40-3631. Transfer of property; preferences; rights of parties; jurisdiction of district court of Shawnee county.
40-3631
40-3631. Transfer of property; preferences; rights of parties;jurisdiction of district court of Shawnee county.(a) (1) A preference is a transfer of any of the property of aninsurer to or for the benefit of a creditor, for or on account of an antecedentdebt, made or suffered by the insurer within one year before the filing of asuccessful petition for liquidation under this act, the effect of whichtransfer may be to enable the creditor to obtain a greater percentage of thisdebt than another creditor of the same class would receive. If a liquidationorder is entered while the insurer is already subject to a rehabilitationorder, then such transfers shall be deemed preferences if made or sufferedwithin one year before the filing of the successful petition forrehabilitation, or within two years before the filing of the successfulpetition for liquidation, whichever time is shorter.
(2) Any preference may be avoided by the liquidator if:
(A) The insurer was insolvent at the time of the transfer;
(B) the transfer was made within four months before the filing of thepetition;
(C) the creditor receiving the preference or to be benefited thereby or thecreditor'sagent acting with reference thereto had, at the time when the transfer wasmade, reasonable cause to believe that the insurer was insolvent or was aboutto become insolvent; or
(D) the creditor receiving the preference was an officer, or any employee orattorney orother person who was in fact in a position of comparable influence with theinsurer to an officer whether or not such creditor held such position, or anyshareholder holding directly or indirectly more than 5% of any class of anyequity security issued by the insurer, or any other person, firm, corporation,association, or aggregation of persons with whom the insurer did not deal atarm's length.
(3) Where the preference is voidable, the liquidator may recover theproperty or, if it has been converted, its value from any person who hasreceived or converted the property, except where a bona fide purchaser orlienor has given less than fair equivalent value, such person shall have a lienupon the property to the extent of the consideration actually given. Where apreference by way of lien or security title is voidable, the court may on duenotice order the lien or title to be preserved for the benefit of the estate,in which event the lien or title shall pass to the liquidator.
(b) (1) A transfer of property other than real property shall be deemed tobe made or suffered when such transfer becomes so far perfected that nosubsequent lienobtainable by legal or equitable proceedings on a simple contract could becomesuperior to the rights of the transferee.
(2) A transfer of real property shall be deemed to be made or suffered whensuch transfer becomes so far perfected that no subsequent bona fide purchaserfrom theinsurer could obtain rights superior to the rights of the transferee.
(3) A transfer which creates an equitable lien shall not be deemed to beperfected if there are available means by which a legal lien could be created.
(4) A transfer not perfected prior to the filing of a petition forliquidation shall be deemed to be made immediately before the filing of thesuccessful petition.
(5) The provisions of this subsection apply whether or not there are, orwere,creditors who might have obtained liens or persons who might have become bonafide purchasers.
(c) (1) A lien obtainable by legal or equitable proceedings upon a simplecontract is one arising in the ordinary course of such proceedings upon theentry or docketing of a judgment or decree, or upon attachment, garnishment,execution or like process, whether before, upon, or after judgment or decreeand whether before or upon levy. It does not include liens which underapplicable law are given a special priority over other liens which are prior intime.
(2) A lien obtainable by legal or equitable proceedings could becomesuperior to the rights of a transferee, or a purchaser could obtain rightssuperior to the rights of a transferee within the meaning of subsection (b), ifsuch consequences would follow only from the lien or purchase itself, or fromthe lien or purchase followed by any step wholly within the control of therespective lienholder or purchaser, with or without the aid of ministerialaction by public officials. Such a lien could not, however, become superiorand such a purchase could not create superior rights for the purpose ofsubsection (b) through any actions subsequent to the obtaining of such a lienor subsequent to such a purchase which requires the agreement or concurrence ofany third party or which require any further judicial action or ruling.
