Freedom Road Found. v. Ohio Dept. of Liquor ControlFreedom Road Found. v. Ohio Dept. of Liquor Control
(No. 96-1006—Submitted May 21, 1997—Decided November 5, 1997.)
APPEAL from the Court of Appeals for Franklin County, No. 95APE08-1030.
{¶ 1} Plaintiff-appellant, Freedom Road Foundation (“Freedom Road”), is a charitable corporation and nonprofit educational entity that is classified as an exempt charitable organization under
{¶ 2} Freedom Road uses liquor-permit-premises owners and employees as volunteers for the organization to sell and redeem “tip tickets” on the liquor-permit
{¶ 3} The dispute arose because the Liquor Control Department cited several of the permit-premises owners under its
{¶ 4} As the litigation progressed, the central issue became whether Freedom Road “conducted” the tip ticket operation, as required by
{¶ 5} The cause is now before the court upon the allowance of a motion to certify the record.
Schottenstein, Zox & Dunn Co., L.P.A., and John A. Gleason, for appellee.
COOK, J.
I
FREEDOM ROAD’S REQUEST FOR DECLARATORY JUDGMENT IS PROPER
{¶ 6} The department initially argues that the trial court never should have reached the merits of the declaratory judgment action because Freedom Road lacks standing to challenge the department’s actions. The department’s argument is based on the fact that Regulation 53 has been enforced against liquor-permit premises, not Freedom Road. The department states that it, in fact, has no authority to regulate the activities of charitable organizations such as Freedom Road. Accordingly, the department argues that only permit-premises owners have standing to challenge the citations.
{¶ 7} By requesting a declaratory judgment, however, Freedom Road is not directly challenging any particular administrative order of the department. Freedom Road would have no standing to make such a challenge. Instead, Freedom Road seeks judicial construction of
{¶ 8} The Declaratory Judgment Act allows “[a]ny person * * * whose rights, status, or other legal relations are affected by a * * * statute [or] rule * * * [to] have determined any question of construction * * * arising under such * * * statute [or] rule * * * and obtain a declaration of rights, status, or other legal relations thereunder.”
II
SUBSTANTIVE ISSUES BEFORE THE COURT
{¶ 9} The remaining issues before the court involve interpretation of
A
FREEDOM ROAD CONDUCTS THE FUNDRAISING ACTIVITY
{¶ 10} Analysis of the statutory terms chosen by the General Assembly to identify the potential actors under
{¶ 12} “Operate,” while not expressly defined in
B
OWNERS AND EMPLOYEES ARE NOT COMPENSATED FOR OPERATING THE FUNDRAISING ACTIVITY
{¶ 13}
{¶ 14} Appellant argues that permit holders and their employees necessarily receive an impermissible “benefit” from any increased patronage that results from the sale of Freedom Road tip tickets in their establishments. Although the department produced no evidence regarding the effect of tip ticket sales on patronage at trial, Freedom Road’s president, Lindy Douglas, acknowledged in her deposition testimony that sales of tip tickets allow participating permit premises to keep customers who otherwise might go elsewhere to engage in gambling.
{¶ 15} In interpreting a statute, we must begin by examining its express terms. The statute itself does not expressly prohibit one who operates or assists a scheme or game of chance from deriving any benefit from that activity. Instead, the statute carefully sets out a list of the types of compensation that such persons are forbidden from receiving. None of the listed forms of compensation may be received “for operating or assisting in the operation of a scheme or game of chance.” The statute thus contemplates a quid pro quo — the receipt of something of value for the giving of another. The benefit of increased patronage, on the other hand, does not come in the form of compensation and therefore is not within the prohibited class.
{¶ 16} We conclude that the benefit of increased patronage does not fall within the prohibited class of compensation listed in
III
FREEDOM ROAD IS NOT ENTITLED TO THE INJUNCTIVE RELIEF THAT IT SEEKS
{¶ 17} Along with a declaration of its rights under statute, Freedom Road requested that the court “temporarily, preliminarily and permanently enjoin the Department, its agents, employees and anyone acting in active concert or participation with it, from issuing citations as a result of Freedom Road’s charitable fundraising activities on permit premises throughout the State of Ohio.”
