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Texas Insurance Code - Not Codified - Section 21A.204. Voidable Preferences And Liens

Legal Research Home > Texas Lawyer > Insurance Code - Not Codified > Texas Insurance Code - Not Codified - Section 21A.204. Voidable Preferences And Liens

Sec. 21A.204. VOIDABLE PREFERENCES AND LIENS.  (a) A
"preference" is a transfer of any interest in property of an insurer
that:
	(1)  is made to or for the benefit of a creditor and for or on
account of an antecedent debt and is made or suffered by the insurer
within two years preceding the filing of a successful petition
commencing delinquency proceedings;  and
	(2)  enables the creditor to receive more than the creditor
would receive if the insurer were liquidated under this chapter,
the transfer had not been made, and the creditor was entitled to
receive payment of the debt to the extent provided by this chapter.
	(b)  Any preference may be avoided by the receiver if:
	(1)  the insurer was insolvent at the time of the transfer;
	(2)  the transfer was made within 120 days before the date of
filing of the petition commencing delinquency proceedings;
	(3)  the creditor receiving the transfer or to be benefited
by the transfer, or the creditor's agent acting with reference to
the transfer, had, at the time the transfer was made, reasonable
cause to believe that the insurer was insolvent or was about to
become insolvent;  or
	(4)  the creditor receiving the transfer was:
	(A)  an officer or director of the insurer;
	(B)  an employee, attorney, or other person who was in fact
in a position to effect a level of control or influence over the
actions of the insurer comparable to that of an officer or director,
without regard to whether the person held that position;  or
	(C)  an affiliate.
	(c)  The receiver may not avoid a transfer under this
section:
	(1)  to the extent that the transfer was:
	(A)  intended by the insurer and the creditor to or for whose
benefit the transfer was made to be a contemporaneous exchange for
new value given to the insurer and in fact was a substantially
contemporaneous exchange;  or
	(B)  made in the ordinary course of business or financial
affairs between the insurer and the transferee and made according
to ordinary business terms in payment of a debt incurred by the
insurer in the ordinary course of business or financial affairs of
the insurer and the transferee;  or
	(2)  to or for the benefit of a creditor, to the extent that,
after the transfer, the creditor gave new value to or for the
benefit of the insurer that was:
	(A)  not secured by an otherwise unavoidable security
interest;  and
	(B)  on account of which new value the insurer did not make an
otherwise unavoidable transfer to or for the benefit of the
creditor.
	(d)  For purposes of this section:
	(1)  a transfer of property other than real property is
deemed to be made or suffered at the time the transfer becomes so
far perfected that any subsequent lien obtainable by legal or
equitable proceedings on a simple contract could not become
superior to the rights of the transferee;
	(2)  a transfer of real property is deemed to be made or
suffered when the transfer is so far perfected that a subsequent
bona fide purchaser from the insurer could not obtain rights
superior to the rights of the transferee;
	(3)  a transfer that creates an equitable lien is not deemed
to be perfected if there are available means by which a legal lien
could be created;  and
	(4)  a transfer not perfected prior to the filing of a
petition for receivership is deemed to be made immediately before
the filing commencing delinquency proceedings.
	(e)  The provisions of this section apply without regard to
whether there are or were creditors who might have obtained liens or
persons who might have become bona fide purchasers.
	(f)  Within the meaning of Subsection (d), "a lien obtainable
by legal or equitable proceedings on a simple contract" is a lien
arising in the ordinary course of proceedings upon the entry or
docketing of a judgment or decree, or upon attachment, garnishment,
execution, or similar process, whether before, upon, or after
judgment or decree and whether before or upon levy.  The term does
not include liens that under applicable law are given a special
priority over other liens that are prior in time.
	(g)  Within the meaning of Subsection (d), 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 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 respective
lienholder or purchaser, with or without the aid of ministerial
action by public officials.  A lien could not, however, become
superior and a purchase could not create superior rights for the
purpose of Subsection (d) through any acts subsequent to the
obtaining of the lien or subsequent to the purchase that require the
agreement or concurrence of any third party or that require any
further judicial action or ruling.
	(h)  A transfer of property for or on account of a new and
contemporaneous consideration that is deemed under Subsection (d)
to be made or suffered after the transfer because of delay in
perfecting the transfer does not become a transfer for or on account
of an antecedent debt if any acts required by the applicable law to
be performed to perfect the transfer against liens or bona fide
purchasers' rights are performed within 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
that becomes security for a future loan, has the same effect as a
transfer for or on account of a new and contemporaneous
consideration.
	(i)(1) If any lien deemed voidable under Subsection (b) 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 commencing delinquency
proceedings under this chapter, the indemnifying transfer or lien
is also deemed voidable.
	(2)  The property affected by any lien deemed voidable under
Subsection (b) and Subdivision (1) is discharged from the lien, and
that property and any of the indemnifying property transferred to
or for the benefit of a surety passes to the receiver, except that
the receivership court may on due notice order any lien deemed
voidable under this section to be preserved for the benefit of the
estate and may direct that a conveyance be executed as may be proper
or adequate to evidence the title of the receiver.
	(3)  Reasonable notice of any hearing in the proceeding shall
be given to all parties as required by law, including the obligee of
a releasing bond or other like obligation.  If an order is entered
for the recovery of indemnifying property in kind or for the
avoidance of an indemnifying lien, the receivership court may in
the same proceeding ascertain the value of the property or lien.  If
the value of the property or lien is less than the amount for which
the property is indemnified or than the amount of the lien, the
transferee or lienholder may elect to retain the property or lien
upon payment to the receiver of its value, as determined by the
receivership court, within a reasonable time determined by the
receivership court.
	(4)  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 receiver, or if the property is
retained under Subdivision (3) to the extent of the amount paid to
the receiver.
	(j)  This section may not be construed to prejudice any other
claim by the receiver against any person.

Added by Acts 2005, 79th Leg., ch. 995, Sec. 1, eff. Sept. 1, 2005.

Last modified: August 11, 2007