LOTTERIES ‑- SALES SCHEME ‑- PROFIT-SHARING CARDS

LOTTERIES ‑- SALES SCHEME ‑- PROFIT-SHARING CARDS.

Under the constitution and statutes of this state a lottery consists of three elements:  (1) prize; (2) chance; and (3) consideration.  The name of the scheme or enterprise is immaterial.  A violation of our lottery statute (RCW 9.59.010) occurs where a store advertises and operates a scheme whereby customers who make purchases in a certain amount (which are recorded on a premium card) or who have made a certain number of visits to a store (and have received the required number of free punches on the premium card) may win from $1 to $1,000.  The first two elements are clearly present; the third, consideration, is established by the fact the paying and nonpaying participants are inextricably grouped together.

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                                                                    May 8, 1963

Honorable Al Henry
State Senator, 17th District
Rio Vista
White Salmon, Washington

                                                                                                                Cite as:  AGO 63-64 No. 22

Dear Sir:

            By letter previously acknowledged you have requested an opinion of this office on a question which we paraphrase as follows:

            Does the following conduct violate our lottery statute, RCW 9.59.010:  A store advertises and operates an alleged "profit-sharing" plan whereby customers are given "profit-sharing cards," upon which purchase amounts and visits are recorded by punching holes in the card at designated places, and when either:

            (1) Purchases totaling $100 are made (and the card is punched), or

            (2) the customer has made 13 visits to the store (without the necessity of making a purchase) and has received the required number of "free punches" on the premium card;

            a sealed patch is removed from the card and the customer is entitled to receive from $1.00 to $1,000?

            In our opinion the conduct described above is prohibited by state law.

             [[Orig. Op. Page 2]]

                                                                     ANALYSIS

            Article II, § 24, of the Washington State Constitution provides:

            "The legislature shall never authorize any lottery or grant any divorce."  (Emphasis supplied.)

            InState ex rel. Evans v. Brotherhood, Etc., 41 Wn. (2d) 133, 145, 247 P. (2d) 787 (1952), the supreme court of this state had occasion to express its opinion on the meaning and scope of the foregoing provision.  In that case the court said:

            ". . . we cannot agree with appellant's contention that Art. II, § 24, of our state constitution applies only to chartered or ticket lotteries.  In the first place, we feel most strongly that the language of this constitutional provisionis not ambiguous.  The provision is phrased in the broadest and most sweeping terms.  It prohibitsany lottery. . . ."

            The statutory law relating to lotteries is found in chapter 9.59 RCW.  RCW 9.59.010 provides:

            "A lottery is a scheme for the distribution of money or property by chance, among personswho have paid or agreed to pay a valuable consideration for the chance, whether it shall be called a lottery, raffle, gift enterprise,or by any other name, and is hereby declared unlawful and a public nuisance.

            "Every person who shall contrive, propose or draw a lottery, or shall assist in contriving, proposing or drawing a lottery, shall be punished by imprisonment in the state penitentiary for not more than five years, or by a fine of not more than one thousand dollars, or by both."  (Emphasis supplied.)1/

             [[Orig. Op. Page 3]]

            Our court has said that the language of RCW 9.59.010, supra, (like Article II, § 24, supra), is very broad and that the "name by which the enterprise is called is immaterial," if the following elements are present:  (1) The distribution of money or property; (2) chance; and (3) a valuable consideration paid or agreed to be paid for the chance.  State v. Danz, 140 Wash. 546, 250 Pac. 37 (1926).  See, also,State v. Wong Took, 147 Wash. 190, 265 Pac. 459 (1928).

            With the foregoing general principles in mind, we deem it necessary to refer to the specific facts of the scheme set forth in your letter since thefacts will necessarily determine whether or not the scheme you describe is violative of RCW 9.59.010, supra.  Your letter indicated that the profit-sharing cards

            ". . . are given to customers free, . . . that  [[Orig. Op. Page 4]] the customer must return to the store 13 times to get the free punches, one each week, before being eligible for a prize . . . These 13 punchesare not required of every customer.  The customer's purchases are punched out on the card and when all the $100 worth of purchases are punched out, then a representative of the store removes the cover tab and the amount of the prize is revealed, from $1.00 to $1,000.  The card states:  'No Purchases Necessary to Obtain Free Punches or your Free Card . . . Free Punch or Punches Each Week.' . . ." (Emphasis supplied.)

            In the plan you have described there is no question but that the first two elements of a lottery are present; that is, the distribution of money in varying amounts determined only by chance.  In determining whether or not the third element (consideration) is present, this office must consider the scheme "as a whole."  We cannot separate, for the purposes of this opinion, the possible alternate methods for securing a chance on the $1 to $1,000 prize.  The scheme either is or is not a lottery and it must stand or fall in its entirety.  See,State v. Danz, supra.

            In theDanz case,supra, Simon Danz and S. D. Maine were jointly charged with operating a lottery in violation of RCW 9.59.010, supra.  They were convicted by a jury.  On appeal, the convictions were upheld.  The majority summarized the facts of the case as follows:

            "Appellant Danz operated a moving picture show in Seattle known as the Hollywood Theatre, situated in a residential district.  Appellant Maine was associated with him in the distribution of groceries or other personal property of value from the stage of the theatre once each week.  The property distributed cost the theatre nothing but was collected by Maine from various stores whose compensation was derived from having their names mentioned as the goods were distributed.  The distribution was by lot and chance.  The enterprise was  [[Orig. Op. Page 5]] locally and commonly known as the 'country store' and put on Thursday night of each week, such night being a time when the theatre did not put on one of its biggest pictures.  On the night of each drawing, each adult theatre patron, upon paying the admission price, received a lottery ticket.  The evidence shows that, by a card conspicuously placed at the entrance to the theatre, the appellants offered free tickets to the drawing without the necessity of purchasing an admission ticket to the theatre, in which respect, however, the evidence also shows without dispute that no one ever asked for or received the one without buying the other.  Nor was there any dispute or denial of the fact that the so-called 'country store' was put on as 'an additional drawing card' for such occasions."  (pp. 546-547.)

