On appeal from the New Jersey Supreme Court.
For the plaintiff-respondent, Walter D. Van Riper, Attorney-General.
For the defendant-appellant, Samuel P. Orlando (Thomas J. Brogan, of counsel).
The opinion of the court was delivered by
FREUND, J. The State of New Jersey recovered a judgment against the Garden State Racing Association for the sum of $557,600.20, being the amount of "breaks" due to the state from the operation of appellant's race track at Camden pursuant to the formula set forth in chapter 169 of the laws of 1946, R.S. 5:5-64. The constitutionality of this statute is the sole issue involved, the facts having been stipulated by the respective parties.
The New Jersey Racing Commission created pursuant to R.S. 5:5-22, et seq., was authorized to license the operation of running horse race meetings on not more than four tracks, at which the pari-mutuel system of wagering on the results of such races was to be conducted. It has granted only three such permits; to appellant, Garden State Racing Association, on November 6th, 1941; to Atlantic City Racing Association and to Monmouth Park Jockey Club on January 30th, 1946. The permits issued are annual permits renewable in accordance with the provisions of the statute.
Under the pari-mutuel system of wagering, the amount due the holders of the winning tickets is computed to the nearest five cents on the dollar wagered. These odd cents are called the "breaks" defined by statute, R.S. 5:5-64 "as the odd cents over any multiple of five cents, calculated on the basis of one dollar otherwise payable to a patron." The present controversy concerns these "breaks." It is apparent that this method of computation and payment is for the convenience of the permit holder in the operation of the parimutuel system of wagering. 38 C.J.S. 47, § 1; Wise v. Delaware Steeplechase and Race Association (Del.), 18 A.2d 419; affirmed, 27 Id. 357.
Prior to 1946, section 44 of chapter 17 of the laws of 1940 controlled the disposition of the "breaks." Under this statute, the permit holder was permitted to retain the "breaks." From July, 1942, when the appellant commenced operation of its track, until the end of the 1945 racing season, the "breaks" or "odd cents" realized from the wagering at appellant's track, which it was permitted to retain and appropriate to itself under the then existing legislation, aggregated
$1,650,000. On April 25th, 1946, the legislature amended section 44, supra, by enacting chapter 169 of the laws of 1946, R.S. 5:5-64, which provides that the permit holder shall pay to the state a share of said "breaks" in accordance with the schedule therein set forth. This share due to the state from the appellant for the year 1946 under R.S. 5:5-64 amounts to $557,600.20, the amount of the judgment from which this appeal was taken.
The appellant argues that the statute is unconstitutional, being in violation of the equal protection clause of the Fourteenth Amendment of the Federal Constitution, and of article 4, section 7, paragraphs 4 and 11 of the New Jersey Constitution. The basis of the attack is that the legislature has made a classification that is arbitrary, capricious and has no substantial relation to the object of the legislation, in that it has divided race track permit holders into two classes; (1) those operating for more than two years, and (2) those operating for less than two years. The former are required to pay to the state their prescribed share of the "breaks," while the state foregoes its share in the "breaks" with the latter during the first two years of their operation, unless the daily average contributions exceed the sum specified in the statute. The appellant is the only permit holder which comes within the first classification, having operated its race track for more than two years, i.e., since July, 1942. The only other two permit holders in the state are in the second classification, as they did not receive their licenses until January 30th, 1946. It is reasonable to assume that the legislature intended that new race track operators be permitted for the first two years of their operation to derive the same privilege or advantage with respect to said "breaks" which the appellant had enjoyed for a period of four years, i.e., from 1942 to 1945, inclusive.
The business of horse racing and pari-mutuel wagering is so definitely affected with a quasi -public interest that legislative supervision, control and regulation is without question required. There was a time when betting on horse racing was prohibited by constitutional amendment, ...