Lead Opinion
13This аction commenced with a claim in contract by J. Robert Wooley, Commissioner of Insurance for the State of Louisiana (the Commissioner), to recover a money judgment pursuant to a suretyship contract executed by Foundation Health Corporation. For the following reasons, we amend and affirm the trial court judgment on the Louisiana contract cause of action.
FACTS ON CONTRCT CLAIM
Foundatiоn Health Corporation (FHC) owned and operated Foundation Health, a Louisiana Health Plan, Inc. (FHLHP), a health maintenance plan in Louisiana. In 1996, as the sole shareholder of FHLHP, FHC executed a guaranty of sufficient capital to ensure FHLHP maintained the minimum capital and surplus requirements required by Louisiana law. The guaranty provided:
This is to certify that Foundation Health Corporation, the sole shareholder of Foundation Health, a Louisiana Health Plan, Inc. (“FHLHP”), guarantees that it shall provide sufficient capital to FHLHP to ensure that FHLHP maintains the minimum amounts of paid capital and surplus required for an HMO [health maintenance organization] under Louisiana law. This guarantee shall remain in place until Foundation Health Corporation provides written notice of its cancellation to the Commissioner of Insurance, State of Louisiana, at least sixty (60) calendars [sic] days in advance of the effective date of cancellation.
At this time, the minimum capital and surplus requirement was $2 Million.
The guaranty was signed by Jeffrey L. Elder, Chief Financial Officer, FHC. Attached to the guaranty was a California All-Purpose Acknowledgment dated December 9, 1996, wherein a California Notary Public certified Elder acknowledged that he executed the guaranty.
During 1997, FHC merged with Health Systems International and became Foundation Health Systems, Inc. On June 23, 1997, Denise Brignac, then Financial Analysis Manager for the Louisiana Department of | ¿Insurance (LaDOI), requested that FHLHP and Foundation Health Systems, Inc., agree to the following:
*663 A parental guarantee ... executed between Foundation Health System, Inc. and Foundation Health, A Lоuisiana Health Plan, Inc. (Foundation Health), where Foundation Health System, Inc. guarantees Foundation Health will meet the statutory networth requirement as long as Foundation Health is a subsidiary of Foundation Health System, Inc., or until the HMO dissolves, whichever occurs first. The document must have the following wording: “non-cancelable by any party without the Commissioner’s approval.” (Emphasis added.)
On July 24, 1997, FHLHP responded to Ms. Brignae and rejеcted the proposed changes for the terms of the guaranty and its termination as follows:
Please note that a parental guarantee has been executed on behalf of the Plan. On December 9,1996 Foundation Health Corporation issued a Guarantee which states:
This is to certify that Foundation Health Corporation [FHC], the sole shareholder of the Plan guarantees that it shall provide sufficient capital to the Plan to ensure that the Plan maintains the minimum amounts of paid capital and surplus required of an HMO under Louisiana Law. This guarantee shall remain in place until FHC provides written notice of its cancellation to the Commissioner of Insurance, State of Louisiana, at least sixty (60) calendar days in advance of the effective date of cancellation.
The Guarantee was signed by FHC’s Chief Financial Officer.
At this date, no specific assets of the parent have been pledged with respect to the guarantee issued to the Plan. However, please note that Foundation Health Systems, Inc. is a large company. At [sic] March 31, 1997, the pro-forma total assets of Foundation Health Sys-terns, Inc. were $4.1 billion, including $1.8 billion in cash and investments.
A copy of the 1996 parental guaranty was attached to the July 24, 1997 correspondence.
At this point in time, FHC had the option of retaining the definite sixty-day notice “bailout” provision that required a written notice or [ ¡¡agreeing with LaDOI’s request for a less definite provision that provided for termination based on the conditions precedent of (1) FHLHP not remaining a subsidiary of FHC, or (2) the dissolution of FHLHP, and (3) Commissioner approval. FHC consciously chose the sixty-day notice “bailout” provision. If FHC had chosen to agree to the proposed termination provision with Commissioner approval, the suretyship would have terminated only upon a sale and Commissioner approval, and this action would be without merit. It is reasonable to infer from FHC’s rejection of the proposed changes that FHC determined that it was in its best interest to remain with the status quo.