{¶ 18} There may be any number of reasons not addressed in this action that would authorize the department to cite the permit holders under its Regulation 53. Our analysis is necessarily restrained by the limited evidence presented by the parties to this action. Accordingly, it would be improper to grant the broad injunctive relief requested by Freedom Road.
IV
CONCLUSION
{¶ 19} For all of the foregoing reasons, we affirm, in part, the decision of the appellate court. We reverse that portion of the appellate court’s decision ordering remand and issue a declaration that
Judgment accordingly.
RESNICK and F.E. SWEENEY, JJ., concur.
DOUGLAS, J., concurs in the syllabus and judgment only.
MOYER, C.J., PFEIFER and LUNDBERG STRATTON, JJ., dissent.
{¶ 20} I respectfully dissent from the majority‘s conclusion that the record before us demonstrates that Ohio liquor permit owners or employees who participate in Freedom Road‘s tip ticket scheme of chance as described by Freedom Road’s president are not “compensat[ed], directly or indirectly, for operating or assisting in the operation of any scheme or game of chance” as prohibited by
I
R.C. 2915.02 and Regulation 532
{¶ 22} Lindy Douglas, Freedom Road’s president, testified that permit holders benefit from selling the tip tickets in that sale of the tickets “keep[s] the customers in their bars” who otherwise might leave to engage in gambling at “the Eagles, Elks or Moose lodges or American Legions.” This evidence demonstrates that permit holders indirectly received a pecuniary benefit in the form of increased patronage, i.e., increased income, as a result of the sale of tip tickets on their liquor establishment premises. In my view, a bar owner who increases profits as a result of offering on-premises charitable gambling thereby indirectly receives a form of compensation for operating or assisting in that scheme. Thus that permit holder falls within the proscription of the quoted last sentence of
{¶ 23} Moreover, if selling Freedom Road tip tickets is an express or implied employment duty of permit holder employees, then those employees are in fact compensated for their assistance in operating the scheme of chance when they receive their pay from their employer.
{¶ 25} However, Freedom Road, as a charitable organization, could legally conduct a tip ticket scheme of chance pursuant to
{¶ 26} If, however, permit-premises employees were selling tip tickets not because they desired to volunteer a service for Freedom Road, but instead because selling the tickets was an express or implied duty of employment assigned for the purpose of increasing the income of the liquor establishment, then the employees would not be volunteers. I agree with the court of appeals that the record is insufficient to indicate whether the persons selling tip tickets were acting as employees of the permit holders or as volunteers.
{¶ 27} If it is true that those employees were not true volunteers, the employer permit holder directing their activities would itself be “conducting” the tip ticket scheme, and the scheme of chance would not be solely “conducted by a charitable organization” as required by
{¶ 28} In determining whether permit holders themselves “conduct” the tip ticket scheme at issue, we look to
{¶ 29} It is possible for more than one legal entity to be deemed to be “conducting” a single scheme of chance, and the testimony of Douglas shows that such a circumstance may well have existed in this case. The evidence in this case shows that Freedom Road itself did little more than periodically drop off new tip ticket supplies and pick up proceeds. On this record, in which Freedom Road’s supervision of actual day-to-day sales of tip tickets was minimal at best, I conclude that the evidence could support a conclusion that permit holders themselves illegally conducted, i.e., backed, promoted, organized, managed, carried on, or prepared, a scheme of chance for their own profit, and not for altruistic or charitable motives, whether or not Freedom Road also may be deemed to have conducted the scheme.
{¶ 30} It is appropriate to mention the scale of the tip ticket scheme at issue here. Douglas testified that, prior to 1994, tip ticket sales had generated revenues totaling as much as $40,000 a week from sales in nearly three hundred fifty liquor establishments. It is doubtful that the General Assembly intended to authorize a largely unregulated gambling scheme of this magnitude when it adopted the charitable organization exemption provision found in
Disposition
{¶ 31} Even assuming that the proposition of law set forth in the syllabus is correct, I do not believe that it is fully dispositive of the action before us. Rather, I would affirm the court of appeals’ remand of this cause for further proceedings.
