Charnes v. Central City Opera House Ass'n

• Decision Date: 15 May 1989
• Docket Number: No. 87SC241,87SC241
• Citation: 773 P.2d 546
• Parties: Alan N. CHARNES, as Executive Director of the Department of Revenue of the State of Colorado, Petitioner, v. The CENTRAL CITY OPERA HOUSE ASSOCIATION, a Colorado nonprofit corporation; and the Brown Palace Hotel Associates Limited Partnership, d/b/a The Brown Palace Hotel, Respondents.
• Court: Colorado Supreme Court

Page 546

773 P.2d 546

Alan N. CHARNES, as Executive Director of the Department of Revenue of the State of Colorado, Petitioner, v. The CENTRAL CITY OPERA HOUSE ASSOCIATION, a Colorado nonprofit corporation; and the Brown Palace Hotel Associates Limited Partnership, d/b/a The Brown Palace Hotel, Respondents.

No. 87SC241.

Supreme Court of Colorado En Banc.

May 15, 1989.

Duane Woodard, Atty. Gen., Charles B. Howe, Chief Deputy Atty. Gen., Richard H. Forman, Sol. Gen., Steven M. Bush, Asst. Atty. Gen., Denver, for petitioner.

Halaby & McCrea, Theodore S. Halaby, Thomas L. Kanan, Denver, for respondents.

QUINN, Chief Justice.

The question in this case is whether a fundraising event conducted by a nonprofit organization constitutes legally permissible or legally impermissible "gambling" as defined in section 18-10-102(2)(d), 8B C.R.S. (1986), when the participants in the event use "scrip money" in card and other wagering games with the objective of winning additional "scrip money" to be used ultimately for bidding on various items auctioned off during the fundraising event. In Central City Opera House Association v. Charnes, 743 P.2d 58 (Colo.App.1987), the court of appeals held that the activities conducted during the fundraising event constituted legally permissible gambling. We reach a contrary result and reverse the judgment of the court of appeals.

Under Colorado law "gambling" is a class 1 petty offense, and "professional gambling" is a class 1 misdemeanor. § 18-10-103(1) & (2), 8B C.R.S. (1986). "Gambling" is defined in section 18-10-102(2), 8B C.R.S. (1986), as the risking of money or other thing of value for gain contingent in whole or in part upon lot, chance, or the happening of an event over which the person taking the risk has no control. After so defining "gambling," section 18-10-102(2) goes on to list four separate activities which are not intended to be included within this statutory definition. One of the four exemptions is a mode of social gambling defined in subparagraph (d) of section 18-10-102(2) as follows: any game or wager which is incidental to a bona fide social relationship, which is participated in by natural persons only, and in which no person participates directly or indirectly in "professional gambling." ¹ "Professional gambling" consists of aiding or inducing another to gamble and doing so with the intent to derive a profit therefrom. § 18-10-102(8)(a), 8B C.R.S. (1986). ² In addition, the Colorado Liquor Code prohibits any person licensed to sell malt, vinous, or spirituous liquors at retail to authorize or permit any gambling, or the use of any gambling device or machine, except as provided by the Bingo and Raffles Law. ³ § 12-47-128(5)(n)(I), 5 C.R.S. (1985).

It was against this statutory backdrop that the Central City Opera House Association (Opera House Association), a nonprofit corporation organized under the laws of the State of Colorado and holding tax-exempt status under section 501(c)(3) of the federal Internal Revenue Code, planned to hold a fundraising event known as the Central City Gala (Gala) on April 19, 1986, at the Brown Palace Hotel in Denver, Colorado. Because the plans for the Gala contemplated that the invited guests would use "scrip money" in playing poker, blackjack, craps, and roulette, and in bidding at an auction, and because the Brown Palace Hotel held a Colorado hotel and restaurant liquor license, see § 12-47-119, 5 C.R.S. (1985 & 1988 Supp.), the association and the hotel filed a complaint in the Denver District Court seeking a declaration of their legal rights and responsibilities with respect to the Gala. The association and the hotel also requested an order enjoining several law enforcement agencies and officials, including the Denver District Attorney, the Executive Director of the Colorado Department of Revenue, the Director of the Department of Excise and Licenses for the City and County of Denver, and the Denver Chief of Police, from interfering with the Gala. In answering the complaint, the governmental agencies and officials took the position that the card and other wagering games at the Gala would constitute illegal gambling in violation of Colorado law.

