A.W.Pherson, Actting Director of Ins. v. Holland-American Ins. Co. Trust

• Decision Date: 22 June 1999
• Docket Number: WD56252
• Parties: A.W. McPherson, Acting Director of Insurance, succeeding Jay Angoff in his capacity as Director of Insurance and Receiver for Holland-America Insurance Company Trust, Mission Reinsurance Corporation Trust, and Mission Insurance Company Trust, Respondent, v. Holland-America Insurance Company Trust, a Missouri Insurance Corporation, et al., Defendants, Danielson Holding Corporation, Appellant. WD56252 Missouri Court of Appeals Western District 0
• Court: Missouri Court of Appeals

A.W. McPherson, Acting Director of Insurance, succeeding Jay Angoff in his capacity as Director of Insurance and Receiver for Holland-America Insurance Company Trust, Mission Reinsurance Corporation Trust, and Mission Insurance Company Trust, Respondent v Holland-America Insurance Company Trust, a Missouri Insurance Corporation, et al., Defendants, Danielson Holding Corporation, Appellant

WD56252

Missouri Court of Appeals Western District

06/22/99

Appeal From: Circuit Court of Jackson County, Hon. John I. Moran

Counsel for Appellant: Gregory P. Forney

Counsel for Respondent: John C. Craft

Opinion Summary: Danielson Holding Corporation (DHC) appeals from the circuit court's judgment approving the allowance of interest, at the statutory rate of nine percent per annum under section 408.020, RSMo 1994, on claims under a plan of distribution of the assets of the Mission Reinsurance Corporation Trust (MRCT), which is in receivership under the supervision of the Missouri Department of Insurance.

In its sole point on appeal, DHC claims that the trial court erred in allowing interest on the claims against the MRCT. Specifically, it claims that the trial court lacked jurisdiction to award interest in that the court's jurisdiction in an insurance receivership proceeding is limited to the exclusive provisions of the Insurance Code (the code), Chapter 375, which does not provide for the recovery of interest on claims for distribution of receivership assets.

Division I holds: The statutory scheme for the receivership in liquidation of an insurance company sets up a self-contained and exclusive statutory scheme. This statutory scheme is found in the Insurance Code. When the General Assembly sets up an exclusive statutory scheme, strict compliance with the prescribed procedure by the court is mandatory and jurisdictional. Thus, in an insurance receivership proceeding, the trial court's jurisdiction is limited exclusively to the provisions of the code, and it cannot act outside that authority. Because the code does not specifically authorize the payment of statutory interest on claims allowed where the receivership assets exceed the sum necessary to pay the total of the principal amount of all claims due and payable, the trial court exceeded its authority and jurisdiction in this case in awarding the same.

Edwin H. Smith, Judge

Danielson Holding Corporation (DHC) appeals from the circuit court's judgment approving the allowance of interest, at the statutory rate of nine percent per annum under section 408.020,¹ on claims under a plan of distribution of the assets of the Mission Reinsurance Corporation Trust (MRCT), which is in receivership under the supervision of the Missouri Department of Insurance (the Department).

In its sole point on appeal, DHC claims that the trial court erred in allowing interest on the claims against the MRCT. Specifically, it claims that the trial court lacked jurisdiction to award interest in that the court's jurisdiction in an insurance receivership proceeding is limited to the exclusive provisions of the Insurance Code (the code), Chapter 375, which does not provide for the recovery of interest on claims for distribution of receivership assets.

We reverse and remand.

Facts

DHC, formerly Mission Insurance Group, Inc., had its headquarters in California and held five insurance subsidiaries. After DHC and its subsidiaries were, by court order, placed in receivership in California in 1985 and after it initiated Chapter 11 bankruptcy, Missouri's Department of Insurance instituted receivership proceedings against the three DHC insurance subsidiaries which were connected to Missouri: Mission Reinsurance Corporation, Holland-America Insurance Company, and Missouri Insurance Company. On March 6, 1987, the circuit court declared the companies to be insolvent.

In an agreement between the California and Missouri courts in 1990, the assets and liabilities of the five DHC insurance subsidiaries were transferred to five separate trusts, and the trusts were substituted as parties for the subsidiaries in the state liquidation proceedings. In an order on April 19, 1990, the trial court reaffirmed its jurisdiction as the domiciliary receivership court of the MRCT and Holland-America Insurance Company Trust (HICT).

