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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,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
IN RE LIFE INSURANCE ) Supreme Court No. S-10503
COMPANY OF ALASKA, in ) Superior Court No. 3AN-97-2651
CI
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.
I. INTRODUCTION
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.
II. FACTS AND PROCEEDINGS
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.
III. DISCUSSION
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
meaningless."10
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
allowed.
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
apply:
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
estate.
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
2002).
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
1979)).
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
claims.
(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
hearing.
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.
