Commonwealth v. Kentucky Jockey Club

• Decision Date: 03 March 1931
• Citation: 38 S.W.2d 987,238 Ky. 739
• Parties: COMMONWEALTH v. KENTUCKY JOCKEY CLUB et al.
• Court: Kentucky Court of Appeals

38 S.W.2d 987

238 Ky. 739

COMMONWEALTH v. KENTUCKY JOCKEY CLUB et al.

Court of Appeals of Kentucky

March 3, 1931

Rehearing Denied June 16, 1931.

Appeal from Circuit Court, Jefferson County, Chancery Branch, First Division.

Suit by the Commonwealth against the Kentucky Jockey Club and others. From judgment dismissing the action, the Commonwealth appeals.

Affirmed.

J. W Cammack, Atty. Gen., M. B. Holifield, Asst. Atty. Gen Elwood Hamilton, of Louisville, and Coleman Taylor, of Russellville, for appellant.

A. J Carroll, A. B. Bensinger, and H. E. McElwain, Jr., all of Louisville, and Maurice Galvin, of Cincinnati, Ohio, for the Commonwealth.

PER CURIAM.

The commonwealth instituted an action in equity against the Kentucky Jockey Club, Latonia Jockey Club, and Churchill Downs, to inquire into the character of their past transactions, and to regulate the scope of their future conduct. The petition presented a threefold aspect, asking relief of an equitable character, embracing also an action in the nature of a quo warranto to forfeit the charters and franchises of the several corporations, and seeking incidentally to recover a large sum of money as damages.

The right to forfeit the franchises of the three defendants was claimed upon the grounds:

(1) That they had operated the pari mutuel system of betting on horse races within the inclosures at the race tracks, and while the races were being run thereon, under licenses from the state racing commission, upon the assumed authority of statutes that were unconstitutional and void.

(2) That they had committed offenses against the statutes of the state designed to prevent and to punish corrupt lobbying and pernicious political practices.

(3) That they had committed acts and engaged in transactions not prohibited or punished by any particular statute, but detrimental to the public welfare, and violative of the implied and express contracts upon which the continuance of the corporate franchises were conditioned, and which constituted an abuse and misuse of their powers.

The prayer for an injunction was predicated upon an assumption of the accuracy of the grounds of forfeiture just recited, and was designed to restrain the defendants from the use of their property for the creation or continuance of a public nuisance, and from threatened violation of penal statutes respecting race track gambling and the corruption of elections.

A substantial sum of money was demanded as damages on account of the acts for which forfeiture of franchises was claimed, and as an incident to the relief sought in that part of the action in the nature of a quo warranto.

The final feature of the petition, and which, in connection with the claim for an injunction, constituted its character as an action for equitable relief, was designed to subject the assets of the Latonia Jockey Club and Churchill Downs, derived by them from the Kentucky Jockey Club, to the satisfaction of the damages demanded from the latter because of its conduct as delineated in the petition. The defendants challenged every position taken by the commonwealth in the petition.

The chancellor held: (a) That the statutes permitting pari mutuel betting on horse races under certain conditions were constitutional and valid; (b) that the commonwealth was not entitled to an injunction; (c) that the right to relief against the Kentucky Jockey Club for its other alleged acts was not defeated by its dissolution or the devolution of its property to its creature corporations, and that a substantial fine could be imposed upon it, as an incident to the ouster, if that action was found justified, but in the determination of which it was entitled to a jury trial; (d) that, if the commonwealth recovered a substantial judgment as a penalty, fine, or damages in the civil action in the nature of a quo warranto, it would have the right in equity to subject the assets of the two creature corporations, received from the Kentucky Jockey Club in consideration of their capital stock, to the satisfaction of such judgment. The case, therefore, was transferred to the common pleas branch for the trial of the issues concerning which defendants were entitled to a jury trial. Judge Dailey, to whom the case was referred, reconsidered the issues raised, and decided that the petition failed to state a cause of action against the Kentucky Jockey Club, since it did not contain allegations excluding the operation of section 1138, Kentucky Statutes, providing that "prosecutions by the commonwealth to recover a penalty for a violation of any penal statute or law" shall be commenced within one year after the right to such penalty accrued, and not thereafter, "unless a different time is allowed by the law imposing the penalty." He held that no cause of action was stated against Churchill Downs sufficient to authorize a forfeiture of its charter, and that the Latonia Jockey Club was not suable in Jefferson county for anything alleged against it. The rulings resulted in a final dismissal of the action, and the commonwealth complains thereof.

