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TEXAS COURT OF APPEALS, THIRD
DISTRICT, AT AUSTIN

NO. 03-07-00249-CV

Texas Lottery Commission,
Appellant

v.

First State Bank of DeQueen, Stone
Street Capital, Inc. and Cletius L. Irvan, Appellees

FROM THE DISTRICT
COURT OF TRAVIS COUNTY, 53RD JUDICIAL DISTRICT

NO.
D-1-GN-06-004663, HONORABLE DERWOOD JOHNSON, JUDGE
PRESIDING

O P I N I O N

In 1995, appellee Cletius Irvan won approximately $9 million in the
Texas Lottery, to be paid in annual installments of around $450,000.
Pursuant to an Arkansas court order that has been domesticated in Texas,
Irvan has attempted to sell and assign his right to receive the last two
installment payments, which are due in 2013 and 2014. The lottery act (at
least as interpreted by the Texas Lottery Commission) explicitly prohibits
this assignment, while the Texas UCC not only allows such assignments, but
provides that any state law restricting them is, to that extent, rendered
ineffective. The question presented in this appeal is which statute
controls. Agreeing with the district court that the UCC controls, we
affirm its judgment.

THE STATUTES

Lottery act

Section 466.406 of the government code prohibits the assignment of a
right to receive a Texas Lottery prize "[e]xcept as provided in this
section and Section 466.410." Tex. Gov't Code Ann. § 466.406(a) (West
2004). Section 466.406 provides that (1) prize payments to a deceased
individual prizewinner can be made to his estate; and (2) a winner's prize
can be "paid to any person under an appropriate judicial order."
Id. § 466.406(b)-(c). In section 466.410, the legislature
authorized assignment of the right to receive future installment prize
payments made by the lottery commission if approved by an order of a
Travis County district court. Id. § 466.410(a) (West 2004).
(1) Such an order shall issue if several procedural and
consumer-protection requirements are satisfied. Id. § 466.410(b).
Among other requirements:

•a petition for the order must be filed and a copy served on the
Commission, which is entitled to intervene "to protect the interests of
the commission"

•the assignment must be in writing and, by its terms, made subject
to the laws of this state

•the assignor must provide a sworn and notarized statement that the
assignor is of sound mind and is not acting under duress; has been
advised regarding the assignment by independent legal counsel and "has
had the opportunity to receive independent financial and tax advice
concerning the effects of the assignment; understands that the assignor
will not receive the prize payments . . . for the assigned years";
understands and agrees that the state, the commission, and its personnel
shall have no further liability to make the assigned payments to the
assignor; has been provided a one-page disclosure statement stating, in
boldfaced, 14-point type, the payments being assigned, purchase price,
discount rate, and any fees; and that the assignor was advised of the
right to cancel the transaction within three days of execution

•the court shall make specific findings regarding compliance with
these and other requirements

Id. § 466.410(b), (e).

The assignment right under section 466.410 is subject to an additional
limitation of significance to this case: "installment prize payments due
within the final two years of the prize payment schedule may not be
assigned." Id. § 466.410(a).

UCC

Article 9 of the Texas UCC also addresses the assignability of Texas
Lottery prizes. Under the UCC, "accounts" are expressly made assignable,
see Tex. Bus. & Com. Code Ann. § 9.406(a) (West 2002),
and "account" is defined to include "winnings in a lottery or other game
of chance operated or sponsored by a state, governmental unit of a state,
or person licensed or authorized to operate the game by a state or
governmental unit of a state." Id. § 9.102(a)(2)(viii) (West
Supp. 2007). Furthermore, UCC section 9.406(f) provides, in relevant
part:

a rule of law, statute, or regulation that prohibits, restricts, or
requires consent of a government, governmental body or official, or
account debtor to the assignment or transfer of, 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 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).

