Judge Bruce G. Iwasaki, Case Number: 24STCP02330, Date: 2024-09-24 Tentative Ruling

Tentative Ruling: Petitioner Gulf Pine Closing LLC’s Motion for Approval for Transfer of Structured Settlement Payment Rights is denied.

On September 3, 2024, Gulf Pine Closing LLC (“Petitioner”) filed the operative First Amended Petition (“FAP”) for Approval for Transfer of Structured Settlement Payment Rights pursuant to California Insurance Code Section 10134 et seq.

The FAP alleges Jocelyn Ramirez aka J.R. (“Payee” or “Statutory Interested Party”) has agreed to sell the periodic sum payments she received in a settlement agreement on a tort claim to Petitioner. (FAP ¶¶2, 6-9.) Specifically, Payee Ramirez entered into a Structured Settlement Annuity Contract as follows:

Commencing November 26, 2023, Payee Ramirez would receive the sum of $2,000.00 per month, payable on the 26th day of each month, until October 26, 2030 (84 Certain Monthly Payments).

Commencing November 26, 2030, Payee Ramirez would receive the sum of $3,475.00 per month, payable on the 26th day of each month, until October 26, 2040 (120 Certain Monthly Payments).

In a prior transfer, Payee Ramirez transferred a total of $1,325,025.00 in future lump sum payments as follows to Petitioner in exchange for $525,227.00 at an Annual Discount Rate (“ADR”) of 10.72 percent:

On July 29, 2024, Petitioner filed the instant Motion for Approval for Transfer of Structured Settlement Payment Rights. On September 11, 2024, Berkshire Hathaway Life Insurance Company of Nebraska (“Annuity Issuer” or “Non-Party”) filed a Response to FAP. No reply has been filed.

The proposed Transfer Agreement in this instant case seeks to transfer the remaining balance of $800,000.68 in future lump sum payments as follows to Petitioner in exchange for $352,487.25 to Payee Ramirez at an ADR of 11.61 percent:

“[T]o ensure that a transfer of a structured settlement payment has no adverse tax impact on any of the persons involved in a factoring transaction, in January 2002, Congress amended the Internal Revenue Code by adopting section 5891 to expressly sanction a tax-free transfer of structured settlement payments.” (321 Henderson Receivables Origination LLC v. Sioteco (2009) 173 Cal.App.4th 1059, 1065.)“In California, the court approval process is governed by the Structured Settlement Transfer Act, (hereinafter SSTA), which requires: (1) disclosures to the transferor of the structured settlement payment rights, (2) notice to the Attorney General, and (3) court approval.” (Id.) “The court-approval process requires the factoring company to file a petition in the county in which the transferor resides for approval of the transfer, attaching copies of the petition, the transfer agreement, the disclosure form, the annuity contract, any qualified assignment agreement and the structured settlement agreement, a list of the names and ages of the transferor’s dependents, notice of the court hearing date, and notice of a right to respond.” (Id. at p. 1066.)

Petitioner contends the terms of the Purchase, Sale, and Transfer Agreement (“Transfer Agreement”) between Payee Ramirez and Petitioner is fair and reasonable to the real parties in interest. As mentioned above, the proposed Transfer Agreement seeks to transfer the remaining balance of $800,000.68 in future lump sum payments to be paid to Payee Ramirez from her Structured Settlement Annuity Contract to Petitioner in exchange for $352,487.25 at an ADR of 11.61 percent. (FAP, Exs. A-B.) The Amounts Payee Ramirez is transferring to Petitioner is the right to receive future payments totaling $800,000 as follows:

Petitioner has provided the Transfer Agreement; disclosure statements for California, Michigan, and Nebraska; Single Premium Annuity Contract with the Annuity Issuer; and the Petition for Approval of Minor Compromise granted in 2016 on Payee Ramirez’s behalf. (FAP, Exs. A-B, F, H.) Petitioner also submitted the Statement of Professional Representation signed by Payee Ramirez attesting to her waiver of independent professional representation. (FAP, Ex. C.) Petitioner submits a document signed by Payee Ramirez attesting to the fact she has no dependents and has never been married. (FAP, Exs. D-E.) Petitioner’s Director of Funding, Ikewa Nesbeth provided a signed Affidavit of Due Diligence regarding attempts to locate a copy of any qualified assignment agreement related to the annuity and a settlement agreement related to the annuity. (FAP, Ex. G.)

