Lamar Sheard seeks the court's approval of the transfer of certain structured payments due to him under a structured settlement agreement in accordance with 26 U.S.C. 5891 et seq. and [*2]GOL § 5-1701 et seq.^[FN1] Mr. Sheard seeks to sell the following: Monthly payments of $1,795.93 due on or about September 8, 2040 through and including August 8, 2050. If his application is approved, Mr. Sheard will retain the following future annuity payments: life contingent monthly payments of $1,795.93 commencing September 8, 2050 and continuing for life thereafter.

In his petition Mr. Sheard sought to transfer his aforementioned payments, which total $215,511.60 when aggregated, for the purchase price of $7,877.00. As amended by an updated disclosure e-mail dated November 12, 2014, the new purchase price is $18,762.00 (see Attached E-mail dated November 12, 2014). In return, Novation Funding will receive Mr. Sheard's monthly payments of $1,795.93 due on or about September 8, 2040 through and including August 8, 2050, totaling $215,511.60. The discounted present value of the purchased payments at the federal interest rate of 2.20% is $109,033.04. Originally, the $7,877.00 that Mr. Sheard was scheduled to receive represented 7.22% of the estimated current value of the payments, otherwise known as the quotient. As amended, the $18,762.00 that Mr. Sheard will receive represents a quotient of 17.20%. The transaction also initially had an annual effective discount rate of 10.89%.^[FN2] The amended annual effective discount rate is now 8.00% annually (see id.).^[FN3]

Even as amended, the amount realized by Mr. Sheard represents a small percentage of what he would receive in the future. Although the court would normally disapprove such an unfavorable transaction outright, the court has determined that this transaction should be approved due to the particular circumstances of this case discussed below.

Mr. Sheard's affidavit reflects the following: He is 33 years old, single, has three minor sons — aged 10, 4, and 3, respectively, — and lives in New York City. At the time that his affidavit was filed, he stated that he was unemployed and seeking Social Security benefits through legal counsel. Mr. Sheard also stated that he had been denied food stamp benefits. He was living with his mother, but subsequently became homeless. His intention was to use the [*3]proceeds of the proposed sale of his future annuity payments to put down two months security for an apartment, and to continue to make rent payments with the remaining funds thereafter. He stated that he had located suitable apartments ranging from $800.00 to $900.00 a month. Mr. Sheard also stated that no family or friends can assist with his needs, and that the sale of his annuity payments is the sole financial means available to him to acquire a stable home.

The court met with Novation Funding's counsel and Mr. Sheard on two occasions, the scheduled return date for the Order to Show Cause, November 5, 2014, and again on November 12, 2014, due to the court's concern about the amount Mr. Sheard would receive as a result of this transaction. Novation Funding asserted that the amount payable to Mr. Sheard was fair, reasonable, and better than other arrangements offered by its competitors.^[FN4] Novation Funding also pointed out that the effective discount rate of 10.89%, later amended and reduced to 8.00%, is the lowest possible rate that it can offer to Mr. Sheard. The annual discount rate of 8.00% might be deemed fair and reasonable in a vacuum or even be common in the industry, but that amount assumes that Mr. Sheard is borrowing money at 8.00% and paying interest at 8.00% every year from 2014 through 2050. A more appropriate metric here is the amount that Mr. Sheard is receiving when set against the present value of the money that he is relinquishing, otherwise known as the discounted present value. The figure yielded from that measurement, as previously stated, is called the quotient. Here, as amended, the quotient is 17.20% — meaning that as approved, Mr. Sheard stands to receive only 17.20% of the amount he would otherwise receive.

On both occasions that Mr. Sheard met with the court he discussed his desire to find suitable housing for himself, and for his three sons during their visits with him. Mr. Sheard also stated that he is currently employed at Macy's, but earns very little on a monthly basis.^[FN5] He said that he presently is living at a cousin's apartment, but that the environment there is unsuitable for him and for his sons who visit with him at the apartment. He also explained that a fracture has developed between him and his mother, making it impossible for him to live with her. Mr. Sheard also stated that he sees his sons every weekend, but that the environment that he presently resides in has made it very difficult for him to coordinate visits with his sons. Mr. Sheard stated to the court that this scenario has caused him great distress. While he understands that the $18,762.00 that he stands to receive in connection with this transaction is a small fraction of the $215,511.60 that he stands to receive were he to wait for twenty-six years to start receiving monthly payments, Mr. Sheard does not believe he has that time. Mr. Sheard hopes to be an active father who sees his sons through their childhood. As such, Mr. Sheard stated that he cannot wait several years to receive his annuity payments, and implored the court to approve this transaction for his sake, and the sake of his sons.

Ordinarily, this is not a transaction that this court would approve (see Matter of 321 Henderson Receivables L.P. v. Martinez, 11 Misc 3d 892, 895 [Sup. Ct., NY County 2006] [*4]["[t]he Legislature in enacting the Structured Settlement Protection Act ^[FN6] did not intend for the courts to be mere rubber stamps' for the proposed sale. On the contrary, the...legislative history makes clear that to avoid the victimization so prevalent in the industry, the courts are intended to examine the various statutory criteria and determine whether the proposed sale will truly serve the best interest' of the payee."]). The $18,762.00 that Mr. Sheard will receive represents a mere 17.20% of the estimated current value of the payments. Although that percentage is low, it must be considered relative to Mr. Sheard's circumstance (see Matter of 321 Henderson Receivables, L.P., 13 Misc 3d 526, 531 [Sup Ct, Erie County 2006]["As in the family law cases, the Legislature...has not provided any precision for the definition of the best interest of a payee under these circumstances and therefore has neither limited the courts to specific factors nor prohibited them from employing such factors. The courts should therefore employ a totality of the circumstances' test similar to what is used in family law matters."]).

Given the amount of money that Mr. Sheard is forfeiting in order to receive $18,762.00 now, it is apt to ask why he cannot wait for the money. The court presented that question to him. Mr. Sheard's response was unwavering: he wants to be with his sons now at any cost. To see his sons in any meaningful way (i.e. overnight visits), Mr. Sheard needs an apartment. Fundamentally, this case is about the opportunity for a father to have the chance to be with his sons in his own stable home, to see them grow, and to see them through their maturation. The time with his sons that Mr. Sheard stands to gain upon approval of this transaction is of immeasurable value to him. In light of the above, the court finds the transaction is in Mr. Sheard's best interest and that the rate is fair and reasonable under the particular circumstances of this case. The court cautions him, however, to use the $18,762.00 that he is receiving here wisely as it comes at a high cost.

It is hereby:

ADJUDGED that the petition is granted; and an Order is signed simultaneously herewith.

This constitutes the Decision and Judgment of the Court.

ENTER:

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