, A corpor,tion, THE FEDERAL RESERVE BANK OF ATLANTA, a corporation, and THE FIRST NATIONAL BANK OF BIRMINGHAM, a corj,oration, DI THE CIRCUIT couT ol THE TENTH JUDICIAL CIRCUIT Complainants OF ALABAU. VS BIRMINGHAM COTTON MILLS, INCORPORATED, a corporation, IN EQUITY. No. Respondent TO THE HONORABLE JUDGES OF IN EQUITY SITTING: TENTH JUDICIAL CIRCUIT OF ALABAMA, Now come the complainants and show unto your Honors as a basis for the relief hereinafter prayed, the following, to—wit: 1. Reconstruction iinance Corporation, a body corporate, organized and existing under the laws of the United States of hzerica ,i. an office in th Birmingham, A.0..baiaal and the iederal Reserve Bank of Atlanta, a body corporate organized and existing under the laws of the United States of America, with an office in idrmirk;iL,:.m, Alabama, and the First National Bank of Birmingham, a national banking association under taa laws of the United States of America with its principal place of business in Birmin,,ham, Alabama, bring this their bill of complaint against Birmingham Cotton aills, Incorlorz,ted, a cor7,oration duly organized and existing under the laws of the State of Alabama and having its principal place of business in the City of hirminLham, State of Alabama. 2. That heretofore on, to—wit: the 12th day of January, 1940, the said Birmingham Cotton iills, Incorporated, executed and delivered to http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis the Reconstruction Finance Corporation a real estate and chattel mortgage to secure an indebtedness evidenced by a promissory note in the principal sum of !Y2500000.00, dated January 12, 1940, with interest taereon at the rate of five per cent (5%) per annum on the unpaid ,rincipal, payable as follows: $12,500.00 monthly commencing twelve months from the date of said note and the balance on or before five years from the date thereof, and ad— ditional annual payments on account of the principal of the n3te to become due and payable on or before a date two months after the close of the first complete fiscal year after the date of said note, and annually thereafter un— til the payment in full of the indebtedness evidenced by said note, each in an amount if any, by which an amount equal to fifty per cent (50%)'of the net earnings of the Birmingham Cotton ailis, incorporated, earned in accord— ance with good accounting practice as determined by the Auditing Division of the Reconstruction Finance Corporation, before depreciation for the pre— ceding fiscal year excess the aggregate fixed amounts payable under the terms of said note during such preceding fiscal year. 3. Birmingham Cotton iills, Incorporated, in and by the terms of said mortgage, granted, bargained, sold and conveyed unto the said ,-,econ— struction Finance Corporation the foliating described real estate situated in Jefferson County, Alabama, to—At: (1) That particular parce_ of land located in the Wai of the NW* of Section 19, Township 17 South, of 1-ange 2 iiest, more particularly described as follais: Beginningat a point on the east line of said NW* of NI. which is 1303.62 feet south of the northeast corner of said quarter— quarter section and run thence Kest at right angles to said east line 30 feet to the corner of an iron fense in the west line of Vanderbilt v‘oad, the beginning point of the description of the property conveyed herein, run http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis thence west at right angles to said east line of said quarter—quarter sec— tion 620 feet; thence north and parallel eith the east line if said quarter— quarter section 338.7 feet, thence 90 degrees 071 to the right end in an easterly direction 99.9 feet, run thence 89 degress 501 to tee left and in a northerly direction 165.05 feet to the south line of a street, thence 89 degrees 471 to the ri .ht and in an easterly direction along said street line 519.6 feet to an iron fence in the west line of Vanderbilt Road; thence South and along the west line of said Vanderbilt Road 504.3 feet to the point of beginning; excepting, ho aver, any and all riGhts and easements which may have attached for a public street (sometimes described of record as Preston Boulevard but never in fact used by the public) along the south boundary of the above described tract, not exceeding 30.87 feet in width. (2) Also an easement and right of eay across the property of Birmingham Textile Comeany (1939) adjoining on the west the above des— cribed tract, for the use, jointly ,ith other served by same, and the main— tenance and operation of the railroad switch or spur track or tracks con— necting the above described premises alth the present right of .ay of Bir— mingham Belt Railroad. (3) Also all uf the buildinGs, improvements, fixtures, and structures of every kind and character located upon said premises first aboae described and all easements and appurtenances thereto belonLing or in anywise appertaining. and by the terms of said mortgage there was bargained, sold, granted and conveyed to the necon.truction Finance Corpoeetion certain personal prop— erty described in said mortgage, a copy of said note is hereto attached, marked Exhibit "A", nd a copy of said mortgage is hereto attached and marked Exhibit "B" and made as fully a part hereof as if herein fully set forth, personal property conveyed by said mortgage is fully described therein. 