Court Opinion

ID: 2715083
Source: CourtListenerOpinion
Date Created: 2014-08-06 17:13:36.120653+00
Date Added: 2024-06-11T09:50:54.324586
License: Public Domain

FILED
                                                                                              C0<: _ ?
                                                                                                      OE APPEALS
                                                                                                   DIVISION 11
                                                                                            2014 JUN 10
                                                                                                        Ali 8: 39

     IN THE COURT OF APPEALS OF THE STATE OF WASHIN

                                              DIVISION II

              MARINE INSURANCE                                          No. 43719 -8 - II
COMPANY; and ROBERT A. BELL,

                                   Appellants,

         v.

STATE OF WASHINGTON, through its
Divisions, Department of Revenue and
The Insurance Commissioner,                                          PUBLISHED OPINION

                                   Respondents.

         WoRSwIcx, J. —     Robert Bell and the Pacific Marine Insurance Company (PacMar) made
                                                                                   1
a claim under     the Washington Uniform Unclaimed        Property   Act (WUUPA)       for property being

held   by the   State Department   of   Revenue ( DOR).   They filed this action in Thurston County

Superior Court after the DOR refused to release the funds. They now appeal the superior court' s

denial of their summary judgment motion and its grant of summary judgment to the State.

         After PacMar entered receivership and was liquidated under chapter 48. 31 RCW, funds

from the PacMar estate were transferred to the State treasury in 2000 and 2002, subject to

escheat to the State after six years. Bell and PacMar argue that the funds could not legally

escheat under RCW 48. 31. 155 because the PacMar funds did not fall within that statute' s scope,

and because the State violated WUUPA and violated Bell and PacMar' s due process rights when

it failed to provide them adequate notice about the transfer of the funds to the State prior to

1
    Chapter 63. 29 RCW.
No. 43719 -8 -II

escheat. We hold that the superior court had jurisdiction to determine whether the DOR' s

decision was correct, and that because Bell and PacMar had no legal interest in the funds, they

had no standing to challenge that DOR decision. We affirm the Thurston County Superior
Court.

                                                           FACTS

            Bell owned the Pacific Marine Holdings Corporation (PacHold), which was incorporated

in California. PacHold was the sole shareholder of PacMar, which was incorporated in

Washington State. The King County Superior Court affirmed the state insurance commissioner

as the PacMar estate' s receiver for the purpose of liquidation in 1989. Although PacMar was

fully liquidated, it has never been legally dissolved.

A.          Distribution ofthe PacMar Estate' s Funds

            The King County Superior Court set August 1, 1996, as the final deadline for creditors to

file claims against the PacMar estate. In 1999, the superior court entered an order approving the

receiver' s ( Commissioner' s) plan to close the PacMar estate and an order approving the

Commissioner' s plan for final distribution of the PacMar estate' s funds. The Commissioner' s

court- approved plan for final distribution divided the creditors' claims into five classes, ranked A

                2
through. F.         The plan paid the claims in classes A through D in full. But after retaining

  51, 450. 00 for administrative costs, insufficient funds remained in the PacMar estate to pay any

2 The record before us does not describe or name the members of classes E or F. Classes A, C,
 and    D   were consistent with       the classes listed in former RCW 48. 31. 280 ( 1975 -76) ( no   claims fell
 into   class   B   and   the   record never   defined   class   B). Former RCW 48. 31. 280 stated that class E
 claims were "[ a] 11 other claims."           But former RCW 48. 31. 280 does not list a class F. Former
 RCW 48. 31. 280 ( 1993) completely overhauled the classes, turning them into eight classes listed
 by number rather than letter. The State asserts that the class E claims are " general creditor
 claims."       Clerk' s Papers ( CP) at 18.

                                                                  2
No. 43719 -8 -II

amount to the claims in classes E or F. Class E' s claims totaled $916, 820. 43 and class F' s

claims totaled $213, 427.29.

       In 2000, the King County Superior Court discharged the receiver and closed the PacMar

estate. The superior court' s order transferred the PacMar estate' s remaining funds to the State

treasury in the following amounts:

        1.   Unclaimed funds of $22, 958. 56, meant to pay issued checks that were either
             outstanding or returned, and to pay claimants who were identified but could
             not be found.

