A number of states have statutes that govern the assignment of lottery prize payments. New Jersey’s, enacted in 1998, contains a provision that says that a lottery winner cannot sell “the last two annual prize payments”. This phrase, argued factoring company BofI Federal Bank in a case decided this month (In re: Petition of BofI Fed. Bank to Assign Lottery Prize Payment Rights, Docket No. A-1694-12T3, 2014 N.J. Super. Lexis 134 (N.J. Super. Ct., App. Div. Oct. 3, 2014)), meant that if the payments were, say quarterly, then they could be assigned. Not so, said the New Jersey appeals court: the phrase meant that any payments made during the last two years of the lottery payment period are covered by this provision and cannot be assigned.
Said the court, rejecting the idea that the word “annual” is unambiguous:
First, we note that the word ‘annual’ could be defined as an adjective that describes an event as occurring once a year, such as an annual report or an annual event, as argued by BofI. However, ‘annual’ is also commonly used as an adjective to describe something calculated over or covering a period of a year. For example, ‘annual income’ and ‘an annual rate of increase.’ In fact, property owners regularly pay their annual real estate taxes in quarterly payments. . . . we agree what the word ‘annual’ is not always limited to payments made only once a year, and therefore not, as BofI argues, a completely unambiguous term.
Because of the ambiguity, the court reviewed the “intent and purpose of the legislation” and found support for the view that “annual” in this context meant any income during the last two-year annual period of the stream of lottery payments – because the legislature’s intent was to ensure that a lottery winner’s child support obligations and debts to the state were paid.
All parties have agreed that one purpose of N.J.S.A. 5:9-13(h) was to promote collection of delinquent child support and debts owed to the State. By prohibiting assignment of the last two years of annual payments, the statute guarantees that if money is owed by the winner for child support, college loans, taxes, or welfare liens, the State will have the opportunity to collect what is owed before the money is gone. If the winner dies before the end of the guaranteed payments . . . the last two years of guaranteed payments will be the last two years of payments from which money owed could be collected. The legislative intention to preserve the last two years of payments for the payment of any outstanding debts incurred by the winner would be defeated if the statute is interpreted to not include that last two years of quarterly payments.
The full BofI opinion is available here.