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1 Martin L. Shives, Esq. (SBN 123631)
SUMMERS & SHIVES, A.P.C.
2 1180 Rosecrans Street, #220
San Diego, CA 92106-2660
3 Telephone: (858) 874-1800
Facsimile: (858) 874-1888
4 martinshives@summers-shives.com
5 Attorneys for Specially Appearing Interested Party
BERKSHIRE HATHAWAY LIFE INSURANCE COMPANY OF NEBRASKA
6
7
8 SUPERIOR COURT OF THE STATE OF CALIFORNIA
9 FOR THE COUNTY OF SAN MATEO
10
11 IN RE: Petition of: ) CASE NO: 24-CIV-00762
)
12 CANYON LAKES TITLE, LLC, ) UNLIMITED JURISDICTION
)
13 Petitioner ) RESPONSE OF SPECIALLY
) APPEARING INTERESTED PARTY
14 ) BERKSHIRE HATHAWAY LIFE
) INSURANCE COMPANY OF
15 (Real Party in Interest D.S.) ) NEBRASKA TO PETITION AND
[aka DE’ANGELO SALONGA] ) FIRST AMENDED PETITION FOR
16 ) APPROVAL FOR TRANSFER OF
) PAYMENT RIGHTS [BY AND
17 ) BETWEEN DE’ANGELO SALONGA
) AND CANYON LAKES TITLE, LLC,
18 ) PURSUANT TO CALIFORNIA
) INSURANCE CODE §§ 10134, ET SEQ.]
19 )
) Date: April 26, 2024
20 ) Time: 9:00 a.m.
) Dept: 24
21 )
)
22 __________________________________ )
23 Specially Appearing Interested Party Berkshire Hathaway Life Insurance Company of
24 Nebraska (“BHLN”) submits the following Response to the original and First Amended Petition
25 (“FAP”) for Approval for Transfer of Payment Rights (collectively, the Petition) by and
26 ////
27 ////
28 ////
Page 1
CASE NO. 24-CIV-00762 - RESPONSE OF BERKSHIRE HATHAWAY LIFE TO CANYON LAKES’
PETITIONS FOR TRANSFER OF STRUCTURED SETTLEMENT PAYMENTS
1 between De’Angelo Salonga (“Mr. Salonga”)1 and Canyon Lakes Title, LLC (“Canyon Lakes”),
2 pursuant to California Insurance Code § 10134, et seq. (the “Transfer Act”):
3 Introduction and Background2
4 Through its Petition, Canyon Lakes seeks permission to purchase from Mr. Salonga all
5 of the remaining future payments due him under a structured settlement annuity. The payments
6 proposed for transfer have a nominal value of $163,075.00. If the transfer is approved, Mr.
7 Salonga, who turned 18 years old in November 2023, would receive an immediate payment of
8 $50,483.82 from Canyon Lakes.
9 For reasons set forth herein, BHLN believes Canyon Lakes’3 original Petition was fatally
10 flawed on procedural and substantive grounds. While the FAP addressed some of the
11 procedural issues, others remain which only can be corrected by Court order. Meanwhile, many
12 of the substantive issues remain unaddressed. For example, the FAP contains a declaration from
13 Mr. Salonga, but it is statutorily inadequate and potentially unsupported by the facts in the
14 record.
15 In BHLN’s experience, Lion Grace entities typically delay and even withhold relevant
16 information from their transfer petitions. Eventually, they will usually supplement their
17 petitions in order to comply minimally, if at all, with the Transfer Act requirements. Typically,
18 these filings are made after the deadline for BHLN and other interested parties to file responsive
19 pleadings. These tactics preclude the Court, payees, interested parties and the public in
20 evaluating whether a proposed transfer is in best interests of the payee.
21
22 1
BHLN understands the “D.S.” and “De’Angelo Salonga” referenced in the Petition to be
23 De’Angelo Lawrence Rebucas Salonga, the Optional Payee of the annuity contract at issue therein.
24 2
To the extent independent evidence is offered to support this Response, it will be provided by the
testimony (by Declaration and/or during the Petition Hearing) of Brennan S. Neville, Associate General
25
Counsel and Assistant Secretary for BHLN and BHG Structured Settlements, Inc. (“BHG”) and Vice
26 President of BIFCO, LLC (“BIFCO”), a company related to BHLN and BHG (“Neville Declaration”).
3
27 Canyon Lakes is a subsidiary, assignee, or otherwise related to Lion Grace Capital (“Lion
Grace”). Canyon Lakes and other similarly affiliated entities will be referred to herein as “Lion Grace
28 entities.”
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CASE NO. 24-CIV-00762 - RESPONSE OF BERKSHIRE HATHAWAY LIFE TO CANYON LAKES’
PETITIONS FOR TRANSFER OF STRUCTURED SETTLEMENT PAYMENTS
1 Specifically, Canyon Lakes seeks to use the Transfer Act as a tool to meet its business
2 model rather than being concerned about whether the transfer is in the best interests of the
3 payee. Such transfers are at an Annual Discount Rate (“ADR”) which is typically much higher
4 than a payee would be charged under a program (the BIFCO Hardship Exchange Program)
5 available to BHLN payees and of which Canyon Lakes is fully aware. As discussed below,
6 Canyon Lakes’ counsel has been previously admonished for piecemeal filings made on behalf
7 of other Lion Grace entities.
8 The FAP remains inadequate. Some of its procedural flaws cannot be corrected without
9 a Court order or the dismissal and re-filing of its petitions - steps which Canyon Lakes has not
10 chosen to pursue. As set forth below, the FAP does not satisfy the Transfer Act in
11 demonstrating the proposed transfer is in Mr. Salonga’s best interests. However, if this Court
12 ultimately is provided sufficient evidence to conclude a transfer of structured settlement
13 payments is in Mr. Salonga’s best interests, BHLN wishes to provide information to ensure this
14 Court considers an alternative which might be more aligned with protecting his best interests.
15 The Incidents and Underlying Settlement
16 In 2012, when Mr. Salonga was a minor, a Complaint was filed on his behalf for the
17 wrongful death of his father. By Order on Minor’s Compromise dated September 5, 2017,
18 entered in the case of Rebucas, et al.v. City of San Bruno, et al., case number 3:14-cv-03313-
19 EMC of the United States District Court for the Northern District of California, the matter was
20 settled with Mr. Salonga and his attorneys receiving $200,000.00.4 The net proceeds, after
21 deduction for attorneys fees and costs, was $105,888.06. According to the Minor’s
22 Compromise, the entirety of those settlement proceeds was used to purchase the BHLN annuity
23 contract described below.
24 ////
25
4
26 The Minor’s Compromise, entered August 30, 2016, was added to the FAP as Exhibit “F.” The
FAP also contains an unamended “Affidavit in Lieu of Settlement Agreement” dated February 4, 2024,
27 which was provided with the original Petition. However, the Affidavit does not reference the added
Minor’s Compromise and that document does not assist in complying with the requirements of the Transfer
28 Act.
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CASE NO. 24-CIV-00762 - RESPONSE OF BERKSHIRE HATHAWAY LIFE TO CANYON LAKES’
PETITIONS FOR TRANSFER OF STRUCTURED SETTLEMENT PAYMENTS
1 The BHLN Contract
2 The obligation to make future payments to Mr. Salonga pursuant to the settlement was
3 assigned to BHG, which funded its obligations by the purchase of an annuity contract, No.
