No. 89-279
IN THE SUPREME COURT OF THE STATE OF MONTANA
1990
MPH COMPANY AND TROPIC INDUSTRIES,
Plaintiffs and Respondents,
-vs-
IMAGINEERING, INC., and BILL R. WILLIAMS,
Defendants and Appellants.
APPEAL FROM: District Court of the Thirteenth Judicial District,
In and for the County of Yellowstone,
The Honorable G. Todd Baugh, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
W. orbi in Howard, ~illings,Montana
For Respondent:
Pierre L. Bacheller, Billings, Montana
Submitted: December 12, 1989
Decided: M a Y 16, 1 9 9 0
Filed:
played by positioning a chip on the layout by means of four
separate directional buttons. Once the player made his selection,
he would place a bet by either inserting coins or pushing the llbetll
button. After placing his bet, the player would start the game by
pushing the llstartll
button. The start button would activate a card
selection device, which was a bowl-shaped container with a spinning
wheel in the bottom and 52 pockets around the periphery, each
pocket representing a different card from a standard deck of cards.
From the llpockettlselections of the last game, six balls would be
dumped into the bowl. The spinning wheel would continue to
randomly bounce the balls around until each found a pocket. As
each ball entered a pocket, it would close a switch, sending
information to the computer. The computer would then display the
selected betting squares on the screen. After the sixth ball found
its pocket, the computer would compute the results of the best
possible poker hand by using 5 out of the 6 selected cards. It
would then display the results on the screen by calculating the
total winnings and advancing the credit meter accordingly.
The parties encountered a variety of problems with the
machines and were forced to modify the contract on several
occasions. In December, 1984, a prototype was delivered to MPH in
Billings. MPH found the machine acceptable and ordered 2 0 units
in kit form for assembly in Billings. MPH subsequently increased
the order to 24 machines, also in kit form.
That December, Imagineering contacted the Nevada gaming
authorities, who told the company that the machine would be illegal
in Montana because it incorporated certain components that enabled
the game to be played for cash. These illegal components included
devices to display the last credits cleared, coin out meters and
cancel credit switches, also known as reset keys. After consulting
with the Nevada authorities, Imagineering discussed the problem
with MPH. Imagineering agreed to send the machines to MPH in
Montana without the illegal parts but with wiring and circuitry
designed to accommodate the components should MPH wish to install
them itself.
Justice William E. Hunt, Sr., delivered the Opinion of the Court.
The District Court of the Thirteenth Judicial District,
Yellowstone County, found defendant, Imagineering, Inc., liable
for breach of contract and breach of implied warranty. The court
entered judgment in favor of plaintiff, MPH Company, in the amount
of $193,663 plus interest. Imagineering appeals. We reverse.
The sole issue raised on appeal is whether the contract
entered into by the parties was illegal under the laws of Montana
and therefore unenforceable.
Defendant and appellant, Imagineering, Inc., is a Nevada
corporation engaged in the design and manufacture of electronic
video machines. Plaintiff and respondent, MPH Company, is a joint
venture comprised of Sam McDonald, Jr., Paul Pendergrass and Ronald
Harding, all of Billings, and Joe Goott of Salt Lake City. Goott
is also the president of Tropic Industries, a Utah corporation.
In January, 1984, MPH and Tropic entered into a contract with
Imagineering wherein Imagineering agreed to design and manufacture
an electronic Poker All Keno machine. This machine was to be the
electronic version of the table game developed and patented by Joe
Goott. A detailed description of the table game can be found in
our decision Goott v. State, 630 P.2d 232, 38 St.Rep. 1037 (Mont.
1981). In Goott, we found that, although the game possessed some
of the characteristics of poker, it was essentially a variation of
keno. We held that the game was illegal under the Montana Card
Games Act (then codified at 3 3 23-5-301 through -332, MCA) . On
remand, the District Court declared that the game was legal under
the Bingo and Raffles Law (then codified at 3 3 23-5-401 through
-431, MCA.
