Meyer v. Hawkinson

2001 ND 78, 626 N.W.2d 262, 2001 N.D. LEXIS 90, 2001 WL 438438

• Court: North Dakota Supreme Court
• Decided: May 1, 2001
• Docket: 20000093
• Status: Published

Opinions

KAPSNER, Justice.

[¶ 1] Clyde and Dorothy Meyer appeal from the district court’s grant of summary judgment for Donald M. and Marilyn F. Hawkinson, dismissing Meyers’ claim for enforcement of an alleged contract to share proceeds of the Western Canadian Lottery. The district court found there was a genuine issue as to the existence of a contract between the parties, but granted summary judgment because the alleged contract had an unlawful object and would be unenforceable as contrary to North Dakota’s public policy against gambling. We hold the public policy of the state of North Dakota would not allow our courts to enforce an alleged contract to share proceeds of a winning lottery ticket. We affirm.

I

[¶ 2] On August 16, 1997, Clyde Meyer drove his wife, Dorothy Meyer, and their friends, Donald and Marilyn Hawkinson, from Fargo, North Dakota to Winnipeg, Canada to attend the horse races. They planned to split the cost of gas for the trip, as was their custom. After checking into the hotel, Donald Hawkinson purchased a lottery ticket with three quick pick numbers at the hotel gift shop, and then he returned to the lounge to tell Marilyn Hawkinson and the Meyers about his purchase. Clyde Meyer claims Donald Haw-kinson said to Clyde, “Go buy three lottery tickets and we’ll split.” According to Dorothy Meyer, Donald Hawkinson said, “I just bought three tickets for the lottery, and you go in and buy three, and if we win, we’ll split.” Hawkinson claims he said he felt “pretty lucky” and suggested to Meyer, “Why don’t you go buy some,” not mentioning any split.

[¶ 3] Dorothy Meyer claims Clyde Meyer said, “Okay,” and left the lounge. Clyde Meyer testified he directly turned around, walked to the gift stand, and bought three lottery tickets. Donald Haw-kinson testified that when Clyde Meyer returned to the lounge, Meyer may have said he got some lottery tickets. However, according to both of the Meyers and Marilyn Hawkinson, Clyde Meyer said nothing about the lottery or tickets when he returned to the table. It is undisputed that when Meyer returned, he said nothing about the number of tickets he had purchased, and he did not show anyone any lottery tickets.

[¶4] The following day Donald Haw-kinson discovered that one of his lottery ticket numbers was a winner of $1.6 million Canadian ($1.2 million U.S.). Clyde claims he went to meet his wife in the restaurant and thought he told her, “We won the lottery, Don’s ticket.”

[¶ 5] The parties had been friends for over forty years, often gambling together. Donald frequently bought lottery tickets, but the parties never pooled them funds to purchase lottery tickets. During their stay in Winnipeg, the parties did not pool their money to bet on horses or to gamble in the casinos. They did have a custom of pooling their money before buying pull tabs, and they would open their pull tabs together and split any proceeds immediately. They also had a custom of splitting the cost of drinks. On this occasion, after Donald won the lottery, he paid for all the Meyers’ drinks and meals.

[¶ 6] The Hawkinsons called their children with the news and invited them to come to Winnipeg to celebrate. Clyde Meyer never telephoned anyone to tell them he had won the lottery. Dorothy Meyer testified she talked on the telephone to one of the Hawkinsons’ children and may have said Donald Hawkinson won the lottery and was now a millionaire. Dorothy called her own son and thought she said, “Don had won the lottery.” She also called her friend and thought she told her, “Don won the lottery.”

[¶ 7] The Hawkinsons and their children arranged for safekeeping the ticket in the hotel safe and later in a safety deposit box. The Meyers did not take part in these arrangements. Later the parties rode together back to Fargo, but there was no mention of splitting the lottery. Two to three weeks later, Donald told Clyde there would be no equal sharing of the winnings, and Clyde said he understood there would be no equal split, but he thought Donald would share the winnings. On about September 17, 1997, Donald sent each of the Meyers $2,500 as a gesture of friendship. Dorothy Meyer stated Clyde expected Donald to buy him a motor home, and so their friendship ended.

