Opinion
Index No. 2016-2610 RJI No. 46-1-2019-1115
12-12-2022
ADVANCE FUNDING, LLC, Petitioner, v. ELFIDO DE LA ROCA, Respondent.
Susanne Gennusa, Esq., for Petitioner Advanced Funding, LLC, until she was withdrawn as counsel on July 24,2020. Jonathon B. Schloss, Esq., Schloss &Schloss, PLLC, for Respondent Elfido De La Roca Jason Little, Esq., Lippes, Mathias, Wexler, Friedman, LLP, for Intervenor Great West Life &Annuity Insurance Company Kent D. Vanderwal, Esq., for New York State Gaming Commission.
Unpublished Opinion
Susanne Gennusa, Esq., for Petitioner Advanced Funding, LLC, until she was withdrawn as counsel on July 24,2020.
Jonathon B. Schloss, Esq., Schloss &Schloss, PLLC, for Respondent Elfido De La Roca
Jason Little, Esq., Lippes, Mathias, Wexler, Friedman, LLP, for Intervenor Great West Life &Annuity Insurance Company
Kent D. Vanderwal, Esq., for New York State Gaming Commission.
DECISION AND ORDER
HON. MICHAEL R. CUEVAS JUSTICE
NOTICE:
PURSUANT TO ARTICLE 55 OF THE CIVIL PRACTICE LAW AND RULES, AN APPEAL FROM THIS JUDGMENT MUST BE TAKEN WITHIN 30 DAYS AFTER SERVICE BY A PARTY UPON THE APPELLANT OF A COPY OF THE JUDGMENT WITH PROOF OF ENTRY EXCEPT THAT WHERE SERVICE OF THE JUDGMENT IS BY MAIL PURSUANT TO RULE 2103 (B)(2) OR 2103 (B)(6), THE ADDITIONAL DAYS PROVIDED SHALL APPLY, REGARDLESS OF WHICH PARTY SERVES THE JUDGMENT WITH NOTICE OF ENTRY.
INTRODUCTION AND PROCEDURAL HISTORY
By an Order to Show Cause dated March 9, 2020, Respondent, Elfido De La Roca ("De La Roca"), seeks, pursuant to CPLR Section 5015 (a)(3) and (4), to vacate an Order of Honorable Vincent J. Reilly, dated January 5, 2017, that granted a Lottery Prize Assignment Agreement ("LPAA") from him to Great West Life &Annuity Insurance Company ("Great West") under Tax Law Section 1613 and 21 NYCRR 2803.11. De La Roca also seeks an award of restitution under CPLR Section 5015 (d).
On April 3, 2011, De La Roca won a $3 million first prize in a New York State Lottery "Win for Life" instant cash game. The prize was payable in twenty annual installments of $150,000.00. However, it appears when De La Roca sought to claim the prize, the ticket seller, Atif Ali ("Ali"), claimed the prize for himself. After commencement of a criminal proceeding against Ali, the Rockland County District Attorney brought a proceeding in the Supreme Court, Rockland County (Index No. 031993/2011) which resulted in an Amended Order that all payments due after February 15,2015 be made to De La Roca. The instant application has its origin with a November 8, 2016, LPAA by which De La Roca allegedly assigned the rights to fourteen lottery prize installment payments (those payable February 15, 2017 through February 15, 2030) of $150,000.00 each in exchange for a lump sum payment of $1.3 million dollars.
July 24, 2020, 21:2-23; 21:24-22:5. .
The payments due on February 15th of 2012, 2013, 2014 and 2015 were directed to be paid to First Trinity Corporation pursuant to a Lottery Prize Assignment Agreement between Advance Funding LLC and Atif Ali (Supreme Court, Schenectady County, Index Number 2011-1062), which was filed just two months after the prize was claimed by Ali. First Trinity was the subsequent assignee of that LPAA.
On November 29, 2016, Advanced Funding LLC ("AF") commenced a special proceeding under New York Tax Law §1613 (a) and (d) and 21 N.Y. C. R. R. 2803.11 for judicial approval of the assignment of De La Roca's lottery prize payments to AF's designated assignee, Great West. The ex parte proceeding was brought before the Honorable Vincent J. Reilly, in the Schenectady County Supreme Court.
The application consisted of:
(1) A document entitled "Ex Parle Application" dated November 29, 2016, signed by Susanne Gennusa, Esq. ("Gennusa"), former attorney for AF.
(2) An Affirmation of Service of Gennusa dated November 29, 2016, affirming that she served the application and proposed Order by mail upon Counsel for the Division of the Lottery and upon Robert Schacht ("Schacht"), purported attorney for De La Roca.
(3) Dan Cevallos' ("Cevallos") (President of AF) affidavit, sworn to November 8, 2016, that included the following exhibits: "A": Amended Order from Zugibe v. Ali, Supreme Court, Rockland County (Index No. 03 1993/2011, William J. Kelly, J.S.C., April 12, 2013), A Certificate of Term Payment for De La Roca's lottery prize and a Change of Winner Status Form; "B": AF's customer privacy policy; "C": A summary of AF's contacts with De La Roca; "D": the LPAA and a written Disclosure Statement, Certificate of Residence and Certificate of Marital Status; "E": a written Disclosure Statement; "F": the purported Affidavit of the De La Roca, supposedly sworn to on November 9, 2016; "G": the Assignments of Sale Agreements from AF to Northeastern Capital Funding LLC ("Northeastern") and from Northeastern to Great West, both dated November 10, 2016; "H": the affirmation of attorney Robert G. Schacht, Esq., dated November 17, 2016; and "I": a copy of an Order of the Supreme Court, Schenectady County in the proceeding of Advance Funding LLC v. Ruben Martinez, dated November 9, 2016.
Ex. J2.
Also repeated separately as Ex. J3.
Also repeated separately as Ex. J4.
Martinez is litigant in a separate action against A. F (Index 2016-2220).
Notably, the LPAA, purportedly signed by Cevallos and De La Roca and dated November 8, 2016, contains no witness signature in any manner. Moreover, the Disclosure Statement and a Certificate of Marital Status also attached to the Agreement, were each purportedly signed by De La Roca. The Disclosure Statement was not witnessed, and the Marital Status was purportedly witnessed, but the Notary did not date when the signer appeared.
Ex. J2; Ex. J7, March 3, 2021:14:16-15:13.
Id.
The Order approving the LPAA, based upon the ex parte submissions of AF was signed by the Honorable Vincent J. Reilly, Jr., on January 5, 2017, and was entered on January 11, 2017. The January 5, 2017, Order approved the LPAA, based upon the ex parte submissions of AF, which names as subsequent assignee, Great West. The Order provided that the payments were assigned by AF to Northeastern Capitol Funding, LLC ("Northeastern"), and then assigned to Great West.
Ex. J5.
Gennusa (former attorney for AF) indicated that Northeastern Capital Funding is related to AF and Monica Ray ("Ray") worked for both, but she did not know the details of the relationship. July 24, 2020, 12:5-12. John Cevallos, the brother of Cevallos signed the papers as president of Northeastern. July 24, 2020, 12:5-22.