PROCEEDINGS BELOW

Appellees Irvan, First State Bank of DeQueen (FSB), and Stone Street
Capital, Inc., filed the underlying action under the Uniform Declaratory
Judgments Act.
(2) They alleged that after Irvan won his Texas Lottery prize in
1995, he became indebted to FSB for approximately $195,000, plus interest,
which he ultimately was unable to pay. Irvan and FSB worked out a
"Composition of Creditors" under Arkansas state law. The Composition of
Creditors provided that, in full satisfaction of his debt, Irvan would pay
to FSB a sum from monies received from the sale of the final two lottery
prize installment payments due in 2013 and 2014.
(3) Irvan was to sell and assign these payments to Stone Street,
which, in turn, would sell and assign the payments to Great-West Life
& Annuity. The proposed plan was filed in Arkansas state court, which
entered a final order approving the Composition of Creditors. The Arkansas
court ordered that Irvan sell and assign the payments to Stone Street and
that Stone Street, in turn, sell and assign the payments to Great-West.
The final order also stated that it constituted "an appropriate judicial
order" under section 466.406(c) of the Texas Government Code and that the
Travis County district court shall grant full faith and credit to its
order. FSB then filed an authenticated copy of the final Arkansas order in
Travis County district court pursuant to the Uniform Enforcement of
Foreign Judgments Act. See Tex. Civ. Prac. & Rem. Code Ann.
§ 35.001-.008 (West 1997 & Supp. 2007).

Appellees further pled that following the filing and entry of the final
order in Travis County, the Commission "advised Plaintiffs that the
Commission does not recognize the validity of the Final Order and intends
to make the . . . Payments to Plaintiff Irvan, in spite of the Final
Order." Appellees alleged that the Commission had contended that Irvan's
assignment was prohibited by sections 466.406 and 466.410 of the
government code. Appellees sought declarations that (1) the final order of
the Arkansas court was, pursuant to the UEFJA, effective as a final order
of the Travis County district court; (2) section 9.406(f) of the Texas UCC
renders ineffective any provision of the Lottery Act that purports to
restrict or prohibit the assignment of lottery winnings; (3) the
assignments were valid transfers and Great-West is the sole and lawful
owner of the right to receive the 2013 and 2014 payments; and (4) in the
alternative, that the final order is "an appropriate judicial order" under
section 466.406(c).
(4)

Soon thereafter, appellees filed a motion for partial summary judgment
on their declaratory-judgment claim that the Texas UCC rendered
ineffective the anti-assignment provisions of the lottery act. The
Commission filed a response and a plea to the jurisdiction, arguing in the
plea that a justiciable controversy existed only as to the
effectiveness of government code 466.410 but not as to 466.406(c).
The district court granted appellees' motion for partial
summary judgment, declaring that "Tex. Bus. & Com. Code §§ 9.406
and 9.102 render ineffective Tex. Gov't Code §§ 466.406 and 466.410
to the extent that Tex. Gov't Code §§ 466.406 and 466.410 purport to
restrict or prohibit the assignment of Texas Lottery prize payments." By
separate order, the court also denied the Commission's plea to the
jurisdiction. Subsequently, by agreed motion, the district court severed
out appellees' UCC claim and rendered a final judgment in
that proceeding based on its partial summary judgment ruling. The
Commission subsequently filed this appeal.
(5)

