TENTATIVE RULING

Calendar:    4

Date:               3/10/2023

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:

This matter was originally heard on January 27, 2023.  

The court issued a tentative ruling via posting on LACourt.org website, which was to address a series of questions to the petitioner and transferor/payee at the hearing, and to deny the petition or grant the petition subject to receiving a declaration under oath from the transferor for needed information, or pursuant to live testimony under oath at the hearing. 

At the hearing, petitioner’s counsel informed the court that the payee was in the hospital.  At the request of petitioner’s counsel, the matter was continued to March 10, 2023, and petitioner’s counsel was ordered to submit a declaration and proposed order for the next court date.  

Petitioner has filed and served a Notice of Continuance of the hearing date, and a Notice of Declaration of Zeferina Rodriguez and Statutorily Executed Transfer Agreement.   

Procedural

As noted above, the court had previously been concerned that the file did not include a declaration of the payee/transferor Zeferina Rodriguez providing critical information in this matter.  A Declaration Zeferina Rodriguez has now been submitted and served. 

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 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 the payee/transferor 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 Rodriguez Declaration indicates that in 2015, Rodriguez’s daughter was hit by a city vehicle and passed away, and the payments under the structured settlement are compensation for her death. 

[Rodriguez Decl., para. 3]. 

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

The Rodriguez Declaration now indicates that Rodriguez is 62 years old, married, and has one dependent, Juan Rodriguez, who is 65 years old.  [Rodriguez Decl., para. 4].  The attachment to the Petition indicating it is a list of “Payee’s dependents,” lists “Juan Rodriguez (65 years old).” [Petition, Ex. C].  The court will inquire if this person is Rodriguez’s husband, if he is in fact a dependent, and whether there are any other dependents.   Rodriguez indicates that she 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.  [Rodriguez Decl., para. 4].  Her spouse is retired and receives $380 per month in social security benefits.  [Rodriguez Decl., para. 4].  Rodriguez is in the process of building an additional room in her home to use as an additional source of income and expect to earn an additional $2,500 per month from renting a second space.  [Rodriguez Decl., para. 4].  Rodriguez has no court ordered child support or maintenance obligations. [Rodriguez Decl., para. 5]. 

Rodriguez has made two prior attempt to transfer a portion of her payment rights.  [Rodriguez Decl., para. 8; 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 at the hearing 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 Decl., Ex. B].   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.  

Rodriguez indicates that with the funds she will pay off a personal loan, credit card debt and medical bills.  She intends to allocate $8,000 to pay off a personal loan, $12,500 to pay off two credit cards and the remainder to pay medical bills from a recent surgery.  [Rodriguez Decl., para. 6].  She would like to clear these debts as soon as possible to avoid accruing further interest, and feels it is in her best interest to enter into this transaction to have the financial means to provide for the foregoing. [Rodriguez Decl., para. 6].   

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. Rodriguez acknowledges in her declaration, “After completing this transfer, I will have no remaining payments on my annuity.”   [Rodriguez Decl., para. 4].   She also indicates that she does not rely on the portion of structured settlement payments she is assigning for her day-to-day living expenses.  [Rodriguez Decl., para. 4].  

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.   

The payee has now provided a declaration on personal knowledge setting forth sources of income, which it appears the payee believes are sufficient to cover expenses.  

The court expects at the hearing to receive information concerning how the transaction is expected to account for the fact that the first two payments being transferred, due January 15, 2023, and February 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 payee has now provided information concerning why the transfer is sought now, to avoid interest accumulating on loan and other debt.  

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 non-assignment 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 non-assignment 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 received and reviewed the Declaration of Zeferina Rodriguez filed and served on March 1, 2023. 

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? 

Was the underlying settlement intended to provide future support?

How will the parties address the circumstance that the first and second payments subject to transfer have 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 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.