623 F.2d 510

UNITED STATES of America, Appellant, v. TWENTY-EIGHT “MIGHTY PAYLOADER” COIN-OPERATED GAMING DEVICES, $1,626.06 in United States Coin and Currency, One Eight Foot by Twenty Foot Trailer, Serial Number Unknown, Bearing Iowa License 5/2 FX 3167, and Miscellaneous Carnival Prizes, and/or Jeffrey A. Blomsness, Twenty-Four “Poker” Coin-Operated Gaming Devices, $2,247.29 in United States Coin and Currency, One Eight Foot by Fifteen Foot Trailer, Serial Number 1232, Bearing Delaware License T 75154, and Miscellaneous Carnival Prizes, and/or Lou Hall and Wayne Chambers, Forty-Four “Sweepstakes” Coin-Operated Gaming Devices, $1,990.95 in United States Coin and Currency, One Eight Foot by Twenty Foot Trailer, Serial Number AGO 378303, Bearing Iowa License 5/2 FX 2728, and Miscellaneous Carnival Prizes, and/or Janice Mars, Ten “Mighty Payloader” Coin-Operated Gaming Devices, $872.68 in United States Coin and Currency, One Eight Foot by Twenty Foot Trailer, Serial Number 266, Bearing Texas Trailer License D 46-593 and Miscellaneous Carnival Prizes, and/or Janice Mars, Twenty-Eight “Mighty Payloader” Coin-Operated Gaming Devices, $1,287.75 in United States Coin and Currency, One Eight Foot by Twenty Foot Trailer, Serial Number 226-2460, Bearing Iowa License 5/2 FX 3652 and Miscellaneous Carnival Prizes, and/or Janice Mars, Twenty-Eight “Mighty Payloader” Coin-Operated Gaming Devices, $889.62 in United States Coin and Currency, One Eight Foot by Twenty Foot Trailer, Serial Number H052, Bearing Florida Temporary License X 65034, and Miscellaneous Carnival Prizes, and/or Janice Mars, Twenty-Four “Crompton Penny Falls” Coin-Operated Gaming Devices, $55.50 in United States Coin and Currency, and Miscellaneous Carnival Prizes, and/or Robert Vogt and Carl Gatlin, Sixty “Sweep-Stakes” Coin-Operated Gaming Devices, $2,027.60 in United States Coin and Currency, and Miscellaneous Carnival Prizes, and/or Jeffrey A. Blomsness, Appellees. UNITED STATES of America, Appellee, v. TWENTY-EIGHT “MIGHTY PAYLOAD-ER” COIN-OPERATED GAMING DEVICES, $1,626.06 in United States Coin and Currency, One Eight Foot by Twenty Foot Trailer, Serial Number Unknown, Bearing Iowa License 5/2 FX 3167, and Miscellaneous Carnival Prizes, and/or Jeffrey A. Blomsness, Appellants. UNITED STATES of America, Appellee, v. TWENTY-FOUR “POKER” COIN-OPERATED GAMING DEVICES, $2,247.29 in United States Coin and Currency, One Eight Foot by Fifteen Foot Trailer, Serial Number 1232, Bearing Delaware License T 75154, and Miscellaneous Carnival Prizes, and/or Lou Hall and Wayne Chambers, Appellants. UNITED STATES of America, Appellee, v. FORTY-FOUR “SWEEPSTAKES” COIN-OPERATED GAMING DEVICES, $1,990.95 in United States Coin and Currency, One Eight Foot by Twenty Foot Trailer, Serial Number AGO 378303, Bearing Iowa License 5/2 FX 2728, and Miscellaneous Carnival Prizes, and/or Janice Mars, Appellants. UNITED STATES of America, Appellee, v. TEN “MIGHTY PAYLOADER” COIN-OPERATED GAMING DEVICES, $872.68 in United States Coin and Cur*?rency, One Eight Foot by Twenty Foot Trailer, Serial Number 266, Bearing Texas Trailer License D 46-593 and Miscellaneous Carnival Prizes, and/or Janice Mars, Appellants. UNITED STATES of America, Appellee, v. TWENTY-EIGHT “MIGHTY PAYLOAD-ER” COIN-OPERATED GAMING DEVICES, $1,287.75 in United States Coin and Currency, One Eight Foot by Twenty Foot Trailer, Serial Number 226-2460, Bearing Iowa License 5/2 FX 3652 and Miscellaneous Carnival Prizes, and/or Janice Mars, Appellants. UNITED STATES of America, Appellee, v. TWENTY-EIGHT “MIGHTY PAYLOAD-ER” COIN-OPERATED GAMING DEVICES, $889.62 in United States Coin and Currency, One Eight Foot by Twenty Foot Trailer, Serial Number H052, Bearing Florida Temporary License X 65034, and Miscellaneous Carnival Prizes, and/or Janice Mars, Appellants. UNITED STATES of America, Appellee, v. TWENTY-FOUR “CROMPTON PENNY FALLS” COIN-OPERATED GAMING DEVICES, $55.50 in United States Coin and Currency, and Miscellaneous Carnival Prizes, and/or Robert Vogt and Carl Gatlin, Appellants. UNITED STATES of America, Appellee, v. SIXTY “SWEEP-STAKES” COIN-OPERATED GAMING DEVICES, $2,027.60 in United States Coin and Currency, and Miscellaneous Carnival Prizes, and/or Jeffrey A. Blomsness, Appellants.

