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Opinion 97001

DATE: January 6, 1997

SUBJECT: Qualification of Horsemen's Benevolent and

Protective Association to Conduct Licensed

Horseracing in Nebraska.




REQUESTED BY: Senator Stan Schellpeper

Nebraska State Legislature




WRITTEN BY: Don Stenberg, Attorney General

L. Jay Bartel, Assistant Attorney General




You have requested our opinion on several questions concerning

the qualification of the Horsemen's Benevolent and Protective

Association ["HBPA"] to conduct licensed horseracing in Nebraska.

You state that the Nebraska State Racing Commission ["Commission"]

is to consider an application by the HBPA for a license to conduct

a live thoroughbred horse race meeting at Fonner Park in 1997.

Your questions concern whether the granting of such a license to

the HPBA is consistent with various existing statutes governing the

conduct of race meetings. If we conclude that it is not, you

indicate that you may consider amendatory legislation to address

the questions presented.




Initially, you direct our attention to Neb. Rev. Stat. § 2-

1204 (1991), which sets forth the requirements for applicants

seeking a license to conduct horseracing in Nebraska. Section 2-

1204 provides, in part:




The State Board of Agriculture, or any county society for

the improvement of agriculture organized under section 2-

201 or 2-221, or any corporation or association of




persons organized and carried on for civic purposes, or

which conducts a livestock exposition for the promotion

of the livestock or horse-breeding industries of the

state, and which does not permit its members to derive

personal profit from its activities by way of dividends

or otherwise, may apply to the State Racing Commission

for a license to conduct horseracing at a designated

place within the state. (emphasis added).




Your question is, assuming the HBPA is organized as a

nonprofit entity, "does the fact that its members win purses which

are generated through its activities violate the provision of this

statute which forbids permitting the members of the organization

from deriving personal profit from its activities?"




A fundamental principle of statutory construction is to

attempt to ascertain legislative intent and to give effect to that

intent. County of Lancaster v. Maser, 224 Neb. 566, 400 N.W.2d 238

(1987). A statute should be interpreted in such a manner as to

give effect to the purpose and intent of the legislature as

ascertained from the entire language of the statute in its plain

and ordinary sense. NC+ Hybrids v. Growers Seed Ass'n, 219 Neb.

296, 363 N.W.2d 362 (1985).




An examination of the language of § 2-1204 reveals that the

Legislature intended to limit the type of entities which could

obtain licenses to conduct horseracing to the following: (1) The

State Board of Agriculture; (2) A county society for the

improvement of agriculture organized under § 2-201 (county

agricultural society) or § 2-221 (county fair); (3) A corporation

or organization organized and carried on for civic purposes; or

(4) a corporation or association which conducts a livestock

exposition for the promotion of the livestock and horse-breeding

industries in the state. With respect to these last two classes of

entities (corporations or associations organized and carried on for

civic purposes, or corporations or associations which conduct

livestock or horse-breeding expositions), the Legislature added a

further requirement. An entity of this type may be licensed to

conduct horseracing only if its members are not permitted "to

derive personal profit from its activities by way of dividends or

otherwise,. . . ."




The prohibition against an entity of this nature obtaining a

license if its members derive "personal profit" from its activities

"by way or dividends or otherwise" appears to be intended to ensure

that only entities which are "non-profit" in nature are licensed by

the Commission to conduct horseracing. The term "dividend", in its

usual and ordinary sense, refers to a distribution of earnings or

profits to shareholders out of or attributable to a corporation's

earnings or profits. Cohen v. Dept. of Revenue, 197 Colo. 385, 593

P.2d 957, 960 (1979); see also Wright v. United States, 482 F.2d

600, 604 (8th Cir. 1973) (Dividend is "a pro rata distribution out

of corporate earnings and profits."). The payment of dividends is,

of course, associated with "for-profit" corporations; "non-profit"

corporations, by definition, are corporations "no part of the

income of which is distributable to its members, directors, or

officers." Black's Law Dictionary 953 (5th ed. 1979).




Section 2-1204 not only prohibits personal profit by members

through the receipt of "dividends", but expands on the prohibition

by precluding personal profit "by way of dividends or otherwise. "

(emphasis added). While this language is susceptible of a broad

interpretation, it appears that, in the context used, it is meant

to prohibit direct monetary gain to members of corporations or

associations seeking a license to conduct horseracing. This

construction is consistent with the common understanding of a non-

profit corporation as one which hinges on "whether the corporation

is being exploited for direct monetary gain." People ex rel.

Meiresonne v. Arnold, 37 Colo. App. 414, 553 P.2d 79, 81 (1976).

Moreover, it seems to comport with the Legislature's intent to

prohibit members from receiving direct financial gain amounting to

"personal profit." Cf. In re Donald Sheldon & Co., Inc., 186 B.R.

364, 369 (S.D.N.Y. 1995) (Holding that, under New York law,

"personal profit or advantage" under illegal personal gain

exclusion in officers' and directors' liability policy required

existence of "direct benefit" to officers.).




In light of the foregoing, we cannot say that the HBPA, as a

non-profit entity, is definitely precluded from obtaining a license

under § 2-1204 because its members may benefit from purses awarded

at licensed horserace meetings. The potential for members to

receive such purse monies constitutes an indirect, contingent

financial benefit which does not appear to fall within the

prohibition against direct financial gain to members in § 2-1204.

As there is, however, some uncertainty concerning the HBPA's

qualification for a license under § 2-1204, you may wish to propose

amendatory legislation addressing this issue.




