Judge Ralph C. Hofer, Case Number: 23GDCP00201, Date: 2023-12-22 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:

(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 settlement agreement. The supplemental documentation includes an Order Approving Compromise of Disputed Claim of a minor, in lieu of the Settlement Agreement. [Notice of Supplemental Filings, Ex. G]. The Order shows the settlement was entered in 2009, and was with defendant Nickelodeon Studios, Inc. [Id.]. The declaration of the payee does not explain why the payee is not able to provide a copy of the underlying settlement agreement, or what efforts have been made to obtain a copy of the agreement. This situation makes it difficult for the court to conclude that it is satisfied that reasonable efforts to locate and secure a copy of the document have been made, including making an inquiry with the payee. This issue will be discussed at the hearing, and, depending upon the further information provided, the court may find that reasonable efforts have been made to locate and secure copies of the missing documents, or may require further showing.

“(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 payee Brandon Aumont’s Declaration provides a summary of the previous transaction, without documentation. [Aumont Decl., para. 8]. The Declaration indicates that the prior transfer was filed in Los Angeles Superior Court in 2018, with payee selling monthly payments of $600 beginning April 3, 2018, continuing through July 3, 2026, increasing 2.5% each October in exchange for $34,729.00. [Aumont Decl., para. 8]. The funds were used to purchase a vehicle, pay off debt and help payee’s parents with medical care and maintenance on their home. [Aumont Decl., para. 8].

The petition seeks approval of a transfer of certain structured settlement payment rights held by transferor Brandon Aumont pursuant to a structured settlement entered into intended as compensation for a personal injury claim which occurred in 2009 when Aumont was a victim of emotional abuse. [Aumont Decl., para. 4]. Aumont indicates that as a result of the incident, he did not sustain any physical injuries, and does not have any ongoing medical issues that require the future annuity payments. [Aumont Decl., para. 4].

Aumont is 32 years old, single, with no minor children or dependents. [Aumont Decl., para. 2; Petition, Ex. D]. Aumont is not now, nor has he ever been, under any court order to pay child or spousal support. [Aumont Decl., para. 2].

Aumont currently works for Pond Works, where he installs custom Koi Ponds, and earns about $100 per day. [Aumont Decl., para. 3]. Aumont indicates that he is also currently receiving monthly annuity payments in the amount of $1,657.26 with a 2.5 % annual increase each October. Once this transfer is approved, he will still receive those current monthly payments until July 3, 2026. On August 3, 2026, when the assigned payments begin, the remaining monthly annuity payment will be $ 1,472.21 with a 2.5% annual increase each October. On October 3, 2034, the monthly annuity payments will become life contingent and will go up to $3,087.45 with a 2.5% annual increase each October, and Aumont will receive those payments for as long as he is alive. [Aumont Decl., para. 3].

Aumont has made one prior attempt to transfer a portion of his payment rights. [Aumont Decl., para. 8]. This petition indicates that the transfer was completed, that Aumont sold monthly payments of $600 beginning April 3, 2018, continuing through July 3, 2026, increasing 2.5% each October in exchange for $34,729.00. [Aumont Decl., para. 8]. The funds were used to purchase a vehicle, pay off debt and help payee’s parents with medical care and maintenance on their home. [Aumont Decl., para. 8].

The current proposed transaction is with M_W_84, LLC. Aumont is transferring 98 monthly payments in the amount of $1,000.00 commencing 8/3/2026 continuing through and including 9/3/2034, increasing annually at 2.5% each October.

The total dollar amount of payments being sold is $109,978.40, with a discounted present value of $76,636.63. The net amount to be paid to Aumont is $51,000.00, with no deduction for expenses. The effective equivalent interest rate being paid on the transaction is 12.16% per year.

Aumont states that he believes the amount is fair and reasonable after having sought many other offers from different companies, with petitioner’s offer being the best available, and that the interest rate is fair. [Aumont Decl. para. 6].

The funds will be used to get Aumont’s license reinstated, purchase a vehicle so that he can start a small business as a mobile mechanic and mobile car detailer, so that he can increase his income. [Aumont Decl., para. 7]. He also plans to use a portion of the funds to pay first and last month’s rent and the security deposit for his own apartment so that he can leave his parents’ house. Any remaining funds will be used toward restoring two classic cars he inherited/already owns, a 1960 Volkswagen and a 1963 Pontiac Bonneville. [Aumon Decl., para. 7].

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 petition and Aumont’s declaration indicate that payee was the victim of emotional abuse in 2009, and received a significant personal injury settlement, but the declaration seems to indicate that no physical injuries were suffered, so no medical care is needed. The absence of continuing physical injury does not eliminate the possibility that payee will require emotional and/or mental health treatment in the future, for which it would appear the settlement was intended to provide. This issue will be discussed at the hearing.

It deal does not appear that the transfer will exhaust future payments from the annuity, and the Aumont Declaration sufficiently explains that the payments which payee is now receiving will not practically speaking suffer a substantial decrease in the future due to the transfer, with the difference for an eight year period being approximately $185 per month. [Aumont Decl., para. 3].

This is, as usual, not a particularly favorable transaction for the transferor/payee, but it appears that Aumont is earning an income, will continue to receive annuity payments, has no dependents, and the funds from this transaction will be used to pursue career goals which will provide long-term benefits.

“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 proof of service of the notice of hearing, petition and supplemental filings does not show service of the documents giving notice to any addresses contained in the annuity document. The proof of service shows service by electronic service only at an address not included on the annuity papers.

Insurance Code §10139.5 provides, in pertinent part, that “[a] direct or indirect transfer of structured settlement payment rights is not effective…unless the transfer has been approved in advance in a final court order based on express written findings by the court that: (3) The transferee has complied with the notification requirements pursuant to paragraph (2) of subdivision (f)…”

“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…

The notice shall include a copy of the petition, along with copies of other specified documents and information, including, under Insurance Code § 10139.5(f)(2)(I), “Proof of service showing compliance with the notification requirements of this section.”

It is not clear that there has been compliance with this section, and it is also not clear that service is appropriately effected by electronic service alone. It will be discussed at the hearing how petitioner determined the appropriate service address for the interested parties, and whether service be electronic means provides the appropriate notice to the annuity holder.

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 service by electronic service effective service? Is petitioner aware of any objection?

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