Judge Ralph C. Hofer, Case Number: 23GDCP00155, Date: 2023-09-01 Tentative Ruling

(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:

“(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 provides a summary of the previous transactions, without documentation. [Grace Decl., para. 7]. The Grace Declaration describes the transaction attempts, made from 2013 through 2022, of which four were approved, and one was ultimately dismissed. The Grace Declaration indicates that in the latest transaction, completed in 2022, the funds received, $29,370.00, were used to pay off credit card debt and for vehicle maintenance. [Grace Decl., para. 7]. The Contreras Declaration confirms that Contreras has previously assigned a portion of her structured settlement payment rights, with the last transfer completed in 2022. [Serrano Decl., para. 7]. The Contreras Declaration does not confirm what the latest transfer funds were used for, and it is not explained by either declarant for what plaintiff used the funds from the other approved transfers. The court finds that the summary and declarations satisfy the statutory requirements.

The petition seeks approval of a transfer of certain structured settlement payment rights held by transferor Amber Contreras pursuant to a structured settlement entered into intended as compensation for a personal injury claim, as, when Contreras was sixteen years old, she was in a car accident and suffered third degree burns to her right arm from her hand to elbow and on the right side of her face. [Contreras Decl., para. 3]. Contreras indicates that there are no longer any reoccurring medical problems related to the original injury and so no continuing need to provide for future medical expenses. [Contreras Decl., para. 3]. Contreras also states that if any unexpected medical attention related to the accident injuries are needed, she has medical insurance through the government. [Contreras Decl., para. 3].

Contreras is 28 years old, single, with two dependents, ages nine and two, who reside with her. [Contreras Decl., para. 4]. Contreras is currently unemployed but actively looking for work. She last worked as a health caregiver, and currently receives $1,000 per month in government benefits/food stamps, and also receives $200 per month from child support payments. [Contreras Decl., para. 4]. She does not rely on the structured settlement payments she is proposing to assign for her day-to-day living expenses. [Contreras Decl., para. 4]. Contreras has no court ordered child support or maintenance obligations. [Contreras Decl., para. 5].

Contreras has previously assigned a portion of her payment rights [Contreras Decl., para. 7]. This petition indicates that the first transaction, with Aikman Structured Finance, LLC, was ultimately approved in 2013, with payee selling monthly payments of $273.00 each beginning on August 14, 2014 through and including July 14, 2029. [Grace Decl., para. 7]. Contreras received $24,000.00 from this transaction. [Id.] It is not specified for what Contreras used the funds.

The second transaction, with J.G. Wentworth, was ultimately approved in 2015, with Contreras selling one lump sum payment of $10,000.00 due August 14, 2019 and one lump sum payment of $15,000.00 due August 14, 2024. Payee received $9,000.00 from this transaction. [Grace Decl., para. 7]. It is not specified how Contreras used the funds.

The fourth transaction, with Palantir Packaging, LLC, was ultimately approved in 2016, with Contreras selling payments of $510.72 each beginning on August 14, 2020 through and including July 14, 2029, with a 3% increase each August; monthly payments of $1,091.71 each beginning August 14, 2019 through and including July 14, 2042, with a 3% increase each August; and one lump sum payment of $20,000.00 due August 14, 2029. [Grace Decl., para. 7]. Payee received $61,000.00 from this transaction. [Id.] It is not specified how Contreras used the funds.

The fifth and latest transaction was with In-Trepid709, LLC, and was ultimately approved in 2022, with Contreras selling monthly life contingent payments of $1,603.21 each beginning on August 14, 2042 through and including July 14, 2062 with 3% increase each August. [Grace Decl., para. 7]. Contreras received $29,370.00 from this transaction and used the funds to pay off credit card debt and vehicle maintenance. [Id.]

The current proposed transaction is with Merope-43, LLC, to be assigned to Apollo Mathers, LLC. Contreras is transferring 152 monthly life-contingent payments of $2,895.58 beginning August 14, 2062 through and including March 14, 2075 with a 3% annual increase each August.

The total dollar amount of payments being sold is $526,157.12, with a discounted present value of $70,961.76. The net amount to be paid to Contreras is $3,250, with no deduction for expenses. The effective equivalent interest rate being paid on the transaction is 11.92% per year.

Contreras states that the funds will be used to pay off debts. She would like to allocate $2,000 to pay off two credit card balances and $600 to pay off a personal loan, so that she can eliminate these monthly obligations to avoid further interest while looking for full-time work. [Contreras Decl., para. 7]. Contreras believes that this result would also allow her other monthly expenses and necessities to be affordable on her current income. [Id]. Contreras 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 payments she is assigning are due more than 39 years from now, she does not rely on them for her current well-being. [Contreras Decl., paras. 7, 8].

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:

(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.

(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:

(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.

(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.

The highlighted factors are of concern here. The main concern is that the injuries described by payee appear to include serious burn injuries, and it is not entirely clear that such injuries would have completely resolved or might not require some future treatment. However, the injuries evidently were sustained when Contreras was sixteen years old, twelve years ago. This issue will be discussed at the hearing. The payee indicates that she currently has medical insurance.

A review of the Annuity Certificate payment schedule and the payments previously transferred suggest that the current transfer, transferring payments due through 2075, would exhaust the payments which Contreras could reasonably expect to transfer in the future, and the court will inquire whether she is aware of that circumstance.

This deal is, as usual, not a particularly favorable transaction for the transferor. This issue appears of concern specifically with respect to the dependents. However, the court recognizes that the family may be facing a hardship situation, is now in a position where the monthly annuity payments have been assigned, and the payments now at issue are to be made so far in the future, and life-contingent, and could be used now to enable the pursuit of an employment situation which could provide long-term benefits. The court will require further information on what was done with the funds received from previous transfers, including funds received of $24,000 in 2013, $9,000 in 2015, and $61,000 in 2016.

“Assignment of Certificate: This Certificate may not be assigned by the Certificate Holder Without our consent. The Certificate Holder shall have sole and exclusive ownership rights in this Certificate. No other person shall have any right to anticipate, sell or absolutely assign (by any means, regardless of form) payments under this Certificate and any attempted assignment will be void at the outset.”

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.

The problem here is that the Annuity Certificate identifies an address of the annuity issuer, Prudential Insurance Company of America, at an address in Newark, New Jersey. [Grace Decl., Ex. A]. The proof of service shows service of the petition and supporting papers on Prudential at an address in Reading, Pennsylvania. It will be discussed at the hearing how petitioner determined the appropriate service address for the interested parties, whether proper notice has been given, and whether the petitioner expects any objection.

For what purposes were the previous transferred payment right proceeds used? The Court notes there is no information provided concerning the funds previously received of $24,000 in 2013, $9,000 in 2015, and $61,000 in 2016.

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