Liquidation of Prestige Cas. Co., Matter of, 1-94-2629

• Decision Date: 30 November 1995
• Docket Number: No. 1-94-2629,1-94-2629
• Citation: 659 N.E.2d 50,213 Ill.Dec. 420,276 Ill.App.3d 698
• Parties: , 213 Ill.Dec. 420 In the Matter of the LIQUIDATION OF PRESTIGE CASUALTY COMPANY.
• Court: United States Appellate Court of Illinois

Page 50

659 N.E.2d 50

276 Ill.App.3d 698, 213 Ill.Dec. 420

In the Matter of the LIQUIDATION OF PRESTIGE CASUALTY COMPANY.

No. 1-94-2629.

Appellate Court of Illinois,

First District, Fourth Division.

Nov. 30, 1995.

Wein & Associates, Grace Elizabeth Wein of Wein & Associates, P.C., Chicago, for Appellant.

James W. Schacht, Acting Director of Insurance of the State of Illinois, John B. Simon, Larry M. Wolfson and Kristina M. Entner of Jenner & Block, Chicago, (Peter G. Gallanis and Paige D. Waters, of Counsel), for Appellee.

Illinois Insurance Guaranty Fund, Thomas W. Jenkins, Timothy M. Maggio and Elizabeth Hoskins Dow of Lord, Bissell & Brook, Chicago, for Amicus Curiae.

Justice CAHILL delivered the opinion of the court:

The law firm of Wein & Associates P.C. (Wein) represented insureds of Prestige Casualty Company (Prestige), a domestic insurance company. A court found Prestige insolvent under Article XIII of the Illinois Insurance Code (Code) on July 26, 1994, and entered an Order of Liquidation. 215 ILCS 5/187 (West 1993).

Wein was counsel of record on over 1600 lawsuits pending against Prestige at the time of the liquidation. The order of liquidation directed Prestige's officers and agents to give immediate possession and control to the liquidator of all property of Prestige. The liquidator served a copy of the July 26 order on Wein on July 28, 1994. At a meeting the same day Wein refused to turn over the files in its possession and asserted a retaining lien over the files as security for fees owed to Wein by Prestige.

The next day, July 29, the liquidator filed an emergency petition to Post Security and for Turn Over of Estate Files and Records. After a hearing held the same day, the trial court ordered the files turned over to the liquidator and ordered the liquidator to deposit $289,251.01 in a segregated account as substitute security for Wein's fees. Wein did not seek a stay of the turn over order, but complied with it and filed this appeal.

Wein raised the following issues on appeal: the trial court's order was a violation of due process; the trial court erred when it ordered the turn over of files without first allowing Wein to withdraw as the attorney of record; the transfer of legal files under the Code to a non-lawyer was improper; the 120 day stay provision of pending actions when a liquidator is appointed does not alleviate Wein's ethical obligations to the insureds under Prestige's polices; and the failure to grant a hearing to adjudicate the amount of fees outstanding on the files was error.

Wein's due process argument rests on an assertion that there was no opportunity to file a written response to the Motion to Turn Over Assets, and that a hearing was held within an hour of Wein receiving notice of it. However, the record reveals that Wein was given an opportunity to be heard, argued its case, and was denied relief. Wein concedes in its brief that due process is a flexible concept that requires some type of hearing and an opportunity to be heard. (Armstrong v. Manzo (1965), 380 U.S. 545, 552, 85 S.Ct. 1187, 1191, 14 L.Ed.2d 62, Golbeck v. City of Chicago (1992), 782 F.Supp. 381.) Nor does Wein quarrel with the statutory framework of a liquidation proceeding.

The intention of the liquidation provisions under Article XIII of the Code is to insure a ratable distribution of an insolvent insurance company's assets. (People ex rel. Jones v. Chicago Lloyds (1945), 391 Ill. 492, 63 N.E.2d 479.) The Code details the Director's authority when acting as a liquidator for an insolvent insurance company: "the Director * * * shall be vested by operation of law (emphasis added) with the title to all property, contracts and rights of action of the company as of the date of the order directing * * * liquidation." (215 ILCS 5/191 (emphasis added) (West 1993).) The Code requires that:

"the circuit court * * * enter forthwith without a hearing (emphasis added) an order directing the director to take possession and control of the property, business, books, records, and accounts of the company * * * and enjoining the company and its officers, directors, agents, servants, and employees from disposition of its property and from transaction of its business except with the concurrence of the Director until further order of the court. * * * Any person having possession of and refusing to deliver any of the property, business, books, records or accounts of a company against which a seizure order has been issued shall be guilty of a Class A misdemeanor." 215 ILCS 5/188.1 (emphasis added) (West 1993).

Due process is served when there is an "opportunity to be heard and to defend in an orderly proceeding adapted to the nature of the case." (Durkin v. Hey (1941), 376 Ill. 292, 300, 33 N.E.2d 463.) Here, a hearing is not...