TENTATIVE RULING

Calendar:    7

Date:               10/28/2022

Case No: 22 GDCP00145

Case Name: Odyssea-Abe83, LLC v. Certain Statutory Interested Parties, etc.

PETITION FOR APPROVAL FOR TRANSFER OF

 STRUCTURED SETTLEMENT PAYMENT RIGHTS

 

Moving Party:               Petitioner Odyssea-Abe83, LLC     

Responding Party:    No Opposition

RELIEF REQUESTED:

Approve transfer of structured settlement payment rights by and between Kyla Johnson, as payee, and petitioner Odyssea-Abe83, LLC 

ANALYSIS:

Procedural

Copies of Documents

Under Insurance Code § 10139.5:

“ (f) 

 (1) A petition under this article for approval of a transfer of structured settlement payment rights shall be made by the transferee and brought in the county in which the payee resides at the time the transfer agreement is signed by the payee, or, if the payee is not domiciled in California, in the county in which the payee resides or in the county where the structured settlement obligor or annuity issuer is domiciled.

 (2) Not less than 20 days prior to the scheduled hearing on any petition for approval of a transfer of structured settlement payment rights under this article, the transferee shall file with the court and serve on all interested parties a notice of the proposed transfer and the petition for its authorization, and shall include the following with that notice:

    (A) A copy of the transferee's current petition and any other prior petition, whether approved or withdrawn, that was filed with the court in accordance with paragraph (6) of subdivision (c).

  (B) A copy of the proposed transfer agreement and disclosure form required by paragraph (3) of subdivision (a).

    (C) A listing of each of the payee's dependents, together with each dependent's age.

  (D) A copy of the disclosure required in subdivision (b) of Section 10136.

  (E) A copy of the annuity contract, if available.

    (F) A copy of any qualified assignment agreement, if available.

    (G) A copy of the underlying structured settlement agreement, if available.

  (H) If a copy of a document described in subparagraph (E), (F), or (G) is unavailable or cannot be located, then the transferee is not required to attach a copy of that document to the petition or notice of the proposed transfer if the transferee satisfies the court that reasonable efforts to locate and secure a copy of the document have been made, including making inquiry with the payee. If the documents are available, but contain a confidentiality or nondisclosure provision, then the transferee shall summarize in the petition the payments due and owing to the payee, and, if requested by the court, shall provide copies of the documents to the court at a scheduled hearing.”

Here, the petition fails to include a copy of the annuity contract, including only a photograph of a letter dated September 19, 2022, purporting to officially verify the interest of Kyla Johnson in periodic payments due under a structured settlement by Talcott Resolution CEBSCO, and also fails to attach a copy of the qualified assignment agreement, or the underlying structured settlement agreement.  The Gephart Declaration indicates that Odyssea-Abe83, LLC has contacted the payee, annuity issuer, and requested court records but has been unable to locate these documents.   [Gephart Decl., para. 1(b)].  The verification letter is attached.  [Ex. A].  The transferor has also provided a Declaration in Lieu of Settlement Agreement confirming that Johnson has searched for but been unable to locate a copy of the Settlement Agreement.   [Ex. B, Declaration in Lieu, para. 3].  Copies of the documents approving a minor’s compromise are attached. [Ex. C]. The court finds that reasonable efforts have been made to locate and secure copies of the documents.  

Substantive

The petition seeks approval of a transfer of certain structured settlement payment rights held by transferor Kyla Johnson pursuant to a structured settlement entered into on behalf of Johnson intended as compensation for a personal injury claim, arising from an incident which occurred when Johnson was in her mother’s womb, and her mother was involved in a car accident which resulted in Johnson’s premature birth and a fractured skull.  [Johnson Decl., para. 3]. 

Johnson indicates that there are no reoccurring medical problems related to the original injury and no continuing need to provide for future medical expenses.  [Decl., para. 3].  

