Johnson v. Collins Entertainment Co.

508 S.E.2d 575, 333 S.C. 96, 1998 S.C. LEXIS 162

• Court: Supreme Court of South Carolina
• Decided: November 19, 1998
• Docket: 24858
• Status: Published

Opinions

FINNEY, Chief Justice:

This matter is before the Court on certification from the United States District Court to answer the following questions.

1. What are the factors to be considered and standards to be applied in determining whether a particular type of activity is a lottery as prohibited by the South Carolina Constitution?

2. Do the Type II and Type III machines constitute lotteries in violation of the South Carolina Constitution?¹

PROCEDURAL HISTORY

Plaintiffs, purporting to represent themselves and others similarly situated, initiated this action for damages and injunctive relief in the State circuit court in June 1997. Defendants own or operate video gaming devices (video poker machines) under authority of licenses issued by the South Carolina Department of Revenue. Defendants removed the action to Federal District Court because the asserted claims included a cause of action under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961 et seq. Subsequently, additional plaintiffs and defendants were added, and the complaint was amended to allege that video poker games are being operated in violation of Article XVII, § 7 of the South Carolina Constitution, which prohibits lotteries.

In December 1997, the plaintiffs filed a motion for a preliminary injunction seeking to have the court enjoin the defendants from continuing to operate their video poker games because the games are illegal lotteries under the State Constitution and are violative of state statutes. The parties agreed that the constitutional issue could override the statutory issues. The South Carolina Attorney General has intervened and joined in the motion for injunctive relief. The District Court allowed the parties to engage in extensive discovery prior to a hearing on the motion for a preliminary injunction. Based upon evidence presented at the motion hearing, that Court made factual findings and issued an Order of Certification to the South Carolina Supreme Court pursuant to South Carolina Appellate Court Rule 228.

ANALYSIS

Rule 228(b), SCACR,² contemplates that the South Carolina Supreme Court will base its answers to the questions certified exclusively upon the findings of fact by the District Court and, if necessary, the record in this matter.

In considering Question 1, we look to the applicable provision of the State Constitution, which reads:

No lottery shall ever be allowed or be advertised by newspapers, or otherwise, or its tickets be sold in this State. The game of bingo, when conducted by charitable, religious or fraternal organizations exempt from federal income taxation or when conducted at recognized annual State and county fairs, shall not be deemed a lottery prohibited by this section.

S.C. Const, art. XVII, § 7.³

The Constitution does not prohibit games of chance or gambling per se; with the exception that it is unlawful for public officials to engage in “gambling or betting on games of chance.” S.C. Const, art. XVII, § 8. The framers of our Constitution clearly distinguished between “lottery” and “gambling or betting on games of chance.” Adhering to the constitutional distinction, the South Carolina statutory scheme includes sections that specifically deal with lottery, gaming, and betting. See, e.g., S.C.Code Ann. §§ 16-19-10 to 16-19-30 (lotteries); S.C.Code Ann. § 16-19-40 (prohibiting games of chance or gambling devices at state and county fairs); and S.C.Code Ann. § 16-19-60 (coin-operated pinball machines). This distinction between lottery and other forms of gaming, found within the text of the Constitution itself, supports the conclusion that its framers used the term “lottery” in a narrow sense. This conclusion accords with that of the South Dakota Supreme Court in a similar case:

[B]y separately stating the terms ‘game of chance’ and ‘lottery,’ the framers of the original [constitutional] provision intended the term ‘game- of chance’ to be broad in scope, including most forms of gaming, and the term ‘lottery’ in the narrower sense contemplating the sale of tokens or tickets to large numbers of people for the chance to share in the distribution of prizes for the purpose of raising public revenue.

Poppen v. Walker, 520 N.W.2d 238, 245 (S.D.1994).

The Constitutional exemption for bingo⁴ is consistent with a narrow reading of the word “lottery” since bingo is commonly defined as a game derived from lotto, which in turn is based on lottery,⁵ or a form of lottery often played simultaneously by hundreds or thousands of people.⁶ However, the fact that bingo is generally considered a lottery, and meets the common definition of lottery, does not prove that other forms of gambling are lotteries. Further, it does not undermine the conclusion that the term lottery is narrowly construed.

