State ex rel. Hunt v. Liberty Investors Life Ins. Co.

• Decision Date: 16 December 1975
• Docket Number: No. 47487,47487
• Citation: 1975 OK 165,543 P.2d 1390
• Parties: The STATE of Oklahoma ex rel. Joe B. HUNT, Insurance Commissioner, Plaintiff-Appellee, v. LIBERTY INVESTORS LIFE INSURANCE COMPANY, an Oklahoma Life Insurance Corporation, Defendant-Appellee, v. B. Cyril ROGERS, Third-Party-Appellant.
• Court: Oklahoma Supreme Court

Page 1390

543 P.2d 1390

The STATE of Oklahoma ex rel. Joe B. HUNT, Insurance Commissioner, Plaintiff-Appellee, v. LIBERTY INVESTORS LIFE INSURANCE COMPANY, an Oklahoma Life

Insurance Corporation, Defendant-Appellee, v. B. Cyril ROGERS, Third-Party-Appellant.

No. 47487.

Supreme Court of Oklahoma.

Dec. 16, 1975.

Doerner, Stuart, Saunders, Daniel & Langenkamp, Robert F. Biolchini, Stephanie K. Seymour, Dallas E. Ferguson, Tulsa, for appellees.

Stipe, Gossett, Stipe & Harper, Oklahoma City, for appellant.

BARNES, Justice:

The single issue to be decided on this appeal is whether the Trial Court erred in refusing to vacate its judgment of March 8, 1974, whereby it was ordered that Receivers were entitled to retain possession of Appellant's 1,282,691 shares of Liberty Investors Life Insurance Company stock.

Appellant, B. Cyril Rogers, seeks the return of said shares of stock pledged as collateral and seized by the Receiver under the terms of the Secured Guarantee, or, alternatively, for a new trial on the matter before a different judge.

For clarity and brevity, we will hereinafter refer to Appellee, Liberty Investors Life Insurance Company, as 'Liberty Investors,' and the Appellant, B. Cyril Rogers, an 'Rogers.' The essential background facts are as hereinafter related.

Rogers became the controlling shareholder of Liberty Investors on September 24, 1972, by purchase of stock from one Johnson Gunn and issuance to Gunn of a check drawn on Rogers' personal account in American Bank of Commerce of Oklahoma City. At the time the check was issued to Gunn, there were not sufficient funds in the American Bank of Commerce to cover the check. On September 29, 1972, Rogers transferred corporate funds, in the amount of the purchase price, from Liberty Investors' accounts to his personal bank account to cover the check issued to Gunn. Rogers testified that the Liberty Investors' check was signed by him and that the Board of Directors of Liberty Investors had authorized him to take this action. The Board members allegedly authorizing this action were those members who became Directors on September 25, 1972.

There is dispute as to whether Rogers was named as the President and a member of the Board of Directors at the meeting of Directors which was also held on September 25, 1972, but Rogers admits that he was acting as general manager of the corporation after that date.

The three Arizona corporations whose stock Roger sold to Liberty Investors were First Equity Corporation, National Agency Company, and First International Corporation. Rogers was the controlling stockholder of all three of these corporations. The prime asset of these three corporations was an Arizona insurance company, International Bankers Life Insurance Company, and the purported purpose of the stock purchases was to give Liberty Investors a controlling interest in the insurance company.

In May, 1972, International Bankers Life Insurance Company had surrendered its certificate to do business in Arizona. On June 28, 1972, the Insurance Commissioner of Arizona instituted receivership proceedings against the company. The insurance company was placed in receivership by the Superior Court of Maricopa County, Arizona, on July 7, 1972, several months prior to the Liberty Investors' stock purchase.

Following the sale of stock to Liberty Investors, the Oklahoma State Insurance Commission became aware of the transaction and started an investigation into the status of Liberty Investors. While this investigation was being conducted, Liberty Investors' Board of Directors held a meeting at which Rogers executed an agreement entitled 'Secured Guarantee.' By this instrument Rogers guaranteed to First Equity Corporation and National Agency Company, as wholly owned subsidiaries of Liberty Investors, that the investment of these corporations in the capital stock of First International Corporation and its subsidiary, International Bankers Life Insurance Company, and Arizona corporation, had a present value of not less than $437,683.20. The Secured Guarantee also provided that should the Board of Directors of Liberty Investors determine on or before December 31, 1973, that its investment, through its wholly owned subsidiaries, in First International Corporation and International Bankers Life Insurance Company, did not have a value of $437,683.20, Rogers guaranteed that he would pay the wholly owned subsidiaries, in cash and on demand, the difference between the actual value or value received and $437,683.20. The Secured Guarantee specified that it was secured by the physical pledge of 1,282,691 shares of the common capital stock of Liberty Investors.