4 BN-17-17743 (“the Contract”) issued on October 3, 2017, by BHLN. The Contract (a copy of
5 which is attached as Exhibit “A” to the Neville Declaration)5 provides for the following
6 payments, as follows:
7 Certain deferred lump sums payable on the following basis:
8 Payment Payment
Date Amount
9
November 3, 2023 $ 5,000.00 (Five Thousand Dollars and Zero Cents)
10 November 3, 2026 $ 5,000.00 (Five Thousand Dollars and Zero Cents)
November 3, 2028 $ 5,000.00 (Five Thousand Dollars and Zero Cents)
11 November 3, 2030 $ 50,000.00 (Fifty Thousand Dollars and Zero Cents)
November 3, 2035 $103,075.00 (One Hundred Three Thousand Seventy-
12 Five Dollars and Zero Cents)
13 The payments due Mr. Salonga under the Contract have a total nominal value of
14 $168,075.00.6 BHLN paid Mr. Salonga the first $5,000.00 lump sum payment that was due
15 November 3, 2023.
16 Canyon Lakes’s Proposed Transfer of Future Payments and Impact on Mr. Salonga
17 As outlined in Schedule “A” to the Transfer Agreement, executed on February 4, 2024
18 (Exhibit “A” to the Petition), Mr. Salonga has agreed to transfer to Canyon Lakes the entirety
19 of the $163,075.00 in future payments remaining under the Contract. In exchange for these
20 future payments, he would receive an immediate payment of $50,483.52. Canyon Lakes asserts
21 it used an ADR of 12.77% to calculate the purchase price. (See, “Disclosure Notice Required
22 by Law,” California version, dated January 25, 2024, Exhibit “B” to Petition).
23
5
Neither the initial Petition nor the FAP provided a copy of the Contract, as required by the
24
Transfer Act. Because its terms are partially raised by Mr. Salonga’s Affidavit, BHLN is providing the
25 Contract despite Canyon Lakes having the burden of supporting its Petition.
6
26 Both versions of the Petition provide copies of the same Affidavit of Mr. Salonga - ostensibly
presented to excuse compliance with Canyon Lakes failure to produce the underlying settlement agreement
27 - one of the three documents required to be produced with the Petition under Insurance Code §
10139.5(f)(2)(E-G). However, the Affidavit fails to demonstrate that Mr. Salonga or Canyon Lakes
28 undertook the “reasonable efforts” to locate the documents required under subsection (H) thereof.
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CASE NO. 24-CIV-00762 - RESPONSE OF BERKSHIRE HATHAWAY LIFE TO CANYON LAKES’
PETITIONS FOR TRANSFER OF STRUCTURED SETTLEMENT PAYMENTS
1 Defective Pleadings and Service Warrant Dismissal and/or Re-Filing
2 The FAP is virtually identical to the original Petition (even using the same documents)
3 except for altering the caption, supplementing Exhibit “F” by adding the Minor’s Compromise,
4 adding Exhibit “G” (a Declaration from Mr. Salonga setting forth reasons for the transfer) and
5 amending the proof of service information as to Mr. Salonga. The FAP does not comply with
6 the Transfer Act (including Insurance Code §§ 10139.5(c)(1)) which requires a statement as to
7 the payee’s address at the time of executing the Petition. Although his Declaration states he
8 lives in Daly City, it does not provide an address.
9 Canyon Lakes’ proof of service suggests Mr. Salonga is receiving mail at 75 Citrus
10 Avenue, Apt 4; Daly City 94014. Mr. Salonga has not provided that address to BHLN for its
11 records, nor has he acknowledged BHLN correspondence sent to that address seeking
12 confirmation. According to BHLN’s records, Mr. Salonga’s last known address as 1306
13 Geneva Avenue, San Francisco, CA 94112.
14 Further, the Petition fails to comply with Code of Civil Procedure. Specifically, the
15 original Petition failed to comply with CCP § 422.40, requiring that the payee be identified in
16 the first-filed caption. Canyon Lakes intentionally omitted the name of Mr. Salonga in the
17 caption by using only his initials - D.S. - without providing authority for doing so.7 This defect
18 impacts the Court’s intake procedures, including preventing the index files from being accurate.
19 Other courts have admonished Lion Grace’s counsel for filing piecemeal pleadings in
20 similar cases and denied or deferred rulings on that basis.8 Compliance with these procedures
21 is required to ensure any transfer order is effective under the Transfer Act. It also is necessary
22 to enable interested parties, the Court and any members of the public to communicate with Mr.
23 Salonga at the address where he currently receives mail.
24
7
25 This is a common practice employed by counsel for the various Lion Grace entities.
8
26 These tactical activities also are evidenced by the original proofs of service listing Mr. Salonga
by his initials and his address as “Daly City, CA 94014,” with no street address. CCP § 1013a, “Proof of
27 service by mail,” requires that the name and address of the person served appear in the proof of service as
was shown on the envelope. That defect fatally prevented jurisdiction over the original Petition from
28 vesting in this Court. Lee v. Pacer Title Company (1994) 28 Cal.App.4th 503, 510.
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CASE NO. 24-CIV-00762 - RESPONSE OF BERKSHIRE HATHAWAY LIFE TO CANYON LAKES’
PETITIONS FOR TRANSFER OF STRUCTURED SETTLEMENT PAYMENTS
1 Canyon Lakes Has Inexcusably Failed to Provide Settlement Documents
2 Substantively, Canyon Lakes has the burden of supporting its Petition with certain
3 fundamental documents, including the annuity contract, the qualified assignment and the
4 underlying structured settlement agreement unless those documents are unavailable. It failed
5 to do this. While the FAP now provides a copy of the Minor’s Compromise, it does not provide
6 copies of the three documents expressly identified as mandated under the Transfer Act, per
7 Insurance Code § 10139.5(f)(2)(E-G). Those documents are required unless the transferee
8 makes an affirmative showing that the documents are not available or are confidential.9
9 Canyon Lakes cannot claim to be excused from producing these documents on the basis
10 of their unavailability. The procedure for establishing an excuse from production is set forth in
11 Insurance Code § 10139.5(f)(2)(H). It requires a showing of reasonable effort to locate the
12 documents.10 Canyon Lakes attached Exhibit “F” to the Petition, an “Affidavit In Lieu of
13 Settlement Agreement” executed by Mr. Salonga purportedly to substantiate its failure to
14 provide that single settlement agreement. While Mr. Salonga states “I have tried to locate a
15
16 9
BHLN has not received a request from Mr. Salonga for copies of these documents. Therefore,
17 it is not filing them with this Response. Rather, it will defer to Mr. Salonga as to the extent of that
production.
18
10
Insurance Code section 10139.5(f)(1) addresses what is required of the Petitioner when it is
19 unable to provide the required documents, in pertinent part, as follows:
20
(f)... (2) Not less than 20 days prior to the scheduled hearing on any petition for approval of a
21 transfer of structured settlement payment rights under this article, the transferee shall file with the court and
serve on all interested parties a notice of the proposed transfer and the petition for its authorization, and
22 shall include the following with that notice:
*****
23 (E) A copy of the annuity contract, if available.
(F) A copy of any qualified assignment agreement, if available.
24
(G) A copy of the underlying structured settlement agreement, if available.
25 (H) If a copy of a document described in subparagraph (E), (F), or (G) is unavailable or
cannot be located, then the transferee is not required to attach a copy of that document to the petition or
26 notice of the proposed transfer if the transferee satisfies the court that reasonable efforts to locate and secure
a copy of the document have been made, including making inquiry with the payee. If the documents are
27 available, but contain a confidentiality or nondisclosure provision, then the transferee shall summarize in
the petition the payments due and owing to the payee, and, if requested by the court, shall provide copies
28 of the documents to the court at a scheduled hearing. [Underlining added.]
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CASE NO. 24-CIV-00762 - RESPONSE OF BERKSHIRE HATHAWAY LIFE TO CANYON LAKES’
PETITIONS FOR TRANSFER OF STRUCTURED SETTLEMENT PAYMENTS
1 copy [of the settlement agreement], but was unable to do so,” he does not explain what steps he
2 took. Canyon Lakes and its counsel are well aware that such documents are available to Mr.
