California Gasoline Retailers v. Regal Petroleum Corp. of Fresno, Inc.

The original plaintiff in this action for injunctive relief was California Gasoline Retailers, a nonprofit California corporation consisting of members distributing the products of the major oil companies, Standard Oil, Shell Oil, Union Oil and others. The defendants, too numerous to name individually, are members of three groups of independent service station operators. For convenience, they have been, and will be, referred to as the Regal Group, the Norwalk Group and the Beacon Group.

All defendants appeal, contending that (1) the plaintiff corporation was not a proper party plaintiff; (2) the court abused its discretion in permitting the amendment and joinder of Hudson as a plaintiff; (3) their advertising and merchandising program did not constitute a lottery as defined by section 319 of the Penal Code; (4) equity will not enjoin the commission of a crime unless the activities constitute a public nuisance, or direct pecuniary loss has been sustained by the plaintiff.

It is also contended that article IY, section 26, of the California Constitution evidences a strong public policy against lotteries in this state. That section, so far as is here pertinent, provides: “The Legislature shall have no power to authorize lotteries or gift enterprises for any purpose and shall pass laws to prohibit the sale in this State of lottery or gift enterprise tickets or tickets in any scheme in the nature of a lottery.” While the section just quoted shows a legislative intention that lotteries are to be prohibited in this state, it is obvious from the language thereof that it is not a “self-enforcing” or “self-executing” provision such as is found in article I, section 14, of the Constitution (Rose v. State, 19 Cal.2d 713 , 720, 721 [ 123 P.2d 505 ]). The language shows that it was intended that the Legislature should have no power to authorize lotteries by legislation and that it was to enact legislation prohibiting lotteries. It is also apparent

“No facts have been alleged to bring Parker within this well established rule regarding class suits. He does not claim to be a member of the interested class, and there is nothing to indicate that he is ‘similarly situated’ with those whom he pretends to represent. There can be no ‘ common or general interest’ in the subject matter of the controversy (Weaver v. Pasadena Tournament of Roses Assn., supra, p. 842) between Parker, who is not employed by the city, and city employees. Parker cannot give himself standing to sue by purporting to represent a class of which he is not a member. ’ ’ In other words, if the rule of Parker v. Bowron, supra, 40 Cal.2d 344 , 352, 353, is strictly applied, there is no community of interest between plaintiff and its members and they are not “similarly situated” since plaintiff is complaining of the inability of its members to pay dues and assessments, and the members are alleged to have been injured by defendants through loss of business. It would thus appear that plaintiff corporation is not a proper party plaintiff.

The amendment to the complaint and the inclusion

Advertising and Merchandising Program As Lottery

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.”

It is agreed by all parties that three elements must be present to constitute a lottery: (1) a prize; (2) distributed by chance; and (3) consideration. All parties are also agreed that the first two elements are present under the facts here presented. It is the third element of consideration upon which the parties differ.

Inasmuch as all three groups of defendants operated in slightly different ways, the facts concerning their operations will be set forth separately.

The Regal Group operates three service stations in Fresno which conduct what is known as a give-away program as part of a merchandising and advertising scheme. Tickets were distributed to the Regal stations for redistribution to the public. They were given to persons before any purchase of gasoline or other service, or whether any sale was made; they were distributed with the stubs attached from house to house; they were distributed at drive-in theaters and at baseball games. Those who received the tickets away from the stations were required to go to one of the stations to deposit the ticket stub. Rules for the drawing were posted in each Regal station and provided that any person over the age of 18 years would receive, free of charge, an officially numbered ticket; that the winner did not have to be present at the time of the drawing; and that the winning numbers would be posted for a seven-day period at the Regal stations after the periodic drawings. The prizes to be won consisted of an automobile, cash and other personal property.

