Judge Ralph C. Hofer, Case Number: 24GDCP00001, Date: 2024-02-02 Tentative Ruling

Judge: Ralph C. Hofer, Case: 24GDCP00001, Date: 2024-02-02 Tentative Ruling

Case Number: 24GDCP00001 Hearing Date: February 2, 2024 Dept: D

TENTATIVE RULING

Calendar: 8

Date: 2/2/2024

Case No: 24 GDCP00001

Case Name: Apollo Mathers, LLC v. Certain Statutory Interested Parties, etc.

PETITION FOR APPROVAL FOR TRANSFER OF STRUCTURED SETTLEMENT PAYMENT RIGHTS

Moving Party: Petitioner Apollo Mathers, LLC

Responding Party: No Opposition

RELIEF REQUESTED:

Approve transfer of structured settlement payment rights by and between Brandon Aumont, as payee, and Apollo Mathers, 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(A) A copy of the transferee's current petition and any other prior petition, whether approved or withdrawn, that was filed with the court in accordance with paragraph (6) of subdivision (c).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).

(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 underlying Settlement Agreement. Petitioner has submitted a Declaration in Lieu of Settlement Agreement in which the payee, Brandon Aumont, indicates that he has diligently searched for the underlying Settlement Agreement, and searched his own records, and does not have a copy of the Settlement Agreement. [Grace Decl., Ex. C, Declaration in Lieu of Settlement Agreement, para. 3]. Aumont also indicates he has contacted the annuity issuer and structured settlement obligor but has not obtained a copy of the Settlement Agreement. [Decl. in Lieu, para. 3].

The declaration of the petitioner’s customer service representative indicates that Apollo Mathers is relying on the Declaration in Lieu of Settlement Agreement. [Grace Decl., para. (1) (a)]. There is no indication, as we usually see, that petitioner itself has contacted the payee, annuity issuer, and requested court records but has been unable to locate missing documents.

However, the payee does submit testimony concerning his efforts to locate a copy of the document. The court finds that reasonable efforts have been made to locate and secure a copy of the missing Settlement Agreement.

Previous Transfers

The petition also does not include copies of documents with respect to previous transfers or attempted transfers. 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).

(Emphasis added).

Paragraph (6) of subdivision (c) of Insurance Code § 10139.5 provides:

“(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:

“ (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 here in his own declaration describes three previous transfer attempts by case number, one of which was approved and two of which were dismissed without prejudice. [Aumont Decl., para. 6]. The description of the approved previous transfer sets forth the payments sold, the amount received, but does not explain the reasons for the transaction or for what the funds were used. [Aumont Decl., para. 6]. The court finds that the descriptions of the previous transfers and use of funds set forth in the Aumont Declaration are sufficient.

Substantive

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 on behalf of Aumont when he was a minor, intended as compensation for a personal injury claim pursued in a lawsuit filed by his family arising from a claim Aumont had been sexually abused, assaulted and suffered emotional injuries. [Declaration in Lieu, para. 2, Aumont Decl., para. 3]. Aumont indicates that there are no longer any reoccurring medical problems related to the original injury, and as such no continuing need to provide for future medical expenses. [Aumont Decl., para. 3].

Aumont is 32 years old, single, with no dependents. [Aumont Decl., para. 4].

Aumont currently works as a handy man and earns approximately $1,000 per month. [Aumont Decl., para. 4]. In addition, he indicates he has assured that even after the current annuity sale, he will continue to receive $1,600 per month from the structured settlement. Aumont indicates that he does not rely on the money from the structured settlement payments for day-to-day living expenses. [Aumont Decl., para. 4].

Aumont has no court ordered child support or maintenance obligations. [Para. 5].

Aumont previously assigned a portion of his structured settlement payment rights, a transaction in 2018, receiving $34,729.00. [Aumont Decl., para. 6]. It is not explained for what the funds were used. Aumont also indicates that two additional sales were contemplated, which were both ultimately dismissed without prejudice. [Aumont Decl., para. 6]. The court will inquire concerning the reason for the previous completed transfer, and what was done with the funds.

The proposed transaction is with Apollo Mathers. Aumont is transferring various monthly payments beginning January 3, 2024, through and including September 3, 2034. The court will inquire if there will be a modification to the agreement taking into account that the January 3, 2024 payment and possibly the February 3, 2024 payment will have already been paid to payee, in the sum of $57.26 each.

The total dollar amount of payments being sold is $116,904.78, with a discounted present value of $79,597.29. The net amount to be paid to Aumont is $59,000, with no deduction for expenses. The effective equivalent interest rate being paid on the transaction is 11.1% per year.

Aumont states that the funds will be used to go back to school. Aumont would like to enroll in Los Angeles Trade-Technical College, in the Advance Transportation and Manufacturing Program, a 36-unit major which will take approximately two years to complete. [Aumont Decl., para. 7]. Aumont indicates that upon graduation there are career opportunities available through the College, with typical starting salaries ranging from $17 to $30 per hour. [Aumont Decl., para. 7]. Aumont indicates the estimated annual cost of the program, including living expenses, is $26,026.00 per year. [Aumont Decl., para. 7]. Aumont would like to have this opportunity to build a career and believes that the transaction would be in his best interest. [Aumont Decl., para. 8].

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, this is a situation where the funds were intended to provide compensation for personal injuries, and the court may want to confirm with the payee that no further medical treatment or continuing care will be required, The funds being transferred will not exhaust all of the available annuity payments, and it appears that Aumont intends to use the funds paid to further his education, build and career, and better provide for himself in the future.

This deal is, as usual, not a particularly favorable transaction for the transferor, but it appears that payee’s living conditions may be stable, he will continue to receive monthly payments, and the funds will be used to invest in payee’s future.

As noted above, the petition does not include a copy of the underlying Settlement Agreement.

This can sometimes be an issue, as 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 annuity certificate submitted states, “This Certificate may not be assigned by the Certificate Holder without our consent.” [Grace Decl., Ex. A, p. 2, “Assignment of Certificate.”]

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 the annuity documentation specifies a “Designated Office for Communication,” as a Prudential office in Dresher, Pennsylvania, but the proof of service shows service on Prudential Insurance at an address in Reading, Pennsylvania. It is accordingly not clear to the court that it can 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. 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 were made to obtain a copy of the underlying Settlement Agreement?

Has Mr. Aumon fully recovered from the personal injuries the structured settlement was intended to provide for?

With respect to the 2018 transaction which was approved, what were the funds used for? Was Mr. Aumon satisfied with that transaction?

Will there be an adjustment to the terms of the agreement to account for one and possibly two of the subject monthly payments already having been paid to payee? What will that adjustment be?

How has the address of the annuity holder been confirmed, as the address in the proof of service is different from the address identified in the annuity certificate as the “Designated Office for Communication?” How has the address 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?

First Amended Petition for Approval for Transfer of Structured Settlement Payment Rights is GRANTED.

DEPARTMENT D IS CONTINUING TO CONDUCT AND ENCOURAGE

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