In re Benninger
| Decision Date | 18 December 2006 |
| Docket Number | No. 05-31181 JAD.,05-31181 JAD. |
| Citation | 357 B.R. 337 |
| Parties | Jody BENNINGER, Debtor. Jody Benninger, Movant, v. First Colony Life Insurance Company, Commonwealth of Pennsylvania Medical Professional Liability Catastrophe Loss Fund, Albert E. Cuneo, and Ronda J. Winnecour, Chapter 13 Trustee, Respondents. Jody Benninger, Movant, v. Albert E. Cuneo, Respondent. |
| Court | U.S. Bankruptcy Court — Western District of Pennsylvania |
Gary Simone, Butler, PA, Chapter 13 Debtor.
Albert E. Cuneo, Pittsburgh, PA, pro se.
There are two matters before the Court, each of which have been consolidated for purposes of this Memorandum Opinion. These two matters are core proceedings pursuant to 28 U.S.C. §§ 157(b)(2)(A), (B), (F), (H), (K) and (O). The first matter is the debtor's Motion to Release Funds Held by First Colony Life Insurance Company (the "Motion to Release Funds"). The second matter is the debtor's Objection to All Proofs of Claim filed by Albert E. Cuneo (the "Claims Objection"). The issues raised by the Motion to Release and the Claims Objection are: Does Albert Cuneo hold any allowable unpaid claims against the debtor, Jody Benninger? If Mr. Cuneo does hold allowed claims, are such claims properly secured against the debtor's interest in a pre-bankruptcy structured settlement of a medical malpractice action? For reasons set more fully in this Memorandum Opinion, the Court concludes that Mr. Cuneo has no unpaid claims that are allowed. For the same reasons why Mr. Cuneo has no unpaid claims that are allowed, the Court also concludes that Cuneo has no security interest whatsoever in any of the debtor's assets. Consequently, the Court will enter an order which (a) grants the Motion to Release Fund, and (b) sustains the Claims Objection.
The claimant in these proceedings, Albert E. Cuneo, filed nine (9) separate secured claims against the bankruptcy estate, each arising out of an "Agreement" dated July 14, 2000 for "Consultation Services" by and between the Debtor and Mr. Cuneo. The following is a summary of the proofs of claim filed by Albert E. Cuneo:
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Proof of Alleged Basis
Claim of Claim Judgment Obtained Claim Amount
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# 6 Services Render 8/09/00; $2,469.03
6/29/00—8/8/00 Butler County, PA
2000-20766
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# 7 Services Rendered 9/05/00; $2,569.97
8/9/00—9/4/00; Butler County, PA
2000-20872
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# 8 Services Rendered 10/11/00; $1,957.07
9/05/00—10/11/00 Butler County, PA
2000-20988
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# 9 Commission on 4/30/02; $28,850.77
annuity proceeds Butler County, PA
transfer to Settlement 2002-20610 ($267, 836.00 × 7% =
Capital ($18,748.52 plus interest)
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# 10 Services Rendered 05/01/02; $2,440.94
10/01/00-11/30/00 Butler County, Pa
2002-20613
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# 11 $100 court ordered 01/21/05; $387.88
counsel fee payable to Butler County, PA
Cuneo 2005-20161
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# 12 Commission of 7% 8/15/05; $11,286.72
based on theory of Butler County, PA
loss of bargain (rate 2005-21583 ($ 7,373.88 principal
Cuneo believes should plus $3,838.63 interests
have been utilized)— plus costs)
first transfer to
Settlement Capital
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# 13 Commission of 7% 8/15/05; $47,297.60
based on theory of Butler County, PA
loss of bargain (rate 2005-21584 ($ 38,578.70 principal
Cuneo believes should plus $8,502.39 plus
have been utilized)— costs
second transfer to
Settlement Capital
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# 14 Lawsuit against n/a unliquidated
Benninger, Butler
County, PA
2003-10409
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The circumstances giving rise to the Debtor's contractual relationship with Mr. Cuneo are unfortunate. In 1979, the debtor Jody Benninger (then known as Jody Frank)(hereinafter referred to as the "Debtor" or "Benninger") gave birth to a son, Jason, who was born prematurely with brain damage and cerebral palsy. Jason Frank remained in the hospital after his birth for approximately one year. Thereafter, he required assistance in all aspects of his life. Jason ultimately passed away on April 5, 1998 at the age of 18.
In 1982, a medical malpractice action was commenced against Benninger's physician on behalf of Benninger's minor severely disabled son, as well as on behalf of Benninger and her then husband in the Court of Common Pleas of Butler County. The action alleged negligence occurring before and at the time of Jason's birth. According to papers filed in the Court of Common Pleas of Butler County, Jason was mentally and physically disabled from birth, having suffered brain damage, spastic athetoid cerebral palsy and related disorders.
A settlement was reached in 1986 in which a structured settlement was established for the benefit of the guardianship estate of Jason Frank. As part of the settlement, a lump sum payment of $140,000 was made for Jason Frank's benefit. To fund the structured settlement, an annuity was purchased on behalf of Jason Frank in the amount of $310,000 to provide an annual income of $20,760.00 payable for a period of thirty years. An additional annuity was also purchased to provide deferred lump sum payments every five years commencing in February 1992 in a scheduled amount.1 Both annuities were purchased by the Medical Professional Liability Catastrophe Loss Fund from First Colony Life Insurance Group.
Prior to her son's death in 1998, Debtor Jody Benninger took care of her two daughters along with her son Jason (who required constant care). At all times material hereto, Benninger did not have employment outside of the home. In terms of education, the Debtor completed her high school education but did not obtain any education beyond a high school diploma. In June 1998, Benninger and her husband were officially divorced.2
After the death of her son, Benninger was a "nervous wreck." Her condition was such that she was under the care of a treating physician, and was on prescription medication (Xanax). During this time frame, the Debtor began to experience financial difficulties.
As a result of Benninger's financial problems, she sought to sell her home in hopes of avoiding a sheriff's sale. Towards this end, Benninger contacted Northwood Realty seeking a realtor to list her home for sale. Benninger came into contact with the respondent Albert E. Cuneo ("Cuneo") through Northwood Realty because, at that time, Cuneo was a real estate agent for the company.
In an effort to alleviate financial burdens that had developed, Benninger also determined to sell her interests in the structured settlement funded by the annuities issued by the First Colony Life Insurance Group. She made this decision after seeing a television advertisement for Peachtree Settlement Funding ("Peachtree"), which is a company that is in the business of purchasing structured settlements. At the time of the advertisement, Benninger had already received a notice of foreclosure against her home. She made the initial contact with Peachtree after seeing the advertisement in hopes of receiving sufficient funds to satisfy her mortgage and other debts. After she made contact with Peachtree, Benninger then filled out some type of contract with Peachtree in order to commence the process whereby the structured settlement could be sold.
After Benninger commenced discussions with Peachtree, Cuneo became aware of Benninger's beneficiary rights to receive the annuity payments and her desire to liquidate them. It is not entirely clear to the Court how this fact became known to Cuneo. It also did not appear to be clear to Benninger, who testified that possibly Cuneo saw her filling out applications for the transfer of the structured settlement funded by the annuities or that he overheard phone conversations that she was having concerning the potential transfer of the right to payments.3 No matter how Cuneo became aware of the possible transaction, it is undisputed in this case that Benninger had initiated contact with Peachtree on her own without the assistance of Cuneo and that Cuneo interjected himself into the process after-the-fact.
After meeting with Benninger, Cuneo drafted an "Agreement", dated July 14, 2000, for "Consultation Services". It is important to note that the...
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