In the Matter of Beverly Hills Bancorp, a California Corporation, Debtor. Commercial Paper Holders v. R. W. Hine, Trustee of Beverly Hills Bancorp

This is an appeal from an order of the district court affirming the bankruptcy court’s order determining the amount of appellants’ claim against the bankruptcy estate of Beverly Hills Bancorp (“Bancorp”). Appellants (hereafter “commercial paper holders” or “CPH”) are a certified class of approximately 225 holders of Bancorp’s commercial paper.

Bancorp owned essentially all of the issued and outstanding shares of Beverly Hills National Bank (“the Bank”). In the early 1970’s, Bancorp made a series of loans that were financed by issuing term notes, or commercial paper. Bancorp sold the commercial paper to appellants, all customers of Beverly Hills National Bank, without registration under the Securities Act of 1933.

In 1973 Bancorp defaulted on the commercial paper. Thereafter a class action was brought on behalf of the CPH, alleging fraud and various Securities Act violations and seeking full recovery from the Bank for the approximately $12,500,000 paid out by the CPH.

In January 1974, the Bank’s assets were sold to Wells Fargo Bank for $12,200,000, thus establishing the Bank Fund. The Bank was placed under a conservatorship, with the Chief Counsel of the Comptroller of the…