Opinion
No. 704077/14.
08-11-2014
ADVANCE FUNDING, LLC, Petitioner, For Judicial Approval of a Transfer Agreement with New York Obligation Law § 5–1701, et seq. v. Susan D. BRENNAN, Allstate Life Insurance Company of New York and Allstate Settlement Corporation, Respondents.
Opinion
Petitioner, by order to show cause, seeks an order of the Court, pursuant to New York Structured Settlement Protection Act, New York General Obligations Law § 5–1701 et seq., approving the transfer of structured settlement payment rights.
No opposition has been filed.
Susan Brennan is the beneficiary of structured settlement payments as follow:
Two hundred and sixteen (216) monthly payments of $430.00 due on or about February 8, 2015 and the 8th of each month thereafter, through and including January 8, 2033, with a 3% annual increase compounded every February 8th.
Ms. Brennan is desirous of transferring her structured settlement payments which have a discount present value of $96,894.82 for a lump sum payment in the amount of $40,000.00.
Pursuant to the amended petition, Ms. Brennan made an application to the Court on or about March 23, 2011 to transfer her rights to structured settlement payments under Index No. 7044/11 before Hon. Dicia Pineda–Kirwan. That application was withdrawn on May 12, 2011; on or about August 8, 2011, an application was made to transfer her rights to structured settlement payments before Hon. James J. Golia and withdrawn on May 11, 2012; on or about January 6, 2014, an application was made before Justice Howard Lane under Index No. 112/14 and was adjourned to August 5, 2014 for a hearing. A notice of discontinuance was filed with the Queens County Clerk on August 7, 2014.
Ms. Brennan is 27 years old and lives with her husband and mother in Far Rockaway, New York.Pursuant to her affidavit in support of the transfer of structured settlement payments, Ms. Brennan plans to use the lump sum payment of $40,000.00 as follows:
“I plan on using the proceeds of this transaction to pay off all my personal loans, a delinquent medical bill, a needed dental procedure and intravenous immunoglobulin (IVIG) medical treatments. I have an autoimmune disease that has rendered my physically disable and I cannot work. I am eligible for both social security and disability benefits that I receive every month. The IVIG treatments are approximately $2,000.00/week of treatments. My treatments are scheduled for three (3) treatments per week, every three (3) weeks. With these proceeds I would like to pay for six (6) months of IVIG treatments that would total $16,000.00. These treatments are medically necessary so that I can keep my immune system healthy order to be able to fight off infections.”
Ms. Brennan further states that due to her disease it is necessary to have major teeth and gum surgery; pay off personal loans and an outstanding medical bill.
In support of the petition, attached are copies of various letters evidencing debts owed by Ms. Brennan which include $900.00 and $4,000.00 to two individuals for loans made to Ms. Brennan for dental work; $4,200.00 loan to Ms. Brennan for back rent; and a bill for the balance of $360.00 for services rendered from South Shore Women's Medical Association. Ms. Brennan also submits an affidavit waiving independent professional advice.
No other documentation is submitted to substantiate the claim for monies for necessary IVIG treatments.
Title 17 of New York's General Obligations law, known as The Structured Settlement Protection Act (SSPA) requires judicial approval before a plaintiff can sell their rights to future structured settlement payments to a third party. 321 Henderson Receivables v. Martinez, 11 Misc.3d 892, 893, 816 N.Y.S.2d 298 (Sup.Ct. New York County 2006). The SSPA was designed to protect recipients of long-term structured settlements from being exploited and deceived by companies assertively seeking to acquire their guaranteed structured settlement payments. Matter of Settlement Funding of New York, LLC (Olivarez), 2007 N.Y. Slip Op. 51708U (Sup.Ct., Kings County 2007), citing 321 Henderson, supra at 893).
In addition, General Obligations Law § 5–1706, states that 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 heart of the SSPA's protection lies in the courts' independent discretionary determination [of] whether ... the transfer is in the best interest of the payee, taking into account the welfare and support of the payee's dependents, 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 ...” Matter of Settlement Capital Corp. (Yates), 12 Misc.3d 1198(A), 2006 N.Y. Slip Op. 51616(U) quoting Matter of Settlement Funding of New York, LLC (Cunningham ), 195 Misc.2d 721 (2003).
Since the enactment of the SSPA statute in 2002, the Courts have adopted a “a more global consideration, finding that the best interest standard requires an individualized analysis to determine whether the proposed transfer of structured settlement payments, which were designed to preserve the injured person's long-term financial security, will provided needed financial rescue without jeopardizing or irreparably impairing the financial security afforded to the payee and his or her dependents by periodic payments .” The Matter of Loiseau, Misc.3d, 2008 WL 5270923, 2008 N.Y. Slip Op. 33331(U).
Courts do not want payees to be lured into giving up their future financial security in order to pursue a short term remedy of a lump sum payment. Many times there are other, much less costly alternatives for payees to obtain money while still preserving their structured settlements. Matter of 321 Henderson Receivable Origination LLC v. Windom, 16 Misc.3d 1112(A), 2007 N.Y. Slip Op. 51400(U).
In the proposed transfer of Ms. Brennan's structured settlement payments, the aggregate amount of the structured settlement payments to be transferred $120,818.40. The discounted present value of the payments to be transferred is $96,894.82 (applying the 2.2% federal discount rate). The gross advance amount is $40,000.00. The annual discount rate, compounded monthly, used to determine the gross advance amount is 12.871%. The net advance amount is $40,000.00 which represents 41.28%, less than half of the discounted present value.
The Court record reflects that the structured settlement payments are the result of an infant's compromise order entered in the Queens County Clerk on December 12, 1994 under Index No. 9475/87. The Court record also reflects that a proceeding in the Civil Court of the City of New York Housing Part under L & T Index 69543/14 is currently pending in which Dolores Brennan and Susan Brennan currently owe $12,463.24 in rental arrears from June 2013.
Ms. Brennan currently receives social security disability payments monthly (amount not disclosed). Ms. Brennan does not indicate any other source of financial income, either from her husband or her mother. “In most cases where the payee is capable of support himself or herself it could be said that the sale of future payments will not jeopardize financial security.” In the Matter of Henderson Receivable Limited Partnership (DeMallie) 2 Misc.3d 463 (Sup.Ct.2003).
After consideration of all of the foregoing factors, the Court is unable to find that the proposed transaction is either or “fair and reasonable.” Surrendering a guaranteed source of income in exchange for a heavily discounted lump sum would not be in the “best interest” of Ms. Brennan and her family. Ms. Brennan's current payments of 216 payments of $430.00 with an annual increase of 3% compounded every February 8th until February 8, 2033 provide a source of income in addition to social security disability payments.
Accordingly, the petition is denied.