Johnson is 23 years old, single, and has one minor dependent, age 2, who resides with Johnson.  [Johnson Decl., para. 4].  Johnson is currently not working and going to school studying sound engineering, with 2-3 years remaining in the program, and does not rely on the structured settlement payments she is assigning for her day-to-day living expenses.  [Johnson Decl., para. 4].   She has no court ordered child support or maintenance obligations. [Para. 5]. 

Johnson has not previously assigned any portion of her payment rights.  [Johnson Decl., para. 6]. 

The transaction is with Odyssea-Abe83, LLC.  Johnson is transferring 294 monthly payments of $200.00 beginning January 15, 2023 through and including June 15, 2047.    

The total dollar amount of payments being sold is $58,800.00, with a discounted present value of $38,738.98. The net amount to be paid to Johnson is $10,000.00, with no deduction for expenses.  

Johnson states that with the funds she will purchase a reliable vehicle and allocate funds for moving expenses. She indicates that she currently lives in Section 8 housing in North Hollywood and pays $760 per month out of pocket and plans to keep the Section 8 housing voucher and relocate to Glendale to be in a safer environment for her daughter.  She will need funds for the first and last month’s rent, a security deposit, and moving expenses.  The remaining funds will be used for Johnson’s school tuition and books.  [Johnson Decl., para. 7].  

Under Insurance Code section 10137(a):

“A transfer of structured settlement payment rights is void unless a court reviews and approves the transfer and finds the following conditions are met:

 (a) The transfer of the structured settlement payment rights is fair and reasonable and in the best interest of the payee, taking into account the welfare and support of his or her dependents.

 (b) The transfer complies with the requirements of this article, will not contravene other applicable law, and the court has reviewed and approved the transfer as provided in Section 10139.5.”

Insurance Code section 10139.5 provides the factors to be considered by the court in determining whether to approve the transfer of a structured settlement.  The highlighted factors are those which are of some concern in connection with this petition. 

(a) A direct or indirect transfer of structured settlement payment rights is not effective and a structured settlement obligor or annuity issuer is not required to make any payment directly or indirectly to any transferee of structured settlement payment rights unless the transfer has been approved in advance in a final court order based on express written findings by the court that:

 (1) The transfer is in the best interest of the payee, taking into account the welfare and support of the payee's dependents.

 (2) The payee has been advised in writing by the transferee to seek independent professional advice regarding the transfer and has either received that advice or knowingly waived, in writing, the opportunity to receive the advice.

 (3) The transferee has complied with the notification requirements pursuant to paragraph (2) of subdivision (f), the transferee has provided the payee with a disclosure form that complies with Section 10136, and the transfer agreement complies with Sections 10136 and 10138.

 (4) The transfer does not contravene any applicable statute or the order of any court or other government authority.

 (5) The payee understands the terms of the transfer agreement, including the terms set forth in the disclosure statement required by Section 10136.

 (6) The payee understands and does not wish to exercise the payee's right to cancel the transfer agreement.

(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.

 (2) The stated purpose of the transfer.

 (3) The payee's financial and economic situation.

 (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 highlighted factors are of concern here. 

Specifically, it is not clear whether there are any continuing effects from the original accident and injury, whether there could be future medical expenses, and, if so, if the transferor has medical insurance. 

It is also of concern that transferor has not set forth any sources of income, but states that there is no dependence on the monthly payments, which will be reduced by $200 a month beginning in January of 2023.  The petition suggests that transferor does in fact rely on the monthly payments, as the Gephart Declaration, in disclosing “the amounts and sources of the Payee’s monthly income and financial resources,” states, “Payee is currently unemployed and receives $1,500.00 per month from her annuity.”  [Gephart Decl., para. 5].  

This is, as usual, not a particularly favorable transaction for the transferor, but if her medical condition is stable, and she can show that she her income is sufficient to cover expenses without the transferred portion of the monthly payment, she is now an adult, and it would appear that the use of the funds now to obtain reliable transportation and relocate to a safer area would benefit Johnson and her dependent going forward.  

