TENTAITVE RULING

Calendar:    1

Date:               4/21/2023

Case No: 22 GDCP00200

Case Name: Lakeside Palms, LLC v. M.D.

PETITION FOR APPROVAL FOR TRANSFER OF STRUCTURED SETTLEMENT PAYMENT RIGHTS

Moving Party:               Petitioner Lakeside Palms, LLC      

Responding Party:    Specially Appearing Interested Party Berkshire Hathaway Life Insurance Company of Nebraska 

RELIEF REQUESTED:

Approve transfer of structured settlement payment rights by and between Maria Barba as payee, and petitioner Lakeside Palms, LLC 

ANALYSIS:

This matter was originally set to be heard on January 13, 2023. 

On January 4, 2023, the court on its own motion continued the hearing on the petition and an OSC Re: Related Case determination of 22 BBCP 00375 to March 10, 2023.  

On January 4, 2023, a Notice of Case Reassignment was filed and served by the court notifying the parties that as of January 4, 2023, the case was reassigned to Judge Tavelman in Department B in Burbank. 

On March 8, 2023, Judge Tavelman issued a court order indicating that the court recuses itself on this case pursuant to CCP section 170.1(a).  The matter was reassigned at the direction of the Supervising Judge to this Department for all further proceedings.  The hearing was continued to April 21, 2023 in this department. 

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    (A) A copy of the transferee's current petition and any other prior petition, whether approved or withdrawn, that was filed with the court in accordance with paragraph (6) of subdivision (c).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, the qualified assignment agreement, or the settlement agreement.  The petition is not verified, and indicates that “at least 20 days prior to the date of the hearing of this Petition, Petitioner has served on all interested parties…which includes to the extent applicable and in the possession of petitioner:…” copies of the annuity contract, the qualified assignment agreement and the underlying structured settlement agreement.  [Petition, para. 8].  Those documents have not been filed or served as represented, and there is no declaration submitted to the court pursuant to which the petitioner indicates it has made any attempt to satisfy the court, as required in under Insurance Code § 10139.5 (f)(2)(H), above, “that reasonable efforts to locate and secure a copy of the document have been made, including making inquiry with the payee.” 

The statutory requirements have not been met here, and the court will discuss this issue at the hearing, and inquire what efforts have been made to locate documents, and, if sufficient evidence is offered, may find that reasonable efforts have been made to locate and secure copies of the missing documents, or may require a further showing.   

In addition, the petition fails to include copies of the records of a previous transfer attempt.    

  Under Insurance Code § 10139.5

“(c) Every petition for approval of a transfer of structured settlement payment rights, except as inquiry with the payee, all of the following:

  “(6) Information regarding previous transfers or attempted transfers, as described in paragraph (11), (12), or (13) of subdivision (b). The transferee or payee may choose to provide this information by providing copies of pleadings, transaction documents, or orders involving any previous attempted or completed transfer or by providing the court a summary of available information regarding any previous transfer or attempted transfer, such as the date of the transfer or attempted transfer, the payments transferred or attempted to be transferred by the payee in the earlier transaction, the amount of money received by the payee in connection with the previous transaction, and generally the payee's reasons for pursuing or completing a previous transaction. The transferee's inability to provide the information required by this paragraph shall not preclude the court from approving the proposed transfer, if the court determines that the information is not available to the transferee after the transferee has made a reasonable effort to secure the information, including making an inquiry with the payee.”

There is no mention of previous transactions in the petition, and no declaration from petitioner, as is usually submitted, summarizing such previous transactions.   The court notes that it has received a Response, as well as a Notice of Related Case filed by Berkshire Hathaway Life Insurance Company of Nebraska, the annuity holder, indicating that this case is related to LASC Case No. 22 BBCP00375, a previous petition filed in Department A, and previously denied in that Department, which was between the same parties, and involved the same right to payments.  [Notice of Related Case, Attachment Ih].  While the cases have not been deemed related, and Department A will not be hearing this matter, this does not relieve petitioner of the obligation to make the required showing with respect to previous transfer attempts.  This issue will also be discussed at the hearing, and unless the court is satisfied with the explanation concerning the previous petition and transfer attempt, the court may require a further showing regarding that transfer attempt. 

Substantive

The petition seeks approval of a transfer of certain structured settlement payment rights held by transferor Maria Del Rosario Barba pursuant to a structured settlement entered into in 2015 on behalf of Barba intended as compensation for a personal injury claim which Barba indicates is a personal and private matter.   [Barba Decl. para. 6].  The Barba Declaration indicates that the original settlement, “was not intended as compensation for physical injuries and as such I have no continuing need to provide for future medical expenses.”  [Barba Decl., para. 6].  The declaration also indicates that documents Barba has been able to locate concerning the settlement, if any, are attached, but there are no documents attached.  This posture makes it difficult for the court to ascertain the nature of the underlying action, which was settled, and particularly what types of injuries for which the settlement was intended to compensate, and whether there is in fact a continuing need for the funds for future expenses, as was the intent.  If the nature of the underlying claim was sensitive, it would be helpful to have the documents which are of public record concerning the underlying action.  Again, this issue will be discussed at the hearing, and the court may require further documentation with respect to the underlying settlement.  