The contract specified that the electronic version of Poker
All Keno was to be a single-player, stand-up video game designed
with a reset key to allow the player to cash in his accumulated
credits. The image projected on the screen was to be the same as
that found on the Poker All Keno table layout. The game would be
After shipping the games, Imagineering sent employees to
Montana to explain the assembly of the machines to technicians
hired by MPH. While in Montana, the Imagineering employees showed
the MPH technicians how to install the electrical components that
Imagineering had refused to install in Nevada. In fact,
Imagineering furnished extra parts for this purpose, although it
appears that the parts were available on the general market and
could have been found in any Radio Shack store.
The kits were delivered in March, 1985. They were assembled
in April of that year and subsequently installed in bars in
Billings, Great Falls and other locations in Montana. The machines
placed in the Montana bars were equipped with components permitting
them to be played for cash.
Although the machines worked in the lab, they did not operate
properly in the electronically l1dirtyl1environment of the local
drinking establishments. Among other problems, the machines
frequently registered unearned credits. Fearing that they would
have to pay out more in cash winnings than the machines were
bringing in, the bar owners asked MPH to remove the games from
their establishments.
Imagineering sent several technicians to Montana in an attempt
to cure the problem. The technicians were unsuccessful in their
endeavors, and in May and June, 1985, MPH pulled the games out of
the taverns.
MPH and Tropic instituted suit against Imagineering and its
president, Bill R. Williams, alleging breach of contract, breach
of warranty, fraud and bad faith. Imagineering and Williams
defended on the basis that the contract was illegal and therefore
unenforceable.
Tropic s claims were dismissed with prejudice. Later, the
remaining parties stipulated to dismissal of all claims against
Williams as well as MPH1s claims of fraud and bad faith against
Imagineering.
In lieu of trial, MPH and Imagineering submitted the case to
the District Court based on the record and a set of stipulated
facts. The parties stipulated that the video machines contained
design defects rendering them commercially unacceptable and
constituting a breach of contract.
The District Court found that the machines were in compliance
with Montana law at the time the contract was to be performed and
that the contract, as amended, was legal and enforceable. The
court entered judgment in favor of MPH in the amount of $193,663
plus pre-judgment interest of $79,354. The principal represented
funds expended by MPH in satisfaction of the contract.
Imagineering argues that the electronic Poker All Keno
machines contemplated by the parties were illegal slot machines
because they were intended to be and actually were played for cash.
We agree that Montana statutes and interpretive case law prohibited
the type of gambling devices for which the parties contracted and
that the machines were, at best, unlawful slot machines.
The Montana Constitution prohibits gambling unless
specifically authorized.
All forms of gambling, lotteries, and gift
enterprises are prohibited unless authorized by
acts of the legislature or by the people through
initiative or referendum.
Art. 111, 5 9, Mont. Const. (1972).
At the time the parties entered into and performed the
contract in question, Montana law prohibited the possession or
operation of slot machines. Section 23-5-104, MCA (1983)(amended
1989 and renumbered 5 23-5-153). A slot machine was defined in 5
23-5-101(1), MCA (1983) (amended 1989 and renumbered 5 23-5-
112 (29)) , as follows:
[A] machine operated by inserting a coin, token,
chip, trade check, or paper currency therein by the
player and from the play of which he obtains or may
obtain money, checks, chips, tokens, or paper
currency redeemable in money.
In 1974, the legislature enacted the Montana Card Games Act,
ch. 293, 5 1, 1974 Mont. Laws 727, and the Bingo and Raffles Law,
ch. 294, 5 1, 1974 Mont. Laws 731. The Montana Card Games Act
authorized certain enumerated card games, including poker. Section
23-5-311, MCA, (1983)(amended 1989). The authorized card games
could be played for cash. Sections 23-5-302, MCA, (1983)(repealed
1989) and 23-5-312, MCA, (1983)(amended 1989). At the time the
parties entered into the contract, the Bingo and Raffles Law
authorized playing bingo for prizes of tangible personal property
only. The law expressly forbade bingo prizes of cash or other
intangible personal property. Section 23-5-412, MCA,
(1983)(amended 1985 and 1989).
