Automatic Music and Vending Corp. v. Liquor Control Com'n

• Decision Date: 24 November 1986
• Docket Number: Docket No. 76285
• Citation: 426 Mich. 452,396 N.W.2d 204
• Parties: AUTOMATIC MUSIC AND VENDING CORPORATION, an Ohio Corporation, and Fraternal Order of Eagles, Sanford Aerie, # 3677, Plaintiffs-Appellees, v. LIQUOR CONTROL COMMISSION, Defendant-Appellant. 426 Mich. 452, 396 N.W.2d 204
• Court: Michigan Supreme Court

Page 204

396 N.W.2d 204

AUTOMATIC MUSIC AND VENDING CORPORATION, an Ohio Corporation, and Fraternal Order of Eagles Sanford Aerie, # 3677 Plaintiffs-Appellees, v. LIQUOR CONTROL COMMISSION, Defendant-Appellant.

Docket No. 76285.

426 Mich. 452, 396 N.W.2d 204

Supreme Court of Michigan.

Argued Oct. 9, 1986.

Decided Nov. 24, 1986.

Cooper and Fink, Daniel S. Cooper, P.C., Mark J. Zausmer, David H. Fink, P.C., Lansing, for plaintiffs-appellees.

Frank J. Kelley, Atty. Gen., Louis J. Caruso, Sol. Gen., Counsel of Record, Lansing, Frank J. Pipp, Asst. Atty. Gen., Larry F. Brya, Asst. Atty. Gen., Kevin Thom, Asst. Atty. Gen., for defendant-appellant.

WILLIAMS, Chief Justice.

The issue in this case is whether a draw poker machine is an illegal gaming device under M.C.L. Sec. 750.303; M.S.A. Sec. 28.535. We hold that the machine in question is an illegal device under that statute. We also reject plaintiff's challenges to the constitutionality of the statute.

FACTS

The facts are accurately and concisely summarized in the opinion of the Court of Appeals, 141 Mich.App. 458, 461-462, 367 N.W.2d 413 (1985):

"Early in 1982, officers of the Michigan Liquor Control Commission became aware that the Sanford Eagles Club had a 'draw poker' video machine in the club. This machine has five windows. When twenty-five cents is inserted in the machine, a playing card appears in each window. Below each window is a button. If a player is dissatisfied with the card first appearing in a window, he may press the button under that card and the first card will disappear and be replaced by another card.

"The machine has two counters on the inside, one which keeps track of the number of quarters placed into the machine and the other which keeps track of the number of free replays erased off the machine without playing them. The device also has a key mechanism which can erase free replays without the replays being played.

"Once a satisfactory hand is established, the game is played as five-card draw poker. When certain hands are obtained, credits are given which entitle the player to free plays.

"On March 30, 1982, the local inspector for the MLCC, Robert Basket, and his supervisor, Donald French, went to the Sanford Eagles Club and played the machine. Supervisor French won 54 free games on that date.

"The officers asked the bartender, Lydia Oswald, if the games could be traded for cash. She informed them that the Eagles did not pay off in cash but only in free replays.

"On May 25, 1982, the same Liquor Control Commission officers returned to the club and played the machine. After this the officers confiscated the machine as a gambling device and issued a complaint with the Michigan Liquor Control Commission against the Sanford Eagles Club. A hearing was held before Hearing Commissioner Andrew Metcalf, Jr., who rendered an opinion on December 1, 1982, finding the machine to be a game 'partly of skill and partly of chance' and an unlawful gambling device under MCL 750.303(1) and 1980 AACS R 436.1013(2). Commissioner Metcalf also ruled that Automatic Music and Vending Corporation could not intervene in the hearing as it was not an involved party. The commissioner ordered a fine of $250 and costs. He did not confiscate the machine.

"Commissioner Metcalf's decision was upheld by the commission on appeal in January, 1983.

"Automatic Music then applied to the circuit court for Ingham County for an order of superintending control to review the actions of the commission. Judge Robert Holmes Bell, in a terse order, reversed the commission and found that free replays do not constitute a reward and are not gaming as defined by MCL 750.303; MSA 28.535."

The Court of Appeals affirmed the order of the circuit court and held: (1) that the draw poker machine was not a gaming device, and (2) that M.C.L. Sec. 750.303(2); M.S.A. Sec. 28.535(2) was unconstitutional. This Court granted leave to appeal 424 Mich. 877 (1986).

I. STATUTORY PROVISIONS

The plaintiff, the Fraternal Order of Eagles, holds a club license issued by the Michigan Liquor Control Commission. As the holder of a club license, plaintiff is subject to regulation 1980 AACS, R 436.1013 which provides in part:

"A licensee shall not allow any gambling devices on the licensed premises which are prohibited by the statutes of this state."

