Summary
reversing a settlement approval because it conflicted with Symetra's antiassignment provisions and rejecting Rapid's preemption argument
Summary of this case from Symetra Life Ins. Co. v. Rapid Settlements, Ltd.Opinion
E040289
6-1-2007
RAPID SETTLEMENTS, LTD., Plaintiff and Respondent, v. SYMETRA LIFE INSURANCE CO. et al., Defendants and Appellants.
William V. McTaggart; Pullman & Comley and Peter J. Vodola for Defendants and Appellants. Law Office of Barry H. Spitzer and Barry H. Spitzer for Plaintiff and Respondent.
NOT TO BE PUBLISHED
I. INTRODUCTION
Rapid Settlements, Ltd. (Rapid) petitioned the trial court to approve a transfer to Rapid of $40,000 or one-third of a $ 120,000 payment due to Randy L. Griffin (Griffin) on October 3, 2011, pursuant to a structured settlement agreement. Insurance Code sections 10134 through 10139.5 (collectively the Act) govern transfers of payments due to payees, such as Griffin, under structured settlement agreements. The Act imposes certain terms and conditions upon such transfers and requires court approval before a transfer may be deemed valid and enforceable. (§§ 10136-10138.)
All further statutory references are to provisions of the Act unless otherwise indicated.
Interested parties Symetra Assigned Benefits Service Company (SABSCO) and Symetra Life Insurance Company (Symetra Life) (collectively Symetra) objected to the approval of the transfer in the superior court. The transfer was approved, and Symetra appeals the order approving the transfer. Symetra contends the order approving the transfer must be reversed and the transfer declared void because (1) the $40,000 payment is not assignable under the terms of the structured settlement agreement, and, alternatively, (2) the transfer agreement between Rapid and Griffin fails to comply with the requirements of the Act. We agree with Symetras first contention. Accordingly, we reverse the order approving the transfer and do not reach Symetras second contention.
The Act defines "interested parties" as including, "with respect to a structured settlement agreement . . . the annuity issuer, [and] the structured settlement obligor . . . ." (§ 10134, subd. (g).) As will appear, SABSCO is the structured settlement obligor and Symetra Life is the annuity issuer as those terms are defined in the Act. (Id., subds. (k)-(l).)
II. FACTS AND PROCEDURAL HISTORY
A. The Structured Settlement Agreement
In September 1993, Griffin settled claims for personal injury by entering into a "structured settlement agreement" (SSA) with certain defendants. The SSA provided for a series of periodic payments to Griffin, including a $120,000 payment due on October 3, 2011. Pursuant to the SSA, defendants insurer and SABSCO entered into a "qualified assignment agreement" (QAA), whereby SABSCO assumed the obligation to make the periodic payments to Griffin under the SSA. Also pursuant to the SSA and in order to fund the periodic payments, SABSCO purchased an annuity from Symetra Life and entered into an "Annuity Contract" with Symetra Life.
The Act defines a "structured settlement agreement" as "an arrangement for periodic payment of damages established by settlement or judgment in resolution of a tort claim in which the payment of the judgment or award is paid in whole, or in part, in periodic tax-free payments rather than a lump-sum payment." (§ 10134, subd. (j).)
The total of all periodic payments due under the structured settlement agreement consisted of $ 460 per month, compounding annually at three percent, for life from November 1, 1993, with the last payment due on October 1, 2023; $25,000 on October 3, 1994; $25,000 on October 3, 1995; $ 25,000 on October 3, 1996; $25,000 on October 3, 1997; $45,000 on October 3, 1998; $75,000 on October 3, 2001; $90,000 on October 3, 2006; $120,000 on October 3, 2011; and $185,000 on October 3, 2016. All periodic payments are guaranteed.
The Act defines "qualified assignment agreement" as "an agreement providing for a qualified assignment within the meaning of Section 130 of Title 26 of the United States Code, as amended from time to time." (§ 10134, subd. (i).)
