Hotel Riviera, Inc. v. First Nat. Bank & Trust Co.
| Decision Date | 11 July 1983 |
| Docket Number | No. CIV 82-146-R.,CIV 82-146-R. |
| Citation | 580 F. Supp. 122 |
| Parties | HOTEL RIVIERA, INC., Plaintiff, v. The FIRST NATIONAL BANK AND TRUST COMPANY OF OKLAHOMA CITY, Defendant. |
| Court | U.S. District Court — Western District of Oklahoma |
Robert D. Nelon, of Andrews, Davis, Legg, Bixler, Milsten & Murrah, Oklahoma City, Okl., for plaintiff.
George W. Dahnke and James E. Britton, of Hastie & Kirschner, Oklahoma City, Okl., for defendant.
Plaintiff and Defendant have both filed Motions for Summary Judgment which have been responded to in briefs in opposition thereto.
The parties agree that the composition of facts enumerated in Plaintiff's and Defendant's briefs are not in material dispute. Accordingly, this Court may assume that there is no evidence which needs to be considered other than that presented by the parties. Harrison Western Corp. v. Gulf Oil Co., 662 F.2d 690 (10th Cir.1981). While the filing of cross-motions for summary judgment does not relieve the court of its obligation to determine whether material factual controversies remain, Harrison, supra, it is evident in this case that no facts are in dispute which would preclude the entry of summary judgment.
Apparently the Plaintiff and Defendant have agreed that the choice of law in this case has no substantive consequence. Both Oklahoma and Nevada, the two states which would bear an appropriate relation to the issues have adopted the U.C.C. See Title 12A, Oklahoma Statutes §§ 1-101 et seq. and Nev.Rev.Stat. §§ 104-1101 et seq.
This is an action to recover on a $250,000.00 cashier's check issued by and drawn upon the Defendant, The First National Bank and Trust Company ("FNB"). The cashier's check was purchased by Richard K. Pemberton on January 5, 1982 and was made payable to him. That same day Pemberton took the check to Las Vegas, Nevada and subsequently endorsed it to the Plaintiff, Hotel Riviera, Inc. ("Riviera").
At the time Pemberton purchased the cashier's check he was employed as Vice President and Oklahoma City Office Manager of the brokerage firm, A.G. Edwards and Sons, Inc. ("AGE"). It is now apparent that the cashier's check represented an intermediate step in an embezzlement scheme which culminated in Pemberton's disappearance on or about January 7, 1982 and his subsequent indictment in this Court and later, his arrest in the State of Georgia. Count II of the indictment charged Pemberton with intentionally devising a scheme to fraudulently obtain money from FNB through a series of acts which resulted in the purchase of the cashier's check. Count III charged Pemberton with fraudulently transferring the cashier's check to Hotel Riviera. On December 15, 1982 the jury found Pemberton guilty on all four counts of the indictment.
The undisputed facts regarding the issuance, transfer and dishonor of the cashier's check in question here are as follows:
On January 5, 1982 Pemberton caused two AGE checks totalling $480,000.00 to be issued naming AGE customers as payees. Pemberton forged the endorsements of the payees and deposited the checks in his personal account at FNB. At the same time, Pemberton wrote a check on the personal account in order to purchase a $250,000.00 cashier's check payable to Pemberton from FNB. Within a few hours thereafter, Pemberton boarded a plane and flew to Las Vegas, Nevada, arriving at the Riviera on the evening of January 5. Pemberton had been a customer of the Riviera since August, 1981 when he had established a $25,000.00 line of credit at the gambling casino. Upon his arrival at the Riviera on this night, Pemberton contacted the Riviera evening shift manager, Mr. Cutsaries, to advise him that he had "just sold an oil well" and had a $250,000.00 cashier's check against which he desired to gamble.
Apparently Riviera's shift managers are given authority to make certain credit decisions. Established policy was that persons were not allowed to gamble against cashier's checks unless the validity and amount of the cashier's check were first verified. Shift managers are given the authority to waive this requirement in some instances, although it appears that the waiver of such requirement would ordinarily be limited to the amount of the individual customer's credit line.
Due to the lateness of the hour that Pemberton began to gamble the shift manager, Cutsaries, elected to waive the requirement of prior verification of the cashier's check and permitted Pemberton to gamble against it. This was done by having Pemberton endorse the cashier's check and leave it with the cashier's cage. Again, established policy called for the cashier's check to be held until completion of the customer's stay at the casino. If the player broke even or came out ahead, the check would be returned to him upon his departure. If the player lost, the check would be taken in payment of markers, which are the instruments utilized by the casino to evidence credit extensions to gamblers.
