Corporate Organization & Audit Co. v. Hodges

47 App. D.C. 460, 1918 U.S. App. LEXIS 2446
CourtCourt of Appeals for the D.C. Circuit
DecidedMarch 4, 1918
DocketNo. 3082
StatusPublished

This text of 47 App. D.C. 460 (Corporate Organization & Audit Co. v. Hodges) is published on Counsel Stack Legal Research, covering Court of Appeals for the D.C. Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Corporate Organization & Audit Co. v. Hodges, 47 App. D.C. 460, 1918 U.S. App. LEXIS 2446 (D.C. Cir. 1918).

Opinion

Mr. Chief Justice Smyth

delivered the opinion of the Court:

It is argued that these facts, undisputed, do not disclose a gift enterprise within the meaning of the sections referred to. For the better understanding of these sections, we must refer to legislation which preceded their enactment. In 1871 the legislative assembly of this District passed an act imposing a license on gift enterprises as defined therein, thus recognizing their validity. Two years thereafter, or in -1873, Congress, being dissatisfied with this, enacted secs. 1176 and 1177, aforementioned. They are as follows:

' “Sec. 1176. So much of the act of ’the legislative assembly of the District of Columbia * * * as authorizes gift enterprises therein, and licenses to be issued therefor, is disapproved and repealed, and hereafter it shall be unlawful for any person or persons to engage in said business in any manner as defined in said act or otherwise.

“Sec. 1177. Every person who shall in any manner engage in any gift enterprise business in the District shall, on conviction thereof in the police court, on information filed for and on behalf of the District, pay a fine not exceeding $1,000, or be imprisoned in the District jail not less than one nor more than six months, or both, in the discretion of the court.”

The scope and effect, as well as the constitutionality of these sections, have been before this court and the Supreme Court of the United States. Lansburgh v. District of Columbia, 11 [463]*463App. D. C. 512; Sheedy v. District of Columbia, 19 App. D. C. 280; District of Columbia v. Kraft, 35 App. D. C. 253, 30 L.R.A.(N.S.) 957; District of Columbia v. Gregory, 35 App. D. C. 271; Re Gregory, 219 U. S. 210, 55 L. ed. 184, 31 Sup. Ct. Rep. 143. In each of the cited cases, the sections were upheld as a proper exercise of the police power by Congress in this District.

In the Lamsburgh Case, trading stamps were placed for a consideration in the hands of a limited' number of merchants who distributed them among their customers in proportion to the amount of purchases made. Upon presenting a book containing not less than 990 stamps to the Trading Stamp Company, the customer obtained a prize. Of this he wits certain. Here the Herald Company delivered the “votes” to the merchant, and he- then delivered them to liis customers, who might or might not receive a prize, depending (a) upon whether he was voted for, and (b) if voted for whether lie received a sufficient number of votes. In the Lamsburgh Case there was no necessary chance. If there was any chance, it was accidental. Yet not only the agent of the Trading Stamp Company, but also the merchant, was convicted, and the conviction sustained by this court, after a very careful review of the applicable law. Sheedy, in the case bearing his name, was a merchant who sold packages of cereal each of which contained a letter in red. A purchaser who found among the letters in his packages enough to spell the word “mothers” would, upon proper application, receive a prize from the manufacturer of tlie cereal. Sheedy was condemned. In the case before us, the one who, by the votes cast for him, becomes a winner, was given a prize by the Herald. What difference in principle is there between tbe acts held unlawful in the Sheedy Case, and the scheme pursued by the Herald. Hie Kraft and Gregory Cases were somewhat different from the others in their facts, yet in substance the same, so this court held. All the aforementioned cases decided that the <1 (“fondants were guilty of conducting a gift enterprise, in violation of secs. 1176 and 1177.

