TENTATIVE RULING

Calendar:    1

Date:               1/27/2023

Case No: 22 GDCP00206

Case Name: Merope-43, LLC v. Certain Statutory Interested Parties, etc.

PETITION FOR APPROVAL FOR TRANSFER OF STRUCTURED SETTLEMENT PAYMENT RIGHTS

Moving Party:               Petitioner Merope-43, LLC     

Responding Party:    No Opposition

RELIEF REQUESTED:

Approve transfer of structured settlement payment rights by and between Kyla Johnson, as payee, and petitioner Merope-43, LLC 

ANALYSIS:

Procedural

No Declaration of Payee/Transferor

The file does not include a declaration of the payee/transferor Kyla Johnson providing critical information in this matter. 

Under Insurance Code § 10139.5:

“(c) Every petition for approval of a transfer of structured settlement payment rights, except as provided in subdivision (d), shall include, to the extent known after the transferee has made reasonable inquiry with the payee, all of the following:

 (1) The payee's name, address, and age.

 (2) The payee's marital status, and, if married or separated, the name of the payee's spouse.

 (3) The names, ages, and place or places of residence of the payee's minor children or other dependents, if any.

 (4) The amounts and sources of the payee's monthly income and financial resources and, if presently married, the amounts and sources of the monthly income and financial resources of the payee's spouse.

 (5) Whether the payee is currently obligated under any child support or spousal support order, and, if so, the names, addresses, and telephone numbers of any individual, entity, or agency that is receiving child or spousal support from the payee under that order or that has jurisdiction over the order or the payments in question.”

Here, without the declaration, the court has no information from a person with personal knowledge concerning marital status, dependents, income, or support obligations.   In addition, without the declaration there is no information at all submitted concerning what the funds are to be used for, and other information the court needs to consider to approve the transfer, as discussed below.  

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:…”

(Emphasis added). 

Under Insurance Code 10139.5 (d):

“(d) With respect to the information required to be included in every petition for approval of a transfer of structured settlement payment rights pursuant to paragraphs (2), (3), (4), (5), and (6) of subdivision (c), that information shall be deemed to be included in the petition if it is provided at the scheduled hearing on the proposed transfer through oral testimony or documentary evidence filed with the court and made a part of the record consistent with the rules of evidence and procedure.”

Unless the payee appears at the hearing and offers oral testimony, the court cannot consider the petition.  The court prefers that the transferor provide a written declaration before the hearing, with the 20-day window required in the statute.  In addition, the contract attached to the motion indicates that payee, “may assign this contract.  Until you notify us in writing, no assignment will be effective against us.”  [Sanchez Decl., Ex. A, p. 5, “Assignment.”]  This admonition would suggest advance notice would be best be provided in the case of assignment. 

If there is no satisfactory declaration on file, the court will deny the petition.

Copies of Documents Regarding Previous Transfers

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).

(Emphasis added). 

  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.”

The Sanchez Declaration indicates that payee has made two prior structured settlement transfers in 2022, but fails to submit documentation concerning those transfers.  

The Sanchez Declaration, without personal knowledge or reference to documentation, provides a summary of the previous transactions.  [Sanchez Decl., para. 7].  The court finds that this declaration of counsel is sufficient to satisfy the statutory requirements. 

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 by Johnson’s guardian ad litem on her behalf in connection with a complaint alleging Johnson was injured in an accident arising out of negligent acts or omissions of unidentified defendants.  [Sanchez Decl., Ex. C]. 

The settlement agreement indicates that the previous lawsuit was for injuries suffered by claimant/payee directly in an accident occurring in 1999, when payee would have been approximately one year old.  It is not clear what the nature of the injuries was, or if payee continues to suffer from such injuries, or requires or anticipates requiring further medical attention for the injuries. 

The Sanchez Declaration represents, with no personal knowledge established, that Kyla Johnson is 23 years old, single, with one dependent, Lyla Elizabeth Johnson, age 3, residing with payee.  [Sanchez Decl., paras. 2-4].  Johnson is currently unemployed and receives $1,500 per month from her annuity.  [Sanchez Decl., para. 5].   Johnson has no court ordered child support or maintenance obligations. [Sanchez Decl., para. 6]. 

Johnson has made two prior attempts to transfer a portion of her payment rights.  [Sanchez Decl., para. 7].  Both transactions were approved.   [Sanchez Decl., para. 7].  Johnson used the proceeds from the two previously approved transactions for her daughter’s expenses, home furniture and personal items, to purchase a hybrid vehicle and to pay insurance expenses.  [Id.].  

The current transaction is with Merope-43, LLC.  Johnson is transferring 210 monthly payments of $300 beginning January 15, 2030 through June 15, 2047.   

