Singer Asset Fin. Co., L.L.C. v Scott

[*1] Singer Asset Fin. Co., L.L.C. v Scott 2006 NY Slip Op 50035(U) [10 Misc 3d 1070(A)] Decided on January 6, 2006 Supreme Court, Rensselaer County Ceresia, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on January 6, 2006
Supreme Court, Rensselaer County

Singer Asset Finance Company, L.L.C., Plaintiff,

against

Thomas L. Scott and INA Life Insurance Company of New York, Defendant.



211646



Sacco & Fillas, LLP

Attorneys For Plaintiff

141-07 20th Avenue

Suite 506

Whitestone, NY 11357

(Tonino Sacco, Esq., of Counsel)

Drinker, Biddle & Reath, LLP

Attorneys For Defendant

Ina Life Insurance Company

of New York n/k/a CIGNA

Life Insurance Company

of New York

140 Broad Street, 39th Floor

New York, NY 10005

(Kristin M. Heine, of Counsel)

George B. Ceresia, J.

Defendant Thomas L. Scott (hereinafter "Scott") is the recipient of payments under a structured settlement which was created in 1982. On September 20, 1999 Scott entered into a loan agreement under which he borrowed the sum of $49,750 from Merrick Bank Corporation, plaintiff's predecessor. The loan was to be repaid from two lump sum payments due under [*2]Scott's structured settlement annuity: $30,000 due April 14, 2001; and $50,000 due April 14, 2004. Although plaintiff apparently received the first payment, it failed to receive the second one. As a consequence, plaintiff has commenced the above-captioned action seeking, inter alia, declaratory and injunctive relief, all towards enforcing the loan documents which Scott apparently signed in 1999. As a part of the relief, plaintiff seeks interest at 18% per annum on the $50,000 lump sum payment, for a total of $65,947.28 (as of October 1, 2005). Defendant Ina Life Insurance, now known as Cigna Life Insurance Company of New York (hereinafter "Cigna") has served an answer containing a counterclaim and cross-claim in interpleader. Scott has not appeared in the action.

Plaintiff has made a motion for a default judgment against Scott, and a motion for summary judgment against Cigna. Cigna has made a motion for discharge pursuant to CPLR § 1006 (f).

Turning first to the motions of plaintiff, the Court notes that in reviewing an application for a default judgment under CPLR 3215, it is the Court's obligation to examine the merits of the pleading to determine whether the moving party has demonstrated, prima facie, entitlement to judgment (see, Dyno v Rose, 260 AD2d 694, 698-699 [3rd Dept., 1999]; see also, Luna v Luna, 263 AD2d 470 [2nd Dept., 1999]).

The instant case has striking similarities to Singer Asset Finance Company, LLC v Bachus (294 AD2d 818 [4th Dept., 2002], lv to app denied, 745 NYS2d 737, mot for lv to app denied 98 NY2d 615). In that case, a structured settlement recipient borrowed the sum of $13,676.46 from Merrick Bank Corporation. In exchange, Merrick Bank Corporation acquired the right to 60 monthly payments of $401.77 under the recipient's structured settlement agreement. Merrick Bank Corporation assigned its interest to Singer Asset Finance Company, L.L.C. (hereinafter "Singer"). When Singer failed to receive the annuity payments, it commenced action against the structured settlement recipient seeking money damages and declaratory relief. Supreme Court granted Singer judgment against the structured settlement recipient in the sum of $22,499.12 plus interest. On appeal, the Appellate Division concluded that Supreme Court erred in finding that the loan documents executed by the structured settlement recipient were valid and enforceable. The Appellate Division found that although the loan documents included a promissory note and security agreement (as is the case here), it was evident that the parties actually intended to effect an absolute and irrevocable assignment of the structured settlement payments to Merrick Bank Corporation/Singer. The Appellate Division found that Singer should not be compensated in breach of contract, but rather on a theory of unjust enrichment. As a consequence, the Appellate Division awarded Singer $13,676.46 together with 9% interest.

