Lemieux v. Tri State Lotto Commission

LEMIEUX_V_TRI_STATE_LOTTO.94-590; 164 Vt 110; 666 A.2d 1170

[Filed 11-Aug-1995]

       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal revision before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of Decisions,
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any errors in order that corrections may be made before this opinion goes
  to press.


                                 No. 94-590


Joseph LeMieux, Jr., et al.                       Supreme Court

                                                  On Appeal from
    v.                                            Washington Superior Court

Tri State Lotto Commission                        March Term, 1995


Alan W. Cheever, J.

       Colin R. Benjamin of Benjamin & Kazmarski, P.C., Newport, and Richard
  H. Saudek of Cheney, Brock, Saudek & Mullett, P.C., Montpelier, for
  plaintiffs-appellants

       Jeffrey L. Amestoy, Attorney General, and Mark J. DiStefano, Assistant
  Attorney General, Montpelier, for defendant-appellee

       M. Jerome Diamond and Joshua R. Diamond of Diamond & Associates, P.C.,
  Montpelier, for amici curiae Allen and Bach Investment Co.


  PRESENT:  Gibson, Dooley, Morse and Johnson, JJ., and Bryan, S.J.,
            Specially Assigned


       DOOLEY, J.   Plaintiffs Joseph Lemieux and Singer Freidlander Corp.
  appeal from the Washington Superior Court's grant of summary judgment to
  defendant Tri-State Lotto Commission, holding that defendant does not have
  to honor an assignment of lottery winnings between the plaintiffs. 
  Plaintiffs argue on appeal that a rule promulgated by defendant barring
  assignment of lottery winnings is invalid because it (1) directly
  contravenes the intent of the Legislature, (2) violates the Vermont
  Constitution's separation of powers requirement, and (3) results in an
  improper retroactive application of law.  We conclude that the Legislature
  did not intend to preclude the assignment of lottery prizes with court
  approval, and therefore, reverse and remand.  This disposition renders
  consideration of plaintiffs' other grounds of appeal unnecessary.

       On March 17, 1987, plaintiff Joseph Lemieux of Jay, Maine won an
  aggregate prize in

 

  the Tri-State Megabucks lottery of $373,000.  This lottery is run for
  the three northern New England states and is administered in Vermont.  Per
  its usual payment plan, defendant disbursed the prize to Lemieux through a
  twenty-year annuity to be paid in equal, annual installments of $18,650. 
  According to his affidavit, Lemieux originally dedicated the proceeds to
  payments on a new house, but his wife lost her job, and Lemieux ended up
  deep in debt.  On  October 26, 1993, after negotiations through his lawyer,
  Lemieux entered into a written agreement with plaintiff Singer Freidlander
  Corp. assigning to the corporation his entire right, title, and interest in
  the lottery-prize installments for the years 1996-2006 for the sum of
  $80,000.   Plaintiffs sought a declaratory judgment from the Washington
  Superior Court authorizing the assignment agreement between them despite
  defendant's regulation barring such agreements.  The trial court granted
  defendant's motion for summary judgment, and this appeal followed.

       The Tri-State Lotto Compact establishes a lottery game to be
  maintained and operated throughout Maine, New Hampshire, and Vermont.  See
  generally Me. Rev. Stat. Ann. tit. 8, §§ 401-422 (West 1994); N.H. Rev.
  Stat. Ann. § 287-F (1987); 31 V.S.A. §§ 671-678.  The member states enacted
  the legislation to raise additional revenue, see, e.g., 31 V.S.A. § 673,
  and to compete more effectively with the large grand prizes offered in the
  Massachusetts and New York lottery games.  The game is administered by a
  commission comprised of one member from each of the party states, 31 V.S.A.
  § 674(C), and this commission has the power to promulgate the rules and
  regulations that govern the game, including the manner of selecting the
  winning tickets and paying the prizes.  Id. § 674(E)(1)(d).

       The Tri-State Lotto Compact also specifically describes the manner in
  which winners of the game are to be certified and paid.  Id. § 674(L)(1). 
  The legislation states that

         Payment of prizes shall be made . . . to holders of the
         tickets . . . except that payment of any prize drawn may be paid
         to the estate of a deceased prize winner, and except that any
         person pursuant to an appropriate judicial order may be paid the
         prize to which the winner is entitled.

