This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.
Facts
The case arose from a structured settlement agreement following a medical malpractice claim. The settlement provided the plaintiff with monthly annuity payments, which included an anti-assignment clause. After the plaintiff's death, disputes arose regarding the assignment of annuity payments to a third party as collateral for a loan, despite the anti-assignment clause (paras 2-7).
Procedural History
- District Court of Bernalillo County: Granted summary judgment in favor of Settlement Funding, allowing foreclosure of the annuity payments and dismissing the plaintiffs' claims (paras 7-8).
Parties' Submissions
- Plaintiffs-Appellants: Argued that the anti-assignment clause in the structured settlement agreement and annuity policy was enforceable under contract law and public policy. They contended that the annuity payments were excluded from the Uniform Commercial Code (UCC) as they arose from a tort claim and were tied to an insurance policy (paras 6-7, 13-14).
- Settlement Funding (Intervenor-Appellee): Claimed that the anti-assignment clause was invalid under the UCC, asserting that the annuity payments were "payment intangibles" subject to Article 9 of the UCC. They argued that they were entitled to foreclose on the annuity payments as collateral for the loan (paras 7, 13-14).
Legal Issues
- Was the anti-assignment clause in the structured settlement agreement and annuity policy enforceable under contract law?
- Did the annuity payments fall under the exclusions of the pre-2001 version of Article 9 of the UCC as either tort claims or insurance policy interests?
- Could equitable estoppel prevent the enforcement of the anti-assignment clause?
Disposition
- The Court of Appeals reversed the trial court's summary judgment in favor of Settlement Funding and remanded the case for entry of summary judgment in favor of the plaintiffs on the enforceability of the anti-assignment clause (paras 30-31).
Reasons
Per Castillo J. (Alarid and Pickard JJ. concurring):
Applicability of the UCC: The Court held that the pre-2001 version of Article 9 of the UCC applied, as the case was initiated before the amendments took effect. Under this version, the annuity payments were excluded from Article 9 as they arose from a tort claim and were tied to an insurance policy (paras 12-25).
- The payments were deemed to "arise out of tort" because they were proceeds from a medical malpractice settlement. Allowing their assignment would undermine the intent of the UCC's exclusion for tort claims (paras 16-23).
- The annuity was also considered an insurance policy under New Mexico law, further exempting it from Article 9 (paras 25-26).
Enforceability of the Anti-Assignment Clause: The anti-assignment clause was clear and unambiguous, reflecting the parties' intent to prohibit assignment. The Court upheld the clause under traditional contract law principles, emphasizing its role in protecting the plaintiff's financial security (paras 26-27).
Equitable Estoppel: The Court rejected Settlement Funding's argument for equitable estoppel, finding no evidence of false representation or concealment by the plaintiffs. Settlement Funding was aware of the anti-assignment clause and attempted to circumvent it (para 28).
Public Policy: The Court highlighted the strong public policy against allowing unrestricted assignment of structured settlement payments, particularly when anti-assignment clauses are included to protect vulnerable individuals. This policy was later codified in New Mexico's Structured Settlement Protection Act (paras 22-23).