Service of the instant March 2020 Order to Show Cause was made by overnight mail service on Advance Funding's attorney of record, Gennusa, and AF's agent for service of process David Linn, the purported attorney of record for De La Roca, Robert G. Schacht, Esq. ("Schacht"), Counsel for the NYS Division of the Lottery (Edmund C. Burns, Esq.), and Great West at their addresses in Greenwood Village, Colorado and Pittsburgh, Pennsylvania (as identified in the January 5, 2017 Court Order).
Due to the COVID-19 Court shutdown, the original hearing date for the March 2020 Order to Show Cause was postponed from March 27, 2020, to July 24, 2020. At the July 24, 2020, appearance, Gennusa appeared seeking to be relieved as counsel for AF. Notice of the adjourned date was served upon Great West, but no one from Great West appeared. Great West did not contact the Court or De La Roca's counsel for the Order to Show Cause, Jonathan Schloss, Esq. ("Schloss") of Schloss &Schloss, PLLC. The Court testimony of De La Roca on July 24, 2020, and requested that De La Roca submit additional documentation, including bank records. On October 22, 2020, De La Roca's counsel submitted De La Roca's bank records together with counsel's affirmation and De La Roca's affidavit. On December 2, 2020, Great West, the assignee of AF's rights, sought leave to intervene in the present application. On December 29, 2020, this Court issued an Order granting Great West intervenor status.
Additional hearings were held on February 18, 2021, and March 3, 2021. At those hearings Great West was represented by Jason Little, Esq. ("Little") of Lippes, Mathias, Wexler, Friedman, LLP; Schloss represented De La Roca; and Kent D. Vanderwal, Esq., appeared for the New York State Gaming Commission. Prior to the February 18, 2021, hearing, all attorneys attended a pre-trial conference on February 5,2021, wherein the parties stipulated to a five-volume set of joint exhibits pursuant to the Uniform Civil Rules for the Supreme Court and the County Court, Rule 202.34. On February 18, 2021, Little stated that he prepared the joint exhibits and that both he and Schloss consented and stipulated to the marking and admission of these exhibits. As indicated by the Court, it will give the evidence submitted on consent the weight it deserves. Great West called no witnesses in this proceeding.
For the reasons discussed below, this Court finds vacatur of the January 5, 2017, Order appropriate. Additionally, the Court finds that the assignment of lottery payments to Great West is unenforceable, that all future payments from the New York State Lottery Commission be made to De La Roca, and that De La Roca be paid restitution of $250,000.00 from Great West, with interest.
HEARING
Hearing was held on July 24, 2020 (prior to Great West's intervention in this matter), February 18, 2021, and March 3, 2021. Since Spanish, rather than English, is De La Roca's primary language, the Court utilized a Spanish interpreter throughout the Court's proceedings. Gennusa provided statements and answered questions for the Court, as an officer of the Court at the July 24 hearing, and De La Roca provided sworn testimony. The hearing dates of February 18 and March 3, 2021, consisted of the De La Roca cross-examination and Schacht testimony.
Because Great West had notice of this proceeding as of February 12, 2020 (Exhibit J20, Bates 18) and elected not to intervene until November 2020 (Exhibit JI5, and J20, Bates 36-41), this Court will not entertain Great West's argument that De La Roca's motion to vacate is untimely. Additionally, De La Roca details that he first learned what occurred when his attorney's office received the entire Court file in February 2020, and immediately sought to vacate the 2017 Order. The Court is not limited to the one-year period for a motion to vacate under the circumstances herein.
A. Susanne Gennusa
Gennusa informed the Court that the proposed order, along with the November 2016 LPAA presented to Judge Reilly for signature, was emailed to her by Monica Ray ("Ray") (a paralegal for AF located in Florida), and that she does not know who prepared it. Gennusa reviewed it, but cannot recall if any changes were made. Gennusa indicated that Schacht was De La Roca's attorney, and he emailed her his affirmation and sent the original via Federal Express. She further provided that she never spoke with Schacht about this matter, and has only spoken with him onetime, despite dealing with him in multiple lottery matters. Gennusa specified that she does not know how lottery winners were referred to Schacht, but she stated that he was familiar with the principal of AF. When asked about a notation in the record that AF received a call from the lottery winner's attorney's office requesting a preliminary meeting with the lottery winner on July 23,2016, at his Westchester office, Gennusa stated that she was unaware whether Schacht, or AF, had a Westchester office.
July 24, 2020, 14:9-15:4.
July 24, 2020,15:1-4. .
July 24, 2020,15:5-22; 15:18-22.
Id.; 16:8-11; 16:12-25.
Id.
July 24, 2020, 19:22-20:13.
Gennusa spoke generally regarding lottery petitions. She detailed that her office only prepared the RJI and index number applications. The ex parte application in blank was sent to her as a word document, the Affidavit of Dan Cevallos was sent signed and notarized, along with the proposed order from Ray via federal express with original signatures. Gennusa would then review the documents and if there were any inconsistencies or inaccuracies she would contact either Ray or Cevallos. She would then speak to Cevallos and confirm the contents of the affirmation and the exhibits and facts that might stick out to her. Gennusa stated that after the Judge signed the papers, Cevallos or Ray would send a messenger to obtain a copy of the order.She explained that she had no responsibility once the papers were submitted, and that her role ended upon the signing of the Order. Gennusa did not serve a copy of the order upon the Lottery Division, the annuity company, or anyone else.
July 24, 2020, 19:6-21.
July 24, 2020, 18:6-25; 18:17-19:3; 19:6-21.
Id.
Id
July 24, 2020, 20:14-25.
Id.
July 24, 2020, 21:2-16.
Gennusa said that contrary to the allegations in De La Roca's moving papers, she never spoke with De La Roca. She has never had any contact with any lottery winners. She also testified that she is not related to anyone at AF, or Northeastern.
July 24, 2020, 21: 11-22:9.
Id.
Id.
Gennusa testified that her only job was to submit the LPAAs, with the supporting documents, to the court and to ensure to the best of her ability that they contained accurate information.Gennusa did not witness any of these documents being signed. She had no input on the negotiations of the assignment agreements. At the conclusion of the Court's questioning, the Court excused Gennusa from her representation of AF.
July 24, 2020, 23:1-19.
July 24, 2020, 24:12-19.
July 24, 2020, 24:20-25:17.
July 24, 2020, 26:15-20.
B. Elfido De La Roca Testimony
De La Roca is from Guatemala. Flis highest level of education is high school, which in Guatemala is nine-years. He speaks very little English and does not read English at all. His primary language is Spanish.
July 24, 2020, 29:6-7.
July 24, 2020, 29:8-13.
July 24, 2020, 29:14-19.
Id.
