Pearsall v. Alexander

Citations: 572 A.2d 113; 11 U.C.C. Rep. Serv. 2d (West) 1081; 90 A.L.R. 4th 773; 1990 D.C. App. LEXIS 62; 1990 WL 31939Docket: 87-826

Court: District of Columbia Court of Appeals; March 22, 1990; District Of Columbia; State Supreme Court

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Harold Pearsall appeals the dismissal of his complaint against Joe Alexander for breach of an agreement to share $20,000 in winnings from a D.C. Lottery ticket. The trial court found that an agreement existed but ruled it invalid under D.C. Code § 16-1701 (1989), based on the Statute of Anne. Pearsall and Alexander had a long-standing friendship and regularly purchased lottery tickets together, sharing modest winnings. On December 16, 1982, after their usual routine, Alexander purchased a second set of tickets, which Pearsall initially claimed. Pearsall eventually gave one ticket to Alexander, whose ticket turned out to be a winner. Despite Pearsall's request for his share, Alexander refused to pay. The court concluded that the trial court erred in applying the statute to their agreement, leading to a reversal and remand for judgment in favor of Pearsall.

The trial court dismissed Pearsall's complaint based on public policy, ruling that contracts from gaming transactions are barred by D.C. Code 16-1701, even when related to legalized gambling. The court referenced Hamilton v. Blankenship, 190 A.2d 904 (D.C.1963), asserting that 16-1701 applies to legally placed bets under D.C. Code 2-2501 to 2537, which governs the D.C. Lottery. The court did not address whether the agreement required a written form under the Statute of Frauds (D.C. Code 28:1-206).

According to D.C. Code 16-1701, gaming contracts are void if they involve consideration for money or valuables won in gaming or for loans made for gambling purposes. Pearsall's claim does not involve recovering a gambling debt or money loaned for gambling. Instead, it pertains to an agreement between Pearsall and Alexander to share winnings from a jointly purchased lottery ticket, which is not classified as a gaming contract under 16-1701. The nature of their agreement—sharing the proceeds from a lottery ticket—does not involve gambling debts or loans, indicating that the trial court incorrectly applied the statute.

Furthermore, the agreement aligns with the spirit of 16-1701, which aims to prevent judicial enforcement of gambling debts that undermine anti-gambling laws. Since the gambling activity involved (betting on the D.C. Lottery) is legal and encouraged by local authorities, the public policy rationale of the statute does not apply in this case.

Denying Pearsall recovery does not deter illegal gambling since betting on the D.C. Lottery is legal. The District encourages participation in the Lottery to promote its public policy, contradicting the notion that denying recovery would serve public interest. Similar cases in other jurisdictions, such as Kaszuba v. Zientara, reinforce that prohibiting agreements to share lottery winnings does not benefit residents and could instead reward those who wrongfully withhold winnings. The trial court found that Pearsall and Alexander had a valid agreement to share winnings, supported by their actions on December 16, 1982, which showed mutual understanding and agreement. Alexander's behavior, including his eagerness to scratch the tickets and his acknowledgment of being "in on it," further confirms the existence of this agreement. This scenario reflects a consistent pattern of conduct, akin to a "course of conduct" under the Uniform Commercial Code.

Mutual promises to share the proceeds of winning lottery tickets constitute adequate consideration between parties, as an exchange of promises is sufficient if bargained-for. Both Pearsall and Alexander experienced detriment due to their respective promises to share the winnings. Alexander's claim that the agreement is unenforceable under D.C.Code § 28:1-206 for lack of a written contract is unfounded, as this statute pertains only to the sale of personal property valued over $5,000, which does not apply to their agreement. The arrangement was not a sale of personal property but rather a commitment to share the proceeds from a jointly-purchased lottery ticket. Consequently, the court finds a valid and enforceable agreement between Pearsall and Alexander regarding the $20,000 ticket purchased on December 16, 1982, and the decision is reversed and remanded for judgment in favor of Pearsall.

The case at hand is distinguished from Nevada cases regarding the Statute of Anne, which invalidated certain types of contracts, including those related to gambling. Specifically, these cases held that the Statute barred gambling establishments from suing customers for losses and vice versa, as well as creditors from recovering funds loaned for gambling. However, the Pearsall-Alexander agreement does not fit into these categories, rendering the Nevada cases irrelevant. The trial court's misapplication of the statute is noted, but the issue of whether the statute has been repealed or narrowed by the enactment of the D.C. Lottery is not addressed. A specific section of the D.C. Lottery statute references agreements to share winnings, indicating a recognition of such agreements while prohibiting only certain Board employees from sharing prizes. This referencing undermines Alexander's argument that the D.C. Lottery rules preclude agreements to share winnings, as those rules pertain to the relationship between the Lottery Commission and claimants, not to third-party agreements.

The U.C.C. definition of "course of dealing" supports the understanding of the agreement between Pearsall and Alexander, and the trial court's findings regarding their agreement are upheld as not clearly erroneous. The agreement may also be characterized as an exchange of mutual promises to forbear, where each party agreed not to claim the entirety of the winnings. Furthermore, Alexander’s argument against enforcing the contract, citing potential tax fraud, is deemed speculative and outside the jurisdiction of the court, with confidence expressed that the IRS would address any such issues.