3 Salonga from BHLN upon his written request, yet there is no reference to having made a request
4 from BHLN for that document or any other required under the Transfer Act. Thus, Canyon
5 Lakes has failed to explain its failure to provide the annuity contract, the settlement agreement
6 or qualified assignment or to be excused after reasonable steps were unsuccessful. The
7 documents are not unavailable; Canyon Lakes has chosen not to obtain or provide them.
8 The practices described herein have been regularly encountered by BHLN when transfer
9 petitions are filed by Lion Grace entities. These tactics hide material information about the
10 transfer and deprive the Court of information to determine the payee’s best interests.
11 Ultimately, the focus of these proceedings should be a fair and open assessment of Mr.
12 Salonga’s situation. Even if he understands the mechanical terms of the transfer, this Court also
13 is statutorily required to exercise its judgment in determining whether the transfer is in the
14 payee’s true best interest. Canyon Lakes’ tactical decision to withhold the payee’s name,
15 address, and settlement documents, when clearly contrary to the requirements of the Transfer
16 Act, inhibits the Court from discharging its responsibilities. When evaluating the request for
17 a transfer, in basic terms, if something is a good idea, absent special circumstances approved
18 by the Court, why hide it from open consideration?
19 Canyon Lakes Has the Burden of Supporting the Petition
20 Under the Transfer Act, Petitioner has the burden of demonstrating that the terms of its
21 proposed transfer are “fair and reasonable” and that the transfer is in the best interests of the
22 payee. The Transfer Act contains 15 non-exclusive factors for this Court to consider in
23 performing its “best interests” analysis pursuant to Insurance Code §10139.5(b)(1-15).
24 Information About Mr. Salonga
25 Canyon Lakes’ original Petition provided this Court with virtually no substantive
26 information about Mr. Salonga or his current situation. The only relevant information provided
27 in Mr. Salonga’s “Affidavit in Lieu of Settlement Agreement” (Exhibit “F” to the Petition) was
28 that his birthdate is 11/3/2005 (thus, he is 18 years old), he lives in San Mateo County, and that
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CASE NO. 24-CIV-00762 - RESPONSE OF BERKSHIRE HATHAWAY LIFE TO CANYON LAKES’
PETITIONS FOR TRANSFER OF STRUCTURED SETTLEMENT PAYMENTS
1 he is seeking to transfer the balance of his future payments. Nothing in the original Petition
2 documents explained his intended use of the proceeds or why the transfer would be in his best
3 interests.
4 The FAP, filed after this matter has been pending for almost two months, now contains
5 a Declaration from Mr. Salonga, dated April 3, 2024. It indicates, at paragraphs 3-5, that he is
6 18 years old, lives in Daly City (without the street address required by 10139.5(c)(1)), works as
7 a mechanic at Midas earning $20.00 per hour, is single and has no dependents. His Declaration
8 also states he intends to use the proceeds to move into his own apartment paying 6 months of rent
9 in advance, purchase furniture, purchase a car and pay tuition to take GM Technician courses
10 through GM ASEP program to increase his earnings. He lists $33,000.00 in specific expenses.
11 Mr. Salonga has provided reasons for wanting to sell his future payments. He has not,
12 however, provided evidence of a plan to use the proceeds he would receive. For example, the
13 Declaration provides a very brief information sheet for an apartment at a specific address, but it
14 does not say that this apartment is actually offered for rent or that Mr. Salonga has taken any steps
15 toward renting it. He also provides a picture showing the price of an automobile without
16 identifying the dealer or advising if that vehicle currently is available. The Declaration also does
17 not address the school where he might take the GM ASEP program, its location and whether he
18 is qualified or has been accepted to attend or has a sponsoring dealership. Further, there is no
19 indication as to whether he can obtain tuition assistance or can continue to work while in school.
20 BHLN does not raise these points to question Mr. Salonga’s goals, much less to
21 discourage him; however, they are highlighted to ensure that the Court confirms whether he really
22 needs the transfer proceeds now and, if he does, not to waste whatever amounts he might receive.
23 If these are Mr. Salonga’s goals, and if the Court finds his plans to achieve them to be in
24 his best interests, the next question is whether he is getting the most benefit from the
25 payments being sold from his structured settlement. This is especially important because, once
26 paid, the benefits of those tax-free payments cannot be replaced.
27 Mr. Salonga currently is employed. The Declaration does not state whether he could
28 obtain tuition assistance from an employer or a student loan at a better interest rate (noting
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CASE NO. 24-CIV-00762 - RESPONSE OF BERKSHIRE HATHAWAY LIFE TO CANYON LAKES’
PETITIONS FOR TRANSFER OF STRUCTURED SETTLEMENT PAYMENTS
1 Canyon Lakes’ proposed 12.77% ADR). Can he get a car loan at a better rate? Is it wise or
2 necessary for him to pay six months rent in advance, particularly if he has to transfer future
3 payments in order to do so.
4 Attached to Mr. Salonga’s Declaration is an advertisement for the GM ASEP program
5 (sponsored by General Motors). According to the GM ASEP website, the program is only taught
6 at three accredited schools in California - they are located in Norwalk (Los Angeles area), El
7 Cajon (San Diego area) and Fresno (see, GM ASEP website at https://gmasep.org/find-a-school.);
8 none appear to be located in the Bay Area. Mr. Salonga’s Affidavit does not state whether he has
9 applied to, or been accepted to, a program at any of these three schools.
10 Independent Professional Advice
11 The Transfer Act has provisions to ensure payees have access to objective assistance.
12 Under Insurance Code § 10139.5(h), Canyon Lakes is required to pay the first $1,500.00 towards
13 the cost of independent professional advice that can help Mr. Salonga to evaluate the transaction.
14 Yet, as often occurs in structured settlement cases, Mr. Salonga has waived his right to consult
15 an independent adviser (see, February 4, 2024, Statement of Professional Representation Waiver,
16 Exhibit “C” to the Petition). He is thus unrepresented in this matter.11
17 As stated elsewhere, BHLN and BIFCO are not competitors of the factoring companies.
18 BHLN is already obligated to pay the existing structured settlement payments as they come due
19 over the next 11-12 years under the schedule in Contract. A transfer to Canyon Lakes, BIFCO
20 or some other company does not change BHLN’s financial obligations - only the name of the
21 payee. As to BIFCO, it offers a transfer option on specific, non-negotiable terms (set forth
22 below) to assist the payee.
23 As such, regardless of what Mr. Salonga’s reasons may now be for entering into the
24 proposed transfer, he likely would benefit from obtaining truly independent advice, particularly
25 when it would come at no cost to him.
26
27 11
In a number of transfer cases, payees execute waivers of independent advice, only to receive last
minute “independent” advice from a particular individual who, without fail, supports their transaction, even
28 when other options more favorable to the payee are available.
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CASE NO. 24-CIV-00762 - RESPONSE OF BERKSHIRE HATHAWAY LIFE TO CANYON LAKES’
PETITIONS FOR TRANSFER OF STRUCTURED SETTLEMENT PAYMENTS
1 Structured Settlements Should Be Preserved Except as Supported By Good Cause
2 Structured settlements are widely used in order to provide for the long-term needs of the
3 settling parties. The settlement is entered into: (a) after being evaluated by financial advisors,
4 lawyers and the courts to maximize recovery or payout for the amount awarded (with the initial
5 funds and their growth being tax free); (b) to pay the money in the future when it may most
6 benefit the payee; and (c) to protect the funds from being spent prematurely by the payee without
7 due consideration. The settlement is reached with everyone having time for deliberation and
8 negotiation - not being under the deadline of a hearing set on short notice without consideration
9 of alternatives and with the process being driven by the interests of a factoring company, an entity
10 financially adverse to the unrepresented payee. Here, as is evident from the Minor’s Compromise
11 (Amended Exhibit “F” to the Petition) at paragraph 6e., thought was given to the timing of the
12 payments - as the payments are due at regular intervals as Mr. Salonga enters adulthood.
