Nevcal Enterprises, Inc. v. Cal-Neva Lodge, Inc.

• Decision Date: 24 July 1961
• Docket Number: CAL-NEVA
• Citation: 194 Cal.App.2d 177,14 Cal.Rptr. 805
• Court: California Court of Appeals Court of Appeals
• Parties: NEVCAL ENTERPRISES, INC., Plaintiff and Appellant, v.LODGE, INC., Defendant and Respondent. Civ. 25176.

Page 805

14 Cal.Rptr. 805

194 Cal.App.2d 177

NEVCAL ENTERPRISES, INC., Plaintiff and Appellant, v. CAL-NEVA LODGE, INC., Defendant and Respondent.

Civ. 25176.

District Court of Appeal, Second District, Division 2, California.

July 24, 1961.

Hearing Denied Sept. 20, 1961.

Lester Wm. Roth, Beverly Hills, for appellant.

Parker, Stanbury, Reese & McGee, Los Angeles, for respondent.

ASHBURN, Justice.

Plaintiff appeals from a judgment denying its prayer for an accounting of the profits of a gaming enterprise in Reno, Nevada.

By agreement of August 29, 1955, defendant (who controlled the same through nominees) agreed to sell to plaintiff a certain building in Reno wherein it conducted a gambling casino under State license as well as a bar, restaurant and other activities. The base price having been fixed at $550,000, it was provided that the buyer should apply for and obtain gaming licenses and that thereupon the sale should be consummated and '[a]t the time of such consummation you [buyer] will be given credit for all profits from the date of acceptance of this proposal to the date of such consummation, and likewise shall suffer all losses during said period of time. If losses exist you shall pay the same at the time of the consummation of the sale.' Buyer forthwith applied for requisite gaming licenses and, pending their approval and issuance, the seller's nominee continued to operate the property, including the gambling hall, until November 11, 1955, when the United States Government put an end to it by seizing in satisfaction of tax liens against defendant some $30,000 in coins and currency on the gambling tables, emptying the slot machines and appropriating all money contained therein; it also attached the bank accounts of defendant in the sum of about $23,000. This seizure resulted from failure of defendant to pay the approximate sum of $88,000 owing by it to the Government for delinquent taxes. The casino remained closed until December, 1955, when plaintiff's licenses were granted and the gaming operations resumed. Between August 29 and November 11 the operations on the premises were profitable, the net income being $55,470.90, the greater portion of which was derived from the gambling.

Plaintiff sued for an accounting of said profits and for other relief. The trial judge held that this was a gambling contract opposed to the public policy of California, found that all other issues had become immaterial and denied any relief. ¹

The contract in question, though made in California, required performance in Nevada through carrying on a business that was and is there licensed and 'a lawful enterprise in Nevada.' Las Vegas Hacienda, Inc. v. Gibson, Nev., 359 P.2d 85, 86. The validity of such a contract generally is governed by the law of place of performance. Robbins v. Pacific Eastern Corp., 8 Cal.2d 241, 272, 274, 65 P.2d 42; Duntley v. Tutt, 48 Cal.App.2d 367, 370, 371, 119 P.2d 804; Rodriguez v. Barnett, 52 Cal.2d 154, 160, 338 P.2d 907; 11 Cal.Jur.2d § 56, p. 138; Rest., Conflict of Laws, § 347, p. 427; 11 Am.Jur. § 136, p. 427; 12 Cal.Jur.2d § 69, p. 272.

Defendant having reaped profits belonging to plaintiff under the terms of the contract, a right of accounting naturally arises unless the taint of gambling renders the above-cited cases inapplicable. It should be remembered that the rights of no member of the public are involved, merely the contractual rights of the parties to a deal involving the running of a gambling casino in Nevada, a lawful project.

Two lines of cases discuss the problem of whether the courts of the forum will recognize and enforce a gambling contract which is valid in the State where the cause of action arose but would have been contrary to local public policy had it been performed in the State of the forum. They of course arrive at different results. See Annotation in 173 A.L.R. 695, 696, 704.

In certain of the decisions in this state gambling is declared contra bonos mores (Braverman v. Horn, 88 Cal.App.2d 379, 198 P.2d 948; Lavick v. Nitzberg, 83 Cal.App.2d 381, 383, 188 P.2d 758; Union Collection Co. v. Buckman, 150 Cal. 159, 161, 88 P. 708, 9 L.R.A., N.S., 568), and hence unlawful. Here we have the question of whether the adverse public policy of California (23 Cal.Jur.2d § 71, p. 697) is so definite and strong that it will not extend comity to a valid contract thus tainted with the California concept of iniquity, though performed in Nevada.

Loranger v. Nadeau, 215 Cal. 362, 366, 10 P.2d 63, 65, 84 A.L.R. 1264: 'It is the general rule in tort actions that the court will, if it has jurisdiction of the necessary parties and can do substantial justice between them in accordance with its own forms of procedure, enforce the foreign law if it is not contrary to the public policy of the forum, to abstract justice, or pure morals, or injurious to the welfare of the people of the state of the forum. 12 Cor.Jur., p. 453. In Loucks v. Standard Oil Co. of New York, 224 N.Y. 99, 120 N.E. 198, 202, it was said: 'The courts are not free to refuse to enforce a foreign right at the pleasure of 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.'' Biewend v. Biewend, 17 Cal.2d 108, 113, 109 P.2d 701, 704, 132 A.L.R. 1264; 'Such a rule of comity is subject to the principle that foreign laws will not be given effect when contrary to the settled public policy of the forum. [Citations.] It must be clear, however, that the enforcement of the right obtained under the laws of another state would be prejudicial to recognized standards of morality and to the general interests of the citizens in the state of the forum.'

In these modern days Californians cannot afford to be too pious about this matter of gambling. Stud poker is contrary to good morals (so it seems), but not draw poker or draw low ball poker (Remmer v. Municipal Court, 90 Cal.App.2d 854, 856-857, 204 P.2d 92; Monterey Club v. Superior Court, 48 Cal.App.2d 131, 146, 119 P.2d 349), although they actually constitute gambling. Lavick v. Nitzberg, supra, 83 Cal.App.2d 381, 382-383, 188 P.2d 758. This situation grows out of the concept that the 'determination of public policy of states resides, first, with the people as expressed in their Constitution and, second, with the representatives of the people--the state Legislature.' Jensen v. Traders & General Ins. Co., 52 Cal.2d 786, 794, 345 P.2d 1, 5. So draw poker, not being declared illegal by statute, is held to be lawful (Monterey Club v. Superior Court, supra, 48 Cal.App. at page 148, 119 P.2d 349). Hence some of our less ascetic communities license draw poker parlors which are conducted to the edification of the citizenry and presumably to the profit of the treasury and the taxpayer.

Horse racing was said in Hankins v. Ottinger, 115 Cal. 454, 456, 47 P. 254, 40 L.R.A. 76, to contravene good morals, and it was held that bets thereon are unenforcible. But the legislature by enactment of the Horse Racing Act of 1933 (codified as Bus. & Prof.Code, §§ 19400-19663), and the People by constitutional amendment ratifying said law (Const. Art. IV, § 25a), have reversed that policy with respect to such gambling done upon the licensed premises of a Racing Association and through pari-mutuel machines. The State licenses qualified applicants to conduct horse racing and betting thereon if made within the track...