Rapid Settlements v. Symetra Life Ins.

• Decision Date: 31 August 2007
• Docket Number: No. 12-07-00008-CV.,12-07-00008-CV.
• Citation: 234 S.W.3d 788
• Parties: RAPID SETTLEMENTS, LTD., Appellant v. SYMETRA LIFE INSURANCE COMPANY and Symetra National Life Insurance Company and Abigail Dempsey, Appellees.
• Court: Texas Court of Appeals

234 S.W.3d 788

RAPID SETTLEMENTS, LTD., Appellant v. SYMETRA LIFE INSURANCE COMPANY and Symetra National Life Insurance Company and Abigail Dempsey, Appellees.

No. 12-07-00008-CV.

Court of Appeals of Texas, Tyler.

August 31, 2007.

Harry J. Fleming and Susan F. Hatcher, Houston, for Appellant.

Jeff D. Lefkowitz, for Appellees.

Abigail Dempsey, pro se.

Panel consisted of GRIFFITH, J., HOYLE, J., and BASS, Retired Justice, Twelfth Court of Appeals, Tyler, sitting by assignment.

OPINION

BILL BASS, Justice.

Rapid Settlements, Ltd. appeals the trial court's order granting a temporary injunction. The order enjoins Rapid from seeking to confirm, enforcing, or compelling performance of an arbitration award transferring to Rapid, pursuant to a transfer agreement, structured settlement payments to be received by Abigail Dempsey. Because we conclude the trial court did not abuse its discretion in granting the temporary injunction, we affirm the trial court's order.

BACKGROUND AND PROCEDURAL HISTORY

Symetra Life Insurance Company issued an annuity to fund a structured settlement concluding litigation arising out of Dempsey's claim of an on the job injury at a Texas nursing home. In addition to a lump sum payment, the settlement guaranteed Dempsey monthly payments of $850.00 for twenty years, the last guaranteed payment due October 25, 2010. Thereafter, the monthly payments were life contingent, that is they were payable to Dempsey but not to her estate or heirs if she died after October 25, 2010. In January 2003, the 145th Judicial District Court of Nacogdoches County approved Dempsey's transfer of her remaining $78,200.00 in guaranteed monthly payments in exchange for $40,000.00.

On March 28, 2005, Dempsey signed a transfer agreement in which she agreed to assign to Rapid 120 monthly payments of $800.00 out of the $850.00 monthly payment beginning on November 25, 2010 through and including October 25, 2020. The agreement provided, as follows: "This transfer agreement is subject to court approval. A court must approve assignor's [Dempsey's] sale, assignment and transfer to Rapid Settlements of the Assigned Payments before such payments can be transferred and the Assignment Price . . . paid to Assignor." However, under the agreement, Dempsey granted to Rapid a security interest in all the assigned payments, "regardless of whether such transfer and assignment is consummated," "to secure payment of the assigned payments to Rapid Settlements and assignor's other obligations hereunder." Of particular significance in this case, the transfer agreement contained an arbitration clause providing that any dispute of any nature under the agreement was to be resolved through arbitration, and the arbitrator's decision would be final, binding, and nonappealable.

As required by Texas Civil Practice and Remedies Code section 141.006, in May 2005, Rapid applied to the trial court for approval of the transfer of the periodic payments. The agreement and the accompanying disclosure statement revealed that in exchange for the transfer of 120 payments totaling $96,000.00 and having a present value of $64,916.00, Dempsey was to receive $9,000.00 ($14,000.00 less $5,000.00 for Rapid's attorney's fees). Symetra opposed the transfer.

The trial court conducted a hearing on Rapid's application for approval of the transfer agreement. Both Dempsey and her husband testified in support of the agreement. Both told the court that they were aware of the disparity between the $9,000.00 they were to receive and the $64,916.00 present value¹ of the 120 payments they were to transfer to Rapid. They testified that their nine year old grandson who lived with them suffered from hydro exothermal dysplasia, that is, he had no sweat glands. They wanted to buy him a special cooling jacket costing between $1,500.00 and $3,000.00 so he could play outside like other boys. The rest of the money they intended to use to fix up a nice inside bathroom for him. In response to the court's questions, they said they could not obtain the money from any other source, and that they realized their grandson would outgrow the special cooling jacket within two years.

