Harriman Institute of Social Research, Inc. v. Carrie Tingley Crippled Children's Hospital

84 P.2d 1088, 43 N.M. 1

• Court: New Mexico Supreme Court
• Decided: October 17, 1938
• Docket: No. 4425.
• Status: Published

Opinions

The question for decision is whether a lottery conducted as part of a fair to be held in this state for the benefit of a charitable institution is legal if less than the gross proceeds of the fair are to be devoted to the charitable purpose. The issue arises out of a suit by The Harriman Institute of Social Research, Inc., a Maryland corporation qualified to do business in New Mexico, as plaintiff, against Carrie Tingley Crippled Children's Hospital, a corporate state institution, as defendant, to determine the legality of certain proposed acts in performance of a contract entered into between them under date of June 17, 1938.

In brief, the complaint sets forth that the Harriman Institute had been active in social research along humanitarian lines; that defendant was organized to provide proper care and treatment for the crippled children of New Mexico and to make available therefor the buildings erected, furnished and equipped for such purpose at Hot Springs, New Mexico; that prior to June 17, 1938, the Harriman Institute had caused a complete investigation and survey to be made of the equipment and purposes of Carrie Tingley Crippled Children's Hospital and that both corporations became convinced that, having similar aims and purposes, if a union of efforts were made such union "would be merely a prelude to the service that could be rendered in future years, not only to New Mexico, but to the nation, by continuing and multiplying the services to humanity offered by petitioner (plaintiff) and defendant, making such services available to crippled children outside of the State of New Mexico, and providing means of research in an effort to eliminate and prevent diseases of children all over the nation."

And so, as the complaint reveals, the two corporations entered into a contract whereby the Harriman Institute undertook to raise the sum of $10,000,000 within the period of three years from June 17, 1938, date of the contract, said moneys to be held in trust for the use and benefit of the defendant. One million dollars of the ten million thus to be raised was to be produced within the period of one year from date of the agreement.

The contract gave plaintiff the exclusive right to solicit and raise funds for the hospital during the period of the agreement, except funds arising from legislative appropriations and fees received from hospitalization of patients. The plaintiff covenanted that in the performance of its contract it would conduct its business strictly in accordance with the laws of the State of New Mexico and of the United States of America.

After execution of the contract, Harriman Institute disclosed its plan to raise the first million dollars of the ten million agreed to be raised by promoting a fair to be held at Tingley Field in the city of Albuquerque between November 20th and 26th, 1938, consisting of all types of commercial, industrial and artistic exhibits, with large displays of Spanish, Mexican and Indian arts and handicraft for exhibit and sale; also extensive entertainment with many of the most popular stage, screen and radio stars booked for appearance to provide amusement for those attending the fair. Season tickets to the fair were to be sold for $1.00 each, entitling the holder to daily admission. The ticket also entitles the holder to participate in a lottery for cash prizes for each unit of 1,750,000 of such tickets as follows:

250 prizes of $ 500.00 each $125,000.00 100 " " 1,000.00 " 100,000.00 5 " " 10,000.00 " 50,000.00 4 " " 12,500.00 " 50,000.00 3 " " 25,000.00 " 75,000.00 2 " " 50,000.00 " 100,000.00 ___________ $500,000.00

The proposed drawings for the cash prizes are planned for Thanksgiving Day, November 24, 1938, the last day of the fair, at Tingley Field in Albuquerque, New Mexico. The presence at the drawing of the holder of a lucky number is not necessary in order to entitle him to receive the cash prize represented by his number. Tickets to the fair are to be sold by authorized agents and sub-agents, each confined to a designated area, the State of New Mexico having been divided into certain selling districts. The agents are to receive 25% of the sale price of the tickets as their commission. It is proposed to allocate the remainder of the sum realized from the sale of season admission tickets as follows:

(1) 40% thereof to be placed in a trust fund for the purpose of creating the cash prizes set out above.

(2) 25% to be placed in another trust fund for the purpose of covering estimated necessary expenses of the fair.

(3) 35% thereof to go into a trust fund as provided in said contract for the use and benefit of Carrie Tingley Crippled Children's Hospital.

When it came to the attention of the hospital board that plaintiff proposed to raise the initial funds promised by said contract by the sale of tickets for a lottery in connection with a fair, a controversy arose as to whether the plan does not breach the covenant in the contract between the parties that "it (plaintiff) will conduct its business strictly in accordance with the laws of the State of New Mexico and of the United States of America." Whereupon the Honorable Clyde Tingley, as Governor of New Mexico, called upon Honorable Frank H. Patton, as Attorney General of said state, for an opinion as to the legality of the proposed plan. Its validity was urged by virtue of the so-called exemption in favor of lotteries for charitable purposes contained in 1929 Comp. § 35-3808. Under date of July 29, 1938, Attorney General Patton rendered his opinion holding illegal the plan outlined. Thereupon this suit for declaratory judgment was instituted.