[¶ 8] Clyde and Dorothy Meyer filed a civil action against Donald and Marilyn Hawkinson to enforce a contract to share equally in the lottery winnings. The Haw-kinsons moved for summary judgment, arguing no reasonable mind could find from the evidence the existence of an enforceable contract, and even if a contract existed, it would be unenforceable as illegal and against public policy. The district court found there was a genuine issue as to whether a contract existed between the parties, making summary judgment inappropriate on that issue. Nevertheless, the district court granted summary judgment for the Hawkinsons, reasoning even if the alleged contract existed, such an agreement would be contrary to North Dakota’s public policy against gambling. The district court concluded the alleged contract would be unenforceable because its object, although lawful in Canada, is unlawful in North Dakota as it violates state anti-gambling statutes. The Meyers appealed.

II

[¶ 9] Summary judgment is a procedural device for properly disposing of a lawsuit without trial if, after viewing the evidence in the light most favorable to the party opposing the summary judgment, there are no genuine issues of material fact or conflicting inferences which reasonably can be drawn from undisputed facts, or if the only issues to be resolved are questions of law. Dan Nelson Const., Inc. v. Nodland & Dickson, 2000 ND 61, ¶ 18, 608 N.W.2d 267. Under N.D.R.Civ.P. 56(c), a court shall render summary judgment “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law.”

III

[¶ 10] The Meyers argue the district court erred in granting Hawkinsons’ motion for summary judgment by finding as a matter of law the alleged contract between the parties is unenforceable because it is contrary to the public policy of North Dakota. We disagree.

[¶ 11] Gambling differs from other business transactions, and ordinary remedies usually are not available to enforce gambling debts. Hochhalter v. Dakota Race Mgmt., 524 N.W.2d 582, 584 (N.D.1994). It is essential to the existence of a contract to have a lawful object. N.D.C.C. § 9-01-02. A contract is void if the consideration given for the contract is unlawful. N.D.C.C. § 9-05-04. A contract is unlawful if it is (1) contrary to an express provision of law; (2) contrary to the policy of express law, although not expressly prohibited; or (8) otherwise contrary to good morals. N.D.C.C. § 9-08-01.

A

[¶ 12] The Meyers argue the alleged contract is not contrary to an express provision of law because it was entered into in Canada where the lottery is legal and because the alleged contract does not violate the laws of North Dakota. However, whether the alleged contract is contrary to express provision of law in North Dakota is essential to determining whether the contract is enforceable. The question is whether such a contract is enforceable in the courts of North Dakota or whether our courts will not be used to enforce such contracts because they are contrary to the public policy of this state.

[¶ 13] The Constitution of North Dakota, Article XI, § 25, provides:

The legislative assembly shall not authorize any game of chance, lottery, or gift enterprises, under any pretense, or for any purpose whatever. However, the legislative assembly may authorize by law bona fide nonprofit veterans’, charitable, educational, religious, or fraternal organizations, civic and service clubs, or such other public-spirited organizations as it may recognize, to conduct games of chance when the entire net proceeds of such games of chance are to be devoted to educational, charitable, patriotic, fraternal, religious, or other public-spirited uses.

[¶ 14] In 1976, a constitutional amendment gave the legislature limited authority to authorize some forms of gambling. See N.D. Op. Att’y Gen. L-178, L-179 (1993). Under that limited constitutional authorization, the legislature enacted N.D.C.C. ch. 53-06.1 describing which games of chance are authorized in North Dakota, the persons and organizations authorized to hold such games of chance, and a regulatory licensing structure to ensure fairness and to ensure proceeds are devoted to purposes required by the constitution. Id. at L-179-80. Under N.D.C.C. § 53-06.1-11.1(2), a licensed organization shall disburse gambling proceeds only for a specified list of educational, charitable, patriotic, fraternal, religious, or public-spirited uses.