The SSA, the QAA, and the Annuity Contract each contain provisions prohibiting assignment of the periodic payments. Section XV of the SSA states: "Said payments cannot be accelerated, deferred, increased or decreased by the Plaintiffs . . . nor shall the Plaintiffs have the power to sell or mortgage or encumber [the] same, or any part thereof, nor anticipate the same or any part thereof by assignment or otherwise."
Similarly, the QAA states: "None of the Periodic Payments may be accelerated, deferred, increased or decreased and may not be anticipated, sold, assigned or encumbered." The Annuity Contract states: "No payment under this annuity contract may be accelerated, deferred, increased, or decreased, or anticipated, sold, assigned, or encumbered in any manner by the annuitant (or either joint annuitant) or any other recipient of the payment."
B. Applicable Federal Tax Law
The parties do not dispute that the nonassignment provisions of the SSA, and of the QAA and the Annuity Contract, were necessary to ensure federal tax benefits to both Griffin and SABSCO at the time the SSA was entered into in 1993. Griffin was able to exclude the periodic payments from his gross income (26 U.S.C.A. § 104(a)(2)), and SABSCO was able to exclude the cost of the "qualified annuity" from its gross income, provided the periodic payments could not be accelerated. (Id., § 130(c)(2); see Western United Life Assur. Co. v. Hayden (3d Cir. 1995) 64 F.3d 833, 839-842 [discussing tax advantages of structured settlements].)
In 2001, Congress passed the Victims of Terrorism Tax Relief Act. (Pub.L. No. 107-134 (Jan. 23, 2002) 115 Stat. 2427, § 115(d)(1).) This legislation added section 5891 to the Internal Revenue Code. Subdivision (d)(1) of the statute states, "If the applicable requirements of [Internal Revenue Code] sections 72, 104(a)(1), 104(a)(2), 130, and 461(h) were satisfied at the time the structured settlement involving structured settlement payment rights was entered into, the subsequent occurrence of a structured settlement factoring transaction shall not affect the application of the provisions of such sections to the parties to the structured settlement (including an assignee under a qualified assignment under section 130 [here, SABSCO]) in any taxable year." (26 U.S.C.A. § 5891(d)(1).)
A "structured settlement factoring transaction" "means a transfer of structured settlement payment rights (including portions of structured settlement payments) made for consideration by means of sale, assignment, pledge, or other form of encumbrance or alienation for consideration." (26 U.S.C.A. § 5891(c)(3).)
However, Internal Revenue Code section 5891 also imposes an excise tax of 40 percent of the "factoring discount" upon the transferee of a structured settlement payment (here, Rapid) unless the transfer is approved in advance in a "qualified order." (26 U.S.C.A. § 5891(a)-(c).) The statute generally defines a "qualified order" as any state court order finding the transfer is in the best interests of the payee and does not contravene any federal or state statute or order. (26 U.S.C.A. § 5891(b)(2).)
The "factoring discount" is defined as "an amount equal to the excess of . . . [¶] (A) the aggregate undiscounted amount of structured settlement payments being acquired in the structured settlement factoring transaction, over [¶] (B) the total amount actually paid by the acquirer to the person from whom such structured settlement payments are acquired." (26 U.S.C.A. § 5891(c)(4).)
A "qualified order" is specifically defined as "a final order, judgment, or decree, which . . . [¶] (A) finds that the transfer . . . [¶] (i) does not contravene any Federal or State statute or the order of any court or responsible administrative authority, and [¶] (ii) is in the best interest of the payee, taking into account the welfare and support of the payees dependents, and [¶] (B) is issued . . . [¶] (i) under the authority of an applicable State statute by an applicable State court, or [¶] (ii) by the responsible administrative authority (if any) which has exclusive jurisdiction over the underlying action or proceeding which was resolved by means of the structured settlement." (26 U.S.C.A. §5891(b)(2).)
