In re Acubens, L.L.C. , 116 N.E.3d 793 ( 2018 )

[Cite as In re Acubens, L.L.C., 2018-Ohio-2607.]
IN THE COURT OF APPEALS OF OHIO
TENTH APPELLATE DISTRICT
In re: :
Acubens, LLC, No. 17AP-870
: (Prob. No. 582975)
Transferee-Appellant.
: (ACCELERATED CALENDAR)
In re: :
Acubens, LLC, No. 17AP-877
: (Prob. No. 582985)
Transferee-Appellant.
: (ACCELERATED CALENDAR)
In re: :
Acubens, LLC, No. 17AP-906
: (Prob. No. 582983)
Transferee-Appellant.
: (ACCELERATED CALENDAR)
D E C I S I O N
Rendered on June 29, 2018
On brief: Steven W. Mastrantonio, for appellant. Argued:
Steven W. Mastrantonio.
On brief: Michael DeWine, Attorney General, and Charles E.
Febus, for appellee Ohio Lottery Commission. Argued:
Charles E. Febus.
APPEALS from the Franklin County Court of Common Pleas,
Probate Division
DORRIAN, J.
{¶ 1} In this consolidated matter, appellant, Acubens, LLC ("Acubens"), appeals
three judgments of the Franklin County Court of Common Pleas, Probate Division, which
Nos. 17AP-870, 17AP-877, and 17AP-906 2
denied Acubens's three applications to receive transfers of future prize installment
payments from the Ohio Lottery Commission ("Lottery Commission").
I. Facts and Procedural History
{¶ 2} Non-parties, Patrick L. Berry, Sr., Donteze Morris, and Michael Yopko
(collectively referred to as "prize winners"), won prizes in the Ohio lottery. All three prize
winners elected to receive their lottery prize winnings in installment payments over time.
All three prize winners then proceeded over time to sell, assign, or redirect some or all of
their future prize installment payments. In order to do this, title to the future prize
installment payments had to be transferred to the persons or entities receiving the
payments. After the initial transfer by the prize winners, the same Berry, Morris, and Yopko
future prize installment payments were transferred multiple times again. Ultimately, an
agreement was made to transfer the same future prize installment payments to Acubens.
{¶ 3} On January 30, 2017, Acubens filed in the trial court applications for approval
of the transfer of numerous future lottery prize installments payments. The Lottery
Commission intervened, and on July 13, 2017, the Lottery Commission filed a brief
opposing the applications to transfer. On July 14, 2017, Acubens filed a brief in support of
the applications to transfer. On August 10, 2017, the parties filed joint stipulations of fact.
According to the joint stipulations, Acubens entered into a Lottery Receivables Purchase
and Sale Agreement ("the agreement") with two entities, B of I Lottery Receivables LLC I
("B of I") and Travilah Road Titling Trust ("Travilah") (collectively, "the transferors") for
the purpose of transferring future prize installment payments from 32 awards from the
transferors to Acubens.
{¶ 4} According to the joint stipulations, the transferors "acquired the rights to
receive the 32 prize awards from Ohio 'prize winners' as defined in the Ohio Lottery Act."
(Joint Stip. at 1.) The trial court previously granted 20 of 32 applications to transfer. The
Lottery Commission objected to the remaining 121 applications, including the applications
to transfer the future prize installments from the Berry, Morris, and Yopko awards at issue
in the present appeal.
1Regarding the applications not at issue in this appeal, the Lottery Commission agreed that the prize winners
previously sold all their payments and there was no remainder left to sell.
Nos. 17AP-870, 17AP-877, and 17AP-906 3
{¶ 5} The parties agreed that "B of I and Travilah are 'transferors' as defined in R.C.
377[0].10(H) in the [3] transactions presently before the Court." (Joint Stip. at 1.)
{¶ 6} The joint stipulations provided additional details relevant to each of the three
prize winners' awards. Berry previously made three transfers, in addition to the retitling
transfer from the transferors to Acubens at issue in the present appeal. Berry had no
remainder from his award. Yopko previously made three transfers and there was one
"retitling transfer from [B of I] to Acubens on October 26, 2016," in addition to the retitling
transfer from the transferors to Acubens at issue. (Joint Stip. at 2.) Yopko had a remainder
from the original award. Morris previously made three transfers and "[t]here was a retitling
transfer on July 28, 2016," in addition to the proposed retitling transfer from the
transferors to Acubens. (Joint Stip. at 3.) Morris had a remainder from the original award.
