Unisys Corporation v. NEBRASKA LIFE & HEALTH INSURANCE GUARANTY …

• Decision Date: 02 January 2004
• Docket Number: No. S-02-1056.,S-02-1056.
• Parties: UNISYS CORPORATION, APPELLEE AND CROSS-APPELLANT, v. NEBRASKA LIFE AND HEALTH INSURANCE GUARANTY ASSOCIATION, AN UNINCORPORATED ASSOCIATION, APPELLANT AND CROSS-APPELLEE.
• Court: Nebraska Supreme Court

267 Neb. 158

673 NW 2d 15

UNISYS CORPORATION, APPELLEE AND CROSS-APPELLANT, v. NEBRASKA LIFE AND HEALTH INSURANCE GUARANTY ASSOCIATION, AN UNINCORPORATED ASSOCIATION, APPELLANT AND CROSS-APPELLEE.

No. S-02-1056.

Supreme Court of Nebraska.

Filed January 2, 2004.

Shawn D. Renner and Pamela Epp Olsen, of Cline, Williams, Wright, Johnson & Oldfather, P.C., for appellant.

Jefferson Downing and Gary L. Young, of Keating, O'Gara, Davis & Nedved, P.C., and Joann Hyle, of Pepper Hamilton L.L.P., for appellee.

CONNOLLY, GERRARD, STEPHAN, McCORMACK, and MILLER-LERMAN, JJ.

STEPHAN, J.

The Nebraska Life and Health Insurance Guaranty Association (Association) appeals from an order of the district court for Lancaster County denying its motion for summary judgment and granting the cross-motion for summary judgment filed by Unisys Corporation. The district court held that certain Unisys employees were entitled to coverage under the Nebraska Life and Health Insurance Guaranty Association Act (Act), Neb. Rev. Stat. §§ 44-2701 to 44-2720 (Reissue 1998), after the insolvency of an insurance company which had issued certain contracts to Unisys retirement plans in which the employees had invested. Specifically, the court held that the contracts at issue were "annuity contracts" under Nebraska law and that the employees were the equitable or beneficial owners of the contracts. The Association contends in this appeal that both determinations were erroneous.

FACTS

The Association is an unincorporated association of insurers created by statute to protect certain Nebraska residents against failure in the performance of contractual obligations of certain impaired or insolvent insurers. See § 44-2701. Unisys is a Delaware corporation with an office in Pennsylvania. Unisys established and is the named fiduciary and plan administrator of the Unisys Savings Plan and the Unisys Retirement Investment Plan (collectively the Plans). The Plans are designed to encourage savings and provide retirement and other benefits to Unisys employees. In furtherance of this purpose, the Plans permit eligible Unisys employees to defer and invest a portion of their compensation in the Plans. Investments made by each participating employee are held in a separate account. The Plans permit withdrawals from employee accounts in the event of the employee's retirement, death, voluntary or involuntary termination of employment, or inservice withdrawals.

In accordance with the terms of the Plans, a trust was established to hold the Plans' assets. Northern Trust Company, an Illinois bank, was the trustee in 1987 and 1988 when the contracts at issue in this case were purchased. Northern Trust was succeeded as trustee by Mellon Bank, a resident of Pennsylvania, which was succeeded as trustee by CoreStates, another Pennsylvania bank. The current trustee is First Union Bank, a bank with its principal place of business in North Carolina.

The Plans identified several investment options from which each participating employee could elect to have current contributions invested, including a "Fixed Income Fund" and an "Insurance Contract Fund." Portions of these two funds were invested in four contracts issued by Executive Life Insurance Company (Executive Life), an insurance company organized under the laws of California and licensed to transact business in Nebraska. Each contract designated the Plans' trustee as the owner of the contract. Two of the contracts defined the term "participant" as "[a]n individual on whose behalf the Trustee will purchase retirement benefits," and the remaining two contracts defined the term as "[a]n individual on whose behalf the [Trustee] will purchase or provide retirement benefits."

In accordance with the Plans' provisions, all four Executive Life contracts permitted the trustee to deposit a premium which would earn interest at a guaranteed rate over a fixed term. Each contract provided that the trustee "may direct [Executive Life] to purchase an individual annuity contract for a participant before the retirement date." The contracts each included an additional provision which permitted the trustee to

withdraw the annuity value required to purchase an annuity for a participant who retires. The [Trustee] will then apply for an individual retirement annuity contract, on a form provided by [Executive Life]. The contract will be owned by the participant, and will specify the dates and amounts of payments, and all other terms and conditions of the . . . annuity.

