Bill Text: CA AB1332 | 2013-2014 | Regular Session | Chaptered
Bill Title: California State Lottery: assignment of prize payments.
Sponsorship: Partisan Bill (Republican 1)
Status: (Passed) 2013-09-09 - Chaptered by Secretary of State - Chapter 273, Statutes of 2013. [AB1332 Detail]
Download: California-2013-AB1332-Chaptered.html
BILL NUMBER: AB 1332 CHAPTERED
BILL TEXT
CHAPTER 273
FILED WITH SECRETARY OF STATE SEPTEMBER 9, 2013
APPROVED BY GOVERNOR SEPTEMBER 9, 2013
PASSED THE SENATE AUGUST 26, 2013
PASSED THE ASSEMBLY AUGUST 30, 2013
AMENDED IN SENATE AUGUST 14, 2013
AMENDED IN ASSEMBLY MARCH 21, 2013
INTRODUCED BY Assembly Member Hagman
FEBRUARY 22, 2013
An act to amend Section 8880.325 of the Government Code, relating
to the California State Lottery, and declaring the urgency thereof,
to take effect immediately.
LEGISLATIVE COUNSEL'S DIGEST
AB 1332, Hagman. California State Lottery: assignment of prize
payments.
The California State Lottery Act of 1984, an initiative measure,
authorizes the California State Lottery and provides for its
operation and administration by the California State Lottery
Commission and the Director of the California State Lottery, with
certain limitations. The act prohibits the assignment of the right of
any person to a prize, except that the payment of any lottery prize
may be assigned under specified circumstances, including as
collateral to secure certain loans and for future payments to another
person designated pursuant to an appropriate judicial order of a
California superior court, or a federal court having jurisdiction
over property located in California, if the court makes a specified
determination. The act provides that a prize winner, by entering into
an agreement to assign prize payments, as specified, is deemed to
have waived any statutory period of limitation as to the State of
California enforcing any rights against annual prize payments due
after the last assigned payment is paid or released, if assigned as
collateral, from the lien granted the secured creditor. The act
provides that these assignments of prize payments as collateral to
secure loans or for future payments to another person designated
pursuant to a judicial order, as described above, are not valid or
allowed for the final 3 annual prize payments from the lottery to the
prizewinner.
This bill would instead provide that the assignment of the final 3
annual prize payments is prohibited unless the contract assigning
all or any part of the final 3 annual prize payments is entered into
on or after the effective date of the bill.
The California State Lottery Act of 1984 provides that none of its
provisions may be changed except to further its purpose by a bill
passed by a 2/3 vote of each house of the Legislature and signed by
the Governor.
This bill would declare that its provisions further the purposes
of the act.
This bill would declare that it is to take effect immediately as
an urgency statute.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 8880.325 of the Government Code is amended to
read:
8880.325. The right of any person to a prize shall not be
assignable, except that the payment of any prize may be assigned, in
whole or in part, as provided by Section 8880.326 and this section,
under any of the following circumstances:
(a) An assignment executed by the prizewinner on a form approved
by, and filed with, the commission during the prizewinner's lifetime
in accordance with regulations adopted by the commission, to a trust
that by its terms is revocable, and that is established by the
prizewinner for the benefit of the prizewinner as a beneficiary and
governed by the laws of the state.
(b) An appropriate judicial order appointing a conservator or a
guardian for the protection of the prizewinner, or for adjudicating
rights to, or ownership of, the prize.
(c) An assignment, as collateral, to a person to secure a loan
pursuant to Division 9 (commencing with Section 9101) of the
Commercial Code. The assignment as collateral of the right to receive
payment of a prize shall be subject to all of the following:
(1) All security agreements, rights of the prizewinner, and rights
of the secured creditor shall be determined pursuant to the laws of
the state.
(2) In the event of a default under the loan or security
agreement, the secured creditor's rights shall be limited to
receiving the regular payments made by the lottery, based on the
prizewinner's right to receive a regular prize payment until the
obligation has been paid in full or the prize has been paid in full,
whichever occurs first. Notwithstanding Division 9 (commencing with
Section 9101) of the Commercial Code, the secured creditor shall not
have the right to sell or assign the prizewinner's rights to payments
to itself or to any other person. This section shall not limit the
secured creditor's right to sell, assign, or transfer the obligation
of the debtor and related security interest to a third party.
(3) The prizewinner and secured creditor may agree, and may
jointly instruct the lottery, to directly deposit all prizewinning
payments into an account maintained by the prizewinner at a federally
insured financial institution located within the state. This account
may be subject to the secured creditor's lien. Upon receipt of these
instructions, the lottery shall continue to deposit all payments due
to the prizewinner into the account until the lottery receives
notification from both the secured creditor and the prizewinner that
the payments are to be made to an account maintained at another bank,
or that the secured creditor releases or terminates the security
interest in the prizewinner's payments.
(4) (A) The prizewinner, pursuant to an order of the court
obtained in compliance with subdivision (d), may direct the lottery
to make the prize payments, in whole or in part, directly to the
secured creditor. A direction to the lottery to make a prize payment
to a secured creditor shall not, in itself, constitute an assignment
of the prize payment to the secured creditor.