In the absence оf any further correspondence, we find that FHC declined the wording of the guaranty suggested by Ms. Brignae, and we find that the original guaranty executed by FHC remained in full force and effect.
After additional mergers, FHC became known as Health Net, Inc. (Health Net). In 1999, pursuant to the terms of a Stock Purchase Agreement (the sale), Health Net transferred all of the stock in the Louisiana health plan to AmCareсo, Inc. (AmCareco), a corporation formed by a group of investors headed by Thomas S. Lucksinger. AmCareco was the sole shareholder of the Louisiana health plan, which became known as AmCare Health Plans of Louisiana, Inc. (AmCare-LA). Pursuant to La. R.S. 22:1004, AmCareco
AmCare-LA was placed in rehabilitation on September 23, 2002, and, on June 30, 2003, the Commissioner filed suit against Health Net seeking enforcement of the guaranty. The Commissioner also filed two other suits against the directors and owners of AmCare-LA and others seeking tort Ifidamages for breach of fiduciary duties, deceptive acts and practices, and fraud. All three of these suits eventually were consolidated for trial.
On November 4, 2005, the trial court rendered judgment in favor of the Commissioner and against Health Net, holding Health Net contractually liable on the guaranty for the total amount of compensatory damages awarded to the Commissioner in the Louisiana action in the amount of $9,511,624.19. Health Net appealed asserting the guaranty had expired as a matter of law and was extinguished by the sale bеtween Health Net and AmCare-co. The Commissioner maintains the guaranty had neither expired nor was terminated because the required cancellation notice never was given, and, consequently, Health Net is still liable under the guaranty-
LAW AND DISCUSSION
A contract of guaranty is equivalent to a contract of suretyship.
Suretyship must be express and in writing. La. C.C. art. 3038. Suretyship cannot be presumed. An agreement to become a surety must be expressed clearly and must be construed within thе limits intended by the parties to the agreement. Placid Refining Co. v. Privette,
Contracts have the effect of law on the parties and must be performed in good faith. La. C.C. art. 1983. Interpretation of a contract is the determination of the common intent of the parties. La. C.C. art. 2045. The intent is to be determined by the words of the contract when they are clear, explicit and lead to no absurd conse
Each provision in a cоntract must be interpreted in light of the other provisions so that each is given the meaning suggested by the contract as a whole. La. C.C. art. 2050. When a contract is clear and unambiguous, the meaning and intent of the parties to the written contract must be sought within the four corners of the instrument and cannot be explained or [acontradicted by parol or other extrinsic evidence. La. C.C. art. 1848; Allain v. Shell Western E & P, Inc., 99-0403, p. 8 (La.App. 1 Cir. 5/12/00),
The use of parol or other extrinsic evidence is proper only when a contract is found to be ambiguous after an examination of the four corners of the agreement, or when it is susceptible to more than one interpretation, or the intent of the parties cannot be ascertained. Sanders v. Ashland Oil, Inc., 96-1751, pp. 8-9 (La.App. 1 Cir. 6/20/97),
Whether a contract is ambiguous is a question of law. Gaylord Container Corp. v. CNA Ins. Companies, 99-1795, p. 9 (La.App. 1 Cir. 4/3/01),
Suretyship is an accessory contrаct by which a person binds himself to a creditor to fulfill the obligation of another upon the failure of the latter to do so. La. C.C. arts. 3035 and 3036; Customr-Bilt,
Louisiana Revised Statute 22:2010, entitled “Protection against insolvency”, provides, in pertinent part:
C. Each health maintenance organization shall establish prior to the issuance of any certifícate of authority, and shall maintain as long as it does business in Louisiana as a health maintenance organization, the following capital and surplus requirements:
(2) For each health maintenance organization which, by July 1, 1995, has filed its application for a certifiсate of authority with the commissioner as required by law, the minimum capital and surplus shall be:
(iii) Two million dollars by July 1, 1998.
