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Texas Lottery Commission v. FirstStateBank of Dequeen, Stone Street Capital, Inc.

A Texas Lottery prize winner 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, in direct conflict with the Texas Uniform Commercial Code (UCC), prohibits assignments of installment payments due within the final two years of the prize payment schedule. Sections 466.406 and 466.410 of the Texas Lottery Act are ineffective to the extent they restrict or prohibit the prize winner's assignment. Therefore, the trial court and court of appeals were correct in holding that the UCC prevailed and the assignments were permitted. Texas Supreme Court, No. 09-11026, 10-04-2010

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Argued December 16, 2009

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.

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