The Norwalk Group

This, too, was a merchandising and advertising program and these defendants advertised in the newspaper, over the radio and by billboards that each month, commencing with May, 1955, the Norwalk stations would give away three Buick automobiles, and several household appliances. When this program was initiated, the distributors, to defray the expenses of the campaign, increased the price of gasoline to the retailers by one cent per gallon which increase was passed on to the consumers. Those Norwalk dealers who did not choose to participate in the program did not receive their gasoline at the increased rate. The Norwalk tickets were given away to anyone who asked for them regardless of whether any product or service offered for sale was purchased; tickets were also distributed from house to house, and some 5,000 of them were placed under windshield wipers of cars parked at the Fresno County Fair Grounds. One of the Norwalk dealers testified that he gave more tickets for larger purchases and that he passed along the one-cent increase in his cost of gasoline to the purchasers thereof. Another Norwalk dealer testified that he gave tickets to those driving into his station both before and after purchases. The ticket stubs were required to be deposited in a receptacle in a Norwalk station. There is evidence in the record that when Norwalk

The Beacon Group

This was a similar advertising and merchandising operation entered into by the Beacon and Caminol Company in conjunction with United Stations, Inc., an association of gasoline stations formed by the operators for the purpose of operating give-away programs. Caminol did not raise the price of gasoline to the dealers, but the dealers raised the price to the consumer by one cent per gallon and then remitted the extra one cent per gallon to Caminol to pay for the expenses and advertising of the give-away program. Tickets were distributed away from the station, to those who made no purchases at the station, and to those who did. The tickets given to persons away from the stations had the stubs attached causing the recipients to go to the station to deposit them. The rules provided that any person 18 years of age, or over, would be given free, on request, an official numbered ticket for any drawing; that the giving of the ticket was unconditional and did not depend on the purchase of any merchandise or services; that the winner did not have to be present at the drawing and that all winning numbers would be posted at the participating stations for a seven-day period. Drawings were held twice a month and prizes were distributed to those holding the winning tickets.

In People v. Cardas, 137 Cal.App.Supp. 788 , 790, 791 [ 28 P.2d 99 ], it was held that “An analysis of the section [Pen. Code, § 319] and an examination of the authorities construing it and other similar statutory provisions disclose that there are three elements necessary to constitute a lottery. These elements are: (1) The disposition of property, (2) upon a contingency determined by chance, (3) to a person who has

In the Cardas case, as in the one under consideration, “Counsel for the People argue that patronage from the ticket holders as a whole constituted consideration for the distribution of the prize even though the individual holders of tickets had not parted with consideration for the individual ticket held by them. This argument apparently proceeds upon the theory that the element of consideration is established by showing that the defendant received something of value in return for the distribution of the prizes. The question of consideration is not to be determined from the standpoint of the defendant, but from that of the holders of the prize tickets. The question is: Did the holders of prize tickets pay a valuable consideration for the chance ? Certainly those who received prize tickets without buying an admission ticket did not pay anything for the chance of getting the prize. They did not hazard anything of value. It would then seem to follow that those who purchased admission tickets and received prize tickets, not at the box office but from another employee,

In People v. Carpenter, 141 Cal.App.2d 884 , 887, 888, 889, 890 [ 297 P.2d 498 ] (hearing denied), a bank night drawing was also involved. As an advertising technique to encourage theater patronage, the operators of Lakewood theater solicited registrations from house to house and gave registration blanks to people attending the theater who were asked if they would like to register for the bank night. Registration blanks were kept at the snack bar and sometimes at the box office and were given to anyone who asked for them. A ticket containing each number was put into a drum kept by the theater as the name to which it was assigned was placed in the registration book. Once a name was registered that person was eligible to win at any bank night held thereafter. Bank nights were held once a week and a ticket was drawn from the drum and given to the manager who compared it with the registration book. The winning name was then announced over loudspeakers within and outside the theater and the person winning was given two minutes to reach the stage and identify himself. Admission tickets were not necessary for persons wishing to enter the theater to see and hear the bank night drawing, or to go into the theater to claim the prize.