        2.   Residual funds of $39, 862.78, meant to pay any late presented bills.

        In 2001, after the PacMar estate' s closure, the PacMar estate acquired $38, 907.48 in new

funds from creditors. The Commissioner petitioned the superior court to transfer the new funds

to the treasury, rather than reopen the estate and distribute these funds. The Commissioner

explained that during the original, final distribution of the PacMar estate' s funds, the

Commissioner never expected to have funds available for distribution towards claims in class E,

and thus, never adjudicated the individual claims in class E for their validity or amount. The

Commissionerrarguedthat the administrative costs ofadjudicating the-numerous class E-claims

would consume all of the PacMar estate' s funds, leaving no funds to pay the class E claims,

which were next in line to receive distributions from the PacMar estate. The superior court

ordered that the PacMar estate would remain closed, and transferred the new funds to the

treasury " in   accordance with   RCW 48. 31. 155."   Clerk' s Papers ( CP) at 228.

        After the new funds were transferred to the treasury, the treasury had custody of the

 following PacMar estate' s funds:

                                                      3
No. 43719 -8 -II

        1.   Unclaimed funds of $22, 958. 56, transferred to the treasury in 2000 upon the
             PacMar estate' s closure, meant to pay issued checks that were outstanding or
             returned, and to pay claimants who were identified but could not be found.

       2.    Residual funds       39, 862. 78, transferred to the treasury in 2000 upon the
                                   of $

             PacMar estate' s closure, meant to pay any late presented bills.

       3.    New funds of $33, 751. 97, transferred to the treasury in 2002 approximately
             two years after the PacMar estate' s closure, representing funds acquired from
             insurance companies.

B.     Bell and PacMar' s Claims

       Bell, a British national, moved to New Zealand in 1987, and stopped following PacMar' s

liquidation in 1988. In 2010, Bell asked the Commissioner whether any funds remained in the

PacMar estate. The Commissioner told Bell to ask the DOR. The DOR informed Bell that the

treasury had received the remaining PacMar estate' s funds as unclaimed property, and that Bell

had 90 days to produce a court order entitling him to the PacMar estate' s funds, or those funds

would permanently escheat:

        You recently inquired about excess proceeds from the liquidation of [the PacMar
        estate]... .

        The fluids currently held as unclaimed property were transferred to the state in
        response       to   a   King County   Court   order.   According   to [ RCW] 48. 31. 155, the
        funds were to be held in trust for six years and then escheat to the state.

        The Unclaimed Property section did not receive information as to whom the
        proceeds belong; therefore, we require a court order directing disbursement of the
        funds.  Unless we are served with a notice of a court proceeding with respect to
        these funds within 90 days from the date of this letter the funds will permanently
        escheat to the state as directed in RCW 48. 31. 155.

CP at 127.

         In Thurston County Superior Court, Bell and PacMar sued the State of Washington,

through its divisions, the DOR and the State Insurance Commissioner. Bell and PacMar

                                                          4
No. 43719 -8 -II

petitioned the superior court to order the State to provide an accounting and to pay them the

funds.

         Both parties moved for summary judgment. In their motion for summary judgment, Bell

and PacMar clarified that they were suing under RCW 63. 29.260 of WUUPA. In its motion for

summary judgment, the State argued that the funds had already escheated because more than six

years had passed since the funds were transferred to the treasury. The State also argued that the

Thurston County Superior Court had no subject matter jurisdiction over Bell and PacMar' s

claims because they were related to the PacMar receivership proceedings.

         The superior court denied Bell and PacMar' s motion for summary judgment and granted

the State' s motion for summary judgment. The superior court issued an opinion letter explaining

its order:

                The    parties   agree   that the issue before this   court   is   simple —who   has

         ownership of the unclaimed property currently held by the Washington State
         Treasurer in the    amount       73, 614. 75 or, alternatively stated, did the State
                                         of $

         properly deny plaintiffs' request to return the money to them as rightful owners.

                Plaintiffs made a number of procedural arguments related to the lack of
         notice of the receivership and final distributions, which they claim they did not
         know about during the receivership process. Plaintiffs also claim that such lack of
         notice constitutes a violation of due process that precludes the State from denying
         plaintiffs' request to return the property to them under the escheat statute, RCW
         63. 29.260. E31

                   This court has no subject matter jurisdiction over the King County
         receivership nor any ability to order any additional remedies as a result of any
         deficiencies ( if any) in that process. The only issue before             this court is the
         application of RCW 63. 29. 260 with respect to the $ 73, 614.75           held by the State.
         Thus, the final orders entered in the receivership control. Whether or not Mr. Bell
         was properly a " claimant" in the PacMar estate, or not, is not an issue this Court

3 The Thurston County Superior Court erroneously referred to RCW 63. 29. 260. The escheat
 statute is RCW 48. 31. 155.

                                                      5
No. 43719 -8 -II

            can or should decide. Nor should this court decide the nature of any notice, or not,
            PacMar or Mr. Bell should have received in the receivership matter.

