J. A15022/16


NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37


NATIONAL AGENCY DEVELOPMENT,              :     IN THE SUPERIOR COURT OF
INC. AND CAREFREE INSURANCE               :          PENNSYLVANIA
MANAGEMENT, INC.,                         :
                                          :
                   v.                     :
                                          :
AF&L INSURANCE COMPANY, INC.,             :
                                          :
                   Appellant              :           No. 1744 EDA 2015
                                          :

                 Appeal from the Order Entered May 14, 2015
                In the Court of Common Pleas of Bucks County
                      Civil Division at No(s): 2015-00117

BEFORE: FORD ELLIOTT, P.J.E., DUBOW, J., and JENKINS, J.

MEMORANDUM BY DUBOW, J.:                          FILED AUGUST 04, 2016

      Appellant, AF&L Insurance Company, Inc., appeals from the May 14,

2015, Order entered in the Bucks County Court of Common Pleas denying

Appellant’s Petition to Stay and Set Aside Writ of Execution (“Petition to

Stay”).    After careful review, we conclude that (i) the amount subject to

execution does not fall within the terms of AF&L’s agreement with the

Pennsylvania Insurance Department, and (ii) the trial court did not abuse its

discretion in finding no equitable grounds sufficient to grant the Petition to

Stay. Therefore, we affirm.

      The trial court summarized the factual and procedural history as

follows.

      AF&L Insurance Company, Inc. (“AF&L”) is a Pennsylvania
      insurance company specializing in long-term care insurance for
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     individuals in nursing homes or assisted-care facilities. AF&L has
     twenty-nine (29) employees, nine (9) of which are part-time.
     Their annual payroll is approximately $2 million dollars.

     Benedict Iacovetti was hired as the Chief Financial Officer of
     AF&L in July of 2002.        After AF&L experienced financial
     instability, Iacovetti assumed the role of the company's
     President in 2007. Iacovetti testified that insurance companies
     in Pennsylvania have certain minimum requirements regarding
     the amount of capital surplus in order to lawfully operate within
     the Commonwealth. At [a hearing on the Petition] Mr. Iacovetti
     testified that AF&L was required to maintain a minimum capital
     surplus of $1,650,000.00.       AF&L's most recent financial
     statements indicated a capital surplus of only $1,600.00. [On
     cross-examination, however, Iocovetti admitted that a recent
     quarterly statement shows Appellant has approximately
     $161,348,543.00 in total assets.]

     By year's end in 2004, AF&L had approximately $20 million in
     pending claims and expected additional claims. In response to
     the company's unstable financial condition, the Pennsylvania
     Insurance Department initiated a Supervisory Order. AF&L was
     instructed by the Insurance Department, among other requests,
     to refrain from selling any new insurance policies.

     Following negotiations with the Pennsylvania Insurance
     Department, AF&L entered into a “Confidential Agreement”
     [(“Confidential Agreement”)] on February 25, 2005.               The
     Agreement was signed by AF&L's Chief Executive Officer Jim
     McDermott, as well as Insurance Department Commissioner
     Steven Johnson. According to lacovetti, the Agreement was
     intended to protect the remaining assets of AF&L from misuse or
     dissipation. Furthermore, it provided an opportunity for AF&L to
     avoid either formal rehabilitation or its outright liquidation. AF&L
     has allegedly complied with all aspects of the [Confidential]
     Agreement, and has not sold any new insurance policies since
     entering the [Confidential] Agreement in February 2005. They
     do, however, continue to collect premiums from policyholders,
     which they then use to compensate agents and to pay taxes.

     In 2008, the Circuit Court of the 11th Judicial Circuit for Miami-
     Dade County, Florida entered a judgment in the amount of
     $541,651.63 against AF&L and in favor of National Agency
     Development, Inc. and Carefree Insurance Management, Inc. In
     order to satisfy this judgment, National Agency Development,


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      Inc. and Carefree Insurance Management, Inc., garnished funds
      on deposit from AF&L's accounts at Santander Bank on February
      19, 2015. These funds are being held in escrow by the attorney
      for National Agency Development, Inc. and Carefree Insurance
      Management, Inc.

Trial Court Opinion, filed 8/26/15, at 1-3.

      Appellant filed a Petition to Stay and Set Aside the Writ of Execution

upon the Florida judgment.      After a hearing, the trial court denied the

Petition to Stay by Order filed May 14, 2015. Appellant timely appealed, and

both Appellant and the trial court complied with Pa.R.A.P. 1925.

      Appellant raises the following two issues for our review:

      A. Whether the trial court erred in denying AF&L's Petition to
      Stay and Set Aside the Writ of Execution and the distribution of
      garnished funds held by Appellees' counsel where the unrefuted
      evidence established that AF&L, due to its hazardous financial
      condition, entered into an agreement with the Insurance
      Department that prohibits the transfer of AF&L's funds without
      the Insurance Department's approval.

