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Johnson v. J.G. Wentworth Originations, LLC

Court of Appeals of Oregon

March 1, 2017

Marshall JOHNSON, Plaintiff-Respondent,
v.
J.G. WENTWORTH ORIGINATIONS, LLC, a Nevada limited liability company, Defendant-Respondent, and METROPOLITAN LIFE INSURANCE COMPANY; and Metropolitan Tower Life Insurance Company, aka Metlife Tower Resources Group, Inc., Other-Appellants.

          Argued and submitted May 27, 2015.

         Multnomah County Circuit Court 140201933; Christopher J. Marshall, Judge.

          Stephen R. Harris, Pennsylvania, argued the cause for appellants. With him on the briefs were Michael T. Stone, Christopher Allnatt, and Brisbee & Stockton LLC.

          Julie A. Weis argued the cause for respondent J.G. Wentworth Originations, LLC. With her on the brief was Sara Ghafouri.

          No appearance for respondent Marshall Johnson.

          Before Sercombe, Presiding Judge, and Hadlock, Chief Judge, and Tookey, Judge.

         Case Summary:

         Metropolitan Tower Life Insurance, the obligor under a structured settlement agreement, appeals from a judgment of the circuit court in this special proceeding for the transfer of structured settlement payment rights under ORS 33.850 to 33.875, contending that the trial court erred in rejecting Met Tower's attempt to prohibit the transfer based on an anti-assignment clause in the structured settlement agreement.

         Held:

         Because the structured settlement was executed in California and provides that California law applies to its interpretation, the court addressed whether, under California law, the antiassignment provision was enforceable. Under California law, as the obligor under the structured settlement agreement, Met Tower is entitled to enforce the antiassignment provision.

         Reversed and remanded.

          HADLOCK, C. J.

         Marshall Johnson is the beneficiary of a right to periodic payments under a structured settlement agreement. Petitioner J. G. Wentworth Originators, LLC (J. G. Wentworth) brought this special proceeding under ORS 33.857 to ORS 33.875 (2005), [1] seeking to purchase at a discount Johnson's right to one future annuity payment and a portion of a future lump sum payment. The trial court issued a judgment approving the transfer, and Metropolitan Tower Life Insurance Company (Met Tower), the obligor under the structured settlement agreement, appeals. We conclude that the trial court erred in approving the transfer, because the structured settlement agreement included an anti-assignment clause that Met Tower has a right to enforce and that prohibited Johnson from transferring his interest in the payments. We therefore reverse.

         The facts are undisputed. In 2006, Johnson, who was then a minor, was injured an automobile accident. In 2008, the tortfeasor's insurer, State Farm, and Johnson's guardian ad litem settled a personal injury claim on behalf of Johnson through a structured settlement agreement. Under the agreement, Johnson was entitled to receive a first payment of $5, 000 on October 5, 2008, five annual payments of $10, 000 each, beginning in October 5, 2010, and a final payment of $41, 970.25 on October 5, 2020. The structured settlement agreement contained a clause stating that Johnson did not "have the power to sell, mortgage, encumber, or anticipate the Periodic Payments, or any part thereof, by assignment or otherwise." It is not disputed that the clause prohibited Johnson from transferring his interest in future payments, that is, that it is an anti-assignment clause. Thus, on its face, the structured settlement agreement prohibited the transfer of Johnson's interest in the future payments.

         But State Farm could assign its obligation under the settlement agreement. Under Internal Revenue Code, 26 USC section 130, a tortfeasor or its insured may assign an obligation under a structured settlement agreement to a "qualified assignee"-an independent third party who assumes the obligation for making the periodic payments. The third-party assignee receives favorable income tax treatment, because the funds received by the assignee from the original obligor (to be used for the purchase of an annuity to fund the periodic payments) are excluded from the assignee's income. 26 USC § 130(a). To meet the requirements of a "qualified assignment, " the payments "cannot be accelerated, deferred, increased, or decreased by the recipient of such payments." 26 USC section 130(c)(2)(B).

         Consistent with 26 USC section 130(c)(2)(B), Johnson's structured settlement agreement with State Farm provided that State Farm could assign its payment obligation to Met Tower, and that Johnson was required to accept the assignment.[2] Contemporaneously with the structured settlement agreement, State Farm and Met Tower executed a qualified assignment agreement (QAA) under which Met Tower assumed responsibility for making the structured settlement payments to Johnson.[3] Like the settlement agreement, the QAA included a paragraph prohibiting Johnson from transferring his right to receive payments under the structured settlement agreement, except that a transfer could be made with advance approval of a court, pursuant to Internal Revenue Code section 5891(b)(2), [4] if the transfer "otherwise complie[d] with applicable state law."[5]

         In 2013, Johnson, who was then 23 years of age, was in need of funds. He contacted J. G. Wentworth, a factoring company, expressing an interest in selling at a discount his annuity payment due in 2014, and half of his final payment due in 2020. Together, the sums had a discounted present value of just over $29, 000. J. G. Wentworth agreed to pay Johnson $17, 250 for the right to receive those sums in the future. In December 2013, Johnson signed an agreement for the transfer of the ...


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