                       Plaintiffs'    argument that the State' s internal communications bind the
            State] is not well taken under the case law relating to when estoppel applies to the
            State, or whether the State' s denial of plaintiffs' claimed ownership interest is
            proper, which is the only issue now before this Court.

                   Under the summary judgment standard, CR 56, plaintiffs have failed to
            meet their burden to establish that they are entitled as a matter of law to recover
            the remaining property held by the State, payment of interest, or any order
            allowing plaintiffs to recover additional funds received after the closing of
            PacMar'    s    liquidation     proceedings.    For these   reasons,   plaintiffs'   motion for

            summary judgment is denied and their complaint is dismissed with prejudice.

CP    at   341 -42 ( citation   omitted).      Bell and PacMar appeal the superior court' s denial of summary

judgment to them, and its grant of summary judgment to the State.

                                                        ANALYSIS

            We review summary judgment de novo, engaging in the same inquiry as the superior

court.      Staples   v.   Allstate Ins. Co., 176 Wn.2d 404, 410, 295 P. 3d 201 ( 2013).         We affirm a

summary judgment decision when no issue of material fact exists and the moving party is
entitled to judgment as a matter of law. Staples, 176 Wn.2d at 410; see CR 56. We may affirm

the superior court' s summary judgment decision on any ground supported by the record. LaMon

v. Butler, 112 Wn.2d 193, 200 -01, 770 P. 2d 1027 ( 1989).

             Our fundamental objective in statutory interpretation is to give effect to the legislature' s

 intent.     Dep' t   of Ecology     v.   Campbell & Gwinn, LLC, 146 Wn.2d 1, 9 - 10, 43 P. 3d 4 ( 2002). If a

 statute' s meaning is plain on its face, then we give effect to that plain meaning as an expression

 of   legislative intent.      Wash. Pub. Ports Ass 'n v. Dep' t ofRevenue, 148 Wn.2d 637, 645, 62 P. 3d

 462 ( 2003).      We discern plain meaning not only from the provision in question but also from

             related statutes and         the underlying legislative purposes.   Wash. Pub. Ports Ass 'n, 148
 closely

                                                               6
No. 43719 -8 -I1

Wn.2d    at   645. If a statute is susceptible to more than one reasonable interpretation after this

inquiry, then the statute is ambiguous and we may resort to additional canons of statutory

construction or       legislative   history.    Campbell & Gwinn, 146 Wn.2d at 12.

              I. THE THURSTON COUNTY SUPERIOR COURT' S SUBJECT MATTER JURISDICTION

         Bell and PacMar argue that the Thurston County Superior Court erred by ruling that it

lacked subject matter jurisdiction over their claims. We hold that the superior court had subject

matter jurisdiction to determine the propriety of the DOR' s escheat decision, and that the King

County receivership orders control.

          We review a superior court' s subject matter jurisdiction de novo. Cole v. Harveyland,

LLC, 163 Wn.          App.   199, 205, 258 P. 3d 70 ( 2011).        A party may raise a lack of subject matter

jurisdiction     at   any time   during   a   proceeding. Skagit Surveyors &        Eng' rs, LLC v. Friends of

Skagit   County,       135 Wn. 2d 542, 556, 958 P. 2d 962 ( 1998). " Subject matter jurisdiction governs

the   court' s   authority to hear    a particular     type of controversy."     Ralph v. Dep' t. ofNatural Res.,

 171 Wn.              262, 267, 286 P. 3d 992 ( 2012),        review granted,     176 Wn.2d 1024 ( 2013). RCW
              App.

4831. 111( 2) limits Washington courts' jurisdictionover matters-related to insurance

receivership proceedings:

          No court of this state has jurisdiction to entertain a complaint praying for the
          dissolution, liquidation, rehabilitation, sequestration, conservation, or receivership
          of an insurer, or praying for an injunction or restraining order or other relief
                                  incidental     to,        relating to   the   proceedings,   other than   in
          preliminary to,                              or

          accordance with this chapter.