De La Roca dealt with a man named Santiago, from AF. They spoke in Spanish. He does not know Santiago's last name [the Court understands it to be Usquiano]. Santiago came to his house every month for four or five months, trying to do business relating to his lottery winnings. De La Roca eventually signed some documents with Santiago. De La Roca testified that he was never given documents in Spanish regarding the lottery agreement. De La Roca also testified that he never had any contact with AF via email.
July 24, 2020, 29:20-30:6.
July 24, 2020, 29:20-30:6.
July 24, 2020, 30:2-3.
July 24, 2020, 32:11-25; 33:1-10; 37:5-7.
July 24, 2020, 33:14-16; 36:22-24.
July 24, 2020, 35:13-15.
July 24, 2020, 48:10-12.
De La Roca detailed that no one ever explained the documents to him, and that he has no family or friends that speak, or read, English. No one ever explained New York Tax Law Section 1613 to him, or the assignment of lottery proceeds. He had no independent legal counsel with him when he signed the documents with Santiago. De La Roca testified that he does not know who Schacht is, and does not know if he is an attorney. Further, that he never went to an attorney's office in Staten island, or Westchester, to discuss an LPAA. De La Roca also testified that he never received a telephone call from an attorney that identified himself as Schacht to discuss the agreement. He was also never asked by AF to call an attorney to discuss the agreement.Although, De La Roca did testify that one-time Santiago brought a lawyer with him for document signing. This testimony contradicts the Cevallos' Affidavit, at paragraph 20, that states: "Mr. De La Roca has designated attorney, Robert G. Schacht, Esq. as attorney of record with respect to this Ex Parte Application." It also contradicts the Schact Affirmation as will be discussed in more detail herein.
July 24, 2020, 33:14-24; Feb. 18, 2021, 19:12-14; 22:8-11.
July 24, 2020, 40:16-41:11; 41:15-18.
July 24, 2020, 41:12-14.
July 24,2020, 33:14-24.
July 24, 2020, 34:7-17.
July 24, 2020, 34:18-21.
July 24, 2020, 34:22-25.
July 24, 2020, 34:7-15.
De La Roca detailed that he was to pay Santiago $200,000.00 and Santiago led him to believe he was to receive $1,100,000.00 for his lottery winnings. Notably, all of the evidence outside of De La Roca's testimony indicates that the amount he was to receive was actually $1,300,000.00, and De La Roca later agreed in leading testimony to this amount. The original lottery prize was for $3 million. However, after De La Roca signed the papers, he never heard from Santiago again.
July 24, 2020, 35:10-25; 36:1-12.
Feb. 18, 2021, 29:2-6.
July 24, 2020, 47:3-6.
Id.; July 24, 2020, 45:3-5.
There is a purported affidavit from De La Roca, dated November 9, 2016, attached to the application for approval of assignment of the LPAA,. De La Roca testified that the signature on this affidavit was not his. Further, that he did not sign any documents before Jacqueline Cameron. Moreover, the affidavit is in English, which again, De La Roca cannot read. Fie also testified that the signature on the LPAA is not his. De La Roca has never heard of Northeastern Funding Company, Northeastern Capitol Funding LLC, or Great West. This contradicts the Cevallos' Affidavit, that states: "[i]n return, Mr. De La Roca has agreed to accept, as consideration for such assignment, payment in a lump sum amount, as such is set forth in the Agreement...."Cevallos also stated:
July 24, 2020, 38:3-22; Respondent's Ex. A.
July 24, 2020, 38:19-22.
July 24, 2020, 38:23-25.
July 24, 2020, 40:12-15. .
July 24, 2020, 42:7- 43:9; 43:10-14.
July 24, 2020, 41:22-42:3; 42:4-6.
Ex. J2, ¶13.
"Pursuant to Section 11 of the Agreement, AF intends to assign its obligations and rights under the Agreement to Northeastern Capital Funding, LLC, Tax I.D. $13-4047431 which in turn, will assign all of its obligations and rights to Great West Life &Annuity Insurance Company/Tax I.D.#84-0467907, prior to entry of a final Order in this case.
Ex. J2,¶17.
The November 9, 2016, De La Roca affidavit states that he has reviewed all the documents prepared for the ex parte application for approval of the assignment. However, several of the documents submitted with the ex parte application were dated after November 9, 2016. For example, the ex parte application is dated November 29, 2016, Schacht's Affirmation is dated November 17,2016, the Assignment to Northeastern is dated November 10, 2016, and the second Assignment to Great West is dated November 10, 2016. The Affidavit also states that the signer (De La Roca) completely understands and approves the court documents as to substance and to form, consents to the relief requested, and agrees to the entry of an order approving the Assignment Agreement, even though the aforementioned documents didn't formally exist when the Affidavit was signed and on a date prior to Schacht's review of the documents.
Ex. J3, Martinez Aff. ¶9.
Ex. J2 '
Ex. J3, Martinez Aff. ¶9.
De La Roca testified that he received a check from Santiago for $445,000.00. But, the check was returned for insufficient funds. He never received any calls from anyone from AF, and was never offered any other money from AF. He testified that he was asked by a woman, that sounded like she worked at AF, to stop calling Santiago. De La Roca testified that he never received any of the payments from his lottery winnings, except for the $50,000.00 that he received as a result of the Order obtained by the Rockland County DA's office against Ali.
July 24, 2020, 44:23-25; Ex. J7, bates stamp 92.
July 24, 2020, 45:1-5.
July 24, 2020, 45:18.
July 24, 2020, 45:22-46:11; 30:7-16; 31:2-32:7.
July 24, 2020, 46:19-47:2.
De La Roca had a bank account, but it was closed when all of this happened. The bank account was with Chase bank. He has no money in that bank account now. He does not remember if he had any electronic fund transfer into that account from AF. When the account was closed, there was money in it, but he does not recall how much. Notably, De La Roca testified that $200,000.00 was never wired into a bank account belonging to him, including from Northeastern or Great West. When asked on cross-examination whether he was aware that $200,000.00 was wired into his account from Great West, De La Roca testified that he was not.De La Roca further testified that he was not aware of whether anyone else had access or authorization to withdraw or deposit money in this account. The Chase bank records were received by the Court after the July 24, 2020 hearing.
July 24, 2020, 48:17-24.
July 24, 2020, 49:2-5.
July 24, 2020, 49:11-12.
July 24, 2020,49:6-10.
July 24, 2020, 49:13-23-51:10.
July 24, 2020, 35:7-35:19.
February 18, 2021, 35:7-19.
Id.
De La Roca testified that he has not received any payments from the Lottery Commission since he met with Santiago. The last payment he received from the Lottery Commission was in 2017.De La Roca testified that when he reached out to the Lottery in 2018, he was told that AF was receiving the payments. De La Roca testified that he has never heard of Cevallos.
July 24, 2020, 36:18-25.
July 24, 2020, 37:1-11; 37:12-38:4.
July 24, 2020, 37:25-38:20.
July 24, 2020, 35:2-3.
