By Order to Show Cause dated February 19, 2009, Petitioner 321 Henderson Receivables Origination, LLC, seeks judicial approval of an assignment of a portion of Respondent Gladys Lugo's structured settlement annuity with Respondent American International Life Assurance Company of New York pursuant to General Obligations Law 5-1701, et seq., more commonly known as "The Structured Settlement Protection Act" (SSPA). Respondent Gladys Lugo has joined in the relief requested.

Petitioner appeared in Part 6 of this Court for oral argument on March 18, 2009, and decision was reserved.

FACTS AND PROCEDURAL BACKGROUND

Respondent Gladys Lugo is the payee of a structured settlement annuity issued by Respondent American International Life Assurance Company of New York.^[FN1] According to the petition and affidavit in support of Ms. Lugo, she is entitled to receive the following guaranteed annuity payments from co-respondents: for twenty years beginning on March 15, 2007, the sum of $674.00 per month with a final payment due April 15, 2027.

Ms. Lugo states that she is presently 21 years of age, single, presently resides with her sister and is unemployed. She has one dependent child and receives assistance from her sister in paying the monthly expenses. Ms. Lugo further states that due to her situation, she requires immediate cash to pay medical expenses (approximately $5,000.00), obtain an automobile (approximately $6,500.00), and to pay rent (approximately $1,600.00 per month).

In order to obtain this immediate cash infusion, Ms. Lugo entered into an assignment agreement with Petitioner 321 Henderson Receivables Origination, LLC, upon the following terms and conditions: that commencing on April 15, 2009 and for one hundred and forty months ending on March 15, 2021, the sum of $300.00 per month shall be assigned to petitioner. The total of these assignments is $43,200.00.

LAW AND APPLICATION

The primary purpose of the SSPA is to protect the recipients of long-term structured settlements from being victimized by companies aggressively seeking the acquisition of their rights to guaranteed structured settlement payments. See 321 Henderson v. Martinez, 11 Misc 3d 892, 816 N.Y.S.2d 298 (Sup Ct NY Cty 2006); In Re Settlement Capital Corp. (Ballos),1 Misc 3d 446, 769 N.Y.S.2d 817 (Sup Ct Qns Cty 2003). To effectuate this purpose, the Legislature created procedural requirements that potential structured settlement transferees must follow before courts review the substantive merits of the proposed assignment. See GOL§ 5-1703; In the matter of Settlement Capital Corp. ("Y"), 194 Misc 2d 711, 756 N.Y.S.2d 728 (Rensselaer Cty). Once the procedural requirements are met, the court shall substantively review the application and make express findings in accordance with GOL § 5-1706.

A review of the application does not indicate that it has been served timely pursuant to GOL § 5-1705 ( c ) and GOL § 5-1701(f) as no affidavits of service have been submitted to the court. However, it appears that all required disclosure pursuant to GOL §5-1703 has been [*2]provided to Ms. Lugo at least ten days prior to the date she signed the transfer agreement. Copies of the disclosure documents have been annexed to the application in accordance with GOL §1705(d). Further — and pursuant to GOL § 5-1706 ( c ) (d) and (e) — the following has occurred: (1) Ms. Lugo has been advised in writing by the transferee to seek independent professional advice regarding the transfer and has received such advice in writing, (2) the transfer does not contravene any applicable statute or order of any court or other government authority, and (3) it is written in plain language and is in literal compliance with GOL § 5-702. Since there is no proof of service, the application is procedurally incorrect under the statute. See GOL § 5-1706(a).

The court is required to make express findings that "the transfer is in the best interest of the payee, taking into account the welfare and support of the payee's dependants; 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." GOL § 5-1706(b). However there is no requirement that the court find that an applicant is suffering from a hardship to approve the transfer of structured settlement payments. This is a two pronged test to be applied in evaluating the parties' agreement. See In Re Settlement Corp. (Ballos), supra at 461.

The best interests determination involves a broad consideration of the facts and the circumstances of the payee, in light of the payee's age, mental capacity, maturity level, ability to show sufficient income that is independent of the payments sought for transfer, capacity to provide for the payee's dependents, and the stated purposes for the transfer request. See In Re Settlement Corp. (Ballos), supra at 454-55.

In this case, the payee is 21 years of age, with no income other than the structured settlement. The petition does not indicate or reference payee's mental capacity or maturity level. However, the petition indicates that payee received the sum of $56,932.73 pursuant to the Compromise Order upon settlement of the underlying lawsuit, and since the payee does not claim an interest stream from said money, the court infers that it has been spent. The payee has one dependent, but no information has been provided concerning the putative father — or his ability to provide support pursuant to Family Law § 413 — which is income that would be independent of the payment sought for transfer and an alternative source to provide for the payee's dependent.

Lastly the substantial costs of raising a child grow along with the child. In the future, greater needs of the child may be unmet if the payee is allowed to sell today a substantial benefit for a fraction of its value. Further, payee's request for $6,500.00 for a car is not explained. Considering the "paternalistic" purpose of the statute, the court finds that it will not be in the best interests of payee (or her dependent) to permit this transaction. See Mtr. of 321 Henderson, 13 Misc 3d 526, 531, 819 N.Y.S.2d 826 (Erie Coun. 2006).

Apart from the foregoing — and turning to the "fair and reasonable" prong — 321 Henderson Receivables Origination, LLC proposes to purchase a portion of payee's structured settlement that according to petitioner is presently worth $37,389.41 for the sum of $16,000.00, or 42.8% of the discounted value relied upon (and 37.03% of the aggregate amount of the payments of $43,200.00 to be transferred). Although payee is not being charged legal fees or processing fees, she is being charged the equivalent of 21.42% per annum interest had the same sum been borrowed and no persuasive explanation is offered for a reduction of $21,389.41, an arrangement that this court deems inappropriate given the guaranteed nature of the annuity payout and the minimal risk involved for petitioner Settlement Funding of New York, LLC. See [*3]In Re Settlement Funding of NY (Cunningham), 195 Misc 2d 721, 761 N.Y.S.2d 816 (Rensselaer Coun. 2003).

CONCLUSION

In light of the above, the proposed transfer does not meet either the "best interests" requirement or the "fair and reasonable" requirement under the statute. Accordingly, the motion is denied and the petition dismissed. This constitutes the decision and order of the court.

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J. S. C.