GNOC, Corp. v. Endico
| Decision Date | 31 May 1989 |
| Docket Number | D,No. 969,969 |
| Citation | 876 F.2d 1076 |
| Parties | GNOC, CORP., t/a Golden Nugget Hotel & Casino, Plaintiff-Appellant, v. Cecelia ENDICO, Executrix of the Estate of Leon Endico, Sr., Deceased, Defendant-Appellee. ocket 88-7820. |
| Court | U.S. Court of Appeals — Second Circuit |
Stephen N. Dratch, Roseland, N.J. (Greenberg, Margolis, Ziegler, Schwartz, Dratch, Fishman, Franzblau & Falkin, P.A., Roseland, N.J., of counsel), for plaintiff-appellant.
Robert S. Ondrovic, White Plains, N.Y. (David E. Worby, P.C., White Plains, N.Y., of counsel), for defendant-appellee.
Before KAUFMAN, PRATT and MINER, Circuit Judges.
Plaintiff-appellant GNOC, Corp. t/a Golden Nugget Hotel & Casino ("Golden Nugget"), incorporated and principally doing business in New Jersey, appeals from two judgments entered in the United States District Court for the Southern District of New York (Brieant, Chief Judge) denying enforcement of a gambling debt incurred by Leon Endico, Sr. at the Golden Nugget casino in Atlantic City, New Jersey. Initially, the district court granted defendant's motion for summary judgment and dismissed the complaint, 692 F.Supp. 1515 (S.D.N.Y.1988), holding that a New York court would apply New Jersey law and that the New Jersey statute and regulations governing casino gambling would render Endico's debt unenforceable because the casino had not properly endorsed checks signed and presented to it by Endico to obtain money for gambling. Thereafter, Golden Nugget moved to alter or amend the judgment based on evidence it submitted that New Jersey would consider the debt enforceable because the casino's endorsement We agree that New York courts would apply New Jersey law. We hold, however, that because Golden Nugget's endorsement of Endico's checks complied with pertinent New Jersey law and regulations, Endico's debt to Golden Nugget is enforceable in New Jersey, and hence, in New York. Moreover, we hold that enforcement is not contrary to New Jersey's public policy. Accordingly, we reverse.
comported with the New Jersey requirements. The court denied the motion, reiterating its earlier opinion and adding that New Jersey public policy also mandated denying enforcement of the debt. The court again entered summary judgment dismissing the complaint. 1
Leon Endico, Sr., a resident of New York, was a regular patron of the Golden Nugget casino in Atlantic City, New Jersey. In 1983, Endico was granted $30,000 in credit from the Golden Nugget. On many occasions after that date, Endico's credit was increased beyond $30,000.
On the weekend of April 19-21, 1985, Endico secured a total of $50,000 for gambling purposes from the Golden Nugget. In exchange, he signed over to the casino ten counter checks, in amounts ranging from $4,000 to $6,000. The counter checks were endorsed before Endico signed them. The numbers 2/008-3879 represent a GNOC casino revenue bank account. Endico won $16,400 that weekend, but died the following month, on May 4, 1985, without extinguishing his debt to the casino. On May 8, Golden Nugget deposited the checks in its New Jersey bank, which then presented the checks to Endico's bank for payment. The checks were dishonored for insufficient funds and eventually returned to Golden Nugget.
Golden Nugget, by letter dated June 20, 1985, informed Mrs. Endico of her husband's debt and requested that a representative contact the casino's corporate counsel for resolution of the problem. Not receiving a satisfactory reply, Golden Nugget brought suit against Cecelia Endico, who was the daughter-in-law of Leon Endico, Sr. and executrix of his estate, in the Southern District of New York on October 20, 1987. Diversity jurisdiction was asserted.
The estate moved to dismiss for failure to state a claim, arguing that Golden Nugget had failed to comply strictly with the rules and regulations of New Jersey's Casino Control Commission ("CCC" or "Commission") by not including the name of the depository bank in the restrictive endorsements of Endico's counter checks. Golden Nugget cross-moved for summary judgment, claiming complete compliance with all applicable rules, regulations and procedures. After further submissions, the estate requested that its motion be considered alternatively as one for summary judgment. The district court, by memorandum and order, held that New York courts would apply New Jersey law, and that if faced with the issue, New Jersey courts would require the name of the depository bank as part of the endorsement. The court justified its conclusion by noting that New Jersey requires "punctilious observance" of the state's casino regulations. The court entered summary judgment on June 29, 1988, dismissing the complaint.
Golden Nugget then moved to alter or amend the judgment, see Fed.R.Civ.P. 59(e). In support of its motion, Golden Nugget relied mainly on an affidavit of Michael A. Santaniello, a former deputy director of CCC. From 1978 to 1986 Santaniello had served variously as Deputy Director of Licensing, Deputy Director of Operations, and Deputy Director of Special Projections. In his affidavit, Santaniello averred that the Commission has never required the name of the depository bank to be included in restrictive endorsements of In a second memorandum and order, the district court assumed Santaniello's assertions to be true for the purpose of the motion but reiterated its belief that New Jersey courts would interpret the regulation at issue to require the name of the bank. The court explained that New Jersey public policy requires strict compliance with regulatory requirements in the collection of gambling debts in order to establish a discernible "paper trail" of casino credit transactions. This policy is designed to avoid the consequences of oversight or fraud in check negotiation. Golden Nugget's motion to alter or amend the judgment was denied. The court agreed with Golden Nugget that certain minor misstatements of fact in its first memorandum and order should be corrected. On September 6, 1988, summary judgment again was entered dismissing the complaint.
counter checks. Specifically, Santaniello's affidavit stated that CCC
Golden Nugget appeals.
In a diversity action a federal court must apply the substantive law of the state in which it sits, Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78-80, 58 S.Ct. 817, 822-23, 82 L.Ed. 1188 (1938), including that state's choice of law provisions, see Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97, 61 S.Ct. 1020, 1021-22, 85 L.Ed. 1477 (1941). Generally, gambling debts are unenforceable in New York as contrary to public policy. See N.Y. Const. art. 1, Sec. 9; N.Y. Gen. Oblig. Law Sec. 5-401 (McKinney 1989); Albert Simon, Inc. v. Myerson, 36 N.Y.2d 300, 303, 327 N.E.2d 801, 802, 367 N.Y.S.2d 755, 757, appeal dismissed, 423 U.S. 908, 96 S.Ct. 209, 46 L.Ed.2d 137 (1975). However, New York law permits the enforcement of gambling debts validly entered into and enforceable where contracted. Intercontinental Hotels Corp. v. Golden, 15 N.Y.2d 9, 13, 203 N.E.2d 210, 212, 254 N.Y.S.2d 527, 529 (1964). Accordingly, the district court properly sought to determine whether Endico's debt to Golden Nugget would be enforced by New Jersey courts.
With the advent of licensed casino gambling in New Jersey, the New Jersey legislature enacted the Casino Control Act (the "Act") to curb potential abuses inherent in gambling culture. See Greenberg v. Kimmelman, 99 N.J. 552, 494 A.2d 294, 297 (1985); In re Adamar, 222 N.J. Super. 464, 537 A.2d 704, 707 (App.Div.1988); Playboy-Elsinore Assocs. v. Strauss, 189 N.J. Super. 185, 459 A.2d 701, 704-05 (Law Div.1983). The Act reads in part:
Notwithstanding the provisions of any law to the contrary, checks cashed in conformity with the requirements of this act...
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