                                                                                                                           Opinions of the United
1995 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


8-30-1995

Western United v Hayden
Precedential or Non-Precedential:

Docket 94-3548




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              UNITED STATES COURT OF APPEALS
                  FOR THE THIRD CIRCUIT
                       ____________

                       No. 94-3548
                       ____________

             WESTERN UNITED ASSURANCE COMPANY

                            v.

          DEBRA ANN HAYDEN; DAVID GERARD HAYDEN;
                RELIANCE INSURANCE COMPANY;
          UNITED PACIFIC LIFE INSURANCE COMPANY;

             WESTERN UNITED ASSURANCE COMPANY
                         Appellant
                   ____________________

    ON APPEAL FROM THE UNITED STATES DISTRICT COURT
       FOR THE WESTERN DISTRICT OF PENNSYLVANIA
               (D.C. Civil No. 93-01850)
                  ____________________

                  Argued: March 9, 1995
Before:   HUTCHINSON, ALITO, and SAROKIN, Circuit Judges

            (Opinion Filed: August 30, 1995)
                   ____________________

                GEORGE M. CHEEVER, ESQ. (Argued)
                CATHERINE L. WELSH, ESQ.
                KIRKPATRICK & LOCKHART
                1500 Oliver Building
                Pittsburgh, PA 15222

                Attorneys for Western United
                Life Assurance Company, Appellant

                MARY REITMEYER, ESQ.
                JOSEPH R. LAWRENCE, ESQ. (Argued)
                1310 Allegheny Building
                429 Forbes Avenue
                Pittsburgh, PA 15219

                Attorneys for Debra A. Hayden and
                David G. Hayden, Appellees

                   ____________________



                            1
OPINION OF THE COURT
____________________




         2
ALITO, Circuit Judge:

            This appeal concerns an adversary proceeding filed by

Debra and David Hayden, who are the debtors in a Chapter 13

bankruptcy proceeding.    The subject of the adversary proceeding

is a prior transaction in which Debra Hayden, in return for a

cash payment, purported to assign to Western United Life

Assurance Company her right to receive certain future periodic

payments.   In the adversary proceeding, the Haydens maintained

that these periodic payments belonged to the bankruptcy estate

because Debra Hayden's transaction did not constitute an

effective assignment.    The bankruptcy court agreed and entered

summary judgment in favor of the Haydens.    The district court

affirmed the bankruptcy court's order.    We now reverse and remand

for further proceedings consistent with this opinion.



                                 I.

            In 1984, Debra Hayden sustained injuries as a result of

allegedly negligent medical treatment.    App. 52.   She

subsequently filed a malpractice suit against the treating

physicians, the hospital and their respective liability insurance

company (collectively the "medical defendants").0    Id.




0
The settlement agreement to the malpractice action contains a
provision proscribing the Haydens from publicizing the facts or
terms of the settlement. The Haydens have moved this court to
maintain the confidentiality of this agreement. We will
therefore refer to the defendants only as the medical defendants.

                                 3
          In February 1988, Ms. Hayden settled her suit with the

medical defendants.   Id.   She executed a settlement agreement

that stated:
          For and In Consideration of the sum of three
          hundred ten thousand dollars ($310,000) to me
          paid in hand by [the medical defendants]
          . . . the receipt of which is hereby
          acknowledged,** I, being of lawful age,
          hereby fully and forever release, acquit and
          discharge the said [medical defendants] . . .
          from any and all actions . . . on account of
          any and all known and unknown injuries . . .
          sustained by me . . . as a result of medical
          treatment received by [me] from [the medical
          defendants].

          ** (and the payment of $290,000 to United
          Pacific Life Ins. Co. for the purchase of an
          annuity contract)

Western's Br. at Exhibit 1.   The medical defendants then entered

into a qualified assignment and assumption agreement with

Reliance Insurance Company ("Reliance").   In pertinent part, this

agreement stated:
          Whereas, the Settlement Agreement provides
          for the [defendants] to make certain periodic
          payments to or for the benefit of [Ms.
          Hayden].

          Whereas, the [defendants] desires to assign
          to [Reliance] its liability to make such
          periodic payments pursuant to the conditions
          of Internal Revenue Code [§] 130(c) . . . .

          NOW, THEREFORE, . . . the parties hereto
          agree as follows:

               1. Liabilities Assigned. The
               [defendants] hereby assigns and
               [Reliance] hereby assumes all of the
               [defendants'] liability to make the
               periodic payments to [Ms. Hayden]. . . .

