by Paul R. Spitzzeri
After the shock of the Temple and Workman bank inventory and the obvious result of the creditors’ meeting being that the bank would not be thrown into bankruptcy, but go into assignment, the work of assignees Edward F. Spence and Daniel Freeman, with support from a creditors’ committee, began.
This largely meant trying to collect on the outstanding loans, overdrafts and other instruments owed to the bank and, if necessary, to file lawsuits to compel repayment. Meanwhile, the loan from Elias J. “Lucky” Baldwin remained in force, with interest accumulating. It also involved trying to realize funds from the rental or sale of whatever property of Temple and Workman not subject by mortgage to the Baldwin loan.
As to what transpired in the press, battle lines were drawn between the Los Angeles Herald (once part-owned by bank president F.P.F. Temple) and the Los Angeles Express. On the 18th, the latter carried a lengthy article on “The Assignment vs. Bankruptcy.” The piece began with:
The great public interest taken in the assignment of the Messrs. Temple & Workman invests with a factitious importance the frantic efforts of the Herald to have the estate thrown into bankruptcy. That paper is now discussing the matter with a febrile vehemence and a personality which are inseparable from all its journalistic efforts.
The Express, whose owners were, in fact, debtors to the bank, as pointed out in an earlier post, claimed that “the assignees, inspired by a genuine and commendable sympathy with the creditors . . . have determined to get something like a fair rental for the several properties of Mr. Temple which have come into their hands..”
With a jab at its rival sheet, the paper noted that “the manager of the Herald was accordingly notified by the proper persons that he could not longer occupy the fine property adjoining the Postoffice at the merely nominal rent of $80 per month, but must hereafter pay $125 a month.” Temple owned both the post office building and the one occupied by the Herald on the west side of Spring Street across from the Temple Block, where the failed bank had been located.
According to the Express, the response of the Herald to the rent increase was “that if this were done he would fight the assignees and throw, or do this best to throw, the estate into bankruptcy.” Moreover, the article went on,
The thunderbolts have the Herald have fallen, and the assignees and the public have been duly appalled at the explosion. The detonation of a pop-gun, or the crackle of popcorn on a hot shovel, are the only parallels for the effect produced.
Moving to the topic of “Why The Assignment Is Preferable to Bankruptcy,” the Express argued that most creditors believed “that very little ever comes from an estate which is thrown into bankruptcy.” It went on to suggest that, if bankruptcy was filed and accepted by the court in San Francisco, it would require the assignees to be from that city and for any proceeds derived from the sale of property to go into a designated bank, namely the Bank of California, according to the Express. The paper then gave this example:
Thus, if the Puente Ranch [actually Workman’s remaining 18,000 or so acres of it] were sold tomorrow for $500,000, that sum would simply be bodily withdrawn from circulation in Los Angeles, and carried up to San Francisco, increasing disastrously the present stringency in the money market in Los Angeles.
Continuing with the argument, the paper claimed that, under bankruptcy law, “the assignee . . . could direct a sale . . . of the Puente or other valuable property, and make the place of venue the Court House steps, in San Francisco, assuring the property’s going for nothing, and keeping what it did bring out of the County, for a time, at least.”
Additionally, property sold under bankruptcy had to go to public auction instead of a “private negotiation to obtain a fair price for the property.” Then, claims of existing persons who’d already filed suits against the bank and its owners “would be preferred claims, entitled to be paid in full before the other creditors could get a dollar of their just dues.”
The Express went on to say
that the claims for homestead exemptions of both the Messrs. Temple & Workman [for their homes and surrounding acreage (100 for Workman, 50 for Temple)] were filed the day after [italics original] their assignment, thus depriving those gentlemen of the ability to reserve to themselves anything whatever. Under the present assignment the creditors get the benefit of the whole property of these gentlemen without any reservation.
Finally, the paper concluded, any costs incurred in the assignment process would be spent in Los Angeles along with any proceeds derived from the actions of the assignees with respect to debts and rented or sold property.
Returning to the question of the Workman share of Rancho La Puente, the Express reported that
We happen to know that the assignees now have an offer of $450,000 for 17,000 acres of the Puente Ranch, exclusive of the residence of Mr. Workman, and of the 1,000 acres which immediately surround it. These last would sell for $30,000.
If, however, bankruptcy was in force, the paper averred, “this ranch might be put up for sale at an inauspicious moment and knocked down for $5 an acre.” Yet, Freeman and Spence, assisted by the advisory committee of creditors, “are in the best possible position to obtain the largest possible result for the creditors.”
Because of these arguments, the Express claimed, only “one fourth of the creditors in number and one third in amount [are willing] to petition the throw the estate into bankruptcy.” Instead, “the great majority . . . join heartily in the movement to get the best possible outcome from the superb Temple & Workman estate.”
Evidently, there were rumors “that the Messrs. Temple & Workman have property which has not gone into the inventory,” but the paper refuted these by noting that Spence and Freeman “employed experts to go all over the books and to search the records exhaustively.” The result was that there not a “sliver of their property, real, personal, or mixed” left out.
The Express ended its lengthy discussion by stating that the creditors made the wise choice in continuing with an assignment. After all, it asked:
Should a bankruptcy sale take place at which the Puente ranch, for instance, should sell for $5 or $10 an acre, where would real estate values in Los Angeles be? They would at one go down below zero.
To the paper, those who advocated bankruptcy were “destructionists” and it concluded the piece by stating, “we are pretty confident that the whole community now regard them as such, and commend our selection of the phrase.”
There are a couple of points to raise about the article. First, while the statement that $480,000 was offered for Workman’s share of Rancho La Puente was a far cry for the inventory’s valuation of that property at $720,000, the economy was in a depressed state. Moreover, as a mortgaged asset, the ranch would only be available for sale if the loan was paid off. Recall in the last post that it was stated Baldwin would accept an early payoff of the principal with a year’s interest.
As to the paper’s insistence that proceedings in San Francisco would be to the detriment of Los Angeles creditors, it would appear that the depositing of funds in a Bay Area bank would be somewhat temporary and perhaps not as dire as portrayed by the Express. It is also questionable as to whether a “superb” property like Workman’s portion of La Puente would automatically be sold at far less the market rate at a public auction as opposed to a private sale.
In any event, the Herald had a much briefer response in its edition of 20 February 1876 and we’ll pick up that part of the story in the next post.