ANALYSIS

The Commission brings forward three issues on appeal challenging the
district court's judgment that article 9 of the Texas UCC renders
ineffective government code sections 466.406 and 466.410 to the extent
that they purport to restrict assignments of Texas Lottery prizes.
(6) The Commission emphasizes the legislative history of the two
sets of provisions. Prior to 1999, the lottery act had prohibited all
assignments of prizes. During its 76th regular session that year, the
legislature amended section 466.406 to its current form and added section
466.410.
(7) During the same session, the legislature adopted revised
article 9 of the UCC, including the language in sections 9.102 and 9.406
on which appellees rely.
(8) The lottery act amendments were enacted approximately two
weeks after the UCC amendments (May 17 versus May 30). The Commission
urges that the legislature could not have intended to enact regulations
and restrictions on lottery prize assignments in government code sections
466.406 and 466.410 that would be rendered wholly ineffective by
the UCC provisions enacted a few days earlier. See Lexington Ins.
Co. v. Strayhorn, 209 S.W.3d 83, 86 (Tex. 2006) ("We must
presume that the entire statute . . . was intended to be effective.");
Liberty Mut. Ins. Co. v. Garrison Contractors, Inc., 966 S.W.2d
482, 485 (Tex. 1998) ("[W]e do not lightly presume that the Legislature
may have done a useless act."); Tex. Gov't Code Ann. § 311.021(2)
(West 2005) (we presume that "the entire statute is to be effective").
This is especially so, the Commission suggests, because the lottery act
amendments were the sole focus of the bill through which they were
enacted. Relatedly, the Commission argues that the policy goals embodied
in the lottery act provisions--including consumer-protection elements
aimed at preventing "prizewinners [from being] cheated into unfavorable
assignments of their lottery prizes without adequate representation"
(9)--would be thwarted by what it terms "normal commercial
law."

The Commission also invokes the principle that a "more specific"
statutory enactment should be read in harmony with "more general" ones and
that the former should control in the event of a conflict. See
Daughters of Charity Health Servs. of Waco v. Linnstaedter, 226
S.W.3d 409, 411 (Tex. 2007) (giving both statutes effect by treating more
specific one as limited exception to more general one); Tex. Gov't Code
Ann. § 311.026 (West 2005) (if specific and general provision cannot be
harmonized, the "special . . . provision prevails as an exception to the
general provision, unless the general provision is the later enactment and
the manifest intent is that the general provision prevail"). In the
alternative, the Commission relies on the rule that if two statutes
enacted during the same session are irreconcilable, it is the
latter-enacted of the two that controls. Tex. Gov't Code Ann. §
311.025(a)-(b) (West 2005).

Appellees respond that the legislature has explicitly specified the
means of resolving any inconsistency between UCC article 9 and the
anti-assignment provisions of the lottery act--the UCC renders the lottery
act ineffective to the extent it purports to limit assignments of lottery
prizes. See Tex. Bus. & Com. Code Ann. § 9.406(f); see
id. § 9.102(a)(2)(viii). In the alternative,
appellees argue that the UCC provisions were actually the latest
enacted, relying on the legislature's re-enactment of
section 9.406(f) when amending the provision in 2001. See
Act of May 17, 2001, 77th Leg., R.S., ch. 705, § 11, 2001
Tex. Gen. Laws 1403, 1405-24 (codified at Tex. Bus. & Com. Code
Ann. § 9.406(f)); see Tex. Const. art. III, § 36. We agree
with appellees that the UCC provisions control over the lottery act's
assignment restrictions.

