Stone Street Capital, LLC v. California State Lottery CommissionStone Street Capital, LLC v. California State Lottery Commission
Stone Street Capital, LLC (appellant), appeals from a final judgment dismissing its action against the California State Lottery Commission (respondent) after the trial court granted respondent’s motion for judgment on the pleadings. Appellant sought declaratory relief, contending that respondent was required by law to recognize and accommodate an assignment of the last three years of prize winner Linda Foster’s lottery winnings. We reject appellant’s position that certain California Uniform Commercial Code provisions invalidate the California State Lottery Act’s (
CONTENTIONS
Appellant contends that lottery winnings are fully assignable under division 9 of the California Uniform Commercial Code, particularly because the revised definition of “account” in division 9, made operative in 2001, includes “winnings in a lottery or other game of chance.” (Cal. U.
BACKGROUND
1. The Lottery Winnings and Arizona Divorce Proceedings
In May 1996, Linda Foster and her then husband, Dennis Foster, were the winners of a California Lottery jackpot of 20 annual payments of $700,000 payable on or about May 20, 1996, through and including May 20, 2015. The Fosters dissolved their marriage on May 27, 2003, in an action in the Arizona Superior Court, which was amended by a property settlement on November 12, 2003.
On April 14, 2006, Linda Foster entered into a written agreement whereby she sold and assigned to appellant her right, title and interest in the final three jackpot prize payments (assigned payments), payable on May 20, 2013, May
On December 1, 2006, Linda Foster reopened the dissolution proceedings in the Arizona Superior Court to modify the 2003 divorce decree and clarify ownership of the assigned payments. The Mohave County Superior Court, in In re Marriage of Foster (Super. Ct. Mohave County, Ariz., 2006, No. DO 2000-4100), found that it was empowered by Arizona law to grant the relief requested and that the circumstances of the case justified relieving Linda and Dennis Foster from operation of the 2003 property settlement. The Mohave County court then ordered that the Fosters’ property settlement be modified “to allow Petitioner and/or Petitioner and Respondent jointly to transfer all their right, title, and interest to future payments from the California Lottery to a third party in exchange for a current cash payment and to divide and allocate that payment between them as follows: [ft] To Petitioner, Linda Veme Foster: $387,542.02 [ft] To Respondent, Dennis Paul Foster: $141,630.25.”
The Arizona court then directed that “the California Lottery Commission shall transfer all of the Petitioner’s right, title, and interest in [the assigned payments] to the designated Assignee.” The Arizona court ordered that, “notwithstanding
On January 9, 2007, the Sacramento County Superior Court, in
Foster
v.
Foster
(Super. Ct. Sac. County, 2007, No. 07AS00075) (Sacramento judgment), entered the Arizona judgment as a foreign judgment and directed that it be given full faith and credit to the maximum extent allowed under federal and state law.
2
Appellant served respondent with the Sacramento judgment on
2. The Trial Court Proceedings
On March 19, 2007, appellant commenced this action with the filing of a complaint for declaratory relief. On April 19, 2007, respondent demurred to the complaint. Appellant opposed the demurrer, respondent replied, and the matter was set for a hearing on June 6, 2007. At the hearing, the trial court found that the action could likely be resolved on the issues of statutory interpretation submitted by the parties, and decided to treat the demurrer as a motion for judgment on the pleadings. It set a briefing schedule and a new hearing date.
The parties filed supplemental briefs and a hearing was held on August 10, 2007. The court issued a written ruling finding that the clear and unambiguous language of
On September 12, 2007, the trial court entered judgment in favor of respondent. On September 14, 2007, respondent served by mail upon appellant notice of entry of judgment. On September 20, 2007, appellant timely filed its notice of appeal from the judgment.
I. Standard of Review
A
trial court’s judgment on an order granting a motion for judgment on the pleadings is reviewed de novo.
(Gerawan Farming v. Lyons
(2000)
Because we review the trial court’s decision de novo, we do not defer to the trial court’s ruling or reasons for its ruling. Instead, we decide the matter anew.