            In order to clearly establish the factual similarity between the instant promotional scheme and the one before the court in the Danz case, supra, we will refer briefly to the "facts" set forth in the dissenting opinion of Judge Parker.  Judge Parker said:

            ". . . Each theatre patron, upon paying the regular admission price to the theatre, was given one of the numbered chance tickets.  Appellants also offered free numbered chance tickets to anyone who would ask for them, though such person should not purchase an admission ticket to the theatre.  This offer was evidenced by a placard put up in a conspicuous place at the front of the theatre.  The placard was approximately nine by eleven inches in size, having upon its face in plain, large letters these words:

            "'Tickets for drawing free.  Not necessary to purchase admission tickets to theatre.'

            "Persons receiving numbered chance tickets, without the purchase of admission tickets to the theatre, would have exactly the same right to receive goods upon the drawing and distribution as those who purchased admission tickets to the theatre and were in the theatre audience at the time of the drawing and distribution.  Upon the drawings being made on the stage of the theatre, each number as drawn would be announced therefrom and anyone in the audience responding and  [[Orig. Op. Page 6]] producing the duplicate numbered ticket would have some goods given to him by Maine, who would announce the name of the store or concern donating the particular goods then given to the holder of that ticket.  If no response came from anyone in the audience producing the duplicate ticket, announcement would be made outside in front of the theatre of the lucky number drawn, and anyone holding the duplicate ticket, though outside the theatre, would have the right to enter the theatre and receive goods the same as if he had been sitting in the audience inside the theatre.  Thus, the holder of any chance numbered ticket who had purchased a regular admission ticket to the entertainment did not, as holder of such chance numbered ticket, have any superior right or chance over an outsider receiving a chance numbered ticket free of cost to him. . . ." (Emphasis supplied.) (pp. 552-553.)

            On the question of whether the element of "consideration" had been established, the majority said:

            "Thus the state established the first and second elements of the crime charged.  We do not understand that the appellants contend to the contrary.  But the chief argument on behalf of the appellants on this branch of the appeal is that the element of consideration for a chance in the drawing was lacking.  But this, under the facts in this case, cannot be determined as a matter of law in favor of the appellants.  Manifestly, it was the plan and purpose of the appellants to get additional money by putting on the chance drawing.  The testimony shows it was put on as an additional drawing card.  The patrons knew it was 'country store' night.  They paid a valuable consideration to participate.  The fact that they paid the same price charged on other nights, when the theatre was running a more popular play without an added attraction, is not conclusive or controlling in favor of the appellants.  A valuable consideration was paid.  What did the purchaser get?  Not simply a ticket for the screen show, but a ticket to that and to the chance drawing.  The appellants and their patrons so understood and intended it.  That was the plan and purpose for which the consideration  [[Orig. Op. Page 7]] was paid.  Nor is the fact that free tickets were offered to outsiders material in any controlling sense.  None such was given out as a matter of fact and,if there had been, it would not of itself have made any difference.  If in the flourishing days of the Louisiana lottery its management had advertised that it would give a free ticket to the president of every bank in the city of New Orleans, that would not have changed the scheme from a lottery, whether or not any one or all of such free tickets were accepted."  (Emphasis supplied.) (pp. 548-549.)

            While we recognize that the court was divided 5 to 4 in the Danz case, supra, on the issue of consideration, the majority opinion is still the law in this state; accordingly, it must be followed by this office.  The reasoning found in the dissenting opinion (not quoted above) may be persuasive to some, but it does not represent the view of the court.  The factual similarity between the instant scheme and the one before the court in theDanz case has been clearly established by the "facts" themselves as hereinbefore set forth.  Further discussion is unnecessary, except to summarize the legal principles derived from theDanz case.

            The name of the scheme or enterprise is immaterial if the elements of prize, chance and consideration are present.  The legal effect of the transaction is not changed by the fact that some do not pay.  (See, also, State v. Greater Huntington Theatre Corporation, 133 W.Va. 252, 55 S.E. (2d) 681 (1949).) A lottery scheme must be considered as a whole where paying and nonpaying participants are inextricably grouped together.  If it is a lottery as to those who do pay, i.e., purchasers of merchandise, it is necessarily a lottery as to those who do not pay for their chance.  Were it otherwise, one free chance distributed along with the balance of the chances which are paid for would presumptively inject validity into all lottery schemes.  Such a guise for circumventing the prohibition against lotteries appears singularly devoid of any lawful basis.

            Accordingly, it is our opinion, based on State v. Danz, supra, that the "profit-sharing plan" set forth in your letter constitutes a lottery as defined in RCW 9.59.010,supra.2/

             [[Orig. Op. Page 8]]

            For the foregoing reasons, we are of the opinion that the scheme you have described is violative of the lottery statute.3/

             The variety of schemes such as we are presently discussing is as limitless as the inventiveness of the human mind.  The legality of each plan must depend on its factual makeup.  Our conclusion therefore is necessarily confined to the present problem.  The general law, i.e., the three requisites to constitute a lottery should be applied to the facts of each case.