Judge Ralph C. Hofer, Case 22GDCP00207 2023-01-27 Tentative Ruling

Judge: Ralph C. Hofer, Case: 22GDCP00207, Date: 2023-01-27 Tentative Ruling

Case Number: 22GDCP00207 Hearing Date: January 27, 2023 Dept: D

TENTATIVE RULING

Calendar: 2

Date: 1/27/2023

Case No: 22 GDCP00207

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 Zeferina Rodriguez, as transferor, and petitioner Merope-43, LLC, as transferee.

ANALYSIS:

Procedural

No Declaration of Payee/Transferor

The file does not include a declaration of the payee/transferor Zeferina Rodriguez 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, there is no copy of the contract or qualified assignment attached to the moving papers, so it is not clear that the qualified assignment is not one which expressly does not permit assignment, as was customary at the time it was issued.

The petition in fact indicates that petitioner is informed and believes that the underlying structured settlement that established the annuity at issue “contained language that restricted/and or prohibited the right and/or power to assign the Assigned Payments in question.” [Petition, para. 7]. If the annuity contract does not permit assignment, in order to avoid enforcement of this term, any information in support of the application is required to be served in advance on the interested parties. See 321 Henderson Receivables Origination LLC v. Sioteco (2009) 173 Cal. App.4th 1059, 1075-1076, holding that an anti-assignment provision does not bar a transfer, “where no interested parties object to the transfer of structured settlement payment rights.” If there is no such satisfactory declaration on file which has been served on the interested parties, the court will deny the petition.

Copies of Documents

Under Insurance Code § 10139.5:

“ (f)

(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).

(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 letter dated April 13, 2018, describing the annuity benefits/payments due. [Grace Decl., para. 1, Ex. A]. There is no copy of the qualified assignment agreement, and no copy of the settlement agreement. Accordingly, there is no copy of any of the required documents before the court.

The Grace Declaration indicates that Merope-43, LLC has contacted the payee, annuity issuer, and requested court records but has been unable to locate these documents. [Grace 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 Rodriguez has searched for but been unable to locate a copy of the Settlement Agreement. [Ex. B, Declaration in Lieu, para. 3]. The court finds that reasonable efforts have been made to locate and secure copies of the documents.

In addition, the petition fails to include copies of the records of two previous transfer attempts.

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 Grace Declaration, without personal knowledge or reference to documentation, provides a summary of the previous transactions. [Grace Decl., para. 7]. The court finds that the summary satisfies the statutory requirements.

Substantive

The petition seeks approval of a transfer of certain structured settlement payment rights held by transferor Zeferina Rodriguez pursuant to a structured settlement entered into as a result of a wrongful death claim. The Declaration in Lieu of Settlement indicates that payee lost her son in 2015 when he was struck by a city vehicle and a lawsuit was filed for damages against the city. [Rodriguez Decl. in Lieu, para. 2].

It is not clear whether Rodriguez was dependent on her son for support, or whether the funds were intended to cover Rodriguez’s living expenses.

The Grace Declaration represents, with no personal knowledge established, that Rodriguez is 62 years old, married to Juan Rodriguez, and has no minor children or other dependents. [Grace Decl., paras. 2-4]. However, the attachment to the Petition indicating it is a list of “Payee’s dependents,” lists “Juan Rodriguez (65 years old).” [Petition, Ex. C]. This discrepancy will be addressed at the hearing. The Grace Declaration indicates that Rodriguez self-employed and sells medicinal herbs and supplements earning $5,000 to $8,000 per month, and also has rental property from which she earns $1,300 per month. [Grace Decl., para. 5]. Her spouse is retired and receives $380 per month in social security income. [Grace Decl., para. 5]. Rodriguez has no court ordered child support or maintenance obligations. [Grace Decl., para. 6].

Rodriguez has made two prior attempt to transfer a portion of her payment rights. [Grace Decl., para. 7]. This petition indicates that the first transaction, with Estate Fund, LLC, is currently pending in Los Angeles Superior Court. [Grace Decl., para. 7]. The court records on that matter, LASC Case No. 22 STCP02751 show that the matter was dismissed without prejudice on December 15, 2022, pursuant to a Request for Dismissal filed by petitioner in that case.

