§ 7067. Voidable preferences and liens
(a)(1) A preference is a transfer of any of the property of an insurer to or for the benefit
of a creditor, for or on account of an antecedent debt, made or suffered by the insurer
within one year before the filing of a successful petition for liquidation under this
chapter, the effect of which transfer may be to enable the creditor to obtain a greater
percentage of this debt than another creditor of the same class would receive. If
a liquidation order is entered while the insurer is already subject to a rehabilitation
order, then such transfers shall be deemed preferences if made or suffered within
one year before the filing of the successful petition for rehabilitation, or within
two years before the filing of the successful petition for liquidation, whichever
time is shorter.
(2) A preference may be avoided by the liquidator if:
(A) the insurer was insolvent at the time of the transfer of property;
(B) the transfer of property was made within four months before the filing of the petition;
(C) the creditor receiving it or to be benefited by it or the creditor’s agent acting
with reference to it had, at the time when the transfer of property was made, reasonable
cause to believe that the insurer was insolvent or was about to become insolvent;
or
(D) the creditor receiving transferred property was an officer, or any employee or attorney
or other person who was in fact in a position of comparable influence in the insurer
to an officer whether or not he or she held such position, or any shareholder holding
directly or indirectly more than five per centum of any class of any equity security
issued by the insurer, or any other person, firm, corporation, association, or aggregation
of persons with whom the insurer did not deal at arm’s length.
(3) Where the preference is voidable, the liquidator may recover the property or, if it
has been converted, its value from any person who has received or converted the property;
except where a bona fide purchaser or lienor has given less than fair equivalent value,
the purchaser or lienor shall have a lien upon the property to the extent of the consideration
actually given by the purchaser or lienor. Where a preference by way of lien or security
title is voidable, the court may on due notice order the lien or title to be preserved
for the benefit of the estate, in which event the lien or title shall pass to the
liquidator.
(4) Notwithstanding subdivision (2) of this subsection, or any other provision of this
chapter to the contrary, no receiver or any other person shall avoid any preference
arising under or in connection with any pledge, security, credit, collateral, loan,
advances, reimbursement, or guarantee agreement or arrangement, or any similar agreement,
arrangement, or other credit enhancement to which a federal home loan bank, as defined
in section 7033 of this title, is a party.
(b)(1) A transfer of property other than real property shall be deemed to be made or suffered
when it becomes so far perfected that no subsequent lien obtainable by legal or equitable
proceedings on a simple contract could become superior to the rights of the transferee.
(2) A transfer of real property shall be deemed to be made or suffered when it becomes
so far perfected that no subsequent bona fide purchaser from the insurer could obtain
rights superior to the rights of the transferee.
(3) A transfer that creates an equitable lien shall not be deemed to be perfected if there
are available means by which a legal lien could be created.
(4) A transfer not perfected prior to the filing of a petition for liquidation shall be
deemed to be made immediately before the filing of the successful petition.
(5) The provisions of this subsection apply whether or not there are or were creditors
who might have obtained liens or persons who might have become bona fide purchasers.
(c)(1) A lien obtainable by legal or equitable proceedings upon a simple contract is one
arising in the ordinary course of such proceedings upon the entry or docketing of
a judgment or decree, or upon attachment, garnishment, execution, or like process,
whether before, upon, or after judgment or decree and whether before or upon levy.
It does not include liens that under applicable law are given a special priority over
other liens that are prior in time.
(2) A lien obtainable by legal or equitable proceedings could become superior to the rights
of a transferee, or a purchaser could obtain rights superior to the rights of a transferee
within the meaning of subsection (b) of this section, if such consequences would follow
only from the lien or purchase itself, or from the lien or purchase followed by any
step wholly within the control of the respective lienholder or purchaser, with or
without the aid of ministerial action by public officials. Such a lien could not,
however, become superior and such a purchase could not create superior rights for
the purpose of subsection (b) of this section through any acts subsequent to the obtaining
of such a lien or subsequent to such a purchase that requires the agreement or concurrence
of any third party or that requires any further judicial action or ruling.
