Causey v. Cannon Sur., LLC

• Decision Date: 07 January 2020
• Docket Number: No. COA19-27,COA19-27
• Citation: 837 S.E.2d 414,269 N.C.App. 134
• Parties: Mike CAUSEY, Commissioner of Insurance of North Carolina, Petitioner, v. CANNON SURETY, LLC, a North Carolina Limited Liability Company, Respondent. Mark L. Bibbs, Attorney At Law d/b/a Bibbs Law Group, Plaintiff, v. Cannon Surety, LLC, a North Carolina Limited Liability Company, Defendant.
• Court: North Carolina Court of Appeals

269 N.C.App. 134

837 S.E.2d 414

Mike CAUSEY, Commissioner of Insurance of North Carolina, Petitioner,

v.CANNON SURETY, LLC, a North Carolina Limited Liability Company, Respondent.

Mark L. Bibbs, Attorney At Law d/b/a Bibbs Law Group, Plaintiff,

v.Cannon Surety, LLC, a North Carolina Limited Liability Company, Defendant.

No. COA19-27

Court of Appeals of North Carolina.

Filed: January 7, 2020

Bibbs Law Group of North Carolina, Raleigh, by Mark L. Bibbs, for Plaintiff-Appellant.

Attorney General Joshua H. Stein, by Special Deputy Attorney General Daniel S. Johnson, Special Deputy Attorney General M. Denise Stanford, and Assistant Attorney General Heather H. Freeman, for Petitioner-Movant-Appellee and Respondent-Defendant-Appellee in Rehabilitation.

COLLINS, Judge.

Attorney Mark L. Bibbs ("Bibbs") appeals from orders granting motions filed by Commissioner of Insurance Mike Causey ("Commissioner") to strike a confession of judgment against Cannon Surety, LLC ("Cannon") in favor of Bibbs for $227,850.50 plus 8% interest, arising from Cannon's breach of contract to pay for Bibbs’ legal services. The confession of judgment violated an existing seizure order entered under the North Carolina Captive Insurance Act, and it was void. Accordingly, we affirm the trial court's orders.

I. Statutory Background: North Carolina Captive Insurance Act

A captive insurance company is "an insurance company that is owned by another organization and whose exclusive purpose is to insure risks of the parent organization and affiliated companies." N.C. Gen. Stat. § 58-3-165 (2018). Captive insurance companies must be licensed, must meet certain capital and surplus requirements, and must file annual reports to the Commissioner. N.C. Gen. Stat. §§ 58-10-345, -370, -405(b), -415 (2018). A captive insurance company failing to meet these requirements may be subject to seizure, rehabilitation, and liquidation by the Commissioner of Insurance. N.C. Gen. Stat. §§ 58-10-475, 58-30-1 to -310 (2018).

To initiate seizure, the Commissioner must file a petition in Wake County Superior Court requesting a formal delinquency proceeding, after which the trial court may issue an ex parte seizure order directing the Commissioner to

take possession and control of all or a part of the property, books, accounts, documents, and other records of an insurer, ... and that, until further order of the Court, enjoins the insurer and its officers, managers, agents, and employees from disposing of its property and from transacting its business except with the written consent of the Commissioner.

N.C. Gen. Stat. § 58-30-65(b) (2018).

To initiate rehabilitation, the Commissioner must petition the court on one or more specified grounds. N.C. Gen. Stat. § 58-30-75 (2018). If granted, a rehabilitation order appoints the Commissioner as the rehabilitator and directs the Commissioner to "take possession of the assets of the insurer and to administer them under the general supervision of the Court." N.C. Gen. Stat. § 58-30-80 (2018). As the rehabilitator, the Commissioner has "all the powers of the directors, officers, and managers, whose authority shall be suspended" and has broad powers to "take such action as he considers necessary or appropriate to reform and revitalize the insurer." N.C. Gen. Stat. § 58-30-85(c) (2018).

II. Factual and Procedural History

Cannon was a licensed special purpose captive insurance company. Accordingly, Cannon was governed by the requirements set forth in the North Carolina Captive Insurance Act, N.C. Gen. Stat. §§ 58-10-335 to -655, and regulated by the Department of Insurance, which included oversight and enforcement by the Commissioner. Cannon's license permitted it to transact insurance for judicial appearance bonds written by or on behalf of the members of its parent company, Premier Judicial Consultants, LLC.

On 27 September 2017, the Commissioner filed a verified petition in Wake County Superior Court requesting a seizure order, an order of rehabilitation, an order appointing a receiver, and injunctive relief against Cannon. This filing commenced case number 17 CVS 11692 (the "Insurance Action"). On that day, the trial court entered a 60-day seizure order and an injunction as follows:

SEIZURE ORDER

1. Pursuant to the provisions of N.C. Gen. Stat. § 58-30-65, Mike Causey, in his capacity as Commissioner of Insurance of the State of North Carolina, is HEREBY ORDERED to take possession and control of all the property, books, accounts, documents, and other records of [Cannon], and of the premises occupied by it for transaction of its business.