C. The Structured Settlement Protection Act
The Act provides: "A transfer of structured settlement payment rights is void unless all of the following conditions are met: [¶] (a) The transfer of the structured settlement payment rights is fair and reasonable and in the best interest of the payee, taking into account the welfare and support of his or her dependents. [¶] (b) The transfer complies with the requirements of this article, will not contravene other applicable law, and is approved by a court as provided in section 10139.5." (§ 10137.)
As originally enacted in 1999, the Act did not require court approval of transfers of structured settlement payment rights. (Stats. 1999, ch. 742, § 1.) The court approval requirement was added to the Act in 2001 and applies to transfers made on or after January 1, 2002. (Stats. 2001, ch. 624, § 2.) One of the reasons cited by the state Senate Judiciary Committee for adding the court approval requirement was the necessity "to conform to pending federal legislation that would impose a potential 40% excise tax on a sale of structured settlement payment rights that was not approved by a court." (Sen. Com. on Judiciary, Analysis of Assem. Bill No. 268 (2001-2002 Reg. Sess.) July 10, 2001, pp. 5-6.) This was a clear reference to Internal Revenue Code section 5891.
In addition to requiring advance court approval as a condition to the validity and enforceability of a transfer, the Act in its present form requires that a transfer be preceded by a written disclosure. (§ 10136.) The disclosure must include a statement that the transfer agreement is not effective until the date on which a court enters a final order approving the transfer agreement. (Id., subd. (c)(1).) The disclosure must also include detailed financial information, including the amounts and due dates of each payment to be transferred, the aggregate amount of the payments to be transferred, the aggregate amount and an itemization, by type and amount, of any expenses to be deducted from the purchase price, the net amount payable to the payee, and the quotient (expressed as a percentage) obtained by dividing the net payment amount by the discounted present value of the payments. (Id., subd. (c)(2)-(9).)
The Act also prohibits certain terms and conditions from being included in a transfer agreement. The prohibited provisions are nonwaivable, and any inclusion of a prohibited provision, with respect to a seller or payee who is a California resident, will render the transfer agreement void and unenforceable. (§ 10138, subds. (a)-(b).) The prohibited provisions include "[a] provision that provides the transferee with a security interest or collateral interest in any structured settlement payment rights that exceed the actual dollar amount of the structured settlement payment rights being transferred" (id., subd. (a)(11)), and a "provision that creates a `buyers first right of refusal to purchase any remaining structured payment rights that the payee may desire to sell in the future" (id., subd. (a)(12)).
The Act requires the transferee (here, Rapid) to file with the state Attorney General a copy of the petition for court approval and all underlying documents, including the transfer agreement, the written disclosure statement, the annuity contract, any qualified assignment agreement, the structured settlement agreement, any order approving the structured settlement agreement, proof of notice to the interested parties, and a verified statement of the transferee stating that all the conditions of sections 10136, 10137, and 10138 have been met. (§ 10139.) A violation of the Act constitutes an unfair business practice pursuant to Chapter 5 (commencing with section 17200) of Part 2 of Division 7 of the Business and Professions Code and is subject to the penalties and remedies of that chapter. (§ 10139.4.)
D. The Proposed Transfer and Petition for Court Approval
In October 2005, Rapid petitioned the superior court to approve, pursuant to the Act, the transfer to Rapid of $40,000 or one-third of the $120,000 periodic payment due to Griffin on October 3, 2011. In exchange for the $40,000 sum, Griffin was to receive a discounted lump sum of $16,000. According to the proposed transfer agreement and the disclosure statement, the $40,000 sum had a present value of $29,557, and no expenses were being charged to Griffin.
The Act provides that: "Neither the annuity issuer nor the structured settlement obligor may be required to divide any structured settlement payment between the payee and any transferee or assignee or between two or more transferees or assignees." (§ 10139.3, subd. (e).) This provision, like all other provisions of the Act, is not waivable. (Id., subd. (a).)