Barba is now 20 years old, single/not married, lives with her “Spouse,” Anthony Zavala, 22 years old, and has two minor children, ages 4 years and one year.  [Barba Decl., paras.2-4].  This recitation is confusing, as it is not clear whether Barba is single or married to her spouse.  A filing by petitioner in January of 2023 also indicates that Barba had a third baby in October 2022.  [Petitioner’s Response to OSC, para. 2, filed 01/25/2023].  Barba indicates she is currently a stay-at-home mother, and Anthony Zavala works at Party Line Events, earning $45,000 per year.  [Barba Decl., para. 5].  Barba has no court ordered child support obligations. [Barba Decl., para. 7]. 

Barba indicates that she has not previously assigned a portion of her structured settlement payment rights, but, as discussed above, other documentation confirms that a previous transfer attempt was made and was denied.  [Barba Decl., para. 10]. 

The current proposed transaction is with petitioner Lakeside Palms.  Barba is transferring one lump sum payment of $136,000.00 due on April 7, 2025 and one lump sum payment of $16,500.00 due on April 7, 2027.  

The total dollar amount of payments being sold is $152,500.00, with a discounted present value of $133,962.41.   The net amount to be paid to Barba is $105,000.00, with no deduction for expenses. The effective equivalent interest rate being paid on the transaction is 15.8% per year.  

   

Barba states that a portion of the funds will be used for housing, to pay off overdue medical expenses, and also states that they are expecting their third child, so the balance will be used for the costs associated with pregnancy and birth.  [Barba Decl., para. 9].  As noted above, it appears that the child was born in October 2022.  

 

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.  A concern includes that it is not clear what injuries, which are represented as not physical in nature, for which the settlement was intended to compensate, and whether those unidentified injuries are likely persisting and would require future attention and funding.  This issue will be discussed at the hearing, and it will also be discussed whether payee has medical insurance. 

Although there is no documentation of the annuity and the payments due, it appears from the declaration that there are continuing monthly and semi-annual payments due and this transaction will not exhaust the entire funds available.   [Barba Decl., para. 6].  

This deal is, as usual, not a particularly favorable transaction for the transferor, but it appears that Barba will continue to receive some monthly payments through the end of the year, and is facing a hardship situation, with the funds being used to address issues which will benefit the family, including the dependents.  This situation is the rare petition where the payee has in fact consulted an attorney, who submits a declaration indicating the attorney has reviewed and approves of the transaction, believes it is fair and reasonable for the client, and that the attorney understands that Barba urgently needs the payment for the payment of medical bills.  [Carrillo Decl., paras. 1-3, filed 03/08/2023].

There has also been a Response filed by the annuity holder, Berkshire Hathaway Life Insurance Company of Nebraska, which indicates that several petitions have been pursued by Barba, in addition to the one previously denied, which were dismissed.  The Response argues that Berkshire Hathaway believes there are significant questions whether the transfer is in the best interests of Barba, then outlines a hardship program available to its payees, such as Barba, through Berkshire Hathaway, pursuant to which the annuity holder estimates that it could pay $24,812.82 more for the same payments being transferred, with the payee being required to contact Berkshire Hathaway, return a short questionnaire, and then Berkshire Hathaway would at its own expense petition for court approval, for an administrative charge.   

The Response indicates that the information about the program is provided to help the court in making its “best interests” determination, and not to profit from any future transaction with Barba and indicates that Berkshire Hathaway will comply with any order of the court regarding maintaining or transferring payments of Barba’s structured settlement. 

There is accordingly no formal objection made or expected from the annuity holder, which has actual notice of this petition and proceeding. 

RULING:

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

Why are required documents not attached to the petition, including documents which it appears could have been easily obtained from the annuity holder, which has specially appeared in this matter?  What efforts have been made to   obtain the annuity contract, qualified assignment, and settlement agreement?

Why is there no information submitted concerning prior petitions, one of which was evidently denied, and three of which were dismissed?   

What is the nature and current state of Ms. Barba’s injuries? Are any future medical expenses anticipated?  Does the payee have medical insurance? 

Does Ms. Barba want to pursue a sale of structured payments with Berkshire Hathaway Life Insurance?

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

  DEPARTMENT D IS CONTINUING TO CONDUCT AND ENCOURAGE 

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