In this instance, although plaintiff has submitted a copy of an order dated September 7, 1982 approving the original settlement, it does not appear that plaintiff has submitted a copy of all underlying settlement documents, including the settlement agreement. As one example, the order dated September 7, 1982 apparently was not the first settlement order, since it makes express reference to a prior order dated August 18, 1982. Apart from the foregoing, it appears that certain exhibits purportedly annexed to the loan documents which serve as a basis for the instant transaction are missing - not the least of which is the annuity contract issued by Cigna. Of particular note, plaintiff has submitted a change of address form signed by Scott, dated October 26, 1999, which recites, in part, as follows: "I confirm that I am receiving payments pursuant to a settlement annuity contract issued by Connecticut General Life Insurance Company of North American * * * and that, under the terms of [*3]this settlement annuity contract, I do not have any rights to accelerate, assign or transfer my interest in any such payments.* * *" (emphasis supplied)

Thus, the only documentary evidence submitted by plaintiff in connection with the lawfulness of the loan documents executed by Scott appears to indicate that the annuity payments were not assignable. As in the Singer case (supra ) the Court is of the view that the instant loan transaction possesses all of the earmarks of an absolute and irrevocable assignment. This being the case, the Court finds that the loan documents violate the anti-assignment provision in the settlement agreement, and that the loan may not be enforced as written (see Singer Asset Finance Company, LLC v Bachus, supra ).

Reviewing the causes of action contained in plaintiff's complaint, the Court finds that plaintiff's first cause of action, in breach of contract, is lacking in merit by reason that the loan documents are unenforceable. Plaintiff's second cause of action, in conversion, is likewise without merit since, assuming the facts as alleged are true, the asserted conversion by Scott would be of annuity payments which he owned, and which he had no right to assign or encumber in the first place. Apart from the foregoing, no evidence in admissible form has been presented to demonstrate to whom the April 14, 2004 annuity payment was delivered, or even that it was paid out at all.

As to plaintiff's third cause of action, the Court finds that plaintiff is entitled to an award on a theory of unjust enrichment (see Singer Asset Finance Company, LLC v Bachus, supra ). As in the Singer case (supra ) the Court finds that plaintiff is entitled to judgment for the unpaid principal on the loan, together with interest at 9%, amounting in all to the sum of $40,478.00 as of January 6, 2006 [FN1].

Plaintiff's fourth cause of action is for injunctive relief to enjoin Scott to affirmatively comply with the loan agreement in all respects "including the payment address instructions, not to interfere with or take any action inconsistent with Plaintiff's rights in and to the Collateral and under the Loan Agreement, to furnish Plaintiff or its successor(s) and/or assign(s) with its Collateral and to honor the Loan Agreement in all respects until Plaintiff's claims and any judgment entered herein are satisfied". Inasmuch as the Court finds that the loan documents are not enforceable, the Court concludes that all forms of injunctive relief must be denied.

Plaintiff's fifth cause of action seeks a declaration of the rights of the plaintiff as against Scott. As noted, the Court finds that the loan documents are not enforceable, but that plaintiff is entitled to judgment on a theory of unjust enrichment. The Court will issue declaratory relief reflective of the foregoing.

Plaintiff's sixth cause of action seeks declaratory and injunctive relief against Cigna for a determination that plaintiff possesses a first perfected security interest in and to the annuity payments, superior to any person and/or entity. Accordingly, plaintiff seeks a determination that Cigna be directed to remit to plaintiff all annuity payments currently being held, as well as all future payments as they become due, until plaintiff's judgment against Scott is satisfied. Notably, as a part of its determination in Singer Asset Finance Company v Bachus (supra ) the Appellate Division determined that since the loan transaction in that case was, in reality, an absolute assignment of the annuitant's interest in the periodic payments, no security interest could be [*4]created in the periodic payments, and that UCC Article 9 did not apply to the transaction. The Court finds that plaintiff has failed to demonstrate that it possesses a valid security interest in the annuity payments (see Singer Asset Finance Company v Bachus, supra ). The relief sought under plaintiff's sixth cause of action must be denied.

Plaintiff's seventh cause of action against Cigna merely incorporates all prior paragraphs of the complaint. The Court finds that it does not operate to serve as the basis for any additional relief as against Cigna.

Turning to plaintiff's request for an award of attorneys fees, ordinarily, attorneys fees may not be collected by a prevailing litigant where there is no agreement, statute or rule providing for such (see, Matter of Thompson v S.L.T. Ready-Mix, 216 AD2d 656 [3rd Dept., 1995]; Matter of Timoshevich, 133 AD2d 1011 [3rd Dept., 1987]; see also, Bibeau v Ward, 228 AD2d 943 [3rd Dept., 1996], mot for lv to appeal denied, 89 NY2d 804). In this instance, the Court is granting an award to plaintiff not by virtue of the loan documents, but rather on a theory of quasi-contract. Apart from the foregoing, the Court observes that plaintiff's counsel failed to annex a detailed itemization of legal services. The Court finds that plaintiff is not entitled to an award of attorneys fees.

