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304.33-310 Voidable preferences and liens.
(1)
(2)
Preferences.
(a) Preference defined. 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 (1) year
before the filing of a successful petition for liquidation under this subtitle,
the effect of which transfer may be to enable the creditor to obtain a
greater percentage of his 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, transfers otherwise qualifying shall be
deemed preferences if made or suffered within one (1) 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.
(b) Invalidation of preferences. Any preference may be avoided by the
liquidator, if
1.
The insurer was insolvent at the time of the transfer, or
2.
The transfer was made within four (4) months before the filing of the
petition, or
3.
The creditor receiving it or to be benefited thereby or his agent
acting with reference thereto had reasonable cause to believe at the
time when the transfer was made that the insurer was insolvent or
was about to become insolvent, or
4.
The creditor receiving it was an officer, employee, attorney or other
person who was in fact in a position of comparable influence in the
insurer to an officer whether or not he held such 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 with whom the insurer did not deal at arm's length.
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 a bona fide purchaser from or lienor of the
debtor's transferee for a present fair equivalent value. Where the bona
fide purchaser or lienor has given less than fair equivalent value, he shall
have a lien upon the property to the extent of the consideration actually
given by him. 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.
Perfection of transfers.
(a) Personal property. A transfer of property other than real property is
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.
(b) Real property. A transfer of real property is deemed to be made or
suffered when it becomes so far perfected that no subsequent bona fide
(3)
(4)
(5)
purchaser from the insurer could obtain rights superior to the rights of
transferee.
(c) Equitable liens. A transfer which creates an equitable lien is not deemed
to be perfected if there are available means by which a legal lien could be
created.
(d) Transfers not perfected prior to petition. 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.
(e) Actual creditors unnecessary. This subsection applies whether or not
there were creditors who might have obtained liens or persons who might
have become bona fide purchasers.
Liens by legal or equitable proceedings.
(a) Definition. 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 which under applicable law are given a special priority over other
liens which are prior in time.
(b) When liens are superior. 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 (2) 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
(2) of this section through any acts subsequent to the obtaining of such a
lien or subsequent to such a purchase which require the agreement or
concurrence of any third party or which require any further judicial action,
or ruling.
Twenty-one day rule. A transfer of property for or on account of a new and
contemporaneous consideration which is deemed under subsection (2) 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
twenty-one (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 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.
Indemnifying transfers also voidable. If any lien deemed voidable under
paragraph (b) of subsection (1) 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 subtitle which
(6)
(7)
(8)
(9)
results in a liquidation order, the indemnifying transfer or lien shall also be
deemed voidable.
Avoidance of lien. The property affected by any lien deemed voidable under
paragraph (b) of subsection (1) of this section and subsection (5) of this section
is 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 the lien to be preserved for the
benefit of the estate and the court may direct that a conveyance be executed
which is adequate to evidence the title of the liquidator.
Hearings to determine rights. The court 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
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 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 fixes.
Surety's liability discharged. The liability of a 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
or, where the property is retained under subsection (7) of this section to the
extent of the amount paid to the liquidator.
Setoff of new advances. 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 otherwise be recoverable from him.
Effective:June 18, 1970
History: Created 1970 Ky. Acts ch. 301, subtit. 33, sec. 31, effective June 18,
1970.
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