Recovery Consultants, Inc. v. Shih-Hsieh, SHIH-HSIEH and N

• Decision Date: 22 November 1988
• Docket Number: SHIH-HSIEH and N
• Citation: 141 A.D.2d 272,534 N.Y.S.2d 374
• Parties: RECOVERY CONSULTANTS, INC., as Assignee of the Sands Hotel, Plaintiff-Respondent-Appellant, v. Marilanelson Shih-Hsieh, Defendants-Appellants-Respondents.
• Court: New York Supreme Court — Appellate Division

Page 374

534 N.Y.S.2d 374

141 A.D.2d 272

RECOVERY CONSULTANTS, INC., as Assignee of the Sands Hotel Plaintiff-Respondent-Appellant, v. Marilan SHIH-HSIEH and Nelson Shih-Hsieh, Defendants-Appellants-Respondents.

Supreme Court, Appellate Division First Department.

Nov. 22, 1988.

Arnold Koenig, of counsel (Margolies & Koenig, New York City, attorneys), for plaintiff-respondent-appellant.

Elliot B. Pasik, of counsel (Rivkin, Radler, Dunne & Bayh, Uniondale, attorneys) for defendants-appellants-respondents.

Before SULLIVAN, J.P., and CARRO, MILONAS, ROSENBERGER and WALLACH, JJ.

SULLIVAN, Justice Presiding.

Recovery Consultants, Inc., as assignee of the Sands Hotel, seeks the recovery of $1,000,000 and accrued interest from March 1982 against Marilan Shih-Hsieh and her son, Nelson, who were guests of the hotel at the time the alleged debt was incurred. The original complaint alleged a single cause of action against Marilan, based on twenty checks drawn by her, each in the amount of $50,000, totalling $1,000,000, payable to the Sands Hotel. A second cause of action was asserted against Nelson, based on his execution of a $1,000,000 check, also payable to the Sands Hotel. Their pro se answer alleged that "[t]he cheques (markers) were for the sole purpose of gambling" and that "[g]ambling debts are unenforceable in the State of New York and in the State of Nevada." The answer also asserted that Nelson was "not [a] principal" in the transaction.

Recovery eventually served an amended complaint, which is at issue here, asserting three causes of action against Marilan and one against Nelson. The first cause of action alleges a $1,000,000 loan to Marilan, while the second is based on the twenty $50,000 counter checks or markers which she signed. The third cause of action alleges breach of contract. The cause of action against Nelson is based on his $1,000,000 check.

Shortly after service of the amended complaint, which was timely answered, Marilan was exhaustively deposed. Although a notice to take his deposition was also served upon Nelson, he refused to appear, complaining to plaintiff's counsel, prior to the date set for deposition, that as a mere "bystander", whose sole involvement in the transaction at issue was the gratuitous giving of a personal $1,000,000 check to the Sands Hotel "as a gesture of appreciation," his testimony would be "wasteful and unnecessary". As a result of his non-appearance, Nelson's answer was, over his opposition, stricken and a judgment in the sum of $1,468,672.50, representing principal and interest, entered against him.

After retaining counsel, the Shih-Hsiehs moved to vacate the default judgment and for summary judgment dismissing the amended complaint, arguing that the amount in dispute represented an unenforceable Nevada gambling debt. In her affidavit in support of summary judgment, opposed solely by an attorney's affirmation, not made on personal knowledge and advancing a legal argument only, Marilan described the underlying incident in detail. She was a guest at the hotel with her two adult children from March 23 through March 28, 1982. Upon her arrival, she applied for and received a $1,000,000 line of credit, which was arranged by Mr. Smythe, the hotel president, so that she could play blackjack at the hotel's casino. In exchange for her $50,000 "marker", known also as a counter check, she received a stack of chips of a similar value. In all, she signed twenty markers, each in the sum of $50,000, receiving commensurate value in chips, all of which she lost at the blackjack tables. The chips were not used for any purpose other than gambling. No cash was involved. Although her son Nelson did not gamble, before departing he gave a $1,000,000 check to the hotel as a courtesy, to express "our appreciation." The check was never deposited.

The court granted the motion only to the extent of reinstating Nelson's answer and vacating a restraining notice on condition of payment of $5,000 in counsel fees to Recovery. The judgment was to remain as security. In denying summary judgment, the court found the proffered defense of illegality to be "fraught with doubt." The parties cross-appealed. We find that since the sum sought to be recovered is, as a matter of law, a gambling debt, which was unenforceable under Nevada law at the time incurred, summary judgment should have been granted and the amended complaint dismissed.

As a general rule, the validity of a contract is determined by the law of the jurisdiction where the contract is made. (Russell v. Societe Anonyme des Establissements Aeroxon, 268 N.Y. 173, 181, 197 N.E. 185.) If legal there, the contract is enforceable elsewhere. This principle of comity yields, however, to the well-established exception that a court will not enforce a contract, even though valid where made, if its enforcement would contravene the public policy of the forum. (People v. Martin, 175 N.Y. 315, 320-321, 67 N.E. 589; Straus & Co. v. Canadian Pacific Ry. Co., 254 N.Y. 407, 414, 173 N.E. 564.)

For more than a century, until a legislative change, effective June 1, 1983, Nevada courts refused to enforce debts incurred as a result of gambling, despite the legality of gambling at authorized licensed casinos in that state. (See, e.g., Scott v. Courtney, 7 Nev. 419; Evans v. Cooke, 11 Nev. 69; Sandler v. Eighth Jud. Dist. Court, 96 Nev. 622, 614 P.2d 10; Sea Air Support, Inc. v. Herrmann, 96 Nev. 574, 613 P.2d 413; Corbin v. O'Keefe, 87 Nev. 189; Wolpert v. Knight, 74 Nev. 322, 330 P.2d 1023; Weisbrod v. Fremont Hotel, 74 Nev. 227, 326 P.2d 1104.) The proscription has been held to apply to both the patrons as well as to the proprietors of gambling establishments. (Corbin v. O'Keefe, supra; Weisbrod v. Fremont Hotel, supra; West Indies v. First National Bank, 67 Nev. 13, 214 P.2d 144.) At the same time, however, a loan agreement to share in the winnings from the borrower's gambling ventures with others was held to be enforceable. (See, Sigel v. McEvoy, 101 Nev. 623, 707 P.2d 1145; see, also, Johnson v. DeLay, 63 Nev. 1, 158 P.2d 547, 161 P.2d 35.) In refusing to enforce gaming debts, Nevada courts applied the common law, as memorialized, at least in part, in the "Statute of Anne" (Statute of 9 Anne, c. 14, § 1), which...