13 The tax-exempt feature of structured settlements is part of why, by their contractual terms,
14 future payment rights generally cannot be transferred or assigned.12 The Legislature has created
15 an exception to the Contract’s terms (which expressly prohibit assignment) by enacting the
16 Transfer Act, however, it permits such transfers only upon court approval and with a specific
17 finding that the transfer is in the payee’s “best interests.”
18 To prevent impulse-driven transfers, as well as the exploitation of potentially vulnerable
19 payees (such as those who are younger or suffered traumatic experiences in connection with their
20 injuries - making them more impressionable), the Legislature has mandated this Court’s
21 evaluation and approval in order to serve as the payee’s last line of protection. Unlike other
22
23 12
See, 321 Henderson Receivables Origination LLC v. Sioteco (2009) 173Cal.App.4th 1059, 1064
(citation omitted): “‘Structured settlements are a type of settlement designed to provide certain tax
24
advantages. In a typical personal injury settlement, a plaintiff who receives a lump-sum payment may
25 exclude this payment from taxable income under I.R.C. [Internal Revenue Code] § 104(a)(2) (providing
that the amount of any damages received on account of personal injuries or sickness are excludable from
26 income). However, any return from the plaintiff’s investment of the lump-sum payment [following a
transfer] is taxable investment income. In contrast, in a structured settlement the claimant receives periodic
27 payments rather than a lump sum, and all of these payments are considered damages received on account
of personal injuries or sickness and are thus excludable from income. Accordingly, a structured settlement
28 effectively shelters from taxation the returns from the investment of the lump-sum payment. [Citations.]’”
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CASE NO. 24-CIV-00762 - RESPONSE OF BERKSHIRE HATHAWAY LIFE TO CANYON LAKES’
PETITIONS FOR TRANSFER OF STRUCTURED SETTLEMENT PAYMENTS
1 financial transactions (for example a consumer loan that generally can be repaid with little or no
2 penalty), once a transfer of structured settlement payments is consummated, it cannot be undone
3 - the protections and tax-free benefits are lost forever.
4 As stated previously, the Petition raises as many questions as it finally starts to provide
5 information about Mr. Salonga’s goals without really attempting to answer whether the present
6 transfer proposal is the best way to achieve them. If, however, this Court ultimately concludes
7 Mr. Salonga would be best served by a transfer, BHLN is willing to assist by providing him an
8 alternative on substantially better financial terms than being offered by Canyon Lakes.
9 The BIFCO Hardship Exchange Program Option
10 Effective January 1, 2017, BIFCO, a company affiliated with BHLN and with BHG,
11 implemented a “Hardship Exchange Program (or the “Program”) for the benefit of existing
12 BHLN annuity payees facing an unanticipated change in circumstances since entering into their
13 structured settlement. The BIFCO Program is described in detail in the accompanying Neville
14 Declaration. In addition to Mr. Neville being Associate General Counsel and Assistant Secretary
15 for BHLN and BHG, he is a Vice President of BIFCO and is familiar with the BIFCO Program
16 described herein.
17 The BIFCO Program is offered as an alternative benefit for BHLN payees (it is not
18 available to the general public) and could be helpful to Mr. Salonga.13 The Program uses an ADR
19 which often (as here) is significantly less than those utilized by factoring companies, such as
20 Canyon Lakes, that are in the business of purchasing annuity payments. Since starting its
21 Hardship Program, BIFCO has completed approximately 174 court-approved transfers.
22 For qualified BHLN payees, BIFCO will contract to purchase future payments at an ADR
23 of 6.5% plus a $1,000.00 administrative charge. These transactions are made within the scope
24 of 26 U.S.C. § 5891 and applicable state law governing the transfer of structured settlement
25 payment rights, including the Transfer Act.
26
27 13
BHLN’s purpose is to assist the Court in protecting the interests of Mr. Salonga. If a transfer is
granted, it does not change BHLN’s payment schedule. BHLN simply changes the name of the payee for
28 each of the payments when they become due.
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CASE NO. 24-CIV-00762 - RESPONSE OF BERKSHIRE HATHAWAY LIFE TO CANYON LAKES’
PETITIONS FOR TRANSFER OF STRUCTURED SETTLEMENT PAYMENTS
1 If BIFCO were to contract to purchase from Mr. Salonga the same $163,975.00 in future
2 payments at issue in this Petition, and using the current hearing date of April 26, 2024, as a
3 measuring date, instead of the $50,483.82 offered by Canyon Lakes, BIFCO could offer him
4 $90,081.62 (a difference of $39,598.10) at an effective ADR of 6.73%. This difference equates
5 to nearly a year of the future salary which Mr. Salonga projects in his Declaration (Exhibit “G”
6 to the Petition at paragraph 10.iv. or more than all of the $33,000.00 he seeks to pay for housing,
7 an automobile and tuition.
8 Alternatively, BIFCO could pay him the same $50,483.82 by purchasing a prorated share
9 of the same payments, totaling $92,188.49 (allowing him to retain $71,797.51 in future payments
10 on the schedule set forth in the Contract). BIFCO could present other scenarios for Mr. Salonga
11 to consider, as well. At this point, there is no indication that Mr. Salonga needs the transfer
12 immediately. Further, it is possible a smaller transaction might be crafted to allow him to address
13 his immediate needs and still preserve substantial payments for the future.
14 Any transaction would require Mr. Salonga to contact BIFCO, and complete a brief
15 information form, at which point BIFCO would provide a disclosure statement and transfer
16 agreement. Further, any potential transaction between Mr. Salonga and BIFCO would be subject
17 to the approval of a court of competent jurisdiction and the attendant “best interests”
18 determination required by the Transfer Act. BIFCO would, at its own expense, prepare and file
19 the petition seeking this Court’s approval of the transaction. Mr. Salonga would not be assessed
20 any charges or fees beyond the $1,000.00 administrative charge already factored into the purchase
21 price. Also, Mr. Salonga would not be assessed any charges or fees if he elected not to pursue
22 the transaction or if the transaction failed to receive court approval.
23 BIFCO is not a bargaining competitor of factoring companies. Rather, the 6.5% ADR and
24 $1,000.00 administrative charge provide an economically fair “safety net” to its payees; the terms
25 are fixed and non-negotiable. If a company such as Canyon Lakes provides an economically
26 better offer to the payee, BIFCO would not submit a competing bid.
27 ////
28 ////
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CASE NO. 24-CIV-00762 - RESPONSE OF BERKSHIRE HATHAWAY LIFE TO CANYON LAKES’
PETITIONS FOR TRANSFER OF STRUCTURED SETTLEMENT PAYMENTS
1 As discussed above, the Transfer Act affords Mr. Salonga the right to obtain independent
2 professional advice with respect to a proposed transfer. Therefore, should Mr. Salonga pursue
3 a transaction with BIFCO, it would urge him to seek independent legal and tax advice, with
I 4 BIFCO paying up to $1,500.00 of the fees incurred doing so. BIFCO anticipates such advice
5 would address the benefits of a lower ADR, the transfer of fewer future payments and/or a
6 higher net payment, whether commercial and/or student loans might better serve his needs,
7 taking into account whether he will work during school, as well establishing the facts of his
8 specific situation, in order to confirm there is a need for the transfer and to help him best
9 manage the tax-free dollars he is scheduled to receive.
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I
; 10 Conclusion
: 11 BHLN submits the proper starting point for Mr. Salonga is to consult with an
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i
I 12 independent professional advisor to consider his options, including the BIFCO program, in
13 order to evaluate whether a transfer is the best way to finance the next steps in his life. If a
. 14 transfer is in his best interests, BHLN and BIFCO are prepared to assist him subject to the
I
15 requirements of the Transfer Act, including this Court's approval.