C. Robert Schacht Testimony
Schacht testified that he was referred to doing lottery assignment work by Luigi Rosabianca ("Rosabianca"), who he went to law school with. Rosabianca eventually went to jail for stealing his client's money. Schacht first represented clients in transactions with AF a long time ago, but cannot say when. He has represented between 10 and 15 lottery winners in AF matters over the last 15 to 20 years. He may have been involved in one deal with Northeast. Schacht further testified that there were transactions with AF, or Northeast, that had his name added to them, but that he actually had nothing to do with.
February 18, 2021, 50:4-21.
February 18, 2021, 50:22-51:1.
Id.
February 18, 2021, 49:13-19.
February 18, 2021, 49:20-50:3.
February 18, 2021, 48:1-20.
Schacht detailed that when representing someone in an AF action he would be contacted by Ray by phone, or email, and she would let him know that a lottery winner would be contacting him, and that he would represent them for the petition. Schacht never spoke with anyone at AF other than Ray. He has never met Gennusa, but he thinks he spoke with her maybe once or twice. He has never had any contact with Dan or John Cevallos other than seeing their name(s) on contracts, petitions, or documents.
February 18, 2021, 51:8-19.
February 18, 2021, 51:20-22.
February 18, 2021, 51:23-52:2.
February 18, 2021, 52:3-16.
Schacht has no documents from the De La Roca transaction other than what was sent to him for this hearing. Schacht testified that he has never met De La Roca. He cannot say that he has ever spoken to him, but may have. Fie has no retainer agreement with De La Roca. He did not enter into retainer agreements with any lottery winners. Schacht detailed that someone who purported to be De La Roca contacted him, and he communicated with them for 15 to 20 minutes regarding the scope of the representation. He had no other contact with the purported De La Roca outside that 15 to 20 minute conversation. When asked about the statement in his affirmation that he thoroughly reviewed the terms and conditions of the LPAA with De La Roca, Schacht again reiterated that he did not recall the conversation. The Court notes that this testimony does not comport with the Schacht's Affirmation, which states: "I have thoroughly reviewed the terms and conditions of the Lottery Prize Assignment Agreement ("Sale Agreement") and have extensively discussed such terms with Mr. De La Roca." Additionally, "By virtue of the foregoing, 1 have concluded that Mr. De La Roca understands all terms and conditions of the Sale Agreement, including the financial terms by which the transaction would be consummated. Mr. De La Roca has concluded that this transaction is in Mr. De La Roca's own best interest." Moreover, "I concur with the conclusion of Mr. De La Roca and conclude that this transaction is fair and reasonable and in the best interest of Mr. De La Roca." The contact was via telephone and not video conference.
February 18, 2021, 52:24-53:3.
February 18, 2021, 49:8-15.
February 18, 2021, 49:10-12.
February 18, 2021, 53:4-6.
February 18, 2021, 53:7-10.
February 18, 2021, 53:11-21.
February 18, 2021, 53:22-54:1.
February 18, 2021, 75:17-22, Ex. J-2, bates 38.
Schacht Aff. ¶3.
Schacht Aff. ¶V.
Schacht Aff. ¶5.
March 3, 2021,16:2-20.
Schacht detailed that the conversation he had with De La Roca was in English, as Schacht doesn't speak Spanish. He noted that it was never necessary for him to hire a translator.Although, he also indicated that he has no specific recollection of this phone call. Despite his not having a specific recollection of this call, when asked who asked him to serve as De La Roca's attorney as indicated in his Affirmation attached to the Ex Parte Application, Schacht answered that it was the person who called him. Schacht has no personal knowledge of any conversations De La Roca may have had with anyone else about this transaction.
February 18, 2021, 54:14-24.
Id.
February 18, 2021, 54:25-55:5. .
February 18, 2021, 65:18- 66:9; Ex. J2, bates 37.
February 18, 2021, 7:10-14.
Schacht testified generally that in AF transactions he never received documents until the contract was already signed and notarized by the lottery winner. The documents he was sent included the contract, affidavit, and petition. Fie had nothing to do with drafting of the contract. His sole purpose was to ensure that the lottery winner was not signing something under duress, and that it was something that he already agreed to in writing and verified. He would confirm they were the person they were purporting to be, and ask them: if they understood why they were calling him; if they had any questions about what they were doing; if they agreed with the terms of the documents that they signed; whether anyone was forcing them to sign the documents; if they still wanted to go through with the arrangement; if they understood the financial arrangement; if they had any questions; whether they were sure they wanted to do this; and he would advise them that they didn't have to do this. Schacht also made it clear he was available for questions, or information, regarding the transaction. Although Schacht testified that he has no specific recollection of the call, he stated that he went through these questions with the purported De La Roca. Schacht further detailed that he would ask the lottery winners if they read through and understood the contracts. He indicated that he did not go line-by-line through the documents with them. The winners always tell him they need the money and don't care about the terms. It was not his place to tell them this was not a good deal, especially when they already signed the agreement and made the arrangements prior to coming to him.
February 18, 2021, 55:6-17.
February 18, 2021, 72:21-73:4.
Id.
February 18, 2021, 55:6-24.
February 18, 2021, 55:25-57:17. .
Id.
February 18, 2021, 57:25-59:8.
February 18, 2021, 73:5-14.
February 18, 2021, 73:15-74:2.
Id.
February 18, 2021, 73:15-74:21.
Schacht testified that he is familiar with the requirement of New York State Tax Law Section 1613, regarding the assignment of lottery winnings, but couldn't say how or when he became familiar with it. This testimony was impeached with the testimony Schacht provided in the Rueben Martinez case where he was asked:
February 18, 2021, 59:9-25.
Question: Okay. Had you ever read the tax law as to what was required to make one of these deals?
Answer: No, I don't practice tax law."
February 18, 2021, 60:14-18, referring to Ex. J-16, p. 88.
Schacht tried to reconcile this discrepancy by stating that the question was relating to the Tax Law generally, when his affidavit stated he understood the Tax Law relating to the assignments, specifically.
February 18, 2021:60:14-61:7.
Schacht testified that the signature on his Affirmation submitted with the Petition in this matter, appears to be his. Schacht's custom was that the day the contact was made with the lottery winner was the day he would sign the documents and send them out.
February 18, 2021, 61:8-62:1; February 18, 2021, 61:8-62:1, Ex. J-2, bates stamp 37, 38.
February 18, 2021, 78:18-79:23.
When he stated in the Affirmation that he was not being compensated by the assignee he was referring to AF. As far as Schacht's payment for the deal, it was his understanding that the lottery winner paid him, but that the checks came from AF. Schacht's Affirmation states that he is De La Roca's independent counsel, that he is not being compensated by AF. Schacht would sometimes get a check for a few petitions that were filed together, but AF was generally bad about paying. He believes he was never paid in this case, but he does not know. He usually got paid after the petition was filed. His fee was $500.00 per petition. When asked about paragraph 2 of his affirmation that states that he is unrelated to and not being compensated by the assignee or any of the assignees affiliates, Schacht could not relay who the assignee is, as he states his contract terms are rusty. But that he assumes the assignee is the intervenor in this case, or maybe AF.He later clarified that he meant AF.