               2. Funding of Periodic Payments.
               [Reliance] may fund the periodic


                                 4
                 payments . . . by purchasing a
                 "qualified funding asset" within the
                 meaning of I.R.C. [§] 130(d), in the
                 form of an annuity contract from United
                 . . . . All rights of ownership and
                 control of such annuity shall be vested
                 in [Reliance]. However, for
                 [Reliance's] convenience, [Reliance]
                 directs United . . . to make the
                 payments to . . . [Ms. Hayden] . . . .

Id. at Exhibit 2.    With funds provided by the medical defendants,

Reliance then purchased a $290,000 annuity from United Pacific

Life Assurance Company ("United").     Western Life Assurance Co. v.
Hayden, No. 93-1850, 94-517, 94-518, at 2 (W.D.Pa. Sept. 20,

1994); App. 53.    The annuity provided for monthly payments of

$2,159.37 for the longer of 30 years or the remainder of Ms.

Hayden's life.    App. 63.   The annuity designated Reliance as the

owner and Ms. Hayden as the payee.     Id. at 60.

           In January 1989, the Haydens were experiencing

financial difficulties.      In re Hayden, No. 92-2261, Adv. No. 92-

0301, at 3 (Bankr. W.D.Pa. Oct. 13, 1993).      To alleviate these

difficulties, the Haydens contacted Donald Bach, who arranged for

at least five loans in various amounts totalling more than

$50,000.   App. 53-54.    In consideration for these loans, the

Haydens agreed to pay back double the amount of the principal in

60 equal monthly payments.      Western at 3.

           Despite these loans, the Haydens continued to

experience financial difficulties.     In re Hayden at 4.   In early

1990, Ms. Hayden asked Bach to consolidate the loans so as to

reduce the monthly payments.     App. 54.   Bach advised Ms. Hayden




                                   5
that although consolidation was not possible, he might be able to

arrange for the purchase of the annuity contract.           Id.

            In July 1990, Bach contacted Western United Life

Assurance Company ("Western") to inquire whether Western had an

interest in purchasing Ms. Hayden's annuity.         Id.    Western

indicated an interest.      On July 24, 1990, Western prepared a

letter from Ms. Hayden addressed to Reliance.         Id.    This letter

stated that Ms. Hayden had entered into an arrangement with

Western and that pursuant to this arrangement she had conveyed

her rights under the settlement agreement, including her right to

receive the monthly annuity payments.         Id. at 77.    The letter

asked Reliance to request that United change the annuity

beneficiary to Western and to send future payments directly to

Western.    Id.

            On August 10, representatives of Reliance and Western

spoke.     Id. at 55.   Reliance informed Western that it would not

honor Ms. Hayden's request.      Id. at 79.    Reliance explained that

it was the owner of the annuity and that Ms. Hayden had no

assignable rights in the policy.       Id.    After subsequent

discussions between Reliance and Western, the two settled on the

following mutually acceptable method of executing the assignment.

Although Reliance insisted that the checks remain payable to Ms.

Hayden, it agreed to honor a request from Ms. Hayden to change

irrevocably the address to which the checks were sent to that of

Western.    Id. at 81.
            In September 1990, the parties executed a series of

documents in an attempt to assign to Western Ms. Hayden's rights


                                   6
to the monthly payments.0   In pertinent part, Ms. Hayden executed

a document entitled "Annuity (Payment) Assignment Agreement." The

document stated:
          FOR VALUE RECEIVED . . . [Debra A.
          Hayden] does hereby assign, transfer, and set
          over to Western . . . all Assignor's right,
          title and interest in and to the periodic
          payments described below together with
          Assignor's existing rights and interest . . .
          in and to the following described annuity
          contract/policy and related release and/or
          settlement agreement . . . .

Western's Br. at Exhibit 5.    The document then identified with

specificity the monthly payments, the annuity contract, and the

settlement agreement.   Ms. Hayden also directed Reliance to have

United irrevocably change the address to which the checks were

sent to that of Western.    Id. at Exhibit 4.   Finally, because the

annuity checks remained payable to Ms. Hayden, she executed an

irrevocable special power of attorney empowering Western to

endorse and cash the checks.   Id. at Exhibit 6.    In return,

Western paid Ms. Hayden $178,395.63, of which $92,420.63 was used

to satisfy the loans.   App. 58; Western at 4.    Pursuant to these
arrangements, the monthly payments were received and deposited by

Western from the end of 1990 until August 1992.    App. 58.

