The Mirage Casino-Hotel v. Pearsall ( 1997 )

IN THE COURT OF APPEALS OF TENNESSEE
WESTERN SECTION AT JACKSON
THE MIRAGE CASINO-HOTEL, )
)
Plaintiff/Appellee, ) Shelby Circuit No. 74546 T.D.
) FILED
VS. ) Appeal No. 02A01-9608-CV-00198
) May 27, 1997
J. ROGER PEARSALL, )
) Cecil Crowson, Jr.
Defendant/Appellant. ) Appellate C ourt Clerk
APPEAL FROM THE CIRCUIT COURT OF SHELBY COUNTY
AT MEMPHIS, TENNESSEE
THE HONORABLE KAY S. ROBILIO, JUDGE
KEITH V. MOORE
Memphis, Tennessee
Attorney for Appellant
BEN G. SISSMAN
DEBORAH A. BRANDON
FRIEDMAN, SISSMAN AND HEATON, P.C.
Memphis, Tennessee
Attorneys for Appellee
AFFIRMED
ALAN E. HIGHERS, J.
CONCUR:
W. FRANK CRAWFORD, P.J., W.S.
DAVID R. FARMER, J.
In this action to enroll a foreign judgment, The Mirage Casino-Hotel (“Plaintiff”)
seeks to enforce a default judgment entered by the District Court of Clark County, Nevada
against J. Roger Pearsall (“Defendant”) for non-payment of eight separate negotiable
instruments executed by him and made payable to the Plaintiff totaling $100,000.00. The
trial court granted Plaintiff’s motion to enroll the foreign judgment of $115,178.00, plus
post-judgment interest, against the Defendant. Defendant appeals the judgment of the
court below arguing that the trial court erred in enforcing the default judgment of the
Nevada District Court because enforcement of the judgment violates public policy of the
State of Tennessee. For the reasons stated hereafter, we affirm the judgment of the trial
court.
FACTS
Plaintiff is the payee and holder in due course of eight separate negotiable
instruments (“checks”) executed by the Defendant, totaling $100,000.00. Defendant used
the $100,000.00 in game chips given him in exchange for his eight checks to play the
game of Black Jack at Plaintiff’s hotel. Plaintiff could have exchanged his game chips for
money at any time; however, he chose to use all of his game chips to gamble at Plaintiff’s
casino.
The eight checks were subsequently dishonored by the National Bank of
Commerce. Despite Plaintiff’s repeated attempts to have the Defendant make the drafts
good, the debt remained unpaid. Plaintiff thereafter sued the Defendant in the District
Court of Clark County, Nevada.
On September 19, 1995, the District Court of Clark County entered a default
judgment against Pearsall in the amount of $100,000.00, plus 15,000.00 in attorney fees,
costs, and accrued and accruing interest at the contract rate of 18 percent per year.
Defendant asserts that full faith and credit should be denied in this case because
gambling is against the public policy of the State of Tennessee.
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LAW
The sole issue before this Court is whether the trial court erred in granting Plaintiff’s
motion to enroll the judgment of the Nevada District Court.
Defendant contends that the trial court’s enforcement of the judgment of the Nevada
court based upon application of the full faith and credit clause was in error. In support of
his argument, Defendant cites the following: T.C.A. § 29-19-101 (1980) (rendering void all
contracts founded, in whole or in part, on gambling or wagering consideration); T.C.A. §
29-19-102 (1980) (barring any action to recover money or property won by any species or
mode of gambling); T.C.A. § 29-19-103 (1980) (providing a qui tam action and monetary
penalty against anyone who institutes an action for money or property claimed under a
contract founded upon gambling consideration); and T.C.A. § 29-19-104 (1980) and § 29-
19-105 (1980) (providing an action for recovery of money or property lost upon any game
or wager).
The full faith and credit clause of the United States Constitution provides as follows:
§ 1. Full faith and credit to records and judicial
proceedings of states. -- Full faith and credit shall be given
in each state to the public acts, records, and judicial
proceedings of every other state. And the congress may by
general laws prescribe the manner in which such acts, records
and proceedings shall be proved, and the effect thereof.
U.S. Const. art. IV, § 1.
In addressing the effect of the full faith and credit clause, Chief Justice Marshall
stated that:
[T]he judgment of a state court should have the same credit,
validity, and effect in every other court in the United States
which it had in the state where it was pronounced, and that
whatever pleas would be good to a suit thereon in such state,
and none others, could be pleaded in any other court in the
United States.
Hampton v. M’Connel, 16 U.S. 234 (1818).