(B) For purposes of this paragraph and subdivision (d), "assignee"
and "secured creditor" are synonymous, and "assignment" or "prize
payment" means the payment that is directed to be paid to the secured
creditor.
(5) For purposes of perfecting the security interest of the
secured creditor, the right of the prizewinner to receive payments is
deemed to be a contract right that is perfected by the filing of a
financing statement with the office of the Secretary of State.
(6) A copy of the security agreement, an endorsed copy of the
financing statement, and the joint instruction to deposit the
prizewinner's payments directly into an account, if any, at the
financial institution shall be filed with the lottery.
Notwithstanding the security interest granted a creditor, all lottery
payments shall be made payable directly to the prizewinner, except
as follows:
(A) Payments sent directly to the financial institution designated
pursuant to paragraph (3).
(B) In the event of a default under the security agreement or
obligation it secures, payments sent directly to the secured creditor
pursuant to an order of a court of competent jurisdiction
determining that the payments are to be made directly to the secured
creditor.
(7) Upon the termination or release of the security interest, the
secured creditor shall file an endorsed copy of the release or
termination of the security interest with the lottery.
(d) Except as provided in subdivision (k), an assignment of future
payments to another person designated pursuant to an appropriate
judicial order of a California superior court or a federal court
having jurisdiction over property located within California, if the
court determines and states in its order all of the following:
(1) That the prizewinner was represented by independent legal
counsel whose name and State Bar of California number appears as
counsel of record on all pleadings filed in all court proceedings.
The prizewinner's legal counsel shall appear as counsel of record at
any proceedings that are required by the court.
(2) That the prizewinner has represented to the court, either by
sworn testimony if a personal appearance is required by the court, or
by written declaration filed with the court under penalty of
perjury, and that the court has determined these representations to
be true and correct, that the prizewinner (A) has reviewed and
understands the terms and effects of the assignment, (B) understands
that he or she will not receive the prize payments, or portions
thereof, for the years assigned, (C) has entered into the agreement
of his or her own free will without undue influence or duress and not
under the influence of drugs or alcohol, (D) has had an opportunity
to retain independent financial and tax advice, and (E) has been
represented by independent legal counsel, who has advised the
prizewinner of his or her legal rights and obligations under the
assignment.
(3) It shall be the responsibility of the prizewinner to bring to
the attention of the court, either by sworn testimony or by written
declaration submitted under penalty of perjury, the existence or
nonexistence of a current spouse. If married, the prizewinner shall
identify his or her spouse and submit to the court a signed and
notarized statement wherein the spouse consents to the assignment. If
the prizewinner is married, and the notarized statement is not
presented to the court, the court shall determine, to the extent
necessary and as appropriate under applicable law, the ability of the
prizewinner to make the proposed assignment without the spouse's
consent.
(4) The specific prize payment or payments assigned, or any
portion thereof, including the dates and amounts of the payments to
be assigned, the years in which each payment is to begin and end, the
gross amount of the annual payments assigned before taxes, the
prizewinner's name as it appears on the lottery claim form, the full
legal name of the assignor if different than the prizewinner's name
as it appears on the lottery claim form, the assignor's social
security or tax identification number, the assignee's full legal name
and social security or tax identification number, and, if
applicable, the citizenship or resident alien number of the assignee
if a natural person.
(5) Expressly identifies the amount, the date if available, any
nonspouse coowner, claimant, or lienholder, and the interests, liens,
security interests, assignments, or offsets asserted by the state or
other persons against any of the prize payments, including, but not
limited to, those payments that are the subject of the proposed
assignment as those interests, liens, security interests,
assignments, or offsets have been represented to the court by the
prizewinner in a written declaration signed under penalty of perjury
and filed with the court.
(6) That the lottery and the State of California are not parties
to the proceeding, and that the lottery and the state may rely upon
the order in disbursing the prize payments that are the subject of
the order. Further, that upon payment of prize moneys pursuant to an
order of the court, the lottery, the director, the commission, and
the employees of the lottery and the state shall be discharged of all
liability for the prize paid, and these persons and entities shall
have no duty or obligation to any person asserting another interest
in, or right to receive, the prize payment.
(7) That the prizewinner or the proposed assignee has obtained and
filed with the court a notification from the lottery of any liens,
levies, or claims, and from the Controller's office of any offsets,
asserted as of that time against the prizewinner, as reflected in
their respective official records as of the time of the notification.
The date of the notification shall not be more than 20 days prior to
the court hearing, unless extended by the court.