Statutory construction presents a question of law that we review de
novo. E.g., State v. Shumake, 199 S.W.3d 279, 284
(Tex. 2006). Our primary objective in statutory construction is to give
effect to the legislature's intent. Id. We seek that intent
"first and foremost" in the statutory text. Lexington Ins. Co.,
209 S.W.3d at 85. We rely on the plain meaning of
the text, unless a different meaning is supplied by legislative
definition or is apparent from context, or unless such a construction
leads to absurd results. City of Rockwall v. Hughes,
246 S.W.3d 621, 625-626, (Tex. 2008) (citing Texas Dep't of
Transp. v. City of Sunset Valley, 146 S.W.3d 637, 642 (Tex.
2004); Taylor v. Firemen's and Policemen's Civil Serv.
Comm'n of City of Lubbock, 616 S.W.2d
187, 189 (Tex. 1981); University of Tex. Sw. Med. Ctr.
v. Loutzenhiser, 140 S.W.3d 351, 356 (Tex. 2004)). "When a
statute's language is clear and unambiguous, it is inappropriate to resort
to rules of construction or extrinsic aids to construe the language."
Id. at 626; see Shumake, 199 S.W.3d at 284 ("If
the statute is clear and unambiguous, we must apply its words according to
their common meaning without resort to rules of construction or extrinsic
aids."); see also Fleming Foods of Tex., Inc. v. Rylander, 6
S.W.3d 278, 286 (Tex. 1999) (even in face of express legislative intent
that recodification be "nonsubstantive," "when . . .
specific provisions of a 'nonsubstantive' codification and the code as a
whole are direct, unambiguous, and cannot be reconciled with prior law,
the codification rather than the prior, repealed statute must be given
effect"). Besides yielding an objective guidepost to the legislature's
intent, reliance on statutory text "ensures that ordinary citizens are
able to 'rely on the plain language . . . to mean what it says.'"
Diversicare Gen. Partner, Inc. v. Rubio, 185 S.W.3d 842, 860
(Tex. 2005) (quoting Fitzgerald v. Advanced Spine Fixation Sys.,
996 S.W.2d 864, 866 (Tex. 1999)).

The parties agree that the UCC and the lottery act are inconsistent
with regard to whether Irvan's assignment is permitted--the UCC provides
that "accounts" (including lottery prizes) are assignable, while the
lottery act prohibits assignments of lottery prizes during the last two
years in which they are to be paid. But unlike the cases involving
overlapping, inconsistent statutes on which the Commission relies, the
legislature has clearly and unambiguously provided a means for
resolving the inconsistency between the lottery act and the UCC. UCC
section 9.406(f) states that:

a rule of law, statute, or regulation that prohibits, restricts, or
requires consent of a government, governmental body or official, or
account debtor to the assignment or transfer of . . . an account
[including state lottery prizes] . . . is ineffective to the extent that
the rule of law, statute, or regulation: . . . 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.

Tex. Bus. & Com. Code Ann. § 9.406(f); see id.
§ 9.102(a)(2)(viii).
(10) We are bound to give this plain language effect "without
resort to rules of construction or extrinsic aids." See Shumake,
199 S.W.3d at 284. That includes resort to the specific-versus-general
statutory-construction principle. If that principle is relevant here,
however, it would require that UCC section 9.406(f)--which specifically
addresses conflicts between article 9 and assignability restrictions under
other Texas law--controls over the general standards of the code
construction act on which the Commission and the dissent rely.
See Tex. Gov't Code Ann. § 311.026(b).
(11)

We recognize that our construction of the UCC renders the assignment
restrictions of government code sections 466.406 and 466.410 entirely
ineffective even though those restrictions were the focus of the 1999
amendments and even though that enactment occurred after the UCC
amendments that session. "It is certainly true that we do not lightly
presume the Legislature may have done a useless act, and will not read
statutory language to be pointless if it is reasonably susceptible of
another construction." Brown v. De La Cruz, 156 S.W.3d 560, 566
(Tex. 2004). But both of these principles, as the Texas Supreme Court has
observed, presume the possibility that the legislature might occasionally
do such a thing. Id. "It is at least theoretically possible that
legislators--like judges or anyone else--may make a mistake." Id.
While we do not lightly presume such occurrences, we are bound to
effectuate the language the legislature has chosen, and that language
leaves no room for a construction other than that the UCC article 9
controls over the assignment restrictions of the lottery act or other
state law. See Fleming Foods, 6 S.W.3d at 286.

