Sea Air Support, Inc. v. Herrmann
29 U.C.C. Rep. Serv. (West) 918, 613 P.2d 413, 96 Nev. 574 (1980)
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Rule of Law:
Under Nevada law, which incorporates the Statute of 9 Anne, c. 14, § 1, checks drawn for the purpose of repaying money knowingly lent or advanced for gaming are void and unenforceable; furthermore, a collection agency is not a holder in due course if it did not take the instrument for value and had notice of a defense against collection.
Facts:
- Ralph Herrmann wrote a check for $10,000 payable to the Ormsby House, a hotel-casino.
- Herrmann exchanged this $10,000 check for three counter checks he had written earlier that evening to acquire gaming chips.
- The Ormsby House was unable to collect the proceeds from the $10,000 check because Herrmann had insufficient funds in his account.
- The Ormsby House assigned the debt evidenced by the dishonored check to Sea Air Support, Inc., dba Automated Accounts Associates, for collection.
- Sea Air Support, Inc. promised to take such legal action as may be necessary to enforce collection of the $10,000.
Procedural Posture:
- Sea Air Support, Inc. filed an action against Ralph Herrmann in district court to recover $10,567.
- The district judge dismissed the action on the ground that Sea Air’s claim is barred by the Statute of Anne.
- Sea Air Support, Inc. appealed the dismissal to the Supreme Court of Nevada.
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Issue:
Does Nevada law, incorporating the Statute of Anne, render a check void and unenforceable when it is drawn to repay money knowingly advanced for gaming purposes, and can a collection agency become a holder in due course of such a check?
Opinions:
Majority - Per Curiam
Yes, Nevada law, incorporating the Statute of Anne, renders a check void and unenforceable when drawn to repay money knowingly advanced for gaming purposes, and a collection agency in this situation is not a holder in due course. Nevada law incorporates the common law of gambling as altered by the Statute of 9 Anne, c. 14, § 1, which voids any notes drawn for the purpose of reimbursing or repaying money knowingly lent or advanced for gaming. Despite gambling being licensed and legal in Nevada, the court has consistently held that debts incurred and checks drawn for gambling purposes are void and unenforceable, citing a long line of precedents. Herrmann's $10,000 check was clearly for repaying money advanced for gaming, making it void and unenforceable. Sea Air Support, Inc. cannot claim holder in due course status under NRS 104.3302(1) because a promise to perform future services, such as collection, does not constitute 'taking for value' under NRS 104.3303. Additionally, Sea Air had at least constructive notice of a defense against collection because the check was payable to a casino and was known to have been dishonored.
Analysis:
This case strongly reaffirms the continued vitality of the Statute of Anne in Nevada, holding that gambling debts are unenforceable even when gambling itself is legal and regulated. It highlights the judiciary's role in applying existing law and signals that any fundamental change to this principle must come from the legislature. The decision also provides important clarification on the 'for value' and 'notice' requirements for holder in due course status under the UCC, particularly for collection agencies dealing with instruments tied to known issues.
