154 the Institute of its buildings and permit it to exist only as a tenant . 2. The Board, following the practice of all important corporations, would elect to place its property - un-der the protection of the Federal court, under a . statute which permits the operation of the School, both in California and China, looking forward to a complete restoration with the return •.)f prosperity. " In June, 1938, the Board, being convinced this petition was the best route, authorized the School's attorney to file all papers necessary to the petition under the Statues. Another development which occurred, however, caused the Board to choose to work through a voluntary re-organization plan was that if it failed, they would then authorize the signing of all the necessary papers for bankruptcy under Title 77B. Amidst all this, the banks holding the mortgages saw foreclosure as their only means of protecting their investments. Consequently, they filed the necessary papers with the Court and served the papers on Biola . A large sign was then posted on the front of the buildings announcing their sale at public auction on August 5, 1938. Never had the Board been faced with this type of situation. They must now find a plan satisfactory to Biola's creditors for refinancing the School's indebtedness or close the doors of Biola forever . The first action of the Board to deal with this crisis was the appoint- ment of a Spec i al Committee, headed by Dr. Talbot, to negotiate with the representatives of the Farmers and Merchants Bank, which held the Second Mortgage in the amount $274,000 . If satisfactory arrangements could be made , then the Committee would approach the Security First National Bank to ar- range to refinance the First Mortgage. In such circumstances, this took courage, but the Committee went trusting God to help them with a solution to their problems . After a long session the representatives of the Bank finally agreed to accept $25,000 in cash, plus the 4,000 shares of Union Oil Company stock,
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