44. Your complainants further show that by the terms of seid mortgage it was provided that all person. property of a like nature to the personal property specifically described in ehe mortgage -eeich should be thereafter acquired by the mortgagor at any time beiere the cancella— tion and surrender of said mortgage and w.ich may be located upon the reel estate described in said mortgage or which may be used or suitable for use http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis 'n cmnectian the business then or thereafter conducted by mortgagor, whereso2ver loc,ted, and specifically including all additions, replacements, attachments, and improvements of or upon any of such personal property, should become additional security for the said indebtedness and by the terms thereof the mortgagor, Birminf,ham Cotton ;Allis, Incorporated, did agree and covenant by p ragraph ten of aid mortgage as falloweg "Mortgagor agrees, frail time to time, forthvith, upon the request of lortgage to execute to Ziortgagee, in form satisfactory to Mortgagee, any additional or supplemental ,Iortgages or other instrument which Mortgagee may deem necessary to specifically describe and convey any after acquired property intended to be covered by tnis Itiortgage or to correct any error or omission in description of property intended to be conveyed hereby or offered by Mortgagor as a part of the security for said loan." Your complainants aver that it is necess_try that this Court ascerta_n what property not specifically deecrinea In s:tia mortgage was acquired oy ir— mineham Cotton Ulls, Incorporated, subseauent to the execution of said mort— gage, upon which by the terms thereof, said mortgage is a lien for the se— curity of the indebtedness described therein. 5. lour complainants further shoe- that under the terms of said mortgage it was agreed that if mortgagor should fail to keels any of the covenants stipulated and the agreements entered into in connection with said indebtedness, or should fail to pay said note or any principal install— ment thereon or any part thereof or any interest "hich mi,ht become due ?.secured by the said mortg 6e as .nd thereon, or any other debt, fien the saue matured, the entire indebtedness should immediately become due and payable at the option of the mortgagee and the mortgage would forthwith be— http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis come subject to foreclosure in accoraance wetn -me terms tnereoi. 6. Complainants further aver that by the terms of said mortgage the Birmingham Cotton Mills, Incorporated, agreed to pay the principal -nd interest evidenced by said note as the sane became due, according to the tenor of said note, to complete and perform all other agreements and obligations contained in said note or in the application for s id loan made by the Birmingham Cotton Mills, Incorporated, ,o the Recons truction Finance Corporation, es well as all agreements and obligations provided or imposed As a condition in connection 7. ith the making of id loan. Your complainants aver that at the time application as made for the loan secured by seid mortgge it was stated that Bir.line inam Cotton Mills, Incorporated, intended to use from the procee ds of sLid loin the sum of $86,000.00 for the purchase of additional machinery to be installed in the mill of the sdd birmingham Cotton Mills, incorporated , and it , as agreed e between the eeconstruction rinence Corporation and the said Birmingham Cotton millet incorporatee, at tne time said loan (as muue aria, as a coneetion tnereof, that the Birmingham Cotton Mills, Incorporated, should purchase and install additional machinery and use for such purposes npt more eh.n 86,000.00 of the proceeds of s' id loan, and that such amount of seie proceeds should be del-DEitea in e separate acceunt and used for sLid purpoee. 8. Your complainants further sho that default was made by the said respondent in the payments due upon the note secure d by said mortgage by failing to p .y on January 12, 1941, on Februa ry 12, 1941, :rid on March 12, 1941, the payments duo to be made on s_Lid debts in accordance with the terms of said note and mortgage, and the respondent has failed and neglected to http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis -5- make the said payments on sedd indebtedness ,nd your complainants, hereto— fore, on, to— it, April 4, 1941, elected to declare the entire indebtedness evidenced and secured by said mortgage, due and payabl e and did on said date, give the said resondent a notice of acceleration of all of the indebtedness and made demand for immediate payment thereof, and the said indebtedness is now wholly in default. A copy of said acceleration notice is attached hereto and marked Exhibit "0" and made fully a part hereof . 