February 18, 2021, 68:13-22.
February 18, 2021, 62:2-13.
Ex. J4.
February 18, 2021, 62:14-23.
February 18, 2021, Id; 63:21-64:3.
February 18, 2021, 62:24-63:20.
February 18, 2021, 64:4-7.
February 18, 2021, 66; 10-67:2, Ex. J-2.
February 18, 2021, 66; 10-67:2, Ex. J-2.
February 18, 2021,68:14-22, Ex. J-2.
Schacht does not remember if the amount of the legal fee that is to be deducted is to appear in the petition. The court noted that the disclosure statement states that the amount of origination or closing fees to be charged to De La Roca is none. Notably, there is also no indication in any of the submitted documents of any funds advanced to De La Roca, which contradicts the funding instruction that stated that De La Roca received an advance in the amount of $1,100,000.00 from AF, that AF asked Great West to pay back, while also sending $200,000.00 to De La Roca. Specifically, none of the six contact summaries in the record detailed in the Cevallos' Affidavit mention an advance payment or loan.
February 18, 2021, 65:5-17.
February 18, 2021, 71:7-25.
The Cevallos' Affidavit submitted with the ex parte application for assignment contains a purported listing of contacts between AF and Schacht. In the separate Statement of Contacts, AF details that prior to the execution of a written purchase and sale agreement, AF had contact with De La Roca through his attorney on several occasions. Schacht testified that he first saw this document when it was sent to him on January 12, 2021. The document says: An Advance Funding sales representative received a call from the lottery winner's attorney's office requesting a preliminary meeting with the lottery winner for the 23rd of August at this Westchester office."Schacht does not have, nor has he ever had, a Westchester office. Additionally, Schacht testified that this could not have been him because he had no contact with De La Roca around the date/time indicated on the form. Schacht testified that he did not participate in any of the purported events, meetings, or calls detailed in the contact sheet. Schacht stated that the first time that he saw the contact sheet was January 12, 2021 when it was sent to him in conjunction with this action. He testified that he did not participate in any of the purported events, meetings, or calls. He does not know if any other attorney did. Attorney Schacht's affirmation and testimony make it clear that he had no contact with AF until after the LPAA was purportedly executed.
Ex. J2, Cevallos Aff. ¶l 1, Ex. C. (the Cevallos' affidavit, which states that AF maintains a computerized record of every outbound call made, including the date, time, and number called, to ensure compliance with privacy and nonharassment policies).
Ex J2, Cevallos A ff. ¶12, Ex. C.
February 18, 2021, 78:3-79:11.
February 18, 2021, 79:22-80:17.
Id.; 47:13-21.
Id.
February 18, 2021, 82:3-8.
February 18, 2021, 78:18-79:19, Ex. J-2, bates 16.
February 18, 2021, 82:3-8, J-2, bates 16; March 3, 2021, 6:11-25, Ex. J-7, bates 51.
March 3, 2021, 6:22-7:21, Ex. J-7.
Attached to the Ex Parte Application is an appearance and waiver signed by Schacht on behalf of De La Roca dated November 17, 2016. Schacht explained that appearances are generally waived in these matters because the assignment is brought on consent. Schacht further detailed that once the Order was issued, he did not serve a notice of entry. Moreover, he did not call the lottery winners to inform them once the orders were signed. After receiving a copy of the order, he never provided it to the Division of Taxation and Finance. The Court noted that the LPAA, where it says Timing of Lump Sum Payments, states: The lump sum payments shall be made to assignor, as soon as reasonably practicable, after AF receives a court order that is not subject to appeal or attack. This would require a Notice of Entry to be filed, to start the clock on the Notice of Appeal date. Schacht testified that in his representation of lottery winners, he did not include ensuring that they received the money they were owed. He never saw documents saying the $1.3 million was paid to De La Roca. He also never saw disclosure of any list of lawsuits or claims filed by Lottery winners against any of the assignees. Schacht did not continue to represent the lottery winner until they were paid out of the proceeds to ensure that they received the amount of money that was promised to them. He would instruct them to call if there was an issue. Schacht was not involved in any closing documents between AF, Great Western, or De La Roca, where any entity was paid the $1.3 million to complete this transaction. Schacht is not aware of whether these documents say that any funds were being advanced to De La Roca, but if the documents say that then that was the deal. If that is not in the document, then Schacht never would have discussed this with De La Roca. No one contacted Schact after the transaction to state that De La Roca received any money prior to the final closing of the transaction.
February 18, 2021, 82:13-83:23; Ex. J-14, bates 13.
February 18,2021, 82:13-83:23.
February 18, 2021, 83:24-84:1.
February 18, 2021, 84:24-85:11.
February 18, 2021, 90:5-9.
February 18, 2021, 88:24-89:8; 86:18-88:22;
February 18, 2021, 92:3-24.
March 3, 2021, 19:5-25.
February 18, 2021, 90:10-91:12.
February 18, 2021, 92:3-24.
February 18, 2021, 92:3-24.
March 3, 2021,17:22-20:3.
March 3, 2021, 20:4-22.
March 3, 2021, 20:4-22.
March 3, 2021, 20:23-21:21.
Schacht cannot specifically identify whether this is the LPAA he reviewed in connection with this matter, but it looks like ones he has seen before.
March 3, 2021, 8:23-9:5, Ex. J-7, bates 53.
Schacht's testimony is not consistent with the assertions made in his affirmation. The testimony is addressed in greater detail later in the decision but will be discussed briefly here for purposes of addressing these contradictions. Contrary to his statement in (¶l), Schacht testified that could not swear that he ever spoke to De La Roca; Contrary to (¶2), Schacht admitted that he was compensated by the assignee, AF, but without basis claimed that he thought the payment was made on behalf of the Lottery Winner; In contrast to affirmation (¶3), Schacht's testimony clearly demonstrates that he had not "thoroughly reviewed the terms and conditions of the Lottery Prize Assignment Agreement" nor had he "extensively discussed such terms with Mr. De La Roca." Schacht's sworn testimony demonstrated his ignorance of the contents of the LPAA. Further, he admitted that he did not discuss any of the terms of the agreement, but only asked the person he believed to be De La Roca if he had read the document, understood it and had any questions; Contrary to his sworn affirmation (¶4), in his testimony, Schacht professed an ignorance of the financial terms and stated that it was not his job to discuss them with his "client." Despite his affirmation statement in (¶5) based his ignorance of the financial terms and his limit inquiry, Schacht would have no basis upon which to conclude that the transaction was "fair and reasonable and in the best interest of Mr. Martinez."
GREAT WEST'S ARGUMENTS
Great West argues that De La Roca did not meet his burden under CPLR 5015(a)(3) to show substantial evidence of fraud by AF in obtaining the Ex Parte 2017 Order approving the LPAA. In support of its position, Great West points to inconsistencies in De La Roca's affidavits submitted in support of his application and his hearing testimony. Such inconsistencies, Great West claims, do not overcome the presumption of execution and genuineness of the De La Roca affidavit submitted in support of the 2017 application for an LPAA approval order.
