Masterson v. State

Donna M. MASTERSON and DG's Shiloh Two, Inc.
v. STATE of Arkansas ex rel. Winston Bryant,
Attorney General

96-1064                                            ___ S.W.2d ___

                    Supreme Court of Arkansas
                 Opinion delivered July 14, 1997


1.   Equity -- chancellor generally has no criminal jurisdiction --
     exception to general rule that equity will not enjoin
     commission of crime when remedy at law is adequate. --
     Generally, a chancellor has no criminal jurisdiction; except
     in narrow circumstances, equity will not enjoin the commission
     of a crime because the remedy at law is adequate; however,
     there are circumstances where both criminal and equitable
     relief are appropriate; if grounds for equity jurisdiction
     exist in a given case, the fact that the act to be enjoined is
     incidentally violative of a criminal enactment will not
     preclude equity's action to enjoin it.

2.   Equity -- public nuisance -- equity has authority to abate. --
     Equity has authority to abate a public nuisance; the
     legislature has not conferred this jurisdiction upon the
     chancery court; they have always had jurisdiction.

3.   Equity -- act both public nuisance and crime -- when
     injunction is warranted. -- Where the act is both a public
     nuisance and a crime, the state may suppress it by a suit in
     equity, or resort to a criminal prosecution, or may do both;
     to warrant an injunction where the nuisance is also a crime,
     there must be proof of what that law denominates a nuisance as
     distinguished from a mere crime.

4.   Equity -- gambling house nuisance under common law -- when
     equity may act to suppress. -- A gambling house is a public
     nuisance under common law; the Attorney General has the power
     and duty under common law to institute equitable proceedings
     to enjoin the nuisance; equity may act to suppress a public
     nuisance, even though the maintenance of the nuisance is a
     crime, where there is alleged in addition to the public
     nuisance some facts that show that the remedy at law, by
     prosecution of the criminal, is inadequate and incomplete to
     effect relief.

5.   Appeal & error -- chancery ruling -- supreme court will not
     reverse unless clearly erroneous. -- The supreme court will
     not reverse the findings and conclusions of a chancery court
     unless they are clearly erroneous.

6.   Equity -- chancellor's conclusions not clearly erroneous --
     chancellor had subject-matter jurisdiction. -- The stipulation
     of facts, considered together with the principles reviewed by
     the supreme court, supported the chancery court's conclusions
     of law; the supreme court found that the chancellor's holdings
     were not clearly erroneous and agreed with the chancery
     court's conclusion of law that the chancery court, as a court
     of equity, had jurisdiction to abate a public nuisance; the
     chancery court had subject-matter jurisdiction.

7.   Equity -- injunctions for otherwise criminal acts may be
     issued where property interests are involved -- protection of
     property rights of public affected by illegal gambling
     activities meets test for relief. -- Ordinarily equity does
     not enjoin the commission of crimes, but it does issue such
     injunctions where property interests are involved; the
     protection of property rights of the public affected by
     illegal gambling activities meets the test for equitable
     relief; if the public nuisance is one touching civil property
     rights or privileges of the public, or the public health is
     affected by a physical nuisance, or if any other ground of
     equity jurisdiction exists calling for an injunction, a
     chancery court will enjoin, notwithstanding the act enjoined
     may also be a crime.

8.   Taxation -- taxation of bingo operations in no way connected
     to whether operation is nuisance -- statute provides only for
     taxation of bingo revenues. -- Appellants' argument that
     because the State is taxing its bingo operations, those
     operations cannot be considered a nuisance was without merit;
     the tax instituted under Ark. Code Ann.  26-52-1501--1507
     (Supp. 1995) and the requirement for annual registration are
     not intended to address any question of legality or illegality
     of the conduct of playing bingo; the statute only provides for
     taxation of bingo revenues; there is no question that playing
     bingo for money constitutes gambling, which is a statutory
     criminal offense. 

