Douglas v. Commonwealth of Kentucky

• Decision Date: 29 November 1897
• Docket Number: No. 10,10
• Parties: DOUGLAS v. COMMONWEALTH OF KENTUCKY
• Court: U.S. Supreme Court

168 U.S. 488

18 S.Ct. 199

42 L.Ed. 553

DOUGLAS

v COMMONWEALTH OF KENTUCKY.

No. 10.

November 29, 1897.

D. W. Sanders and John G. Carlisle, for plaintiff in error.

W. S. Taylor, for defendant in error.

Mr. Justice HARLAN delivered the opinion of the court.

By section 226 of the constitution of Kentucky of 1891, it is provided that: 'Lotteries and gift enterprises are forbidden, and no privileges shall be granted for such purposes, and none shall be exercised, and no schemes for similar purposes shall be allowed. The general assembly shall enforce this section by proper penalties. All lottery privileges or charters heretofore granted are revoked.'

By joint resolution of the general assembly passed January 30, 1892, the attorney general of that commonwealth was directed, in execution of this constitutional provision, to immediately institute and prosecute such legal proceedings as might be necessary to suppress or revoke all lotteries or lottery franchises, privileges, or charters operated in Kentucky.

In conformity with that resolution the present action was instituted in the Louisville law and equity court. The petition charged that the defendants were exercising in the city of Louisville, Ky., and elsewhere, without lawful warrant, the right, privilege, and franchise to operate a lottery. The relief asked was a judgment preventing the exercise by the defendants of such lottery franchise.

The defendant Douglas in his answer set out numerous acts of legislation, under the authority of which he claimed the right to conduct the lottery in question. He insisted that the statutory and constitutional provisions invoked in support of the action were repugnant to the clause of the constitution of the United States prohibiting any state from passing a law impairing the obligation of contracts.

The defense was sustained by the court of original jurisdiction, which overruled a demurrer to the answer; and, the commonwealth having declined to plead further, its petition was dismissed. That judgment was reversed by the court of appeals of Kentucky, and the validity of the above constitutional provision relating to lotteries, and as applied to the defendant's claim of a lottery privilege, was adjudged not to be repugnant to the constitution of the United States. 24 S. W. 233.

The case is here upon writ of error sued out by Douglas, who claims that by the final judgment of the highest court of Kentucky he has been denied a right and immunity secured to him by the constitution of the United States.

It appears that under authority conferred by various legislative enactments, which need not be specially set forth, the mayor and board of councilmen of the city of Frankfort, a municipal corporation of Kentucky, made December 31, 1875, a written agreement with one E. S. Stewart, whereby that city sold, conveyed, and assigned to him a scheme of lottery, composed of 30,900 classes, which it had devised, not more than two of which were to be drawn on each day, Sundays ex- cepted, until the whole number should have been fully drawn; Stewart to have the right to control and operate such scheme in accordance with the provisions of the acts under which the city proceeded. The agreement provided that in consideration of the above sale, assignment, and transfer, Stewart should pay to the city of Frankfort various sums of money at stated times. As required by the agreement, and in conformity with the acts of assembly, he executed to the commonwealth a bond in the penal sum of $100,000, conditioned for a faithful compliance with the provisions of those acts, and for the payment of all sums stipulated to be paid to the city on Frankfort, as well as all prizes drawn in any class under said lottery scheme.

By an act approved March 22, 1890, the general assembly of Kentucky repealed the charter of the Frankfort lottery. Acts Ky. 1889-90, vol. 1, pp. 42, 43. But Stewart had died before the passage of that act, and by contract with his wife, as sole legatee and devisee of his estate, Douglas acquired the right to operate the lottery scheme that had been acquired by Stewart.

It is stated in the answer—and, as this case was determined upon demurrer to the answer, it must be assumed in the present action to be true—that Stewart and Douglas fully complied with all the provisions of the above contract, paid all installments due the city of Frankfort as the same became payable, fully performed every condition of his contract and bond, and were ready and willing to carry out the same according to the terms, stipulations, and covenants thereof.