      B. Whether the trial court abused its discretion in finding that
      there were no strong equitable reasons present to grant AF&L's
      Petition to Stay and Set Aside the Writ of Execution where
      Pa.C.R.P. 3121 where [sic] AF&L presented unrefuted evidence
      that the garnished funds belong to its policyholders and further
      that public policy favors the Insurance Department's efforts to
      informally rehabilitate AF&L.

Appellant’s Brief at 5.

      Our Supreme Court has held that while “the power to stay execution of

a judgment is necessary to prevent injustice, it should never be exercised

unless the case is plain, and the equity of the party asking the interposition

of the court is free from doubt or difficulty.” Pennsylvania Company For




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Insurances, etc. v. Scott, 198 A. 115, 122 (Pa. 1938). When reviewing a

trial court’s denial of a petition to stay a writ of execution, this Court gives

great deference to the trial court’s determinations, and will not disturb the

trial court’s ruling “unless our review of the record reveals a clear abuse of

discretion or error of law below.” Anmuth v. Chagan, 485 A.2d 769, 771

(Pa. Super. 1984).

      With this standard of review in mind, we address the arguments raised

by Appellant.

                Interpreting the Confidential Agreement

      At the heart of Appellant’s first issue is a disagreement between the

parties regarding the proper interpretation of the Confidential Agreement

between Appellant and the Pennsylvania Insurance Department. Appellant

argues that the terms of the Confidential Agreement would have barred

Appellant from voluntarily transferring funds to satisfy the judgment and

that Appellees were therefore barred from obtaining the funds involuntarily

through a writ of execution. Appellant’s Brief at 14-22.

      Our standard of review when interpreting a contract, such as the

Confidential Agreement, is well settled:

      The interpretation of any contract is a question of law and this
      Court’s scope of review is plenary. Moreover, we need not defer
      to the conclusions of the trial court and are free to draw our own
      inferences. In interpreting a contract, the ultimate goal is to
      ascertain and give effect to the intent of the parties as
      reasonably manifested by the language of their written
      agreement. When construing agreements involving clear and
      unambiguous terms, this Court need only examine the writing


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     itself to give effect to the parties’ understanding. This Court
     must construe the contract only as written and may not modify
     the plain meaning under the guise of interpretation.

Stephan v. Waldron Elec. Heating and Cooling LLC, 100 A.3d 660, 665

(Pa. Super. 2014) (internal quotation marks and citations omitted).

     When determining whether the language of a contract is unambiguous,

this Court looks to whether “we can determine its meaning without any

guide other than a knowledge of the simple facts on which, from the nature

of the language in general, its meaning depends.” State Farm Fire & Cas.

Co. v. PECO, 54 A.3d 921, 928 (Pa. Super. 2012) (internal quotation

omitted). “When terms in a contract are not defined, we must construe the

words in accordance with their natural, plain, and ordinary meaning.” Id.

     Appellant’s Brief to this Court highlights four paragraphs of the

Confidential Agreement which, Appellant summarily argues, barred the

transfer of funds in this case. Those terms provide:

     6. AF &L shall not make any single withdrawal of monies from its
     bank accounts nor make any single disbursement, payment, or
     transfer of assets in an amount exceeding 5% of its then
     aggregate cash and investments without the Department's prior
     written approval. The withdrawal of funds for investment
     purposes in compliance with Paragraph 7, below, shall not be
     subject to this paragraph.

                                    ***

     9. AF &L shall not loan monies to any person without the
     Department's prior written approval. Any loans provided for in
     policies of insurance shall not be subject to this paragraph.

     10. AF &L shall not execute any new pledge or assignment of
     any of its assets without the Department's prior written
     approval. AF &L shall not, in any transaction or series of related


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        transactions, dispose of any fixed assets of plant, property or
        equipment having a book value of $100,000 or more, without
        the Department's prior written approval.

                                       ***

        19. AF &L shall not consummate any material transactions, as
        defined in Chapter 27 of Title 31 of the Pennsylvania Code, with
        any person (whether or not affiliated) without the Department's
        prior written approval.

Confidential Letter of Agreement, dated 2/25/05, at 2-4.1

        It is clear that the plain and unambiguous language of paragraphs 9

and 10 do not apply to the garnishment at issue.                Paragraph 9 bars

Appellant from loaning monies; the payment of a judgment, whether

voluntarily or involuntarily, is not a loan.     Paragraph 10 prohibits certain

pledges, assignments, and the disposal of certain fixed tangible assets.