           On May 14, 1992, Debra and David Hayden filed a

voluntary bankruptcy petition under Chapter 13 of the bankruptcy

code.   Western at 5.   Subsequently, the Haydens filed a six-count

adversary complaint against Western, United, and Reliance.0      In
0
 Other documents included beneficiary consents by David Hayden
and by Ms. Hayden's daughter and various option agreements. App.
90-93.
0
 Count I requested a determination of Western's secured status
pursuant to 11 U.S.C. § 506 or an avoidance of a lien pursuant to


                                 7
this complaint, the Haydens alleged that the September 1990

documents executed by Ms. Hayden did not create an effective

assignment.    Thus, the Haydens argued that the annuity checks

were property of the estate and that the court should order

Western to turn over these checks to the estate.     Similarly, the

Haydens maintained that Western was only an unsecured creditor of

the estate for a sum equal to the value of its bargain with Ms.

Hayden less any prepetition annuity checks it received and

cashed.

          The parties moved for summary judgment on the adversary

complaint.    In re Hayden at 1.   The bankruptcy court entered

partial summary judgment in favor of the Haydens.0    Id. at 14.

The court held that the documents executed by Ms. Hayden did not

create an effective assignment and that the monthly annuity

payments were the property of the bankruptcy estate.     Thus, the

court ruled that Western was an unsecured creditor and ordered

Western to surrender the postpetition annuity payments to the

Chapter 13 trustee.    Id.

             The bankruptcy court subsequently confirmed the

Hayden's Chapter 13 plan.     In pertinent part, the plan provided

11 U.S.C. § 522. Count II sought to void, under 11 U.S.C. § 552,
any security interest asserted by Western in the annuity
payments. Count III alleged that Western violated that automatic
stay provisions of 11 U.S.C. § 362. Count IV sought, pursuant to
11 U.S.C. § 542, the turnover of the postpetition annuity
payments received by Western on the ground that they were
property of the bankruptcy estate. Count V maintained that by
receiving the checks Western benefitted from a preference
proscribed by 11 U.S.C. § 547. Finally, Count VI alleged that
Reliance and United, in violation of 11 U.S.C. § 543, disbursed
to Western funds belonging to bankruptcy the estate.
0
 The court made no determination regarding counts III and V.


                                   8
that all monthly annuity payments from the commencement of the

case to the date of consummation would be surrendered to the

trustee for distribution to the creditors.    Western at 5.   For

the first six months after consummation, the Haydens were to

receive the monthly annuity checks, from which $870 would be

given to the trustee for distribution to the creditors.    Id.      The

remaining portion of the annuity checks for this six-month

period, as well as the full amount of all subsequent annuity

checks, was excluded as a payment reasonably necessary for the

support of the debtor under 11 U.S.C. § 522(d)(10)(E).    Thus, the

effect of the bankruptcy court's ruling in the adversary

proceeding and its approval of the plan was that the Haydens

continued to receive the annuity payments while Western received

only a small percentage of the sum it paid to Ms. Hayden for her

purported assignment.

          Western separately appealed to the district court the

bankruptcy court's decisions to grant summary judgment and to

approve the plan.0   The district court affirmed the bankruptcy

court's holding that the documents executed by Ms. Hayden failed

to create an effective assignment.    The district court focused on

Ms. Hayden's rights under the annuity contract.    It explained

that because Ms. Hayden was not the owner of the annuity she did

not possess the legal right to change the designated beneficiary

of the annuity.   Western at 8.   Therefore, the court concluded,

"it is a simple matter to conclude that she could not assign the

0
Western also appealed a third bankruptcy court decision not
relevant to this appeal.


                                  9
right to receive the annuity payments . . . ."     Id.   The district

court also affirmed the bankruptcy court's confirmation of the

plan.   Id. at 10.

            Western then appealed both decisions to this court. The

present appeal concerns only the bankruptcy court's ruling with

respect to the adversary action.0     Western contends that it,

rather than the Haydens' estate, possesses the right to receive

the monthly payments.   Western believes that the district court

improperly focused only on Ms. Hayden's rights under the annuity

contract.   It argues that Ms. Hayden assigned all her rights

under the annuity contract and settlement agreement and that

these rights included the right to receive the monthly annuity

payments.    The Haydens respond by arguing that Ms. Hayden could

not have executed an effective assignment because she did not

have any assignable rights under either document and that even if

she did, Pennsylvania law prevented the assignment of these

rights.0



                                II.

            We exercise plenary review over an appeal from an order

granting summary judgment.    Rosen v. Bezner, 996 F.2d 1527, 1530
(3d Cir. 1993).   We look to Pennsylvania law to determine whether


0
 Western filed two appeals with this court. The present appeal,
No. 94-3548, concerns only the adversary proceeding. Appeal No.
94-3549 challenges the confirmation of the plan. In light of our
holding in the present appeal, we need not, and do not, consider
the merits of appeal No. 94-3549.
0
 Western raised several alternative arguments. In light of our
holding, we need not and do not reach these arguments.