Payee Ramirez declares that she plans to use the funds from the transfer transaction to buy out her sister’s interest in the familial home they inherited when their parents died. (FAP, Ex. I – Ramirez Decl., ¶10.) She avers, without explanation, that Annuity Issuer has been a “thorn in [her] side,” and she wishes to proceed with Petitioner. (Id. – Ramirez Decl., ¶11.), Petitioner states that based upon an Appraisal Report for the familial home, its market value is $890,000.00. (Id. – Ramirez Decl., Ex. 1.) Finally, Petitioner filed proof of service by mail of the Motion, FAP, and related documents on Payee Ramirez, Annuity Issuer, Annuity Obligor BHG Structured Settlement, Inc., and Martin L. Shives. (POS, 7/29/24.)

In opposition, Annuity Issuer Berkshire first raises procedural arguments in regard to the original Petition. For instance, Annuity Issuer Berkshire contends the original Petition failed to provide Payee Ramirez’s full name and address as required under Insurance Code Section 10139.5(c)(1) and had limited exhibits that were heavily redacted. Moreover, Annuity Issuer Berkshire contends Petitioner amended the caption to the FAP to include Payee Ramirez’s name and title as “Real Party in Interest” without permission from the court per California Rules of Court, Rule 3.1324(d). Berkshire further argues Petitioner failed to serve the Notice of Case Assignment, Civil Case Cover Sheet, or Civil Case Cover Sheet Addendum and Statement of Location with the original Petition. Similarly, Annuity Issuer Berkshire contends Petitioner failed to file a Notice of Related Cases where there was a prior petition at the West Covina Courthouse per California Rules of Court, Rule 3.300(b). Annuity Issuer Berkshire also argues the service of the original Petition was untimely and does not apprise the public that Payee Ramirez is a party to the action. Annuity Issuer Berkshire argues the FAP fails to cure the defective notice to the public or in the Court’s records.

Berkshire does not cite to any case law supporting its contention that Petitioner must strictly comply with California Rules of Court, Rule 3.1324(d). A “related case” is defined as “A pending civil case is related to another pending civil case, or to a civil case that was dismissed with or without prejudice, or to a civil case that was disposed of by judgment, if the cases:(1) Involve the same parties and are based on the same or similar claims; (2) Arise from the same or substantially identical transactions, incidents, or events requiring the determination of the same or substantially identical questions of law or fact; (3) Involve claims against, title to, possession of, or damages to the same property; or (4) Are likely for other reasons to require substantial duplication of judicial resources if heard by different judges.” The prior petition was neither dismissed with or without prejudice nor disposed of by judgment, thus Petitioner was not required to file a Notice of Related Cases.

Annuity Issuer Berkshire argues the proposed Transfer Agreement is not in Payee Ramirez’s best interests for several reasons. Payee Ramirez waived the assistance of independent professional representation when per Insurance Code Section 10139.5, subdivision (h), Petitioner is required to pay the first $1,500.00 towards the cost of independent professional advice for Payee Ramirez. This concerns the Court as well.

