Aurora Nat. Life Assur. Co. v. Harrison

• Decision Date: 21 November 2006
• Docket Number: No. 4:05-cv-00445-JEG-CFB.,4:05-cv-00445-JEG-CFB.
• Citation: 462 F.Supp.2d 951
• Parties: AURORA NATIONAL LIFE ASSURANCE COMPANY, Interpleader Plaintiff, v. Patreka HARRISON f/k/a Patreka Lunsford f/k/a Patreka Ewing, Gary Ewing, FL Assignments Corporation, and Singer Asset Finance Company, Interpleader Defendants, Patreka Harrison f/k/a Patreka Lundsford f/k/a Patreka Ewing, Cross-Claim Plaintiff and Cross-Claim Defendant, v. Singer Asset Finance Company, Cross-Claim Defendant and Cross-Claim Plaintiff.
• Court: U.S. District Court — Southern District of Iowa

462 F.Supp.2d 951

AURORA NATIONAL LIFE ASSURANCE COMPANY, Interpleader Plaintiff, v. Patreka HARRISON f/k/a Patreka Lunsford f/k/a Patreka Ewing, Gary Ewing, FL Assignments Corporation, and Singer Asset Finance Company, Interpleader Defendants, Patreka Harrison f/k/a Patreka Lundsford f/k/a Patreka Ewing, Cross-Claim Plaintiff and Cross-Claim Defendant, v. Singer Asset Finance Company, Cross-Claim Defendant and Cross-Claim Plaintiff.

No. 4:05-cv-00445-JEG-CFB.

United States District Court, S.D. Iowa, Central Division.

November 21, 2006.

John B. Dempsey, Steven C. Baker, Drinker Biddle & Reath LLP, Philadelphia, PA, Jeffrey D. Goetz, Bradshaw Fowler Proctor & Fairgrove, Des Moines, IA, for Interpleader Plaintiff.

Gail E. Boliver, Eric Bidwell, Boliver Law Firm, Marshalltown, IA, Mark. D. Walz, Davis Brown Koehn Shors & Roberts PC, Des Moines, IA, for Interpleader Defendants/Cross-Claim Defendant/Cross-Claim Plaintiff.

ORDER

GRITZNER, District Judge.

This matter comes before the Court on a Motion for Summary Judgment filed by Cross-Claim Plaintiff/Cross-Claim Defendant Patreka Harrison (Clerk's No. 46) and a Cross-Motion for Summary Judgment filed by Cross-Claim Defendant/Cross-Claim Plaintiff Singer Asset Finance Company (Clerk's No. 57). Also pending are Motions to Strike filed by Harrison (Clerk's No. 59) and Singer (Clerk's No. 49). Harrison is represented by Gail E. Boliver and Eric Bidwell, and Singer is represented by Mark D. Walz. Following an October 13, 2006, hearing, these matters are fully submitted and ready for disposition.

MATERIAL FACTS¹

Harrison is a resident of Amarillo, Texas. Singer is a Delaware limited liability company with its principal place of business in Florida.

On October 15, 1985, while Harrison was a minor, Harrison's representative and the Security Bank of Nevada, through its Trust Department, acting as trustee and guardian of Harrison's estate, entered into a structured settlement agreement and release (the "Settlement Agreement") with Royal Insurance Company ("Royal Insurance") to settle a personal injury action brought in Nevada by Harrison's estate against William and Edith Price.² The Prices were insureds of Royal Insurance. The Settlement Agreement was drafted and executed pursuant to an order entered by a Nevada state court.

The Settlement Agreement required the Prices, through Royal Insurance, to pay to the Security Bank of Nevada and eventually to Harrison an immediate lump sum of money as well as amounts disbursed periodically over several years (the "Periodic Payments"). The Periodic Payments were to be funded through the purchase of an annuity policy by Royal Insurance from Executive Life Insurance Company ("Executive Life"). Under the Settlement Agreement, Harrison would "have no rights of ownership in the annuity contract, no right to designate a beneficiary and no other right or control under the annuity contract whatsoever," but the Settlement Agreement did not restrict Harrison's right to assign the Periodic Payments.

The Settlement Agreement permitted Royal Insurance and the Prices to "assign their duties and obligations with respect to [the Periodic Payments] and the purchase of said annuity obligations to First Executive Corporation" ("First Executive"). Royal Insurance and the Prices made such an assignment.³ First Executive purchased an annuity policy (the "Annuity") from Executive Life to fund its obligation to make the Periodic Payments. First Executive was later succeeded by FL Assignments.

Under the Settlement Agreement and the Annuity, Harrison was to be provided benefits in the following manner:

• $1200 per month for a period of five years, with the first payment due November 16, 1985, and the final payment due October 16, 1990.

• $1200 per month for a period of five years, with the first payment due November 16, 1994, and the final payment due October 16, 1999.

• $2500 per month for sixteen years, with the first payment due November 16, 1999, and the final payment due October 16, 2015. If Harrison lived beyond October 16, 2015, the annuity would pay $2500 per month on the 16th day of each month for the remainder of Harrison's life beginning on November 16, 2015.

• Lump sum payments:

• $12,000 on November 16 in 1990, 1991, and 1992.

