96 1454 La.App. 1 Cir. 5/9/97, Bayou Contractors, Inc. v. Brown

Decision Date09 May 1997
Citation693 So.2d 1249
Parties96 1454 La.App. 1 Cir
CourtCourt of Appeal of Louisiana — District of US

Lloyd N. Shields and Daniel Lund, III, New Orleans, for Plaintiff-Appellant Bayou Contractors, Inc.

Stephen I. Dwyer, Susanne Cambre and Gregory J. Charles, Metairie, for Defendant-Appellee James H. "Jim" Brown, as Commissioner

of Insurance for the State of Louisiana.

Before GONZALES, KUHN and CHIASSON, 1 JJ.

[96 1454 La.App. 1 Cir. 2] CHIASSON, Judge Pro Tem.

Plaintiff Bayou Contractors, Inc. (Bayou) appeals a judgment rendered by the Nineteenth Judicial District Court in and for the parish of East Baton Rouge in suit number 418,671, which judgment was in favor of defendant, James H. "Jim" Brown as Commissioner of Insurance for the State of Louisiana, (Commissioner), in his capacity as receiver and liquidator of ANA Insurance Group (ANA). We vacate a portion of that judgment, reverse another portion, and remand the matter for further proceedings consistent with this opinion.

FACTS

The essential facts of this litigation involve several dates and events, as follows:

April 24, 1992: Nancy Matherne granted to ANA a mortgage to secure a loan of $150,000 on property that she owned in LaPlace, Louisiana.

May 17, 1993: ANA was liquidated and the Commissioner was named as liquidator.

June 15, 1993: J. Caldarera & Company, Inc. (Caldarera) entered into a contract (apparently unrecorded) with Ms. Matherne for construction of Oaks II Subdivision on the mortgaged property in LaPlace.

November 1993: Bayou, a subcontractor, commenced work at Oaks II, providing labor, materials, equipment and supervision.

May 24, 1994: Ms. Matherne executed a dation en paiement of the LaPlace property to the Commissioner as ANA's liquidator.

July 15, 1994: Bayou filed a lien against Caldarera and Ms. Matherne under the Private Works Act, LSA-R.S. 9:4801 et seq.

September 15, 1994: In Brown v. ANA, suit number 388,758(D), Judge J. Michael McDonald, Nineteenth Judicial District Court, canceled Bayou's lien so the property could be sold; he also ordered $30,000 deposited into the registry of the court from the sales proceeds of the Matherne property. The judgment specified: (1) "This money shall be held in lieu of the said lien." (2) "All parties shall have whatever rights, if any, they had prior to this judgment to assert any claims or defenses, as provided by law." (3) "This matter is hereby continued without date, subject to further order of this Court, for the disposition of any such [96 1454 La.App. 1 Cir. 3] claims and/or defenses." 2 This judgment was not appealed, nor were writs sought by either party.

July 14, 1995: Less than one year subsequent to filing its lien, Bayou filed the instant suit against the Commissioner, suit number 418,671(D) in the Nineteenth Judicial District Court, seeking the principal sum of $22,580 plus interest and costs and any penalties allowed by law. The suit was assigned to Division D, Judge Janice Clark.

January 8, 1996: The Minutes of Court reflect the Commissioner's motion for summary judgment came on for hearing before Judge Janice Clark.

January 16, 1996: The Minutes of Court reflect Judge Janice Clark signed a judgment granting the Commissioner's motion for summary judgment, dismissing Bayou's suit against Brown and ordering the $30,000 deposited into the registry of the court to be released to the Commissioner. (The date written on the judgment is not legible.)

January 17, 1996: Bayou filed a motion for new trial.

March 8, 1996: Bayou filed an "Opposition to Defendant's Motion to Withdraw Funds from the Registry of the Court," which is in the record before us on appeal, although there is no written motion in the record.

April 8, 1996: Bayou's motion for new trial was denied by Judge Janice Clark.

April 26, 1996: Bayou's motion for devolutive appeal was filed and served on opposing counsel.

May 1, 1996: Judge Janice Clark signed an order for devolutive appeal of the January, 1996 judgment(s), with a return date of June 1, 1996.

ASSIGNMENTS OF ERROR

On appeal in suit number 418,671, Bayou asserts that:

1. The trial court erred in finding that under La. R.S. 22:762 the Commissioner had the authority to void Bayou's lien, thereby depriving Bayou of its lien rights and its ability to collect from the proceeds of the sale of the property in question.

2. The trial court erred in its judgment of January 16, 1996 ... in releasing to the Commissioner monies in the registry of the court before ruling on Bayou's motion for new trial and before the expiration of the period for the filing of suspensive appeals.

