David C. Farmer, Successor-Trustee vs. Harmon
(Formerly Woo vs. Harmon & Nicholson vs. Harmon)
U.S. District Court For the District of Hawaii
Judges: David A. Ezra; Kevin S. Chang
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DEFENDANT’S WITNESS
GERALD TAKEUCHI
Atlas Insurance Agency, Inc
1132 Bishop Street, Suite 1600
Honolulu, HI 96813
Fax: 808-533-8777
Website: http://www.atlasinsurance.net
Gerald Takeuchi was the former president of Four Star Insurance Agency, Inc.; currently an agent for Atlas Insurance Agency, Inc. and Island Insurance Company.
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IN THE SUPREME COURT OF THE STATE OF HAWAI`I
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FOUR STAR INSURANCE AGENCY, INC.; J.D. JENKINS & CO., INC.; INSURANCE HAWAII, INC.; BIG ISLAND INSURANCE AGENCY, INC.; and PYRAMID INSURANCE, Plaintiffs-Appellants, v. HAWAIIAN ELECTRIC INDUSTRIES, INC.; HEI DIVERSIFIED, INC.; THE HAWAIIAN INSURANCE & GUARANTY COMPANY, LIMITED; UNITED NATIONAL INSURANCE COMPANY, LIMITED; HAWAIIAN UNDERWRITERS INSURANCE CO., LTD.; ROBERT F. CLARKE; EDWARD J. BLACKBURN; THOMAS S. ADAMS; GARY L. KIRBY; DAVID L. WARD; NEAL H. KUNDE; ROBERT F. MOUGEOT; REYNALDO D. GRAULTY, only in his capacity as Insurance Commissioner of the State of Hawai`i and Rehabilitator and/or Liquidator of Hawaiian Insurance & Guaranty Company, Limited, United National Insurance Company, Ltd. and Hawaiian Underwriters Insurance Co., Ltd., Defendants-Appellees, and DOES 1 through 100, Defendants
NO. 20710
APPEAL FROM THE FIRST CIRCUIT COURT
(CIV. NO. 94-4555-12)
MOON, CJ, KLEIN, LEVINSON, NAKAYAMA, AND RAMIL, JJ.
OPINION OF THE COURT BY RAMIL, J.
This appeal arises from the rehabilitation of defendant-appellee The Hawaiian Insurance & Guaranty Company, Ltd. (HIGC), and the liquidation of defendants-appellees Hawaiian Underwriters Insurance Co., Ltd. (HUI) and United National Insurance Company, Limited (UNICO). Shortly after the insolvency of HIGC, HUI, and UNICO, the Insurance Commissioner (the Commissioner) seized the assets of HIGC, HUI, and UNICO, and eventually settled all claims against HIGC, HUI, UNICO. The Commissioner also obtained a thirty-two million dollar cash settlement against defendant-appellee Hawaiian Electric Industries, Inc. (HEI), the parent company of HIGC, HUI, and UNICO. Thereafter, plaintiffs-appellants Four Star Insurance Agency, Inc., et al. (collectively, Plaintiffs) brought their own action against HIGC, HUI, UNICO, HEI, and various directors and officers (collectively, Defendants) for alleged unpaid commissions. The circuit court granted Defendants' motions for summary judgment and entered judgment in favor of Defendants.
From this judgment, Plaintiffs appealed.
On appeal, Plaintiffs contend, inter alia, that the Commissioner did not have authority to settle their claims because: (1) the claims were "unique and personal" to Plaintiffs; and (2) the unpaid commissions were held "in trust" for Plaintiffs. Because we hold that the Commissioner had exclusive standing to assert Plaintiffs' claims arising out of the insolvency of HIGC, HUI, and UNICO, we affirm the circuit court's judgment filed April 25, 1997.
