Preview
FILED: QUEENS COUNTY CLERK 07/26/2023 12:58 PM INDEX NO. 707638/2023
NYSCEF DOC. NO. 18 RECEIVED NYSCEF: 07/26/2023
SUPREME COURT OF THE STATE OF NEW YORK
QUEENS COUNTY
PRESENT: HON. PHILLIP HOM PART
Justice
---------------------------------------------------------------------------------X INDEX NO. 707638/2023
ADALBERTO BATRES AQUILES, FOR JUDICIAL
APPROVAL OF A TRANSFER AGREEMENT IN MOTION DATE 08/14/2023
ACCORDANCE WITH NEW YORK GENERAL
OBLIGATIONS LAW 5-1701, ET SEQ., MOTION SEQ. NO. 001
Petitioner, 7/26/2023
-v-
LABYRINTH FUNDING LLC,UNITED STATES LIFE DECISION + ORDER ON
INSURANCE COMPANY IN THE CITY OF NEW YORK, MOTION
AMERICAN GENERAL ANNUITY SERVICE
CORPORATION,
Respondent.
---------------------------------------------------------------------------------X
The following e-filed documents, listed by NYSCEF document number (Motion 001) 12, 13, 14, 15, 16,
17
were read on this motion to/for HEARING .
Upon the foregoing documents, this Petition and Order to Show Cause for a
transfer of certain payments under a structured settlement are determined as follows:
On April 12, 2023, Petitioner Adallberto Batres Aquiles (“Petitioner”) started this
special proceeding. Petitioner moves by order to show cause to obtain leave of Court to sell
a portion of his structured settlement to Respondent Labyrinth Funding LLC (“Labyrinth”).
The structured settlement was created in an agreement settling Petitioner’s personal injury
claims from an incident on March 20, 2007.
In the purchase agreement attached to his Petition, Petitioner agreed to sell 150
monthly payments of $895.45 for the period May 15, 2023 to October 15, 2035 (total
$134,317.50) for an $80,000 purchase price. Later, in a June 1, 2023, letter from Labyrinth
to Petitioner, the agreement was modified to the sale of “240 monthly non-guaranteed life-
contingent payments of $1,395.45 from 11/15/35 - 10/15/55,” (Total $334,908.00) for a
$6,500.00 purchase price.
Recently, in Cordero v Transamerica Annuity Serv. Corp., the Court of Appeals,
while addressing an unrelated certified question from the United States Court of Appeals for
the Eleventh Circuit, discussed the Periodic Payment Settlement Act of 1982 (“PPSA”), the
federal law governing structured settlements (2023 WL 3061503 [2023]; 2023 NY Lexis
707638/2023 ADALBERTO BATRES AQUILES, FOR JUDICIAL APPROVAL OF A TRANSFER Page 1 of 4
AGREEMENT IN ACCORDANCE WITH NEW YORK GENERAL OBLIGATIONS LAW 5-1701, ET
SEQ. vs. LABYRINTH FUNDING LLC ET AL
Motion No. 001
1 of 4
FILED: QUEENS COUNTY CLERK 07/26/2023 12:58 PM INDEX NO. 707638/2023
NYSCEF DOC. NO. 18 RECEIVED NYSCEF: 07/26/2023
656 [2023]). The Court noted one objective of the PPSA is to help ensure that tort victims,
particularly minors, do not squander their settlement proceeds (see id.), and that "[f]avorable
tax treatment of structured settlements is thought to encourage provident use of tort damage
awards by people who might use a lump sum award unwisely, forfeit financial security and
risk becoming dependent on public benefits such as Medicaid or Supplemental Security
Income" (id., quoting 145 Cong. Rec. S5281-01 [Statement of Sen. Chafee]).
In New York, the transfers of structured settlement payments are governed by
General Obligations Law §§ 5-1701 – 5-1709 also known as the “Structured Settlements
Protection Act” (“SSPA”). The SSPA requires court approval of transfers.
No direct or indirect transfer of structured settlement payment rights shall be
effective…unless the transfer has been authorized in advance in a final order
of a court of competent jurisdiction based upon express findings by such court
that: …the transfer is in the best interest of the payee…[and] the net advance
amount, [is] fair and reasonable….
General Obligations Law § 5-1706 [b].
Although there do not appear to be any appellate decisions providing guidance on
what is in the best interest of the payee, the court in another Queens County case, found,
after reviewing legislative history, that the SSPA was intended to limit “transfers of
structured settlement payment to true hardship cases” (In re Settlement Capital Corp.