Great West argues further that De La Roca's affidavits and testimony do not clearly state a position that he did not sign the LPAA and that he admits signing some documents and to understanding the basic terms proposed in the LPAA. In response to De La Roca's claims that he didn't understand what he was signing, Great West responds that he had a duty to read what he was signing and that he should not be rewarded for his negligence in failing to take steps to understand what he was signing.
THE LAW AND DISCUSSION
A. The Court Has The Discretion To Vacate A Prior Order Under CPLR 5015.
The Court can vacate a prior default judgment or order, in the interest of substantial justice, subject to reversal only where there has been a clear abuse of discretion. CPLR §5015; Woodson v. Mendon Leasing Corp., 100 N.Y.2d 62, 68 (2003). On review, the court considers both facts and equities affecting litigants. Nash v. Auth. of New York and New Jersey, 22 N.Y.3d 220, 226 (2013). The Court may relieve a party from a prior order, upon noticed motion, on grounds that include newly discovered evidence; or fraud, misrepresentation, or other misconduct of an adverse party. CPLR 5015 (a). The Third Department has also found vacatur appropriate where a party did not receive actual notice of the pending action and was able to adequately demonstrate a meritorious defense. CPLR 317; Gardner v. Another Phyllis's, Inc.,216 A.D.2d 620, 627 (3d Dept. 1995). The law in New York also clearly instructs that "[t]he remedy for fraud allegedly committed during the course of a legal proceeding must be exercised in that lawsuit by moving to vacate the civil judgment." Marshall v. Grant, 521 F.Supp.2d 240 (E.D.N.Y. 2007).
The purported assignment between AF and De La Roca is now before the Court for consideration of vacatur due to false and fraudulent actions, material misrepresentations and misconduct by AF and the attorneys involved in the submission of the LPAA for approval. As will be discussed, this Court finds that the failure to comply with Tax Law Section 1613, while representations were made to the Court that Tax Law Section 1613 was complied with, justifies vacatur of the Order of assignment. Section 1613 was created to protect individuals such as De Le Roca, which undermines Great West's argument that De La Roca was negligent. Before the Court can consider the substantive issues, it must determine whether the Court approving the assignment of the LPAA had jurisdiction over the respondent, in this case, De La Roca. For the reasons stated herein and below, the interest of substantial justice warrants vacatur of the LPAA.
B. SINCE THE COURT LACKED JURISDICTION OVER DE LA ROCA ON THE INITIAL EX PARTE APPLICATION, THE RESULTING ORDER OR JUDGMENT IS A NULLITY AND MUST BE SET ASIDE.
The Court must initially decide under CPLR 5015 (a)(4) whether the Court lacked jurisdiction over De La Roca. If it did, the order or judgment is a nullity and this Court has no discretion, and it must set aside the Order, unconditionally. Gager v. White, et al., 53 N.Y.2d 475 (1981); Shaw v. Shaw, 97 A.D.2d 403 (2d Dept 1983). Here, there is no reliable evidence that De La Roca retained Schacht to represent him in the initial transaction. Schacht's only purported contact was a 15-to-20-minute conversation telephone conversation he claims to have had with a person identifying himself as De La Roca. Schacht admitted that he cannot state that he ever spoke to De La Roca, he took no contact information, did not obtain a retainer or letter agreement with De La Roca, and was not paid a fee by De La Roca. Moreover, he claims to have no specific recollection of the alleged conversation. De La Roca emphatically testified that he never met with, spoke with, or retained any attorney. He stated that he was never asked to call Schacht and he never received a telephone call from Schacht. Simply put, an unauthorized appearance by an attorney is insufficient to confer personal jurisdiction over a party and a judgment, predicated upon jurisdiction based upon an unauthorized appearance, is void. Skyline Agency, Inc. v. Coppotelli, et al., 117 A.D.2d 135 (2d Dept 1986); Wickham v. Liberty Mut. Ins. Co. et al., 73 A.D.2d 742 (3d Dept. 1979).
C. Tax Law 1613 (d) Requires That A Lottery Prize Assignment Agreement Be Approved By An Order Of The Supreme Court,
For lottery prize payments to be validly assigned in New York, the parties to the assignment agreement must first obtain "an appropriate judicial order" which directs the Lottery Commission to make prize payments, in whole or in part, to the designated assignee, approving the transaction. New York Tax Law §1613 (a); 21 NYCRR §2803.11; see also, In re Cabrera, 196 Mise.2d 329 (Kings Cty. Sup. Ct. 2003); Matter of Guri, 247 A.D.2d 388 (2d Dept. 1998). Periodic lottery prize payments may not be assigned in exchange for a lump sum payoff by a pro forma judicial order upon an ex parte application, but only upon examination of relevant statutory factors, and after notice to all affected parties. Cabrera, supra, 196 Mise. 2d, at 209.
To succeed on a petition for approval of a lottery prize payment assignment, the petitioner must establish that all the conditions within Tax Law 1613 (d) have been met.
(i) The assignment is in writing, is executed by the assignor, and is, by its terms, subject to the laws of this state, (ii) The purchase price being paid for the payments being assigned represents a present value of the payments being assigned, discounted at an annual rate that does not exceed ten percentage points over the Wall Street Journal prime rate published on the business day prior to the date of execution of the contract. (iii) The contract of assignment expressly states that the assignor has three business days after the contract was signed to cancel the assignment. (iv) The assignor provides an affidavit attesting that he or she: (A) Is of sound mind, is in full command of his or her faculties, and is not acting under duress; (B) Has been advised regarding the assignment by his or her own independent legal counsel, who is unrelated to and is not being compensated by the assignee or any of the assignee's affiliates, and has received independent financial or tax advice concerning the effects of the assignment from a lawyer or other professional who is unrelated to and is not being compensated by the assignee or any of the assignee's affiliates; (c) Understands that he or she will not receive the prize payments or portions thereof for the years assigned; (D) Understands and agrees that, with regard to the assigned payments, the division and its officials and employees will have no further liability or responsibility to make the assigned payments to him or her; (E) Has been provided with a one-page written disclosure statement setting forth, in bold type of not less than fourteen points, the payments being assigned, by amounts and payment dates; the purchase price being paid; the rate of discount to present value, assuming daily compounding and funding on the contract date; and the amount, if any, of any origination or closing fees that will be charged to him or her; and (F) Was advised in writing, at the time he or she signed the assignment contract, that he or she had the right to cancel the contract, without any further obligation, within three business days following the date on which the contract was signed. (v) Written notice of the proposed assignment and any court hearing concerning the proposed assignment is provided to the division's counsel at least thirty days prior to any court hearing. The division is not required to appear in or be named as a party to any such action seeking judicial confirmation of an assignment under this subdivision but may intervene as of right in any such proceeding. Tax Law 1613 (d).