In the superior court, Symetra objected to the proposed transfer on the grounds it violated the nonassignment provision or section XV of the SSA. Symetra further argued that the proposed transfer agreement violated the Act and was therefore void and unenforceable because it contained a prohibited provision in the form of a buyers right of first refusal in future payments and a prohibited security interest. (§ 10138, subd. (a)(11)-(12).)
The superior court approved the transfer, expressly finding that the transfer was in Griffins best interest. The court rejected Symetras argument that the nonassignment provision of the SSA prohibited the transfer. The court relied on the "general policy favoring the free alienation of contract rights" to payment, as opposed to contractual duties, and indicated that the nonassignment provision appeared to be "solely for tax purposes." The court also rejected Symetras argument that the proposed transfer agreement contained prohibited provisions, noting that, although Rapid had filed a UCC financing statement containing a prohibited buyers right of first refusal, Rapid admitted it had included the right of first refusal in error and was in the process of filing a financing statement without the prohibited provision.
III. DISCUSSION
Symetra contends that the superior court order approving the transfer to Rapid of the $40,000 sum must be reversed and the transfer declared void, because the nonassignment provisions of the SSA prohibit the transfer and, under the terms of the Act, any proposed transfer in violation of Symetras existing contract rights is to be deemed void. We agree.
Alternatively, Symetra argues that the proposed transfer is void because the proposed transfer agreement between Rapid and Griffin contains prohibited provisions, including a buyers right of first refusal to future payments and a security interest in sums in excess of the net amount payable to Griffin. (§ 10138, subds. (a)(11)-(12).) Because we agree with Symetras first contention, we do not reach these questions.
A. Standard of Review
The issues presented involve the interpretation of provisions of the SSA and the Act, and there are no disputed issues of fact. We therefore apply a de novo standard of review. (Rodriguez v. American Technologies, Inc. (2006) 136 Cal.App.4th 1110, 1117.)
B. The Nonassignment Provisions are Clear, Unambiguous, and Enforceable
Section XV of the SSA provides that the periodic payments due to Griffin "cannot be accelerated, deferred, increased or decreased by the Plaintiffs . . . nor shall the Plaintiffs have the power to sell or mortgage or encumber [the] same, or any part thereof, nor anticipate the same or any part thereof by assignment or otherwise." Somewhat redundantly, section XVI of the SSA states, "The periodic payments to be received by the Plaintiffs . . . are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge or encumbrance by Plaintiffs . . . ."
"`Under statutory rules of contract interpretation, the mutual intention of the parties at the time the contract is formed governs interpretation. (Civ. Code, § 1636.) Such intent is to be inferred, if possible, solely from the written provisions of the contract. (Id., § 1639.) The "clear and explicit" meaning of these provisions, interpreted in their "ordinary and popular sense," unless "used by the parties in a technical sense or a special meaning is given to them by usage" (id., § 1644) controls judicial interpretation. (Id., § 1638.)" (Santisas v. Goodin (1998) 17 Cal.4th 599, 608.)
In Johnson v. First Colony Life Ins. Co. (C.D.Cal. 1998) 26 F.Supp.2d 1227 (Johnson), a case predating the Act, the plaintiffs filed suit against the annuity issuer, seeking declaratory relief that the nonassignment provision in the plaintiffs structured settlement agreement did not prohibit an assignment of the plaintiffs periodic payment rights. (Id. at pp. 1227-1228.) Notably, the nonassignment provision at issue in Johnson was essentially identical to section XV of the SSA, and the court held that the provision prohibited the proposed assignment. (Id. at pp. 1228-1230.)
The nonassignment clause in the structured settlement agreement in Johnson provided, "Said payments cannot be accelerated, deferred, increased or decreased by Johnson . . . nor shall Johnson have the power to sell or mortgage or encumber same or any part thereof or anticipate the same or any part thereof by assignment or otherwise." (Johnson, supra, 26 F.Supp.2d at p. 1227.)
