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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. In Re Life Insurance Co. of Alaska (8/22/2003) sp-5729

In Re Life Insurance Co. of Alaska (8/22/2003) sp-5729

     Notice:   This opinion is subject to correction  before
     publication  in  the  Pacific  Reporter.   Readers  are
     requested to bring errors to the attention of the Clerk
     of  the  Appellate  Courts, 303  K  Street,  Anchorage,
     Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,


IN RE LIFE INSURANCE          )    Supreme Court No. S-10503
COMPANY OF ALASKA, in         )    Superior Court No. 3AN-97-2651
receivership.                      )
                              )    O P I N I O N
________________________________)  [No. 5729 - August 22, 2003]

          Appeal  from the Superior Court of the  State
          of    Alaska,   Third   Judicial    District,
          Anchorage, John Reese, Judge.

          Appearances:  Timothy A. McKeever  and  Colby
          J.   Smith,   Holmes,   Weddle   &   Barcott,
          Anchorage, for Appellant Carpenter  Financial
          Group,  Inc.   Mark  A.  Sandberg,  Sandberg,
          Wuestenfeld & Corey, Anchorage, for  Receiver
          Robert  A.  Lohr, Director, State of  Alaska,
          Division of Insurance.

          Before:    Fabe,  Chief  Justice,   Matthews,
          Eastaugh, Bryner, and Carpeneti, Justices.

          EASTAUGH, Justice.


           During  liquidation  of a life  insurance  company,  a

claimant sought recovery of $500,000 which the claimant contended

it  had paid to the insurer in exchange for a surplus note.   The

receiver  denied  the claim.  When the claimant objected  to  the

denial,  the  superior  court conducted an  evidentiary  hearing;

finding  that the claimant had been repaid, it denied the  claim.

The  claimant  raises  two  arguments  on  appeal.   Because   AS

21.78.170(d) applied to the superior court's review of the denied

claim,  we first reject the claimant's argument that the superior

court's  failure to rule on the claim within 120 days  after  the

receiver  denied  it  had  the effect under  AS  21.78.293(b)  of

automatically  approving  the claim.  And  because  the  superior

court  conducted  a  de  novo  evidentiary  hearing  and  entered

findings  of  fact  when it ruled against the claimant,  we  also

reject  its argument that the superior court erred by applying  a

deferential  standard  of review to the  receiver's  denial.   We

therefore affirm.


           The  Life  Insurance Company of Alaska (LICA)  was  an

Alaska  corporation authorized to transact the business  of  life

insurance  in  Alaska.   In 1992 the Alaska  Pacific  Acquisition

Group  purchased a controlling interest in LICA.   In  June  1994

Daniel  Carpenter,  one of the two founding  partners  of  Alaska

Pacific,  acquired Alaska Pacific, giving Carpenter a controlling

interest in LICA.

           LICA was experiencing serious financial difficulty  by

June  1994  and  was in danger of being shut down by  the  Alaska

Division  of Insurance.  In an attempt to resolve LICA's problems

Carpenter  Financial  Group, Inc. (another entity  controlled  by

Daniel Carpenter) wrote two checks to LICA, one for $500,000  and

one for $600,000, in exchange for two surplus notes from LICA for

the  same amounts.1  The surplus notes were dated June 30,  1994.

But   LICA's  problems  continued,  and  in  September  1994  the

corporation was involuntarily dissolved by the state.  LICA  sold

most  of its existing policies to another insurer, and in January

1996 the state suspended LICA's authority as an insurance company

in Alaska.

          The superior court appointed the Director of the Alaska

Division  of Insurance as the receiver of LICA.  The receiver  is

overseeing the liquidation of LICA, and must periodically  report

to  the  superior court.2  Parties with claims against an insurer

being  liquidated file proof of their claims with  the  receiver,

who approves or denies the claims and recommends distribution  of

the liquidated company's assets.3  LICA's only remaining asset is

its state-required statutory deposit of $300,000.

