Matter of Seneca One, LLC v Hall
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Matter of Seneca One, LLC v Hall 2011 NY Slip Op 32278(U) August 18, 2011 Supreme Court, Nassau County Docket Number: 8769/11 Judge: Thomas Feinman Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. [* 1] cNV SHORT FORM ORDER SUPREME COURT - STATE OF NEW YORK COUNTY OF NASSAU Present: Hon. Thomas Feinman Justice In the Matter of the Petition of SENECA ONE , LLC TRIAL/IAS PART 13 NASSAU COUNTY Petitioner For Approval of the Sale and Transfer of Strctued Settlement Payment Rights of ERNEST HALL 1701 , et seq. In Accordance with Gen. Oblig. Law INDEX NO. 8769/11 x X X MOTION SUBMISSION DATE: 7/11/11 - against - ERNST HALL , NEW YORK LIFE INSURACE MOTION SEQUENCE NO. COMPANY , and NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION Respondents. The following papers read on this motion: Order to Show Cause and Affdavits.......................... Affirmation in Opposition.......................................... Reply Affirmation...................................................... N/A N/A Relief Requested The petitioner initiates this special proceeding, by way of Order to Show Cause , for an order approving the transfer of strctmed settlement payment rights from Ernest Hall , (hereinafer referred to as "Hall"), to petitioner , Seneca One, LLC. , (hereinafter referred to as " Seneca Seneca provides that it is a limited liabilty company organzed and existing under the laws of the State of Marland. Seneca seeks approval of the transfer of certin strctmed settlement payment rights under the New York Strctured Settlement Protection Act , (hereinafer referred to as " SSPA"). Hall, a resident of the State of New York, County of Nassau, curently resides at 229 Benson Avenue , Elmont, New York. Hall is the beneficiar of a structued settement that provides that Hall was entitled to two milion four hundred fift thousand and 00/100 dollars ($2,450 000. 00), in the following maner. Hall was entitled to an up- front cash payment of one 001100 dollar, ($1, 450, 000. 00), and future periodic milion four hundred fift thousand and payments of one millon and 00/100 dollars , ($1 000 000. 00), beginning on December 1 , 2006 , of six thousand six hundred ten and 00/100 dollars , ($6 610. 00), per month for the life of Hall with fifteen (15) years certn. [* 2] Hall, under the terms of the Transferred Assignent Agreement with Seneca intends to transfer and sell his rights to fift-nine (59) monthly payments in the amount of one thousand fom hundred and 00/100 dollars , ($1 400. 00), beginning on or about Janua 1 2017 through on or about November 1 , 2021. In consideration for se1lng these payments , Seneca agrees to pay Hall the sum of twenty thousand six hundred seventeen and 36/100 dollars, ($20 617.36). Applicable Law A was enacted as a result of concern that the strctued settlement payees are especially prone to being victimized and quickly (In re Petition of The SSP dissipating their awards. Settlement Funding of New York, LLC 761 NYS2d 816). " The SSPA protects payees from being taen advantage of by businesses seeking to acquire the payee s strctured settlement payment rights " and discourages such transfers by requirig special proceedigs seekigjudicial approval of the transfer. (Id General Obligations Law 1705 and 5- 1706). A proposed transfer of a portion of payee s strctued settlement for less than haf its present discounted value was found not to be in the payee s "best interest" , as required by the Strctued Settlement Protection Act (SSP A). (Id. McKinney s General Obligations Law 1706(b)). The payee s wilingness to transfer the settement "has no bearng on the cour' s determination of whether the interest rate paid by the transferee is ' fair and reasonable ' withn the meanng of Strctued Settlement Protection Act (SSP A). (Id.) General Obligations Law disclosure: 1703 , effective July 1 2002 , provides the following required (a) the amounts and due dates of the strctued settlement payments to be transferred; (b) the aggregate amount of such payments; ( c) the discounted present value of the payments to be transferred , which shall be identified as the "calculation of curent value of the transferred stctured settement payments under federal standards for valuing anuities , and the amount of the applicable federal rate used in calculating such discounted present value; (d) the price quote from the original anuity issuer , or, if such price quote is not readily available from the original anuity issuer , then a price quite from two other anuity issuers that reflects the current cost of purchasing a comparable anuity for the aggregate amount of payments to be transferred; ( e) the gross advance amount and the anual discount rate , compounded monthy, used to determine such figue; (t) an itemized listing of all commissions , fees , costs , expenses and charges payable by the payee or deductible from the gross amount otherwse payable to the payee and the tota amount of such fees; (g) the net advance amount including the statement: " The net cash payment you ," [* 3] receive in this transaction from the buyer was determined by applying the specified discount rate to the amount of future payments received by the buyer , less the total amount of commissions , fees , costs , expenses and charges payable by you (h) the amount of any penalties or liquidated damages payable by the payee