Wednesday, November 7, 2012
Court of Appeal Rules:
Contract to Provide Gambling Stake Not Against Public Policy
By KENNETH OFGANG, Staff Writer
A contract to provide a would-be professional poker player with a stake, to be used only at legal gaming, was not rendered unenforceable by California’s public policy against gambling, this district’s Court of Appeal ruled yesterday.
Div. Four reinstated a suit by Xavier Kyablue against Abraham Watkins. Los Angeles Superior Court Judge James R. Dunn had sustained Watkins’ demurrer after Kyablue sued to recover more than $38,000 he allegedly advanced to Watkins for expenses and potential wagering.
Kyablue, who has competed in several World Series of Poker events, alleged that he and Watkins, who was a friend, entered into an oral agreement so that Watkins could get into professional poker. The agreement allegedly provided that Kyablue would provide Watkins with funding, which could only be spent with Kyablue’s express approval.
In return, Kyablue would get half of Watkins’ winnings, and would bear all losses. Kyablue reserved the right to terminate the relationship at any time, in which event Watkins would be required to repay the advances on demand.
In November 2009, Kyablue alleges, he terminated the relationship and demanded repayment of $38,054, including more than $11,000 in unpaid loans and the rest in funds that were advanced for potential wagering, but which he had not yet authorized Watkins to spend.
Dunn sustained Watkins’ demurrer on the ground that gambling-related contracts are contrary to California public policy.
But Presiding Justice Norman Epstein, writing for the Court of Appeal, cited Metropolitan Creditors Service v. Sadri (1993) 15 Cal.App.4th 1821, which noted that “California’s historical public policy against gambling has been substantially eroded.”
Metropolitan distinguished between gambling in general and the enforcement of gambling debts, in other words gambling on credit, which the court found to be contrary to public policy.
The terms of the alleged contract between Kyablue and Watkins do not raise the same type of public policy issues, Epstein said, adding:
“The express limitation of the use of funds to legal gambling further mitigates any unlawfulness of the contract since its execution would violate only a waning public policy against gambling in general, rather than an express prohibition such as Penal Code section 330, which proscribes illegal gambling.”
In addition, Watkins would be unjustly enriched if he was allowed to keep the money, Epstein said.
Epstein also concluded that even if the mere advance of funds for gambling purposes was contrary to public policy, it would not preclude an action for return of the money before it was wagered. And because a contract that was legal in part and illegal in part would still be enforceable as to the legal part, Kyablue would in any event have the right to recover the money he loaned Watkins for expenses, the jurist said.
Attorneys Joseph R. Baer and Nate G. Kraut represented Kyablue on appeal. Watkins represented himself.
The case is Kyablue v. Watkins, B233860.
Copyright 2012, Metropolitan News Company