           Carpenter Financial asserted a claim against LICA  for

$500,000  for repayment of one of the surplus notes.   (Carpenter

Financial  explained  that it decided not to  file  a  claim  for

repayment  of  the other surplus note because LICA's  assets  are

only  $360,000.)  The receiver denied the claim in February  2001

after  determining  that  it  was not  supported  by  substantial

evidence.   The two checks from Carpenter Financial to LICA  were

both  dated  June  30,  1994.  LICA's quarterly  report  for  the

quarter  ending June 30, 1994 showed $1,100,000 in proceeds  from

the  sale of surplus notes.  But neither check had been deposited

into  LICA's accounts by June 30, 1994.  The $500,000  check  was

not  deposited into LICA's account until September 19, 1994.   On

September 22 $500,000 was transferred from LICA's account into an

unknown  account at the same bank via a customer transfer  debit.

The next day, $600,000 was deposited into LICA's account.

            In   April   2001   Carpenter   Financial   requested

reconsideration of the receiver's February 2001 decision.

           Alaska  Statute 21.78.170(d) provides  that  "[i]f  an

objection  is filed with the receiver and the receiver  does  not

alter  the denial of the claim as a result of the objection,  the

receiver  shall  ask  the  court  for  a  hearing  as   soon   as

practicable."  The receiver did not alter his denial of Carpenter

Financial's claim after Carpenter Financial filed its  objection.

On  July  13, 2001 the receiver filed with the superior  court  a

report entitled "Second Report on Claims Recommending Approval of

Accepted  Claims  and A Request for Partial  Distribution."   The

receiver's report noted that "[f]our claimants whose claims  were

denied have filed an objection to the denial.  The Receiver  will

request that the court set hearings on these claims in a separate

motion."  On August 24, 2001 the receiver asked the court to  set

hearings.   The superior court scheduled a hearing  on  Carpenter

Financial's claim for January 2002.

          On November 21, 2001 Carpenter Financial filed a motion

for summary judgment asking the superior court to treat Carpenter

Financial's  claim  as  approved.  Carpenter  Financial's  motion

argued  that  because  the  court  had  not  ruled  on  Carpenter

Financial's  claim within 120 days after the receiver  filed  its

July  13 report, AS 21.78.293(b) required the court to order  the

receiver  to  approve Carpenter Financial's claim.  The  superior

court denied Carpenter Financial's motion.

          The superior court then conducted the scheduled hearing

on  the  merits  of Carpenter Financial's claim.  The  state  and

Carpenter Financial both participated.  At the conclusion of  the

hearing,  the court denied Carpenter Financial's claim.   In  the

course  of  doing so, the court stated from the bench  that  "The

question  is  whether  there's  substantial  evidence  that   the

receiver's  decision  to disallow the $500,000  claim  .  .  .  -

whether there was substantial evidence to support that conclusion

to deny it."  (Emphasis added.)

           Carpenter  Financial appeals the denial of its  motion

for  summary judgment.  Carpenter Financial also argues that  the

superior  court  applied  the wrong standard  of  review  at  the

evidentiary  hearing,  and  that  this  error  denied   Carpenter

Financial due process because the court was required to conduct a

de  novo hearing.  Alternatively, Carpenter Financial asks us  to

remand to the superior court with instructions to conduct  a  new

hearing applying the proper standard of proof.


          A.   Standard of Review

           We  review  a grant or denial of summary  judgment  de

novo.4   Summary judgment is appropriate if no genuine  issue  of

material fact exists and the moving party is entitled to judgment

as  a  matter of law.5   Carpenter Financial's argument that  the

superior  court  should have granted its summary judgment  motion

turns  on a question of statutory interpretation.  "We apply  our

independent  judgment to questions of statutory interpretation."6

We  will "adopt the rule of law that is most persuasive in  light

of precedent, reason, and policy."7

           The  question whether the superior court  applied  the

proper standard of review in denying Carpenter Financial's  claim

is a question of law to which we apply our independent judgment.8

          B.    Applicability of AS 21.78.293(b)  to  a  Superior
          Court Appeal of a Receiver's Denial of Claim
           Carpenter  Financial  first argues  that  because  the

superior court did not disapprove the claim within 120 days after

the  receiver  submitted  the  claim  report  to  the  court,  AS

21.78.293(b) requires that the claim must be treated as  allowed.