{¶ 7} On August 15, 2017, the magistrate filed decisions denying the requests to
transfer the Berry, Morris, and Yopko future prize installment payments. On August 29,
2017, Acubens filed objections to the magistrate's August 15, 2017 decisions. On
November 16, 2017, the trial court filed decisions overruling the objections to the
magistrate's decisions and adopting the magistrate's decisions filed August 15, 2017.
II. Assignment of Error
{¶ 8} Acubens appeals and assigns the following single assignment of error for our
review:
The Trial Court erred as a matter of law when it concluded that
all transfers are subject to the restrictions contained in R.C. §
3770.121.
III. Discussion
{¶ 9} In its assignment of error, Acubens argues the trial court erred in applying
R.C. 3770.121 to bar the transfers at issue. Specifically, Acubens contends the restrictions,
pursuant to R.C. 3770.121, on the number of allowable transfers apply only to "prize
winners" as that term is defined by R.C. 3770.10. The Lottery Commission responds that
R.C. 3770.121, when considered in conjunction with Ohio Adm.Code 3770:1-8-01(B)(5),
applies to bar the transfers.
Nos. 17AP-870, 17AP-877, and 17AP-906 4
A. Applicable Law and Standard of Review
{¶ 10} R.C. Chapter 3770 governs the state lottery, including the Lottery
Commission. R.C. 3770.03(A) vests the Lottery Commission with authority to promulgate
rules regarding subjects delegated to its authority, providing in part:
The state lottery commission shall promulgate rules under
which a statewide lottery may be conducted, which includes,
and since the original enactment of this section has included,
the authority for the commission to operate video lottery
terminal games. * * * The rules shall be promulgated pursuant
to Chapter 119. of the Revised Code, except that instant game
rules shall be promulgated pursuant to section 111.15 of the
Revised Code but are not subject to division (D) of that section.
Subjects covered in these rules shall include, but need not be
limited to, the following:
(1) The type of lottery to be conducted;
(2) The prices of tickets in the lottery;
(3) The number, nature, and value of prize awards, the manner
and frequency of prize drawings, and the manner in which
prizes shall be awarded to holders of winning tickets.
{¶ 11} Generally, "administrative rules do not dictate public policy, but rather
expound upon public policy already established by the General Assembly in the Revised
Code." Chambers v. St. Mary's School, 82 Ohio St. 3d 563, 567 (1998). The purpose of
administrative rulemaking is to facilitate an administrative agency's placing into effect the
public policy embodied in legislation to be administered by the agency. AMOCO Oil Co. v.
Petroleum Underground Storage Tank Release Comp. Bd., 89 Ohio St. 3d 477, 483 (2000).
"Administrative agencies may make only 'subordinate' rules." Chambers at 567, quoting
Belden v. Union Cent. Life Ins. Co., 143 Ohio St. 329, 342-43 (1944).
{¶ 12} Courts generally accord deference to an administrative agency's
interpretation of its own administrative rules. HCMC, Inc. v. Ohio Dept. of Job & Family
Servs., 179 Ohio App. 3d 707, 2008-Ohio-6223, ¶ 24 (10th Dist.). This deference is based
on recognition that "[t]he General Assembly created these administrative bodies to
facilitate certain areas of the law by placing the administration of those areas before boards
or commissions composed of individuals who possess special expertise." Salem v.
Koncelik, 164 Ohio App. 3d 597, 2005-Ohio-5537, ¶ 16 (10th Dist.). See also Chambers at
Nos. 17AP-870, 17AP-877, and 17AP-906 5
567 (stating that "[a]dministrative agencies have the technical expertise to compose
[administrative] rules").
{¶ 13} "Due deference to an administrative agency's interpretation of its own
administrative rules, however, is not unfettered." HCMC at ¶ 25. "If an agency's
interpretation is unreasonable and fails to apply the plain language of a statute or rule, then
an appellate court need not defer to such an unreasonable interpretation." Id. See AMOCO
at 484 ("Rules adopted by administrative agencies are valid and enforceable unless
unreasonable or in conflict with the statutory enactment covering the same subject
matter."). An appellate court exercises plenary review on questions of law. 1609 Gilsey
Invests., Inc. v. Liquor Control Comm., 10th Dist. No. 07AP-1069, 2008-Ohio-2795, ¶ 9,
citing Chirila v. Ohio State Chiropractic Bd., 145 Ohio App. 3d 589, 592 (10th Dist.2001).