The Johnson court reasoned that the nonassignment provision "very clearly" prohibited the plaintiffs from assigning their right to receive payments and, although parties generally have a right to freely transfer property, they may agree by contract to give up that right. (Johnson, supra, 26 F.Supp.2d at p. 1229.) The court also observed that nonassignment provisions are routinely enforced, and the defendant obligors had a right to rely on the provision. (Id. at pp. 1229-1230.)
The Johnson court also rejected the plaintiffs argument that the nonassignment clause was solely for their benefit and therefore waivable by them. To the contrary, the court noted that, under California law, "it is clear that `clauses restricting assignability are for the benefit of the obligor . . .," "Plaintiffs . . . failed to overcome [this] presumption," and that it "defies all logic that a party could have the right to waive a term that, by its unambiguous language, restricts that partys own behavior." (Johnson, supra, 26 F.Supp.2d at pp. 1229-1230.) Nor did the nonassignment clause constitute an unreasonable restraint on alienation of property. (Id. at pp. 1229-1230.)
Here, as in Johnson, the nonassignment provisions of the SSA clearly prohibit Griffin from assigning his right to receive all or any part of the periodic payments. Furthermore, no reason appears why the nonassignment provisions are unenforceable. (See, e.g., Wellenkamp v. Bank of America (1978) 21 Cal.3d 943, 948; Civ. Code., § 711 [only unreasonable restraints on alienation are void].) Symetra therefore has a right to rely on the provisions. (Johnson, supra, 26 F.Supp.2d at p. 1230.)
Rapid argues that the nonassignment provisions of the SSA should be disregarded because they are a "creature of tax fiction" or were intended solely for tax purposes and are no longer necessary in light of Internal Revenue Code section 5891. It is not for this court to speculate concerning the reasons contracting parties may have had for including a clear and ambiguous term in their agreement. "`Where contract language is clear and explicit and does not lead to absurd results, we ascertain intent from the written terms and go no further." (Shaw v. Regents of University of California (1997) 58 Cal.App.4th 44, 53; Civ. Code, § 1636.)
In any event, the nonassignment provisions of the SSA ostensibly have a dual purpose: ensuring tax advantages to Griffin and SABSCO and protecting Symetra against a material increase in risks and burdens in administering the SSA. If Griffins right to receive periodic payments was freely assignable, Symetra would be exposed to potentially numerous and conflicting claims of untold numbers of assignees. In view of the nonassignment provisions, Symetra did not bargain for these additional "transactions costs" when it entered into the QAA and negotiated the price of the Annuity Contract.
Some courts have interpreted particular nonassignment provisions in structured settlement agreements as allowing periodic payments to be assigned where, for example, the payee has bargained away the "right" but not the "power" to assign, or the nonassignment provision does not expressly state an assignment shall be "void." (Rumbin v. Utica Mut. Ins. Co. (2000) 254 Conn. 259, 268-276 (Rumbin) and cases cited; Owen v. CNA Ins./Continental Cas. Co. (2001) 167 N.J. 450, 459, 467-470 .) These courts have reasoned that anti-assignment clauses are to be narrowly construed, in view of the modern policy of the law which favors the free assignment of contract rights. Under this view, unless a nonassignment clause expressly limits the assignors "power" to assign or expressly declares any assignment to be "void," the clause will be construed as limiting only the assignors right to assign. In this event, an assignment will be upheld as valid and enforceable, and the obligor may recover damages for breach of the covenant not to assign. (Rumbin, supra, 757 A.2d at p. 531; Owen, supra, 771 A.2d at p. 1214.)
