Metcalf v. VOLUNTARY EMPLOYEES'BEN. ASS'N

• Decision Date: 22 August 2002
• Docket Number: No. 23084.,23084.
• Citation: 52 P.3d 823,99 Haw. 53
• Parties: Wayne C. METCALF, III in his capacity as Liquidator and Trustee of the PGMA Liquidating Trust, Plaintiff-Appellee/Cross-Appellant, v. VOLUNTARY EMPLOYEES' BENEFIT ASSOCIATION OF HAWAI`I, Defendant-Appellant/Cross-Appellee.
• Court: Hawaii Supreme Court

52 P.3d 823

99 Haw. 53

Wayne C. METCALF, III in his capacity as Liquidator and Trustee of the PGMA Liquidating Trust, Plaintiff-Appellee/Cross-Appellant, v. VOLUNTARY EMPLOYEES' BENEFIT ASSOCIATION OF HAWAI`I, Defendant-Appellant/Cross-Appellee.

No. 23084.

Supreme Court of Hawai`i.

August 22, 2002.

Paul A. Schraff and Eric K. Sakai (of Dwyer, Imanaka, Schraff, Kudo, Meyer & Fujimoto), on the briefs, Honolulu, for defendant-appellant/cross-appellee Voluntary Employees' Benefit Association of Hawai`i.

Bert T. Kobayashi, Jr., Lex R. Smith, and Ann C. Teranishi (of Kobayashi, Sugita & Goda), on the briefs, Honolulu, for plaintiff-appellee/cross-appellant Wayne C. Metcalf, III, in his capacity as Liquidator and Trustee of the PGMA Liquidating Trust.

MOON, C.J., LEVINSON, NAKAYAMA, and RAMIL, JJ.; ACOBA, J., dissenting.

Opinion of the Court by MOON, C.J.

Defendant-appellant/cross-appellee Voluntary Employees' Benefit Association of Hawai`i (VEBAH) and plaintiff-appellee/cross-appellant State Insurance Commissioner Wayne C. Metcalf, III, [hereinafter, the Commissioner] appeal from the December 27, 1999 amended judgment of the Circuit Court of the First Circuit, the Honorable Kevin S.C. Chang presiding. VEBAH argues that the circuit court erred in: (1) dismissing VEBAH's counterclaims based upon provisions of Article 15 of the Insurance Code; and (2) concluding that VEBAH is liable for post-judgment interest. The Commissioner claims that the circuit court erred in: (1) refusing to consider his request for pre-judgment interest and (2) denying his request for attorneys' fees. We affirm in part and vacate in part the amended judgment of the circuit court and remand this case for further proceedings.

I. BACKGROUND

VEBAH entered into an agreement with Pacific Group Medical Association (PGMA), a mutual benefit society organized and licensed under Hawai`i Revised Statutes (HRS) chapter 432<sup>1</sup> that was engaged in the business of insurance. Under the "Pacific Group Medical Association Voluntary Employees' Benefit Association of Hawai`i Master Agreement" [hereinafter, the PGMA/VEBAH Master Agreement] PGMA agreed to provide health benefits to VEBAH members in exchange for specified premiums. The agreement was effective from July 1, 1995, and VEBAH paid monthly premiums under the agreement from July 1995 through December 1996. For the months of January and February 1997, VEBAH paid only $500,000.00 of the premiums owed and withheld a total of $874,437.11,² allegedly due to complaints from VEBAH members over delayed payments of benefits. Effective March 1, 1997, VEBAH withdrew its members from PGMA and enrolled them in substitute plans.

A. The Special Proceeding Against PGMA

On March 11, 1997, the Commissioner initiated Special Proceeding No. 97-0135 in circuit court [hereinafter, Special Proceeding] to rehabilitate PGMA pursuant to Article 15 of the Insurance Code [hereinafter, Article 15], governing the supervision, rehabilitation, and liquidation of insurers.³ On March 12, 1997, the court appointed the Commissioner to serve as the rehabilitator of PGMA.

During the Special Proceeding, VEBAH argued⁴ that Article 15 did not apply to PGMA because it was a mutual benefit society. On September 26, 1997, the Commissioner filed a motion seeking a declaratory judgment that Article 15 applied to the proceedings against PGMA. VEBAH filed a memorandum in opposition to the Commissioner's motion and appeared at the October 15, 1997 hearing on the motion. The circuit court ruled that Article 15 applied to the Special Proceeding and ordered the liquidation of PGMA pursuant to HRS §§ 431:15-305⁵ and 431:15-307⁶ (1993). The court appointed the Commissioner to serve as the liquidator of PGMA. A final order in the Special Proceeding was not filed until January 23, 2002, and a notice of appeal was filed by VEBAH on February 22, 2002.

B. The Commissioner's Suit Against VEBAH

On February 2, 1998, the Commissioner, in his capacity as the liquidator of PGMA, filed a complaint to compel VEBAH to turn over to him the premiums from January and February 1997 that were withheld. Count I of the complaint was based on HRS § 431:15-323 (1993), which provides that any person, "other than the insured, responsible for the payment of a premium shall be obligated to pay any unpaid collected premium held by such person at the time of the declaration of insolvency, whether earned or unearned, as shown on the records of the insurer." Count II was based upon an alleged breach of the PGMA/VEBAH Master Agreement.