2. The Commissioner is hereby authorized, empowered and directed to take into his possession and control all property, stocks, bonds, securities, bank accounts, savings accounts, monies, accounts receivable, books, papers, records, data bases, printouts and computations, ... and all other assets of any and all kinds and nature whatsoever belonging to [Cannon], wherever located, and to conduct [Cannon's] business and administer [Cannon's] assets and affairs.

INJUNCTION AGAINST INTERFERENCE WITH COMMISSIONER

3. Until further Order of this Court, [Cannon], its trustees, officers, directors, agents, employees, third party administrators, and all other persons with notice of this Order are hereby ENJOINED and RESTRAINED from the disposition, waste or impairment of any of [Cannon's] property, assets, or records, and said persons are enjoined from transacting [Cannon's] business except with the written consent of the Commissioner. All such persons are hereby ORDERED to surrender to the Commissioner any and all property or records of [Cannon] in their custody or control, wherever situated.

4. Until further order of this Court, [Cannon], its officers, managers, agents, employees, and third party administrators are hereby ENJOINED and RESTRAINED from interfering in any manner with the Commissioner in the exercise of his duties.

5. All persons, firms and corporations with notice of the Court's Order are hereby enjoined from obtaining preferential payments or transfers against [Cannon] or its assets.

6. This Seizure Order shall be effective, unless otherwise extended, for sixty (60) days from the date of this Seizure Order, which is the period the undersigned considers necessary for the Commissioner to ascertain the condition of the insurer.

As counsel for Cannon, Bibbs filed a motion requesting review, relief, and dissolution of the seizure order, followed by an emergency motion asking the trial court to stay enforcement of and set aside the seizure order. The Commissioner filed a motion for partial summary judgment, seeking to be appointed rehabilitator of Cannon. The trial court extended the seizure order until the latter of a ruling on the Commissioner's partial summary judgment motion or 28 December 2017. The Commissioner served Bibbs, as counsel for Cannon, with the extension of the seizure order on 17 November 2017.

On 15 December 2017, Bibbs moved to withdraw as counsel of record for Cannon, on the ground that Cannon had failed to pay Bibbs for legal representation in the Insurance Action. The trial court granted the motion that day.

On 18 December 2017, Bibbs filed a confession of judgment as a plaintiff in Wake County Superior Court, commencing case number 17 CVS 15505 (the "Attorney Action"). The confession of judgment was signed by Dallas R. McClain ("McClain"), President of Cannon, and averred that (1) Cannon breached a contract with Bibbs for legal services by defaulting on payments due; (2) the confession of judgment resulted from settlement negotiations to resolve the balance owed; (3) McClain authorized the entry of judgment against Cannon in favor of Bibbs for $227,850.50 plus 8% interest; (4) Cannon, "through its President and legally authorized officer, Dallas R. McClain, expressly agree[d] to waive any right to a hearing or appeal arising from entry of" the confession of judgment; and (5) the confession of judgment, executed "by its President and legally authorized officer, Dallas R. McClain," should be binding on all future successors in interest of Cannon.

In the Insurance Action, the trial court entered orders in January 2018 granting the Commissioner's motion for partial summary judgment, placing Cannon in rehabilitation, appointing the Commissioner as rehabilitator and receiver of Cannon, and issuing an injunction against Cannon to prevent interference with rehabilitation.

On 6 February 2018, the Commissioner filed motions in the Insurance Action and the Attorney Action to strike the "purported" confession of judgment filed by Bibbs, contending that McClain's act of signing the confession of judgment violated the seizure order and injunction, rendering the confession of judgment void.¹

On 15 March 2018, Bibbs filed motions to intervene and for payment of attorney fees in the Insurance Action. The trial court heard arguments regarding the motions filed by both parties on 21 March 2018. The trial court had show cause orders served on McClain and Bibbs "for interference with this Court's Seizure Order and Extension of the Seizure Order." On 18 April 2018, the trial court entered orders granting the Commissioner's motions to strike the confession of judgment and denying Bibbs’ motions to intervene and for payment of attorney fees in the Insurance Action.

From the 18 April 2018 orders, Bibbs timely filed notice of appeal.²

III. Discussion

Bibbs asserts that the trial court improperly struck the confession of judgment and urges this Court to apply the doctrine of judicial estoppel to reverse the trial court's order.

A. Confession of Judgment

Whether a confession of judgment is void is a question of law, which we review de novo. See Carolina Power & Light Co. v. City of Asheville , 358 N.C. 512, 517, 597 S.E.2d 717, 721 (2004). Under de novo review, we consider the matter anew and freely substitute our own judgment for that of the lower tribunal. State v. Biber , 365 N.C. 162, 168, 712 S.E.2d 874, 878 (2011).

"A...