NATHAN SCHUR v. CITY OF SANTA MONICA

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District Court of Appeal, Second District, Division 3, California.

NATHAN H. SCHUR, Inc., a California corporation, Plaintiff and Respondent, v. CITY OF SANTA MONICA, a Municipal corporation, and H. W. Hutchinson, Chief of Police, Defendants.

Roy C. TROEGER, Sevant Smith, Joseph Silverman, Max Kleiger, Edmond G. Friege, and Nathan Franklin, Plaintiffs and Appellants, v. CITY OF SANTA MONICA, a Municipal corporation, H. W. Hutchinson, Chief of Police of the City of Santa Monica, and K. O. Grubb, City Clerk of the City of Santa Monica, Defendants. Roy C. Troeger, Sevant Smith, Joseph Silverman, Max Kleiger, Edmond G. Friege, and Nathan Franklin, Appellants. (in consolidated cases).*

Civ. 20948.

Decided: January 24, 1956

LeSage & Bowman, and Thomas W. LeSage, Pasadena, for appellants Roy C. Troeger and others. Caryl Warner, Los Angeles, for respondent Nathan H. Schur, Inc., a corp.

On January 25, 1954, Nathan H. Schur, Inc., a corporation, commenced an action (No. 623918) against the City of Santa Monica, alleging in the complaint that a certain city ordinance (which restricts licenses for games of skill to one license for each 12,000 of population) created a monopoly and was unconstitutional.

On May 19, 1954, said Schur corporation commenced another action (No. 628822) against said city and its chief of police, for declaratory relief, seeking among other things a determination of the validity of section 4226 of the Municipal Code of Santa Monica (which permits the operation of games of skill under certain circumstances), and for an injunction restraining defendants from expending any city tax funds for licensing games under said section 4226 or other salaries in administering or policing of games licensed under that section. It was alleged in the amended complaint therein that an actual controversy exists involving the validity of said section 4226; defendant city contends that said ordinance is valid, and plaintiff contends that the ordinance is void and in violation of the state gambling laws; said section and the games licensed thereunder are illegal in that they are games, in the nature of a lottery in violation of section 321 of the Penal Code, wherein the participants play against each other and a prize is distributed by chance; that the licensing of the games pursuant to said section 4226 of the Santa Monica Municipal Code constitutes a violation of section 337 of the Penal Code which makes it a felony for any city officer to issue a license giving authority to any person to conduct a game prohibited by section 330 of the Penal Code; and said section 4226 and the licensing procedure of defendant city violates the state gambling laws.

On June 2., 1954, Roy C. Troeger and

On June 29, 1954, Roy C. Troeger and (No. 630504) against the City of Santa Monica, its chief of police and its city clerk, for declaratory relief and an injunction. It was alleged in the complaint, in part, that plaintiffs for the past several years have been licensees ‘under police permits and licenses' granted pursuant to sections 4226, 6122 and 6207 of the Municipal Code of Santa Monica; they have been and are operating games ‘predominately of skill’ in compliance with said code; prior to the filing of this action, plaintiffs submitted to the defendant chief of police applications for renewal of their police permits, in order to obtain the renewal of their licenses be fore June 30, 1954 (the date designated in the Municipal Code for expiration of annual licenses). It was alleged therein, upon information and belief, that the chief of police intended to refuse to issue the permits, which would prevent the renewal of plaintiffs' licenses, and which would make the operation of plaintiffs' businesses after June 30, 1954, a misdemeanor. It was alleged further therein that a dispute had arisen between plaintiffs and defendants as to whether the individual skill ball games operated by plaintiffs are games in which skill is the predominate factor in determining the winner, and as to whether plaintiffs are entitled to police permits and licenses. Plaintiffs prayed that the court declare the rights of the parties and determine that the permits and licenses should be issued to them; that the court order the chief to issue the permits, and order the city clerk to issue the licenses; and that defendants be enjoined from interfering with the operation of plaintiffs' businesses pending the determination of the action.