I. BACKGROUND
A. The Parties
Defendants HIG, HUI, and UNICO were insurance companies in Hawai`i that sold property insurance, vehicle insurance, general casualty insurance, and other types of insurance policies. Defendants HIGC, HUI, and UNICO operated collectively as The Hawaiian Insurance Group (HIG). HIGC, HUI, and UNICO were wholly owned subsidiaries of defendant-appellee HEI Diversified, Inc. (HEIDI). In turn, HEIDI was a wholly owned subsidiary of HEI.(2)
Plaintiffs are independent insurance agents that serviced HIG's customers.(3) Plaintiffs had a "direct billing" arrangement with HIG. Under this arrangement, Plaintiffs would sell HIG's policies. HIG would then bill its customers directly and collect premiums accordingly. In turn, HIG would then pay Plaintiffs a specified percentage of the collected premiums as Plaintiffs' earned commissions.
B. Hurricane Iniki
On September 11, 1992, Hurricane Iniki caused major property damage to the Island of Kaua`i and parts of O`ahu. As a result of the hurricane, homeowners and property owners flooded HIG and other insurance companies with hurricane-related damage claims. Eventually, the claims overwhelmed HIG's financial resources. In response to these damage claims, on December 3, 1992, HEI announced that it would not contribute additional capital to HIG.
C. The HIG Lawsuit & the Reorganization/Liquidation Plan
On December 18, 1992, the circuit court granted then-Insurance Commissioner Linda Chu Takayama's (the Commissioner) motion to take possession and control of all of HIG's assets. On December 24, 1992, the circuit court placed HIG in rehabilitation and appointed the Commissioner as rehabilitator. As rehabilitator, the Commissioner was directed to take possession of and administer HIG's assets under the court's supervision.
On April 12, 1993, the Commissioner, in her capacity as rehabilitator, filed a motion for approval of a plan for reorganization of HIGC and for liquidation of UNICO and HUI (the plan) in a special proceeding entitled Takayama v. The Hawaiian Insurance & Guaranty Company, Ltd., et al. (the HIG lawsuit). The circuit court approved the plan, which set forth an exclusive procedure whereby policyholders, claimants and creditors of HIG could file proofs of claim for resolution and payment of any monies allegedly due.
The plan gave creditors three options. Under the first option, the creditor would participate in the plan and be entitled to receive twenty-five percent of its claim within ninety days after filing a claim form. The balance of the claim would be paid if and when such sums became available. Under the second option, the creditor would participate in the plan and be entitled to receive fifty percent of its claim within 90 days after filing a claim form. This payment would be paid "in full satisfaction of all sums due such creditor." Under the third option, the creditor would not participate in the plan and be entitled to receive a pro-rata payment only from such sums as may become available in the future.
All of the Plaintiffs elected to participate in the plan by selecting either the first or second option. None of the Plaintiffs selected the third option. Accordingly, each Plaintiff was paid at least fifty percent of the amount claimed.
In addition to the three creditor payment options, the plan stated that the Commissioner would commence and pursue a lawsuit against HEI, HEIDI, and some or all of the officers and directors of HIGC. The plan also stated that the Commissioner could settle such a lawsuit upon terms the Commissioner deemed appropriate, subject to court approval.
D. The HEI Lawsuit
On April 12, 1993, the Commissioner, in her capacity as rehabilitator/liquidator, filed a complaint entitled Takayama v. Hawaiian Electric Industries, Inc., et al. (the HEI lawsuit). The Commissioner subsequently amended the HEI lawsuit to reflect that the action was brought on behalf of all creditors, potential creditors, policyholders, and claimants of HIG.
The HEI lawsuit consisted of thirteen causes of action and alleged, in relevant part, that HEI, HEIDI, and a number of their corporate officers (the HEI defendants) had: (1) misled HIG's creditors, policyholders and the public regarding HEI's and HEIDI's financial support of HIG; and (2) mismanaged and drained financial assets from HIG.
On February 10, 1994, the Commissioner and the HEI defendants signed a global settlement agreement and general release. Under this settlement, HEI agreed to immediately pay thirty-two million dollars in cash to the Commissioner. The payment was intended to help reduce an anticipated seventy million dollar deficit facing HIG. In effect, the payment would be available for distribution to HIG's policyholders, creditors, and claimants in accordance with the plan's claims settlement procedure. In exchange for the immediate cash payment, the Commissioner, in her capacity as rehabilitator/liquidator and on behalf of all the policyholders, claimants and creditors of the HIG Group, agreed to release and discharge each of the HEI defendants.