Moreover, Payee Ramirez and Petitioner already had a prior transfer approved for $1,325,025.00, wherein she received $525,277.00 – less than 40% – to be used to diversify her investment portfolio and unspecified repairs to the Property. Berkshire points out that Ramirez does not explain how much of the $525,227.00 was used for investments versus unspecified repairs to her house, and how much money remains in her investment account. Annuity Issuer Berkshire also asserts it has a Hardship Exchange Program Option that uses an Annual Discount Rate (“ADR”) lower than the ADR used by Petitioner. In fact, Annuity Issuer Berkshire contends under the Hardship Program it could offer Payee Ramirez the same proposed Transfer of $800,000.68 in exchange for $485,284.06 to be paid to Payee Ramirez at an ADR of 6.54 percent. Alternatively, Annuity Issuer Berkshire asserts in exchange for a prorated share of the $800,000.68 lump sum payment in the amount of $581,652.20, Payee Ramirez would receive $352,487.25 being offered by Petitioner, allowing Payee Ramirez to retain $218,348.48 in future deferred lump sum payments. Ramirez does not explain why she finds Berkshire’s proposal disadvantageous. Finally, Annuity Issuer Berkshire asserts there does not appear to be a deadline for Payee Ramirez to purchase of her sister’s interest in the familial home.

Pursuant to Insurance Code Section 10139.5(b), “When determining whether the proposed transfer should be approved, including whether the transfer is fair, reasonable, and in the payee's best interest, taking into account the welfare and support of the payee's dependents, the court shall consider the totality of the circumstances, including, but not limited to, all of the following:

(1) The reasonable preference and desire of the payee to complete the proposed transaction, taking into account the payee’s age, mental capacity, legal knowledge, and apparent maturity level.

(4) The terms of the transaction, including whether the payee is transferring monthly or lump sum payments or all or a portion of his or her future payments.

(5) Whether, when the settlement was completed, the future periodic payments that are the subject of the proposed transfer were intended to pay for the future medical care and treatment of the payee relating to injuries sustained by the payee in the incident that was the subject of the settlement and whether the payee still needs those future payments to pay for that future care and treatment.

(6) Whether, when the settlement was completed, the future periodic payments that are the subject of the proposed transfer were intended to provide for the necessary living expenses of the payee and whether the payee still needs the future structured settlement payments to pay for future necessary living expenses.

(7) Whether the payee is, at the time of the proposed transfer, likely to require future medical care and treatment for the injuries that the payee sustained in connection with the incident that was the subject of the settlement and whether the payee lacks other resources, including insurance, sufficient to cover those future medical expenses.

(8) Whether the payee has other means of income or support, aside from the structured settlement payments that are the subject of the proposed transfer, sufficient to meet the payee's future financial obligations for maintenance and support of the payee's dependents, specifically including, but not limited to, the payee's child support obligations, if any. The payee shall disclose to the transferee and the court his or her court-ordered child support or maintenance obligations for the court's consideration.

(9) Whether the financial terms of the transaction, including the discount rate applied to determine the amount to be paid to the payee, the expenses and costs of the transaction for both the payee and the transferee, the size of the transaction, the available financial alternatives to the payee to achieve the payee's stated objectives, are fair and reasonable.

(10) Whether the payee completed previous transactions involving the payee's structured settlement payments and the timing and size of the previous transactions and whether the payee was satisfied with any previous transaction.

(11) Whether the transferee attempted previous transactions involving the payee's structured settlement payments that were denied, or that were dismissed or withdrawn prior to a decision on the merits, within the past five years.

(12) Whether, to the best of the transferee’s knowledge after making inquiry with the payee, the payee has attempted structured settlement payment transfer transactions with another person or entity, other than the transferee, that were denied, or which were dismissed or withdrawn prior to a decision on the merits, within the past five years.

(13) Whether the payee, or his or her family or dependents, are in or are facing a hardship situation.

(14) Whether the payee received independent legal or financial advice regarding the transaction. The court may deny or defer ruling on the petition for approval of a transfer of structured settlement payment rights if the court believes that the payee does not fully understand the proposed transaction and that independent legal or financial advice regarding the transaction should be obtained by the payee.