On June 30, 1954, a temporary restraining order was issued in this action (No. 630504), restraining the defendants from ‘interfering with the operation of said businesses of the plaintiffs on the ground that they do not have a license from said City or that they do not have a permit.”

On July 16, 1954, the three cases above mentioned were consolidated. It appears that a preliminary injunction was issued in the Troeger action, restraining the city from interfering with the operation of games by plaintiffs. It also appears that a preliminary injunction was issued in the second Schur action, restraining the city from expending tax funds in licensing games under section 4226.

On September 20, 1954, Troeger and his five co-plaintiffs gave notice of motion to file a supplemental complaint. On September 27, the motion was granted by Judge Whyte (in the law and motion department). In the supplemental complaint they alleged that when plaintiffs' applications for permits were denied by the chief of police, the plaintiffs requested a public hearing by said chief, which request was denied; thereafter plaintiffs requested a public hearing before the City Council of Santa Monica for a determination as to whether the permits and licenses for the games should be issued; the council conducted a hearing on August 17, 1954; due notice of the hearing was given; plaintiffs offered evidence at the hearing ‘both oral and documentary, and under oath’; Nathan H. Schur appeared at the hearing and ‘offered his sworn testimony in opposition to the said plaintiffs'; the council duly adopted findings of fact and conclusions of law, a copy of which is attached to the supplemental complaint; a certified reporter's transcript of the evidence at said hearing will be presented to the court; by reason of said findings and hearing plaintiffs are entitled to a review of the evidence and a determination by the court that by reason of said evidence and findings plaintiffs are entitled to the permits and licenses. Plaintiffs prayed, in the supplemental complaint, that the court review the evidence offered at the hearing and the findings and conclusions based thereon; and that a writ of mandate or other appropriate writ be issued commanding the chief of police and the city clerk to issue the permits and licenses.

The city council's findings of fact and conclusions, referred to in the supplemental complaint, were made on August 24, 1954. The council found that ‘there is no apparent danger to public health and safety of the people of the City; that the applicants, their officers or agents, if any, are morally responsible and have a good reputation, and that the conducting of the business of the applicants in the locations indicated on their applications is in conformance with the zoning laws' that ‘said games are played’ as described in Exhibit A attached to the findings; that the ‘game as outlined’ in Exhibit A is a game in which skill predominates. As a ‘Conclusion,’ the council stated that ‘the applicants are entitled to police permits and licenses.’

At the time the three consolidated actions came on for trial (September 29), the time for answering the supplemental complaint in the Troeger action had not expired, and defendant city waived time to answer and admitted the facts pleaded in the supplemental complaint. Counsel for Troeger and his co-plaintiffs stated that the original transcript of the evidence in the proceeding before the city council was available for presentation to the court. He objected ‘to the introduction of any testimony,’ and he made a motion that the court limit the evidence ‘to said findings and transcripts' in the proceeding before the city council. The objection was overruled and motion was denied. Evidence was received in the Troeger action, and in the second Schur action (regarding validity of section 4226). Evidence in the first Schur action, or ‘monopoly’ action, was not presented for the reason, as stated by the trial judge, that in the event he found that the games in question were games of chance, it would not be necessary to present evidence in that action. The court vacated the order of consolidation as to that action.

In consolidated findings as to the other two actions, the court found that section 4226 of the Santa Monica Municipal Code is a valid ordinance; that the game for which Troeger and his co-plaintiffs sought licenses constitutes a lottery, that chance is the dominating factor in determining the result, and that the games violate Chapters 9 and 10 of Title 9 (of Part 1) of the Penal Code (re lotteries and gaming); that the expending of public funds by defendant city, its agents, and the chief of police and his agents, in the licensing of gambling games prohibited by Chapters 9 and 10, Title 9, of the Penal Code of California, and the expending of such funds for printing, preparing, and filing applications for permits constitutes an illegal expenditure and waste of public funds; and that the chief of police and the city clerk lawfully refused the applications of plaintiffs Troeger, et al., for the issuance of permits and licenses. A judgment was entered in the second Schur action, and a judgment was entered in the Troeger action.