The Court in Rountree v. Ingle, 94 S.C. 231, 77 S.E. 931 (1913),⁷ distinguished lotteries from gambling by stating: “Our statute makes not only the promoter of a lottery, but the adventurers in it liable to indictment ... The purchaser of a lottery ticket in this State is therefore in a different plight from one who loses money in gambling ... who may recover the amount paid out.”

The Court in Darlington Theatres characterized a lottery as a form of gambling which provided for the distribution of prizes by lot or chance. Darlington Theatres, Inc. v. Coker, 190 S.C. 282, 2 S.E.2d 782 (1939). While every lottery is a gaming device, not every gaming device is a lottery within the generally recognized meaning of the word. Accordingly, not all forms of gambling are violative of our constitution. In 1818, this Court narrowly construed the term “lottery” as “a term of art” noting that “otherwise it may mean any thing, as in common parlance it is applied to one half of the ordinary occurrences or accidents of life.” State v. Pinchback, 9 S.C.L. 128 (2 Mill) (1818) The Pinchback Court emphasized the necessity of restricting application of the term lottery to only one class of adventures or hazards. In doing so, the Court stated that an activity “may be an adventure or hazard without a lottery; every throw of the die, even for an ordinary wager, is an adventure or hazard and I am sure it never yet entered the mind of any man that it constituted a lottery.” State v. Pinchback, supra.

Likewise, the Court in Darlington Theatres found it apparent that “the constitutional and legislative prohibition is directed at a special type of vice in the fields of advertising and gift enterprises — the type that has come to be denominated both in the law and in common parlance by the word lottery.” Darlington Theatres, 190 S.C. at 290, 2 S.E.2d at 786. The Court held the statutes enforcing the constitutional prohibition against lotteries were “undoubtedly directed at a particular type of gaming or gambling which has become commonly known as a lottery, and not the prohibition of games of chance of all kinds.” Id.

The Darlington Theatres decision addresses the definition of lottery in some detail. The word lottery has no technical, legal meaning, but must be construed in the popular sense. Darlington Theatres, 190 S.C. at 292, 2 S.E.2d at 786. Lottery is “a species of gaming, which may be defined as a scheme for the distribution of prizes or things of value by lot or chance among persons who have paid, or agreed to pay, a valuable consideration for the chance to obtain a prize.” Darlington Theatres, supra. The definition of lottery involves a “scheme for raising money by selling chances to share in a distribution of prizes; more specifically, a scheme for the distribution of prizes by chance among persons purchasing tickets, the correspondingly numbered slips, or lots, representing prizes or blanks, being drawn from a wheel on a day previously announced in connection with the scheme of intended prizes.” 190 S.C. at 292-93, 2 S.E.2d at 787.⁸

Historically, in the early 1800’s, a lottery was typically a government-sponsored means of raising revenue by selling tickets for prizes awarded by lot. See Ronald J. Rychlak, Lotteries, Revenues and Social Costs: A Historical Examination of State-Sponsored Gambling, 34 B.C.L.Rev. 11 (1992). A “lottery” in its narrowest sense is commonly defined as “a gambling game ... in which a large number of tickets are sold and a drawing is held for certain prizes.”⁹ Since its original ratification in 1868 the constitutional provision has specified “tickets” as part of the prohibited lottery activity. See 1868 S.C. Const, art. XIV, § 2. Use of the word “tickets” indicates the framers’ narrow conception of a lottery as commonly understood, i.e., gambling involves “tickets” and a drawing by lot.

CONCLUSION

We emphasize that the first question before this Court pertains to whether a particular activity is a lottery prohibited by the state constitution. The parties focus on the broader issue of chance. However, as the district judge noted in the Order of Certification, it is unnecessary to define the meaning of the term chance if this Court finds video gaming devices are not lotteries. We find lottery is a term of art and video gaming devices do not come within the plain and ordinary meaning of “lottery” because they do not involve a drawing and “tickets” or other indicium of entitlement to a prize.¹⁰ We have made this finding based on the longstanding definitions and distinctions enunciated in Darlington Theatres, Rountree, and Pinchback. This Court is constrained to give the words of our Constitution their plain and ordinary meaning. See Davis v. County of Greenville, 313 S.C. 459, 443 S.E.2d 383 (1994) (language of constitution given its plain and ordinary meaning).

