In The Matter Of DRB Capital, Inc.

Case Number

25CV04648

Case Type

Hearing Date / Time

Wed, 10/15/2025 - 10:00

Nature of Proceedings

First Amended Verified Petition For Approval Of Structured Settlement Payment Rights

Tentative Ruling

For Petitioner DRB Capital, LLC: Juan C. Lozano, The Law Office Of Juan C. Lozano

                                   

For Real Party In Interest/Transferor Fallon Kelly a/k/a F.K: No appearance

RULING

For the reasons set forth herein, the verified first amended petition of DRB Capital, LLC, for approval of structured settlement payment rights is denied.

Background

The first amended verified petition (FAP) of DRB Capital, LLC, (DRB) for approval of structured settlement payment rights, filed on August 18, 2025, is the operative pleading in this action. As alleged in the FAP:

Fallon Kelly, who is also known as “F.K.” (Kelly) is a resident of the County of Santa Barbara who is over the age of 18. (FAP, ¶ 2.) Kelly entered into a structured settlement agreement (the structured settlement), in settlement of a claim for damages arising in connection with a tort claim. (FAP, ¶ 6.) The structured settlement established an annuity which provides for certain payments. (FAP, ¶¶ 7-8.)

Prudential Assigned Settlement Services Corporation (the Obligor) is an insurance company and the “Structured Settlement Obligor”, as that term is defined in Insurance Code section 10134, subdivision (k), who has a continuing periodic payment obligation to Kelly under the structured settlement. (FAP, ¶ 3.) Prudential Insurance Company Of America (the Annuity Issuer) issued an insurance contract used to fund the settlement payment obligations of the Obligor. (FAP, ¶ 4.) The structured settlement contains language which restricts or prohibits the assignment of the payments at issue in the FAP. (FAP, ¶ 7.)

Kelly has agreed to sell, and DRP has agreed to purchase, payments reflected in a proposed “Transfer Agreement”, which DRB alleges “will be filed hereto.” (FAP, ¶ 9.) Upon the Court approving the “Transfer Agreement”, DRB will assign all its rights, title and interest in the proposed Transfer Agreement to its assignee, to be designated at the time of the hearing on the present matter. (FAP, ¶ 10.)

DRB also alleges, in a conclusory manner, that the transfer complies with Insurance Code section 10134 et seq., does not contravene any statute or order, that Kelly has been advised in writing to seek independent professional advice regarding the transfer, that Kelly has either received that advice or waived the opportunity to receive the advice, that DRB has complied with notification requirements, that DRB provided Kelly with a compliant disclosure statement, that Kelly understands the terms of the transfer agreement and disclosure statement and does not wish to exercise Kelly’s right to cancel the Transfer Agreement, and that the Transfer Agreement complies with Insurance Code sections 10136, subdivision (c), and 10138. (FAP, ¶¶ 12-16.)

On August 18, 2025, the same date the FAP was filed, DRB filed a notice that the FAP will be heard on September 17, 2025.

The petition is unopposed.

On September 17, 2025, after a hearing, the Court entered a minute order (the Order) adopting its tentative ruling on the FAP as follows:

“For all reasons discussed herein, the Court will continue the hearing on the present petition to permit DRB to submit supplemental briefing sufficiently addressing the matters further discussed below.

“A direct or indirect transfer of structured settlement payment rights is not effective and a structured settlement obligor or annuity issuer is not required to make any payment directly or indirectly to any transferee of structured settlement payment rights unless the transfer has been approved in advance in a final Court order based on express written findings by the Court that:

“(1) The transfer is in the best interest of the payee, taking into account the welfare and support of the payee’s dependents.

“(2) The payee has been advised in writing by the transferee to seek independent professional advice regarding the transfer and has either received that advice or knowingly waived, in writing, the opportunity to receive the advice.

“(3) The transferee has complied with the notification requirements pursuant to paragraph (2) of subdivision (f), the transferee has provided the payee with a disclosure form that complies with Section 10136, and the transfer agreement complies with Sections 10136 and 10138.

“(4) The transfer does not contravene any applicable statute or the order of any Court or other government authority.

“(5) The payee understands the terms of the transfer agreement, including the terms set forth in the disclosure statement required by Section 10136.

“(6) The payee understands and does not wish to exercise the payee’s right to cancel the transfer agreement.” (Ins. Code, § 10139.5, subd. (a); see also 321 Henderson Receivables Origination LLC v. Sioteco (2009) 173 Cal.App.4th 1059, 1066 (321 Henderson).) (Note: Undesignated statutory references shall be to the Insurance Code unless otherwise stated.)