(d) A transfer of property for or on account of a new and contemporaneousconsideration which is deemed under subsection (b) to be made or suffered afterthe transfer because of delay in perfecting such transfer does not therebybecome atransfer for or on account of an antecedent debt if any acts required by theapplicable law to be performed in order to perfect the transfer as againstliens or bona fide purchasers' rights are performed within 21 days or anyperiod expressly allowed by law, whichever is less. A transfer to secure afuture loan, if such a loan is actually made, or a transfer which becomessecurity for a future loan, shall have the same effect as a transfer for or onaccount of a new and contemporaneous consideration.
(e) If any lien deemed voidable under subsection (a)(2) has been dissolvedby the furnishing of a bond or other obligation, the surety on which has beenindemnified directly or indirectly by the transfer of or the creation of a lienupon any property of an insurer before the filing of a petition under this actwhich results in a liquidation order, the indemnifying transfer or lien shallalso be deemed voidable.
(f) The property affected by any lien deemed voidable under subsections (a)and (e) shall be discharged from such lien, and that property and any of theindemnifying property transferred to or for the benefit of a surety shall passto the liquidator, except that the court may on due notice order any such liento be preserved for the benefit of the estate and the court may direct thatsuch conveyance be executed as may be proper or adequate to evidence the titleof the liquidator.
(g) The district court of Shawnee county shall have summary jurisdiction ofany proceeding by the liquidator to hear and determine the rights of anyparties under this section. Reasonable notice of any hearing in the proceedingshall be given to all parties in interest, including the obligee of a releasingbond or other like obligation. Where an order is entered for the recovery ofindemnifying property in-kind or for the avoidance of an indemnifying lien, thecourt, upon application of any party in interest, shall in the same proceedingascertain the value of the property or lien, and if the value is less than theamount for which the property is indemnity or than the amount of the lien, thetransferee or lienholder may elect to retain the property or lien upon paymentof its value, as ascertained by the court, to the liquidator, within suchreasonable times as the court shall fix.
(h) The liability of the surety under a releasing bond or other likeobligation shall be discharged to the extent of the value of the indemnifyingproperty recovered or the indemnifying lien nullified and avoided by theliquidator, or where the property is retained under subsection (g) to theextent of the amount paid to the liquidator.
(i) If a creditor has been preferred, and afterward in good faith gives theinsurer further credit without security of any kind, for property which becomesa part of the insurer's estate, the amount of the new credit remaining unpaidat the time of the petition may be setoff against the preference which wouldotherwise be recoverable.
(j) If an insurer shall, directly or indirectly, within four months beforethe filing of a successful petition for liquidation under this act, or at anytime in contemplation of a proceeding to liquidate such insurer, pay money ortransferproperty to an attorney-at-law for services rendered or to be rendered, thetransactions may be examined by the court on its own motion or shall beexamined by the court on petition of the liquidator and shall be held validonly to the extent of a reasonable amount to be determined by the court, andthe excess may be recovered by the liquidator for the benefits of the estateprovided that where the attorney is in a position of influence with the insureror an affiliate thereof payment of any money or the transfer of any property tothe attorney-at-law for services rendered or to be rendered shall be governedby the provision of subsection (a)(2)(D).
(k) (1) Every officer, manager, employee, shareholder, member, subscriber,attorney or any other person acting on behalf of the insurer who knowinglyparticipates in giving any preference when such person has reasonable cause tobelieve the insurer is or is about to become insolvent at the time of thepreference shall be personally liable to the liquidator for the amount of thepreference. It is permissible to infer that there is a reasonable cause to sobelieve if the transfer was made within four months before the date of filingof this successful petition for liquidation.
(2) Every person receiving any property from the insurer or the benefitthereof as a preference voidable under subsection (a) shall be personallyliable therefor and shall be bound to account to the liquidator.
(3) Nothing in this subsection shall prejudice any other claim by theliquidator against any person.
History: L. 1991, ch. 125, § 27; July 1.