Nos. 79-1432, 79-1448 to 79-1455.

United States Court of Appeals, Eighth Circuit.

Submitted Dec. 5, 1979.

Decided June 11, 1980.

*512Sam Sexton, Jr., Fort Smith, Ark., for appellant.

Andrew S. Gordon (argued), Atty., Dept, of Justice, William G. Otis, Washington, D. C., W. H. Dillahunty, U. S. Atty., Little Rock, Ark., and J. Michael Fitzhugh, Asst. U. S. Atty., Western District of Arkansas, Fort Smith, Ark., on brief, for appellees.

Before GIBSON, Chief Judge,* and LAY and McMILLIAN, Circuit Judges.

LAY, Chief Judge.

The district court determined that various coin-operated machines were taxable as gaming devices under 26 U.S.C. § 4461.1 *513The court held, however, that the machines were not to be forfeited under 26 U.S.C. § 7302. The owners of the machines have appealed, arguing that the machines do not fall within the definition of 26 U.S.C. § 4462 for several reasons. The Government has cross-appealed, urging that the district court erred in not ordering forfeiture. We hold the machines are subject to the special tax, but that the district court erred in not ordering forfeiture.

On appeal the owners of the machines urge inter alia that the machines are games of skill and as such are not gaming devices; that the prizes won are less than the cost to the player and without the possibility of gain; therefore, there can be no tax under the statute.

Facts.

In September 1978, the machines in question were seized by the Internal Revenue Service (IRS) as gaming devices on which no tax had been paid, at the Fort Smith Fair held at Fort Smith, Arkansas.

The owners’ basic argument on appeal2 is the evidence fails to show that the machines in question were coin-operated3 gaming devices within the meaning of 26 U.S.C. § 4462.4 They urge the machines *514are games of skill, and the element of chance, if any, is insufficient to render the machines gaming devices under the statute. The machines involved in these forfeiture proceedings are referred to as the Poker Reno, Mighty Payloader, Crompton Penny Falls, and the Sweepstakes.

Poker Reno Machines.

The Poker Reno type machines were described and found to be gaming devices in United States v. 20 “Dealer’s Choice” Machines & Coin Contents of $3.50, 341 F.Supp. 1147 (D.S.C.1972), rev’d on other grounds, 483 F.2d 474 (4th Cir. 1973). Similar machines have been found judicially and administratively to be gaming devices within the meaning of section 4462. United States v. One Bally “Barrel-O-Fun” Coin-Operated Gaming Device, 224 F.Supp. 794 (M.D.Pa.1963), aff’d sub nom. Brozzetti v. Rogers, 337 F.2d 857 (3rd Cir. 1964); Rev. Rul. 72-566, 1972-2 C.B. 583; Rev.Rul. 56-309, 1956-2 C.B. 893. The fact that the Poker Reno machines, unlike the machines in the cases cited, did not have an electrical control which, in the owners’ words, “deprived the player of the opportunity to exercise his skill in playing the machine,” is not decisive, since the amount of time involved in playing the machine does not alter the substantial element of chance involved. The evidence shows that the “skill” involved in playing was only a small factor and that the element of chance was a substantial factor in winning. The fact that there may be some skill involved in the game is not determinative. United States v. Korpan, 354 U.S. 271, 77 S.Ct. 1099, 1 L.Ed.2d 1337 (1957). When there is a substantial element of chance involved, the fact that skill in operating the machine is helpful in attaining the end sought does not take the machine out of the type defined by the statute. See United States v. 24 Digger Merchandising Machines, 202 F.2d 647, 649-50 (8th Cir.), cert. denied, 354 U.S. 998, 73 S.Ct. 1140, 97 L.Ed. 1404 (1953). The district court found that there was a substantial element of chance involved in the successful operation of the Poker Reno machines. There was also evidence that the return on the machines was greater than the 10$ investment. Play on these machines is initiated by insertion of a coin. In addition, the regulations specifically state that the Poker Reno type machines are covered by the statute. 26 C.F.R. § 45.-4462-l(aX2)(v). The district court’s finding that the Poker Reno machines are coin-operated devices within the meaning of section 4462 is not clearly erroneous.