In 1976, this Court considered the legality of electronic keno
games under the Bingo and Raffles Law. In Treasure State Games,
Inc. v. State, 170 Mont. 189, 551 P.2d 1008 (1976), we upheld the
legality of electronic keno under these laws, concluding that
electronic keno machines were merely the mechanical simulation of
the lawful game of bingo. We did not consider whether such
machines could be legally played for cash prizes.
In 1981, Joe Goott, one of the members of MPH, brought a
declaratory judgment action in the Silver Bow County District
Court, seeking to have the table version of Poker All Keno declared
lawful. The District Court held that the game was lawful under the
Card Games Act. On appeal, we reversed, reasoning that Poker All
Keno was a "casino-type of banking game" that pitted players
against the house rather than against each other, an activity that
the legislature did not intend to authorize when it enacted the
Card Games Act. Goott, 630 P.2d at 234, 38 St.Rep at 1039. On
remand, the District Court held that Poker All Keno was legal under
the Bingo and Raffles Law, which left the game subject to the
prohibition against cash prizes.
The following year, we were presented with the opportunity to
determine the legality of live keno games. In Gallatin County v.
D & R Music and Vending, Inc., 201 Mont. 409, 412, 654 P.2d 998,
1000 (1982) (Gallatin I), we held that live keno came within the
statutory definition of the game of bingo and was therefore legal
under the Bingo and Raffles Law. MPH claims that Gallatin I also
authorized the playing of keno for cash because the stipulated
description of keno presented by the parties described the amount
of cash paid for winning the game. It appears, however, that the
question of whether the game was legally played for cash prizes was
not presented to this Court. Rather, the issue in Gallatin I was
whether the game of keno conformed with the legal description of
bingo under 5 23-5-402 (1)(a), MCA (1981)(repealed 1989) . Because
we did not, in Gallatin I, discuss the legality of playing keno for
cash, it cannot be said that the case authorized such activity.
In fact, Gallatin I could not possibly have legalized playing keno
or any other form of bingo for cash when 5 23-5-412, MCA, as it
stood in 1982 expressly proscribed such activity.
Any question that Gallatin I permitted playing electronic keno
for cash prizes was clarified by the legislature's amendment to 5
23-5-412, MCA, in April, 1985, the same time that the Poker All
Keno machines that form the basis of this action were being
assembled and placed in bars in Montana. The statute was amended
to read as follows:
Bingo prizes may be paid in either tangible
personal property or cash, except that a prize must
be paid in tanqible personal property if the qame
is played on a player-operated electronic video
qame machine. (Emphasis added.)
Section 23-5-412, MCA (enacted April 12, 1985) . Thus, while the
amended statute authorized cash prizes for live bingo games, it
continued to prohibit prizes of intangible personal property for
electronic versions of the game.
In February, 1984, shortly after the parties entered into the
contract for the manufacture of Poker All Keno machines, this Court
decided Gallatin County v. D & R Music and Vending, Inc., 208 Mont.
138, 676 P.2d 779 (1984) (Gallatin 11). Using much the same
reasoning as that employed in Goott, we held that electronic poker
machines were not authorized under the Montana Card Games Act. We
held that electronic poker machines were slot machines, which 23-
5-101, MCA (1983), expressly barred.
In 1985, the legislature passed the Video Draw Poker Machine
Control Law, Ch. 720, 5 1, 1985 Mont. Laws 1649. While this act
legalized video draw poker machines and authorized playing those
machines for cash prizes, it did not authorize playing Poker All
Keno for cash. Instead, the law was expressly limited to machines
offering the game of draw poker. Section 23-5-606 (4), MCA
(1985)(amended 1987 and repealed 1989). Poker All Keno, which
possessed elements of both the game of poker and the game of keno,
was not draw poker as that game was defined in S 23-5-606(4), MCA
(1985). Thus, the passage of the Video Draw Poker Machine Control
Law did not legalize the electronic version of Poker All Keno.
