Carnival Leisure Industries, Ltd. v. Aubin, 93-2878
| Decision Date | 02 June 1995 |
| Docket Number | No. 93-2878,93-2878 |
| Citation | 53 F.3d 716 |
| Parties | CARNIVAL LEISURE INDUSTRIES, LTD., Plaintiff-Appellee, v. George J. AUBIN, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Michael A. Maness, Houston, TX, for appellant.
Hugh L. McKenney, Joel Lee-Eric Jesse, Houston, TX, and James E. Tribble, Blackwell & Walker, Miami, FL, for appellee.
Appeal from United States District Court for the Southern District of Texas.
Before JONES, DUHE and STEWART, Circuit Judges.
This appeal involves the issue of whether an unpaid gambling debt, which we previously held to be unenforceable as against Texas public policy, can be used to support an action for fraud against the gambler who was extended the credit by a casino. We conclude that it cannot under the facts as presented in this case.
As indicated above, this is not the first time these litigants have been before us concerning this $25,000, eight-year dispute. The first hand in this controversy was played in Carnival Leisure Industries, Ltd. v. Aubin, 938 F.2d 624 (5th Cir.1991) (Aubin I ). Our opinion today constitutes a final disposition of the case.
During a January 1987 visit to the Bahamas, George Aubin, an astute businessman, frequent gambler, and Texas resident, visited Cable Beach Hotel and Casino, which was owned and operated by Carnival Leisure, a Bahamian corporation, for fun and frolic. After gambling away all the money he had brought to the casino, Aubin asked that credit be extended to him so that he could continue gambling. The casino issued six "markers" to Aubin, which he signed, totaling $25,000. 1 Markers may be used by a patron to obtain food, beverages, souvenirs, or lodging at the casino. However, it is undisputed that in this case Aubin obtained $25,000 in gambling chips with his markers.
Aubin contends that he signed markers which did not contain the name of his Houston bank, his account number, the date, etc. He contends that the casino added this information to the markers before presenting them for payment. He denies that he had authorized the completion or presentation of the markers for payment. The forms signed by Aubin contained the following language in small type:
I represent that I have received cash for the above amount and that said amount is on deposit in said financial entity in my name, is free and clear of claim and is subject to this check and is hereby assigned to payee, and I guarantee payment with exchange and costs in collecting.
Notwithstanding this language, it is undisputed that Aubin did not receive "cash" in exchange for signing the markers: He received $25,000 in gambling chips. It is also undisputed that, at the time Aubin signed the markers, he did not have the $25,000 on deposit at his Houston bank.
Luck was not a lady to Aubin; he lost the entire $25,000 playing blackjack. However, having been bested in the card game, Aubin nonetheless beat the casino to the draw: when Aubin did not redeem the markers within 30 days and the drafts were presented for payment at Aubin's Houston bank, the casino learned, much to its consternation, that he had stopped payment on the bank drafts.
After unsuccessful collection attempts, Carnival Leisure sued Aubin to enforce the debt in the United States District Court for the Southern District of Texas. 2 Carnival later amended its petition to allege fraud, conversion, and equitable estoppel as well. The district court granted Carnival's motion for summary judgment, finding that the debt was enforceable under Texas law because public policy in that state had changed and now favored enforcement of gambling debts. Aubin decided to spin the appellate wheel and take a chance that this court would disagree. We did.
In Aubin I, Judge Garwood, writing for the panel, concluded that although public policy in Texas may have shifted with regard to gambling, as evidenced by the enactment of statutes legalizing certain forms of gambling, there was a continued public policy in the Lone Star State which disfavors gambling on credit. Accordingly, we reversed the district court's grant of summary judgment in favor of Carnival and remanded to the district court "for further proceedings consistent with this opinion." Ibid at 626.
On remand, the district court indicated its intention to dismiss Carnival's case, and invited briefs on the issue of whether Carnival's fraud claims were barred by Texas public policy. The district court concluded that the fraud claim was not barred by public policy, nor by the law of the case, and set the matter for trial. After a bench trial, the district judge concluded in Carnival Leisure Industries, Ltd. v. Aubin, 830 F.Supp. 371 (S.D.Tex.1993), that although the gambling debt itself was unenforceable under this court's mandate, Carnival nonetheless could recover against Aubin for fraud. He found that, "[w]hen Aubin signed the drafts, he promised to pay Carnival by honoring the drafts," Ibid at 377, that Aubin never intended to honor the drafts when he signed them, and that the facts established fraud. The court entered judgment in favor of Carnival for $25,000 plus costs and attorney's fees. Once again, Aubin has rolled the dice and filed an appeal.
As we shuffle the deck for the final hand in this litigation, we begin with a review of the elements which must be proven by a plaintiff asserting a cause of action for fraud. Under Texas law, the elements of fraud are (a) a material misrepresentation of a present existing fact, (b) that was known to be false when made, (c) that was intended to be acted upon (d) that was relied upon, and (e) that caused injury. DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 688 (Tex.1990).
In ruling in favor of Carnival on remand, the district judge held that Aubin committed fraud when he signed the six markers, finding that Aubin did not intend to repay them at the time he signed them because he stated that he considered the documents to be markers and not drafts. By this, Aubin meant that they were merely a means for the casino to keep track of how much he had lost and owed. Aubin subjectively predicted that it would not be necessary for the instruments to be presented for payment because he, like most gamblers, was ever the optimist and fully expected to win. The district judge considered Aubin's testimony in this regard as establishing that Aubin never intended to honor the drafts, thus supporting a finding of fraud. Carnival, 830 F.Supp. at 377. The district court also relied heavily upon the fact that Aubin was a former bank president who knew that a gambling debt was not always enforceable in Texas. Ibid.
Aubin has proceeded to ante up his best arguments in support of a reversal on the finding of fraud. We will "deal" with each of the parties' arguments under our Erie 3 duty to apply Texas law.
Aubin first intimates in brief that an action for the $25,000 may not be maintained against him because he "returned" the entire $25,000 in chips to Carnival by playing and losing at blackjack. We summarily reject this specious argument. To reverse on the basis that the debt was repaid by the loss of chips during play would defy common sense.
Aubin's next argument is based on the law of the case doctrine. The law of the case doctrine states that absent manifest error, or an intervening change in the law, an appellate court's decision of a legal issue, whether explicitly or by necessary implication, establishes the law of the case and must be followed in all subsequent proceedings in the same case. Morrow v. Dillard, 580 F.2d 1284, 1290 (5th Cir.1978).
Aubin submits that the panel opinion, which held that the gambling debt is unenforceable under Texas law, precludes a finding of fraud under the law of the case doctrine. Carnival disagrees. The thrust of Carnival's argument that law of the case does not preclude recovery for fraud centers around the fact that Aubin signed the markers when he knew they were unenforceable under the law of his home state. Carnival argues that the present issue is whether Texas public policy protects those who sign negotiable instruments with fraudulent intent, an issue it contends was not before this court and was not decided by "necessary implication" in Aubin I. Carnival claims that Aubin's signing of the markers constitutes a fraudulent misrepresentation which is actionable and which exists separate and apart from the determination that the debt is unenforceable. Carnival's arguments focus on its contention that the language quoted above on the face of the markers constituted a material misrepresentation by Aubin that there were sufficient funds in his Houston bank account...
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