The first condition listed is that the assignment agreement is in writing and signed by the assignor. In this case, a written LPAA dated November 8, 2016, was submitted to the Court with a signature on the line above the printed name Elfido De La Roca, Assignor. De La Roca testified that the signature on the LPAA was not his. The signature was not executed before a Notary Public or any other witness. De La Roca testified that he did sign some documents with Santiago that he understood meant that he would receive either $1,300,000.00 or $1,1000,000.00 after paying $200,000.00 as a fee. There was no evidence submitted at hearing to rebut De La Roca's claim that it was not his signature on the LPAA documents. Both Gennusa and Schacht testified that they never witnessed the signing of any LPAA documents, and Cameron was not produced with respect to the execution of the affidavit. Notably, De La Roca's testimony was given additional credence by the testimony of Schacht, who testified that AF had previously added his name to lottery assignment agreements in cases he was not a part of. While not a handwriting expert, the Court notes that each of the signatures attributed to De La Roca is significantly different from the others. Given the other false statements by AF and its fraudulent practices, this Court finds De La Roca's claims that his signature was forged on the assignment agreement and accompanying documents credible and so finds. Such fraudulent conduct necessarily results in the agreement being deemed voidab initio. Orlosky v. Empire Sec. Systems, Inc., 230 A.D.2d 401, 403 (3d Dept 1997). Therefore, the Court must find, by a preponderance of the evidence, that De La Roca did not sign the November 8, 2016, LPAA, and that there was never a valid agreement, signed by him, to be approved by the Court.
Great West makes a few arguments, and attacks De La Roca's credibility, in its Memorandum of Law in Response to Respondent's Motion to Vacate the Court's January 5, 2017, Order under CPLR Section 5015 (a)(3) &(4) and for Restitution under CPLR Section 5015 (d). This memorandum of law was attached to the trial record as part of the joint exhibits. However, this Court is not going to consider any impeachment of De La Roca's credibility by documents or arguments cited to in Great West's opposition papers, that were not made on cross-examination.
The second condition required for court approval of a LPAA is that the Assignor be "advised regarding the assignment by his or her own independent legal counsel, who is unrelated to and is not being compensated by the assignee or any of the assignee's affiliates, and has received independent financial or tax advice concerning the effects of the assignment from a lawyer or other professional who is unrelated to and is not being compensated by the assignee or any of the assignee's affiliates." As outlined in detail above, the testimony of De La Roca and Schacht clearly demonstrate that De La Roca was not represented during the ex parte application for assignment of his lottery rights. De La Roca denied knowing, retaining, or maintaining any sort of attorney client relationship with Schacht. Schacht also could not provide a retainer agreement, letter of engagement or any evidence to support the contention that he represented De La Roca. At best, Schacht claims someone who claimed to be De La Roca called his office and that he had a 15-to-20-minute telephone conversation with the individual in which he fulfilled his limited representation of that "client." Schacht then acted as De La Roca's attorney by approving all paperwork submitted to him by AF within the same day as the 15-to-20-minute phone conversation, without enough time to properly advise De La Roca of what the documents contained, and waived De La Roca's right of appearance and consented to Orders contrary to De La Roca's interests each and every time it was requested of him by AF. Not only did Schacht waive De La Roca's appearance but he also failed to provide him with a copy of the Court's Order, along with the Notice of Entry. It is apparent to this Court that De La Roca did not engage attorney Schacht, did not authorize Schacht to act on his behalf, did not have proper notice of the proceedings, and that fraud was perpetrated upon him in obtaining the Orders assigning his lottery winnings. For these reasons alone, a motion to vacate the prior Order of January 5, 2017, is proper.
This Court notes that the case law cited by Great West in its Opposition indicates that the Petitioner's burden is to show evidence of fraud or misrepresentation by sufficient evidence, not substantial evidence. See, Thakur v. Thakur, 49 A.D.3d 861, 861-62 (2d Dept. 2008). Notably, this is a Second Department case, not a Third-Department case. Great West also cites to T.S. v. E.I, 49 Mise. 3d 542, 546 (Fam. Ct. Onondaga County, June 26, 2015), a family court case that is not binding on this Court. T.S. merely details that the burden on Petitioner to substantiate fraud or misrepresentation on the Court is one of substantial evidence but offers no citation to support this burden.
This Court also notes additional failings. Tax Law Section 1613 (d)(9)(i) mandates that the contract is to include an affidavit from the assignee. While there is an affidavit of Cevallos on behalf of the initial assignee, AF, there is no affidavit from Great West, Advance Funding's assignee. Moreover, Tax Law Section 1613 (d)(9)(H) states that the assignee affidavit must include a summary of lawsuits involving the assignee, and at the time of this filing Great West was involved in at least one action in Texas, Galindo v. Prosperity Partners, Comet Financial, and Great West Life and Annuity Insurance Company, Case Number D-l-GN-05-000574 (Travis County, Texas 2009), that should have been disclosed to De La Roca, and the Court, but wasn't. The affidavit is also to include a summary of all contacts with the assignor. Tax Law §1613 (d)(9)(i). The testimony of De La Roca demonstrates that the purported contacts summarized as occurring between AF and De La Roca never actually happened and were apparently entirely false.
Lastly, a further indication of the perpetuation of a fraud in this matter is that AF paid De La Roca $445,000.00 in a check that bounced and made no further attempt to pay De La Roca. It is clear to this Court that AF took advantage of a non-English speaking individual, with a limited education, to defraud him of his lottery winnings. Accordingly, a motion to vacate the Court's Order of January 5, 2017, is proper and hereby granted, and the Commission shall now make all payments to De La Roca.
This Court does not accept Great West's argument that De La Roca was negligent in not having an English speaker read the documents that he was signing. First Nat. Bank of Odessa v. Fazzari, 10 N.Y.2d 394, 397-98 (1961). An instrument may be deemed void where the signer was unaware of what the contents of the writing were where he did not speak the English language or where the contents were misrepresented to him. Cash v. Titan Financial Services, Inc., 58 A.D.3d 785, 788 (2d Dept. 2009).
D. Great West Must Make Partial Restitution under CPLR 5015(d).
Where a judgment or order is set aside or vacated, the court may direct and enforce restitution in like manner and subject to the same conditions as where a judgment is reversed or modified on appeal. CPLR §5015 (d). Whether to direct restitution is entirely within the discretion of the Court. See, Deli of Lathan, Inc. v. Freije, 133 A.D.2d 889 (3d Dept. 1987); CPLR §5523; Charles A. Gaetano Constr. v. Citizens Devs. Of Oneonta, 223 A.D.2d 866, 867 (3d Dept. 1996); Albany Sav. Bank v. All Advantages Limousine Serv., 154 A.D.2d 759, 761 (3d Dept. 1989). De La Roca seeks $150,000.00 each February starting in 2017, with statutory interest of 9% per year.
