Fewell v. Pickens

• Court: Arkansas Supreme Court
• Writing for the Court: Appeal from the Superior Court of the State of Alaska, Third Judicial District, Palmer, Beverly W. Cutler; PER CURIAM; Cutler
• Citation: Fewell v. Pickens, 57 S.W.3d 144, 346 Ark. 246 (Ark. 2001)
• Decision Date: 11 October 2001
• Docket Number: 01-339
• Parties: BOB E. FEWELL AND HOLDINGSCO, INC., APPELLANTS, VS. MIKE PICKENS, INSURANCE COMMISSIONER, AMERICAN INVESTORS LIFE INSURANCE CO., ARKANSAS LIFE AND DISABILITY INSURANCE GUARANTY ASSOC., APPELLEE.SUPREME COURT OF ARKANSAS 11 October 2001 APPEAL FROM THE PULASKI COUNTY CIRCUIT COURT, SEVENTH DIVISION NO. CV00-5833, HON. JOHN BERTRAN PLEGGE, JUDGE, AFFIRMED. JIM HANNAH, Associate Justice Appellants Bob E. Fewell and Holdingsco, Inc., appeal from the Pulaski County Circuit Court's order liquidating American Investors Life Insurance Company (American Investors) as part of the ongoing receivership action previously addressed in a prior appeal by these parties. See Fewell v. Pickens, 344 Ark. 368, 39 S.W.3d 447 (2001) ("Fewell I"). In the prior appeal, Fewell and Holdingsco appealed the Pulaski County Circuit Court's orders appointing a receiver for American Investors, enjoining the appellants from transacting business for the company, denying their motion to vacate theorder appointing the receiver, granting an injunction, and denying their motion to strike an affidavit of service. The appellee is Mike Pickens, who is the Arkansas Insurance Commissioner and appointed receiver. A summary of facts leading to the first appeal in this matter is contained in our prior opinion and will not be restated here. However, the facts leading to this present appeal occurred during the pendency of that appeal, and they are summarized herein. On

BOB E. FEWELL AND HOLDINGSCO, INC., APPELLANTS VS MIKE PICKENS, INSURANCE COMMISSIONER, AMERICAN INVESTORS LIFE INSURANCE CO., ARKANSAS LIFE AND DISABILITY INSURANCE GUARANTY ASSOC., APPELLEE

No. 01-339

SUPREME COURT OF ARKANSAS

11 October 2001

APPEAL FROM THE PULASKI COUNTY CIRCUIT COURT, SEVENTH DIVISION NO. CV00-5833, HON. JOHN BERTRAN PLEGGE, JUDGE, AFFIRMED.

JIM HANNAH, Associate Justice

Appellants Bob E. Fewell and Holdingsco, Inc., appeal from the Pulaski County Circuit Court's order liquidating American Investors Life Insurance Company (American Investors) as part of the ongoing receivership action previously addressed in a prior appeal by these parties. See Fewell v. Pickens, 344 Ark. 368, 39 S.W.3d 447 (2001) ("Fewell I"). In the prior appeal, Fewell and Holdingsco appealed the Pulaski County Circuit Court's orders appointing a receiver for American Investors, enjoining the appellants from transacting business for the company, denying their motion to vacate theorder appointing the receiver, granting an injunction, and denying their motion to strike an affidavit of service. The appellee is Mike Pickens, who is the Arkansas Insurance Commissioner and appointed receiver.

A summary of facts leading to the first appeal in this matter is contained in our prior opinion and will not be restated here. However, the facts leading to this present appeal occurred during the pendency of that appeal, and they are summarized herein. On January 26, 2001, the Insurance Commissioner filed an Application for Order to Show Cause and for Order of Liquidation. The trial court scheduled a hearing on this motion for February 23, 2001.

On February 5, 2001, Fewell and Holdingsco filed a motion to dismiss, strike, or stay the Commissioner's application for a show-cause order and order of liquidation arguing that such an application was an "admission" that the original receivership was improper and that this was an attempt to transfer the burden of proof from the Insurance Department to American Investors and the appellants. Fewell and Holdingsco also argued that the show-cause proceedings should be stayed pending the appeal of the appointment of the receiver. Fewell and Holdingsco requested in a separate document filed February7, 2001, that the trial court postpone the scheduled hearing on Feburary 23, 2001, so that discovery could be completed.

In addition to the pleadings filed in circuit court, Fewell and Holdingsco petitioned the Arkansas Supreme Court for a Writ of Prohibition to prohibit the trial court from proceeding on the application, and this court denied the writ on February 15, 2001, after oral arguments. Fewell and Holdingsco then sought a stay in the trial court, and the trial court denied the stay. Upon this denial by the trial court, Fewell and Holdingsco renewed their Petition for Writ of Prohibition, and this court again denied the petition without prejudice on February 22, 2001, and indicated that the issue of the trial court's jurisdiction to hear the matter of liquidation could be raised again on appeal.

The trial court held the hearing on February 23, 2001, at which the Commissioner presented evidence for his petition for liquidation. Following the hearing, the trial court entered its Order of Liquidation requiring the appointed receiver to liquidate American Investors and to prohibit Fewell, Holdingsco, and American Investors from doing anything to diminish the value of American Investors or any of its holdings and assets. Fewell and Holdingsco filed a notice ofappeal on March 5, 2001.