Generally, the Court approval process governed by section 10136 et seq. (the Structured Settlement Transfer Act or Act) “requires: (1) disclosures to the transferor of the structured settlement payment rights, (2) notice to the Attorney General, and (3) Court approval[,]” and requires the filing of a petition “in the county in which the transferor resides for approval of the transfer, attaching copies of the petition, the transfer agreement, the disclosure form, the annuity contract, any qualified assignment agreement and the structured settlement agreement, a list of the names and ages of the transferor’s dependents, notice of the Court hearing date, and notice of a right to respond....After consideration of the petition and its attached documents, any written support or opposition by interested parties, and any evidence presented at the hearing, the Court grants or denies the petition.” (321 Henderson, supra, 173 Cal.App.4th at pp. 1065-1066.) To grant the petition for approval, the Court must make the express findings set forth above. (Id. At p. 1066.) 

The express written findings required to grant the present petition must be supported by facts and evidence appearing in the record. The conclusory and general allegations of the FAP, which include no reference or citation to any matters in the record including the exhibits attached to the FAP, do not clearly identify or explain which facts or evidence support each of the factors set forth above, why any particular facts or evidence are sufficient to permit the Court to make each of the findings described above, and where these matters are located in the record. Moreover, the manner in which DRB has presented the FAP, without more, forces the Court to expend scarce judicial resources to search the record for relevant facts and evidence and to determine which may or do support each of the factors described above.

By way of example, the FAP asserts that the proposed transfer agreement “will be filed....” (FAP, ¶ 9.) It is unclear to the Court, from this allegation, whether the exhibits to the FAP includes the “Transfer Agreement” referenced in paragraph 9 of the FAP, or where among the exhibits attached to the FAP that agreement appears.

The Court must also find that the proposed transfer is in the best interest of Kelly. Wholly absent from the FAP are any facts or evidence, supported by any necessary or appropriate citations to the record, to permit the Court to conclude that the proposed transfer is in the best interests of Kelly.

Also absent from the conclusory FAP is information or evidence sufficient to show that Kelly has been advised in writing by DRB to seek independent professional advice regarding the proposed transfer; that Kelly has either received that advice or knowingly waived in writing the opportunity to receive that advice; that DRB has complied with all notice requirements; that DRB has provided Kelly with a compliant disclosure form; that Kelly understands the terms of the proposed transfer agreement or required disclosure statement; or that Kelly understands and does not wish to exercise their right to cancel the proposed transfer agreement.

The examples provided above are intended to be illustrative but not exhaustive of the deficiencies in the present petition which prevent the Court from making the express findings required under section 10139.5, and which require the Court to otherwise expend significantly more judicial resources than would otherwise be required under similar circumstances.

Though there exist sufficient grounds to deny the FAP for all reasons discussed above, the Court will instead continue the hearing on that petition to afford DRB an opportunity to file and serve a supplemental brief addressing the matters discussed herein. The supplemental brief must make a sufficient showing, on a point-by-point basis with reasoned factual and legal argument supported by specific citations to the record, why each factor set forth in subdivision (a) of section 10139.5 has been satisfied here. Further, as the Court expects that DRB’s supplemental brief will include citations or references to matters appearing in the record, including the exhibits attached to the FAP, those citations “must reference the number or letter of the exhibit, the specific page, and, if applicable, the paragraph or line number.” (Cal. Rules of Court, rule 3.1113(k).) The supplemental brief must also include information and evidence which is sufficient to permit the Court to make the express written findings described above, including with respect to statutory notice and service requirements.

The Court will also require DRB to serve its supplemental brief, if any, on all interested parties as that term is defined in subdivision (g) of section 10134, to file proof of such service, and to give compliant notice of the Court’s ruling herein.” (See, Order.)

Pursuant to the Order, the Court continued the hearing on the FAP to October 15, 2025, and ordered DRB to, on or before October 1, file and serve a supplemental brief setting forth each of the matters described above.

On October 2, 2025, DRB filed its supplemental brief.

Analysis

As noted in the Order:

“A direct or indirect transfer of structured settlement payment rights is not effective and a structured settlement obligor or annuity issuer is not required to make any payment directly or indirectly to any transferee of structured settlement payment rights unless the transfer has been approved in advance in a final Court order based on express written findings by the Court that:

“(1) The transfer is in the best interest of the payee, taking into account the welfare and support of the payee’s dependents.

“(2) The payee has been advised in writing by the transferee to seek independent professional advice regarding the transfer and has either received that advice or knowingly waived, in writing, the opportunity to receive the advice.

“(3) The transferee has complied with the notification requirements pursuant to paragraph (2) of subdivision (f), the transferee has provided the payee with a disclosure form that complies with Section 10136, and the transfer agreement complies with Sections 10136 and 10138.