                                 10
the documents executed by Ms. Hayden constituted an effective

assignment.0   Under Pennsylvania law, "when interpreting a

contract a court must determine the intent of the parties and

effect must be given to all provisions in the contract."      Dept.

of Transp. v. Manor Mines, Inc., 565 A.2d 428, 432 (Pa.

1989)(citations omitted).    If a written contract is clear and

unambiguous, then the court construes the contract as a matter of

law by its contents alone.    Id.; Allegheny International v.

Allegheny Ludlum Steel Corp., 40 F.3d 1416, 1424 (3d Cir. 1994).

If, however, the contract is ambiguous, then "in order to

ascertain th[e intention of the parties], the court may consider

the surrounding circumstances, the situation of the parties, the

objects they apparently have in view and the nature of the

subject-matter of the agreement."      International Organization

Master, Mates and Pilots of America, Local No. 2 v. International

Organization Master, Mates and Pilots of America, Inc., 439 A.2d

621, 624 (Pa. 1981).



                                 A.

          We begin our inquiry by considering whether the annuity

assignment agreement executed by Ms. Hayden in September of 1990

created an effective assignment.      According to the language of

that document, Ms. Hayden agreed to "assign, transfer, and set

over to Western . . . all [her] right, title and interest . . .


0
All parties agree that Pennsylvania law governs this case. We
agree. We note that the relevant documents were executed in
Pennsylvania and that the Haydens reside in Pennsylvania.


                                 11
in and to the . . . annuity contract/policy and related release

and/or settlement agreement . . . ."     Western's Br. at Exhibit 5.

We find that this language inescapably and unambiguously

expresses an intent by Ms. Hayden to assign to Western all her

rights under the annuity contract and the settlement agreement.

          The Haydens argue that despite this clear language, the

document is not an assignment.     Rather, they contend that the

document is merely a contract to transfer funds to be received in

the future.     Under the Restatement (Second) of Contracts § 330, a

contract to make a future assignment of a right or to transfer

proceeds to be received in the future is not an assignment.

          Our review of section 330, however, convinces us that

the September 1990 document created an effective assignment.

Section 330 distinguishes between, on the one hand, an obligee's

intention to bind himself contractually to make a future

assignment and, on the other, an intention to make a present

assignment.     See Restatement (Second) of Contracts § 330,

comments a-b.    The former is merely a contract, but the latter is

an assignment.     The test is whether the obligee manifests an

intention to transfer present ownership of the right.     Id.; see
also Melnick v. Pennsylvania Co. for Banking and Trusts, 119 A.2d

825, 826 (Pa. Super. 1956)(in banc)(finding that the statement "I

. . . hereby authorize and empower you . . . to . . . assign" was

not an assignment because "these words indicate[d] no present

intent to transfer or divest oneself from the right to demand

possession of the [subject matter of the agreement]."); Daymut v.
Commonwealth Dept. of Public Welfare, 410 A.2d 1318, 1319 (Pa.


                                  12
Cmwlth 1980)(finding document not to be an assignment because it

did not "indicate a present intent of the obligor to divest

himself of any right to demand possession of [the subject matter

of the agreement].")0

          In the present case, the document executed by Ms.

Hayden used the present tense and stated that Ms. Hayden "does

hereby assign . . . ."   We believe that this language clearly

indicates an intent to make a present assignment.    Thus, we find

that this document was intended to create an effective assignment

and not a contract to make a future assignment.     We conclude,

therefore, that the September 1990 documents executed by Ms.

Hayden created an effective legal assignment of Ms. Hayden's

rights under the annuity contract and settlement agreement.     This

conclusion does not end our inquiry, however, because we must

determine exactly what rights Ms. Hayden was empowered to assign

under these two agreements.   We next turn to this issue.



                                B.

          To determine whether Ms. Hayden had assignable rights

under the annuity contract or the settlement agreement, we must

consider each of these documents.    With respect to the annuity

contract, Western concedes that Ms. Hayden did not have a legally

assignable right under this contract.0   Western's Br. at 15.

0
 Although Pennsylvania courts have not explicitly adopted § 330,
we believe that Melnick and Daymut indicate that Pennsylvania
does follow this section.
0
 Although Western concedes that Ms. Hayden did not have a legally
assignable right, it argues that Ms. Hayden's assignment of her
expectancy interest in the annuity payments is enforceable in

                                13
Western and the Haydens agree that Reliance is the undisputed

owner of the annuity.     Id.   As owner, the annuity contract vests

Reliance with the right to change the payee and to direct the

annuity payments to whomever it desires.      App. 65.    Because Ms.

