513 S.W.3d 28
Tex. App.2016Background
- Esperanza Hughes (recipient) was awarded $6,500/month for life under a wrongful-death Compromise Settlement Agreement; a Uniform Qualified Assignment assigned payment obligations to MTRG, which purchased an annuity from Metropolitan Life Insurance Co. (MLIC).
- The settlement, the qualified assignment, and the annuity certificate expressly state the periodic payments are nonassignable and that MTRG owns the annuity and controls payee designations.
- Hughes contracted with Peachtree Settlement Funding to sell 237 monthly payments of $1,500 (Aug. 1, 2015–Apr. 1, 2035) for a lump sum (initially $155,107; later increased to $158,516.92).
- Peachtree filed an application under the Texas Structured Settlement Protection Act to approve the transfer; MetLife (interested party/annuity issuer) objected, citing the anti-assignment language in the governing contracts.
- The trial court approved the transfer and ordered a servicing arrangement requiring MetLife to pay 100% of each periodic payment to Peachtree (as Hughes’s designated payment agent), which would forward $5,000 to Hughes and retain $1,500.
- The court of appeals reversed, holding the anti-assignment provisions in the Compromise Settlement Agreement, Uniform Qualified Assignment, and annuity contract unambiguously barred Hughes’s sale/assignment; it remanded with instructions to deny Peachtree’s application.
Issues
| Issue | Plaintiff's Argument (Hughes/Peachtree) | Defendant's Argument (MetLife) | Held |
|---|---|---|---|
| Whether Hughes could transfer/sell a portion of her structured payments despite contract language | Hughes/Peachtree: transfer is permitted under the Protection Act; Hughes designated Peachtree as payment agent and agreed to sell/assign the payments | MetLife: governing agreements unambiguously prohibit acceleration, anticipation, sale, assignment, or encumbrance of periodic payments | Held: Transfer barred — anti-assignment clauses are enforceable and prevent the sale/assignment |
| Whether the trial court impermissibly rewrote contracts by imposing a servicing arrangement | Hughes/Peachtree: servicing order merely effectuated agent designation and approved transfer under statute | MetLife: order rewrote contracts by requiring MetLife to send full payments to Peachtree contrary to contract terms | Held: Trial court erred — it could not impose a servicing arrangement that overrides contractual restrictions |
| Whether an agency designation made Peachtree an effective assignee for payments | Hughes/Peachtree: Peachtree was designated as Hughes’s authorized payment agent to receive payments | MetLife: no agency agreement existed that gave Hughes control over Peachtree; agency cannot circumvent anti-assignment language | Held: Agency theory rejected — record lacks evidence of an agency giving Hughes control to make Peachtree effective in contravention of contracts |
| Whether public policy or statute invalidates anti-assignment clauses here | Hughes/Peachtree: structured-settlement transfer approval under the Protection Act allows this transaction despite contractual restrictions | MetLife: no statute invalidates the anti-assignment terms; parties may contractually restrict assignments | Held: Anti-assignment clauses are not invalidated here; court will enforce unambiguous contractual terms |
Key Cases Cited
- Washington Square Fin., LLC v. RSL Funding, LLC, 418 S.W.3d 761 (Tex. App. 2013) (de novo review of contract construction)
- Metro. Ins. & Annuity Co. v. Peachtree Settlement Funding, LLC, 500 S.W.3d 5 (Tex. App. 2016) (prior Peachtree transfer decision; record differences noted)
- In re Deepwater Horizon, 470 S.W.3d 452 (Tex. 2015) (unambiguous contract language construed as a matter of law)
- Grieve v. Gen. Am. Life Ins. Co., 58 F. Supp. 2d 319 (D. Vt. 1999) (federal court upholding anti-assignment provisions in settlement/annuity documents)
- J.G. Wentworth S.S.C. Ltd. P’ship v. Callahan, 256 Wis. 2d 807 (Wis. App. 2002) (anti-assignment language in settlement agreement enforced)
- In re Foreman, 365 Ill. App. 3d 608 (Ill. App. 2006) (clear, unambiguous anti-assignment clause given full effect)