State ex rel. Ins. Com'R v. Bcbs, No. 32979.

CourtSupreme Court of West Virginia
Writing for the CourtDavis
Citation638 S.E.2d 144
Decision Date05 October 2006
Docket NumberNo. 32979.
PartiesSTATE of West Virginia ex rel. INSURANCE COMMISSIONER OF THE STATE OF WEST VIRGINIA, Petitioner Below, West Virginia Hospital Association, Intervenor, West Virginia State Medical Association, Intervenor, v. BLUE CROSS AND BLUE SHIELD OF WEST VIRGINIA, INC., Respondent Below, Appellee, and United Mine Workers of America, International Union, Intervenor Below, Appellant, v. Receiver of Blue Cross and Blue Shield of West Virginia, Inc., Respondent Below, Appellee.

Page 144

638 S.E.2d 144
STATE of West Virginia ex rel. INSURANCE COMMISSIONER OF THE STATE OF WEST VIRGINIA, Petitioner Below,
West Virginia Hospital Association, Intervenor,
West Virginia State Medical Association, Intervenor,
v.
BLUE CROSS AND BLUE SHIELD OF WEST VIRGINIA, INC., Respondent Below, Appellee, and
United Mine Workers of America, International Union, Intervenor Below, Appellant,
v.
Receiver of Blue Cross and Blue Shield of West Virginia, Inc., Respondent Below, Appellee.
No. 32979.
Supreme Court of Appeals of West Virginia.
Submitted: September 6, 2006.
Decided: October 5, 2006.

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Bradley J. Pyles, Pyles, Haviland, Turner & Smith, Logan, for Appellant UMWA.

Anthony J. Cicconi, Shaffer & Shaffer, Charleston, for W.V. Hospital Association.

Don R. Sensabaugh, Jaclyn A. Bryk, Flaherty Sensabaugh & Bonasso, Charleston, for W.V. Medical Association.

Robert L. Greer, Clarksburg, for Blue Cross & Blue Shield.

Christopher S. Smith, Hoyer, Hoyer & Smith, Charleston, for Appellee Receiver.

DAVIS, C.J.


This appeal was brought by the International Union, United Mine Workers of America, appellant/intervenor below (hereinafter "UMWA"), from an order of the Circuit Court of Kanawha County that granted summary judgment in favor of the Receiver of Blue Cross and Blue Shield of West Virginia, appellee/applicant (hereinafter "Receiver").1 This matter arose out of a delinquency proceeding2 involving Blue Cross and Blue Shield of West Virginia (hereinafter "Blue Cross").3 During the delinquency proceeding, UMWA intervened and filed a claim with the Receiver for the return of money it had previously given to Blue Cross. UMWA argued that the money was given to Blue Cross as a trust fund and was therefore not part of the liquidation estate of Blue Cross or, alternatively, that the money was a secured claim or special deposit. The Receiver rejected UMWA's contentions and found that, for priority payment purposes, UMWA had a general unsecured creditor claim.4 The circuit court appointed a referee to make recommendations on how to resolve the dispute. The parties filed cross-motions for summary

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judgment with the referee. The referee issued findings of fact and conclusions of law and recommended denying UMWA's motion for summary judgment and granting the Receiver's motion for summary judgment. The circuit court adopted the referee's findings of fact, conclusions of law and recommendations. In this appeal, UMWA contends that the circuit court committed error in finding that its claim was not a trust and therefore outside the liquidation estate of Blue Cross.5 After consideration of the arguments of the parties and a careful review of the briefs and record, we reverse the circuit court's order and remand this case for entry of an order granting UMWA's motion for summary judgment.

I.
FACTUAL AND PROCEDURAL HISTORY

On April 7, 1986, UMWA and Blue Cross entered into an agreement that created a one year program called the "UMWA Emergency Care Pilot Program" (hereinafter "Emergency Care Program").6 The Emergency Care Program was created for the purpose of providing a health insurance plan to unemployed or involuntarily laid off UMWA members and their dependents.7 Under the terms of the agreement, UMWA tendered to Blue Cross the sum of $1,000,000.00.8 The agreement obligated Blue Cross to invest the money at an annual interest rate which was not less than one percent greater than the yield on a one year Treasury Bill. At the end of the one year expiration of the Emergency Care Program, Blue Cross was obligated to return the one million dollars and to turn over all interest earned after an additional one year "claims run-out period."9

The record indicates that after the Emergency Care Program expired, the parties entered into another, essentially identical, one year agreement.10 The second agreement covered the period of April 1, 1987, to March 31, 1988. Subsequent to the expiration of the second agreement, the parties entered a third agreement, which was also essentially identical to the first agreement.11 The third agreement covered the period of April 1, 1988, to March 31, 1989. When the third agreement expired, the parties did not enter into a new formal written agreement. However, the parties agreed that the Emergency Care Program would continue until April 30, 1990.