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In Christmas v. Russell, 72 U.S. 290 (1866), the defendant, a Mississippi resident,
executed a promissory note in Mississippi, which was endorsed by the payee to the
plaintiff, a Kentucky resident. After an action on this note had been barred by the
Mississippi statute of limitations, the defendant, having come into Kentucky on a visit, was
there sued on the note. Defendant’s defense of the Mississippi statute of limitations was
overruled, and the court entered a judgment for the plaintiff. The plaintiff then brought suit
upon this Kentucky judgment in the Federal Circuit Court of Mississippi, and the defendant
asserted a defense under another Mississippi statute, which provided that no action should
be maintained on any judgment rendered against a Mississippi resident by a foreign court
where the cause of action would have been barred by the Mississippi statute of limitations
if suit would have been brought in Mississippi. The defense was overruled, and the court
entered a judgment for the plaintiff. In affirming the judgment, the United States Supreme
Court held that under the full faith and credit clause this Mississippi statute was
unconstitutional and void as affecting the right of the plaintiff to enforce the Kentucky
judgment. Because the judgment was valid in Kentucky and conclusive between the
parties there, the Supreme Court stated that it was not competent for any other state to
authorize its courts to open the merits of the action and review the cause or to enact that
such a judgment should not receive the same faith and credit that by law it had in the
courts of the state from which it was taken. Id.
In Fauntleroy v. Lum, 210 U.S. 230 (1908), residents of Mississippi entered into a
gambling contract involving cotton futures. The contract was prohibited by Mississippi
statutory law, and Mississippi statutes prevented Mississippi courts from giving effect to
such a contract. The parties to the contract submitted their differences to arbitration in
Mississippi, and the party in whose favor the arbitration award was made then sued
unsuccessfully in Mississippi. The prevailing party later sued in Missouri and obtained
personal service on the defendant Mississippi citizen in Missouri. The Missouri court
rejected the defendant’s proffered evidence as to the illegal and criminal nature of the
underlying transaction under Mississippi law, and a judgment was entered for the plaintiff.
Plaintiff’s assignee then sued on the Missouri judgment in Mississippi, and the defendant
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again argued that the Missouri judgment could not be enforced in Mississippi because the
underlying transaction was prohibited by Mississippi law. The Mississippi Supreme Court
held that enforcement of the Missouri judgment was not required under the full faith and
credit clause; however, the United States Supreme Court reversed the judgment of the
Mississippi Supreme Court holding that Mississippi could not go beyond the Missouri
judgment. In upholding the validity of the Missouri judgment in Mississippi, the Supreme
Court stated that:
[T]he judgment of a state court should have the same credit,
validity, and effect in every other court in the United States
which it had in the state where it was pronounced, and that
whatever pleas would be good to a suit thereon in such state,
and none others, could be pleaded in any other court in the
United States.
Fauntleroy, 210 U.S. at 236, quoting Hampton v. M’Connel, 16 U.S. 234 (1818).
Based upon the foregoing Supreme Court case precedent and its progeny, it is now
well established that the full faith and credit clause of the federal constitution requires that
the judgment of a state court, which had jurisdiction of the parties and the subject matter
in suit, be given the same credit, validity and effect in the courts of every other state and
that such judgment be equally conclusive upon the merits in the courts of the enforcing
states. Roche v. McDonald, 275 U.S. 449, 451-52 (1928); Converse v. Hamilton, 224 U.S.
243, 259 (1912); Tilt v. Kelsey, 207 U.S. 43, 57 (1907); Hancock National Bank v. Farnum,
176 U.S. 640, 643 (1900); Cheever v. Wilson, 76 U.S. 108 (1869); D’Arcy v. Ketchum, 52
U.S. 165 (1850); Hampton v. M’Connel, 16 U.S. 234 (1818); Mills v. Duryee, 11 U.S. 481
(1813).
Moreover, in Davis v. Davis, 305 U.S. 32, 40 (1938), the Supreme Court stated that
Article IV, § 1 of the United States Constitution requires that “not some but full” faith and
credit be given by states to the judicial decrees of other states. In other words, when a
decree is rendered in one state, the full faith and credit clause demands that other states
give the decree the equivalent force and effect to which it was entitled in the state where
it was rendered. Harding v. Harding, 198 U.S. 317, 341 (1905).
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In refining the requirements under the full faith and credit clause, the Supreme Court
in Titus v. Wallick, 306 U.S. 282, 291 (1939), stated that:
[T]he constitutional mandate requires credit to be given to a
money judgment rendered on a civil cause of action in another
state, even though the forum would have been under no duty
to entertain the suit on which the judgment was founded.
