In Re Kaufman
2001 OK 88, 37 P.3d 845, 72 O.B.A.J. 3061 (2001)
Rule of Law:
Where an anti-assignment provision in a structured settlement clearly and unambiguously limits an annuitant's power to alienate future payments, the restriction on alienability is valid; however, an annuitant/assignor is estopped from enforcing such a valid anti-assignment clause against their own assignee.
Facts:
- In April 1996, John A. Kaufman settled a wrongful death claim with Love's Country Stores, Inc. and United States Fidelity & Guaranty Company (USF & G).
- Kaufman signed a Settlement Agreement and Release that provided for a lump-sum payment and periodic monthly payments of $2,008.75, guaranteed for twenty years, which explicitly stated it would be construed under Oklahoma law.
- The settlement agreement specifically included an anti-assignment provision stating that Kaufman had no "power to sell, mortgage, encumber, or anticipate the future payments by assignment or otherwise."
- USF & G entered into a qualified agreement with SAFECO Assigned Benefits Company (SAFECO), under which SAFECO assumed responsibility for Kaufman's periodic payments and purchased an annuity to ensure them.
- After seeing a television commercial for J.G. Wentworth S.B.C., Limited Partnership (Wentworth), Kaufman requested paperwork to sell his annuity payments.
- On June 9, 1999, Kaufman executed a purchase agreement with Wentworth, selling his right to sixty monthly annuity payments with a total value of $120,525.00 for a lump sum of $80,507.26.
- Wentworth was entitled to receive payments from July 1999 through June 2004, but has received no payments since May 2000.
- Kaufman used the lump sum received from Wentworth to start a trenching business, which subsequently failed.
Procedural Posture:
- John A. Kaufman (debtor/annuitant/assignor) filed a voluntary Chapter 13 bankruptcy petition on September 22, 2000.
- In his bankruptcy petition, Kaufman listed the purchase agreement with J.G. Wentworth S.B.C., Limited Partnership (creditor/assignee) as an unsecured claim and proposed using the annuity payments to fund his Chapter 13 plan.
- On November 27, 2001, Wentworth filed a motion for relief from the automatic stay, seeking permission to seize the contracted-for annuity payments.
- Kaufman asserted that the purchase agreement was invalid due to the anti-assignment language in the settlement agreement.
- The bankruptcy court certified two questions of law to the Supreme Court of Oklahoma pursuant to the Uniform Certification of Questions of Law Act.
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Issue:
1. Does an anti-assignment provision in a structured settlement agreement that clearly and unambiguously limits an annuitant's power to sell, mortgage, encumber, or anticipate future payments by assignment or otherwise, render such a restriction on alienability valid under Oklahoma law? 2. If such an anti-assignment provision is valid, may an annuitant/assignor enforce that clause against a third-party/assignee with whom they entered into a purchase agreement for future annuity payments in exchange for a lump sum?
Opinions:
Majority - Kauger, J.
1. Yes, an anti-assignment provision in a structured settlement agreement that clearly and unambiguously limits an annuitant's power to sell, mortgage, encumber, or anticipate future payments by assignment or otherwise, renders such a restriction on alienability valid under Oklahoma law. The court held that the cardinal rule in Oklahoma contract interpretation is to determine and give effect to the intent of the parties, which is manifested by the agreement's language (15 O.S.1991 § 152). The settlement agreement's language, stating Kaufman has no "power to sell, mortgage, encumber, or anticipate the future payments by assignment or otherwise," was deemed clear and definite in its intent to prohibit alienation. This determination aligns with decisions from other jurisdictions upholding anti-assignment provisions limiting the assignor's "power" to alienate contractual rights and with general policy considerations favoring the long-term security and tax-favorable treatment underlying structured settlements. 2. No, an annuitant/assignor may not enforce a valid anti-assignment clause against a third-party/assignee with whom they entered into a purchase agreement for future annuity payments. The court found that well-settled principles of Oklahoma law prevent an assignor from raising non-assignability against their own assignee. Citing Harris v. Tipton, 1939 OK 256, the court reiterated that "An assignor is not permitted to raise [nonassignability] as against the assignee, and it is right and just that he should not be permitted to do so, for a more perfect illustration of the necessity for the doctrine of estoppel could hardly be stated." The court also declined to void the contract on public policy grounds under the Structured Settlement Protection Act of 2001 (12 O.S.2001 § 3238 et seq.), noting that § 3245 explicitly directs that nothing in the Act should imply the validity or invalidity of agreements entered into before its effective date.
Concurring - Hargrave, C.J., Hodges, Lavender, Opala, Summers, Boudreau, and Winchester, JJ.
These justices concur with the majority opinion.
Concurring in part and dissenting in part - Watt, V.C.J.
This justice concurs in part and dissents in part.
Analysis:
This case provides critical clarification on two distinct aspects of contract law relevant to structured settlements: the validity of anti-assignment clauses and the equitable principle of estoppel. By upholding clear anti-assignment provisions, especially those limiting the "power" to assign, the court supports the intent of parties and the policy goals behind structured settlements to provide long-term financial security. Simultaneously, the court's reinforcement of the long-standing principle that an assignor cannot assert non-assignability against their own assignee prevents opportunistic behavior and promotes contractual good faith. This ruling balances contractual freedom with equitable considerations, ensuring that while restrictions on alienation can be valid, they cannot be used by the breaching party to escape their subsequent obligations to an assignee.