9.   Equity -- commercial bingo hall is common-law public nuisance
     -- equity may act to suppress public nuisance where remedy at
     law is inadequate and incomplete. -- The operation of a
     commercial bingo hall meets the definitions of a gambling
     house, and is therefore a common-law public nuisance; where it
     was stipulated that the operation of the bingo halls had been
     profitable enough to make necessary the payment of taxes on
     gross receipts and that appellants intended to continue the
     activities, thereby showing that the operation of the gambling
     houses had resulted in losses to the public patrons of money;
     and where it was stipulated that no prosecution had been
     initiated against those operations by anyone, notwithstanding
     the open, continuous, and lucrative operation of the public
     nuisance, there was support for the chancery court's
     conclusion that there was no adequate remedy at law; equity
     may act to suppress a public nuisance where the remedy at law
     is inadequate and incomplete.

     Appeal from Washington Chancery Court; John Lineberger,
Chancellor; affirmed.
     Everett Law Firm, by: William B. Putman, and Mashburn &
Taylor, by: Timothy L. Brooks, for appellants.
     Winston Bryant, Att'y Gen., by:  James DePriest, Senior Asst.
Att'y Gen., for appellees.

     Ray Thornton, Justice.   
     Donna M. Masterson owns and controls DG's Shiloh Two, Inc. 
Both are appellants in this action.  Between January 1993 and
August 1996, DG's Shiloh Two owned, and Donna Masterson managed,
two bingo halls located in Springdale, Arkansas.  In January, 1993,
the State of Arkansas ex rel. Winston Bryant, Attorney General,
appellee, filed a complaint in the chancery court of Washington
County against appellants alleging that the bingo operations
constituted public nuisances and seeking an order to abate and
enjoin such activities.  Other operators of bingo halls were named
but were dismissed when they discontinued their bingo operations. 
Appellants continued to operate their bingo halls and agreed with
appellee to submit the matter to the chancery court upon stipulated
facts. 
     Appellants argued that appellee failed to allege irreparable
harm as a basis for injunctive relief, and urged that the adoption
by the state of Ark. Code Ann.  26-52-1501--1507 (Supp. 1995),
which taxes gross receipts from bingo operations, under which
appellants remitted $316,266.00 in taxes to the state, supports
appellants' contention that the bingo halls are not public
nuisances.  Appellants also argued that the chancery court lacked
subject-matter jurisdiction.
     On August 12, 1996, the chancery court entered a decree
abating the bingo activities as a public nuisance and enjoining the
appellants from continuing such activities.  On appeal, appellants
assert that the chancery court erred in finding that their bingo
operations constituted a public nuisance, and further contend that
the court lacked subject-matter jurisdiction to conclude that bingo
is a lottery or to abate and enjoin such activity.  Finally,
appellants argue that the court erred in not granting their motion
for summary judgment.  We have considered each assignment of error
and have determined that the trial court should be affirmed.  This
resolves any issue concerning summary judgment.