See also, Milwaukee County v. M. E. White Co., 296 U.S. 268 (1935); Roche v. McDonald,
275 U.S. 449 (1928); Fauntleroy, 210 U.S. at 236; Christmas v. Russell, 72 U.S. 290
(1866).
Thus, where an action is brought on a judgment rendered by a court of a sister
state, the full faith and credit clause of the federal constitution prohibits an inquiry into the
merits of the original cause of action. In an action on a foreign judgment, the forum court
may inquire only into questions which would be considered on collateral attack in the state
where the judgment was rendered. Fauntleroy, 210 U.S. at 236; Hampton v. M’Connel,
16 U.S. 234 (1818). Therefore, even though a cause of action could not be entertained
in the forum state because it had been barred by the applicable statute of limitations or
because the particular action was not recognized in courts of the forum state, the judgment
thereon obtained in a sister state is entitled to full faith and credit. See, Titus v. Wallick,
306 U.S.282 (1939); Kenney v. Supreme Lodge of the World, Loyal Order of Moose, 252
U.S. 411, 415-16 (1920); Fauntleroy, 210 U.S. 230; Christmas v. Russell, 72 U.S. 290
(1866).
Notwithstanding the foregoing, the United States Supreme Court has recognized at
least three exceptions to the full faith and credit clause. First, a forum court may not
enforce a judgment that is void for lack of subject matter or personal jurisdiction. See,
Flexner v. Farson, 248 U.S. 289 (1919); Western Life Indem. Co. of Illinois v. Rupp, 235
U.S. 261 (1914); Grover & Baker S. M. Co. v. Radcliffe, 137 U.S. 287 (1890); Hall v.
Lanning, 91 U.S. 160 (1875); Four Seasons Gardening & Landscaping, Inc. v. Crouch,
688 S.W.2d 439 (Tenn. Ct. App. 1984); In Re Riggs, 612 S.W.2d 461, 465 (Tenn. Ct. App.
1980). Second, when the judgment of the foreign court was based upon fraud, the forum
court may choose not to enroll the judgment. See, In Re Riggs, 612 S.W.2d 461, 465
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(Tenn. Ct. App. 1980) (stating that full faith and credit must be given to the judgment of a
foreign state unless the judgment was vitiated by a manifest fraud); Lee v. Carroll, 146
So. 2d 242, 244 (La. Ct. App. 1962). Third, where enforcement of the judgment would
violate the public policy of the forum state, the forum court may refuse to enforce the
judgment of the foreign court. See, Four Seasons Gardening & Landscaping, Inc. v.
Crouch, 688 S.W.2d 439, 445 (Tenn. Ct. App. 1984) (stating that a foreign judgment will
not be enforced if it violates the “strong” public policy of Tennessee); In Re Riggs, 612
S.W.2d 461, 465 (Tenn. Ct. App. 1980) (stating that Tennessee courts are not obliged to
give full faith and credit to a judgment of a foreign state which is violative Tennesee’s public
policy).
We note, however, that in Hotel Ramada of Nevada, Inc. v. Thakkar, No.
03A019103CV00113, 1991 WL 135471 (Tenn. Ct. App. July 25, 1991), this Court
addressed the same issue as in the case at bar. The plaintiff casino loaned defendant
casino chips having an approximate total value of $19,000.00. These loans of casino chips
were evidenced by seven negotiable checks executed by defendant at various times
throughout August 22 and 23, 1987. By the end of the day on August 23, 1987, all of the
loaned casino chips had been lost by defendant in gambling at plaintiff’s casino.
Thereafter, plaintiff brought suit in the United States District Court in Nevada, seeking to
recover the value of its loan of casino chips. The Nevada District Court granted judgment
in favor of the plaintiff for $19,000.00. In Tennessee, the trial court held that the judgment
was entitled to full faith and credit, and defendant appealed to this Court. In enforcing the
judgment of the United States District Court in Nevada, this Court stated as follows:
Our review of the case law leads us to conclude that
enforcement of a debt incurred in the purchase of gambling
chips in a state where gambling is perfectly legal does not
violate the strong public policy of this State.
Thakkar, 1991 WL 135471, at *3.
Because under Fauntleroy and its progeny, a state court must give full faith and
credit to a monetary judgment rendered in a court of another state, even though the
enforcing forum might not recognize the underlying cause of action, the trial court did not
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err in enforcing the judgment of the Nevada District Court, giving full faith and credit to the
foreign judgment.
The judgment of the trial court is hereby affirmed. Costs on appeal are taxed to
Appellant for which execution may issue if necessary.
HIGHERS, J.
CONCUR:
CRAWFORD, P.J., W.S.
FARMER, J.
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