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Wall v. Corona Capital, LLC

United States District Court, W.D. Pennsylvania

January 12, 2017

ROBERT WALL and LINDA WALL
v.
ALTIUM GROUP, LLC

          MEMORANDUM

          KEARNEY, J.

         A person injured by another's negligence may be awarded a sum of money either through settlement or verdict. Sometimes the party at fault agrees to pay the verdict or settlement in a defined amount over a defined length of time as financed by a lender. These payments are called structured annuity payments. Finance companies have created a secondary market selling these structured annuities because the injured party needs immediate cash and is willing to assign her right to the structured annuity payments at a slightly discounted value in a lump sum. The finance company, in turn, finds intermediaries and stockbrokers who sell the assignment of the structured annuity payments to an investor. Today, we address the damage when a court later invalidates the assignment of the structured annuity payments but the investor has already paid and turns around and sues the finance company selling her the annuity payments. When, as here, the investor has no specific commercial relationship with the original injured party who sold the structured annuity, she may not sue the finance company for breach of transfer warranties under the Uniform Commercial Code but may sue the intermediary seller receiving her investment for breach of contract.

         I. Allegations and defenses.

         Corona Capital purchases structured annuity payments at a discount from injured individuals who settled personal injury claims. Altium Group LLC connects Corona Capital, with potential purchasers or investors for annuity payments. Robert and Linda Wall are two of those investors, who with the aid of their financial advisor, purchased a structured annuity payment from Altium.[1]

         On November 8, 2011, the Walls and Altium signed a "Master Structured Settlement Receivable Purchase and Sale Agreement and Non-Circumvention Agreement." Under this agreement, the Walls wired Altium a $5, 000 deposit on the purchase price and agreed to wire Altium the balance upon receipt of the Closing Book.[2]

         Corona Capital then arranged for the purchase and transfer of Kenneth Stevens' structured settlement payment rights, payable under an annuity issued by New York Life Insurance. On January 12, 2012, Kenneth Stevens signed an "Absolute Assignment and UCC Article 9 Security Agreement" assigning his right to payments from New York Life to Corona Capital.

         Corona Capital then sold the right, title, and interest payments to Mr. Stevens' annuity to Altium on March 15, 2012.[3] A Florida state court granted Corona Capital's petition to approve the transfer on March 28, 2012 entitling the Walls to receive 60 payments of $3, 000 with 3% annual increase in payments beginning on June 1, 2014, and ending with the last payment on May 1, 2019.[4]

         On April 19, 2012, Altium sent the Walls the "Closing Books" and the Walls wired Altium the remaining purchase price of $147, 833.37.

         Over two years later, the same Florida state court vacated its March 28, 2012 Order and ordered New York Life Insurance to make the structured settlement payments to Stevens' attorneys and not to the Walls.[5]

         The Walls paid $152, 833.37 to Altium under the Master Agreement but never received payments from Altium or Corona Capital.[6] The Walls sued Altium Group and Corona Capital for breach of Uniform Commercial Code ("UCC") transfer warranties, breach of contract, and unjust enrichment. We lacked personal jurisdiction over Corona Capital and dismissed it on November 22, 2016.[7]

         II. Analysis

         Altium now moves for judgment on the pleadings seeking to dismiss Walls' claim for breach of the Uniform Commercial Code's transfer warranties and breach of the November 8, 2011 Master Agreement.[8]

         A. We dismiss the Walls' breach of transfer warranty claim.

         The Walls allege Altium breached the warranty of signature guaranteed under Pennsylvania's Commercial Code, 13 Pa. C.S. § 3416.[9] The Walls attached the January 12, 2012 "Absolute Assignment and UCC Article 9 Security Agreement" between Mr. Stevens and Corona Capital and allege the January 12, 2012 Assignment document carries UCC warranties. Neither the Walls nor Altium are parties to the January 12, 2012 Assignment. Altium cannot, as a matter of law, breach the transfer warranties under the Uniform Commercial Code because the Walls were not parties to the January 12, 2012 Assignment.

         Under Pennsylvania's Commercial Code § 3416(a)(1), "[a] person who transfers an instrument for consideration warrants to the transferee and, if the transfer is by indorsement, to any subsequent transferee that... the warrantor is a person entitled to enforce the instrument."[10]UCC Comment to "subsection (a)(1) is a ...


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