The foregoing facts appearing upon the face of the complaint, the defendant challenged the sufficiency of the facts pleaded to support the relief prayed upon the ground, first, that all the proceeds of the fair proposed to be promoted and conducted by plaintiff were not to be expended for charitable purposes, and, second, that the contract entered into between the two corporations was ultra vires as an unlawful delegation by defendant of the duty conferred and enjoined upon it by Laws 1937, c. 13, of soliciting and "receiving all gifts and bequests and the supervision, management and control of all funds received by defendant." The trial court sustained the first ground of demurrer by holding that the proposed plan was not within the provisions of the exception contained in 1929 Comp. § 35-3808, and therefore was unlawful. It overruled the second ground of the demurrer by holding that the contract between the plaintiff and defendant was not ultra vires, and was therefore lawful. The plaintiff appealed from said judgment, assigning as error the action of the trial court in sustaining the first ground of the demurrer. The defendant took a cross-appeal, assigning as error the action of the court in overruling the second ground of the demurrer.

A decision of the question presented by the appeal of the Harriman Institute involves the consideration of our lottery statutes, particularly 1929 Comp. § 35-3808 thereof. The act was adopted on February 12, 1889, consisting of six sections. It now appears as 1929 Comp. §§ 35-3803 to 35-3808, inclusive. Section 35-3803 inveighs against promoting lotteries. The next section, 35-3804, penalizes the writing, printing, vending or possessing of any ticket, token or device, purporting to entitle the holder, bearer or any other person to any prize or share or interest therein to be drawn in any lottery in or out of the State. Section 35-3805 makes it a crime to permit "any house, shop or other building" to be used for conducting a lottery or any of its incidents. Advertising a lottery in any manner is proscribed and penalized by § 35-3806, while the following section, 35-3807, condemns and outlaws fictitious lotteries, prescribing penalties. Section 35-3808, the final section of the act, is the one whose meaning becomes the subject of strongest controversy. It reads:

"The provisions of the five preceding sections shall be construed to apply to every device or devices and only to such device or devices as are commonly called or known as lottery, although designated or called by any other name, but shall not be construed to apply to any sale or drawing of any prize at any fair held in this state for the benefit of any church, public library or religious society, situate or being in this state, or for charitable purposes, when all the proceeds of such fair shall be expended in this state for the benefit of such church, public library, religious society, or charitable purposes. L. '89, Ch. 47, § 6; C.L. '97, § 1332; Code '15, § 1765."

The intended meaning of the phrase "all the proceeds", occurring in the exempting language of the preceding section, will be decisive. If it means what, upon its face, it appears to mean, the "entire proceeds", the "gross proceeds", then plaintiff's position is rendered untenable and must be abandoned, since admittedly the plan disclosed does not contemplate a donation to charity of the gross proceeds of the fair. On the other hand, if this phrase means only that the "net proceeds" of the fair shall go to charity in order to avoid the penalties of the statute, the plan is not upon its face illegal. We have concluded that the phrase "all the proceeds" does not mean "the net proceeds"; that the two phrases are opposite in meaning and that the plan revealed for raising the first one million dollars under the contract is therefore illegal. We are brought to this conclusion by the following considerations.

The lottery statute (1929 Comp. §§ 35-3803 to 35-3807 inclusive) was enacted to suppress a widespread evil — gambling in lotteries. The legislature of 1889 was not unfamiliar with the noted "Louisiana Lottery" and there were others spread over the country. In City of Roswell v. Jones, 41 N.M. 258, 67 P.2d 286, this court quoted approvingly certain texts upon the pernicious result of widespread participation by the public in lotteries and emphasized the purpose of our own statute as one to curb the evil. We quote from that opinion as follows [page 289]:

"We prefer to reason the matter in our own way, going to the fundamental reason for banning lottery schemes. * * *

"`When, however, the community at large is invited to come in, a new and very serious objection springs up. Independently of the opportunity for fraud by the managers of such enterprises, their publication imparts an excited spirit of gambling to the public generally. On the one side, often ensue gross cases of deception as to the scheme itself; on the other, the sacrifice of the savings by the ignorant and credulous, and excitement, destructive of regular industry, often inducing insanity. It isto suppress this species of lottery, we should remember, that thelottery statutes are aimed.' [Italics in text]. Wharton's Criminal Law, vol. 2, p. 2075, part section 1778. * * *

"In volume 7 of the New Standard Encyclopedia we find: `Lottery, a scheme for the distribution of prizes by chance. Lotteries like every other species of gambling have a pernicious influence on the character of those concerned in them. As this kind of gambling can be carried on secretly and the temptations are thrown in the way of both sexes, all ages and all descriptions of persons, it spreads widely in a community, and thus silently infects the sober, economical, and industrious habits of a people.' * * *

"The term `lottery,' as popularly and generally used, refers to a gambling scheme in which chances are sold or disposed of for value, and the sums thus paid are hazarded in the hope of winning a much larger sum. That is the predominant characteristic of lotteries which have become known to history. The evil whichattends such a lottery is that it arouses the gambling spirit andleads people to hazard their substance on a mere chance. It isundoubtedly the evil against which our statute is directed." (Italics supplied.)