In the Carpenter case the court held that the element of chance was lacking inasmuch as under the facts of that case Carpenter, who arranged to have himself chosen as the one to draw the ticket, had palmed a ticket which he purported to draw from the drum on the stage. This was done according to a prearranged plan with two others. The court stated the “initial question” to be “Was the bank night drawing a lottery?” And after holding that the element of chance was missing due to the fraud of Carpenter, continued: “We come now to the third element in a lottery, viz: consideration for the chance of winning the prize. The question of consideration is not to be determined from the standpoint of the defendant, but from that of the holders of prize tickets. The question is: Did the holders of prize tickets pay a valuable consideration for the chance ? Certainly those who received prize tickets without buying an admission ticket did not pay anything for the chance of getting the prize. They did not hazard anything of value. It would then seem to follow that those who purchased admission tickets and received prize tickets, not at the box office but from another employee, could

“The court in the Cardas case, supra, relied on Cross v. People, 18 Colo. 321 [ 32 P. 821 , 36 Am.St.Rep. 292 ]. In discussing the element of consideration in a lottery, the Colorado Supreme Court stated: ‘By the admitted facts it is shown that the plaintiffs in error gave business cards which entitled the holders to a chance on a piano, to be distributed as the holders of such chances might elect. These tickets or chances were given indiscriminately to persons, whether they purchased goods of plaintiffs in error or not, to those who registered their names at their shoe store, and to those who, from a distance, sent the return postage. While it is admitted that Charles Linton purchased goods to the amount of one dollar at their store, and received one of these cards, it is admitted that such purchase, or any purchase of goods, was not a condition upon which the card was delivered. The fact that such cards or chances were given away to induce persons to visit their store with the expectation that they might purchase goods, and thereby increase their trade, is a benefit too remote to constitute a consideration for the chances. Persons holding these cards, although not present, were, equally with those visiting their store, entitled to draw the prize. The element of gambling that is necessary to constitute this a lottery within the purview of the statute, to wit, the paying of money, directly or indirectly, for the chance of drawing the piano, is lacking, and the transaction did not constitute a violation of the statute.’ ” In holding that the element of consideration was also lacking the court had this to say: “Certainly those who registered upon request of a solicitor without attending the theater did not pay for the chance of getting the prize; neither did those who later registered without purchasing an admission ticket. Those who purchased admission tickets and then registered while they were at the theater as patrons, cannot be said to have paid a consideration for the privilege of registering, as they could have done so without buying an admission ticket. Once a person’s name was registered, it might be drawn at any bank night thereafter, and it was not necessary that he purchase an admission ticket either to listen to or see the bank night drawing or to claim the award if his name was called.

“It therefore follows, under the principles of the Cardas ease, supra, that no consideration was paid for the chance of winning the bank night prize in the instant case.”

The People, as amicus curiae, make the following point: It is contended that there are two types of advertising schemes—“closed participation” and “flexible participation.” A closed participation scheme is where those participating in the scheme have paid a consideration for a chance to win the prize; the flexible participation type is where some have paid a consideration and some have not. As in the case at bar, there were some customers of the gasoline stations who received prize tickets after purchase of the products offered for sale, and others who received the tickets at their homes, or at other places, and paid for no merchandise. In this latter connection, the argument is made that in all of the groups the major part of the tickets went to those who made purchases. It is pointed out that in People v. Gonzales, 62 Cal.App.2d 274 , 278, 279, 285, 286 [ 144 P.2d 605 ], the theater manager testified that one cash night prize ticket was given to each patron who purchased a ticket when he purchased the ticket and another was given to him as he left the theater. No tickets were distributed to persons who had not purchased admission tickets. The court noted that “There was no general or indiscriminate distribution of the drawing tickets to persons irrespective of whether they paid admission.” The court, after discussing the Cardas case, supra ( 137 Cal.App.Supp. 788 ), stated: “The decision in the Cardas case was a proper determination upon the facts therein that the drawing therein was not a lottery. That decision, however, is not determinative or at all persuasive that the drawing herein, involving facts vastly different from those

Since it clearly appears from the record that any person could have received a ticket, or tickets, free for the asking, or even without a request and without any necessity of making any kind of purchase it would seem that the relative numbers of tickets distributed with purchases or without purchases should not be determinative of the issue involved which is whether the holder, or holders, of the tickets paid, or promised to pay a valuable consideration for the chance of winning a prize. As the court stated in the Carpenter case, supra ( 141 Cal.App.2d 884 , 888) : “It would then seem to follow that those who purchased admission tickets and received prize tickets, not at the box office but from another employee, could not be said to have paid a consideration for the prize tickets since they could have received them free.” Also, in the Carpenter case (p. 889), the court, quoting from Cross v. People, 18 Colo. 321 [ 32 P. 821 , 36 Am.St.Rep. 292 ], stated that “ ‘. . . The element of gambling that is necessary to constitute this a lottery within the purview of the statute, to wit, the paying of money, directly or indirectly, for the chance of drawing the piano, is lacking, and the transaction did not constitute a violation of the statute.’ ”