[96 1454 La.App. 1 Cir. 4] INSURANCE COMPANY INSOLVENCY

In LeBlanc v. Bernard, 554 So.2d 1378, 1382 (La.App. 1st Cir.1989), writ denied, 559 So.2d 1357 (La.1990), this court analyzed Louisiana's regulatory scheme in LSA-R.S. 22:733 et seq., governing insolvent insurance companies as follows:

The Commissioner's function as rehabilitator or liquidator requires, initially, a determination of the assets and liabilities of the insurer. See LSA-R.S. 22:750 (requiring a report to the court reflecting assets and liabilities within a specified time period). The Commissioner's title to property in this capacity is in the nature of a fiduciary holding those assets for the benefit of parties in varied legal relationships to the insurer. See Couch, 2A Couch Cyclopedia of Insurance § 22:45 (Anderson 2d ed. 1984). ... The scheme for liquidation provides that the rights and liabilities of the insurer and its creditors (excepting contingent claims) are fixed upon the entry of the liquidation order. LSA-R.S. 22:738. Thereafter, a time period is set within which claims must be presented. LSA-R.S. 22:748. The priority of claims, including claims by employees for compensation, claims evidenced by written instruments, contingent claims, and secured claims, is set forth by statute. LSA-R.S. 22:746 and 749. The scheme, similar to proceedings in bankruptcy, contemplates the conversion of non-liquid assets into liquid ones, and empowers the Commissioner to void transfers or encumbrances on these assets which frustrate this purpose. LSA-R.S. 22:745 (providing for voiding transfers or liens made within four months of the petition to show cause if a preference to a creditor or policyholder is granted thereby). The marshalling of assets and prioritizing of claims pursuant to this scheme is the exercise of the police power of the State of Louisiana. See Morris v. Jones, 329 U.S. 545, 552-557, 67 S.Ct. 451, 457, 91 L.Ed. 488 (1947).

An integral part of the scheme is distribution of the funds within a reasonable time period, the general rule being that policyholders and general creditors share ratably, and that in the absence of some statutory preference, no preference exists. Couch, supra, 22:79 and 84. LSA-R.S. 22:749(E) recognizes a preference insofar as secured creditors are secured to the extent of their security and become general creditors insofar as the balance (if there remains one). [Emphasis in original.]

The purpose of the regulatory scheme detailed above, including the Uniform Insurers Liquidation Act, codified in LSA-R.S. 22:758 through 22:763, is to prevent those creditors of the insolvent insurer who are better informed than other creditors from obtaining unfair preference and advantage to themselves by instituting attachment or similar proceedings against the property of the insolvent insurer. The Uniform Insurers Liquidation Act insulates the insurer from proceedings initiated before ancillary proceedings are commenced and allows less well-informed creditors to preserve and protect their claims. Equal treatment for all creditors is the lynchpin of the uniform law. See Reynolds v. National Society of Health, [96 1454 La.App. 1 Cir. 5] 595 So.2d 374 (La.App.2d Cir.1992), citing State v. Preferred Accident Insurance Co., 149 So.2d 632 (La.App. 1st Cir.1963).

However, in cases where the Uniform Insurers Liquidation Act does not apply, a seizure by a creditor prior to the appointment of a receiver confers upon the seizing creditor a lien which is preferred over the rights of the receiver as well as those of other creditors. State v. Preferred Accident Insurance Co., 149 So.2d. at 640. It is only where the statute applies that such a preference is specifically proscribed pursuant to LSA-R.S. 22:762. Id. The Louisiana Supreme Court has established the rule that when the Uniform Insurers Liquidation Act is not applicable, deposits in the hands of the state treasurer (or Commissioner) are subject to attachment, garnishment or execution even if instituted during the period four months prior to commencement of delinquency proceedings. Id. at 641. In Martin v. General American Casualty Co., 226 La. 481, 76 So.2d 537 (1954), the court cited and quoted a very early case, In re Bryce Cash Store, Inc., 12 La.App. 365, 124 So. 544, 545, to describe the effect of a receivership, as follows:

The property of the debtor was attached before the receiver was appointed, and the privilege, when recognized by the court, dated back to the service of the writ. Now, was this seizure and the privilege conferred by it divested when the receiver was appointed and took over the property? The answer is, "No."

* * *

The appointment of a receiver sustains the status quo of the corporation, and is meant to preserve and not to cause injury either to the creditors or to the corporation. His taking over of the property brings about no change of title and cannot prejudice the rights of any creditor. He takes the property as he finds it, burdened with all the liens and privileges which affected it in the hands of the corporation, and to the same extent. ... The property was, at the time the receiver was appointed, in the custody of the sheriff, who had taken possession of it under the writ of...

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