TENTATIVE RULING

Calendar:    7

Date:               3/10/2023

Case No: 23 GDCP00015

Case Name: Merope-43 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 Darlene Toloza, as payee, and Merope-43 LLC, as transferee. 

ANALYSIS:

Procedural

Copies of Documents

Under Insurance Code § 10139.5:

“ (f) 

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

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

    (A) A copy of the transferee's current petition and any other prior petition, whether approved or withdrawn, that was filed with the court in accordance with paragraph (6) of subdivision (c).

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

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

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

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

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

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

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

Here, the petition fails to include a copy of the annuity contract, and also fails to attach a copy of the qualified assignment agreement.  The Settlement Agreement and Release of All Claims is submitted, which includes as an Exhibit a schedule of payments to be made to the payee, Darlene Toloza.  [Malate Decl., Ex. A, Settlement Agreement, Ex. B].  The Malate Declaration indicates that Merope-43 has contacted the payee, annuity issuer, and requested court records but has been unable to locate these documents.   [Malate Decl., para. 1 (b)].  The court finds that reasonable efforts have been made to locate and secure copies of the missing documents.     

Substantive

The petition seeks approval of a transfer of certain structured settlement payment rights held by transferor Darlene Toloza pursuant to a structured settlement entered into on behalf of Toloza by her GAL, intended as compensation for a wrongful death claim, arising from an incident in 2012 when Toloza was a minor, and her father was killed by a police officer.  [Toloza Decl., para. 3; Malate Decl., Ex. A, Settlement Agreement, para. A].   

Toloza is 20 years old, single, and has one dependent, age 1 month, who resides with Toloza.  [Toloza Decl., para. 4].  Toloza currently works full-time for Jamba Juice and earns approximately $2,600 per month, and also receives $281 for food stamps and $500 per month from her annuity and does not rely on the structured settlement payments she is proposing to assign for her day-to-day living expenses.   [Toloza Decl., para. 4].  Toloza has no court ordered child support or maintenance obligations. [Para. 5]. 

Toloza has never previously assigned a portion of her structured settlement payment rights.  [Toloza Decl., para. 6].  

The proposed transaction is with Merope-43.  Toloza is transferring one lump payment of $40,218.22 due on May 15, 2032.

The total dollar amount of payments being sold is $40,218.22, with a discounted present value of $26,232.27.  The net amount to be paid to Toloza is $9,000, with no deduction for expenses. The effective equivalent interest rate being paid on the transaction is 17.45% per year.     

Toloza states that the funds will be used to put a down payment on a car, pay past due rent, and pay off a loan.  She intends to allocate $4,000 for a down payment on a vehicle, $2,000 to pay past due rent, and $1,200 to pay off a loan from Progressive Leasing, with any remaining funds to be set aside for unexpected miscellaneous expenses.  [Toloza Decl., para. 7].  Toloza indicates that she feels it is in her best interest to enter into this transaction so that she can have the financial means to provide for the foregoing, and also indicates that since the lump sum payment she is assigning is due more than nine years from now, she does not rely on it for her current wellbeing, and will continue to receive $500 per month from the annuity through April 2024, as well as a lump sum payment of $10,000 due May 2027 and a lump sum payment of $25,000 due May 2032.  [Toloza Decl., para. 8].  This assertion appears to be supported by the payment schedule attached to the Settlement Agreement.  [Malate Decl., Ex. A, Ex. B].  

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.  The funds being transferred are part of a lump sum payment of $65,218.22 which would be due in May 2032, and Toloza will continue to receive monthly payments of $500 through 2024, and receive further lump sum payments.  It does not appear that the funds sought to be transferred would otherwise be available or relied upon to fulfill the intended purpose of a wrongful death settlement to provide for the necessary living expenses of the payee.  It is not clear if there would be such future expenses anticipated to arise in 2032 which the settlement was structured to address. This issue will be discussed at the hearing. 

This deal is, as usual, not a particularly favorable transaction for the transferor, but it appears that payee’s living conditions may be stable, she is employed full time, and the funds will be used to obtain a vehicle and otherwise benefit the household and dependent.  

As noted above, petitioner has not submitted a copy of the annuity.   

This lack of the annuity contract can sometimes be an issue, as such annuities often include non-assignment 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 problem here is that without an annuity agreement, or any documentation concerning the annuity company, there is no address provided to permit the court to confirm from the petition and proof of service that the interested parties, specifically the annuity company, have received appropriate notice of the petition hearing to object.  No address is provided in the supporting declaration.  [See Malate Decl., para. 1(a)(ii)].  It will be discussed at the hearing how petitioner determined the appropriate service address for the interested parties.  

RULING:

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

What efforts made to obtain annuity contract, qualified assignment? 

Where is the Ms. Toloza living with her child, and is her income sufficient to cover the living expenses intended to be the subject of the structured settlement payments? 

How has the address of the annuity holder in the proof of service been confirmed so that it can be determined that all interested parties have notice of this hearing?  Is petitioner aware of any objection?

 

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.