Judge Bruce G. Iwasaki, Case Number: 24STCP02991, Date: 2024-11-15 Tentative Ruling

Responding Party: Unopposed

Tentative Ruling: The Court will inquire of the transferor/payee regarding the transaction. The Court believes it will be in his best interest to receive independent financial and legal advice.

On September 18, 2024, J.G. Wentworth Originations, LLC (“Petitioner”) filed this Petition for Approval for Transfer of Structured Settlement Payment Rights (“Petition”) pursuant to California Insurance Code Section 10134 et seq.

The Petition alleges transferor/payee Felipe Curiel (“Payee” or “Transferor”) has agreed to sell the period sum payments he received in a settlement agreement on a personal injury claim to Petitioner. (Pet., ¶¶ 3-4, 7, Ex. A.) Specifically, Payee Curiel entered into a Structured Settlement Annuity Contract with MetLife Life Insurance Company that provides for periodic payments of $313.95 monthly, beginning on November 15, 2024 and ending on July 15, 2041. (Pet., ¶¶ 3-5 and Exh. C; Curiel Decl., ¶ 5.)

Through the Tuscaloosa County, Alabama Superior Court on August 23, 2021, transferring monthly payment portions of $200.00 from September 2021 through August 2041 in exchange for $15,500.00 to the same Petitioner, J.G. Wentworth (Case No. CV-2021-900610);

Through the Tuscaloosa County, Alabama Superior Court on July 27, 2022, transferring monthly payment portions of $116.52 from February 2023 through August 2041 in exchange for $8,500.00, to the same Petitioner, J.G. Wentworth (Case No. CV-2022-900479); and

Through the Tuscaloosa County, Alabama Superior Court on December 28, 2022, transferring monthly payment portions of $306.32 from February 2023 through August 2041 in exchange for $27,819.32, to a different Payee, Novation Funding, LLC (Case No. CV-2022-900924).

The proposed Transfer Agreement in the instant case seeks to transfer $63,103.95 in future payments to Petitioner in exchange for $23,623.83 to Payee Curiel at an ADR of 15.23 percent. Payee’s current structured settlement has a present value of $43,426, utilizing the IRS value for annual discount rate of 4.8%.

“[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 Curiel and Petitioner is fair and reasonable. As noted above, Petitioner and Payee seek to transfer future payments of $63,103.95 for an immediate lump-sum payment of $23,623.83. (Pet., Exh. A.) Petitioner seeks to purchase Payee’s right to future payments for approximately 55% of their current value ($23,623.83 divided by $43,426.30).

Petitioner has provided the proposed Purchase Agreement and disclosure form and the California Disclosure Statement, both signed by Payee. (Petn., Exs. A-B.) Petitioner also submitted a Verification of Benefits from the Annuity Issuer, dated September 18, 2024, confirming the terms of the annuity. (Id., Ex. C.) Payee attests he waived independent professional representation and advice and authenticates a signed written waiver of same. (Id., Ex. E.) Petitioner also provided a copy of the underlying settlement agreement. (Id., Ex. D.) The Court will inquire of Payee why he has elected not to obtain independent – and substantially free – financial expertise on this matter.

Payee declares that he is 32 years old, not married, and has no minor children. He is employed full time earning $4,400 per month. (Curiel Decl., ¶ 8.) He states he is currently experiencing financial hardship, but does not describe the nature of the hardship. Specifically, he states that his student loans are placing a “strain on [his] budget” and that he needs “relief from the stress of managing multiple loans.” (Ibid.) He does not state what the outstanding loan balance is, his monthly payments, the interest rate he is paying, and whether he qualifies for any of the many deferral and forgiveness programs that have been created for student loans in recent years. He intends to use funds from the proposed transfer to “eliminate or significantly reduce [his] monthly payments” to “set [him] on a path to becoming debt-free sooner.” (Id., ¶ 11.) He offers no details on what that means.

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 cannot conclude on the information provided that the proposed Transfer Agreement is fair and reasonable. The payee is an adult in his thirties who suffers from no apparent incapacity. He waived legal and financial advice, and he has completed several similar transactions over the prior few years. He ostensibly understands these transactions’ financial import and is satisfied with their results. No prior transfer has been denied, dismissed, or withdrawn. (Curiel Decl., ¶ 10.)

Payee will use the funds to reduce a different loan, but offers no information on the interest rate of the student loan. The appropriate comparison is set forth in the disclosure statement: If the Payee borrowed $23,623 and paid that loan back in installments with each of the payments he now seeks to transfer to Petitioner, the equivalent interest rate Payee would pay is 15.23% per year. In effect he is trading a student loan payment of a certain interest rate that he has not disclosed, for a loan with an interest rate of over 15%. Perhaps this is necessary. But the Court is concerned that Payee has not received sufficient independent advice to make a decision that is in his financial interest.

Based on the foregoing concerns, the Court will inquire of the Payee. The Court will specifically inquire why Payee has waived free financial advice from an independent source.

Department 58