United States District Court, W.D. Pennsylvania
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.
Allegations and defenses.
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.
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.
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 then sold the right, title, and interest payments to
Mr. Stevens' annuity to Altium on March 15,
2012. 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,
April 19, 2012, Altium sent the Walls the "Closing
Books" and the Walls wired Altium the remaining purchase
price of $147, 833.37.
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.
Walls paid $152, 833.37 to Altium under the Master Agreement
but never received payments from Altium or Corona
Capital. 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,
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.
We dismiss the Walls' breach of transfer warranty
Walls allege Altium breached the warranty of signature
guaranteed under Pennsylvania's Commercial Code, 13 Pa.
C.S. § 3416. 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.
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."UCC Comment to "subsection (a)(1) is