Matter of 321 Henderson Receivables Origination LLC

[*1] Matter of 321 Henderson Receivables Origination LLC 2009 NY Slip Op 50024(U) [22 Misc 3d 1106(A)] Decided on January 8, 2009 Supreme Court, Broome County Lebous, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 8, 2009
Supreme Court, Broome County

In the Matter of the Petition of 321 Henderson Receivables Origination, LLC, Petitioner, and Ashley Taro, TRANSAMERICA FINANCIAL LIFE INSURANCE COMPANY F/K/A TRANSAMERICA LIFE INSURANCE COMPANY and TRANSAMERICA ANNUITY SERVICE CORPORATION as Interested Persons pursuant to GOL § 5-1701 (c)



2008-2817



COUNSEL FOR PETITIONER:

MELVIN & MELVIN, PLLC

BY:LOUIS LEVINE, ESQ., OF COUNSEL

217 SOUTH SALINA STREET, SUITE 700

SYRACUSE, NY 13202

KELLY E. FISCHER, ESQ.

142 FRONT STREET

BINGHAMTON, NY 13905

ASHLEY TARO 11 TREMONT AVENUE, APT. 7

BINGHAMTON, NY 13903

Ferris D. Lebous, J.

Petitioner, 321 Henderson Receivables Origination, LLC, moves for judicial approval of the proposed transfer of certain future payment rights of Ashley Taro due under a structured settlement agreement in exchange for the present payment of a discounted lump sum (General Obligations Law § 5-1701 et seq.).

BACKGROUND

Ms. Taro obtained a structured settlement arising out of a personal injury action as follows:

$13,100 on May 23, 2005;

$13,100 on May 23, 2006;

$13,100 on May 23, 2007;

$13,100 on May 23, 2008; and

$50,000 on May 23, 2017.

Ms. Taro, age 21, is single with no children and is currently unemployed. By way of this petition, petitioner and Ms. Taro seek approval of an Agreement in which Ms. Taro would transfer her right to the $50,000 lump sum payment due on May 23, 2017 in exchange for a net amount of $12,500.

DISCUSSION

General Obligations Law § 5-1701 et seq., also known as the "Structured Settlement Protection Act" or "SSPA", was enacted in 2002 due to the concern that structured settlement payees, such as Ms. Taro, are particularly prone to being victimized and quickly dissipating their assets and to protect them from the growing number of companies using "'[a]ggressive advertising, plus the allure of quick and easy cash, to induce settlement recipients to cash out future payments, often at substantial discounts, depriving victims and their families of the long-term financial security their structured settlements were designed to provide' (Mem. in Support, NY State Assembly, 2002 McKinney's Session Laws of NY, at 2036)" (Singer Asset Finance Co., LLC v Melvin, 33 AD3d 355 [2006]). This legislation "[d]iscourages such transfers by requiring would-be transferees to commence special proceedings for the purpose of seeking judicial approval of the transfer [citations omitted]" (Settlement Funding of New York, LLC [Cunningham], 195 Misc 2d 721, 722 [Rensselaer County 2003]). "The SSPA clearly reflects the Legislature's dissatisfaction with the structured settlement transfer market rates, and its conclusion that payees cannot protect their best interest and thus require judicial supervision" (Settlement Funding [Cunningham], 195 Misc 2d at 724). "Clearly, the New York State Legislature in enacting [the] SSPA and in empowering the courts with the discretion to determine whether the terms of a proposed transfer of future payments are fair and reasonable did not intend for the courts to be mere rubber stamps" (Settlement Capital Corp. [Ballos], 1 Misc 3d 446, 461 [*2][Queens County 2003]).

As such, this court's judicial function under the SSPA requires an evaluation of a variety of factors, but particularly: (1) whether the transaction is fair and reasonable; and (2) 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.

In determining whether the transaction is fair and reasonable, the court should examine the discount rate used to determine the gross advance amount and the fees and expenses used to determine the net advance amount. Here, petitioner determined the gross advance amount of $13,250 by applying an annual discount rate of 17.00%. The court notes that similar rates have been deemed unreasonable (Cunningham, 195 Misc 2d at 724 [15.46%]; Settlement Capital Corp., [Ballos], 1 Misc 3d 446 [19.82%]; and Settlement Capital Corp. ["Y"], 194 Misc 2d 711 [18.621%]). Petitioner also proposes to deduct from said gross advance amount the cost of administrative fees of $750 leaving a net advance amount of $12,500. Thus, the net advance amount proposed to be paid to Ms. Taro represents only 25% of the future payment that Ms. Taro would transfer to petitioner.[FN1] Based on the foregoing, the court finds said transaction is not fair and reasonable.

The next consideration is whether the proposed transfer is in Ms. Taro's "best interest."

Ms. Taro avers that she seeks to use the funds to pay for college tuition, the purchase of a used car, and to pay off various debts and fines including $750 for the reinstatement of her suspended driver's license. With respect to the college tuition, Ms. Taro states that she will need approximately $7,000 to pay for two years tuition at Broome Community College. Although certainly a laudable goal, the court was not provided with any documentation other than the school's generic "Fee Schedule for 2008-2009" establishing that Ms. Taro has in fact applied to and/or has been accepted at the school. Additionally, the only reference to the availability of financial aid is the passing statement that Ms. Taro "[w]ill be applying for financial assistance but has not yet been granted any" (Amended Petition, ¶ 15).

The court finds most compelling Ms. Taro's candid explanation of how she has spent the

$52,400 ($13,100 per year for four years) she has received since 2005 under the terms of the personal injury settlement. Ms. Taro has been living on her own since she was 17 years old using said funds for living expenses, supporting her half siblings, and purchasing two vehicles (one of which was stolen and the other was sold after being involved in an accident). Additionally troubling to this court is Ms. Taro's statement, with no specific details, that she has "[g]iven about $7,000 of that money to family members who needed it" (Amended Petition, ¶ 17).Finally, Ms. Taro offers no employment history for the past four years. [*3]

Based on this record, the court finds that there has been no showing that there would be a real advantage or gain to Ms. Taro in receiving $12,500 in exchange for a $50,000 future payment. Quite simply, the court finds that agreeing to giving up the right to a $50,000 future payments in exchange for a payment today of a mere $12,500 is not in Ms. Taro's best interest.

Based on the foregoing, the court finds that petitioner has failed to demonstrate to the court's satisfaction that the transaction is fair and reasonable and that the transfer is in Ms. Taro's best interest (GOL § 5-1706 [b]). Consequently, the Petition is denied.

Dated: January 8, 2009

Binghamton, New York

s/ Ferris D. Lebous

Hon. Ferris D. Lebous

Justice, Supreme Court Footnotes

Footnote 1:Ms. Taro consulted with Kelly E. Fischer, Esq. who indicates he reviewed the terms and conditions of the proposed transfer to her.