Each contract provided that at the end of the fixed term, Executive Life would pay to the trustee, as owner, the accumulated fund value, calculated on the basis of all premium deposits, less any withdrawals and scheduled payments, plus interest earned at the guaranteed rate and left on deposit with Executive Life.

On April 11, 1991, the commissioner of insurance of the State of California placed Executive Life in conservation, thereby freezing all assets of the company. On December 6, Executive Life was declared insolvent by a California court. At the time that the assets of Executive Life were frozen, 278 Unisys employees residing in Nebraska participated in the Plans and had over $1,061,564 invested in the Executive Life contracts. When Executive Life was placed in conservatorship, all payments and withdrawals under the Executive Life contracts were suspended. In response, the Plans suspended all transactions with respect to that portion of the fixed income fund and the insurance contract fund represented by the Executive Life contracts as of March 31, 1991. The Plans also froze the proportional share of each affected employee's account balance, which was calculated by applying the percentage of the fixed income fund and the insurance contract fund invested in the four Executive Life contracts to each individual employee's account balance in those funds. After these actions were taken, the affected employees were not permitted to make any deposits or withdrawals from the "frozen" portion of their accounts, and therefore each employee's "frozen account" balance was unchanged when Executive Life was declared insolvent on December 6. Subsequently, each employee has received a quarterly account statement showing separately the balance in his or her regular account and the balance in his or her frozen Executive Life account. Under a rehabilitation plan for Executive Life approved by a California court, the affected Unisys employees have recovered a portion of the amount in their frozen accounts. On behalf of these employees, Unisys submitted a claim to the Association for the unpaid balance and interest. The Association denied the claim.

Unisys then filed this action in the district court for Lancaster County. In its operative amended petition, Unisys sought a declaratory judgment that the Executive Life contracts were annuity contracts covered by the Act and that the Nebraska resident participants were entitled to compensation under the Act for amounts still owed by Executive Life under the contracts. The Association filed an answer denying these allegations and asserting certain affirmative defenses. Each party moved for summary judgment.

The district court granted Unisys' motion for summary judgment and denied that of the Association, concluding that the Executive Life contracts were annuity contracts under the Act and that the Act extended coverage to the Plan participants as the equitable or beneficial owners of the contracts. The court denied Unisys' motion for prejudgment and postjudgment interest. The Association filed this timely appeal, and Unisys cross-appealed.

ASSIGNMENTS OF ERROR

The Association assigns, restated, that the district court erred in (1) concluding that the Executive Life contracts were annuity contracts covered by the Act and (2) concluding that the Nebraska resident plan participants were equitable or beneficial owners of the contracts and thus covered by the Act.

In its cross-appeal, Unisys assigns that the district court erred in denying its motions for prejudgment and postjudgment interest.

STANDARD OF REVIEW

[1,2] Summary judgment is proper when the pleadings and the evidence admitted at the hearing disclose that there is no genuine issue as to any material fact or as to the ultimate inferences that may be drawn from those facts and that the moving party is entitled to judgment as a matter of law. Hamilton v. Nestor, 265 Neb. 757, 659 N.W.2d 321 (2003); Bennett v. Labenz, 265 Neb. 750, 659 N.W.2d 339 (2003). Summary judgment is proper where the facts are uncontroverted and the moving party is entitled to judgment as a matter of law. Fontenelle Equip. v. Pattlen Enters., 262 Neb. 129, 629 N.W.2d 534 (2001).

[3] Although the denial of a motion for summary judgment, standing alone, is not a final, appealable order, when adverse parties have each moved for summary judgment and the trial court has sustained one of the motions, the reviewing court obtains jurisdiction over both motions and may determine the controversy which is the subject of those motions or make an order specifying the facts which appear without substantial controversy and direct further proceedings as it deems just. Hogan v. Garden County, 264 Neb. 115, 646 N.W.2d 257 (2002); Fontenelle Equip., supra.

[4] Statutory interpretation presents a question of law. When reviewing questions of law, an appellate court has an obligation to resolve the questions independently of the conclusion reached by the trial court. State ex rel. City of Alma v. Furnas Cty. Farms, 266 Neb. 558, 667 N.W.2d 512 (2003); Longo v. Longo, 266 Neb. 171, 663 N.W.2d 604 (2003).

ANALYSIS

[5,6] We begin with the principle that when asked to interpret a statute, a court must determine and give effect to the purpose and intent of the Legislature as ascertained from the entire language of the statute considered in its plain, ordinary, and popular sense. Nebraska Life & Health Ins. Guar. Assn. v. Dobias, 247...