Settlement Funding, LLC v. Brenston

Decision Date26 August 2013
Docket NumberDocket Nos. 4–12–0869,4–12–0870,4–12–0944 cons.
Citation998 N.E.2d 111,2013 IL App (4th) 120869,375 Ill.Dec. 819
PartiesSETTLEMENT FUNDING, LLC, Petitioner/Transferee–Appellee, v. Cathy BRENSTON, Respondent/Transferor–Appellant.
CourtUnited States Appellate Court of Illinois

OPINION TEXT STARTS HERE

Jeffrey M. Goldberg (argued), Bradley Schulman, and Gregory P. Markwell, all of Jeffrey M. Goldberg Law Offices, of Chicago, for appellant.

Diane Green–Kelly, Michael D. Richman, and David A. Maas, all of Reed Smith LLP, of Chicago, and Margaret M. Grignonpro hac vice, of Reed Smith LLP, of Los Angeles, California, for appellee.

OPINION

Justice CATES delivered the judgment of the court, with opinion.

¶ 1 The respondent-transferor, Cathy Brenston, filed petitions to vacate void orders which approved the transfer of her structured settlement payment rights to the petitioner-transferee, Settlement Funding, LLC. The circuit court of Sangamon County found that Brenston's petitions, filed more than two years after the entry of the transfer orders, were time-barred. On appeal, Brenston contends that the court erred in dismissing the petitions where the pleadings sufficiently showed that the orders approving the transfers were obtained by fraud, and therefore void and subject to challenge at any time. Brenston also contends that the court erred in denying her motions to reconsider and motions for leave to file amended petitions to assert a legal disability of incompetence. We reverse and remand with directions.

¶ 2 I. FACTS AND PROCEDURAL HISTORY

¶ 3 This case involves three appeals (Nos. 4–12–0869, 4–12–0870, 4–12–0944) that originated in the Fourth District Appellate Court. The cases were consolidated under No. 4–12–0869 for purposes of hearing and decision. At the request of the Fourth District, the Illinois Supreme Court issued an order assigning the consolidated appeals to this court. The appeals challenge the validity of the trial court's orders granting two petitions filed by Settlement Funding, pursuant to the Structured Settlement Protection Act (Act) (215 ILCS 153/1 to 35 (West 2008)), seeking court approval for the transfer of certain structured settlement payment rights due Brenston. The structured payments were part of a negotiated settlement of a medical negligence action that Brenston filed in 1999. We begin there and set forth the facts and procedural history that are pertinent to the disposition of this appeal.

¶ 4 A. The Underlying Medical Negligence Action

¶ 5 In 1999, Cathy Brenston filed a medical negligence action in the circuit court of Cook County, against defendants, University of Illinois Chicago Hospital and University of Illinois at Chicago Women's Care Center. Brenston alleged that she suffered severe injuries as a result of negligent medical treatment she received at the University of Illinois Chicago Hospital and the University of Illinois at Chicago Women's Care Center during the period from August 1998 through November 1998.

¶ 6 In January 2003, Brenston settled the case with the University of Illinois Board of Trustees (University Board). The settlement included a lump-sum payment of $864,228 and structured periodic payments. According to the payment schedule, Brenston would receive $5,000 per month, guaranteed for 120 months, beginning March 1, 2003, and ending on February 1, 2013, with payments increasing 3% annually, and thereafter, a monthly payment of $6,719.58, guaranteed for 60 months, beginning March 1, 2013, and running for the longer of her life or through February 1, 2018, with payments increasing 3% annually. The settlement documents include the written settlement agreement, uniform qualified assignment release and pledge agreements, and annuity contracts.

¶ 7 1. The Written Settlement Agreement

¶ 8 The written settlement agreement contains an antiassignment provision which states: Claimant acknowledges that the Periodic Payments described in Section 2.0 cannot be accelerated, deferred, increased or decreased by the Claimant; nor shall Claimant have the power to sell, mortgage, encumber, or anticipate the Periodic Payments, or any part thereof, by assignment or otherwise.” The written settlement agreement also includes a provision in which the claimant acknowledges that the University Board will make qualified assignments of its liability to make periodic payments to Allstate Settlement Corporation and to GE Capital Assignment Corporation, within the meaning of section 130(c) of the Internal Revenue Code of 1986, as amended, and that the claimant will accept the assignments without a right of rejection.

¶ 9 2. The Uniform Qualified Assignments and Annuity Contracts

¶ 10 The University Board executed two uniform qualified assignment release and pledge agreements within the meaning of and subject to the conditions in section 130(c) of the Internal Revenue Code of 1986. One qualified assignment is with Allstate Assignment Company (the Allstate Assignment) and the other is with GE Capital Assignment Corporation (the GE Assignment). In each agreement, the University Board is the assignor and Brenston is the secured party.