9. Your compLlinante further show tht default s made by the said res, ondent in that the said respondent had agreed , as a condition im— posed in connection "ith the making oisaid loan, ,hat the total amount of the mortgagorts current assets should, at all times prior to payment in full of the indebtedness evidenced by the note, exceed the total amount of bor— ro.:er's current liabilities (other than borro.orts indebt edness on account of the loan) be not less than V. 5,000.00; all current 1 assets and/or current liabilities to be determined in accordance eith good accoun ting practice as determined by the Auditing Division Jf the Aeconstructi on Finance Corporation; and your complainants aver that the mortgagor allo.ed its net current as— sets to drop belo-; the sum of $75,000.00, which complainants aver was a breach of the covenants of mortgagor to at all times mainta in said current assets at more than 375,000.00 as provided in its agree:n ent. A copy of said agreement is hereto attached and marked Exhibit "D" nd made fully a p:Irt lereof. 10. Complainhits further aver that default .ias made by the said respondent in th.t, it ;:as one of the conditions impose d in connection Ath http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis the making of said loen un t the borro. r ,ould deposit eel proceeds of said loan and of all advances on account thereoe, in a special account ith a bank or trust company, and would use the eroceeds eeereel only for the pur-oses agreed upon; and complainants aver that one of said conditions eas that an amount should be used for the purchase of addiei ,nel machinery and equipment, ahich should become a part of the security under the terms of said mortgage, and that of said proceeds of said loan ;'586,000.00 should be used for such puroses; and complainants aver that in violatien el such agree— ment by tne mortgagor, tne proceeds ox said loan were not aepositea in a spe— cial account and the 86,000.00 of said proceeds wes not used or the ur ose of purchasing and acquiring addition _I machinery and equipment/ but vas used by the mortgagor for otherpurposes, which complainantaver was in viola— tion of the terms of the agreement between the mortgagor and complainants and constituted _4 default in said mortgage. 11. Your complainants further shoe that default was made by said respondent in that by the terms of paragra)h ten of sA.d mortg,ge the mort— gagor agreed from time to time fortheieh upon the request of the mortgagee, to execute to mortgagee in form satisfactory to mortgagee, any additional or supplemental mortgage or other instrument hich mortgagee ;light deem nec— essary to specifically describe and convey any after—acquir.d :Toperty in— tended to be covered by the mortgage, and complainants aver that the mortgegpr did acquire additional property after the date of the execution of s id mort— gage which was intended to be covered by said mortgage and that complainants did request tne mortgagor to execute an additionel or supplemenual mortgage http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis or other instrument in form furnished to .jne Lortgagor; L:nd compiaihants aver that such request was made on, to—,it, June 27, 1940, ricl th:t .aortga,or has failed or refused to execute and f!trnish same to complainants although re— peatedly requested so to do, all of . hich compldnants aver was a breach of the covew,nts eD,Ited in ..aid mortgage and constitutes a default thereon. 12. Your complainants further aver tn,t after the execution And delivery of the aforesaid note and mortgage to the Reconstruction Fiwaice Corporation, that the Reconstruction iinance Corporation sold and transferred said note -nd mortgage, the debt evidenced and secured thereby and all se— curity therefor, and all documents and agreements in connection therewith to the First National Bank of Bir.Aini;ham, A1baa, ahich bank did thereafter and ')rior to the fill g of this bill, sell to ,he l'ederal "c:eserve Bank of Atia a forty per cent (40) interebt :mu participation in said indebted— ness, the note evideading the erlme and all security therefor, and also did sell to the Reconstruction Fin ,nce Cor)oratdon a fifty per cent (50) interest and p,rticipation in s'ld indebtedness, ,he note evidencing the s_me and all security theref r* and the lirst Natiowd Bank of Birmingham did retain a ten per cent (10%)interest in said indebtedness, he note evidencing the szle and all security therefor, so that the ownership of s