Plaintiffs and amicus curiae both argue that People v. Gonzales, 62 Cal.App.2d 274 [ 144 P.2d 605 ], laid down the rule that a closed participation program and thus a lottery exists where the distribution of tickets to persons other than customers is not “substantial” or is “negligible” in comparison with those distributed to customers. This rule, it is contended, has “emasculated” the holding of People v. Cardas, 137 Cal.App.Supp. 788 [ 28 P.2d 99 ], In view of the holding

Reliance is also placed on Holmes v. Saunders, 114 Cal.App. 2d 389 , 390, 391 [ 250 P.2d 269 ], where tickets for a drawing where an automobile was the prize, were distributed to all those who paid $1.00 for a six months’ subscription to the “Associated Bulletin.” It was there said: “The consideration to make such a transaction, a lottery need not be paid exclusively for the chance to win the prize. It is sufficient that the consideration, as here, be paid for something else and the chance to win the prize. (People v. Gonzales, 62 Cal.App.2d 274 [ 144 P.2d 605 ]; People v. Miller, 271 N.Y. 44 [ 2 N.E.2d 38 ]; and see the many eases collected in the notes in 48 A.L.R. 1115 ; 57 A.L.R. 424 ; 103 A.L.R. 866 ; 109 A.L.R. 709 ; 113 A.L.R. 1121 .) It is said in 34 American Jurisprudence 650 ‘that no sooner is the term “lottery” defined by a court, than ingenuity evolves some scheme within the mischief discussed, although not quite within the letter of the definition given; but an examination of the many cases on the subject will show that it is very difficult, if not impossible, for the most ingenious and subtle mind to devise any scheme or plan, short of a gratuitous distribution of property, which has not been held by the courts of this country to be in violation of the lottery laws. . . . The court will inquire, not into the name, but into the game, however skillfully disguised, in order to ascertain if it is prohibited. . . .’ ”

Several eases from other states are cited by the People in an endeavor to show that the promotional scheme here involved did constitute a lottery. One somewhat factually similar is Featkerstone v. Independent Service Stations Assn., (Tex. Civ. App.) 10 S.W.2d 124 , 125, 126, 127, where a prize

We are also urged by the People to consider section 1605 of the Civil Code in defining the consideration necessary under the lottery statutes. That section provides that “Any benefit conferred, or agreed to be conferred, upon the promisor, by any other person, to which the promisor is not lawfully entitled, or any prejudice suffered, or agreed to be suffered, by such person, other than such as he is at the time of consent lawfully bound to suffer, as an inducement to the promisor, is a good consideration for a promise.” It would again appear that, in view of the plain provisions of section 319 of the Penal Code, in order to constitute consideration within the definition of a lottery there must be a valuable consideration paid, or promised to be paid by the ticket holder. (People v. Carpenter, 141 Cal.App.2d 884 [ 297 P.2d 498 ].) We held in De Mille v. American Fed. of Radio Artists, 31 Cal.2d 139 ,156 [ 187 P.2d 769 , 175 A.L.R. 382 ], that “Penal statutes will not be given application beyond their plain intent. Such acts include only those offenses coming clearly within the import of the language.” The “realistic approach” to the consideration necessary to constitute a promotion scheme a lottery which is urged upon us by the People in asking us to accept the definition of consideration as found in section 1605 of the Civil Code would seem to be an argument which should be directed to the Legislature rather than to this court.

It is our conclusion that defendants’ advertising and promotional scheme did not fall within the definition of a lottery as set forth in section 319 of the Penal Code because of the lack of consideration.

The portions of the judgment appealed from are reversed.

Gibson, C. J., Shenk, J., Traynor, J., Schauer, J., Spence, J., and McComb, J., concurred.