M.C.L. Sec. 750.303; M.S.A. Sec. 28.535, the statute which discusses gambling devices provides in relevant part:

"(1) A person who for hire, gain, or reward, keeps or maintains a gaming room, gaming table, game of skill or chance, or game partly of skill and partly of chance, used for gaming, or who permits a gaming room, or gaming table, or game to be kept, maintained, or played on premises occupied or controlled by the person, is guilty of a misdemeanor, punishable by imprisonment for not more than 2 years, or a fine of not more than $1,000.00....

"(2) This section shall not apply to a mechanical amusement device which may through the application of an element of skill reward the player with the right to replay the mechanical device at no additional cost if the mechanical amusement device is not allowed to accumulate more than 15 replays at 1 time; the device is designed so that accumulated free replays may only be discharged by reactivating the device for 1 additional play for each accumulated free replay; and the device makes no permanent record directly or indirectly of the free replays awarded."

A. Analysis of M.C.L. Sec. 750.303(1); M.S.A. Sec. 28.535(1)

Since M.C.L. Sec. 750.303(1); M.S.A. Sec. 28.535(1) does not define the term "gaming," ¹ we refer to the common-law definition which requires the presence of three elements: (1) price or consideration, (2) chance, and (3) prize or reward. 89 A.L.R.2d 815, 827. See also State v. Pinball Machines, 404 P.2d 923, 925 (Alas.1965); Farina v. Kelly, 147 Conn. 444, 449-450, 162 A.2d 517 (1960); State v. Paul, 43 N.J.Super. 396, 402-404, 128 A.2d 737 (1957); Westerhaus Co. v. Cincinnati, 165 Ohio St. 327, 335-336, 135 N.E.2d 318 (1956). Therefore, a machine which encompasses these three elements is a machine "used for gaming" under M.C.L. Sec. 750.303(1); M.S.A. Sec. 28.535(1).

With respect to the draw poker machine which is the subject of this dispute, both parties agree that consideration, in the form of the money needed to play the game, and chance, in the random distribution of the cards, are present. The more controversial issue is whether or not a free game constitutes a reward or prize. This issue has previously been considered and decided by this Court.

In Oatman v. Port Huron Chief of Police, 310 Mich. 57, 59, 16 N.W.2d 665 (1944), we held that "[s]ince these free plays, the testimony shows, would ordinarily cost the player five cents each, the opportunity to have free plays is a thing of value." See also Henry v. Kuney, 280 Mich. 188, 192, 273 N.W. 442 (1937).

" '[W]here there is an element of chance in the operation of the slot machine--where the one who plays the machine stands to win or lose money, trade checks, or prizes, by a chance,--the machine is a gambling device....' " (Emphasis added.)

We see no reason to reverse this decision as we are not persuaded that changes in the amusement machine industry have rendered the statute meaningless. ² Therefore, the draw poker machine is a gambling device under M.C.L. Sec. 750.303(1); M.S.A. Sec. 28.535(1).

B. Relevance of the Statutory Exception

In 1975, the Legislature amended M.C.L. Sec. 750.303; M.S.A. Sec. 28.535 and added subsection 2. That section provides for the exemption of certain devices from subsection 1. The exemption states that it

"shall not apply to a mechanical amusement device which may through the application of an element of skill reward the player with the right to replay the mechanical device at no additional cost if the mechanical amusement device is not allowed to accumulate more than 15 replays at 1 time; the device is designed so that accumulated free replays may only be discharged by reactivating the device for 1 additional play for each accumulated free replay; and the device makes no permanent record directly or indirectly of the free replays awarded."

The draw poker game at issue does not qualify for this exemption because: (1) it allows the accumulation of more than fifteen replays, (2) there is a button on the machine which can discharge all the free replays, and (3) there is a permanent record kept in the machine of the number of free replays awarded.

II. CONSTITUTIONALITY OF THE STATUTORY EXCEPTION

The Court of Appeals held that M.C.L. Sec. 750.303(2); M.S.A. Sec. 28.535(2) unconstitutionally denies equal protection and is unconstitutionally vague. We disagree with both findings.

A. Equal Protection Challenge

The Court of Appeals correctly stated that the appropriate test for an equal protection claim under both the Michigan and the United States Constitutions is whether the legislation bears a reasonable relationship to a legitimate goal of the Legislature. As we stated in Johnson v. Harnischfeger Corp., 414 Mich. 102, 114, 323 N.W.2d 912 (1982), in challenging a statute on equal protection grounds, a plaintiff must show that the classifications created "are so arbitrary that they cannot be supported under any state of facts, either known or which could reasonably be assumed." See also Shavers v. Attorney General, 402 Mich. 554, 613, 267 N.W.2d 72 (1978); Mutchall v. Kalamazoo, 323 Mich. 215, 227, 35 N.W.2d 245 (1948).

It appears that the Court of Appeals in this case found that the distinction made in the statute between machines which allow fifteen or fewer free replays and those which allow more was unconstitutionally arbitrary. We cannot agree. The Legislature may reasonably believe that the larger the number of free replays available, the greater the incentive to make cash payoffs. As the existence of such payoffs may be difficult to prove, the Legislature strove to avoid the...