Matter of J.G. Wentworth Originations LLC v McDonald
Annotate this CaseDecided on July 8, 2020
Supreme Court, Warren County
In the Matter of the Application of J.G. Wentworth Originations, LLC, Petitioner,
against
Pamela McDonald, UTICA MUTUAL INSURANCE COMPANY and UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK, as Interested Persons pursuant to General Obligations Law § 5-1701 (f)., Respondent.
EF2020-67893
Paris & Chaikin, PLLC, New York (Ian M. Chaikin of counsel), for petitioner.
Pamela McDonald, Warrensburg, respondent pro se.
Robert J. Muller, J.
Petitioner seeks court approval for the transfer of a periodic payment consistent with the Structured Settlement Protection Act (SSPA) (see General Obligations Law art 5, title 17). The SSPA, enacted in 2002 (see L 2002, ch 537), was intended to, inter alia, provide a level of protection to structured settlement payees negotiating to sell or transfer a periodic payment to third parties. The statute specifically provides for disclosure with respect to the terms and provisions of the proposed transfer, together with prior judicial approval. The Court initially observes that the parties have complied with General Obligations Law § 5-1705 (c), which requires a copy of the order to show cause and petition to be served upon all interested parties at least twenty (20) days before the time at which the petition is noticed to be heard.
On March 13, 1984, Richard Secor and Sheila Secor — as parents and natural guardians of Pamela Secor, now known as Pamela McDonald — entered into a "Structured Settlement Agreement and Release" (hereinafter Agreement) whereby Ms. McDonald was to receive the following periodic payments: (1) $10,000.00 on August 22, 1992; (2) $10,000.00 on August 22, 1993; (3) $20,000.00 on August 22, 1994; (4) $20,000.00 on August 22, 1995; (5) $40,000.00 on August 22, 1999; and (6) $1,500.00 per month beginning on September 22, 1999 and terminating upon her death or at the conclusion of 240 payments — whichever occurs later. The Agreement [*2]further provides that "the payments to be made . . . shall not be subject to assignment, transfer, commutation or encumbrance except as provided herein."
The Court notes that four previous applications have been filed to transfer Ms. McDonald's structured settlement rights. The first application was filed in Washington County in October 2004 and granted by the Hon. David B. Krogmann, J.S.C. by Decision and Order dated January 5, 2005. At that time, Ms. McDonald was authorized to assign her $1,500.00 monthly payments from approximately 2005 to 2018 to 321 Henderson Receivables LP in exchange for a lump sum of $140,000.00.
The second and third applications were filed in Warren County in September 2016 and March 2017, respectively, and both were denied by this Court. The September 2016 application sought to transfer $750.00 of each $1,500.00 monthly payment to which Ms. McDonald was entitled from November 22, 2018 to October 22, 2033 — for an aggregate sum of $135,000.00 — to petitioner for a lump sum $25,000.00. This was denied by Order dated October 25, 2016, with the Court finding that the transfer was "not in the best interests of [Ms. McDonald]." The March 2017 application sought to transfer $750.00 of each $1,500.00 monthly payment to which Ms. McDonald was entitled from September 22, 2019 to August 22, 2039 — for an aggregate sum of $180,000.00 — to Stone Street Capital, LLC for a lump sum of $23,500.00. This was denied by Order dated May 1, 2017.
The fourth application — also filed in Warren County — sought to transfer Ms. McDonald's right to 180 monthly payments of $1,500.00 beginning on December 22, 2020 and ending on November 22, 2035 — for an aggregate sum of $144,000.00 — to petitioner for a lump sum of $52,800.00. Ms. McDonald — who was then 44 years old, married and had no minor dependents — indicated that she planned to use the money to purchase the 2002 double-wide trailer that she and her husband had been renting. The Court approved this application by Order dated December 10, 2019.
