Summary
suggesting a need for additional state regulation of structured settlement agreements to protect the beneficiaries of those agreements
Summary of this case from In re BerghmanOpinion
No. 98-01526
Opinion filed March 10, 1999
Appeal from the Circuit Court for Hillsborough County; Dick Greco, Jr., Judge.
Patricia A. Burton, Wilton Manors, for Appellant.
Mark G. Rodriguez of Woodruff Jeeves, P.A., St. Petersburg, for Appellee Sun State Capital Funding, Inc.
No appearance on behalf of Appellee Patricia Ann Parker.
First Colony Life Insurance Company (First Colony) appeals a final order of garnishment entered against it in favor of Sun State Capital Funding, Inc. (Sun State). The order was entered without an evidentiary hearing and is comparable to a judgment on the pleadings. We reverse because there are unresolved factual issues in this case. We provide a detailed description of the underlying financial transaction because it involves an assignment of payments under a structured settlement agreement, which frustrates the intent of that agreement. This case suggests a need for additional state regulation of structured settlement agreements to protect the beneficiaries of those agreements.
Patricia Ann Parker, f/k/a Patricia Ann Brown, individually, and as personal representative of the estate of Kelvin Leon Brown, filed a lawsuit in the Ninth Judicial Circuit against Bob Dance Jeep Eagle, Inc., concerning an automobile accident on the Bee Line Expressway in Orange County, Florida. The accident occurred on June 16, 1993, and apparently resulted in the death of Mr. Brown and damages to Ms. Parker. On April 25, 1996, Ms. Parker signed a structured settlement agreement with Shelby Insurance Company to resolve this claim. The structured settlement agreement provided for a payment of $160,000 at the time of settlement and an additional $162,500, payable in six installments beginning on May 1, 1999, and ending on May 1, 2011. The agreement provided that no portion of the payments could be "accelerated, deferred, increased or decreased, anticipated, sold, assigned, pledged, or encumbered by Plaintiff or Payee." This agreement apparently was finalized on June 11, 1996.
Our record contains very limited information about the tort claim. The information comes from the recitals in the settlement agreement and release.
Such agreements have complicated federal income tax ramifications that need not be discussed in this opinion, but suffice it to say that the agreement allowed a "qualified assignment" of the defendant's and insurer's obligations under the agreement pursuant to section 130(c) of the Internal Revenue Code of 1986. The agreement specified that the defendant and the insurer could purchase two separate annuities to fund the six installment payments. It was agreed that First Colony would provide an annuity to fund three payments: $25,000 on May 1, 2002; $30,000 on May 1, 2005; and $20,000 on May 1, 2008. The actual annuity is not in our record but no party denies that First Colony has issued or arranged for the issuance of such an annuity. The legal owner of the annuity is allegedly Jamestown Life Insurance Company (Jamestown Life). Ms. Parker is only the beneficiary of the annuity.
On June 20, 1997, about a year after Ms. Parker settled this lawsuit, she entered into a "Fund Acquisition Agreement" with Sun State. At the same time, she executed a "Change of Beneficiary Agreement." Accurate copies of those agreements are appended to this opinion. In essence, Ms. Parker agreed to change the beneficiary status on the annuity for the first two payments so that Sun State would receive these payments. In exchange for these future payments totalling $55,000, Ms. Parker received a net payment of $16,000 in June 1997. Even adjusting the future payments to present value using a very high interest rate, this transaction appears to favor Sun State.
She paid a "brokerage fee" of $1,890.13 to someone as a part of this transaction.
In paragraph 4(B) of the Fund Acquisition Agreement, Ms. Parker agreed to provide a "payment and/or performance bond within 3 days of the date hereof" in the amount of $46,200 as security. It is unclear from our record how or where Ms. Parker was to obtain such a performance bond. She apparently did not obtain the bond by June 23, 1997.
