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Singer Asset Finance Co. v. CGU Life Insurance Company of America6/10/2002
We granted a writ of certiorari in CGU Life Ins. Co. v. Singer Asset Finance Co., 250 Ga. App. 516 (553 SE2d 8) (2001), a case of first impression, to determine whether a tax-preferred structured settlement agreement can preclude the assignment of future payments. The answer in this case is "yes."
CGU Life Insurance Company of America entered into structured settlement agreements with Christopher and Jonathan Revill. Pursuant to the agreements, CGU was to make future periodic payments, in addition to an initial lump sum payment, to each Revill brother. The agreements contain a clause which states that future payments could not be accelerated, deferred, increased or decreased . . . nor shall [the Revill brothers] have the power to sell or mortgage or encumber same, or any part thereof, by assignment or otherwise.
The agreements also provided that CGU could make a "qualified assignment" of its obligation to make future payments within the meaning of Section 130 (c) of the Internal Revenue Code. Pursuant to that provision, CGU assigned its liability for all future payments to CGU Annuity Service Corporation, and that entity purchased an annuity to fund the periodic payments.
Thereafter, in exchange for a lump sum payment, the Revill brothers assigned their right to receive some of their future payments to Singer Asset Finance Company. When CGU learned of that transaction, it brought suit against Singer and the Revill brothers to have the assignment of future payments declared unenforceable; Singer and the Revills counterclaimed seeking a declaration that the assignment was valid.
On cross-motions for summary judgment, the trial court upheld the validity of the assignment. The Court of Appeals reversed, holding that the structured settlement agreement precluded the assignment of future payments by the Revills to Singer. We granted a writ of certiorari to review the opinion of the Court of Appeals. We conclude that the Court of Appeals was correct in that the non-assignment language of the structured settlement agreement prohibits the assignment of future payments by the Revills. Accordingly, we affirm.
1. In Mail Concepts v. Foote & Davies, 200 Ga. App. 778 (409 SE2d 567) (1991), the Court of Appeals held that a non-assignment clause in a contract for services and labor was unenforceable. In so holding, the court observed that, with the exception of contracts requiring peculiar skills or services which are inherently not assignable:
once a party to the contract performs its obligations thereunder so that the contract is no longer executory, its right to enforce the other party's liability under the contract may be assigned without the other party's consent even if the contract contains a non-assignment clause. Id. at 781.
We reject Singer's assertion that Mail Concepts controls the outcome of this case. Unlike the assignment in Mail Concepts, the assignment in this case will materially reduce the value of the contract. See Grieve v. General American Life Ins., 58 FSupp2d 319, 322 (D.Vt. 1999). By this we mean that, although contracts are generally assignable in this state even when they contain a non-assignment clause, Mail Concepts, supra, they should not be assigned when that clause was inserted to protect a party from a material reduction in the value of the contract. See Restatement 2d, Contracts, ยง 317 (2) (a). Here, as we shall see, the non-assignment clause was contained in a structured settlement agreement, and the assignment of future payments under that agreement would materially reduce its value to CGU.
2. A structured settlement is
a type of settlement designed to provide certain t
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