On December 6, 1996, Jay Angoff, then director of the Department of Insurance and the court-appointed receiver of the companies (the Director),² asked the trial court to approve his plan for distributing assets of the MRCT. He asked permission to assess statutory interest, pursuant to section 408.020, on claims allowed against the trust from March 6, 1987, the date of liquidation, through the date of payment of each claim. He contended that section 375.700.1(5) authorized interest on such claims by virtue of its authorizing payment of "other debts." He estimated that claims would total $20 million and that interest would be $17.7 million. At that time, the trust assets had a market value of slightly less than $46.5 million.³ Of the $46.5 million, approximately $14 million represented property of the estate of the HICT, which was being held by the MRCT for its benefit. Thus, after that amount was transferred to the HICT in 1997, the MRCT was left with assets of approximately $32 million, which exceeded the principal amount of allowed claims against it, plus interest, by $12 million.⁴

On April 3, 1997, the trial court approved the requested interest payments, and DHC appealed from that order to this court. On appeal, in the case of Angoff v. Holland-America Co. Trust, 969 S.W.2d 351 (Mo. App. 1998), this court dismissed DHC's appeal for lack of jurisdiction, finding that the trial court's April 3, 1997, order approving interest payments was not a final judgment from which it could appeal. Id. at 353.

On July 20, 1998, DHC filed a motion to amend the trial court's April 3 order, seeking to have the order properly denominated a judgment from which an appeal could be taken. On July 24, 1998, the trial court amended its April 3 order and denominated it a judgment. On July 24, 1998, DHC filed a motion to set aside the July 24 judgment on the basis that the parties' counsel had not been properly served with notice of the judgment pursuant to Rules 74.03 and 74.06.⁵ On August 11, 1998, the trial court re-issued its July 24 judgment.This appeal follows.

Standard of Review

The question of whether a trial court has acted outside its jurisdiction is a question of law. Cook v. Polineni, 967 S.W.2d 687, 690 (Mo. App. 1998); Farris v. Boyke, 936 S.W.2d 197, 200 (Mo. App. 1996); Laser Vision Ctrs., Inc. v. Laser Vision Ctrs. Int'l, SpA, 930 S.W.2d 29, 31 (Mo. App. 1996). Hence, review is de novo, with the appellate court independently considering the evidence and reaching its own conclusions. Cook, 967 S.W.2d at 690; Millers Mut. Ins. Ass'n v. Shell Oil Co., 959 S.W.2d 864, 866 (Mo. App. 1997). As such, no deference is due the trial court's judgment. Millers, 959 S.W.2d at 866-67.

I.

In its sole point on appeal, DHC claims that the trial court erred in allowing interest on the claims against the MRCT. Specifically, it claims that the trial court lacked jurisdiction to award interest in that the court's jurisdiction in an insurance receivership proceeding is limited to the exclusive provisions of the Insurance Code, Chapter 375, which does not provide for the recovery of interest on claims for distribution of receivership assets. In response, the Director contends that where the General Assembly has not "prescribed an explicit statutory procedure" in the code, the trial court, in an insurance receivership proceeding, is not limited to its exclusive provisions. Thus, he argues, because no explicit statutory procedure is set forth in the code relating to the recovery of interest on claims, the trial court was free to rely on section 408.020,⁶ providing for interest where none has been agreed upon by the parties, in permitting the recovery of interest in this case. In the alternative, the Director contends that, even if the trial court's jurisdiction was limited in scope to the exclusive provisions of the code, four provisions thereof, sections 375.700.1 & .3, 375.1182.1(22), and 375.1220.1, authorized the recovery of interest.⁷ Thus, the issue presented is whether, in an insolvency proceeding under the code, a trial court exceeds its jurisdiction in approving the payment of statutory interest on claims allowed where the receivership assets exceed the sum necessary to pay the total of the principal amount of all claims due and payable under the code.

"The statutory scheme for the receivership in liquidation of an insurance company . . . sets up a self-contained and exclusive statutory scheme." State ex rel. ISC Fin. Corp. v. Kinder, 684 S.W.2d 910, 913 (Mo. App. 1985) (citing O'Malley v. Prudential Cas. & Sur. Co., 80 S.W.2d 896, 897 (Mo. App. 1935)). This statutory scheme is found in the code. Medallion Ins. Co. v. Wartenbee, 568 S.W.2d 599, 601 (Mo. App. 1978). The provisions of the code are summary, special, and complete in themselves. Angoff, 969 S.W.2d at 353 (citing Melahn v. Continental Sec. Life Ins. Co., 793 S.W.2d 425, 428 (Mo. App. 1990)). It is a self-contained, exclusive, and comprehensive code, requiring the trial court to administer the insolvent company in accordance with its statutory provisions. William Blair Realty Partners, III v. Transit Cas. Co. (In re Transit Cas. Co.), 900 S.W.2d 671, 675 (Mo. App. 1995).

The legislature, in enactment of the insurance laws, now Chapter 375, RSMo., "has evidenced an intention to provide an exclusive code for the insurance business, including the course to be followed in the distribution of the assets of a dissolved company among claimants and others entitled thereto, and excluding the application of statutes which might seem . . . to be in conflict with any section of the Insurance Code."

Wartenbee, 568 S.W.2d at 601 (quoting O'Malley...