Judge Bruce G. Iwasaki, Case Number: 24STCP02943, Date: 2024-10-31 Tentative Ruling

Responding Party: Unopposed

Tentative Ruling: Petitioner J.G. Wentworth Originations, LLC’s Petition for Approval for Transfer of Structured Settlement Payment Rights is continued to permit Payee to receive financial and legal advice.

On October 8, 2024, J.G. Wentworth Originations, 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 Samuel Moreno Jr., aka S.M. (“Payee” or “Transferor”) has agreed to sell the periodic sum payments he received in a settlement agreement on a personal injury claim to Petitioner. (FAP ¶¶3-4, 7, Ex. A.) Specifically, Payee Moreno entered into a Structured Settlement Annuity Contract with Prudential Insurance Company of America as follows:

In a prior transfer, Payee Moreno transferred a total of $150,000.00 in future lump sum payments as follows in exchange for $100,000.00 at an Annual Discount Rate (“ADR”) of 5.27 percent:

The proposed Transfer Agreement in this instant case seeks to transfer $450,000.00 in future payments as follows to Petitioner in exchange for $70,000.00 to Payee Moreno at an ADR of 8.65 percent:

According to the California Disclosure Statement, those future payments have a discounted present value equal to $155,147.70, calculated by applying the discount rate of 4.8 percent utilized by the Internal Revenue Service to value annuities in probate proceedings.

“[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 proposed California Purchase Contract (“Transfer Agreement”) between Payee Moreno and Petitioner is fair and reasonable. As mentioned above, the proposed Transfer Agreement seeks to transfer $450,000.00 in future lump sum payments to be paid to Payee Moreno from his Structured Settlement Annuity Contract to Petitioner in exchange for $70,000.00 at an ADR of 8.65 percent. (FAP, Ex. A.) The Amounts Payee Moreno is transferring to Petitioner is the right to receive future payments totaling $450,000 as follows:

Petitioner has provided the proposed Transfer Agreement and disclosure form; disclosure statement for California; and the Structured Settlement Annuity Contract with Prudential Insurance Company of America (“Annuity Issuer”). (FAP, at p. 5, Exs. A-C.) Petitioner also submitted the Statement of Professional Representation signed by Payee Moreno attesting to his waiver of independent professional representation. (Id. at p. 9, Ex. D.) Finally, Petitioner has lodged with the Court, a copy of the underlying settlement agreement, which contains a confidentiality clause.

Here, Payee Moreno declares that he plans to use the funds from the proposed transaction to purchase a new car and do home improvement to fix/remediate the dry rot all around the wood in his house. (Moreno Decl., ¶11.)

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 Moreno declares that he is a 38 years old, single male with no minor children and no child support obligations. (Moreno Decl., ¶8.) He avers that he is currently experiencing a financial hardship due unemployment and only receives $1,000.00 from Supplemental Security Income (“SSI”) and $100.00 in Social Security Administration (“SSA”) monthly. (Id. ¶11.) However, the declaration provides no information as to how long Transferor/Payee has been unemployed and if he is actively looking for employment. Similarly, Payee Moreno’s declaration merely states the remediation work on his house “will be a very expensive fix that my insurance will not cover” without stating how much it will cost to fix the dry rot all around the wood in his home, how much the insurance is willing to cover, or if there are any alternative insurance options he could obtain to fix the issue. Likewise, Payee Moreno does not state what type of car he is looking to purchase, how much it will cost to purchase said vehicle, whether the purchase will be financed/leased/paid for outright, or any other details for the Court to evaluate the reasonableness of the proposed transaction. The use of the word “new” suggest that Payee Moreno already has a vehicle but he provides no specifics as to whether this car is currently financed/leased/paid off, how much maintaining this car costs him monthly (if at all), or whether there are any issues with the car, which necessitates purchasing a new car. Additionally, Payee Moreno does not state what his living expenses are and how much of his SSI and SSA benefits contribute to these expenses. There is no indication from the facts that Payee Moreno has considered how the proposed Transfer might affect his SSI and SSA eligibility.

Also, Payee Moreno completed a prior transfer transaction, which was approved on January 31, 2020 in Los Angeles Superior Court case no. 19BBCP00482. (Moreno Decl., ¶9.) Payee Moreno received $100,000.00 in exchange for transferring his rights to receive $150,000.00 in future lump sum payments. (Id.) He provides no specifics as to what the money was used for and how much of it remains, if any. The remaining balance for guaranteed lump sum payments under the Annuity Contract is $1,071,913.37, thus the proposed transaction would leave $621,913.37 remaining to be paid to Payee Moreno in guaranteed lump sum payments as follows:

Lastly, Petitioner is required to pay up to $1,500.00 for independent professional advice, thus Payee Moreno would not suffer any financial harm in seeking such advice prior to transferring $450,000.00 of future lump sum payments.

Based on the foregoing, the Court is inclined to deny Petitioner J.G. Wentworth Originations, LLC’s Motion for Approval for Transfer of Structured Settlement Payment Rights. The Court does not find that Payee’s purported use of the funds to be reasonable. The Court does not find that the amount ($70,000.00) Payee is expected to receive is fair in light of Payee giving up the right to receive $450,000.00 in future payments. The Court believes the Payee should obtain independent legal and financial advice, at least some of which can be paid for by Petitioner. As such, the Court continues the hearing to permit Payee to receive independent financial and legal advice. The declaration of said professional advisor shall be submitted to the Court. Finally, the Court encourages Mr. Moreno to consider how this proposed transaction might affect his SSI and SSA eligibility; other options that could supplement his meager income on a monthly or quarterly basis; and other ways to finance his purchase of a new car and home improvement, including loans.

Department 58