          Subject-Matter Jurisdiction of Chancery Court
     Appellants correctly state the general rule that a chancellor
has no criminal jurisdiction.  State v. Vaughan, 81 Ark 117, 98 S.W. 685 (1906).  Further, it is correct that "except in narrow
circumstances . . . equity will not enjoin the commission of a
crime because the remedy at law is adequate."  Bates v. Bates, 303
Ark 89, 93, 793 S.W.2d 788, 791 (1990).  However, there are
circumstances to which we refer in Bates and other cases where both
criminal and equitable relief are appropriate.  In a case involving
an erroneously granted exception to the provisions of a city
ordinance prohibiting the erection of a nonfireproof building, the
chancery court refused to issue an injunction against the
prohibited structure because the ordinance prescribed criminal
punishments of a fine for each day of violation.  Meyer v. Seifert,
216 Ark 293, 225 S.W.2d 4 (1949).  The appellees in that case
argued that the criminal penalty was exclusive.  We disagreed and
reversed, stating in the words of Justice Robert A. Leflar: 
     That equity will not act to restrain ordinary violations of
     the criminal law, but will leave the task of enforcing the
     criminal laws to courts having criminal jurisdiction, is basic
     learning in our legal system.  But it is equally basic that if
     grounds for equity jurisdiction exist in a given case, the
     fact that the act to be enjoined is incidentally violative of
     a criminal enactment will not preclude equity's action to
     enjoin it.
Id. at 296-97, 225 S.W.2d  at 6.
     In State ex rel. Att'y Gen. v. Karston, 208 Ark. 703, 187 S.W.2d 327 (1945), we decided that the chancery court erred in
refusing to entertain jurisdiction of an injunction proceeding
brought by the Attorney General seeking to enjoin the operation of
a gambling house and stated:
     The chancery court held that it had no jurisdiction in
     this case.  We have repeatedly recognized that equity has
     authority to abate a public nuisance.  In Ross et al. v.
     State, 184 Ark. 385, 42 S.W.2d 376, we quoted from Marvel
     v. State, 127 Ark. 595, 193 S.W.2d 259, 5 A.L.R. 1458, as
     follows: "The Legislature has not conferred the
     jurisdiction upon the chancery court to abate public
     nuisances.  This jurisdiction they have always had."
Id. at 710, 187 S.W.2d  at 330 (emphasis added).
     We also quoted with approval the statement from 39 Am. Jur.
410, as follows: 
     Where the act is both a public nuisance and a crime, the
     state may suppress it by a suit in equity, or resort to
     a criminal prosecution, or may do both. . . .  To warrant
     an injunction where the nuisance is also a crime, there
     must be proof of what that law denominates a nuisance as
     distinguished from a mere crime.
Id. at 711, 187 S.W.2d  at 330.
     In an earlier case involving the same gambling house, Albright
v. Karston, 206 Ark. 307, 176 S.W.2d 421 (1943), we reversed the
local chancellor's decree protecting the gambling house from
interference by the state police.  We pointed out that "a gambling
house was a public nuisance at common law, and the operation of a
gambling house has by statute been made a felony in Arkansas."  Id.
at 311-312, 176 S.W.2d  at 328.
     In State ex rel. Att'y Gen. v. Karston, supra, we cited many
decisions declaring a gambling house to be a public nuisance at
common law, determined that the Attorney General has the power and
duty under common law to institute equitable proceedings to enjoin
the nuisance, and summed up as follows:
     [B]y the weight of authority, equity may act to suppress
     a public nuisance, even though the maintenance of the
     nuisance is a crime, where there is alleged in addition
     to the public nuisance, some facts which show the remedy
     at law, by prosecution of the criminal, is inadequate and
     incomplete to effect relief.
Id. at 712, 187 S.W.2d  at 331.
     In the case under consideration we note that the stipulation
of facts, considered together with the principles we have reviewed,
support the chancery court's following conclusions of law: 
     That each of the bingo halls at issue in this case have
     operated (openly, publicly, repeatedly, continuously,
     persistently, and intentionally) on a regular basis for an
     extended period of time, notwithstanding any potential
     application or enforcement of any criminal statutes.  It
     appears to this court that, whatever remedy may exist at law,
     it has proved to be inadequate.  (Emphasis added.)

     We will not reverse the findings and conclusions of a chancery
court unless they are clearly erroneous.  Osborne v. Power, 318
Ark. 858, 890 S.W.2d 570 (1993).  We conclude that the findings are
not clearly erroneous, and agree with the chancery court's
conclusion of law "that this Court, as a court of equity, has
jurisdiction to abate a public nuisance."  We hold that the
chancery court has subject-matter jurisdiction.