(Ballos), 1 Misc 3d 446, 449 [Sup Ct, Queens County 2003], citing Legislative Memo in
Support, 2002 McKinney’s Session Laws of NY at 2036). The determination of what is in
the best interest of the payee is to be on
a case-by-case analysis to determine whether the proposed transfer of
structured settlement payments, which were designed to preserve the injured
person’s long term financial security, will provide needed financial security
without jeopardizing or irreparably impairing the financial security afforded
to the payee and his or her dependents by the periodic payments
In re Settlement Capital Corp. (Ballos), at 455.
In Matter of 321 Henderson Receivables L.P., the court did not approve a petition
for the sale of structured settlement proceeds because it was not in the best interests of the
payee (13 Misc 3d 526 [Sup Ct, Erie County 2006]). There, the payee was injured as an
infant and received a structured settlement. The court previously approved sale of $85,000
of the settlement and just five months later, the payee applied to sell $125,000 in future
payments for the net amount of $51,500. The payee wanted to use the money to expand her
landscaping business but admitted mistakes in her prior investments in the business. The
court, in denying the transfer, noted payee’s failure to understand the deep discount, the
value the payments have for payee and her children in the future, and the harsh realities of
starting a business.
707638/2023 ADALBERTO BATRES AQUILES, FOR JUDICIAL APPROVAL OF A TRANSFER Page 2 of 4
AGREEMENT IN ACCORDANCE WITH NEW YORK GENERAL OBLIGATIONS LAW 5-1701, ET
SEQ. vs. LABYRINTH FUNDING LLC ET AL
Motion No. 001
2 of 4
FILED: QUEENS COUNTY CLERK 07/26/2023 12:58 PM INDEX NO. 707638/2023
NYSCEF DOC. NO. 18 RECEIVED NYSCEF: 07/26/2023
Likewise, there is no bright line test to determine when a transfer is fair and
reasonable.
The fairness and reasonableness of the transaction is to be weighed from the
perspective of the overall market in loans, taking into account prevailing
interest rates and the possibilities of alternative financing…. The more
pressing the need, the more reasonable it may be for a payee to obtain
immediate cash at a steep discount rate
Matter of 321 Henderson Receivables Ltd. Partnership, 2 Misc 3d 463, 465 [Sup Ct, Monroe
County 2003].
On June 15, 2023, this Court held a virtual hearing as required under General
Obligations Law § 5-1705 (e). During the hearing, Petitioner stated he needed the $6,500.00
to purchase merchandise for a store owned by his wife. Petitioner was walking around the
store during the hearing and did not appear to understand what he was selling in return for
the $6,500.00. When asked what caused the substantial change in the terms of the sale,
Petitioner said it was because of breathing and gastric health issues related to working at the
Twin Towers. Petitioner also testified that he had no other way of getting the $6,500.00.
When asked if he tried to get a loan, he testified he went to one bank, Chase, and was denied.
There have been five prior attempts to transfer Petitioner’s structured settlement payments.
The Court declined to sign the OSC in four applications and one was discontinued.
Petitioner, like the payee in Matter of 321 Henderson Receivables L.P., does not
appear to appreciate the value of the future payments. Petitioner is seeking to sell
$334,908.00 of his structured settlement for $6,500. The Court understands these payments,
beginning in 2035, should be discounted because they are contingent on Petitioner’s living,
but it is unclear why the offer was discounted so substantially, even with Petitioner’s 9/11
related health issues, which he would have had during the initial offer. During the virtual
hearing, Petitioner was walking around and did not appear to be suffering any health issues.
Petitioner also did not provide any medical records regarding his health.
As discussed in Cordero v Transamerica Annuity Serv. Corp and In re Settlement
Capital Corp. (Ballos), the court needs to determine whether the proposed transfer of
structured settlement payments are designed to preserve the injured person’s long term
financial security and to provide needed financial security without jeopardizing or
irreparably impairing the financial security afforded to the payee and his or her dependents
by the periodic payments. The present case does not appear to be a “true hardship” case and
the Court is concerned that Petitioner was unable to explain the full terms of the sale. While
walking around the store, it appeared to be well-stocked and Petitioner did not make a
diligent effort to obtain a loan, only applying to one bank. Petitioner selling his structured
settlement payments beginning in 2035 will harm his financial security, possibly making
him reliant on public assistance when he gets older. It is also concerning that Petitioner
waived his right to independent professional representation while trying to make this
transfer.