Notwithstanding the wisdom or soundness of requiring nonassignment clauses to contain specific terms, section XV of the SSA clearly states that Griffin has no "power" to assign the periodic payments. Thus, even under the Rumbin analysis, section XV of the SSA contains a valid and enforceable nonassignment clause, and its invocation by Symetra renders the proposed transfer to Rapid void. (Rumbin, supra, 757 A.2d at p. 533, fn. 9 [no "power" to effectively provide that any assignment will be invalid]; see also Rest.2d Contracts, § 317, p. 15 ["[a] contractual right can be assigned unless . . . assignment is validly precluded by contract"].)
The dissent in Rumbin criticized the power/right dichotomy as "impos[ing] on contracting parties an illogical and arbitrary set [of] contractual mantra that must be recited in order to draft a valid antiassignment clause." (Rumbin, supra, 757 A.2d at p. 537 (dis. opn. of Norcott, J.).) The dissent reasoned that anti-assignment clauses may nevertheless clearly and unambiguously express the parties intent to prohibit assignment — even if they do not prohibit the "power" to assign, declare an assignment "void," or use other specific language. (Id. at pp. 538-541.) In the dissents view, the nonassignment clause in Rumbin clearly and unambiguously prohibited assignment, even though it did not expressly prohibit the "power" to assign or declare an assignment "void or invalid." (Id. at pp. 540-541; see also Crespi, "Selling Structured Settlements: The Uncertain Effect of AntiAssignment Clauses" (2001) 28 Pepperdine L.Rev. 787, 815-817 [criticizing Rumbin courts approach of upholding or invalidating assignments based on "fine verbal distinctions" in the anti-assignment clause].)
Rapid further argues that, "Symetra has actively solicited the assignment of Griffins payment rights despite the anti-assignment language in [the SSA]," and that this "establishes that the practical interpretation of the contract, as evidenced by Symetras words, acts and conduct, is that Griffins payment rights are in fact assignable and Symetra has simply objected on a purely competitive basis." We discern no "practical interpretation" of the anti-assignment provisions of the SSA based on Symetras determination not to waive the provisions in favor of Rapid. As the Johnson court observed, under California law it is clear that nonassignment provisions are for the benefit of the obligor, and only the obligor has the right to waive the provisions. (Johnson, supra, 26 F.Supp.2d at pp. 1229-1230.) As the obligor, Symetra may choose to enforce or waive the nonassignment provisions of the SSA. That it chose not to waive the provisions in favor of Rapid does not mean Symetra may not waive the provisions in favor of itself or an affiliated entity.
C. No Statutory Abrogation of Nonassignment Provisions
Rapid argues that the indemnity provisions of the Act and Internal Revenue Code section 5891 have abrogated the nonassignment provisions of the SSA. We disagree.
First, an interpretation of either statute as abrogating Symetras contractual right to enforce the nonassignment provisions of the SSA would conflict with the well-established rule of statutory construction that a statute should be interpreted, whenever possible, to avoid rather than create constitutional issues. (Frye v. Tenderloin Housing Clinic, Inc. (2006) 38 Cal.4th 23, 42-43.) Interpreting the Act or Internal Revenue Code section 5891 as abrogating Symetras right to enforce the nonassignment provisions would clearly raise a constitutional issue in that it would deprive Symetra of its preexisting contractual right to enforce the nonassignment provisions of the SSA.
It is similarly axiomatic that "`"a retrospective operation will not be given to a statute which interferes with antecedent rights . . . unless such be the `unequivocal and inflexible import of the terms, and the manifest intention of the legislature." [Citation.]" (Evangelatos v. Superior Court (1988) 44 Cal.3d 1188, 1207, italics omitted.)