It is clear from the statutes and the case law that, at the
time the parties entered into and performed the contract, Montana
law forbade playing Poker All Keno for cash prizes. Goott
prohibited the table version of the game under the Montana Card
Games Act. Gallatin 11, which banned electronic draw poker games,
emphasized the holding in Goott, i.e., that forms of gambling that
pitted a player against the house, whether the games were live or
mechanical, were not permitted under the Card Games Act. Although
the Video Draw Poker Machine Control Act overruled the holding in
Gallatin I1 by legalizing electronic draw poker machin'es, the act
did not authorize Poker All Keno machines.
Assuming that electronic Poker All Keno machines were legal
under the Bingo and Raffles Law, the game could still not be played
legitimately for cash. Gallatin I, while holding that electronic
keno was a lawful game, did not authorize playing the game for cash
prizes, nor could it have done so in the face of the express
statutory prohibition against such activity. Furthermore, the 1985
amendment of 5 23-5-412, MCA, specifically provided that electronic
versions of bingo could be played only for prizes of tangible
personal property.
In light of the above discussion, we must conclude that, at
the time the parties entered into and performed the contract, Poker
All Keno machines played for cash prizes were not authorized under
either the Montana Card Games Act, the Video Draw Poker Machine
Control Law or the Bingo and Raffles Law. Consequently, the
machines were slot machines as defined in 5 23-5-101(1), MCA
Section 28-2-701(1), MCA, provides that a thing or an act is
not lawful if it is I1contrary to an express provision of 1aw.I'
Slot machines were expressly prohibited by 5 23-5-104, MCA (1983),
at the time the parties entered into and performed the contract.
Therefore, Poker All Keno machines, because they were slot
machines, were unlawful under Montana law.
"Where a contract has but a single object and such object is
unlawful, whether in whole or in part, . .. the entire contract
is void.I1 Section 28-2-603, MCA. "The object of a contract is the
thing which it is agreed on the part of the party receiving the
consideration to do or not to do." Section 28-2-601, MCA. In the
present case, the object of the contract was the design and
manufacture of Poker All Keno machines. Because the machines were
unlawful, the entire contract was void.
A party to an illegal contract may not use the courts of this
state to enforce the agreement.
No principle of law is better settled than that a
party to an illegal contract cannot come into a
court of law and ask to have his illegal objects
carried out, nor can he set up a case in which he
must necessarily disclose an illegal purpose as the
groundwork of his claim . . .. The law, in short,
will not aid either party to an illegal agreement.
It leaves the parties where it finds them.
Therefore neither a court of law nor a court of
equity will aid the one in enforcinq it, or qive
damases for a breach of it, or set it aside at the
suit of the other, or, when the asreement has been
executed in whole or in part by the payment of
money or the transfer of other property, lend its
aid to recover it back. (Emphasis added.)
Glass v. Basin & Bay State Mining Co., 31 Mont. 21, 33, 77 P. 302,
305 (1904) (quoting 9 D. Lawson, Cyclopedia of Law and Procedure
546) . Accord McPartlin v. Fransen, 199 Mont. 143, 146-47, 648 P.2d
729, 730-31 (1982); McManus v. Fulton, 85 Mont. 170, 182-83, 278
P. 126, 131 (1929).
At oral argument, MPH advanced the theory that the parties1
modification of the contract changed the agreement from an illegal
to a legal contract. MPH argued that because the Poker All Keno
machines shipped to Montana by Imagineering did not include the
components enabling them to be played for cash, the machines were
legal under Montana law.
We reject this argument for two reasons. First, ' [t]he object
I
of the contract must be lawful when the contract is made . . . .I1
Section 28-2-602, MCA. The original object of the contract was
the design and manufacture of a Poker All Keno machine that could
be played for cash prizes. Therefore, the object was not lawful
when the contract was made.