707638/2023 ADALBERTO BATRES AQUILES, FOR JUDICIAL APPROVAL OF A TRANSFER Page 3 of 4
AGREEMENT IN ACCORDANCE WITH NEW YORK GENERAL OBLIGATIONS LAW 5-1701, ET
SEQ. vs. LABYRINTH FUNDING LLC ET AL
Motion No. 001
3 of 4
FILED: QUEENS COUNTY CLERK 07/26/2023 12:58 PM INDEX NO. 707638/2023
NYSCEF DOC. NO. 18 RECEIVED NYSCEF: 07/26/2023
Given these concerns, among others, the Court finds that the transfer of twenty years
of Petitioner’s structured settlement payments, from November 15, 2035, to October 15,
2055, worth $334,908.00 for a $6,500.00 purchase price, is not in Petitioner’s best interests
and the Petition and Order to Show Cause are denied. There is no need to make a finding
on whether the transfer is fair and reasonable because the SSPA requires transfers to pass a
two-part test and the Court has found this transfer would not be in Petitioner’s best interest.
In accordance with the foregoing, it is ORDERED that the Petition and Order to
Show Cause are denied; and it is further
ORDERED that the Petition is dismissed; and it is further
ORDERED that Respondent Labyrinth Funding LLC shall serve a copy of this
Decision and Order with Notice of Entry upon all interested parties within twenty (20) days
of the date of entry.
This constitutes the Decision and Order of the Court. 7/26/2023
7/25/2023 $SIG$
DATE PHILLIP HOM, J.S.C.
CHECK ONE: X CASE DISPOSED NON-FINAL DISPOSITION
GRANTED X DENIED GRANTED IN PART OTHER
APPLICATION: SETTLE ORDER SUBMIT ORDER
CHECK IF APPROPRIATE: INCLUDES FIDUCIARY APPOINTMENT REFERENCE
TRANSFER/REASSIGN
707638/2023 ADALBERTO BATRES AQUILES, FOR JUDICIAL APPROVAL OF A TRANSFER Page 4 of 4
AGREEMENT IN ACCORDANCE WITH NEW YORK GENERAL OBLIGATIONS LAW 5-1701, ET
SEQ. vs. LABYRINTH FUNDING LLC ET AL
Motion No. 001
4 of 4
Preview
FILED: QUEENS COUNTY CLERK 07/26/2023 12:58 PM INDEX NO. 707638/2023 NYSCEF DOC. NO. 18 RECEIVED NYSCEF: 07/26/2023 SUPREME COURT OF THE STATE OF NEW YORK QUEENS COUNTY PRESENT: HON. PHILLIP HOM PART Justice ---------------------------------------------------------------------------------X INDEX NO. 707638/2023 ADALBERTO BATRES AQUILES, FOR JUDICIAL APPROVAL OF A TRANSFER AGREEMENT IN MOTION DATE 08/14/2023 ACCORDANCE WITH NEW YORK GENERAL OBLIGATIONS LAW 5-1701, ET SEQ., MOTION SEQ. NO. 001 Petitioner, 7/26/2023 -v- LABYRINTH FUNDING LLC,UNITED STATES LIFE DECISION + ORDER ON INSURANCE COMPANY IN THE CITY OF NEW YORK, MOTION AMERICAN GENERAL ANNUITY SERVICE CORPORATION, Respondent. ---------------------------------------------------------------------------------X The following e-filed documents, listed by NYSCEF document number (Motion 001) 12, 13, 14, 15, 16, 17 were read on this motion to/for HEARING . Upon the foregoing documents, this Petition and Order to Show Cause for a transfer of certain payments under a structured settlement are determined as follows: On April 12, 2023, Petitioner Adallberto Batres Aquiles (“Petitioner”) started this special proceeding. Petitioner moves by order to show cause to obtain leave of Court to sell a portion of his structured settlement to Respondent Labyrinth Funding LLC (“Labyrinth”). The structured settlement was created in an agreement settling Petitioner’s personal injury claims from an incident on March 20, 2007. In the purchase agreement attached to his Petition, Petitioner agreed to sell 150 monthly payments of $895.45 for the period May 15, 2023 to October 15, 2035 (total $134,317.50) for an $80,000 purchase price. Later, in a June 1, 2023, letter from Labyrinth to Petitioner, the agreement was modified to the sale of “240 monthly non-guaranteed life- contingent payments of $1,395.45 from 11/15/35 - 10/15/55,” (Total $334,908.00) for a $6,500.00 purchase price. Recently, in Cordero v Transamerica Annuity Serv. Corp., the Court of Appeals, while addressing an unrelated certified question from the United States Court of Appeals for the Eleventh Circuit, discussed the Periodic Payment Settlement Act of 1982 (“PPSA”), the federal law governing structured settlements (2023 WL 3061503 [2023]; 2023 NY Lexis 707638/2023 ADALBERTO BATRES AQUILES, FOR JUDICIAL APPROVAL OF A TRANSFER Page 1 of 4 AGREEMENT IN ACCORDANCE WITH NEW YORK GENERAL OBLIGATIONS LAW 