 Emphasis        added.)     We analyzed RCW 48. 31. 111 to determine the meaning of "relating to the

 proceedings" in St. John Medical Center v. Department ofSocial and Health Services, 110 Wn.

 App.   51, 60, 38 P. 3d 383 ( 2002). There, we applied a federal test used to determine whether

                                                                7
No. 43719 -8 -II

requested relief "related to" a bankruptcy proceeding to analyze whether a requested relief

 related   to"     an   insurance company receivership proceeding                   under chapter   48. 31 RCW. 110 Wn.

App. at 62. The adopted federal test asks

            whether the outcome of [the current] proceeding could conceivably have any
          effect onthe estate being administered in bankruptcy. [ T] he proceeding need not
                                               the debtor                   the debtor' s property "; instead, the
          necessarily be            against                  or   against

          action is related to the bankruptcy proceeding if the outcome of the action could
           alter    the "      debtor'   s   rights,   liabilities,   options,     or   freedom   of   action (   either

          positively         or   negatively)"    or in any way impact the handling and administration of
          the bankruptcy estate.

110 Wn.      App.       at   62 ( emphasis     added) ( some alterations      in   original) ( citation omitted) ( quoting

Pacor, Inc. v. Higgins, 743 F. 2d 984, 994 ( 3rd Cir. 1984)).

           Here, Bell and PacMar sued under the authority granted by RCW 63. 29.260 of WUUPA

to challenge the DOR' s decision. CP at 4; see CP at 32. RCW 63. 29. 260 states:

           A person aggrieved by a decision of the [ DOR][41 or whose claim has not been
           acted upon within ninety days after its filing may bring an action to establish the
           claim in the superior court of Thurston County naming the [ DOR] as a defendant.
           The action must be brought within ninety days after the decision of the [ DOR] or
           within one hundred eighty days after the filing of the claim if the [ DOR] has
           failed to act on it.

           We hold that when a litigant sues under RCW 63. 29.260 to challenge a DOR decision

that the funds of a liquidated insurance company will escheat to the State, the superior court has

subject matter jurisdiction to review the DOR' s decision, but must allow the receivership orders

to control its review. If such a superior court were to look beyond the receivership orders, its

 decision    would " relate         to" the receivership because it '         could conceivably have any effect on the

 4
     See RCW 63. 29. 010( 5).

                                                                      8
No. 43719 -8 -II

estate   being   administered   in   bankruptcy. "' St. John   Med: Ctr.,   110 Wn. App. at 62 ( quoting

Pacor, Inc., 743 F. 2d at 994).

          Thus, the Thurston County Superior Court had subject matter jurisdiction over the limited

issue of whether the DOR' s decision, that the funds would escheat to the State, was erroneous.

But the receivership orders control its review. In light of the superior court' s limited review, we

next consider whether Bell and PacMar had standing to assert their claim that the DOR' s

decision was erroneous.

                    II. STANDING To CHALLENGE THE DOR' S DECISION UNDER WUUPA

          Bell and PacMar argue that they had standing to challenge the DOR' s decision because

they had a legal interest in the PacMar estate' s funds. The State argues that Bell and PacMar had
no standing to assert their claim because they had no legal interest in the funds. We agree with
the State.5

          Standing is a threshold issue that we review de novo as a question of law. See In re
Estate of Becker, 177 Wn.2d 242, 246, 298 P. 3d 720 ( 2013).            Without standing, a court lacks the

5 In 1993, the legislature significantly amended RCW 48. 31. 280. Compare former RCW
48. 31. 280 ( 1975 -76)   with   former RCW 48. 31. 280 ( 1993).      The King County Superior Court
entered orders appointing a receiver for liquidation prior to 1993, but made all of its other orders
years after the 1993 amendments.

          We apply former RCW 48. 31. 280 ( 1993) for two reasons. First, both parties argue from
former    chapter    48. 31 RCW ( 1993)     on appeal.   Second, "[ a] statute applies ` when the

precipitating event for the application of the statute occurs after the effective date of the statute,
 even though the precipitating event had its origin in a situation existing prior to the enactment of
the            Myles v. Clark County, 170 Wn. App. 521, 532, 289 P. 3d 650 ( 2012), review
      statute. "'

 denied, 176  Wn.2d 1015 ( 2013) ( quoting Aetna Life Ins. Co. v. Wash. Life & Disability Ins.
 Guar. Ass 'n, 83 Wn. 2d 523, 535, 520 P. 2d 162 ( 1974)). Here, the precipitating event for the
 distribution statute' s application is the entry of the King County Superior Court' s orders
 occurring after the 1993 amendments, not its orders appointing the receiver before 1993.