(e) The assignment of the right to receive any prize payment or
payments by the prizewinner pursuant to subdivision (d) shall be
conditioned on the following terms, conditions, and rights, which may
not be waived or modified by the prizewinner:
(1) The payment of moneys to, or on behalf of, the prizewinner by
the assignee, in consideration for the assignment of the prize
payment or payments, shall be made in full prior to the time when,
under the terms of the assignment, the lottery is required to make
the first prize payment to the assignee, or may be made in two
installments, the first being paid prior to the time when, under the
terms of the assignment, the lottery is required to make the first
prize payment to the assignee and the second installment within 11
months thereafter. The second installment shall not be in an amount
that exceeds the first installment. Notwithstanding this paragraph,
any other installment payment schedule is permitted if the
installment obligation relating to the installments is guaranteed by
a financial institution, as defined in paragraph (2) of subdivision
(a) of Section 4981 of the Financial Code, or a brokerage firm that
is a member of the Securities Investor Protection Corporation (SIPC),
as required by the federal Securities Investor Protection Act of
1970 (15 U.S.C. Sec. 78aaa et seq.).
(2) If the prizewinner elects to accept the consideration to be
paid for the assignment in two installments as provided in paragraph
(1), the prizewinner shall have a special lien for the balance of any
payment due, effective without any further action, agreement, or
notice, on any of the prize payments assigned by the prizewinner for
the payment of moneys from the assignee. This lien shall terminate
upon the prizewinner receiving actual payment of the moneys. The
tendering of a check, payment instrument, or recital of payment shall
not constitute actual payment of moneys for the purposes of this
paragraph. Notwithstanding this paragraph, if a prizewinner accepts
an installment obligation guaranteed by a Federal Deposit Insurance
Corporation (FDIC) or SIPC insured entity, then the lien created by
this section shall automatically terminate upon delivery of the
installment obligation.
(3) The Legislature finds and declares that the creation of a
statutory lien in favor of a prizewinner is necessary to protect the
rights of the prizewinner from any creditors, subsequent bankruptcy
trustees of the assignee, or from any subsequent assignees when the
prizewinner has not received full payment for the assigned prize
payments.
(f) Prior to the assignment of any prize as provided in
subdivisions (c) and (d), the Controller shall determine whether the
prizewinner owes any obligation that is subject to offset under
Article 2 (commencing with Section 12410) of Chapter 5 of Part 2 of
Division 3, and shall provide written notification of that
determination to the lottery and to the Secretary of State.
(g) If the lottery determines that the court order issued pursuant
to subdivision (d) is complete and correct in all respects, the
lottery shall send the prizewinner and the assignee or assignees
written confirmation of receipt of the court-ordered assignment and
of the lottery's intention to rely on that assignment in making
future payments to the assignee or assignees named in the court
order.
(h) Notwithstanding any other law, by entering into an agreement
to assign any prize payments pursuant to subdivision (c) or (d), a
prizewinner shall be deemed to have waived any statutory period of
limitation as to the State of California enforcing any rights against
annual prize payments due after the last assigned payment is paid or
released, if assigned as collateral, from the lien granted the
secured creditor.
(i) The assignment of prize payments pursuant to either
subdivision (c) or (d) shall not be valid or allowed for the final
three annual prize payments from the lottery to the prizewinner
unless the contract assigning all or any part of the final three
annual prize payments is entered into on or after the effective date
of the act adding this subdivision.
(j) Any loans made to a prizewinner pursuant to this section shall
be exempt from the usury provisions of Article XV of the California
Constitution with respect to an assignment of a lottery prize as
collateral to secure a loan.
(k) (1) Notwithstanding any other provision of this section, a
prizewinner shall not have the right to assign prize payments
pursuant to subdivision (d), or to direct the payment of a prize
pursuant to paragraph (4) of subdivision (c), if either of the
following occurs:
(A) The issuance by the United States Internal Revenue Service
(IRS) of a technical rule letter, revenue ruling, or other public
ruling of the IRS in which the IRS determines that, based upon the
right of assignment provided in subdivision (d), a California lottery
prizewinner who does not assign any prize payments pursuant to
subdivision (d) would be subject to an immediate income tax liability
for the value of the entire prize rather than annual income tax
liability for each installment when paid.
(B) The issuance by a court of competent jurisdiction of a
published decision holding that, based upon the right of assignment
provided in subdivision (d), a California lottery prizewinner who
does not assign any prize payments pursuant to subdivision (d) would
be subject to an immediate income tax liability for the value of the
entire prize rather than annual income tax liability for each
installment when paid.
(2) Upon receipt of a letter or ruling from the IRS or a published
decision of a court of competent jurisdiction, as specified in
paragraph (1), the director shall immediately file a copy of that
letter, ruling, or published decision with the Secretary of State.
Immediately upon the filing by the director of a letter, ruling, or
published decision with the Secretary of State, a prizewinner shall
be ineligible to assign a prize pursuant to subdivision (d), or to
direct the payment of a prize pursuant to paragraph (4) of
subdivision (c).
SEC. 2. The Legislature finds and declares that this act furthers
the purposes of the California State Lottery Act of 1984 enacted by
Proposition 37 at the November 6, 1984, general election.
SEC. 3. This act is an urgency statute necessary for the immediate
preservation of the public peace, health, or safety within the
meaning of Article IV of the Constitution and shall go into immediate
effect. The facts constituting the necessity are:
To ensure the protection of California lottery prizewinners and
the lawful assignment of their prize payments, it is necessary for
this measure to take effect immediately.