The Commission and the dissent urge that our construction thwarts
important legislative policy objectives or "social policies" embodied in
sections 466.406 and 466.410, including protecting the perceived interests
of prize winners. But giving effect to the lottery act's assignment
restrictions at the expense of the UCC would also thwart important
legislative policy objectives. "The UCC, a uniform code, must be
'liberally construed and applied to promote its underlying purposes and
policies' . . . '(1) to simplify, clarify and modernize the law governing
commercial transactions; (2) to permit the continued expansion of
commercial practices through custom, usage and agreement of the parties;
and (3) to make uniform the law among the
various jurisdictions.'" Southwest Bank v. Information
Support Concepts, Inc., 149 S.W.3d
104, 110 (Tex. 2003) (quoting Tex. Bus. & Com. Code
Ann. § 1.103(a)) (emphasis added); see also Tex. Gov't Code
Ann. § 311.028 (West 2005) ("A uniform act included in a code shall be
construed to effect its general purpose to make uniform the law of those
states that enact it."). "Additionally, the UCC is 'carefully integrated
and intended as a uniform codification of permanent character covering an
entire "field" of law, [and] is to be regarded as particularly resistant
to implied repeal.'" Southwest Bank, 149 S.W.3d at 111 (quoting
Tex. Bus. & Com. Code Ann. § 1.104 cmt. 1); see also id.
("'In view of the considered and deliberate manner of preparing and
adopting the UCC, it is obvious that a repeal of any of its provisions is
not to be lightly assumed to have been intended by the legislature.'")
(quoting Lary Lawrence, Lawrence's Anderson on the Uniform Commercial
Code § 1-104:3 (3d ed. 2003)). "Given this express goal, we must be
careful not to interpret any statute that does not explicitly amend or
modify the UCC as doing so impliedly. By adhering to this discipline, we
preserve the UCC's purposes and policies." Id.

The Commission emphasizes that the legislature did not incorporate into
section 9.406 an additional subsection from the model UCC article 9 that
would have specifically enumerated any statutes that were not preempted.
See U.C.C. § 9-406(j) (2000). It also points out that the
legislature did not explicitly provide, as some states have, that article
9 preempts future enactments that do not contain language explicitly
preempting 9-406. See Ala. Code 7-9A-406(j); N.C. Gen. Stat. Ann.
§ 25-9-406(j); Pa. Cons. Stat. Ann. § 9-406(j). Whether the
legislature might have been even more explicit in providing that article 9
of the Texas UCC preempts other laws that purport to restrict assignments
of accounts is beside the point--it remains that the legislature did so
plainly and unambiguously. We also observe that while some states have
included anti-assignment language in their state lottery statutes that
explicitly preempt the UCC, the Texas Legislature did not do so.
See Midland States Life Ins. Co. v. Cardillo, 797
N.E.2d 11, 17-18 (Mass. App. Ct. 2003) (lottery winnings not
assignable where state lottery statute explicitly preempted UCC).

Unless and until the legislature instructs us otherwise, we will apply
the statutes as currently written as authoritatively reflecting its intent
regarding its desired balancing between the policy interests served by the
UCC and those served by the lottery act's assignment restrictions. We hold
that the district court did not err in holding that sections 9.406 and
9.102 of the Texas UCC render ineffective government code sections 466.406
and 466.410 to the extent the latter purport to restrict or prohibit the
assignment of lottery prize payments.

CONCLUSION

We affirm the judgment of the district court.

_____________________________________________

Bob Pemberton, Justice

Before Justices Patterson, Puryear and Pemberton;

Dissenting Opinion by Justice Patterson

Affirmed

Filed: May 16, 2008

1. The Commission has construed the "appropriate
judicial order" referenced in section 466.406(c) to apply only to a court
order that "resolves a bona fide underlying controversy involving the
prize winner, which order shall not include an order issued to enforce or
approve an agreement between a prize winner and any third party, where the
prize winner has agreed to transfer future prize payments to a third party
in exchange for consideration." 16 Tex. Admin. Code § 401.309(b)(2)
(2008). Voluntary assignments, in the Commission's view, are governed
exclusively by section 466.410.

2. See Tex. Civ. Prac. & Rem. Code Ann. §
37.001-.011 (West 1997 & Supp. 2007).

3. Apparently Irvan had previously assigned his right
to receive prior installment payments.

4. Appellees also sought mandatory injunctive relief
compelling the Commission to make the payments to Great-West, as well as
attorney's fees.

