Nevada Tax Commission v. Hicks

• Decision Date: 03 May 1957
• Docket Number: No. 3949,3949
• Citation: 73 Nev. 115,310 P.2d 852
• Parties: NEVADA TAX COMMISSION, composed of Charles H. Russell, Chairman, Robert A. Allen, D. W. Park, Norman D. Brown, Paul D. McDermott, Gordon Lathrop and W. S. Larsh, Appellants, v. Marion B. HICKS, James F. Schuyler, Clifford A. Jones, Victor B. Sayre, Harry Badger, William Deer, Jack Lane, Joe Wells and L. B. Scherer, doing business as the Thunderbird Hotel Company, a copartnership, Respondents.
• Court: Nevada Supreme Court

Page 852

310 P.2d 852

73 Nev. 115

NEVADA TAX COMMISSION, composed of Charles H. Russell,

Chairman, Robert A. Allen, D. W. Park, Norman D.

Brown, Paul D. McDermott, Gordon Lathrop and W. S. Larsh, Appellants, v. Marion B. HICKS, James F. Schuyler, Clifford A. Jones, Victor B. Sayre, Harry Badger, William Deer, Jack Lane, Joe

Wells and L. B. Scherer, doing business as the Thunderbird

Hotel Company, a copartnership, Respondents.

No. 3949.

Supreme Court of Nevada.

May 3, 1957.

E. Frandsen Loomis, Springer & McKissick, Reno, for appellants.

Woodburn, Forman, Wedge, Blakey & Thompson, Reno, Harry E. Claiborne, Las Vegas, for respondents.

MERRILL, Justice.

This matter is before this court on review of action taken by the Nevada Tax Commission. This is an appeal taken by the commission from judgment of the court below setting aside the commission's order suspending the gambling licenses theretofore issued by the state to respondents as partners in the operation of a gambling enterprise.

On February 10, 1955 the commission issued a citation to respondents ordering them to show cause why their state gambling licenses should not be revoked. Hearing was had on March 30, 1955, and on April 25, 1955 the commission made its findings of fact and conclusions of law and entered its order. It declared respondents Marion B. Hicks and Clifford A. Jones unsuitable to hold gambling licenses and suspended the licenses of all respondents until the two unsuitable licensees had disposed of their partnership interest.

On May 18, 1955 the present action was brought by respondents against the commission seeking an injunction against the enforcement of the suspension order. On that date an order temporarily restraining suspension was issued by the trial court and on June 22, 1955 an injunction against suspension, pendente lite, was issued. Trial was had October 17 and 18, 1955. In the course of trial evidence as to the suitability of Hicks and Jones, not presented to the commission, was received by the trial court over the commission's objection. The commission rested its case upon the record made before it. On December 19, 1955 the trial court rendered its decision in favor of respondents, granting a permanent injunction against enforcement of the suspension order upon the ground that it was not supported by substantial evidence. This appeal was then taken by the commission.

The commission contends: (1) That the trial court erred in receiving new evidence and thus transforming what should have been a review of the commission's action into a trial de novo. (2) That the trial court had no authority to grant an injunction pendente lite. (3) The the suspension order was supported by substantial evidence and should have been affirmed.

It is apparent that this appeal, in general, presents two duties to this court: First, that of fixing the jurisdictional area within which the courts shall act in this field of gambling control; Second, that of proceeding to act within the judicial area as so delineated.

We turn to the first of these matters. In this regard statutory language, as hereinafter quoted, is general. However, against a background of common knowledge, of which we here take note, the legislative intent emerges with clarity.

We note that while gambling, duly licensed, is a lawful enterprise in Nevada, it is unlawful elsewhere in this country; that unlawfully followed elsewhere it tends there to create as well as to attract a criminal element; that it is a pursuit which, unlawfully followed, is conducive of corruption; that the criminal and corruptive elements engaged in unlawful gambling, tend to organize and thus obtain widespread power and control over corruptive criminal enterprises throughout this country; that the existence of organized crime has long been recognized and has become a serious concern of the Federal government as well as the governments of the several states.

Throughout this country, then, gambling has necessarily surrounded itself with an aura of crime and corruption. Those in management of this pursuit who have succeeded, have done so not only through a disregard of law, but, in a competitive world, through a superior talent for such disregard and for the corruption of those in public authority.