Second, although Imagineering may have shipped lawful
machines, it appears that the contract was not fully performed at
that point. Imagineering sent employees to Montana to oversee the
assembly of the machines and to show MPH1s technicians how to
install the parts that would enable the machine to be played for
cash. These actions constitute a common scheme or plan to use the
machines for illegal purposes within this state. When the general
scheme of the contracting parties is to bring about unlawful
results, the contract is unenforceable. See 15 Williston on
Contracts 8 8 1752 and 1755 (3d ed. 1972).
The parties originally planned to manufacture and design
illegal gambling machines for use within the state of Montana.
The parties did not deviate from the original object of the
contract even though the manufacturer shipped lawful machines into
this state. The end product--a Poker All Keno machine that could
be played for cash prizes--was also the original object of the
contract. As the object of the parties was to manufacture and
market an unlawful slot machine, the contract was illegal. Neither
party may come into our courts seeking damages for breach of that
agreement.
The judgment of the District Court is reversed.
We Concur: .-a
Justice John C. Sheehy, dissenting:
I dissent on three grounds: 1) That at all times herein
there was confusion, even among county attorneys, as to the
application of law to video-electronic keno machines; 2) The
contract here for the manufacture of the machines is severable from
any illegality; and 3) Principles of restitution allow recovery
here.
Confusion in the Law
In Treasure State Games, Inc. v. State (1976), 170 Mont. 189,
551 P.2d 1008, this Court held that electronic bingo and keno
machines were lawful in Montana under the Bingo and Raffle Law of
1974. At that time, 5 23-5-412, MCA, provided:
Bingo prizes [including keno] must be in tangible
personal property only and not in money, cash, stocks,
bonds, evidences of indebtedness, or other intangible
personal property and must not exceed the value of $100
for each individual award.. ..
Under this statute, no cash prizes could be granted winners
of any bingo or keno games, whether live, player-operated or
electronic.
The question of the legality of keno came before this Court
again in Gallatin County v. D & R Music and Vending, Inc. (1982),
201 Mont. 409, 654 P.2d 998 (Gallatin I). There this Court upheld
the validity of keno as it is operated in most of the Montana
establishments at the present time. The numbers are selected at
random from numbered ping pong balls blown into a tube. This Court
said that such a device was in accord with the Bingo and Raffle
Law of 1974 and issued mandamus requiring the appropriate officers
to issue licenses for the keno machines. Noteworthy in that case,
however, is the opinion of Justice Daniel J. Shea, who, specially
concurring, noted that it was common knowledge in the state that
such keno is played with the expectation that a player would
receive money if he won. Justice Shea pointed out that even though
§ 23-5-412, as above quoted, was in effect, the county attorneys
did not prosecute any establishment for paying cash to the winners
as a matter of general policy.
This was the state of the law when in early 1985, the
plaintiff MPH Company contracted with Bill R. Williams and
Imagineering, Inc. for the manufacture of video keno machines. The
only theoretical difference between the machines contracted for
and the usual version of keno is that the proposed machines would
be operated by a single player and the numbers would be flashed on
a video screen. The contract was entered into and was to be
performed in the early months of 1985.
From the date of Justice Shea's special concurrence, in
December of 1982, until 1985, nothing was done to amend the Bingo
and Raffle Law so as to provide that cash would be paid on keno
games in this state. Under any objective test, the 1985 and
1987 sessions of the Montana legislature were among the worst in
our state history. It is a strange but true fact that the worse
a legislature is the more Acts it will pass relating to the same
subject.
In 1985, the legislature passed Ch. 465, Laws of Montana
(1985), which became 5 23-5-412, MCA, and which has now been
repealed. That statute, as passed in 1985, read as follows:
Bingo prizes may be paid either in tangible personal
property or cash, except that a prize must be paid in
tansible personal property if the same is laved on a
player-operated video same machine. (Italics supplied.)
It is important to note the change that the 1985 amendment to
5 23-5-412, MCA, made with respect to its former version. Whereas
formerly no cash prizes could be legally awarded for the playing
of bingo (and therefore keno), after the amendment, prizes could
be paid in cash except only for player-operated video game
machines. Thus, in the same establishment, a keno game which was
operated by ping pong balls could merit cash prizes, but a player-
operated video keno machine in the same premises, could not legally
award cash prizes.