16 Of course, BHLN will comply with any order of this court regarding payments of Mr.
17 Salonga' s structured settlement.
18 Respectfully submitted,
i 19 SUMMERS & SHIVES, A.P.C.
i 20
Preview
1 Martin L. Shives, Esq. (SBN 123631) SUMMERS & SHIVES, A.P.C. 2 1180 Rosecrans Street, #220 San Diego, CA 92106-2660 3 Telephone: (858) 874-1800 Facsimile: (858) 874-1888 4 martinshives@summers-shives.com 5 Attorneys for Specially Appearing Interested Party BERKSHIRE HATHAWAY LIFE INSURANCE COMPANY OF NEBRASKA 6 7 8 SUPERIOR COURT OF THE STATE OF CALIFORNIA 9 FOR THE COUNTY OF SAN MATEO 10 11 IN RE: Petition of: ) CASE NO: 24-CIV-00762 ) 12 CANYON LAKES TITLE, LLC, ) UNLIMITED JURISDICTION ) 13 Petitioner ) RESPONSE OF SPECIALLY ) APPEARING INTERESTED PARTY 14 ) BERKSHIRE HATHAWAY LIFE ) INSURANCE COMPANY OF 15 (Real Party in Interest D.S.) ) NEBRASKA TO PETITION AND [aka DE’ANGELO SALONGA] ) FIRST AMENDED PETITION FOR 16 ) APPROVAL FOR TRANSFER OF ) PAYMENT RIGHTS [BY AND 17 ) BETWEEN DE’ANGELO SALONGA ) AND CANYON LAKES TITLE, LLC, 18 ) PURSUANT TO CALIFORNIA ) INSURANCE CODE §§ 10134, ET SEQ.] 19 ) ) Date: April 26, 2024 20 ) Time: 9:00 a.m. ) Dept: 24 21 ) ) 22 __________________________________ ) 23 Specially Appearing Interested Party Berkshire Hathaway Life Insurance Company of 24 Nebraska (“BHLN”) submits the following Response to the original and First Amended Petition 25 (“FAP”) for Approval for Transfer of Payment Rights (collectively, the Petition) by and 26 //// 27 //// 28 //// Page 1 CASE NO. 24-CIV-00762 - RESPONSE OF BERKSHIRE HATHAWAY LIFE TO CANYON LAKES’ PETITIONS FOR TRANSFER OF STRUCTURED SETTLEMENT PAYMENTS 1 between De’Angelo Salonga (“Mr. Salonga”)1 and Canyon Lakes Title, LLC (“Canyon Lakes”), 2 pursuant to California Insurance Code § 10134, et seq. (the “Transfer Act”): 3 Introduction and Background2 4 Through its Petition, Canyon Lakes seeks permission to purchase from Mr. Salonga all 5 of the remaining future payments due him under a structured settlement annuity. The payments 6 proposed for transfer have a nominal value of $163,075.00. If the transfer is approved, Mr. 7 Salonga, who turned 18 years old in November 2023, would receive an immediate payment of 8 $50,483.82 from Canyon Lakes. 9 For reasons set forth herein, BHLN believes Canyon Lakes’3 original Petition was fatally 10 flawed on procedural and substantive grounds. While the FAP addressed some of the 11 procedural issues, others remain which only can be corrected by Court order. Meanwhile, many 12 of the substantive issues remain unaddressed. For example, the FAP contains a declaration from 13 Mr. Salonga, but it is statutorily inadequate and potentially unsupported by the facts in the 14 record. 15 In BHLN’s experience, Lion Grace entities typically delay and even withhold relevant 16 information from their transfer petitions. Eventually, they will usually supplement their 17 petitions in order to comply minimally, if at all, with the Transfer Act requirements. Typically, 18 these filings are made after the deadline for BHLN and other interested parties to file responsive 19 pleadings. These tactics preclude the Court, payees, interested parties and the public in 20 evaluating whether a proposed transfer is in best interests of the payee. 21 22 1 BHLN understands the “D.S.” and “De’Angelo Salonga” referenced in the Petition to be 23 De’Angelo Lawrence Rebucas Salonga, the Optional Payee of the annuity contract at issue therein. 24 2 To the extent independent evidence is offered to support this Response, it will be provided by the testimony (by Declaration and/or during the Petition Hearing) of Brennan S. Neville, Associate General 25 Counsel and Assistant Secretary for BHLN and BHG Structured Settlements, Inc. (“BHG”) and Vice 26 President of BIFCO, LLC (“BIFCO”), a company related to BHLN and BHG (“Neville Declaration”). 3 27 Canyon Lakes is a subsidiary, assignee, or otherwise related to Lion Grace Capital (“Lion Grace”). Canyon Lakes and other similarly affiliated entities will be referred to herein as “Lion Grace 28 entities.” Page 2 CASE NO. 24-CIV-00762 - RESPONSE OF BERKSHIRE HATHAWAY LIFE TO CANYON LAKES’ PETITIONS FOR TRANSFER OF STRUCTURED SETTLEMENT PAYMENTS 1 Specifically, Canyon Lakes seeks to use the Transfer Act as a tool to meet its business 2 model rather than being concerned about whether the transfer is in the best interests of the 3 payee. Such transfers are at an Annual Discount Rate (“ADR”) which is typically much higher 4 than a payee would be charged under a program (the BIFCO Hardship Exchange Program) 5 available to BHLN payees and of which Canyon Lakes is fully aware. As discussed below, 6 Canyon Lakes’ counsel has been previously admonished for piecemeal filings made on behalf 7 of other Lion Grace entities. 8 The FAP remains inadequate. Some of its procedural flaws cannot be corrected without 9 a Court order or the dismissal and re-filing of its petitions - steps which Canyon Lakes has not 10 chosen to pursue. As set forth below, the FAP does not satisfy the Transfer Act in 11 demonstrating the proposed transfer is in Mr. Salonga’s best interests. However, if this Court 12 ultimately is provided sufficient evidence to conclude a transfer of structured settlement 13 payments is in Mr. Salonga’s best interests, BHLN wishes to provide information to ensure this 14 Court considers an alternative which might be more aligned with protecting his best interests. 15 The Incidents and Underlying Settlement 16 In 2012, when Mr. Salonga was a minor, a Complaint was filed on his behalf for the 17 wrongful death of his father. By Order on Minor’s Compromise dated September 5, 2017, 18 entered in the case of Rebucas, et al.v. City of San Bruno, et al., case number 3:14-cv-03313- 19 EMC of the United States District Court for the Northern District of California, the matter was 20 settled with Mr. Salonga and his attorneys receiving $200,000.00.4 The net proceeds, after 21 deduction for attorneys fees and costs, was $105,888.06. According to the Minor’s 22 Compromise, the entirety of those settlement proceeds was used to purchase the BHLN annuity 23 contract described below. 24 //// 25 4 26 The Minor’s Compromise, entered August 30, 2016, was added to the FAP as Exhibit “F.” The FAP also contains an unamended “Affidavit in Lieu of Settlement Agreement” dated February 4, 2024, 27 which was provided with the original Petition. However, the Affidavit does not reference the added Minor’s Compromise and that document does not assist in complying with the requirements of the Transfer 28 Act. Page 3 CASE NO. 24-CIV-00762 - RESPONSE OF BERKSHIRE HATHAWAY LIFE TO CANYON LAKES’ PETITIONS FOR TRANSFER OF STRUCTURED SETTLEMENT PAYMENTS 1 The BHLN Contract 2 The obligation to make future payments to Mr. Salonga pursuant to the settlement was 3 assigned to BHG, which funded its obligations by the purchase of an annuity contract, No. 4 BN-17-17743 (“the Contract”) issued on October 3, 2017, by BHLN. The Contract (a copy of 5 which is attached as Exhibit “A” to the Neville Declaration)5 provides for the following 6 payments, as follows: 7 Certain deferred lump sums payable on the following basis: 8 Payment Payment Date Amount 9 November 3, 2023 $ 5,000.00 (Five Thousand Dollars and Zero Cents) 10 November 3, 2026 $ 5,000.00 (Five Thousand Dollars and Zero Cents) November 3, 2028 $ 5,000.00 (Five Thousand Dollars and Zero Cents) 11 November 3, 2030 $ 50,000.00 (Fifty Thousand Dollars and Zero Cents) November 3, 2035 $103,075.00 (One Hundred Three Thousand Seventy- 12 Five Dollars and Zero Cents) 13 The payments due Mr. Salonga under the Contract have a total nominal value of 14 $168,075.00.6 BHLN paid Mr. Salonga the first $5,000.00 lump sum payment that was due 15 November 3, 2023. 16 Canyon Lakes’s Proposed Transfer of Future Payments and Impact on Mr. Salonga 17 As outlined in Schedule “A” to the Transfer Agreement, executed on February 4, 2024 18 (Exhibit “A” to the Petition), Mr. Salonga has agreed to transfer to Canyon Lakes the entirety 19 of the $163,075.00 in future payments remaining under the Contract. In exchange for these 20 future payments, he would receive an immediate payment of $50,483.52. Canyon Lakes asserts 21 it used an ADR of 12.77% to calculate the purchase price. (See, “Disclosure Notice Required 22 by Law,” California version, dated January 25, 2024, Exhibit “B” to Petition). 