Opinion
No. 260574/08.
2012-05-18
In the Matter of the Petition of STONE STREET CAPITAL, L.L.C. Approval of Transfer of Structured Settlement Payment Rights in Accordance with GOL § 5–1701, Petitioners v. Ricardo SPRAUVE, Aetna Life Assignment Company and ING Life Insurance and Annuity Company f/k/a Aetna Life Insurance and Annuity Company, Respondents.
Adam Zoldessy, Esq., for Petitioner.
ALEXANDER W. HUNTER JR., J.
The motion by petitioner for an order seeking approval of the transfer of certain structured settlement payment rights of Ricardo Sprauve to petitioner, is granted.
Respondent Ricardo Sprauve obtained a structured settlement as a result of a personal injury action. Pursuant to the terms of the structured settlement, plaintiff was to receive $750.00 per month for thirty (30) years certain and life, whichever is longer, beginning November 29, 1995. He is also to receive lump sum payments in the following amounts: $15,000.00 on November 29, 1998; $20,000.00 on November 29, 2003; $30,000.00 on November 29, 2008; $50,000.00 on November 29, 2013; $60,000.00 on November 29, 2018; $80,000.00 on November 29, 2023 and $125,633.00 on November 29, 2028.
Respondent seeks to make the following transfers to petitioner: eighty-four (84) monthly payments of $250.00 from May 29, 2018 through and including April 29, 2025; six (6) monthly payments of $750.00 from May 29, 2025 through and including October 29, 2025; one (1) lump sum payment of $10,750.00 due and payable on November 29, 2013; one lump sum payment of $30,000.00 due and payable on November 29, 2018; and one lump sum payment of $30,000.00 due and payable on November 29, 2023.
According to the disclosure statement annexed to the petition as Exhibit E, the aggregate amount of the payments to be transferred to petitioner is $96,250.00. The discounted present value of the payments to be transferred is $85,362.87. The effective discount rate applied to this transaction is 1.40% and the gross amount payable to Mr. Sprauve is $31,797.00. The annual discount rate compounded monthly, used to determine that figure is 14.22%. Petitioner's counsel subsequently sent a letter to this court dated May 11, 2012, indicating that the new sum payable to Mr. Sprauve is $37,000.00 and that no commissions, fees, costs or expenses would be charged to Mr. Sprauve.
Mr. Sprauve submitted an affidavit wherein he states that he is forty-three (43) years old, he has never been married and has no dependents. He states that he received the settlement payments as a result of an accident which caused him to injure his left leg and he has restricted left leg motion. Mr. Sprauve states that he has been diagnosed with Compartment Syndrome which restricts the nerves/tissue in his left leg and the condition will deteriorate if he does not receive ongoing medical treatment and physical therapy for it. He asserts that the treatment is not covered by his Medicare benefits and his condition is not covered by Medicaid or public assistance. Mr. Sprauve states that he currently receives $500.00 per month in SSI disability benefits and approximately $400.00 per month from his two brothers. He further states that his doctors have advised him that he must continue with treatment or his condition will deteriorate and is potentially terminal if not properly treated. (Exhibit F).
Mr. Sprauve contends in his affidavit that the transfer of his structured settlement payments is the “sole financial means available to me to continue urgently needed treatment.” (Exhibit F, para. 6). He intends to use the proceeds of the transfer to pre-pay monthly co-op charges of $1,300.00 per month for several months while he obtains treatment for his leg. He also claims that he will use approximately $19,000.00 for outstanding medical debt not covered by his Medicare because he will be sued if he does not pay said bills and his ability to get future treatments will be impaired. (Exhibit F, para. 7–8). Finally, Mr. Sprauve claims that he will use approximately $2,500.00 to cover physical therapy for his leg as his doctors have confirmed that he requires at least six (6) months of therapy at a cost of $500.00 per month. He has no savings or credit to obtain financing and has no other family or friends available to assist him and no public assistance options available to him. Thus, he claims the proposed transfer is “vital” to maintain his health. (Exhibit F, para. 18).
Mr. Sprauve discloses that he made three prior transfers of structured settlement payment rights. One was made in 2008 and he received $14,250.00. He claims that he used the money to pay off medical bills, including those not covered by Medicaid, for his ongoing medical condition. In the second transfer, made in 2010, he received $32,773.00. He used the proceeds to purchase the co-op apartment where he currently resides. In the third transfer made in April 2011, he received $21,974.00 and he used the proceeds to pay his monthly common/maintenance charges and to pay gas, electric and water bills that were past due. (Exhibit F, para. 18).
