Demurrer (Judge Ralph C. Hofer)


Case Number: EC064716??? Hearing Date: June 17, 2016??? Dept: NCD

TENTATIVE RULING

DEMURRER
[CCP ?430.10 et. seq.]

Calendar: 6
Date: 6/17/16
Case No: EC 064716
Case Name: Sharon Nash v. Fremont Investment & Loan et al.

Moving Party: Defendants Ocwen Loan Servicing, LLC., HSBC Bank USA, et al. Responding Party: Plaintiff Sharon Nash

ANALYSIS:
Plaintiff filed a Verified First Amended Complaint in this action on June 1, 2016, after the filing of the demurrer, and before the date for filing an opposition to the demurrer.

Under CCP ? 472:
?(a) A party may amend its pleading once without leave of the court at any time before the answer or demurrer is filed, or after a demurrer is filed but before the demurrer is heard if the amended complaint, cross-complaint, or answer is filed and served no later than the date for filing an opposition to the demurrer?.?

The demurrer will be accordingly be taken off calendar as moot.

RULING:
Demurrer is taken off calendar as moot in light of the filing on June 1, 2016 of a Verified First Amended Complaint.


Case Number: ES019776??? Hearing Date: June 17, 2016??? Dept: NCD

TENTATIVE RULING

Calendar: 8
Date: 6/17/16
Case No: ES 019776
Case Name: In the Matter of Rolando Pool

PETITION FOR APPROVAL FOR TRANSFER OF STRUCTURED SETTLEMENT PAYMENT RIGHTS
[Insurance Code ?10134 et. seq.]

Moving Party: Petitioner Catalina Structured Funding, Inc.
Responding Party: No Opposition

RELIEF REQUESTED:
Approve transfer of structured settlement payment rights by and between Rolando Pool, as transferor, and Catalina Structured Funding, Inc., as transferee.

RULING:
At the hearing, the court will make inquiry concerning the following issues:

1) Address on proof of service of annuity holder, why not to address in New York, NY.?
2) What efforts made to obtain documents, i.e., the annuity contract, the qualified assignment
agreement, and the underlying structured settlement agreement?
3) Is transferor fully aware that this proceeding will be the final opportunity to transfer benefits?
4) How are injuries resolved when limited mobility remains, possibly creating a continuing need
for further medical attention, and future insurance?
5) Why was structured settlement transfer in 2016 with Peachtree Settlement Funding denied by
the Los Angeles County Superior Court?
6) What documentation is there regarding previous transfers?

Petition for Approval for Transfer of Structured Settlement Payment Rights is GRANTED subject to the above referenced inquiries being resolved to the satisfaction of the Court.

ANALYSIS:
Procedural
Copies of Documents
Under Insurance Code ? 10139.5:
? (f)

(1) A petition under this article for approval of a transfer of structured settlement payment rights shall be made by the transferee and brought in the county in which the payee resides at the time the transfer agreement is signed by the payee, or, if the payee is not domiciled in California, in the county in which the payee resides or in the county where the structured settlement obligor or annuity issuer is domiciled.

(2) Not less than 20 days prior to the scheduled hearing on any petition for approval of a transfer of structured settlement payment rights under this article, the transferee shall file with the court and serve on all interested parties a notice of the proposed transfer and the petition for its authorization, and shall include the following with that notice:

(A) A copy of the transferee’s current petition and any other prior petition, whether approved or withdrawn, that was filed with the court in accordance with paragraph (6) of subdivision (c).

(B) A copy of the proposed transfer agreement and disclosure form required by paragraph (3) of subdivision (a).

(C) A listing of each of the payee’s dependents, together with each dependent’s age.

(D) A copy of the disclosure required in subdivision (b) of Section 10136.

(E) A copy of the annuity contract, if available.

(F) A copy of any qualified assignment agreement, if available.

(G) A copy of the underlying structured settlement agreement, if available.

(H) If a copy of a document described in subparagraph (E), (F), or (G) is unavailable or cannot be located, then the transferee is not required to attach a copy of that document to the petition or notice of the proposed transfer if the transferee satisfies the court that reasonable efforts to locate and secure a copy of the document have been made, including making inquiry with the payee. If the documents are available, but contain a confidentiality or nondisclosure provision, then the transferee shall summarize in the petition the payments due and owing to the payee, and, if requested by the court, shall provide copies of the documents to the court at a scheduled hearing.?

Here, the petition fails to include a copy of the annuity contract, qualified assignment agreement, or underlying structured settlement agreement. The Gaviria Declaration indicates that Catalina has contacted the payee, annuity issuer, and requested court records but has been unable to locate these documents. [Para. 1]. The annuity issuer has provided a letter verifying the benefits payable as to transferor as of June 12, 2015. [Ex. A]. The transferor has provided a declaration concerning the settlement agreement, which was evidently entered on his behalf when he was a newborn. [Ex. B]. The court may find that reasonable efforts have been made to locate and secure copies of the documents. The Court will inquire further at the hearing.