A special meeting of the Board of Directors of Liberty Investors was held November 20, 1972, at which Rogers acted as Chairman. The Directors unanimously adopted a resolution providing that the Secured Guarantee in favor of First Equity Corporation and National Agency Company, executed by Rogers November 7, 1972, be amended to run directly in favor of Liberty Investors, rather than in favor of the two wholly owned subsidiaries. Rogers signed and approved the minutes of this meeting.

On November 8, 1972, the day following execution of the Secured Guarantee by Rogers, the State of Oklahoma, ex rel Joe B. Hunt as Insurance Commissioner, instituted this receivership action against Liberty Investors by filing its Application for Order Appointing Receiver and Temporary Restraining Order, and an Order to Show Cause and Temporary Restraining Order was entered by the Trial Court on that date.

Following proceedings before the Trial Court and an original proceeding in the Supreme Court, the Trial Court issued an Order and Injunction on April 3, 1973, appointing the State Insurance Commissioner as Receiver for Liberty Investors, and providing for the appointment of Patrick A Williams as an Assistant Insurance Commissioner and Assistant Receiver.

On December 20, 1973, the Assistant Receiver filed an Application for Permission to Make Demand Pursuant to the Secured Guarantee. This Application set forth the facts concerning Liberty Investors' purchase of the Arizona companies' stock from Appellant Rogers, the execution of the Secured Guarantee by Rogers, and amendment thereof, and the fact the Assistant Receiver held 1,282,691 shares of Liberty Investors' stock pledged by Rogers as security pursuant to the Secured Guarantee. The Application also set forth that the Assistant Receiver had made the determination that the stock of First International Corporation and International Bankers Life Insurance Company owned by Liberty Investors had a value of ZERO DOLLARS, based on evidence described in the Application.

On December 20, 1973, pursuant to the Assistant Receiver's Application, the Trial Court issued an Order finding the Assistant Receiver had authority to exercise the functions of the Board of Directors and, thus, to make the determination that the stock guaranteed by Rogers had a value of zero dollars, and to make demand on Rogers in accordance with the terms of the Secured Guarantee.

The Order authorized the Assistant Receiver to make demand on Rogers for payment of the $437,683.20 guaranteed by the Secured Guarantee, on or before December 31, 1973, and, in the event of nonpayment, ordered Rogers to appear at a hearing February 8, 1974, to show cause why Liberty Investors should not be allowed to retain the stock Rogers had pledged.

The record reflects that the Order and Application were timely served on Rogers and his attorney, by mailing copies to them by certified mail, return receipt requested, and by the verified Proof of Mailing filed in this case.

Rogers failed to pay the $437,683.20 to Liberty Investors by December 31, 1973. At the show cause hearing set for February 8, 1974, the Trial Court granted Rogers a continuance for the purpose of submitting written objections to the Trial Court's order of December 20, 1973. The hearing was reset for March 8, 1974.

Appellant filed objections under the title 'Multiple Pleadings' March 4, 1974, asserting he was not a proper party to the proceedings before the Trial Court, that the Assistant Receiver's reliance on the terms of the Secured Guarantee was in conflict with a position taken in previous proceedings before the Supreme Court, and that the Assistant Receiver had not complied with the applicable statutory provisions in the foreclosure proceedings.

Rogers failed to appear, either personally or by counsel, at the show cause hearing on March 8, 1974. The Trial Court entered an order stating that it had considered the written objections filed on behalf of Rogers and had overruled each of those objections. The Trial Court specifically found that Rogers had, on several occasions, appeared before the Court and requested affirmative relief in the receivership action, thereby entering a general appearance and waiving the right to challenge the jurisdiction of the Court over his person. Additionally, the Trial Court determined that it had jurisdiction over the shares of stock which constituted the subject matter of the foreclosure proceedings, and that the Assistant Receiver had complied with statutory provisions in foreclosing on the pledged stock. The Court decreed Liberty Investors was entitled to retain the 1,282,691 shares pledged to it under the terms of the Secured Guarantee and ordered the Assistant Receiver to take the necessary action to transfer legal title to the stock to Liberty Investors.

On April 9, 1974, Rogers filed a Special Appearance and Motion to Vacate the Trial Court's Order of March 8, 1974. This Motion was heard April 23, 1974, and the Court found none of the issues raised in Rogers' Motion was sufficient grounds for vacating the judgment and order. The Court specifically found that both Rogers and his counsel had notice of the March 8, 1974, hearing by both mailing and publication. The Trial Court noted the Motion to Vacate was not filed within...