Hayden did not have an enforceable right to remain as the annuity

payee, Western concedes that she could not assign a right to

receive those payments.    Western's Br. at 15, 27.      Thus, we

consider Ms. Hayden's rights under the settlement agreement.

            Western argues that under the settlement agreement Ms.

Hayden had a legally assignable right to receive the monthly

payments.    Western interprets this agreement as requiring

Reliance, as the medical defendants' assignee, to pay Ms. Hayden

the periodic payments from the annuity or from another source.

Western's Br. at 29.    Because the agreement created a right to

receive the periodic payments, Western argues that Ms. Hayden

could assign this right to receive the payments.

            The Haydens, however, contend that Ms. Hayden had no

assignable rights under the settlement agreement.        Although their

exact interpretation of the settlement agreement is unclear, they

appear to argue that it required only the purchase of an annuity

for the benefit of Ms. Hayden and nothing more.      The Haydens

reject Western's claim that the settlement agreement created a

contractual obligation to make the periodic payments independent

of the purchase of the annuity.      Ms. Hayden, they observe,

released the medical defendants from liability in consideration

equity. Western's Br. at 28. In light of our holding, we need
not and do not consider this issue.


                                   14
of a cash payment and "the payment of $290,000 to United Pacific

Life Ins. Co. for the purchase of an annuity contract . . . ."

Western's Br. at Exhibit 1.     Thus, the Haydens maintain that

because the settlement agreement did not require more than the

purchase of an annuity and because the annuity was purchased, Ms.

Hayden did not have any remaining assignable rights under the

agreement.

             We believe that the language of the settlement

agreement is ambiguous and could support either of these

interpretations.    The ambiguity arises from the fact that the

literal language of the agreement does not define the

relationship between Ms. Hayden and the annuity.     Thus, one can

imply various relationships between them.     We offer a few

illustrative examples:    (1) the medical defendants must purchase

the annuity and assign it to Ms. Hayden; (2) the medical

defendants must purchase the annuity and irrevocably name Ms.

Hayden as payee; (3) the medical defendants must purchase the

annuity and use it as security for their obligation to Ms.

Hayden; or (4) the medical defendants must purchase the annuity

but need not use it even as security for their obligation to Ms.

Hayden.

             Because the language of the settlement agreement is

ambiguous, to determine the intent of the parties we look to the

surrounding circumstances, the situation of the parties, and the

objects they apparently have in view.     International Organization
Master, Mates and Pilots of America, 439 A.2d at 624.     Western

argues that when these factors are considered, it is clear as a


                                  15
matter of law that the medical defendants, Reliance, and Ms.

Hayden intended to enter into a "structured settlement" in

accordance with §§ 104(a)(2) and 130 of the Internal Revenue Code

("I.R.C."), 26 U.S.C. §§ 104(a)(2), 130.      Western further

maintains that a structured settlement would require Ms. Hayden

to retain a right to periodic payments under the settlement

agreement.    Thus, contends Western, the parties to that agreement

intended to vest Ms. Hayden with an assignable right to receive

the payments under the agreement.      We consider each prong of

Western's argument in turn.

             Structured settlements are a type of settlement

designed to provide certain tax advantages.      In a typical

personal injury settlement, a plaintiff who receives a lump-sum

payment may exclude this payment from taxable income under I.R.C.

§ 104(a)(2) (providing that the amount of any damages received on

account of personal injuries or sickness are excludable from

income).     However, any return from the plaintiff's investment of

the lump-sum payment is taxable investment income.      In contrast,

in a structured settlement the claimant receives periodic

payments rather than a lump sum, and all of these payments are

considered damages received on account of personal injuries or

sickness and are thus excludable from income.      Accordingly, a

structured settlement effectively shelters from taxation the

returns from the investment of the lump-sum payment.      See Rev.

Rul. 79-220, 1979-2 C.B. 74.    See also Sen. Rep. No. 97-646, 97th

Cong., 2d Sess. reprinted in 1979 U.S.C.C.A.N. 4580, 4583




                                  16
(explaining that Pub. L. No. 97-473, 96 Stat. 2605, codified Rev.

Rul. 79-220 at 26 U.S.C. § 104(a)(2)).

            A key characteristic of a structured settlement is that

the beneficiary of the settlement must not have actual or

constructive receipt of the economic benefit of the payments.

Rev. Rul. 79-220.     In a structured settlement, the settling

defendant's "purchase of a[n] . . . annuity contract from the

other insurance company [is] merely an investment by [the

settling defendant] to provide a source of funds for [him] to

satisfy [his] obligation to [the plaintiff]."       Id.   The

arrangement is "merely a matter of convenience to the [defendant]

and d[oes] not give the recipient any right in the annuity

itself."   Id.    (emphasis added).     Because the recipient never had

actual or constructive receipt of the lump-sum amount, the

recipient need not include the investment yield on that amount as

taxable income.     Id.   Thus, the exclusion applies to the full

amount of the annuity payments because the full amount is

received as damages on account of personal injuries.        Id.

