RSL-3B-IL, Ltd. v. the Prudential Insurance Company of America and Prudential Structured Settlement Company F/K/A Prudential Property and Casualty Insurance Company of Holmdel, New Jersey
01-14-00482-CV
| Tex. App. | Jan 12, 2015Background
- Erica Adegoke was the annuitant under an annuity (PSSC owner; Prudential issuer) that funded a structured settlement; the settlement, qualified assignment, and annuity reserved ownership and payment-direction rights to PSSC and disclaimed any ownership or control by Adegoke.
- Adegoke previously sold payment streams to Settlement Capital Corporation (SCC) by court-approved transfer; the SCC order directed Prudential/PSSC to deliver the full periodic payments to SCC.
- In 2003 Adegoke (via Rapid Settlements) obtained a separate transfer order (the Rapid Order) directing Prudential/PSSC to pay portions of the same periodic payments to RSL-3B-IL (RSL), creating two conflicting court orders for the same finite funds.
- Prudential and PSSC suspended payment because the two orders were irreconcilable, sought to resolve the conflict (including a stipulation), and then filed an interpleader counterclaim identifying themselves as innocent stakeholders.
- RSL sued Prudential for breach of contract premised on the Rapid Order; at trial the court granted Prudential’s directed verdict, the jury awarded Prudential attorneys’ fees on the interpleader, and the court entered a final judgment allowing disbursement (less fees) to RSL; claims between RSL and Adegoke’s distributee were later severed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a court transfer order (Rapid Order) can form the basis of a breach of contract claim against the annuity issuer | Rapid (RSL) contends the Rapid Order vested contract rights to payment and thus supports breach damages against Prudential | Prudential argues court orders are not private contracts and cannot create contractual obligations against an annuity issuer; contract elements are absent | Court accepted Prudential’s position; directed verdict for Prudential (order not a contract) |
| Whether the annuitant (Adegoke) had assignable ownership or contractual rights in the annuity to convey to RSL | RSL asserts it obtained Adegoke’s rights to annuity payments and can enforce those rights | Prudential contends PSSC owned the annuity and the annuitant was an incidental payee with no ownership rights to assign | Court held (as a matter of law/factual posture) annuitant had no enforceable rights to assign; RSL’s claim fails |
| Whether anti-assignment language and third-party beneficiary status bar RSL’s claim | RSL urged assignment/rights through court order and other agreements | Prudential relied on explicit anti-assignment clauses and that Adegoke was an incidental (not intended) third-party beneficiary, so no rights passed | Court treated anti-assignment and incidental-beneficiary principles as dispositive—no enforceable rights passed to RSL |
| Whether Prudential properly interpleaded funds and is entitled to attorneys’ fees; whether severance of remaining claims was proper | RSL challenged interpleader timing/necessity and opposed severance | Prudential argued conflicting orders created competing claims, it timely interpleaded and disclaimed interest, and severance was appropriate because nothing remained between Prudential and the intervenor | Court found interpleader proper, awarded fees to Prudential (jury), and severed unrelated remaining claims |
Key Cases Cited
- Tawes v. Barnes, 340 S.W.3d 419 (Tex. 2011) (principles on third-party beneficiary and incidental beneficiary status)
- Stine v. Stewart, 80 S.W.3d 586 (Tex. 2002) (third-party beneficiary recovery requires intent to benefit that third party)
- South Texas Water Authority v. Lomas, 223 S.W.3d 304 (Tex. 2007) (strong presumption against conferring third-party beneficiary status)
- Allstate Ins. Co. v. American Bankers Ins. Co. of Florida, 882 F.2d 856 (4th Cir.) (one cannot assign or enforce rights in a contract one does not own)
- In re Jack (Settlement Capital Corp. v. Allstate Life Ins. Co.), 390 B.R. 307 (Bankr. S.D. Tex.) (annuitant had no enforceable rights under annuity contract that owner had reserved; assignments invalid)