5-1701, ET SEQ. vs. LABYRINTH FUNDING LLC ET AL Motion No. 001 1 of 4 FILED: QUEENS COUNTY CLERK 07/26/2023 12:58 PM INDEX NO. 707638/2023 NYSCEF DOC. NO. 18 RECEIVED NYSCEF: 07/26/2023 656 [2023]). The Court noted one objective of the PPSA is to help ensure that tort victims, particularly minors, do not squander their settlement proceeds (see id.), and that "[f]avorable tax treatment of structured settlements is thought to encourage provident use of tort damage awards by people who might use a lump sum award unwisely, forfeit financial security and risk becoming dependent on public benefits such as Medicaid or Supplemental Security Income" (id., quoting 145 Cong. Rec. S5281-01 [Statement of Sen. Chafee]). In New York, the transfers of structured settlement payments are governed by General Obligations Law §§ 5-1701 – 5-1709 also known as the “Structured Settlements Protection Act” (“SSPA”). The SSPA requires court approval of transfers. No direct or indirect transfer of structured settlement payment rights shall be effective…unless the transfer has been authorized in advance in a final order of a court of competent jurisdiction based upon express findings by such court that: …the transfer is in the best interest of the payee…[and] the net advance amount, [is] fair and reasonable…. General Obligations Law § 5-1706 [b]. Although there do not appear to be any appellate decisions providing guidance on what is in the best interest of the payee, the court in another Queens County case, found, after reviewing legislative history, that the SSPA was intended to limit “transfers of structured settlement payment to true hardship cases” (In re Settlement Capital Corp. (Ballos), 1 Misc 3d 446, 449 [Sup Ct, Queens County 2003], citing Legislative Memo in Support, 2002 McKinney’s Session Laws of NY at 2036). The determination of what is in the best interest of the payee is to be on a case-by-case analysis to determine whether the proposed transfer of structured settlement payments, which were designed to preserve the injured person’s long term financial security, will provide needed financial security without jeopardizing or irreparably impairing the financial security afforded to the payee and his or her dependents by the periodic payments In re Settlement Capital Corp. (Ballos), at 455. In Matter of 321 Henderson Receivables L.P., the court did not approve a petition for the sale of structured settlement proceeds because it was not in the best interests of the payee (13 Misc 3d 526 [Sup Ct, Erie County 2006]). There, the payee was injured as an infant and received a structured settlement. The court previously approved sale of $85,000 of the settlement and just five months later, the payee applied to sell $125,000 in future payments for the net amount of $51,500. The payee wanted to use the money to expand her landscaping business but admitted mistakes in her prior investments in the business. The court, in denying the transfer, noted payee’s failure to understand the deep discount, the value the payments have for payee and her children in the future, and the harsh realities of starting a business. 707638/2023 ADALBERTO BATRES AQUILES, FOR JUDICIAL APPROVAL OF A TRANSFER Page 2 of 4 AGREEMENT IN ACCORDANCE WITH NEW YORK GENERAL OBLIGATIONS LAW 5-1701, ET SEQ. vs. LABYRINTH FUNDING LLC ET AL Motion No. 001 2 of 4 FILED: QUEENS COUNTY CLERK 07/26/2023 12:58 PM INDEX NO. 707638/2023 NYSCEF DOC. NO. 18 RECEIVED NYSCEF: 07/26/2023 Likewise, there is no bright line test to determine when a transfer is fair and reasonable. The fairness and reasonableness of the transaction is to be weighed from the perspective of the overall market in loans, taking into account prevailing interest rates and the possibilities of alternative financing…. The more pressing the need, the more reasonable it may be for a payee to obtain immediate cash at a steep discount rate Matter of 321 Henderson Receivables Ltd. Partnership, 2 Misc 3d 463, 465 [Sup Ct, Monroe County 2003]. On June 15, 2023, this Court held a virtual hearing as required under General Obligations Law § 5-1705 (e). During the hearing, Petitioner stated he needed the $6,500.00 to purchase merchandise for a store owned by his