Mighty Payloader, Crompton Penny Falls and Sweepstakes Machines.

The Mighty Payloader, Crompton Penny Falls and Sweepstakes machines are similar in their operation. The district court described the operation of those machines in the following manner:

The Mighty Payloader contains a blade which constantly and steadily moves across the playing surface. On the playing surface are tokens, prizes and coins. At the front of the machine is a coin slot. When the player inserts a coin through the coin slot onto the playing surface, the coin may land on the playing surface, be pushed by the moving blade and thereby push one of the tokens, coins or prizes on the playing surface into the dispensing bin. The player has some control over where his coin lands on the playing board. Since the spot where the coin lands totally controls whether the player wins, he has some, but not total, control over whether he wins or loses.

United States v. 28 “Mighty Payloader” Coin-Operated Gaming Devices, No. 79-2016 (W.D.Ark., filed May 18, 1979).

The district court found these machines were operated by insertion of a quarter and that the value of the prizes varies but some were worth at least $1.00. It also found there is a substantial element of chance involved in playing these games. We cannot say the machines are exempt as a matter of law under 26 C.F.R. § 45.4461-l(a).

*515As noted in the discussion of the Poker Reno games, the fact that some skill is involved in successfully operating the machines does not mean that they are not covered by section 4462. United States v. Korpan, 354 U.S. 271, 77 S.Ct. 1099, 1 L.Ed.2d 1337 (1957); United States v. 20 “Dealer’s Choice” Machines & Coin Contents of $3.50, 483 F.2d 474 (4th Cir. 1973). Courts have held that there must be a substantial element of chance before the machines will be considered coin-operated gaming devices. United States v. 20 “Dealer’s Choice” Machines & Coin Contents of $3.50, 483 F.2d 474 (4th Cir. 1973); United States v. 24 Digger Merchandising Machines, 202 F.2d 647 (8th Cir.), cert. denied, 354 U.S. 998, 73 S.Ct. 1140, 97 L.Ed. 1404 (1953).

It does not appear that there are any reported cases discussing the exact type of machines involved here. Rev.Rul. 59-293, 1959-2 C.B. 338 found that a “Rotary Pusher” which operates on some of the same principles is taxable as a coin-operated gaming device. Successful operation of claw or digger machines and pinball machines has been held to involve a substantial element of chance. See, e. g., Johnson v. Phinney, 218 F.2d 303 (5th Cir. 1955); Boosalis v. Crawford, 99 F.2d 374 (D.C.Cir.1938); Tooley v. United States, 134 F.Supp. 162 (D.Nev.1955); United States v. 10, More or Less, Digger Machines, 109 F.Supp. 825 (E.D.Mo.1952); see also 26 C.F.R. § 45.-4462-l(a)(2)(ii).5 Analogies between the machines involved in these cases and the ones here are readily apparent.

Unlike the player of the bowling machine 6 who can place his puck anywhere on the playing surface prior to its release, the evidence showed the machines here placed limitations on the tossing of the coin, and the player does not have complete control over where the coin lands on the playing surface. In many ways the element of chance in the successful operation of these machines is more analogous to that of a pinball machine than a bowling machine.

As an additional ground for reversal, the owners argue the district court erred in allowing the IRS agents to give opinion evidence as to the element of chance in playing the machines. The district court did not base its decision solely on this testimony. The court observed at least one of the machines and listened to testimony on how all the machines operated. From that evidence it could have found that successful operation of these machines required a substantial element of chance. The district court’s finding on the matter is not clearly erroneous.