¶ 11 In the Allstate Assignment, Allstate Assignment Company, the assignee-debtor, and Allstate Life Insurance Company, the annuity issuer, agreed to accept a qualified assignment of the University Board's obligation to make monthly payments to Brenston in the sum of $5,000, for the period from March 1, 2003, through February 1, 2013. The Allstate Assignment states that all rights of ownership in and control of the annuity remain vested in the assignee-debtor and that Brenston, as the secured party, has no rights of ownership or control over the annuity. The face page of the Allstate annuity contract contains a stamped notice which states:

“This annuity contract has been delivered to the possession of Cathy Brenston for the sole purpose of perfecting a lien and security interest of such person. Cathy Brenston is not the owner of, and has no ownership right in this contract and may not anticipate, sell, assign, pledge, encumber or otherwise use this contract as any form of collateral.”

¶ 12 In the GE Assignment, GE Capital Assignment Corporation, the assignee-debtor, and GE Capital Assurance Company, the annuity issuer, agreed to accept a qualified assignment of the University Board's obligation to make monthly payments to Brenston in the sum of $6,719.58, beginning March 1, 2013, and continuing for the longer of her life or through February 1, 2018. The GE Assignment states that Brenston, as the secured party, “may not transfer, sell, pledge, hypothecate, or otherwise alienate or encumber (referred to in this agreement as ‘transfers') her right to receive the periodic payments without first complying with any law specifically applying to such transfers in Brenston's home state, the Virginia structured settlement protection act, and any applicable federal law, and that “any transfers or attempted transfers in contravention of this provision shall be void.” The GE Assignment further provides that the secured party may make a written request to change the beneficiary designation, but that the assignee's decision on that request is final.

¶ 13 GE Capital Assignment Corporation subsequently funded its obligation with an annuity purchased from Genworth Life Insurance Company. Under the terms of the Genworth annuity contract, Brenston would receive a monthly payment of $6,719.58, beginning March 1, 2013, guaranteed for 60 months or for Brenston's life. The front page of the Genworth annuity contract is stamped with a notice similar to that on the face page of the Allstate annuity. It states that Cathy Brenston is not the owner of, and has no ownership right in, the annuity contract, and that Brenston may not anticipate, sell, assign, pledge, encumber, or otherwise use this contract as any form of collateral. The annuity contract further provides that Brenston, as the secured party, has no rights of ownership or control of the contract, and that no payments to be made under the contract may be transferred, commuted, or encumbered by Brenston.

¶ 14 B. Settlement Funding's Petition for Approval of Transfer – No. 07–CH–451

¶ 15 On June 12, 2007, Settlement Funding filed a two-count petition in the circuit court of Sangamon County (07–CH–451) seeking approval of a transfer of certain structured settlement payment rights from Brenston. The petition was filed pursuant to the Act (215 ILCS 153/1 to 35 (West 2006)) and section 5891 of the federal tax code (26 U.S.C. § 5891 (2006)). Count I asserts that Brenston and Settlement Funding have entered into an “Absolute Assignment and UCC Article 9 Security Agreement” wherein Brenston has agreed to assign to Settlement Funding her monthly payments in the sum of $6,719.58, for the five-year period from March 1, 2013, through February 1, 2018, under the Genworth annuity, to Settlement Funding in exchange for a single payment of $92,041.70, less the processing fees. Settlement Funding attached an Illinois transfer disclosure and a Delaware transfer disclosure to the petition. The disclosures state that the sum of the aggregate payments for the period of March 1, 2013, through February 1, 2018, is $428,101.95, with a discounted present cash value of $264,088.08.

¶ 16 Count II states that Brenston and Settlement Funding have entered into an “Absolute Assignment and UCC Article 9 Security Agreement” wherein Brenston has agreed to assign to Settlement Funding a portion of her monthly payments in the sum of $4,251.37, for the five-year period from March 1, 2008, through February 1, 2013, under the Allstate annuity, in exchange for a single payment of $146,782.35, less legal and processing fees. Settlement Funding attached an Illinois transfer disclosure to the petition. The disclosure states that the sum of the aggregate payments for the period of March 1, 2008, through February 1, 2013, is $270,853.21, with a discounted present cash value of...

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7 cases
  • Sanders v. JGWPT Holdings, Inc.
    • United States
    • U.S. District Court — Northern District of Illinois
    • July 26, 2016
    ...transactions involving structured settlement contracts with anti-assignment clauses. See Settlement Funding v. Brenston, 998 N.E.2d 111, 123, 2013 IL App (4th) 120869, 375 Ill. Dec. 819 (2013) ("[SSPA] did not apply because of the antiassignment clause in the settlement agreement and the an......
  • Metzger v. Brotman
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    ...order was produced by fraud and can be challenged at any time or in any court, either directly or collaterally ( Settlement Funding, LLC v. Brentson , 2013 IL App (4th) 120869, ¶ 38, 375 Ill.Dec. 819, 998 N.E.2d 111 ), such review does not apply to this case. ¶ 48 In this case, plaintiff's ......
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    ...and their families of the long-term financial security the structured settlements were designed to provide." Settlement Funding, LLC v. Brenston, 2013 IL App (4th) 120869, ¶ 34, 998 N.E.2d 111.¶ 47 Effective July 30, 1998, section 155.34(b) of the Illinois Insurance Code (Insurance Code) (2......
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