On March 3, 1994, Insurance Commissioner Lawrence M. Reifurth, who succeeded Commissioner Takayama, filed a motion for approval of the settlement agreement. Prior to the hearing on the motion, notice of the court hearing on the settlement agreement was addressed and sent to all known policyholders, claimants and creditors of HIG, including Plaintiffs.(4) The notice stated that approval of the settlement agreement would result in a release "of any and all claims held by the Commissioner/Rehabilitator/Liquidator and by HIG in their representative capacities" on behalf of the policyholders, claimants and creditors of HIG. On April 6, 1994, having received no objections from Plaintiffs and there being no appearance by Plaintiffs at the hearing, the circuit court granted Reifurth's motion for approval of the settlement agreement finding that it was fair and reasonable. The court also found that [t]he Settlement Agreement has been entered into in good faith, represents the compromise of disputed claims, and the terms thereof are fair, reasonable and in the respective best interests of the public, the past, present and future policyholders, claimants and creditors . . . .
Consequently, the HEI lawsuit was later dismissed with prejudice.
E. Plaintiffs' Lawsuit Against The HEI Defendants
On December 2, 1994, after the HEI lawsuit had been settled and dismissed, Plaintiffs filed a complaint against HEI, HEIDI, HIGC, UNICO, HUI, various officers and directors of HIGC and HEI, and Insurance Commissioners Takayama and Reifurth (Plaintiffs' lawsuit). Like the HEI lawsuit, Plaintiffs' lawsuit alleged, inter alia, that the HEI Defendants had: (1) misled Plaintiffs regarding HEI's and HEIDI's financial support of HIG; and (2) mismanaged and drained financial assets from HIG.
Defendants brought various motions for summary judgment. The circuit court granted summary judgment in favor of all defendants named in Plaintiffs' suit and entered judgment in favor of all defendants. From this judgment, Plaintiffs filed a timely appeal.
II. STANDARDS OF REVIEW
A. Summary Judgment
We review [a] circuit court's award of summary judgment de novo under the same standard applied by the circuit court. Amfac, Inc. v. Waikiki Beachcomber Inv. Co., 74 Haw. 85, 104, 839 P.2d 10, 22, reconsideration denied, 74 Haw. 650, 843 P.2d 144 (1992) (citation omitted). As we have often articulated:
[s]ummary judgment is appropriate if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law....
III. DISCUSSION
Defendants contend that the Commissioner, as liquidator under HRS § 431:15-310, had exclusive standing to assert common claims on behalf of HIG, its policyholders and creditors against third parties. We agree.
A. Applicable Rules of Statutory Construction
Although we obtain the intention of the legislature primarily from the language of the statute itself, we have rejected an approach to statutory construction which limits us to the words of a statute, for when aid to construction of the meaning of words, as used in the statute, is available, there certainly can be no rule of law which forbids its use, however clear the words may appear on superficial examination. Thus, the plain language rule of statutory construction, does not preclude an examination of sources other than the language of the statute itself even when the language appears clear upon perfunctory review. Were this not the case, a court may be unable to adequately discern the underlying policy which the legislature seeks to promulgate and, thus, would be unable to determine if a literal construction would produce an absurd or unjust result, inconsistent with the policies of the statute....
B. Scope of Insurance Commissioner's Authority
HRS § 431:15-310 is part of the Insurers Supervision, Rehabilitation and Liquidation Act (ISRLA). See HRS ch. 431:15 (1993). HRS § 431:15-310(a) provides in relevant part:
The liquidator shall have the power to:
. . . .
(13) Prosecute any action which may exist on behalf of the creditors, members, policyholders or shareholders of the insurer against any officer of the insurer, or any other person;
. . . .
