In re Wiggins

• Decision Date: 21 September 2001
• Docket Number: Bankruptcy No. 99-40458.,Adversary No. 99-6212.
• Citation: 273 B.R. 839
• Parties: In re Joshua John WIGGINS, Debtor. Joshua John Wiggins, an incapacitated person by and through his guardians and his guardians and conservators, and David Hale & Eva Hale; and L.D. Fitzgerald, as Trustee in Bankruptcy, Plaintiffs, v. Peachtree Settlement Funding, Defendant.
• Court: U.S. Bankruptcy Court — District of Idaho

273 B.R. 839

In re Joshua John WIGGINS, Debtor Joshua John Wiggins, an incapacitated person by and through his guardians and his guardians and conservators, and David Hale & Eva Hale; and L.D. Fitzgerald, as Trustee in Bankruptcy, Plaintiffs, v. Peachtree Settlement Funding, Defendant.

Bankruptcy No. 99-40458.

Adversary No. 99-6212.

United States Bankruptcy Court, D. Idaho.

September 21, 2001.

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John T. Lezamiz and Robyn M. Brody, Hepworth, Lezamiz & Hohnhorst, Twin Falls, ID, for Plaintiffs.

W. Cullen Battle and Jay F. Cobb, Fabian & Clendenin, Salt Lake City, Utah and Craig W. Christensen, Pocatello, ID, for Defendant.

MEMORANDUM OF DECISION

JIM D. PAPPAS, Chief Judge.

I. Background

Joshua John Wiggins ("Joshua" or "Wiggins") filed for protection under Chapter 13 of the Bankruptcy Code on March 26, 1999. On September 13, 1999, acting by and through his parents, guardians and conservators, David and Eva Hale, Wiggins commenced this adversary proceeding against Defendant Peachtree Settlement Funding. The Chapter 13 Trustee, L.D. Fitzgerald, joined Wiggins as a party-plaintiff in the action on behalf of the bankruptcy estate.

A trial in the adversary proceeding was conducted by the Court sitting without a jury on May 10, 11, 17, and 18, 2001. Eight witnesses were called to testify in person at trial. Extensive deposition testimony, in both written and video format, was also included in the record. In addition, hundreds of pages of documents and other exhibits were received in evidence. When the record was complete, counsel for the parties were invited to make extensive oral closing arguments. Upon conclusion of the proceedings, all issues raised in this action were taken under advisement.

After a thorough review of the record, evidence and testimony, the Court intends that this Memorandum serve as its formal findings of fact and conclusions of law in this difficult case. Fed. R. Bankr.P. 7052.¹

II. Facts.

A. General Comments.

Before embarking upon the details of this action, some preliminary observations are appropriate. In this contest, the parties took markedly different positions concerning several critical issues of fact. These versions of the facts were, at times, irreconcilable. In other words, according to the parties, depending upon the position taken, some witnesses who testified must be believed, while others could not be correctly recounting the crucial facts and events. As a result, some of the Court's findings that follow resolve disputed issues of fact to a varying degree. And while perhaps obvious under these circumstances, the Court starts its recitation of the material facts here by making clear that what follows represents the Court's assessment of the credibility of the various witnesses and its decision concerning the appropriate weight to be assigned to the witnesses' testimony.

While not always the situation, in this case, the Court's ability to observe the witnesses during testimony was extremely helpful and important. In some instances, the Court formed firm and definite impressions of the credibility of certain witnesses by watching them testify, by assessing their demeanor and reaction to questioning by counsel, either in the courtroom or via video testimony. Therefore, it should come as no surprise that based upon what the Court saw at trial, some witnesses seemed completely credible, while others were less so.

Moreover, while several thorny issues of fact may be highlighted in this Memorandum, others may not. Even though the Court may not in every instance provide a detailed analysis of the factors it considered in determining whether to adopt a particular witness's testimony or party's view of the facts concerning disputed issues, it should not be assumed the Court failed to engage in the balancing process inherent in deciding all conflicting fact issues.

Given this context, the important facts are summarized below.

B. Joshua Wiggins.

Joshua Wiggins was an active, happy, intelligent sixteen-year-old in December, 1994. He was a good student, healthy, and participated in a variety of activities at school and through his church. Joshua lived at home near the small farming community of Heyburn, Idaho, with his mother and step-father, Eva and David Hale. David was a farmer; Eva was a service representative for the local telephone company. Joshua got along well with his parents and his many friends. In short, Wiggins' life as a teenager in rural southern Idaho was good.