The court does not have an actual copy of the annuity, only a letter verifying interest in periodic payments.  [Gephart Decl., Ex. A].  

This failure can sometimes be an issue, as such annuities often include nonassignment clauses.  In fact, the petition indicates: 

“Petitioner is informed and believes and upon that basis alleges that the underlying structured settlement that established the annuity at issue in the present case contained language that restricted and/or prohibited the right and/or power to assign the Assigned Payments in question.”

[First Amended Petition, para. 7]. 

The issue of whether nonassignment clauses bar a structured settlement transfer such as the one at issue here, has been addressed by case law, and the court of appeal has concluded that where notice has been provided to the interested parties, and no objection is made, the court is authorized to consider the petition regardless of the existence of a nonassignment clause:

“The superior court, however, did conclude that public policy bars the waiver of the contractual antiassignment clauses with respect to factoring transactions. We disagree. We conclude that California Uniform Commercial Code section 9408 evidences a public policy against antiassignment provisions in general and that the SSTA, Insurance Code section 10136 et seq., evidences a public policy in favor of court-approved factoring transactions.  Thus, public policy favors the legal conclusion that antiassignment provisions do not bar court-approved transfers of structured settlement payments.

Therefore, we conclude that, where no interested parties object to the transfer of structured settlement payment rights, the antiassignment provisions in the annuity contract, settlement agreement or other related contracts do not bar the factoring transaction at issue in this appeal.

321 Henderson Receivables Origination LLC v. Sioteco (2009) 173 Cal. App.4th 1059, 1075-1076. 

The problem here is that the letter includes addresses for the annuity holder in Hartford, Connecticut, and North Windsor, Connecticut, but the proof of service shows notice has been served at an address in Wilmington, Delaware.  This situation suggests that the interested parties, specifically the annuity company, have not received appropriate notice of the petition hearing to object.  It will be discussed at the hearing how petitioner determined the appropriate service address for the interested parties.  

RULING:

The Court has the following questions for the petitioner and transferor:

What efforts made to obtain annuity contract, qualified assignment, settlement agreement? 

What is the current status of transferor’s injuries?  Does the transferor have medical insurance? 

What are all transferor’s sources of income?  How will reduction in monthly annuity payments affect ability to cover expenses?

How have the addresses of the annuity holder in the proof of service been confirmed so that it can be determined that interested parties have notice of this hearing?  The addresses included in the petition on the letter from the annuity holder are different from the address used in the proofs of service.  Is petitioner aware of any objection?

 

First Amended Petition for Approval for Transfer of Structured Settlement Payment Rights is GRANTED. 

GIVEN THE CORONAVIRUS CRISIS, AND TO ADHERE TO HEALTH GUIDANCE THAT DICTATES SAFETY MEASURES, DEPARTMENT D IS ENCOURAGING AUDIO OR VIDEO APPEARANCES

Please make arrangement in advance if you wish to appear via LACourtConnect/Microsoft Teams by visiting www.lacourt.org to schedule a remote appearance.  Please note that LACourtConnect/Microsoft Teams offers free audio and video appearance. Counsel and parties (including self-represented litigants) are encouraged not to personally appear.  With respect to the wearing of face masks, Department D recognizes that currently, the Los Angeles Department of Public Health strongly recommends masks indoors, especially when interacting with individuals whose vaccination status is unknown; for individuals who have a health condition that puts them at higher risk for severe illness; individuals who live with someone who is at higher risk; and for individuals who are around children who are not yet eligible for vaccines.  In accordance with this guidance, it is strongly recommended that anyone personally appearing in Department D wear a face mask.  The Department D Judge and court staff will continue to wear face masks.  If no appearance is set up through LACourtConnect/Microsoft Teams, or otherwise, then the Court will assume the parties are submitting on the tentative.