23 5 Neither the initial Petition nor the FAP provided a copy of the Contract, as required by the 24 Transfer Act. Because its terms are partially raised by Mr. Salonga’s Affidavit, BHLN is providing the 25 Contract despite Canyon Lakes having the burden of supporting its Petition. 6 26 Both versions of the Petition provide copies of the same Affidavit of Mr. Salonga - ostensibly presented to excuse compliance with Canyon Lakes failure to produce the underlying settlement agreement 27 - one of the three documents required to be produced with the Petition under Insurance Code § 10139.5(f)(2)(E-G). However, the Affidavit fails to demonstrate that Mr. Salonga or Canyon Lakes 28 undertook the “reasonable efforts” to locate the documents required under subsection (H) thereof. Page 4 CASE NO. 24-CIV-00762 - RESPONSE OF BERKSHIRE HATHAWAY LIFE TO CANYON LAKES’ PETITIONS FOR TRANSFER OF STRUCTURED SETTLEMENT PAYMENTS 1 Defective Pleadings and Service Warrant Dismissal and/or Re-Filing 2 The FAP is virtually identical to the original Petition (even using the same documents) 3 except for altering the caption, supplementing Exhibit “F” by adding the Minor’s Compromise, 4 adding Exhibit “G” (a Declaration from Mr. Salonga setting forth reasons for the transfer) and 5 amending the proof of service information as to Mr. Salonga. The FAP does not comply with 6 the Transfer Act (including Insurance Code §§ 10139.5(c)(1)) which requires a statement as to 7 the payee’s address at the time of executing the Petition. Although his Declaration states he 8 lives in Daly City, it does not provide an address. 9 Canyon Lakes’ proof of service suggests Mr. Salonga is receiving mail at 75 Citrus 10 Avenue, Apt 4; Daly City 94014. Mr. Salonga has not provided that address to BHLN for its 11 records, nor has he acknowledged BHLN correspondence sent to that address seeking 12 confirmation. According to BHLN’s records, Mr. Salonga’s last known address as 1306 13 Geneva Avenue, San Francisco, CA 94112. 14 Further, the Petition fails to comply with Code of Civil Procedure. Specifically, the 15 original Petition failed to comply with CCP § 422.40, requiring that the payee be identified in 16 the first-filed caption. Canyon Lakes intentionally omitted the name of Mr. Salonga in the 17 caption by using only his initials - D.S. - without providing authority for doing so.7 This defect 18 impacts the Court’s intake procedures, including preventing the index files from being accurate. 19 Other courts have admonished Lion Grace’s counsel for filing piecemeal pleadings in 20 similar cases and denied or deferred rulings on that basis.8 Compliance with these procedures 21 is required to ensure any transfer order is effective under the Transfer Act. It also is necessary 22 to enable interested parties, the Court and any members of the public to communicate with Mr. 23 Salonga at the address where he currently receives mail. 24 7 25 This is a common practice employed by counsel for the various Lion Grace entities. 8 26 These tactical activities also are evidenced by the original proofs of service listing Mr. Salonga by his initials and his address as “Daly City, CA 94014,” with no street address. CCP § 1013a, “Proof of 27 service by mail,” requires that the name and address of the person served appear in the proof of service as was shown on the envelope. That defect fatally prevented jurisdiction over the original Petition from 28 vesting in this Court. Lee v. Pacer Title Company (1994) 28 Cal.App.4th 503, 510. Page 5 CASE NO. 24-CIV-00762 - RESPONSE OF BERKSHIRE HATHAWAY LIFE TO CANYON LAKES’ PETITIONS FOR TRANSFER OF STRUCTURED SETTLEMENT PAYMENTS 1 Canyon Lakes Has Inexcusably Failed to Provide Settlement Documents 2 Substantively, Canyon Lakes has the burden of supporting its Petition with certain 3 fundamental documents, including the annuity contract, the qualified assignment and the 4 underlying structured settlement agreement unless those documents are unavailable. It failed 5 to do this. While the FAP now provides a copy of the Minor’s Compromise, it does not provide 6 copies of the three documents expressly identified as mandated under the Transfer Act, per 7 Insurance Code § 10139.5(f)(2)(E-G). Those documents are required unless the transferee 8 makes an affirmative showing that the documents are not available or are confidential.9 9 Canyon Lakes cannot claim to be excused from producing these documents on the basis 10 of their unavailability. The procedure for establishing an excuse from production is set forth in 11 Insurance Code § 10139.5(f)(2)(H). It requires a showing of reasonable effort to locate the 12 documents.10 Canyon Lakes attached Exhibit “F” to the Petition, an “Affidavit In Lieu of 13 Settlement Agreement” executed by Mr. Salonga purportedly to substantiate its failure to 14 provide that single settlement agreement. While Mr. Salonga states “I have tried to locate a 15 16 9 BHLN has not received a request from Mr. Salonga for copies of these documents. Therefore, 17 it is not filing them with this Response. Rather, it will defer to Mr. Salonga as to the extent of that production. 18 10 Insurance Code section 10139.5(f)(1) addresses what is required of the Petitioner when it is 19 unable to provide the required documents, in pertinent part, as follows: 20 (f)... (2) Not less than 20 days prior to the scheduled hearing on any petition for approval of a 21 transfer of structured settlement payment rights under this article, the transferee shall file with the court and serve on all interested parties a notice of the proposed transfer and the petition for its authorization, and 22 shall include the following with that notice: ***** 23 (E) A copy of the annuity contract, if available. (F) A copy of any qualified assignment agreement, if available. 24 (G) A copy of the underlying structured settlement agreement, if available. 25 (H) If a copy of a document described in subparagraph (E), (F), or (G) is unavailable or cannot be located, then the transferee is not required to attach a copy of that document to the petition or 26 notice of the proposed transfer if the transferee satisfies the court that reasonable efforts to locate and secure a copy of the document have been made, including making inquiry with the payee. If the documents are 27 available, but contain a confidentiality or nondisclosure provision, then the transferee shall summarize in the petition the payments due and owing to the payee, and, if requested by the court, shall provide copies 28 of the documents to the court at a scheduled hearing. [Underlining added.] Page 6 CASE NO. 24-CIV-00762 - RESPONSE OF BERKSHIRE HATHAWAY LIFE TO CANYON LAKES’ PETITIONS FOR TRANSFER OF STRUCTURED SETTLEMENT PAYMENTS 1 copy [of the settlement agreement], but was unable to do so,” he does not explain what steps he 2 took. Canyon Lakes and its counsel are well aware that such documents are available to Mr. 3 Salonga from BHLN upon his written request, yet there is no reference to having made a request 4 from BHLN for that document or any other required under the Transfer Act. Thus, Canyon 5 Lakes has failed to explain its failure to provide the annuity contract, the settlement agreement 6 or qualified assignment or to be excused after reasonable steps were unsuccessful. The 7 documents are not unavailable; Canyon Lakes has chosen not to obtain or provide them. 8 The practices described herein have been regularly encountered by BHLN when transfer 9 petitions are filed by Lion Grace entities. These tactics hide material information about the 10 transfer and deprive the Court of information to determine the payee’s best interests. 