Opinion
No. 4344/2012.
2012-07-9
In the Matter of the Petition of J.G. WENTWORTH ORIGINATIONS, LLC, Petitioner, and Brandy Pretto, USAA Life Insurance and United Services Automobile Association, As Interested Persons Pursuant to GOL § 5–1701(c).
Lum, Drasco & Positan, LLC, by Michael F. Nestor, Esq., New York City, for the Petitioner.
CHARLES J. MARKEY, J.
Petitioner commenced this special proceeding pursuant to General Obligations Law, Title 17, known as the Structured Settlement Protection Act (“SSPA”), for approval of the transfer of certain structured settlement payment rights to it from Pretto.
Initially, the Court notes that the notice of petition is not signed by petitioner's counsel, as required by CPLR 2101(d) and 22 NYCRR 130–1.1a(a). Despite this procedural irregularity, and given the absence of prejudice, the Court will entertain the petition ( see, Green v. Tierney, 59 AD3d 900, 901 [3rd Dept.2009] [“(W)e conclude that the dismissal of the unsigned petition without first bringing the error to petitioner's attention so it could be corrected was an improvident exercise of discretion.”] ).
The SSPA requires that certain procedural and substantive safeguards be followed before a structured settlement payment may be transferred (General Obligations Law § 5–1705). Specifically, the procedure mandates that a copy of a disclosure statement, as required under General Obligations Law section 5–1703, be attached to the petition and that proof of service upon the payee be provided ( id.). Additionally, pursuant to General Obligations Law section 5–1706:
No direct or indirect transfer of structured settlement payment rights shall be effective and no structured settlement obligor or annuity issuer shall be required to make any payment directly or indirectly to any transferee of structured settlement payment rights unless the transfer has been authorized in advance in a final order of a court of competent jurisdiction based upon express findings by such court that:
(a) the transfer complies with the requirements of this title;
(b) the transfer is in the best interest of the payee, taking into account the welfare and support of the payee's depend[e]nts; and whether the transaction, including the discount rate used to determine the gross advance amount and the fees and expenses used to determine the net advance amount, are fair and reasonable. Provided the court makes the findings as outlined in this subdivision, there is no requirement for the court to find that an applicant is suffering from a hardship to approve the transfer of structured settlement payments under this subdivision;
(c) the payee has been advised in writing by the transferee to seek independent professional advice regarding the transfer and has either received such advice or knowingly waived such advice in writing;
(d) the transfer does not contravene any applicable statute or the order of any court of other government authority; and
(e) is written in plain language and in compliance with section 5–702 of this article.
In the case at bar, a careful review of the submissions accompanying the petition demonstrates that the application complies with the procedural mandates of General Obligations Law sections 5–1703 and 5–1706(a), (c), (d), and (e). Having satisfied the procedural requirements of the SSPA, the Court must determine, pursuant to General Obligations Law section 5–1706(b), whether the proposed transfer is in the best interests of the payee and whether the transaction is fair and reasonable.
Pursuant to the terms of the structured settlement agreement, Pretto became the recipient of certain structured settlement payment rights which provided for a series of deferred cash payments as follows: one payment of $5,000.00 on January 27, 2015, one payment of $5,000.00 on January 27, 2018, one payment of $5,000.00 on January 27, 2021, and one payment of $11,700.00 on January 27, 2024.
In return for selling her right to receive these payments, Pretto will receive immediate compensation in the gross amount of $7,200.00. In this proposed transfer, the aggregate amount of the structured settlement payments to be transferred is $26,700.00. The discounted present value of the payments to be transferred is $23,714.57 (using the applicable federal rate of 1.40%). The net advance amount is $7,200.00, which, according to the “New York Disclosure Statement” submitted in support of the petition, represents an annual discount rate of 19.11% assuming monthly compounding.
This Court finds, upon the foregoing papers, that petitioner has failed to meet its burden of establishing that the transaction is in Pretto's best interests ( see, Matter of J.G. Wentworth Originations, LLC v. Allstate Life Ins. Co. of NY, 2012 WL 2154973, 2012 N.Y. Slip Op 31501[U] [Sup Ct New York County 2012]; Matter of Wentworth Originations, LLC v. Ferrer, 2012 WL 1854926, 2012 N.Y. Slip Op 31294[U] [Sup Ct Queens County 2012] [Lane, J.]; Settlement Funding of NY, LLC v. Hartford–Comprehensive Empl. Ben. Serv. Co., 25 Misc.3d 1220[A], 22009 WL 3630802, 2009 N.Y. Slip Op 52201[U] [Sup Ct Queens County 2009] [decision by the undersigned]; Matter of 321 Henderson Receivables Origination, LLC [Logan], 19 Misc.3d 504, 2008 N.Y. Slip Op 28072 [Sup Ct Queens County 2008] [decision by the undersigned] ).
In her affidavit, Pretto, who is 20 years old, single, and has no dependents, stated that, from the lump sum payment she would receive, she intends to use the funds to pay for her schooling at Queensborough Community College, including more than two years of tuition and books. However admirable Pretto's intention to obtain a degree in criminal justice may be, the taking of such a deep discount on her settlement funds is a questionable means of attaining her goal.
In particular, Pretto is currently employed as a sales associate making $13,000.00 per year, and she has not indicated whether she has looked into obtaining a student loan with terms more favorable than the proposed transaction. Pretto has also elected not to consult with an independent professional advisor regarding the transfer. Under these circumstances, the Court is not persuaded that Pretto fully appreciates the financial consequences of the transaction.
Furthermore, petitioner has not demonstrated that the 19.11% discount rate applied against the funds sought to be transferred is fair and reasonable within the meaning of the SSPA ( see, Matter of Hanks v. Transamerica Annuity Serv. Corp., 2011 WL 4528672, 2011 N.Y. Slip Op 32512[U] [Sup Ct Nassau County 2011] [19.99% discount rate not accepted as fair and reasonable]; Settlement Funding of NY, LLC v. Hartford–Comprehensive Empl. Ben. Serv. Co., 25 Misc.3d 1220[A], 22009 WL 3630802, 2009 N.Y. Slip Op 52201[U], supra [14.99% discount rate not accepted as fair and reasonable]; Matter of Settlement Capital Corp. [Ballos], 1 Misc.3d 446 [Sup Ct Queens County 2003] [Satterfield, J.] [15.591% discount rate not accepted as fair and reasonable]; Matter of Settlement Funding of N.Y. [Cunningham], 195 Misc.2d 721 [Sup Ct Rensselaer County 2003] [15.46% discount rate not accepted as fair and reasonable] ).
Accordingly, the petition for approval of the transfer of certain structured settlement rights is denied.
The foregoing constitutes the decision, order, and opinion of the Court.