Intercontinental Hotels Corp. v. Golden

Valente, J.

The question in this case is whether the courts of New York will sanction recovery by plaintiff of the amount of credit extended by its gambling casino in the Commonwealth of Puerto Rico to a patron to permit him to continue gambling.

Defendant was a guest at plaintiff’s Intercontinental Hotel in Puerto Rico from December 8 through December 14,1960. During his stay there, in an attempt to turn chance into fortune, he played—on credit generously furnished by plaintiff—at the dice tables in the casino conducted by the hotel, lost and, when he ascertained the extent of his indebtedness, reneged. Following the loss of $6,000 in cash which defendant allegedly brought with him, plaintiff advanced chips to the defendant in the sum of $12,000 which he eventually also lost. On December 14, 1960, he delivered to plaintiff his check for $3,000, dated December 17, 1960, payable at the Manufacturers Trust Co. in New York City, in part payment of his gambling debt. The check was not honored when presented for payment. For the remaining $9,000 defendant had given plaintiff 131. O. U. ’s. At Trial Term, plaintiff recovered judgment on the check and the I. O. TJ.’s for the full $12,000 plus interest of $1,102.50.

Strangely enough, no appellate court in this State has ruled on the question of whether there can be recovery in New York on a professional gambling debt incurred in a jurisdiction where gambling is legalized.* It is conceded that in Puerto Rico gambling has been legalized (Laws of Puerto Rico Ann., tit. 15, ch. 5, §§ 71-84) and that plaintiff’s casino was duly licensed at the time defendant used its facilities.

Subdivision 1 of section 9 of article I of the New York State Constitution provides that “ no lottery or the sale of lottery tickets, pool selling, book-making, or any other kind of gambling, except pari-mutuel betting on horse races * * * shall hereafter be authorized or allowed within this state. ’ ’ The exception as to pari-mutuel betting was incorporated by amendment in 1939; and, by an amendment in 1957, subdivision 2 was added to section 9 to authorize, upon a local option basis, the conduct of games of chance commonly known as bingo and lotto. More particular reference to these amendments will be made hereinafter.

The constitutional prohibition on all kinds of gambling has existed since 1894. Article 88 of the Penal Law contains numerous provisions making different types of gambling criminal offenses. In People v. Lambrix (204 N. Y. 261, 264-265) Cullen, C. J., in referring to the Penal Law provisions on gambling said: ‘ ‘ while all gambling has for a long time been illegal in this state, professional gambling and the maintenance of gambling resorts alone have been subjected to the penalties of the criminal law.”

So, too, in Watts v. Malatesta (262 N. Y. 80, 82) the court said: "The evil which the law chiefly condemns (N. Y. Const., art. I, § 9) and makes criminal (Penal Law, art. 88) is betting and gambling organized and carried on as a systematic business."

The courts of New York will generally enforce contracts made in other jurisdictions. The validity of such contracts is determined by the law of the place where the contracts are made. (United States Mtge. & Trust Co. v. Ruggles, 258 N. Y. 32; Straus & Co. v. Canadian Pacific Ry. Co., 254 N. Y. 407.) But as the court in the Straus & Co. case said (p. 414): “ There is, however, a well-established exception to the rule to the effect that a court will not enforce a contract though valid where made if its enforcement is contrary to the policy of the forum. (People v. Martin, 175 N. Y. 315; Williston on Contracts, vol. 3, § 1792.) ” The classic statement of the public policy doctrine is contained in Loucks v. Standard Oil Co. (224 N. Y. 99, 111) where Cabdozo, J., wrote: “ The courts are not free to refuse to enforce a foreign right at the pleasure of the judges, to suit the individual notion of expediency or fairness. They do not close their doors unless help would violate some fundamental principle of justice, some prevalent conception of good morals, some deep-rooted tradition of the common weal.”

In section 612 of the Restatement, Conflict of Laws the rule is stated as follows: “No action can be maintained upon a cause of action created in another state the enforcement of which is contrary to the strong public policy of the forum.”

As an illustration of the rule, the Restatement gives this example: “1. By the law of state X, gambling debts may be recovered; by the law of state Y, to allow recovery on such debts would be against public policy. A sues B in Y on a gambling debt incurred in X. Judgment for B.”

In the volume of New York Annotations of the Restatement on Conflict of Laws it is noted that section 612 of the Restatement “ is in accord with the law of New York ” (p. 386). (See, also, Leñar, Conflict of Laws [1959], § 48, pp. 80-83.)

The “ public policy ” limitation of the operation of the choice of law has been the subject of much comment in the recent literature of the law. (See Paulsen and Sovern, “Public Policy” in the Conflict of Laws [1956], 56 Col. L. Rev. 969; Ehrenzweig, Contracts in the Conflicts of Laws [1959], 59 Col. L. Rev. 973; Lorenzen, Territoriality, Public Policy and the Conflict of Laws [1924], 33 Yale L. J. 736; Beach, Uniform Interstate Enforcement of Vested Rights [1918], 27 Yale L. J. 656; 2 Rabel, Conflict of Laws: A Comparative Study, ch. 33, pp. 551-591.)

There is no undeviating and precise definition of such a general term as “ strong public policy.” In People v. Hawkins (157 N. Y. 1, 12) it was stated: “ Therefore, when we speak of the public policy of the state, we mean the law of the state, whether found in the Constitution, the statutes or judicial records ’ ’. (See, also, Building Serv. Union v. Gazzam, 339 U. S. 532, 537.)

