Settlement Capital Corporation, Inc. v. Pagan

649 F.Supp.2d 545

SETTLEMENT CAPITAL CORPORATION, INC., Plaintiff, v. Zulay PAGAN, et. al., Defendants.

Civil Action No. 3:07-CV-1609-O.

United States District Court, N.D. Texas, Dallas Division.

July 24, 2009.

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Jeffrey S. Lowenstein, Wendy Ann Duprey, Bell Nunnally & Martin LLP, Dallas, TX, for Plaintiff.

Zulay Pagan, Bronx, NY, pro se.

Kenneth R. Stein, Matthews Stein Shiels Pearce Knott Eden & Davis, Michael S Alfred, Hallett & Perrin, Dallas, TX, Jenifer N. Smith, Stephen R. Harris, Drinker Biddle & Reath LLP, Philadelphia, PA, for Defendants.

MEMORANDUM OPINION AND ORDER

REED O'CONNOR, District Judge.

Before the Court are the following motions from the parties:

(1) Plaintiff Settlement Capital Corporation, Inc.'s Motion for Partial Summary Judgment (Doc. # 132).

(2) Plaintiff Settlement Capital Corporation, Inc.'s Motion for Leave to File Supplement Appendix to Evidence in Support of SCC's Motion for Partial Summary Judgment (Doc. # 210).

(3) Plaintiff Settlement Capital Corporation, Inc.'s Objections to, and Motion to Strike Seneca and Route 28's Evidence In Support of Their Response to SCC's Motion for Partial Summary Judgment (Doc. # 181).

(4) Defendant Seneca and Route 28's Amended Motion for Summary Judgment (Doc. # 147).

(5) Plaintiff Settlement Capital Corporation, Inc.'s Motion for Leave to File Supplement Appendix to Evidence in Support of SCC's Opposition to Seneca and Route 28's Amended Motion for Summary Judgment (Doc. # 211).

(6) Plaintiff Settlement Capital Corporation, Inc.'s Objections to, and Motion to Strike Seneca and Route 28's Evidence In Support of Their Amended Motion for Summary Judgment (Doc. # 172).

(7) Plaintiff Settlement Capital Corporation, Inc.'s Motion for Leave to File Second Amended Complaint (Doc. # 143).

After considering these documents and the applicable authorities, the Court finds as follows:

I. Factual and Procedural Background

The following facts are undisputed by the parties after reviewing their respective pleadings, briefs, and evidence. In 1995 Zulay Pagan, her father, and Fireman's Fund Insurance Company ("FFIC") entered into a settlement agreement ("the 1995 agreement") by which Pagan would receive from FFIC a number of periodic lump-sum payments over several years.¹ One of these payments was in the amount of $250,000 due and payable on August 1, 2009 ("the 2009 payment").² The 1995 agreement included an anti-assignment provision stating as follows: "nor shall ZULAY PAGAN have the power to sell or mortgage or encumber the Periodic Payments, or any part thereof, by assignment or otherwise."³

In March 2002, Pagan submitted an application to plaintiff SCC to sell her rights to receive the 2009 payment.⁴ The following month Pagan and SCC executed an agreement ("the SCC purchase agreement") providing that in exchange for an immediate payment of $75,211 Pagan would sell her right to receive the 2009 payment to SCC.⁵ Included in the SCC purchase agreement was a waiver of the anti-assignment provision in the 1995 Agreement stating as follows:

Section 6.1. Assignability. To the extent that any restrictions on the assignability of the Periodic Payments were included in the Settlement Agreement or the Annuity for the benefit of the Seller, Seller acknowledges his intent to waive said benefits . . . Seller hereby WAIVES AND RELEASES all rights and benefits of Seller in, to, or under, all such restrictions on assignability, if any.⁶

Section 4.18. Covenant Not to Sue. Seller does hereby irrevocably and expressly covenant and agree that Seller shall not at anytime sue or institute or pursue any legal action or demand . . . against Purchaser . . . any actual or threatened claim that Seller lacked the power to sell or transfer the Periodic Payments or that all or any part of the Periodic Payments were non-transferable, non-assignable, or similarly restricted or that otherwise depends for its basis . . . on any language in the Settlement Agreement, the Annuity, or any related writing that similarly restricts the transferability of the Periodic Payments or the proceeds thereof[.]⁷

When the SCC purchase agreement was executed Pagan was a resident of New York.⁸ Furthermore, it is undisputed that the SCC purchase agreement was executed before the New York Legislature enacted its Structured Settlement Protection Act ("SSPA") which became effective on July 1, 2002.⁹ Since the SCC purchase agreement was pre-SSPA, SCC filed a UCC statement in New York, showing that SCC had a security interest in various periodic payments under the annuity.¹⁰