The case was tried to the court on January 13, 1986. Testimony during the trial centered on the nature of the Opera House Association and the specific plans for the fundraising event. The association's president testified that the association is a nonprofit corporation exempt from taxation pursuant to section 501(c)(3) of the federal Internal Revenue Code and that its purposes are the preservation of the Central City Opera House and other historic buildings in Central City and the offering of quality opera and theater programs for people living in Denver and other cities in Colorado. The association consists of approximately 200 members who pay a minimum of $100 annually to maintain their membership. All proceeds from the association's activities are used for charitable purposes and are not distributed to its officers, directors, or members.

The volunteer co-chairperson of the fundraising event also testified and described the plans for the Gala. Attendance would be by invitation only, extended to approximately 2,500 people who were association members, members of an affiliated women's guild, or had shown interest in the association in the past. The Gala was to be held at the Brown Palace Hotel, which holds a Colorado liquor license. The hotel would not charge the association for the hotel space, but would charge for any food and drink served to the Gala invitees. The price for tickets for the Gala would be $375 per couple, with corporate tables available for $3,000 or $5,000. The $375 price for tickets would include a buffet dinner, cocktails, music, and dancing in a "Gay 90s" setting. Although the hotel space provided for the event could accommodate approximately 600 guests, it was anticipated that about 300 people would attend.

The Gala invitees attending the event could make an additional contribution for "scrip money," which could be used to play such games as poker, blackjack, craps, and roulette. These games would be conducted by association volunteers. The "scrip money" could be used to bid on donated items auctioned off during the event. These items would include such goods and services as a fur coat, jewelry, dinners at local restaurants, and vacations at various hotels. The highest bidder with sufficient "scrip money" to cover the bid would be considered the successful bidder for the item in question. The "scrip money" could not be converted back to cash, and any "scrip money" not used to purchase items at the auction would become worthless.

At the conclusion of the evidence the trial court determined that neither the Opera House Association nor the Brown Palace Hotel would be in violation of Colorado law in staging the Gala. The court reasoned that the association was a tax-exempt organization under section 501(c)(3) of the Internal Revenue Code, that the proceeds from the Gala would be applied to the charitable activities of the association and no one would derive a "profit" therefrom, and that any gambling at the event would be incidental to a bona fide social relationship. The court accordingly concluded that the card and wagering games at the Gala would constitute permissible social gambling. After the entry of the trial court judgment, the Gala was held as scheduled on April 19, 1986.

The Executive Director of the Colorado Department of Revenue appealed the ruling of the district court to the court of appeals, which affirmed the judgment. We thereafter granted the Director of Revenue's petition for certiorari to consider whether the card and other wagering games at the Gala constituted legally permissible or legally impermissible "gambling" under Colorado law.

II.

The facts in this case are undisputed, and the issue before us involves a question of law, namely, the proper construction and application of a statute to the undisputed facts. See, e.g., People v. Colorado Springs Board of Realtors, Inc., 692 P.2d 1055, 1068 (Colo.1984); Weed v. Monfort Feed Lots, Inc., 156 Colo. 577, 580, 402 P.2d 177, 179 (1965). The focal point in resolving this issue is the statutory definition of "gambling" in section 18-10-102(2). This definition finds its source in the Colorado Criminal Code, which was enacted in 1971. Ch. 121, sec. 1, § 40-10-102, 1971 Colo.Sess.Laws 388, 477-78. The statutory definition of "gambling" is contained in section 18-10-102(2), 8B C.R.S. (1986), and consists of the following three elements: (1) risking any money or thing of value; (2) for gain--that is, "the direct realization of winnings," § 18-10-102(1), 8B C.R.S. (1986); and (3) contingent in whole or in part upon lot, chance, or the happening of an event over which the person taking a risk has no control. The definition of "gambling," however, does not stop there, but rather goes on to exempt certain conduct which otherwise might reasonably have been considered as satisfying the general definition of "gambling." The statutory exemption pertinent to this case consists of a permissible form of social gambling which, as outlined in subsection 18-10-102(2)(d), 8B C.R.S. (1986), requires the following components: (1) any game, wager, or transaction incidental to a bona fide social relationship; (2) participated in by natural persons only; and (3) in which no person directly or indirectly participates in "professional gambling"--that is, aiding or inducing another to engage in gambling, with the intent to derive a "profit" therefrom, § 18-10-102(8)(a), 8B C.R.S. (1986). For purposes of "professional gambling," the term "profit" means realized or unrealized benefit, direct or indirect, including without limitation benefits from proprietorship, management, or unequal advantage in a series of transactions. § 18-10-102(1), 8B C.R.S. (1986).

In enacting the statutory definition of "gambling"...