“(4) The transfer does not contravene any applicable statute or the order of any Court or other government authority.

“(5) The payee understands the terms of the transfer agreement, including the terms set forth in the disclosure statement required by Section 10136.

“(6) The payee understands and does not wish to exercise the payee’s right to cancel the transfer agreement.” (Ins. Code, § 10139.5, subd. (a); see also 321 Henderson Receivables Origination LLC v. Sioteco (2009) 173 Cal.App.4th 1059, 1066 (321 Henderson) [general discussion].) (Note: Undesignated statutory references shall be to the Insurance Code unless otherwise stated.)

In its supplemental brief, DRB asserts that Kelly “lays out their reasons for the transfer and why this transfer is in their best interests, pursuant to subdivision (b) of section 10139.5 in the Amended Exhibit “B” attached to this document.” (Supp. Brief at p. 2.) Though the “Amended Exhibit B” attached to the supplemental brief consists of a declaration purportedly made by Kelly (the amended Kelly declaration), that declaration is not signed by Kelly, or dated.

Even if the Court were to consider the amended Kelly declaration, and the information and evidence appearing in that declaration, the FAP, and the supplemental brief is insufficient to show why the transfer at issue is in Kelly’s best interest.

For example, the “Absolute Sale and Security Agreement” attached to the FAP, which the Court understands to be the proposed “Transfer Agreement” at issue, shows that the periodic payments under the structured settlement that will be transferred by Kelly to DRB include 25 monthly payments in the amount of $500 commencing on October 11, 2025, and ending on October 11, 2027, and 4 semi-annual payments of $17,500 commencing on November 11, 2025, and ending on May 11, 2027. (FAP, ¶ 9 & Exh. A [Transfer Agreement], ¶ 3(b) & Exh. A.) Though the periodic payments total $82,500, the amount to be paid by DRB to Kelly in exchange for this transfer totals $64,905.22. (FAP, Exh. A, ¶ 3(c) & (e).)  

Information appearing in the FAP also shows that, based on the amount Kelly will receive from DRB and the amounts and timing of the periodic payments to be made to Kelly under the structured settlement as further described above, Kelly will pay to DRB an imputed interest rate of 24.9 percent per year. (FAP, Exh. A, ¶3(h).)

The available information and evidence also shows that the structured settlement ostensibly arose from a claim for the wrongful death of Kelly’s father, and that the periodic payments under that settlement were not intended for Kelly’s medical care, injuries sustained by Kelly, or for Kelly’s living expenses. (Supp. Brief., Amended Exh. B, ¶ 7.)

The present record reflects that Kelly is single, has no minor dependents or child or spousal support obligations, and is a full time student whose tuition is covered through a CalVet Fee Waiver. (Supp. Brief., Amended Exh. B, ¶¶ 3, 6 & 9.) Notwithstanding that the periodic payments under the structured settlement were not intended for living expenses, Kelly intends to use $15,000 from the transaction to pay rent, utility, and credit card payments. (Ibid.) Kelly also intends to use a portion of the funds to purchase a vehicle. (Ibid.)

Considering the frequency and amount of the monthly and semi-annual periodic payments to be made to Kelly under the structured settlement described above, and that these payments will be made within a relatively short period of time, the FAP fails to explain why Kelly requires an immediate payment now, or why these periodic payments are insufficient. In addition, considering that the amended Kelly declaration shows that Kelly is unemployed and that Kelly’s sole source of income is the periodic payments described above (Supp. Brief, Exh. A, ¶¶ 4 & 9), DRB fails to explain why the proposed transfer, which will result in a significantly reduced payment to Kelly, is in Kelly’s best interest.

The amended Kelly declaration also shows that Kelly plans to invest the amount of $20,000 in Fidelity investment and money market accounts. (Ibid.) The same reasoning and analysis apply. Wholly absent from the FAP and supplemental brief is any information or evidence showing why the investments intended by Kelly would yield a rate of return that is higher than the interest Kelly will effectively pay to DRB as further described above. Moreover, information appearing in the FAP and amended Kelly declaration gives rise to an inference that the periodic payments were themselves intended for investment purposes. (See, e.g., Supp. Brief, Exh. A, ¶ 7(d) [stating that the periodic payments were not intended to pay for medical or living expenses].)

Upon consideration of the information and evidence described above and presented in the FAP, the supplemental brief filed by DRB, and in the exhibits to these documents, and for all reasons discussed above, DRB has failed to meet its burden to show why the transfer proposed in the FAP is in the best interest of Kelly. (321 Henderson, supra, 173 Cal.App.4th at pp. 1065-1066.) Therefore, and for these reasons, the Court will deny the FAP.