Texas Lottery Commission v. First State Bank of DeQueen

325 S.W.3d 628, 54 Tex. Sup. Ct. J. 17, 2010 Tex. LEXIS 690, 2010 WL 3818297
CourtTexas Supreme Court
DecidedOctober 1, 2010
Docket08-0523
StatusPublished
Cited by586 cases

This text of 325 S.W.3d 628 (Texas Lottery Commission v. First State Bank of DeQueen) is published on Counsel Stack Legal Research, covering Texas Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Texas Lottery Commission v. First State Bank of DeQueen, 325 S.W.3d 628, 54 Tex. Sup. Ct. J. 17, 2010 Tex. LEXIS 690, 2010 WL 3818297 (Tex. 2010).

Opinion

Justice JOHNSON

delivered the opinion of the Court.

This case arises because provisions of the Texas Uniform Commercial Code (UCC) and the Texas Lottery Act conflict as to whether installment payments of a lottery prize are assignable. The primary issues are whether the Commission has sovereign immunity from suit and whether the Lottery Act’s prohibition against transferring the last two installments of a prize are negated by the UCC.

Cletius Irvan, a Texas Lottery prizewinner, assigned his final two annual installment prize payments as part of a financial arrangement by which he was to pay a bank debt. The Lottery Commission refused to recognize the assignment because the Lottery Act prohibits assignments of installment payments due within the final two years of the prize payment schedule. Irvan and other parties to the assignment sought a declaratory judgment that the UCC permits such assignments and specifically renders conflicting provisions of the Lottery Act ineffective. The trial court and court of appeals held that the UCC prevailed and the assignments were permitted. We agree and affirm the court of appeals’ judgment.

I. Background

A. The Statutory Conflict

When the Lottery Act was first enacted, lottery prizes generally could not be assigned, and to the extent they could be assigned, the assignment had to be pursuant to an “appropriate judicial order” that resolved a controversy involving the prize winner. See Act of Aug. 12, 1991, 72nd Leg., 1st C.S., ch. 6, § 2, 1991 Tex. Gen. Laws 197, 218 (current version at Tex. Gov’t Code § 466.406). In 1999, the Act was amended and restrictions on assignment of prizes were relaxed. Act of May 30, 1999, 76th Leg., R.S., ch. 1394, §§ 2, 4, 1999 Tex. Gen. Laws 4717, 4717-18. The amended provisions authorized prize winners to assign all but the last two installment prize payments if certain requirements were met. 1 Tex. Gov’t Code § 466.410(a). Under the amended Act, however, “prize payments due within the *632 final two years of the prize payment schedule may not be assigned.” Id.

The apparent statutory conflict in this case arises because thirteen days before amending the Lottery Act in 1999 the Legislature amended the UCC and included “winnings in a lottery or other game of chance operated or sponsored by a state” as part of the definition of “account.” Act of May 17, 1999, 76th Leg., R.S., ch. 414, § 1.01, 1999 Tex. Gen. Laws 2639, 2640 (codified at TEX. BUS. & COM. CODE § 9.102(a)(2)(viii)). Under the UCC, accounts are assignable. See Tex. Bus. & Com.Code § 9.406(a). The UCC amendments, however, did not parallel the Lottery Act amendments that prohibited assignment of the last two installment payments of a lottery prize. To the contrary, the UCC reinforced the assignable character of accounts by specifying that rules of law, statutes and regulations purporting to prohibit or restrict assignment of accounts are ineffective:

[A] rule of law, statute, or regulation that prohibits, restricts, or requires the consent of a government, governmental body or official, or account debtor to the assignment or transfer of, or creation of a security interest in, an account or chattel paper is ineffective to the extent that the rule of law, statute, or regulation:
(1) prohibits, restricts, or requires the consent of the government, governmental body or official, or account debtor to the assignment or transfer of, or the creation, attachment, perfection, or enforcement of a security interest in, the account or chattel paper. ...

Id. § 9.406(f). The amendments to the UCC were effective in 2001. In 2001, section 9.406(f) was amended in part and reenacted; the provisions making conflicting statutes ineffective were not changed by the amendment. See Act of May 17, 2001, 77th Leg, R.S. ch. 705, § 11, 2001 Tex. Gen. Laws 1403, 1405 (codified at TEX. BUS. & COM. CODE § 9.406(f)).

B. Facts

Cletius Irvan won a Texas Lottery prize in 1995. The prize was payable in twenty annual installments of just over $440,000 each, with the final two payments to be made in 2013 and 2014. After the Legislature amended the Act so prize payments could be assigned, Irvan assigned his rights to all but the last two of his prize payments in exchange for a lump sum. 2 He later became indebted to First State Bank of DeQueen (FSB DeQueen). Arrangements were made in 2006 for Irvan to pay the debt through a common-law Composition of Creditors proceeding in Arkansas. The creditors’ arrangement provided for Irvan to assign the rights to his final two annual lottery payments to Stone Street Capital, which would in turn assign the rights to Great-West Life and Annuity. In consideration for assigning his rights, Irvan was to receive a lump sum of $308,032, out of which he would pay FSB DeQueen. The arrangement was approved by an Arkansas court. FSB De-Queen notified the Lottery Commission of the assignment and filed an application in Travis County to register the Arkansas judgment approving the arrangement. See Tex. Civ. Prac. & Rem.Code § 35.003. The Commission advised FSB DeQueen and Irvan that it did not recognize the validity of the Arkansas judgment and it intended to make the final prize payments to Irvan.

*633 FSB DeQueen, Irvan, and Stone Street Capital (collectively, FSB) filed suit pursuant to the Declaratory Judgments Act (DJA) seeking declaratory and injunctive relief. See id. §§ 37.001-011. Specifically, FSB sought declaratory judgment that (1) the final Arkansas order is effective as a Travis County judgment, (2) Section 9.406(c) of the UCC renders Lottery Act sections 466.406 and 466.410 ineffective, (3) the assignments of the final prize payments from Irvan to Stone Street and from Stone Street to Great-West are enforceable, and alternatively, (4) the Arkansas Final Order is an “appropriate judicial order pursuant to which the Commission shall make the final prize payments to Great-West.” See Tex. Gov’t Code § 466.406(f) (“A prize to which a winner is otherwise entitled may be paid to any person under an appropriate judicial order.”). FSB also requested the court to enjoin the Commission and to require it to make the final lottery payments to Great-West.

FSB moved for partial summary judgment on its claim that the UCC renders the anti-assignment provisions of the Lottery Act ineffective. The trial court granted the motion and declared that UCC sections 9.406 and 9.102 render Lottery Act sections 466.406 and 466.410 ineffective to the extent those sections purport to restrict or prohibit assignment of prize payments. At the parties’ request, the trial court severed the UCC claim and the Commission appealed the summary judgment. The court of appeals affirmed. 254 S.W.3d 677.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

State v. Paul Reed Harper
Texas Supreme Court, 2018
Facility Insurance Corporation v. Patients Medical Center
574 S.W.3d 436 (Court of Appeals of Texas, 2018)
JCB, Incorporated v. Horsburgh & Scott Company
912 F.3d 238 (Fifth Circuit, 2018)
Nikolas Zane Goodson v. State
Court of Appeals of Texas, 2018

Cite This Page — Counsel Stack

Bluebook (online)
325 S.W.3d 628, 54 Tex. Sup. Ct. J. 17, 2010 Tex. LEXIS 690, 2010 WL 3818297, Counsel Stack Legal Research, https://law.counselstack.com/opinion/texas-lottery-commission-v-first-state-bank-of-dequeen-tex-2010.