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NEMTIN v. ZARIN

September 7, 1983

MARTHA NEMTIN, Plaintiff,
v.
DAVID R. ZARIN, Defendant



The opinion of the court was delivered by: BIUNNO

 This suit is nominally one to recover on certain promissory notes, security agreements, checks issued by a borrower to a lender to repay loans (some of those checks having been presented for payment and dishonored, and others of which have not been presented), and related instruments.

 The complaint was filed in this court, alleging jurisdiction under 28 USC ยง 1332(a), with plaintiff a citizen of Canada and defendant a citizen of New Jersey. The amount in controversy is said to exceed $10,000., and there is no doubt that it does.

 Defendant has moved for partial summary judgment on all counts, asserting grounds for non-liability (thus making the judgment sought "partial"), and plaintiff has filed a cross-motion.

 The amended complaint is in eleven counts, each based upon a note or other instrument in a series between the parties, though not chronologically arranged. The last count, dealing with what appears to be the earliest note was added when the complaint was amended because, as the court understands it, defendant had been paying interest on that note when suit was filed and it was not then regarded as being in default. Interest payments stopped after suit was filed, and the complaint was amended (actually supplemented) to assert the added item.

 The major focus of the issue presented by the motion arises out of the nature and application of the law of New Jersey to the transactions and instruments giving rise to the suit. Put very briefly, defendant was evidently engaged over a period of time in rather steady and increasingly heavy gambling at legalized casinos in Atlantic City, and accepted loans in various forms from the plaintiff in part to maintain his credit standing at the casinos so he could continue gambling, and in part to use her own credit at the casinos to get chips for gambling.

 Needless to say, the usual operation of the law of large numbers coupled with payoff odds lower than the mathematical probabilities, eventually led to losses in millions of dollars and an inability to repay the plaintiff.

 It is indicated that a Superior Court suit was begun by the major casino involved against both the parties to this suit. Defendant here seems to have negotiated some kind of settlement arrangement based on an installment arrangement secured by such collateral he could provide. The settlement was to have disposed of the casino's claim against plaintiff as well, it is indicated that plaintiff here did not approve the proposal, possibly seeking better terms, and that suit continues against her there.

 The question whether her claims asserted here should have been advanced as mandatory cross-claims in the Superior Court suit brought by the casino, under the principle of New Jersey's "single controversy" rule has not been raised or considered at this stage, and it is merely noted at this time.

 In order to grasp the legal aspect of the issue now before the court, it is necessary to have a clear understanding of the historical and legal development of New Jersey law in respect to gambling. Because the jurisdictional basis is diversity of citizenship, this court sits as though it were the Superior Court of New Jersey as to law other than procedure, under Erie R. Co. v. Tompkins, 304 U.S. 64, 82 L. Ed. 1188, 58 S. Ct. 817 (1938).

 The Constitutional History.

 New Jersey's first Constitution was adopted at Burlington on July 2, 1776, the same day that the Congress of the original colonies, assembled at Philadelphia, adopted a resolution declaring that the colonies were free and independent States. It remained in effect until September 2, 1844 when a new constitution replaced it after being agreed upon by delegates of the people in convention in Trenton and ratified by the people at an election held August 13, 1844. See N.J. Const., 1844 Art. VIII, sec. 4 for effective date.

 Under the 1776 Constitution the authority to introduce and pass bills was placed in a legislative council (one member from each county, plus the Governor, who presided) and a general assembly (three members from each county, subject to adjustment by a majority of the representatives of both bodies on the principles of more equal representation). There were no significant limitations on the legislative power. The main exception was that the legislative council was not to prepare or alter any money bill. See, N.J. Const. 1776, Art. I, III, V and VI.

 The laws published not long before by Mr. Allinson were to remain in full force (except as incompatible with the constitution) until altered by the legislature. N.J. Const. 1776, Art. XXI.

 The common law of England, and so much of its statutes as had been practiced, was continued in force (except those parts repugnant to rights and privileges in the Constitution) until altered by future law of the legislature. N.J. Const. 1776, Art. XXII.

 There is nothing in that first Constitution about gambling, or about laws on gambling.

 New Jersey's second Constitution of 1844, like the 1776 charter, also provided that the common law and statute law then in force and not repugnant to the Constitution, were to remain in force until altered or repealed by the legislature. N.J. Const. 1844, Art. X, par. 1.

 It did contain a provision on lotteries. That provision simply read, (Art. IV, sec. VII, par. 2):

 
"No lottery shall be authorized by this State; and no ticket in any lottery not authorized by a law of this state shall be bought or sold within the State".

 By amendment approved September 28, 1897 and proclaimed October 26, 1897, this same provision was altered to read:

 
"No lottery shall be authorized by the legislature or otherwise in this State, and no ticket in any lottery shall be bought or sold within this State, nor shall pool-selling, book-making or gambling of any kind be authorized or allowed within this State, nor shall any gambling device, practice or game of chance now prohibited by law be legalized, or the remedy, penalty or punishment now provided therefor be in any way diminished."

 The provision remained unchanged until amended, at the special election of June 20, 1939, proclamation of July 11, 1939, to legalize horse race meetings and pari-mutuel betting thereon, subject to restrictions in the amendment. This change was integrated with what was there, and which was strengthened in some respects while modified to accommodate the legalized activity. The text as amended read:

 
2. Horse race meeting; pari mutuel betting; lotteries, roulette or games of chance; pool-selling, book-making or gambling

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