            Before 1983, the utility of structured settlements was

diminished by the credit risk that the recipient would have to

assume.    William Winslow, Tax Reform Preserves Structured
Settlements, 65 Taxes 22, 24 (1987).       Because the annuity was

merely a matter of convenience and did not give the recipient any

right in the annuity, in the case of the settling defendant's

default the plaintiff could not seek redress from the annuity

issuer.    Id.   This presented a problem if the settling

defendant's general credit risk was high.


                                   17
           Congress addressed this problem by enacting I.R.C.

§130.   See Sen. Rep. No. 97-646, 97th Cong., 2d Sess. reprinted

in 1979 U.S.C.C.A.N. 4580, 4583.     As we detail in subsection C of

this opinion, section 130 allows a tax-neutral transaction in

which the settling defendant assigns and a third party assumes

the obligation to make periodic payments under most section

104(a)(2) structured settlements.     When the third party assignee,

such as Reliance, has a credit rating superior to that of the

settling defendant, such an assignment and assumption agreement

benefits a plaintiff, such as Ms. Hayden, by allowing her to rely

on the assignee's superior credit.     Winslow, supra.

           In the instant case, it is apparent that Ms. Hayden,

the medical defendants and Reliance structured the settlement to

conform with the requirements of sections 104 and 130.     Indeed,

the parties to the present case agree that the assignment and

assumption agreement was designed to "follow[] the road map laid

out in I.R.C. § 130 . . ." and that the annuity was purchased as

part of a structured settlement agreement.     See Hayden's Br. at

19, 28; Western's Br. at 4.   The language of the assignment and

assumption agreement confirms this.0    The agreement expressly
0
Although Ms. Hayden was not a signatory to this the assignment
and assumption agreement, this agreement provides evidence of her
intent in executing the settlement agreement. When construing an
ambiguous contract which by necessary implication refers to
another document, the court may look to such document as
additional evidence in order to ascertain the intention of the
parties. International Organization Master, Mates and Pilots,
439 A.2d at 625. Moreover, as we explain below, under
Pennsylvania law when two or more writings are executed as part
of one transaction they should be construed together. Finally,
we also observe that in the assignment and assumption agreement,
the medical defendants "warrant[ed] that [Ms. Hayden . . .


                                18
stated that it was intended to create an assignment pursuant to

the conditions of section 130.   Moreover, the assignment and

assumption agreement complied with the requirements of a section

104(a)(2) structured settlement. The agreement stated that
          Reliance may fund the periodic payments . . .
          by purchasing a[n] . . . annuity contract
          from United . . . . All rights of ownership
          and control of such annuity shall be vested
          in [Reliance]. However, for [Reliance's]
          convenience, [Reliance] directs United to
          make the payments to . . . [Ms. Hayden]
          . . . .

Western's Br. at Exhibit 2 (emphasis added).   Thus, the agreement

explicitly complied with the Revenue Ruling by stating that the

annuity was merely a convenient method by which Reliance could

fund the obligation and that Reliance, and not Ms. Hayden,

exercised ownership and control over the annuity.

          Our conclusion that the medical defendants, Reliance

and Ms. Hayden intended to enter into a structured settlement

clarifies the scope of Ms. Hayden's rights under the structured

settlement.   As previously explained, under a structured

settlement the obligor has a continuing obligation to pay the

periodic payments to the recipient.   The annuity is merely a

convenient funding mechanism and does not alter this obligation.

Thus, we believe it is clear as a matter of law that under the

settlement agreement the medical defendants had a continuing

obligation to pay Ms. Hayden the monthly payments.



consented to the assumption of [the] obligation as direct
obligation of Reliance . . . and in substitution of the
Assignor." Western's Br. at Exhibit 2. The Haydens do not argue
that Ms. Hayden did not consent to the agreement as warranted.