According to the Louisiana Form-A Application, the original license for the Louisiana health plan was certified effective January 13, 1994.
The first sentence of the guaranty identifies the party executing the guaranty as FHC and states it will provide sufficient capital to FHLHP to ensure FHLHP maintains the minimum amounts of “cаpital and surplus required for an HMO under Louisiana law.” Through acquisitions and mergers, FHC eventually became known as Health Net and FHLHP became known as AmCare-LA. The suretyship is express and in writing. The wording of the contract is clear and unambiguous. FHC, now Health Net, |nagreed to be the surety for the underlying obligations of FHLHP, now AmCare-LA, to maintain the minimum amount of capital required of an HMO under Louisiana law.
Furthermore, there is no dispute that at the time the guaranty was executed it was intended as a continuing guaranty. La. C.C. art. 3061 provides, in pertinent part:
A surety may terminate the surety-ship by notice to the creditor. The termination does not affect the surety’s liability for obligations incurred by the*667 principal obligor, or obligations the creditor is bound to permit the principal obligor to incur at the time the notice is received, nor may it prejudice the creditor or principal obligor who has changed his position in reliance on the surety-ship.
The terms of the contract are clear and unambiguous in providing that the suretyship will continue until sixty days after written notice of cancellation is made to the Commissioner. The law is well-settled that a continuing suretyship remains in force until revoked. Custom-Bilt,
Health Net asserts that the execution of the sale with AmCareco extinguished its obligation under the suretyship contract because the sale provided that all intercompany agreements were terminated. This is not factually or legally correct. Health Net’s obligation under the contract of suretyship is not an intercompany agreement; it is a legal suretyship contract to secure the obligation of AmCare-LA to maintain minimum statutory _[i2capital and surplus requirements for the ultimate benefit of its enrollees, providers, employees and other creditors.
LaDOI’s knowledge of the sale did not terminate the suretyship. Notice to a creditor that a surety has sold its interest in a business entity to another does not constitute notice of revocаtion on a continuing suretyship to the creditors. Custom-Silt,
The contract of suretyship is enforceable. Health Net failed to meet its burden of proving it had properly revoked the suretyship. Health Net is legally bound by the terms of the suretyship.
The Commissioner’s April 30,1999 approval of AmCareco’s Form-A application included the following condition, “The capitоl [sic] of Foundation Health, a Louisiana Health Plan shall at all times remain at a minimum of $4,000,000.00 (Four Million dollars).” La. R.S. 22:3, La. R.S. 22:773, La. R.S. 22:2014 and La. Admin. Code Title 37, Part XIII, § 1307B4 authorize the Commissioner, upon a determination that the continued operation of an insurer may be hazardous to policyholders or the public, to increase an insurer’s capital and surplus requirements. Nothing in the record indicates any person rеquested a hearing to challenge the | ^enforcement of the additional condition on the Louisiana health plan.
The facts in the record on appeal show that the losses of the enrollees, providers, employees, and other creditors of Am-Care-LA exceeded $2,000,000.00. Thus, Health Net is contractually liable for the full amount of the guaranty.
DECREE
For the foregoing reasons, the judgment of the trial court on the Louisiana contract cause of action is affirmed as to the liability of Health Net under the contract of suretyship and is amended to reduce the amount of the award from $9,511,624.19 to $2,000,000.00 plus legal interest thereon from the date of judicial demand until paid. Costs in this action shall be | udetermined, allocated, and taxed as provided for in Part XV of our opinion pertaining to the tort causes of action rendered this date in District Court Docket Number 499,737, 509,297, and 512,366, and all three Court of Apрeal Docket Numbers 2006-1140-1145 and 2006-1158-1163.
