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TRANSAMERICA INSURANCE CO. v. JUDIE (05/20/77)

COMMONWEALTH COURT OF PENNSYLVANIA


decided: May 20, 1977.

TRANSAMERICA INSURANCE CO.
v.
JUDIE, INC., T/D/B/A JACKIE B'S RESTAURANT, APPELLANT V. BUREAU OF STATE LOTTERIES, DEPARTMENT OF REVENUE, COMMONWEALTH OF PENNSYLVANIA

Appeal from the Order of the Court of Common Pleas of York County in case of Transamerica Insurance Co. v. Judie, Inc., t/d/b/a Jackie B's Restaurant v. Bureau of State Lotteries, Department of Revenue, Commonwealth of Pennsylvania, No. 333 August Term, 1975.

COUNSEL

Gerald E. Ruth, for appellant.

G. Alan Kramer, with him Joseph W. McGuire, Deputy Attorney General, J. Justin Blewitt, Jr., Deputy Attorney General, and Robert P. Kane, Attorney General, for appellee.

President Judge Bowman and Judges Crumlish, Jr., Kramer, Wilkinson, Jr., Mencer, Rogers and Blatt. Opinion by Judge Crumlish, Jr.

Author: Crumlish

[ 30 Pa. Commw. Page 260]

This is an appeal from an order of the common pleas court sustaining the preliminary objections of the additional defendant, the Bureau of State Lotteries (Bureau) and dismissing the action of Judie, Inc., t/d/b/a Jackie B's Restaurant (Appellant), a licensed sales agent of the Bureau.

[ 30 Pa. Commw. Page 261]

Appellant reported the theft of 475 lottery tickets from its place of business in June of 1972. Upon learning of the theft, the Bureau invalidated the stolen tickets, withdrawing them from the forthcoming lottery.

Pursuant to a bond executed between the Commonwealth and Transamerica Insurance Company (Plaintiff), the Commonwealth assigned its right to collect the value of these tickets to Plaintiff. In June of 1975, Plaintiff commenced this action in assumpsit against Appellant in the court of common pleas for $237.50, the purchase price of the 475 tickets. Subsequently, Appellant joined the Bureau in the action, naming it as an additional defendant, and alleging that the Bureau, by invalidating the stolen tickets, illegally precluded Appellant's opportunity of winning the lottery and claimed damages of one million dollars. Judgment by default, entered against the Bureau for $1,000,000, was subsequently stricken by the court below on the basis of procedural irregularities. Subsequently, the preliminary objection of the Bureau asserting the doctrine of sovereign immunity was granted and the action against the Bureau dismissed. This appeal followed.

Appellant contends that the court below erred in its application of the doctrine of sovereign immunity. After reviewing the statutory provisions creating the Bureau and the applicable case law, we hold that the Bureau is an integral part of the Commonwealth. Because of the exclusive jurisdiction of the Board of Arbitration of Claims*fn1 over contractual disputes with the Commonwealth,*fn2 we hold that Appellant's action

[ 30 Pa. Commw. Page 262]

    against the Bureau was improperly brought before the court below.

The Bureau was created by the State Lottery Law (Law).*fn3 Section 4 of the Law*fn4 specifically states that the Bureau is created "within the Department of Revenue." (Emphasis added.) Section 6 of the Law*fn5 places upon the Secretary of Revenue the duty of administering the lottery as well as the responsibility for promulgating rules and regulations governing the operation of the lottery. Licensing of agents is also performed by the Secretary of Revenue.

In Specter v. Commonwealth, 462 Pa. 474, 493, 341 A.2d 481, 490 (1975), cited by Appellant, our Supreme Court stripped the Turnpike Commission of its immunity and stated "that the Commission is separate and apart from the Commonwealth." Unlike the Bureau, the Turnpike Commission itself has been given the power to make "necessary rules and regulations for its own government."*fn6 Under Section 6 of the Law, it is the Secretary of Revenue who has the power to establish the type of lottery to be conducted, the prices of tickets, the prizes to be awarded and the power to regulate the licensing of agents for the sale of tickets.

We have further concluded that the financial independence of the Turnpike Commission from the Commonwealth was the primary factor leading our Supreme Court in Specter, supra, to hold that the Turnpike Commission is independent of the Commonwealth.*fn7 With respect to the Bureau's finances, Section

[ 30 Pa. Commw. Page 26312]

(a) of the Law*fn8 provides that in the event sufficient funds are not available from lottery receipts to meet the Bureau's statutory obligations, additional funds to fulfill these obligations shall be appropriated from the General Fund. In addition, unlike the Turnpike Commission which financed its initial costs of development through the sale of bonds*fn9 not deemed to be a debt of the Commonwealth,*fn10 the Bureau's development was financed by the legislature through an appropriation of one million dollars to the Department of Revenue to be repaid from lottery receipts.*fn11 Clearly, the Bureau does not possess the financial independence of the Turnpike Commission, but rather its economic ties are such as to render it an integral part of the Commonwealth.

We note that an extensive set of regulations has been promulgated governing the entire lottery system including conditions deemed to be agreed upon by the sales agents upon the issuance of licenses.*fn12 Clearly, these agreed upon conditions are in the nature of a contractual agreement between the agents and the Bureau. As we wrote in United Brokers Mortgage Co. v. Fidelity Philadelphia Trust Co., 26 Pa. Commonwealth Ct. 260, 266, 363 A.2d 817, 821 (1976), "claims against the Commonwealth arising from contracts are exclusively within the jurisdiction of the Board of Arbitration of Claims to the extent the Legislature has waived sovereign immunity in creating said Board." Finding Appellant's suit against the Bureau in the nature of a contractual action against the Commonwealth and therefore one which properly lies before

[ 30 Pa. Commw. Page 264]

    the Board, we transfer Appellant's claim to the Board for its consideration. Further, because of our disposition, we need not consider Appellant's second contention, namely, that the court below improperly struck the default judgment entered against the Bureau.

Accordingly, we

Order

And Now, this 20th day of May, 1977, having concluded that jurisdiction over the claim of Judie, Inc., t/d/b/a Jackie B's Restaurant, properly lies in the Board of Arbitration of Claims, this action is hereby transferred to the Board of Arbitration of Claims where said action shall be considered filed as of the date the same was filed in the Court of Common Pleas of York County. The claim of Transamerica Insurance Co. shall continue in the Court of Common Pleas of York County for further proceedings not inconsistent with this opinion.

Disposition

Claim of defendant transferred to the Board of Arbitration of Claims.


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