Great West demonstrated that it paid $1,433,480.47 million dollars regarding this purported assignment. $1,233,480.47 of that money was sent to AF and $200,000.00 of that money was sent to De La Roca. Great West then collected $600,000.00 of lottery payments from the Lottery Commission as part of the assignment. The total amount of money remaining to be paid out on De La Roca's lottery win is $1,500,000.00. The interests of justice provide that Great West should not benefit from the misrepresentations made to this Court and to De La Roca by allowing them to be unjustly enriched to De La Roca's detriment. Great West is not without fault here, and certainly not as a sophisticated investment company. Great West wired AF its payment before it was due under the terms of the purported LPAA. For example, the Agreement indicated that payment was to be made only after a valid Court Order was obtained and entered, and no longer subject to appeal or attack. Without the Notice of Entry of the 2017 Order, the 2017 Order is still vulnerable to appeal and attack. The funding and wiring instructions also differed from the instructions provided in the Agreement and in the 2017 Order. Great West failed to provide any written amendment to the Agreement. The Agreement provides that De La Roca was to receive $1,300,000.00, but Great West suggests, and the audit trail report demonstrates, that De La Roca only received $200,000.00 from Great West. The Agreement explicitly forbade any amendment to the Agreement that was not in writing and executed by both parties, and no such amendment was submitted to this Court. Lastly, the Agreement specifically states that "(a]ny default in the performance of this Assignment shall constitute a default of all documents." Great West could not provide any proof that AF paid De La Roca fulfilling its obligation under the LPAA.
Audit trail report attached as Exhibit M to the Affidavit in Response to Respondent's Motion to Vacate the Court's January 5, 2017, Order Under CPLR 5015 (a)(3)(&(4) and for Restitution under CPLR 5015 (d)\ Ex.J19, bates 71, 72.
Id.
Exhibit J2, bates 18; Exhibit J 19, bates 11.
Exhibit J2, bates 19.
Exhibit J2, bates 18; Exhibit J19, bates 48-55; Exhibit J14, bates 15-20.
Exhibit J2, Bates Stamp 22; Exhibit J19, bates stamp 43-46.
Exhibit J2, Bates Stamp 20.
On July 27, 2022, Schloss submitted a New Jersey case, In Re Ofred Tavarez, 2021 WL 2396575 (Sup. Ct. Bergen Cty., April 2021) for the Court's consideration. While the Court recognizes that this is an out-of-state case that is not binding, it disagrees with Great West assertion that it is not relevant because it is based in contract law. In Tavaerz the Court detailed,
Contract law dictates that an assignee who take[s] the rights of the assignor is at the mercy of their performance unless the assignee takes the obligations of the assignor's contract as well. In that case, [the assignee] would have been responsible for paying [the assignor] the balance of what he was owed at that time before they could be entitled to the 180 payments [ ]. But under the current facts, the Structured Settlement Order was violated by Advanced Funding at the outset due to its nonpayment. Advanced Funding then sold its rights to payment-which it never successfully acquired- to [assignee] and now cannot be found to be held responsible. The remedy on this motion to vacate is to vacate the Structured Settlement Order which would result in [assignor] remaining the beneficiary to the annuity.The Superior Court of Bergen County further detailed that any amounts that assignor was paid could be recouped from assignee from the future annuity payments via motion.
Accordingly, since Great West paid $200,000.00 directly to De La Roca, they may retain this amount. However, they must refund De La Roca the $400,000.00 that they collected over and above this amount and are not allowed to collect any additional monies from the Lottery Commission on the purported De La Roca assignment. Great West may attempt to collect any money that it claims it lost from AF.
THE COURT'S RULING
Based upon the foregoing, it is hereby
ORDERED that this Court hereby vacates the Order of January 5, 2017, pursuant to CPLR Section 5015 (a)(3) and (4) and finds that the assignment of lottery payments to Great West Life &Annuity Insurance Company is unenforceable; and it is further
ORDERED that the Order of this Court staying any payments on this lottery prize be and . hereby is lifted and the New York State Lottery Commission be and hereby is directed to make all remaining lottery installment payments to the Lottery Winner, Elfido De La Roca; and it is further
ORDERED that Great West Life &Annuity Insurance Company be and hereby is directed to reimburse Elfido De La Roca the amount of $600,00.00 represented the four payments of $150,000.00 each it collected from his lottery prize, but is entitled to a credit for the $200,000.00 it paid to Elfido De La Roca, leaving a remaining balance due De La Roca of $400,000.00 with interest at a rate of 9% per annum beginning from the February 15, 2018 payment.
Papers Considered:
Trial Exhibits:
July 24, 2020 All Exhibits introduced on this date were incorporated into the joint exhibits
Joint Exhibits J-l through J-21 (Many of these exhibits were repetitive and unnecessary)
Exhibit J1: Affirmation in response to Respondent's Motion to Vacate the Court's January 5, 2017, Order under CPLR 5015(a)(3)&(4) and for restitution under CPLR 5015 (d)
Exhibit J2: Affidavit of Dan Cevallos, Sworn to on November 8, 2016, with Exhibits
Exhibit J3: Affidavit of Elfido De La Roca, Sworn to on November 9, 2016
Exhibit J4: Affirmation of Robert G. Schacht, Esq., Affirmed on November 17, 2016
Exhibit J5: January 2017 Order (Hon. Vincent J. Reilly)
Exhibit J6: Order to Show Cause on Motion
Exhibit J7: Affirmation of Jonathan B. Schloss, Esq., in Support of Respondent's Motion pursuant to CPLR 5015 (a)(3) and (a)(4) to Vacate
Exhibit J8: Affidavit of Elfido De La Roca dated February 21,2020, in support of OSC
Exhibit J9: Amended Order to Show Cause dated July 2, 2020
Exhibit J10: Transcript from July 24, 2020, Hearing
Exhibit J11: Affidavit of Elfido De La Roca Sworn to on October 21, 2020, in support of OSC
Exhibit J12: Attorney Supplemental Affirmation of Jonathan B. Schloss, Esq. in support of OSC
Exhibit J13: Notice of Intervention Motion dated December 1, 2020
Exhibit J14: Affirmation in Support of the Intervention Motion dated December 1, 2020
Exhibit J15: Affidavit in Support of Intervention Motion dated November 30, 2020
Exhibit J16: Affirmation in Opposition to the Intervention Motion, affirmed on December 15, 2020
Exhibit J17: Memorandum of Law in further support of Intervention dated December 21,2020
Exhibit J18: Transcript of Proceeding on November 10, 2020
Exhibit J19: Affidavit in Response to Respondent's Motion to Vacate the Court's January 5, 2017, Order
Exhibit J20: Reply Affirmation of Jonathan B. Schloss, Esq.
Exhibit R1: Affidavit of Dan Cevallos in support of Motion to Reargue/Renew
Exhibit R2: Affidavit of John Cevallos in Further Support of Motion to Dismiss
Exhibit R3: Affidavit in Support of Order to Show Cause for Injunction Relief
Exhibit J21: Affidavit of Service and Confirmation of Efiling of Subpoena Duces Tecum Ad Testificandum