Harriman Inst. of Soc. Research, Inc. v. Carrie Tingley Crippled Children's Hosp., 4425.

• Decision Date: 17 October 1938
• Docket Number: No. 4425.,4425.
• Citation: 43 N.M. 1,84 P.2d 1088
• Parties: HARRIMAN INSTITUTE OF SOCIAL RESEARCH, Inc.,v.CARRIE TINGLEY CRIPPLED CHILDREN'S HOSPITAL (two cases).
• Court: New Mexico Supreme Court

43 N.M. 1

84 P.2d 1088

HARRIMAN INSTITUTE OF SOCIAL RESEARCH, Inc.,

v.CARRIE TINGLEY CRIPPLED CHILDREN'S HOSPITAL (two cases).

No. 4425.

Supreme Court of New Mexico.

Oct. 17, 1938.Rehearing Denied Dec. 12, 1938.

Appeal from District Court, Bernalillo County; Irwin S. Moise, Judge.

Action for a declaratory judgment by the Harriman Institute of Social Research, Inc., against the Carrie Tingley Crippled Children's Hospital, to determine the legality of certain proposed acts in performance of a contract between the parties. From an adverse judgment, plaintiff appeals, and defendant files cross-appeal.

Affirmed.

The lottery statutes sought to prevent widespread participation in any kind of lottery whether conducted by a charitable organization or otherwise. Comp.St.1929, §§ 35-3803 to 35-3808.

Joseph L. Dailey, John F. Simms, and Waldo H. Rogers, all of Albuquerque, for appellant.

Frank H. Patton, Atty. Gen., Richard E. Manson, Asst. Atty. Gen., and Rodey & Dickason and William A. Sloan, all of Albuquerque, for appellee.

SADLER, Justice.

The question for decision is whether a lottery conducted as part of a fair to be held in this state for the benefit of a charitable institution is legal if less than the gross proceeds of the fair are to be devoted to the charitable purpose. The issue arises out of a suit by The Harriman Institute of Social Research, Inc., a Maryland corporation qualified to do business in New Mexico, as plaintiff, against Carrie Tingley Crippled Children's Hospital, a corporate state institution, as defendant, to determine the legality of certain proposed acts in performance of a contract entered into between them under date of June 17, 1938.

In brief, the complaint sets forth that the Harriman Institute had been active in social research along humanitarian lines; that defendant was organized to provide proper care and treatment for the crippled children of New Mexico and to make available therefor the buildings erected, furnished and equipped for such purpose at Hot Springs, New Mexico; that prior to June 17, 1938, the Harriman Institute had caused a complete investigation and survey to be made of the equipment and purposes of Carrie Tingley Crippled Children's Hospital and that both corporations became convinced that, having similar aims and purposes, if a union of efforts were made such union “would be merely a prelude to the service that could be rendered in future years, not only to New Mexico, but to the nation, by continuing and multiplying the services to humanity offered by petitioner (plaintiff) and defendant, making such services available to crippled children outside of the State of New Mexico, and providing means of research in an effort to eliminate and prevent diseases of children all over the nation.”

And so, as the complaint reveals, the two corporations entered into a contract whereby the Harriman Institute undertook to raise the sum of $10,000,000 within the period of three years from June 17, 1938, date of the contract, said moneys to be held in trust for the use and benefit of the defendant. One million dollars of the ten million thus to be raised was to be produced within the period of one year from date of the agreement.

The contract gave plaintiff the exclusive right to solicit and raise funds for the hospital during the period of the agreement, except funds arising from legislative appropriations and fees received from hospitalization of patients. The plaintiff covenanted that in the performance of its contract it would conduct its business strictly in accordance with the laws of the State of New Mexico and of the United States of America.

After execution of the contract, Harriman Institute disclosed its plan to raise the first million dollars of the ten million agreed to be raised by promoting a fair to be held at Tingley Field in the city of Albuquerque between November 20th and 26th, 1938, consisting of all types of commercial, industrial and artistic exhibits, with large displays of Spanish, Mexican and Indian arts and handicraft for exhibit and sale; also extensive entertainment with many of the most popular stage, screen and radio stars booked for appearance to provide amusement for those attending the fair. Season tickets to the fair were to be sold for $1.00 each, entitling the holder to daily admission. The ticket also entitles the holder to participate in a lottery for cash prizes for each unit of 1,750,000 of such tickets as follows:

250 prizes of $ 500.00 each $125,000.00 100 ‘ ‘ 1,000.00 ‘ 100,000.00 5 ‘ ‘ 10,000.00 ‘ 50,000.00 4 ‘ ‘ 12,500.00 ‘ 50,000.00 3 ‘ ‘ 25,000.00 ‘ 75,000.00 2 ‘ ‘ 50,000.00 ‘ 100,000.00 $500,000.00