Pemberton gambled at the Riviera dice tables from the time of his arrival late on January 5 until the morning of January 6. Advances to Pemberton by the Riviera were handled in two ways. First, Riviera recorded a cash deposit of $250,000.00 on Pemberton's credit card with the casino and then reduced that deposit on two occasions to reflect two advances of $50,000.00 each in gambling chips to Pemberton. Thereafter, Pemberton executed markers in the amounts of $50,000.00, $38,000.00 and $118,500.00 to evidence additional advances of chips to him. Thus Pemberton's markers and advances totalled $306,500.00 which exceeded the combined total of his credit limit ($25,000.00) and the deposited cashier's check ($250,000.00) by the sum of $31,500.00.
During the early portion of the evening, prior to midnight, Pemberton had substantial winnings. On several occasions the chips were exchanged for cash at the cashier's cage and the cash placed in a safe deposit box in Pemberton's name. The amount which Pemberton had transferred to the safe deposit box is unclear but appears to have been in the range of $50,000.00 to $100,000.00.
At 7:12 a.m., on January 6, an employee of the Riviera cashier's department contacted FNB to verify the $250,000.00 cashier's check by verifying the name of the payee, the amount, the check number, that no stop orders were outstanding against the check and that the check had not been reported lost or stolen. The FNB employee verified the cashier's check and told the Riviera employee that the check was "okay." The verification was noted on a copy of the cashier's check.
In view of the fact that Pemberton had exceeded the total of his credit limit and the cashier's check, the graveyard shift manager left orders when he went off duty at 8:00 a.m. on January 6 that Pemberton was not to be allowed access to his safe deposit box until he reduced his debt to the casino to $275,000.00 (his credit limit plus credit for the cashier's check). Therefore, at 10:00 a.m., in the presence of the day shift manager, Pemberton removed $31,500.00 from the safe deposit box which he paid to the cashier. He also executed a new marker for $18,500.00 and his previously executed $50,000.00 marker was returned to him. The net effect of this transaction was to reduce the outstanding obligation of Pemberton to the Riviera to $275,000.00.
At 11:00 a.m. on January 6 the Riviera endorsed and deposited the $250,000.00 cashier's check in the ordinary course of business. Apparently at approximately 2:00 p.m. on January 6 Pemberton again opened his safe deposit box, at which time he was allowed to empty its contents, believed to be about $100,000.00 cash, and he departed from the Hotel Riviera and Las Vegas. On Thursday, January 7, Pemberton returned to the FNB in Oklahoma City and withdrew $225,000.00 from his account there. From that point until his arrest in Georgia on June 25, 1982 Pemberton's whereabouts were unknown to FNB, AGE and Riviera.
On the afternoon of January 8, 1982 FNB received oral notification that the two AGE checks totalling $480,000.00 which Pemberton had deposited in his account at FNB on January 5 were being returned because the endorsements of the named payees were forgeries.
When the $250,000.00 cashier's check deposited by the Riviera and forwarded through banking channels arrived at FNB on January 12, 1982 it was returned unpaid.
The Plaintiff and Defendant have each set forth a legal theory under which they may prevail.
FNB's argument begins with the general principle that a negotiable instrument which is transferred in payment of a gambling debt is void and unenforceable.1 Sandler v. Eighth Judicial Dist. Court, 96 Nev. 622, 614 P.2d 10 (1980); Sea Air Support, Inc. v. Herrmann, 96 Nev. 574, 613 P.2d 413 (1980); Corbin v. O'Keefe, 87 Nev. 189, 484 P.2d 565 (1971) (per curiam); Wolpert v. Knight, 74 Nev. 322, 330 P.2d 1023 (1958); Weisbrod v. Fremont Hotel Inc., 74 Nev. 227, 326 P.2d 1104 (1958); West Indies, Inc. v. First National Bank of Nevada, 67 Nev. 13, 214 P.2d 144 (1950); Craig v. Harrah, 66 Nev. 1, 201 P.2d 1081 (1949); Menardi v. Wacker, 32 Nev. 169, 105 P. 287 (1909); Burke & Co. v. Buck, 31 Nev. 74, 99 P. 1078 (1909); Evans v. Cook, 11 Nev. 69 (1876); Scott v. Courtney, 7 Nev. 419 (1872).
Although gambling is legal in Nevada, these Nevada Supreme Court decisions have uniformly held that gambling debts are unenforceable based on the determination that Nevada adopted the English common law of gambling as modified by the Statute of 9 Anne, c. 14, § 1.2
Reasoning that Pemberton's endorsement and Riviera's acquisition of the cashier's check violated the Statute of Anne and that therefore the transfer was void, FNB contends that the cashier's check cannot be enforced and FNB is entitled to summary judgment.
The second tier of FNB's theory is that even if the cashier's check were deemed enforceable, the void nature of the underlying transaction prevents Riviera from attaining holder in due course status and hence subjects...
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Hotel Riviera, Inc. v. First Nat. Bank and Trust Co. of Oklahoma City, Okl.
...of consideration. The trial court allowed the defense, entered judgment for the Bank, and denied the Hotel's motion for rehearing, 580 F.Supp. 122. We The question presented is whether the Hotel, as endorser without knowledge of the underlying fraud of the purchaser of the cashier's check, ......