(19) Exercise and enforce all the rights, remedies, and powers of any creditor, shareholder, policyholder, or member, including any power to avoid any transfer or lien that may be given by the general law and that is not included with section 431:15-315 through section 431:15-317; [and]
. . . .
(22) Exercise all powers now held or hereafter conferred upon receivers by the laws of this State not inconsistent with the provisions of this article.
(Emphases added.) Likewise, HRS § 431:15-313(b) (1993) provides in relevant part:
The liquidator may, upon or after an order for liquidation, within two years or such time in addition to two years as applicable law may permit, institute an action or proceeding on behalf of the estate of the insurer upon any cause of action against which the period of limitation fixed by applicable law has not expired at the time of the filing of the petition upon which such order is entered.
(Emphases added.) Based upon the plain language of HRS §§ 431:15-310 and 431:15-313, the Commissioner, as liquidator of an insurer undergoing liquidation, has the power to prosecute any and all lawsuits on behalf of the insurer and all creditors, shareholders, policyholders, or members of the insurer....
Given the factual similarity between this case and Corcoran, we hold as a matter of law that the Commissioner in this case had exclusive standing to assert all claims arising out of HIG's liquidation and rehabilitation on behalf of not only HIG, but also its creditors, including Plaintiffs.(9) Because Defendants were entitled to judgment as a matter of law and there being no genuine issues of material fact, the circuit court properly granted summary judgment in favor of Defendants.
IV. CONCLUSION
For the reasons discussed above, we affirm the circuit court's judgment filed April 25, 1997.
On the briefs:
David K. Lum and Keith S.
Agena, of Char, Sakamoto,
Ishii, Lum & Ching; Philip
Borowsky, pro hac vice, of
San Francisco; Jani Iwamoto,
pro hac vice, of San Francisco
for Plaintiffs-Appellants
Four Star Insurance Agency,
Inc.; J.D. Jenkins & Co., Inc.;
Insurance Hawaii, Inc.; Big
Island Insurance Agency, Inc.;
Mitchell C. Sockett, of Cades
Defendants-Appellees Hawaiian
Diversified, Inc.; Robert F.
Clarke and Robert F. Mougeot
Clifford K. Higa, Joseph N.
Kiyose, Rod S. Aoki, John A.
Kodachi, of Kobayashi, Sugita
& Goda, for Defendants-
Appellees United National
George W. Playdon, Jr. and
Kelvin H. Kaneshiro, of
Reinwald, O'Connor & Playdon,
for Defendants-Appellees
Thomas S. Adams, Gary L. Kirby,
David L. Ward, and Neal H. Kunde
Deborah Day Emerson and
David A. Webber, Deputy
Attorneys General, for
Defendant-Appellee Reynaldo D.
Graulty, only in his capacity
Jerrold Y. Chun, of Chun
Chipchase Takayama Nagatani,
for Defendants-Appellees
Lawrence M. Reifurth, in their
respective capacities as
Rehabilitators and/or
Liquidators of the Hawaiian
Insurance & Guaranty Company,
Limited, United National
Insurance Company, Ltd., and
Hawaiian Underwriters Insurance
Co., Ltd, join answering brief
of Defendants-Appellees United
National Insurance Company,
Limited and Hawaiian Underwriters
Insurance Co., Ltd.
1. Linda Chu Takayama and Lawrence M. Reifurth are no longer in the position of Insurance Commisioner, Department of Commerce and Consumer Affairs of the State of Hawai`i. Pursuant to Hawai`i Rules of Appellate Procedure (HRAP) Rule 43(c)(1), Reynaldo D. Graulty has been substituted automatically in this case.
2. In addition to HIGC, HUI, UNICO, HEIDI, and HEI, the other defendants in this case are Robert Clarke, Robert Mougeot, Thomas Adams, Gary Kirby, David Ward, and Neal Kunde. Robert Clarke is the president and CEO of HEI and was HIGC's former chairman and director. Robert Mougeot is HEI's Financial Vice-President and was a former HIGC director. Thomas Adams, Gary Kirby, David Ward, and Neal Kunde were former HIGC officers.