{¶ 32} Unfortunately the combined decision and judgment entry issued by the trial court is ambiguous as to whether the court intended thereby to award a declaratory judgment or, rather, to deny a declaratory judgment and issue findings of fact and conclusions of law justifying that denial. The caption to its decision reads “Decision and Entry Denying Plaintiff Freedom Road Foundation’s Request for Declaratory Judgment and Permanent Injunctive Relief Filed on October 19, 1994.” (Emphasis added.) The trial court expressly stated in the body of its opinion that “Freedom Road’s requests for a declaration and an injunction are DENIED.”
{¶ 33} Nevertheless, the opinion included findings of fact and conclusions of law, which might, in a general sense, be deemed declarations of law. Clearly, however, the trial court refused to grant Freedom Road the declaratory judgment it sought, that being a declaration that “its charitable fundraising activities are in compliance with
{¶ 34} In either event, my review of the record leads me to conclude that the trial court entered final judgment adverse to Freedom Road based solely on its determination that participating permit owners/employees were not volunteers. It failed to discuss numerous other arguments the department had made, apparently deeming them to be moot, as to why the best exercise of the trial court’s discretion would be complete denial of declaratory judgment. Among those arguments were contentions that no true case or controversy existed between the parties and that issuance of a declaratory judgment was precluded by res judicata and estoppel doctrines. Moreover, I note that
{¶ 35} The requirement of
{¶ 36} In view of the majority’s rejection of the sole basis for the trial court decision, I believe the trial court should be given the opportunity to consider the department’s remaining arguments against entry of declaratory judgment. In effect, the majority has itself determined that a declaratory judgment should be issued, has formulated the terms of that declaratory judgment and has incorporated that declaration into syllabus law. The majority thereby encroaches upon the principle that issuance or denial of declaratory judgment is committed in the first instance to the sound discretion of the trial court, reversible only upon demonstration of an abuse of that discretion or error of law.
{¶ 37} I do not believe the court was bound to issue a declaratory judgment at the conclusion of the trial. As noted in 2 Anderson, Actions for Declaratory Judgments (1951) 919-920, Section 383, “there is a distinction between the jurisdiction of a court to grant declaratory relief and the exercise of discretion pursuant to that jurisdiction. * * * [T]he final exercise of the court’s discretion either to declare rights and legal relations of the parties, or to decline to pronounce a declaratory judgment, cannot be anticipated in advance of the development of the proof.” Thus, even where a justiciable controversy exists, declaratory judgment may be refused if,
{¶ 38} For the foregoing reasons I would affirm the judgment of the court of appeals and remand the cause to accord the trial court the opportunity to reconsider whether to issue a declaratory judgment.
PFEIFER and LUNDBERG STRATTON, JJ., concur in the foregoing dissenting opinion.
Notes
“(A) No person shall do any of the following:
“* * *
“(2) Establish, promote, or operate or knowingly engage in conduct that facilitates any scheme or game of chance conducted for profit[.]
“* * *
“(D) This section does not apply to any of the following:
“(1) Schemes of chance conducted by a charitable organization that is * * * [a recognized 501(c)(3) organization], provided that all of the money or assets received from the scheme of chance after deduction only of prizes paid out during the conduct of the scheme of chance are used by, or given, donated, or otherwise transferred to, any [recognized 501(c)(3) organization], and provided that the scheme of chance is not conducted during, or within ten hours of, a bingo game conducted for amusement purposes only pursuant to section 2915.12 of the Revised Code[.]
“(2) * * *
“No person shall receive any commission, wage, salary, reward, tip, donation, gratuity, or other form of compensation, directly or indirectly, for operating or assisting in the operation of any scheme or game of chance.
“(E) Division (D) of this section shall not be construed to authorize the sale, lease, or other temporary or permanent transfer of the right to conduct schemes of chance or games of chance as granted by division (D) of this section, by any charitable organization that is granted that right.” (Emphasis added.)
“(B) No person authorized to sell alcoholic beverages shall have, harbor, keep, exhibit, possess or employ or allow to be kept, exhibited or used in, upon or about the premises of the permit holder any gambling device * * * which is or has been used for gambling offenses * * *.
“* * *
“(D) This rule * * * shall not prohibit the conducting of schemes of chance * * * by charitable organizations * * * so long as there is strict compliance with division (D) of section 2915.02 of the Revised Code.”