Arizona Court of Appeals Division One Holds That a Party With a Contract to Assign a Lottery Price Has No Right to Intervene in a Lottery Prize Assignment Action Under A.R.S. § 5-563 Where Prior Assignee Has Merely a Contingent Interest in the Prize Money.

Wallace Thomas, Jr. won a one million dollar Arizona Lottery prize, and chose to receive it in annual installments.  Thomas then negotiated with Genex Capital Corporation and Woodbridge Structured Funding, LLC to receive a lump sum in exchange for the assignment of his lottery payments.  Thomas signed an assignment agreement with Genex, but then emailed and faxed a cancelation of that agreement on the same day.  The following day Thomas signed another assignment agreement with Woodbridge.  Several days later Genex notified Thomas that it did not accept his cancelation of their contract, and it filed a UCC financing statement with the Arizona Secretary of State in an attempt to perfect a security interest in the lottery prize.  Thomas and Woodbridge then filed an action in court to obtain the approval of the assignment agreement, as required under A.R.S. § 5-563.  That statute provides that a person may assign a lottery prize only after filing an affidavit with the trial court and receiving an appropriate order from the superior court.  Genex sought to intervene in that action, claiming that the assignment was invalid because Thomas had previously assigned his interest in the lottery payments to Genex, and because Thomas omitted from the court that he had previously signed an assignment agreement with Genex.  The trial court denied Genex’s motion to intervene and to set aside the judgment, and Genex appealed.

The court of appeals noted that lottery prizes are assignable only upon court approval, so the Thomas/Genex contract did not establish Genex’s direct interest in the lottery payments.  Additionally, the court held that because Genex gave no value to Thomas in exchange for the assignment, Genex’s security interest did not attach and thus was not enforceable against Thomas or Woodbridge.  Accordingly, the court held that Genex had merely a contingent rather than a direct interest in the lottery payments, in spite of the contract Thomas executed in Genex’s favor, and therefore could not intervene as of right under Arizona Rule of Civil Procedure 24(a).  Furthermore, because Genex did not have a direct interest in the subject matter of the assignment action, the appellate court held that Genex did not have standing to seek to set aside the trial court’s approval of the Thomas/Woodbridge assignment under Arizona Rule of Civil Procedure 60(c).  The court noted that Thomas’s failure to notify the trial court that he had previously signed an assignment agreement with Genex was not a misrepresentation warranting Rule 60 relief.

Judge Orozco authored the opinion, and Chief Judge Johnsen and Judge Winthrop concurred.