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FENSTERMACHER v. PHILADELPHIA NATL. BANK

November 20, 1972

R. Glen FENSTERMACHER
v.
PHILADELPHIA NATIONAL BANK and Carson Investment Company


John Morgan Davis, District Judge.


The opinion of the court was delivered by: DAVIS

JOHN MORGAN DAVIS, District Judge.

 PNB had made a loan in which the shares of Fidelity were used as collateral. The obligors were having difficulty in making the required payments. The payments were due in February, 1972 and PNB gave them a thirty day extension. In August, 1972 PNB demanded payment and the obligors did not make the required payment. Finally, in the early part of October, 1972, PNB advised the obligors that they would sell the stock pursuant to their rights as a secured creditor.

 There had been some inquiry by CICO to Charles Pancoast, Senior Vice-President of PNB, on September 28, 1972 as to the purchase of the stock for $38.00 a share. However, Mr. Pancoast told CICO that they would have to contact the obligors of the loan. On October 26, 1972 the bank decided that they would sell the stock. The bank had received a list of ten to fifteen names of possible purchasers from one of the obligors' attorney. The bank sent out a letter which listed the conditions of the sale (P-1) dated October 26, 1972 to the plaintiff, CICO and other individuals. The conditions of the letter were as follows:

 
October 26, 1972
 
CONDITIONS OF PROPOSED PRIVATE SALE OF 21,600 SHARES OF THE CAPITAL STOCK OF FIDELITY NATIONAL BANK OF PA.
 
To Those Interested in the Proposed Private Sale by the Philadelphia National Bank of 21,600 Shares of the Capital Stock of Fidelity National Bank of Pa., Williamsport, Pa. . .
 
You are hereby notified of the following conditions to be observed in connection with the proposed private sale by this Bank of the collateral pledged with it under a certain loan of February 25, 1971, being 21,600 shares of the capital stock of Fidelity National Bank of Pa.:
 
1. This Bank will entertain sealed bids for the purchase of the shares. All such bids must be received at the desk of Charles E. Pancoast, III, Senior Vice-President, at the Main Office of this Bank, Broad and Chestnut Streets, Philadelphia, not later than noon on Thursday, November 9, 1972.
 
2. No bid for less than all of the 21,600 shares will be entertained.
 
3. All sealed bids must be accompanied by a certified check payable to the order of this Bank in the amount of 10% of the bid. Said amount will constitute partial payment if the bid is accepted and the purchase completed; will be returned if the bid is not accepted; and will be retained by this Bank as liquidated damages in the event that the bid is accepted but the bidder fails to complete his purchase in accordance with these conditions of sale.
 
4. The high bidder meeting the foregoing conditions will, subject to paragraph 8 below, be promptly notified of acceptance of the bid; whereupon the remainder of the purchase price will be payable by receipt at this Bank as aforesaid, within five business days after such notification is given to the successful bidder, of a certified check payable to the order of this Bank in the amount of the unpaid balance.
 
5. Consummation of the contract of sale will be made immediately upon receipt of the full bid price by delivery of the single stock certificate for 21,600 shares and a blank stock power executed by all five registered owners of the stock, but without delivery of a bill of sale, without guarantee of signatures, without payment of any transfer or other tax, and without representation or warranty by this Bank. Reference is made to the Uniform Commercial Code (Sections 8-301 and 9-504) for a statement as to the rights received by the purchaser and the discharge of the security interest of this Bank.
 
6. In accordance with the terms of the agreement between this Bank and its borrowers in the loan for repayment of which the stock has been pledged, this Bank has given notice to Fidelity National Bank of Pa. that this Bank has exercised its right to vote the shares. Should there be a meeting of the shareholders of Fidelity National Bank of Pa. for which the record date for determination of shareholders entitled to vote is a date prior to that of registration of the shares on the records of Fidelity National Bank of Pa. in the name of the successful bidder, this Bank will execute a proxy in favor of or in accordance with the written directions of the purchaser, provided that the purchaser has completed his purchase and received delivery of the shares as mentioned above.
 
7. By the act of submitting a bid the bidder waives any right to a statement by this Bank of such knowledge as this Bank may have concerning Fidelity National Bank of Pa.
 
8. This Bank reserves the right to waive any irregularity in a bid and to reject any and all bids submitted to it.
 
9. All bids shall be submitted by filling in the appropriate blanks below and signing the form in which they appear.
 
THE PHILADELPHIA NATIONAL BANK
 
[(sgd). Charles E. Pancoast ]
 
Senior Vice ...

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