[¶ 15] Under North Dakota law, gambling is defined as risking any money or other thing of value for gain, contingent on a lot, chance, or the happening or outcome of an event over which the person taking the risk has no control. N.D.C.C. § 12.1-28-01(1). In addition, N.D.C.C. § 12.1-28-02(2) makes it a class A misdemeanor to:

a.Sell, purchase, receive, or transfer a chance to participate in a lottery, whether the lottery is drawn in state or out of state, and whether the lottery is lawful in the other state or country;

b. Disseminate information about a lottery with intent to encourage participation in it, except that a legal lottery may be advertised in North Dakota; or

c. Engage in gambling on private premises where the total amount wagered by an individual player exceeds five hundred dollars per individual hand, game, or event.

Clearly, an alleged contract to share proceeds of a $1.2 million lottery would be illegal if entered into in North Dakota.¹

[¶ 16] Our state constitution expressly forbids lotteries and games of chance unless the entire net proceeds are devoted to public-spirited uses statutorily specified as educational, charitable, patriotic, fraternal, and religious. N.D. Const, art. XI, § 25; see also N.D.C.C. § 53-06.1-11.1(2). In addition, N.D.C.C. § 12.1-28-02(2), which criminalizes sales, purchases, receipt, or transfer of lottery chances, comprehensively forbids such activities whether the lottery is in state or out of state. By express terms, the statute prohibits these activities even if the lottery is legal in the other state or country. The statute also criminalizes dissemination of information about a lottery with intent to encourage participation in the lottery. Although § 12.1-28-02(2) refers to lottery chances, not proceeds, a chance to share proceeds is really a chance to participate in a lottery.

[¶ 17] The alleged contract between the Meyers and Hawkinsons to share lottery winnings is a wager, or “risking any money ... or other thing of value for gain, contingent [on a] lot, chance, ... or the happening or outcome of an event ... over which the person taking the risk has no control,” and constitutes gambling under the statutory definition of gambling. See N.D.C.C. § 12.1-28-01(1). This Court will not enforce contracts which have an unlawful purpose or unlawful consideration. See N.D.C.C. §§ 9-01-02, 9-05-04; see also Erickson v. North Dakota State Fair Ass’n of Fargo, 211 N.W. 597, 599, 54 N.D. 830, 836 (N.D.1926) (refusing to enforce an alleged contract to run an illegal horse race for prize money because courts will not aid parties engaged in illegal transactions, but rather will leave the parties where it finds them); Drinkall v. Movius State Bank, 88 N.W. 724, 727, 11 N.D. 10 (N.D.1901) (holding neither party to an illegal contract may be aided by the courts, either to set it aside or enforce it).

[¶ 18] We conclude the alleged contract if entered into in North Dakota would violate the express law against gambling. However, the contract was not created in North Dakota, so that does not end our inquiry. The contract may still be unlawful if contrary to the public policy underpinning express law, although not expressly prohibited. N.D.C.C. § 9-08-01; see also Cont’l Cas. Co. v. Kinsey, 499 N.W.2d 574, 580 (N.D.1993) (noting the importance of enforcing contracts unless they clearly contravene public policy or express law).

B

[¶ 19] The Meyers argue the alleged contract to share lottery proceeds is not void as against public policy. We are not persuaded.

[¶ 20] Public policy is a principle of law whereby contracts will not be enforced if they have a tendency to be injurious to the public or against the public good. Johnson v. Peterbilt of Fargo, Inc., 438 N.W.2d 162, 163 (N.D.1989). Whether the contract is against public policy is generally provided for by the state constitution or statute. Id.; see, e.g., N.D.C.C. § 9-08-02 (providing that all contracts which have for their object exemption of persons from responsibility for their own fraud or willful injury to the person or property of another, or wilful or negligent violation of law, are against the policy of the law). However, when a contract is inconsistent with fair and honorable dealing, contrary to sound policy, and offensive to good morals, the courts have the authority to declare the contract void as against public policy. Johnson, at 164; see also N.D.C.C. § 9-08-01 (deeming contracts unlawful if contrary to express law; contrary to policy of express law, although not expressly prohibited; or contrary to good morals).

