Ex parte Serio
Decision Date | 18 June 2004 |
Citation | 893 So.2d 1148 |
Parties | Ex parte Gregory V. SERIO, superintendent of insurance of the State of New York, as rehabilitator of Frontier Insurance Company. (In re Schillinger Place, L.L.C., et al. v. Cay-Chel, Inc., and Frontier Insurance Company). |
Court | Alabama Supreme Court |
W. Steele Holman II of Armbrecht Jackson, LLP, Mobile; and John E. Menechino, Jr., of Smith, Currie & Hancock, LLP, Atlanta, Georgia, for petitioner.
Dennis R. Bailey, James W. Garrett, Jr., and R. Mac Freeman, Jr., of Rushton, Stakely, Johnston & Garret, P.A., Montgomery, for respondents.
Gregory V. Serio, superintendent of insurance of the State of New York, as rehabilitator of Frontier Insurance Company, petitions this Court for a writ of mandamus directing the trial court (1) to issue an injunction staying all claims against Frontier in Schillinger Place, L.L.C., et al. v. Cay-Chel, Inc., et al., a case currently pending in the Mobile Circuit Court, and (2) to permit Serio, as the rehabilitator of Frontier to pursue Frontier's counterclaims in the same case. The plaintiffs, Schillinger Place, L.L.C., Crestview, L.L.C., and the Trotman Company, Inc., in response, argue that this Court should uphold the trial court's decision to place this matter back on its active docket. We grant the petition in part, deny it in part, and issue the writ.
In March 1997, the plaintiffs in the underlying action entered into a contract with Cay-Chel, Inc., for the construction in Mobile, Alabama, of a commercial-development project known as Schillinger Place. In April 1997, the parties entered into another contract for the construction of a commercial-development project known as Crestview Market Place, in Crestview, Florida. For each project Cay-Chel executed with Frontier, a corporation domiciled in New York, both a performance bond and a payment bond. Under the terms of the bonds, Frontier would become responsible for the performance of the construction contracts and for Cay-Chel's debts if Cay-Chel defaulted on its contracts with the plaintiffs.
By December 1997, Cay-Chel was in default on both the Schillinger Place and the Crestview Market Place contracts. The plaintiffs demanded performance by and payment from Frontier; however, the plaintiffs allege, Frontier refused to perform in accordance with the terms of the bonds. In November 1998, the plaintiffs sued Cay-Chel and Frontier in the Mobile Circuit Court. Frontier asserted counterclaims against the plaintiffs, and the parties thereafter engaged in discovery.
During discovery, Frontier became insolvent. On August 27, 2001, a New York state court appointed Gregory V. Serio, the superintendent of insurance of the State of New York, as Frontier's temporary rehabilitator. On September 28, the Mobile Circuit Court placed Schillinger Place on its administrative docket pending a final order from the New York court regarding Frontier's status. On October 15, the New York court issued its permanent "Order of Rehabilitation." That order provided, in relevant part:
Schillinger Place remained on the administrative docket of the Mobile Circuit Court until April 2003, when Frontier moved the court to reinstate Frontier's counterclaims to the court's active docket. In the same motion, Frontier requested that the court continue to stay the plaintiffs' claims against it in the same case. In May, the trial court granted in part and denied in part Frontier's motion and reinstated the entire case to its active trial docket. Frontier then petitioned this Court for the writ of mandamus.
The applicable standard of review for a petition for a writ of mandamus is well settled. In Ex parte Miles, 841 So.2d 242, 243-44 (Ala.2002), we stated:
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(Quoting Ex parte Empire Fire & Marine Ins. Co., 720 So.2d 893, 894 (Ala.1998).) Moreover, "[t]he burden is on the petitioner who seeks a writ of mandamus to show that each element required for issuance of the writ has been satisfied." Ex parte Patterson, 853 So.2d 260, 263 (Ala.Civ.App.2002) (citing Ex parte Consolidated Publ'g Co., 601 So.2d 423 (Ala.1992)).
Frontier argues that it has a clear legal right to have the plaintiffs' claims against it stayed based on Alabama's version of the Uniform Insurers Liquidation Act ("UILA") appearing at §§ 27-32-1(2) through (13); 27-32-4; 27-32-5; and 27-32-15 through -22, Ala.Code 1975. The National Conference of Commissioners on Uniform State Laws drafted the UILA to "resolve some of the complexities of liquidating an insolvent insurance company with assets in multiple states." Levin v. National Colonial Ins. Co., 1 N.Y.3d 350, 356, 806 N.E.2d 473, 476, 774 N.Y.S.2d 465, 468 (2004). Alabama adopted the UILA in 1971 in order "to effectuate its general purpose to make uniform the law of those states that enact it." § 27-32-22(b). New York has also adopted the UILA and is therefore considered a "reciprocal state," as that term is defined at § 27-32-1(8). Because New York is a reciprocal state and the UILA expressly empowers a court to issue "injunctions or orders as may be deemed necessary to prevent ... the commencement or prosecution of any actions, or the obtaining of preferences, judgments, attachments or other liens" against an insurer or its assets, Frontier argues that the Mobile Circuit Court is bound to adhere to the New York court's October 15 order and to stay the plaintiffs' claims against it. § 27-32-5(b).
Frontier's argument is supported by this Court's previous decisions interpreting the Alabama UILA. In Ex parte United Equitable Life Insurance Co., 595 So.2d 1373, 1374 (Ala.1992), two policyholders sued United after it failed to pay a claim they had submitted. Because United was undergoing a rehabilitation proceeding in Illinois, it promptly moved the trial court, under the Alabama UILA, to stay the action. The trial court denied United's motion, reasoning that allowing the policyholder merely to obtain a judgment against United would not violate the Alabama UILA, although the policyholder would be prevented from collecting on that judgment. In reversing the trial court's decision this Court stated:
595 So.2d at 1375. In Ex parte Noble Trucking Co., 675 So.2d 356 (Ala.1996), we again recognized the right of an insurance company undergoing rehabilitation to obtain, pursuant to the Alabama UILA, a stay in ongoing litigation, although, for reasons not dispositive in the present case, we ultimately decided that the plaintiff did not have a right to a stay in that case.1 See also Reliance Nat'l Indem. Co. v. Pinnacle Cas. Assur. Corp., 160 F.Supp.2d 1327, 1334 (M.D.Ala.2001) ().
Frontier cites cases from the United States Court of Appeals for the Eighth Circuit and from federal and state courts in Alabama, California, Florida, Hawaii, Kentucky, Pennsylvania, South Carolina, and Texas, in which courts have stayed actions against Frontier based on the New York court's October 15 rehabilitation order. According to Frontier, those cases all support the proposition that, under the UILA, courts are bound to recognize stay orders issued by courts presiding over rehabilitation proceedings in foreign jurisdictions. See, e.g., Frontier Ins. Co. v. American Title Servs., 838 So.2d 1178, 1179 (Fla.Dist.Ct.App.2003)
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Frontier has established that it has a clear legal right under the Alabama UILA to a stay of all claims against it in Alabama. Therefore, the trial...
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