id indebtedness, the note evidencing the sale and all security thereof, hs at all times since, to—wit, November 19, 1940, been as follows: http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis Federal ,teserve Bank of Atlanta 40% First National Bank of Bimin,,;ham 10% Aeconstruction Finmce Corporation 50% 13. Complainants further aver that by the terms oi seid note the respondent did agree to p,y all the expenses, including a reasonable attorney's fee, in connection with attempts eo collect the indebtedness secured by said mortgage or the foreclosure thereof, and t'a eu by the terms of said mortgage it is provided th,t if an Attorney is emeloyed to fore— close the mortgage or to collect any indebtedness thereby secured, or to enforce any of the provisions of this mortgage, then in such event, the mortgagor agrees to pay such reasonebee uttorneyle fee as may be incurred by mortgagee for any such services ujd th-t the amount of such attorney's fee ehall become a part of the indebtedness secured by said mortgage and th ,t these provisions shall apply to any proceeding in a Court of Equity or Bankruptcy, or any other Court, as well as under Neer of s.le conee_ned in said mortgage; and compleihants aver te.t it has become necessary and that attorneys have been employed for the purpose of enforcing the collection f sLid indebtedness ,nd loe the pur;,oee of foreclosint said mortga e , and expenses have been incurred in connection thereeith. 7:HEREFORE, THE PR TIES CONSIDERED, the complatiants pray that summons in due form may issue out of this lionorabee Court to the respond— ent, Biralinghem Cotton Uills, Incorporated, requiring ithin the time prescribed by law, to plead, anseer dr demur to this bill ol complaint, that an account may be taken of all property of the respondent h reto subject to the lien of this indendure, includink, the personal ; .•repert, ecquired after the execution of said mortgage, rici intended to beincluded as e _eart of the security thereof; and that such mortgage reAy be decreed to be a valic. first http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis lien upon all and sin, ul.r thereof. Ih%t n account be teeen by ,nd unler the direction of this Honer4bie Court of ;eice is due and oeine, to eace of your said complainants for principal and interest on the indebtedness secured by eaid mortgage and that the amount of said indebtedness be ascertained after alloeing all proper sot -offs thereto, and that this Court determine what is a proper amount to be allo ed to the complainants for its expenditures in connection ith this foreclosure and the proper amount to be paid to complainants' solictors as reasonable uttorney's fees, and th ,t, the said respondent he ordered %nd decreed to pey to your complainants, dehin such reasonable time as shall be fixed by this Court, Ault m y be found due them on the taking of said account as aforesaid, together ith the costs of this suit and the reasonable attorneyls fees ascertained by this Court or in 6fauit thereof, that said real estate and personal property conveyed by said mortgage and other property pledged as additionel security for said indebtedness and all property ascertained by this Court to be subject to the lien of said mortgege ray by the Register of this Court be offered for sale and sold for cash at ublic outcey to the hiehest binder after due notice of the time and place and toms of said sale have been given and ubliched in ,ccordance with the decree of this Court, and tht it be decreed tei .t the compl,inants, or either of them, may become the purchaser of said property if the hi,hest bidder therefor at said sale, and that if said complainants, or either of them, should become such purchaser that they be permitted us a credit on such purchase price the amount ascertained to be due to the complainants or the particular complainant ehich mAy become the purchaser thereof. http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis —10— Your complainants further pray that in the event of the sale of aid property in accordance pith the terms of the decree of this courts such property should nDt bring the amount decreed to be owing to complAinantss trr,t tnen a juaEment be entered against tne respondence ior any aeliciency nd th t execution may be issued ac,,inst the said respondent for the satis— faction of the remainers if :nys due to compiainantss together costs which rezdn unsatisfied after the application o3 ith the the proceeds of the sale thereon. Complainants pray for such others further, .nd different relief as in equity they may be entitled. RECASTRUCTION FINANCE CORPORATION BY FEDERAL, RESERVE BANK OF ATLANTA, By THE FIRST NATIOiAL BAIA OF BIILIINGHAM, By Bennerss Burr, :AcKamy & Forman 11rris & Brown Of Counsel http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis http://fraser.stlouisfed.org Federal Reserve Bank of St. Louis