Judge Ralph C. Hofer, Case 23GDCP00051 2023-04-28 Tentative Ruling

Judge: Ralph C. Hofer, Case: 23GDCP00051, Date: 2023-04-28 Tentative Ruling

Case Number: 23GDCP00051 Hearing Date: April 28, 2023 Dept: D

TENTATIVE RULING

Calendar: 4

Date: 4/28/2023

Case No: 23 GDCP00051

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 Kyla Johnson, as payee, and Merope-43 LLC, as transferee.

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 the nature of the settlement and injuries, whether the settlement funds are still needed to address personal injuries, what the funds from the transfer 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.

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 copies of the records of three 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 Sanchez Declaration provides a summary of the previous transactions, without personal knowledge or documentation. [Sanchez Decl., para. 7]. The Sanchez Declaration indicates that previous transfers have been made since 2022, with the last transfer completed in 2023 and the funds from the transfers used for payee’s daughter’s expenses, home furniture, and personal items, to purchase a vehicle and pay insurance expenses, and, most recently, for dental work, school tuition and out of pocket expenses. [Sanchez Decl., para. 7]. Since there is no declaration from the payee, this information is not confirmed by a witness with personal knowledge. The court may find that the summary included in the Sanchez Declaration satisfies the statutory requirements or may require that further documentation be submitted.

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 by Johnson’s guardian at litem, which was evidently intended as compensation for a personal injury claim, as, in June 1999, Johnson was injured in an accident occurring in Los Angeles, which injuries were alleged to arisen out of negligent acts or omissions of defendants, whose names have been redacted from the Settlement Agreement submitted with the petition. [See Sanchez Decl., Ex. C]. There has been no explanation why this redaction is appropriate, and no order obtained for a sealing order.

In any case, it is not clear what injuries were suffered, the severity of those injuries, or whether such injuries have since been treated and resolved or persist. This deficiency is a clear obstacle created by the failure of the parties to submit a timely declaration of the payee, and will be discussed at the hearing.

The Sanchez Declaration represents, with no personal knowledge established, that Johnson is 23 years old, single, and has one minor child, age three, residing with Johnson. [Sanchez Decl., paras. 2-4]. The Sanchez Declaration indicates that 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 three 2prior attempt to transfer a portion of her payment rights, all of which were approved. [Sanchez Decl., para. 7]. The Sanchez Declaration indicates that in the 2022 transaction with Odyssea-Abe 83, LLC, Johnson transferred 294 monthly payments of $200 beginning January 15, 2023 through and including June 15, 2047, and used the funds of $10,000 for her daughter’s expenses, home furniture and personal items. [Sanchez Decl., para. 7].

In the second transaction, in 2022, with Merope-43, LLC, Johnson transferred 270 monthly payments of $500 beginning January 15, 2025 through and including June 15, 2047, and used the funds of $30,523.39 to purchase a vehicle and pay insurance expenses. [Sanchez Decl., para. 7].

In the third transaction, in 2023, with petitioner Merope-43, LLC, Johnson transferred 210 monthly payments of $300 beginning January 15, 2030 through and including June 15, 2047, and used the funds of $7,500 for dental work, school tuition and out of pocket expenses. [Sanchez Decl., para. 7].

The current proposed transaction is again with Merope-43. Johnson is transferring 12 monthly payments of $800 beginning January 15, 2024 through and including December 15, 1924, and 60 monthly payments of $300 beginning January 15, 2025 through and including December 15, 2029.

The total dollar amount of payments being sold is $27,600.00, with a discounted present value of $23,801.36. The net amount to be paid to Johnson is $9,619.06, with no deduction for expenses. The effective equivalent interest rate being paid on the transaction is 47.33% per year.