You next direct our attention to Neb. Rev. Stat. § 2-1205

(1991), which provides, in part:

No license [to conduct horse racing] shall be granted to

any corporation or association except upon the express

condition that it shall not, by any lease, contract,

understanding, or arrangement of whatever kind or nature,

grant, assign, or turn over to any person, corporation,

or association the operation or management of any racing

or race meeting licensed under such sections or of the

parimutuel system of wagering described in section 2-1207

or in any manner permit any person, corporation, or

association other than the licensee to have any share,

percentage, or proportion of the money received for

admissions to the racing or race meeting or from the

operation of the parimutuel system; and any violation of

such conditions shall authorize and require the

commission immediately to revoke such license.




Your question is whether "this provision prohibit[s] granting

a license to the horsemen's organization to use the same facilities

which are owned and operated by another organization which has a

license to conduct live racing or simulcasting?"




Based on the facts presented in your request, it is our

understanding that the HBPA is contemplating seeking a license to

conduct a certain number of days of live horse racing in 1997. If

such a license is issued, the HBPA would be the licensee conducting

its own race meet. As such, it would be responsible for the

conduct and operation of the race meeting. While it will no doubt

be necessary for the HBPA to enter into some arrangement for the

lease or use of horseracing facilities to enable it to conduct a

race meeting, this would not be contrary to § 2-1205. Section 2-

1205 prohibits a licensee from assigning an interest in or turning

over the operation and management of the licensee's race meeting to

another person or entity. The lease of such facilities by another

licensee (the HBPA) to allow it to conduct a race meeting does not

amount to an arrangement whereby the licensee has turned over the

operation and management of its race meeting to the HBPA. Rather,

the HBPA will be conducting its own separate, independent, race

meeting. Thus, we do not believe § 2-1205 has any application in

this situation.




You also ask if there is "a conflict between being prohibited

from permitting any person, corporation or association other than

the licensee from having any share, percentage or proportion of the

money received from the operation of the parimutuel system pursuant

to this section and receiving a share of the parimutuel wagering

for purses pursuant to sections 2-1207.01 and 2-1208.04?"




Neb. Rev. Stat. § 2-1207(2) (Cum. Supp. 1996) requires

licensees to deduct certain amounts from wagers on horse races "to

be used to promote agriculture and horse breeding in Nebraska and

for the support and preservation of horseracing pursuant to section

2-1207.01." Section 2-1207.01 provides, in part, that "[t]he

amount deducted from wagers pursuant to subsection (2) of section

2-1207 may be used to promote agriculture and horsebreeding in

Nebraska and shall be distributed as purse supplements and breeder

and stallion awards for Nebraska-bred horses,. . . ." Neb. Rev.

Stat. § 2-1208.04(1) (Cum. Supp. 1996), requires the withholding of

a portion of gross daily receipts generated from exotic wagers for

placement into the Track Distribution Fund. The Fund is

distributed to racetracks conducting parimutuel wagering on

thoroughbred horseracing "to supplement purses at the track." Neb.

Rev. Stat. § 2-1208.04(2) (Cum. Supp. 1996).




Arguably, a conflict can be seen between the prohibition in §

2-1205 against "any person, corporation, or association other than

the licensee" having "any share, percentage, or proportion of the

money received. . .from the operation of the parimutuel system. .

.", and the provisions of §§ 2-1207.01 and 2-1208.04, requiring the

withholding of receipts from certain wagers to promote agriculture

and horsebreeding through purse supplements or breeder and stallion

awards for Nebraska-bred horses. Even if these provisions were

construed to be conflicting, however, this would not invalidate §§

2-1207.01 and 2-1208.04. "It is a well-established rule that

special provisions of a statute in regard to a particular subject

will prevail over general provisions in the same or other statutes

so far as there is a conflict." Kibbon v. School Dist. of Omaha,

196 Neb. 293, 298-99, 242 N.W.2d 634, 637 (1985). Moreover,

"[w]here general and special provisions of statutes are in

conflict, the general law yields to the special, without regard to

the priority of dates in enacting the same,. . . ." Id. Thus,

even if construed to be conflicting, the special provisions of §§

2-1207.01 and 2-1208.04 requiring the use of a percentage of

certain wagers for specified purposes, would control over the

general language in § 2-1205.




Finally, you note that, pursuant to Neb. Rev. Stat. §§ 2-1243

to 2-1246 (Cum. Supp. 1996), certain rights are granted to

"horseracing industry participants." "Horseracing industry

participant" is defined to "mean an individual who currently holds

a license from the State Racing Commission and who owns, trains,

cares for, or rides horses stabled at a Nebraska-licensed racetrack

for the purposes of horseracing at the live race meeting at such

racetrack." Neb. Rev. Stat. § 2-1244 (Cum. Supp. 1996). Under §

2-1245, horseracing industry participants are entitled to certain

rights, including "reasonable treatment from those licensed to

conduct thoroughbred race meets." Neb. Rev. Stat. § 2-1245(1)

(Cum. Supp. 1996). Your question is as follows:




If the HBPA holds the license to conduct racing, is it in

the same position as any other licensee and therefore

restricted from taking any of the actions outlined in

that section with regard to its membership, or does it

have another relationship because of the fact that its

members are composed of horseracing industry

participants, and, if so, are there potential conflicts

of interest in relation to the statute because of its

position as representative of both the track and the

horseracing industry participant?




If the HBPA is acting as a licensee conducting a horse race

meeting, it is subject to the provisions of § 2-1245 in relation to

horseracing industry participants, to the same extent as any other

licensee. If, as you suggest, this may create potential conflicts

or inconsistencies by virtue of the HBPA's status as a

representative of the horseracing industry on behalf of its

members, you may wish to consider amendatory legislation dealing

with this issue.




Very truly yours,




DON STENBERG

Attorney General








L. Jay Bartel

Assistant Attorney General




7-231-7.3




cc: Patrick J. O'Donnell

Clerk of the Legislature




APPROVED BY:






________________________________

DON STENBERG, Attorney General