in the event of any breach of the transfer agreement by the payee; and (i) a statement that the payee has the right to cancel the transfer agreement, without penalty or fuer obligation , no later than the third business day afer the date the ageement is signed by the payee. General Obligations Law ~5- 1706 provides that the trfer must be in the best interest of the payee , the tranaction is fair and reasonable , and the payee has been advised in wrting to seek independent professional advice regarding the transfer and has either received such advice , or knowingly waived such advice in writig. '" (DJiscounted present value ' means the present value of future payments , as determined by discounting such payments to the present using the most recently published applicable federal rate for determining the present value of an anuity, as issued by the United States Internal Revenue Service. " (General Obligations Law 1701(c)). The primar purose of the SSP A is to protect recipients oflong-term strctued settlements from being victimized by companies aggressively seeking the acquisition of their rights to guaranteed strcted settlement payments. " (321 Henderson Receivables Origination, LLC v. Lugo 889 NYS2d 508). The Court must independently determine , in its discretion , whether "the transfer is in the best interest of the payee , tang into account the welfare and support of the payee dependents , and whether the transaction , including the discount rate used to determine the gross advance amount and fees and expenses used to determine the net advance amount fair and reasonable (emphasis added. (In re Petition of Settlement Funding of New York; LLe, supra , are citing General Obligations Law ~5- 1706(b D. " This is a two pronged test to be applied in evaluating . the paries ' ageement." (321 Henderson Receivables Origination, LLC, supra). The best interests determination , at the Cour' s discretion , involves consideration of several facts and circumstaces concerning the payee , including the payee s age, mental capacity, matuity level abilty to show suffcient income that is independent of the payments sought for transfer , and abilty to provide for payee s dependents. (321 Henderson Receivables Origination, LLC, supra). The best interest prong should be assessed on a case by case basis giving specific consideration to such factors as the payee s age; mental and physical capacity, matuty level; abilty to show suffcient income that is independent ofthe payments sought for transfer; capacity to provide for the welfare and support of the payee s dependents; the need for medical treatment; the stated purose for the transfer; and the demonstrated abilty of the payee to appreciate the financial terms and consequences of the proposed tranfer based upon independent legal and financial advice. (Whitney 3375/2011 NYLJ June 24 , 2011; citing Matter of Settlement Capital Corporation v. LM Property, (Ballos J, I Misc3d 446). The " best interest" consideration is separate and independent of the consideration of whether the transfer is "fair and reasonable (In re Petition of Settlement Funding of New York, LLe, supra). A Payee who desperately needed cash to obtan " life sustaning medical treatment for a love one " in the face of having no other alternative mean of raising money would serve a payee s best interest in the face of a "life and death emergency (Id) The Cour found the ,' [* 4] in a 21 year old payee s best interest when the payee had a dependent , without any information concerng the putative father , and the request for fuds to purchase a vehicle were not Henderson Receivables Origination, LLC, supra). explained. (321 trsfer was not The ' best interest' stadard under SSPA requires a case by case analysis to determine whether the proposed tranfer of strctued settlement payments , which were designed to preserve the injured person s long-term financial securty, will provide needed finacial rescue without jeoparding or ireparably impairing financial securty aforded to the payee and his or her dependents by the periodic payments. (In re Settlement Capital Corp. 769 NYS2d 817). explantion as to why the payee has an immediate need for the trsfer of funds , or lump sum , is 194 Misc2d 711). taen into consideration. (Whitney, supra, citing In re Settlement Capital Corp., A payee who had not " enjoyed the benefits of wise and unbiased counsel in the management of her finacial afais " and waived her right to consult with an independent professional , confrmed the cour' s impression that the payee did not fully appreciate the consequences of her transfer. (Whitney v. LM Property, supra). The proposed trsfer of the portion of the payee s strctued settlement which would result in the transferee paying " less than half of settlement' s present discounted value " was not fair and reasonable as required by SSPA. (In re Petition of Settlement Funding of New York, LLC, supra). The interest rate paid for the transfer of a strctued settlement of "no more than 8% would be fair and reasonable " under SSP A whereby the tranferee does not charge counsel fees and costs to the payee as a transfer expense. (Id. citing General Obligations Law ~5- 1701(5)). Discussion In the cae at bar, the proposed trsfer payments of one thousd involves the transfer of fift-nine (59) four hundred and 00/100 dollars, ($1 ADO. monthy 00), commencing on or about Janua 1 2017 and ending on or about November 1, 2021. The aggregate amount of payments sold to Seneca is eighty-two thousand six hundred and 00/100 present value of sixty- four thousand eight hundred fift-nine a net payment to the payee, of twenty thousand six dollar , ($82 600. 