                 Bingo Halls as a Public Nuisance
     In reviewing the question whether the chancery court had
subject-matter jurisdiction to enjoin a public nuisance, we cited
Albright v. Karston, supra and State ex. rel. Att'y Gen. v.
Karston, supra, for guidance as to the availability of equitable
relief when criminal penalties are also available.  In these cases,
we pointed to many other cases that declared gambling houses to be
public nuisances at common law.  The availability of equitable
relief to enjoin a gambling activity was discussed in Meyer v.
Seifert, where we stated:
     In one of the most publicized cases that ever arose in
     Arkansas, Chancellor Martin enjoined the holding at Hot
     Springs of a world championship heavyweight prize-fight
     between James J. Corbett and Robert Fitzsimmons.  State ex
     rel. Atty. Gen. v. Corbett, Fitzsimmons, et al., Martin's
     Chanc. Decisions 366.  Judge Martin conceded that ordinarily
     equity does not enjoin the commission of crimes, but pointed
     out that it does issue such injunctions where property
     interests are involved, and emphasized the prospective
     property injuries threatened by the prizefight, notably the
     payment of money by purchases of tickets of admission to the
     illegal enterprise, losses by bettors . . . .
Id. at 297, 225 S.W.2d  at 6-7.
     This articulation of possible property losses incurred through
gambling activities may reflect the rationale for decisions that a
gambling house constitutes a public nuisance at common law.  The
protection of property rights of the public affected by illegal
gambling activities meets the test for equitable relief suggested
by Chief Justice Hill in State v. Vaughan, where after denying the
injunction in the particular case, we added:
     On the other hand, if the public nuisance is one touching
     civil property rights or privileges of the public, or the
     public health is affected by a physical nuisance, or if any
     other ground of equity jurisdiction exists calling for an
     injunction, a chancery court will enjoin, notwithstanding the
     act enjoined may also be a crime.
Id. at 126, 98 S.W.  at 690.
     Appellants argue that because the state is taxing its bingo
operations, those operations cannot be considered a nuisance.  We
have considered a similar argument that Act 939, (codified at Ark.
Code Ann.  26-52-1501--1507 (Supp. 1995)), legalizes bingo in our
recent decision in Billy/Dot, Inc. v. Fields, 322 Ark. 272, 908 S.W.2d 335 (1995), where we stated:
     Billy/Dot admits that it operates a bingo establishment where
     money is at risk, but it is wrong in contending that Act 939
     legalizes bingo.  The Act specifically does not make bingo
     legal, as is evidenced by its Emergency Clause: "[T]hat this
     tax and the requirement for annual registration are not
     intended to address any question of legality or illegality of
     the conduct of playing bingo;" Act 939 only provides for
     taxation of bingo revenues.  Because there is no lawful
     business operation at issue here, there is no valid property
     right to be protected in this matter.
Id. at 277, 908 S.W.2d  at 337.  In Billy/Dot, we also made the
following determination: 
     Here, there is no question but that playing bingo for money
     constitutes gambling which is a criminal offense under our
     statutes, and the chancery court so found.  In doing so, the
     court correctly cited State v. Torres, 309 Ark. 422, 831 S.W.2d 903 (1992), in its order.
Id.
     The operation of a commercial bingo hall meets the definitions
of a gambling house, and is therefore a common-law public nuisance. 
In the case before us it was stipulated that the operation of the
bingo halls has been profitable enough to make necessary the
payments of taxes of $316,266.00 on gross receipts from July 1993
until June of 1996, and that appellants intend to continue the
activities, thereby showing that the operation of the gambling
houses have resulted in losses to the public patrons of money from
their purchase of cards and pull-tabs from which the proceeds are
at least sufficient to pay appellant's taxes.  It was also
stipulated that no prosecution has been initiated against those
operations by anyone, thereby showing that the prosecuting attorney
has not brought criminal charges.  Whether this is because of the
difficulty in gaining convictions, or a belief that other criminal
violations have higher priority, or because the prosecuting
attorney simply chooses not to prosecute is not relevant.  The
stipulation that no prosecution has occurred notwithstanding the
open continuous, and lucrative operation of the public nuisance
supports the chancery court's conclusion that there is no adequate
remedy at law.  Equity may act to suppress a public nuisance where
the remedy at law is inadequate and incomplete.  State ex rel.
Att'y Gen. v. Karston, supra. 
     Appellees urge that appellants' operation of commercial bingo
halls should be declared to be a public nuisance because it flouts
the public policy of Arkansas, as expressed in the prohibition
against lotteries contained in Ark. Const. art. 19,  14.  We need
not address that argument because of our determination that
appellants are operating gambling houses, and that such activities
are public nuisances under the common law.