Subsection  .293(b)  provides  for  the  automatic  approval   of

"[c]laims  in  a report that are not disapproved  by  the  court"

within 120 days after the receiver submits its report.9

            Carpenter  Financial  relies  on  the  principle   of

statutory construction that the initial inquiry must focus on the

plain  meaning of the statute, and argues that we must apply  the

plain  meaning  "so long as construction in accordance  with  the

literal  language  of  the  statute  does  not  prove  absurd  or


           On its face and read in isolation, the second sentence

of  AS 21.78.293(b) might seem to apply to denied claims.  If so,

because   the   superior  court  did  not  disapprove   Carpenter

Financial's  denied  claim within 120  days  after  the  receiver

submitted its report to the court, subsection .293(b) would  seem

to  require that Carpenter Financial's claim should be treated as


            In  support  of  its  statutory  argument,  Carpenter

Financial  asserts  that  because  the  first  sentence   of   AS

21.78.293(b)   speaks  of  "allowed  claims,"   the   unqualified

reference  to "claims" in the second sentence must refer  to  all

claims,  whether  the receiver allowed them or denied  them.   It

consequently reasons that even denied claims must be  treated  as

allowed  under AS 21.78.293(b) if the court fails to reject  them

within 120 days after the receiver submits them.

           We  are  not persuaded by this construction.  Per  the

second  sentence of AS 21.78.293(b), "[c]laims in a  report  that

are not disapproved by the court" within 120 days are treated  as

allowed.   Per  the first sentence, however, the  superior  court

must  disapprove  unsubstantiated claims when they  are  "allowed

claims"  but has no comparable duty to disapprove unsubstantiated

disallowed   claims.   Thus,  claims  which  the   receiver   has

disallowed are not subject to the approval-by-inaction  provision

of AS 21.78.293(b).  Or, as the superior court ruled, "the second

sentence  describes  the  automatic approval  of  claims  already

approved  by  the  [r]eceiver."   Therefore,  the  plain  meaning

Carpenter Financial would attribute to subsection .293(b) is  far

from  plain, and is contrary to a careful reading of  the  entire

subsection.  We conclude that the automatic approval rule  of  AS

21.78.293(b) only applies to allowed claims.

           Alaska Statute 21.78.170(d)  concerns judicial  review

of denied claims.11 That subsection confirms the implausibility of

Carpenter   Financial's  statutory  argument  and  confirms   our

conclusion  that AS 21.78.293(b) only applies to judicial  review

of  allowed claims.  We agree with the receiver's contention that

AS 21.78.170(d), rather than AS 21.78.293(b), controls challenges

to  denials of claims.  Carpenter Financial's argument - that all

claims  not rejected by the superior court within 120 days  after

the  receiver  submits them are automatically  approved  -  would

strip all meaning from subsection .170(d).

           Carpenter  Financial asserts that  subsection  .293(b)

merely  provides some specifics for the procedure  set  forth  in

subsection  .170(d).   It argues that subsection  .293(b)  simply

defines  the  "as  soon as practicable" language from  subsection

.170(d).   Carpenter Financial is mistaken.  It is  correct  that

both  subsections  involve  superior court  oversight  of  claims

decided  by  a  receiver in an insurance liquidation.   But  even

though  subsection .293(b) specifies a particular number of  days

for   superior  court  action,  subsection  .170(d)   does   not.

Subsection  .170(d) specifically refers to the appeal  of  claims

the   receiver  has  denied.   Subsection  .293(b)  concerns  the

mandatory superior court review of claims already approved by the

receiver.  Subsection .170(d) does not specifically state exactly

when  the  superior  court must rule on  a  claim,  but  it  does

specifically  apply  to denied claims.  The  legislature  enacted

different  review  schemes for different  categories  of  claims,

distinguishing between those the receiver has approved and  those

the receiver has denied.  The automatic approval-by-inaction rule

only  applies  to claims that the receiver has already  approved.