Some of the recitals in the judgment in the second Schur action were that the three actions had previously been ordered consolidated (by the presiding judge); the order of consolidation as to action No. 623918 (first Schur action—monopoly action) had been vacated (by the trial judge); and consolidated findings of fact and conclusions of law (as to the other two actions—Troeger and second Schur) had been filed. In that judgment (second Schur action) it was adjudged that Nathan H. Schur, Inc., a corporation, have declaratory relief against defendant City of Santa Monica, and the court declares that section 4226 of the Santa Monica Municipal Code (which permits the operation of games of skill) is a valid ordinance but the game as played, described in the findings, violates said ordinance and the laws of California. It was further adjudged therein that defendant city, its officers, agents, and defendant chief of police are enjoined from expending public funds of the city in the licensing of any said gambling games played in violation of Chapters 9 and 10, Title 9, of the Penal Code of California; and said defendants and persons are further enjoined from expending public funds of said city for printing, preparing, issuing or filing of applications for permits or licenses for any of said gambling games.

The recitals which are in the judgment in the Troeger action include the recitals above mentioned which are in the judgment in the second Schur action. In that judgment (Troeger action) it was adjudged that section 4226 of the Santa Monica Municipal Code is valid, but the games for which plaintiffs seek licenses are played in violation of said ordinance and in violation of Chapters 9 and 10, Title 9, of the Penal Code of California; and that defendants (city, chief of police, and city clerk) recover costs from plaintiffs.

Troeger and his five co-plaintiffs appeal from both judgments (except the portions that said section 4226 is valid).

Appellants contend that the trial court erred in refusing to review the findings of the City Council of Santa Monica. They argue that the court was limited to a review of the action of the city council to determine whether the council had abused its discretion; that the court had no jurisdiction to decide the issue of fact, as to gambling, in the first instance; that the city council had adjudicated the factual issue by determining that the games were games of skill.