The current dispute between SCC and the various defendants arose as a result of a chain of events that began in February 2007. That month Pagan executed an agreement ("the Seneca agreement") with defendant Seneca One LLC ("Seneca"). Pursuant to the Seneca agreement Pagan transferred her right to receive $100,000 of the $250,000 proceeds of the 2009 payment, that she allegedly had already sold to SCC, in exchange for an immediate payment of $56,800.82.¹¹ Under the Seneca Agreement Pagan was also supposed to keep the remaining $150,000 of the 2009 payment.¹² In March 2007, Seneca executed an assignment agreement with defendant Route 28 Receivables LLC ("Route 28"), that purported to transfer Seneca's rights under the Seneca Agreement to Route 28.¹³ At the time Pagan lived in Florida, which had enacted SSPA legislation.¹⁴ As per Florida SSPA law, Seneca sought Florida state Court approval of the Seneca Agreement, which was granted in an order dated March 23, 2007 ("the March 2007 Order").¹⁵ The Florida Court that issued the March 2007 Order does not appear to have had any notice of SCC and Pagan's 2002 agreement with regard to the 2009 payment.¹⁶ It is intensely disputed by the parties whether or not Seneca and Route 28 had any actual or constructive notice of the SCC purchase agreement when they executed the Seneca agreement with Pagan. The March 2007 Order directed FFIC to transmit the entire 2009 payment to Seneca, which would in turn keep $100,000 and transfer the remaining $150,000 to Pagan.¹⁷

In March 2007, Pagan entered into another agreement ("the Stone Street Agreement") with Stone Street Capital, LLC ("Stone Street") to sell the rights to another payment in the amount of $175,000 due and payable on August 1, 2014 ("the 2014 payment").¹⁸ Stone Street initiated proceedings in Florida state court to gain approval of the Stone Street agreement.¹⁹ In April 2007, a Florida court signed an order ("the April 2007 Order") approving the Stone Street agreement.²⁰ Included in the April 2007 Order was an acknowledgment of SCC's pre-SSPA transaction with regard to the 2009 payment.²¹ The order expressly stated that it approved only the Stone Street agreement.²² The acknowledgment was included in the April 2007 Order only because SCC requested, as a condition of releasing its security interest against the 2014 payment in favor of Stone Street, that its transaction with Pagan regarding the 2009 payment be recognized in the order.²³ The April 2007 Order directed FFIC to transmit the 2014 payment to Stone Street.²⁴

In a letter dated August 30, 2007, FFIC notified Stone Street, Seneca, and SCC that it had received the conflicting March 2007 and April 2007 orders. The letter stated that FFIC could not split the 2009 payment and asked Stone Street and Seneca how they intended to rectify the problem.²⁵ The orders conflicted because the March 2007 Order directed FFIC to transmit the entire 2009 payment to Seneca whereas the April 2007 Order noted that SCC was due to receive the entire 2009 payment.²⁶ SCC responded by writing FFIC to request that the entire 2009 payment be remitted to SCC when it became due.²⁷ Seneca responded by writing Stone Street demanding that it amend the April 2007 Order to require FFIC to remit the entire 2009 payment to Seneca.²⁸

SCC initiated the instant lawsuit on September 19, 2007 naming Pagan, Seneca, Route 28, and FFIC as defendants. SCC sought declaratory relief against Pagan, Seneca, Route 28, and FFIC. SCC also asserted claims for theft, conspiracy, conversion, and violations of Chapter 12 of the Texas Civil Practice and Remedies Code against Seneca. Seneca responded by filing counterclaims asserting slander of title and seeking declaratory relief in addition to raising several affirmative defenses. Pagan also raised various affirmative defenses and counterclaimed for certification of a class action on behalf of all persons who assigned structured settlement payments to SCC allegedly in violation of an anti-assignment clause in their contract. However, around September 2008 Pagan ceased communication with her attorneys and after unsuccessful efforts to locate her, Pagan's attorneys were granted leave to withdrew as counsel of record. Further, because Pagan ceased her participation in this matter, disregarded Court orders, and abandoned this litigation, the Court dismissed Pagan's class action counterclaim without prejudice.²⁹ To date Pagan has made no further effort to participate in this litigation. FFIC counterclaimed with an interpleader claim and later moved for summary judgment on that claim. In March 2009, this Court granted FFIC's motion for summary judgment and dismissed them from the lawsuit on the condition that when the 2009 payment becomes payable on August 1, 2009 that it be paid into the registry of the Court.

II. Summary Judgment Standard

Summary judgment is proper when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.³⁰ "[T]he substantive law will identify which facts are material."³¹ A dispute regarding a material fact is "genuine" if the evidence is such that a reasonable jury could return a verdict in favor of the nonmoving party.³² When...