Opinion
3375/2011.
Decided June 24, 2011.
Paris Chaikin, PLLC, Attorneys for Plaintiff, Settlement Funding of New York, LLC, New York, NY.
Co-Plaintiffs, Settlement Funding of New York, LLC, (hereinafter "Settlement Funding") and Charlotte Whitney, commenced the instant action by Order to Show Cause requesting the transfer of structured settlement payment rights. The following papers numbered 1 through 9 were considered in deciding the present motion:
PAPERS NUMBERED
Order to Show Cause 1 Petition 2 Attorney Verification 3 Exhibits A-E 4 Affidavit of Personal Service/Affidavit of Service 5 Payee's Declaration in Support of Transfer 6 Petition dated November 16, 2007 Index No: 2204/20077 Petition dated October 16, 2008 Index No: 24134/20088 Petition dated October 5, 2009 Index No: 22919/20099Factual Procedural Background
Co-Plaintiff, Settlement Funding commenced the present action by Order to Show Cause seeking approval of the transfer of certain structured settlement payment rights under an Absolute Assignment Agreement. Plaintiff, Charlotte Whitney, is the beneficiary of a Settlement Agreement arising from a personal injury lawsuit. The Compromise Order signed by the Honorable Ira Gammerman on November 14, 1990, provided that the Plaintiff would receive a structured settlement with a lifetime monthly income and a sixty-six (66) year guarantee (Exhibit A). After receiving the structured settlement, Plaintiff has made several applications seeking the transfer of her rights to future structured settlement payments.
Co-Plaintiff Charlotte Whitney avers that in 2007, she made her first application to sell her right to receive one lump sum payment of $30,000 due September 2009, and another in the same amount due September 2014. Plaintiff received $29,000 in exchange for selling her right to receive lump sum payments totaling $60,000 to Settlement Funding . Plaintiff alleged that she needed the funds to secure an apartment, pay bills, purchase furniture and make repairs to her automobile. (Petition ¶ 14). The Court approved the transfer on or about November 19, 2007. On or about October 16, 2008, Plaintiffs once again requested a Court Order so that Co-Plaintiff Whitney could sell her rights to certain scheduled payments in return for a lump sum. Charlotte Whitney sought to transfer $132,000 of her future payments to the Co-Petitioner Settlement Funding. The application was approved and Plaintiff Whitney received $48,404 in exchange for the transfer, which include her monthly payments of $500 from January 2009 through August 2017, a lump payment of $10,000 in September 2009, a lump sum of $30,000 in September 2014, and another lump sum of $40,000 in September 2019. (Petition ¶ 15). Plaintiff Whitney alleged in that application that she needed the $48,404 lump sum distribution to fund a move to North Carolina to be closer to her family. However, Charlotte Whitney's address in 2008 was the same address she used in her 2007 application, despite the fact that the $29,000 distribution she received that year was to secure her own apartment. Plaintiff Whitney 2008 application proposed that she would use $20,000 for a down payment on a single family home; $10,000 to pay for moving expenses and the remaining $18,400 for the purchase of a Dodge Durango automobile. The Court notes that Plaintiff Whitney alleged she would use part of the distribution approved in November 2007 to repair her automobile.
On or about September 27, 2009, Plaintiffs made a third request in three years to sell Plaintiff Whitney's rights to certain of her structured settlement payments. This application approved on December 23, 2009, sold $500 of each monthly payment that she was entitled to receive from September 2012 through August 2022 to Co-Plaintiff Settlement Funding. $60,000 of Co-Plaintiff Whitney's future payments were sold to Settlement Funding and after deductions for legal fees, commissions, fees, costs and expenses Whitney received $15,001.53. The application stated that Co-Plaintiff Whitney needed to sell her monthly distributions, as her nephew was to live with her and she would need to buy furniture to accommodate him, and that she intended to pay outstanding medical bills and pre pay her rent. Again the Court notes that this third application in 2009 designates the same address as Plaintiff Whitney used in the 2007 and 2008 applications, despite her expressed intention to secure her own apartment in 2007 and her 2008 plan to purchase a one family house in North Carolina.
Co-Plaintiffs, for the fourth time, seek the approval of this Court to transfer settlement payments. In the present motion, barely a year following her last distribution, Plaintiff Whitney seeks to transfer to Settlement Funding, her right to the following structured payments: 156 monthly payments in the amount of $500 and two lump payments of $10,000. In exchange for the sale of these payments, which total $98,000, Whitney will receive a gross purchase price of $12,409.47 (Petition ¶ 17). This year Ms. Whitney, still single with no dependants and still unemployed, states that she intends to use the proceeds to pay Wachovia bank $1000 for outstanding overdraft fees, purchase a new vehicle and establish an emergency savings fund to provide a cushion in the event of unforseen circumstances. (Petition ¶ 21b).