With this court's pronouncement that the purpose of the statute is as stated, it is readily seen that a lottery conducted on the mammoth scale proposed for this one promotes the very evil which this court has said the statute was designed to prevent.

We thus are confronted by an anomaly in the statute if we adopt plaintiff's contention that the phrase "all the proceeds" means "the net proceeds". Hence, this theory is not to be too readily accepted. In other words, if such a construction permits the evil to flourish in all its pristine growth, we should inquire, at least, if the legislature could so have intended, or did so intend. Upon its face, it seems incongruous that, after laboring through the enactment of five sections accomplishing an airtight declaration of outlawry against mass gambling in lotteries, the legislature should, in a single sentence in the sixth section, undo all it so painstakingly had just enacted. We do not think it wittingly accomplished this absurdity.

Much was said in oral argument about taking away the profit from the promotion of lotteries and that this one earns not a cent of profit for its promoters, as though removing profit from lotteries were an aim of the statute. But the purpose of the statute is not so much to deny profit to promoters as to prevent widespread participation in lotteries. It eliminates profit from lotteries by outlawing them as an incident only to its greater purpose of preventing altogether mass gambling in lotteries. No profit, no lotteries, or fewer lotteries, was doubtless the logic of the legislative mind. The important thing, the chief end sought by this legislation, undoubtedly was to allay and curb the gambling spirit of the public and thus prevent the waste of money needed for more substantial purposes.

Now the gambling spirit feeds itself with as much relish upon a charity lottery as upon any other kind. If the average person be consumed with a desire to take a chance and get something for nothing, it matters not to him whether the promoter makes a profit or that the profit goes to charity. Indeed, if it does go to charity, his participation wears a cloak of piety otherwise denied it. He thus may be persuaded to purchase tickets oftener and in larger volume because operated in the name of charity or religion. The point we seek to make is that widespread participation in a charity lottery is just as baneful in its effect upon the public as widespread participation in any other kind of lottery. And we think it will be conceded, indeed we feel this court has said as much, that our lottery statutes sought to prevent widespread participation in any kind of lottery.

This brings us to our theory of decision. Undoubtedly the exception in the statute represents an afterthought or compromise which likely was agreed upon even before introduction of the bill. The legislative mind must have been centered upon some particular practice then prevailing in the territory and the act sought to exempt it. The defendant says it was the practice, still extant, of conducting a raffle or lottery for some donated article of food, clothing or other item of personal property, in connection with church or charity fairs and bazaars. That the practice related to lotteries for the sole benefit of a religious society, public library or charity, there can be no doubt. They alone are mentioned in the exempting clause. That they must have been conducted upon a small scale and as a mere incident to the fair or bazaar seems equally obvious. No one suggests that a lottery on the mammoth scale proposed for this one ever heretofore has been held in this state, nor do counsel suggest or call to mind any previous one for the privileged purposes of a size sufficient even to attract attention.

Even so, it is not conclusive against plaintiff's position that the legislative mind was not centered upon such widespread operations under the exemption as the plan proposed, if it employed language unmistakably embracing it. However, when we give to the language of the exemption, "all the proceeds", the meaning which a first reading suggests — "the whole proceeds", "the gross proceeds" — there can be no doubt the present plan is outlawed under plaintiff's admission that only a part of the proceeds of the fair is to be donated to charity.

Thus, by the construction we give the statute, which indeed is no construction at all (the words "all the proceeds" not calling for construction, Vukovich v. St. Louis, Rocky Mt. Pac. Co.,40 N.M. 374, 60 P.2d 356), the legislature is not convicted of doing a meaningless and absurd thing — of outlawing and legalizing the same evil in the same act — and the purpose of the statute as declared in City of Roswell v. Jones, supra, is preserved. It is only when we depart from the patent meaning of the words "all the proceeds", when we change by construction this initially suggested, this first-blush meaning to read "the net proceeds", that we encounter difficulty and undo the legislature's painstaking work.