(15) Any other factors or facts that the payee, the transferee, or any other interested party calls to the attention of the reviewing court or that the court determines should be considered in reviewing the transfer.”

The Court finds that under the totality of the circumstances, the proposed Transfer Agreement is not fair and reasonable. Payee Ramirez is an 18-year old full-time Psychology student at Rio Hondo College, who works as a Nanny making about $4,000.00 per month. (FAP, Ex. I – Ramirez Decl., ¶3.) She attests the proposed Transfer funds are not intended to pay for necessary living expenses, future living expenses, or future medical care. (Id. at ¶¶7-8.) Further, she has completed a prior transfer transaction, which was approved on February 13, 2024 in Los Angeles Superior Court case no. 23PSCP00533. (Id. at ¶9.) Payee Ramirez received $525,227.00, which were used to place with her financial advisor for her investment portfolios and do repairs to the familial home she inherited. (Id.) As discussed above, Payee Ramirez’s declaration does not state what type of repairs were made, how much they costed her, or how much of the previous transfer funds she used to cover such costs. Moreover, Payee Ramirez states she is aware of Annuity Issuer Berkshire’s Hardship Program and their position on the transfer transactions, however, she wishes to proceed with the Transfer Agreement between her and Petitioner. (Id. at ¶11.) She offers no logical explanation for this. Payee Ramirez is only 18-years old and waived independent professional assistance, even though she avers that she consulted with her financial advisor and real estate attorneys regarding using the proposed Transfer Agreement funds to buy out her sister’s interest in the familial home and got the house appraised. (Id. at ¶10.) No declarations from these advisors were submitted. As mentioned above, Petitioner is required to pay up to $1,500.00 for independent professional advice, thus Payee Ramirez would not suffer any financial harm in seeking such advice and would likely benefit from it.

Payee Ramirez states she will continue to receive monthly payments (currently $2,000) through October 2040, with aggregate payments of $565,000. (Id. at ¶13.) Payee Ramirez has no dependents and is single (never been married), with no child or spousal support obligations. Despite the previous transfer being approximately seven months ago and for $1,325,025.00 with Payee Ramirez receiving $525,277.00 of it, Payee Ramirez does not express any dissatisfaction with the outcome.

Ramirez provides no specifics as to how much of the previous $1,325,025.00 transfer was invested, where it was invested, and as Annuity Issuer Berkshire points out, how much remains in said investment accounts. Depending on the amount in the investment accounts, there is no telling whether or not it could possibly cover Payee Ramirez’s purchase of her sister’s interest or that she has considered such option. Similarly, Payee Ramirez merely states she is a college student but fails to provide any details as to her tuition and other related expenses, whether she is paying out of pocket as opposed to receiving scholarships, and whether she is receiving student loans or has incurred any college debt.

Ramirez’s declaration offers no facts explaining why receiving the funds from the proposed Transfer Agreement is urgent, other than her sister’s desire to sell the Property. As previously mentioned, neither Petitioner nor Payee Ramirez attests to a deadline in regards to her purchase of her sister’s interest in the Property. In addition, the proposed Transfer Agreement seeks the remaining balance of Payee Ramirez’s lump sum payments under the Structured Settlement Annuity Contract, leaving only her monthly payments of $2,000 until October 26, 2030 and $3,475.00 until October 26, 2040, for a purported total of $565,000.00 instead of $1,365,000.68 (total remaining nominal value). Lastly, there are no facts suggesting that Payee Ramirez has considered borrowing the money to purchase her sister’s interest in the Property at a lower rate than what is being offered in the proposed Transfer Agreement.

Based on the foregoing, Petitioner Gulf Pine Closing LLC’s Motion for Approval for Transfer of Structured Settlement Payment Rights is denied. The Court does not find that Payee’s preference and desire to be reasonable. The Court does not believe the Payee fully understands the proposed transaction and she should obtain independent legal and financial advice, at least some of which can be paid for by Petitioner.

Department 58