Furthermore, "[a]s a general rule, `[u]nless expressly provided, statutes should not be interpreted to alter the common law, and should be construed to avoid conflict with common law rules. [Citation.] "A statute will be construed in light of common law decisions, unless its language `"clearly and unequivocally discloses an intention to depart from, alter, or abrogate the common law rule concerning the particular subject matter . . . ." [Citations.] [Citation.]" [Citation.] Accordingly, `[t]here is a presumption that a statute does not, by implication, repeal the common law. . . ." (California Assn. of Health Facilities v. Department of Health Services (1997) 16 Cal.4th 284, 297.) "California law . . . requires a clear and unambiguous statement when a statute alters common law." (California Teachers Assn v. Davis (C.D.Cal. 1999) 64 F.Supp.2d 945, 957.) There is no clear statement in the Act or in Internal Revenue Code section 5891 that either was intended to abrogate the existing contractual rights of structured settlement obligors to enforce nonassignment provisions in structured settlement agreements.
Rapid argues that the indemnity provisions of the Act, specifically, subdivision (d) of section 10139.3 and subdivision (b)(2) of section 10139.5, indicate a clear legislative intent to abrogate nonassignment provisions in existing structured settlement agreements. The former provision states that the transferee is liable to the structured settlement obligor and annuity issuer "for any and all taxes incurred as a consequence of the transfer . . . ." (§ 10139.3, subd. (d).) The latter provision applies "if the transfer contravenes the terms of the structured settlement agreement" and states that the transferee shall be liable to the structured settlement obligor and annuity issuer for "(A) Any taxes incurred by those parties as a consequence of the transfer" together with "(B) Any other liabilities or costs, including reasonable costs and attorneys fees, arising from compliance by those parties with the order of the court or arising as a consequence of the transferees failure to comply with this article." (§ 10139.5, subd. (b)(2).)
We are not persuaded that these indemnity provisions indicate a clear legislative intent to abrogate a structured settlement obligors right to enforce a nonassignment provision in a structured settlement agreement. We presume that if the Legislature had intended by the Act to abrogate the common-law enforceability of nonassignment provisions in existing structured settlement agreements, the Act would clearly so state. (California Assn. of Health Facilities v. Department of Health Services, supra, 16 Cal.4th at p. 297.) The indemnity provisions of the Act are not a clear indication of such intent.
To the contrary, the indemnity provisions are clearly consistent with allowing a structured settlement obligor to enforce a nonassignment provision. The obligor could decide to waive a nonassignment provision by failing to object to a proposed transfer, in which event, the indemnity provisions would protect the obligor from any damages as a result of that transfer. On the other hand, the obligor could decide to enforce the nonassignment provision and object to the proposed transfer. In this event, the obligor could void the proposed transfer and the indemnity provisions would be inoperative.
Nor does Internal Revenue Code section 5891 indicate a clear legislative intent to abrogate the contractual rights of structured settlement obligors to enforce nonassignment provisions in structured settlement agreements. The federal statute addresses only the tax consequences of transfers of structured settlement payment rights; it does not address the contract rights or obligations of the parties to the structured settlement agreement.
Other courts have reached the same conclusion. As one Illinois appellate court has observed, Internal Revenue Code section 5891 "only specifies what tax treatment certain kinds of structured settlement will be afforded; it leaves to the individual states the question of assignability. The clear and unambiguous language of the settlement agreement controls our analysis here." (Rapid Settlements, Ltd. v. Symetra Life Ins. Co. (In re Foreman) (2006) 365 Ill.App.3d 608, 613-614 .) And, as the Georgia Supreme Court has observed, "Whatever effect this change [26 U.S.C.A. § 5891] may have on future assignments, it plays no role [regarding the assignability of existing structured settlement payment rights] because . . . the assignment of a structured settlement agreement exposes the obligor to potential litigation and administrative risks." (Singer Asset Finance v. CGU Life Ins. (2002) 275 Ga. 328, 331 ; see also Rapid Settlements Ltd.s v. Symetra (2006) 133 Wn.App. 350, 366 [Internal Revenue Code section 5891 does not preempt the North Carolina structured settlement protection act].)