[¶ 21] Despite the constitutional amendment authorizing some limited forms of gambling, the legislature’s anti-gambling message remains especially strong regarding lotteries. Section 12.1-28-02(2), N.D.C.C., prohibits the sale, purchase, receipt, or transfer of a chance to participate in a lottery, whether the lottery is drawn in state or out of state, and whether the lottery is lawful in the other state or country. (Emphasis added.) We regard the underlined language as clear indication of the public policy against lotteries. The use of our courts in the manner requested by the Meyers would frustrate that policy. In addition to the legislature, the voters have demonstrated opposition to lotteries. In 1986, a constitutional amendment proposed authorizing a state-operated lottery for the purpose of providing tax relief for the citizens of North Dakota. See 86-31 N.D. Op. Att’y Gen. Op. 152, 152-53 (1986); see also N.D. Const, art. XI, § 25. This proposed amendment met strong resistance. See 86-31 N.D. Att’y Gen. Op., at 152. Ultimately, the proposed amendment to establish a North Dakota lottery was defeated in the November 1986 general election. See id.

[¶ 22] Other attempts to authorize lotteries in North Dakota have also failed. For example, when the City of Grand Forks inquired whether cities could allow lotteries or other non-licensed games of chance to be conducted within city limits, the Attorney General indicated cities lack that authority. See 85-15 N.D. Att’y Gen. Op. 46, 46 (1985). The Attorney General also indicated a private club, which was licensed to conduct games of chance, was prohibited from holding a drawing. See 82-7 N.D. Att’y Gen. Op. 17, 17 (1982). The Attorney General determined that a drawing in which members sign their names when entering the club, contribute money, and then the name of one member is drawn who wins the entire pot would constitute a prohibited lottery. Id. at 18.

[¶ 23] Accordingly, the public policy in North Dakota runs consistently against lotteries. On the basis of public policy, our courts will not enforce contracts deemed injurious to the public or against the public good. Johnson, 438 N.W.2d at 163-64 (indicating that whether a contract is against public policy is generally provided by the state constitution or by statute). For example, this Court has refused to enforce a contract, as against public policy, when the contract defeated the express purposes of a statute. Schollmeyer v. Saxowsky, 211 N.W.2d 377, 386 (N.D.1973). In Schollmeyer, we voided a contract provision because the no-recourse clause oppressed the rights of purchasers and defeated the express purposes of a statute protecting them. Id. The statute at issue, N.D.C.C. § 10-04-17, held sellers jointly and severally liable to purchasers, for securities sales contracts made in violation of the Securities Act, as well as imposing joint and several liability on officers and directors who aided or participated in the sale. Id. Therefore, we invalidated a clause in a debenture contract that prohibited recourse by the purchaser against the officers or directors for payment of the debenture. Id. We concluded the no-recourse clause oppressed and restrained the legal rights of the purchasers conferred by the statute. Id. Thus, on the basis of public policy, we refused to enforce the contractual provision because it was contrary to the spirit of § 10-02-17 and defeated the statute’s purposes of protecting securities purchasers. Id. See generally Thompson v. First Nat’l Bank in Grand Forks, 269 N.W.2d 763, 764-65 (N.D.1978) (voiding as against public policy a contract which restricted a trustee’s exercise of his discretionary power and which was entered into without knowledge of the court or other interested parties); Glass v. Swimaster Corp., 21 N.W.2d 468, 472-73, 74 N.D. 282, 292 (N.D.1946) (voiding as against public policy a contract which contemplated procuring personal and political influence to secure the Navy’s acceptance of a bid to perform services); Mees v. Grewer, 245 N.W. 813, 815-17, 63 N.D. 74, 81 (N.D.1932) (voiding as against public policy a secret contract between an employee and a third person which would allow the employee to serve two masters and give him the power to wrong his principal).