B. Analysis
{¶ 14} We begin our analysis by reviewing the statutory text, keeping in mind that
"our paramount concern" in statutory interpretation "is the legislative intent in enacting
the statute." State ex rel. Steele v. Morrissey, 103 Ohio St. 3d 355, 2004-Ohio-4960, ¶ 21,
citing State ex rel. United States Steel Corp. v. Zaleski, 98 Ohio St. 3d 395, 2003-Ohio-1630,
¶ 12. "In determining this intent, we first review the statutory language, reading words and
phrases in context and construing them according to the rules of grammar and common
usage." Id., citing State ex rel. Rose v. Lorain Cty. Bd. of Elections, 90 Ohio St. 3d 229, 231
(2000), and R.C. 1.42.
{¶ 15} R.C. 3770.121 provides:
Any state lottery commission rules allowing lottery prize
awards to be paid in installments also shall allow a prize
winner who is being paid a prize award in that manner to
transfer all or a portion of the remainder of the prize award,
subject to each of the following conditions:
(A) If each transfer is for less than one hundred per cent of the
remainder of the prize award, the remainder of the prize award
for each transfer must be five hundred thousand dollars or
greater at the time of the transfer. If the lottery prize award is a
lifetime prize, for each transfer the remainder of the minimum
guaranteed prize to which the prize winner is entitled must be
five hundred thousand dollars or greater at the time of the
transfer.
Nos. 17AP-870, 17AP-877, and 17AP-906 6
(B) Payments of the prize award transferred shall be subject to
the withholding or deduction of any amounts that are required
to be withheld or deducted under section 3119.80, 3119.81,
3121.02, 3121.03, 3123.06, 3770.071, or 5747.062 of the
Revised Code.
(C) The maximum number of transfers under this section with
respect to any single prize award shall not exceed three unless
a greater number has been specified by the commission in the
rules.
(Emphasis added.)
{¶ 16} R.C. 3770.10, which defines terms as used throughout the section on lottery
awards, provides in pertinent part:
As used in sections 3770.07 and 3770.10 to 3770.14 of the
Revised Code:
(A) "Court of competent jurisdiction" means either the
general division or the probate division of the court of
common pleas of the county in which the prize winner or
transferor resides, or, if the prize winner or transferor is not a
resident of this state, either the general division or the probate
division of the court of common pleas of Franklin county or a
federal court having jurisdiction over the lottery prize award.
***
(D) "Prize winner" means any person that holds the right to
receive all or any part of a lottery prize award as a result of
being any of the following:
(1) A person who is a claimant under division (A) of section
3770.07 of the Revised Code;
(2) A person who is entitled to a prize award and who is under
a legal disability as described in division (B) of section
3770.07 of the Revised Code;
(3) A person who was awarded a prize award to which another
has claimed title by a federal bankruptcy court order or other
court order referred to in division (D) of section 3770.07 of the
Revised Code;
Nos. 17AP-870, 17AP-877, and 17AP-906 7
(4) A person who is receiving payments upon the death of a
prize winner as provided in division (D) of section 3770.07 of
the Revised Code.
(E) "Transfer" means any form of sale, assignment, or
redirection of payment of all or any part of a lottery prize
award for consideration.
(F) "Transfer agreement" means an agreement that is
complete and valid, and that provides for the transfer of all or
any part of a lottery prize award from a transferor to a
transferee.
***
(G) "Transferee" means a party acquiring or proposing to
acquire all or any part of a lottery prize award through a
transfer.
(H) "Transferor" means either a prize winner or a transferee
in an earlier transfer whose interest is acquired by or is sought
to be acquired by a transferee or a new transferee through a
transfer.
Thus, the term "transferor" as defined by R.C. 3770.10 includes both prize winners and
transferees in a prior transfer agreement between either a prize winner or another
transferee. For purposes of illustration, a prize winner could enter into a transfer agreement
with a transferee. That same transferee could then, as a transferor, enter into a transfer
agreement with another transferee, including one without any relationship to the prize
winner in the original transfer agreement. Such is the case here, as Acubens seeks to acquire
the interest of the transferors who were transferees in earlier transfer agreements.
{¶ 17} Finally, Ohio Adm.Code 3770:1-8-01(B)(5) provides: "Partial assignments
and/or transfers of lottery prize awards are governed by section 3770.121 of the Revised
Code."
{¶ 18} Regarding the Berry, Morris, and Yopko future prize installment payments,
the trial court found the proposed transfers were "forbidden * * * pursuant to R.C.