Accordingly, Sun State sued Ms. Parker for breach of the agreement be cause she did not obtain the bond. This suit was filed in Hillsborough County, even though the agreement selects Pinellas County as the appropriate venue, and Ms. Parker apparently lives in Orange County. The suit was filed on July 24, 1997, only a month after her failure to obtain the bond.
Oddly, Ms. Parker's attorney from Pinellas County, Collin D. Vause, served an answer to the complaint one day later in which Ms. Parker admits the allegations, waives her right to any final hearing, and consents to the entry of a judgment against her for all relief requested in the complaint without further notice to her. In late August, a joint stipulation was filed authorizing a $55,000 judgment to be entered against Patricia Ann Parker, including language to enjoin her from taking any action to rescind or cancel the change of beneficiary agreement. On August 26, 1997, the trial court entered a judgment against Ms. Parker for $55,000, "which shall bear interest at the rate prescribed by law and for which let execution issue." The judgment also enjoined her from taking any action to rescind or cancel the change of beneficiary agreement.
These facts suggest that Ms. Parker may have signed some document when she received the money from Sun State that appointed Mr. Vause as her attorney and authorized him to consent to judgment. Our record, however, does not explain why he filed this answer when he did.
Thus, in exchange for a payment of $16,000 to Ms. Parker on June 20, 1997, Sun State received a judgment on August 26, 1997, for $55,000 plus legal interest. At least on paper, Sun State tripled the value of its asset in two months. Because interest is accruing on the judgment effective August 26, 1997, the future payments of $55,000, if made, will still leave a sizeable judgment against Ms. Parker.
Ms. Parker did not appeal this judgment. She has not actively participated in the garnishment action or in this appeal. Pursuant to Florida Rule of Appellate Procedure 9.020(g)(2), she is an appellee.
On September 15, 1997, Sun State filed a short motion for "continuing" writ of garnishment against First Colony. The motion contains few factual allegations and does not state the legal basis for a "continuing" writ nor does it explain what debt is due from First Colony to Ms. Parker or what property of hers may be in First Colony's possession. On September 15, the trial court entered an order authorizing the issuance of a continuing writ against First Colony. Our record does not contain a copy of the writ.
See § 77.0305, Fla. Stat. (1997) (providing for continuing writs of garnishments against employer for salary or wages). Cf. Hernando County v. Warner, 705 So.2d 1053 (Fla. 5th DCA 1998) (noting that section 77.0305 subjects the county to garnishment proceedings when the judgment debtor is an employee owed wages or salary). We are not aware of any other statutory authority for continuing writs of garnishment.
Although our record does not contain a copy of the writ, First Colony submitted an appendix with what purports to be a copy of the "Continuing Writ of Garnishment." This writ is not in conformity with Florida Rule of Civil Procedure Form 1.907(b), but rather includes the provisions required by Florida Rule of Civil Procedure 1.907(a) and then adds a paragraph:
If Garnishee is required to make pariodic [sic] payments to Defendant, then Garnishee is required to withhold the payment of the periodic payments that accrue or are payable on or after the date of service of this Writ until further order of court.
We are not aware of any legal basis for this paragraph.
First Colony answered the writ, denying that it had any personal property of Patricia Ann Parker. It admitted that she was the designated future payee on a single premium annuity contract owned by Jamestown Life and alleged the three future payments previously described in this opinion. It alleged that the benefits under the structured settlement could not be assigned pursuant to the terms of the agreement and that the annuity contract was a "qualified funding asset" for purposes of the Internal Revenue Code. It maintained that any amount owed to Ms. Parker was actually owed by Jamestown Life and that First Colony was only a legal guarantor. It also raised the statutory exemption from garnishment of annuity contracts pursuant to section 222.14, Florida Statutes (1997). A representative of Jamestown Life filed an affidavit supporting the answer.