(Jenkins
v.
T&N PLC
(1996)
II. The Lottery Act Governs the Assignment at Issue
Appellant’s main argument is that California’s Uniform Commercial Code section 9406, subdivision (f) (section 9406(f)) permits Linda Foster to assign her final three lottery payments, notwithstanding specific provisions of the Lottery Act to the contrary.
Section 9406(f) provides that:
“(f) Except as otherwise provided in Sections 9407 and 10303, and subject to subdivisions (h) and (i), 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 does either of the following:
“(1) Prohibits, restricts, or requires the consent of the government, governmental body or official, or account debtor to the assignment or transfer of . . . the account or chattel paper.”
Appellant argues that this prohibition on the legal restriction of assignments applies to lottery winnings because the definition of “account” in division 9 of the California Uniform Commercial Code, made operative in 2001, specifically includes “winnings in a lottery or other game of chance
The relevant Lottery Act provision,
Respondent argues that, if section 9406(f) is determined to supersede the Lottery Act, it is unconstitutional. In enacting the Lottery Act by initiative measure, respondent explains, the people of the State of California declared the Lottery Act could not be amended except to further its purpose of providing funding for education. 5 A reading of section 9406(f) which alters the Lottery Act would constitute an amendment to the Lottery Act. Without a specific Legislative finding that such amendment furthers the purpose of the Lottery Act, respondent argues, such an amendment is unconstitutional.
California law requires that we avoid pronouncing upon the constitutionality of a statute unless such a pronouncement is absolutely necessary. The Supreme Court has explained that “ ‘[i]t is a well-established principle’ ” that courts “ ‘will not decide constitutional questions where other grounds are available and dispositive of the issues of the case.’ ”
(Palermo
v.
Stockton Theatres, Inc.
(1948)
B. The specific provisions of the Lottery Act control over the general provisions of the California Uniform Commercial Code
If two seemingly inconsistent statutes conflict, the court’s role is to harmonize the law.
(People v. Pieters
(1991)
We find that these principles of statutory interpretation apply to the situation before us. The California Uniform Commercial Code provisions cited by appellant are general rules that exist to make various commercial practices uniform. (Cal. U.
In addition, a conclusion that section 9406(f) trumps
In this case, we can resolve the conflict between the statutes in a way that allows both statutes to operate concurrently. Under
Stop Youth Addiction, Inc.
v.
Lucky Stores, Inc., supra,
C. The Legislature did not express a specific intent to override the Lottery Act
Appellant argues that, in enacting section 9406(f), the Legislature contemplated that there may be laws, statutes, or regulations that prohibit the assignment of “accounts” and issued a blanket rule rendering “ineffective” all such laws. Appellant compares section 9406(f) to the Song-Beverly Consumer Warranty Act (
No comparable language exists in the California Uniform Commercial Code specifically declaring that the California Uniform Commercial Code “shall prevail” over the Lottery Act or any other conflicting legislation.
6
Instead, as we have discussed above, the California Uniform Commercial Code merely provides a general rule against statutory prohibitions on the assignment of accounts. The Legislature is presumed to know the law regarding the dominance of specific laws over general laws.
(Loken v. Century 21-Award Properties
(1995)
D. The out-of-state decisions cited by appellant are not persuasive
Appellant asks that we take note that “courts in the states of Texas, Kentucky, Missouri, and Indiana each have entered judgments finding that the provisions of the UCC invalidate prior statutory restraints on the assignment of lottery prizes.”
8
We are not persuaded by these judgments. Appellant provides no analysis equating the laws at issue in those states with the California laws in question; nor does appellant provide any analysis showing that those states follow the same rules of statutory construction as we follow in California. The Texas order consists of three sentences, with no analysis or background. The Kentucky court found that the Uniform Commercial Code impliedly repealed the state lottery act because the Uniform Commercial Code was enacted later in time. As set forth above, the rule in California is that a specific statute controls over a general statute, regardless of which statute was passed earlier.
