Code Section

Insurance Code - INS

DIVISION 1. GENERAL RULES GOVERNING INSURANCE [100 - 1879.8]

  ( Division 1 enacted by Stats. 1935, Ch. 145. )
  

PART 2. THE BUSINESS OF INSURANCE [680 - 1879.8]

  ( Part 2 enacted by Stats. 1935, Ch. 145. )
  

CHAPTER 1. General Regulations [680 - 1113]

  ( Chapter 1 enacted by Stats. 1935, Ch. 145. )
  

ARTICLE 14. Proceedings in Cases of Insolvency and Delinquency [1091 - 1134]
  ( Article 14 amended by Stats. 1935, Ch. 291. )

  
1034.  

(a) A preference is a transfer of any of the property of the person proceeded against to or for the benefit of a creditor, for or on account of an antecedent debt, made or suffered by the person proceeded against within one year before the filing of a petition for liquidation pursuant to Section 1016, the effect of which transfer may be to enable the creditor to obtain a greater percentage of this debt than another creditor of the same class would receive. The following transactions shall be among those that may be considered a preference:

(1) A transfer of property of the person proceeded against.

(2) The creation of a lien on the property of the person proceeded against.

(3) The entry of a judgment against the person proceeded against.

(4) The transfers or other payments by the person proceeded against pursuant to subdivision (f) of Section 10506 in support of guarantees contemplated by Section 10506.4.

(b) If a liquidation order is entered pursuant to Section 1016 while the person proceeded against is already subject to a conservation order, then the transfers described in subdivision (a) shall be deemed preferences if made or suffered within one year before the filing of the successful petition for conservation, or within two years before the filing of the successful petition for liquidation, whichever time is shorter.

(c) Any preference may be avoided by the liquidator if any of the following is applicable:

(1) The transfer was made within four months before the filing of the petition.

(2) The creditor receiving the transfer or to be benefited thereby or his or her agent acting with reference thereto had, at the time when the transfer was made, reasonable cause to believe that the person proceeded against was insolvent or was about to become insolvent.

(3) The creditor receiving the transfer was an officer, or any employee or attorney or other person who was in fact in a position of comparable influence in the person proceeded against to an officer, whether or not the person held that position, or any shareholder holding directly or indirectly more than 5 percent of any class of any equity security issued by the person proceeded against, or any other person, firm, corporation, association, or aggregation of persons with whom the person proceeded against did not deal at arm’s length.

(d) Where the preference is voidable, the liquidator may recover the property or, if it has been converted, its value from any person who has received or converted the property; except where a bona fide purchaser or lienor has given less than fair equivalent value, the purchaser or lienor shall have a lien upon the property to the extent of the consideration actually given. Where a preference by way of lien or security title is voidable, the court may on due notice order the lien or title to be preserved for the benefit of the estate, in which event the lien or title shall pass to the liquidator.

(Repealed and added by Stats. 1995, Ch. 580, Sec. 6. Effective January 1, 1996.)