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Midland States Life Insurance Co. v. Hamideh

Case Date: 12/29/1999
Court: 1st District Appellate
Docket No: 1-98-4617

Midland States Life Insurance Co. v. Hamideh, No. 1-98-4617

1st District, December 29, 1999

Third Division

MIDLAND STATES LIFE INSURANCE CO.,

Plaintiff-Appellant,

v.

ABLA HAMIDEH,

Defendant-Appellee,

and

SAMY HAMMAD,

Third-Party Intervenor-Appellee,

and

ILLINOIS DEPARTMENT OF THE LOTTERY,

Citation Respondent-Appellee.

 Appeal from the Circuit Court of Cook County.

98 L 03303

Honorable Thomas Quinn, Judge Presiding.

JUSTICE WOLFSON delivered the opinion of the court:

The question in this case is whether an Illinois State Lottery winner can pledge as collateral for a loan her right to receive payments of her winnings. In this case of first impression, we hold she cannot. We agree with the trial court that her pledge of lottery payments was an invalid assignment pursuant to Section 13 of the Lottery Law.

FACTS

On August 10, 1996, Abla Hamideh (Hamideh) entered into a loan agreement with Elantra Consulting Co. (Elantra). According to the promissory note, Hamideh received $102,800 in exchange for a promise to pay Elantra four installments of $44,850 ($179,400), with the first installment coming due on November 13, 1997. The note also provided that, on default, the entire principal and interest would be due.

Hamideh was a 1988 Illinois State Lottery winner entitled to receive annual payments of $44,850 each November until the year 2007. As collateral for the loan, Hamideh pledged her right to receive six lottery payments from the Illinois State Lottery. In accord with the loan agreement, Hamideh also sent a letter to the Illinois Department of the Lottery (the Department), directing it to deposit her future lottery installment payments, beginning in November 1997, into a BankFirst bank account in Knoxville, Tennessee, to which Elantra and its assigns had "sole right and power to withdraw funds..." On August 13, 1996, Elantra recorded with the Illinois Secretary of State its U.C.C. financing statement showing the security agreement for the loan.

In September 1996, Elantra assigned its interest in the note and security agreement with Hamideh to Midland States Life Insurance Co. (Midland). Hamideh signed a power of attorney appointing Midland her attorney in connection with the BankFirst bank account, where her lottery winnings were to be sent.

In November 1997, Hamideh defaulted on the loan by failing to pay the first installment. Midland brought suit against Hamideh in the state of Colorado, County of Denver, to recover the entire amount of the note and interest. On March 5, 1998, a default judgment was entered by the Denver court against Hamideh in the amount of $187,019.24, plus 23.4% interest.

On March 19, 1998, Midland registered the Colorado default judgment in Illinois. On April 9, 1998, Midland filed a citation to discover assets with the Department and then, on June 22, 1998, filed a complaint against Hamideh in the circuit court of Cook County seeking turnover of Hamideh's annual lottery payments pursuant to the security agreement on the loan.

On July 22, 1998, the Department, as citation respondent, filed a response to the motion for turnover of Hamideh's lottery funds. The Department asked the court to deny the motion and dismiss the citation. The Department argued the security agreement was a voluntary assignment prohibited by