3. The Plaintiffs in this appeal are: (1) Four Star Insurance Agency, (2) J.D. Jenkins & Company, Insurance Hawaii, (3) Big Island Insurance Agency, and (4) Pyramid Insurance Agency.
4. Although Plaintiffs contend that they never received notice of the hearing on the Commissioner's motion for approval of the settlement agreement, the circuit court specifically found that appropriate notices were mailed to all policyholders, claimants, and creditors of HIG. In addition, notice of the hearing was published in a newspaper of general circulation....
8. Plaintiffs assert that the Commissioner had no authority to retain the "earned" commissions that were "vested" in Plaintiffs and held in "trust" by the Commissioner. Plaintiffs assertion is without merit and is not relevant to the issue of whether Plaintiffs had standing to bring an action against the parent company of HIG.
HRS § 431:15-103(a)(8) defines "general assets" as "all property, real, personal, or otherwise, not specifically mortgaged, pledged, deposited, or otherwise encumbered for the security or benefit of specified persons or classes of persons." (Emphasis added.) In this case, the record indicates that the premiums paid by the insureds were paid directly to HIG and were the property of HIG. In turn, HIG would pay Plaintiffs a commission based on a percentage of the amount of premiums collected. Because the premiums collected by HIG were not specifically set aside (i.e., encumbered) for the benefit of the Plaintiffs, the commissions collected were part of HIG's general assets. In addition, Plaintiffs have not cited to any section of HRS ch. 431:15 that would support their contention that earned commissions of agents are to be treated differently from general assets. Therefore, inasmuch as the Commissioner takes possession of the assets of the insurer and administers them under the general supervision of the court once the liquidation order is filed, we reject Plaintiffs' contention that part of the premiums collected by HIG were earned commissions held in trust for the benefit of Plaintiffs.
9. In addition, Plaintiffs argue that the Commissioner did not have authority to settle their claims against HEI because: (1) the Commissioner lacked authority to file Plaintiffs' alter ego claims against the HEI defendants; and (2) the Commissioner had authority to prosecute and settle only "common" claims, as opposed to "unique and personal" claims. However, inasmuch as the plain language of HRS §§ 431:15-310(a)(13) and (19) expressly state that the liquidator has the power to "[p]rosecute any action which may exist on behalf of the creditors" and "exercise and enforce all the rights, remedies, and powers of any creditor," we reject Plaintiffs' argument that the Commissioner did not have authority to file alter ego claims against the HEI. HRS §§ 431:15-310(a)(13) and (19) (emphases added). In addition, because all of Plaintiffs' claims against HEI stem from the insolvency of HIG, we reject Plaintiffs' contention that their claims against HEI were "unique and personal" as compared to the claims of other HIG creditors.
http://www.state.hi.us/jud/20710.htm
Gerald Takeuchi is expected to testify regarding his business, professional and personal relationships with Defendant Bobby N. Harmon, Hawaiian Insurance Companies, George Ariyoshi, Rey Graulty, Wayne Metcalf, Laurence Reifurth, Linda Chu Takayama, Mark Polivka, Neal Kunde, J.P. Schmidt, Atlas Insurance Agency, Island Insurance Company, Colbert Matsumoto, AIG, Robin Campaniano, American Mutual Underwriters, Ltd., and others as named upon discovery.
Internet References:
http://www.islandinsurance.com/findanagent.asp?sub=Search&a=gA
www.kycbs.net/AlliedWorldAssurance.htm
www.kycbs.net/ArbitrateThis.htm
www.kycbs.net/Claims-Branch-Island.htm
www.kycbs.net/First-Insurance.htm
www.kycbs.net/GoldmanSachs.htm
www.kycbs.net/Insurance-Vampires.htm
www.kycbs.net/Travelers-St-Paul.htm
TO GO TO THE DAVID C. FARMER VS. HARMON WITNESS INDEX
www.kycbs.net/CV05-00030-Witness-Index.htm