[¶ 24] The Meyers argue that by refusing them an opportunity to enforce this contract, the courts would only reward those who convert the property of others. They cite cases from other jurisdictions which have enforced alleged contracts to split the proceeds of lotteries, although the lotteries were not legal in the state where the contract was formed. See, e.g., Pearsall v. Alexander, 572 A.2d 113, 115-16 (App.D.C.1990) (enforcing an agreement to share the winnings of a jointly purchased lottery ticket as not against public policy, because the parties did not wager against one another on the lottery’s outcome, so the agreement was not a prohibited gaming contract); Talley v. Mathis, 265 Ga. 179, 453 S.E.2d 704, 705-06 (1995) (enforcing an agreement to jointly purchase a lottery ticket and to share the proceeds, as not violative of either Georgia’s statute prohibiting gambling contracts or public policy, because the lottery was legal in Kentucky where the ticket was purchased); Kaszuba v. Zientara, 506 N.E.2d 1, 1-3 (Ind.1987) (enforcing a contract entered into in Indiana, whereby Kaszuba would travel to Illinois with Zientara’s money to purchase an Illinois lottery ticket for Zientara, because despite the longstanding Indiana public policy against lotteries, prohibiting this contract would not shelter Indiana citizens from legal lotteries in sister states); Miller v. Radikopf 394 Mich. 83, 228 N.W.2d 386, 386-87 (1975) (enforcing an agreement, to jointly buy and divide winnings of an Irish sweepstakes ticket as not against public policy, because state statutes did not prohibit accepting proceeds of winning lottery tickets, but only prohibited selling the tickets); Castilleja v. Camero, 414 S.W.2d 424, 425-28 (Tex.1967) (enforcing as not against public policy an agreement made in Texas to jointly purchase a Mexican lottery ticket and split the proceeds, because this contract did not violate the laws of Mexico and, since the parties both had lawful ownership rights to the proceeds, refusal to enforce the contract would violate Texas’ strong public policy against conversion of property).

[¶ 25] Other jurisdictions have refused to enforce contracts to split lottery proceeds because if the winning ticket is not jointly owned, then the parties are wagering against each other on the outcome of the lottery, which violates state statutes against wagering on the outcome of uncertain events over which no party has control. In Dickerson v. Deno, 770 So.2d 63, 64 (Ala.2000), the court voided an agreement to share winnings between Alabama holders of individually owned Florida lottery tickets. Because the tickets were owned by each individual party, they could only receive the proceeds from the winning lottery ticket as a result of their side agreement to share, not as a result of an ownership interest in the winning ticket. Id. at 66. Thus, the court reasoned the contract was founded on gambling consideration as it was a wager, hedging their bets in an attempt to increase each party’s odds of winning the Florida lottery, an uncertain event none of the parties controlled. Id. at 66-67.

[¶ 26] One jurisdiction even refused to enforce an agreement to split lottery proceeds between joint owners of the winning ticket, reasoning their joint venture was formed for the purpose of wagering on the outcome of a contingent event. See Cole v. Hughes, 114 N.C.App. 424, 442 S.E.2d 86, 88-89 (1994) (voiding a joint venture agreement entered into in North Carolina to purchase Virginia lottery tickets and equally share winnings because North Carolina statute prohibits wagers depending on any chance event and voids contracts for the purpose of such wagering). When the parties then tried to enforce their joint venture agreement in Virginia, where the winning lottery ticket was purchased legally, that jurisdiction also refused to enforce the contract because the agreement was based on gambling consideration. See Hughes v. Cole, 251 Va. 3, 465 S.E.2d 820, 827 (1996) (voiding the joint venture agreement entered into in North Carolina to purchase Virginia lottery tickets and share winnings, because a Virginia statute prohibited gaming contracts, even though the lottery was legal in Virginia).

[¶ 27] In this case, the Meyers and Hawkinsons did not pool their money to jointly purchase the winning lottery ticket, and therefore Hawkinsons are not converting Meyers’ property. Rather, Clyde Meyer and Donald Hawkinson were allegedly exchanging promises to share winnings from then’ individually owned lottery tickets on the happening of the uncertain event that the numbers drawn in the Canadian lottery matched one of their ticket numbers. Consequently, the alleged contract between Hawkinson and Meyer was a wager or side bet, that is, an attempt to hedge their bets and increase their odds of winning the Canadian lottery.