Sun State then filed a motion for entry of continuing final garnishment judgment. On March 5, 1998, the trial court entered a final garnishment judgment requiring First Colony to pay $25,000 to Sun State on May 1, 2002, and $30,000 on May 1, 2005. This judgment was entered without an evidentiary hearing and was based on arguments of counsel and the contents of the record. It is this judgment that First Colony has appealed. First Colony is concerned that the judgment, if affirmed, may have adverse tax consequences for First Colony and for Ms. Parker.
Our record does not establish that notice was given to Ms. Parker pursuant to section 77.055, Florida Statutes (1997). Sun State may maintain that she waived such notice.
The record in this case presents numerous questions and few answers. Sun State did not file a reply to First Colony's answer and, thus, the answer is taken as true. See § 77.082, Fla. Stat. (1997). On this record, there is no evidence of any debt due from First Colony to Ms. Parker that would be subject to garnishment and no basis to use a "continuing" writ to attempt collection of an amount that may become due years in the future. See Gieger v. Sun First Nat'l Bank, 427 So.2d 815, 818 (Fla. 5th DCA 1983) (trial court erred in ordering garnishment of future payments on installment promissory note). Accordingly, we reverse this judgment and remand this case to the circuit court for further proceedings.
Reversed and remanded.
PATTERSON, A.C.J., and BLUE, J., Concur.
APPENDIX FUND ACQUISITION AGREEMENT
THIS FUND ACQUISITION AGREEMENT is entered into this 20th day of June, 1997, by and between SUN STATE CAPITAL FUNDING, INC., a Florida corporation (herein " SSCF"), with a principal place of business of 507 S. Prospect Ave, Clearwater, FL 34616 and Patricia Ann Parker (herein Parker of 1423 Kozart Ct., Orlando, FL 32811.
WITNESSETH
WHEREAS, Parker desires to acquire from SSCF and SSCF is agreeable to making available to Parker, under the terms and conditions hereinafter set forth, the sum of Seventeen Thousand, eight hundred, ninety Dollars and 13/100 ( $17,890.13), less a brokerage fee of $1,890.13 with a net amount to Parker of $16,000.00 (herein "Acquisition")
WHEREAS, as consideration for SSCF making the Acquisition available to Parker, Parker will pay SSCF the sum of Fifty-five Thousand Dollars ($55,000.00) payable in lump sums of $25,000.00 on 5/01/02 and $30,000.00 on 5/01/05.
WHEREAS, Parker has the right to the following remaining payments due under that certain Settlement Agreement and Release with First Colony Life Insurance Company under Contract #2427693, (herein "Insurance contract") (Exhibit "A") lump sums of $25,000.00 on 5/01/02 and $30,000.00 on 5/01/05, for a total of 2 payments or $55,000.00.
WHEREAS, it is agreed that said Insurance Contract prohibits the assignment of the Insurance Contract Payments to SSCF as security for the Acquisition, however it is also agreed that Parker is unrestricted in her right to expend any and all of said payments in any way she desires following the receipt thereof, and
WHEREAS, SSCF is willing, subject to the security hereinafter described, to accept Parker's promise to pay the consideration from the Insurance Contract Payments as she receives same, and Parker hereby promises to pay SSCF from any and all of her assets including the Insurance Contract Payments as such payments are received.
NOW THEREFORE, in consideration of the mutual promises and covenants herein set forth, and other good and valuable consideration, the parties agree as follows:
1. RECITALS. The above recitals are true and correct and made an integral part hereof.
2. CONSIDERATION. The consideration to be paid to Parker by SSCF shall be the sum of Seventeen Thousand, eight hundred, ninety Dollars and 13/100 ( $17,890.13), less a brokerage fee of $1,890.13 with a net amount to Parker of $16,000.00.
3. PAYMENT TO SSCF. Parker hereby agrees to pay to SSCF Fifty-five Thousand Dollars ($55,000.00) as follows:
lump sums of $25,000.00 on 5/01/02 and $30,000.00 on 5/01/05.