Plaintiff and Co-Plaintiff moved this Court on January 26, 2011 by Order to Show Cause. The Court established a motion schedule for service of the Order and the supporting paperwork, however, in its directives, this Court clearly established that all parties must be served by personal service on or before February 10, 2011. Plaintiff submitted an affidavit of service evidencing that while Defendants were served personally, Settlement Funding was unable to accomplish personal delivery on Charlotte Whitney and served her by "nail and mail" service on February 9, 2011.
Discussion
As is discussed further herein, Plaintiff's motion must be denied because the motion, when assessed on the merits, is contrary to the letter and spirit of the Structured Settlement Protection Act (SSPA). See General Obligations Law Title 17.
Defective Service on the Plaintiff, Charlotte Whitney
A party moving this Court by Order to Show Cause receives a signed Order along with a motion schedule clearly indicating how service of process must be affected. Here, the Court directed personal service on all parties. The method of service provided for in an order to show cause is jurisdictional in nature and must be strictly complied with. See Matter of Marcoccia v. Garfinkle, 307 AD2d 1010, (2003); Matter of McGreevy v. Simon, 220 AD2d 713 (1995). Plaintiff submits an affidavit indicating that Plaintiff, Charlotte V. Whitney, was served via substituted service pursuant to CPLR § 308(4). Substituted "nail and mail" service is proper under the CPLR § 308(4) upon a showing of due diligence at attempted personal "in hand" service. This Court does not find that the affidavit of service presented evidences due diligence prior to employing substituted service. The process server's affidavit shows that he made three separate attempts to serve Ms. Whitney at her home before resorting to "nail and mail" service. No evidence is presented that Plaintiff Settlement Funding attempted to call Ms. Whitney or inquire as to her whereabouts before employing "nail and mail" service. As no hard and fast rule exists to determine an exact definition of "due diligence" the determination is ultimately a fact-specific case-by-case analysis. Barnes v. New York, 51 NY2d 906, 907 (1980). Considering that Ms. Whitney is a co-Plaintiff in the present action and has a vested interest in the outcome of the present motion, it would seem that Plaintiff Settlement Funding could have called Ms. Whitney or otherwise inquired about her whereabouts before employing substituted service. However, even if this Court had accepted the process server's efforts as diligent, the merits of the present application cannot withstand judicial scrutiny and Plaintiff's motion should be denied on the merits.
Transferring Structured Settlement Payments under the SSPA
Structured settlement payments are designed to provide the individual receiving the payments long-term financial security. Matter of Settlement Capital Corporation [Ballos] , 1 Misc 3d 446, 455 (Supreme Ct., Queens Co., 2003). The Structured Settlement Protection Act (SSPA),General Obligations Law §§ 5-1701, was enacted in 2002, as a result of concern that structured settlement "payees", are especially prone to being victimized and quickly dissipating their awards. In re Settlement Funding of NY L.L.C., 195 Misc 2d 721, 722 (Supreme Ct., Rensselaer Co., 2003). General Obligations Law § 5-1706 governs approval of structured settlement payment rights. The Court is required to find 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 § 5-702 of this article.
The plain language of General Obligations Law § 5-1706 sets forth several procedural mandates as a condition precedent to judicial approval on an application for transfer of a structured settlement. Although Plaintiff's application is procedurally sound, for reasons discussed further herein, this Court believes that Plaintiff Charlotte Whitney has not provided sufficient evidence to satisfy this Court that this transfer is in her best interest.
When evaluating the best interest prong of this analysis, the Courts generally employ a more global consideration, finding that the best interest standard requires an individualized analysis of the proposed transfer. Matter of Settlement Capital Corporation [Ballos] , 1 Misc 3d 446, 455 (Supreme Ct., Queens Co., 2003). The best interest prong should be assessed on a case by case basis, giving specific consideration to such factors as the payee's age; mental and physical capacity; maturity level; ability to show sufficient income that is independent of the payments sought for transfer; capacity to provide for the welfare and support of the payee's dependants; the need for medical treatment; the stated purpose for the transfer; and the demonstrated ability of the payee to appreciate the financial terms and consequences of the proposed transfer based upon independent legal and financial advice. Id.