5. The Commission also filed an interlocutory appeal
from the district court's order denying its plea to the jurisdiction, but
subsequently dismissed that proceeding. Texas Lottery Comm'n
v. First State Bank of DeQueen, No. 03-07-00290-CV (Tex.
App.--Austin Aug. 24, 2007), available at
http://www.3rdcoa.courts.state.tx.us/opinions/HTMLOpinion.asp?OpinionID=16178.

6. It briefed but ultimately conceded a fourth issue
challenging appellees' standing.

7. Act of May 30, 1999, 76th Leg., R.S., ch. 1394, §§
2, 4, 1999 Tex. Gen. Laws 4717, 4717-4718.

8. Act of May 17, 1999, 76th Leg., R.S., ch. 414, §
1.01, 1999 Tex. Gen. Laws 2639, 2639-2640, 2697-2698.

9. The Commission also emphasizes other provisions of
section 466.410 that address tax issues, see Tex. Gov't Code Ann.
§ 466.410(i)-(j), and what it characterizes as "uncertainty as to the
proper payee or the risk of double liability against the State." See
id. § 466.410(d), (e), (h).

10. This statutory language is hardly ambiguous, as
the dissent contends, unless one thinks that "A trumps B" is.
See Texas Lottery Comm'n v. First State Bank of DeQueen,
No. 03-07-00249-CV, ___ S.W.3d ___, ___ (Tex. App.--Austin May 16,
2008, no pet. h.) (Patterson, J. dissenting). Based on such a
premise, the dissent dismisses as "largely a fiction here" the principle
that we must be faithful to the plain meaning of this statute. See
id. It is true, as the dissent emphasizes, that our construction of a
statute's text may be informed by such considerations as "the object
sought to be obtained, the circumstances under which the statutes were
enacted, the legislative history, and the consequences of a
particular construction." Tex. Gov't Code Ann. § 311.023 (West 2005);
see Texas Lottery Comm'n, No. 03-07-00249-CV, ___ S.W.3d at
___(Patterson, J. dissenting). This does not mean, however, that
we are free to abandon the statutory text in favor of a contrary
"construction" derived from these factors. Diversicare Gen. Partner,
Inc. v. Rubio, 185 S.W.3d 842, 860 (Tex. 2005), on which the dissent
relies, emphatically rejects that notion:

As we have often explained:

Courts must take statutes as they find them. More than that, they
should be willing to take them as they find them. They should search out
carefully the intendment of a statute, giving full effect to all of its
terms. But they must find its intent in its language, and not elsewhere.
They are not the law-making body. They are not responsible for omissions
in legislation. They are responsible for a true and fair interpretation of
the written law. It must be an interpretation which expresses only the
will of the makers of the law, not forced nor strained, but simply such as
the words of the law in their plain sense fairly sanction and will clearly
sustain.

Straightforward statutory construction ensures that ordinary citizens
are able "to rely on the plain language of a statute to mean what it
says." But when courts "abandon the plain meaning of words, statutory
construction rests upon insecure and obscure foundations at best."

Rubio, 185 S.W.3d at 860 (internal citations omitted).

11. For similar reasons, comment 3 to UCC section
1.103(b), which addresses the UCC's concepts of supplementation and
preemption that govern its general relationship to other
bodies of state law, does not aid the dissent. See Texas
Lottery Comm'n, No. 03-07-00249-CV, ___ S.W.3d at
___(Patterson, J. dissenting); Tex. Bus. & Com. Code Ann. § 1.103(b)
& cmts. 2, 3 (West. Supp. 2007). Here, as we have explained, "other
interpretative principles addressing the interrelationship between
statutes"--i.e., the applicable interpretative principles other than those
set forth in UCC section 1.103(b)--require us to construe UCC section
9.406(f) to mean what it plainly
says.