Furthermore, one of the "required conditions" to the validity of a proposed transfer under the Act is that it not contravene "other applicable law." (§ 10137.) For the reasons discussed below, the phrase "other applicable law," as used in section 10137, encompasses the existing contractual rights of structured settlement obligors to enforce nonassignment provisions in structured settlement agreements. So interpreted, section 10137 indicates that the Legislature intended to recognize and give effect to the contract rights of structured settlement obligors, not abrogate them.
D. Transfers in Violation of Nonassignment Provisions are Voidable Under the Act
Section 10137 states: "A transfer of structured settlement payment rights is void unless all of the following conditions are met: [¶] . . . [¶] (b) The transfer complies with the requirements of [the Act], will not contravene other applicable law, and is approved by a court as provided in Section 10139.5." (Italics added.) Symetra maintains that the phrase "other applicable law" includes existing contractual rights of structured settlement obligors and annuity issuers to enforce nonassignment provisions in structured settlement agreements. We agree.
We presume that the Legislature was aware of existing "applicable law" when it enacted section 10137. (See Viking Pools, Inc. v. Maloney (1989) 48 Cal.3d 602, 609.) This "applicable law" included the contractual rights of structured settlement obligors or annuity issuers to enforce nonassignment provision in structured settlement agreements. (Johnson, supra, 26 F.Supp.2d at pp. 1229-1230.) Indeed, the Legislatures awareness of these parties preexisting contractual rights is reflected in section 10134, subdivision (g), which defines "interested parties" as including, "with respect to a structured settlement agreement . . . the annuity issuer, the structured settlement obligor, and any other party who has continuing rights or obligations under the structured settlement agreement." Moreover, "interested parties" are required to be given notice of a proposed transfer (§ 10139.5, subd. (c)(2)), apparently so they may have an opportunity to object and assert their contractual rights, including their right to enforce a nonassignment provision (id., subd. (c)(2)(H) [notice to include "[n]otification that any interested party is entitled to support, oppose, or otherwise respond to the transferees application"]).
We therefore interpret section 10137 as meaning that a proposed transfer is void if it contravenes the existing contractual rights of a structured settlement obligor or annuity issuer to enforce a nonassignment provision, provided the interested parties timely object to the proposed transfer on these grounds after having been given notice and an opportunity to be heard. In the present case, Symetra asserted its right to enforce the nonassignment provisions of the SSA in the superior court, in opposition to Rapids petition to approve the proposed transfer, and Symetras existing contractual rights are valid and enforceable for the reasons we have explained. Thus, here, the superior court erroneously approved the proposed transfer; instead, the transfer should have been declared void.
We are mindful that the Act contemplates that courts may approve transfers that contravene the terms of a structured settlement agreement. Subdivision (a) of section 10139.5 lists the "express written findings" a court is required to make before it may approve a proposed transfer. The list does not include a finding that the transfer does not contravene the terms of the structured settlement agreement. Instead, the court must find that "[t]he transfer does not contravene any applicable statue or the order of any court or other government authority." (§ 10139.5, subd. (a)(4).) And as discussed, the indemnity provisions of subdivision (b)(2) of section 10139.5 apply only if a transfer contravenes the terms of the structured settlement agreement.
None of this means, however, that a court may approve a transfer notwithstanding a timely and meritorious objection that it would contravene a valid and enforceable nonassignment provision of the underlying structured settlement agreement. Section 10139.5 must be interpreted consistently with section 10137, and both provisions must be interpreted in light of the long-settled rule that, wherever possible, statutes are not to be interpreted as raising unnecessary constitutional questions (Frye v. Tenderloin Housing Clinic, Inc., supra, 38 Cal.4th at pp. 42-43) or as retroactively abrogating existing contractual rights (Evangelatos v. Superior Court, supra, 44 Cal.3d at p. 1207).
IV. DISPOSITION
The order approving the proposed transfer from Griffin to Rapid is reversed, and the proposed transfer is hereby disapproved. Appellants to recover their costs on appeal.
We concur:
Ramirez, P.J.
Richli, J.