  Id.   By rule, the commission has defined "appropriate judicial order"
  as a court order "in a

 

  proceeding principally based upon an issue other than the assignment
  or conveyance of a lottery prize in which the court makes a
  disposition of the lottery prize as a remedy."  Tri-State Lottery
  Commission Rule 11(d).(FN1)  The issue is whether a court can order defendant
  to pay an assignee of a ticketholder, other than in the circumstances
  authorized by the rule.  Resolution of this issue necessitates that we
  decide whether Rule 11(d) is valid.

       This Court has been traditionally reluctant to substitute our judgment
  for the experience and expertise of an agency.  See In re Agency of Admin.,
  141 Vt. 68, 74, 444 A.2d 1349, 1351 (1982).  Absent a compelling indication
  that an agency has misinterpreted the statute it has been charged to
  execute, we will defer to the agency's judgment.  Id. at 74-75, 444 A.2d at
  1351-52; Vermont Ass'n of Realtors v. State, 156 Vt. 525, 530, 593 A.2d 462, ___ (1991).  Accordingly, we have consistently held that agency
  actions, including the promulgation of rules, enjoy a presumption of
  validity.  Id. at 530, 593 A.2d  at 465.

 

       Despite this deferential standard of review, this Court has never been
  hesitant to intervene if an administrative agency uses its rulemaking power
  to exceed its legislative grant of authority.  Agency of Admin., 141 Vt. at
  75, 444 A.2d  at 1352.  The wide discretion afforded agency actions will not
  stand if this discretion is exercised in an unrestrained manner. State v.
  Auclair, 110 Vt. 147, 163, 4 A.2d 107, 114 (1939); see also Trybulski v.
  Bellows Falls Hydro-Electric Corp., 112 Vt. 1, 7, 20 A.2d 117, 120 (1941)
  (agency has only such powers as are expressly conferred by Legislature). 
  Therefore, an agency rule or regulation that compromises the intent of the
  authorizing statute is void.  In re Club 107, 152 Vt. 320, 322, 566 A.2d 966, 967 (1989); Agency of Admin., 141 Vt. at 74-75, 444 A.2d  at 1351-52.

       In construing a statute, our overall objective is to give effect to
  the intent of the Legislature.  See Massachusetts Mun. Wholesale Elec. Co.
  v. State, 161 Vt. 346, 355, 639 A.2d 995, 1001 (1994).  We look to the
  whole of the statute and every part of it, its subject matter, the effect
  and consequences, and the reason and spirit of the law.  See Winey v.
  William E. Dailey, Inc., 161 Vt. 129, 136, 636 A.2d 744, 749 (1993).  If
  the statute is unambiguous, we look first to the plain, ordinary meaning of
  the statutory language.  See Massachusetts Mun. Wholesale Elec. Co., 161
  Vt. at 355, 639 A.2d  at 1001 .

       At the center of this dispute is the statutory language that allows
  payment to other than a ticketholder pursuant to an "appropriate judicial
  order."  Defendant interprets the statutory language narrowly, so as not to
  undercut a policy of nonassignment of lottery proceeds which it finds in
  the statutory scheme.  It argues, moreover, that its rulemaking power is
  broad enough to allow it to define the term and that we must uphold its
  definition.  Plaintiffs take the other side of these arguments stressing
  that the language does not limit the court's authority to act in a
  proceeding where the purpose is to validate an assignment.

       We concede that the meaning of the statutory language is far from
  plain.  Although the wording appears to require that the judicial order be
  "appropriate," both sides agree that it is the circumstances giving rise to
  the order that must be "appropriate."  See McCabe v. Director

 

  of N.J. Lottery Comm'n, 363 A.2d 387, 388 (N.J. Super. Ct. Ch. Div.
  1976) (identical language in New Jersey statute means that judiciary can
  authorize assignment in "suitable or appropriate circumstances").  We
  conclude, however, that the wording supports plaintiffs' argument.

       The statutory language "appropriate judicial order" is present in
  virtually every lottery statute in the United States.  As defendant points
  out, numerous appellate courts have interpreted this language, usually in
  disputes similar to this one.  In each instance, the court has adopted a
  narrow interpretation of the language, much like that adopted by defendant
  here, or has enforced rules of the lottery agency embodying a narrow
  construction.  See In re Dalton, 146 B.R. 460, 463 (Bankr. D. Ariz. 1992);
  R&P Capital Resources v. California State Lottery, 37 Cal. Rptr. 2d 436,
  440 (Cal. Ct. App. 1995); Walker v. Rogers, 1995 Ill. App. LEXIS 335,
  *15-16 (Ill. App. Ct. 1995); In re La. Lottery Corp. Grand Prize Drawing,
  643 So. 2d 843, 846 (La. Ct. App. 1994); McCabe v. Director of N.J. Lottery
  Comm'n, 363 A.2d  at 390; Lotto Jackpot Won by Marianov, 625 A.2d 637, 640
  (Pa. 1993); Converse v. Lottery Comm'n, 783 P.2d 1116, 1118 (Wash. Ct. App.
  1989); see also Myers v. Ohio State Lottery Comm'n, 517 N.E.2d 1029, 1034
  (Ohio Ct. App. 1986) (language does not permit either voluntary assignment
  or attachment by creditors pursuant to judicial order).