                         Conclusion
     On the basis of the stipulations agreed to in this case, the
chancery court found that appellants' bingo halls are public
nuisances that have operated openly, continuously, and
intentionally, for an extended period of time, without any
application or enforcement of criminal penalties.  The chancery
court made specific findings and conclusions of law, including the
following:
     That each of the bingo halls...have operated on a regular
     basis for an extended period...notwithstanding any potential
     application or enforcement of any criminal statute.  It
     appears to this court that, whatever remedy may exist at law,
     it has proved to be inadequate.
     
     That the bingo activities conducted by defendants should be
     abated as a public nuisance and each defendant should be
     enjoined and restrained from conducting any further bingo
     activities.

These findings and conclusions are not clearly erroneous, and are
consistent with the principles of law we have articulated.  The
judgment of the chancery court is affirmed.
     Corbin, J., dissenting.
             Donald L. Corbin, Justice, dissenting.

     I dissent for the reason that the chancery court lacked
jurisdiction to enjoin Appellants' operation of two bingo halls as
public nuisances.  At first glance, the majority opinion appears to
rely upon this court's decision in State ex rel. Att'y Gen. v.
Karston, 208 Ark. 703, 187 S.W.2d 327 (1945), quoting parts of that
decision that are favorable to the majority's conclusion.  Upon
closer examination, however, it becomes clear that the majority
completely ignores the ultimate holding of that decision:
     [T]he state may properly seek to protect the community by
     asking the aid of a court of equity where the criminal
     law enforcement agencies have broken down, and thereby
     rendered the remedy at law to be inadequate or
     incomplete.

Id. at 716, 187 S.W.2d  at 333 (emphasis added).  Contrary to the
majority's implication, that decision did not rest on prior
holdings that gambling houses were common-law nuisances.  Nor did
it provide that whenever a criminal law is being violated, the
State may put an end to it by seeking an injunction on the ground
that the criminal activity is, in and of itself, a public nuisance. 
Instead, the decision in Karston turned upon the particular facts
of that case, which are drastically different from those in the
present case.
     Karston, who was a notorious bookmaker in Hot Springs, had
been arrested for gambling no less than ten times, but to no avail
because he continued his bookmaking operations after his arrests. 
Moreover, there were allegations in that case that the local law
enforcement agencies were condoning Karston's activities and had
refused to prosecute him on the charges.  This court thus held that
because the criminal law had broken down, rendering the remedy at
law inadequate, equity had the power to enjoin the activity as a
public nuisance.  Here, there was no evidence or even allegation
that the activities of the bingo halls constituted a public
nuisance beyond the mere contention that they were being operated
in violation of the law.  No citizen complaints were heard and no
allegations were made that anyone had suffered injury as a result
of the bingo operations.  In short, there was no demonstration that
the criminal law had broken down such that equity became empowered
to enjoin the activity as a public nuisance. 
     The first case to address the issue of whether equity could
issue an injunction to stop a gambling operation was State v.
Vaughan, 81 Ark. 117, 98 S.W. 685 (1906).  In that case, this court
held: 
       It is demonstrably true that it is a sound principle
     of equity jurisprudence that an injunction will not lie
     at the instance of the State to restrain a public
     nuisance where the nuisance is one arising from the
     illegal, immoral or pernicious acts of men which for the
     time being make the property devoted to such use a
     nuisance, where such nuisance is indictable and
     punishable under the criminal law.  On the other hand, if
     the public nuisance is one touching civil property rights
     or privileges of the public, or the public health is
     affected by a physical nuisance, or if any other ground
     of equity jurisdiction exists calling for an injunction,
     a chancery court will enjoin notwithstanding the act
     enjoined may also be a crime. 

