Opinion
INDEX NO. 17041/11 MOTION SEQUENCE NO. 1
02-02-2012
In the Matter of the Petition of J.G. WENTWORTH ORIGINATIONS, LLC, f/k/a 321 HENDERSON RECEIVABLES ORIGINATION, LLC, Petitioner, v. LISA MAURELLO and CONTINENTAL CASUALTY COMPANY, As Interested Persons Pursuant to GOL §5-1701(c).
SHORT FORM ORDER
Present: Hon. Thomas Feinman Justice
trial/ias part 9
Nassau county
motion submission
date: 1/9/12
The following papers read on this motion:
+-------------------------------------+ ¦Order to Show Cause and Affdavits¦X ¦ +---------------------------------+---¦ ¦Affirmation in Opposition ¦N/A¦ +---------------------------------+---¦ ¦Reply Affirmation ¦N/A¦ +-------------------------------------+
Relief Requested
The petitioner initiates this special proceeding, by way of Order to Show Cause, for an order approving the transfer of structured settlement payment rights from Lisa Maurello, (hereinafter referred to as "Maurello"), to petitioner, J.G. Wentworth Originations, LLC, f/k/a 321 Henderson Receivables Origination, LLC, (hereinafter referred to as "J.G. Wentworth").
Maurello, under the terms of the Transferred Assignment Agreement with J.G. Wentworth intends to transfer and sell his rights to sixty-nine (69) monthly payments in the amount of four hundred and 00/100 dollars, ($400.00), beginning on or about February 4,2012 through on or about November 4,2017.
In consideration for selling these payments, J.G. Wentworth agrees to pay Maurello the sum of nineteen thousand six hundred and 00/100 dollars, ($19,600.00).
Applicable Law
The SSPA was enacted as a result of concern that the structured settlement payees are especially prone to being victimized and quickly dissipating their awards. (In re Petition of Settlement Funding of New York, LLC, 761 NYS2d 816). "The SSPA protects payees from being taken advantage of by businesses seeking to acquire the payee's structured settlement payment rights" and discourages such transfers by requiring special proceedings seeking judicial approval ot the transfer. (Id., General Obligations Law §§5-1705 and 5-1706). A proposed transfer of a portion of payee's structured settlement for less than half its present discounted value was found not to be in the payee's "best interest", as required by the Structured Settlement Protection Act (SSPA). (Id, McKinney's General Obligations Law §5-1706(b)). The payee's willingness to transfer the settlement "has no bearing on the court's determination of whether the interest rate paid by the transferee is 'fair and reasonable' within the meaning of Structured Settlement Protection Act, (SSPA)." (Id)
General Obligations Law §5-1703, effective July 1, 2002, provides the following required disclosure:
(a) the amounts and due dates of the structured settlement payments to be transferred;
(b) the aggregate amount of such payments;
(c) the discounted present value of the payments to be transferred, which shall be identified as the "calculation of current value of the transferred structured settlement payments under federal standards for valuing annuities", and the amount of the applicable federal rate used in calculating such discounted present value;
(d) the price quote from the original annuity issuer, or, if such price quote is not readily available from the original annuity issuer, then a price quite from two other annuity issuers mat reflects the current cost of purchasing a comparable annuity for the aggregate amount of payments to be transferred;
(e) the gross advance amount and the annual discount rate, compounded monthly, used to determine such figure;
(f) an itemized listing of all commissions, fees, costs, expenses and charges payable by the payee or deductible from the gross amount otherwise payable to the payee and the total amount of such fees;
(g) the net advance amount including the statement: "The net cash payment you receive in this transaction from the buyer was determined by applying the specified discount rate to the amount of future payments received by the buyer, less the total amount of commissions, fees, costs, expenses and charges payable by you";
(h) the amount of any penalties or liquidated damages payable by the payee in the event of any breach of the transfer agreement by the payee; and
(i) a statement that the payee has the right to cancel the transfer agreement, without penalty or further obligation, no later than the third business day after the date the agreement is signed by the payee.
General Obligations Law §5-1706 provides that the transfer must be in the best interest of the payee, the transaction is fair and reasonable, and the payee has been advised in writing to seek independent professional advice regarding the transfer and has either received such advice, or knowingly waived such advice in writing.'" [D]scounted present value' means the present value of future payments, as determined by discounting such payments to the present using the most recently published applicable federal rate for determining the present value of an annuity, as issued by the United States Internal Revenue Service." (General Obligations Law §5-1701(c)).
