Settlement Funding of N.Y., LLC v Transamerica Annuity Serv. Corp.

[*1] Settlement Funding of NY, LLC v Transamerica Annuity Serv. Corp. 2006 NY Slip Op 50332(U) [11 Misc 3d 1061(A)] Decided on February 6, 2006 Supreme Court, Bronx County Guzman, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 February 6, 2006
Supreme Court, Bronx County

Settlement Funding of New York, LLC, for Judicial approval of Absolute Assignment and UCC Article 9 Security Agreement with VICTOR S. OCASIO pursuant to Articule 5,Title 17 of the New York General Obligations Law, Petitioner,

against

Transamerica Annuity Service Corporation and TRANSAMERICA FINANCIAL LIFE INSURANCE COMPANY,, Respondent..



23382/05

Wilma Guzman, J.

This matter appeared before the Court on an Order to Show Cause wherein the petitioner,

Settlement Funding of New York, LLC was seeking an Order of the Court approving the transfer

of structured settlement payments rights pursuant to the Transfer Agreement entered into

between Victor S, Ocasio and Settlement Funding of New York, LLC, as Transferee, dated

October 22, 2005. The application by petitioner for an order pursuant to General Obligations

Law §5-1701 approving the transfer of the structure settlement payment rights from payee, Victor

S. Ocasio to petitioner was submitted without opposition. The Court, however, upon review of

all the documents felt compelled to conduct a hearing in order to determine whether the

"transaction is in the best interest" of payee, Victor S. Ocasio. At the court's request, a hearing

was scheduled and held on January 18, 2006, wherein the attorney for the petitioner was present,

and Mr. Victor S. Ocasio was also present.

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This court deems the hearing necessary in order to comply with the statute known as the

Structured Settlement Protection Act (SSPA) which required judicial approval as a prerequisite

to an injured plaintiff's transfer or sale to a third-party of future structured settlement payments.

The statute was enacted to afford protection to individuals selling their rights to future payment

under a structured settlement, to a third party, in exchange for a lump sum payment. (Matter of

Settlement Capital Corp. [In re Richard C. Ballos], 1 Misc 3d 446) The Act was further enacted

to prevent the payees being victimized by companies aggressively seeking to acquire their rights.

(In re Ballos, 1 Misc 3d 445, 451; Matter of 321 Henderson Receivables LP v. Martinez, Jr.,

NYLJ, January 25, 2006, pg.19, col. 1) Therefore, pursuant to GOL §5-1706(b) the court must

make a finding that transfer is in the "best interest" of the payee prior to approving a transfer of

payments. GOL§5-1706(b) states, in part:

"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 the fees

and expenses used to determine the net advance amount, are

fair and reasonable."

Clearly, the Legislative, in enacting the SSPA intended the courts to examine the

proposed transaction and make a determination whether the transaction truly serves the "best

interest" of the payee. It appears, however, that neither the Legislative nor SSPA defined "the

best interest" of the payee. As a result of the growing number of applications, the court applying

the intent of the statute together with recent case law has developed the following criteria the

courts should consider "(1) payee's age; mental capacity; physical capacity, maturity level,

independent income and ability to support dependents; (2) purpose of the intended use of the

funds; (3) potential need for future medical treatment; (4) the financial acumen of the payee; (5)

whether payee is in a hardship situation to the extent that he or she is in dire straits'; (6) the

ability of the payee to appreciate financial consequences based on independent legal and financial

advice; (7) the timing of the application". ( Settlement Funding of New York, LLC [In re Platt],

2 Misc 3d 872).

In the present case, the court heard from Mr. Ocasio, a 28 year old married man

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with 2 children who is presently employed with Cablevision as a customer service representative.

Mr. Ocasio indicated that prior to working with Cablevision he had fallen into hard times in that

the had been laid off from his previous job. He recently received a notice of eviction and was

scheduled to appeared before Housing Court on said notice. In addition, Mr. Ocasio indicated as [*2]

a result of being out of work, he had fallen behind on his car payments, and an action to

repossess his car was about to commence. Mr. Ocasio indicated he was requesting the court to

approve the transfer in that his credit rating is poor and he is unable to obtain any loans. He

indicated he was in need of immediate cash in order to pay his back rent and his car payments.

Mr. Ocasio indicated he just commenced a new job, and once he paid off all his arrears, he would

be in a better financial position to provide for his family and himself. Mr. Ocasio clearly

understood the rights he was giving up, and the ramifications thereof. Mr Ocasio indicated to the

court his present hardship and desire to proceed with the transfer. Mr. Ocasio further indicated

that he transferred only a portion of his future structure settlement payments, and has retained

possession of other future payments. Mr. Ocasio appeared to be an intelligent, articulate

individual with an understanding of the proceedings. He is presently gainfully employed,

and did not appear mentally or physically incapacitated.

The court must also determine whether the discount rate if fair and reasonable.

The discount rate determination is an area of great concern. Since a discount rate is an

"elusive concept" it has been the most problematic area since it is based upon a measure of risk

and expected growth of investment. (In re Platt, supra) Therefore, each case must be reviewed on

its own merits. The Court has reviewed the affidavit submitted by Mr. Andrew S. Hillman,

Chief Executive Officer of Specialty Asset Advisors, Inc., a consulting firm retained by the

petitioner, who has been in the secondary market for the financing of structured settlement

payment for the past eleven years. It appears that currently in the marketplace the discount rate

for transfers range from 15.5%-25% per annum, with the majority of transactions having characteristics similar to the case at bar with the range of 18%-23% per annum. It appears the following factors are considered in determining the discount rate including but not limited to "a) the very limited marketplace for owners of structured settlements to find purchasers of their payments; b) the up- front costs and complexity of financing including unique marketing

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challenges; c) the (I) relatively small size of each transaction, (ii) long duration of the transactions and (iii) carrying costs'; d) costs of funds; e) the credit worthiness of the seller; f)

the credit quality of the underlying obligor and the capital markets' perceived default risk; g) quality of title and compliance with the Court's order. (See pg. 4 of Andrew S. Hillman affidavit) According to Mr. Hillman, the indicator in determining whether a discount rate is "fair and reasonable" is the market which has held steady between 18% and 23%. Based upon Mr. Hillman's affidavit, the a review of the documents submitted, the nature of the industry and the risk factor involved in determining the discount rate, the court find in this case the discount rate to be fair and reasonable.

However, the Court will disallow the attorney's fees and processing fee. Pursuant to GOL

§5-1703(f) an itemized listing of all commissions, fees, expenses and charges payable by the

payee are to be disclosed. In this matter the attorneys fail to itemize both the legal fee incurred [*3]

and processing fee pursuant to statute. It is further noted by this court that the petitioner

submitted 2 disclosure forms executed by the payee. One form bearing heading "New York

Transfer Disclosure" signed by payee on October 22, 2005 and the other form bearing heading

"New Mexico Transfer Disclosure" signed by payee on October 22, 2005 with both forms having

a "rubber stamped" legal fees amounts of $2000.00 and processing fee of $200.00. Clearly, a

blanket statement of fees is not the intention of the statute.

Therefore, the payee now being of age, having been informed and made aware of the

ramifications of the transfer; having waived his right to seek or obtain an independent

professional advice regarding the Agreement; and under the circumstances of this case there has

been no showing that the transfer is not in the best interest of the payee, the application for

transfer is granted, with the exceptions set forth herein above. .

The foregoing is the Memorandum of the court, and Order of Approval shall issue

consistent with the findings herein.

______________________________________

Dated:02-06-06 WILMA GUZMAN, J.S.C.