There is also no copy of the records of previous transfers.

Under Insurance Code ? 10139.5
?(c) Every petition for approval of a transfer of structured settlement payment rights, except as provided in subdivision (d), shall include, to the extent known after the transferee has made reasonable inquiry with the payee, all of the following:

? (6) Information regarding previous transfers or attempted transfers, as described in paragraph (11), (12), or (13) of subdivision (b). The transferee or payee may choose to provide this information by providing copies of pleadings, transaction documents, or orders involving any previous attempted or completed transfer or by providing the court a summary of available information regarding any previous transfer or attempted transfer, such as the date of the transfer or attempted transfer, the payments transferred or attempted to be transferred by the payee in the earlier transaction, the amount of money received by the payee in connection with the previous transaction, and generally the payee’s reasons for pursuing or completing a previous transaction. The transferee’s inability to provide the information required by this paragraph shall not preclude the court from approving the proposed transfer, if the court determines that the information is not available to the transferee after the transferee has made a reasonable effort to secure the information, including making an inquiry with the payee.?

Here, the court may find that the descriptions of the previous transfers in the Gaviria Declaration are sufficient. The Court will inquire further at the hearing as to the documentation with respect to those transfers.

Substantive
The petition seeks approval of a transfer of certain structured settlement payment rights held by transferor Rolando Pool pursuant to a settlement agreement entered into intended to compensate Pool for personal injuries and medical expenses due to a doctor breaking Pool?s left arm during his birth. [Pool Decl., para. 3].

Pool indicates that other than having limited mobility in his left arm, there are no longer any reoccurring medical problems relating to the injury, so no continuing need to provide for future medical expenses. [Pool Decl.,para, 3].

Pool is now 28 years old, single, without dependents and without child support or maintenance obligations. He works as an inventory taker earning approximately $800 per month, and is currently looking for another job offering him more hours. [Pool Decl., para. 4].

Pool has previously assigned a portion of his payment rights. The Gaviria Declaration describes four previous attempts at transfer of structured settlement payments, three of which were approved, with a recent attempt in 2016 denied. The funds were previously used to purchase a vehicle, pay bills and rent, and cover living expenses. [Gaviria Decl., para. 7].

The current transaction is with Catalina. Pool is transferring 120 monthly life contingency payments of $735.93 beginning June 1, 2018 through May 1, 2028 with a 3% annual increase each June and 120 monthly life contingent payments of $1,806.13 beginning June 1, 2028 through and including May 1, 2038 with a 3% increase each June. The total dollar amount of payments being sold is $350,802.96, with a discounted present value of $271,746.12. The net amount to be paid to Pool is $42,500, with no deduction for expenses.

Pool states that with the funds he will use a portion toward assisting his mother in having eye surgery to address her glaucoma, and to purchase medication for her, and another portion to pay off past due bills and collections, with the remaining funds to be used toward purchasing a mobile home. [Pool Decl., para. 7-9]. It also appears that he will become the owner of a life insurance policy, and that the payments being transferred are all remaining payments he is due.

Under Insurance Code section 10137(a):
?A transfer of structured settlement payment rights is void unless a court reviews and approves the transfer and finds the following conditions are met:

(a) The transfer of the structured settlement payment rights is fair and reasonable and in the best interest of the payee, taking into account the welfare and support of his or her dependents.

(b) The transfer complies with the requirements of this article, will not contravene other applicable law, and the court has reviewed and approved the transfer as provided in Section 10139.5.?

Insurance Code section 10139.5 provides the factors to be considered by the court in determining whether to approve the transfer of a structured settlement. The highlighted factors are those which are of some concern in connection with this petition.
(a) A direct or indirect transfer of structured settlement payment rights is not effective and a structured settlement obligor or annuity issuer is not required to make any payment directly or indirectly to any transferee of structured settlement payment rights unless the transfer has been approved in advance in a final court order based on express written findings by the court that:

(1) The transfer is in the best interest of the payee, taking into account the welfare and support of the payee’s dependents.

(2) The payee has been advised in writing by the transferee to seek independent professional advice regarding the transfer and has either received that advice or knowingly waived, in writing, the opportunity to receive the advice.

(3) The transferee has complied with the notification requirements pursuant to paragraph (2) of subdivision (f), the transferee has provided the payee with a disclosure form that complies with Section 10136, and the transfer agreement complies with Sections 10136 and 10138.

(4) The transfer does not contravene any applicable statute or the order of any court or other government authority.

(5) The payee understands the terms of the transfer agreement, including the terms set forth in the disclosure statement required by Section 10136.

(6) The payee understands and does not wish to exercise the payee’s right to cancel the transfer agreement.

(b) When determining whether the proposed transfer should be approved, including whether the transfer is fair, reasonable, and in the payee’s best interest, taking into account the welfare and support of the payee’s dependents, the court shall consider the totality of the circumstances, including, but not limited to, all of the following:

(1) The reasonable preference and desire of the payee to complete the proposed transaction, taking into account the payee’s age, mental capacity, legal knowledge, and apparent maturity level.