(People
v.
Gilbert, supra,
Appellant discusses in detail the Massachusetts decision
Midland States Life Insurance Co.
v.
Cardillo
(2003)
The Massachusetts Legislature’s decision to specifically exempt its prohibition on assignment of lottery proceeds from article 9 does not change the outcome here. The California Legislature did not need to create an exemption because, as discussed above, the law of California provides that a specific statute, such as
Appellant puts great emphasis on the principle of statutory interpretation which provides that when two acts governing the same subject matter cannot be reconciled, the later-enacted statute will prevail over the earlier-enacted statute. 10
In support of its position that this principle alone should guide us, appellant cites several cases. None supports appellant’s contention that the timing of the enactment of the statutes is determinative in this matter.
The first case cited by appellant is
Fuentes v. Workers’ Comp. Appeals Bd.
(1976)
Next, appellant discusses in detail the decision in
Directors Guild of America
v.
Harmony Pictures
(C.D.Cal. 1998)
None of the other cases cited by appellant persuades us that we should resort to the question of timing in this matter. (See
L.A. Police Protective League v. City of L.A.
(1994)
The cases discussed above all support our finding that the California Uniform Commercial Code can and should be harmonized with
m. The Lottery Act Does Not Permit Assignment Under These Circumstances
We have found that
Appellant first argues that
On appeal from a judgment on the pleadings, the court assumes the truth of, and liberally construes, all properly pleaded factual allegations in the complaint. (Gerawan Farming v. Lyons, supra, 24 Cal.4th at pp. 515-516.) Appellant’s complaint alleges that Linda Foster and Dennis Foster dissolved their marriage on May 27, 2003, and that their property settlement was finalized on November 12, 2003. The complaint further alleges that “On April 14, 2006, Stone Street and Linda Foster entered into a written Sale Agreement for Lottery Prize Payments.” Subsequently, Linda Foster petitioned the Arizona court to reopen die dissolution proceedings, and the Arizona court complied on December 1, 2006. Thus, the complaint alleges a voluntary assignment agreement, entered into without a court order, over two years after the 2003 marital settlement was finalized and over six months before the dissolution proceedings were reopened.
We therefore find that appellant’s position that the assignment was an involuntary assignment, made “in the context” of a marital dispute, is belied by appellant’s own allegations and judicially noticed facts regarding the Arizona judgment. However, we note that appellant did object at the hearing
We need not address the alleged “factual question” of whether or not the assignment was a voluntary assignment under
We reiterate that
If statutory language is not ambiguous, we presume that the Legislature meant what it said and apply the plain meaning of the statute.
(In re Marquez
(2003)
Appellant asks that we read the statute to permit assignments made pursuant to “an appropriate judicial order . . . adjudicating rights to, or ownership of, the prize.” This interpretation would require us to ignore the word “for” the second time it is used. The word “for,” used in the final clause of the subdivision, ensures that we read the statute as describing the two purposes for which the conservator or guardian may properly have been appointed: first,
for
the protection of the prizewinner; or second,
for
adjudicating rights to, or ownership of, the prize. We may not “broaden or narrow
Further, appellant’s argument that this interpretation results in an absurdity because “[a] conservator does not adjudicate rights, nor does a guardian” is not well taken. A guardian or conservator may properly be appointed in order to represent a prizewinner in a judicial or administrative proceeding in the event that the prizewinner is incompetent to represent his or her own interests. (See, e.g.,
Finally, appellant claims that “as a matter of practice, the Lottery has consistently interpreted the appropriate court order language to refer to judicial orders made in disputes over ownership rights to lottery prizes.” Respondent concedes that such regulations were contradictory to the statute’s plain language and exceeded respondent’s authority.
(Helene Curtis v. Assessment Appeals Bd.
(1999)
The judgment is affirmed. Appellant shall pay the costs of appeal.
Boren, P. J., and Ashmann-Gerst, J., concurred.