00), at a discounted 07/100 dollars ($64 859. 07), with hundred seventeen and 36/100 dollars, and ($20 617. 36). Here, the payment of twenty thousand six hundred seventeen and 36/100 dollars ($20 617. 36), is less than half of the discount present value , and therefore , is not " fai and reasonable . Additionally, this Cour finds the anua discount rate of 19. 130% excessive. The second prong of ths test requires this Cour to determine whether the transfer is in the payee s "best interest" . Hall , who avers that he is mared with no children , submits that he intends to use the lump payment of twenty thousand six hundred seventeen and 36/1 00 dollars, ($20 617. 36), from Seneca to eliminate a high interest credit card debt. However, Hall , does not provide any documentaion to substtiate his submissions. Hall does not indicate what, if any, hardship, he endurng. -4- ,' [* 5] Hall provides that he had previously transferred portions of his strctured settlement on three dollars 001100 prior occasions. In 2009, Hall received a lump sum of twenty($29, 000. 00), which he used for home repairs. In 2010 , he received a lump sum of fift-one thousand and 00/100 dollars , ($51 000. 00), and used the fuds to payoff a credit debt and purchase a car. In Januar of this year , 2011 , he received a lump sum of twenty-six thousand six hundred seventy- two and 25/100 dollars , ($26 672. 25), and used the fuds to improve his home. This Court is concerned with Hall' s decision to waive independent professional advice regarding this transaction under these circumstaces. This Cour is not satisfied that Hall fully appreciates the consequences of the proposed transaction. As this is Hall' four request to transfer fuds from his structued settement , which appear to be a habitual practice at a signficant loss, given the totality of these circumstances , this Cour canot approve the transfer. nie thousand and Additionally, service on Hall is defective. As per the directives of the instat Order to Show Cause , the petitioner was directed to serve Hall by personal service. The submitted purported affidavit of service on Hall provides that Hall was served by "nail and mail" Service puruat to CPLR 9308(4), commonly known as ' nail and m l' servce , may be used only where servce under CPLR 9301(a) or 308(2) canot be made with ' due diligence (Waterman v. Jones 46 AD3d 63). A mere showing of severa attempts at service may not satisfy County of Nassau v. Long, citing due dilgence" before resorting to " nail and mail" service (Id, Earle v. Valente 302 AD2d 353 , and County of Nassau v. Yohaman 34 AD3d 620; 35 AD3d 787; Annis v. Long, 298 AD2d 340), " given the reduced likelihood that a sumons served pursuat to 34 AD3d 414). v. Letosky, County of Nassau (nail and mail service) will be received. (Id. citing The instat afdavit of service provides that the process server attempted service on thee different week days at or around the time when one can reaonably be expected to be going to and from work, without an indication as to how the process server attempted personal service upon the defendant pursuat to CPLR 9308(1) or ~308(2), before resorting to nail and mail services. Therefore , the afdavit of service is deficient on its face. The Appellate Division, Second Deparent has addressed this very same issue. The " due dilgence " requirement pursuant to CPLR 9308(4), " nail and mail" , is not met when the process server attempts to serve a defendant on thee weekdays prior to resortng to "nail and mail" Attempts made on weekdays durng hours when it could reasonably have been expected that the defendant was either working, or in transit to or from work, did not satisfy the " due dilgence requirement for "nail and mail" service under CPLR ~308(4). (County of Nassau v. Long, supra). It has been held that thee attempts to make service of a sumons and complaint upon a defendat at his residence at different times and on different days, including a Saturday, were sufficient to constitute due dilgence, (Johnson v. Waters 291 AD2d 481), while three attempts to effect service on a closed professional offce during morning hours on a day afer Thansgiving did not constitute due diligence as the efforts were "perfunctory, rather than dilgent" (Claerbaut v. East Long Island Hospital 117 AD2d 772). In light of the forgoing, as the purprted afdavit of service indicates that the process server attempted to serve Hall on two prior occasions on weekdays before resortng to nal and mail on the third attempt, also on a weekday, at times one could reasonably be expected to be going to and from work, or be at work , service is defective. [* 6] Conclusion In light of the foregoing, as the proposed tranfer of a porton of the payee s rights and interests in his strctued settlement does not meet the " best interest" requirement , or the " fair and reasonable requirement" under SSP A , the motion is denied and the petition is dismissed. ENTER: IS. Dated: August 12 , 2011 cc: Sacco & Filas, LLP Ernest Hall New York Life Insurce and Anuity Corpration New York Life Inurance Company ENTERFr AUG 18 2011 NASSAU COUNY COUNt . CLER' S OFF/( f
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