"The primary purpose of the SSP A is to protect recipients of long-term structured settlements from being victimized by companies aggressively seeking the acquisition of their rights to guaranteed structured settlement payments." (321 Henderson Receivables Origination, LLC v. Lugo, 889 NYS2d 508). The Court must independently determine, in its discretion, 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 fees and expenses used to determine the net advance amount, are fair and reasonable", (emphasis added.) (In re Petition of Settlement Funding of New York, LLC, supra, citing General Obligations Law §5-1706[b]). "This is a two pronged test to be applied in evaluating the parties' agreement." (321 Henderson Receivables Origination, LLC, supra).
The best interests determination, at the Court's discretion, involves consideration of several facts and circumstances concerning the payee, including the payee's age, mental capacity, maturity level, "ability to show sufficient income that is independent of the payments sought for transfer", and ability to provide for payee's dependents. (321 Henderson Receivables Origination, LLC, supra). "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 dependents; 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." (Whitney v. LM Property, 3375/2011 NYLJ June 24,2011; citing Matter of Settlement Capital Corporation, [Ballos], 1 Misc3d 446). The "best interest" consideration is separate and independent of the consideration of whether the transfer is "fair and reasonable". (In re Petition of Settlement Funding of New York, LLC, supra). A Payee who desperately needed cash to obtain "life sustaining medical treatment for a love one" in the face of having no other alternative means of raising money would serve a payee's best interest in the face of a "life and death emergency". (Id.) The Court found the
transfer was not in a 21 year old payee's best interest when the payee had a dependent, without any information concerning the putative father, and the request for funds to purchase a vehicle were not explained. (321 Henderson Receivables Origination, LLC, supra).
"The 'best interest' standard under SSPA requires a case by case 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 provide needed financial rescue without jeopardizing or irreparably impairing financial security afforded to the payee and his or her dependents by the periodic payments." (In re Settlement Capital Corp., 769 NYS2d 817). An explanation as to why the payee has an immediate need for the transfer of funds, or lump sum, is taken into consideration. (Whitney, supra, citing In re Settlement Capital Corp., 194 Misc2d 711).
A payee who had not "enjoyed the benefits of wise and unbiased counsel in the management of her financial affairs" and waived her right to consult with an independent professional, confirmed the court's impression that the payee did not fully appreciate the consequences of her transfer. (Whitney v. LM Property, supra).
The proposed transfer of the portion of the payee's structured settlement which would result in the transferee paying "less than half of settlement's present discounted value" was not fair and reasonable as required by SSPA. (In re Petition of Settlement Funding of New York, LLC, supra). As already provided, the interest rate paid for the transfer of a structured settlement of "no more than 8% would be fair and reasonable" under SSPA whereby the transferee does not charge counsel fees and costs to the payee as a transfer expense. (Id, citing General Obligations Law §5-1701(5)).
Discussion
In the case at bar, the proposed transfer involves the transfer of sixty-nine (69) monthly payments of four hundred and 00/100 dollars, ($400.00), commencing on or about February 4,2012 and ending on or about November 4,2017. The aggregate amount of payments sold to Maurello is thirty-seven thousand two hundred and 00/100 dollars, ($37,200.00), at a discounted present value of thirty-five thousand two hundred thirty-nine and 87/100 dollars, ($35,289.87), with a net payment to the payee, of nineteen thousand six hundred and 00/100 dollars, ($19,600.00).
Here, the payment of nineteen thousand six hundred and 00/100 dollars, ($ 19,600.00), with an annual discount rate of 19.87% per year, is excessive and not "fair and reasonable".
The second prong of this test requires this Court to determine whether the transfer is in the payee's "best interest". Maurello, avers that she is single, has no children, is unemployed and needs to pay two thousand one hundred and 00/100 dollars, ($2,100.00), condo fees, nine thousand five hundred and 00/100 dollars, ($9,500.00), for bills, and the remainder for home improvement. However, Maurello, does not provide any documentation to substantiate her submissions.
Maurello has previously transferred portions of her structured settlement on or about January 30, 2008, whereby Maurello transferred monthly portions of six hundred and 00/100 dollars, ($600.00), monthly payments commencing November4,2007 and continuing through and including October 4,2017, and one lump sum payment of one hundred twelve thousand one hundred ninety-two and 20/100 dollars, ($112,192.20), due on November 4,2018. This Court is concerned with Maurello's decision to waive independent professional advice regarding this transaction under these circumstances. This Court is not satisfied that Maurello fully appreciates the consequences of the proposed transaction.
Conclusion
In light of the foregoing, as the proposed transfer of a portion of the payee's rights and interests in his structured settlement does not meet the "best interest" requirement, or the "fair and reasonable requirement" under SSPA, the motion is denied and the petition is dismissed.
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J.S.C
cc: Lum, Drasco & Positan, LLC
Lisa Maurello
Drinker, Biddle & Reath, Esqs.