Id. at 126, 98 S.W.  at 690 (emphasis added). 
     In Karston, this court relied on the above language from
Vaughan, as well as the decision in DeQueen v. Fenton, 98 Ark. 521,
136 S.W. 945 (1911), which held that the chancery court has no
criminal jurisdiction, and thus, has no jurisdiction to restrain
acts solely because they are criminal.  Additionally, the Karston
court cited 39 Am. Jur. Nuisances  147 (1942) for the proposition
that "[t]o warrant an injunction where the nuisance is also a
crime, there must be proof of what that law denominates a nuisance
as distinguished from a mere crime."  Karston, 208 Ark. at 711, 187 S.W.2d  at 330.  In other words, in order for equity to enjoin
criminal activity, there must be evidence that the activity is a
nuisance, in the traditional meaning of that term, in addition to
the fact that the activity is a crime.
     Subsequent to the decision in Karston, in Hickinbotham v.
Corder, 227 Ark. 713, 301 S.W.2d 30, cert. denied, 355 U.S. 841
(1957), this court held that there were only two instances where
chancery will assume jurisdiction to enjoin the commission of a
criminal offense:  (1) Where the enforcement of the criminal law
will not deter violation, or (2) where the complaining party has
shown an injury.  Here, enforcement of Ark. Code Ann.  5-66-103
(Repl. 1993) would deter violations of the law in that the persons
convicted of gambling shall be sentenced to one to three years in
prison.  Moreover, in this case, the complaining party, the State,
has shown no injury.  There was absolutely no indication at all
that any property owners or other citizens had complained about any
adverse affects resulting from the bingo halls' operations.  
     More recently, in Bates v. Bates, 303 Ark. 89, 793 S.W.2d 788
(1990), the appellant sought to have the chancery court enjoin her
housemate from committing acts of domestic abuse against her under
a theory that chancery has jurisdiction to protect personal and
property rights.  This court held that equity may only protect
those rights when certain conditions are present, one of which is
where the remedy at law is inadequate.  Appellant argued that the
criminal statutes were ineffective because battered housemates are
afraid to file criminal charges and prosecutors do not act
diligently.  This court held that "[e]ven if the arguments were
valid, we would not ignore the jurisdictional language of the
Constitution and, in doing so, deprive an accused of his
Constitutional right to a trial by jury."  Id. at 92, 793 S.W.2d  at
790.  This court held further that "equity will not enjoin the
commission of a crime because the remedy at law is adequate. . . .
If the rule were otherwise, the constitutional right of trial by
jury would be infringed."  Id. at 93, 793 S.W.2d  at 791.  This
court did acknowledge a limited exception to that rule, which
arises when the criminal act is "incidental" and there is a danger
of "irreparable pecuniary injury to property or pecuniary rights of
the complaining party."  Id. at 93, 793 S.W.2d  at 791 (quoting
Smith v. Hamm, 207 Ark. 507, 181 S.W.2d 475 (1944)).  Such
exception is not applicable to this case because the criminal act
of operating a gambling house was the sole reason for enjoining the
activity.  
     In the present case, there was no evidence whatsoever that the
criminal law had broken down or that the remedies at law were
inadequate.  In fact, there was no evidence that the legal remedy
had even been attempted before the State filed for an injunction. 
Instead, the facts presented below indicate that the bingo halls
had been in operation since January 1, 1993, and that the State
filed its suit for injunction a mere twenty-one days later.  It was
stipulated by both parties that Appellants had never been arrested
for any violation of the law pertaining to their bingo operations,
and that further, there were no allegations concerning rowdiness,
drunkenness, excessive traffic, loud noises, or any of the more
traditional nuisances.  
     The trial court's ruling that the remedies available at law
were inadequate just because the bingo halls had been in continual
operation for some time is clearly erroneous.  It is not enough to
render the legal remedy inadequate to merely point to the fact that
a criminal offense has been committed.  According to our case law,
there must be more -- i.e., an allegation that local law
enforcement authorities have refused to enforce the criminal law or
that the bingo operators have been arrested in the past and such
arrests have not deterred their illegal gambling activities.  The
majority's decision in this case circumvents the constitutional
right to trial by jury, by allowing courts of equity to stop
allegedly criminal activity and deprive the actors of their
livelihood without requiring the State to prove beyond a reasonable
doubt that such actions are criminal.  
     For the reasons given, I would reverse the ruling of the
chancery court and dismiss the case.