The total dollar amount of payments being sold is $63,000.00, with a discounted present value of $28,745.76.  The net amount to be paid to Johnson is $7,500.00, with no deduction for expenses.  The effective equivalent interest rate is 16.5% per year.   

There is no declaration of the payee, so it is not clear what Johnson   intends to do with the funds, or whether she is facing a hardship situation. 

It would appear that the transfer could dispose of at least a portion of the $1,500 per month payee relies upon for income beginning in 2030. 

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.”

Specifically, it appears that the original settlement was intended to provide compensation for personal injuries, and funds to address future medical needs and expenses.  It is not clear what was the nature of the injuries, what the current status of those injuries are, and whether there is an anticipated need for further medical treatment.  It is also not clear if the transferor has medical insurance. 

It is also of concern that transferor has a dependent and it is not clear what the funds are intended to cover, and whether such transfer would be in the best interest of the dependent.   It also appears that payee depends on the monthly payments for daily living expenses, and it is not clear that there is an understanding that those monthly payments will be reduced in the future. 

This transaction is an unfavorable transaction for the transferor, but the court will receive evidence concerning the intended purpose of the settlement funds, and any relevant information concerning the transferor’s medical condition, and whether transferor or the dependent are able to cover expenses.  

The copy of the annuity contract submitted with the moving papers permits assignment, indicating that payee, “may assign this contract.  Until you notify us in writing, no assignment will be effective against us.”  [Sanchez Decl., Ex. A, p. 5, “Assignment.”] 

The proof of service shows that service of the moving documents was made on Talcott Resolution Life Insurance Company, when the contract submitted indicates the party committed to making income payments under the annuity is Hartford Life Insurance Company, at a different address.   It is not clear how the parties determined the appropriate service address for the annuity owner. This issue will be discussed that the hearing.  

RULING:

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

What efforts made to obtain copies of documents in connection with previous transactions? 

Why was no timely declaration of the transferor submitted in support of the petition?

Are the representations in the Sanchez Declaration correct that transferor is 23 years old, single, with one minor dependent, three years of age?  

What is the current status of transferor’s injuries for which the settlement was intended to compensate?  Does transferor need the funds from the annuity to address current and future medical expenses with respect to those injuries?  Does the transferor and her dependent have medical insurance? 

What are all transferor’s sources of income?  How will transfer effect ability to cover expenses?

What does transferor intend to do with the funds received from the current transfer?

Is petitioner aware of any objection to the transfer on the part of the annuity holder?  Why was the annuity holder Hartford Life Insurance Company not included on the proof of service, with the moving documents instead being served on Talcott Resolution Life Insurance Company? 

Amended Petition for Approval for Transfer of Structured Settlement Payment Rights is GRANTED, subject to receiving a declaration from the transferor regarding her financial and medical status or providing such information by testimony under oath at the hearing.

The Court notes the filing of a Notice of Declaration of Kyla Johnson on January 24, 2023, just three court days to the hearing, and after the Court had already prepared the tentative ruling without the benefit of this document.  This late filing has caused great inconvenience to the Court.  The Court in this case reluctantly has considered the declaration.  

The declaration of the payee now explains that the original settlement was intended as compensation for a personal injury claim which arose when Johnson’s mother was in a car accident while pregnant with Johnson, which resulted in Johnson’s premature birth and a fractured skull.  [Johnson Decl., para.  3].  Johnson indicates that there are no longer any recurring medical problems related to the original injury and no continuing need to provide for future medical expenses.  [Johnson Decl., para. 3].  

Johnson indicates that she is 23 years old, with one dependent, age 2, who resides with her.  [Johnson Decl., para. 4].  She is currently not working and going to school at Citrus College studying music and sound engineering, and receives $1,300 per month from her annuity, and will continue to receive payments through June of 2024, and does not rely on the structured settlement payments she is proposing to assign for her day-to-day living expenses.   [Johnson Decl., para. 4]. 

Johnson does not have any court-ordered child support or maintenance obligations.  [Johnson Decl., para. 5].

Johnson intends to use the funds ($7,500) for dental work and school tuition fees.  She intends to allocate approximately $4,000 for dental work and braces, and the remainder of the funds will be used to cover school tuition and out of pocket expenses.  [Johnson Decl., para. 7].   

The Court will require information at the hearing concerning the matters set forth in the original tentative ruling which are not addressed by the declaration, including what was done with the proceeds of the previous transfer (there were two) which was not used to purchase a vehicle, efforts to obtain documents, whether such transfer would be in the best interest of the dependent, whether Johnson and her dependent have medical insurance, whether without the future payments being assigned Johnson will be able to cover expenses, how the parties determined the appropriate address at which to provide notice to the annuity holder, and whether there is any expectation that there would be objection to this transfer.   

There being no objection, the Petition 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.