4. SECURITY. Parker shall be deemed to have granted, and Parker does hereby grant to SSCF, as of the date hereof, a security interest in all of Parker's right, title and interest in the Insurance Payments made pursuant to the Insurance Contract, to the extent permitted by law, both before and after same are made.
A. It is acknowledged that the transaction provided for herein is subject to any and all restrictions and or limitations contained in the Insurance Contract including those against assigning, selling or hypothecating the payments to be made under the Insurance Contract. This Agreement, to the extent it is not inconsistent with the Insurance Contract provisions, assigns to SSCF the payments to be received by Parker under the Insurance Contract, but only after they are received by and vested in Parker.
B. In order to secure payment to SSCF of the payment sum, Parker hereby agrees to obtain a payment and/or performance bond within 3 days of the date hereof, in such amount and containing such provisions as are acceptable to SSCF and as will insure payment to SSCF of the total sum due SSCF hereunder in the amount of $46,200.00. Failure by Parker to obtain such a payment and/or performance bond from a company licensed to write such insurance in the State of Florida, and with a financial statement satisfactory to SSCF, within 30 days following execution of this Agreement, or in the event Parker breaches any of the other terms or covenants of this Agreement, SSCF shall have the right to seek redress against Parker by any legal means, including seeking a final judgment of garnishment against Parker in order to garnish the Payments due under the Insurance Contract.
5. CONTINGENCIES. As a condition of closing by SSCF, the following items must be complied with by Parker:
A. Verification of the interest of Parker in the Insurance Contract.
B. Parker's complete and prompt execution of the following documents:
1) Request by Parker for release of information to SSCF from First Colony LIFE INSURANCE COMPANY of all terms and related matters concerning the Insurance Contract.
2) Change of address form directing First Colony LIFE Insurance Company to make payments to Parker in care of SSCF.
3) All documents associated with securing additional life insurance policy coverage on Parker's life for the benefit of SSCF if deemed necessary by SSCF, insuring SSCF in the event of the death of Parker prior to the full amount of the payment to SSCF.
4) Parker's marital, financial statements, health and legal status.
6. REPRESENTATIONS AND WARRANTIES. Parker represents and warrants the following.
A. She has the right and authority to enter into this Agreement.
B. There is no outstanding or current sale, option, assignment, pledge, lien or encumbrance against or related to any of the payments due under the Insurance Contract.
C. There is due and owing under the Insurance Contract an amount not less than $55,000.00 as of the date hereof.
D. There are no outstanding or unsatisfied judgments, levy's, or claims against him by any third party.
E. There are no lawsuits pending or threatened against him.
F. No action or proceeding has been instituted or is threatened to restrain, prohibit, declare invalid or seek such other relief with respect to the Insurance Contract.
G. No defenses or offsets, or notices thereof, exist to the full and complete payment and performance of the Insurance Contract in the amount as elsewhere set forth in this Agreement.
H. She is not indebted to any present or former spouse for alimony, support maintenance or similar obligation or if she is so indebted, she has made adequate provisions for such payments in the future.
I. She has paid all federal, state and local taxes due through and including the date hereof, or has made adequate provisions for such payments.
J. She recognizes and assumes the obligation for any and all tax consequences that may result to her by reason of this Agreement. She has not relied on any representations or statements made by SSCF or its agents in connection with this transaction except as otherwise stated herein. She acknowledges that she has been advised by SSCF to consult with an attorney and tax advisor regarding the consequences of this transaction including but not limited to income tax consequences. She acknowledges that neither SSCF nor any of its agents have offered or rendered any advice or opinion regarding any tax consequences to him of this transaction.
K. Parker represents her marital status is that of Married.
7. EXEMPTIONS. Parker hereby waives any and all exemption rights from garnishment, attachment or levy brought by SSCF arising out of a breach of this Agreement, at the time when such are sought, irrespective of her domicile or residence.
8. ACCELERATION UPON BREACH. Upon the occurrence of a breach of this contract, SSCF may in its sole discretion, call the entire payment balance due under this contract immediately payable in full.