The answer further averred that on the 11th day of September, 1878, the court of appeals of Kentucky, in the case of Webb v. Commonwealth of Kentucky, brought to enjoin the exercise of the privileges of a lottery grant, adjudged that the sale of a lottery franchise under the authority of the state vested in the vendee a property right to conduct such lottery in accordance with the terms of his contract, which could not be repealed by the legislature of the state, and held section 6 of article 21, c. 28, of the Revised Statutes, attempting such repeal, to be void, so far as it affected the rights of the purchaser under a contract made before the passage of the act.

The answer also contained the following averments: 'Defendant says that he has a vested right to conduct the lottery business by drawing the classes contained in the scheme which the city of Frankfort sold and conveyed to E. S. Stewart under the terms, conditions, and covenants of the contract of December 31, 1875, executed and delivered as aforesaid, and that there has never been at any time more than two classes in said scheme drawn in one day, and there are a large number of classes in said scheme yet to be drawn; that his said right under his said contract was authorized and approved by the commonwealth of Kentucky, repeatedly adjudged valid by the judicial tribunals of this state, and such right has always been held by the courts of this state inviolable, and not subject to repeal, alteration, or modification by subsequent legislatures. Defendant says that he has paid large sums of money for said scheme devised as aforesaid, and said contract, and has made contracts and incurred liabilities involving large sums of money upon the faith of said contract, and relying upon the terms thereof, and upon the decisions of the courts of the state adjudging said contract to be valid, obligatory, and inviolable.'

In support of the contention that the contracts for the purchase of the lottery scheme in question were valid and irrepealable, the defendant in his answer referred to an act of the general assembly approved May 17, 1886, declaring that 'every corporation or person to whom a lottery franchise has been granted by the general assembly of this commonwealth, and which franchise has been declared by a judgment of the court of appeals to be a lawful and existing one, or the lawful grantee, alienee, legatee or assignee of such franchise, shall be authorized to operate and conduct a lottery in this commonwealth when he, she, or it shall have filed with the auditor of public accounts a certified copy of the judgment rendered, and the opinion delivered by the court of appeals in a case heard and determined before it, in which it has determined that a lottery could be lawfully operated under said grant from the general assembly of this commonwealth, and obtain from the said auditor a license (which is hereby authorized and directed to issue on the filing of said copies hereinbefore required), reciting the filing of said copies, and authorizing the operation of said lottery for one year from the date thereof, on the condition that said licensee shall, within five days thereafter, pay to the said auditor of the state the sum of $2,000; and said license issued by said auditor, as hereinbefore directed, and any and all renewals thereof, as hereinafter provided for, shall be conclusive evidence in all the courts of this commonwealth of the rights of the licensee to operate a lottery for the period therein named,' etc.

Under that statute the defendant obtained a license from the audito of public accounts, from year to year, and paid to the state $2,000 annually every year since the passage of that act.

The answer also stated: 'And the general assembly of Kentucky, further recognizing the property rights of this defendant under his said contract, by an act of the general assembly of the state approved May 12, 1884, enacted that the general council of the city of Louisville should be ordinance provide for the payment of $200 per annum for every lottery office, or agency therefor, in the city of Louisville, which ordinance was accordingly passed by the general council of the city of Louisville, and is now a valid and existing law, and this defendant has paid the city of Louisville $200 for each office operated by him, and at the time of the institution of this suit had paid the city of Louisville the sum of $200 for each office he then operated, in advance, for one year from the time of the issue of the license, and that the said licenses thus obtained have not yet expired.'

The defendant, in addition, pleaded res judicata in respect of the matters involved in this action. This defense is thus set forth: 'The defendant further states: That after the making of the contract between the city of Frankfort and said E. S. Stewart, as set forth in the second paragraph hereof, the commonwealth of Kentucky, by her attorney general filed a petition in the Franklin circuit court against the city of Frankfort, the said E. S. Stewart, and others, in the nature of a writ of quo warranto, alleging in said petition that the said E. S. Stewart, and others claiming under him, were selling lottery tickets under the said grant, claiming under the contract referred to in the second paragraph herein; and further alleged that the said board of councilmen of the city of...