As a final argument, the owners assert that when the prize returned is of no greater value than the amount of money required to operate the machine, section 4462 does not apply because it was the intent of Congress to exclude machines on which the potential of profit to the player has been eliminated. The testimony at the trial, including the testimony of the owners, establishes, however, that prizes of at least $1.00 could be obtained with a 25<t play in all but the Poker Reno machine. The Poker Reno machine was operated with a dime with which one could win coupons; an accumulated number of coupons (numbers not specified) could be cashed in for prizes such as tool sets or portable radios. It is true that many of the prizes to be won operating the machines were minimal in value, e. g., the list of items seized includes 295 playing cards, 250 sets of toy soldiers, 228 glass animals, 168 plastic plates, 108 banks, 94 ash trays, 953 chain bracelets, 144 bracelets, and 102 dogs on sticks. Nonetheless, the opportunity to win a greater premium did *516exist.7 Rev.Rul. 56-309, 1956-2 C.B. 893, observes:

A coin-operated machine that, upon the insertion of a coin, delivers a ticket that entitles the player to a prize if the poker hand symbols on the ticket constitute a winning hand, is considered to be a coin-operated gaming device taxable under section 4461 of the Internal Revenue Code of 1954.

The district court determined the machines are coin-operated gaming devices. The district court’s findings, that successful operation of these machines involves a substantial element of chance, that prizes greater than the value of the cost of a play can be obtained, and that the machines are coin-operated, are not clearly erroneous.

The Cross-Appeal.

The Government argues that the district court erred in not requiring the seized items to be forfeited under 26 U.S.C. §§ 7301, 7302. The district court held there are unique circumstances in this case which would make it fundamentally unfair for the Government to take the machines from their owners without first giving them the opportunity to pay the tax. The court discussed the following equitable considerations: (1) the IRS’ failure to attempt to collect taxes on these types of machines generally; and (2) persons in the carnival business were unaware or misled by conduct and statements made by agents of the IRS. The court recited the fact that the IRS sent a letter from the Ogden, Utah Regional Office to a person who owned similar machines, stating that no tax was due if the prizes that could be won were less than $10.00 to $15.00.

26 U.S.C. § 7302 provides:

It shall be unlawful to have or possess any property intended for use in violating the provisions of the internal revenue laws, or regulations prescribed under such laws, or which has been so used, and no property rights shall exist in any such property. A search warrant may issue as provided in chapter 205 of title 18 of the United States Code and the Federal Rules of Criminal Procedure for the seizure of such property. Nothing in this section shall in any manner limit or affect any criminal or forfeiture provision of the internal revenue laws, or of any other law. The seizure and forfeiture of any property under the provisions of this section and the disposition of such property subsequent to seizure and forfeiture, or the disposition of the proceeds from the sale of such property, shall be in accordance with existing laws or those hereafter in existence relating to seizures, forfeitures, and disposition of property or proceeds, for violation of the internal revenue laws.

The Government contends that section 7302 does not allow a good faith defense. Having determined the machines are subject to the tax imposed by 26 U.S.C. § 4461 and the tax was not paid, it is clear the property has been used in violation of the internal revenue laws and is subject to forfeiture. Forfeiture statutes have an extraordinarily broad scope. United States v. United States Coin & Currency, 401 U.S. 715, 91 S.Ct. 1041, 28 L.Ed.2d 434 (1971).

The innocence of the owner is not a defense to forfeiture, since the proceeding is in rem against the article to be forfeited. Calero-Toledo v. Pearson Yacht Leasing Co., 416 U.S. 663, 680, 683, 94 S.Ct. 2080 (1974); J. W. Goldsmith, Jr.-Grant Co. v. United States, 254 U.S. 505, 41 S.Ct. 189, 65 L.Ed. 376 (1921); United States v. Bride, 308 F.2d 470, 474 (9th Cir. 1962); United States v. One 1958 Pontiac Coupe, 298 F.2d 421, 422 (7th Cir. 1962); United States v. Four (4) Pinball Machines, 429 F.Supp. 1002 (D.Hawaii 1977); United States v. One 1968 *517Ford Pickup Truck, 310 F.Supp. 789 (S.D. Ala.1970).8

We hold the machines are coin-operated gaming devices within the meaning of 26 U.S.C. § 4462 and are subject to forfeiture pursuant to 26 U.S.C. § 7302.

The judgment of the district court is affirmed, but modified; the cause is remanded to the district court with directions that the judgment be amended to direct forfeiture of the machines.

United States v. Twenty-Eight “Mighty Payloader” Coin-Operated Gaming Devices
623 F.2d 510

Case Details

Name
United States v. Twenty-Eight “Mighty Payloader” Coin-Operated Gaming Devices
Decision Date
Jun 11, 1980
Citations

623 F.2d 510

Jurisdiction
United States

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