State v. Nixon

Decision Date05 January 1979
Docket NumberNo. 378S44,378S44
Citation384 N.E.2d 152,270 Ind. 192
PartiesSTATE of Indiana, Appellant, Hoosier Horse Industries, Inc. (Intervening Defendant) Appellant, v. Joseph H. NIXON, Appellee.
CourtIndiana Supreme Court

Theodore L. Sendak, Atty. Gen., Donald P. Bogard, Deputy Atty. Gen., Chief Counsel, Ronald J. Semler, Deputy Atty. Gen., Indianapolis, for appellant State of Indiana.

Henry J. Price, James A. Strain, Donald E. Knebel, Indianapolis, for appellant Hoosier Horse Industries, Inc.

David F. McNamar, Michael R. Franceschini, Indianapolis, Robert M. Gholston, Franklin, for appellee.

PRENTICE, Justice.

This is an appeal from a judgment granting injunctive relief and determining the constitutionality of 1977 Indiana Acts Public Law 47 (March 25, 1977), hereinafter referred to as the Pari-Mutuel Wagering Act.DP The Indiana General Assembly enacted Public Law 47 over the veto of the Governor. The Act permits pari-mutuel wagering upon horse races and harness races under conditions contained in the Act, and establishes the Indiana Racing Commission to regulate racing and pari-mutuel betting. Under it, the Governor is empowered to appoint and remove this Commission's members. The Act provides for the licensing of persons and organizations to conduct racing with pari-mutuel betting, and provides that pari-mutuel race track betting shall be permitted only in those Indiana counties which authorize such betting by ordinance approved in a county-wide referendum. The Act empowers the Governor to appoint and remove the Commission's members, provides the manner in which the pari-mutuel betting operates and requires payment of a tax by the racetrack on its share ("retainage") of the bets to the State and County treasuries. Ind.Code §§ 4-25-1-1 to 4-25-6-15 (Burns 1977); Ind.Code §§ 35-45-5-5, 35-31-2-7 (Burns 1977).

Nixon, the plaintiff (appellee), sought a declaratory judgment that the Pari-Mutuel Wagering Act was unconstitutional and an injunction forbidding the Governor from appointing members to the Indiana Racing Commission, as required by the Act. 1 The named defendants were the State of Indiana and the Honorable Otis R. Bowen, Governor of Indiana, ("State"). Hoosier Horse Industries, Inc., ("Hoosier Horse") a corporation desiring to conduct racetrack pari-mutuel betting, intervened as a defendant. The Johnson Circuit Court, after hearing evidence, found the Act to be unconstitutional upon several grounds and issued the requested injunctive and declaratory relief. The State and Hoosier Horse have appealed to this Court pursuant to Ind.R.App.P. 4(A)(8) which is applicable because a statute of this State has been declared unconstitutional.

I.

Nixon argues that this appeal is moot because of a failure of appellants to include the Governor of Indiana as a nominal party to the appeal. In this regard the State's brief expressly states that the Governor is not a party to the appeal. Nixon's argument and the State's assertion are incorrect. Indiana R.App.P. 2(B) provides that "All parties of record in the trial court Shall be parties on appeal." (Emphasis added.) The rule operates of its own force to make all parties in the trial court parties on appeal, whether such parties participate actively or not. Therefore the asserted mootness, the immunity of the injunction against the Governor from review, does not exist.

City of Indianapolis v. Indiana State Board of Tax Commissioners, (1974) 261 Ind. 635, 308 N.E.2d 868, relied upon by Nixon, does not reconstruct the old rules of necessary and indispensable parties. In City of Indianapolis the Only appellant was the city, which lacked standing. Therefore no proper complainant sought to invoke the jurisdiction of this Court, and there was consequently no "case or controversy" to be adjudicated. 261 Ind. at 638, 308 N.E.2d at 869. In this case the State is not alleged to lack standing as a party. The appeal is not moot.

II.

The Act defines the "pari-mutuel system of wagering" as follows:

" 'Pari-mutuel system of wagering' means the method or system or wagering on horses at the track only under which those persons who wager on horses, which finish in the position or positions for which wagers are taken, share in the total amount wagered, less deductions specified and permitted by law." Ind.Code § 4-25-1-10 (Burns 1977 Supp.).