A. Breach shall be defined as any failure or inability by Parker to perform any of her obligations under this contract.
B. The failure of SSCF to immediately exercise its right to accelerate the payment and declare the same to be fully due and owing shall not constitute a waiver of the right to later accelerate Parker's obligation hereunder.
9. MISCELLANEOUS. It is hereby expressly agreed by Parker that time is of the essence for this Agreement. SSCF shall not by any act of omission or commission be deemed to waive any of its rights, remedies or powers hereunder or otherwise, unless such waiver is in writing and signed by SSCF.
A. Parker agrees to save, hold harmless, defend and indemnify SSCF against all claims, losses, damages or expenses including reasonable attorney fees and court costs which SSCF might incur in defending any claims or proceedings brought by Parker or any third party, or for any other event, arising out out of this agreement and/or the underlying transaction herein provided for.
B. If any provision of this Agreement is found to be unenforceable or invalid, the remaining provisions shall continue to be valid and enforceable.
C. Parker agrees to keep SSCF advised of her current residence mailing address at all times until this contract is completed.
D. Parker agrees to cooperate with SSCF in any way requested to effect the expectations of the parties herein including, but not necessarily limited to, signing any additional documents or participating in any court proceedings.
E. To extent required by the Insurance Contract, Parker agrees to satisfy any and all requests made by First Colony LIFE INSURANCE COMPANY for evidence that she is still living.
F. Parker agrees to do all that is necessary as the payee under the Insurance Contract to enforce her rights under the Insurance Contract. That is, if payments are withheld or unpaid, Parker agrees to make claim against the payor or owner of the Insurance Contracts necessary in order to insure continued payments to Parker, in care of Sun State Capital Funding, Inc., in accordance with this Agreement. Should she fail to do so, SSCF may enforce this provision by an affirmative injunction or action for specific performance.
G. Both SSCF and Parker have entered into this Agreement freely, willingly, and voluntarily and with the advice of independent counsel. Prior to the execution of this Agreement both parties received independent legal advice and counsel regarding the rights and obligations in connection with the legal, tax, investment, or their ramification of this transaction.
H. All parties agree if there is any future contract between SSCF and Parker, compensation for such transaction will be due to Sun State Capital Funding, Inc. by Parker and such compensation must comply with a separate agreement between Sun State Capital Funding, Inc. and Parker.
10. NOTICES. Parties agree to keep the other party apprised of current resident mailing address at all times or until this contract is completed. Any notice required or permitted to be given under this Agreement shall be sufficient if in writing, and if sent by certified mail to the following addresses:
AS TO SSCF: 507 S. Prospect Ave. Clearwater, FL 34616
WITH COPY TO: Mike O'Haire, Esq. 4890 122 Ave. N. Suite #4 Clearwater, Fl. 34622
AS TO PARKER: 1423 Kozart Ct. Orlando, FL 32811
WITH COPY TO: _______________________ _______________________ _______________________
11. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of the parties. Any amendments thereto shall be in writing and executed by both parties. The terms, provisions, representations, and warranties contained herein shall not merge in, but shall survive the closing of the transaction.
12. BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of the heirs, personal representatives and assigns of the parties hereto.
13. VENUE. This Agreement shall be governed and controlled as to its validity, enforcement, interpretation, construction, effect, and to all other respects, including, but not limited to the legality of the interest charged hereunder, by the statute, laws and decisions of the State of Florida. It is agreed by the parties that all actions or proceedings arising directly, indirectly or otherwise in connection with, out of, related to or from this Agreement shall be litigated only in courts having a situs within or whose jurisdiction includes Pinellas County, Florida. For the purpose of the foregoing, the parties and all their principals, sureties, guarantors and endorsers hereby consent and submit to the jurisdiction of any local, state or federal court located within or whose jurisdiction includes Pinellas County, Florida. The parties and all their principals, sureties, guarantors and endorsers hereby waive any right that they may have to transfer or change the venue of any litigation brought against them in accordance with this paragraph. In the event of litigation, the prevailing party shall be entitled to be reimbursed by the losing party for all costs of litigation, including reasonable attorneys' fees.
