Pegasus of Omaha, Inc. v. State, 42135

• Decision Date: 19 June 1979
• Docket Number: No. 42135,42135
• Parties: PEGASUS OF OMAHA, INC., a Nebraska Corporation, Appellant, v. STATE of Nebraska et al., Appellees.
• Court: Nebraska Supreme Court

Page 64

280 N.W.2d 64

203 Neb. 755

PEGASUS OF OMAHA, INC., a Nebraska Corporation, Appellant, v. STATE of Nebraska et al., Appellees.

No. 42135.

Supreme Court of Nebraska.

June 19, 1979.

Syllabus by the Court

1. Police Powers: Gambling. A racetrack messenger service, whether or not it actually engages in gambling, is so intertwined with gambling that it falls within the State's plenary police power to regulate gaming activity.

2. Legislature: Gambling: Statutes. Prohibition by the Legislature of operation of racetrack messenger services bears a reasonable relationship to the legitimate State interest in the regulation of gambling. No constitutional provision renders such prohibition unlawful. § 2-1221, R.R.S.1943.

Richard J. Bruckner, Mark Theisen, and Richard E. Shugrue, Omaha, for appellant.

Paul L. Douglas, Atty. Gen., and Ralph H. Gillan, Asst. Atty. Gen., Lincoln, for appellees.

Heard before KRIVOSHA, C. J., and BOSLAUGH, McCOWN, CLINTON, BRODKEY, WHITE, and HASTINGS, JJ.

PER CURIAM.

The appellant, Pegasus of Omaha, Inc., plaintiff below, filed this action in the District Court for Douglas County, Nebraska, for a declaratory judgment holding that section 2-1221, R.R.S.1943, is unconstitutional. After trial, petition of the plaintiff-appellant was denied. We affirm.

Section 2-1221, R.R.S.1943, in the pertinent part, reads as follows: "Whoever for a fee, directly or indirectly, accepts anything of value to be wagered or to be transmitted or delivered for wager in any pari-mutuel or certificate system of wagering on horse races, or for a fee delivers anything of value which has been received outside of the enclosure of a race track holding a race meet licensed under Chapter 2, article 12, to be placed as wagers in the pari-mutuel pool or certificate system of wagering on horse racing within such enclosure shall be guilty of a misdemeanor * * * " and be punished as provided therein.

Article III, section 24, of the Constitution of Nebraska, generally prohibits games of chance and lotteries but further provides: "Nothing in this section shall be construed to prohibit the enactment of laws providing for the licensing and regulation of wagering on the results of horse races by the parimutuel or certificate method, when conducted by licensees within the race track enclosure at licensed horse race meetings, * * *."

Appellant concedes that the Legislature, in the exercise of its police power, may prohibit entirely games of chance or gambling and further implicitly admits that if the service offered by appellant could be determined to be gambling, the same would be absolutely prohibited as not falling within the exception of allowable gambling of Article III, section 24, of the Constitution of Nebraska. It is the appellant's contention then that the service offered is not gambling. At trial, the appellant offered evidence to show that Pegasus, a Nebraska corporation, engages in the messenger business. Its purpose is to transmit wagers for a fee for persons wishing to wager but unable or unwilling to attend a licensed horse race meeting. The appellant charges a flat 10 percent of the amount to be transmitted to the track. The terms and conditions of the contract appoint the appellant, Pegasus, as agent for persons using its services and specifically states: "Money paid to Pegasus does not constitute a bet or wager. When tendered to Pegasus by a principal, Pegasus will provide an agent to be empowered by that principal to place such money in the parimutuel pool * * * of any enclosed race track which is licensed by the Nebraska Racing Commission to conduct race meetings." The Iowa Supreme Court in State ex rel. Turner v. Drake, 242 N.W.2d 707 (Iowa, 1976), held a similar business did not constitute gambling. From this premise, Pegasus argues that it is conducting a beneficial and lawful business which, under Article I, section 3, of the Constitution of Nebraska, may not be taken away or destroyed under the guise of regulation. Article I, section 3, provides that no person shall be deprived of life, liberty, or property without due process of law. Pegasus contends that while the activity may be peculiarly subject to regulation, it is not within the power of the Legislature to absolutely prohibit an otherwise lawful occupation. It also argues that, in violation of the guarantee of equal protection, the classifications inherent in the statute bear no reasonable relationship to legitimate state policies. We shall deal with the appellant's assignments together.

It is not the position of the State that Pegasus' activities constitute gambling, but it is their position that in the exercise of its police power, a state may constitutionally prohibit an activity which the Legislature determines threatens the health, morals, or general welfare of the people of the state; that the business of Pegasus is, in fact, so intertwined with gambling that the Legislature may properly and has determined that the activity is one that constitutes a danger to the morals or general welfare of the people of this State and thus may be prohibited.

In determining that a statute nearly identical to Nebraska's was valid, the Illinois Supreme Court said: "Even if racetrack-messenger services were operated without a hint of impropriety and even if we were to accept the doubtful proposition that these services do not constitute gambling itself, it is obvious that plaintiffs' business is completely intertwined with gambling and could not exist without it. As such, plaintiffs' business is within the State's plenary police power to regulate gaming activity. It is well within the authority of the State of Illinois to limit gambling on horse races to those who are at the track betting for themselves or betting for others only as a courtesy and not for a fee. In essence, this statute is part of the State's regulatory plan for limited gambling, and we find nothing in the Illinois or Federal constitutions which prevents its enactment or enforcement of such a statute." Finish Line Exp., Inc. v. City of Chicago, 72 Ill.2d 131, 19 Ill.Dec. 626, 379 N.E.2d 290.

The Illinois court considered the report of a special investigation by a legislative committee in its decision. A copy of the report was considered by a committee of the Nebraska Legislature which conducted hearings concerning the legislation outlawing messenger services. Appellant here contends that reception by the trial court of that report was error. They argue that it is irrelevant since Pegasus has not been shown to have engaged in any of the abuses cited therein. The objection misses the point. The report was relevant as part of the legislative history of the challenged statute. In its summary of the report, the Illinois court said: "Both houses of the General Assembly passed this amendment unanimously after the Illinois Legislative Investigating Commission reported a long list of serious and widespread problems with the messenger services, including booking of bets without buying the corresponding parimutuel tickets, failure to pay off winners, involvement of organized crime, and a reduction in track attendance and betting with a corresponding loss of local and State revenue. 'To be a valid exercise of the police power, the enactment of the legislature must bear a reasonable relation to the public interest sought to be protected, and the means adopted must be a reasonable method to accomplish such objective. (Citations.)' (Sherman v. Reynolds, Inc. v. Mahin (1970), 47 Ill.2d 323, 327, 265 N.E.2d 640, 642.) In view of the reported problems, it cannot fairly be said that the legislature acted unreasonably in prohibiting the racetrack-messenger services from charging a fee rather than attempting to regulate those activities." Finish Line Exp., Inc. v. City of Chicago, supra.

The activity of Pegasus is so intertwined with gambling that, under its constitutional power to regulate, the Legislature may ban messenger services operated for a fee from accepting bets and conveying the bets to a licensed racetrack. The equal protection argument that persons who perform...