On the night of December 22, coming home from a high school basketball game, things suddenly and permanently changed for Joshua. On that wintry evening, he was involved in a terrible automobile accident on a rural road near his home.

Another young man in the vehicle, Wiggins' friend, was killed. Joshua also nearly died from the severe head and other injuries he sustained in the wreck. As it turned out, he survived, but not without first dwelling in a coma for six days. While all were relieved that he lived and would, to a large degree, recover from his injuries, Joshua still to this day suffers the residual effects of the permanent and irreversible damage he sustained to the frontal lobe of his brain. And though the two medical experts who testified at trial disagree on some points, they both confidently concluded that, given his brain injury, Joshua has experienced, and will continue to experience, difficulty exercising basic "executive functioning" skills. These are the essential skills that allow humans to effectively problem-solve, reason, exercise judgment, organize, and plan. In addition, as a result of his injuries, Wiggins will experience serious and potentially dangerous and destructive seizures unless he takes his medication.

After the accident, the Hales retained counsel to investigate the accident to determine if the family had a claim for damages for Joshua's personal injuries. While Wiggins' injuries were severe and permanent, and his medical expenses extensive, the family's prospects for a large recovery were dim. Because of his injuries, Wiggins could not remember how the accident occurred, the other boy in the vehicle at the time was killed, and there was an unresolved question as to who was driving at the time of the accident.

After considerable efforts, the family's lawyers were able to negotiate a settlement to partially compensate for Wiggins' injuries. Under this arrangement, Wiggins was to receive a total of $150,000. Because the Hales wanted Joshua to be protected and secure in his future, it was decided that this settlement money should be "structured" and payable over time. It was decided Wiggins should receive a lump sum of $50,000 from State Farm Insurance Company, the insurer for the adverse party, and another $5,852 from his own under-insured motorist coverage through Unigard Security Insurance Company. Plaintiffs' Exhibit 8, p. 3. In addition, Unigard agreed to purchase an annuity for Wiggins' benefit. This annuity provided for payments to Joshua of $375 per month for the rest of his life, guaranteed for twenty years, beginning July 1, 1999. The amount of the monthly payments was to increase by two percent compounded annually. In addition, because the Hales wanted Joshua to have the opportunity to attempt to obtain a college education, Wiggins was to receive three other lump sum payments of $3,600 each, payable on January 5 and August 5, 1998, and January 5, 1999, to help with his educational expenses. Id. at pp. 4-5. Unigard assigned its liability for these payments to Safeco Assigned Benefits Service Company, Plaintiffs' Exhibit 11, which in turn agreed to make the payments to Wiggins.

The settlement was formalized on February 22, 1997. By then Wiggins was 18 years old. Plaintiffs' Exhibit 8. While his mother and stepfather, together with his lawyers, provided guidance for his decision, as an adult, Joshua signed the settlement and release documents in his own name.² Included in the Release, Indemnification and Settlement Agreement was the following pronouncement:

The periodic payments to be received by [Wiggins] pursuant to Paragraph III are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge or encumbrance by [Wiggins].

Id., p. 7. Similar language is found in the Annuity Contract, too:

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.

Plaintiffs' Exhibit 9, p. 3. Both David and Eva Hale testified these provisions were included in the settlement documents, at least in part, as a means to safeguard the annuity payments and Wiggins' future. In other words, given Joshua's condition, his parents were concerned about his ability to properly manage his finances. Eva Hale testified, and the Court believes her, that these anti-assignment provisions were "very important" and that she would not have wanted the settlement structured in the manner it was, or the annuity purchased, without these protections.

Though now a young adult, because of his injuries, Wiggins continued to live at home. As contemplated by Wiggins and the Hales, Joshua's annuity payments were paid directly into a joint bank savings account. Both Wiggins and his mother were signatories on the account. Mrs. Hale testified she believed the account was a "dual signature" account, requiring her consent for any withdrawals, rather than simply a joint account. However, the evidence suggests she was mistaken in this regard. As set up by the bank, apparently either Wiggins or Eva Hale could transact in the account proceeds separately. Defendant's Exhibit 104. At any rate, Mrs. Hale testified, and the Court accepts, that she intended the account be set up with her name on it, and...