Yet, the same 1985 legislature passed a law making valid video
draw poker machines (which is a flvideo
game machineff),
and allowing
the players of such machines to draw their winnings in cash.
Chapter 720, Laws of Montana (1985). Except that the draw poker
and keno games are different in design, there is no real gambling
distinction between a video poker game and a video keno game, or
for that matter a video bingo game. They are all Ifvideo game
machines. If
Was there considerable confusion about the legality of video
keno machines at the time of this contract? There certainly was.
We need look no further than the finding of District Judge G. Todd
Baugh in this case:
.
. . The court finds that the machines were legal and
in compliance with Montana law at the time the contract
was to be performed and that the contract, as amended,
is therefore enforceable.
The only feature of the machines manufactured in this case
upon which the majority may hinge their decision is that the
machines had been modified after manufacture to provide for the
payment to winners in cash. The modification involved a print-
out which would show the number of game credits to which the winner
was entitled. The credits could be paid off by the owner of the
machines for the value of goods instead of cash, which would be
legal without doubt. It was the eventual establishments that paid
these credits in cash.
Severability of the Contract
There is no law of which we have been made aware here that
prohibited Imagineering, Inc. from manufacturing the machines in
Utah and transporting them to Montana for acceptance by the buyer.
The fact is that the machines could not be used for any purpose.
They were defective. They did not work. They were inoperable
legally or illegally. Imagineering, Inc. admits the deficiencies,
and acknowledges in this case that insofar as its performance was
concerned, breached the contract.
Where an agreement or obligation is incidentally,
indirectly, or remotely connected with an illegal
transaction, it will generally be enforced if it is
supported by an independent consideration so that the
plaintiff does not require the aid of the illegal
transaction to make out his case. Even though the
parties to an action have been engaged in a transaction
either malum in se or prohibited by law, if the cause of
action between them is disconnected from the illegal act
and is founded upon a distinct and collateral
consideration, and the plaintiff is not obliged to resort
to the illegal agreement or transaction in order to
maintain the suit, the illegality of the formal
transaction will not impair or bar the right to maintain
the suit.
17 Am.Jur.2d 590, 591, Contracts, 5 219.
The legality or illegality of the eventual use of the
machines, if they had been properly manufactured, should not be an
issue in this case. If a hardware store sold on credit to a
customer a gun which the customer later used to shoot somebody, the
hardware store can still collect on its bill though the gun was
used for an illegal purpose. The situation is no different here.
The contract, to the extent that it existed between these parties,
was legal.
Restitution
The 1987 session of the legislature also busied itself
concerning electronic video gambling games. It amended 5 23-5-
402, MCA, to include a definition of a video keno machine as one
where the winner could receive cash. Ch. 652, Laws of Montana
(1987). The 1987 legislature again defined a "keno machine" by
amending 5 23-5-602, MCA, to include electronic video keno machines
where the player could receive cash winnings.
In the circumstances, principles of restitution apply here.
Restatement (Second) of Contracts 5 198 provides:
A party has a claim in restitution for performance that
he has rendered under or in return for a promise that is
unenforceable on grounds of public policy if:
(a) He was excusably ignorant of the facts or of
lesislation of a minor character, in the absence of which
the provision would be enforceable, or
(b) He was not equally in the wrong with the promisor.
(Emphasis added.)
The parties in this case testified that they thought their
machines were legal. The district judge thought they were legal.
The minor character of the illegality, that is that the prizes
should be paid in values of personal property rather than by cash
when video keno machines were used, is obvious when one considers
the number of other legal gambling devices or machines which paid
off in cash, particularly including live and video keno. In sheer
numbers of situations, the public policy was to award cash prizes.
The minor character of the illegality is further demonstrated
that in 1989 the legislature adopted the Video Gaming Machine and
Control Law, 8 8 23-5-602, et seq. Under the new law, video draw
poker and keno machines are described, provision is made for their
licensing, cash winnings are allowed, and instead of the top $100
per game cash winnings formerly permitted, the top limit now is
$800 cash per game for a video keno machine, 5 23-5-608, MCA, and
the payment must be in cash!