(d) A transfer of property for or on account of a new and contemporaneous consideration
that is deemed under subsection (b) of this section to be made or suffered after the
transfer because of delay in perfecting it does not thereby become a transfer for
or on account of an antecedent debt if any acts required by the applicable law to
be performed in order to perfect the transfer as against liens or bona fide purchasers’
rights are performed within 21 days or any period expressly allowed by the law, whichever
is less. A transfer to secure a future loan, if such a loan is actually made, or
a transfer that becomes security for a future loan, shall have the same effect as
a transfer for or on account of a new and contemporaneous consideration.
(e) If any lien deemed voidable under subdivision (a)(2) of this section has been dissolved
by the furnishing of a bond or other obligation, the surety on which has been indemnified
directly or indirectly by the transfer of or the creation of a lien upon any property
of an insurer before the filing of a petition under this chapter that results in a
liquidation order, the indemnifying transfer or lien shall also be deemed voidable.
(f) The property affected by any lien deemed voidable under subsections (a) and (e) of
this section shall be discharged from such lien, and that property and any of the
indemnifying property transferred to or for the benefit of a surety shall pass to
the liquidator, except that the court may on due notice order any such lien to be
preserved for the benefit of the estate and the court may direct that such conveyance
be executed as may be proper or adequate to evidence the title of the liquidator.
(g) The Superior Court of Washington County shall have summary jurisdiction of any proceeding
by the liquidator to hear and determine the rights of any parties under this section.
Reasonable notice of hearing in the proceeding shall be given to all parties in interest,
including the obligee of a releasing bond or other like obligation. Where an order
is entered for the recovery of indemnifying property in kind or for the avoidance
of an indemnifying lien, the court, upon application of any party in interest, shall
in the same proceeding ascertain the value of the property or lien, and if the value
is less than the amount for which the property is indemnity or less than the amount
of the lien, the transferee or lienholder may elect to retain the property or lien
upon payment of its value, as ascertained by the court, to the liquidator, within
such reasonable times as the court shall fix.
(h) The liability of the surety under a releasing bond or other like obligation shall
be discharged to the extent of the value of the indemnifying property recovered or
the indemnifying lien nullified and avoided by the liquidator, or where the property
is retained under subsection (g) of this section to the extent of the amount paid
to the liquidator.
(i) If a creditor has been preferred, and afterward in good faith gives the insurer further
credit without security of any kind, for property that becomes a part of the insurer’s
estate, the amount of the new credit remaining unpaid at the time of the petition
may be set off against the preference that would otherwise be recoverable.
(j) If an insurer shall, directly or indirectly, within four months before the filing
of a successful petition for liquidation under this chapter, or at any time in contemplation
of a proceeding to liquidate it, pay money or transfer property to an attorney for
services rendered or to be rendered, the transactions may be examined by the court
on its own motion or shall be examined by the court on petition of the liquidator
and shall be held valid only to the extent of a reasonable amount to be determined
by the court, and the excess may be recovered by the liquidator for the benefits of
the estate provided that where the attorney is in a position of influence in the insurer
or an affiliate thereof payment of any money or the transfer of any property to the
attorney for services rendered or to be rendered shall be governed by the provision
of subdivision (a)(2)(D) of this section.
(k)(1) Every officer, manager, employee, shareholder, member, subscriber, attorney, or any
other person acting on behalf of the insurer who knowingly participates in giving
any preference when such person has reasonable cause to believe the insurer is or
is about to become insolvent at the time of the preference shall be personally liable
to the liquidator for the amount of the preference. It is permissible to infer that
there is a reasonable cause to so believe if the transfer was made within four months
before the date of filing of this successful petition for liquidation.
(2) Every person receiving any property from the insurer or the benefit thereof as a preference
voidable under subsection (a) of this section shall be personally liable therefor
and shall be bound to account to the liquidator.
(3) Nothing in this subsection shall prejudice any other claim by the liquidator against
any person. (Added 1991, No. 45, § 2, eff. May 29, 1991; amended 2021, No. 105 (Adj. Sess.), § 256, eff. July 1, 2022; 2023, No. 32, § 12, eff. July 1, 2023.)