The second petition, by petitioner Tanner 221, LLC, was heard in this Department, LASC Case No. 22 GDCP00127, on December 9, 2022, and the petition was granted. The court will require information concerning whether the recently approved petition involves the same payments which are at issue in this matter.

The transaction before this court is with Merope-43, LLC. [Petition, Ex. A]. Rodriguez is transferring 153 monthly payments of $400 beginning January 15, 2023 through and including September 15, 2035.

The total dollar amount of payments being sold is $61,200.00, with a discounted present value of $44,660.35. The net amount to be paid to Rodriguez is $24,006.67, with no deduction for expenses. The effective equivalent interest rate being paid on the transaction is 19.44% per year.

There is no declaration of the payee, other than in connection with the settlement agreement, so it is not clear what Rodriguez intends to do with the funds, or whether she is facing a hardship situation.

It would appear that the transfer would transfer the last remaining annuity payments due to Rodriguez, as the letter submitted from Pacific Life & Annuity Services, Inc. indicates that annuity payments due are $1,608.44 payable monthly, guaranteed for 15 years with the last guaranteed payment on September 15, 2035. [Grace Decl., Ex. A]. The previous transfer approved on December 9, 2022 left payments of $400 per month, which payments are proposed to be transferred here. This outcome will leave Rodriguez with no further opportunity to transfer or receive annuity payments. The court will inquire whether Rodriguez is aware that this will transfer all of her remaining future payments.

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 the funds were intended to provide for payee’s living expenses, or why the payments, due to payee as an adult, were structured in this fashion. As noted above, it is also not clear that payee understands that this transaction will be transfer all remaining future payments.

It is also of concern that the payee has not provided a declaration on personal knowledge setting forth sources of income. The court will inquire if the Grace declaration correctly reports that Rodriguez is self-employed and sells medicinal herbs and supplements earning $5,000 to $8,000 per month, and also has rental property from which she earns $1,300 per month, and that her spouse is retired and receives $380 per month in social security income. [Grace Decl., para. 5]. It will also be discussed if current income is sufficient to cover expenses. The court will also expect information concerning how the transaction is expected to account for the fact that the first payment being transferred, due January 15, 2023, will have already become due by the date of the hearing.

This offer is not a particularly favorable transaction for the transferor, as the monthly payments would be due in the full amount beginning immediately, but the court will receive evidence concerning the intended purpose of the annuity, and the reasons for seeking the transfer now.

The court does not have an actual copy of the annuity, only a letter indicating the payments due to Rodriguez as payee under the plan purchased in the annuity. [Grace Decl., Ex. A].

This 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.”

[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 proof of service shows that the annuity holder has been served with the moving papers at an address which is not included on the letter submitted to the court from the annuity holder. [See Grace Decl., Ex. A; Notice of Proof of Service]. As noted above, the Petition actually alleges that the formal agreement includes a non-assignment clause. The court will inquire at the hearing how the appropriate mailing address was determined, and whether there is any expectation that there will be objection to the transfer.

RULING:

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

What efforts made to obtain annuity contract, qualified assignment, 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 Grace Declaration correct that transferor is 62 years old, married, with no dependents, and is self-employed earning $5,000 to $8,000 per month, in addition to income from a rental property of $1,300 per month, with her spouse receiving $380 per month in social security income?

Was the underlying settlement intended to provide future support?

Will the transfer dispose of all future payments, as appears to be the case, and is the transferor aware that she will have no further future payments?

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

How will the parties address the circumstance that the first payment subject to transfer has already become due?

Is petitioner aware of any objection to the transfer on the part of the annuity holder? How did petitioner locate the service address for the annuity owner Pacific Life and Annuity Services, Inc.?

Petition for Approval for Transfer of Structured Settlement Payment Rights is DENIED/ GRANTED, subject to receiving a declaration under oath from the transferor for the needed information, or pursuant to live testimony under oath at the hearing.

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.