AMENDED AND AFFIRMED.
Notes
. In brief and oral argument, the parties agreed that the law of Louisiana controls on this issue. La. C.C. art. 3537 et seq.
. Although there are minor differences between them, for purposes of this appeal a "guaranty’' in the common law is equivalent to our civilian "suretyship.” See BLACK’S LAW DICTIONARY 712 and 1456 (7th ed. 1999).
.Prior to enactment of 2006 La. Acts No. 533, La. R.S. 10:1-201(40) provided, " ‘Surety’ includes guarantor.”
. See also La. R.S. 22:741 and 22:746.
. Pursuant to the balance billing provisions of La. R.S. 22:2018 A(l) and C, enrollees shall not be liable to providers for any sums owed by their HMO.
. See La. R.S. 22:1351 et seq. and La. Admin. Code Title 37, Part XIII, § 1307C.
Lead Opinion
ON REHEARING
Before CIACCIO, LANIER and CLAIBORNE, JJ.
| -¡The plaintiff-appellee, hereinafter referred to as the Louisiana Receiver, has applied for a rehearing en banc and a rehearing pursuant to Uniform Rules— Courts of Appeal, Rules 1-5 and 2-18.
Rehearing En Banc
The Louisiana Receiver asserts that a rehearing en banc should be granted because “[njumerous important public policy matters that directly affect the regulation of insuranсe companies and their management are implicated by the interpretation of this parental guarantee.” Although the Louisiana Receiver has asserted this factual conclusion, he has failed to state what these “[njumerous important policy matters” are for us to consider.
Rule 1-5 specifies that “[w]hen authorized by law, or when the court deems it necessary to promote justice or expedite the business of court, the court may sit ... en banc.” The Louisiana Receiver has not cited a law, and we are not aware of one, that would require an en banc rehearing on any of the issues in this case. Sitting en banc will not “expedite the business of court” in this case, and, in fact, will delay its final resolution. Finally, because the Louisiana Receiver has failed to assert what “important public policy matters” are at issue, other than those already decided, nо necessity to “promote justice” has been demonstrated.
Rehearing
In the rehearing application pursuant to Rules 2-18.1 and 2-18.2, the Louisiana Receiver asserts this court overlooked “Health Net’s concurrent obligation to maintain the ‘surplus required’ for a Louisiana HMO to remain in operation”, the capital and surplus requirement “obligated Health Net to meet all ofjjthe liabilities of the Louisiana HMO” and the capital and surplus requirement of the suretyship contract “obligated Health Net to pay for all outstanding liabilities and capital requirements relating to the Louisiana HMO; i.e., the entire $9,511,624.19 awarded by the trial court.” The Louisiana Receiver has cited no statutory law or jurisprudence to support this claim.
This claim is patently without merit. La. R.S. 22:20T0C(2), now La. R.S. 22:254; La. R.S. 22:732.2(3)(a)(ii) and (c), now La. R.S. 22:2003; La. C.C. arts. 3036, 3066 and 3067; аnd La. R.S. 12:1E, I, L, N, T and V.
Accordingly, the application for a rehearing is denied.
. The Hon. Philip C. Ciaccio, Judge (Retired), the Hon. Walter I. Lanier, Jr., Judge (Retired), and the Hon. Ian W. Claiborne, Judge (Retired), are serving as judges ad hoc by special appointment of the Louisiana Supreme Court.
. As previous!}' indicated in our original opinion, the trial court judge refused to advise why she granted this award amount when she ordered to do so in paragraph (9)(n) of the July 10, 2007 order of this Court.
. Statutory construction laws require that all laws pertaining to the same subject matter must be inteipreted in reference to each others. La. C.C. art. 13; Holly & Smith Architects, Inc. v. St. Helena Congregate Facility, Inc., 2006-0582, p. 10 (La. 11/29/06),