§ 58-30-150. Voidable preferences and liens.
§58‑30‑150. Voidable preferences and liens.
(a) A preference is atransfer of any of the property of an insurer to or for the benefit of acreditor, for or on account of an antecedent debt, made or suffered by theinsurer within one year before the filing of a successful petition forliquidation under this Article, the effect of which transfer may be to enablethe creditor to obtain a greater percentage of this debt than another creditorof the same class would receive. If a liquidation order is entered while theinsurer is already subject to a rehabilitation order, then such transfers shallbe deemed to be preferences if made or suffered within one year before thefiling of the successful petition for rehabilitation, or within two yearsbefore the filing of the successful petition for liquidation, whichever time isshorter. Any preference may be avoided by the liquidator if:
(1) The insurer wasinsolvent at the time of the transfer;
(2) The transfer wasmade within four months before the filing of the petition;
(3) The creditorreceiving it or to be benefited thereby or his agent acting with referencethereto had, at the time the transfer was made, reasonable cause to believethat the insurer was insolvent or was about to become insolvent; or
(4) The creditorreceiving it was an officer, or any employee, attorney, or other person who wasin fact in a position of comparable influence in the insurer to an officer,whether or not he held such position, or any shareholder holding directly orindirectly more than five percent (5%) of any class of any equity securityissued by the insurer, or any other person, firm, corporation, association, oraggregation of persons with whom the insurer did not deal at arm's length.
Where the preference is voidable,the liquidator may recover the property or, if it has been converted, its valuefrom any person who has received or converted the property; except where a bonafide purchaser or lienor has given less than fair equivalent value, he shallhave a lien upon the property to the extent of the consideration actually givenby him. Where a preference by way of lien or security title is voidable, theCourt may on due notice order the lien or title to be preserved for the benefitof the estate, in which event the lien or title shall pass to the liquidator.
(b) A transfer ofproperty other than real property shall be deemed to be made or suffered whenit becomes so far perfected that no subsequent lien obtainable by legal orequitable proceedings on a simple contract could become superior to the rightsof the transferee. A transfer of real property shall be deemed to be made orsuffered when it becomes so far perfected that no subsequent bona fidepurchaser from the insurer could obtain rights superior to the rights of thetransferee. A transfer that creates an equitable lien shall not be deemed tobe perfected if there are available means by which a legal lien could becreated. 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. The provisions of this subsection apply whether or notthere are or were creditors who might have obtained liens or persons who mighthave become bona fide purchasers.
(c) A lien obtainableby legal or equitable proceedings upon a simple contract is one arising in theordinary course of such proceedings upon the entry or docketing of a judgmentor decree, or upon attachment, garnishment, execution, or like process, whetherbefore, upon, or after judgment or decree and whether before or upon levy. Itdoes not include liens that under applicable law are given a special priorityover other liens that are prior in time. A lien obtainable by legal orequitable proceedings could become superior to the rights of a transferee, or apurchaser could obtain rights superior to the rights of a transferee within themeaning of subsection (b) of this section, if such consequences would followonly from the lien or purchase itself, or from the lien or purchase followed byany step wholly within the control of the respective lienholder or purchaser,with or without the aid of ministerial action by public officials. Such a liencould not, however, become superior and such a purchase could not createsuperior rights for the purpose of subsection (b) of this section through anyacts subsequent to the obtaining of such a lien or subsequent to such apurchase that require the agreement or concurrence of any third party or thatrequire any further judicial action or ruling.
(d) A transfer ofproperty for or on account of a new and contemporaneous consideration that isdeemed under subsection (b) of this section to be made or suffered after thetransfer because of delay in perfecting it does not thereby become a transferfor or on account of any antecedent debt if any acts required by the applicablelaw to be performed in order to perfect the transfer as against liens or bonafide purchasers' rights are performed within 21 days or any period expresslyallowed by the law, whichever is less. A transfer to secure a future loan, ifsuch a loan is actually made, or a transfer that becomes security for a futureloan, shall have the same effect as a transfer for or on account of a new andcontemporaneous consideration.
(e) If any lien deemedto be voidable under subdivision (a)(2) of this section has been dissolved bythe 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 thisArticle that results in a liquidation order, the indemnifying transfer or lienshall also be deemed to be voidable.
(f) The propertyaffected by any lien deemed to be voidable under subsections (a) and (e) ofthis section shall be discharged from such lien, and that property and any ofthe indemnifying property transferred to or for the benefit of a surety shallpass to the liquidator; except that the Court may on due notice order any suchlien to be preserved for the benefit of the estate, and the Court may directthat such conveyance be executed as may be proper or adequate to evidence thetitle of the liquidator.
(g) The Court shallhave summary jurisdiction of any proceeding by the liquidator to hear anddetermine the rights of any parties under this section. Reasonable notice ofany hearing in the proceeding shall be given to all parties in interest,including the obligee of a releasing bond or other like obligation. Where anorder is entered for the recovery of indemnifying property in kind or for theavoidance of an indemnifying lien, the Court, upon application of any party ininterest, shall in the same proceeding ascertain the value of the property orlien. If such value is less than the amount for which the property isindemnity or than the amount of the lien, the transferee or lienholder mayelect to retain the property or lien upon payment of its value, as ascertainedby the Court, to the liquidator, within such reasonable times as the Courtshall fix.
(h) The liability ofthe surety under a releasing bond or other like obligation shall be dischargedto the extent of the value of the indemnifying property recovered or theindemnifying lien nullified and avoided by the liquidator; or where theproperty is retained under subsection (g) of this section to the extent of theamount paid to the liquidator.
(i) If a creditor hasbeen preferred and afterward in good faith gives the insurer further credit,without security of any kind, for property that becomes a part of the insurer'sestate, the amount of the new credit remaining unpaid at the time of thepetition may be set off against the preference that would otherwise berecoverable from him.
(j) If an insurer,within four months before the filing of a successful petition for liquidationunder this Article, or at any time in contemplation of a proceeding toliquidate it, directly or indirectly pays money or transfers property to anattorney at law for services rendered or to be rendered, such transactions maybe examined by the Court on its own motion or on petition of the liquidator,and shall be held valid only to the extent of a reasonable amount to bedetermined by the Court. Any excess may be recovered by the liquidator for thebenefit of the estate; provided that where the attorney is in a position ofinfluence in the insurer or an affiliate thereof, payment of any money or thetransfer of any property to the attorney at law for services rendered or to berendered shall be governed by the provision of subdivision (a)(4) of thissection.
(k) Every officer,manager, employee, shareholder, member, subscriber, attorney, or any otherperson acting on behalf of the insurer who knowingly participates in giving anypreference, when he has reasonable cause to believe the insurer is or is aboutto become insolvent at the time of the preference, shall be personally liableto the liquidator for the amount of the preference. It is permissible to inferthat there is a reasonable cause to so believe if the transfer was made withinfour months before the date of filing of the successful petition forliquidation. Every person receiving any property from the insurer or thebenefit thereof as a preference voidable under subsection (a) of this sectionshall be personally liable therefor and shall be bound to account to theliquidator. Nothing in this subsection prejudices any other claim by theliquidator against any person. (1989, c. 452, s. 1.)