RSL Funding, LLC v. Alford

• Decision Date: 18 August 2015
• Docket Number: E060421
• Citation: 190 Cal.Rptr.3d 917,239 Cal.App.4th 741
• Court: California Court of Appeals Court of Appeals
• Parties: RSL FUNDING, LLC, Plaintiff and Respondent, v. Felicia ALFORD, Defendant and Respondent; State Farm Fire and Casualty Company et al., Objectors and Appellants.

239 Cal.App.4th 741

190 Cal.Rptr.3d 917

RSL FUNDING, LLC, Plaintiff and Respondent

v.Felicia ALFORD, Defendant and Respondent;

State Farm Fire and Casualty Company et al., Objectors and Appellants.

E060421

Court of Appeal, Fourth District, Division 2, California.

Filed August 18, 2015

As Modified on Denial of Rehearing September 10, 2015

Drinker Biddle & Reath, Ryan S. Fife, Alexis N. Burgess, Los Angeles and Stephen R. Harris, for Objectors and Appellants.

Law Offices of Amir M. Kahana, Amir M. Kahana, Irvine; The Feldman Law Firm and E. John Gorman, for Plaintiff and Respondent.

No appearance for Defendant and Respondent Felicia Alford, in pro. per.

OPINION

McKINSTER, Acting P.J.

INTRODUCTION

Objectors and appellants State Farm Fire and Casualty Company (State Farm Fire) and State Farm Life Insurance Company (State Farm Life) (collectively, State Farm) appeal from the trial court's approval of an order directing the transfer of structured settlement payments to plaintiff and respondent RSL Funding, LLC (RSL).

FACTS AND PROCEDURAL BACKGROUND

In 1994, defendant Felicia Alford, then a minor, by her guardians, settled a personal injury claim against certain insureds of defendant State Farm Fire.

The settlement was approved by a court order that provided, “for the best interest of the minor ... the proceeds of such settlement be paid and used in the manner hereinafter specifically provided.” Under the settlement, the payor, State Farm Life, was to deliver an annuity providing for guaranteed payments, as follows: (1) $10,000 annually from August 11, 2003, through August 11, 2006; (2) $50,000 on August 11, 2009; (3) $100,000 on August 11, 2016; and (4) $151,558.80 on August 11, 2021. State Farm Fire purchased an annuity contract from State Farm Life, which provides for the periodic payments to be made.

In July 2012, Alford entered into a contract with RSL under which she received $30,000 in exchange for a $50,000 portion of the payment due on August 11, 2016. RSL assigned its payment to Extended Holdings, Ltd. (EHL). The trial court approved the transfer, and State Farm did not contest the transfer. Thus, under the 2012 order, State Farm was required to deliver a $50,000 portion of the August 11, 2016, payment to EHL.

On July 12, 2013, Alford entered into a second contract with RSL in which Alford agreed to assign to RSL $25,000 of the $100,000 payment due on August 11, 2016, and $25,000 of the payment of $151,558.80 due on August 11, 2021, in exchange for a current payment of $22,500. RSL assigned its rights to receive the periodic payments to EHL. RSL filed a petition for approval of the transfer. State Farm filed an opposition to the petition, asserting, among other grounds, that (1) the proposed transfer would violate a California statute (Ins.Code, § 10139.5, subd. (e)(3) ),¹ which provides that an annuity issuer and settlement obligor may not be required to divide payments, and (2) the proposed transfer would materially increase State Farm's burdens and risks.

The trial court approved the transfer petition, and State Farm has appealed.

DISCUSSION

Standard of Review

We review a trial court's interpretation of a statute under a de novo standard of review. (Gogri v. Jack in the Box, Inc. (2008) 166 Cal.App.4th 255, 264, 82 Cal.Rptr.3d 629.)

The Structured Settlement Protection Act

The California Legislature has adopted the Structured Settlement Protection Act (SSPA) (§ 10134 et seq.) to protect structured settlement payees from exploitation by factoring companies. Annuity issuers and structured settlement obligors are defined as “interested parties” under the SSPA (§ 10134, subd. (g)), and as such, are entitled to notice of petitions to authorize transfer of payments under a structured settlement agreement. (§§ 10139, subd. (a), 10139.5, subd. (f)(2).)

A transfer to a factoring company must be approved by the court and requires an express finding that the proposed transfer “will not contravene other applicable law.” (§ 10137, subd. (b).) The SSPA specifically provides, “Neither the annuity issuer nor the structured settlement obligor may be required to divide any structured settlement payment between the payee and any transferee or assignee or between two or more transferees or assignees.” (§ 10139.3, subd. (e).)

State Farm initially contended that the trial court's order requires it to split the $100,000 lump-sum payment due on August 11, 2016, three ways, among (1) RSL ($25,000), (2) EHL, RSL's assignee in the 2012 transfer ($50,000), and (3) Alford ($25,000). At oral argument, State Farm's counsel conceded that because RSL had assigned both the 2012 and 2013 payments to EHL, it was required to make only two payments, not three.