In Kilberg v. Northeast Airlines (9 N Y 2d 34, 39) Desmond, Ch. J., found that the prohibition of any limitation of the amount to be recovered in a wrongful death action, contained in our State Constitution, represented a public policy which was “ strong, clear and old.” Reference was made to the fact that the provision had been in the Constitution since 1894 and that each later revision of the State Constitution had included the same provision. The court refused to apply so much of the Massachusetts law—where the death had occurred — that limited damages, because the Massachusetts statute was “ so completely contrary to our public policy ” (p. 40).

The anti-gambling clause of the State Constitution is of the same venerable vintage as. the wrongful death action provision and has also been included in all later revisions of the Constitution. Thus the prohibition against gambling represents, not just a temporary fancy, but a deep-rooted policy to which courts ' should give constructive effect. That long-standing policy regards gambling as a tainted transaction and there is no hint either in the Constitution or the Penal Law that the courts should purge the taint and ignore the policy when an out-of-State transaction is involved.

In Watts v. Malatesta (262 N. Y. 80, supra) where in an action by one to recover losses from a professional gambler the court refused to permit the defendant to set off the plaintiff’s winnings, the court (p. 83) characterized the professional gambler in the following language: "whatever his shape may be, he is an outlaw.” The same conclusion was reached in Hofferman v. Simmons (290 N. Y. 449, 456). It would indeed be a perversion of public policy to permit recovery in a court of law by one whom the courts consider an “ outlaw” solely because the gambling occurred beyond the State line. The constitutional command should not be so obliquely nullified or disregarded and its clear public policy ignored. What is presented in the instant case is not merely a difference in laws between New York and Puerto Rico but a deep-rooted inconsistency between our domestic principles and those of jurisdictions where public gambling may be permitted.

The precise question posed herein has been considered by the lower courts in this State. In Nielsen v. Donnelly (110 Misc. 266) the court refused to enforce a gambling agreement made in Louisiana, where such agreements were valid. In Tropicales, S. A. v. Milora (7 Misc 2d 281) and Tropicales, S. A. v. Drinkhouse (15 Misc 2d 425) it was concluded that gambling debts incurred in Cuba, where the transactions were valid, were subject to action in New York. While the Tropicales cases could be distinguished,* there is implicit in those decisions the notion that the enforcement in this State of gambling debts incurred in Cuba is not contrary to our public policy.

We believe the Nielsen case reached the correct result. There is a conflict of authority on the general question among the courts of the various States. (11 Am. Jur., Conflict of Laws, § 136; Anno. 173 A. L. R. 695.) In the 173 A. L. R. annotation to the case of Ciampittiello v. Campitello (134 Conn. 51) it is stated (p. 696): “ The prevailing view seems to be to regard statutes declaring gambling contracts and transactions illegal or void, as embodying a distinctive public policy, which requires the court of the state or country in which they are enacted to refuse to recognize or enforce any contract or transaction in violation of their terms, even though such contract or transaction may have had its situs outside the forum, and therefore does not come within the direct operation of the statutes.”

We hold that the clear public policy of this State will not permit suit in our courts to recover on a gambling debt which arose in a professional gambling house even though the gambling was legal where the debt allegedly arose.

Trial Term evidently considered that the legalizing of parimutuel betting and the operation of bingo games in this State had somehow weakened the force of our public policy against gambling. The carving out of the exceptions to the constitutional prohibition against gambling was for limited and restrictive purposes. In the case of pari-mutuel betting the purpose was to provide revenue for the support of the government and in the bingo and lotto amendment the aim was to aid charitable organizations to raise funds. The operations of these two types of activities are hedged in by strict legislative requirements.

In the light of the history and purpose of the amendments permitting pari-mutuel betting and bingo, it cannot be inferred that when the amendments were adopted, and the other provisions of subdivision 1 of section 9 of article I of the Constitution were left unchanged, that there was any intent to displace the prohibition against gambling beyond those specified. The enactment of the constitutional exceptions must be deemed as an affirmation of the continuance of the residual constitutional prohibition against gambling. The limited exceptions give no hint of any constitutional or legislative intent to devitalize the remaining provisions of subdivision 1 of section 9 of article I of the Constitution prohibiting gambling. The unqualified command of the Constitution expresses a clear and deep-rooted policy against gambling. Our courts may not place out-of-State gambling transactions, such as are involved here, on any different footing from domestic gambling, if the public policy of the forum is properly to be served.

In view of our conclusion that plaintiff may not recover in our courts upon the gambling debt herein, it becomes unnecessary to discuss the collateral question of whether in any event, there could be recovery on that portion of the action based on the $3,000 check. Since the check was payable in New York, the cause of action arose in this State (Gonzales v. Industrial Bank [of Cuba], 12 N Y 2d 33, supra; Hibernia Nat. Bank v. Lacombe, 84 N. Y. 367) and, under New York law, there could be no recovery on the check (Thuna v. Wolf, 132 Misc. 56, supra).

The judgment should therefore be reversed, on the law, and the complaint dismissed, with costs to appellant.

* The paucity of decisions may, perhaps, be explained by the fact that the payment of gambling debts is considered by many as a point of honor; by the success of extrajudicial collection methods or by a tacit realization of the reluctance of appellate courts to enforce such obligations.

* The Brinkhouse ease does not discuss the question of public policy and in effect relies on the decision in Milora. In the Milora case, it was ruled that it was not established that the check was issued in payment of a gambling debt. Hence, the opinion, insofar as it deals with the conflict of laws problem, is dictum. Since in both Milora and Brinkhouse, the actions were on checks payable in New York, the causes of action arose in New York (Gonzalez v. Industrial Bank [of Cuba], 12 N Y 2d 33) and there could not properly be any recovery on checks founded upon a consideration that was illegal in the place of performance (Thuna v. Wolf, 132 Misc. 56).