When the Emergency Care Program ended on April 30, 1990, Blue Cross did not return the one million dollars. In May of 1990, the parties agreed that beginning on July 1, 1990, the interest UMWA was entitled to receive would be paid on a monthly basis. In June of 1990, Blue Cross proposed returning the one million dollars to UMWA in January of 1991. UMWA rejected the proposal. However, Blue Cross unilaterally set up a special sinking fund that it paid into

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monthly for the purpose of generating the one million dollars owed to UMWA. The last deposit into the sinking fund was made on October 9, 1990, at which time the sinking fund had a value of $710,748.49.12

On or about October 24, 1990, the Insurance Commissioner filed an Application for Liquidation Order and Injunction against Blue Cross.13 The circuit court entered an order on October 26, 1990, approving a liquidation delinquency proceeding against Blue Cross and appointing the Insurance Commissioner as Receiver.14 In 1991, UMWA filed a motion to intervene in the delinquency proceeding. The circuit court granted the motion on April 2, 1991. By letter dated July 2, 1991, UMWA filed a claim with the Receiver for the money owed to it by Blue Cross. Specifically, UMWA sought the return of $1,088,148.1315 on the following grounds: (1) the money was exempt from the liquidation estate of Blue Cross because it was held as a trust or (2) if the money was deemed part of the estate, it was a secured claim or special deposit claim under the applicable statute. The Receiver issued a Notice of Determination on June 22, 1992, wherein it was held that UMWA had a general unsecured claim, and that it was likely that the funds of the estate were insufficient to pay general unsecured claims.16 On August 11, 1992, UMWA filed an objection to the Receiver's determination.17

After UMWA filed its objection to the Receiver's ruling, the circuit court entered an amended order on March 12, 1993, appointing a referee to take evidence regarding the dispute and to make recommendations to the court.18 After an extensive period of discovery, the Receiver filed a motion for summary judgment with the referee on August 10, 2000. On September 2, 2000, UMWA filed a response and cross-motion for summary judgment.19 The referee filed findings of fact and conclusions of law, with a recommendation that summary judgment be granted to the Receiver and that UMWA's motion for summary judgment be denied. By order entered May 10, 2005, the circuit court adopted the referee's findings of fact, conclusions of law and recommendations. UMWA thereafter filed this appeal.

II.
STANDARD OF REVIEW

The statute in place when this delinquency proceeding began stated that an objection to a Receiver's decision "may be heard by the court or by a court-appointed referee who shall submit findings of fact along with his recommendation." W. Va.

Page 150

Code § 33-24-25(d) (1990).20 The clear intent of this statute is to permit a "bench" proceeding in delinquency proceedings, but not a jury trial. The instant case was submitted to the referee, and ultimately the circuit court, on cross-motions for summary judgment.21 In deciding the facts and rendering its conclusions of law and recommendations, the referee considered the briefs and reviewed the voluminous record developed during discovery, including deposition testimonies.22 The circuit court adopted in full the referee's findings of fact, conclusions of law and recommendations.23 Under these circumstances, this Court is obligated to apply our standard of review applicable to summary judgment in ordinary civil actions.24 We have held that "[a] circuit court's entry of summary judgment is reviewed de novo." Syl. pt. 1, Painter v. Peavy, 192 W.Va. 189, 451 S.E.2d 755 (1994).25 Furthermore, this Court has indicated that "[a] motion for summary judgment should be granted only when it is clear that there is no genuine issue of fact to be tried and inquiry concerning the facts is not desirable to clarify the application of the law." Syl. pt. 3, Aetna Cas. & Sur. Co. v. Federal Ins. Co. of New York, 148 W.Va. 160, 133 S.E.2d 770 (1963).

III.
DISCUSSION

In granting summary judgment to the Receiver, the circuit court found that the undisputed facts showed that UMWA's claim was that of a general unsecured creditor. UMWA has argued that it was entitled to summary judgment because the undisputed facts established that the one million dollars it gave to Blue Cross was a trust and therefore outside the liquidation estate or, alternatively, that the money was a secured claim. In resolving this matter we need only address UMWA's first contention. In doing so, several issues must be resolved: (1) was a trust created, (2) was the trust destroyed when the last formal written agreement expired, (3) was the trust destroyed because of commingling, and (4) can the trust fund be traced. Each of these issues will be addressed separately.