Despite conceding in the trial court that “an issuer cannot be forced to split or divide payments,” RSL now argues that section 10139.3, subdivision (e), is merely permissive, not mandatory, because the statute uses the word “ ‘may’ ” instead of “ ‘shall.’ ” RSL contends the trial court properly exercised its discretion to permit payment splitting.

We agree that settled principles of statutory construction direct that “we ‘ordinarily’ construe the word ‘may’ as permissive and the word ‘shall’ as mandatory, ‘particularly’ when a single statute uses both terms.” (Tarrant Bell Prop., LLC v. Superior Court (2011) 51 Cal.4th 538, 542, 121 Cal.Rptr.3d 312, 247 P.3d 542.) However, RSL fails to recognize that a contrary principle of statutory construction governs when the statute, such as section 10139.3, subdivision (e), uses a negative form of the word “may.” “ ‘One of the strongest indications of what construction should be given a statutory provision may be found in the use of negative, prohibitory, or exclusionary words. Where statutory restrictions are couched in negative terms they are usually held to be mandatory. In the language of one court “there is but one way to obey the command ‘thou shalt not,’ and that is to refrain altogether from doing the forbidden act.” ' (2A Sutherland, [Statutory Construction (4th ed. 1972) ] § 57.09, p. 661, fns. omitted.)” (People v. Harner (1989) 213 Cal.App.3d 1400, 1418, 262 Cal.Rptr. 422.) As a court in another state has pointed out, if a legislature intends the phrase to be permissive, it can simply omit the word “ ‘not.’ ” (State v. Gettman (1989) 56 Wash.App. 51, 54, 782 P.2d 216.) Here, the statute's use of the words “neither” and “nor” combined with “may be required” clearly indicates the Legislature's intention to impose a mandatory rule.

Moreover, while the parties have cited no published California case law expressly applying section 10139.3, subdivision (e), and our own research has revealed none, courts in other states have construed similar language in their own statutes to be mandatory. For example, in J.G. Went worth Originations, LLC v. Freelon (Tex.Ct.App.2014) 446 S.W.3d 426, at page 428, footnote 4, the court observed that under the language of Texas's version of the SSPA (identical to that of subd. (e)), a settlement obligor “would not agree, and it could not be compelled under the SSPA, to divide the annuity payments” between the annuitant and her transferee. (See also In re A Transfer of Structured Settlement Payment Rights by Laurel J. Shanks (Tenn.Ct.App. May 27, 2014, No. E2013–01702–COA–R3–CV) 2014 WL 2193658, at pages *9–*10, 2014 Tenn.App. Lexis 301, at pages *26–*27 [stating that it would violate a similar provision under Tenn. law to require an annuity issuer or structured settlement obligor to divide payments].)

“Where, as here, there is no California case directly on point, foreign decisions involving similar statutes and similar factual situations are of great value to the California courts.” (Martinez v. Enterprise Rent–A–Car Co. (2004) 119 Cal.App.4th 46, 55, 13 Cal.Rptr.3d 857.) Although such authorities are persuasive rather than mandatory precedent, we agree with their reasoning and conclusions. We therefore conclude that the trial court erred in entering an order that requires State Farm to divide payments because the SSPA provides that an annuity issuer may not be required to do so. (§ 10139.3, subd. (e).)

Waiver, Forfeiture, Judicial Estoppel

RSL contends that State Farm has waived or forfeited or is judicially estopped from asserting its statutory right to avoid splitting payments because it waived any objections to dividing payment in the 2012 transfer order and agreed in its 2013 proposed order to divide payments. State Farm responds that it expressly preserved its ability to object to payment splitting in 2012 and timely objected to the 2013 transfer.

Effect of 2012 Order

Waiver is the “intentional relinquishment of a known right.” (Applera Corp. v. MP Biomeds . , LLC (2009) 173 Cal.App.4th 769, 791, 93 Cal.Rptr.3d 178.) RSL argues that by agreeing to split payments in the 2012 order, State Farm intentionally relinquished its right to assert the anti-splitting statute. However, the 2012 order expressly stated that State Farm's “lack of opposition to this matter, or stipulation hereto or compliance herewith, shall not constitute evidence in any other matter, and is not intended to constitute evidence in any other matter that: [¶]... [¶] c. Annuity Owner [State Farm Fire] and Annuity Issuer [State Farm Life] have waived any right in connection with any other litigation or claims.” The 2012 order thus makes it clear that State Farm did not intentionally relinquish its rights under section 10139.3, subdivision (e), with respect to future transactions.

RSL nonetheless argues that by failing to object to the 2012 order, State Farm put an end to the anti-assignment condition. To support that position, RSL cites German–American Sav. Bank v. Gollmer (1909) 155 Cal. 683, 102 P. 932. That case stated the principle that a condition against waiver of assignment of a leasehold estate is permanently discharged by consent or waiver. (Id. at p. 688, 102 P. 932.) That principle is inapposite in the present context.

The Proposed 2013 Order

RSL...