The evidence as to the operation of the betting is not in dispute. Bettors make their bets by purchasing tickets in the amount they wish to risk. Bettors bet that a given horse will "win" (finish in first place), "place" (finish in first or second place), or "show" (finish in first, second, or third place) by purchasing the appropriate ticket. All money bet to win is placed in the "win pool," to place in the "place pool," and to show in the "show pool." The licensed pari-mutuel operator is authorized by the Act to retain 17% Of each pool, Ind.Code § 4-25-4-3, from which he pays special taxes, and the operator and the State split the "breaks," fractional amounts left over after calculation of winnings to the nearest ten cents. The pools are distributed to bettors holding winning tickets as follows:

"(a) Win pool:

(1) Win tickets sold on all horses entered in a race, times the ticket prices = the gross win pool.

(2) Gross win pool, less 17% Retainage = the net win pool.

(3) The net win pool, divided by the number of tickets sold on the winning horse = the gross payoff.

(4) Gross payoff, less breakage (if any) = payoff to a bettor holding a winning win ticket.

(b) Place pool:

(1) Place tickets sold on all horses entered in a race, times the ticket price = the gross place pool.

(2) The gross place pool, less 17% Retainage, less the price of place tickets sold on the winning horse to place and place tickets sold on the place horse = the net place pool.

(3) The net place pool, divided by 2 (the win and the place horses) = the net place pool for the win and place horses.

(4) The net place pool for the winning horse, divided by the equivalent number of $2.00 place tickets sold on the winning horse = the place payoff for the equivalent number of $2.00 tickets before adding the price of the ticket purchased, less breakage (if any).

(5) The net place pool for the place horse, divided by the equivalent number of $2.00 place tickets sold on the place horse = place payoff for the equivalent number of $2.00 tickets before adding the price of the ticket purchased, less breakage, (if any).

(6) To the amounts determined in 4 and 5 add the price of the ticket purchased, less breakage (if any) = payoff to a bettor holding a winning place ticket.

(c) Show pool:

(1) Show tickets sold on all horses entered in a race, times the ticket price = the gross show pool.

(2) The gross show pool, less 17% Retainage, less the price of tickets sold on the win, place, and show horses = the net show pool.

(3) The net show pool, divided by 3 (the win, place, and show horses) = the net show pool for each of the win, place and show horses.

(4) The net show pool for the winning horse, divided by the equivalent number of $2.00 show tickets sold on the winner = show payoff for the equivalent number of $2.00 tickets on the winning horse before adding the price of the ticket, less breakage (if any).

(5) The net show pool for the place horse, divided by the equivalent number of $2.00 show tickets sold on the winning place horse = show payoff for the equivalent number of $2.00 tickets on the place horse before adding the price of the ticket, less breakage (if any).

(6) The net show pool for the place horse, divided by the equivalent number of $2.00 show tickets sold on the winning place horse = show payoff for the equivalent number of $2.00 tickets on the show horse before adding the price of the ticket, less breakage (if any).

(7) To the amounts determined in 4 and 5 and 6, add the price of the ticket purchased, less breakage (if any) = payoff to a bettor holding a winning show ticket." Finding of Fact No. 10.

The Act provides that a winning bettor can never recover less than the amount of his bet plus ten cents, Ind.Code § 4-25-4-5. The "odds" on each horse (return on amount of bet) are thus determined by the distribution of the bets. The Act provides that each pari-mutuel racetrack must maintain a sign displaying approximate odds as they develop during the period before the race when the ticket windows are open. Ind.Code § 4-25-4-5.

Witnesses testified that numerous factors enter into the outcome of the race itself, including the speed and endurance of each horse, the weight and ability of each jockey, the condition of the track and the length of the course. These factors can be assessed from the record of past success of horses and riders, knowledge of the genealogy and training of the horses, and observation of the horses and track before the race. The necessary documentary information can be obtained from "racing forms" of general circulation or from racetrack programs.

Based upon the provisions of the Act and this evidence, the trial court held that pari-mutuel wagering constituted a lottery within the meaning of the following provisions of our Constitution: "No lottery shall be authorized; nor shall the sale of lottery tickets be allowed." Indiana Constitution Article 15, § 8.

Appellants dispute this conclusion as contrary to law. Inasmuch as the Legislature is presumed to have concluded that pari-mutuel wagering was not a lottery, it was the burden of Nixon in the trial court to establish clearly that such wagering was within the constitutional prohibition. Reilly v. Robertson, (1977) Ind., 360 N.E.2d 171, 175. On appeal this Court presumes the correctness of the judgment of the court below, but this presumption will not remedy any deficiencies in Nixon's showing of unconstitutionality.

In Tinder v. Music Operating, Inc., (1957) 237 Ind. 33, 40, 142 N.E.2d 610, 614, heavily relied upon by Defendant and Intervening Defendant, we said:

"What is lottery? The Courts of...

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