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In re Nitz

October 26, 2000

IN RE HERMAN NITZ, SR.,
PETITIONER-APPELLEE
(SAFECO LIFE INSURANCE COMPANY, INTERVENOR-APPELLANT).



Appeal from the Circuit Court of Du Page County. No. 99-CH-0167 Honorable Terrence M. Sheen, Judge, Presiding.

The opinion of the court was delivered by: Justice Galasso

The intervenor, Safeco Life Insurance Company (Safeco), appeals from an order of the circuit court of Du Page County approving the petitioner's, Herman Nitz, Sr.'s, request to make an assignment of his benefits under a structured settlement agreement. We reverse the order of the trial court.

The record in this case reveals the following facts. The petitioner filed a complaint against certain defendants, not parties to this appeal, alleging negligence that resulted in injuries to him and seeking money damages. Subsequently, the petitioner entered into a structured settlement agreement with National Union Fire Insurance Company (also not a party to this appeal), acting on behalf of the defendants. Under the settlement agreement, the petitioner was to receive a life annuity that paid the petitioner $3,000 per month, with 25 years guaranteed, increasing by 2% annually. The agreement provided in pertinent part as follows:

"Plaintiff is and shall be a general creditor to the Defendant and/or the Insurer. Said payments to Plaintiff required herein cannot be accelerated, deferred, increased or decreased by the Plaintiff and no part of the payments called for herein or any assets of the Defendant and/or the Insurer is to be subject to execution or any legal process for any obligation in any manner, nor shall the Plaintiff have the power to sell or mortgage or encumber same or any part thereof, not anticipate the same, or any part thereof, by assignment or otherwise." (Emphasis added.)

The agreement further provided, however, that the insurer could make a " 'qualified assignment' within the meaning of Section 130(c) of the Internal Revenue Code of 1986, of the Defendant's and/or the Insurer's liability to make the periodic payments required herein." The assignment was duly made to Safeco Assigned Benefits Service Company (Sabsco). Pursuant to its rights under the agreement, Sabsco purchased an annuity policy from Safeco to fund its liability to make the periodic payments to the petitioner.

On February 8, 1999, pursuant to section 155.34 of the Illinois Insurance Code (215 ILCS 5/155.34 (West 1998)), the petitioner filed a petition seeking court approval of an assignment of certain of the periodic payments due him under his structured settlement agreement to Singer Asset Finance Company (Singer). He further requested that the assigned benefits be paid to a trust at an address in New York. Upon notice of the filing of the petition, Safeco filed an appearance and objections to the petition. The petitioner filed a response to Safeco's objections, raising, inter alia, the question of Safeco's standing to assert a violation of the settlement agreement since it was neither a party to the agreement nor in privity with any party to the agreement. However, at the hearing on the petition, the petitioner did not contest Safeco's participation in the proceedings.

After hearing the testimony of the petitioner and the arguments of counsel, the trial court found that, while there could be no permanent assignment under the settlement agreement, the agreement did not prohibit redesignation of the payments, and, therefore, the petitioner was not making an assignment that was prohibited under the settlement agreement. However, the trial court also stated as follows:

"In light of that, the court will rule as follows: No. 1, although the court finds that any further assignments will clearly not be in your best interest, Mr. Nitz, this one in and of itself, since he is under no disability and on the basis of the fact that he wants to get rid of the home, the court finds that it may not be absolutely prohibitively against his best interest. It may not be wise to do, but what's wise to do and what's in your best interest are obviously two different things. I would not recommend you do this, but the court never can give advise [sic] to any party. So in and of itself the assignment does not require the court to rule that it's absolutely contrary to your best interest."

The trial court approved the assignment, and Safeco filed a timely notice of appeal.

We address, first, the petitioner's argument that Safeco lacks standing to bring this appeal. The petitioner points out that Safeco is merely the holder of the funds, and its only duty is to make the periodic payments as directed by Sabsco or the petitioner. The petitioner maintains that Safeco has suffered no injury as a result of the trial court's order, since the order only requires it to redirect the payments to a new address under the petitioner's name. Finally, the petitioner notes that Sabsco, the owner of the annuity, chose not to contest the petition.

Standing in Illinois requires only some injury in fact to a legally cognizable interest. Greer v. Illinois Housing Development Authority, 122 Ill. 2d 462, 492 (1988); see also City of Carbondale v. City of Marion, 210 Ill. App. 3d 870 (1991). In order to determine whether a party has standing, the court must determine whether the party would be benefitted by the relief granted. Board of Trustees of Community College District No. 508 v. Rosewell, 262 Ill. App. 3d 938, 954 (1992).

The above cases, relied on by the petitioner, concern standing in the trial court as opposed to standing on appeal, which is the issue before this court. This court has held that any party to a case may seek appellate review from a final judgment that is adverse to his interests, and whether the party was actually aggrieved does not determine his right to appeal. See Hamann v. Sumichrast, 222 Ill. App. 3d 962, 986 (1991). A party has standing to appeal where he or she has some real interest in the cause of action or a legal or equitable interest in the subject matter of the controversy. Duncan v. Church of the Living God, 278 Ill. App. 3d 588, 593 (1996). Finally, a party may challenge any judgment adverse to its interests. St. Paul Fire & Marine Insurance Co. v. Downs, 247 Ill. App. 3d 382, 390 (1993). Even a nonparty has standing to appeal if he has a direct, immediate, and substantial interest in the subject matter that would be prejudiced by the judgment or benefitted by its reversal. Downs, 247 Ill. App. 3d at 390.

Safeco's objections to the petition in this case were accompanied, inter alia, by the affidavit of Kevin Woods, employed by Safeco in its settlement annuities department. In his affidavit, Mr. Woods stated that the attempted or proposed assignments of structured settlement annuity payments resulted in burdensome administrative problems such as staffing changes to handle correspondence and to follow up tasks in order to respond to information and processing requests related to the proposed or attempted assignments and increased legal and administrative expenses. Mr. Woods also stated that Safeco was concerned about the potential for double liability and tax ramifications.

In light of the adverse financial and administrative impact Safeco alleges it would suffer if the order approving the assignment was affirmed, we conclude that Safeco has standing to appeal from that order. Compare Midland States Life Insurance Co. v. Hamideh, 311 Ill. App. 3d 127 (1999) (part of the rationale behind Illinois lottery law's prohibition against assignment of lottery proceeds was the additional financial burden to the state).

We now turn to the issues raised by this appeal.

Section 155.34 states in pertinent part as follows:

"(b) No person who is the beneficiary of a structured settlement of a claim for personal injury may assign in any manner the payments of the settlement without prior approval of the circuit court of the county where an action was or could have been maintained." 215 ILCS 5/155.34(b) (West 1998).

We observe, first, that section 155.34 was enacted by the legislature to protect structured settlement recipients. 90th Ill. Gen. Assem., House Proceedings, April 10, 1997, at 94-104. The legislature was concerned that such persons were accepting offers of ready, but deeply discounted, cash from companies in exchange for their settlement annuity payments and then ending up penniless and without resources in the future. See 90th Ill. Gen. Assem., House Proceedings, April 10, 1997, at 96-97 (statements of Representative Leitch). The clear language of section 155.34(b) requiring court approval for assignments of payments presupposes that the payments are in fact assignable. Where a structured settlement agreement does not permit the payments to be assigned, the court's authority to act on a petition seeking approval of the assignment of payments under such an agreement is not invoked, and the petition should be dismissed. Therefore, we must first determine the assignability of the payments under the terms of the structured settlement agreement in this case before we can uphold the trial court's exercise of discretion in approving the assignment. See ...


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