For gambling to take its place as a lawful enterprise in Nevada it is not enough that this state has named it lawful. We have but offered it the opportunity for lawful existence. The offer is a risky one, not only for the people of this state, but for the entire nation. Organized crime must not be given refuge here through the legitimatizing of one of its principal sources of income. Nevada gambling, if it is to succeed as a lawful enterprise, must be free from the criminal and corruptive taint acquired by gambling beyond our borders. If this is to be accomplished not only must the operation of gambling be carefully controlled, but the character and background of those who would engage in gambling in this state must be carefully scrutinized.

This court has already had occasion to note that the control and licensing of gambling is a duty demanding special knowledge and experience in matters of personnel, operation, and finance, as related to this type of enterprise. Dunn v. Nevada Tax Comm., 67 Nev. 173, 216 P.2d 985. The risks to which the public is subjected by the legalizing of this otherwise unlawful activity are met solely by the manner in which licensing and control are carried out. The administrative responsibility is great.

Against this background of common knowledge we turn to the statutory provisions. The function of the tax commission in gambling control, as applied to the facts of this case, is briefly and generally stated in § 10b of the gambling control act in effect at the time these proceedings were initiated. Sec. 3302.18 NCL 1943-1949 Supp., as amended Stats.1953, c. 284, pp. 439 and 440 (since superseded by NRS 463.130, 463.140.) That section provides, 'It is hereby declared to be the policy of this act that all establishments where gambling games are conducted or operated or where gambling devices are operated in the State of Nevada shall be licensed and controlled so as to better protect the public health, safety, morals, good order and general welfare of the inhabitants of the State of Nevada, and it is hereby made the duty of the Nevada tax commission to investigate into the legal qualifications of each applicant for licenses under this act before any such license is issued, to the end that licenses shall not be issued to unqualified or disqualified persons or to unsuitable persons or for prohibited places or locations.'

The pertinent statutory provision for judicial review is brief. Section 10ff of the gambling control act, in effect at the time these proceedings were initiated, § 3302.22a NCL 1943-1949 Supp. (since superseded by NRS 463.310), deals with the commission's power of revocation and suspension of licenses and provides in part, 'Any such revocation or suspension so made shall become and remain effective until reversed or modified by a court of competent jurisdiction upon review.'

In this case the suspension order was based upon the ground that two of the individual licensees were not suitable to hold license. We are dealing with the duty to determine the suitability of those who would secure or retain gambling licenses. This duty the legislature has expressly imposed upon the tax commission. In cases of revocation or suspension the manner in which this duty is carried out is made subject to judicial review.

To accomplish its duty the commission must first define suitability: fix the standards by which it is to judge suitability. Here it acts administratively. Next is must ascertain and examine the facts of the particular case to determine whether its standards have been met. Here, in cases of revocation or suspension where the factual determinations are made after hearing and notice, the commission acts in a quasi-judicial capacity. It is in this respect only, in the usual case, that revocation or suspension is subject to review by the courts. Accord: State ex rel. Grimes v. Board of Commissioners of City of Las Vegas, 53 Nev. 364, 1 P.2d 570. It is not the province of the courts to decide what shall constitute suitability to engage in gambling in this state. That is an administrative determination to be made by the commission in the exercise of its judgment based upon its specialized experience and knowledge. Accord: Dunn v. Nevada Tax Comm., supra. Whether suitability as defined by the commission exists in the particular case is a question of fact and of evidence, not of administrative ruling. Judgment upon such questions is judgment which the courts are qualified to review.

This is not to say that the administrative determination, (as distinguished from the judicial), is wholly exempt from judicial scrutiny. Standards of suitability may be fixed which are so completely unrelated to the subject as to demonstrate that the administrative action of the commission in defining suitability was arbitrary, discriminatory, capricious, or wholly beyond the sphere of its authority. We are not faced with such a situation in this case, however. The only 'review' with which we are concerned is the review of the action of the commission in its quasi-judicial capacity.

Since the nature of the court review in such a case as this is limited, the action taken by the commission must make it possible for the courts to respect those limits. It would not do, therefore, for the commission to rule simply that upon all the facts of the case it has concluded that the licensee is unsuitable. A court review of such a determination would require the court itself to fix its own standards of suitability in order to determine whether, upon the proof, such standards have been met. As we shall note later in this opinion, the commission in this case did not make such a general determination....