11 Ultimately, the focus of these proceedings should be a fair and open assessment of Mr. 12 Salonga’s situation. Even if he understands the mechanical terms of the transfer, this Court also 13 is statutorily required to exercise its judgment in determining whether the transfer is in the 14 payee’s true best interest. Canyon Lakes’ tactical decision to withhold the payee’s name, 15 address, and settlement documents, when clearly contrary to the requirements of the Transfer 16 Act, inhibits the Court from discharging its responsibilities. When evaluating the request for 17 a transfer, in basic terms, if something is a good idea, absent special circumstances approved 18 by the Court, why hide it from open consideration? 19 Canyon Lakes Has the Burden of Supporting the Petition 20 Under the Transfer Act, Petitioner has the burden of demonstrating that the terms of its 21 proposed transfer are “fair and reasonable” and that the transfer is in the best interests of the 22 payee. The Transfer Act contains 15 non-exclusive factors for this Court to consider in 23 performing its “best interests” analysis pursuant to Insurance Code §10139.5(b)(1-15). 24 Information About Mr. Salonga 25 Canyon Lakes’ original Petition provided this Court with virtually no substantive 26 information about Mr. Salonga or his current situation. The only relevant information provided 27 in Mr. Salonga’s “Affidavit in Lieu of Settlement Agreement” (Exhibit “F” to the Petition) was 28 that his birthdate is 11/3/2005 (thus, he is 18 years old), he lives in San Mateo County, and that Page 7 CASE NO. 24-CIV-00762 - RESPONSE OF BERKSHIRE HATHAWAY LIFE TO CANYON LAKES’ PETITIONS FOR TRANSFER OF STRUCTURED SETTLEMENT PAYMENTS 1 he is seeking to transfer the balance of his future payments. Nothing in the original Petition 2 documents explained his intended use of the proceeds or why the transfer would be in his best 3 interests. 4 The FAP, filed after this matter has been pending for almost two months, now contains 5 a Declaration from Mr. Salonga, dated April 3, 2024. It indicates, at paragraphs 3-5, that he is 6 18 years old, lives in Daly City (without the street address required by 10139.5(c)(1)), works as 7 a mechanic at Midas earning $20.00 per hour, is single and has no dependents. His Declaration 8 also states he intends to use the proceeds to move into his own apartment paying 6 months of rent 9 in advance, purchase furniture, purchase a car and pay tuition to take GM Technician courses 10 through GM ASEP program to increase his earnings. He lists $33,000.00 in specific expenses. 11 Mr. Salonga has provided reasons for wanting to sell his future payments. He has not, 12 however, provided evidence of a plan to use the proceeds he would receive. For example, the 13 Declaration provides a very brief information sheet for an apartment at a specific address, but it 14 does not say that this apartment is actually offered for rent or that Mr. Salonga has taken any steps 15 toward renting it. He also provides a picture showing the price of an automobile without 16 identifying the dealer or advising if that vehicle currently is available. The Declaration also does 17 not address the school where he might take the GM ASEP program, its location and whether he 18 is qualified or has been accepted to attend or has a sponsoring dealership. Further, there is no 19 indication as to whether he can obtain tuition assistance or can continue to work while in school. 20 BHLN does not raise these points to question Mr. Salonga’s goals, much less to 21 discourage him; however, they are highlighted to ensure that the Court confirms whether he really 22 needs the transfer proceeds now and, if he does, not to waste whatever amounts he might receive. 23 If these are Mr. Salonga’s goals, and if the Court finds his plans to achieve them to be in 24 his best interests, the next question is whether he is getting the most benefit from the 25 payments being sold from his structured settlement. This is especially important because, once 26 paid, the benefits of those tax-free payments cannot be replaced. 27 Mr. Salonga currently is employed. The Declaration does not state whether he could 28 obtain tuition assistance from an employer or a student loan at a better interest rate (noting Page 8 CASE NO. 24-CIV-00762 - RESPONSE OF BERKSHIRE HATHAWAY LIFE TO CANYON LAKES’ PETITIONS FOR TRANSFER OF STRUCTURED SETTLEMENT PAYMENTS 1 Canyon Lakes’ proposed 12.77% ADR). Can he get a car loan at a better rate? Is it wise or 2 necessary for him to pay six months rent in advance, particularly if he has to transfer future 3 payments in order to do so. 4 Attached to Mr. Salonga’s Declaration is an advertisement for the GM ASEP program 5 (sponsored by General Motors). According to the GM ASEP website, the program is only taught 6 at three accredited schools in California - they are located in Norwalk (Los Angeles area), El 7 Cajon (San Diego area) and Fresno (see, GM ASEP website at https://gmasep.org/find-a-school.); 8 none appear to be located in the Bay Area. Mr. Salonga’s Affidavit does not state whether he has 9 applied to, or been accepted to, a program at any of these three schools. 10 Independent Professional Advice 11 The Transfer Act has provisions to ensure payees have access to objective assistance. 12 Under Insurance Code § 10139.5(h), Canyon Lakes is required to pay the first $1,500.00 towards 13 the cost of independent professional advice that can help Mr. Salonga to evaluate the transaction. 14 Yet, as often occurs in structured settlement cases, Mr. Salonga has waived his right to consult 15 an independent adviser (see, February 4, 2024, Statement of Professional Representation Waiver, 16 Exhibit “C” to the Petition). He is thus unrepresented in this matter.11 17 As stated elsewhere, BHLN and BIFCO are not competitors of the factoring companies. 18 BHLN is already obligated to pay the existing structured settlement payments as they come due 19 over the next 11-12 years under the schedule in Contract. A transfer to Canyon Lakes, BIFCO 20 or some other company does not change BHLN’s financial obligations - only the name of the 21 payee. As to BIFCO, it offers a transfer option on specific, non-negotiable terms (set forth 22 below) to assist the payee. 23 As such, regardless of what Mr. Salonga’s reasons may now be for entering into the 24 proposed transfer, he likely would benefit from obtaining truly independent advice, particularly 25 when it would come at no cost to him. 26 27 11 In a number of transfer cases, payees execute waivers of independent advice, only to receive last minute “independent” advice from a particular individual who, without fail, supports their transaction, even 28 when other options more favorable to the payee are available. Page 9 CASE NO. 24-CIV-00762 - RESPONSE OF BERKSHIRE HATHAWAY LIFE TO CANYON LAKES’ PETITIONS FOR TRANSFER OF STRUCTURED SETTLEMENT PAYMENTS 1 Structured Settlements Should Be Preserved Except as Supported By Good Cause 2 Structured settlements are widely used in order to provide for the long-term needs of the 3 settling parties. The settlement is entered into: (a) after being evaluated by financial advisors, 4 lawyers and the courts to maximize recovery or payout for the amount awarded (with the initial 5 funds and their growth being tax free); (b) to pay the money in the future when it may most 6 benefit the payee; and (c) to protect the funds from being spent prematurely by the payee without 7 due consideration. The settlement is reached with everyone having time for deliberation and 8 negotiation - not being under the deadline of a hearing set on short notice without consideration 9 of alternatives and with the process being driven by the interests of a factoring company, an entity 10 financially adverse to the unrepresented payee. Here, as is evident from the Minor’s Compromise 11 (Amended Exhibit “F” to the Petition) at paragraph 6e., thought was given to the timing of the 12 payments - as the payments are due at regular intervals as Mr. Salonga enters adulthood. 13 The tax-exempt feature of structured settlements is part of why, by their contractual terms, 14 future payment rights generally cannot be transferred or assigned.12 The Legislature has created 15 an exception to the Contract’s terms (which expressly prohibit assignment) by enacting the 16 Transfer Act, however, it permits such transfers only upon court approval and with a specific 17 finding that the transfer is in the payee’s “best interests.” 