As above shown, the Schur corporation commenced an action against the city and chief of police on May 19 (case No. 628822) for declaratory relief and an injunction restraining defendants from expending public funds for licensing the games. Said plaintiff sought a declaration that the games were games of chance in violation of the state gambling laws. About 40 days later (June 29), Troeger and other operators of the games commenced an action against the city, chief of police, and city clerk for declaratory relief and an injunction restraining defendants from interfering with the operation of the games. Those plaintiffs sought a declaration to the effect that the games were games of skill and not games of chance, that the city ordinance was valid, and that the licenses should be issued. About two weeks later (July 16), upon motion by the defendants in both actions, the cases were consolidated. About a month and a half later (September 27—two days before the trial), the plaintiffs, Troeger and others, filed the supplemental complaint alleging matters relative to the hearing before the city council. It thus appears that the plaintiffs in both cases sought declaratory relief with respect to the same controversy, that is, the illegality or legality of the games;—the Schur action being filed first, seeking a declaration that the games were in violation of state gambling laws, and seeking an injunction to prevent waste of public funds in licensing and policing the games; and the Troeger action being filed over a month later, seeking a declaration that the games were games of skill, that the city ordinance was valid, and that the licenses should be issued. It appears further that the defendant City of Santa Monica (and the chief and clerk) asked for the consolidation of the cases. Also, the proceeding before the city council, which was commenced by Troeger and the other operators, was not commenced until after they had invoked the jurisdiction of the court, and until after the city had asked for and obtained a consolidation of the cases. There was no pleading by the city that the issue as to illegality or legality of the games should be decided by the city council. Of course, the issues of the Schur case, as to violation of state gambling laws and as to injunction to prevent waste of public funds, could not be decided by the city council. The court was required to decide those issues. The effect of the contention of Troeger and others is that even though they invoked the jurisdiction of the court, and even though their case was consolidated with a case that could not be decided by the council, the trial court was required to ignore their original complaint, and was permitted to consider only their supplemental complaint and the transcript of the hearing before the council, and to determine only whether the decision of the council was supported by substantial evidence. It seems to be their contention that the trial court should not be permitted to decide the question as to ‘skill’ or ‘chance’ on the merits, as originally asked by them, but that the court, in declaring the rights of the parties in the two declaratory relief actions, must accept the decision of the city council which was made after the court actions were filed and were at issue as consolidated cases. Troeger and his co-plaintiffs were not aggrieved by the decision of the city council—the decision was in their favor. They should not be permitted to occupy a more advantageous position by reason of having filed their declaratory relief action than they would have occupied if they had not filed the action. Certainly, if the only proceeding had been the hearing before the city council which resulted favorably to Troeger and his associates, they (who were not aggrieved) would not have been permitted to seek a review by the court of the decision of the council. They cannot do indirectly what they could not do directly. The supplemental complaint changed the issues as presented by the original Troeger complaint. In any event the Schur action, which presented issues as to whether the games were games of chance in violation of the state laws and whether there should be an injunction to prevent waste of public funds, was before the court for decision; and the court, in determining those issues, could not consider any decision of the city council with respect to the city ordinance or the legality of the games under the ordinance. In order to determine the Schur action the court was required to and it did receive evidence regarding the games, the equipment used in playing them, and the manner in which they were played. Also, upon stipulation of the parties, the judge, who was accompanied by the attorneys for the parties and attacheś of the court, went to some of the places of business of Troeger and his associates and observed, and participated in, the playing of the games. The court found, as above stated, that the game constituted a lottery, that chance is the dominating factor in determining the result, and that the games violate Chapters 9 and 10 of Title 9 (Part 1) of the Penal Code. The defendant City of Santa Monica was enjoined from expending public funds in licensing the games. Irrespective of a consideration of the findings of the city council, the question common to both actions, as to whether the games were games of chance or skill, was necessarily decided by the court under the issues presented in the Schur action. The two actions were consolidated and were tried on the basis that the plaintiff in the Schur action and the plaintiffs in the Troeger action were adversaries. Troeger and others have appealed from the judgment in the Schur action. The city has not appealed in either action. It does not appear that the court erred in refusing to review the findings of the city council. Furthermore, under the circumstances here, where the issue regarding chance or skill was necessarily and properly decided under the issues in the Schur action, the question on appeal as to whether the court should have reviewed the findings of the city council is moot.

Appellants cite Fascination, Inc., v. Hoover, 39 Cal.2d 260, 246 P.2d 656, in support of their contention that the court in the present case was limited to a review of the findings of the city council. In that case an application to operate the game of ‘Fascination’ was denied by the chief of police and city prosecutor of Long Beach, who were the proper officials to determine the application. They made an investigation by observing and playing the game, but they did not conduct a hearing. The applicant filed a mandamus action to compel the issuance of the license. The trial court received evidence as to the investigation, and received additional evilence as to whether the game was one of skill or chance. On appeal it was held that a hearing and notice of hearing were required; that the trial court was limited to an examination of matters considered by said officials in arriving at their decision; and that it was error to receive the additional evidence as to whether the game was one of skill or chance. In the present case, Troeger and his associates sought a declaration of their rights by the court, without submitting the matter to the city council. At that time there had been no action by a city agency with respect to the game. The Schur action, which was also for declaratory relief, had been filed previously; and the two cases were consolidated before the supplemental complaint, referring to action by the city council, was filed. The subsequent action of the council was not adverse to Troeger and his associates but was favorable to them. It thus appears that the Fascination case, which was the usual mandamus proceeding for a review of adverse action, is distinguishable from the present case.

