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Dolan: Enforcing gambling debts between friends

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The Warriors’ David Lee, center, and Stephen Curry disembark a plane Wednesday after winning the NBA Finals on Tuesday night over the Cleveland Cavaliers. (AP/JEFF CHIU)
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This week’s article comes from Will R., who asks:

Q: “My buddy made a bet with me about the NBA Finals. He bet on the Cavs, and I put my money on the Warriors. Now that the Warriors won, he refuses to honor the bet.  Do I have any legal rights to make him pay me, can I sue him?

A: Will, this is an interesting question. I bet you won’t like the answer. In California, betting on sports games is illegal. The Penal Code makes it illegal, with some exceptions for small office pools, to make or accept a bet or wager upon the result of contest of skill, speed or power of endurance between persons, animals, or mechanical apparatus. (Cal. Penal Code § 337a.)

Here in California, the policy behind the criminal statute is also at play in the civil courts. There has been a strong, long-standing, public policy against judicial resolution of civil claims arising out of gambling contracts or transactions. This public policy applies to both actions for recovery of gambling losses and actions to enforce gambling debts. (Kelly v. First Astri Corp. (1999) 72 C.A.4th 462)

That means that as a matter of public policy, the courts will not use their power to enforce the bet with your friend. Of course there are certain statutory exceptions to these laws that allow for the operation of card rooms and the state lottery. Interestingly, the policy against using the courts to resolve illegal gambling debts is so strong that even the loser of a bet cannot get help from the courts to recover money that he or she has lost. (See Wallace v. Openhanded (1946) 73 C.A.2d 25.)

What about loaned money used for gambling? Will the courts enforce those? The answer is, as it often is in the law — it depends. Mere knowledge by a lender of the borrower’s improper purpose will not invalidate a loan, nor the courts ability or willingness to enforce it. (1 Witkin, Summary 10th (2005) Contracts, § 426, p. 466.) For example, a Nevada gambling house may cash a check for a patron. That transaction is, in essence, the patron agreeing to pay the establishment. So long as there are no restrictions placed on the use of the money, i.e., they could use it for food, drinks, paying their hotel bill or shopping,if the person puts a stop payment on the check, a California court would likely hear the matter.

However, if the person lending the money makes the illegal use a requirement of the loan, the courts may not be so willing to step in. If the establishment took the check in direct exchange for gambling chips, the courts have held that to be “contrary to good morals,” and would not enforce that transaction. (Braverman v. Horn (1948) 88 C.A.2d 379.)

Since California has a historically strong public policy to not use the judiciary to enforce gambling contracts, just enjoy the Warriors’ win and consider the unpaid wager a lesson learned.

Christopher B. Dolan is owner of the Dolan Law Firm. Email questions to help@dolanlawfirm.com.

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