Question 2 asks us to apply the legal definition of lottery to preliminary findings of fact so that the conclusions of this Court may be considered by the District Court Judge in determining whether to issue a preliminary injunction. As stated in the Order of Certification, no finding of this Court will be binding for entry of any permanent injunction or for the award of damages by the District Court. We answer the second question with the caveat that we are giving a response only to an interlocutory question of fact. Hence, the answer of this Court to Question 2 is that Type II and III machines do not constitute lotteries in violation of the South Carolina Constitution.

Deliberations on this matter were conducted within an atmosphere charged with the knowledge of the potentially grave and far-reaching consequences of our decision, regardless of the manner in which we responded to the questions certified. We are bound by the parameters set out in the State Constitution, statutes, and common law which direct our decisionmaking process. We are persuaded, and legal authority directs, that the alleged deleterious effect of an activity upon society is not a proper basis upon which the Courts may declare unlawful any such activity. If the results of our conclusions are “inimicable to public welfare, then it would be a matter for legislative action, and not one for the Courts.” Darlington Theatres, supra, at 789. The judiciary does not play a role in determining whether video poker machines should be allowed or prohibited in our State. For this reason we must not abuse the language of our constitution to force a solution to an issue that rightfully must be resolved by our General Assembly.

CERTIFIED QUESTIONS ANSWERED.

MOORE, J., and CHARLES W. WHETSTONE, Jr., Acting Associate Justice, concur.

1 . The machines at issue are all video gambling devices that are physically present and licensed for operation in this state as Class III machines (sub-types II and III) under S.C.Code Ann. § 12 — 21— 2720(A)(3). Type II include the games of lotto, bingo and the traditional game of keno. Type III include games such as poker and black jack well as one variety of keno.

2 . A certification order shall set forth the questions of law to be answered, all findings of fact relevant to the questions certified, and a statement showing fully the nature of the controversy in which the questions arose. The Supreme Court may request the original or copies of all or of any portion of the record before the certifying court to be filed with the Court, if, in the opinion of the Supreme Court, the record or a portion thereof may be necessary in deciding to accept or in answering the questions. Rule 228(b), SCACR.

3 . Prior state constitutions included the following language similar to the current lottery prohibition provision. “Lotteries, and the sale of lottery tickets, for any purpose whatever, are prohibited, and the General Assembly shall prevent the same by penal laws.” S.C. Const, art. XIV, § 2 (1868). "No lottery shall ever be allowed, or be advertised by newspaper, or otherwise, or its tickets be sold in this state; and the General Assembly shall provide by law at its next session for the enforcement of this provision.” S.C. Const, art. XVII, § 7 (1895). In 1975, the constitutional provision prohibiting lotteries was amended and remains in effect to this date.

4 . The game of bingo, when conducted by charitable, religious or fraternal organizations exempt from federal income taxation or when conducted at recognized annual State and county fairs, shall not be deemed a lottery prohibited by this section. S.C. Const, art. XVII, § 7.

5 . Encarta 97 Encyclopedia (Microsoft deluxe ed. 1996).

6 . 2 The New Encyclopedia Britannica 218 (15th ed. 1997).

7 . The Court decided the question of plaintiff's right to ownership of a prize claimed by the defendant who recovered the winning lottery ticket after it had been discarded by the plaintiff. Rountree v. Ingle, supra.

8 . The dissent relies on the three element test of prize, consideration, and chance derived from our decision in Darlington Theatres. This test was used in Darlington Theatres to determine whether a drawing of signature cards qualified as an illegal lottery. The general character of the form of gaming in that case, a drawing with "tickets,” was not in question. The issue there was simply whether a lack of consideration removed the scheme from the definition of a prohibited lottery.

9 . Random House Dictionary of the English Language Second Edition Unabridged (1987).

10 . Electronic ticketing would not necessarily preclude finding a lottery where electronic registration is the functional equivalent of a lottery ticket, i.e., evidence of one’s entitlement to a prize over claims by competing ticket-holders.