The proposed drawings for the cash prizes are planned for Thanksgiving Day, November 24, 1938, the last day of the fair, at Tingley Field in Albuquerque, New Mexico. The presence at the drawing of the holder of a lucky number is not necessary in order to entitle him to receive the cash prize represented by his number. Tickets to the fair are to be sold by authorized agents and sub-agents, each confined to a designated area, the State of New Mexico having been divided into certain selling districts. The agents are to receive 25% of the sale price of the tickets as their commission. It is proposed to allocate the remainder of the sum realized from the sale of season admission tickets as follows:

(1) 40% thereof to be placed in a trust fund for the purpose of creating the cash prizes set out above.

(2) 25% to be placed in another trust fund for the purpose of covering estimated necessary expenses of the fair.

(3) 35% thereof to go into a trust fund as provided in said contract for the use and benefit of Carrie Tingley Crippled Children's Hospital.

When it came to the attention of the hospital board that plaintiff proposed to raise the initial funds promised by said contract by the sale of tickets for a lottery in connection with a fair, a controversy arose as to whether the plan does not breach the covenant in the contract between the parties that “it (plaintiff) will conduct its business strictly in accordance with the laws of the State of New Mexico and of the United States of America.” Whereupon the Honorable Clyde Tingley, as Governor of New Mexico, called upon Honorable Frank H. Patton, as Attorney General of said state, for an opinion as to the legality of the proposed plan. Its validity was urged by virtue of the so-called exemption in favor of lotteries for charitable purposes contained in 1929 Comp. § 35-3808. Under date of July 29, 1938, Attorney General Patton rendered his opinion holding illegal the plan outlined. Thereupon this suit for declaratory judgment was instituted.

The foregoing facts appearing upon the face of the complaint, the defendant challenged the sufficiency of the facts pleaded to support the relief prayed upon the ground, first, that all the proceeds of the fair proposed to be promoted and conducted by plaintiff were not to be expended for charitable purposes, and, second, that the contract entered into between the two corporations was ultra vires as an unlawful delegation by defendant of the duty conferred and enjoined upon it by Laws 1937, c. 13, of soliciting and “receiving all gifts and bequests and the supervision, management and control of all funds received by defendant.” The trial court sustained the first ground of demurrer by holding that the proposed plan was not within the provisions of the exception contained in 1929 Comp. § 35-3808, and therefore was unlawful. It overruled the second ground of the demurrer by holding that the contract between the plaintiff and defendant was not ultra vires, and was therefore lawful. The plaintiff appealed from said judgment, assigning as error the action of the trial court in sustaining the first ground of the demurrer. The defendant took a cross-appeal, assigning as error the action of the court in overruling the second ground of the demurrer.

A decision of the question presented by the appeal of the Harriman Institute involves the consideration of our lottery statutes, particularly 1929 Comp. § 35-3808 thereof. The act was adopted on February 12, 1889, consisting of six sections. It now appears as 1929 Comp. §§ 35-3803 to 35-3808, inclusive. Section 35-3803 inveighs against promoting lotteries. The next section, 35-3804, penalizes the writing, printing, vending or possessing of any ticket, token or device, purporting to entitle the holder, bearer or any other person to any prize or share or interest therein to be drawn in any lottery in or out of the State. Section 35-3805 makes it a crime to permit “any house, shop or other building” to be used for conducting a lottery or any of its incidents. Advertising a lottery in any manner is proscribed and penalized by § 35-3806, while the following section, 35-3807, condemns and outlaws fictitious lotteries, prescribing penalties. Section 35,3808, the final section of the act, is the one whose meaning becomes the subject of strongest controversy. It reads:

“The provisions of the five preceding sections shall be construed to apply to every device or devices and only to such device or devices as are commonly called or known as lottery, although designated or called by any other name, but shall not be construed to apply to any sale or drawing of any prize at any fair held in this state for the benefit of any church, public library or religious society, situate or being in this state, or for charitable purposes, when all the proceeds of such fair shall be expended in this state for the benefit of such church, public library, religious society, or charitable purposes. L. '89, Ch. 47, § 6; C.L. '97, § 1332; Code '15, § 1765.”

[1] The intended meaning of the phrase “all the proceeds”, occurring in the exempting language of the preceding section, will be decisive. If it means what, upon its face, it appears to mean, the “entire proceeds”, the “gross proceeds”, then plaintiff's position is rendered...