3770.121." (Nov. 16, 2017 Decisions at 11.) The trial court acknowledged Acubens's
argument stating that "Acubens draws a distinction between prize winner and transferor
and rightly so, the difference exists." (Nov. 16, 2017 Decisions at 8.) The court found,
Nos. 17AP-870, 17AP-877, and 17AP-906 8
however, that "[t]his definitional distinction relied upon by Acubens to justify the law not
being applicable to them is nothing more than a red herring designed to confuse the issue
in this case." (Nov. 16, 2017 Decisions at 8.) Instead, the court stated that "[t]he real issue
in this matter is whether the applicable statutes intended for prize winners to be treated
differently from transferors for purposes of whether a transfer is appropriate and for
purposes of the 3 transfer restriction." (Nov. 16, 2017 Decisions at 8.)
{¶ 19} In resolving this question, the court relied on Ohio Adm.Code 3770:1-8-
01(B)(5) and R.C. 3770.121. The court found that, although R.C. 3770.121 was
"unambiguous," the Lottery Commission's interpretation of its regulations "makes it clear
that all transfers of lottery prizes are governed by R.C. 3770.121 and not just transfers by
prize winners." (Nov. 16, 2017 Decisions at 8.) Further, the court stated "[t]his court
believes that the legislature did not anticipate treating the two differently for purposes of
transfer." (Nov. 16, 2017 Decisions at 8.) The trial court supported its conclusion by stating
that "[a]n interpretation that holds that all transfers of lottery prizes are governed by R.C.
3770.121 is consistent with the spirit of the law and the restrictions placed on transfer which
were designed to prevent an undue burden upon the [Lottery Commission] in dealing with
transfers." (Nov. 16, 2017 Decisions at 9.) As a result, the court found the transfers were
"forbidden" as "fourth * * * transfer[s] pursuant to R.C. 3770.121(C)." (Nov. 16, 2017
Decisions at 11.)
{¶ 20} Finally, the court held regarding the transfers related to the Morris and
Berry's awards, "even if th[e] proposed transfer[s] would be allowable under R.C.
3770.121(C), the transfer in question would be improper pursuant to R.C. 3770.121(A)
because [Morris and Berry's] account[s] lack[] the minimum amount of $500,000 required
for transfer."2 (Nov. 16, 2017 Decisions at 11.)
{¶ 21} Here, as stipulated by the parties, the transferors before us are not prize
winners but, rather, " 'transferors' as defined in R.C. 377[0].10(H)." (Joint Stip. at 1.) The
General Assembly's decision to define "prize winner" and "transferor" separately in R.C.
3770.10 demonstrates its intent for there to be a distinction between the two terms in the
statutory sections to which they apply. This distinction is evident, for example, in R.C.
2The trial court did not provide this justification in the case related to Yopko's award, as it found, consistent
with the stipulated facts, that Yopko had a "remainder of [greater than $500,000] to sell." (Nov. 16, 2017
Decisions at 4.)
Nos. 17AP-870, 17AP-877, and 17AP-906 9
3770.12, which provides conditions for the approval of a lottery prize award "[i]f the
transferor is a prize winner." R.C. 3770.12(A) and (B). This example illustrates that, while
all prize winners can be transferors, not all transferors need be prize winners.
{¶ 22} R.C. 3770.121, the statutory provision relied on by the Lottery Commission
and trial court to deny the transfers at issue, states that "[a]ny state lottery commission
rules allowing lottery prize awards to be paid in installments also shall allow a prize winner
who is being paid a prize award in that manner to transfer all or a portion of the remainder
of the prize award, subject to each of the following conditions." (Emphasis added.) Thus,
the plain language of R.C. 3770.121 only regulates transfers by prize winners, as that term
is defined in R.C. 3770.10, not transfers by transferees, now transferors, in an earlier
transfer. Hoffman v. State Med. Bd., 113 Ohio St. 3d 376, 2007-Ohio-2201, ¶ 26, quoting
R.C. 1.42 (stating that " '[w]ords * * * that have acquired a technical or particular meaning,
whether by legislative definition or otherwise, shall be construed accordingly' ").
{¶ 23} The Lottery Commission nonetheless argues that Ohio Adm.Code 3770:1-8-
01(B)(5) makes it clear that R.C. 3770.121 is intended to apply to any transferor. As
previously noted, Ohio Adm.Code 3770:1-8-01(B)(5) provides: "Partial assignments and/or
transfers of lottery prize awards are governed by section 3770.121 of the Revised Code."
Although we defer to the Lottery Commission's interpretation of its rules, such deference
does not extend to the plain language of the statute.