Annexed to petitioner's papers is a fourth application made for the exact transfer of structured settlement payments respondent Sprauve seeks to make herein. That application was made by order to show cause and declined to sign by Judge Howard Sherman on December 21, 2011 who indicated that the application would be reconsidered upon submission of an affidavit with reasons for the previous transfers and the need for additional funds shortly after the last transfer. (Exhibit 1). Petitioner then submitted a notice to discontinue that action without prejudice on December 23, 2011.
Mr. Sprauve now makes the instant application and provides an explanation as to what he did with the funds he received in the previous transfers as well as his current need for the transfer of further funds. He asserts in his affidavit that the disclosure statement given to him by petitioner advised him to seek professional advice regarding the agreement from an attorney, accountant or other professional of his choice. However, he “knowingly” decided to waive the independent professional advice regarding the transaction. (Exhibit F, para. 16).
The Structured Settlement Protection Act (SSPA) codified under General Obligations Law, Title 17, was enacted in July of 2002 because of the concern that “... a growing number of factoring companies have used aggressive advertising, plus the allure of quick and easy cash, to induce settlement recipients to cash out future payments, often at substantial discounts, depriving victims and their families of the long-term financial security their structured settlements were designed to provide. Although transfers of structured settlements payments are generally prohibited by contract ... factoring companies have built a rapidly expanding business around circumventing these prohibitions.” (N.Y. Spons. Memo., 2002 Ch. 537). A determination would be made by a Supreme Court judge as to whether the transfer is “in compliance with applicable law, that key terms have been disclosed, that the transfer meets a hardship standard, and that independent professional advice has been obtained .” (N.Y. Bill Jacket, 2002 A.B. 6936, Ch. 537). In 2004, the SSPA was amended in that the hardship requirement was “eliminated as a precondition to transfers and the requirement that disclosures be made at the front end' was added.” (N.Y. Spons. Memo., 2004 Ch. 480).
The procedural requirements that must be met for approval of a transfer are found under General Obligations Law § 5–1705. The requirements are that a copy of the notice of petition and petition by order to show cause be served upon all interested parties at least twenty days before the time at which the petition is noticed to be heard, the petition must include a copy of the transfer agreement, a copy of the disclosure statement and proof of notice of that statement as well as a listing of each of the payee's dependents along with the dependents' age.
Pursuant to General Obligations Law § 5–1706, the court must make the following findings before a transfer can be effectuated. These are 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 dependants; 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 or other government authority; and (e) is written in plain language and in compliance with section 5–702 of this article.”
The two most important components of the SSPA are whether or not the transaction, including the discount rate and the amount of fees and expenses, is fair and reasonable and whether the transaction is in the best interest of the payee. The trial courts have ruled on what is determined to be fair and reasonable and whether the transfer is in the best interest of the payee on a case by case basis viewing the totality of the circumstances. Matter of Settlement Capital Corp. v. Yates, 12 Misc.3d 1198(A) [2006].
Mr. Sprauve made a transfer of a portion of his structured settlement payments only one year ago. He claims to have used the funds to pay arrears on the monthly maintenance charges for his co-op as well as other outstanding utility and water bills. He now requires the funds to pre-pay several months of his maintenance charges, to pay off outstanding medical debt and to pay for therapy he requires for his leg. Moreover, on the return date of this motion, Mr. Sprauve provided this court with a copy of a “five-day notice to pay rent arrears” given to him by his landlord, warning him that if he did not pay his rent arrears in the amount of $2,600.00, he would be evicted and still be responsible for paying the rent. Mr. Sprauve also provided this court with a “Final Turn–Off Notice” from Con Edison for arrears he owes on his utility bill. It is apparent that Mr. Sprauve is unable to afford his apartment based on his current monthly income and continues to amass arrears which he pays off by transferring payments from his structured settlement.
Moreover, after transferring all of the proposed future payments, Mr. Sprauve will only be left with one lump sum payment of $125,633.00 payable to him on November 29, 2028. However, if this court does not approve the current transfer, Mr. Sprauve claims that he will be unable to pay outstanding medical debt and will be sued for it and he will not be able to receive the therapy he requires to improve his medical condition. Accordingly, this court hereby approves the instant transaction solely because of Mr. Sprauve's medical needs. Any future requests by Mr. Sprauve to transfer the final amount of funds remaining in his structured settlement, will not be approved for the purpose of paying off rental or maintenance charge arrears or outstanding utility bills.
A copy of this decision shall be attached to any future applications by Mr. Sprauve to transfer his structured settlement funds.
This constitutes the decision of this court.
Submit order.