That legal sanction for a lottery under the plan exposed to us would produce mass gambling upon an unprecedented scale in New Mexico, there can be no doubt. An analysis of the working of the plan, the accuracy of which is not questioned, is taken from the brief of the Attorney General, as follows:

"Here is just how the plan will work out. For every $1.00 ticket sold the following distribution will be made:

Agents' Commission 25¢ Incidental expense 18 3/4¢ Prizes 30¢ Charity (Hospital) 26 1/4¢

If 1,000,000 tickets are sold the following is the picture:

Agent's commission $250,000 Incidental expense 187,500 Prizes 300,000 Charity (Hospital) 262,000

"In order to raise $1,000,000 for the Hospital by means of a lottery, it will be necessary to sell $3,846,200 worth of tickets. In the event that is done, the agents' commissions will roughly amount to some $961,550."

We are not unmindful that the word "proceeds" has been given varying meanings in decided cases, dependent upon the context of the statute or contract in which it is found. Not infrequently its meaning is controlled by a custom or practice of the particular trade, business or industry to which the contract employing it relates. See In re Roosevelt's Estate, 131 Misc. 800,228 N.Y.S. 323; In re Dickson's Assigned Estate, 166 Pa. 134, 30 A. 1032; Moss Point Lumber Co. v. Thompson, 83 Miss. 499,35 So. 828; Troutman v. Polhill, 79 Wn. 390, 140 P. 319. But where no ambiguity arises from the manner of its use, from the context or from a custom in the trade or business in which employed, the word "proceeds" alone without the use of a qualifying adjective such as "gross", "entire" or "all", often has been held to mean "gross proceeds." See Dittemore v. Cable Milling Co., 16 Idaho 298, 101 P. 593, 133 Am.St. Rep. 98; Salisbury v. Spofford, 22 Idaho 393, 126 P. 400; Atchison, T. S.F.R. v. State ex rel. Sanders, 22 Kan. 1; Staples v. Wheeler,38 Me. 372; Brown v. Green Hickey Leather Co., 244 Mass. 168,138 N.E. 714; McMurphy v. Garland, 47 N.H. 316; Caperton's Adm'rs v. Caperton's Heirs, 36 W. Va. 479, 15 S.E. 257.

Such is the meaning first suggested to our minds by the phrase "all the proceeds" as found in the statute in question. So viewing the matter, to give the phrase the meaning contended for by plaintiff, to our minds, would be the equivalent of having it read "the gross net proceeds." When the legislature used the word"all" we think it sought to emphasize the idea that it meant more than a part of the proceeds.

The case most relied upon by plaintiff is Commonwealth v. Alexander, 185 Mass. 551, 70 N.E. 1017. The language is not identical with that in the case at bar. The prohibition was against keeping open on the Lord's Day any shop, warehouse or workhouse, or the doing of any labor or business, etc., "except a concert of sacred music or an entertainment given by a religious or charitable society the proceeds of which, if any, are to be devoted exclusively to a charitable or religious purpose," etc. A divided court held this meant the net proceeds. We should have been helped to such a conclusion by the proviso "if any", although the majority apparently attach no significance to the use of this phrase. Certainly there rarely, if ever, would be an entertainment from which some proceeds did not arise. Hence, the expression "the proceeds of which, if any," readily suggests "net" proceeds.

It was argued at submission that since § 35-3808 directs that the preceding five sections shall not be construed to apply to the kind of lottery exempted (for charitable purposes) and since § 35-3803 specifically mentions a lottery for "money", the legislature must have contemplated that the money prize would be deducted, thus denying to the phrase "all the proceeds" a meaning of "gross proceeds". This is persuasive but not decisive. For instance, if the purpose of the lottery be to aid in building a church, or furnishing a hospital, a given person charitably disposed might wish to see his donation of $100 or $200 raised to $500 or $1000 from the proceeds of lottery tickets purchased by others, many of whom would otherwise contribute nothing. Thus persuaded, the original donor would make an outright gift of the money prize to be raffled off.

Whether a lottery of the kind outlined in the complaint shall be permitted in New Mexico is purely a matter of legislative policy with which the courts are not concerned. We believe the policy expressed by the statute to be as we have declared it. And, considering the comparative ease with which money can be raised through lotteries and the ever present need of funds for charitable institutions and religious societies, the failure of needy institutions over a period of fifty years to invoke any such license under the statute as that now claimed suggests the legislative policy as declared by us to be that generally accepted by the public at large. The statute permits lotteries, yes; but under the conditions imposed they will always be petty in scope.

Truly, no worthier institution could have been selected to become beneficiary of the large sum proposed to be raised by plaintiff than Carrie Tingley Crippled Children's Hospital of Hot Springs, New Mexico, for it is engaged in the great humanitarian work of rehabilitating crippled children of this and other states. But the legislature has said the plan proposed for raising the endowment is unlawful. The Attorney General so ruled. The trial court so adjudged and we now affirm its judgment, leaving undetermined, because unnecessary to decide them, the questions raised by defendant's cross-appeal.

It is so ordered.

BRICE, J., concurs.

ZINN, J., did not participate.