       In each of these cases, however, the statutory scheme contains an
  express statutory prohibition on voluntary assignment.  This is a "clear
  and unambiguous statement of legislative intent."  In re La. Lottery Corp.
  Grand Prize Drawing, 643 So. 2d  at 845.  Thus, if the "appropriate judicial
  order" language were interpreted to allow voluntary assignment in such a
  system, "the exception would swallow the rule of no assignment."  R&P
  Capital Resources, 37 Cal. Rptr. 2d  at 439.  The language can be harmonized
  with the legislative intent by not allowing a judicial order to validate a
  voluntary assignment.  See Walker, 1995 Ill. App. LEXIS at *15.

       The Tri-State Lotto Compact contains no express prohibition on
  voluntary assignment.

 

  Thus, there is no inherent tension in the statutory scheme that
  requires us to narrow the authorization for payment to persons other than
  the ticketholder.  Our statute provides that "any person pursuant to an
  appropriate judicial order may be paid the prize to which the winner is
  entitled."  31 V.S.A. § 674(L)(1) (emphasis added).  The words convey a
  broad power, not a limited one, as defendant urges.  We will apply it
  according to the wording the Legislature chose.  See Robes v. Town of
  Hartford, 161 Vt. 187, 193, 636 A.2d 342, 347 (1993) (we presume that
  Legislature chooses its words "advisedly").

       Defendant argues, however, that 31 V.S.A. § 674(L)(1) requires it to
  pay the ticketholder, 31 V.S.A. § 674(L)(1), and that this requirement
  should be interpreted as a prohibition on assignment.  We do not view the
  payment provision as a prohibition or policy against assignment, but
  instead as a direction on how payment is to be made as long as there is no
  judicial order to the contrary and the prizewinner is not deceased.  As the
  decisions reflect, the statutes are so similar among states that a model
  act exists de facto.  Out of thirty-six jurisdictions with lottery
  statutes, twenty-eight contain prohibitions on voluntary assignment. See
  Walker, 1995 Ill. App. LEXIS at *9.  Given the wide use of lottery
  legislation that specifically bars assignments, it is clear that the Maine,
  New Hampshire, and Vermont legislatures purposefully eliminated this
  language so as to allow for assignments.  See 2B N. Singer, Sutherland
  Statutory Construction § 52.02, at 200 (5th ed. 1992) (changes made in
  statute by legislature of adopting state must have been for purpose of
  avoiding construction developed elsewhere).  As reinforcement of this
  point, we note that Maine's state lottery statute does not permit the
  assignment of prizes, Me. Rev. Stat. Ann. tit. 8 § 378 (West 1994), and
  that Maine was the first of the states to pass the Tri-State Lotto Compact. 
  We infer that the absence of the language prohibiting voluntary assignment
  from the compact was intentional.

       Although we reach the opposite conclusion from other decisions, based
  on the characteristics of our statutory scheme, one part of the rationale
  for some of those decisions requires discussion.  Both the California and
  Pennsylvania courts found reinforcement for their

 

  position in the lack of standards for judicial action in approving an
  assignment.  See R&P Capital Resources, 37 Cal. Rptr. 2d  at 439; Lotto
  Jackpot Won by Marianov, 625 A.2d  at 639-40.  We agree that a standardless
  authorization for judicial action in ex parte proceedings would be an
  unreasonable result and would, in fact, raise separation of power concerns. 
  We can avoid this only by finding some standards in the cryptic term
  "appropriate."

       In an earlier decision, the Washington Superior Court interpreted the
  term as requiring the court to consider traditional equitable issues in
  determining whether to approve an assignment.  Thus, the court reviewed the
  assignment contract to determine whether it "is the result of fraud,
  incapacity, duress, undue influence, or illegality [and] the interests of
  plaintiff have been protected."  Seybolt v. Tri-State Lotto Comm'n,  No.
  S-782-92 WnC, slip op. at 2 (Washington Super. Ct. Feb. 2, 1993).  The
  court approved the assignment because the ticketholder acted on advice of
  a financial advisor and was so elderly that it was unlikely she would
  receive all the installments during her life.  Id., slip op. at 1.  It
  found no evidence of fraud or overreaching.