Presently before the Court is the fifth application — filed on May 26, 2020 — which seeks to transfer $850.00 of each $1,500.00 monthly payment to which Ms. McDonald is entitled from December 22, 2035 to November 22, 2050 — for an aggregate sum of $153,000.00 — to petitioner for a lump sum of $2,500.00. Ms. McDonald now describes herself as "45 years old, widowed and with no minor children." She intends to use the funds to purchase a new kitchen stove.
As observed above, petitioner technically complies with General Obligations Law § 5-1705 by including a copy of the transfer agreement, a copy of the disclosure statement and proof of service upon all interested parties, including the party currently receiving the structured settlement payments and the obligor responsible for making the payments (see Matter of J.G. Wentworth Originations, LLC [Allstate Life Ins. Co. of N.Y.-Kwant], 61 Misc 3d 1224[A], 2018 NY Slip Op 51730[U], *1 [Sup Ct, Dutchess County 2018]; Matter of 321 Henderson Receivables L.P. v. Martinez, 11 Misc 3d 892, 894-895 [Sup Ct, NY County 2006]). The obligor — Utica Mutual Insurance Company — has also specifically consented to the transfer.
That being said, in enacting the SSPA the Legislature "'did not intend for the courts to be mere rubber stamps' for the proposed sale" (Matter of 321 Henderson Receivables L.P. v. Martinez, 11 Misc 3d at 895, quoting Matter of Settlement Capital Corp. [Ballos], 1 Misc 3d 446, 461 [Sup Ct, Queens County 2003]; accord Matter of J.G. Wentworth Originations, LLC [Allstate Life Ins. Co. of N.Y.-Kwant], 61 Misc 3d 1224[A] at *1). Rather, "the courts are [*3]intended to examine the various statutory criteria and determine whether the proposed sale will truly serve the 'best interest' of the payee" (Matter of 321 Henderson Receivables L.P. v. Martinez, 11 Misc 3d at 895; accord Matter of J.G. Wentworth Originations, LLC [Allstate Life Ins. Co. of N.Y.-Kwant], 61 Misc 3d 1224[A] at *1).
When considering the best interest of the payee, "the court must . . . determine 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" (Matter of J.G. Wentworth Originations, LLC [Allstate Life Ins. Co. of N.Y.-Kwant], 61 Misc 3d 1224[A] at *1; see General Obligations Law § 5-1706 [b]; Matter of 321 Henderson Receivables L.P. v. Martinez, 11 Misc 3d at 894; Matter of Settlement Funding of NY LLC v Solivan, 8 Misc 3d 1006 [A] [Sup Ct, Kings County 2005]). Application of this best interest standard "'requires a case-by-case analysis to determine whether the proposed transfer of structured settlement payments, . . . designed to preserve the injured person's long-term financial security, will provide needed financial rescue without jeopardizing or irreparably impairing the financial security afforded to the payee . . . '" (Matter of Novation Funding LLC v Griffin, 39 Misc 3d 1207(A), 2013 NY Slip Op 50511[U], *4 [Sup Ct, Kings County 2013], quoting Matter of Settlement Capital Corp. [Ballos], 1 Misc 3d at 455).
Considering the history of these several applications and Ms. McDonald's expressed desire to relinquish the aggregate amount of $153,000.00 in exchange for a $2,500.00 kitchen appliance, the Court specifically finds that the proposed transfer is not in her best interest.
Therefore, having considered the Petition with exhibits attached thereto, verified May 6, 2020; Affidavit of Pamela McDonald with exhibits attached thereto, sworn to April 28, 2020, submitted in support of the Petition; and the correspondence of Adam M. Kelly, Esq., dated June 17, 2020, it is hereby
ORDERED that the relief requested is denied in its entirety; and it is further
ORDERED that the petition is dismissed without prejudice.
This shall constitute the Decision and Order of the Court.
Dated: July 8, 2020
Lake George, New York
_____s/__________________
ROBERT J. MULLER, J.S.C.
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