{¶ 24} The Lottery Commission's interpretation of R.C. 3770.121 would essentially
amend the statute's use of the term "prize winner" to "transferor." However, administrative
agencies may not add to or subtract from a legislative enactment. Teamsters Local Union
No. 348 v. Cuyahoga Falls Clerk of Court, 10th Dist. No. 10AP-728, 2011-Ohio-2416, ¶ 22
(invalidating administrative agency's statutory interpretation that added a requirement to
statute). See also Vargas v. State Med. Bd. of Ohio, 10th Dist. No. 11AP-872, 2012-Ohio-
2735, ¶ 13, citing Cent. Ohio Joint Vocational School Dist. Bd. of Edn. v. Ohio Bur. of Emp.
Servs., 21 Ohio St. 3d 5, 10 (1986); Wymsylo v. Bartec, Inc., 132 Ohio St. 3d 167, 2012-Ohio-
2187, ¶ 39; AMOCO at 484 (finding that "administrative rule cannot add or subtract from
the legislative enactment"). Similarly, were we to accept the Lottery Commission's
interpretation of "prize winner" to include all transferors, the separate definition of prize
winner in R.C. 3770.10 would be rendered mere surplusage as applied to R.C. 3770.121. See
Nos. 17AP-870, 17AP-877, and 17AP-906 10
also D.A.B.E., Inc. v. Toledo-Lucas Cty. Bd. of Health, 96 Ohio St. 3d 250, 2002-Ohio-4172,
¶ 26 (stating "[a] basic rule of statutory construction requires that 'words in statutes should
not be construed to be redundant, nor should any words be ignored,' " so that "[n]o part
should be treated as superfluous unless that is manifestly required"); Perrysburg Twp. v.
Rossford, 103 Ohio St. 3d 79, 2004-Ohio-4362, ¶ 7 (avoiding interpreting a statute as
containing "surplusage" and instead giving "effect to the words used"); Huntington Natl.
Bank v. 199 S. Fifth St. Co., LLC, 10th Dist. No. 10AP-1082, 2011-Ohio-3707, ¶ 18; State v.
Ryan, 8th Dist. No. 98005, 2012-Ohio-5070, ¶ 15 (noting that courts avoid statutory
interpretations that render statutory language surplusage). Had the General Assembly
intended for the restrictions on transfers in R.C. 3770.121 to apply to all transferors, instead
of only prize winners, it clearly knew how to do so.
{¶ 25} The Lottery Commission's interpretation of R.C. 3770.121 also leads to
absurd or unreasonable results. If R.C. 3770.121 applies to all transferors as suggested by
the Lottery Commission, a prize winner could be limited to only one transfer, despite
otherwise complying with the provisions of R.C. 3770.121. For example, a prize winner
could transfer a portion of his or her award to a transferee. That same transferee could then
as a transferor complete two additional transfers of the award. Thus, even if the prize
winner is not a party to any subsequent transfers and otherwise in compliance with R.C.
3770.121(A), the prize winner would be prevented by R.C. 3770.121(C) from making
additional transfers of the remainder of his or her award. Such a result is incongruous with
the intention of the General Assembly as expressed in the plain language of R.C. 3770.121
and would create confusion and uncertainty on the part of prize winners regarding their
ability to make subsequent transfers. R.C. 1.47(C). See also State v. Cabrales, 118 Ohio
St.3d 54, 2008-Ohio-1625, ¶ 20 (stating that courts "must avoid statutory interpretations
that create absurd or unreasonable results" and "should also avoid interpretations that
create confusion or uncertainty"); Burroughs v. Ohio Dept. of Adm. Servs., 10th Dist. No.
12AP-522, 2013-Ohio-3261, ¶ 32.
{¶ 26} Moreover, according to the stipulated facts, two prize awards previously
approved by a court had already been transferred for a fourth time in 2016. The Lottery
Commission does not offer an explanation for those transfers consistent with its
interpretation of Ohio Adm.Code 3770:1-8-01(B)(5) and R.C. 3770.121. As such, it is
Nos. 17AP-870, 17AP-877, and 17AP-906 11
unclear whether the Lottery Commission has changed its interpretation subsequent to
those transfers.
{¶ 27} In conclusion, we find that, based on the plain language of R.C. 3770.121 in
conjunction with R.C. 3770.10, the trial court erred in barring the transfers at issue. HCMC
at ¶ 25. See also Guethlein v. Ohio State Liquor Control Comm., 10th Dist. No. 05AP-888,
2006-Ohio-1525, ¶ 24. Accordingly, we sustain Acubens's assignment of error.
IV. Conclusion
{¶ 28} Having sustained Acubens's single assignment of error, we reverse the
judgments of the Franklin County Court of Common Pleas, Probate Division, and remand
these matters to that court for further proceedings consistent with law and this decision.
Judgments reversed;
cause remanded.
BROWN, P.J., and BRUNNER, J., concur.