worth of chips to continue gambling. He also lost those chips.
The next day, he signed two additional markers in order to
continue his gambling. Zonis lost this $11,000 at the dice tables
as well and returned to Chicago the next day. When Resorts
presented the four checks for collection at Zonis' bank, the bank
refused to honor the checks because his signatures did not match
the signature in the bank's file. Zonis has not paid the $25,000
despite the demands of Resort's collection agents.
At the outset of our inquiry, we note that there is some
controversy concerning the law to be applied in this case.
Resorts maintains that New Jersey law controls the claims in the
case, but it adds its claims are also enforceable under Illinois
law. Zonis argues that Illinois law governs the validity of
Resorts' claims, and that the enforcement of gambling debts is
void as against Illinois public policy. Zonis also contends that
Resorts failed to comply with New Jersey law in extending him
Federal courts in diversity of citizenship cases must determine
what the rule of law in the state is and apply it; they are not
free to ignore state substantive law. Gracyalny v. Westinghouse
Corp., 723 F.2d 1311 at 1316, n. 8 (7th Cir. 1983). Moreover, we
are to apply the choice of law rules of the state in which we
sit, Illinois. Klaxon v. Stentor Electric Mfg. Co., 313 U.S. 487,
61 S.Ct. 1020, 85 L.Ed. 1477 (1941). The prevailing Illinois rule
in contract cases is that if performance and execution of a
contract occur in different states, the place of performance
governs questions of validity, construction and scope. If,
however, the contract is to be performed in more than one state,
the law of the place of execution governs. P.S. & E. Inc. v.
Selastomer Detroit, Inc., 470 F.2d 125, 127 (7th Cir. 1972);
Bergman v. Dartmouth Behavioral Science Center, Inc., No.
82-6176, slip op. at 3 (N.D.Ill. April 5, 1983). The parties do
not agree where the contracts at issue were executed, nor where
they were to be performed.
As our discussion will reveal, gambling contracts are contrary
to Illinois public policy, and were we to apply Illinois law, we
would not enforce Resorts' claims. Even if we were to hold that
New Jersey law applied in this case, we would not enforce
Resorts' claims. This is so because under the public policy
doctrine, a court will refuse to apply the law of a foreign state
if "it is contrary to pure morals or abstract justice, or . . .
the enforcement would be of evil example and harmful to its own
people." Champagnie v. W.E. O'Neil Construction Co.,
77 Ill. App.3d 136, 139, 32 Ill.Dec. 609, 611, 395 N.E.2d 990, 992
(1st Dist. 1979), citing 16 Am.Jur.2d Conflict of Laws §
6 (1971). Allowing Resorts to enforce its claims in the present
case would violate Illinois public policy,*fn1 and if choice of
law rules mandated application of New Jersey law, we would still
decline to enforce Resorts' claims.
The public policy of a state may be found in its judicial
decisions, legislation and construction as well as prevailing
customs, morals and notions of justice. Marchlik v. Coronet
Insurance Co., 40 Ill.2d 327, 332, 239 N.E.2d 799, 802 (1968).
The Illinois Supreme Court long ago determined that gambling
contracts are contrary to the public policy of the State of
Illinois. Speculative contracts for the delivery of grain were
declared to be wagers or gambling contracts and therefore void in
Pope v. Handke, 155 Ill. 617, 40 N.E. 839 (1895). The court
observed that such contracts were void both in the state where
the notes were executed and in Illinois, where suit was brought.
Id. at 621, 40 N.E. at 840. In Thomas v. First National Bank,
213 Ill. 261, 72 N.E. 801 (1905), the court refused to enforce the
assignment of a certificate of deposit to the manager of a firm
involved in gambling. The court dismissed the argument that it
should enforce the assignment because it was not contrary to
law in Washington, where the parties had entered into it:
A contract made in one State, though lawful there,
will not be enforced in another where to do so would
contravene the criminal laws of the latter or where
to do so would be against the express prohibition of
its laws. Comity between different States does not
require a law of one State to be executed in another
when it would be against the public policy of the
latter State. No jurisdiction is bound to recognize
or enforce contracts which are injurious to the
welfare of its people or which are in violation of
its own laws.
Id. at 266-67, 72 N.E. at 803.*fn2
More recent lower court decisions have restated the state's
public policy against gambling. In Israel v. Selman, 263 Ill. App. 351
(1st Dist. 1931), the court refused to enforce a gambling
contract entered into in another state where the transaction was
lawful, noting that comity does not require a contract made in
one state to be executed in another, where it would violate
public policy. Id. at 357. Accord, Hall v. Montaleone,
38 Ill. App.3d 591, 592, 348 N.E.2d 196, 198 (2d Dist. 1976). But cf.
People v. Mitchell, 111 Ill.App.3d 1026, 67 Ill.Dec. 669,
444 N.E.2d 1153 (3d Dist. 1983) (Heiple, J. dissenting) ("The
position of the State of Illinois on gambling is ambivalent,
inconsistent, contradictory and self-serving.")
But an analysis of the case law alone does not end our inquiry;
we must also examine Illinois statutes. Although not controlling
in this case, the Illinois statute regarding contracts based upon
gambling transactions should be examined in our search for
Illinois public policy. The statute provides that