Appellant sedes to distinguish those cases from the present one. It first points to the Legislative Act of 1871, which says [464]*464that any “person wlio shall sell or offer for sale any real estate or article of merchandise of any description whatever, or any ticket of admission to any exhibition or performance, * * * with the promise * * * to give or bestow * * * any article or thing,” etc., shall be regarded as conducting “a gift enterprise;” and then to sec. 1170, which declares that “it shall be unlawful for any person or persons to engage in said business in any manner, as defined in said act or otherwise.” Appellant urges that no one can be guilty of conducting a gift enterprise under the statute except in connection with a sale or offer of sale of real estate, articles of merchandise, or tickets of admission to a place of amusement; and then adds that the Herald Company was not ertgaged in any of these occupations. No, but the advertiser, to whom the votes were given, was, and he distributed them with the merchandise which he sold. This was a necessary part of the scheme and was made so by the Herald Company. It cannot be divorced from the part played by that company. When the company gave out the votes, it intended that the merchant advertiser should distribute them to his customers and thereby hold out “a promise of gift” of an “article or thing for and in consideration of the purchase” by the customer of an “other article or thing.” Unless this was done the scheme would be abortive. The transaction, taken as a whole, clearly fell within the definition of a gift enterprise as outlined in the Act of 1871.

Even if it did not it would be unimportant, because the definition of see. 1176 is not limited to that found in the act. The section says that it shall be unlawful for anyone to conduct a gift enterprise “in any manner as defined in said act or otherwise.” A gift enterprise as there outlined, or as otherwise.— generally — defined, is prohibited. This is the view which the United States Supreme Court took of the matter in the Gregory Case. It said: “The purpose of the provision of sec. 1176 was to disapprove and repeal the former authorization, but not to establish an exclusive definition based upon it. The language of see. 1176 conclusively negatives such an intention. It follows that sec. 1177 is not controlled by the definition to be found in the Act of 1871.” In the Gregory Case the court [465]*465gives us one definition of such an enterprise. It said: “Thus a ‘gift enterprise' has been defined to be ‘a scheme for the division or distribution of certain articles of property, to bo determined by chance, amongst chose who have taken shares in the scheme.’See also State v. Shugart, 138 Ala. 86, 91, 100 Am. St. Rep. 17, 35 So. 28; Winston v. Beeson, 135 N. C. 271, 279, 65 L.R.A. 167, 47 S. E. 457.)

The scheme before us did not limit the distribution of its prizes to those who took or received the shares, — the votes. Anyone but the advertiser could be a recipient, but that makes no essential difference. The plan was for the distribution of prizes — gifts—amongst those who by chance received the highest number of votes, and came within the definition given in the Gregory Case.

A gift enterprise is usually considered in the books as a species of lottery, and a lottery', according to a recognized authority, has these essential elements, — consideration, prize1, and chance. 17 R. C. L. 1222. So has the instant scheme.

The Supreme Court of the Enited States in three case's (Rast v. Van Deman & L. Co. 240 U. S. 342, 60 L. ed. 679, L.R.A.1917A, 421. 36 Sup. Ct. Rep. 370, Ann. Cas.

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Related

Matter of Gregory
219 U.S. 210 (Supreme Court, 1911)
Rast v. Van Deman & Lewis Co.
240 U.S. 342 (Supreme Court, 1916)
Tanner v. Little
240 U.S. 369 (Supreme Court, 1916)
Pitney v. Washington
240 U.S. 387 (Supreme Court, 1916)
Winston v. Beeson.
65 L.R.A. 167 (Supreme Court of North Carolina, 1904)
State v. Shugart
138 Ala. 86 (Supreme Court of Alabama, 1902)
Brooklyn Daily Eagle v. Voorhies
181 F. 579 (U.S. Circuit Court for the District of Eastern New York, 1910)

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Bluebook (online)
47 App. D.C. 460, 1918 U.S. App. LEXIS 2446, Counsel Stack Legal Research, https://law.counselstack.com/opinion/corporate-organization-audit-co-v-hodges-cadc-1918.