Notes
The agreement was between Linda Foster and Stone Street Capital, Inc. On March 1, 2007, Stone Street Capital, Inc., assigned to appellant all of its assets and liabilities, including the assets and liabilities from which this dispute has arisen. Both Stone Street Capital, Inc., and appellant are referred to as appellant.
Respondent asked that we take judicial notice of the stipulated judgment filed in
Foster v. Foster, supra,
No. 07AS00075, filed January 9, 2007, which attaches a copy of the Arizona court’s order in
In re the Marriage of Linda Veme Foster and Dennis Paul Foster,
in the
Government Code section 8880.326 governs distribution of prize payments to prizewinners upon the prizewinner’s death.
Respondent has directed us to the legislative history of the Lottery Act for insight into the Legislature’s rationale for severely restricting a prizewinner’s rights to assignment of the prize winnings. Specifically, the Assembly Committee on Governmental Organization made the following observation about the 1994 amendments to the Lottery Act, which added the statutory prohibition on assignment of the final three prize payments: “There are fears that prize winners will be taken advantage of by unscrupulous companies offering an immediate cash payout in exchange for assignment of a prize. Presumably, a court in approving any assignment allowed by this legislation would review the relevant issues of the proposed assignment to determine that the interests of the parties are protected . . . .” (Assem. Com. on Governmental Organization, Concurrence in Senate Amendments, Analysis of Assem. Bill No. 3542 (1993-1994 Reg. Sess.) Sept. 1, 1994, p. 2.) We granted respondent’s request for judicial notice of these amendments and other relevant legislative materials.
The Lottery Act was enacted by an initiative measure, commonly known as Proposition 37, in 1984. Appellant has asked that we take judicial notice of portions of the California ballot pamphlet for the General Election of November 6, 1984. We granted appellant’s request.
Respondent points out that, in contrast to the California Uniform Commercial Code,
Appellant also points out that the California Uniform Commercial Code contains a “no implied repeal provision” (Cal. U.
Appellant directs us to a request for judicial notice filed in the superior court attaching (1) an “Order Granting Partial Summary Judgment in the action entitled First State Bank of Dequeen, et al. v. Texas Lottery Commission, District Court of Travis County, Texas, 53rd Judicial District, Cause No. D-I-GN-06-004663”; (2) “Opinion and Order granting summary judgment in favor of Stone Street Capital, Inc. and denying summary judgment in favor of Kentucky Lottery Corporation et al. in an action entitled Stone Street Capital, Inc. v. Kentucky Lottery Corporation, et al., Jefferson (Kentucky) Circuit Court, Division Five, Case No. 05-CI-05747”; (3) “Judgment and Order in the action entitled Stone Street Capital, Inc., et al. v. Missouri Lottery Commission, et al., Circuit Court in the County of Cole, State of Missouri, Case No. 06AC-CC00969”; and (4) “Agreed Findings and Order in the action entitled Stone Street Capital, Inc., et al. v. Indiana State Lottery Commission, etc., et al., Marion County (Indiana) Superior Court, Cause No. 49D03-0607-PL-030514.” While these orders are not published, appellant cites
Lebrillo,
v.
Farmers Group, Inc.
(2004)
Appellant has advised us of the recent decision of the Court of Appeals of Texas captioned
Texas Lottery Comm’n
v.
First State Bank of DeQueen
(2008)
Respondent argues that because appellant did not raise this argument below, appellant has forfeited its right to make this argument on appeal. However, “a change in theory is permitted on appeal when ‘a question of law only is presented on the facts appearing in the record.’ [Citations.]”
(Ward
v.
Taggart
(1959)
We note that lower federal decisional authority is neither binding nor controlling in matters involving state law.
(Miller v. Collectors Universe, Inc.
(2008)
Appellant also attempts to rely on respondent’s interpretation of former section 8880.32, subdivision (g), which provided that lottery prize payments could be assigned “to a person designated pursuant to an appropriate judicial order.” (See
R & P Capital Res. v. Cal. State Lottery
(1995)