Opinion
9892/05.
Decided September 7, 2005.
Background
This matter appeared on the motion calendar on May 17, 2005. The court granted the petitioner's application on default and instructed the petitioner to Settle Order on Notice. Upon further review of the motion papers submitted, the court vacates said ruling and rules accordingly:
Upon the following cited papers, 321 Henderson Receivables, L.P (petitioner) makes the instant application, pursuant to General Obligations Law sec. 5-1701 through 5-1709, known as the Structured Settlement Protection Act, for the approval of transfer of certain rights vested in Fred D'Amore, under a structured settlement funded by New York Life Insurance Company.
Specifically, Mr. D'Amore seeks to assign his right to receive sixty-seven (67) monthly payments of $2,050.00 each beginning on January 15, 2021 through July 15, 2026 in exchange for a lump sum. The aggregate amount of the payments to be transferred is $137,350.00, in consideration for a gross advance amount from 321 Henderson Receivable, L.P. of $10,000.00.
In support of the application for judicial approval of the proposed transfer, petitioner submits a document entitled "Disclosure Statement" which indicates that: the aggregate amount of the purchased payments is $137,350.00; the discounted present value of the aggregate payments to be transferred at 4.6% rate is $59,297.87; this is the calculation of current value of the transferred structured settlement payments under federal standards for valuing annuities; the gross amount payable to seller is $10,000.00. The document also indicates that based on the net amount Mr. D'Amore will receive from 321 Henderson Receivables, L.P., and the amounts and timing of the structured settlement payments that he will be turning over to them, he will in effect be paying interest at a rate of 15.17% per year. Petitioner relied upon this Disclosure Statement as evidence that the discounted rate is "fair and reasonable."
To further the application, petitioner submits a letter from an attorney, Antonio Pasquariello, dated February 19, 2005. Mr. Pasquariello contends that his offices have discussed and apprised Mr. D'Amore of the actual and potential legal, financial and tax ramifications of this agreement. The Court has also been provided with an affidavit of David Reape, the Senior Vice President of 321 Henderson Receivables, in which he stated that one of his responsibilities included establishing pricing guidelines for their purchase of deferred cash flows, including structured settlement payments.
In his affidavit, Mr. Reape lists various factors that are taken into account in determining at what value 321 Henderson will purchase a structured settlement. Some of those factors include the size and timing of payments, internal costs of funds, servicing expenses, the costs of locating potential clients, and the expense associated with obtaining court orders under various state statutes, and expenses associated with ensuring that the annuity companies comply with court orders. However, Mr. Reape made no showing as to how these factors specifically resulted in the discount rate applied in this case, other than stating that "the effective rate of Fred D'Amore's transfer is 15.17%, which is within industry standards for these types of transfers and is comparable to major credit card rates." He notes that the $10,000.00 dollars that Mr. D'Amore will be receiving is the present fair market value for these types of transactions, and that "based on the applicable federal rate for valuing annuities, the seller is receiving 16.90% of the IRS valuation of this payment stream."
Petitioner also submits the signed affidavit of Mr. D'Amore, sworn to on January 31, 2005 in support of the application. In his affidavit, Mr. D'Amore acknowledges receipt of a disclosure statement from the petitioner detailing the terms of the agreement, and states that he was advised to obtain professional advice about the transaction. Mr. D'Amore states that he is a 43 old, single, and has a one (1) year-old child, who lives with her mother. He is currently employed by DP New York City, as a truck driver, and earns $70,000 annually. He submits in his affidavit that he plans to use the cash he receives from petitioner to purchase a truck for $10,000.000, as he does not have assets or credit resources to finance these needs.
Mr. D'Amore concludes that completing the transaction with the petitioner will improve his current standard of living and financial circumstances, and that this transaction is in his best interest.
Issue
At issue is whether approval of the proposed transfer would be consistent with the spirit of the Structured Settlement Protection Act sec. 5-1701.
Discussion
The Structured Settlement Protection Act (SSPA) was adopted by the State Legislature to afford greater protection to individuals selling their rights to future payments under a structured settlement in exchange for a lump-sum payment to a third person ( Matter of Settlement Capital Corp., 1 Misc 3d 446). The Act was enacted as a result of concern that structured settlement "payees," such as Mr. D'Amore, are especially prone to being victimized and quickly dissipating their awards ( In the Matter of Settlement Funding of New York, 195 Misc 2d 721, 725). The Act protects payees from being taken advantage of by businesses seeking to obtain the payee's structured settlement payment rights ( In the Matter of Settlement Funding of New York., supra). The enactment provides for disclosure with respect to the terms and provisions of the proposed transfer as well as prior judicial approval ( In The Matter of Settlement capital Corporation, 194 Misc 2d 711).
Before approving the transfer of structured settlement payments rights, a court must determine whether the transfer is in the best interest of the payee, taking into account the welfare and support of the payee's dependents, 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" (General Obligations Law sec, 5-1706 [b]).
In the present case, this Court is not persuaded by the arguments set forth in petitioner's application that the discount rate used to determine the gross advance amount, and the fees and expenses used to determine the net advance amount seems fair and reasonable. It is apparent to the court that the proposed transfer in this case is not in the best interest of Mr. D' Amore or his son. Mr. D'Amore is proposing to assign his rights and interest to receive sixty-seven (67) monthly payments of $2,050.00, each beginning on January 15, 2021 through July 15, 2026, with an aggregate amount of the payments totaling $137,350.00, at a discount rate of 15.17%. This proposed assignment is quite troubling to the Court, which is mindful of the legislative intent to protect the recipients of long-term structured settlements from being victimized by companies aggressively seeking the acquisition of their rights (GOL sec. 5-1706).
There is no evidence in the record to suggest that Mr. D'Amore will not be able to meet his financial needs or be able to afford to buy a truck for $10,000.00. The Court is not convinced that Mr. D'Amore has exhausted other options of obtaining a loan at a lower interest rate than what is being offered by the petitioner, before considering transfer of certain rights vested in him under his structured settlement. Mr. D'Amore states that he is employed, and there is no showing of a hardship or a reason for the assignment that comports with the purpose of the statute, which is to provide emergency assistance to those payees of structured settlement agreements that are in immediate financial need ( In the Matter of Settlement Funding of New York, 195 Misc 2d 721, 725) ; Grieve v. General Am. Life Ins. Co, 58 F Supp 2d 319, 324). Furthermore, this court also finds disquieting the fact that Mr. D'Amore has not appeared personally before the court, and counsel has not been able to effectuate service on Mr. D'Amore despite several attempts, and is now seeking the approval of this transfer on default.
Based on a thorough review of the application, this Court finds that petitioner has failed to meet its burden of establishing that the transaction is in the best interest of Mr. D'Amore and his dependent and, that the terms of the transaction including the discount rate used to determine the gross advance amount is "fair and reasonable."
Accordingly, petitioner's application for judicial approval of the transfer of interest in Mr. D'Amore's structured settlement is denied.
This constitutes the Decision and Order of this Court.