Opinion
18874 2009
10-29-2009
SETTLEMENT FUNDING OF NEW YORK, LLC, Petitioner, v. HARTFORD-COMPREHENSIVE EMPLOYEE BEN. SVC. CO., ET AL., Respondents.
Attorneys for petitioner Settlement Funding of New York, LLC: Paris & Chaikin, PLLC, by Ian M. Chaikin, Esq., New York, NY.
Upon the foregoing papers it is ordered that the petition is determined as follows:
The petitioner commenced this special proceeding pursuant to General Obligations Law, Title 17, known as the SSPA, for the approval of transfer of certain structured settlement payment rights to it from Mr. Persaud.
The SSPA requires that certain procedural and substantive safeguards be followed before a structured settlement payment may be transferred (GOL § 1705). The procedure includes that a copy of a disclosure statement as required under GOL § 5-1703 be attached to the petition and that proof of service upon the payee be provided. Moreover, pursuant to GOL § 5-1706, entitled, Approval of Transfers of Structure Settlement Payment Rights, "No direct or indirect transfer of structure settlement payment rights shall be effective and no structured settlement obligor or annuity issuer shall be required to make any payment directly or indirectly to any transferee of structured settlement payment rights unless the transfer has been authorized in advance in a final order of a court of competent jurisdiction based upon express findings by such court 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 determined the net advance amount are fair and reasonable;
(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 of other government authority; and
(e) is written in plain language and in compliance with section 5-702 of this article."
In determining the matter at issue, the court is required to assess whether the statutory mandates of the SSPA have been met. A review of the submissions accompanying the petition demonstrates that the application procedurally and facially complies with GOL §§ 5-1703 and 5-1706(a)(c)(d) and (e). Since such procedural compliance is evident herein, the court must then determine, pursuant to 5-1706(b), whether "the transfer is in the best interest of the payee, taking into account the welfare and support of the payee's dependents [if any]; 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."
The funds that are the subject of this petition represent a portion of structured settlement payments due to Mr. Persaud in accordance with the settlement of a certain personal injury action commenced on his behalf when he was a child. Pursuant to the terms of the structured settlement agreement, Mr. Persaud became entitled to receive a series of deferred payments according to the following payment schedule:
(a) seven annual lump sum payments of $22,500.00, the first of which to begin on July 29, 2008 and the last of which to be made on July 29, 2014; and
(b) a lump sum of $175,028.31 on July 29, 2015.
Mr. Persaud has already received two lump sum payments of $ 22,500.00. He now proposes to transfer unto the petitioner a portion of the five lump sum payments that he is scheduled to receive on July 29, 2010; July 29, 2011; July 29, 2012; July 29, 2013; and July 29, 2014, in the respective amount of $12,500.00 each, and one lump sum payment of $55,000.00 out of the $175,028.31 that he is scheduled to receive on July 29, 2015, for an aggregate amount of $ 117,500.00 with a discounted present value of $103,735.49, for which the petitioner proposes to pay Mr. Persaud a gross advance amount of $64,355.50. An annual discount rate of 14.99% was used to determine the gross advance amount. After legal fees of $2,000.00 and a $200.00 processing fee, the net final advance amount is $62,155.60.00, which represents 59.91% of the estimated current value and 52.89% of the $117,500.00 to be transferred to the petitioner.
In support of the unopposed application for judicial approval of the proposed transfer Mr. Persaud, who is 19 years old, indicates that he lives with and is supported by his parents. He states that he unemployed and plans to use the proceeds of the subject transaction for a down payment towards the purchase of a house and new furniture. He would also like to use a portion of the proceeds to fund an emergency savings account and pre-pay the mortgage on the house for a period of twelve months. Mr. Persaud states that his father has offered to co-sign a mortgage loan for him, although he will be solely responsible for making his monthly mortgage payments.
Other than the enumerated structured settlement payments, it appears that Mr. Persaud does not have any other source of income or assets to finance his stated goals. Moreover, he fails to explain how he will be able to obtain financing for the purchase of a home, afford to maintain the anticipated monthly mortgage payments, or satisfy the other expenses associated with home ownership without job and a steady income. He also fails to explain how he utilized the recent lump sum structured settlement payments that he received in July 2008 and July 2009. Further, while Mr. Persaud has consulted with an attorney for advice in connection with the proposed transfer, the court is not satisfied that he fully appreciates the consequences of such transfer. Moreover, although Mr. Persaud does not have any dependants, given the substantial amount of money that he has already dissipated since last year, and taking into account his non-advanced level of education and lack of employment, it appears that the proposed transfer would severely compromise Mr. Persaud's future financial security.
Finally, the petitioner has not demonstrated that the 14.99 % discount rate applied against the funds sought to be transferred is "fair and reasonable" within the meaning of the SSPA (See In re Settlement Capital Corp., 1 Misc 3d 446 [2003] [15.591% discount rate not accepted as fair and reasonable]; Settlement Funding of New York, LLC (Cunningham), 195 Misc 2d 721 [2003] [15.46% discount rate not accepted as fair and reasonable, and the court suggested that a rate of 8% would be fair and reasonable provided that attorney fees are not deducted from the amount given to the payee]; see also In re Petition of Settlement Funding of New York, 195 Misc 2d 721 [2003] [18.46% discount rate not accepted as fair and reasonable]; In re Settlement Capital Corp. for Approval of Transfer of Structured Settlement Payment Rights of "Y", 194 Misc 2d 711 [2003] [18.621% rate not accepted as fair and reasonable]).
Based upon the foregoing, the petitioner has failed to meet its burden of establishing that the transaction is in Mr. Persaud's best interests and that the terms of the transaction are fair and reasonable.
Accordingly, the petition is denied in all respects and the proceeding is dismissed.
This constitutes the decision and judgment of the court.