WebBank v. AMERICAN GENERAL ANNUITY SERVICE

• Decision Date: 16 August 2002
• Docket Number: No. 20010256, No. 20010259., No. 20010253
• Citation: 54 P.3d 1139,2002 UT 88
• Parties: WEBBANK, a Utah industrial loan corporation, Susan Soliz, Justin Magner, Econuel Ingram, and Johnny Childers, Plaintiffs and Appellees, v. AMERICAN GENERAL ANNUITY SERVICE CORP., a Texas corporation, Allstate Insurance Company, Allstate Settlement Company, a Nebraska corporation, and Metropolitan Insurance and Annuity Co., a Delaware corporation, Defendants and Appellant. WebBank, a Utah industrial loan corporation, and Jesse Rodriguez, Plaintiffs and Appellees, v. Metropolitan Insurance and Annuity Co., a Delaware corporation, Defendant and Appellant. WebBank, a Utah industrial loan corporation, and Justice Lockridge, Plaintiffs and Appellees, v. Metropolitan Insurance and Annuity Company, a Delaware corporation, Defendant and Appellant.
• Court: Utah Supreme Court

54 P.3d 1139

2002 UT 88

WEBBANK, a Utah industrial loan corporation, Susan Soliz, Justin Magner, Econuel Ingram, and Johnny Childers, Plaintiffs and Appellees, v. AMERICAN GENERAL ANNUITY SERVICE CORP., a Texas corporation, Allstate Insurance Company, Allstate Settlement Company, a Nebraska corporation, and Metropolitan Insurance and Annuity Co., a Delaware corporation, Defendants and Appellant.

WebBank, a Utah industrial loan corporation, and Jesse Rodriguez, Plaintiffs and Appellees, v. Metropolitan Insurance and Annuity Co., a Delaware corporation, Defendant and Appellant.

WebBank, a Utah industrial loan corporation, and Justice Lockridge, Plaintiffs and Appellees, v. Metropolitan Insurance and Annuity Company, a Delaware corporation, Defendant and Appellant.

Nos. 20010253, 20010256, 20010259.

Supreme Court of Utah.

August 16, 2002.

Glen F. Strong, Craig T. Jacobsen, David C. Wright, Salt Lake City, and Craig M. Lessner, Norcross, GA, for WebBank.

Stephen C. Baker, Michael J. Miller, Philadelphia, PA, and Milo Marsden, Salt Lake City, for American General Annuity Service Corp., Allstate Insurance Co., Allstate Settlement Co.

Bret F. Randall, Melissa J. Barbanell, Salt Lake City, for Metropolitan Insurance & Annuity Co.

RUSSON, Justice:

¶ 1 American General Annuity Service Corporation ("American General") appeals the trial court's grant of summary judgment in favor of WebBank.¹ We reverse and remand.

BACKGROUND

¶ 2 The instant case arises in connection with a financial transaction centered around a structured settlement agreement, specifically, the transfer of payments of money owing under the structured settlement agreement. A structured settlement agreement is a method for compensating an injured person. Under a structured settlement, a plaintiff becomes entitled to and receives an amount of money payable over time in the form of monthly and periodic payments ("structured settlement payments") as compensation for personal injury from a defendant or its insurer.

¶ 3 Structured settlements first came into common usage in the 1960s and 1970s and subsequently gained favorable tax status with a 1982 amendment to the federal Internal Revenue Code. At that time, Congress recognized that many personal injury victims were dissipating the settlements received as compensation for their tort claims, leaving them without means of support. In response to this concern, Congress amended the Internal Revenue Code to provide, among other things, tax benefits to personal injury victims and insurers that settle claims through the steady payment of settlement funds over an extended period of time. See 26 U.S.C. § 104(a)(2) (2002) (excluding such payments from the calculation of an individual's gross income for federal income tax purposes); 26 U.S.C. § 130 (2002) (providing tax benefits to certain personal injury liability assignments and qualified funding assets). Consequently, structured settlements have become a common and familiar means of settling lawsuits.

¶ 4 In the unrelated, yet predicate, action to this case, Susan Soliz ("Soliz"), a personal injury victim, commenced a lawsuit arising out of an injury she suffered. To resolve the lawsuit, Soliz entered into a structured settlement agreement with the defendant in that action and/or the defendant's liability insurer under which she received monthly settlement payments. As part of the settlement agreement, Soliz agreed, among other things, that the payments to which she was entitled under the structured settlement agreement would not be accelerated or assigned. The structured settlement agreement, however, did provide that American General would assume the obligation to make future settlement payments to Soliz pursuant to the structured settlement agreement. Under this arrangement, structured settlement payments were made to Soliz without incident.

