Opinion ID: 2373573
Heading Depth: 1
Heading Rank: 8

Heading: judgment creditors

Text: Pepsi-Cola Bottling Company of Charlotte, North Carolina, Inc. (hereinafter Pepsi), appeals from the Commonwealth Court's approval of the plan, alleging that as a federal court judgment holder against Mutual Fire, the principle of the Full Faith and Credit Clause of the United States Constitution mandates that it be given full payment, including interest, due to an alleged superiority of its claim, irrespective of the insurance rehabilitation proceedings. Initially, the contention by Pepsi that it is entitled to an elevated priority by virtue of its status as a federal court judgment holder is both unsubstantiated and without merit. This theory is unsupported by existing case law and neither the provisions of 40 P.S. § 221.14 et seq. providing for rehabilitation, nor 40 P.S. § 221.19 et seq. providing for liquidation, contemplate a specific elevated priority for judgment creditors. As the Commonwealth Court stated in refuting this contention: On the contrary, the serving of a judgment does not elevate the status of such claims. Grode, 132 Pa.Commw. at 217, 572 A.2d at 808 ( citing Davis v. Commonwealth Trust Co., 335 Pa. 387, 7 A.2d 3 (1939)). While Pepsi may not be expressly entitled to an elevated priority for purposes of Class 4 distribution, another facet of the Plan's treatment of Pepsi warrants our discussion. Pepsi alleges that its judgment, including interest, against Mutual Fire was filed on September 4, 1986, one week before the Insurance Commissioner suspended the business of Mutual Fire and three months before the Commissioner filed the Petition for Rehabilitation. In approving the Plan, however, the Commonwealth Court recognized that the judgment in favor of Pepsi against Mutual Fire is binding on and cannot be altered by the Rehabilitator. Grode, 132 Pa.Commw. at 217, 572 A.2d at 808. The problem concerns Section XVII of the Plan which expressly prohibits the payment of interest to creditors unless provided for in the Plan. Thus, an apparent inconsistency exists which resulted in Pepsi filing a Motion For Clarification of the Commonwealth Court's Order approving the Plan, a motion which appears to remain without a ruling. The case relied upon by both parties, Davis v. Commonwealth Trust Co., 335 Pa. 387, 7 A.2d 3 (1939), while proper authority to deny Pepsi's earlier claim of elevated priority, is not analogous for purposes of the instant dilemma concerning the viability of interest awarded. In Davis, the issue concerned the claim of a creditor which had been awarded a judgment against the liquidating trustee by a court years after the liquidation started. Pepsi's judgment entered September 4, 1986 provides: NOW, THEREFORE, IT IS ORDERED, ADJUDGED AND DECREED that on its first claim for relief, denominated First Count in the complaint, plaintiff Pepsi-Cola Bottling Company of Charlotte, Inc. have and recover of and from defendant The Mutual Fire, Marine and Inland Insurance Company the principal sum of One Million Two Hundred Thousand Dollars ($1,200,000.00), plus interest thereon at the legal rate, eight percent (8%) per annum, from and after the date of the breach, May 21, 1986, plus costs. The Court noted that this judgment is binding, inviolate and not subject to any alteration by the Rehabilitator. We view that statement as an implied modification of the Plan's interest prohibition contained in Section XVII as respects Pepsi-Cola Company of Charlotte, Inc. While the Rehabilitator's equitable powers do afford her the authority to limit or deny interest which accrues after a petition for rehabilitation or liquidation has been filed, the federal judgment held by Pepsi including the amounts for interest expressly provided for from May 21, 1986 must be accepted and given dignity up until December 4, 1986, the date the Insurance Commissioner sought to invoke her equitable powers pursuant to her Petition for Rehabilitation. [13] Accordingly, we remand this issue to the Commonwealth Court for the purpose of modifying its January 23, 1990 Order, in favor of maintaining Pepsi-Cola Bottling Company of Charlotte, Inc. as a Class 4 policyholder creditor, for the full amount of the federal judgment entered on September 4, 1986, including all interest provided for between May 21, 1986 and December 4, 1986.