Appellants contend that the court erred in not making findings with respect to the issues presented by the supplemental complaint. Respondent Schur, Inc., asserts that such findings were not required because the allegations of the supplemental complaint were admitted by the parties. Findings are not essential as to ultimate facts which have been agreed upon. Temple v. Corporation of America, 71 Cal.App.2d 599, 604, 163 P.2d 67. Counsel for defendants and counsel for Schur, Inc., admitted the facts pleaded in the supplemental complaint. In view of such stipulation and the adequate findings as to the issues included in the Schur action, it was not necessary to make findings regarding the supplemental complaint.

Appellants also contend that the court erred in finding that the games were predominantly games of chance. They argue that the games are games of skill, and the finding of the court is not based on substantial evidence. The court found that the game was played as follows:

‘Said game is played by no more than 50 players or participants at any one time, and the fee for the playing of which game is determined and paid in advance, and the prize or award to any such person winning the game consists only of merchandise not exceeding $25.00 in value. As seat at a counter is provided for each player; in front of each player is a receptacle which is divided into 75 equal compartments measuring approximately 1 7/8 inches square and numbered 1 to 75; in the center of said 75 compartments is a skill hole approximately 3 1/2 inches square painted red. Balls used in the game are 1 1/2 inches in diameter, made of material having a considerable amount of bounce. Charts used in the game by each player have the numbers 1 to 75 arranged in five vertical rows in fixed combinations of numbers so that all charts will be different in that in the first row of vertical numbers on each chart the numbers 1 to 15 appear in combinations; in the second row, the numbers 16 to 30 appear in combinations; in the third row, the numbers 31 to 45 appear in combinations; in the fourth row, the numbers 46 to 60 appear in combinations, and in the fifth row, the numbers 61 to 75 appear in combinations. The game is started by the announcer calling eight common numbers secured by eight different players throwing one ball each; as these numbers are called, the players place a small marker on their charts. After the eight numbers are called, the announcer informs the players to throw skill balls, one at a time into his or her individual receptacle, endeavoring to complete a row of five numbers vertically, horizontally or diagonally on their charts. The player cannot win with called numbers; the player cannot be declared a winner unless the player has tossed at least one or more skill balls in the winning combination with the least number of balls thrown plus putting a skill ball through the skill hole in the center of the receptacle. Such winner wins the prize. In case of tie, the prize is divided.’

That finding is supported by ample evidence. Nathan H. Schur and Charles B. Schur, who testified as to the manner in which the game is played, gave a description of the game which was in substance the description of the game as stated in said finding. As above stated, upon stipulation of the parties, the judge observed, and participated in, the playing of the games. The court also found: ‘[T]hat the use and employment of the rubber balls in conjunction with the charts bearing numbers, and the receptacles containing compartments, in playing the foregoing game, constitutes a lottery, and that chance, and not skill, is the dominating factor in determining the result, and that the said use and employment of said device violates Chapters 9 and 10, Title 9, California Penal Code.’ That finding is supported by ample evidence. Section 319 of the Penal Code provides: ‘A lottery is any scheme for the disposal or distribution of property by chance, among persons who have paid or promised to pay any valuable consideration for the chance of obtaining such property or a portion of it, or for any share or any interest in such property, upon any agreement, understanding, or expectation that it is to be distributed or disposed of by lot or chance, whether called a lottery, raffle, or gift enterprise, or by whatever name the same may be known.’ Section 320 of the Penal Code provides: ‘Every person who contrives, prepares, sets up, proposes, or draws any lottery, is guilty of a misdemeanor.’ The court did not err in finding that the game is a lottery; that chance is the dominating factor in determining the result of the game; and that the game is illegal.

By reason of the above conclusions, it is not necessary to discuss other contentions.

The judgments are affirmed.

PARKER WOOD, Justice.

SHINN, P. J., and VALLEÉ, J., concur.