                                                          9
No. 43719 -8 -II

necessary jurisdictional power to entertain a party' s claim. High Tide Seafoods v. State, 106

Wn.2d 695, 702, 725 P. 2d 411 ( 1986).

           To have standing, a claimant must establish that injury has occurred to a legally protected

right.     Sprague   v.   Sysco   Corp.,   97 Wn.   App.   169, 176   n. 2,   982 P. 2d 1202 ( 1999).   A party has

standing to    raise an     issue if that party "` has a distinct and personal interest in the outcome of the

case. "'    Timberlane Homeowners Ass 'n, Inc. v. Brame, 79 Wn. App. 303, 307, 901 P. 2d 1074

 1995) ( quoting Erection Co.          v.   Dep' t of Labor & Indus., 65 Wn. App. 461, 467, 828 P. 2d 657

 1992)).

            At the beginning of a delinquency proceeding, the superior court appoints the

Commissioner as the receiver and grants the Commissioner title to the delinquent insurance

company' s assets. When the Commissioner is ready to distribute the delinquent insurance

company' s post -liquidation funds to fulfill creditors' claims, former RCW 48.31. 280 ( 1993)
states:

            The priority of distribution of claims from the insurer' s estate is as follows: Every
            claim in a class must be paid in full or adequate funds retained for payment
            before the members of the next class receive any payment no subclasses maybe
            established within a class; and no claim by a shareholder, policyholder, or other
            creditor may circumvent the priority classes through the use of equitable
            remedies.

 Emphasis       added.)     Former RCW 48. 31. 280 then divides creditors' claims into prioritized

classes. Under former RCW 48. 31. 280, shareholders fall within the lowest priority class, and the

liquidated insurance company does not fall within any class.

            Here, the record makes clear that the class E claims were next in line to receive payment

 from the PacMar estate. The PacMar estate has not paid the class E claims, due to the

 administrative costs of adjudicating those claims. The PacMar estate does not have adequate

                                                              10
No. 43719 -8 -II

funds retained for payment of the class E claims because only $73, 614.75 is available for

distribution,    and   the class   E   claims   total $ 916, 820. 43.   Until the PacMar estate pays the class E

claims in full, or has adequate funds retained for their payment, former RCW 48. 31. 280 forbids

payment to any other creditors.

        Bell and PacMar do not assert that their claims are class E claims, nor do they assert that

former RCW 48. 31. 280 gives their claims ( claims of the liquidated insurance company and its

indirect shareholder) a higher priority to the funds than the class E claims. Thus, we hold that

the King County receivership orders established that Bell and PacMar had no legal interest in the

PacMar estate' s funds because the receivership orders established that the class E claims are next

in line to receive payment, and the PacMar estate has neither paid nor retained adequate funds

for the payment of these claims.

          Because the receivership orders established that Bell and PacMar had no legal interest in
the PacMar estate' s funds, Bell and PacMar would never have had any entitlement to the funds.

Because they would never have had any entitlement to the funds, Bell and PacMar had no
distinct and personal interest in the outcome of the case, and thus, they lacked standing to

challenge the DOR' s decision. To assert a legal interest in the funds, Bell and PacMar must

move to reopen the King County receivership for a new determination as to their legal interest in
                 6
those   funds.

 6 Because Bell and PacMar had no legal interest in the liquidated PacMar estate' s funds, they had
 no legitimate claim of entitlement to a vested property right in those funds, and thus, had no due
 process right as      to those funds. See U. S. CONST.          amend.   XIV, § 1; WASH. CONST. art. 1, §   3;
 Dellen Wood Prods., Inc.          v.   Dep' t of Labor &     Indus.,       Wn.   App. ,    319 P. 3d 847, 860
 2014).

                                                               11
No. 43719- 8- 11

       We affirm the Thurston County Superior Court because Bell and PacMar had no standing

to assert their claim under WUUPA because they had no legal interest in the liquidated PacMar

estate' s funds. We do not consider the parties' remaining arguments because such consideration

is unnecessary to resolve this case, given Bell and PacMar' s lack of standing.

We concur:

                                                 12