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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
(3)
(4)
(5)
when it becomes so far perfected that no subsequent bona fide 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
(6)
(7)
(8)
(9)
filing of a petition under this subtitle which 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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