On April 5, 2001, this court issued its opinion regarding the legality of the trial courts appointment of a receiver and initiation of delinquency proceedings in August 2000. See Fewell I. In the opinion, this court specifically found, among other things, that Fewell and Holdingsco bargained away their ability to challenge the Commissioner's initiation of delinquency proceedings and claim for receivership in the 1999 Agreements detailed in our prior opinion. This court found that Fewell and Holdingsco waived the statutory requirements under Ark. Code Ann. § 23-68-104 (Repl. 1994), for an Order to Show Cause and Petition for Receivership. The Court further found that the Arkansas Uniform Insurers Liquidation Act, Ark. Code Ann. §§ 23-68-101-23-68-132 (Repl. 1994, Supp. 1999) (Uniform Act), is a special statutory proceeding that usurps the Rules of Civil Procedure, thus allowing the trial court to conduct the proceedings outside the constraints of those rules.

I. Application of Ark. Code Ann. § 23-68-104

In their first argument on appeal, Fewell and Holdingsco argue that the trial court erred in failing to follow the statutory procedures in Ark. Code Ann. § 23-68-104 requiring the Commissioner to apply for an order to show cause and the trial court to conduct a "full hearing" on that application. The Commissioner argues that Ark. Code Ann. § 23-68-104 does not apply and that Fewell and Holdingsco did not show that failure of the trial court to proceed under that provision was error.

We do not reach this issue because our prior opinion holds that Fewell and Holdingsco waived their right to a show-cause order and a hearing under the 1999 Agreements. In our opinion issued on April 5, 2001, we stated that:

In light of the language contained in the 1999 Agreements between the parties, we conclude that the statutory requirements of § 23-68-104 do not control in this case. It is true that § 23-68-104 contemplates the commissioner's petition for an order to show cause and a full hearing before granting that petition. But Fewell and Holdingsco waived those statutory requirements under the Uniform Act by consenting to an immediate receivership in the event of breach without prior notice. The standard definition of waiver is the voluntary abandonment or surrender by a capable person of a right known by him to exist, with the intent that he will forever be deprived of its benefits. Pearson v. Henrickson, 336 Ark. 12, 983 S.W.2d 419 (1999) (citing Continental Ins. Cos. V. Stanley, 263 Ark. 638, 569 S.W.2d 653 (1978)); Smith v. Walt Bennett Ford, Inc., 314 Ark. 591, 864 S.W.2d 817 (1993). Fewell and Holdingsco clearly agreed in 1999 to waiver of their statutory rights under § 23-68-104, if Pickens would forebear placing them into receivership at that time.

The circuit court found that the appellants had consented to the entry of an order of receivership without prior notice. We agree with the court's finding and hold that Fewell and Holdingsco waived their rights under § 23-68-104 by executing the 1999 Agreements. We hold, in addition, that the immediate entry of a receivership order on July 11, 2000, with the permanent injunction, albeit entered ex parte, did not violate due process protections. We further note that on August 4, 2000, the appellants did have the opportunity to be heard on the circuit judge's order. Indeed, at that time they made their argument to the judge concerning the alleged lack of a 1999 True Up Calculation and moved that the July 11, 2000 order be set aside. This request was denied. The August 4, 2000 hearing, in our view, provided the appellants with an opportunity to be heard on the legitimacy of the receivership order.

Fewell I, 344 Ark. at 380. Clearly, we held that Fewell and Holdingsco waived their right to a show-cause order and hearing under the 1999 Agreements. Those Agreements contained this language:

However, upon breach of any one of the aforesaid covenants, the Company, the Parent and Fewell hereby agree and consent to the immediate commencement and entry of an order granting receivership against the Company by the Department under Ark. Code Ann. § 23-68-101 through § 23-68-132 and waive prior notice of entry of an order of permanent receivership.

Such a waiver extends to this case because we hold that Ark. Code Ann. § 23-68-104 only applies to the "commencement" of delinquency proceedings, which necessarily means that it applies to the initiation by the Commissioner of the proceedings to place an insurance company into receivership. The statute at issue, Ark. Code Ann. § 23-68-104, states:

Commencement of delinquency proceedings.

The commissioner shall commence any such proceedings by application to the court for an order directing the insurer to show cause why the commissioner should not have the relief prayed for. On the return of such order to show cause, and after a full hearing, the court shall either deny the application or grant the application, together with such other relief as the nature of the case and the interests of the policyholders, creditors, stockholders, members, subscribers, or the public may require.

The term "delinquency proceeding" is defined in Ark. Code Ann. § 23-68-102(3) as:

(3) "Delinquency proceeding" means any proceeding commenced against an insurer pursuant to this chapter for the purpose of liquidating, rehabilitating, reorganizing, or conserving such insurer.

These statutory sections indicate that the initial filing of delinquency proceedings by the Commissioner must involve an application for an order to show cause and a full hearing on that initial application to institute delinquency proceedings. However, subsequent proceedings, which are not "commencement" proceedings, do not fall under the requirements of Ark. Code Ann. § 23-68-104.

The Uniform Act supports a finding that the trial court is not required to enter a show-cause order and hold a "full hearing" after the "commencement" of the action. In Ark. Code Ann. § 23-68-107, the statute provides for a procedure allowing the Commissioner to apply for liquidation. The statute states:

23-68-107. Grounds for liquidation.

The commissioner may apply to the court for an order appointing him as receiver, if his appointment as receiver shall not be then in effect, and directing him to liquidate the business of a domestic insurer or of the United States branch of an alien insurer...