                                 19
          The Haydens' arguments to the contrary are

contradictory.    While conceding that the parties followed the

"roadmap laid out in I.R.C. § 130" and that the annuity "was

purchased as the most significant part of a very specific

structured settlement agreement," the Haydens argue that the

annuity contract was not merely an accommodation to Reliance and

that Reliance has no obligation to make periodic payments

independent of the annuity.    Hayden's Br. at 19, 28.   The Haydens

argument reveals a misunderstanding of structured settlements. If

the parties intended to structure the transaction pursuant to

I.R.C. §§ 104 and 130, then they must have intended that the

annuity be merely an accommodation and that Reliance have a

general obligation to make the periodic payments.    Furthermore,

the Haydens' interpretation would

render the assignment and assumption agreement meaningless.    If

the sole obligation under the settlement agreement was to

purchase the annuity, there would be no point to inserting

Reliance into the transaction; the medical defendants could have

purchased the annuity themselves and thereby fulfilled all their

obligations.     It is thus apparent that the defendants executed

the assignment because under the settlement agreement they had a

continuing obligation that they wished to assign, namely, the

obligation to make periodic payments.    We conclude, therefore,

that the settlement agreement gave Ms. Hayden a legal right to

receive monthly payments of $2159.37.    We next consider whether

this right was assignable.




                                  20
                                  C.

             A contractual right to receive a future stream of

payments is typically assignable.      E. Allan Farnsworth,

Farnsworth on Contracts §11.2 (1990).      The Haydens argue,

however, that even if the settlement agreement vested Ms. Hayden

with a legal right to receive the monthly payments, this right

was not assignable.     The Haydens support this assertion with two

arguments.

             First, the Haydens argue that the parties to the

structured settlement must have intended impliedly to restrict

the assignment of Ms. Hayden's right to receive the monthly

payments.     They premise this argument on their belief that an

assignment by Ms. Hayden would cause negative tax consequences

for Reliance and that to avoid such a result the parties must

have intended to restrict the assignment of the payments.

According to the Haydens, in order for Reliance to exclude from

income the amount it received for agreeing to the assignment, the

periodic payments it agreed to make must be excludable from the

payee's gross income under section 104(a)(2).     See I.R.C.

§ 130(a),(c)(2)(E).    Thus, they conclude that the agreement must

impliedly restrict assignments because the payments are

excludable only if Ms. Hayden is the payee.

             We consider the operation of section 130 for the

limited purpose of assessing whether the parties intended

impliedly to restrict assignments.      The Internal Revenue Code

defines gross income broadly to include "all income from whatever

source derived . . . ."     I.R.C. § 61.    Under section 130(a),


                                  21
however, an assignee may exclude from gross income "[a]ny amount

received for agreeing to a qualified assignment . . . to the

extent that such amount does not exceed the aggregate cost of a

qualified funding asset."    A qualified assignment is one that

satisfies certain criteria, one of which requires that the

periodic payments assigned must be excludable from the

recipient's gross income under I.R.C. § 104(a)(2).     See I.R.C.

§130(c)(2)(E).    Furthermore, a qualified funding asset is an

annuity contract meeting certain requirements and purchased by

the assignee within 60 days of the assignment.      See I.R.C.

§130(d).

            When an assignee receives an amount for agreeing to a

qualified assignment, the assignee may use that amount to

purchase an annuity that satisfies the criteria of a qualified

funding asset.    I.R.C. § 130(a).    If the assignee does so, the

assignee can exclude the amount used to purchase the annuity from

income.    Because this amount was excluded, the basis of the

annuity is then reduced by that amount.      I.R.C. § 130(b).    In the

future, the income from the annuity is offset, presumably by a

business expense deduction, when these payments are distributed

to the payee.    See C.C.H. Standard Federal Tax Reports ¶ 7383
(1994).    See generally I.R.C. §§ 61, 162.0

0
An example may be helpful. Assume a settling defendant pays a
third party $100,000 for its agreement to assume an obligation to
make periodic payments under a structured settlement. Assume
further that the assignment is a qualified assignment under
I.R.C. § 130(c). If the third party purchases an $95,000
qualified funding asset then it has $5000 of income. The basis
of the annuity is reduced to $0. All future income from the
annuity is taxable income, which presumably is offset by a

                                 22
             In the present case, Reliance presumably exercised its

section 130 exclusion when it assumed the medical defendants'

obligation.    The Haydens would have us conclude that Reliance

would retroactively lose this exclusion if Ms. Hayden assigned

her right to receive the periodic payments under the settlement

agreement.    Thus, they would have us infer that, upon Ms.

Hayden's assignment of the payments, the original cost of the

annuity less the annuity payments already received as income by

Reliance becomes income to Reliance and the basis of the annuity

is increased accordingly.    The Haydens, however, do not cite, and

our research has failed to reveal, any support for this novel

proposition.    We are therefore unpersuaded by the Haydens theory,

and we decline to infer that the settlement agreement was

intended to limit assignment of Ms. Hayden's right to receive the

periodic payments.

             The Haydens present a second reason why they believe

that even if Ms. Hayden had a legal right to receive the monthly

payments, this right was not assignable.    They contend that the

settlement agreement must be read together with the annuity

contract and that a provision of the annuity contract prevents

the assignment of Ms. Haydens' rights under both that contract

and the settlement agreement.