¶ 5 At some point after the initiation of the structured settlement payments, Soliz, for reasons irrelevant to this appeal, was in need of an immediate, lump-sum payment of money instead of the periodic payments she had been receiving under her structured settlement agreement. To this end, Soliz entered into a financial transaction with WebBank, an industrial loan corporation organized under the laws of this state. Under their Loan and Security Agreement ("security agreement") and attendant promissory note,² Soliz agreed to transfer her interest in her future structured settlement payments to WebBank in exchange for a purported loan.³ In other words, Soliz sought to exchange her structured settlement payments over a period of time for an immediate, lump-sum payment from WebBank, and WebBank offered to lend her a present sum of money and required her to secure the repayment of the purported loan with her future stream of structured settlement payments as collateral. In addition, as a condition precedent to the execution of the purported loan and the immediate payment of a lump sum to Soliz, WebBank required the receipt of a final, nonappealable court order determining that WebBank had a security interest in the structured settlement payments as collateral for the purported loan. It also required that payments on the purported loan be made directly from American General to WebBank, thus by-passing Soliz. That financial transaction and its underlying security agreement are the subject of this appeal.

PROCEDURAL HISTORY

¶ 6 Sometime between November 1999 and April 2000, WebBank, for itself and on behalf of Soliz, commenced a declaratory judgment action seeking a judicial determination pursuant to the conditions precedent required in the security agreement.

¶ 7 WebBank and American General filed cross-motions for summary judgment. On August 18, 2000, the trial court granted partial summary judgment in favor of WebBank, denied American General's motion for summary judgment, and permitted further discovery focused on the discrete and, in the trial court's view, dispositive issue of whether the financial transaction between WebBank and Soliz was a loan or a sale. After further discovery, WebBank and American General renewed and re-briefed their motions for summary judgment. On November 13, 2000, the trial court granted summary judgment in favor of WebBank on the remaining issue of whether the financial transaction between WebBank and Soliz should be considered a loan or a sale, concluding that there were no genuine issues of material fact and that the transaction or transfer was as a matter of law a loan instead of a sale or an assignment. American General timely appealed.

¶ 8 On appeal, American General argues that the trial court erred in concluding as a matter of law that the financial transaction between WebBank and Soliz was a loan and not a sale because the question of whether the parties to a particular transaction, such as the one in this case, intended to create a loan or a sale is a question of fact to be resolved by the trier of fact, therefore precluding the grant of summary judgment. In addition, American General asserts that, despite the lack of any ambiguity in the terms and provisions of the security agreement and promissory note, the nature and character of the transaction as a whole is ambiguous, and that the existence of such an ambiguity as to WebBank's and Soliz's true intent regarding the nature or character of the transaction should have precluded the trial court's grant of summary judgment.⁴ Alternatively, American General argues that, even if the trial court did not err in concluding that the transaction in question was a loan, it did err by concluding that Article 9 of the UCC governed the transaction and that the "tort exemption" and/or the "insurance and annuity exemption" of Article 9 of the UCC, codified at Utah Code Ann. § 70A-9-104(k) and -104(g) (1997) respectively, did not apply to the transfer of Soliz's structured settlement payments to WebBank.

¶ 9 WebBank counters that the trial court correctly held that as a matter of law Web-Bank and Soliz intended to create a security interest in favor of WebBank in the structured settlement payments through their security agreement and related promissory note. WebBank argues that the trial court could properly decide this issue as a matter of law because the trial court needed only look to the four corners of the unambiguous security agreement and promissory note executed between WebBank and Soliz to determine that WebBank and Soliz intended to create a security interest in the structured settlement payments, and consequently, a secured transaction subject to Article 9 of the UCC.⁵ Furthermore, WebBank contends that the trial court was correct in concluding that Article 9 of the UCC governed the transaction and that the exemptions to the application of Article 9 did not apply.

STANDARD OF REVIEW

¶ 10 A trial court may properly grant summary judgment when "there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." Utah R. Civ. P. 56(c); see also Holmes Dev., LLC v. Cook, 2002 UT 38, ¶ 21, 48 P.3d 895

; Ault v. Holden, 2002 UT 33, ¶ 15, 44 P.3d 781; State ex rel. Div. of Forestry, Fire & State Lands v. Tooele County, 2002 UT 8, ¶ 8, 44 P.3d 680. The propriety of a trial court's grant of summary judgment is a question of law. Holmes Dev., 2002 UT 38 at ¶ 21, 48 P.3d 895. In deciding whether summary judgment was appropriate, we need review only whether the trial court erred in applying the relevant law and whether a material fact was in dispute. Id.; Hill v. Allred, 2001 UT 16, ¶ 12, 28 P.3d 1271. "We thus review the trial court's legal conclusions for correctness, according them no deference." Holmes Dev., 2002 UT 38 at ¶ 21, 48 P.3d 895; see also Ault, 2002 UT 33 at ¶ 15, 44 P.3d 781.

ANALYSIS

¶ 11 On appeal, both WebBank and American General agree that the central issue in this case concerns WebBank's and Soliz's intentions, that is, whether WebBank and Soliz intended to...