[¶ 28] We have recognized that courts must be mindful of the right of individuals to enter contracts, when the court is faced with deciding whether a contract is against public policy. Martin v. Allianz Life Ins. Co. of North America, 1998 ND 8, ¶ 20, 573 N.W.2d 823. We have also acknowledged that the legislature is much better suited than the courts for setting the public policy of the state. Id. The statutory language, as well as the legislative and electoral history, comprehensively and clearly convey the policy underlying North Dakota’s repeated rejection of a state-operated lottery and high-stakes gambling. See Trinity Med. Ctr., Inc. v. Holum, 544 N.W.2d 148, 152 (N.D.1996) (providing the “cardinal rule” of statutory construction is that our interpretation must be consistent with legislative intent and done in a manner which will accomplish the policy goals and objectives of the statute). Therefore, we affirm the trial court’s grant of summary judgment by finding as a matter of law the alleged contract between Clyde Meyer and Donald Hawkinson is contrary to public policy of the state of North Dakota and unenforceable in our courts.

IV

[¶29] The Meyers further argue that summary judgment was inappropriate because, taking the evidence in the light most favorable to the Meyers, who opposed the summary judgment, there is a genuine issue as to the existence of an enforceable agreement between the parties. Because we affirm the trial court’s decision the contract, if it existed, is unenforceable in the courts of North Dakota, consideration of this issue is unnecessary. See Thompson v. First Nat’l Bank in Grand Forks, 269 N.W.2d 763, 765 (N.D.1978) (determining it was unnecessary to decide whether the parties were precluded from enforcing the contract on other grounds when we disposed of the case on the ground of public policy considerations).

V

[¶ 30] The judgment of dismissal is affirmed.

[¶ 31] GERALD W. VANDE WALLE, C.J., and MARY MUEHLEN MARING, J., concur.

1 . On the Basis of the Canadian criminal code, we cannot determine the alleged contract between the Hawkinsons and Meyers would be legal under Canadian law. Section 206, Criminal Code, R.S.C., ch. C-46 (1999) (Can.), delineates offenses in relation to lotteries and games of chance, specifically:

(1) Every one is guilty of an indictable of-fence ... who

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(e) conducts, manages or is a party to any scheme, contrivance or operation of any kind by which any person, on payment of any sum of money, or the giving of any valuable security, or by obligating himself to pay any sum of money or give any valuable security, shall become entitled under the scheme, contrivance or operation to receive from the person conducting or managing the scheme, contrivance or operation, or any other person, a larger sum of money or amount of valuable security than the sum or amount paid or given, or to be paid or given, by reason of the fact that other persons have paid or given, or obligated themselves to pay or give any sum of money or valuable security under the scheme, contrivance or operation;

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A "lottery scheme” is defined as “a game or any proposal, scheme, plan, means, device, contrivance or operation described in any of paragraphs 206(l)(a) to (g), whether or not it involves betting....” Criminal Code, R.S.C., ch. C-46, § 207(4) (1999) (Can.). No cases have been cited to us interpreting these sections under similar facts, and our research has been unable to find any. Because the alleged contract would be illegal under North Dakota law, see N.D.C.C. § 12.1-28-02(2), and because it has not been demonstrated that the alleged contract would be legal in Canada either, we do not raise the issue of conflict of laws. See, e.g., Daley v. Am. States Preferred Ins. Co., 1998 ND 225, ¶¶ 7-17, 587 N.W.2d 159 (explaining our significant contacts two-pronged analysis for choice of law issues, when there is a conflict regarding which jurisdiction’s laws to apply). Since N.D.C.C. § 9-08-01 voids contracts as unlawful if either contrary to express provision of law or contrary to public policy underlying the express law, we find it unnecessary to conduct a choice of law inquiry. See Cont’l Cas. Co. v. Kinsey, 499 N.W.2d 574, 580 (N.D. 1993) ("It is an important function of the courts to 'maintain and enforce contracts, unless it clearly appears they contravene public policy or express law.’ ”).