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

The annuity contract indicates that the payments due to Johnson are $1,500 monthly for life with 360 months guaranteed, beginning 07/15/2017. This would be thirty years guaranteed, through 2047. It appears Johnson has already transferred for most months $1,000 of the $1,500 monthly payments through 2047, and by this transaction proposes to transfer another $800 beginning January 15, 2024 through and including December 15, 1924, and monthly payments of $300 beginning January 15, 2025 through and including December 15, 2029. There would accordingly be no payments left through December 2024, and $200 per month left from January 2025 through December 2029, with $600 per month left from 2030 through 2047.

This result leaves a small portion of the payments for any future transfer, and more importantly, appears to exhaust payments altogether until January of 2025, and reduce payments to $200 and then $600 monthly in the future. This is of concern because the petition indicates that the $1,500 payments monthly from the annuity are Johnson’s only source of income, which will be eliminated or reduced by this transfer. This issue will be discussed at the hearing. The court will inquire whether Johnson is aware that this transfer will reduce her monthly income from the annuity and her opportunity to transfer payments in the future.

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 here is that it is nowhere specified what the personal injuries were which were intended to be compensated for by the settlement, and whether they would continue to be needed to compensate for such injuries, or provide for future medical expenses. This issue will be discussed at the hearing, and it will also be discussed whether payee has medical insurance. It is also not clear that payee understands that this will transfer a significant portion of any remaining future payments.

As noted above, it is a critical deficiency that the payee has not provided a declaration on personal knowledge setting forth such critical facts, as well as facts concerning sources of income. The court will inquire if the Sanchez Declaration correctly reports that Johnson’s only source of monthly income is the $1,500 annuity payments, which have dwindled, and will be reduced further by this transaction, to a period when they will not be available at all. [Sanchez Decl., para. 5]. It will also be discussed if current income is sufficient to cover expenses for Johnson and her dependent.

This deal is not a favorable transaction for the transferor, but the court will receive evidence concerning the intended purpose of the annuity, and the reasons for seeking the transfer now.

In addition, the annuity contract, while permitting assignment, provides that, “Until you notify us in writing, no assignment will be effective against us.” [Sanchez Decl., Ex. A, p. 5, “Assignment”].

The Contract submitted is with Hartford Life Insurance Company, under letterhead with an address in Simsbury, Connecticut. [Sanchez Decl., Ex. A]. The proof of service shows that the First Amended Petition was served on “Talcott Resolution Life Insurance Company,” at an address in Wilmington, Delaware. [POS, filed 04/04/2023].

It will be discussed if notice has been given to Hartford Life Insurance Company, as required in the Contract, or why service on Talcott Resolution Life Insurance Company is believed to provide the proper notice.

RULING:

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

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

What is the current state of Kyla Johnson’s injuries? Are any future medical expenses anticipated? Does the payee have medical insurance?

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

Are the representations in the Sanchez Declaration correct that transferor is 23, years old, single with one dependent, 3 years old, and with income of $1,500 from the annuity? There is some doubt about the income representation given the details regarding previous transactions transferring a portion of that monthly payment, and concern that the current transaction will temporarily eliminate and then significantly reduce such income source.

Is the transferor aware that future payments are being significantly reduced, and transferor will have limited opportunity to engage in future transfers?

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 are notices not being sent to Hartford Life Insurance Company, at its address in Simsbury, Connecticut, but to Talcott Resolution Life Insurance Company, at an address in Wilmington, Delaware?

First Amended Petition for Approval for Transfer of Structured Settlement Payment Rights is DENIED. The court has no declaration under oath from the transferor for the needed information. Also, the court will not accept an interest rate of 47.33% per year. Given the payee/transferor’s recent petitions granting larger transfer of payments and the payee/transferor’s apparent lack of income, the court is not inclined to grant this transfer.

DEPARTMENT D IS CONTINUING TO CONDUCT AND ENCOURAGE 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 appearances. However, ADVANCE REGISTRATION IS REQUIRED.

If no appearance is set up through LACourtConnect/Microsoft Teams, or no appearance is otherwise made, then the Court will assume the parties are submitting on the tentative.