Section 198 of the Restatement (Second) of Contracts is
particularly applicable here. The purported issue of illegality
is whether the winner in using the machines, if they worked, could
get cash, or receive the value in goods. Legislative enactments
before and after the contract in this case demonstrate the minor
character of the difference that relates to illegality. The
investors in this case should not take the hit. We ought to
promote a better business climate in this state by protecting
in-state entrepreneurs from phony defenses.
I would affirm the District Court.
S P A T E R E P O R T E R
Box 749
Helena, Montana 59624
VOLUME 47
c~XGZ-J
MPH COMPANY AND TROPIC INDUSTRIES,
Plaintiffs and Respondents,
Submitted: Dec. 12, 1989
v. Decided: May 16, 1990
IMAGINEERING,INC., and BILL R' WILLIAMS,
.
'
C
I . 1 Defendants and Appellantsr 2 , , -;:-$ ' , , :: -- --. -.. " -
I_ -.
.
,- - ;
%
(.,r-.2--.
3:..!- :- >- " . - - - b- * 16 ;.. : . ;.:,' ,....-i
*
I - . . -
4. .. . ... -
4 -
.
.
-A
..
- . ,--- - -
s . . - - * A
.
3 -
,.- , 7. '
. -.,f-+-.".--.
-.*
- - :
&T> . ' - c. . -
CONTRACTS--GAMING, Appeal from finding that ellant ant- breached the
contract and the implied warranty where the contract was illegal under
the laws of Montana and therefore unenforceable. The Supreme Court .
held:
1. The object of the contract was the design and manufacture of Poker
All Keno machines. Because the machines were unlawful, the entire
contract was void.
2. When thi general scheme of the contracting parties is to bring
about unlawful results, the contract is unenforceable. .
,
Appeal from the ~hirteent)l Judicial District Court, Yellowstone
County, Honorable G Todd Baugh, Judge
.
For Appellant: W.
For Respondent: Pierre L Bacheller, Billings
.
Opinion by Justice Hunt; Chief Justice Turnage and Justices Harrison,
Barz, McDonough and Weber concur. Justice Sheehy dissents and filed
an opinion.
Reversed.
Mont. - . ,
K2H Company, Plaintiffs and Respondents, v.
,Imasineering, Inc., Defendants and Appellants
47 St.Rep. 947
Justice Hunt delivered the Opinion of the Court.
(
The District Court of the Thirteenth Judicial District,
Yellowstone County, found defendant, Imagineering, Inc., liable for
breach of contract and breach of implied warranty. The court entered
judgment in favor of plaintiff, MPH Company, in the amount of $193,663
plus interest. Imagineering appeals. We reverse.
The sole'issue raised on appeal is whether the contract entered
into by the parties was illegal under the laws of Montana and
therefore unenforceable.
t
Defendant and appellant, Imagineering, Inc., -isL Nevada a
1 corporation engaged in the design and-manufactureof electronic video '
t
I
machines. Plaintiff and respondent, MPH Company, is a joint venture
comprisedaof am ~ c ~ o n a l d ,
' -3r., Paul Pendergrass and Ronald Harding,
all of Billings, and Joe Goott of Salt-Lake City. Goott is also the
president of Tropic Industries, a Utah corporation.
