§ 27-14.3-32. 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 the transfers shall be deemed preferences if made or suffered within one
year before the filing of the successful petition for rehabilitation, or within two
(2) years before the filing of the successful petition for liquidation, whichever
time is shorter.
(2) Any preference may be avoided by the liquidator if:
(i) The insurer was insolvent at the time of the transfer;
(ii) The transfer was made within four (4) months before the filing of the petition;
(iii) 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 was made, reasonable cause
to believe that the insurer was insolvent or was about to become insolvent; or
(iv) The creditor receiving it 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 the position, or any shareholder holding directly or
indirectly more than five percent (5%) 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;
provided, that 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 preserved for the benefit of the estate, in the event the lien or title shall
pass to the liquidator.
(4) Notwithstanding subsection (a)(2) of this section, or any other provision of this
chapter, 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 § 27-14.3-5, is a party.
(b)(1) A transfer of property other than real property shall be deemed 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 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 which creates an equitable lien shall not be deemed 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 made immediately before the filing of the successful petition.
(5) The provisions of this subsection (b) 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 the proceedings upon the entry or docketing of a
judgment or decree, or upon attachment, garnishment, execution, or a similar 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 which 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 the 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 lienholder or purchaser, with or without the
aid of ministerial action by public officials. That lien could not become superior
and that purchase could not create superior rights for the purpose of subsection (b)
of this section through any acts subsequent to the obtaining of the lien or subsequent
to the purchase which require the agreement or concurrence of any third party or which
require any further judicial action or ruling.
(d) A transfer of property for or on account of a new and contemporaneous consideration
which is deemed under subsection (b) of this section made or suffered after the transfer
because of delay in perfecting it does not by this 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 twenty-one (21) days or any period expressly allowed by the law,
whichever is less. A transfer to secure a future loan, if the loan is actually made,
or a transfer, which 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 subsection (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 which 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 the 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 lien preserved for the benefit of
the estate and the court may direct that conveyance executed as may be proper or adequate
to evidence the title of the liquidator.
(g) The superior court for the county of Providence 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 any hearing in the proceeding shall be given to
all parties in interest, including the obligee of a releasing bond or other similar
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 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 any reasonable times as the court shall fix.
(h) The liability of the surety under a releasing bond or other similar 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 which 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 which would be recoverable from the creditor.
(j) If an insurer, directly or indirectly, within one year before the filing of a successful
petition for liquidation under this chapter, or at any time in contemplation of a
proceeding to liquidate it, pays money or transfers property to an attorney at law
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 of the insurer, payment of any money or the transfer of any
property to the attorney at law for services rendered or to be rendered shall be governed
by the provision of subsection (a)(2)(iv) 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 he or she 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 believe this if the transfer was made within four (4)
months before the date of filing of this successful petition for liquidation.
(2) Every person receiving any property from the insurer or the benefit of the property
as a preference voidable under subsection (a) of this section shall be personally
liable for it and shall be bound to account to the liquidator.
(3) Nothing in this subsection (k) shall prejudice any other claim by the liquidator against
any person.