In summary, the Court concludes that plaintiff's motion for a default judgment against Thomas L. Scott must be denied, other than to grant judgment in favor of plaintiff and against Scott in the sum of $40,478.00 (which includes interest to January 6, 2005) on a theory of unjust enrichment. Plaintiff's motion for summary judgment against Cigna must be denied.

Turning to Cigna's motion for discharge pursuant to CPLR § 1006 (f), initially, as with all applications for a default judgment, the Court finds that it must first determine whether Cigna properly acquired personal jurisdiction over Scott. As stated in CPLR § 3012 (a): "The complaint may be served with the summons. A subsequent pleading asserting new or additional claims for relief shall be served upon a party who has not appeared in the manner provided for service of a summons." (emphasis supplied)

Professor Siegel in his practice commentary for CPLR § 3012 emphasizes that if defendant "X" does not appear, it is necessary for co-defendant "Y" to personally serve its cross-claim upon the defendant "X" in order to acquire personal jurisdiction over "Y" (see Siegel, Practice Commentaries, Mc Kinney's Cons Laws of NY, Book 7B, CPLR C3012:7 at 652). In this instance, Cigna's answer containing a cross-claim against Scott was served via Federal Express on January 18, 2005. Inasmuch as this is not an authorized method of obtaining personal jurisdiction over a natural person under CPLR § 308, the Court finds that Cigna failed to acquire personal jurisdiction over Scott with respect to its cross-claim. Under the circumstances, Cigna's motion must be denied.

Accordingly, it is

ORDERED, that plaintiff's motion for a default judgment against defendant Thomas L. Scott is granted in part, and denied in part, in keeping with this decision; and it is further

ORDERED, that plaintiff's motion for summary judgment against Ina Life [*5]Insurance Company of New York, now known as Cigna Life Insurance Company of New York is denied; and it is further

ORDERED, ADJUDGED and DECLARED, that the loan agreement, promissory note, security agreement, UCC-1 Financing Statements, powers of attorney and related documents executed by defendant Thomas L. Scott are determined to be invalid and unenforceable; and it is further

ORDERED, ADJUDGED and DECLARED, that plaintiff is entitled to an award of $40,478.00 against Thomas L. Scott on a theory of unjust enrichment, together with interest at 9% from January 6, 2006, and it is further

ORDERED, ADJUDGED and DECLARED, that plaintiff does not possess a security interest in annuity payments set forth in the annuity issued by Ina Life Insurance Company of New York, now known as Cigna Life Insurance Company of New York to Thomas L. Scott; and that plaintiff is not entitled to an order directing Ina Life Insurance Company of New York, now known as Cigna Life Insurance Company of New York to remit to plaintiff periodic payments currently being held, or payable in the future to plaintiff under said annuity; and it is further

ORDERED, that the motion of Ina Life Insurance Company of New York n/k/a CIGNA Life Insurance Company of New York pursuant to CPLR § 1006 (f) is denied; and

ORDERED, that all other relief requested by plaintiff be and hereby is denied.

This shall constitute the decision, order and judgment of the Court. All papers are returned to the attorney for the plaintiff, who is directed to enter this Decision/Order/Judgment without notice and to serve all attorneys of record with a copy of this Decision/Order/Judgment with notice of entry.

Dated:January 6, 2006

Troy, New York S/______________________________________

George B. Ceresia, Jr.

Supreme Court Justice

Singer Asset Finance Company v. Thomas L. Scott

Interest Computation

(Computed at 9%, Compounded Annually)

Debit/Credit Balance

09/20/99 Loan 49,750.0049,750.00

Computation of 9/20/01 Interest:

09/20/00 Interest4,477.50 54,227.50

Interest on $54,227.50

04/14/01 Payment -30,000.00 24,227.50 From 9/20/00 to 4/14/01

(206 Days) =2,754.46

09/20/01 Interest3,704.31 27,931.81 Interest on $24,227.50

From 4/14/01 to 9/20/01

(159 days) = 949.85

09/20/02 Interest2,513.86 30,445.67

09/20/03 Interest2,740.11 33,185.78Total3,704.31

09/20/04 Interest2,986.72 36,172.50

Computation of 1/05/06 Interest:

09/20/05 Interest3,255.53 39,428.03 Interest on $39,428.03

From 9/20/05 to 1/06/06

(108 days) =1,049.97

01/05/06 Interest1,049.97 40,478.00 Footnotes

Footnote 1:A copy of the Court's computation of the amount due is annexed hereto.