wife. Petitioner was walking around the store during the hearing and did not appear to understand what he was selling in return for the $6,500.00. When asked what caused the substantial change in the terms of the sale, Petitioner said it was because of breathing and gastric health issues related to working at the Twin Towers. Petitioner also testified that he had no other way of getting the $6,500.00. When asked if he tried to get a loan, he testified he went to one bank, Chase, and was denied. There have been five prior attempts to transfer Petitioner’s structured settlement payments. The Court declined to sign the OSC in four applications and one was discontinued. Petitioner, like the payee in Matter of 321 Henderson Receivables L.P., does not appear to appreciate the value of the future payments. Petitioner is seeking to sell $334,908.00 of his structured settlement for $6,500. The Court understands these payments, beginning in 2035, should be discounted because they are contingent on Petitioner’s living, but it is unclear why the offer was discounted so substantially, even with Petitioner’s 9/11 related health issues, which he would have had during the initial offer. During the virtual hearing, Petitioner was walking around and did not appear to be suffering any health issues. Petitioner also did not provide any medical records regarding his health. As discussed in Cordero v Transamerica Annuity Serv. Corp and In re Settlement Capital Corp. (Ballos), the court needs to determine whether the proposed transfer of structured settlement payments are designed to preserve the injured person’s long term financial security and to provide needed financial security without jeopardizing or irreparably impairing the financial security afforded to the payee and his or her dependents by the periodic payments. The present case does not appear to be a “true hardship” case and the Court is concerned that Petitioner was unable to explain the full terms of the sale. While walking around the store, it appeared to be well-stocked and Petitioner did not make a diligent effort to obtain a loan, only applying to one bank. Petitioner selling his structured settlement payments beginning in 2035 will harm his financial security, possibly making him reliant on public assistance when he gets older. It is also concerning that Petitioner waived his right to independent professional representation while trying to make this transfer. 707638/2023 ADALBERTO BATRES AQUILES, FOR JUDICIAL APPROVAL OF A TRANSFER Page 3 of 4 AGREEMENT IN ACCORDANCE WITH NEW YORK GENERAL OBLIGATIONS LAW 5-1701, ET SEQ. vs. LABYRINTH FUNDING LLC ET AL Motion No. 001 3 of 4 FILED: QUEENS COUNTY CLERK 07/26/2023 12:58 PM INDEX NO. 707638/2023 NYSCEF DOC. NO. 18 RECEIVED NYSCEF: 07/26/2023 Given these concerns, among others, the Court finds that the transfer of twenty years of Petitioner’s structured settlement payments, from November 15, 2035, to October 15, 2055, worth $334,908.00 for a $6,500.00 purchase price, is not in Petitioner’s best interests and the Petition and Order to Show Cause are denied. There is no need to make a finding on whether the transfer is fair and reasonable because the SSPA requires transfers to pass a two-part test and the Court has found this transfer would not be in Petitioner’s best interest. In accordance with the foregoing, it is ORDERED that the Petition and Order to Show Cause are denied; and it is further ORDERED that the Petition is dismissed; and it is further ORDERED that Respondent Labyrinth Funding LLC shall serve a copy of this Decision and Order with Notice of Entry upon all interested parties within twenty (20) days of the date of entry. This constitutes the Decision and Order of the Court. 7/26/2023 7/25/2023 $SIG$ DATE PHILLIP HOM, J.S.C. CHECK ONE: X CASE DISPOSED NON-FINAL DISPOSITION GRANTED X DENIED GRANTED IN PART OTHER APPLICATION: SETTLE ORDER SUBMIT ORDER CHECK IF APPROPRIATE: INCLUDES FIDUCIARY APPOINTMENT REFERENCE TRANSFER/REASSIGN 707638/2023 ADALBERTO BATRES AQUILES, FOR JUDICIAL APPROVAL OF A TRANSFER Page 4 of 4 AGREEMENT IN ACCORDANCE WITH NEW YORK GENERAL OBLIGATIONS LAW 5-1701, ET SEQ. vs. LABYRINTH FUNDING LLC ET AL Motion No. 001 4 of 4