1. The first question to be disposed of is the validity of the various statutes exempting the pari mutuel system of betting on horse races under certain conditions from the operation of the anti-gambling laws. A brief history of the course of legislation and judicial decision upon the subject is appropriate. In 1881, this court decided that the machine known as French pool or pari mutuel was "a contrivance used in betting," within the denunciation of the statutes then in force. Com. v. Simonds, 79 Ky. 618; Cf. Elias & Co. v. Gill, 92 Ky. 573, 18 S.W. 454, 13 Ky. Law Rep. 798. In 1886 the Legislature enacted the law constituting the present sections 1960 and 1961 of the Kentucky Statutes. The original bill passed by the Senate contained no exemptions of any character. In the House an amendment was added by which it was provided: "This act shall not apply to persons who may sell combination or French pools on any regular race track during the races thereon." The Senate accepted the amendment, and so the act was adopted and approved March 25, 1886.1 Session Acts 1885-86, p. 36; Gen. Stats. (1887 Ed.) p. 692.

After the adoption of the present Constitution, the Statutes were revised, re-enacted, and republished as Kentucky Statutes, and the present sections 1960, 1961, were carried forward in that revision Acts 1891-92-93, c. 177, p. 740, §§ 6, 7.

In 1906 an act was adopted creating the state racing commission and defining its powers and duties. Ky. Stats. §§ 3990a--1 to 3990a--5. It was empowered to prescribe the rules under which running races could be conducted in this commonwealth.

In 1908 the "Pool Room Act" was enacted, with comprehensive inhibitions, but containing this exemption:

"The provisions of the act shall not apply to enclosures during regular race meetings or such enclosures wherein horse racing is being conducted under license from the state racing commission, and it shall not apply to enclosures during regular race meetings wherein trotting and pacing races are being conducted by regularly organized associations organized for that purpose." Kentucky Statutes, § 3914b--6. This act was held valid in Com. v. Starr, 160 Ky. 260, 169 S.W. 743.

In 1920, section 1328a, Kentucky Statutes, was passed prohibiting betting on horse races, except at authorized race meetings held pursuant to license from the state racing commission. At the same session a tax of $2,500 for each day races were run was imposed upon each race track under the jurisdiction of the state racing commission. Section 4223b--1, Ky. Stats.

In 1908 the case of Grinstead v. Kirby, 110 S.W. 247, 33 Ky. Law Rep. 287, was decided. The opinion did not discuss the validity of the various statutes then in force. It dealt only with a construction thereof. The court tacitly assumed the constitutionality of the statutes. In the course of the opinion, it was said: "When the new Constitution came into effect, and special legislation was prohibited, it was perceived by the Legislature that some general provision must be made if the privileges which these racing associations then enjoyed were to continue. The raising of horses for the track had long been a favored industry in a large part of the state and much capital was invested in it. The Legislature evidently had in mind granting a privilege to the regular race tracks during the races thereon. *** The object of the exception was not to protect those who sell the pools. What the Legislature had in mind was the benefit to the regular race tracks during the races thereon. *** It cannot be presumed that the Legislature intended in one section of the act to legalize the selling of the pools and in another section to impose a penalty on all those who buy pools. *** But manifestly the Legislature intended that the selling of combination or French pools on any regular race track during the races thereon should not be illegal."

In State Racing Commission v. Latonia Agricultural Association, 136 Ky. 173, 123 S.W. 681, 25 L.R.A. (N. S.) 905, the question presented was the validity of a rule of the racing commission to prohibit "book making" on the race courses and to prescribe the pari mutuel system of betting. In the opinion it was said (page 182 of 136 Ky. 123 S.W. 681, 684):

"But the Legislature by section 1961 excepted race tracks from the operation of the 'Paris-Mutual' system of betting, which was sustained by this court as a legitimate exercise of police power, in Grinstead v. Kirby, 110 S.W. 247, 33 Ky. Law Rep. 287."

The court then was composed of the members which had constituted it less than two years before when the case of Grinstead v. Kirby was decided.

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