(2) The stated purpose of the transfer.

(3) The payee’s financial and economic situation.

(4) The terms of the transaction, including whether the payee is transferring monthly or lump sum payments or all or a portion of his or her future payments.

(5) Whether, when the settlement was completed, the future periodic payments that are the subject of the proposed transfer were intended to pay for the future medical care and treatment of the payee relating to injuries sustained by the payee in the incident that was the subject of the settlement and whether the payee still needs those future payments to pay for that future care and treatment.

(6) Whether, when the settlement was completed, the future periodic payments that are the subject of the proposed transfer were intended to provide for the necessary living expenses of the payee and whether the payee still needs the future structured settlement payments to pay for future necessary living expenses.

(7) Whether the payee is, at the time of the proposed transfer, likely to require future medical care and treatment for the injuries that the payee sustained in connection with the incident that was the subject of the settlement and whether the payee lacks other resources, including insurance, sufficient to cover those future medical expenses.

(8) Whether the payee has other means of income or support, aside from the structured settlement payments that are the subject of the proposed transfer, sufficient to meet the payee’s future financial obligations for maintenance and support of the payee’s dependents, specifically including, but not limited to, the payee’s child support obligations, if any. The payee shall disclose to the transferee and the court his or her court-ordered child support or maintenance obligations for the court’s consideration.

(9) Whether the financial terms of the transaction, including the discount rate applied to determine the amount to be paid to the payee, the expenses and costs of the transaction for both the payee and the transferee, the size of the transaction, the available financial alternatives to the payee to achieve the payee’s stated objectives, are fair and reasonable.

(10) Whether the payee completed previous transactions involving the payee’s structured settlement payments and the timing and size of the previous transactions and whether the payee was satisfied with any previous transaction.

(11) Whether the transferee attempted previous transactions involving the payee’s structured settlement payments that were denied, or that were dismissed or withdrawn prior to a decision on the merits, within the past five years.

(12) Whether, to the best of the transferee’s knowledge after making inquiry with the payee, the payee has attempted structured settlement payment transfer transactions with another person or entity, other than the transferee, that were denied, or which were dismissed or withdrawn prior to a decision on the merits, within the past five years.

(13) Whether the payee, or his or her family or dependents, are in or are facing a hardship situation.

(14) Whether the payee received independent legal or financial advice regarding the transaction. The court may deny or defer ruling on the petition for approval of a transfer of structured settlement payment rights if the court believes that the payee does not fully understand the proposed transaction and that independent legal or financial advice regarding the transaction should be obtained by the payee.

(15) Any other factors or facts that the payee, the transferee, or any other interested party calls to the attention of the reviewing court or that the court determines should be considered in reviewing the transfer.?

The transaction raises concerns with respect to medical expenses and future medical expense needs, as it is not explained fully how Pool?s limited mobility in his arm does not require further attention, and whether transferor has medical insurance to cover any future needs. In addition, the court will want to confirm at the hearing that Pool is aware that he is assigning all of his remaining structured settlement payments, unless he lives beyond May of 2038. The court will also inquire at the hearing concerning why the most recent petition to assign benefits was denied by a LASC earlier this year.

This seems like an unusually ill-advised deal, with an equivalent interest rate of 20%. However, the transferor is now an adult, and Catalina assumes some risk if Pool does not live through 2038, and life contingency benefits are in fact not paid.

With respect to the annuity, it is confirmed only by letter, so the court cannot confirm that it contains a nonassignment clause. [Ex. A].

The issue of whether nonassignment clauses bar a structured settlement transfer such as the one at issue here, has been addressed by the California court of appeal, which concluded that where notice has been provided to the interested parties, and no objection is made, the court is authorized to consider the petition regardless of the existence of a nonassignment clause:
?The superior court, however, did conclude that public policy bars the waiver of the contractual antiassignment clauses with respect to factoring transactions. We disagree. We conclude that California Uniform Commercial Code section 9408 evidences a public policy against antiassignment provisions in general and that the SSTA, Insurance Code section 10136 et seq., evidences a public policy in favor of court-approved factoring transactions. [*1076] Thus, public policy favors the legal conclusion that antiassignment provisions do not bar court-approved transfers of structured settlement payments.

Therefore, we conclude that, where no interested parties object to the transfer of structured settlement payment rights, the antiassignment provisions in the annuity contract, settlement agreement or other related contracts do not bar the factoring transaction at issue in this appeal.
321 Henderson Receivables Origination LLC v. Sioteco (2009) 173 Cal. App.4th 1059, at 1075-1076.

The problem here is that the letter shows an address in New York, New York. [Ex. A]. The proof of service of this petition shows it was sent by priority mail to the annuity holder at an address in Philadelphia, Pennsylvania. It is accordingly not clear that the annuity company has received appropriate notice of the petition hearing to object. The matter may be continued to require appropriate service on the interested parties.