Again, the payment of a judgment cannot reasonably be understood as a

pledge, assignment, or disposal. Appellant has not presented any evidence

or argument to this Court suggesting how these paragraphs could be

understood to apply to this transfer.

        Paragraphs   6   and   19   both   include   language   requiring   written

authorization for any transfer involving more than five percent of Appellant’s

assets.    Appellant argues that the proper inquiry is whether the garnished

amount, $541,651.63, is more than five percent of their capital surplus, in

this case $1,600.00.      Because we instead conclude that the broad, but



1
    The Confidential Agreement does define any of the terms therein.



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unambiguous, language in paragraphs 6 and 19 refers to Appellant’s total

assets of $161,348,543.00, we conclude that neither paragraph requires the

approval of the Insurance Commissioner prior to the instant garnishment.

     In particular, paragraph 19 prohibits certain material transactions,

with the term “material transaction” defined by reference to Chapter 27 of

Title 31 of the Pennsylvania Code. The Code requires “disclosure of material

acquisitions or disposition of assets” where three requirements are met:

     (1) A single transaction, or a series of related transactions
     during a 30-day period, involves more than 5% of the insurer's
     total admitted assets as reported in the insurer's most recent
     annual statutory financial statement filed with the Department.

     (2) The transaction is nonrecurring.

     (3) The transaction is not in the ordinary course of business.

31 Pa. Code § 27.3 (emphasis added). Similarly, Paragraph 6 places limits

on Appellant’s ability to transfer more than five percent of its “then

aggregate cash and investments.”

     Because they are not defined in the agreement, we consider the

natural, plain, and ordinary meaning of the phrases “total admitted assets”

and “then aggregate cash and investments.” See State Farm Fire & Cas.

Co., supra at 928.     It is readily apparent that these phrases broadly

encompass the total assets claimed by Appellant, and not some subset

thereof. Construing either phrase to mean only Appellant’s capital surplus

would require this Court to impermissibly “modify the plain meaning under

the guise of interpretation.” Stephan, supra at 665.



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      Having   determined     that   paragraphs    6     and   19   only   apply   to

transactions of more than five percent of Appellant’s total assets, we turn to

the garnishment at issue in this case. Appellant’s recently reported assets,

testified to at trial, are $161,348,543.00.            The garnishment amount,

$541,651.63, represents less than one percent of Appellant’s total assets,

making Paragraphs 6 and 19 inapplicable. Therefore, we conclude that the

Confidential Agreement has no bearing on the garnishment of this judgment,

and Appellant is not entitled to relief on this claim.

                   Equitable Grounds for Granting Stay

      Appellant next argues that the trial court erred in denying the stay of

execution “where Pa.C.R.P. 3121 merely requires a showing of any equitable

ground.”    Appellant’s Brief at 22-23.     According to Appellant, because it

presented    evidence   suggesting    the   garnished     funds     “belong   to   its

policyholders” and that public policy favors the rehabilitation of distressed

insurance companies, Appellant is entitled to a stay on equitable grounds.

Appellant’s reliance on Pa.C.R.P. 3121 is misplaced.

      Rule 3121, which governs a court’s authority to stay or set aside an

execution of judgment, states in relevant part:

      (b) Execution may be stayed by the court as to all or any part of
      the property of the defendant upon its own motion or application
      of any party in interest showing

            (1) a defect in the writ, levy or service; or

            (2) any other legal or equitable ground therefor.




                                      -8-
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                                        ***

      (d) The court may on application of any party in interest set
      aside the writ, service or levy

            (1) for a defect therein;

            (2) upon a showing of exemption or immunity of
            property from execution, or

            (3) upon any other legal or equitable ground
            therefor.

Pa.C.R.P.   3121    (emphasis    added).      Importantly,   neither   subsection

mandates that a trial court must grant relief upon a showing of equitable

grounds.

      In the instant case, the trial court properly considered the arguments

put forth by Appellant, as well as Appellee’s arguments against finding

equitable grounds for relief.      The trial court then acknowledged, on the

record, its discretion to set aside the writ “on any legal ground or equitable

ground” before ultimately declining to exercise its discretion in the interest

of justice. N.T. 5/13/16 at 55. Seeing no abuse of discretion, based on our

review of the record and the arguments of the parties, we conclude that

Appellant is not entitled to relief on this claim.

      Based on the foregoing, we affirm the trial court’s May 14, 2015 Order

denying Appellant’s Petition to Stay and Set Aside Writ of Execution.

      Order affirmed. Jurisdiction relinquished.

President Judge Emeritus joins the memorandum.

Judge Jenkins concurs in result.



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Judgment Entered.




Joseph D. Seletyn, Esq.
Prothonotary

Date: 8/4/2016




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