       Without specifying in advance all of the considerations that will go
  into court review of assignment contracts, we agree that such review must
  be limited according to the necessarily limited role of the judiciary.  As
  in this case, the presence of the Lotto Commission as defendant creates a
  sufficient adversary proceeding for the court to act.  By interpreting the
  statute to avoid an unreasonable or unjust result, we find adequate
  guidance in its language.

       Finally, we must address defendant's argument that it is empowered to
  define "appropriate" by regulation and has done so here.  Defendant points
  to two sections of the compact:

       (E)(1) The commission shall have the power and it shall be its duty
       to operate and administer Tri-State Lotto and to promulgate rules
       and regulations governing the establishment and operation of the
       lotto, including but not limited to the following topics:
       
                          . . .
        (d) the manner of selecting the winning tickets and paying
        the prizes;

 
                               . . .

   31 V.S.A. § 674(E)(1)(d), and

         (L)(3) Prizes may be paid in such manner as the commission may
         direct in its rules and regulations as long as the rules and
         regulations are not inconsistent with this compact.

   31 V.S.A. § 674(L)(3).

       As indicated above, we normally do not interfere with an
  administrative agency's construction of the statute it administers, and we
  presume that administrative rules are valid. Vermont Ass'n of Realtors, 156
  Vt. at 530, 593 A.2d  at 465.  We cannot enforce administrative rules if
  they are inconsistent with the authorizing statute.  We have already found
  an inconsistency between the statute and the Commission's rule because the
  statute imposes no limits on when a transfer of lottery winnings can be
  found appropriate and the rule does impose limits.

       We think, however, there is a more fundamental inconsistency that
  defeats the rule. Under defendant's interpretation of the statute, as
  embodied in Rule 11(d), the court decides to approve a transfer of the
  lottery prize interest, but the Lotto Commission decides when such a
  transfer is appropriate.  We see no authorization for this division of
  power in the statutory language.  Whether we view the words in isolation or
  in context, their import is that the court, not the Commission, decides
  when an order allowing a transfer would be appropriate.

       Moreover, we view the result brought about by the Rule as
  unreasonable.  See Chamberlin v. Vermont Dep't of Taxes, 160 Vt. 578, 580,
  632 A.2d 1103, 1104 (1993) (presume no unjust or unreasonable result was
  intended).  If the Commission can restrict the grounds for court action as
  in Rule 11(d), it can, in effect, take over the approval decision, making
  the court decision perfunctory.  If the Legislature had intended to give
  the Commission such power, it would have left the approval decision to the
  Commission in the first instance.

       Neither of the rulemaking authorizations contained in the statute
  validate a rule that is inconsistent with the Compact language; in fact, §
  674(L)(3) explicitly validates rules only if

 

  "not inconsistent" with the compact.  Despite the presumption of
  validity of administrative rules and the discretion we accord the
  Commission, we conclude that Rule 11(d) is inconsistent with the statute
  and decline to enforce it.

       The trial court granted summary judgment for defendant without
  reaching the merits of whether the assignment should be approved.  Although
  plaintiffs request that we enter summary judgment for them, or direct the
  trial court to do so, we believe this action would be premature. The trial
  court must determine whether the assignment should be approved in this
  case. Reversed and remanded for proceedings not inconsistent with this
  opinion.

                              FOR THE COURT:



                              _______________________________________
                              Associate Justice


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                              Footnotes

FN1.  Regulation 11(d) provides that:
         
         No right of any person is assignable, except that payment of any
         prize may be paid to the estate of a deceased winner, and except
         that any person pursuant to an appropriate judicial order may be
         paid the prize to which the winner is entitled.  An appropriate
         judicial order is defined to be an order of a court of competent
         jurisdiction in a proceeding principally based upon an issue other
         than the assignment or conveyance of a lottery prize in which the
         court makes a disposition of the lottery prize as a remedy.
         Examples of appropriate court orders are, but are not limited to
         the following:
               1)  Domestic relations or divorce orders;
               2)  Orders in bankruptcy proceedings;
               3)  Child support or other support orders;
               4)  Orders in cases alleging personal injury or
                    property damage;
               5)  Orders in garnishment, attachment, or trustee
                    process proceedings; and
               6)  Orders seeking satisfaction of other judicial orders.