Unsurprisingly, the trial court denied approval of the transfer finding that Rapid had not shown that the transfer was in the best interest of the payee (Dempsey), as required by Texas Civil Practice and Remedies Code section 141.004. The trial court further found that the transfer would contravene section 141.007(b) providing that any claim that the payee had breached the agreement shall be determined in and under the laws of this state, and also providing that the transfer agreement may not authorize the transferee or any other party to confess judgment or consent to the entry of judgment against the payee. The trial court further found that the transfer agreement contravened section 141.007(c), which prohibits the transfer of life-contingent payments

unless, prior to the date on which the payee signs the transfer agreement, the transferee has established and agreed to maintain procedures reasonably satisfactory to the structured settlement obligor and the annuity issuer for: (1) periodically confirming the payee's survival; and (2) giving the structured settlement obligor and the annuity issuer prompt written notice in the event of the payee's death.

The court signed its order denying approval of the transfer on July 17, 2005.

On July 19, 2005, two days after the trial court denied approval of the transfer, Dempsey signed a promissory note promising to pay Rapid $1,000.00 due September 2, 2005, "or earlier upon approval of the Transfer Agreement . . . by a court or in arbitration proceedings." The note recites that it was for advances made to Dempsey against the payment of the assignment price under the transfer agreement, and that it was secured by the transfer agreement. The note also provided that any dispute arising out of a breach of this note or any of the other loan documents shall be resolved by arbitration, the single arbitrator's decision to be final, binding, and nonappealable.²

Wasting no time, Rapid submitted its demand for arbitration on August 13, 2005 reciting that Dempsey was a party to the Transfer Agreement, which provided for arbitration, and demanding arbitration of a dispute involving damages related to Dempsey's breach of the Transfer Agreement. Rapid also alleged that it had advanced Dempsey $2,000.00 pending completion of the transfer, but that Dempsey had breached the contract "by not completing actions required by the court considering approval." It alleged that Dempsey obtained the $2,000.00 under false pretenses in an attempt to commit fraud on Rapid. The arbitrator scheduled a hearing and sent notice thereof to the interested parties including Symetra. Symetra did not participate in the arbitration proceedings.

After a telephone conference with Dempsey, the arbitrator entered an award based on agreed findings. The award stated the arbitrator's jurisdiction "derived from the contractual agreement of the parties as set forth in the transfer agreement." The arbitrator further concluded that he had "authority to enter an award based upon the garnishment of the res, here being the assigned payments." "Further, the arbitrator [found] that Symetra's position is in the nature of a stakeholder similar to that in an interpleader action." Based on agreed findings, the arbitrator found the transfer agreement was valid, binding, and enforceable, that "Dempsey breached the promissory note with Rapid, and that in satisfaction thereof the parties have agreed to a complete transfer pursuant to the [Texas Structured Settlement Protection] Act."

The arbitrator then ordered the transfer to Rapid of the same 120 monthly payments of $800.00 for the same consideration, $14,000.00 less $5,000.00, specified in the transfer agreement whose approval had been rejected by the trial court in its July 17, 2006 order. The arbitrator found that the transfer represented the fair market value of the payments, that the transfer was in Dempsey's best interests, that she had no dependents, and that the money was to be used for home repairs. The award also ordered Symetra to pay Rapid the payments whose transfer had been denied by the trial court.

On October 31, 2005, Rapid filed its petition for confirmation of the award in the County Court at Law No. 3 in Harris County. Symetra successfully sought to abate the Harris County proceeding urging the prior consideration of the matter by the 145th District Court of Nacogdoches County, the trial court herein, and that under the Texas Structured Settlement Protection Act (SSPA), jurisdiction and venue were in Nacogdoches County where Dempsey resides. The Harris County court abated the Harris County case on November 29, 2006.

Symetra then filed its petition in the trial court asking for injunctive relief to prevent Rapid and Dempsey from seeking to enforce or confirm the arbitration award. Symetra also asked the court to declare the arbitration provision in the Transfer Agreement invalid because Rapid had not obtained the proper court's approval of the proposed transfer and because the arbitration provision was an attempt to evade the safeguards provided by the SSPA and was unconscionable.

On December 14, 2006, Rapid filed in the trial court its Application for Confirmation of the Arbitration Award.

On December 19, 2006, the trial court signed a temporary injunction ordering Rapid and Dempsey

not to do anything directly or indirectly, in Harris County or anywhere else other than in this Court, to seek to confirm, enforce or compel performance under the Arbitration Award including but not limited to by pursuing or taking any action in Cause No. 850538 in County Court at Law No. 3, Harris County, Texas or any appeal or mandamus therefrom from the date of this Order until judgment in this Cause is rendered by this Court.

Rapid contends (1) that the trial...