In January, 1984, MPH and Tropic entered into a contract with
Imagineering wherein Imagineering agreed to design and manufacture an
electronic Poker All Keno machine. This machine was to be the
electronic version of the table game developed and patented by Joe
Goott. A detailed description of the table game can be found in our
decision Goott v. State, 630 P.2d 232, 38 St.Rep. 1037 (Mont. 1981). -
In Goott, we found that, although the game possessed some of the
characteristics of ppker, it was essentially a variation of keno. We
held that the game was illegal under the Montana Card Games Act [then-
codified at secs. 23-5-301 through -332, MCA). District:'
Court declared that the game was legal under
(then codified at sec. 23-5-401 through -431,
v
The contract specified that the electronic ersion of Poker All
Keno was to be a single-player, stand-up video game designed with a
reset key to allow the player to cash in his accumulated credits. The
image projected on the screen was to be the same as that found on the
Poker All Keno table layout. The game would be played by positioning a
chip on the layout by means of four separate directional buttons. Once
the player made his selection, he would place a bet by either
inserting coins or pushing the "bet" button. After placing his bet,
the player would start the game by pushing the "start" button. The
start button would activate a card selecsjbn device, which was a bowl-
shaped container with a spinning wheel in the bottom and 52 pockets
around the periphery, each pocket representing a different card from a
standard deck of cards. From the "pocket" selections of the last game,
six balls would be dumped into the bowl. The spinning wheel would
continue to randomly bounce the balls around until each found a
pocket. As each ball entered a pocket, it would close a switch,
sending information to the computer. The computer would then display
the selected betting squares on the screen. After the sixth ball found
its pocket, the computer would compute the results of the best
possible poker hand by using 5 out of the 6 selected cards. It would
then display the results on the screen by calculating the total
winnings and advancing the credit meter accordingly.
KPH Company, Plaintiffs and Respondents, v.
rmagineering, Inc., Defendants and Appellants
47 St.Rep. 947
[I] "Where a contract has but a single object and such object is
unlawful, whether in whole or in part, ... the entire contract is
void." Section 28-2-603, MCA. "The object of a contract is the thing
which it is agreed on the part of the party receiving the
consideration to do or not to do." Section 28-2-601, MCA. In the
present case, the object of the contract was the design and
manufacture of Poker All Keno machines. Because the machines were
unlawful, the entire contract was void.
A party to an illegal contract may not use the courts of this
state to enforce the agreement.
"No principle of law is better settled than that a party to an
illegal contract cannot come into a court of law and ask to have his
illegal objects carried out, nor can he set up a case in which he must
necessarily disclose an illegal purpose as the groundwork of his claim
. . . . The law, in short, will not aid either party to an illeqal
agreement. It leaves the parties where it finds them. heref fore
neither - court - - law nor a court of equity - -aid - -
a of - - - - will - the one in
enforcinq - - give damages - - a breach - - - - - it aside at
it, or for of it, or set - -
- - - - the other, - - - agreement - - executed in
the suit of or, when the has been
whole or - part 9 - payment of money - - transfer of other
in the or the
property, - -its - to recover - -
lend - aid iTback." (Emphasis added.)-
Glass v. Basin & Bay State Mining Co., 31 Mont. 21, 33, 77 P. 302, 305
(1904) (quoting 9 D. Lawson, Cyclopedia of Law and Procedure 546).
Accord McPartlin v. Fransen, 199 Mont. 143, 146-47, 648 P.2d 729, 730-
31 (1982); McManus v. Fulton, 85 Mont. 170, 182-83, 278 P. 126, 131
(1929).
At oral argument, MPH advanced the theory that the parties'
modification of the contract changed the agreement from an illegal to
a legal contract. MPH argued that because the Poker All Keno machines
shipped to Montana by Imagineering did not include the components
enabling them to be played for cash, the machines were legal under
Montana law.
We reject this argument for two reasons. First, "[tlhe object of
the contract must be lawful when the contract is made . . . ."Section
28-2-602, MCA. The original object of the contract was the design and
manufacture of a Poker All Keno machine that could be played for cash
prizes. Therefore, the object was not lawful when the contract was
made.
[23 Second, although Imagineering may have shipped lawful
machines, it appears that the contract was not fully performed at that
point. agineering sent employees to Montana to oversee the
assemb the machines and to show MPH's technicians how to install
the pa hat would enable the machine to be played for cash. These
a common scheme or plan to use the machines for
illegal purposes within this state. When the general scheme of the
contracting parties is to bring about unlawful results, the contract
is unenforceable. See 15 Williston on Contracts secs. 1752 and 1755
( 3 d ed. 1972).