Alaska   Statute  21.78.170(d),  not  AS  21.78.293(b),  controls

appeals of claims the receiver has denied.

          C.   The Standard of Review the Superior Court Applied

           Carpenter Financial argues that the superior court was

required  to conduct an independent review of the merits  of  the

claim  but failed to do so, and instead merely determined whether

substantial  evidence supported the receiver's  decision  denying

the claim.  Carpenter Financial asserts that this error denied it

due process.

           In  Williams  v. Wainscott we ruled that the  superior

court  was required to conduct a de novo evidentiary hearing  for

claims  denied  by a receiver in an insurance liquidation.12   In

support of its argument that the superior court applied the wrong

standard, Carpenter Financial relies on a statement the  superior

court  made  at  the  conclusion  of  the  three-day  evidentiary

hearing.   The  superior court stated: "The question  is  whether

there's  substantial  evidence that the  receiver's  decision  to

disallow the $500,000 claim . . . - whether there was substantial

evidence  to  support  that conclusion to  deny  it."   (Emphasis

added.)   Carpenter  Financial asserts that these  references  to

"substantial evidence" establish that the superior court did  not

conduct  the required independent review of Carpenter Financial's

claims.   The receiver responds that despite the superior court's

"unfortunate"  statement,  the entire  course  of  the  three-day

hearing and the superior court's ultimate ruling demonstrate that

the  court conducted a de novo hearing on the merits of Carpenter

Financial's claims.

           At  the  beginning of the hearing, before the  parties

made their opening statements, the superior court asked "What  do

the parties think of the burden of proof?"  Counsel for Carpenter

Financial  replied that Carpenter Financial had  "the  burden  of

showing  that the funds that were in question . . . were incurred

on  behalf  of  LICA  and the funds were deposited  -  were  made

available  to  LICA,  and I believe that the receiver  bears  the

burden  of  proof as to the defenses that they allege."   Counsel

for the receiver agreed.

           In his opening statement, Carpenter Financial's lawyer

again discussed  the standard of review for the superior court to


          Just to make it clear, the parties agree that
          this  is  a  trial  de  novo.  .  .  .  [T]he
          decisions of the receiver are entitled to  no
          deference  by  this Court.  It's  very  clear
          from  . . . Williams v. Wainscott that that's
          the  law  in  this state, and we believe  the
          standard  of  proof and the  receiver  agrees
          that  the  standard of proof is  whether  our
          claims are supported by substantial evidence,
          and  we  believe  that we  will  be  able  to
          establish that  this . . . the money went  to
          LICA   and  that  the  attorney's  fees  were
          incurred on behalf of LICA.
(Emphasis added.)

           Carpenter Financial spent three days trying  to  prove

that  substantial evidence supported its claims.   After  closing

arguments,  the  superior court issued an oral  ruling  from  the

bench.  As we noted above, the court prefaced its ruling with its

reference   to  "substantial  evidence."   But  the  court   then

proceeded  to summarize the evidence it had heard over the  prior

three days, and concluded:

          I   find  the  [$500,000  surplus  note]  was
          repaid.   Mr.  Carpenter took the  money.   I
          don't  know where he put it, but he took  it.
          Therefore,  it's  in his pocket.   It's  been
          repaid as a matter of law in this case, and .
          .  . it is not a valid claim against the LICA
The  court's oral findings never mention the receiver's decision.

The  transcript establishes that the court gave no  deference  to

the  receiver's decision and instead made its own findings  based

on  the  evidence  produced during the  superior  court  hearing.

Carpenter  Financial  points to nothing other  than  the  court's

brief reference to "substantial evidence" to support its argument

that  the court applied an improper standard of review.  But  the

court's  findings and the course of proceedings at the  three-day

hearing  indicate that the court actually made its  own  findings

and  did not merely determine that substantial evidence supported

the receiver's decision.13

           The superior court did not apply the wrong standard of

review and therefore committed no legal error.  It conducted a de

novo trial at which evidence was presented; it then made its  own

independent  findings.  The court consequently  did  not  deprive

Carpenter Financial of procedural due process.