          Under Pennsylvania law,
          when two or more writings are executed at the
          same time and involve the same transaction,
          they should be construed as a whole. If the
          writings pertain to the same transaction, it

business expense. See generally C.C.H. Standard Federal Tax
Reports ¶ 7383.03 (1994).


                                  23
          does not matter that the parties to each
          writing are not the same.

Black v. T.M. Landis, Inc., 421 A.2d 1105, 1107 (Pa. Super.
1980)(citations omitted).    This general rule also applies where

several agreements are made as part of one transaction even

though they are executed at different times.    Neville v. Scott,

127 A.2d 755, 757 (Pa. Super. 1956).

          In the present case, the Haydens maintain that

Pennsylvania law requires the settlement agreement and the

annuity contract to be read together.    Both documents were

executed as part of the structured settlement.    The settlement

agreement specifically referred to the purchase of an annuity

from United.   Although Ms. Hayden was not a party to the annuity

contract, she was the annuitant and the payee of the contract.

Furthermore, the settlement agreement and the annuity contract

were executed within two weeks of each other.    Because Western

agrees with this argument, we will assume that the two documents

should be read together.    See Western's Reply Br. at 4.   Thus, we

turn to consider whether the annuity contract contained a clause

proscribing assignments by Ms. Hayden.

          The Haydens contend that the following clause in the

annuity contract proscribed assignments by Ms. Hayden:
          Protection from Creditors -- The Annuity
          payments will not be subject to the debts,
          contracts or engagements of any person
          entitled to such payments by the terms of the
          Contract. Nor will any such payments be
          subject to any judicial process to levy or
          attach them. This protection is given to the
          extent allowed by law.

Id.



                                 24
            For at least three reasons, we reject the Haydens'

argument.    First, the plain language of the clause refers only to

involuntary attachments.     As the title of the clause implies, the

clause acts to protect the payee from creditors by preventing

them from attaching the annuity payments.    The clause, however,

does not expressly bar a voluntary assignment.    If the parties to

the annuity contract intended to proscribe voluntary assignments,

it would have been simple to add a clause to accomplish that

purpose.    See Bank of New England v. Standlund, 529 N.E. 394, 395

(Ma. 1988)(interpreting clause, which stated: "no income or

principal . . . payable to any beneficiary . . . shall be

attachable, trusteeable or in any manner liable for or to be

taken for any debts, contracts or obligations of . . .

beneficiary," to restrict only involuntary alienation because

there were no "words that indicate[d] . . . [an] inten[t] to

prohibit . . . beneficiaries from voluntarily assigning their

interests in the [trust].")

            Second, other provisions of the contract imply that

this clause does not prevent voluntary assignments.    The annuity

contract explicitly states that "the owner may assign an interest

in th[e annuity] contract."    Western's Br. at Exhibit 3.   The

owner can also be the payee.    If the protection-from-creditors

clause prevents an assignment by "any person entitled to such
payments by the terms of the [c]ontract," then it would prevent

assignments by the owner when the owner was also the person

entitled to such payments.    Thus, reading the protection-from-

creditors clause to bar voluntary assignments would contradict


                                  25
the owner's right to assign an interest in the annuity when the

owner was also a payee.

             Third, even if the annuity contract's protection-from-

creditors clause proscribed the payee from voluntarily assigning

her rights to receive payments under the annuity, this would not

imply that in the instant case it prevents Ms. Hayden from

assigning her rights to receive periodic payments under the

settlement agreement.    Reading the annuity contract and the

settlement agreement as a whole, it is clear that the protection-

from-creditors clause of the annuity applies only to the annuity

payments.    The clause plainly states that it applies to "[t]he

[a]nnuity payments."    We find no evidence to support the

proposition that this clause was intended also to apply to

payments made under the settlement agreement.     Consequently, we

reject the Haydens' argument that Ms. Hayden's right to receive

periodic payments under the settlement agreement was not

assignable.



                                 III.

             For the reasons stated we hold that, as a matter of

law, the documents executed by Ms. Hayden in September 1990

constituted an effective legal assignment to Western of her right

to receive the periodic payments provided for in the settlement

agreement.    Thus, unlike the concurrence, we hold that Western

now has a right to receive the periodic payments from Reliance

and that Ms. Hayden no longer has a right to receive these

payments.    In light of this holding we must reverse the order of


                                  26
the district court in the adversary proceeding.   We need not and

do not consider the additional arguments raised by the parties.

Rather, we remand this case for further proceedings consistent

with this opinion.




                               27