18 To prevent impulse-driven transfers, as well as the exploitation of potentially vulnerable 19 payees (such as those who are younger or suffered traumatic experiences in connection with their 20 injuries - making them more impressionable), the Legislature has mandated this Court’s 21 evaluation and approval in order to serve as the payee’s last line of protection. Unlike other 22 23 12 See, 321 Henderson Receivables Origination LLC v. Sioteco (2009) 173Cal.App.4th 1059, 1064 (citation omitted): “‘Structured settlements are a type of settlement designed to provide certain tax 24 advantages. In a typical personal injury settlement, a plaintiff who receives a lump-sum payment may 25 exclude this payment from taxable income under I.R.C. [Internal Revenue Code] § 104(a)(2) (providing that the amount of any damages received on account of personal injuries or sickness are excludable from 26 income). However, any return from the plaintiff’s investment of the lump-sum payment [following a transfer] is taxable investment income. In contrast, in a structured settlement the claimant receives periodic 27 payments rather than a lump sum, and all of these payments are considered damages received on account of personal injuries or sickness and are thus excludable from income. Accordingly, a structured settlement 28 effectively shelters from taxation the returns from the investment of the lump-sum payment. [Citations.]’” Page 10 CASE NO. 24-CIV-00762 - RESPONSE OF BERKSHIRE HATHAWAY LIFE TO CANYON LAKES’ PETITIONS FOR TRANSFER OF STRUCTURED SETTLEMENT PAYMENTS 1 financial transactions (for example a consumer loan that generally can be repaid with little or no 2 penalty), once a transfer of structured settlement payments is consummated, it cannot be undone 3 - the protections and tax-free benefits are lost forever. 4 As stated previously, the Petition raises as many questions as it finally starts to provide 5 information about Mr. Salonga’s goals without really attempting to answer whether the present 6 transfer proposal is the best way to achieve them. If, however, this Court ultimately concludes 7 Mr. Salonga would be best served by a transfer, BHLN is willing to assist by providing him an 8 alternative on substantially better financial terms than being offered by Canyon Lakes. 9 The BIFCO Hardship Exchange Program Option 10 Effective January 1, 2017, BIFCO, a company affiliated with BHLN and with BHG, 11 implemented a “Hardship Exchange Program (or the “Program”) for the benefit of existing 12 BHLN annuity payees facing an unanticipated change in circumstances since entering into their 13 structured settlement. The BIFCO Program is described in detail in the accompanying Neville 14 Declaration. In addition to Mr. Neville being Associate General Counsel and Assistant Secretary 15 for BHLN and BHG, he is a Vice President of BIFCO and is familiar with the BIFCO Program 16 described herein. 17 The BIFCO Program is offered as an alternative benefit for BHLN payees (it is not 18 available to the general public) and could be helpful to Mr. Salonga.13 The Program uses an ADR 19 which often (as here) is significantly less than those utilized by factoring companies, such as 20 Canyon Lakes, that are in the business of purchasing annuity payments. Since starting its 21 Hardship Program, BIFCO has completed approximately 174 court-approved transfers. 22 For qualified BHLN payees, BIFCO will contract to purchase future payments at an ADR 23 of 6.5% plus a $1,000.00 administrative charge. These transactions are made within the scope 24 of 26 U.S.C. § 5891 and applicable state law governing the transfer of structured settlement 25 payment rights, including the Transfer Act. 26 27 13 BHLN’s purpose is to assist the Court in protecting the interests of Mr. Salonga. If a transfer is granted, it does not change BHLN’s payment schedule. BHLN simply changes the name of the payee for 28 each of the payments when they become due. Page 11 CASE NO. 24-CIV-00762 - RESPONSE OF BERKSHIRE HATHAWAY LIFE TO CANYON LAKES’ PETITIONS FOR TRANSFER OF STRUCTURED SETTLEMENT PAYMENTS 1 If BIFCO were to contract to purchase from Mr. Salonga the same $163,975.00 in future 2 payments at issue in this Petition, and using the current hearing date of April 26, 2024, as a 3 measuring date, instead of the $50,483.82 offered by Canyon Lakes, BIFCO could offer him 4 $90,081.62 (a difference of $39,598.10) at an effective ADR of 6.73%. This difference equates 5 to nearly a year of the future salary which Mr. Salonga projects in his Declaration (Exhibit “G” 6 to the Petition at paragraph 10.iv. or more than all of the $33,000.00 he seeks to pay for housing, 7 an automobile and tuition. 8 Alternatively, BIFCO could pay him the same $50,483.82 by purchasing a prorated share 9 of the same payments, totaling $92,188.49 (allowing him to retain $71,797.51 in future payments 10 on the schedule set forth in the Contract). BIFCO could present other scenarios for Mr. Salonga 11 to consider, as well. At this point, there is no indication that Mr. Salonga needs the transfer 12 immediately. Further, it is possible a smaller transaction might be crafted to allow him to address 13 his immediate needs and still preserve substantial payments for the future. 14 Any transaction would require Mr. Salonga to contact BIFCO, and complete a brief 15 information form, at which point BIFCO would provide a disclosure statement and transfer 16 agreement. Further, any potential transaction between Mr. Salonga and BIFCO would be subject 17 to the approval of a court of competent jurisdiction and the attendant “best interests” 18 determination required by the Transfer Act. BIFCO would, at its own expense, prepare and file 19 the petition seeking this Court’s approval of the transaction. Mr. Salonga would not be assessed 20 any charges or fees beyond the $1,000.00 administrative charge already factored into the purchase 21 price. Also, Mr. Salonga would not be assessed any charges or fees if he elected not to pursue 22 the transaction or if the transaction failed to receive court approval. 23 BIFCO is not a bargaining competitor of factoring companies. Rather, the 6.5% ADR and 24 $1,000.00 administrative charge provide an economically fair “safety net” to its payees; the terms 25 are fixed and non-negotiable. If a company such as Canyon Lakes provides an economically 26 better offer to the payee, BIFCO would not submit a competing bid. 27 //// 28 //// Page 12 CASE NO. 24-CIV-00762 - RESPONSE OF BERKSHIRE HATHAWAY LIFE TO CANYON LAKES’ PETITIONS FOR TRANSFER OF STRUCTURED SETTLEMENT PAYMENTS 1 As discussed above, the Transfer Act affords Mr. Salonga the right to obtain independent 2 professional advice with respect to a proposed transfer. Therefore, should Mr. Salonga pursue 3 a transaction with BIFCO, it would urge him to seek independent legal and tax advice, with I 4 BIFCO paying up to $1,500.00 of the fees incurred doing so. BIFCO anticipates such advice 5 would address the benefits of a lower ADR, the transfer of fewer future payments and/or a 6 higher net payment, whether commercial and/or student loans might better serve his needs, 7 taking into account whether he will work during school, as well establishing the facts of his 8 specific situation, in order to confirm there is a need for the transfer and to help him best 9 manage the tax-free dollars he is scheduled to receive. I I ; 10 Conclusion : 11 BHLN submits the proper starting point for Mr. Salonga is to consult with an I i I 12 independent professional advisor to consider his options, including the BIFCO program, in 13 order to evaluate whether a transfer is the best way to finance the next steps in his life. If a . 14 transfer is in his best interests, BHLN and BIFCO are prepared to assist him subject to the I 15 requirements of the Transfer Act, including this Court's approval. 16 Of course, BHLN will comply with any order of this court regarding payments of Mr. 17 Salonga' s structured settlement. 18 Respectfully submitted, i 19 SUMMERS & SHIVES, A.P.C. i 20