SIGNED AND SEALED IN THE SUN STATE CAPITAL FUNDING, INC. PRESENCE OF a Florida corporation
________________________ By: _______________________________ Witness Signature STEVEN L. TALSNESS, President
________________________ Printed Name
________________________ Witness Signature
________________________ Printed Name
STATE OF FLORIDA COUNTY OF PINELLAS
The foregoing instrument was acknowledge before me this 20th day of June 1997, by Steven L. Talsness, President of Sun Stats Capital Funding, Inc., a Florida corporation, on behalf of the corporation. She ( ) is personally known to me, or ( ) has produced FL ID as identification.
My Commission Expires: _______________________________ NOTARY PUBLIC, STATE OF FLORIDA
_______________________ _______________________________ Witness Signature Patricia Ann Parker
_______________________ Printed Name
_______________________ Witness Signature
_______________________ Printed Name
STATE OF FLORIDA COUNTY OF Orange
The foregoing instrument was acknowledged before this 20th day of June, 1997, by Patricia Ann Parker who ( ) personally known to me, or ( ) has produced FL ID as identification.
My Commission Expires: ________________________________ NOTARY PUBLIC, STATE OF FLORIDA
CHANGE OF BENEFICIARY AGREEMENT Patricia Ann Parker
THIS CHANGE OF BENEFICIARY AGREEMENT entered into the 20th day of June 1997, between Patricia Ann Parker of 1423 Kozart Ct., Orlando, FL 32811 ("Parker") and SUN STATE CAPITAL FUNDING, INC., 507 S. Prospect Ave. Clearwater, FL 34616 ("SSCF").
In consideration of the promises and covenants herein contained and other good and valuable consideration, the parties hereto agree as follows:
1. Parker covenants that, as of the date hereof, Parker will execute a notice directing the appropriate owner/payor of First Colony Life Insurance Company Insurance Contract/Policy Number No. #2427693, to change the beneficiary of said Insurance Contract from that of its current status to reflect that Sun State Capital Funding, Inc. is the beneficiary of the following lump sum payments:
$25,000.00 on 5/01/02 and $30,000.00 on 5/01/05.
2. Further, Parker covenants from the date hereof until May 15, 2005, that Parker will not make any further changes in the beneficiary clause of the Insurance Contract without the express written consent of Sun State Capital Funding, Inc. which consent shall be in the sole discretion of Sun State Capital Funding, Inc.
3. In the event Parker fails to specifically perform and abide by all of the terms of the Change of Beneficiary Agreement, Sun State Capital Funding, Inc. shall be entitled to pursue all remedies against Parker to which it is lawfully entitle pursuant to this obligation herein undertaken by Parker.
4. This agreement shall be binding upon and inure to the benefit of Parker and Sun State Capital Funding, Inc., and their respective heirs, executors, administrator, estates, successors, and assigns, and shall inure to the benefit of Sun State Capital funding, its successors and assigns.
5. Venue for any action relating to this matter shall be in Pinellas County, Florida. In the event any litigation arises out of this Change of Beneficiary Agreement, the prevailing party shall reimburse the non-prevailing party for all reasonable attorney's fees and costs.
_______________________ _________________________ Witness Signature Patricia Ann Parker
_______________________ Printed Name
_______________________ Witness Signature
_______________________ Printed Name
STATE OF FLORIDA COUNTY OF Orange
The foregoing instrument was acknowledged before this 20 day of June, 1997, by Patricia Ann Parker who, ( ) is personally known to me, or ( ) has produced FL ID as identification.
My Commission Expires: _________________________________ NOTARY PUBLIC, STATE OF FLORIDA