            Because we conclude that the superior court  did  not

err, we do not reach the receiver's alternative argument that the

surplus  note  can only be repaid from surplus  funds  above  the

minimum statutory deposit of $300,000 - a surplus that LICA  does

not have.14

IV.                      CONCLUSION

          We therefore AFFIRM the decision of the superior court.

1     A  surplus  note is somewhat similar to a  corporate  bond;
surplus  notes  are  issued  by  insurance  companies  to  obtain
capital.  An insurance company can only repay a surplus note from
funds in its surplus, i.e., the amount by which its assets exceed
its  liabilities.   By their terms, the two  LICA  surplus  notes
could  only  be  repaid from "excess surplus,"  which  the  notes
defined as "surplus in excess of $300,000 capital and surplus."
2     AS  21.78.293(a) provides in part: "As soon as practicable,
the  receiver shall present to the court a report of  the  claims
against the insurer, along with the receiver's recommendations."
3    AS 21.78.010-.330.
4     Cabana v. Kenai Peninsula Borough, 50 P.3d 798, 801 (Alaska
5    United Airlines, Inc. v. State Farm Fire & Cas. Co., 51 P.3d
928, 932 (Alaska 2002).
6    Jerue v. Millet, 66 P.3d 736, 740 (Alaska 2003).
7     Id.  (quoting Guin v. Ha, 591 P.2d 1281, 1284  n.6  (Alaska
8    Williams v. Wainscott, 974 P.2d 975, 978 n.6 (Alaska 1999).
9    The full text of AS 21.78.293(b) provides:

          The   court   shall  review  and  adopt   the
          receiver's  report  on  claims  by  approving
          those   claims   that   are   supported    by
          substantial evidence and disapproving allowed
          claims  that are not supported by substantial
          evidence.   Claims in a report that  are  not
          disapproved by the court within a  period  of
          120 days following submission by the receiver
          shall  be treated by the receiver as  allowed
(Emphasis added.)

10     We have rejected a strict application of the plain meaning
rule  when  interpreting statutes.  Wold v. Progressive Preferred
Ins.  Co., 52 P.3d 155, 161 (Alaska 2002).  We have observed that
"even  when a statute's language meaning seems plain on its face,
ambiguity  may  arise  if  applying  that  meaning  would   yield
anomalous  consequences," Federal Deposit Ins. Corp.  v.  Laidlaw
Transit,  Inc., 21 P.3d 344, 351 (Alaska 2001), and  consequently
have  adopted a sliding scale of interpretation under which  "the
plainer  the  statutory  language is,  the  more  convincing  the
evidence  of  contrary legislative purpose or  intent  must  be."
Lakosh v. Alaska Dep't of Envtl. Conservation, 49 P.3d 1111, 1117
(Alaska 2002).
11    AS 21.78.170(d) provides:

          If  an  objection is filed with the  receiver
          and the receiver does not alter the denial of
          the  claim as a result of the objection,  the
          receiver shall ask the court for a hearing as
          soon  as practicable and give notice  of  the
          hearing  by first class mail to the  claimant
          or  the claimant's attorney and to any  other
          person  directly affected, not less  than  10
          nor  more than 30 days before the date of the
12    Williams v. Wainscott, 974 P.2d 975, 978 (Alaska 1999).
13     Carpenter Financial does not argue to this court that  the
superior court committed clear error in holding that the note was
repaid  and  that  Carpenter Financial's claim was  invalid.   We
therefore  do  not  consider whether the evidence  supported  the
superior court's findings of fact.
14    Because we have concluded based on our independent judgment
that  the  superior  court did not apply the  wrong  standard  of
review,  it is also unnecessary for us to consider the receiver's
argument  that  Carpenter Financial waived the standard-of-review
issue  in the superior court, and that consequently we can review
only for plain error.