In her previous applications, Plaintiff has transferred her funds at a significant loss, in return for a lump sum. In total, Plaintiff has already sold approximately $252,000.00 of her structured settlement and has received approximately $92,000.00. The present application is Plaintiff's fourth request in as many years to transfer funds from her structured settlement. The present motion requests that this court approve a transfer whereby Plaintiff would sell 156 monthly payments each in the amount of $500.00, and two lump payments of $10,000.00. The total amount of this transfer is $98,000.00 and in return Plaintiff would receive approximately $12,409.47. Plaintiff is asking this Court to approve a transfer whereby Plaintiff will receive a 12.66% return. This Court cannot in good faith, having considered the totality of all the circumstances, approve a transfer and thereby authorize what appears to be a habitual practice of annually transferring her structured settlement rights at a substantial loss. Furthermore, her previous applications and the present application evidence an irresponsible pattern of spending remedied by regularly moving this Court to approve the transfer of settlement funds.
In 2007, Plaintiff sold two lump sums of $30,000.00 one due in 2009, and another due in 2014 ($60,000.00). In 2008, Plaintiff then sold $500.00 of her monthly income between January 2009 through August 2017 ($52,000.00), one lump sum of $10,000.00 due September 2009, one lump sum due September 2014 of $30,000.00 and one lump sum of $40,000.00 due September 2019.($80,000.00). In 2009, Plaintiff sold, $500.00 of her monthly settlement reward from September 2012 through August 2022. ($60,000.00). In total, Plaintiff has already sold approximately $252,000.00.
In 2007, Plaintiff received $29,000.00. In 2008, she received $48,000.00, and in 2009, Plaintiff received $15,000.00.
Plaintiff is 26 years old and presumably unemployed. Although in her application, Plaintiff avers that she has payments left on her structured settlement and she continues to receive payments through same, Plaintiff does not seem to be aware that if she continues to sell her settlements at the present rate, Plaintiff will lose a significant portion of the settlement and the future security that her settlement ensures will be gone. It appears to this Court that Plaintiff Whitney has not enjoyed the benefits of wise and unbiased counsel in the management of her financial affairs. Such advice could have proposed projects perhaps of an educational or entrepreneurial nature, designed to advance Ms. Whitney's situation. Instead, while still a young woman, Plaintiff Whitney is encumbered with debt and does not appear to fully benefit from the financial security her structured payments should have afforded her. Plaintiff's waiver of her right to consult with an independent professional only confirms this Court's impression that Ms. Whitney does not fully appreciate the consequences of such transfer. Matter of Settlement Funding of NY L.L.C. (Williams), 2010 NY Slip Op 52103U (Supreme Ct., Queens Co., 2010).
Plaintiff claims that she needs these funds to buy a new car, pay an outstanding $1000.00 to Wachovia for overdraft fees, and establish an emergency fund to provide a financial cushion for unforseen circumstances.(Whitney Decl. ¶ 6). What Plaintiff Whitney's application also lacks, is an explanation as to why the Plaintiff needs these payments now. In re Settlement Capital Corp., 194 Misc 2d 711, (Court maintained that Plaintiff's application did not explain the immediate need for the transfer of funds, particularly when a lump sum payment was forthcoming). According to the 1990 Compromise Order, Plaintiff is presently receiving $3,5000.00 per month, a portion of which she has already sold for a lump sum. In addition, in 2014, Plaintiff should receive a lump sum of $30,000.00. Plaintiff's explanation of her present need for the transfer of said funds is insufficient and inadequate to convince this Court that the sale of the future payments will enhance her standard of living . The repetitive requests in Plaintiff's applications indicates to this Court that these transfers have not fulfilled their intended purpose of helping Plaintiff to acquire her own apartment, to purchase a home, to secure reliable transportation or employment and pay off her loans. In fact, if Plaintiff has amassed debts, as she claims, the interest rate on said debts should be weighed against the return rate of transferring her structured settlement payments. Plaintiff's application does not convince this Court that this transfer is in her best interest. Plaintiff has sold a significant portion of her settlement in the past 3 years, and now endeavors to continue to sell these payments at a significant loss. In accordance with the legislative intent of the SSPA, this Court cannot grant to Plaintiff the relief it seeks.
As noted above, in 2007, Plaintiff sold $30,000.00 of her $60,000.00 2014 lump sum.
Accordingly, Plaintiff's motion is DENIED.
To the extent that To the extent any relief requested in Motion Sequence 1 was not addressed by the Court, it is hereby deemed denied.
The foregoing constitutes the Opinion, Decision and Order of this Court.