• $37,000 on November 16, 1993.

• $50,000 on November 16, 1998.

• $75,000 on November 16, 2003.

• $100,000 on November 16, 2008.

• $125,000 on November 16, 2013.

• $150,000 on November 16, 2018.

• $200,000 on November 16, 2023.

• $300,000 on November 16, 2028.

• $400,000 on November 16, 2033.

Harrison App. 4-10, 272.

Following the conservation and liquidation of Executive Life, the Annuity was assumed by Aurora National Life Assurance Company ("Aurora"), a California company, in 1993 at 100 percent of its initial value (the "Restructured Annuity"). Aurora issued new terms governing the Restructured Annuity. The terms of the Restructured Annuity describe and distinguish the roles of various parties to the contract:

Owner. The Owner of this contract as named in the Application or as changed by Written Request⁴ thereafter while the Annuitant is alive.... Payee.... The individual or entity to whom Benefit Payments are made under this contract....

. . . .

Assignment. This contract may be assigned by Written Request by the Owner while any Annuitant was alive . . . .

Owner.

. . . .

e. Change. While the Annuitant is alive, the Owner may designate or change the ownership by Written Request or a contingent Owner may be designated or changed by Written Request....

See Harrison App. 20, 25, 29-30. Harrison was the Restructured Annuity's payee, and FL Assignments was its owner. As the quoted terms show, the Restructured Annuity could not be assigned without a Written Request submitted by FL Assignments. The record is devoid of such a request.

Beginning in 1997, Harrison sought to increase her income during a period of economic distress. Through a series of four transactions executed over a sixteen-month period (collectively, the "Purchase Agreements"), Singer paid Harrison lump sums of money in exchange for Harrison's promise to transfer control over the Periodic Payments to Singer. Each Purchase Agreement contains a clause indicating Harrison

hereby sells, transfers, assigns, sets over and conveys to [Singer], or at [Singer]'s election, [Singer]'s assignee, all right, title and interest of [Harrison] in and to the "Assigned Assets", and, in reliance on the representations, warranties and covenants of [Harrison] contained herein and subject to the terms and conditions hereof, [Singer] hereby purchases and accepts the assignment of all right, title and interest of [Harrison] in and to the Assigned Assets, in consideration of the payment of the Purchase Price ....

Harrison App. 257, 349, 450, 551.⁵

Through a "Notice of Direction of Payments" attached to the Purchase Agreements, Harrison directed First Executive or FL Assignments and Aurora to remit all Periodic Payments to a bank account in Harrison's name located in New York. The Notice attached to the first two Purchase Agreements directs the Periodic Payments to be made by wire transfer and includes wiring instructions to access an account owned by Harrison. The Notices do not indicate Harrison assigned or sold her right to receive payments under the Settlement Agreement, the Annuity, or the Restructured Annuity; instead, each Notice indicates Harrison was changing the address and bank account to which she wished the Periodic Payments to be sent. The account was actually apparently controlled by Singer, which would deduct an amount equaling the payments assigned by the Purchase Agreements and refund the balance to Harrison.

Under section 5(d) of the Purchase Agreements, Harrison agreed not to make changes in the instructions set forth in the Notices of Direction of Payments after execution of the Purchase Agreements. Section 5(f) of the Purchase Agreements required Harrison to "immediately deliver to [Singer] any checks, funds or other form of payment on account of or in connection with the Annuity or the Assigned Assets hereafter received by [Harrison] or anyone (other than [Singer] ) claiming by or through [Harrison]." Harrison App. 262, 354, 455, 555.

Harrison executed a document labeled "Absolute Assignment and Waiver of Claim" with each Purchase Agreement. Through each waiver, Harrison "release[d] any rights, claims, interest, powers and privileges to any benefits or proceeds that [Harrison] might [have had] or in the future possess under the [Settlement Agreement], or in relation thereto, regarding the Assigned Assets." Harrison App. 324, 423, 524, 624. Singer claims the waiver, when read with other documents attached to each Purchase Agreement, secures Singer's right to receive all payments due to Harrison under the Settlement Agreement.

The four Purchase Agreements set forth the financial terms of each transaction. Via a Purchase Agreement dated July 18, 1997, Harrison received an immediate payment of $44,033, and Singer received the right to

30 monthly payments of $150.00 commencing August 16, 1997 through and including January 16, 2000; 30 monthly payments of $500.00 commencing February 16, 2000 through and including July 15, 2002; [l]ump sum payment as follows: $50,000.00 due November 16, 1998.

Harrison App. 268. Through this transaction, Harrison sold the right to receive nearly $69,500 in future payments for the immediate sum of $44,033. A letter from Harrison dated June 28, 1997, indicates she understood she was "accepting the quote for $44,033 in exchange for [the] lump sum of $50,000 due on 11/16/1998 and monthly payments in the amount [of] $150 for 30 months, then increasing to $500 for an additional 30 months." Singer App. 6.

Through a Purchase Agreement dated April 23, 1998, Harrison sold the right to receive a "[l]ump sum payment of $75,000 due November 16, 2000" for $25,734 payable immediately. Harrison App....