A. A Trust Was Created

The brief of UMWA indicates that the summary judgment order of the circuit court "does not specifically address the question of whether or not a trust was created by the agreement of April 1, 1986, although the order apparently implicitly assumes that a trust was created." We agree with this observation. Further, we find that a trust did in fact exist between UMWA and Blue Cross.

It was held in Syllabus point 1 of Straton v. Aldridge, 121 W.Va. 691, 6 S.E.2d 222 (1939), that "[a]n express trust must be based on an agreement, express or implied, or on a clear declaration...

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9 practice notes
  • Third Bank v. Mcclure Properties Inc., Civil Action No. 3:08-0210.
    • United States
    • United States District Courts. 4th Circuit. Southern District of West Virginia
    • July 9, 2010
    ...by a fiduciary relationship or duty. State ex rel. Ins. Comm'r of State of W.V. v. Blue Cross & Blue Shield of W.V., 219 W.Va. 541, 638 S.E.2d 144, 156 n. 37 (2006) (“A debt is a contractual obligation of one person to pay a fixed sum of money to another. The difference between a trust and ......
  • Gainer v. Walker, No. 34401.
    • United States
    • Supreme Court of West Virginia
    • May 19, 2009
    ...(2008), State ex rel. Ins. Com'r of State of West Virginia v. Blue Cross and Blue Shield of West Virginia, Inc., 219 W.Va. 541, 557 n. 3, 638 S.E.2d 144, 160 n. 3 (2006); and Beard v. Lim, 185 W.Va. 749, 754 n. 7, 408 S.E.2d 772, 777 n. 7 (1991). Nonetheless, our review of this issue does n......
  • Janura v. Janura, No. 20-0159
    • United States
    • Supreme Court of West Virginia
    • February 2, 2021
    ...In State ex rel. Insurance Commissioner of West Virginia v. Blue Cross and Blue Shield of West Virginia, Inc., 219 W. Va. 541, 547-48, 638 S.E.2d 144, 150-11 (2006), we reiterated that a trust "must be based . . . on a clear declaration of trust by its creator." (quoting Syl. Pt. 1, Straton......
  • CitiMortgage, Inc. v. Just Mortg., Inc., No. 4:09 CV 1909 DDN
    • United States
    • United States District Courts. 8th Circuit. United States District Court (Eastern District of Missouri)
    • December 13, 2013
    ...intermediate balance in the account. State ex rel. Ins. Com'r of State of W. Virginia v. Blue Cross & Blue Shield of W. Virginia, Inc., 638 S.E.2d 144, 158 (W. Va. 2006). 3. The court notes that the "affirmative defenses" asserted by defendants include legal principles that are not affirmat......
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9 cases
  • Third Bank v. Mcclure Properties Inc., Civil Action No. 3:08-0210.
    • United States
    • United States District Courts. 4th Circuit. Southern District of West Virginia
    • July 9, 2010
    ...by a fiduciary relationship or duty. State ex rel. Ins. Comm'r of State of W.V. v. Blue Cross & Blue Shield of W.V., 219 W.Va. 541, 638 S.E.2d 144, 156 n. 37 (2006) (“A debt is a contractual obligation of one person to pay a fixed sum of money to another. The difference between a trust and ......
  • Gainer v. Walker, No. 34401.
    • United States
    • Supreme Court of West Virginia
    • May 19, 2009
    ...(2008), State ex rel. Ins. Com'r of State of West Virginia v. Blue Cross and Blue Shield of West Virginia, Inc., 219 W.Va. 541, 557 n. 3, 638 S.E.2d 144, 160 n. 3 (2006); and Beard v. Lim, 185 W.Va. 749, 754 n. 7, 408 S.E.2d 772, 777 n. 7 (1991). Nonetheless, our review of this issue does n......
  • Janura v. Janura, No. 20-0159
    • United States
    • Supreme Court of West Virginia
    • February 2, 2021
    ...In State ex rel. Insurance Commissioner of West Virginia v. Blue Cross and Blue Shield of West Virginia, Inc., 219 W. Va. 541, 547-48, 638 S.E.2d 144, 150-11 (2006), we reiterated that a trust "must be based . . . on a clear declaration of trust by its creator." (quoting Syl. Pt. 1, Straton......
  • CitiMortgage, Inc. v. Just Mortg., Inc., No. 4:09 CV 1909 DDN
    • United States
    • United States District Courts. 8th Circuit. United States District Court (Eastern District of Missouri)
    • December 13, 2013
    ...intermediate balance in the account. State ex rel. Ins. Com'r of State of W. Virginia v. Blue Cross & Blue Shield of W. Virginia, Inc., 638 S.E.2d 144, 158 (W. Va. 2006). 3. The court notes that the "affirmative defenses" asserted by defendants include legal principles that are not affirmat......
  • Request a trial to view additional results

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