On March 17, 1998, VEBAH filed an answer to the complaint and counterclaims against PGMA and the Commissioner, alleging: (1) breach of contract by PGMA; (2) breach of contract by the Commissioner; (3) misrepresentation by PGMA; (4) rescission; (5) setoff and recoupment; (6) negligence by the Commissioner; (7) aiding and abetting of PGMA's negligence, misrepresentation, and breach of contract by the Commissioner; and (8) a right to indemnity by and contribution from the Commissioner.

On July 8, 1998, upon motion by the Commissioner, the circuit court dismissed VEBAH's counterclaims. The court deferred to the determination from the Special Proceeding that Article 15 applied to PGMA based upon the principle of judicial comity and ruled that HRS § 431:15-319(b) (1993)⁷ barred VEBAH's counterclaims. VEBAH appealed from the dismissal order; however, on October 22, 1998, this court dismissed VEBAH's appeal for lack of appellate jurisdiction.

On January 29, 1999, the Commissioner filed a motion for summary judgment on count I (his claim based on HRS § 431:15-323). On June 9, 1999, an order granting in part and denying in part the Commissioner's motion for summary judgment was filed. The order included: (1) judgment in favor of the Commissioner and against VEBAH in the amount of $874,437.11 plus post-judgment interest pursuant to HRS § 478-3 (1993) (discussed infra); (2) an order for VEBAH to pay any and all PGMA premium money in VEBAH's possession and control; and (3) denial of the Commissioner's requests for pre-judgment interest and attorneys' fees on the ground that Article 15 does not provide for either. Thereafter, a final judgment as to count I was filed on August 27, 1999. The same day, count II, the breach of contract claim, was dismissed without prejudice by stipulation.

On September 1, 1999, VEBAH filed a motion requesting to deposit funds with the court, to otherwise stay enforcement of the judgment, and to alter or amend the judgment, or, in the alternative, to set the amount of a supersedeas bond. VEBAH's motion was granted in part, and, on October 4, 1999, the circuit court filed an order allowing VEBAH to deposit the funds with the court in lieu of a bond, but ruled that VEBAH remained liable for post-judgment interest until the funds were paid to the Commissioner.

An amended final judgment was filed on December 27, 1999. VEBAH filed its notice of appeal on January 11, 2000, and the Commissioner filed his notice of cross-appeal on January 25, 2000.

II. STANDARDS OF REVIEW

A. Conclusions of Law

We review the trial court's conclusions of law de novo under the right/wrong standard. Under this standard, we examine the facts and answer the question without being required to give any weight to the trial court's answer to it. Thus, a conclusion of law is not binding upon the appellate court and is freely reviewable for its correctness.

Fujimoto v. Au, 95 Hawai`i 116, 137, 19 P.3d 699, 720 (2001) (citations omitted) (internal quotation marks, brackets, and ellipsis points omitted).

B. Statutory Interpretation

"`The interpretation of a statute is a question of law reviewable de novo.'" Beneficial Hawai`i, Inc. v. Kida, 96 Hawai`i 289, 305, 30 P.3d 895, 911 (2001) (citations omitted).

C. Awards of Interest

This court reviews rulings on interest pursuant to HRS §§ 478-3 and 636-16 (1993) for abuse of discretion. See Sussel v. Civil Serv. Comm'n., 74 Haw. 599, 619, 851 P.2d 311, 321 (1993).

The trial court abuses its discretion if it bases its ruling on an erroneous view of the law or on a clearly erroneous assessment of the evidence. Stated differently, an abuse of discretion occurs where the trial court has clearly exceeded the bounds of reason or disregarded rules or principles of law or practice to the substantial detriment of a party litigant.

Molinar v. Schweizer, 95 Hawai`i 331, 335, 22 P.3d 978, 982 (2001) (quoting Canalez v. Bob's Appliance, 89 Hawai`i 292, 299, 972 P.2d 295, 302 (1999)).

III. DISCUSSION

A. VEBAH's Claims on Appeal

VEBAH argues that the circuit court erred in dismissing its counterclaims based upon HRS § 431:15-319(b) because: (1) it improperly applied the principle of judicial comity; and (2) Article 15 did not apply to PGMA insofar as it was a mutual benefit society. Thus, in effect, VEBAH directly attacks the circuit court's determination in this case and collaterally attacks the court's determination in the Special Proceeding that Article 15 applied to PGMA. VEBAH also argues that the award of post-judgment interest was improper because: (1) HRS § 478-3 was inapplicable to the monetary award of $874,437.11; and (2) the award of interest amounted to an illegal and excessive penalty.

1. Denial of VEBAH's Counterclaims Based on Article 15

a. judicial comity

VEBAH argues that the circuit court erred in ruling that Article 15 applied to PGMA based on the principle of judicial comity. Comity is "`not a rule of law, but one of practice, convenience, and expediency.' It does not of its own force compel a particular course of action. Rather, it is an expression of one state's entirely voluntarily decision to defer to the policy of another." Columbia Falls Aluminum Co. v. Hindin/Owne/Engelke, Inc., 224 Mont. 202, 728 P.2d 1342, 1345 (1986),reh'g denied,224 Mont. 202, 728 P.2d 1342 (1987) (quoting Simmons v. State, 206 Mont. 264, 670 P.2d 1372, 1385 (1983) (citations omitted)). This court has explained that, "...